John Andrew v Pathology One & Anor (Industrial) - [2014] VMC 30

IN THE MAGISTRATES’ COURT
OF VICTORIA
AT MELBOURNE D12985070

BETWEEN:

DR JOHN ANDREW Plaintiff

-and-

PATHOLOGY ONE (ACN 133307070) First Defendant

-and-

DR PETER FRANCIS STRATMANN Second Defendant

MAGISTRATE: Ginnane

DATE OF DECISION: 2 December 2014

PLACE HEARD: Melbourne

APPEARANCES:Counsel Solicitors

For the Plaintiff Mr JRM Tracey TressCox

For the Defendant Mr J McKenna Russell Kennedy

REASONS FOR DECISION

Catchwords: contract of employment – termination by reason of redundancy – contract provided for three months’ notice – contract silent as to capacity to make payment in lieu of notice – notice of termination provided – subsequent decision to make payment of balance of notice period in lieu – whether employment ended on provision of notice in lieu or continued until expiration of period of notice under contract – implication of term- whether term of payment in lieu ought be inferred into contract – no implication of term – consequences of breach in making part payment of notice in lieu – assessment of damages - whether amounts equal to annual leave and superannuation should be assessed as damages for breach of contract – no order made for damages to represent annual leave and superannuation – balance of notice in lieu paid at part time rate – whether contract made provision for employment of plaintiff to transfer from full time to part time – no express or implied term - balance of notice paid in lieu constitutes breach of contract – damages awarded on difference in rate – whether breaches of Fair Work Act – no breach - claim for accessorial liability dismissed

HIS HONOUR

Introduction

The plaintiff, Dr John Andrew is a specialist pathologist with expertise in microbiology. He is notable in his field. His academic, professional and personal qualities are unquestioned. They were acknowledged by Dr Peter Stratmann, the second defendant in the course of his evidence.

In November 2012 Dr Andrew commenced employment with Pathology One. It proved to be of short duration. It ended because of a decision to sell and close the business by Dr Stratmann in early January 2013. As a result, those persons employed by Pathology One became redundant in the classical and, perhaps, purest expression of that concept[1]. It is as regards the obligations of Pathology One to make various payments on the conclusion of Dr Andrew’s employment that gives rise to this litigation.
[1] Redundancy, whilst not a term of art, at least embraces the situation when the job of the employee is no longer to be performed by any employee

By Amended Statement of Claim dated 4 June 2014 a number of matters are pleaded, not all of which are controversial. First, it is accepted that Dr Andrew meets the requisite description of being a national system employee within the meaning of the Fair Work Act 2009 (“FWA”) and, in particular, s 13. Pathology One is a national system employer and bound by the FWA in relation to its employment of Dr Andrew. Dr Stratmann is the sole director and secretary of Pathology One, and is in effective control of the company.

Mr McKenna of counsel who appeared for the plaintiff identified 8 questions which he said called for decision by the Court. Mr Tracey of counsel who appeared for the plaintiff agreed with the formulation by Mr McKenna. They are:

(a)What was Dr Andrew’s entitlement between 4 February and April 2013?

(b)What was the employer's capacity to give notice? Was it actual notice or was there a capacity to give notice and payment in lieu of notice?

(c)Did an obligation reside in Dr Andrew to mitigate his loss and did he take all reasonable steps to do so?

(d)Was there an entitlement arising out of Dr Andrews employment to accrue annual leave between 4 February and 10 April 2013 pursuant to his employment agreement?
(e)Was there an entitlement arising out of Dr Andrews employment under the provisions of the Fair Work Act to accrue annual leave between 4 February and 10 April 2013 ?

(f)Was there any entitlement to superannuation arising on amounts paid or owing to Dr Andrew after 4 February 2013?

(g)Was there an obligation by the defendant to pay wages after 4 February 2013 for the purposes of section 343 (1) of the Fair Work Act? The plaintiff abandoned the pursuit of this ground in the course of the hearing; and

(h)If there was a contravention of the Fair Work Act, was Dr Stratmann the person involved in a contravention?

Of the eight questions, the first three are closely related and their determination in the main will resolve the questions regarding annual leave whether arsing at law or under the FWA and of superannuation. In order to appreciate understand the dispute and to resolve the questions, it is necessary to set out in some detail the evidence I heard.

Dr Andrew’s evidence

Dr Andrew is 67 years of age. He is married, and father to an adult son who due to his own circumstances requires particular devotion from Dr Andrew and his wife. In mid 2012 Dr Andrew was employed as a pathologist with Healthscope Pathology. He was employed on a three-year contract. It was not renewed. Dr Andrew was not impressed by the manner in which Healthscope went about this decision but nothing turns on it. He worked through a period of leave with Healthscope and commenced a search for local, sessional or part-time work. This was the type of work he was looking for in July 2012. He was not looking for a full-time position. He went about pursuing employment options by a variety of conventional means appropriate for a man of his expertise and standing and alert to the comparatively limited market for pathology opportunities for a person of his specialist training. The means he adopted were word of mouth with colleagues, connections through his network of professional associations and also the dispatch of a number of emails, one of which found its way to Ms Mahtab Minai, the General Manager of Pathology One with whom Dr Andrew had come to make a professional acquaintance whilst employed at Healthscope. His email to Pathology One (Exhibit P1) relevantly stated:

Hi Mahtab,
Just to let you know I will be leaving Healthscope the end of July. I may be available to do locums or some sessional work.

Dr Andrew received a telephone call from Ms Minai and as a result they met. In all, Dr Andrew said he participated in three face to face meetings with Ms Minai. The first occurred in early August 2012 and comprised a general discussion. On 8 August 2012 Ms Minai sent Dr Andrew an email (Exhibit P2) referring to their meeting and requesting another meeting that would be attended by Dr Stratmann. On 14 August 2012, the three principals met. Dr Andrew recalled this meeting was also general in nature. Following on from this, a third meeting took place with Ms Minai. Nothing turns on it.

In October 2012 Dr Andrew performed some unpaid work for Pathology One and so establishing his credentials with a view to securing part time employment. In about late October 2012, Dr Andrew was required in New South Wales to undertake two National Association of Testing Authorities (NATA) assessments. He advised Ms Minai that for all effective purposes, he would not be back in Melbourne until the week following the Melbourne Cup. By email to Ms Minai dated 29 October 2012 (Exhibit P3) Dr Andrew addressed his diary commitments and also set out in detail certain matters by way of “suggestions for consideration” in reaching an agreement for employment. These suggestions were addressed in the context that Pathology One and Dr Andrew were then contemplating part time employment. One matter mentioned in Dr Andrew’s email included “as discussed 3 months notice by either party would be acceptable…”

By email and attachment from Ms Minai dated 31 October 2012, Dr Andrew was provided a “first draft of an employment contract”. The text of Ms Minai’s email message included a request that Dr Andrew review it and get back to her with any comments or suggestions. Dr Andrews thinks that due to his absence from Victoria he probably saw the email on his return to Melbourne after Cup week. It is uncontroversial that the contract attached to Ms Minai’s email, and described as a “first draft” was never executed but was expressed to be for part time work of 1 day per week. It contained a clause concerning termination on notice expressed as follows:

17 Termination Upon prior Notice
17.1 Subject to the other terms of this contract, either party may terminate the Employment at any time by giving the other party prior notice of three month.
18 Termination Upon payment in Lieu of Notice
The Employer may terminate the Employment by either:
Making a payment in lieu of the entire period which is equivalent to the employee’s remuneration for this period; or
Requiring the Employee to work part of the notice period and making a payment in lieu of the balance of the notice period
In either case, the Employment will be terminated immediately upon the Employer making the payment in lieu of notice.

Dr Andrew was aware that Pathology One employed a fulltime pathologist whose background was largely in histopathology which was not a discipline pursued by Pathology One. He was also aware that Pathology One was interested in expanding the amount of microbiology work that could be undertaken on site rather than farming it out to other laboratories, such as Healthscope.

Dr Andrew and Ms Minai held further discussions. Dr Andrew’s recollection is that he was told about the difficulties Pathology One faced in relation to its existing pathologist not being on site at Pathology One a sufficient number of hours to comply with Health Insurance Commission requirements and very relevantly that a NATA visit to the Pathology One laboratory was scheduled to take place on 9 November 2012. Hence Ms Minai told Dr Andrew that Pathology One required him to commence employment on a full time basis on 8 November 2012.

