K J Siely Pty Ltd v Hanson Construction Materials Pty Ltd

[2008] NSWDC 117

CITATION:	K J Siely Pty Ltd v Hanson Construction Materials Pty Ltd [2008] NSWDC 117
HEARING DATE(S):	14/4/08 - 16/4/08 and 23/6/08
JUDGMENT DATE:	8 July 2008
JURISDICTION:	Civil
JUDGMENT OF:	Rolfe DCJ
DECISION:	See Judgment para 79.
CATCHWORDS:	Cartage Contract - Consideration of whether there was serious misconduct giving rise to breach, unlawful termination, assessment of damages where there is a contractual right to terminate anyway.
CASES CITED:	Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64
PARTIES:	K J Siely Pty Ltd (Plaintiff) Hanson Construction Materials Pty Ltd (Defendant)
FILE NUMBER(S):	2583/07
COUNSEL:	JJE Fernon SC with T J Boyd (for the Plaintiff) J Murphy with Y Shariff (for the Defendant)

JUDGMENT

1 The plaintiff was an independent operator which owned and operated a concrete truck. On 28 April 2005 the plaintiff entered into a contract in the form of a deed of that date under which the defendant granted the plaintiff a cartage contract for a term commencing on 1 May 2005 until 31 October 2014 (the “Contract”).

2 The terms and conditions of the Contract incorporated the terms and conditions applying to all contract carriers carting concrete for the defendant in New South Wales in accordance with a contract determination (“Determination”) made between the defendant and the Transport Workers’ Union of New South Wales. The Determination was registered and approved by the Industrial Relations Commission of New South Wales. The terms and conditions of the Determination are Annexure RF 3 to the affidavit of Russell Farr sworn 18 February 2008 (exhibit 1). It applied to the defendant’s fleet of about 167 lorry owner/drivers (“LODs”) across New South Wales.

3 Between 1 May 2005 and 2 June 2006 the plaintiff carried out cartage services for the defendant under the Contract. The cartage services were largely performed in and out of the site known as the Western Suburbs Concrete Plant at Penrith (“WSC Plant”). The defendant sold concrete from the WSC Plant and other plants using its fleet of LODs.

4 On 2 June 2006 the defendant suspended the plaintiff from work “effective immediately”. The suspension was notified by the defendant to the plaintiff in a letter dated 2 June 2006 (exhibit 1 p 74) in the following terms:

“Dear Ken

Re: Gross Misconduct

Less than one month ago we had a meeting with you in which you were given a letter highlighting some serious issues of misconduct while operating out of the Western Suburbs Concrete Plant. As explained in the letter, based on this misconduct it was open to Hanson to terminate your contract immediately, however you were given 90 days to sell your contract on the open market and you indicated that you would.

Since our meeting on May 3rd, there have been several incidents involving you including:

1. Attempting to create a petition amongst other LODs in support of you remaining as a contractor with Hanson;

2. Urinating in public – in the yard at the split drum only 40 metres from the toilets;

3. Driving straight past the slump stand after being loaded without checking your load;

4. Dangerous driving – overtaking company trucks at high speed on the private road into Wallgrove quarry;

5. Breech (sic) of safety – attempting to reverse at high speed with the intention of running into a company truck at the split drum;

6. Intentionally hosing down a company driver on a customer’s site;

7. Communicating a threat to a company driver after you refused to move your truck out of the way.

Yesterday you and I had a discussion in which you stated that you wanted to remain as a contractor with Hanson because “I’ve only ever had problems at Penrith and nowhere else”, but all of the examples listed above occurred after you were transferred to the split drum. You also stated most emphatically that you would not sell your truck and contract, adding that you would “see us in court”. You should be aware that under the terms of your contract, given incidents such as those listed above Hanson can take your contract without compensation.

Due to the seriousness of this situation and the potential for this unacceptable behaviour to continue, you are hereby suspended from work effective immediately. I further require you to respond to this letter in writing by 3PM Monday 5th June 2006.

Sincerely

Russell Farr
Concrete Transport Manager”

5 By letter dated 7 August 2006 the defendant terminated the Contract pursuant to Clause 3.2 (b) of the Determination. The letter from the defendant to the plaintiff of 7 August 2006 (exhibit 2 p 72) was in the following terms:

“Dear Ken

Re: Notice of Termination of Cartage Contract

Further to our correspondence with you over the last two months our company has tried its utmost to accommodate your situation. However despite all our efforts you have failed to co-operate at all. The facts are these:

(i) Your conduct at Western Suburbs Concrete and subsequently was so bad that none of our other carriers or staff would work with you. We tried but were unable to find a single location where the carriers and staff were prepared to work alongside you. The reason was that you had consistently displayed aggressive and threatening behaviour to both carriers and staff.

(ii) We could have terminated your contract on the spot but we gave you the opportunity to sell your contract on the open market in an effort to avoid this step. Any other carrier in your situation would have seized the chance to sell his contract and move on. Instead you engaged a solicitor who promised us that you would sell your contract, but then turned around and told us that you would accept “arbitration”. As our lawyer informed your lawyer, we were under no obligation to “arbitrate” anything. Your conduct justified termination and we offered you a chance to sell your contract to avoid the termination scenario. For whatever reason you have passed up that opportunity.

We cannot sustain your situation at Hanson any longer. You have completely destroyed your own standing by aggressive and threatening behaviour to our carriers and staff. That constitutes misconduct of the most serious kind and for this reason we are giving you formal notice that your cartage contract is hereby terminated in accordance with Clause 3.2 (b) of the Contraction Determination.

