Kirchner v Mayne Nickless Ltd

SUPREME COURT OF VICTORIA
COMMON LAW DIVISION
Not Restricted

No. 7651 of 1998

GRAHAM JAMES KIRCHNER	Plaintiff
v
MAYNE NICKLESS LIMITED (ACN 004 073 410)	Defendant

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JUDGE:	Balmford, J.
WHERE HELD:	Melbourne
DATE OF HEARING:	14-16, 22-25, and 28 August 2000
DATE OF JUDGMENT:	2 November 2000
CASE MAY BE CITED AS:	Kirchner v Mayne Nickless Ltd
MEDIA NEUTRAL CITATION:	[2000] VSC 459

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Termination of employment – Whether termination constituted a breach of an express oral term in the Plaintiff’s service agreement with the Defendant whereby that agreement would remain in force for a minimum period of four years – If agreement was to operate for an indefinite period, whether the Defendant provided the Plaintiff with reasonable notice of termination.

Black v Brimbank City Council (1998) 152 ALR 491
Byrne v Australian Airlines (1995) 185 CLR 410
Crawford Fitting Co & Ors v Sydney Valve Fittings Pty Ltd & Anor (1988) 14 NSWLR 438
Furey v Civil Service Association of WA (Inc) (1999) 91 FCR 407
Haley v Public Transport Corporation of Victoria [1998] VSC 132

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr FX Costigan QC with Mr RM Niall	McMullin Coate & Co
For the Defendant	Mr JI Fajgenbaum QC with Mr MG Rinaldi	Freehills

HER HONOUR:

Introduction

The plaintiff was engaged as an owner-driver by the defendant (“the company”) and provided services to the company pursuant to that engagement, as an independent contractor operating a pick-up and delivery service as and when required. There is an issue as to whether the engagement entered into by the company was made with the plaintiff alone, or with a partnership of the plaintiff and his wife. In view of the conclusion which I have reached it is not necessary for me to determine that issue, and in referring only to “the plaintiff” I should not be taken as having done so. The plaintiff’s engagement (and that of a number of other owner-drivers) was terminated by the company on or about 4 February 1994. He claims damages on the principal ground that that termination was a breach of an express oral term of his agreement with the company (“the service agreement”) which was to the effect that the service agreement would remain in force for a minimum period of four years from 19 June 1992. A subsidiary claim, based on the assumption that the service agreement was to operate for an indefinite period, was that reasonable notice of termination had not been given to the plaintiff by the company. As to the claim that the company was not entitled to terminate the plaintiff’s engagement on the ground of redundancy, see paragraph 91 below. The other grounds particularised in the statement of claim were effectively abandoned and need not be considered further.

The company has a number of divisions. The plaintiff’s engagement was in connection with a courier business carried on under the name of Security Express (or Security Express Country Courier Services), which was referred to as a division of the company. A significant proportion of the business of Security Express was the collection and delivery of cheques between bank branches and the clearing house, in which context security and reliability of service were extremely important. At all relevant times the business operated from premises in Dawson Street, Brunswick (“the yard”). The work of the business was carried out by some 120 owner-drivers, chiefly operating one-tonne trucks, although some, including the plaintiff’s truck, were larger than that.

The plaintiff commenced work as an owner-driver with Security Express in 1985. A letter of engagement dated 24 September 1990 records his engagement as a subcontractor driver providing a linehaul service to and from Warrnambool five nights per week “for a minimum of four years, subject to normal conditions of engagement” commencing on 1 October 1990. The rate of payment was based upon a three tier payment structure, involving:

Standing costs, initially at $94 per night “based upon a 4 year leasing arrangement”;
Operating costs, initially at 38.2 cents per kilometre “based upon the costs of maintaining and operating a 6 tonne Panchecian”; and
Labour, initially at $15.50 per hour.

The evidence of the plaintiff was that he purchased the six tonne truck in November 1990, with the encouragement of Mr Algar, the State Operations Manager of Security Express, but that he would not have done so but for the offer of a four year agreement. He obtained finance over four years from the ANZ Bank. He knew that a fresh form of agreement for owner-drivers operating from the yard, (“the yard agreement”) was at that time being negotiated between Mr Algar and Mr Ioannou, the principal delegate of the yard to the Transport Workers Union (“the union”). The plaintiff was also a union delegate, but because he drove at night and slept in the day time he relied on Mr Ioannou to keep him informed of the negotiations as they progressed. He was told by Mr Algar, at the time when he signed the letter of engagement in 1990, that when the yard agreement was signed “I would start off again for another four years”. He said that he was told by Mr Ioannou, after the yard agreement was signed, that his job was “indefinite”, but in answer to a subsequent question, said that Mr Ioannou had told him the same thing as Mr Algar. In due course, after the yard agreement was signed, he refinanced his truck for another four years “because I was told my job was going to go for another four years after signing the yard agreement”.