By email dated 8 November 2012 to Dr Andrew, Ms Minai referred to a number of administrative matters involving the provision of Medicare Provider numbers and her message went on to say:

“Many thanks for the extended conversations during the past few days and sincere apologies for disrupting your family weekend. I am very pleased that we have achieved a mutual agreement which will be documented and available for your perusal within the next few days.
…
I look forward to seeing you at the laboratory tomorrow…

The employment commences

Dr Andrew commenced full-time employment with Pathology One on 8 November 2012. He was provided with a letter of offer bearing that date signed Ms Minai and with provision for his signature. The letter dated 8 November 2012 was expressed as follows:

Dear John,
Further to our recent discussions, I am pleased to offer you the Full time Pathologist position at Pathology One, commencing at 9 AM on Thursday, 8 November 2012.
The primary duties and key responsibilities of this position will be to undertake the Approved Pathology Practitioner responsibilities for the Laboratory.
Additionally, you will be required to attend the Laboratory on a daily basis (9 AM to 5 PM). You will also be required to provide support to the Pathology One laboratory staff in terms of staff continuing education, participation in and review of external Quality Assurance Programs, internal Quality Control matters and review and advice on all complex cases.
This agreement may be terminated by mutual agreement. Either party may terminate this agreement at any time by giving the other party prior notice of three months.
Please sign this document in the space provided below returned to meet your earliest convenience.
We look forward to working with you at Pathology One.

Dr Andrews signed the letter dated 8 November 2012. He said, and I accept, that the letter was a “stop gap” measure to allow his employment to get underway in time for the NATA attendance on 9 November 2012 and so satisfy the requirement for the presence of a fulltime pathologist. This also was the character assigned to the letter by Ms Minai. Although the letter included a provision for termination by “mutual agreement” by “prior notice of three months”, it was silent on the right to terminate on the provision of payment in lieu of notice.

The 12 November 2012 agreement

Dr Andrew said that the next relevant matter to occur was the receipt of a letter from Ms Minai on behalf of Pathology One dated 12 November 2012 (Exhibit P7). Dr Andrew regards this letter as the document constituting the agreement governing his employment. He said that although he signed the letter this did not occur until approximately 16 November 2012 after he had sent a note to Ms Minai on 15 November 2012 with handwritten suggestions to be included in his contract, all of which were adopted and are reflected in the letter dated 12 November 2012. The letter states:
Dear John
Further to our recent discussions, I am pleased to offer you the Full time Pathologist position at Pathology One, commencing Thursday, 8 November 2012.
The primary duties and key responsibilities of this position will be to undertake the Approved Pathology Practitioner responsibilities for the laboratory. Additionally, you will be required to attend the Laboratory on a daily basis to provide support to the Pathology One laboratory staff in terms of staff continuing education, participation in and review of external Quality Assurance Programs, internal Quality Control matters and review and advice on all complex cases.
The total package for this position is $400,000 (inclusive of Superannuation). Pathology One will also reimburse all costs associated with professional memberships and Medical Indemnity Insurance.
I will proceed to draw up a simple contract incorporating the following components:
·Annual leave of 12 weeks per annum, taken by mutual agreement;
·Long service leave-as per statutory requirements;
·10 days of sick leave (Personal/carers leave) as per statutory requirements;
·Full-time position to revert to part-time (between 1-2 days) per week by mutual agreement;
·Anticipated transition to part-time position by mid January 2013 or later by mutual agreement;
·Notice for termination of contract (either full-time or part-time) must be three months by either party;
·Under part-time arrangement, APP responsibilities to be shared with other pathologists;
·Under full-time contract provision for cover for APP responsibilities (including billing by alternative pathologist) to fulfil undertaking requirements particularly in the event of leave, if required
·Remuneration package to be increased by 5% on annual basis;
·Once part-time, this position will have the flexibility to work more/less days if required and by mutual agreement. This arrangement will be in line with cover required for other part-time pathologists’ leave.
Please sign this document in the space provided below and return to me at your earliest convenience.
We look forward to working with you at Pathology One.

Dr Andrew said that the fourth and fifth bullet points of the letter were included at his initiative. They reflected his original intention which was for part time employment but he harboured doubts that Pathology One would be able to recruit suitable pathologists in a timely fashion. Therefore, he included flexible language to protect Pathology One from being left in the lurch in the event that it had not been able to recruit additional suitable pathologists by the anticipated time frame of mid January 2013. He said that had this proved to be the case, he would have been willing to work on full time until the end of January 2013 or later if required to facilitate the recruitment of additional pathologists.

November 2013 to January 2104

Dr Andrew testified about his suite of working hours. He worked from 8.00 am to 5 00 pm or thereabouts Mondays to Fridays. He made himself available for work and was on call during the period of his agreed Christmas leave. Dr Richard Norris was called in to cover for Dr Andrew for two days during this period of leave.

Dr Andrew returned to work on 7 January 2013.

On Thursday 10 January 2013 an announcement was made to the staff of Pathology One that their employment had been made redundant. Dr Andrew referred to an e-mail dated 14 January 2013 from Ms Minai to staff (Exhibit P9) that reflected the announcement that had been made to staff orally on 10 January 2013.

Dr Andrew said that despite the announcement of the decision to sell Pathology One, work in progress continued and new work continued to be received in the laboratory. He continued to work in accordance with his APP accreditation requirement and therefore fees were able to be charged by Pathology One for the work he performed.

Practical steps were put in train in anticipation of the closure of the business. For example, 22 January 2013 was designated to be the last day for the receipt of specimens by the laboratory. Furthermore, work in train was required to be concluded and delivered back by the laboratory by this date.

The parties agree that Dr Andrew’s last day at work was 4 February 2013.

Meetings with Dr Stratmann

Dr Andrew met with Dr Stratmann on 21 January 2013. Dr Andrew said that this was the first occasion he became aware that Pathology One did not intend to honour his understanding of his entitlements to be paid notice based on a full-time employment wage. Dr Andrew said that Dr Stratmann said to him that to do so would not accord with his understanding of their agreement.

On 22 January 2013 Dr Andrew said he met with Dr Stratmann and Ms Minai and was provided with a letter of the same date (Exhibit P10) that reads:

Dear John,
Following a brief discussion yesterday, and in the context of the closure of the laboratory which was announced on Thursday, January 10, 2013, we need to confirm your future role in the laboratory, and I need to notify you when this will cease. As you are aware, we have been working through the issues with yourself and the laboratory staff since the announcement, but now need to finalise them.
Your requirement at commencement was to assume a part-time role 1-2 days per week at around this time, with the actual days and hours to be decided by mutual agreement, as discussed and agreed at the time. Three half days would best suit the laboratory's needs during the wind down phase, and is consistent with our agreement.
In keeping with the above, plus your preference to have particular days of leave, we need to plan your specific working hours and days for the weeks ahead.
Your termination date will be Wednesday 10th of April 2013, with cessation of your presence at the laboratory to be discussed in the following weeks. At that time the balance of your notice period entitlements up until the termination date will be paid out to you along with your accrued but undertaken an annual leave entitlements[2].

[2] Emphasis added

Dr Andrew replied to Dr Stratmann by letter dated 23 January 2013 (Exhibit P11). Relevantly, it stated:
Dear Peter,
Following our brief discussion on the afternoon of Monday 21st January I requested written confirmation of verbal advice I had previously been given with regard my situation, following the announcement made by you on the afternoon of 10th January that the laboratory was to close, and to which I referred during that discussion.
The situation was further discussed at our meeting yesterday afternoon (22/1/2013) in the presence of Mahtab Minai at the conclusion of which you handed me your letter of 22^nd January advising me that my termination date will be Wednesday 10^th April 2013 and your suggested position with regard to this.
In the light of our differing positions I am appending a copy of the advice I have been given for your review prior to resuming working through such issues as requested in your letter.
I make the following comments in respect to yesterday's meeting and the advised closure of the laboratory.
I took up and assumed the professional and medico-legal responsibilities as a full-time pathologist on the clear understanding that there would be a future part-time position for me at Pathology One. I believe I have more than adequately fulfilled my undertaking and assisted in protecting the business at a difficult time for you.
Although I have taken annual leave (as it has accrued to me) in all instances I have still continued to be "on-call" and to actively deal with calls from the laboratory staff, doctors and patients. This has included over the Christmas/New Year period when you were also on leave but not able to be contacted.
As I mentioned yesterday had I been made aware of the likely imminent future closure of the laboratory I would not have accepted the position. The outcome is professionally embarrassing to me to say the least. In respect to this I have now become aware that as early as mid-December pathology companies were being advised that they were not successful in tendering for Medical One collection centres.
I await your response in progressing and finalising outstanding issues…

I was directed to a letter dated 31 January 2013 from Pathology One signed by Dr Stratmann and addressed to Dr Andrew (Exhibit P12). Dr Andrew said he thought Dr Stratmann provided it to him at work on 1 February 2013. It took issue with the plaintiff's position and informed him that he was not required to work out his notice. Relevantly the letter states:

Dear John,
I confirm that I received your letter of 23 January 2013 and the letter you forwarded from Norton Rose dated 22 January 2013.
I remain of the view that we reached an agreement at the time of your commencement that your role would revert to part-time (between 1-2 days) by mid-January 2012. This arrangement was put in place at your request and is set out in the letter of offer signed by you dated 12 November 2012.
The decision to close the laboratory was very difficult and it is not a reflection in any way knew what the work you have done will stop there was no definite decision made in relation to the future of Pathology One until the Christmas period, with a closure date not certain until the New Year.
I am now writing to notify you that from Monday 4 February 2012 you will not be required to work out the balance of your notice period because there is no further work available for you at Pathology One. You are entitled to be paid out on the balance of your notice period up until 10 April 2012 at the rate of pay which would have been payable had you worked out the notice period[3]. In accordance with our agreement, you are now engaged on a part-time basis and as a result he will be entitled to be paid 1.5 days pay to each remaining week of your notice period.
You will also be entitled to be paid of all accrued but undertaken annual leave. Annual leave has accrued on the basis of the hours you have worked each week.
Details of your entitlements will be forwarded to you on Monday, February 4, and the amounts will be paid into your bank account as you previously notified the payment of salary.