We will arrange through your solicitor to remove the agitator from your truck so that you may then utilise the truck elsewhere. Any payments due to you on termination will be credited to your bank account in the ordinary course.

Sincerely

Russell Farr
Concrete Transport Manager”

6 Clause 3.2 of the Determination was in the following terms (exhibit 1 p 13):

“3.2 Termination of Contracts of Carriage

(a) From 1 November 2004 if the Contractor decides to terminate a contract of carriage for any reason other than serious misconduct the Contractor shall pay to the Carrier an immediate termination payment of $66,000.00 and the contract shall terminate forthwith. In addition to the termination payment the Contractor shall offer to purchase the truck owned by the Carrier at the relevant market value at that time. The Carrier may choose to accept or reject the offer of the Contractor.

(b) Where the Contractor terminates a contract of carriage at any time by reason of serious misconduct by the Carrier then the Contractor has the right to terminate the contract without notice and without an obligation to make any compensation payment to the Carrier. For the purposes of this Arrangement “serious misconduct” may include acts of physical violence, serious theft, serious threats made to a person, gross negligence.

(c) Where a Carrier decides to leave the fleet and not invoke the provisions of Clause 4 Assignment of Contracts of Carriage then the Carrier must give the Contractor no less than one (1) months notice of intention to leave. The Contractor and the Carrier may negotiate a purchase by the Contractor of the Carrier’s truck if they so choose.”

7 It is the plaintiff’s case that the defendant wrongfully prevented the plaintiff from performing its obligations under the Contract after 2 June 2006 and that the purported termination on 7 August 2006 was unlawful. The plaintiff claims damages for these breaches.

8 Mr Russell Farr is the defendant’s Concrete Transport Manager, Eastern Region. Mr Farr reports to Mr Anthony Clarkson, the Regional Logistics Manager, Eastern Region. In turn, Mr Clarkson reports to Mr Lee Essing, the General Manager of the defendant. Mr Peter Vicary is the General Manager of Western Suburbs Concrete Pty Limited and works from the WSC Plant at Penrith.

9 On 4 April 2006 Mr Farr received a phone call from Mr Vicary and arranged a meeting the following day to discuss with Mr Siely certain allegations that had been made. The meeting took place on 5 April 2006 and was attended by Mr Clarkson and Mr Farr on behalf of the defendant and Mr Siely on behalf of the plaintiff. Two union delegates also attended. In this regard, Mr Clarkson’s evidence was that he explained to Mr Siely certain allegations that Mr Vicary had made. These are contained in Mr Vicary’s statement, exhibit 5. In it Mr Vicary said he had spoken to Mr Siely on numerous occasions over breaches of yard rules, in particular, washing his truck out at the slump stand when the yard policy was for truck agitators to be washed out under the plant. He said Mr Siely constantly ignored instructions not to hose his barrel when his truck was being loaded with concrete under the plant because moisture hampered the performance of a dry dust extraction system at that location. Mr Siely told Mr Vicary other drivers had used the hose in the same location. Mr Vicary also said that subsequent to his discussion with Mr Siely about this, a sign was erected in the loading bay stating that there was to be absolutely no hosing down of trucks whilst they were under the plant. Notwithstanding, Mr Siely had disregarded the instruction. Mr Vicary also reprimanded Mr Siely for using the company photocopier in the office. Mr Vicary had also spoken to Mr Siely about some spilt concrete in front of the plant, although Mr Siely said that someone from either Penrith City Council or Western Suburbs Concrete Pty Limited had caused the spill. With regard to the photocopying incident, Mr Vicary said in his statement that Mr Siely attempted to block him from the machine using an arm and then restrained him when Mr Vicary attempted to pull paper from the copier. Mr Vicary said he leaned against Mr Siely to move him away from the copier and Mr Siely complained about being assaulted. Mr Vicary also said in his statement that when Mr Siely attended a customer’s residence to make a delivery the customer reported that Mr Siely had described the residence as a dump.

10 On 18 March 2006 Mr Vicary said he saw Mr Siely drive his agitator to the after hours wash out stand. Water was not to be collected from that point when the batcher was still in the office (and he was). Accordingly, Mr Vicary sent the yard manager Mr Morgan to speak to Mr Siely. He observed the two of them speaking and saw Mr Siely attempting to place something in the keyhole of the electrical box which activates the pump. Mr Morgan then placed his right hand over Mr Siely’s right hand and he then pulled Mr Siely away from the electrical box, as a result of which Mr Siely pushed Mr Morgan backwards.

11 After this incident Mr Vicary said the lock on the electrical board had to be repaired and the key to the box was removed and retained by the yard manager.

12 On 4 April 2006 when Mr Siely could not obtain water from the batcher he drove to the slump stand and began filling his barrel with water there. Mr Vicary asked him to come back under the plant but he refused. Mr Vicary then walked to the slump stand with the intention of turning the tap off but Mr Siely put both hands on the tap to prevent him from doing so. Mr Vicary removed Mr Siely’s hand from the tap and whilst this occurred, Mr Siely leant his shoulder against Mr Vicary. The result was that Mr Siely clipped his hand on a steel washer and cut it. There followed a verbal exchange between the two.

13 Although Mr Vicary asked Mr Siely to leave the site, he refused, so Mr Vicary got into the plaintiff’s truck and drove it outside the front gate. He then handed the keys to Mr Siely who appeared enraged, walking towards Mr Vicary with his fists up. Nothing occurred before Mr Siely got into the truck and left other than Mr Siely swearing at Mr Vicary.

