King v Braemore Resources Plc
[2010] WADC 143
•1 OCTOBER 2010
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: KING -v- BRAEMORE RESOURCES PLC [2010] WADC 143
CORAM: DERRICK DCJ
HEARD: 17 SEPTEMBER 2010
DELIVERED : 1 OCTOBER 2010
FILE NO/S: CIV 1964 of 2010
BETWEEN: AARON JAMES KING
Plaintiff
AND
BRAEMORE RESOURCES PLC
Defendant
Catchwords:
Trial of preliminary issues
Contract - Employment agreement - Principles of construction - Interpretation of clause of agreement - Meaning of phrase 'resulting, for any reason, in' - Contra proferentem rule
Legislation:
Rules of the Supreme Court (WA) O 32 r 4, O 43 r 16
Result:
Preliminary issue question answered in favour of the defendant
Representation:
Counsel:
Plaintiff: Mr M F Holler
Defendant: Mr J B Blackburn
Solicitors:
Plaintiff: Talbot Olivier
Defendant: HLS Legal
Case(s) referred to in judgment(s):
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99
Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98
CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535
Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21
Fitzgerald v Penn (1954) 91 CLR 268
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
MLC Limited v O’Neill [2001] NSWCA 161
North v Marina [2003] NSWSC 64
Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109
Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64
S & Y Investments (No 2) Pty Ltd (in liq) v Commercial Union Assurance Co of Australia Ltd (1986) 85 FLR 285
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Van Efferen v CMA Corporation Limited [2009] FCA 597
Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 9] [2010] WASC 44
Zhu v Treasurer (New South Wales) [2004] HCA 56; (2004) 218 CLR 530
Zotti v Australian Associated Motor Insurers Limited [2009] NSWCA 323
DERRICK DCJ:
Background
On 30 June 2010 the plaintiff commenced an action against the defendant, his former employer, claiming damages for alleged breaches of a written employment agreement entered into between the plaintiff and the defendant on 15 February 2008 (the Employment Agreement).
On 4 August 2010 the defendant filed a chamber summons seeking orders that par 14 of the plaintiff's Statement of Claim be struck out, alternatively, that pursuant to O 32 r 4 of the Rules of the Supreme Court1971 (the RSC) the following question be tried as a preliminary issue in the action:
Whether upon the facts pleaded in paragraphs 1 to 5, 12 to 13 and 18 of the statement of claim, and accepting that termination of the plaintiff's employment amounted to a departure by the plaintiff as an officer of the defendant, the plaintiff is entitled to a severance payment in accordance with clause 18.5 of the Employment Agreement.
The application the subject of the chambers summons was supported by an affidavit sworn by the defendant's solicitor on 4 August 2010. The grounds for seeking the alternative order relating to the trial of the preliminary issue were set out in [22] – [31] of the affidavit.
On 10 August 2010 the parties filed a Memorandum of Consent Orders pursuant to O 43 r 16 of the RSC (the Memorandum). The Memorandum stated that the parties consented to the following orders:
1. Pursuant to O 32 r 4 of the RSC the following question be tried as a preliminary issue between the plaintiff and the defendant in this action, namely:
Whether upon the facts pleaded in paragraphs 1 to 5, 12 to 13 and 18 of the statement of claim, and accepting that the termination of the plaintiff's employment amounted to a departure by the plaintiff as an officer of the defendant, the plaintiff is entitled to a severance payment in accordance with clause 18.5 of the Employment Agreement.
2.The chamber summons filed by the defendant on 4 August 2010 is adjourned sine die with no order as to costs.
3.The trial of the preliminary issue be listed for hearing at a special appointment before a judge in chambers on a date to be fixed.
4.The hearing be a hearing under r 61(2)(b)(i) of the District Court Rules 2005 to which r 61(4) and (5) of the District Court Rules 2005 shall apply.
Also on 10 August 2010 the plaintiff filed an Amended Statement of Claim which inserted new allegations as [15] and [16]. Consequently, [18] of the Statement of Claim is now [20] of the Amended Statement of Claim.
On 17 August 2010 a registrar of the court made orders in terms of the Memorandum.
On 3 September 2010 the plaintiff's solicitors, with the consent of the defendant's solicitors, provided to the court a copy of the Employment Agreement for use at the trial of the preliminary issue.
