James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland - [2015] NSWSC 243

Supreme Court

New South Wales

Medium Neutral Citation: James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland [2015] NSWSC 243
Hearing dates: 24 November 2014 to 10 December 2014
Date of orders: 19 March 2015
Decision date: 19 March 2015
Jurisdiction: Equity Division - Commercial List
Before: McDougall J
Decision:
James v RBS: judgment to be for plaintiff for $2,932,692.31 plus interest; reserve costs.
McKeith v RBS: judgment to be for defendants; reserve costs.

Catchwords:
CONTRACT - employment - termination - arising from takeover of employer by consortium - where employer’s redundancy policy required making of severance payments and of giving good faith consideration to making of bonus payments - whether redundancy policy expressly incorporated into contract of employment - effect of contractual term stating that employee is bound by a policy containing bilateral obligations - whether redundancy policy alternatively incorporated into contract of employment by course of dealing

CONTRACT - deed of release - whether redundancy policy permitted requiring a deed of release as a precondition to making of severance or bonus payments - whether legitimate for deed of release to be unilateral and broad in its terms

CONTRACT - unilateral contracts - whether representations that redundancy policy would remain in place amounted to a contractual offer - where no clear and unequivocal mode of acceptance of such offer - where no evidence of reliance on offer in any event - whether representations that new chief executive officer would be selected through a fair appointment process based on merit amounted to a contractual offer - representations not promissory in nature - where not shown in any event that the appointment process lacked fairness or transparency

ESTOPPEL - estoppel by convention - whether parties conducted relations on a mutual understanding that redundancy procedures would be applied - requirements of detriment and unconscionability
ESTOPPEL - promissory estoppel - whether employee was entitled to rely on statement by human resources staff that policies would be applied in a particular way - where employee knew that staff member did not have authority to bind the company - where detriment not proved
Cases Cited: Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 88 ALJR 552
Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424
Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2014] WASCA 180
Blatch v Arthur (1774) 1 Cowp 63; 98 ER 969
Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153
Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256
Foggo v O’Sullivan Partners (Advisory) Pty Ltd (2011) 206 IR 87
Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641
Hammond v JP Morgan Trust Australia Ltd [2012] NSWCA 295
Hays Personnel Services (Australia) Pty Ltd v Motorline Pty Ltd [2008] QCA 375
Henry Kendall and Sons v William Lillico and Sons Ltd [1969] 2 AC 31
In the matter of ACN 050 541 047 Ltd [2002] NSWSC 586
Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 6) (2007) 63 ACSR 1
Jones v Dunkel (1959) 101 CLR 298
La Rosa v Nudrill Pty Ltd [2013] WASCA 18
Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713
Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301
Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193
Saleh v Romanous (2010) 79 NSWLR 453
Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165
Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387
Willis v Health Communications Network Ltd (2007) 167 IR 425
Texts Cited: Oxford English Dictionary (online)
Carter, Peden and Tolhurst, Contract Law in Australia (LexisNexis, Fifth Edition, 2007)
Category: Principal judgment
Parties:
James v RBS:
Angus Gordon Charnock James (plaintiff)
Royal Bank of Scotland Group plc and others (defendants)
McKeith v RBS:
Colin McKeith (plaintiff)
Royal Bank of Scotland Group plc and others (defendants)
Representation:
Counsel:
J N West QC / M J Steele SC (plaintiffs)
J Sheahan QC / T Saunders (defendants)
Solicitors:
Harmers Workplace Lawyers (plaintiffs)
Allens (defendants)

File Number(s): 2011/320618; 2011/320637

Judgment

HIS HONOUR: The plaintiffs, Mr Angus James and Mr Colin McKeith, worked for ABN AMRO Australia Holdings Limited (AAAH) up until 2008. They held very senior positions. Mr James was the chief executive officer, and a director of the company. Mr McKeith was the head of global markets, and also a director.
Following the world-wide takeover of the ABN AMRO Group (AA Group) by a consortium (I set out the membership of the consortium at [9] below), the operations of AAAH were merged with the Australian operations of one of the consortium’s members, Royal Bank of Scotland plc (RBS).
As a result of that merger, the employment of Messrs James and McKeith finished. In the euphemistic language used to describe such events, they were made, or their positions became, redundant.
Mr James and Mr McKeith say that, upon redundancy, they should have been paid substantial amounts of money in accordance with the redundancy policy of AAAH. Mr James claims almost $3 million for severance pay and an “ex gratia” payment on account of bonus. Mr McKeith seeks in total almost $4.4 million under the same headings.
In addition, Mr James claims that he had a right under policies announced by the consortium, to be considered as head of the merged Australian operations of AAAH and RBS. That right is said to arise from a promise of “a fair appointment process based on merit and competencies”, to be applied regardless of whether the candidate was a former AAAH employee or a former RBS employee. Mr James claims that the appointment process did not meet the description that I have given. He claims almost $11.4 million in lost remuneration.
The claims are put in various ways. Messrs James and McKeith say:

that the redundancy policy was part of their respective contracts of employment (although the ways in which, it is said, the policy became incorporated into their respective contracts is different);

alternatively, that the relevant entities are estopped (on various bases) from denying that the redundancy policy formed part of their contracts of employment;

in Mr James’ case, that there was a contract between him and the relevant RBS entities guaranteeing him a fair appointment process based on merit and competencies; and

alternatively, in Mr James’ case, that the relevant RBS entities are estopped from denying that he was entitled to such an appointment process.

That very broad outline of the disputes has given rise to a number of detailed agreed issues. To enable those issues to be understood, it is desirable, before setting them out, to state some, essentially non-contentious, matters of background.

The factual background

AAAH was a member of the AA Group: a banking group based in the Netherlands. The parent company was ABN AMRO Holdings NV (AANV). Messrs James and McKeith were employed not by AAAH but by a related entity (another subsidiary of AANV) known as ABN AMRO Services Australia Limited (AAAS). It is however common ground that, under their respective contracts of employment, Messrs James and McKeith were required to devote their energies towards the performance of their duties in their respective positions as AAAH’s chief executive officer and head of global markets.
In early 2007, RBS formed a consortium with Fortis NV and Fortis SA (together, Fortis) and Banco Santander Central Hispano SA (Santander). The consortium members incorporated a bidding vehicle known as RFS Holdings BV (RFS). RFS made an offer to acquire the entire issued and outstanding capital of AANV.
There was a rival offer, made by Barclays plc.
The consortium’s offer was successful. The offer became unconditional on 10 October 2007.
The consortium’s members had agreed that if their offer were successful, the various business units of AANV would be divided between them. As part of that agreement, RBS took over AANV’s “Business Unit Asia”. AAAH was a part of that business unit.
RBS had opened a branch office in Australia in 1999. That branch operated as “RBS Australia”. It was so operating when the takeover became unconditional.
When RBS acquired (among other assets) the Business Unit Asia, it gave consideration to whether AAAH should be broken up (with parts of it sold and parts retained), or merged with the Australian operations of RBS. For a while, RBS pursued the former alternative. However, in the absence of any acceptable offer to acquire the business of AAAH (or those parts of it that RBS sought to divest), RBS pursued the alternative: amalgamating the two Australian operations.
RBS’ attempts to deal with AAAH were complicated because AANV did not own all the issued share capital in AAAH. It held (directly or indirectly) some 76% of the issued shares. The remaining 34% were held by trustees, AA Employee Plans Pty Limited (AAEP) and AANZ Employee Plans Limited (together “the trustees”). The trustees held shares in AAAH on trust for employees for AAAH or its counterpart in New Zealand who had participated in an “Employee Incentive Plan” (EIP). However, ultimately, RBS decided to deal with AAAH, it was necessary for it, in doing so, to buy out the shares held by the trustees.
It was not technically difficult to buy out the shares. AANV had held a call option pursuant to which it could acquire the shares at any time, with the price to be determined by an agreed formula. In consequence of the takeover, RBS effectively acquired the benefit of that call option. The formula for determination of the price involved, as a very significant integer, a component known as “WEV”. WEV in turn reflected “Return on Equity” (ROE) above a relatively modest threshold of 8.5% per annum. In 2006 and, in particular, 2007, AAAH had achieved very high profits and correspondingly high ROE. As a result, if RBS exercised the call option, it would have to pay a very high price for the EIP shares.
At all material times, AAAS had a redundancy policy in place. That policy was described as a “closed” policy. Although the existence of the policy was no doubt known to employees of AAAS, the terms of the policy were not. They were not available on the AA intranet. Ms Amelia McArdle, who was at the time employed by AAAS as deputy head of human resources, said that if an employee had asked her about the detail of the redundancy policy, she would not have disclosed it.
I shall return to the detail of the redundancy policy. It is sufficient to note, for present purposes, that on redundancy, any payment to be made:

would include accrued contractual and statutory entitlements;

could include also a “severance” payment, based on number of years of service, but capped in a way that is of no present moment (there was also a dispute as to whether the severance payment was an entitlement or a discretionary matter); and

might also include, on an “ex gratia” basis, a discretionary amount in respect of bonus entitlements that might become payable for the calendar year in which redundancy occurred.

The plaintiffs said that the ex gratia payment reflected a common practice in the investment banking world. They submitted that employees were often rewarded for their services not only by fixed remuneration, but also, at the discretion of the employer and depending on the financial performance of the business and their contribution to it, by bonus payments. If an employee became redundant relatively late in the calendar year (AAAH paid bonuses on a calendar yearly basis, often with deferred elements), it might be thought unjust that, as a result, he or she would lose what might otherwise have been a substantial bonus. Having said that, there were, as Mr Sheahan of Queen’s Counsel (who appeared with Mr Saunders of Counsel for the defendants) submitted, other objectives also promoted by the payment of bonuses.
The existence of rival bids for AANV raised, as an issue that required consideration, the fate of the employees of the AA Group in the event that either bid succeeded. I think it was seen to be likely that one or the other of them would. As a result, the consortium gave consideration to making known to employees of the AA Group the way that, if successful, its members would deal with their future employment.
If the consortium succeeded in its bid, it was obvious that there would be job losses when the various business units, having been divided among the consortium’s members, were either sold off or merged with the operations of the acquirer. From the consortium’s perspective, it was desirable that there be no mass exodus of employees during the takeover process and its implementation. AA Group made announcements relating to both future employment possibilities and redundancy. It also developed a “Communication Pack” for Australia and New Zealand, to be issued (as it was issued) upon the bid’s becoming unconditional. In relation to continuing employment, the Communication Pack stated:

Employment Conditions
Q: What do we know about the consortium’s approach to employees?
A: We have been positively impressed by the commitment of the consortium to the key part employees play in creating and sustaining a successful business. They are keenly aware of the need to be seen and deliver on that promise if they are to win the trust and respect of the ABN AMRO employees. The consortium has communicated a number of ‘people principles’ which they will apply to integration:
• It is the bank’s firm intention that job losses will be managed through voluntary measures, including natural turnover, redeployment and voluntary redundancy.
• There will be no forced dismissals in the Netherlands. Departure through the Social Plan is not considered to be a forced dismissal.
• RBS will not take initiatives of any significance in terms of the off-shoring of activities as a result of this transaction.
• Existing Social Plans and Collective Labour Agreements will be honoured.
• The bank commits to continue working constructively with works councils, trade unions and other representative bodies.
• It is the bank’s firm intention to actively retain individuals in key roles across the transaction, to ensure business continuity.
• Retention of the best talent will be done through a fair appointment process based on merit and competencies, and in compliance with legal obligations.