In cross-examination the plaintiff agreed that an undated letter drafted for him by a barrister, and sent by him to the company after he was retrenched, made no reference to a four year term. That letter relevantly reads:

I refer to the recent purported termination of my contract with the company. The terms of the contract do not permit the company to unilaterally terminate the contract other than under clauses 9.2 and 9.3, which do not apply in the present circumstances.

Clauses 9.2 and 9.3 of the yard agreement deal with dismissal for misconduct, and are summarised in paragraph 8 below.

The yard agreement is entitled on its cover sheet “An Agreement between Security Express Country Courier Services Management and Owner Drivers in Victoria: Effective 19 June 1992”. The text of the last page before the schedules, page 20, reads as follows:

The forementioned agreement is mutually supported by the following appointees.

No issue was made of any ambiguity in that sentence. There follow the signatures of P.R. Algar, as State Operations Manager, endorsed with a Security Express stamp; N. Ioannou, as delegate; C. Keily, as Victorian Branch Secretary of the union, endorsed with a Victorian Branch stamp; and D. Grove, as Industrial Officer of the union. The page is dated 22 June 1992. Further down the page are four more signatures: those of Mr Ison, as General Manager, Security Express Country Courier Services; Mr Price as Federal Secretary of the union; Mr Mauchline, not described, who was in fact the State Secretary of the union; and Mr Ioannou again. The signature of Mr Mauchline is dated “20/9/93”.

A photocopy of the yard agreement is in evidence on which a number of signatures appear on the otherwise plain obverse of the last three pages. It is not in issue that these are the signatures of many, if not all, of the owner-drivers in the yard, including the plaintiff. It was my understanding that it was agreed between counsel that the drivers who signed on those pages were not parties to the yard agreement, but signed in acknowledgment that that agreement had been made between the company and the union, despite the title appearing on the cover sheet. However, the plaintiff’s counsel submitted that the yard agreement was, as its title would indicate, an agreement between the company and the drivers. In view of the conclusion I have reached it is not necessary for me to resolve this issue. It is common ground that the yard agreement, on whatever basis, formed part of the service agreement between the plaintiff and the company. I am satisfied that any contract between the plaintiff and the company which may have been created by the execution of the letter of engagement referred to in paragraph 3 above was superseded on the execution of the yard agreement. I note that in any case no breach of any such contract is claimed as a cause of action.

The yard agreement deals in some detail with a number of matters including responsibilities of owner drivers, security, starting times, approved periods of absence, remuneration, vehicle selection, orientation training, minimum engagement of new owner-drivers, overtime rates, the use of radios and uniforms. Remuneration is based on the three tier payment structure described in paragraph 3 above. The rates of standing costs are set out in the schedules and calculated on the basis of financing the vehicle over four years. Clause 7.2 provides that a vehicle purchased new “shall remain satisfactory to the Company for not less than four years”. A reference committee is established, consisting of the State Operations Manager and the union delegate. Clause 9.1 provides that termination by an owner driver is to be on two weeks notice. Clause 9.2 provides that an owner driver who commits serious misconduct (as defined in clause 9.3) or is in breach of the yard agreement “may be terminated summarily by the Company, following concurrence by the Reference Committee”. There is no other provision for termination of the employment of an owner-driver.

Clause 18.1 of the yard agreement reads, so far as here relevant:

This Agreement shall be in effect for an unlimited tenure and will continue in force in respect to the Company in the event that an individual signatory for the company is replaced. The Agreement is only severable for the reasons specified herein in respect to the individual Owner Driver signatories. This agreement will be of indefinite duration but can be amended by the relevant parties who are the Company signatory and the Union delegate. Should the agreement cease to be in effect then such agreements that were in place prior to the signing of this agreement (as listed at Schedule 7) shall be in force.