The trial of the preliminary issue took place before me on 17 September 2010.
Given that the plaintiff has filed an Amended Statement of Claim I will treat the preliminary issue question as referring to [1] – [5], [12] ‑ [13] and [20] of the Amended Statement of Claim.
The defendant has not filed an Amended Defence. I assume that the defendant has refrained from doing so pending the determination of the preliminary issue question.
The pleadings and the significance of the preliminary issue question
The wording of the preliminary issue question means that I am required, in determining the question, to treat the facts pleaded in [1] ‑ [5], [12], [13] and [20] of the Amended Statement of Claim as agreed facts. Paragraphs [1] – [5], [12], [13] and [20] of the Amended Statement of Claim read as follows:
1.Until 9 November 2009 the Plaintiff was employed by the Defendant as Vice President – Metallurgy reporting to the Chief Executive Officer of the Defendant.
2.The Defendant is a duly incorporated company registered in England and Wales.
3.The Plaintiff and Defendant are parties to a written Employment Agreement dated 15 February 2008 ("the Employment Agreement").
4.Material express terms of the Employment Agreement were:
(a)the Plaintiff was entitled to an annual remuneration package of $AUD330,000.00 inclusive of statutory superannuation (clause 5.1 and Annexure B);
(b)on termination of the Employment Agreement only the Plaintiff was entitled to be paid in lieu of annual leave accrued (clause 11.3);
(c)the employment would continue indefinitely subject to either party giving the other party 1 months notice or 1 months pay in lieu of notice, if the Plaintiff's employment was terminated after 1 year's employment (clause 18.1);
(d)if the Plaintiff's employment was terminated as a result of him being made redundant, or he was retrenched for reasons based on the Company's operational requirements, the Employee was entitled to a severance package which would be agreed between the Defendant and the Plaintiff at the time. If the parties could not reach agreement, the Plaintiff was entitled to a severance package not less than the statutory minimum severance pay entitlement envisaged by the Basic Conditions of Employment Act 75 of 1997 (clause 18.3);
Particulars
(i)The Basic Conditions of Employment Act 75 of 1997 ("BCEA") is an Act of the Parliament of the Republic of South Africa.
(ii)Section 41(2) of the BCEA provides that an employer must pay to an employee who is dismissed for reasons based on the employer's operational requirements severance pay equal to at least one week's remuneration for each completed year of continuous service calculated in accordance with section 35.
(iii)Section 35 of the BCEA sets out the method for calculating an employer's remuneration and wages for the purpose of calculating severance pay.
(e)should a change of control event occur resulting, for any reason, in the Plaintiff's departure as an officer of the Defendant he is entitled to a severance payment equal to 12 months of his annual remuneration package (clause 18.5).
5.The Plaintiff was an officer of the Defendant while employed by the Defendant.
Particulars
The position of Vice President – Metallurgy reporting to the Chief Executive Officer of the Defendant amounted to an office of the Defendant.
…
12.On 29 October 2009, during the Plaintiff's employment, a change of control event occurred in the Defendant being the sanctioning by the High Court of Justice in England and Wales of a scheme of arrangement to implement the acquisition by Jubilee Platinum plc of the entire issued and to be issued share capital of the Defendant.
13.On 9 November 2009 by letter the Defendant terminated the employment of the Plaintiff.
…
20.Despite demand the Defendant has refused to pay the Plaintiff a severance payment equal to 12 months of his annual remuneration package.
Thus the facts pleaded in [1] – [5], [12], [13] and [20] of the Amended Statement of Claim do not contain an assertion that the change of control event caused the Defendant to terminate the plaintiff's employment.
In order to complete the picture, and to explain the significance of the preliminary issue question to the action, it is necessary to refer to [14], [15] and [16] of the Amended Statement of Claim and [17] of the Defence. Paragraphs [14], [15] and [16] of the Amended Statement of Claim are in the following terms:
14.Properly construed the term pleaded in paragraph 4(e) entitled the Plaintiff to the severance payment if departure by the Plaintiff was something which occurred after the change of control event.