14 Mr Clarkson’s said that at the meeting on 5 April 2006 (exhibit 2 para 19) he explained Mr Vicary’s allegations and asked Mr Siely for his version of events. Mr Clarkson said:

“I recall that Siely gave a very different version from the one I’d heard from Peter Vicary.”

15 Mr Clarkson’s said that he considered the allegations made against Mr Siely were very serious and involved a threat to the safety of other personnel. However, Mr Clarkson informed Mr Siely that he could continue to work and would be transferred to another plant, but that an investigation into the matter would be undertaken. Mr Clarkson also asked Mr Siely to submit to a drug and alcohol test, which he did, and the test did not reveal any drugs or alcohol present in the bloodstream.

16 Mr Clarkson arranged for Mr Siely to work from the “Split Drum”, a mobile concrete plant based at Wallgrove. In the meantime, Mr Peter Watson, the defendant’s Accident Investigator, was instructed to undertake a full investigation.

17 An unsigned statement of the Yard Manager, Mr Morgan, is in evidence as exhibit 4. The inference the Court draws is that this document was prepared by the investigator Mr Watson after he spoke to Mr Morgan. In exhibit 4 Mr Morgan said that over the preceding six months (presumably prior to April 2006) he had spoken to Mr Siely about using the after hours wash out during normal operating hours, using fresh water as opposed to recycled water to wash out his agitator and ignoring instructions. In exhibit 4 Mr Morgan stated that on 18 March 2006 he saw Mr Siely run from the lunchroom area towards the keyboard that controlled the pump for after hours water use. Mr Morgan told Mr Siely he was not supposed to use the after hours water to which Mr Siely responded “get fucked” and then placed his hand over the pump switch. When told by Mr Morgan that he could not use the after hours water, Mr Siely pushed him away from the keyboard. He then placed both hands over the keyboard switch and pulled down hard on it so that it broke off. He then placed both his hands on Mr Morgan’s chest and pushed Mr Morgan backwards. However, Mr Morgan only took one step back. Although Mr Siely placed both his hands up and clenched his fists and stepped towards Mr Morgan, there was no physical engagement. Mr Siely simply said “oh stuff you” and walked away to the lunchroom.

18 Also in evidence as exhibit 3 was a statement from an agitator driver, Mr Majed Haddad. This statement was not signed and the Court infers it was taken by Mr Watson during his investigation.

19 In exhibit 3 Mr Haddad said that about six months ago (presumably prior to April 2006) he was involved in an incident with Mr Siely when their trucks were parked alongside each other. He saw water dripping from Mr Siely’s truck and pointed towards it. Mr Siely was in his vehicle and shrugged his shoulders in response. He also raised his middle finger in Mr Haddad’s direction. Mr Siely flicked a cigarette through his driver’s side window in the direction of where Mr Haddad was standing. Mr Haddad said he made a gesture towards Mr Siely indicating that he would wash Mr Siely’s eye with recycled water. Mr Haddad then hosed Mr Siely’s cabin with recycled water. After they finished loading their trucks Mr Haddad drove his truck passed Mr Siely’s and stopped and got out and hosed Mr Siely’s cabin with recycled water. That caused Mr Siely to run towards Mr Haddad and so Mr Haddad pointed the hose directly on Mr Siely, who continued to run at him and grab his throat with his right hand. As Mr Siely would not let go, Mr Haddad saturated him with the hose and Mr Siely let go.

20 On another occasion about one month before the statement was made, Mr Siely had a discussion with Mr Haddad and two other drivers about a concrete spill. Mr Haddad asserted that it was probably Mr Siely who had been the culprit, to which Mr Siely replied “it wasn’t me you stupid idiot”. When Mr Haddad asked what he had been called, Mr Siely replied “shut up you stupid fucking wog”.

21 Mr Clarkson, as Regional Logistics Manager of the defendant, was the person who made the decision to terminate the plaintiff’s Contract. As well as his statement (exhibit 2), Mr Clarkson gave oral evidence.

22 Mr Clarkson said in his evidence (T 17) that at the meeting on 5 April 2006 he became aware that there were differences between Mr Vicary and Mr Siely about their versions of the events and it was for this reason that Mr Clarkson initiated the investigation by Mr Watson.

23 Mr Clarkson said (T 18) that he received a summary of Mr Watson’s investigatory report in mid April 2006, after Mr Watson had interviewed a number of people, including Mr Vicary, Mr Siely, Mr Morgan and Mr Haddad. Mr Watson had noted in his summary that there was a conflict in the evidence between Mr Siely and the defendant’s management which remained unresolved at that point.

24 Mr Clarkson said that when he considered Mr Watson’s report he knew that Mr Vicary and Mr Morgan had a complaint against Mr Siely, but he said (T 19) he was not aware that Mr Haddad had a complaint.

25 Mr Clarkson said in the period immediately following his receipt of the investigator’s summary he took no action against Mr Siely or the plaintiff. He prepared a memorandum of 1 May 2006 (exhibit 2 p 47). Amongst other things, Mr Clarkson recorded in his memo:

. “there is no documentary evidence of performance management of Ken Siely.

. Ken has made it clear since day one that he wants to get out of WSC and I believe has instigated a strategy to make that happen.

. Ken is without question an LOD that we would rather not have in our fleet.

. we do not have enough evidence or history of performance management that would allow us to take Ken’s contract at this stage.

. if we allowed Ken to transfer to another plant we have effectively given him what he wants.

. if we allowed Ken to transfer to another plant this would also send the wrong message to other LODs that want to be transferred that if you misbehave you will get what you want.