In relation to redundancy, the Communication Pack stated:

Q: Will there be redundancies? How many, where and when can we expect the first cuts?
A: We anticipate there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the consortium has guaranteed to all staff that all existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made it clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the redundancy policy and practice from the consortium. To find out more about your local ABN AMRO policies please contact your local HR representative.
Additionally, the consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly.

There is no doubt that these announcements were made to the staff of AAAH, and that managers (both line managers and Human Resources – HR – managers) were encouraged to discuss with staff, to the extent necessary, the matters stated. That appears from some “internal communication guidelines” within the Communication Pack itself:

Internal communication guidelines
Avoid written communication: The legal constraints on what can and cannot be said are onerous and anything written must be signed off by Group Communication and Group Legal. Until otherwise advised, stick to verbal communication based on the information contained within this pack.
Place emphasis on listening and discussion: With no new news to share your emphasis should be on creating a forum for people to discuss the information and raise their questions. Allowing people to voice their immediate concerns will help then digest the details and also move through the process.
Resist the urge to speculate: Stick to the key messages and information outlined within this pack. If you don’t have the information or answer to a question it’s OK to say “I don’t know” and will get back to your team.
Escalate key issues and questions: FAQs will be updated regularly on the Transition site but for them to be meaningful we need to know which questions are being asked by your teams. This information will also help inform tailored and targeted communication activities. Please email the Communications Team with any feedback.
Be mindful of your actions: People will be looking to you for cues as how to react and behave. Pay special attention to what you do and say, informally as well as formally as people will read much more into your behaviour than usual.

Although the Communication Pack stated AA Group’s understanding of the consortium’s “guarantee” in relation to existing redundancy policies and practices, it does not appear that, at least initially, the AAAS redundancy policy changed from being a closed policy to one that was made available on the intranet, or otherwise accessible to employees. On the contrary, it was not for another year or more that the policy was made available on the intranet. When it was, all references to ex gratia payments (on account of bonus) had been removed.

The real issues in dispute

I set out the parties’ joint statement of the real issues:

Joint Statement of Real Issues for Determination
Redundancy Policy issues
1   Were the terms of AAAH’s redundancy policy expressly incorporated into Mr James’ contract of employment?
2   Were the terms of AAAH’s redundancy policy incorporated into the plaintiffs’ contracts of employment by the course of dealing referred to in paragraph 22 of the Commercial List Statements?
3   Were relations between each of the plaintiffs and ABN AMRO Services conducted from at least September 2007 on the basis of a mutual understanding, encouraged by the making of the representations pleaded in paragraph 17 of the Commercial List Statements that, if they were retrenched during the period of two years after 10 October 2007, they would be treated in accordance with the redundancy procedures, plans, policies and practices of ABN AMRO Services, as those procedures, plans, policies and practices existed on 10 October 2007. If so, is ABN AMRO Services now estopped from departing from the premise that, if the plaintiffs were retrenched during a period of 2 years from 10 October 2007, they would be treated in that way?
4   Was ABN AMRO Services required by the terms of the redundancy policy to act fairly and equitably in its treatment of employees being retrenched?
5   Did ABN AMRO Services act fairly and equitably in its treatment of the plaintiffs in relation to their retrenchment?
6   Was ABN AMRO Services required by the terms of the redundancy policy to make a severance payment to employees being retrenched?
7   Was ABN AMRO Services required by the terms of the redundancy policy to give consideration, in good faith, to the making to an employee being retrenched of a severance payment or an ex gratia payment up to a pro rata amount of the average of that employee’s prior two years bonuses?
8   Did ABN AMRO give consideration, in good faith, to the making to Mr McKeith pursuant to the redundancy policy of an ex gratia payment up to a pro rata amount of the average of his prior two years bonuses?

9   Did the redundancy policy permit ABN AMRO Services to require, as a condition of the making of a severance or ex gratia payment, that Mr James execute a deed of release? If so, was the release required of Mr James in September 2008 a release falling within the terms of the policy?
10   Did the redundancy policy permit ABN AMRO Services to require that, as a condition of the making of a severance payment, that Mr McKeith execute a deed of release? If so, was the release required of Mr McKeith in December 2008 a release falling within the terms of the policy?
11   Did ABN AMRO Services apply to the plaintiffs the redundancy procedures, plans, policies and practices of ABN AMRO Services as they existed on 10 October 2007? In particular, did ABN AMRO Services have a policy, practice, plan or procedure as at 10 October 2007 of:
(a)   Making severance payments to Director or Executive Director level employees being retrenched in accordance with the formula in the redundancy policy?
(b)   Giving individual consideration in good faith to the making to such employees of an ex gratia payment based on a pro rata amount of the average of that employee’s prior two years bonuses?
(c)   Making ex gratia payments to such employees, based on a pro rata amount of the average of that employee’s prior two years bonuses?

12   Were representations made to Mr McKeith in relation to the redundancy procedures, plans, policies, practices and payments which would apply to him as an employee of ABN AMRO Services if he was retrenched in late 2008 or early 2009? If so, did Mr McKeith rely on any such representations to his detriment and is ABN AMRO Services estopped from departing from the premise that, if Mr McKeith were retrenched he would be treated in a manner consistent with those representations?
13   Was a promise made to the plaintiffs by RBS and RFS that they would ensure that, if the plaintiffs’ employment was terminated by reason of redundancy within two years of 10 October 2007, they would have applied to them the redundancy procedures, plans, policies and practices of ABN AMRO Services as those procedures, plans, policies and practices existed as at 10 October 2007?
14   Was that promise supported by any consideration by the plaintiffs?
15   Did RBS or RFS fail to ensure that the plaintiffs had applied to them the redundancy procedures, plans, policies and practices of ABN AMRO Services as those procedures, plans, policies and practices existed as at 10 October 2007?
16   What loss or damage was suffered by the plaintiffs?
Appointment promise issues
17   Was a promise made to Mr James by RBS and RFS that they would ensure that he would be considered for positions in the new organisation created by the merger by a fair appointment process based on merit and competencies?
18   Was that promise supported by any consideration by Mr James?
19   Did Mr James rely on that promise to his detriment and are RBS or RFS now estopped from departing from that premise?
20   Was Mr James considered for the position of Chief Executive Officer of the organisation created by the merger of RBS Australia and AAAH by a fair appointment process based on merit and competencies?
21   Did Mr James suffer any loss or damage as a result of any failure of RBS and RFS to ensure that he was considered for the position of Chief Executive Officer of the organisation created by the merger of RBS Australia and AAAH by a fair appointment process based on merit and competencies?
22   If so, what is the quantum of that loss or damage?

It will be noted that some of the issues referred to “pleadings” in the respective commercial list statements. To the extent that it is necessary to do so, I will set out or summarise those quasi-pleadings when discussing the particular issues.

First issue: incorporation of the redundancy policy into Mr James’ contract of employment

The redundancy policy

I set out the terms of the redundancy policy, as it applied in 2007 and up until Mr James was “made redundant”:

REDUNDANCY POLICY
This policy will take effect on and from July 2001 and provides principles and guidelines to follow in the event that an individual or group of staff is made redundant.
Guiding Principles
In all cases where redundancy arises, staff will be treated fairly, equitably and consistent with the organisations values.
ABN AMRO will consider alternative measures before making a staff member redundant.
ABN AMRO will provide support, either through outplacement counselling or by providing access to the Employee Assistance Program where appropriate.
The HR Department is responsible for the administration of all redundancies.
Circumstances when this Policy Applies
Staff members may be made redundant in the following circumstances:
• Staff reduction due to technological change or restructure of work that is materially different to the current role.
• Closure or relocation of a business unit where the work is no longer required to be performed.
• Internal firm reorganisation or restructure resulting in closure of the staff member’s workplace and a diminishing need for the staff to do the available work.

Circumstances when this Policy will Not Apply
A redundancy will not arise in circumstances where a transfer of employment takes place (the employer changes but the work and the terms of employment remain materially the same).
Redundancy will not be used to manage poor performers out of the organisation.
Process & Procedures
In any of the circumstances identified above, the line manager and the Business Unit Head will consult with the relevant HR Adviser to identify those staff that may be eligible for redundancy.
The first step will be to establish whether redeployment is possible. Redeployment will be offered when there is a match between the skills of an individual and those required of a vacant role. Where the role is in another business unit, the relevant business unit head will be consulted and the transfer will only take place if all parties agree.
Where redeployment is not possible, the Payroll Manager will prepare a redundancy schedule.
The HR Adviser will work with members of the HR team to prepare a redundancy schedule based on the terms of this policy, taking into account length of service. The schedule is discussed and agreed with the line manager and the business unit head.
In cases where outplacement or any other special provisions are to be included, there will be set out in an attached letter. The HR Adviser will prepare the Deed of Release. The HR Adviser will notify IT to ensure that the staff member’s access to Notes and other systems is terminated within the required timeframe and notices circulated.
The time and date for announcement to the staff member is set and the line manager/business unit head will be present when the HR Adviser.
At the meeting, the staff member will be provided with advice on the terms of the redundancy, final payment and tax liability as per the schedule and the Deed of Release. The Deed of Release should be signed and returned to HR before the final payment is made.
The staff member will also return all company property (security pass, laptop, phone, pager, IT fob and Amex card). All items will be checked off against issued property and the checklist will be completed and placed on file.
Where the staff member has a staff housing loan, the interest rate on the loan will immediately be adjusted to reflect the FBT benchmark rate and a grace period of three months will be available to arrange re-financing of the loan.
Where a staff member has a vehicle/s packaged through a novated or associated lease or other package items such as parking or vehicle running expenses deducted from salary, all accounts will be settled as at the effective termination date. The staff member will be responsible for organising to have the novation agreement change with the lease finance provider.
The HRA will check with the Remuneration team to establish if the employee is a member of the share scheme. If so, the shares will vest immediately on termination and the price will be established by taking an average over the 5 trading days immediately prior to termination date. The Remuneration team will assist with calculations and the payment will not form part of the ETP but be paid gross.
At the time of exit, costs of packaged items owing will be determined, any pre-paid or allocated costs will be adjusted and any outstanding liabilities including FBT will be settled from the termination payment.
The HR Adviser will also arrange for an exit interview to take place either immediately following the announcement to the staff member or at a suitable time that can be agreed.
A copy of the final documentation will be provided to the Payroll Manager to prepare the final payment and to terminate the employee on the WorkForce system. Information will also be placed on the staff member’s file prior to it being placed in the inactive employee section.
Calculating Redundancy Terms
Redundancy terms will be calculated based on the table below to determine notice and severance periods. Important points to note are:
• Redundancy terms will be calculated on the package value inclusive of all superannuation but exclusive of any bonus earned in the prior year
• The notice period will generally be 4 weeks unless otherwise stipulated in the contract of employment
• An additional week will be added to the notice period for staff aged over 45
• Severance will be pro-rated based on part years completed, 1 additional week for each quarter worked
• Part time staff will have severance calculated based on % of EFT
• The redundancy payment will generally be capped at 52 weeks with the provision to increase to 78 weeks maximum for staff at Director or above or where the staff member is over 55 years of age. Extension of the cap above 52 weeks will be at the discretion of the business unit head and the HR Director.
• Accrued annual leave will be included in the calculation and long service leave will be included only where the staff member has 5 or more years of continuous service. Accrued sick leave is not included in the calculation.