Particulars
(i)Clause 18.5 is in terms of "… change of control event occur resulting, for any reason, in your departure as an officer of the company …";
(ii)Of the two dictionary meanings of "resulting" one turns on there being a reason so as to be a consequence (ie, a causative link between the event and the outcome) and the other does not require a reason and simply looks at whether a specified thing occurred after the change of control event;
(iii)The non-causative meaning is to be preferred otherwise the words "for any reason" in the phrase "resulting, for any reason, in your departure as an officer of the Company" would be redundant; and
(iv)The Plaintiff was subject to a 12 month restraint period from date of termination of employment for any reason.
15.In the alternative to paragraph 14, properly construed the term pleaded in paragraph 4(e) entitled the Plaintiff to the severance payment if departure by the Plaintiff was something which occurred within a reasonable time after the change of control event.
Particulars
(i)Clause 18.5 is in terms of "… change of control event occur resulting, for any reason, in your departure as an officer of the company …";
(ii)Of the two dictionary meanings of "resulting" one turns on there being a reason so as to be a consequence (ie, a causative link between the event and the outcome) and the other does not require a reason and simply looks at whether a specified thing occurred after the change of control event;
(iii)The non-causative meaning is to be preferred otherwise the words "for any reason" in the phrase "resulting, for any reason, in your departure as an officer of the Company" would be redundant; and
(iv)The Plaintiff was subject to a 12 month restraint period from date of termination of employment for any reason.
16.The departure by the Plaintiff occurred within a reasonable period of time after the change of control event as pleaded in paragraphs 12 and 13 above.
Therefore the plaintiff's case is that on the facts pleaded in [1] – [5], [12] and [13] of the Amended Statement of Claim he is entitled, on the proper construction of cl 18.5 of the Employment Agreement, to a severance payment equal to 12 months of his annual remuneration package notwithstanding that on those pleaded facts there was no causal connection between the change of control event and the termination amounting to a departure by him as an officer of the defendant.
Paragraph [17] of the Defence is in the following terms:
The Defendant denies paragraph 14 of the [Statement of Claim] and says that properly construed clause 18.5 of the Employment Agreement entitled the Plaintiff to the severance payment only if the change of control event caused the Plaintiff's departure as an officer of the Defendant.
The Defence does not contain any express plea in response to [15] and [16] of the Amended Statement of Claim because, as I have already mentioned, those paragraphs appeared for the first time in the Amended Statement of Claim. Nonetheless, it is clear from [17] of the Defence (as is accepted by the parties) that the defendant's case is that on the facts as pleaded in [1] – [5], [12], [13] and [20] of the Amended Statement of Claim there is no entitlement under cl 18.5 of the Employment Agreement to the severance payment referred to in the clause because on those facts the change of control event was not the cause of the plaintiff's departure as an officer of the defendant.
When the preliminary issue question is viewed against the background of the above outlined competing cases of the parties, the significance of the question to the action is clear.
The terms of cl 18 of the Employment Agreement
The substance and effect of some of the subclauses within cl 18 of the Employment Agreement is set out in the above quoted [4] of the Amended Statement of Claim. However, given the importance of cl 18 as a whole to the determination of the preliminary issue question it is necessary to set the clause in full herein. Clause 18 provided:
18.Notice of Termination
18.1.The Employee's employment will commence on the Commencement Date and will continue for an indefinite period, subject to either Party being entitled to terminate the employment relationship by giving the other written notice of not less than 1 (one) week in the first 6 (six) months of employment; 2 (two) weeks in the second 6 (six) months of employment and a month's notice thereafter. The Company may elect to pay the Employee in lieu of notice.
18.2.Notwithstanding anything to the contrary herein, the Company shall be entitled to terminate the Employee's employment:
18.2.1.summarily (without notice) if the Employee is guilty of conduct justifying summary dismissal in accordance with the common law or the Act or the Company's Disciplinary Code and Procedure; and/or
18.2.2.on notice, if the Employee:
18.2.3.performs his duties and functions unsatisfactorily; and/or
18.2.4.is incapacitated as a consequence of his ill‑health; and/or
18.2.5.suffers a Disability; and/or
18.2.6.is made redundant or retrenched for reasons based on the Company's operational requirements; and/or
18.2.7.for any other reason justified in the law.
18.3.For the avoidance of any doubt, it is recorded that if the Employee's employment is terminated as a result of him being made redundant, or he is retrenched for reasons based on the Company's operational requirements, the Employee shall be entitled to a severance package which shall be agreed between the Company and the Employee at the time. If the Parties are unable to reach agreement regarding a severance package contemplated in this clause 18.3, then the Company shall pay the Employee a severance package not less than the statutory minimum severance pay entitlement envisaged by the BCEA.