[3] Emphasis added

By letter dated 31 January 2013 Dr Andrew closed off his undertaking for APP accreditation (Exhibit P16).

On 4 February 2013 Dr Andrew and Dr Stratmann met and later that day Dr Andrew forwarded to Dr Stratmann his typed notes of their discussion and invited a response from him if there were any matters contained in them which he contested (Exhibit P13). There are two matters worthy of mention about the notes. The first relates to a discussion to defer Dr Andrew’s final payment so as to allow Dr Stratmann the opportunity to obtain further advice, and a contention by Dr Andrew that he and Dr Stratmann had not had any prior discussion about his role reverting to part-time prior to being made redundant. Dr Andrew’s notes of 4 February 2012 assert that he and Dr Stratmann had not reached any mutual agreement about becoming part-time or how many days part-time might constitute.

Dr Stratmann replied to Dr Andrew by e-mail in the evening of 4 February 2013. Relevantly he confirmed the receipt of Dr Andrew’s notes, said he had not had time to consider them, and whilst not contesting their accuracy agreed not to pay the amounts referrable to his termination for a period of two weeks, (“especially in the context of a proposal that you are considering[4]"). He noted that Dr Andrew would receive payment the next day for all hours worked for the week ending Sunday, February 3^rd but such payment would not include any termination payments.
[4] The “proposal” was not clarified in the hearing

Dr Andrew sent Dr Stratmann an e-mail dated 12 February 2013. Dr Stratmann replied on 13 February 2013. On 22 February 2013 a solicitor’s letter of demand was sent on behalf of Dr Andrew.

On 2 April 2013 Dr Andrew received a payment. Payment amounted to payment for all days worked until that point in time.

Events following termination

Dr Andrew testified about his efforts to mitigate his loss. He said he contacted a colleague at Melbourne Pathology. He said he subsequently forwarded an enquiry to a colleague and he made enquiries of Dorovitch Pathology but nothing was forthcoming.

Ms Minar testifies

At the conclusion of Dr Andrew’s evidence in chief Ms Minai was interposed and gave evidence. She is currently the Victorian Operations Manager, Laboratory Services, St John of God Health Care. In her guise as the former General Manager of Pathology One, she was, among other things, responsible for recruiting. She said that in about mid 2012 Pathology One employed one full-time equivalent. She knew of Dr Andrew and, in July 2012, she received an e-mail from him promoting his availability for employment.

She said she met with Dr Andrew at a coffee shop in Kew. She recalled that Dr Andrew expressed a desire to obtain short term employment as he only wanted to work until January 2013. She said they met for a second time and, as best she can recall, this was shortly after Melbourne Cup Day. Ms Minai said agreement was reached with Dr Andrew that he would be employed on a full-time basis. Her evidence confirmed a good many of the matters testified to by Dr Andrew such as the events in connection with the sufficiency of attendance on site by the existing full time pathologist, his departure, the impending NATA attendance on 9 November2012 and the request by Pathology One that led to the change in Dr Andrew’s engagement from anticipated part time employment on an ongoing basis to full-time employment with a transition to ongoing part time employment at or about the middle of January 2013.

Ms Minai was directed to the letter of offer to Dr Andrew 8 November 2012 (Exhibit P6). She acknowledged her signature and said that she and Dr Stratmann agreed to send the letter of offer to Dr Andrew in those terms. She agreed too that it came into existence as a stop gap to facilitate both the operational needs of Pathology One and the scheduled NATA visit.

Ms Minai acknowledged that the contract suggestions made by Dr Andrew were included in her letter dated 12 November 2012.
Ms Minai said she understood that a further contract of employment dated 28 November 2012 was given to Dr Andrew (Exhibit D2). She said that she was “99.99% certain” she gave it to Dr Andrew because it was a document that concerned matters of importance concerning the alteration of Dr Andrew’s employment to part-time, something she said, Dr Andrew had been asking about throughout November 2012.

Ms Minai was cross-examined. She said that she became aware of the closure of Pathology One on Friday, 3 January 2013. On 10 January 2013 she sent out a notice to employees of a meeting to be held with staff that day (Exhibit P9).

In relation to the 28 November 2012 agreement, she said that she was unaware of the existence of any email or anything else that would identify its despatch to Dr Andrew in a manner similar to her earlier emails and attachments forwarded to him and she could not say if it was ever signed by Dr Andrew.

Dr Andrew is cross-examined

Mr McKenna questioned Dr Andrew about the extent of efforts he made to mitigate the loss occasioned by the termination of his employment with Pathology One. Dr Andrew said of each of the organisations mentioned by Mr McKenna with whom he had not made contact, that he doubted any of them would have had a requirement from microbiologist of his age and his expertise.

Dr Andrew said that in addition to the matters he testified to in his evidence in chief, he contacted perhaps in the order of 10 or 12 colleagues and sent out approximately 30 e-mails. It was suggested to Dr Andrew that he was not looking to obtain full-time employment. Dr Andrews said that he would have given due consideration to any offer of employment as he had in relation to the altered nature of the employment with Pathology One.

Dr Andrew was asked about his email to Ms Minai dated 29 October 2012 (Exhibit P4). Mr McKenna suggested to him that by the time of this email he was “pretty close to an agreement to revert to part-time”. He was also directed to (Exhibit P5), the long form standard contract for part-time employment of 1 day per week. I am satisfied that nothing turns on that document because the dynamic of the employment altered.

Dr Andrew said he had discussions over the course of the Melbourne Cup weekend with Ms Minai. She explained that Pathology One’s requirements had altered and that a full-time pathologist was now required and that he replied that he hoped it would only be a “temporary arrangement". Mr McKenna suggested to Dr Andrew that he did more than content himself with an expression of hope, and in fact made it a requirement of his employment. Dr Andrew rejected this and said it remained only a "hope and expectation".

Mr McKenna took Dr Andrew to (Exhibit P8) and the notes he prepared for contract suggestions. Dr Andrew acknowledged the receipt of the long form agreement for part-time employment of 1 day a week. Mr McKenna suggested to him that he was involved in ongoing discussions with Dr Stratmann and that recognition of a change in his employment status was a matter required by Dr Andrew. He disagreed. Mr McKenna suggested to Dr Andrew that he told Dr Stratmann that he would be reverting to part-time employment in mid January 2013. Dr Andrew accepted that in the course of discussions with Dr Stratmann in connection with the prospective recruitment of additional pathologists, this was most likely accompanied by mention being made to the effect this would facilitate him reverting to part-time in accordance with his original intention.

Mr McKenna put it to Dr Andrew that he was provided with the letter dated 28 November 2012 signed by Ms Minai and that this constituted the settled employment agreement made with Pathology One (Exhibit D2). Dr Andrew denied this and said that first occasion he saw the letter was just prior to the mediation conducted in this proceeding. Exhibit D2 is expressed as confirmatory of the offer of employment as a full time pathologist with a commencement date of 8 November 2012. Clause 2.2 states that Dr Andrew’s “employment with the Company will continue until terminated by either party in accordance with this Agreement”. Clause 2.3 warrants being set out in full. It provides:
2.3 You and the Company will use your reasonable best endeavours to meet to discuss your ongoing employment as a full-time employee with the Company by Friday, 18^th January 2013 for the purpose of seeking to agree on either:
(a)extending your employment as a full-time employee for a specified term; or
(b)varying your employment to become a part-time employee for a specified term.
2.4 If no agreement can be reached by the parties under clause 2.3 above, your employment will automatically end on Friday 18th of January 2013 or such other date as may be agreed by the parties.