. we would not be able to send an existing LOD to WSC to replace Ken and would therefore be forced to send a company truck which will ultimately cost Hanson more.”

26 Under the heading “Recommendations” Mr Clarkson recommended:

. “send Ken back to WSC

. issue Ken a strong warning letter that indicates that if he does not follow reasonable directions or if any other serious behavioural issues occur then Ken’s contract could be terminated.

. sending Ken back to WSC will ensure the pressure remains on Ken which will result in one of three things happening:

1. Ken corrects his behaviour.

2. Ken sells his contract (has expressed that this is possible) or

3. Ken slips up and Hanson takes his contract.

. ask Russell Farr and Peter Vicary to sit down and determine a strategy to performance manage Ken.

. ensure Ken is not treated any differently to other drivers ie. Getting water, being told to say “please” etc.”

27 In cross-examination Mr Clarkson agreed that he had issued the memorandum on 1 May 2006 following a call he had received from Mr Vicary and that he knew Mr Vicary as a person who had a complaint against Mr Siely. He also knew Mr Vicary was important because he was the General Manager of Western Suburbs Concrete Pty Limited, a company in a joint venture with the defendant, or a related company of the defendant. Mr Clarkson also agreed in cross-examination (T 20) that his opinion as at 1 May 2006 was that there was not then enough evidence or history of performance management which would allow the defendant to terminate the plaintiff’s contract for serious misconduct. He reiterated that he was particularly concerned about the lack of documentary evidence that Mr Siely had been spoken to or of any explanations being given to Mr Siely about what was required. Mr Clarkson was aware that Mr Siely was concerned he was being treated differently from other drivers. Mr Clarkson said (T 21) that this was a matter of concern to him, although, without question, Mr Siely was a driver that the defendant would rather not have in its fleet. Mr Clarkson said he had a belief that Mr Siely wanted to be transferred to another plant and that he was concerned to ensure that did not happen.

28 So far as his recommendations were concerned, Mr Clarkson agreed that in communicating them to the defendant’s management, he was also communicating them to two directors of Western Suburbs Concrete Pty Limited. In cross-examination Mr Clarkson gave the following further evidence about his recommendations and concerns as at 1 May 2006 (T 22.15-34):

“Q. At this time your recommendation was that a strong warning letter be sent to Mr Siely to indicate that if he didn’t follow reasonable directions, or if there were any other serious behavioural issues, then his contract could be terminated?
A. Yes I did.

Q. And one of your concerns was to ensure that the pressure remained on Mr Siely, do you agree with that?
A. I do.

Q. And you wished to ensure that the pressure remained upon Mr Siely so that one of three things would happen, namely that Mr Siely corrects his behaviour, sells his contract or slips up and Hanson would take his contract?
A. That’s true.

Q. And by that third option, namely that Mr Siely would slip up and Hanson would take his contract, by that you mean that Hanson would terminate his contract?
A. That’s correct.

Q. Terminate his contract for serious misconduct?
A. That’s correct.”

29 Although Mr Clarkson gave evidence that he had discussions with Mr Essing, as a result of which the defendant’s intention was to give the plaintiff an opportunity to assign his Contract failing which the defendant would terminate the Contract and pay the plaintiff $66,000, I am satisfied that the defendant through Mr Clarkson and its other managers, had no intention to pay the plaintiff $66,000 as part of any termination of the Contract. Clearly, Mr Clarkson’s evidence about the defendant’s intention was based on an assumption on his part that a letter had been sent to the plaintiff along these lines. No such letter was ever sent. In fact, the letter that was sent by the defendant to the plaintiff on 3 May 2006 was in the following terms:

“Dear Ken

Re: Notification to Assign Contract

In the short time your company has been contracted to Hanson there has been considerable tension created at the Western Suburbs Concrete yard where you have been based. There have been numerous incidents of harassment, abuse and threats issued by you to other team members. You have also said a number of appalling things to various team members. This culminated in an incident where the Manager of the WSC business, Peter Vicary, believed that you had threatened him. Although you denied threatening Mr Vicary he was adamant that you had.

At the core of this problem is your apparent inability to work effectively with fellow team members. It was a problem for you at your previous place of work and has continued to be a problem in your time at Hanson. Although you are an independent contractor you are nevertheless obliged to work with a team. If you fail to do that properly then you are filing to carry out a fundamental term of your contract with Hanson.

Quite frankly it would be open to Hanson to terminate your contract now. However we have decided to give you an opportunity to sell your contract on the open market. You have 90 days from today to complete that sale. If you fail to complete the sale within that time frame then Hanson will move to terminate your contract unilaterally by reason of the continued failure by you to work with out other team members at Hanson.

I should also emphasise that if there are any further incidents of threats, tension or violence during your remaining time with Hanson you will be at severe risk that the company will terminate your contract immediately without compensation. So it is up to you to moderate your behaviour until you have sold your contract. If you do not then you might find yourself without any contract at all to sell.

Yours etc.
Leigh Essing
Regional General Manager”

30 Mr Clarkson’s evidence was, notwithstanding the wording in the third paragraph in the above letter, his view at the time was that it was not open to the defendant to terminate the plaintiff’s contract for serious misconduct. As Mr Clarkson saw it, it was open to the defendant to terminate the Contract on payment to the plaintiff of $66,000. That was not referred to in the letter. Rather, Mr Clarkson agreed that what the defendant was seeking to convey to Mr Siely was that the plaintiff was to be given the opportunity to sell the Contract on the open market providing it could find a buyer at an appropriate price who would be acceptable to the defendant. The defendant’s intention was that if the plaintiff failed to complete such a sale within 90 days, the defendant would move to terminate the Contract unilaterally. Putting it plainly at T 27, Mr Clarkson conceded that the defendant’s intention was for the plaintiff to sell the Contract so the defendant could get rid of Mr Siely from the yard.