18.4.Should the company terminate your employment without cause during the first year of your employment, you will be paid a severance in the amount of six months of your annual base salary. After one full year of service, should the company terminate your employment without cause, your severance will be increased to twelve months of your annual base salary. You may terminate your employment at any time with two months notice in writing to the Board.
18.5.At any time during your employment, should a change of control event occur resulting, for any reason, in your departure as an officer of the company, you would be entitled to a severance payment equal to twelve months of your annual remuneration package.
18.6.If you are terminated for cause, the company shall reimburse you for any salary and reasonable business expense as may be accrued and unpaid on the date of termination and shall have no further obligations.
18.7.The Employee's employment shall terminate Ipso facto upon him reaching Pensionable Age.
The interpretation of clause 18.5 of the Employment Agreement
The parties' contentions
The determination of the preliminary issue question turns upon the interpretation of the words 'resulting, for any reason, in your departure as an officer of the company' used in cl 18.5 of the Employment Agreement.
As is apparent from the Amended Statement of Claim, the plaintiff submits that the words 'resulting, for any reason, in your departure as an officer of the company' do not import a causal connection between the change of control event and the departure of the plaintiff as an officer of the company. The plaintiff argues that the words require only that the departure follow the change of control event, or alternatively that the departure follow within a reasonable time of the change of control event.
The defendant, consistently with [17] of the Defence, submits that the words 'resulting, for any reason, in your departure as an officer of the company' used in cl 18.5 do import a causal connection between the change of control event and the departure of the plaintiff as an officer of the company.
Principles of construction and interpretation
The primary duty of a court in construing a contract is to endeavour to discover the intention of the parties as embodied in the words they have used in the contract: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99, 109 – 110; Permanent Building Society (in liq) v Wheeler (1992) 10 WAR 109, 118 – 119; Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21 [251]; Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 9] [2010] WASC 44 [94]. I must therefore interpret the words used in cl 18.5 as having the meaning and effect that a reasonable person in the position of the contracting parties would have understood their meaning and effect to be: Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70 [11]; (2001) 210 CLR 181, 188; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 [40]; (2004) 219 CLR 165, 179; Corporate Systems v Lingard [252] – [253]; Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98 [145]; Wright Prospecting v Hancock [87]. In performing this task I must consider not only the text of the clause, but also the context in which the clause appears, the surrounding circumstances known to both parties and the purpose and object of the transaction the subject of the Employment Agreement: Toll v Alphapharm [40] 179; Corporate Systems v Lingard [253].
I should, if the words of the clause permit, avoid interpreting the clause in a way which is not commercially sensible or which gives rise to a commercial nonsense: McCann v Switzerland Insurance Australia Ltd [2000] HCA 65 [22]; (2000) 203 CLR 579, 589; Maggbury v Hafele [43] 198; Zhu v Treasurer of the State of New South Wales [2004] HCA 56 [82]; (2004) 218 CLR 530, 559. This is so because a commercial interpretation is more likely to give effect to the intention of the parties.
In the present case neither party has sought to adduce additional evidence of surrounding circumstances. Accordingly, the surrounding circumstances in the present case are confined to those which can be gleaned without evidence from the terms of the Employment Agreement itself: Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 [158], [166].
The 'ordinary' meaning of the phrase 'resulting in'
It is convenient to commence the process of interpreting cl 18.5 by considering the plain or 'ordinary' meaning of the word 'result' and its cognate expressions.
The Australian Concise Oxford Dictionary (4th ed) defines the word 'result' when used as a noun in the following terms:
1.A consequence, issue or outcome of something.
2.A satisfactory outcome; a favourable result.
3.A quantity, formula etc., obtained by calculation.
4.A final score, mark or placing in a sporting event or examination.
The same dictionary defines the word 'result' when used as a verb in the following terms:
1.(Often foll. by from) arise as the actual consequence or follow as a logical consequence (from conditions, causes, etc.).
2.[Often foll. by in] have a specified end or outcome (resulted in a large profit).