Dr Andrew accepted that when notified on 10 January 2013 of his redundancy he was also told of the imminent closure of Pathology One and became aware that the likely effective closing date for the business would be in the week commencing 21 January 2013.

Mr McKenna suggested to Dr Andrew that his intention to transition to part time employment by mid January 2013 only altered after being told of the impending closure of the laboratory and his redundancy and that this change of heart was made for no more than an effort to maximise the payment made to him on termination. Dr Andrew rejected the suggestion.

Dr Andrew worked the week commencing 14 January 2013. Mr McKenna asked Dr Andrew if he could recall whether during this week Dr Stratmann had mentioned his ongoing employment status. Dr Andrew said, "He might have made a passing comment to which I would have said, ‘it's business as usual’". Mr McKenna suggested that in fact Dr Stratmann had approached him in the laboratory that week and said words to the effect that, "we need to sort out what is happening-your circumstances have changed", to which Dr Andrew replied, "let's talk later". Dr Andrew could not recall if such an exchange occurred. It might have. Dr Andrew was asked if he accepted that Dr Stratmann had told him that that he and other pathologists could cover for Dr Andrew if he wished. Again, Dr Andrew could not recall the occasion of such a conversation or whether, as was suggested, he said to Dr Stratmann, "I am fine for now and will be available as required during the wind down period".

Mr McKenna asked Dr Andrew if he agreed that the "wind down" began on 22 January 2013. Dr Andrew said that the laboratory was “still working hard” in the days after 22 January 2013.

Dr Andrew was directed specifically to matters raised in the course of the meeting held with Dr Stratmann on 21 January 2013. Dr Andrew said that Dr Stratmann told him that he was required to be part time and that he replied that, "events have overtaken all of that". Dr Andrew expressed his desire to be paid three months’ notice at the full-time rate. He agreed to meet again with Dr Stratmann the following day, and on 22 January 2013, they met and Dr Stratmann gave him another letter (Exhibit P 10).

Dr Andrew was asked about the extent of leave he took in January 2013. It appears he took leave on Friday 25 January, Monday 28 January and Tuesday, 29 January 2013. Dr Andrew worked full-time on 23 January 2013 and 24 January 2013.

Dr Andrew was taken to his letter dated 31 January 2013 (Exhibit P 16) to Medicare regarding his APP and Medicare Provider number and his notice of intention to close both his undertaking and provider number with effect from 31 January 2013. He acknowledged that that thereafter he was unable to undertake any remunerative work for the benefit of the laboratory.

Dr Stratmann testifies

Dr Stratmann was the Managing Director of the first defendant. He said his involvement in the business was mostly clinical but he was also concerned with the commercial side of the business. The clinical work by way of pathology was but one of three parts of the business. He said he would visit the offices of Pathology One perhaps three times per week and that the business had been operational for about four years by the time Dr Andrew was employed.

Dr Stratmann spoke about the lack of skilled pathologists and a need the business identified to ensure compliance with the regulatory arrangements for the supervision of the laboratory staff by appropriately qualified pathologists. Dr Stratmann said that in 2012 the business wished to employ an additional part-time laboratory pathologist. NATA requirements were changing, and the adequacy of level rated pathologists employed by the laboratory was inadequate to cover all of its needs operationally and for broader-based pathology expertise.

Dr Stratmann said that Ms Minai was the person with “first instance” responsibility for the recruitment of Dr Andrew. Dr Stratmann said that he met once with Dr Andrew over a coffee in Kew and this was a casual conversation, in the nature of a "getting to know you" meeting.

Dr Stratmann said that Dr Andrew was not recruited as a full-time pathologist but commenced work on 8 November 2012 on this basis. Dr Stratmann said that he had no discussions with Dr Andrew regarding contract terms prior to him commencing work but that afterward, as he put it, there were “multiple discussions and it is plain that he would not be there after mid January 2013."

In regard to discussions concerning the closure of the business, Dr Stratmann said that the decision was announced to staff on the afternoon of 10 January 2013 but he had spoken with Dr Andrew in the morning. Dr Stratmann said he had multiple discussions with Dr Andrew on 14 January 2013 and during the course of that working week. He described these as "corridor discussions" and he gave, by way of example of the type of words exchanged, something such as, "John, we need to catch up". Dr Stratmann said he particularly recalled the first of these discussions occurred around about the reception desk located at the entrance to the office, with him saying to Dr Andrew, "this is clearly the week where things will change between us", and Dr Andrew replied that he “would work in with us”. Dr Stratmann said he told Dr Andrew that part-time employment would be appropriate.

Dr Stratmann spoke of a second discussion later that week that took place in his office. He said that he told Dr Andrew that certainty was required and this would serve both their interests.

Dr Stratmann addressed the events of the following week. He could not recall a meeting with Dr Andrew on 21 January 2013 but he could recall a meeting with him on 22 January 2013 in the company of Miss Minai. He said he gave Dr Andrew the letter dated 22 January 2013 (Exhibit P 10). Dr Stratmann said he had the letter with him and he used it as his basis for speaking notes in their discussions. Annual leave was discussed together with the basis upon which entitlements would be paid out to Dr Andrew.
As regards the contract dated 28 November 2012 (Exhibit D2), Dr Stratmann said he believed it was executed by Dr Andrew. He was unable to take the matter further.
Dr Stratmann said Dr Andrew had asked him to defer his final pay, and he agreed to this request.

Dr Stratmann was directed to, an e-mail from Dr Andrew dated 4 February 2013 (Exhibit P 13). Dr Stratmann said he responded to it. He described the period of 4 February 2013 to April 2013 as, "lawyers at 20 paces".

In cross-examination Dr Stratmann maintained that Dr Andrew made multiple requests to go part-time. He was referred to (Exhibit P7).

Dr Stratmann acknowledged that Dr Andrew worked full time until 4 February 2013 and that he told Dr Andrew that he was happy for him to be paid full-time until this date.

Discussion and analysis of the evidence

The plaintiff commenced work with the defendant on 8 November 2012. Despite the intended recruitment of Dr Andrew as a part time microbiologist, there is consensus that because of changes wrought by reason of the requirements of Pathology One, Dr Andrew took up employment on a full time basis.

The defendants argue that it was specifically contemplated that Dr Andrew’s employment would transition from full-time to part-time employment. I am satisfied on the evidence that there can be no serious dispute about this. The question is whether it was a term of Dr Andrew’s employment to this effect.

Based on the 28 November 2012 letter that Dr Stratmann believes was sent to Dr Andrew and executed by him, the date of transition was fixed as “by Friday 18 January 2013”. Based on the letter dated 12 November 2012 the change was expressed to be an “Anticipated transition…by mid January 2013”.

The defendants would have it that as a result of the announcement of on 10 January 2013 that the business of Pathology One would cease, and thereafter until 4 February 2013, Dr Andrew was not required to attend for work on a full-time basis but offered to be "on call" should any staff at the clinic need to ask him questions. Furthermore, from on or about the announcement of closure date on 10 January 2013 until 4 February 2013, Dr Andrew’s attendances at the laboratory were at his discretion and from time to time. I am unable to accept this submission. There remained work to be undertaken by Dr Andrew well after the announcement of closure was made to staff on 10 January 2013 and at least until the close of his undertaking and provider number with effect from 31 January 2013.

Dr Andrew contends that at no time after 10 January 2013 was any agreement reached with the defendants that he would commence working on a part-time basis and that at no stage did he work for the defendant on a part-time basis and therefore he is entitled to be paid a full time rate. Dr Andrew argues that it was “anticipated” that his employment would transition to part-time hours, but at no time prior to the notification of the decision to terminate his employment, was the anticipated change brought to fruition by way of a concluded agreement.

The defendants counter this argument by recourse to what Mr McKenna described as the “reality of the situation” that is, that they and Dr Andrew had it within their express understanding and contemplation in late November 2013, and in fact agreement had been reached, that Dr Andrew would commence working on a part-time basis by either “mid January 2013” or “by Friday18 January 2013”. The defendants say this express understanding is plain and can be gleaned from the letter dated 28 November 2012 provided to Dr Andrew by Ms Minai together with conversations between Dr Andrew and Ms Minai. The specific dates of conversations between Dr Andrew and Ms Minai relied on are 31 August 2012, 15 October 2012 and 6 November 2012. In addition the defendants point out that they conducted themselves in furtherance of this understanding as revealed by Ms Minai’s efforts to recruit additional pathologists, which did not come to fruition only because of the intervention of the decision by Dr Stratmann to sell Pathology One.