Component Calculation

Values

Salary

● Salary will be calculated from the last pay date to the termination date

Notice Period

● Four (4) weeks unless otherwise stipulated in employment contract

● Additional week if employee over 45 years of age

Severance

● Four (4) weeks for the first full or part year and four (4) weeks for each completed year of service thereafter

● For employees with service less than two (2) years, severance will be a minimum of eight (8) weeks

● One (1) week for each quarter in a part completed year of service

Leave

● Accrued annual leave will be calculated and paid to the termination date

● Long service leave will be paid where the employee has more than five (5) years of completed service

● Accrued sick leave is not paid

Redundancy Cap

● Payments will be capped at fifty two (52) weeks

● May be extended to seventy eight (78) weeks if Director or above and/or over 55 years of age with sign off by business unit head and Director HR

● May be extended to seventy eight (78) weeks if Director or above and/or over 55 years of age with sign off by business unit head and Director HR

Outplacement Support

● Outplacement support will be determined in consultation with the business unit manager and will depend on level and years of service

Ex-gratia Payments

● Depending on circumstances, ex-gratia payments may be included in the calculation to a maximum based on the following formula:

(average of prior 2 years bonus)

● Number of months worked in current year

Component Calculation	Values
Salary	● Salary will be calculated from the last pay date to the termination date
Notice Period	● Four (4) weeks unless otherwise stipulated in employment contract ● Additional week if employee over 45 years of age
Severance	● Four (4) weeks for the first full or part year and four (4) weeks for each completed year of service thereafter ● For employees with service less than two (2) years, severance will be a minimum of eight (8) weeks ● One (1) week for each quarter in a part completed year of service
Leave	● Accrued annual leave will be calculated and paid to the termination date ● Long service leave will be paid where the employee has more than five (5) years of completed service ● Accrued sick leave is not paid
Redundancy Cap	● Payments will be capped at fifty two (52) weeks ● May be extended to seventy eight (78) weeks if Director or above and/or over 55 years of age with sign off by business unit head and Director HR ● May be extended to seventy eight (78) weeks if Director or above and/or over 55 years of age with sign off by business unit head and Director HR
Outplacement Support	● Outplacement support will be determined in consultation with the business unit manager and will depend on level and years of service
Ex-gratia Payments	● Depending on circumstances, ex-gratia payments may be included in the calculation to a maximum based on the following formula: (average of prior 2 years bonus) ● Number of months worked in current year

It is common ground that Messrs James and McKeith were at the level of “Director or above” for the purposes of the redundancy policy.

Terms of Mr James’ employment contract

Mr James was employed pursuant to an express written agreement, constituted by a letter of offer dated and expressed to be effective from 1 January 2007, and presumably accepted by him on or about that date. Mr James had in fact been employed since May 1997 and, as the offer made clear, what was negotiated in January 2007 was a “revised contract”.
The contract contains the following relevant provisions:

Remuneration
Your total remuneration for this position will be $500,000 per annum gross, paid monthly.
Your total remuneration includes your salary, the minimum contribution required under the Superannuation Guarantee Act and Fringe Benefits Tax. Salary levels are reviewed on a regular basis at the discretion of ABN AMRO and any change may take into account factors including cost of living increases and individual performance levels.
ABN AMRO conducts performance reviews with all staff and, as a condition of your employment, you are required to participate.
In addition, you are eligible to participate in ABN AMRO’s discretionary bonus scheme. All bonus payments are subject to being in our employment and not working out a period of notice at the time payment is due. They are not regarded as being part of your total remuneration.
Any bonus payment will also be subject to statutory deductions and may be delivered subject to the thresholds and rules of any incentive or deferred award programme(s) being operated by ABN AMRO as amended or substituted from time to time.
Your total remuneration and any bonus payments are for all of your working hours, including hours worked in excess of your ordinary hours of work.
Please note that all information regarding your total remuneration and any bonus payments is confidential.
…
Termination
Either party may terminate the employment by the giving of twelve weeks notice in writing to the other party. ABN AMRO may elect to make a payment in lieu of such notice equal to your total remuneration for the balance of your notice period. However, in the case of misconduct, your employment may be terminated by ABN AMRO without notice or payment in lieu of notice.
On termination, you will be required to return all items of property belonging to ABN AMRO which are in your possession before your final payment will be processed.
ABN AMRO Policies
You agree to be bound by the policies of ABN AMRO as may exist from time to time. You acknowledge and accept that it is the prerogative of ABN AMRO to vary, change or terminate existing policies as well as to devise and introduce new policies.
ABN AMRO Australia operates in a Smoke Free Environment and is an Equal Opportunity Employer.
…
If you consider any of these terms to be unfair or unreasonable, please feel free to discuss them with us before signing this letter. Otherwise, please sign and date the attached copy of this letter and return the signed copy to us within seven days as evidence that you accept these terms and conditions. If you have any questions or would like any further information please do not hesitate to contact us to discuss the details.

The parties’ submissions

Mr West of Queen’s Counsel, who appeared with Mr Steele of Senior Counsel for the plaintiffs, submitted that, by reason of the letter’s provisions dealing with “the policies of ABN AMRO” (AA Policies), Mr James’ contract of employment incorporated, as having contractual effect, those policies as they existed from time to time. Those policies included, Mr West submitted, the redundancy policy.
It was clear Mr West submitted, that the letter of offer was intended to be a serious document, the acceptance of which would involve legal consequences. The first proposition may be accepted.
Mr West submitted, further, that by agreeing to be bound by AA Policies from time to time, Mr James both undertook an obligation to comply with whatever in fact those policies might be from time to time, and signified that he had accepted an offer from AAAS that it also, as employer, would be bound by AA Policies from time to time. Mr West relied on what the High Court of Australia (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) had said in Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at [40] (I omit citations):

This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

Mr Sheahan relied on the fact that the redundancy policy was a closed policy, not available to employees as of course (as other policies were). He relied, further, on the facts that: the policy was not provided to Mr James when the offer of employment was made; Mr James was not required to read it; and Mr James was not required to acknowledge it individually. Mr Sheahan submitted that those facts spoke against ascribing contractual effect to the redundancy policy.
Further, Mr Sheahan submitted, the contract of employment contained no promise by AAAS to be bound by any AA Policies from time to time. (I should say that it is not in dispute that the redundancy policy fell within the class of “the policies of ABN AMRO” for the purposes of the contract of employment.)

Decision

In my view, the redundancy policy did have contractual effect as between Mr James and AAAS. It acquired that contractual effect because, as was submitted for Mr James, it was incorporated into the contract of employment between them.
I accept, as Mr Sheahan submitted, that there are indicia to the contrary:

the policy was a closed policy, not made available to employees; at most, they would be told of its existence and that it applied to them; they would not be told “the mechanics or the components of that” (see Ms McArdle at T185.33-34);

the policy stated that it “provides principles and guidelines to follow in the event that an individual or group staff is made redundant”; and

the policy contained an aspirational statement as to the way in that employees would be treated on redundancy: not something necessarily to be found in a document intended to have contractual effect.

However, clearly enough, one of the objectives sought to be achieved by AAAS in its contract with Mr James was the imposition on Mr James of an obligation to obey AA Policies as they existed from time to time. Looking at the matter objectively, it is difficult to conclude that the parties would have intended that one of them – the employee, Mr James – would be bound by his employer’s policies from time to time, but that the other – the employer – would not be bound.
To my mind, the undertaking by the employee to be bound by the employer’s policies as they exist from time to time makes sense only if, implicitly at least, the employer also undertakes to be bound by, or to observe, the terms of those policies. As a matter of common sense, such policies might impose obligations on either or both of the employer and the employee. Thus, they might be for the benefit of either or both of those parties.
The language of the relevant provision in the contract of employment is the language of contract: the employee agrees to be bound by the relevant policies. That language suggests that the employee is agreeing to be bound by policies as if, or because, they form part of the contract of employment. On that basis, the policies would also, and equally, bind the employer. That follows, at least as to the redundancy policy, because it sets out things to be done by each of them. The obligations are not merely unilateral.

I accept, as Mr Sheahan submitted, that the prefatory words of the redundancy policy suggest that it was intended to operate as stating “principles and guidelines” to be followed in the event of redundancy. However, when one moves past those introductory and aspirational words to the detail of the policy, it does far more than that.
First, the policy states the circumstances in which it will, and will not, apply. Where it is said to apply, the “process and procedures” to be followed are set out in terms of obligation. There is no suggestion that either employer or employee is at liberty to ignore them.
Next, the policy obliges “the Payroll Manager” to prepare “a redundancy schedule”. It is however clear that this is something to be done by “[t]he HR Adviser”. That duty is imposed on the HR Adviser as a matter of obligation: he or she “will work with” others to prepare the schedule “based on the terms of this policy…”. Perhaps the Payroll Manager was one of those with whom the HR Adviser would work to prepare that schedule.
Other applicable matters “will be set out in an attached letter”. The HR Adviser “will prepare the Deed of Release”. The language of obligation is repeated thereafter, throughout the succeeding steps contemplated by the policy.
Further, the policy sets out in terms of obligation the way in which redundancy terms are to be calculated: they “will be calculated based on the table below…”. Further, they “will be calculated on the package value… but exclusive of any bonus…”.
Thus, I do not accept Mr Sheahan’s submission, that the function of the policy was only to bind Mr James to the obligations on employees set out in it (for example, to return all company property). The terms in which those “obligations” (as Mr Sheahan described them) are expressed are the same terms used to spell out what it is the employer should do: just as the employee “will” do the various things specified for employees to do, so, too, the employer “will” follow through various steps said to be incumbent on the employer to perform.
Mr Sheahan submitted that the redundancy policy did not confer a benefit of a kind ordinarily found in employment contracts. I do not know if that submission was based on some a priori assumption as to what employment contracts generally, or invariably, provide. There was no evidence of any common form of contract of employment, either in the world of investment banking or more generally.
However, what can be said about the redundancy policy is that it deals, among other things, with the discharge of obligations that in my understanding generally are to be found in employment contracts: the payment of salary up to the date of termination; the payment of salary on account of notice; and payments on account of accrued annual leave and (in some circumstances) long service leave entitlements.
It may be – I do not know – that severance payments and payments on account of bonus expectations are not found in employment contracts generally. As I have said, there is no evidence on the point. But I am not prepared to assume that such provisions are not to be found, either generally or at least from time to time, in the contracts of people employed to work in the business of investment banking. Nor am I prepared to assume that they are not to be found, either ordinarily or from time to time, in the employment contracts of those employed at a very senior level in large commercial enterprises. To the extent that one may take notice, judicial or otherwise, of what appears in the press, a contrary impression might be gained; but I put no reliance on this observation.
A case discussed in submissions was the decision of the Full Court of the Federal Court of Australia in Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193. The respondent employee in that case had worked in the same business, although for different employers, for many years. The changes of employer occurred because the business in which the employee worked had been sold from time to time, and because of corporate reorganisations.
After the last relevant change of employer, and after the employee had been working for the new employer for some five months, the employer wrote to the employee offering him a position as “Senior Technician with our company at our Melbourne Plant”. The letter had not been the result of any negotiation. Its purpose was to formalise the employment relationship then in place.
The employee accepted the letter by signing a copy, underneath a statement whereby he agreed and accepted employment with the employer on the terms and conditions outlined in the letter. One of those terms or conditions was that the employee agreed “to abide by all company policies and practices currently in place, any alterations made to them, and any new ones introduced”.
The primary judge held that redundancy policies contained in a manual, which policies did not come into existence until after the letter was signed and returned, were incorporated into the contract of employment. The Full Court by majority (North and Mansfield JJ, Lindgren J dissenting) upheld the decision of the primary judge.
North J noted at [97] “that the major part of the manual was devoted to specifying items which made provision for the benefit of the employee”. His Honour said at [98] that “[i]n the main the provisions are expressed in the language of obligation”. I interpose to note that what his Honour regarded as “language of obligation” was very similar to the language in Mr James’ contract. For example, in Riverwood, there was a provision:

When an employee is called for jury duty, the company will make up the difference between the jury fee and the ordinary rate of pay for the hours or days lost.