The Macquarie Dictionary (4th ed) defines the word 'result' when used as a noun to mean 'that which results; the outcome, consequence or effect'. It defines 'result' when used as a verb to mean:
3.[T]o spring, arise, or proceed as a consequence from actions, circumstances, premises, etc.; be the outcome. 4. to terminate or end in a specified manner or thing.
Substantially the same definitions to those cited above are contained in the Australian Pocket Oxford Dictionary and the New Shorter Oxford English Dictionary.
The word 'consequence' is relevantly defined in the Australian Concise Oxford Dictionary (4th ed) as 'the result or effect of an action or condition'. The Macquarie Dictionary (4th ed) relevantly defines 'consequence' as:
1.[T]he act or fact of following as an effect or result upon something antecedent.
2.[T]hat which so follows; an effect or result.
The phrase 'resulting in' has previously been accepted as importing a causative element: Fitzgerald v Penn (1954) 91 CLR 268, 274. The phrase 'result of' has also, in a variety of contexts, previously been accepted as importing a causative element: S & Y Investments (No 2) Pty Ltd(in liq) v Commercial Union Assurance Co of Australia Ltd (1986) 85 FLR 285, 292; Van Efferen v CMA Corporation Limited [2009] FCA 597 [51]; Zotti v Australian Associated Motor Insurers Limited [2009] NSWCA 323 [44].
During the hearing of the preliminary issue counsel for the defendant informed me that he has not been able to find one case in which the phrases 'result of' or 'result in' or their cognate expressions have been interpreted as not importing a causative element. Counsel for the plaintiff did not produce any such case. My research has produced a similar result to that of the plaintiff's counsel.
The plaintiff submits that there is a difference between the ordinary meaning of the phrase 'result from' and the ordinary meaning of the phrase 'result in'. He contends that while the phrase 'result of' clearly does import a causative element, the phrase 'result in' carries with it only an association between the two relevant events as opposed to a causal link. The plaintiff places particular reliance in this context on the second of the above cited definitions of 'result' when used as a verb contained in the Australian Concise Oxford Dictionary.
I do not accept the plaintiff's submission. In my view the ordinary meaning of the phrase 'result in' and its cognate expressions, as revealed by the dictionary definitions is, subject to questions of context and purpose, causative. To say that something has a 'specified end or outcome' as in 'resulted in a large profit' is to say that the second occurrence must be a consequence of the first occurrence, or to put it another way, the first occurrence must be the cause of the second occurrence.
The effect of the words 'for any reason'
The plaintiff submits, in effect, that even if the 'ordinary' meaning of the words 'resulting in' imports a causative element, the inclusion of the words 'for any reason' in cl 18.5 makes clear that the words 'resulting in' as they appear in cl 18.5 do not require that the plaintiff's departure as an officer of the company must be a consequence of the change of control event. The plaintiff submits that the use of the words 'for any reason' indicates that the change of control event does not have to be the cause of the plaintiff's departure but merely an event that occurs before the plaintiff departs for any reason. The plaintiff submits that if this interpretation is not adopted then the words 'for any reason' are not given any work to do and are superfluous.
The plaintiff's submission requires consideration of the context in which cl 18.5 appears.
Clause 18 of the Employment Agreement is headed 'Notice of Termination'. However, a reading of the clause reveals that it deals with more than the giving of notice of termination of the Employment Agreement.
Clause 18.1 specifies the periods of notice that must be given by the defendant as employer and the plaintiff as employee in order to terminate the employment relationship.
Clause 18.2 provides for the situations in which the defendant is entitled to terminate the employment relationship. The clause does not prescribe any notice periods for terminating the plaintiff's employment. Nor does it provide for any severance packages in the event of the employment being terminated.
Clause 18.3 does deal with the issue of a severance package. It provides that if the plaintiff's employment is terminated for the reason specified in cl 18.2.6 he is entitled to a severance package to be agreed between the plaintiff and the defendant at the time, and that if no agreement is reached he is entitled to a severance package not less than the statutory minimum pay entitlement envisaged by the Basic Conditions of Employment Act 75 of 1997.
Clause 18.4 also provides for the payment of a severance package but in different circumstances to those dealt with by cl 18.3. Clause 18.4 specifies the severance package to be paid to the plaintiff if the defendant terminates his employment without cause as the defendant is able to do pursuant to cl 18.2.7.