The parties agree that on or about 31 January 2013, Dr Andrew was advised of the following:
(i)First, that from 4 February 2013 he would not be required to continue working because there was no further work available to him;
(ii)Second, he would be paid out the balance of his notice period up to 10 April 2014;
(iii)Third, he was henceforth engaged on a part-time basis;
(iv)Fourth he would be paid for the period 4 February 2013 to 10 April 2013 on the basis of a 1.5 day per week calculation;
(v)Fifth, he would be paid all accrued but undertaken annual leave.
On 2 April 2013 Dr Andrew received a "termination payment" of $21,171.41 said to be made up of 10 weeks’ pay exclusive of superannuation for the period 4 February 2013 to 10 April 2013 which amount was calculated and preferable to service of 1.5 days per week and an the amount of $5,122.63 being annual leave accrued at that rate of service for the period up to 4 February 2013. Thus the payment had the character of both a payment of wages in arrears and payment in advance or of a payment in lieu.

Mr Tracey on behalf of Dr Andrew submitted that the proper point to commence an analysis of Dr Andrew’s claims is to identify the agreement struck between the parties. The plaintiff relies on the 12 November 2012 document (Exhibit P7). The plaintiff’s pleaded case is that the parties’ agreement was constituted by the letter dated 8 November 2012 together with the letter dated 12 November 2012. Both documents were signed by the plaintiff and Ms Minai. Mr Tracey submitted that from these documents, the following terms and conditions are identified as applicable to Dr Andrew:
(i)Employment in the position of a microbiologist pathologist;
(ii)Undertaking approved pathology practitioner responsibilities as governed by the relevant legislative scheme;
(iii)Attending the laboratory to undertake work between the hours of 9.00 am and 5.00 pm each Monday to Friday;
(iv)Remuneration of $400,000 per annum inclusive of superannuation;
(v)12 weeks annual leave by mutual agreement;
(vi)A transition of employment from full-time to part-time employment anticipated to occur in mid January 2013 or later by mutual agreement;
(vii)An annual 5% increase in the plaintiff's annual remuneration;
(viii)Three months’ notice of termination;
Mr McKenna submitted in accordance with the defendants’ Amended Defence that the employment agreement struck between the parties comprised:
(i)An undated document titled, "Employment Contract" provided to the plaintiff on or about 8 November 2012;
(ii)A letter from Dr Stratmann and Ms Minai to the plaintiff dated 12 November 2012; and
(iii)A letter to Dr Andrew dated 28 November 2012 provided to him by Ms Minai in about late December 2012.

The 28 November 2012 “agreement”

It is necessary that I make a finding regarding the provenance of what was described as “the other contract of employment” constituted by the letter dated 28 November 2013 from Pathology One to Dr Andrew (Exhibit D 2). Dr Stratmann said he believed that by the time of his discussions with Dr Andrew in January 2013 the 28 November 2012 document had been executed. I am not prepared to accept this. Dr Stratmann's correspondence dated 22 January 2013 (Exhibit P 10) is devoid of reference to the 28 November 2012 agreement as too is the letter from Dr Stratmann dated 31 January 2013. Dr Stratmann placed his reliance on the 28 November 2012 document having been supplied to Dr Andrew by Ms Minai.

A plain reading of the matters contained in the letter dated 31 January 2013 from Dr Stratmann favours a conclusion that his understanding of where matters stood was derived from something other than the supposed 28 November 2012 agreement. For example, the reference in the 31 January 2012 letter to, “1 to 2 days” can be seen as a reference to the condition expressed in the 12 November 2012 letter, as can be, the second line of the second paragraph of the 31 January letter. Dr Stratmann endeavoured to explain this as nothing more than an attempt to reflect his understanding of the conditions expressed in the 12 November 2012 letter and that at the time of the letter dated 31 January 2013 he was thinking of the "entire scenario". However, there is no reference in the 31 January 2013 letter to, for example, the date of 18 January 2013 as the transition date by Dr Andrew to part time employment.
Dr Andrew’s evidence was that he had not seen the 28 November 2012 agreement until the legal processes in this proceeding was underway.

I prefer the account given by Dr Andrew on the question of the provenance of the document dated 28 November 2012. I am not satisfied that it was given to Dr Andrew. It cannot have work to do in forming the employment agreement with Pathology One.

Mr McKenna submitted that in the event I found as I have in relation to the document of 28 November 2012, it mattered not, because the facts necessary to determine the correct status of Dr Andrew’s employment and hence the applicable rate for notice to be paid to him after work ceased could be determined upon the construction of the 12 November 2012 letter when coupled with discussions between Dr Andrew and Ms Minai.

The implied term

The defence mounted by Pathology One relies on the implication of a term. In Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352, Sir Anthony Mason (with whom Stephen and Wilson JJ agreed upon the issue of ad hoc implied terms) stated his now famous "true rule" governing the admission of evidence of surrounding circumstances in an exercise of contractual interpretation for an instrument. At p 352 Mason observed:

The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we've seen, if the facts are notorious knowledge of them will be presumed.

Since the statement of the “true rule” in Codelfa subsequent decisions suggested an inclination to perhaps to relegate the significance of “ambiguity” For example, in MBF Investments Pty Ltd v Nolan [2011] VSCA 114 at [195] – [204] Neave, Redlich and Weinberg JJA at [197] referred to a "lively debate" that had endured years over of when a court could have regard to circumstances surrounding the making of a contract in the exercise of construction, as something that was effectively quelled. That comment with the passage of time has proved to be ambitious. In Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 the High Court refused an application for special leave to appeal from the New South Wales Court of Appeal. The trial judge had considered the literal meaning of the words of a letter agreement generated an uncommercial outcome, and so have taken a different view of the text. In the Court of Appeal, Macfarlan JA said:

A court is not justified in disregarding an ambiguous language simply because the contract would have a more commercial and businesslike operation if an interpretation different to that dictated by the language were adopted.

Gummow, Heydon and Bell JJ said at [2]:

The position of Codelfa, as binding authority, was made clear in the joint reasons of five Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5; (2002) 240 CLR 45 at 62-63 [39] and it should not have been necessary to reiterate the point here.

There are occasions that warrant the implication of a term or terms based on the actual or presumed intention of the parties. There is a commonality of terminology used by the Courts in discussions of when the implication of terms can arise. They may be necessary to give “business efficacy” to a contract, or result from a course of dealings, or arise as a result of custom or trade usage. In Codelfa [9] Mason set out the conditions necessary for implying a term as they were found by the majority in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1977] HCA 40:
(1) It must be reasonable and equitable;
(2) It must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(3) It must be so obvious that 'it goes without saying';
(4) It must be capable of clear expression;
(5) It must not contradict any express term of the contract.
His Honour explained the conceptual underpinning of the basis for the implication of a term as follows [at 5-8]:
The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract. In each case the problem is caused by a deficiency in the expression of the consensual agreement. A term which should have been included has been omitted. The difference is that with rectification the term which has been omitted and should have been included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it - it is not a term that they have actually agreed upon. Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it. Rectification ensures that the contract gives effect to the parties' actual intention; the implication of a term is designed to give effect to the parties' presumed intention.
For obvious reasons the courts are slow to imply a term. In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made. The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue. And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.
Accordingly, the courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract. ...
The basis on which the courts act in implying a term was expressed by MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd (1939) 2 KB 206, at p 227 in terms that have been universally accepted: "Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying. . .” (at p347)
Here Pathology One and Dr Stratmann seek to rely on the presumed intention derived from conversations with Dr Stratmann to import into the 12 November 2012 letter a necessary term that his employment would revert to part time employment in or about mid January 2013 or by 18 January 2013. If this is the case, it is also argued that the applicable rate of pay at the date of the provision of notice would be a part time rate.

Mr Tracey contested the defendants’ submissions and argued that the12 November 2012 document contained key provisions that admit of a simple interpretation. He said that Dr Andrew was employed on a full-time position that was to revert to between 1 to 2 days employment "by mutual agreement". The anticipated transition date of January 2013 or later was also predicated on the satisfaction of “mutual agreement”. Without mutuality, the agreement would continue or it could be terminated in accordance with its terms by the provision of three months’ notice given by either Dr Andrew or Pathology One.

If meaning could be given to the agreement that in the event Dr Andrew’s employment had not reverted to part time employment by mid January 2013, there could hardly be any occasion for it to transition “or later by mutual agreement” because by 10 January 2013 staff were advised of the redundancy and, by email dated 14 January 2013, Dr Andrew had been told that his period of notice had commenced to run. Thereafter there could be no mutually reached agreement for Dr Andrew to commence employment on a part time basis. The word “anticipated” is the past tense past particle of the verb “anticipate” and, in my judgement, is antithetical to an automatic transition of one type of employment replacing another. I am satisfied that the employment agreement when viewed in light of the surrounding circumstances was for ongoing employment of Dr Andrew and not an agreement for him to assist in the winding down of the business and cessation of his employment. There is no evidence that the sale of the business was in the contemplation of any party at the time that Dr Andrew was recruited. Indeed all the outward indicators are to the contrary.