An amendment to the yard agreement was executed on 15 April 1993 between Mr Mattes, then State Operations Manager, and Mr Ioannou as union delegate. The relevant portion of the amendment reads:

3.It is further acknowledged that if redundancies are to occur, they shall occur in accordance with the agreement and that the terms and conditions on which those redundancies occur shall be specified in the agreement, subject to clause 18.1.

At all relevant times the company had in place a redundancy policy which is not referred to in the yard agreement.

In a letter written on Security Express letterhead to Mr Ioannou on 18 June 1992, shortly before the signing of the yard agreement, Mr Algar says:

Further to our discussions of 16 June 1992, this memo confirms that subcontractors existing vehicles will remain acceptable for the purpose of executing their duties for a period not exceeding four (4) years from the date of signing of the Security Express (Vic) Agreement.
The purpose of this arrangement is to enable existing owner drivers a reasonable timeframe in order to arrange replacement of their vehicle.

The case for the plaintiff is that the service agreement between the plaintiff and the company included, as well as the terms of the yard agreement, an oral term to the effect that the service agreement would remain in force for a minimum period of four years from 19 June 1992. This is denied by the company. It is not in issue that the yard agreement contains no such term.

The company claims that it was an express or implied term of the service agreement that that agreement was terminable in the event of business restructure by the company upon payment to the owner-driver of an amount calculated in accordance with the company’s redundancy policy, on reasonable notice or pay in lieu thereof, and that it was lawfully terminated accordingly.

The Evidence for the Plaintiff as to the claimed four year term

There are some generalities deriving from the evidence which it is convenient to set out here, to save repetition. No witness called for either party who was at a relevant time employed by the company is still in its employ, although Mr Bacher left the company only in July this year. Of the ten former owner-drivers for Security Express who gave evidence in support of the plaintiff, seven, namely Mr Ioannou, Mr Tralci, Mr Alan Gerrard, Mr Garbelletto, Mr Daniel Gerrard, Mr Bertolini and Mr Hall, are plaintiffs in similar actions to this against the company. Mr Costigan indicated that there were some 45 similar proceedings on foot. All of the meetings of owner-drivers which are referred to were held in Royal Parade, Parkville. The position of State Manager of Security Express during the relevant period was held by:

Before Mr Heerey:  Mr Edwards
Before August 1991, for a
short period:  Mr Heerey, who has since died.
August 1990 to March 1992:        Mr Collins, who gave evidence.
March 1992 to August 1993:        Mr Hollands, who gave evidence.
August 1993 onwards:                 Mr Bacher, who gave evidence.

Negotiations for the yard agreement, as has been said, were carried out between Mr Algar, representing the company, and Mr Ioannou. These two gentlemen have, since their dismissal from Security Express, been associated in business, to the extent that they were directors of the same companies. Each of them, in evidence, was concerned to play down the connection. Mr Algar said in evidence that the company was concerned about the effect on the service it provided to its customers of a number of industrial disputes within the industry in which Security Express “became embroiled”. He was instructed by his predecessor as State Operations Manager, Mr Edwards, to negotiate a yard agreement for the yard in Brunswick. Primarily he was negotiating with Mr Ioannou, who he understood to be speaking on behalf of the owner-drivers. Another relevant factor in the negotiations for the yard agreement was, he said, that vehicles in the fleet were up to ten years old, and did not look professional. In order to encourage drivers to acquire new vehicles it was necessary to offer them some security of tenure. He said, “The emphasis throughout was to present a much more professional and working image in the marketplace and, for that reason, we needed to ensure that the drivers had new vehicles.” A four year time frame was selected because the company could not afford to reimburse drivers for their purchasing costs over a lesser period. This was a reference to the standing costs component of the three tier payment structure described in paragraph 3 above. It was agreed before the completion of the negotiations that in order to introduce larger vehicles into the fleet, a letter of engagement for four years should be given as a forerunner to the agreement. This was the only way to bring the new vehicles into the fleet.

Mr Algar said that he addressed a number of meetings of owner-drivers between late 1989 and 1992 to bring the drivers up to date with the negotiations. He told them that “the company would provide them a minimum of four years engagement under the new yard agreement”. He was also at the same time negotiating new four year agreements with the banks which would be “back to back with the drivers’ agreement”. He gave the names of Mr McCracken and Mr Raeck at the National Australia Bank and Mr Rowbotham at the Commonwealth Bank among other names of bank officers with whom he had conducted such negotiations. The banks, he said, were not prepared to negotiate a four year term until the company could demonstrate that the drivers were committed for a period of four years. He agreed that this statement was inconsistent with clause 9.1 of the yard agreement, entitling a driver to terminate his engagement on two weeks notice.