Clause 18.6 provides for the severance package that is to be paid to the plaintiff if his employment is terminated for cause, that is, for one of the reasons specified in cl 18.2.1 to cl 18.2.5.
Clause 18.7 provides that the plaintiff's employment terminates upon him reaching 65 years of age.
It is against this contextual background that cl 18.5 must be considered. Clause 18.5, like cl 18.3, cl 18.4 and cl 18.6, provides for the severance package to be paid to the plaintiff in a specific situation, namely when a change of control event occurs that results, for any reason, in his departure as an officer of the company. Viewed in this context the use of the words 'for any reason' are not rendered superfluous if the words 'resulting in' are interpreted as importing a causative element. The words 'for any reason' make clear that if the change of control event results in the departure of the plaintiff as an officer of the defendant, he is entitled to the severance package provided for in the clause regardless of the reasons why the change of control event had that consequence and even though the circumstances of the departure might otherwise fall within the terms of one of the other severance package provisions. The words 'for any reason' make clear that cl 18.5 prevails over cl 18.3, cl 18.4 and cl 18.6 provided it can be said that it is the change of control event that has resulted in the plaintiff's departure.
For example, if the change of control event results in the plaintiff being rendered superfluous to the defendant's operational requirements and the defendant therefore terminates the plaintiff's employment pursuant to cl 18.2.6, the plaintiff is entitled to the severance payment under cl 18.5 rather than the potentially less favourable severance package provided for by cl 18.3. Similarly, if the change of control event causes the defendant to terminate the plaintiff's employment without cause during the first year of his employment, the plaintiff is entitled to the severance package provided for in cl 18.5 as opposed to the package provided for in cl 18.4.
In addition, the use of the words 'for any reason' also serves to emphasise that the departure consequential on the change of control event need not be for one of the reasons specified in cl 18.2. Thus if as a consequence of the change of control event the plaintiff decides that he no longer wishes to work for the defendant and therefore terminates his employment pursuant to cl 18.1 of the Employment Agreement, the plaintiff is entitled to the severance payment under cl 18.5. The reason why the change of control event has caused the plaintiff to no longer want to work for the defendant is irrelevant.
Commercially sensible interpretation
In my view the above interpretation of cl 18.5 accords not only with the ordinary meaning of the words when read in context, but also commercial common sense. On the plaintiff's interpretation of cl 18.5, as reflected in [14] of the Amended Statement of Claim, the plaintiff would be entitled to the severance payment provided for in the clause even in circumstances where he remains in employment with the defendant for many years after the change of control event and then leaves the defendant's employment of his own volition for reasons completely unrelated to the change of control event. Such an arrangement would introduce a considerable degree of uncertainty as to the potential liability of the defendant and could not in any sense be described as commercially sensible or business like.
The defendant's interpretation of the clause as reflected in [15] of the Amended Statement of Claim is also, in my view, not commercially sensible. Under this interpretation cl 18.5 provides the plaintiff with a significant financial benefit despite the absence of anything more than a temporal connection between the change of control event and his departure from the defendant. Thus on the plaintiff's interpretation the plaintiff is entitled to the severance package provided for by cl 18.5 if within 'a reasonable time' (whatever this means) after the change of control event he resigns because of ill health, or resigns in order to accept a better paid job, or is dismissed for poor performance or misconduct. To interpret the clause in this way would in my view be to give the clause a meaning that was neither commercially sensible nor business like.
Purpose
The plaintiff contends that the purpose of cl 18.5 was to provide the plaintiff, who was a highly paid and senior employee of the defendant, with some financial security if the circumstances envisaged by the clause arose. He submits that an interpretation of cl 18.5 which requires the change of control event to be the cause of his departure as an officer of the defendant, as opposed to merely preceding the departure or being temporally connected with the departure, is inconsistent with this purpose. As part of this submission the plaintiff points to the fact that if a causal element is imported into cl 18.5 he is put in the position, if his employment is terminated by the defendant after a change of control event, of having to prove the causal link between the change of control event and his termination despite his position of 'informational and evidentiary disadvantage' to that of the plaintiff.