Further, North J concluded at [101], [102], although there were aspects of the manual that imposed “minor administrative obligations on the employee”, the principal concern of the manual at least was “laying down employees’ entitlements”.
North J (at [108]) considered that it followed, from the ordinary English meaning of the expression “abide by”, that “the natural meaning of the term under consideration, viewed in the context in which the contract of employment was made, imposed upon [the employer] an obligation to make the redundancy payments in accordance with the provision in the manual”.
North J was not concerned at the prospect that the employer could unilaterally and to the detriment of the employee vary the benefits provided under the manual. His Honour said at [111]:

In any event, the purported agreement to abide by alterations or additions to the policies and practices of Riverwood did not create a legally binding obligation on Mr McCormick to accept any unilateral alteration or addition. A purported agreement which leaves the content of the agreement entirely at the discretion of one party is not contractual in nature. Any alteration or addition to the company policies and practices could only achieve binding contractual effect if there was separate agreement to such alterations or additions, either by way of variation of the existing agreement or by way of entering into a new agreement.

It would follow, I think, that his Honour’s reasoning was to this effect:

the employee was entitled to receive, and the employers was bound to give, the benefit of policies from time to time applicable;

the employer could not use the power to make and vary policies as a means of altering unilaterally the terms of the contract of employment; and

any alteration to the terms of employment would require bilateral agreement.

Mansfield J at [146] referred to dictionary meanings of “abide by”, including “to be bound by” or “to comply with”; or “to accept the consequences of”; or “to accept and continue to observe…”.
Those meanings led his Honour to the view, at [147], that the expression “abide by” could “encompass the circumstance where there may be an existing or proposed bilateral or multipartite mutual obligation, which one person agrees to accept or adhere to”.
At [150], Mansfield J expressed his agreement with the reasoning of the primary judge. The primary judge had concluded that the presumed (objective) intention of the parties, in relation to policies of the employer in the manual as they applied to the employee, was that the employee was contractually entitled to the benefit of those policies.
It may be accepted that the language of the contract under consideration in Riverwood is not the same as the language under consideration in Mr James’ case. However, as Mansfield J indicated at [146], there is an overlapping of meaning between the expressions “to abide by” and “to be bound by”. That overlapping meaning is that the person who agrees to abide, or to be bound by, certain policies agrees to accept them and to perform them in so far as they fall on him or her to be performed.
I accept that the Court’s task, in construing a contract, is to decide what, objectively, the parties intended, as it appears from, among other things, the language that they employed. It seems to me to follow that although dictionary definitions cannot be decisive of the outcome, nonetheless the ordinary English meaning of words may provide some guidance to ascertaining that presumed objective intention.
One of the dictionary meanings of “bind” is “to subject to a specific legal obligation” (Oxford English Dictionary online). Translating that into the passive mode, one could say “to be subject to a specific legal obligation” or “to become subject to a specific legal obligation”. Indeed, the same source says, of the expression “to be bound” that it signifies “to be under obligation, to have it as a duty, moral or legal, to do something”.
However, the expression “to be bound” must be considered and construed in its context. That context is to be found in the letter of 1 January 2007. With more specificity, that context is the offer of (continued) employment set out in that letter.
The letter commences by referring “to recent discussions”. It states the delight of its signatories “to confirm your current terms and conditions of employment with [AAAS]”. However, the last paragraph of the letter indicates that Mr James was free to negotiate, in particular as to any terms that he considered “to be unfair and unreasonable”. If he did not wish to do so – that is to say, if he accepted the terms offered – he was asked to “sign and date the attached copy of this letter and return the signed copy to us… as evidence that you accept these terms and conditions”.
So viewed, it seems to me that the letter should be regarded as containing an offer by AAAS of the terms on which Mr James would continue to be employed in the position of chief executive officer (of AAAH). Those terms and conditions included:

terms and conditions that Mr James was obliged to perform; and

terms and conditions that AAAS was obliged to perform.

The letter dealt with the subject of “Termination”, and with obligations on termination. However, it is clear from the redundancy policy (which both existed and was known to exist at the time the letter was proffered and accepted) that what was said as to “Termination” did not exhaust the topic. Specifically, it did not deal with the question of what might happen, over and above the limited provision set out, should Mr James become (or be made) redundant. AAAS knew this. So too, in my view, did Mr James.
I accept that at all times relevant to Mr James, the redundancy policy was a closed policy and not one to which, in the ordinary way at least, employees would gain access. It is nonetheless the fact, as to Mr James, that he knew of the existence of the policy. In general terms, he had some knowledge that in some circumstances the policy might provide for an employee made redundant to receive an ex gratia payment. His knowledge was derived from his role as a “line manager” who had discussed and agreed the redundancy schedule with the relevant “HR Adviser” in specific cases.
Thus, to the common knowledge of AAAS and Mr James as at 1 July 2007, what the contract of employment stated as to payments that might be made on termination of employment did not exhaust the universe of known (at least as to their existence) available possibilities.
Further, a significant purpose of the redundancy policy was to provide for benefits, of the various kinds described in it, to be paid to employees who were made redundant. There is obvious value to an employer in having a defined code to deal with its monetary obligations where an employee, through no fault of his or her own, is retrenched because his or her position has become redundant. There is, equally, an obvious advantage to the employee in that unhappy situation.
In those circumstances, the proposition that the employee might be bound to accept whatever the redundancy policy provided for him or her in the circumstance or redundancy, but that the employer was not bound to offer that provision, does not strike me as one which the Court should be quick to adopt. Particularly as to ex gratia payments, the employer’s position is sufficiently protected because the making of such a payment is said expressly to be “[d]epending on circumstances”.
Even if the policy be regarded as having contractual force, the making of such an order is clearly discretionary. To put it another way, on this analysis AAAS was not obliged to make a redundancy payment regardless of circumstances. It was however obliged to consider in good faith whether or not to do so.
The letter of 1 July 2007 was an offer of the terms on which AAAS would (continue to) employ Mr James. On that approach, the offered terms included its policies, or more accurately AA Policies, as they might exist from time to time. When Mr James accepted the offer, he was bound by its terms; and so was AAAS. More specifically, AAAS became bound to offer to Mr James the benefit of AA Policies from time to time, just as Mr James became bound to observe them.
The evidence does not make it crystal clear that the redundancy policy was a policy of AAAS. However, as I have said, the hearing proceeded on the basis (relevantly for present purposes) that it was an AA Policy: a policy of the kind referred to in the “policies” clause of the letter of offer. And again as I have said, the redundancy policy had been in force for about six years as at 1 January 2007.
I conclude that the redundancy policy, as it stood at the time when Mr James’ employment was terminated, was incorporated into his contract of employment. In that character, it was binding alike on Mr James and AAAS.

Second issue: incorporation by a course of dealing

The issue as stated refers to para 22 of the Commercial List Statements to identify the course of dealing. However, that paragraph in each case does no more than incorporate other paragraphs: specifically, paragraphs 11 to 14 and 17 to 21.
To give content to issue 2, I set out paras 11 to 14 and 17 to 21 of Mr James’ Commercial List Statement.

Redundancy Policy incorporated into contract of Employment by course of dealing
11. From time to time during his employment, representations were made to Mr James to the effect that there was a redundancy policy which applied to employees of ABN AMRO Services whose employment was being terminated by reason of redundancy and which contained provision for severance payments to be made to such employees.
Particulars
The representations were made to Mr James by members of the Human Resources department of ABN AMRO Services from time to time in the course of dealing with the position of employees whose employment was being terminated by reason of redundancy.
12. The representations referred to in paragraph [11] were made by or on behalf of ABN AMRO Services.
13. From time to time during his employment, to the knowledge of Mr James, severance payments were made by ABN AMRO Services to employees whose employment was being terminated by reason of redundancy, pursuant to the terms of the redundancy policy.
14. On around 29 May 2007, Banco Santander S.A. (a company incorporated in Spain), Fortis N.V. (a company incorporated in the Netherlands), RFS and RBS (together, the Consortium) announced their intention to make an offer, acting through RFS, for the entire issued and outstanding capital of ABN AMRO Holdings, subject to certain conditions (the Consortium’s bid).
…
17. From around July 2007, representations were made to Mr James that there were redundancy procedures, plans, policies and practices which would apply to employees of ABN AMRO Services whose employment was terminated by reason of redundancy, on which those employees could rely.
Particulars
The representations were partly express and partly implied. To the extent that they were express, they were in writing and were made by:
(a)    the publication to employees of ABN AMRO Services, on around 30 July 2007, of a Press Release by ABN AMRO Holdings entitled “ABN AMRO – Offer Update” containing the words:
“The Boards welcome the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to redundancy procedures”;
(b)    the publication on around 16 September 2007 of a Press Release by ABN AMRO Holdings entitled “ABN AMRO publishes shareholders’ circular including reasoned opinion of the Boards” containing the words
“The ABN AMRO Boards also noted that commitments made to employees and trade unions in respect of employee’s rights and respecting of existing agreements including redundancy plans.”
and:
“The ABN AMRO Boards welcomed the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to social plans, collective labour agreements and redundancy procedures”;
(c)   the publication on around 20 September 2007 of a copy of the presentation slides for a presentation by the Chairman of the Managing Board of ABN AMRO Holdings to an Extraordinary General Meeting of Shareholders which included the words (at slide 16), under the heading “Proposed Corporate Governance and impact on employment Consortium Offer” of the words:
“global guarantee that all existing redundancy plans will be extended at least at same level for a period of two years after the merger becomes unconditional”;
(d)    the publication on around 8 October 2007 of a document entitled “AU_NZ Communication Pack Acquisition Announcement – Approved materials to be used when communicating with staff” containing the following question and answer:
“Q: Will there be redundancies? How many, where and when can we expect the first cuts?
A: We anticipate that there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the consortium has guaranteed to all staff that existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the redundancy policy and practice from the consortium. To find out more about your local ABN AMRO policies please contact your local HR representative.
Additionally, the consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly.”
To the extent that the representations were implied, the implication arose from the publication of the aforementioned express written representations in the context of the facts pleaded in paragraphs [11] to [13], together with the absence of any reservation, qualification or caveat in relation to the applicability of those representations to employees of ABN AMRO Services.