31 Mr Clarkson also agreed (T 28) that although the letter of 3 May 2006 referred to the “core problem” of Mr Siely apparently being unable to work effectively with fellow team members, that this was not a conclusion the investigator had reached. Moreover, Mr Clarkson understood the Contract was very important to the plaintiff because of the ten year term which had involved a substantial investment made by the plaintiff insofar as it had “purchased” a previous contract. Mr Clarkson therefore acknowledged that any decisions the defendant made concerning the Contract could have serious ramifications from the plaintiff’s point of view and Mr Siely personally.

32 Mr Clarkson also said that as at 1 May 2006 he was not made aware of any complaints made by Mr Haddad or Mr Morgan and as far as Mr Vicary was concerned, following the investigation, there was a conflict between Mr Vicary and Mr Siely which remained unresolved.

33 Mr Clarkson was asked in cross-examination about the defendant’s letter to the plaintiff of 9 June 2006. That letter (exhibit 2 p 50) was in the following terms:

“Dear Ken

Re: Gross Misconduct

In our letter dated June 2nd last we required you to respond to allegations of serious misconduct on your behalf which had arisen since your transfer to our Split Drum operation at Wallgrove.

As of today we have still not received a written response from you. The incidents of misconduct are serious indeed and it is simply unacceptable that you have failed to respond.

After carefully considering your previous record and your more recent unacceptable behaviour Hanson can no longer accept your continued presence in its Concrete Transport Fleet and have decided to reduce the time you have to sell your contract.

If you do not present a buyer to Hanson by 9.00am Monday 19 June 2006 Hanson will terminate your contract without compensation due to the serious misconduct detailed to you in our letter of 2 June last. You will remain suspended without compensation during the time it takes for you to finalise the sale of your contract with Hanson.

I strongly encourage you to take this opportunity to sell your contract because if you have not done so by time and date mentioned above you will not have a contract to sell. We are also aware that you have received inquiries from interested buyers to there should be no barriers to you completing the transaction within the time frame specified.

Regards
Anthony Clarkson
Regional Logistics Manager – Eastern Region”

34 Mr Clarkson agreed that as at 9 June 2006 the plaintiff company had been suspended without receiving compensation. He accepted that reducing the time available for the plaintiff to sell its contract would make selling it more difficult (T 30-31), including achieving a reasonable price on the sale.

35 Mr Clarkson made it quite clear in his evidence (T 32) that as at 9 June 2006 that if the plaintiff had not sold its Contract by 19 June, then the defendant would terminate the contract on the grounds of serious misconduct. There was no suggestion in the letter of 9 June 2006 the defendant would pay the plaintiff $66,000 on termination of the Contract because of the defendant’s intention to terminate for serious misconduct. In this regard, Mr Clarkson’s evidence of the defendant’s intention was as follows (T 31):

“Q. You say, do you, that the company’s intention to terminate the contract for serious misconduct was different from its intention as of the beginning of May 2006?
A. That’s correct.

Q. When do you say the company’s intention changed to an intention to terminate for serious misconduct?
A. Well when some serious offence occurred at that split run that Mr – Mr Siely was involved in, when he was transferred to that plan.

Q. When do you say that was?
A. It was towards the end of May, I don’t recollect the exact date.

Q. Am I to understand that you as at the end of May or around that time, you had then decided for the company to terminate the contract for serious misconduct?
A. I formed the very strong view that things had to come to a head, and after the – the seriousness of what came to my attention, and I formed the view that we had the grounds to terminate for gross misconduct at that time. It was not our intention from the beginning.”

36 Mr Clarkson said that as at 9 June 2006 the incidents of misconduct identified in the letter dated 2 June 2006 were incidents of misconduct that justified the termination of the Contract on the grounds of serious misconduct. Although that letter was sent by Mr Farr to the plaintiff, Mr Clarkson agreed he approved it before it was sent.

37 Mr Clarkson said that prior to approving the letter of 2 June 2006 Mr Farr gave him the statement of one of the drivers, Mr Ianni and another person, Mr Arthur Kinsella.

38 Mr Clarkson then gave evidence about each of the seven items listed in the letter of 2 June 2006.

39 First of all, Mr Clarkson agreed that the allegation that Mr Siely was attempting to create a petition amongst other LODs in support of his company remaining as a contractor with the defendant was not serious misconduct. Mr Clarkson’s concern in this respect was about potential disharmony in the yard. Although it was put to Mr Clarkson that Mr Siely would be concerned to speak to other LODs about their support for him in the yard, Mr Clarkson asserted that such support did not exist but he had no first hand knowledge of this. Moreover, none of the drivers in the yard had spoken to him about this.

40 With regard to the second item, namely “urinating in public – in the yard at the Split Drum only 40 metres from the toilets”, after being pressed about the matter, Mr Clarkson agreed that although, in effect, it was undesirable behaviour and perhaps misconduct, it was not “gross” misconduct.

41 The third item was “driving straight past the slump stand after being loaded without checking your load”. The slump stand is a structure used by drivers so they can get to a height where it is possible for them to see within the barrel of the concrete truck and inspect the load. The fundamental issue here was that the load had to be checked by the driver himself. In this instance Mr Siely checked the load but at another location. Although the defendant’s procedures were that loads should be checked at the slump stand, Mr Clarkson conceded that if the load was in fact checked then Mr Siely’s driving past the slump stand could hardly constitute gross misconduct.