I accept that the purpose of cl 18.5 is as contended for by the plaintiff (as does the defendant). However, I do not accept that an interpretation of cl 18.5 which requires there to be a causal link between the change of control event and the plaintiff's departure as an officer of the defendant is inconsistent with that purpose. I see no inconsistency between an intention on the part of the parties to provide the plaintiff with a degree of financial security in the event of a change of control event, and a requirement for there to be a causal link between the change of control event and the plaintiff's departure as an officer of the defendant before the entitlement to the financial security, that is the severance package, arises.
I accept that there may be certain situations in which the plaintiff will be in a position of disadvantage compared to the defendant in relation to the proof of the causal link between the change of control event and his departure from the defendant. However, this argument cuts both ways. Thus if the plaintiff resigns his position and asserts that it is the change of control event that has caused him to do so, it will be the defendant who will be at the 'informational and evidentiary' disadvantage. In short, depending on the circumstances both parties may have difficulties of proof to overcome. I therefore do not consider that issues relating to difficulties in proving the causal link provide a basis for ascribing to the parties an intention to provide the plaintiff with the benefit contained in cl 18.5 regardless of whether or not the change of control event is the cause of the plaintiff's departure.
Possibility of using different words
The plaintiff submits that if the parties had wanted to introduce a causal link into cl 18.5 they could have chosen a form of words that would have made this intention much clearer. They could, it is submitted, have used phrases such as 'should a departure occur from a change of control event' or 'if a change of control event causes a departure'. This may be so. However, and as the defendant submitted, if the parties had intended to require only that the departure follow the change of control event, or only that there be a temporal connection between the change of control event and the departure, they could have used words which would have made this intention much clearer, for example, 'if a departure follows a change of control event' or 'should a departure occur within [a specified period] after a change of control event'. The fact is that the parties used the words that they did and they must be interpreted in accordance with the principles of construction to which I have already referred. In these circumstances, and bearing in mind the ordinary meaning of the words that were used, the context in which they appeared and issues of commercial sense and purpose, the failure by the parties to use one form of words over another is not something which in my view supports the interpretation contended for by the plaintiff.
Contra proferentem rule
During the course of oral submissions the plaintiff's counsel sought to place reliance on the contra proferentum rule in support of the plaintiff's argument that cl 18.5 should not be interpreted as requiring a causal link between the change of control event and the plaintiff's departure. Counsel submitted that under this principle of construction the words used in the clause of a document should be construed against the party who has 'put forward the clause: see North v Marina [2003] NSWSC 64 [56] ‑ [65] and the cases cited therein.
It is not clear on the authorities that counsel's statement of the contra proferentum rule is the only way in which the rule has been applied. Another line of authorities suggests that the correct statement of the rule is that a provision in a contract is to be interpreted against the person for whose benefit it is inserted: see North v Marina [66] ‑ [67] and the cases cited therein. Clearly cl 18.5 of the Employment Agreement has been inserted for the benefit of the plaintiff.
Whatever the correct statement or application of the contra proferentem rule, it is clear that the rule is only to be used where the document or clause is otherwise ambiguous: CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535, 548; North v Marina [76]. The rule is a principle of last resort: MLC Limited v O’Neill [2001] NSWCA 161 [20]; McCann v Switzerland Insurance Australia Limited [74] 602; North v Marina [77]. Furthermore, in deciding if a document or clause is ambiguous no stretched or artificial notion of ambiguity should be used: CE Heath Underwriting & Insurance (Aust) v Edwards Dunlop 548; North v Marina [76].
In my view cl 18.5, construed in accordance with the previously referred to principles of construction other than the contra proferentem rule is not ambiguous. There is therefore no need to resort to the use of the rule in the present case.
Conclusion
For the reasons that I have stated it is my opinion that the words 'resulting, for any reason, in your departure as an officer of the company' used in cl 18.5 of the Employment Agreement require that the departure be as a consequence of the change of control event. In other words, there must, in my view, be a causal connection between the change of control event and the departure. This is, in my opinion, the meaning which a reasonable person in the position of the contracting parties would understand the words to carry. Accordingly, my answer to the question tried as the preliminary issue is 'no'.
The parties have not by the preliminary issue question requested the court to deal with the issue of the extent of the causal link (for example, sole, substantial, concurrent) that must, for the purposes of cl 18.5, exist between the change of control event and the plaintiff's departure as an officer of the company. Counsel did not during the trial of the preliminary issue ask me to attempt to deal with this issue. I therefore express no view in relation to this issue.
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