18. The representations referred to in paragraph [17] were made by or on behalf of ABN AMRO Services.
19. Further and in the alternative, the representations referred to in paragraph [17] were made with the knowledge of ABN AMRO Services and without contradiction or qualification by it.
20. On around 3 September 2008, representations were made to Mr James that, in the event that his employment was terminated by reason of redundancy, he would be entitled to severance payments calculated in accordance with a redundancy policy of ABN AMRO Services that applied to him.
Particulars
(a)   The representations were partly oral and partly written.
(b)    To the extent that the representations were oral they were made in a conversation between Mr James and Ms Amelia McArdle on behalf of ABN AMRO Services to the effect that Mr James would be entitled on termination of his employment by reason of redundancy to severance payments in accordance with a document entitled “Joe Bloggs, Final Payment To: 09-Sep-08 #1037”, which payments had been calculated in accordance with normal practice in such cases.
(c)   To the extent that the representations were written, they were made by:
the provision to Mr James by Ms McArdle of a copy of the aforesaid “Joe Bloggs” document; and
the provision to Mr James by Mr John McCormick of a form of Deed of Release dated 2 September 2008 between Mr James and ABN AMRO Services, which deed provided for the making of severance payments to Mr James calculated in accordance with the “Joe Bloggs” document.
21. The representations referred to in paragraph [20] were made by or on behalf of ABN AMRO Services.

Mr McKeith’s Commercial List Statement is to similar effect, although the particulars given of paras 11, 17 and 20 are different. I set out those particulars (omitting what appears to be a duplication of one matter):

11. …
Particulars
The representations comprised:
(a)    statements made orally to Mr McKeith by representatives of ABN AMRO Services from time to time in the course of dealing with the position of employees whose employment was being terminated by reason of redundancy;
(b)   the circulation among employees of ABN AMRO Services, including Mr McKeith, from around June 2007, in the context of the prospect of a pending takeover of the ABN AMRO group of companies, of copies of a document entitled “Redundancy Policy” which in its terms took effect on and from July 2001; and
(c)   a statement was made orally to Mr McKeith by Ms Kate Naughton, the Human Resources executive for the Global Markets business, in around June 2007, to the effect that the aforesaid document was the current policy of ABN AMRO Services which applied in the case of retrenchment of employees of ABN AMRO Services.
…
17. …
Particulars
The representations were partly express and partly implied. To the extent that they were express, they comprised:
(a)    statements made orally from time to time by Mr Gary Page, the Global Head of Markets of ABN AMRO Holdings, during fortnightly telephone conference calls with the Global Markets Management Team, from around mid-2007, to the effect that under the Consortium bid, redundancy practices would stay in place for two years post the completion of the takeover and that the employees of ABN AMRO Services could be confident that the redundancy policies which were then in place would be honoured for the next two years;
(b)    a statement made orally to Mr McKeith by Mr Jeroen Drost, Asian Head of ABN AMRO Holdings, in around mid-2007 to the effect that RBS would be applying existing ABN AMRO redundancy practices for two years and would set aside a pool from which to pay out any redundancies;
(c)   the publication to employees of ABN AMRO Services, on around 30 July 2007, of a Press Release by ABN AMRO Holdings entitled “ABN AMRO – Offer Update” containing the words:
“The Boards welcome the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to redundancy procedures”;
…
[Subpara (d) appears to be a duplication of subpara (c)]
(e)    the publication on around 16 September 2007 of a Press Release by ABN AMRO Holdings entitled “ABN AMRO publishes shareholders’ circular including reasoned opinion of the Boards” containing the words:
“The ABN AMRO Boards also noted that commitments made to employees and trade unions in respect of employee’s rights and respecting of existing agreements including redundancy plans.”
and:
“The ABN AMRO Boards welcomed the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to social plans, collective labour agreements and redundancy procedures”;
(f)    the publication on around 20 September 2007 of a copy of the presentation slides for a presentation by the Chairman of the Managing Board of ABN AMRO Holdings to an Extraordinary General Meeting of Shareholders which included the words (at slide 16), under the heading “Proposed Corporate Governance and impact on employment Consortium Offer” of the words:
“global guarantee that all existing redundancy plans will be extended at least at same level for a period of two years after the merger becomes unconditional”;
(g)   the publication on around 8 October 2007 of a document entitled “AU_NZ Communication Pack Acquisition Announcement – Approved materials to be used when communicating with staff” containing the following question and answer:
“Q: Will there be redundancies? How many, where and when can we expect the first cuts?
A: We anticipate that there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the consortium has guaranteed to all staff that existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the redundancy policy and practice from the consortium. To find out more about your local ABN AMRO policies please contact your local HR representative.
Additionally, the consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly”; and
(h)   the publication in late November 2007 on the ABN AMRO intranet, under the heading “Policies and Procedures” of the words:
“Redundancy is dealt with at a country level (therefore there is no global policy). Please refer to HR policies and procedures on your HR BP for more detail. The consortium have guaranteed that all existing ABN AMRO policies related to redundancies will remain in place for a period of 2 years from 11 October 2007. Further, the consortium made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended.”
To the extent that the representations were implied, the implication arose from the publication of the aforementioned express written representations in the context of the facts pleaded in paragraphs [11] to [13], together with the absence of any reservation, qualification or caveat in relation to the applicability of those representations to employees of ABN AMRO Services.
…
20. …
Particulars
(a)   The representations were partly oral and partly written.
(b)    To the extent that the representations were oral they were made in two conversations between Mr McKeith and Ms Amelia McArdle on behalf of ABN AMRO Services to the effect that Mr McKeith would be entitled on termination of his employment by reason of redundancy to severance payments in accordance with a document provided to him at that time;
(c)   To the extent that the representations were written, they were made by:

the provision to Mr McKeith by Ms McArdle of a written advice setting out what his redundancy package would be if he were retrenched in October 2008; and

the provision to Mr McKeith by Ms McArdle of a further written advice setting out what his redundancy package would be if he were retrenched in March 2009.

The contracts in question

Before turning to the authorities, I point out that:

the contract on which Mr James sued was made on 1 January 2007, and said to be effective from that date; and

the contract on which Mr McKeith sued was made on 21 February 2005, and said to be effective from 1 January 2005.

Those dates assume some significance, in circumstances where there is no express pleading of variation. As Mr Sheahan submitted, if variation were relied upon, it would be necessary to consider (among other things) whether any consideration had been given to support the alleged variation to existing contractual terms (Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713 at [21]).

The principles and the authorities relied upon

What, precisely, the plaintiffs mean by the expression “course of dealing” is unclear. The concept was explained in their written closing submissions as being “a manifestation of an objective intention by the parties to incorporate the terms of the policy into the contracts of employment of the employees”.
The classic case of incorporation by a course of dealings occurs where parties have had numerous contractual dealings over a period of time, with each dealing effected by a separate contract. The circumstances may give rise to an inference that the parties intended or accepted that documents given by one to the other, at or shortly after the time each contract was made, were to have contractual effect. In those circumstances, it may be concluded that the terms stated in those documents should be incorporated into the parties’ contracts. That is clear from the leading English case, Henry Kendall and Sons v William Lillico and Sons Ltd [1969] 2 AC 31.
In that case, the parties had had a long history of contractual dealings. The contracts were made orally in each case. After each oral contract was concluded, one party sent to the other a document containing what it said were the terms governing the contract that had just been made. The failure of the recipient to object to those terms, as terms of the contract, justified the inference that they were incorporated into the individual oral contracts.
Lord Morris of Borth-y-Gest (at 90) stated the consequences with his customary clarity:

Over the course of a long period prior to the three oral contracts which are now in question [the purchaser] knew that when [the vendor] sold they did so on the terms that they had continuously made known to [the purchaser]. In those circumstances it is reasonable to hold that when [the purchaser] placed an order to buy they did so on the basis and with the knowledge that an acceptance of the order by [the vendor] and their agreement to sell would be on the terms and conditions set out on their contract notes to the extent to which they were applicable.

Lord Guest spoke to similar effect at 104.
Thus, in Carter, Peden and Tolhurst, Contract Law in Australia (LexisNexis, Fifth Edition, 2007), the authors say at [10-18] that:

A course of dealing occurs when the contract at issue between the parties is preceded by a series of transactions over time. Such a course of dealing may have the effect of incorporating terms into a contract.

A similar approach was taken in Hays Personnel Services (Australia) Pty Ltd v Motorline Pty Ltd [2008] QCA 375. Holmes JA, with whom Keane JA and McMeekin J agreed, said at [18] that time sheets provided by one party to the other, as part of their course of dealing prior to making the contract on which the plaintiff sued, could be regarded as incorporated into that contract. See also, to similar effect, McLure P in La Rosa v Nudrill Pty Ltd [2013] WASCA 18 at [35], [43], and Buss JA in the same case at [68].
In the present case, the plaintiffs do not allege a course of conduct prior to the making of their respective contracts, except to the very limited extent that Mr James referred to his knowledge arising from his participation, as line manager, in two redundancies. Mr James referred to two occasions which, he said, occurred in about 2001. He referred also to a third occasion in about 2006, but agreed in cross-examination that he may have been mistaken in thinking that any ex gratia payment, on account of bonus, was made on this third occasion.
It is not clear from the case pleaded for Mr McKeith that any of the matters on which he relies to support his case of incorporation by course of dealing occurred prior to the making of his contract. Certainly, in the course of cross-examination, Mr McKeith referred to occasions when he, as line manager, had been involved in redundancies. That evidence (at T144,148-149) was silent as to when it was that those events took place.
Mr West referred to three decisions which, he submitted, showed that the question of incorporation by course of dealing could not be limited in the way that the authorities to which I have referred might suggest. The cases relied upon were:

the decision of Hely J in Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301;

the decision of Austin J in In the matter ofACN 050 541 047 Ltd [2002] NSWSC 586; and

the decision of the Court of Appeal of this State in Willis v Health Communications Network Ltd (2007) 167 IR 425.