It is convenient to deal here with the evidence of the bank officers called by the respondent. Mr Rowbotham gave oral evidence, and statements by Mr McCracken and Mr Raeck were put in evidence by consent. I am satisfied from that evidence, which it is not necessary to set out here, that any discussions which Mr Algar held with Mr Rowbotham and Mr McCracken related only to operational matters. Mr Raeck was concerned at a slightly higher level. Each of the three said that the term of engagement of Security Express drivers was irrelevant to his concerns in relation to the bank’s agreement with Security Express.

Mr Algar said that he had told Mr Ison, the General Manager of Security Express, and Mr Hollands, as State Manager, about the arrangement for a minimum four year term. It was communicated to Mr Ison in a presentation. He agreed in cross-examination that in a six page report explaining in detail the intent of the yard agreement which he sent to Mr Ison in June 1993, he made no reference to any minimum four year term. He said that he had written other letters to Mr Ison and to several State Managers which referred to the four year term and that there were copies of those letters in his files which had been retained by the defendant. However, no such letters were discovered, and there was no suggestion on the part of the plaintiff that complete discovery had not been made by the company.

Mr Algar agreed in cross-examination that Mr Ison and Mr Hollands had been concerned that the yard agreement effectively gave the owner-drivers life tenure, because it provided for an indefinite duration. (The transcript here refers to Mr Collins, but my note refers to Mr Hollands. The names sound similar. Given the date of execution of the yard agreement, I think that it is probable that the question related to Mr Hollands.) He was asked whether he told them that they need not worry because he had done a deal on the side that the drivers were to have a term of only four years. He gave no effective answer to that question. He could not recall whether any drivers had in fact bought new trucks after the signing of the yard agreement, and agreed that his letter of 18 June 1992, set out in paragraph 11 above, and clause 7.2 of the yard agreement, set out in paragraph 8 above, meant that there was no need for the drivers to do so. Indeed, it is clear that the combined effect of the letter and clause 7.2 was to negate what he had said was not merely a relevant factor in the negotiations, but “the emphasis throughout” (see paragraph 15 above). They effectively meant that the vehicles which were ten years old would now remain acceptable until they were fourteen years old, and would look even less professional.

It was put to Mr Algar and he initially agreed, that all his discussions with the drivers were not about four year security of tenure, but instead they were discussions of the position, as reflected in the yard agreement, that the drivers could safely assume that when they were employed, a vehicle could be used that was up to four years old. However, when the same point was put to him again at a later stage in the cross-examination, he disagreed. He said that he had promised the drivers on a number of occasions that “in order to execute the yard agreement, those drivers who were engaged by Security Express would continue to be engaged for a minimum of four years”. It was put to him that that was inconsistent with the express indefinite term of the yard agreement and he said “No, no it wasn’t. The purpose of the minimum four years was in order to bring the yard agreement into place.” He later accepted that there was such an inconsistency, but said that the workers sought the four year minimum term and it related to all three tiers of remuneration, not merely to the standing costs which were calculated by reference to the purchase of a truck on four years financing. He was unable to explain how the term of the agreement affected the labour and operating costs. It was put to him that if the four year term affected only existing drivers at 19 June 1992, then those drivers had shorter tenure than drivers engaged later, who would have indefinite tenure, and he agreed, but added that the reference committee could decide otherwise. He was asked why the four year term was not written into the yard agreement and replied that in his opinion there was no need to write it in.

Mr Algar agreed that after his dismissal by the company he thought that he had been unfairly dismissed, and took proceedings in the South Australian Industrial Relations Commission.

Mr Ioannou was, as has been said, the union delegate, and one of the owner-drivers. He said that it was part of his duties to negotiate on behalf of members. The minimum four-year term was, he said, “the guts of the whole agreement”. He had discussed it with a number of executives of the company. He described meetings at which he, and at times Mr Algar, had reported to the drivers on the progress of the negotiations. He described a meeting after the yard agreement was signed by the four original signatories, Mr Algar, himself, Mr Keily and Mr Grove, at which Mr Algar had explained it to the drivers and questions had been asked. Mr Algar had assured a questioner that even if the company lost the bank contracts, the drivers still had tenure for four years.