42 Mr Clarkson confirmed that his concern about Mr Siely driving past the slump stand was, in reality, that the load had not been checked. In this respect, Mr Clarkson’s evidence was that he received a copy of Mr Siely’s response to the letter dated 2 June 2006 and observed that in it Mr Siely acknowledged that he had driven past the slump stand but had checked his load at the loading sock. It is clear from Mr Clarkson’s evidence at T 40-41 that although this is not the usual procedure, it was possible for the load to be checked at that point. Mr Clarkson also told the Court, with regard to the origin of the complaint made on this issue against Mr Siely, that it had come from a batcher in the employ of the defendant but he had not spoken to the man personally. Insofar as Mr Siely had told the defendant he had checked the load, Mr Clarkson said that although he disbelieved Mr Siely he had not spoken to him about that. Moreover, Mr Clarkson agreed that the method used by Mr Siely to check the load by getting onto the rear step of the truck was not dangerous. In any event, the Court infers from Mr Clarkson’s evidence that he made no attempt to direct Mr Farr to speak to Mr Siely about the matter any further after the defendant received Mr Siely’s response to the letter of 2 June 2006.

43 Mr Clarkson was asked about item 4 in the letter of 2 June 2006 relating to “dangerous driving, overtaking company trucks at high speed on a private road in the Wallgrove quarry”. Mr Clarkson said he was seeking to convey to Mr Siely that he had engaged in dangerous driving because he had overtaken company trucks at high speed on a private road. First of all, Mr Clarkson agreed there was nothing in the letter indicating to Mr Siely who made the complaint or where it emanated from. Mr Clarkson agreed that item 4 in the letter was a complaint about something that was considerably more serious than the actual complaint in Mr Ianni’s letter to Mr Farr (exhibit 7). As that records, there was only one instance of overtaking with regard to one other truck and Mr Siely told that driver that he was “only mucking around”. There was no evidence of high speed in exhibit 7, nor for that matter in exhibit 8. In this respect Mr Clarkson agreed that, in deciding to terminate the plaintiff’s Contract for serious misconduct, he acted on his own belief that Mr Siely had engaged in dangerous driving by overtaking company trucks (plural) at high speed on the private road into Wallgrove quarry.

44 Mr Clarkson agreed that Mr Siely had responded with his own letter and denied the complaint of dangerous driving (exhibit 2 p 53). In this respect Mr Clarkson conceded he neither spoke to Mr Siely about the matter nor the driver Mr Ianni. Mr Clarkson also acknowledged that before receiving Mr Siely’s response to the allegation a decision had already been made to terminate the plaintiff’s Contract for serious misconduct. The allegation in item 4 was a significant factor in that decision. Mr Clarkson said the complaint recorded in item 4 was a more serious issue than the complaints in items 1, 2 and 3. In fact, items 1 and 2 could be disregarded.

45 Mr Clarkson said that after the defendant received Mr Siely’s response to the letter of 2 June 2006, whilst the defendant considered it, the defendant did not deviate from a course of conduct that would result in termination of the plaintiff’s Contract on the grounds of serious misconduct if the Contract was not sold in the meantime. This was because from early May 2006 the defendant had decided to get rid of the plaintiff (T 54) and if the plaintiff did not remove himself from the yard by selling the Contract, the defendant would do it for him by terminating the Contract.

46 Finally, Mr Clarkson agreed with regard to item 4 that apart from a single instance of alleged overtaking of Mr Ianni, there was no other circumstance where Mr Siely had overtaken a company truck at high speed.

47 Next, Mr Clarkson was asked about item 5 in the letter of 2 June 2006 “breach of safety – attempting to reverse at high speed with the intention of running into a company truck at the Split Drum”. In this respect Mr Clarkson was shown a record of a statement from Mr Ianni (exhibit 9). Mr Clarkson acknowledged there was no reference in the document to a vehicle reversing at high speed, nor was there any record of an intention on the part of the driver of the vehicle to run into a company truck. In essence, Mr Clarkson agreed (T 55) that the description of the complaint in item 5 was more extravagant than what was recorded in exhibit 9. Moreover, Mr Clarkson agreed that Mr Siely had dealt with this matter in his response (exhibit 2 p 56) and that if Mr Siely’s version of events was correct, the conduct of the other driver, Mr Ianni, was not appropriate conduct. Mr Clarkson agreed that Mr Siely acknowledged he reversed a couple of feet but had a lapse of concentration because of Mr Ianni’s conduct, as a result of which, he nearly collided (accidentally) with Mr Ianni.

48 Mr Clarkson conceded he did not speak to Mr Siely after receiving his explanation, nor did he have a conversation with Mr Ianni. He simply relied on what was in exhibit 9.

49 When it was put to Mr Clarkson in globo as it were, that he did not take into account, for the purpose of making a decision to terminate the plaintiff’s Contract on the grounds of misconduct any matter other than the seven items listed in the letter of 2 June 2006, he agreed with this proposition at T 59.11.

50 With regard to item 6 “intentionally hosing down a company driver on a customer’s site”, Mr Clarkson agreed there was nothing in the letter to indicate who the company driver was or where or when the incident occurred. In fact, Mr Clarkson was not sure who the driver was. He did not speak to the driver and he did not know where the customer site was. In other words, there was no evidence to substantiate the allegation.

51 With regard to item 7 “communicating a threat to a company driver after you refused to move your truck out of the way”, Mr Clarkson agreed that the driver was not identified, nor was the nature of the threat and how it had been communicated by Mr Siely. As well, the company was not identified; in fact, Mr Clarkson could not recall what the threat was, how it was said to have been communicated and who the driver concerned was.