Reynolds is a difficult case. Hely J observed at [56] that the parties paid “[l]ittle attention… in evidence or argument… as to whether the ‘Termination of Employment’ policy of the respondent, or the benefits payable pursuant to that policy, were terms of the applicant’s contract of employment”. His Honour noted that, with one presently irrelevant exception, both parties had appeared to proceed on the assumption that the policy was incorporated into the contract of employment.
Hely J concluded at [62] that it was open to the Court to infer that the relevant policy had been incorporated into the contract of employment. His Honour relied on some particular facts, “and in particular from the fact that severance payments were made to the applicant in conformity with the ‘Termination of Employment’ policy without any suggestion that they were gratuitously made”.
No doubt because the parties proceeded on the assumption that the policy was incorporated into the contract of employment, Hely J did not expressly refer to the principles by which incorporation from a course of dealing may occur. Nor did his Honour discuss the point that, at least in the ordinary case, what must be proved is a course of dealing that takes place over a period of time prior to the making of the contract in suit.
In my view, the decision in Reynolds should be regarded as one that is responsive simply to its particular facts. It should not be taken as authority for a wider proposition that, absent variation, terms arising from a post-contractual course of dealing may be incorporated into that existing contract (rather than into a new contract made after that course of dealings has occurred).
To jump ahead for a moment: I add that in Willis, Tobias JA (with whom Mason P and McColl JA agreed) said at [64] that Hely J had dealt with the issue on the basis that the redundancy policy was an implied term of the contract by operation of the business efficacy rule. Although, if I may say so with respect, I am not sure that this is a correct reading of the reasons given by Hely J for deciding that the policy was incorporated into the contract of employment, it does show that the decision in Reynolds should be treated, as I have said, as one which depends entirely on its own facts.
In La Rosa, McLure P said at [43] that incorporation based on prior dealings is not the same as implication in fact or implication based on trade custom or usage. What is involved is, rather, inference based on prior conduct.
It may be that the decision in Reynolds can be explained upon the basis that Hely J held, in effect, that the relevant policy had been incorporated into the contract of employment by way of variation, with that variation being inferred from a course of dealings. That would be consistent with the analysis of North J in Riverwood referred to at [57], [58] above. If that is the correct understanding, then, given that no case of variation was pleaded or argued before me, Reynolds is of no assistance to the plaintiffs.
ACN 050 541 047 Ltd was not a case where there was an issue between parties as to incorporation of a term into a contract by a course of dealings. It was, rather, a case where the administrator of a company sought (to quote from Austin J at [1]) “either advice and directions from the court, or a declaratory order… to the effect that [the administrator] would be justified in making redundancy payments” with a certain level of priority to employees who the administrator dismissed or who, prior to the appointment of the administrator, the company had dismissed.
Austin J said at [34] that it was appropriate to give the direction sought, but not to make a declaration of right.
As is apparent from [26], [27] of his Honour’s reasons, there was evidence before Austin J that the letters of employment of the individuals in question “did not fully represent the terms and conditions of employment”. There was also evidence “that the policy and practice of the company was that employees made redundant were entitled to a payment” calculated in a certain way.
Equally, it is apparent from what Austin J said at [30], [31] that there was “[s]ome general corroboration” that the company did have such a policy and practice, and that this policy and practice had been communicated to some former employees.
Austin J referred at [26] to the decision of Hely J in Reynolds. His Honour drew from that decision the proposition that:

An entitlement to redundancy benefits, distinct from any requirement to provide notice of termination or payment in lieu of notice, may arise by implication from the employer’s adoption of a termination policy, even though the remainder of the contract of employment is in writing…

Austin J did not decide the case before him on the basis that the redundancy terms had been incorporated by a course of dealings into the contracts in question. His Honour’s decision was founded on the proposition that there had been a variation of those contracts. That too is consistent with the reasoning of North J in Riverwood.
I add that unless Austin J intended the reference to “implication” to be read as “inference” (which is what Hely J did, as appears in particular from Reynolds at [62]), then for the reasons indicated, I would respectfully disagree with his Honour’s observation that the decision in Reynolds was based on implication. Austin J referred to Reynolds at [40] to [45] in this context. I do not read those paragraphs as providing any support for the proposition that there was any process of implication in fact, as opposed to inference drawn from proved facts.
Austin J concluded at [33]:

In those circumstances the adoption of the redundancy policy, communicated to [the employees], and their continuing to work with knowledge of the policy when they might have terminated their contracts by resigning had the effect of constituting a variation of their contracts of employment, supported by valuable consideration, and therefore valid and enforceable.”

When the decision in ACN 050 541 047 Ltd is read as a whole, it does not go so far as Mr West submitted. Specifically, in my view, that decision provides no support for any proposition beyond the (in principle, incontestable) proposition that a contract may be varied by a course of dealings where there can be spelled out, from the course of dealings, a corresponding intention to vary the terms of the contract and consideration for the variation that is “offered” and “accepted”.

“Desk assessment” appears to involve no more than a review of the relevant material. It was not put that Mr James’ claims should have been reviewed “by an external provider”.

The pleaded case

The starting point, and in my view the real source of difficulty in relation to this issue, is the extraordinarily uninformative way in which the case of breach is pleaded (Commercial List Statement, para 60):

Loss
60. RFS and RBS failed to ensure that Mr James was considered for the position of Chief Executive Officer for the Australian operations of the new organisation created by the merger by a fair appointment process based on merit and competencies.

There are no particulars given of that bald assertion.

The case that was argued

In written opening submissions, Mr West put the elements of what, he said, was involved in a fair and transparent selection process based on merits and competencies as follows (para 69):

In general terms, it is submitted that such a promise, read in the context in which it was made, ought to have involved at least the following elements:
a. First, that no material (and certainly no decisive) weight was to be given to whether a candidate for a position in the merged organization was from RBS or ABN AMRO;
b. Secondly, even-handed treatment of all candidates (as distinct from affording a favoured candidate the “inside running”);
c. Thirdly, an objective, disciplined and transparent process of consideration of a candidate’s merit and competencies (as distinct from a “behind closed doors” subjective decision);
d. Fourthly, a process based on accurate and complete information (as distinct from rumour or prejudice); and
e. Fifthly, a process which accorded the candidate a fair opportunity to address any concerns about their suitability for the role that might fairly be able to be addressed by them if given the chance.

That formulation was repeated, although with some elaboration, in the written closing submissions in chief.

Outline of the parties’ submissions

Mr Sheahan submitted that it was unfair to permit Mr James to pursue the case that had been outlined, he submitted for the first time, in opening. In particular, Mr Sheahan submitted, it was unfair to do so when the alleged deficiencies in the appointment process had not been put to the relevant witnesses of the defendants: Mr McCormick and Mr Workman.
Mr West responded that it was not necessary to put to those witnesses the elements of want of fairness in the appointment process. That was so, he submitted, because the test was objective. What was required was, instead, that the Court compare what had been done with what, on a proper analysis, a fair appointment process based on merit and competencies should involve.
Beyond that opening skirmish, the submissions for Mr James descended into a mass of detail. Distilled to their elements, those submissions were that:

when Mr McCormick came to Australia to undertake a review (or due diligence analysis) of AAAH in November 2007, so as to make a recommendation on what should be done with the business, he formed an immediate although preliminary view that Mr James should not be the CEO of the merged organisation;

that view was based, among other things, on a “them and us” attitude, and was unfairly influenced by irrelevant considerations such as that the EIP, of which Mr James was (or was seen as) a principal architect, was unduly favourable to employees and disadvantageous to AAAH and, more widely, AANV;

although Mr McCormick’s initial view was not then accepted, he nonetheless continued to hold to it;

thereafter, Mr Williams was given an opportunity to put his views as to how the merged business should be run; no such opportunity was given to Mr James;

when the final decision was made, Mr McCormick’s recommendation, based as it was on irrelevant and unfair considerations, was accepted; and

Mr James had never been given an opportunity to explain the matters that Mr McCormick, in particular, thought weighed against his appointment as CEO of the merged organisation.

Mr Sheahan submitted, in outline, that:

it was significant that Mr McCormick’s initial view (formed in November 2007) was rejected;

thereafter, as contemporaneous records showed, Mr McCormick maintained an open mind, and recognised that Mr James was a strong candidate for the role;

Mr McCormick was not the sole decision-maker; the decision was taken by five very senior employees of RBS at the time, who after discussion decided that Mr Williams was the preferred candidate;

before the final decision was made, Mr McCormick had done all that was necessary in reviewing Mr James’ claims to the role, including previous performance reviews and other matters bearing on his suitability; and

the decision that was made was one that was reasonably open to the decision-makers, and did not lack any essential element of fairness or transparency; in particular, the reasons given were not spurious or irrelevant, and were held in good faith.

Decision

I hope that I do not do undue violence to the very detailed submissions put by abbreviating, so far as possible, the relevant facts. To a great extent, the material on which counsel relied is to be found in contemporaneous documents. To the extent that reliance was placed on the evidence given in chief or in cross-examination, that seems to me to have been more in the nature of giving colour to what in any event appears from those contemporaneous documents.
The starting point is that in late November 2007, Mr McCormick undoubtedly thought and recommended that Mr Williams should be appointed to the role of CEO of the merged organisation in preference to Mr James. Mr McCormick’s recommendation was discussed with other employees of RBS, including Mr Cameron, Mr Workman and Mr Crowe. His recommendation was not then accepted. A decision was made to do further work on the selection process. Whilst that was happening, Mr Workman was assigned the role of assessing what RBS should do with AAAH. The options were to break up the business and sell parts of it, or to integrate the business completely.
In April and May 2008, Mr McCormick expressed positive views of Mr James in emails to, respectively, Mr Stephen Daniels (who was the HR director for RBS’ Global Banking and Markets (GBM) business) and Mr Workman. In the first of those emails, Mr McCormick effectively recognised that Mr James and Mr Williams had equal and strong claims to be CEO of a merged business. In the second of those emails, he recognised that Messrs James and Williams were competitors “for the top slot” but that it might be necessary to seek external advice on, among other things, that role.
It is the fact, as Mr West submitted, that Mr Williams was given an opportunity to provide his views on how a merged operation might be conducted. That happened first of all in November 2007 when, as appears from an email of 19 December 2007, Mr Williams and his senior management team had assessed the AAAH business and made recommendations to Mr McCormick, who appears to have reached similar views.
The significance of that may be limited. Although Mr McCormick then held the view, and recommended, that Mr Williams should be appointed as CEO of the merged organisation in place of Mr James, that recommendation was not accepted. More significantly, in May 2008 (when, as appears from the emails to which I referred at [540], Mr McCormick was considering the competing claims of Mr James and Mr Williams), Mr McCormick, as he put it in an email to Mr Workman, “asked Steve [Williams] to put his best thoughts down within a week on how he would approach an integration and drive the combined business – numbers, people, governance and clients”.
Mr Williams appears to have accepted that opportunity – no doubt, with some enthusiasm. On 30 May 2008, Mr McCormick sent an email to Mr Workmen attaching “an integration plan for AAAH in the event that we don’t sell it”. He said that the attached document “has had input from and is supported by” four people – including himself, Mr Richard Place, and Mr Williams.
Mr James was not given a similar opportunity to put his views. On the contrary, as appears from emails in April concerning appointments to staff positions in the merged operations, Mr James appears either to have been left out of what he thought was the necessary consultative process or, at the least, perceived that he had been left out.
On any view, the process that had been followed in relation to the selection of the CEO was more detailed than the communicated HR principles seem to have required. Mr McCormick had spent some nine hours’ time with Mr James in November 2007, and had worked with him thereafter on the sale/integration process. I note that, whilst sale was an option and thus there was a possibility that the sold-off AAAH business might be a competitor of RBS Australia, communications between Messrs McCormick and James were, properly, less detailed than might otherwise have been the case.
Mr McCormick had ample opportunity to observe Mr James in the performance of his role, and to make an assessment of Mr James’ strengths and weaknesses. Equally, Mr McCormick had ample opportunity to make an assessment of Mr Williams’ claims to the CEO’s role, including Mr Williams’ strengths and weaknesses.
Were it not for the opportunities given to Mr Williams to set out his thoughts on how a merged business could operate, I would have no doubt that the selection process was as fair and transparent as it needed to be, and that it took adequate account of the strengths and competencies of the two candidates for the role of CEO.
It is apparent from the documents that of the five decision-makers, four at least appear to have had an open mind on the subject, and to have given adequate consideration to the respective claims of Messrs James and Williams to be CEO of the merged organisation. As to the fifth – Mr McCormick – there can be no doubt that he had preferred Mr Williams at the outset. When it came time to make a decision, Mr McCormick either adhered or returned to that initial view. But the emails to which I have referred show that in April and May 2008, Mr McCormick recognised that Mr James had a serious claim to the role, which required consideration.
On balance, I do not think that the opportunity given to Mr Williams in November 2007 is of itself proof of unfairness. At that time, Mr Williams was the head of RBS Australia. It was natural that he should be asked how he saw his organisation fitting in with either all or some parts of the operations of AAAH. Nor do I think that the evidence justifies a conclusion that whatever Mr Williams said at the time had any particular influence on Mr McCormick’s thinking in April and May 2008. On the contrary, Mr McCormick’s thinking appears to have been based on other factors.
It could be said that there is a hint of want of transparency. But in view of all the other matters to which I have referred, that of itself goes nowhere.
Quite different considerations apply in respect of the opportunity given to Mr Williams in May 2008. At that time, as I have said, Mr McCormick recognised that there were strong competing claims that required consideration. He gave an opportunity to one of the claimants to advance his case by putting forward what he would do with the merged business – how he would run it and what he hoped it would achieve. He gave no such opportunity to the other candidate.
I do not think that the opportunity given to Mr Williams, but denied to Mr James, was insignificant. On the contrary: it is difficult to think of anything more important (leaving aside personal or moral failings, of which there is no suggestion in this case). If one is considering who is to head a merged business and how that merged business is to function, it would seem to me to be axiomatic that the candidates for the role should each be asked how they would approach the task were they to be appointed, and how they would seek to direct and operate the merged business.
It is unclear however whether the advantage that Mr Williams was given in this respect had any significant impact on the decision that ultimately was made. The factors that Mr McCormick saw as being important were:

in his view, the business of AAAH under Mr James’ leadership had been focused on operations within Australia; and Mr James did not have experience in working within an integrated global banking operation (nor, in Mr McCormick’s view, did Mr James have any great interest in working in that way). Mr McCormick thought it was important that the merged operations in Australia should function as part of the regional and global GBM business of RBS. Mr McCormick thought that Mr Williams was better suited to doing this, because of his experience of working within the GBM business. Mr McCormick had regard to Mr James’ performance reviews, which he said supported his opinion on this point (and, objectively, they did).

Mr McCormick took an adverse view of the way in which aspects of AAAH’s business had been run. It was in Mr McCormick’s view highly leveraged; a substantial part of the net profit after tax was paid out to management; there had been a number of risky loans; the performance of the business was unduly dependent on cheap funding from its parent; and the way in which the business had been run inflated the share price, for the benefit of management under the EIP. Objectively, there was a basis for those views. Whilst there was some debate in the evidence as to how highly leveraged the business of AAAH was, in my view it was legitimate for Mr McCormick to take the view that it was too highly leveraged. Mr McCormick was, after all, a very senior and highly experienced banker, and knew the way that his employer (with whose business operations the operations of AAAH were to be integrated) conducted its business.

Mr McCormick did not think that Mr James would work effectively with him. Mr McCormick derived that view from his experience of working with Mr James and from what Mr James’ superiors had told him. Whether or not Mr McCormick was correct in this view, there was undoubtedly material which, objectively, was capable of supporting it.

Mr McCormick thought that if the EIP were terminated (and RBS was working to achieve this, to consolidate its control of AAAH), Mr James might not be prepared to work without the high level of incentive that had been made available under the EIP. Mr McCormick was also concerned that Mr James might not be happy running what was in effect a smaller business than the AAAH business, with fewer employees and a more narrow business focus.

Mr McCormick thought that, overall, Mr Williams had broader and more relevant banking experience than Mr James. Mr McCormick had confidence in Mr Williams’ integrity and thought (no doubt, with good reason) that Mr Williams could work within the reporting structures of RBS. It is clear that Mr McCormick regarded “culture” as an important consideration. Mr West sought, I think a little unfairly, to portray “culture” as a “weasel word”. I do not agree. It is apparent that Mr McCormick placed a very high value on the ability of employees to work in accordance with the systems, values and way of doing business that RBS had established world-wide. It was open to Mr McCormick to think that Mr James might not have so much respect for that culture as did Mr Williams. And I think it was open to Mr McCormick to give weight to this.

Equally, Mr McCormick did give consideration to the matters that favoured Mr James’ appointment. He recognised that Mr James had a strong public profile, a proven track record, and had personal qualities that would enable him to promote the merged business within the Australian market place. However, in Mr McCormick’s view, the balance of considerations favoured Mr Williams.

Mr Workman took into account very similar matters:

based on his experience of working with Mr James, he felt that Mr James might not work effectively within the integrated global structure of RBS’ GBM business. Mr Workman thought it was important that Mr James would respect and work within RBS’ management structure, but had doubts that he might do so.

He understood that Mr McCormick had formed the view that the business of AAAH was focused very much on Australian operations and that it did not have a global or Asian outlook. Mr Workman wanted the merged business to look out to Asia, and thought that Mr James did not have the necessary experience to achieve this.

Mr Workman knew that Mr Williams was able to operate well within the RBS management structure. He knew that Mr Williams had very strong experience as a banker outside Australia. He thought that Mr Williams was well qualified to perform the role of CEO.

Like Mr McCormick, Mr Workman did give consideration to Mr James’ positive qualities. He knew that Mr James had a high profile in the Australian market. He thought that Mr James had shown the capacity to generate business for his company. He believed that Mr James both gave the appearance of being a leader, and in fact had been a good leader. Finally, and importantly, Mr Workman knew that Mr James had a strong background in the equities markets and in mergers and acquisitions.

Another element of fairness or transparency that was said to be lacking is that Mr James was not given an opportunity to comment on, or explain, the adverse perceptions of him that had been formed. I do not think that this is a valid criticism. Messrs McCormick and Workman had had substantial experience, over a period of about nine months, of working with Mr James during the abortive sale process and then during the first phase of integration. They had had every opportunity to assess his personality and character, as those matters might be relevant to the role of CEO of the merged operations. They had reviewed historical material relating to him, including comments by his superiors within the AA Group. I do not think that it was necessary for them to take up all their concerns with Mr James.
The question is finely balanced. I do not regard it as consistent with fairness or transparency that Mr Williams was given an opportunity to state how he would approach integration “and drive the combined business” whereas Mr James was not. However, given the totally uninformative nature of the pleading and the failure to give any specificity to this aspect of Mr James’ case until it was opened, the significance of this is necessarily diminished. Had that matter been pleaded and particularised, the defendants might well have been able to meet it with other evidence.
The defendants have been put very much in the position of responding on the run to this aspect of the case as it was developed against them. There were other aspects of the plaintiffs’ cases that were inadequately particularised but where careful attention to the affidavit evidence would have revealed (and, no doubt, did reveal) what the case was in those respects. But this is not so in respect of the appointment promise case. The case for Mr James on the appointment process emerged only through the opening, with references to the documents that were said to be relevant, and through the cross-examination of Messrs McCormick and Williams.
I accept that whether or not a fair and transparent appointment process, based on merits and competencies, was conducted is a matter to be judged objectively. But inevitably, in judging that, the consideration is driven by the evidence that is available. I do not think that it was irrelevant that the detail of lack of fairness and transparency was not put to Mr McCormick or to Mr Workman. On the contrary, I think that, had those matters been put, the Court would have been assisted by taking into account, in coming to a view, such answers as they might have given.
In my view, a decision in favour of Mr James on this aspect of his case would involve very substantial procedural unfairness to the defendants. It cannot be said that the evidence is all the one way, nor that an outcome in his favour is inevitable. As I have said, the decision is finely balanced. And the issue is complicated because the subject matter of the only significant aspect of unfairness – the failure to give Mr James an opportunity to show “how he would approach an integration and drive the combined business” – does not appear to have been one of the considerations that, ultimately, guided the decision so far as Mr McCormick and Mr Workman were concerned.

To put it another way, I think that before the Court could conclude that there was relevant unfairness, it would have to be satisfied that the element of unfairness was dispositive, in whole or in part, of the decision to appoint Mr Williams. I am not prepared to find so, on the evidence. And that view of the evidence is fortified because:

the relevant matter was not pleaded or particularised;

thus, the defendants had no real chance to consider and meet it; and

it was not squarely put to the relevant witnesses as a significant and relevant flaw in their decision-making.

I conclude that Mr James has not shown that the appointment process lacked relevant fairness or transparency. Nor has he shown that it did not take into account, in an appropriate way, the competing merits and competencies of him and Mr Williams.