He said that the reference committee, which consisted of Mr Algar and himself, had held meetings in the period between the signing of the yard agreement and the termination of the plaintiff’s engagement, but did not at any time adopt the company’s redundancy policy as part of the yard agreement.

He said that Mr Ison had signed the yard agreement as described in paragraph 6 above in about March 1993, and he described as follows a meeting of drivers at about that time at which Mr Ison had been present.

I said, "Ladies and gentlemen", I said, "There has been a lot of toing and froing regarding the yard agreement, its legalities in terms of we've heard certain managers saying it's not legal, it's this, it's that, it's not an important document, because the GM hasn't signed it at this stage". The drivers didn't know that it was signed by the GM, Mike Ison, and I said, "There has been a lot of toing and froing about the yard agreement, its legalities. I would like to take the opportunity to introduce our general manager, Mr Mike Ison. Just to let you know that a few days ago, he has put an end to all the uncertainty. You people don't know this, but he has actually put his signature to the agreement acknowledging that it's unique to our business, acknowledging that your employment is safe for a minimum of four years. . . .
I introduced Mike. He got a round of applause. He went on about other bits and pieces. He was going on about where the company is going, how we were unique from other yards, how this won't - it will make us focus, we can all pull together in the same direction, and things to that nature, and that was it. He said that Security Express was a unique business. He kept on using that expression and it was compared to other yards. It was a unique business and hopefully we can all now pull in the same direction. We've got an agreement which is unique, it has never been done in another yard that he knows about where you've got guaranteed employment for - I believe - he might have said for four years or he might have said for a minimum of four years, but he said one of the two.

Mr Ioannou agreed that a letter of 13 December 1993 in which the State Secretary of the union stated that any redundancies would be a breach of the yard agreement, set out the position which he and the union were taking up at that time. That letter makes no reference to a four year minimum term.

In cross-examination Mr Ioannou agreed that in his office at the yard he kept many documents which he thought were important, and that if he had had a document evidencing a promise by Mayne Nickless for four years security of tenure he would have kept it. He said that there were some documents referring to a four year term which he had not been able to locate for the purposes of this proceeding. It was put to him that he had never had any such document in his possession and he denied that. He produced Exhibit 2, which is an undated, unaddressed, incomplete, amended draft letter, which he said was in Mr Algar’s handwriting, and which he said he had recently found in an old shoebox, and which reads:

With respect to our recent negotiations, the following points are made to clarify the intent of the tenure of appointment of sub contract driver [sic] in the agreement.
The agreement is based upon an unlimited tenure therefore, after four years a subcontract driver may be reengaged. Four year [sic] provides Security Express the opportunity to appraise driver performance and decide whether future engagements will be offered. The driver therefore, will be engaged for a minimum of four year [sic] and may be longer.
I hope this resolves the matter.

It was common ground that it was not possible to determine the date of that document. Although it was produced by Mr Ioannou only under cross-examination, the plaintiff’s counsel sought to rely upon it. Even accepting the unchallenged evidence that it is in the handwriting of Mr Algar, it proves nothing.

Mr Ioannou was asked why, if the four year minimum term was so important to him, he had not insisted on its being included in the written yard agreement. He replied “Because we negotiated that yard agreement over two years, and that was the most focal point in discussions with the drivers, with management, with management and the drivers, constantly. It was a known fact. It was reiterated on many occasions in front of all other managers. . . . My understanding if somebody gives a commitment, you shake hands on it, that’s the commitment.”

He was then asked, in a question which followed logically from that answer, why he had wanted a written yard agreement and replied that job security was paramount. He was again asked, a number of times and in a number of different ways, and on two separate occasions, why he had not insisted on the four year minimum term being included in the written yard agreement. His answers can most kindly be described as evasive. He gave no satisfactory answer to the questions. He was asked what was the commencement date of the four year minimum term and initially gave no satisfactory answer to that question. Later he said that he believed the period would have commenced on the signing of the agreement.

Mr Bacher was the State Manager of Security Express at the time when the redundancies which were given effect to in early 1994 were under consideration. It was put to Mr Ioannou that Mr Bacher would say that Mr Ioannou had consistently told him that the redundancies would be in breach of the yard agreement because the yard agreement gave the drivers unlimited tenure, and had not said that the yard agreement gave a four year minimum term. He gave no satisfactory response.