Furthermore, and even if I was inclined to prefer the defendants’ account of the agreement, nonetheless Dr Stratmann said in evidence that he agreed to Dr Andrew continuing as a full-time employee on and after the provision of the notice on 10 January 2013. Such “mutuality” therefore as existed resulted in the extension of Dr Andrew’s full-time employment and was not a change to part time employment.

In any event order for the defendants to get to a position to impute the term as they would have it, the minimum proper approach dictated by the application of the "true rule" is to permit evidence of surrounding circumstances of a relevant transaction if the threshold of ambiguity is first surmounted. It is ambiguity that warrants recourse to the surrounding circumstances not collateral issues such as the commerciality or practicality of applying the agreement as found. Does 12 November 2012 agreement admit of ambiguity? The language said to admit of ambiguity is:

· Full-time position to revert to part-time (between 1-2 days) per week by mutual agreement

· Anticipated transition to part-time position by mid January 2013 or later by mutual agreement

The first of the two bulleted paragraphs extracted above is hardly controversial. It really does no more than express the intention the parties had. It accords with the sort of work Dr Andrew had been doing at Healthscope, and conformed to the type of work he was looking for after leaving Healthscope and, for all effective purposes, was the type of employment that would most likely have been concluded between Ms Minai and Dr Andrew in late October 2012 but for the change in circumstances faced by Pathology One. However, and in my judgement relevantly, such an intention was predicated on a transition by Dr Andrew from fulltime employment to ongoing part time employment with Pathology One. It would not make sense to treat the second of the bulleted paragraphs as reflecting an intention on the part of Dr Andrew to transition to part time employment by mid January 2013 or later by mutual agreement where this would result in his part time employment amounting to nothing more than him either the working through a period of notice either to 10 April 2013 or, on another view of the issues joined, until 4 February 2013.

If any ambiguity exists it is a barren exercise to try and resolve it because if the language used means 13 January 2013 or some time later, nonetheless both scenarios are predicated on “mutual agreement” and the evidence is against a conclusion that mutual agreement was reached. If however, the correct interpretation is that the anticipated transition by 13 January 2013 need not be by “mutual agreement” then there was no decision conveyed to Dr Andrew by Pathology One by mid January 2013. The fact of the matter is that the agreement on its own terms made allowance to end the agreement in the absence of mutual agreement which was by recourse to “3 months” notice by either party.

I am satisfied that Dr Andrew came to the employment with a desire for part time employment and I accept that all things being equal he wanted this to take effect by the middle part of January 2013 or the end of January 2013. Furthermore, and all things being equal, this depended on the appointment of addition pathologists and of course ongoing part time employment for him but that all of these matters remained a work in progress at the date that he was notified of redundancy. I think it is not entirely unhelpful to consider what might have occurred had the decision not been taken by Dr Stratmann to cease operations at Pathology One. Understandably the defendants submit that the answer is obvious and consistent with Dr Andrew's stated intention which was to "transition to part-time employment". Dr Andrew contests this conclusion, at least to this extent, by submitting that no agreement had been reached with Pathology One of when and to what extent he would move to part time employment. I agree with the plaintiff’s submissions.

I am further satisfied and find that the decision to pay Dr Andrew notice for the period from 4 February 2013 to 10 April 2013 at a rate equivalent to 1.5 days was arbitrary. It was contrary to Dr Andrew’s agreement and it amounted to a breach of contract.

The next question to which attention is directed is an assessment of when Dr Andrew’s employment ended. The answer to this question also lies in an analysis of the agreement between the parties and whether Pathology One could terminate Dr Andrew’s employment by a partial payment in lieu of notice. The answer may also affect the amount if any beyond what has already been paid to Dr Andrew by way of accrued but untaken annual leave and, possibly as well, superannuation contributions.

When did Dr Andrew’s employment end?

On 10 January 2013 Dr Andrew was notified that his employment would come to an end as a result of a redundancy. By email dated 15 January 2013 (Exhibit P9) Ms Minai sent an email to all staff including Dr Andrew that read as follows:

Dear Team;
Please be advised that as discussed on Thursday 10^th January 2013, your position at Pathology One has been made redundant. The notice period commenced on Thursday 10^th January 2013 as well…

Therefore, Dr Andrew’s period of three months’ notice under his employment agreement would conclude on 10 April 2013. I note that there is nothing contained in the email from Ms Minai to suggest that Dr Andrew’s notice would be paid at a full time rate from 10 January to either mid January 2013 or 18 January 2013 and thereafter until 10 April 2013 but at the part time rate.

Dr Andrew’s employment would have ended at the expiration of the period of notice, that is, on 10 April 2013. The email from Ms Minai of 15 January 2013 and the facts then in existence gives no basis to contend otherwise than that the period of notice was to be served out. The subsequent “corridor” discussions between Dr Andrew and Dr Stratmann concerning the closing date of the laboratory had not by then been broached.

There was no capacity expressed in the employment agreement that reserved to the employer the provision of payment in lieu of notice. This being so, then the ordinary principles apply meaning, that the wages “earned” during the period of notice would continue to attract annual leave and also attract superannuation obligations on the part of the employer. In such a case Dr Andrew’s final pay for 10 April 2013 would have reflected annual leave accruals to this date unless of course he had chosen to take a component of it.

However, the employer’s position in relation to Dr Andrew working through the full period of his notice altered. It altered because Pathology One through the offices of Dr Stratmann determined that there would be no practical requirement for the balance of the period of notice that commenced on 10 January 2013 to be worked out because there would be no further work for Dr Andrew to do by the end of January 2013. This decision was expressed by Dr Stratmann in his letter to Dr Andrew dated 22 January 2013 (Exhibit P 10)in the following terms:

Following our brief discussion yesterday, and in the context of the closure of the laboratory which was announced on Thursday, January 10^th 2013, we need to confirm your future role in the laboratory, and I need to notify you when this will cease. As you are aware, we have been working through the issues with yourself and the laboratory staff since the announcement, but now need to finalise them.
Your requirement commencement was to assume a part-time role of 1-2 days per week at around this time, with the actual days and hours to be decided by mutual agreement, as discussed and agreed time. Three half days would best suit the laboratory's needs during the wind down phase, and is consistent with our agreement.
In keeping with the above, plus your preference to a particular days leave, we need to plan your specific working hours and days for the weeks ahead.

Your termination date will be 10 April 2013 and your cessation at laboratory to be discussed in the following weeks. At that time the balance of your notice period entitlements up until the termination date will be paid up to you along with your accrued but untaken annual leave entitlements.

100.Accordingly the letter from Pathology One notified Dr Andrew that the balance of the period of notice under his contract would be paid out by way of a payment in lieu to commence from an as yet agreed date and advised him that a period of work of some three half days per week would best suit the needs of the laboratory in the interim period. Despite this reference to three half days, the parties accept that Dr Andrew remained in full time employment up to 4 February 2013.

101.Dr Stratmann wrote again to Dr Andrew on 31 January 2013 (Exhibit P 12). He now provided the date for the cessation of employment. He said so far as is relevant:
"I remain of the view that we reached an agreement at the time of your commencement that your role would revert to part time (between 1 to 2 days) by mid-January 2012. This arrangement was put in place at your request and is set out in the letter of offer signed by you dated 12 November 2012.
...
I am now writing that from 4 February 2012 you will not need to work out the balance of your notice period because there is no further work available for you at Pathology One. You are entitled to be paid out the balance of your notice period up until 10 April 2012 at the rate of pay which would have been payable had you worked out the notice period. In accordance with our agreement, you are now engaged on a part-time basis and as a result you will be entitled to be paid 1.5 days pay for each remaining week of your notice period.

You will also be entitled to be paid all accrued but undertaken annual leave. Annual leave has accrued on the basis of the hours you have worked each week."

102.In Siagian v Sanel Pty Ltd (1994) 122 ALR 333, Wilcox CJ traversed a good deal of case law on the question of the effect of the provision of notice in its various guises as a mechanism to identify the point in time that employment ends. His Honour distilled a number of the principles in the following terms at p 355:

“It seems to me that, in the absence of evidence of concrete intention[5], it should usually be inferred that the employer intended the termination to take effect immediately. This conclusion not only reflects the more accurate meaning of the phrase "payment in lieu of notice"; it accords with common sense. An employer who wishes to terminate an employee’s services, and is prepared to pay out a period of notice without requiring the employee to work, will surely wish to end the relationship immediately. If the employee is not to work, there is no advantage to the employer in keeping the relationship alive during the period for which payment is made; and there is the disadvantage that the employer will be burdened with employment related costs, such as workers’ compensation insurance, payroll tax, liability for the payments etc. The employer also incurs the risk that some new burden will be imposed in respect of the employment during the period."
[5] My emphasis added

103.The defendants argue that in light of the decision in Saigan, and upon the decision to make a payment of notice in lieu, Dr Andrew’s employment ceased as at 4 February 2013. That is to say he was entitled to his wage for the period representing the balance of the notice period but not annual leave because there could not be service.