Twenty-first issue: loss or damage

On the view to which I have come, this issue does not arise. Against the possibility that others may come to a different view, I shall however show why, in my view, Mr James has not proved that he has suffered loss.
It was common ground that the issue was to be approached as one of assessment of damages for loss of opportunity. In this case, the opportunity that, hypothetically on my conclusions, Mr James lost was the opportunity to have his claim to be appointed CEO of the merged operations considered in a fair and transparent way, and decided on the basis of competing merits and competencies.
Thus, the Court is required to consider the likelihood that Mr James would have been appointed had the process possessed the qualities that, hypothetically on my conclusions, it lacked.
There can be no doubt that each of Mr James and Mr Williams had a strong claim to the role of CEO. Mr James had been proven as a leader. He was recognised as someone who could generate business. He had a high profile, and substantial respect, within the Australia business community. The operations of AAAH had prospered under his leadership.
The business of AAAH was very substantially larger than the Australian business of RBS. Ranking of the two companies showed that, in every area where they competed (although in fact there were not all that many), AAAH was perceived consistently to have out-performed RBS.
Mr Williams did not have the breadth of experience within Australia that Mr James had. He did however have very significant international experience. And, importantly from the prospective of the decision-makers, he had very extensive experience of working within RBS’ GBM business and its management structures. He was someone upon whom reliance could be placed to work within and according to the rules and values of RBS – its “culture”.
Mr James was perceived as an outsider (to the RBS culture), and as someone who preferred working independently. The former point is self-evident, given that Mr James had had very little experience of working within RBS. The latter point seems to me to emerge with some degree of clarity from the evidence of a whole, although it is very much impressionistic. I do not regard it as a criticism of Mr James. On the contrary, there is much to be said for the proposition that the CEO of an Australian business should work independently to develop and advance that business.
The failure to put to Messrs McCormick and Workman the alleged deficiencies in the selection process is significant in this part of the case also. The submissions for Mr James identified a number of aspects of the process which, it was said, should have been, but were not, followed. Whether some or any of those matters would have been relevant to the ultimate decision is a matter of speculation, because the two decision-makers who were called were not asked to express a view on them.
It may be accepted that each of the candidates had a strong claim. It may be accepted that they had different skills and qualifications. It may be accepted that either would have made an excellent choice. The question is, were the matters that were said to favour the selection of Mr James over Mr Williams of such significance that, in a hypothetically fair and transparent process based on merits and competencies, they would have led to a different result?
In my view, that question should be answered “no”. In the absence of exploration of the matter in any detail with Messrs McCormick and Workman, I am not prepared to conclude that, in the hypothetical universe, the former would have recommended, and the latter accepted, that Mr James be employed. None of those matters, it seems to me, would have undone what appear to have been the key determinants in their thought processes.
In those circumstances, I conclude that it has not been shown that the lost opportunity is one which had any real or valuable prospect of maturing into an offer of employment.
Again, because of the possibility that others may come to a different view, I shall set out briefly the approach to assessment of damages that seems to me to commend itself.
The starting point in the calculations took the remuneration and other rewards derived by Mr Williams during the course of his employment as CEO. That employment commenced in September 2008 and terminated in February 2012, when the position became redundant. The damages model assumed that Mr James would have been employed for the same time, and would have earned the same remuneration. I accept that assumption. It is plausible. It was not put that (for example) Mr James might have persuaded RBS to pay him more than in fact it paid Mr Williams. And to the extent that Mr James (if selected) might not have lasted until February 2012, that should be accommodated by the selection of an appropriate discount for contingencies.
Mr James and Mr McKeith started a consultancy business known as AquAsia. That business derived some income over the period from September 2008 to February 2012. To the extent that it did, it is common ground that the income earned by Mr James from the business should be set off against damages referable to the loss of income and bonuses.
Mr James also claimed that he had lost the opportunity to be employed after February 2012, as a senior person in the investment banking world. He relied on the evidence of Ms Sharon Mackie, an employment consultant. I accept that Ms Mackie sought to give truthful and accurate evidence. I am not however satisfied that it can be said, based on her evidence, that Mr James is likely to have earned anything more from February 2012 until his hypothetical retirement at age 60 (in 2023) than he has in fact earned, and is likely to earn, from the business of AquAsia.
Ms Mackie’s evidence as to the roles that might have been open to Mr James was given at a high level of generality. Further, to the extent that Ms Mackie expressed a view as to the likelihood that Mr James would gain such employment, there was no connection between the very scanty factual information that she stated and the conclusion that she expressed to enable the Court to understand how, as a matter of logical application of her undoubted expertise, she moved from the premises to the conclusion. That is so both in relation to the likely positions that Mr James might be offered and the likely remuneration that he might have earned in such positions.
It could be thought, perhaps, that it was in any event open to Mr James to take up such an offer if one came his way. Ms Mackie said however that it was unlikely that offers would be put to Mr James, because he had been out of the industry for some time. I am not entirely sure that I agree. The performance of AquAsia appears to have been stellar in recent years. One would have thought that Mr James and Mr McKeith have thereby provided reminders to their colleagues and former colleagues of their abilities in the investment banking world.
Thus, I do not think that there is any allowance to be made for lost opportunity after February 2012. The evidence does not support a conclusion that Mr James might have earned more after that month, had he remained employed by RBS until February 2012 and then become redundant, than in fact he has earned and is likely to earn.
The defendants’ submissions included the proposition that, even if the Court were otherwise minded to allow damages equivalent to the net “closed period” loss from September 2008 to February 2012, some allowance should be made for the fact that, over that time, Mr James and Mr McKeith had built up a successful business, the full earning potential of which did not begin to emerge until after the end of that period.
Had I come to the view that Mr James had made out a claim for damages, I would think that some allowance should be made for the fact that his earnings for the closed period were effectively depressed because, rather than seeking employment, he concentrated on working with Mr McKeith to set up an independent business. My present view is that if it were necessary to assess damages, there should be deducted, from the net closed period loss, an amount representing the value of Mr James’ interest in the AquAsia business as at February 2012. The asset – his interest in the AquAsia business – was something that Mr James was able to acquire only because he was not working for RBS or for another employer. In those circumstances, I think, a principled approach to the assessment of damages requires that some allowance be made for this.
If I thought that Mr James had made out his case for damages for breach of the appointment promise, I would direct the parties to agree them or, in the absence of agreement, refer the question out. The basis on which the agreement or reference should be made or conducted would be that damages are to be assessed (before any allowances for vicissitudes) as:

the amount that was in fact paid to Mr Williams for the closed period by way of remuneration and bonuses (and by way of redundancy payment);

less such amounts as Mr James has in fact earned from the AquAsia business over that period; and

less the value of Mr James’ interest in the AquAsia business as at February 2012.

There was an argument as to the appropriate discount to be allowed for contingencies. In respect of the closed period loss, the only relevant “contingency” is that for reasons personal to Mr James, he might not have been employed for the whole of the period. Mr West argued for what he said was the conventional 15% discount. Mr Sheahan submitted that, having regard to the views held about Mr James, the likelihood was that his employment would have been terminated earlier than February 2012. He submitted that a figure of 50% was more appropriate.
I should note also that Mr Sheahan submitted that in any event, Mr James’ hypothetical employment as CEO of the merged operations was terminable on one month’s notice. Thus, he submitted, damages should not be assessed beyond one month’s salary and other benefits. I do not agree with this submission. It assumes that RBS would have had some reason to terminate Mr James’ employment. No reason has been submitted, other than the “cultural” and related factors to which I have referred. Since those are matters to be taken into account in considering the “discount for contingencies” argument, I do not accept that damages should be limited to the loss of one month’s salary and benefits.
Returning to the question of an appropriate discount for contingencies: I do think that there is a stronger than usual possibility that Mr James’ employment might have been terminated, for reasons that would have seemed to RBS at least to be appropriate, before February 2012.
No doubt, in the hypothetical world where Mr James had been appointed as CEO of the merged business, he would have worked hard to fit in. I accept that he would have sought to operate in the RBS “culture”. Nevertheless, I do think that there would have been a real likelihood that Mr James might not have fitted in to the RBS “culture” (or might have been perceived as not fitting in). Thus, I do think that there is a likelihood that RBS would have sought to remove him before February 2012, and to appoint one of its own in his place.
Doing the best I can, and recognising that this piles up speculation on speculation, I would assess the appropriate discount at 30%.
Accordingly, if the matter were to go to assessment of damages, the figure derived from the process described at [582] above should be discounted by 30%. Of course, there would then need to be a calculation of interest.

Conclusion and orders

Mr James is entitled to judgment in the sum of $2,932,692.31 together with interest to be calculated from the date when the redundancy payment should have been made to him. The parties did not in their submissions address in terms the question of whether any judgment recovered by Mr James should be against AAAS only, or against all the defendants. However, the claim that has succeeded was, of necessity, a claim against AAAS only, arising one way or another out of Mr James’ contract of employment.
In the circumstances, the safest course is to leave it to the parties to bring in short minutes of order to reflect my reasons, and to include an agreed calculation of interest. If there is to be a dispute as to identification of the defendant(s) against whom judgment should be given, I will deal with it – probably on the papers, with directions for submissions.
On Mr McKeith’s case, there should be judgment for the defendants.
There will no doubt be disputes as to costs. Again, I think, the best way to deal with that would be on the papers. However, if the parties have a different view, they should let me know.
The only orders that I make at this time are:

stand the matter over to 10am on 27 March 2015 for the parties to bring in short minutes of order, and for directions in respect of the resolution of any outstanding issues, including as to costs; and

reserve costs.

**********

Decision last updated: 20 March 2015

Medium Neutral Citation:	James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland [2015] NSWSC 243
Hearing dates:	24 November 2014 to 10 December 2014
Date of orders:	19 March 2015
Decision date:	19 March 2015
Jurisdiction:	Equity Division - Commercial List
Before:	McDougall J
Decision:	James v RBS: judgment to be for plaintiff for $2,932,692.31 plus interest; reserve costs. McKeith v RBS: judgment to be for defendants; reserve costs.
Catchwords:	CONTRACT - employment - termination - arising from takeover of employer by consortium - where employer’s redundancy policy required making of severance payments and of giving good faith consideration to making of bonus payments - whether redundancy policy expressly incorporated into contract of employment - effect of contractual term stating that employee is bound by a policy containing bilateral obligations - whether redundancy policy alternatively incorporated into contract of employment by course of dealing CONTRACT - deed of release - whether redundancy policy permitted requiring a deed of release as a precondition to making of severance or bonus payments - whether legitimate for deed of release to be unilateral and broad in its terms CONTRACT - unilateral contracts - whether representations that redundancy policy would remain in place amounted to a contractual offer - where no clear and unequivocal mode of acceptance of such offer - where no evidence of reliance on offer in any event - whether representations that new chief executive officer would be selected through a fair appointment process based on merit amounted to a contractual offer - representations not promissory in nature - where not shown in any event that the appointment process lacked fairness or transparency ESTOPPEL - estoppel by convention - whether parties conducted relations on a mutual understanding that redundancy procedures would be applied - requirements of detriment and unconscionability ESTOPPEL - promissory estoppel - whether employee was entitled to rely on statement by human resources staff that policies would be applied in a particular way - where employee knew that staff member did not have authority to bind the company - where detriment not proved
Cases Cited:	Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 88 ALJR 552 Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2014] WASCA 180 Blatch v Arthur (1774) 1 Cowp 63; 98 ER 969 Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153 Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 Foggo v O’Sullivan Partners (Advisory) Pty Ltd (2011) 206 IR 87 Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 Hammond v JP Morgan Trust Australia Ltd [2012] NSWCA 295 Hays Personnel Services (Australia) Pty Ltd v Motorline Pty Ltd [2008] QCA 375 Henry Kendall and Sons v William Lillico and Sons Ltd [1969] 2 AC 31 In the matter of ACN 050 541 047 Ltd [2002] NSWSC 586 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 6) (2007) 63 ACSR 1 Jones v Dunkel (1959) 101 CLR 298 La Rosa v Nudrill Pty Ltd [2013] WASCA 18 Moratic Pty Ltd v Gordon (2007) 13 BPR 24,713 Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301 Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193 Saleh v Romanous (2010) 79 NSWLR 453 Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 Willis v Health Communications Network Ltd (2007) 167 IR 425
Texts Cited:	Oxford English Dictionary (online) Carter, Peden and Tolhurst, Contract Law in Australia (LexisNexis, Fifth Edition, 2007)
Category:	Principal judgment
Parties:	James v RBS: Angus Gordon Charnock James (plaintiff) Royal Bank of Scotland Group plc and others (defendants) McKeith v RBS: Colin McKeith (plaintiff) Royal Bank of Scotland Group plc and others (defendants)
Representation:	Counsel: J N West QC / M J Steele SC (plaintiffs) J Sheahan QC / T Saunders (defendants) Solicitors: Harmers Workplace Lawyers (plaintiffs) Allens (defendants)
File Number(s):	2011/320618; 2011/320637