Asked whether any drivers replaced their vehicles after the signing of the yard agreement Mr Ioannou said that some did, but he could not remember their names. He said that it was common knowledge that the yard agreement was to operate for a four year minimum term.

Mr Ioannou agreed that there was only one original of the yard agreement signed by all the signatories (apart from the drivers who had signed the back of a photocopy), and it had been held by him. An internal memorandum dated 29 April 1993 from Mr Hollands, when he was State Manager, states that Mr Bernhardt, an industrial relations officer of the company, had a signed copy, and Mr Hollands reaffirmed this in evidence, but no such document was discovered, and there is no other suggestion that one existed. Mr Bacher said in evidence that he was not aware of it. I consider it probable that Mr Hollands was misinformed.

Mr Ioannou was asked why he had obtained the signatures of Mr Price, the federal secretary of the union, and Mr Mauchline the state secretary, to the yard agreement. He said that those signatures were obtained “much later” than the signature of Mr Ison, but he could not remember when it was. Mr Mauchline’s signature is dated “20/9/93”.

When asked this question again, Mr Ioannou would only say that any additional signatures were a bonus, and the more signatures the better. It was put to him that after Mr Ison had signed the yard agreement, as General Manager of Security Express, he had thought it appropriate to have it signed by officers of the union at a higher level than the original signatories, but he gave the same answer. It was put to him that it was because he knew that the yard agreement was a contract between the company and the union, and he replied:

No, I had always known this was a contract between the drivers, whether the union signed it, whatever it was. The drivers were the ones. It was their livelihoods on the line, they were the ones who were promised, "Go out, you can buy - you are safe for the next four years minimum no matter what happens", and that was reiterated many, many times.

I have already said, at paragraph 7 above, that I do not find it necessary to resolve the issue as to who were the parties to the yard agreement.

A number of witnesses were called for the plaintiff who had been owner–drivers for Security Express at the relevant time. Their evidence, which is set out in the following paragraphs down to paragraph 43, was similar, but not identical. They all spoke of the meetings of drivers which have been referred to already.

Mr Tralci, one such owner-driver, said that Mr Algar, in answer to a question, had said “Even if the wheels weren’t turning and the vans were sitting in the yard, that we were guaranteed the four years.” Mr Algar had made that statement more than once. Mr Tralci had bought a new truck shortly before the execution of the yard agreement and said he would not have done so unless he had been guaranteed employment over a period of time. He also remembered the meeting at which Mr Ison had spoken, and recalled that he had guaranteed the four year term. He said that he had signed the back of the yard agreement, and had read it before signing. He agreed that there was no written term in the yard agreement providing for a four year minimum term. He believed that it would be rectified later to include that term.

Mr Alan Gerrard was another one of the owner-drivers and was the third union delegate, with Mr Ioannou and the plaintiff. He said that Mr Algar, at one of the meetings, had said that a four year minimum term was guaranteed, even if Security Express “lost the banks”. He had purchased a secondhand back-up vehicle after the signing of the yard agreement, but agreed that it was not the kind of new vehicle which the yard agreement was said to encourage. He said that at the meeting which Mr Ison attended, Mr Ioannou had introduced Mr Ison as “the man who signed the agreement which guarantees us a job for four years”. He said that it was common knowledge throughout the company, both drivers and managers, that the yard agreement guaranteed the owner-drivers a job for four years. He said that he and others took it for granted that the yard agreement would be renegotiated every four years.

Mr Drew said that at the meeting attended by Mr Ison he had asked whether Mr Ison could guarantee that the yard agreement meant that he would be employed for four years, and Mr Ison had said, “Yes, I can”. He said that he had asked that question “on numerous occasions”. He did not explain why he had found it necessary to do so.

Mr Yarpuzlu said that Mr Algar had said at a meeting that the yard agreement was “an unlimited tenure with a term of four years”. He remembered Mr Drew asking if the term of the yard agreement was four years and Mr Algar replying that it was. He remembered Mr Ison saying that it was a four year contract, and said “There was always talk of a four year contract”.

Mr Garbelletto said that on numerous occasions in response to questions, Mr Algar had told the drivers that they were guaranteed employment for four years even if Security Express lost all its major clients. He remembered Mr Drew asking such a question. At the meeting Mr Ison attended, he had told the drivers their employment was guaranteed for four years.