104.However, in support of the contrary position and a submission that Dr Andrew’s employment continued until 13 April 2103, and so attracted the benefits concomitant with such a position, namely annual leave, Mr Tracey referred to the House of Lords in Delaney v Staples (trading as De Montfort Recruitment) [1992] 1 A.C. 687. This case concerned the circumstances of an employee who was dismissed with the provision of a cheque, expressed to amount to payment in lieu of notice, which was subsequently stopped by the employer on the ground that he was entitled to dismiss the employee summarily. The complaint made by the employee was brought to an industrial tribunal pursuant to the Wages Act 1986 that held that it lacked jurisdiction to make an award under the Act but declared the amounts owed were unlawful deductions and contravened the Act and made an award of such amounts in the employee's favour. Both the employee and the employer took the matters on appeal which resulted in a decision that that held that none of the sums fell within the ambit of the Act and further that neither claim came within the jurisdiction of the tribunal. The employee’s appeal was dismissed but the employer’s cross-appeal was allowed. The Court of Appeal then allowed the employee’s appeal in part and restored the industrial tribunal's decision. The matter came before the House of Lords on the question whether the industrial tribunal had jurisdiction to adjudicate on payments in lieu of notice. Lord Browne-Wilkinson in expressing the unanimous decision of their Lordships said at [p692]:

The phrase "payment in lieu of notice" is not a term of art. It is commonly used to describe many types of payment the legal analysis of which differs. Without attempting to give an exhaustive list, the following are the principal categories.
(1) An employer gives proper notice of termination to his employee, tells the employee that he need not work until the termination date and gives him the wages attributable to the notice period in a lump sum. In this case (commonly called "gardening leave”) there is no breach of contract by the employer. The employment continues until the expiry of the notice: the lump sum payment is simply advance payment of wages.
(2) The contract of employment provides expressly that the employment may be terminated either by notice or, on payment of a sum in lieu of notice, summarily. In such a case if the employer summarily dismisses the employee he is not in breach of contract provided that he makes the payment in lieu. But the payment in lieu is not a payment of wages in the ordinary sense since it is not a payment for work to be done under the contract of employment.
(3) At the end of the employment, the employer and employee agree that the employment is to terminate forthwith on payment of a sum in lieu of notice. Again, the employer is not in breach of contract by dismissing summarily and the payment in lieu is not strictly wages since it is not remuneration for work done during the continuance of the employment.
(4) Without the agreement of the employee, the employer summarily dismisses the employee and tenders a payment in lieu of proper notice. This is by far the most common type of payment in lieu and the present case falls into this category.

105.Mr Tracey submitted that Dr Andrew fell within the first category of case. I do not agree. Gardening leave is an awkward concept to apply in relation to a business that is to cease operations due to a redundancy. Furthermore proper notice was given and Dr Andrew worked a portion of it. The three month notice that commenced on 10 January 2013 did not terminate Dr Andrew’s employment and did not amount to a breach of contract. However the letter dated 31 January 2013 intended to terminate the employment with immediate effect from 4 February 2013 on the provision of the balance of the three month notice period as a payment in lieu did amount to a breach of contract. The decision was not permitted under the employment agreement. There was no express or implied reservation to the employer to pay out a period of notice.

106.Mr Tracey submitted that the consequence in law of a breach of contract such as is pleaded are well expressed by reference to the decision of the High Court in Sanders v Snell (1998) 196 CLR 329. At page 337 the Court had this to say:

In terminating the respondent’s employment, the Bureau did not act under cl9 (a) of the contract of employment. It did not contend at the time of termination (and has not contended subsequently) that the respondent had been absent from duty without authority or was guilty of misconduct. Rather, it sought to act under cl 9(b). Only cl 9(a) speaks of payment of salary in lieu of notice. Clause 9(b) does not refer to payment of salary in lieu; it speaks only of "two months notice of intention to terminate the employment" being given by either the Bureau or the employee. The contract being cast in these terms, it is not possible to imply in it some term that would permit the Bureau to make payments to the respondent in lieu of notice except in the cases specifically identified in cl 9(a)…To imply such term would fly in the face of the express provisions of the agreement [BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 cited]. It follows that for the Bureau to terminate the contract of employment under cl9 (b) without first giving the notice stipulated in clause would be a breach of contract, unless the parties agreed to the contract being terminated in this way."

107.Mr Tracey was at pains to argue that his primary position was that Dr Andrew’s employment was not terminated because of the provision of payment in lieu of notice. He submitted that Dr Andrew’s position departs from the “usual position” expressed by Wilcox CJ in Saigan that employment comes to an end upon the provision of payment in lieu and he relied on a number of facts the totality of which he argues warrants a departure from the usual position that the employment ends on payment of notice. Mr Tracey referred to the letter dated 22 January 2013 (Exhibit P 10) from Dr Stratmann to Dr Andrew, the salient part of which reads:

"Your termination date will be 10 April 2013 and your cessation at laboratory to be discussed in the following weeks…" [my emphasis added].

108.Mr Tracey submitted that the 22 January 2013 letter did not terminate the employment of Dr Andrew but rather reserved the matter of the “cessation of work” to some future date, which Mr Tracey submitted contended should be regarded as 10 April 2012. Mr Tracey submitted this interpretation is consistent with the email from Ms Minai to Dr Andrew dated 14 January 2013 in which she said that three months’ notice would commence on 10 January 2013 as opposed to stating that Dr Andrew’s employment ended there and then. I am unable to accept this submission. It fails to take account of Dr Andrew’s acknowledgement in evidence that he was aware that it was anticipated that the effective closure of Pathology One would occur in the week commencing 23 January 2013 that being the last date for the receipt of samples and the date for the return of all samples that had been received into the laboratory.

109.Mr Tracey submitted that Dr Andrew’s employment continued and was expressed to continue until 10 April 2013 and that all that occurred amounted to a payment made in advance of wages based on calculations determined by Pathology One.

110.Mr McKenna challenged the plaintiff’s submission. Whilst not submitting that the plaintiff’s argument was an exercise in artifice he did submit that “in reality” Dr Andrew worked through approximately three weeks of his notice from 10 January 2013 and on 4 February 2013 was paid the balance owing to 10 April 2013 by way of payment in lieu the effect of which was the employment then came to an end.

Discussion and analysis of the evidence

111.The decision by Pathology One to provide the balance of the period of the three months’ notice of termination of employment of Dr Andrew by way of a payment in lieu of notice amounted to a breach of his contract of employment. However, I do not accept the plaintiff’s submission that Dr Andrew’s employment continued until 10 April 2013. In my judgment the proper conclusion is that Dr Andrew’s employment ended on the decision by Pathology One to make a payment of the balance of the notice in lieu.

112.I think also that the reality of the case is somewhat more nuanced than the plaintiff would have it and fails to pay sufficient regard to the facts. I am not satisfied that my decision is affected to the contrary because the decision to pay out the balance of the period of notice by a payment in lieu was not accompanied by an immediate payment of the balance of the notice amount. I think the exchange between the parties reveals an intention on their part to broker a resolution and give further consideration to each of their expressed positions even though as alluded to by me earlier in my decision, they both appear to have been at odds as to what the others proposed course of conduct might amount to. The decision to not make the payment immediately does not alter the true character of the decision.

113.Dr Andrew’s employment was terminated by reason of a redundancy, the validity or genuineness of which was not challenged.

114.Dr Andrew delivered up his APP and Medicare provider authorisations with effect from 31 January 2013. He could not perform any services commensurate with his position of employment thereafter.

115.No new work was brought into the laboratory and all existing work was retuned by 31 January 2013. That is the evidence of the parties and nothing contradicted it.

116.Dr Andrew was given three months’ notice of termination by reason of redundancy. This was in accordance with his employment agreement. I find that when he was given notice of termination by reason of redundancy he was employed as the full-time pathologist for Pathology One. I find that Dr Andrew continued to work through part of the three month notice period as the full time pathologist and that he was paid on this basis up until 4 February 2013. I am satisfied and find, that no discussions occurred between Dr Andrew and Dr Stratmann or between Dr Andrew and anyone on behalf of the defendants of sufficient certainty to warrant me concluding that on an objective analysis the parties concluded an agreement in which transition from full-time to part-time employment had been reached as to commence by, or on, or before a certain date.