52 When asked again if the only matters that he took into account for the purpose of deciding to terminate the plaintiff’s Contract on the grounds of serious misconduct were those listed as items 1-7 in the letter of 2 June 2006, Mr Clarkson prevaricated somewhat and referred in his evidence to “the issues that occurred prior” (T 61.6). However, when questioned further about the matter, he agreed that he had not included in his affidavit any important communication between himself and Mr Farr between 3 May 2006 and 1 June 2006 which might otherwise have had a bearing on the matter and he agreed that although prior to 3 May 2006 there had been issues relating to Mr Siely, that as at that date he was satisfied that those matters did not give rise to a ground of termination of the Contract for serious misconduct. The position only changed when he spoke to Mr Farr on 1 June 2006 as a result of which the defendant sent the letter to the plaintiff dated 2 June 2006.

53 In relation to the letter of termination dated 7 August 2006, Mr Clarkson initially asserted that the decision to terminate had not been made prior to 7 August 2006 (T 64). However, when pressed, he conceded that prior to receipt of Mr Siely’s letter of 13 June 2006 the defendant had made the decision to terminate the Contract on the grounds of serious misconduct based on the information it then had. Once Mr Siely provided the information, according to Mr Clarkson, the defendant “considered that as part of the decision to allow him to continue on the path to sell the Contract. So we didn’t terminate Contract at that point” (T 64.42). However, Mr Clarkson then said that prior to the receipt of Mr Siely’s response of 13 June 2006 the company had decided that Mr Siely was never going to work for it again (T 65.5). If Mr Siely did not find a buyer within the time stipulated in the letter of 9 June 2006, then the Contract would be terminated on the grounds of serious misconduct. In this respect, Mr Clarkson’s evidence was that he believed the letter of 7 August 2006 set out the reasons for the termination of the plaintiff’s Contract. Although initially Mr Clarkson said at the end of his cross-examination that by 2 June 2006 a decision to terminate the plaintiff’s Contract for serious misconduct had not been made (T 66.7), he agreed that nothing had changed from 2 June 2006 until 9 August 2006 other than the fact that the plaintiff did not sell its Contract. He agreed that, in fact, nothing came to light from the defendant’s point of view between 2 June 2006 and 7 August 2006.

54 The plaintiff submits that there was no serious misconduct on its part which entitled the defendant to terminate the Contract on 7 August 2006. Under Clause 3.2(b) of the Determination, “serious misconduct” may include acts of physical violence, serious theft, serious threats made to a person and gross negligence. These words of description govern the character of the type of conduct that may constitute serious misconduct under the Contract.

55 I have set out in detail what occurred prior to 3 May 2006. Although on the face of it the defendant had legitimate concerns about the conduct of Mr Siely which had been reported to it and which it had investigated, I am comfortably satisfied that, after reviewing all the evidence, the defendant, through Mr Clarkson, was not satisfied that there was sufficient evidence available which would justify termination of the Contract on the grounds of serious misconduct. It was not just the defendant’s failure to keep adequate and accurate documentary evidence of Mr Siely’s performance that led Mr Clarkson to this conclusion. Mr Clarkson also took into account Mr Siely’s concern that he was being treated differently from other drivers, that Mr Siely had given a different account of events than Mr Vicary, and, so far as the complaints about Mr Siely were concerned generally, there was a conflict in the evidence about what had actually happened.

56 It was for these reasons that Mr Clarkson decided to send to the plaintiff the warning letter of 3 May 2006. The letter was intended to keep the pressure on Mr Siely so that he would either sell his Contract or, slip up, that is, misconduct himself in a serious way, thereby giving the defendant the opportunity to terminate the Contract under Clause 3.2(b) of the Determination. Either way, I am satisfied that the defendant wanted the plaintiff out but at the same time had no intention of compensating the plaintiff.

57 Based on Mr Clarkson’s evidence, I am satisfied that the defendant decided at the end of May 2006 to terminate the Contract. The defendant’s decision was made in reliance on Clause 3.2(b) of the Determination. Through Mr Clarkson, the defendant considered that Items 1-7 (inclusive) in the letter of 2 June 2006 were incidents of serious misconduct which had occurred after 3 May 2006. First of all, it should be noted that the letter of termination dated 7 August 2006 did not refer to Items 1-7 of the letter of 2 June 2006. Secondly, the Court is satisfied that none of the incidents relied on amounted to serious misconduct. As noted already, Mr Clarkson conceded with regard to Item 1 that Mr Siely’s attempt to raise a petition could not be regarded as serious misconduct. It was merely the exercise of a democratic act.

58 There was evidence that Mr Siely urinated in public. Such behaviour was undoubtedly vulgar, anti-social and undesirable. At its highest it was misconduct, but it was not serious misconduct, as Mr Clarkson conceded.

59 As to Item 3, after being cross-examined about it, Mr Clarkson agreed that what Mr Siely had done was not serious misconduct. Looking at it objectively, Mr Siely had not followed the procedure in the yard. Whilst this was a breach of the yard rules, it could hardly be described as misconduct, let alone serious misconduct. Mr Clarkson agreed that his real concern was that the load be checked and he acknowledged that the method used by Mr Siely to check the load was not dangerous.

60 During Mr Clarkson’s cross-examination it became clear that the complaint in Item 4 was an exaggeration. Mr Clarkson accepted that there was no evidence of overtaking at high speed, nor was there evidence that Mr Siely was guilty of overtaking trucks plural. Moreover, Mr Siely denied the allegation. There is, therefore no cogent evidence of serious misconduct with regard to this item.