117.I do not accept a submission by the defendants, the effect of which would be to sanction the calculation of the balance of the amount of notice owed to Dr Andrew by reference to an anticipated variation of his working hours to come into effect after notice of termination was given on10 January 2013 and for the balance of the period of notice from 4 February 2013 to 10 April 2013.

118.I am satisfied that Dr Andrew was entitled to be paid the entire three months notice on the basis of his employment status as full time pathologist. I am satisfied that Pathology One could only give Dr Andrew the provision of three months notice and not payment in lieu of all or some part thereof. The12 November 2012 document is silent on the right of Pathology One to give notice by means of pay in lieu of notice. Mr McKenna submitted the 12 November 2012 agreement does not contain any term that would fly in the face of the implication of such term and that the right to do so should be seen as within the reasonable contemplation of the parties as it was reserved by clause 18 of the first draft contract sent to Dr Andrew by Ms Minai (Exhibit P5). This document however did not regulate the parties’ relations. It was a document that Ms Minai described as a standard agreement and was susceptible of negotiation which, the subsequent facts reveal, indeed occurred. It was predicated on a wholly different employment arrangement from that which came to fruition. I do not find that there is occasion to import or imply such a condition. I refer to and adopt the principles of law in relation to the implication of terms that I have addressed earlier in my reasons.

119.therefore I am satisfied that a further breach of contract occurred by the decision to pay Dr Andrew the part time rate for the period of the purported payment in lieu of notice. What then is the consequence of this breach?

Assessment of damages

120.Because Dr Andrew’s contract of employment was breached by Pathology One, the remedy is by way of damages. The ordinary rule is that damages are designed to put the plaintiff back in the position he or she would have been had the breach not occurred.

Annual leave

121.Can annual leave accrue after 4 February 2013? The claim for annual leave was pursued by Dr Andrew as a right under both his employment agreement and under the FWA.

122.The defendants submit that no obligation to pay annual leave as a monetary amount up until 10 April 2013 arose because there was no service by Dr Andrew.

123.First, Dr Andrew relies on the agreement reflected in the letter dated 12 November 2012 of 12 weeks’ per annum. Second he says that on the premise that his employment continued until 10 April 2013 then he has an entitlement under the FWA, and that by reason of the failure to pay annual leave on the period of notice paid in lieu there arose a contravention of the FWA.

124.Section 87 (2) of the FWA prescribes the method of accrual of Dr Andrew’s entitlement to annual leave. It states:
Accrual of leave

(2) An employee’s entitlement to paid annual leave accrues progressively during a year of service according to the employee’s ordinary hours of work, and accumulates from year to year.
Note:If an employee’s employment ends during what would otherwise have been a year of service, the employee accrues paid annual leave up to when the employment ends.

125.Section 90 (2) of the FWA provides:
If, when the employment of an employee ends, the employee has a period of untaken paid annual leave, the employer must pay the employee the amount that would have been payable to the employee had the employee taken that period of leave.

126.Mr Tracey submitted that annual leave was an ordinary and consequential loss occasioned by the breach and he called in aid the decision in Paterson v Middle Harbour Yacht Club & Anor (1996) 64 FCR 405 at 409 in which Whitlam J said:

In addition, had Mr Patterson continued in employment at the Club for the duration of his contract, he would have received at 11 November 1995 an amount of $7,791.47 for long service leave over and above the amount he received on 7 August 1993 when he was dismissed.

127.The decision by Whitlam J is not novel and, in the usual set of circumstances, would warrant such an outcome. However, the decision is elliptical in the sense that whilst His Honour found that the employer “was not entitled to dismiss Mr. Patterson summarily” and that it did not “have the right to terminate his employment by payment of four weeks’ salary[6]” the decision is not otherwise dispositive of legal reasoning, and the preponderance of the decision is concerned with the analysis of the assessment of damages and the implication of taxation treatment to the same.

[6] (1996) 64 FCR at 406

128.In the case of Dr Andrew, if the damages analysis is applied and the question is posed, what his position would have been had the breach of contract by purporting to make a payment in lieu the effect of which ended his employment not occurred, then the answer must be, that in any event Dr Andrew would not have been performing work. Pathology One had ceased operations by the date of breach of contract and Dr Andrew could not work because as at 31 January 2013 he had surrendered his requite authorisations. Whilst in the pure legal sense, and in accordance with employment theory, his employment would have remained on foot and not have ended until the three months had expired because there was no power to make a payment in partial lieu of notice, he would not have been performing work. It would be a different matter had the employment of Dr Andrew not terminated in consequence of a redundancy. In such a case it could conformably with principle and authority be said that but for the breach he would have been expected to have remained in service for the balance of the notice period and hence been readily entitled at the conclusion of the notice period to annual leave accrued during that period. This is not such a case.

129.Mr McKenna submitted that the entitlement to annual leave accrued as a minimum by reason of the performance of work and there was not a performance of work after 4 February 2013 by Dr Andrew. Mr McKenna referred to the cancellation by Dr Andrew of his APP and Medicare authorities from 31 January 2103. I agree with Mr McKenna’s analysis. In my judgment, it would be a fiction to ignore that these authorities were cancelled in consequence of the sale and closure of the business of Pathology One following on from which there came to be no further work to be done by Dr Andrew and this reality is unrelated to the breach occasioned by the decision to pay the balance of the notice period from 3 February 2013 to 10 April 2103 by way of payment in lieu. There was no capacity for Dr Andrew to provide services during the remainder of the period of notice.

130.In my view of the matter, there is nothing in the FWA by express language or necessary implication to enlarge the period of annual leave beyond the date at which employment ends. Section 90 (2) of the FWA merely fixes the period that annual leave is assessed which is when employment ends and which on occasions such as this may be a date different in time for the accrual of annual leave which as I have said, is dependent on the “performance of work”.There could not be any performance of work by Dr Andrew because the business closed. There could not be any performance of work because I have found that the payment made in lieu terminated the employment as at 4 February 2013.

131.I am satisfied that annual leave did not accrue to Dr Andrew in the period from 4 February 2013 to 10 April 2013 as either a contract entitlement or under the FWA.

Superannuation

132.By reference to the reasoning I have already expressed there is no occasion to award Dr Andrew an amount for superannuation contributions that would have applied to a period of employment from 4 February 2013 to 10 April 2103.

Calculation of damages

133.In this case the calculation of damages is not necessarily as straightforward an exercise as the defendants would have it of affirming the proposition that had the breach of contract not occurred then Dr Andrew would have reverted to part time employment and thus be in line with the form of payment determined by the defendants for payment of notice after 4 February 2012. This is because the contract did not allow for the reversion to part time employment and because the decision to sell the business intervened. On this analysis had the breach not occurred then Dr Andrew would have been no longer employed at all as opposed to working part-time. This is a misleading analysis. I consider the state of affairs in existence when the breach occurred reveals that:
(i) The business had been sold and so there could be no alteration to part time employment;
(ii) Dr Andrew at no stage worked part time for Pathology One. He at all times was employed full-time;
(iii) He was working full time at the date of sale of the business and at the announcement of the closure and at the date when it was decided to pay the balance of the notice period by payment in lieu;
(iv) No agreement had been reached with Dr Andrew to revert to part time employment; and

(v) Dr Andrew’s contract required three months notice.

134.Dr Andrew ought to have been paid the entire period of his notice at the full time rate. He was not. He is entitled to the difference subject to mitigation.

Mitigation

135.I am also satisfied as I have earlier expressed in these reasons in regard to the efforts taken by Dr Andrew after leaving Pathology One that he acted reasonably. In particular, I note and regard as relevant to the question of reasonableness of the steps taken by Dr Andrew that he sent in the order of 10 or 12 e-mails after leaving Healthscope from which he received but one reply, that being from Ms Minai at Pathology One. I am satisfied that the steps taken by Dr Andrew in making contact with Melbourne Pathology and Dorevitch Pathology and through his professional network together with having signed up with Medirecruit agency were reasonable and sufficient efforts to discharge any obligation to mitigate.

Contraventions of the FWA

136.Because of the conclusions I have reached, there is no occasion for me to find that Pathology One contravened the FWA and, therefore, no basis to conclude that Dr Stratmann was involved in a contravention by way of aiding, abetting, counselling or procuring breaches under the FWA in regard to Dr Andrew. The question of the application of civil penalties does not arise.

137.Dr Andrew is entitled to an award of damages as against the first defendant, Pathology One. Dr Andrew was entitled to be paid three months’ notice by way of wages in the sum of $73,846.15 inclusive of superannuation for the period 4 February 2013 to 10 April 2013 from which the amount paid by Pathology One of $21,171.49 is to be deducted leaving an amount of damages in the sum of $50,769.23. The claim against the second defendant, Dr Peter Stratmann is dismissed. I will hear the parties as to the form of final order including the calculation of interest and costs.