61 Similarly, Item 5 was an exaggeration. Mr Clarkson conceded there was no evidence of high speed or or deliberate intention to run into a truck. At its highest, Mr Siely’s conduct was negligent, but he was not grossly negligent.

62 There was no evidence to substantiate the allegation in Item 6.

63 Item 7 can be dismissed entirely because Mr Clarkson could not identify who the driver was, what was the nature of alleged threat, and how it had been communicated.

64 It follows that the purported termination on 7 August 2006 was unlawful because there was no serious misconduct by the plaintiff.

65 In truth, the defendant terminated the plaintiff’s Contract because it wanted to get Mr Siely out of the yard and did not want to have to compensate him.

66 The plaintiff concedes that although the term of the Contract was from 1 May 2005 until 31 October 2014, it is not entitled to damages for the whole of the period between 7 August 2006 and 31 October 2014. This is because of the entitlement of the defendant to terminate in accordance with Clause 3.2(a) of the Determination. In that respect, relying on Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64, the defendant submitted that the Court’s task was to determine whether, on the evidence before it, the defendant would have exercised its entitlement to terminate under Clause 3.2(a) noting that the High Court said in Amann:

“… the mere existence of a contractual right in a party to terminate does not operate automatically to restrict damages that can be awarded. The Court does not reach a conclusion by reference to an improbably factual hypothesis. The Court must have regard to the facts and evaluate the possible exercise of the right in all the relevant circumstances of the case.”

67 Counsel for the plaintiff did not demur from this submission.

68 In my assessment, it would be unrealistic to approach this case on the basis that if the defendant had not purported to terminate on 7 August 2006 it would have done so shortly thereafter under Clause 3.2(a). This is because the defendant had no intention of compensating the plaintiff under Clause 3.2(a). Mr Clarkson considered that such an action would be sending out the wrong message to other LODs and employees. At the same time, it would be unrealistic to assume that the defendant would have let things drag on for too long because the defendant wanted to get rid of Mr Siely from the yard. Sooner or later commonsense would have prevailed and the defendant would have exercised its lawful right under 3.2(a). In this respect I think it most likely that this would have occurred no later than 2 years after 30 June 2006. Accordingly, I propose to award the plaintiff damages on the basis of its lost profits for that two year period together with its entitlement to receive compensation under Clause 3.2(a).

69 The plaintiff relied on the report of Gavin Riley, Chartered Accountant, in support of its damages claim (exhibit A). Mr Riley had access to the plaintiff’s financial statements (exhibit B).

70 In Appendix 1 of his report Mr Riley calculated the plaintiff’s losses. In doing to Mr Riley based his calculation of the plaintiff’s loss of income on the difference between the revenue from cartages and the associated costs on a basis consistent with the expected costs set out in the Rise and Fall Formula in Clause 6.1(a)(v) of Schedule A of the Determination. In his calculation, Mr Riley had regard to the plaintiff’s financial records which included actual costs.

71 I see no reason why the Court should not adopt Mr Riley’s report. Although it was submitted that his calculations provide for a salary to be paid to Mr Siely, it would be unrealistic to exclude this item since the plaintiff’s performance over the two year period would have required Mr Siely’s participation and the payment of a salary to him was the most tax effective way for the plaintiff to arrange its affairs and generate a profit.

72 Accordingly, accepting Mr Riley’s calculations, the Court awards damages for the first of two years (2007) in the amount of $78,352. For the second of two years (2008) the Court awards damages of $72,688.

73 As the plaintiff was entitled to receive $66,000 under Clause 3.2(a), this amount will also be included in the plaintiff’s damages.

74 Under Clause 3.2(a) the plaintiff was entitled to be paid the market value of the truck at the time, i.e. 30 June 2008.

75 The best evidence of the value of the truck today is in Mr Riley’s report. As at 30 June 2006 Mr Riley valued it at $96,600. Mr Riley allowed for depreciation of $8,782 per annum and so the Court arrives at the amount of $79,036 ($96,000 - $8752 x 2).

76 The defendant submitted that an allowance for failure to mitigate ought be made because the plaintiff made no real effort to “sell” the Contract. The submission is flawed because there was no contract to sell. However, given that the plaintiff adduced no evidence of using his truck for the period of two years, it seems to me that the plaintiff ought to have mitigated his loss by selling the truck shortly after 7 August 2006. Accepting Mr Riley’s evidence that the truck was worth $96,600 as at 30 June 2006, I calculate that the plaintiff could have sold it for $95,000 by 31 August 2006. This amount will be deducted from the plaintiff’s damages.

77 In summary, then, the plaintiff’s damages are as follows:

(a) Loss in year 1 $78,352

Loss in year 2 $72,688

Clause 3.2(a) entitlement $66,000

Allowance for sale of truck to defendant $79,036

Sub Total $296,076

Less allowance for failure to mitigate $95,000

________

Total $201,076

________

78 The plaintiff claims interest. Since the award of damages spans a two year period (twenty-four months) and includes amounts (c) and (d) above which would only be payable now, I propose to award interest for a period of 9 months on the whole sum. Under the Rules of Court the applicable rate is 10% per annum and so I arrive at a figure for interest in the sum of $15,080.

79 In the result the Court makes the following orders:

1. Verdict and Judgment for the Plaintiff in the sum of $216,156.

2. Direct that the exhibits be returned.

80 Costs should follow the event on the ordinary basis but I will hear argument if either party wishes to make a different submission.

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