Mr Daniel Gerrard is the son of Mr Alan Gerrard. He said that Mr Algar at a meeting had said “You’re guaranteed a job for four years, whether your wheels are rolling or not”. He had been waiting to purchase a van until he got the guarantee and did so in May, before the yard agreement was signed. At the meeting Mr Ison attended, he had been introduced as “the man who had guaranteed us a job for four years”. No starting point was given for the four year period.

Mr Bertolini gave evidence that at a meeting, Mr Algar had said that even if Security Express lost the banks the drivers were still guaranteed a job for four years. According to Mr Bertolini, “He was promising us that no matter what, if we lost the banks, we would be sitting in the depot for the next four years minimum.” Mr Ison, at the meeting he attended, had reassured the drivers that they would be employed with the company for the next four years. However, in cross-examination Mr Bertolini said that he did not recall Mr Ison saying four years, but that he was reassuring the drivers of the same things which Mr Algar had said.

Mr Hall said that on more than one occasion Mr Algar “mentioned that it was a minimum term of a four year contract”. Mr Ison, at the meeting he had attended, had said, when questions were asked about what would happen if Security Express lost contracts, that “all the terms and the conditions of the agreement are guaranteed for the four years”.

Mr Spence said that Mr Algar had said that the drivers were getting a guaranteed term of employment for four years. Even if they had to spend some time sitting in the depot, they would still be paid according to their B forms, which set out their individual hours and rates of pay. He agreed in cross-examination that when Mr Algar said this, he was talking about a term that was to go into the document.

Mr Grove was an industrial officer with the union for three years from 1989, and liaised with Mr Ioannou. He was one of the signatories to the yard agreement, referred to in paragraph 6 above. Before signing, he had, at the suggestion of Mr Ioannou, rung Mr Algar “to confirm that all drivers subject to the agreement were guaranteed a minimum period of four years employment”. Mr Algar had replied that that was the case. Mr Grove had replied that on that basis he was happy to sign. He said in cross-examination, of that conversation, ”I was asking him to confirm what was an underlying assumption in all of the negotiations, and which was something that was commonly understood, but I wanted it confirmed before we signed.”.

Three other former executives of Security Express, in addition to Mr Algar, were called for the plaintiff. Mr Mattes was Victorian Operations Manager of Security Express until he was dismissed in September 1993. He said that the dismissal arose out of a perceived conflict of interest to do with a business relationship with Mr Algar, who was dismissed at the same time. He still did some consultancy work for Mr Algar. He was not responsible for the yard agreement, but was privy to the negotiations. He gave evidence of a meeting of drivers at which Mr Algar had said of the yard agreement:

Basically, it was a three tier agreement and it was to be over a four year period for the purchase of the vehicles and standing costs of the vehicle which were a four year period, as were the trucks for the previous line haul agreement.

He said that in answer to a question, Mr Algar had said that the yard agreement was to be for a four year period, which would then be renegotiated.

Mr Mattes said that he had signed the amendment to the yard agreement described in paragraph 10 above “with a view to getting the drivers to actually hold back on annual leave claims”. Mr Ison had been concerned that he had “gone against the company” and had asked him to rescind his signature. He did not do so, because he had obtained the trust of the drivers and did not wish to weaken his position with them.

He had been present at the meeting when Mr Ison spoke, and he said that Mr Ison had ”basically reaffirmed the agreement as it stood, that he had signed the agreement, and that it was for four years, it was a four year agreement”. In cross-examination he said that Mr Ison had said that the yard agreement guaranteed employment for at least four years. He had not read the yard agreement, but the negotiations for it had been on the basis that the drivers’ jobs would be secure for four years. However, he agreed that the concern of Mr Ison and Mr Hollands had been that the yard agreement gave the drivers tenure for life, not that it gave them tenure for four years.

Mr Theodosis was night key operations manager with Security Express until about February 1994. He said that he was told that the yard agreement was for four years. Mr Ioannou had said, at the meeting when he introduced Mr Ison, that the yard agreement was to be for four years; so had Mr Ison and Mr Algar.

Mr Last was operations manager at the yard until the middle of 1991. In about 1992 he was manager of banking and financial institutions. His employment with the company was terminated in about the middle of 1994. He said that at a meeting after the yard agreement was signed, Mr Algar had told the drivers that it “gave them an employment contract for four years”. He agreed in cross-examination that what Mr Algar had said was that the four year term was written into the yard agreement.

He said that after the yard agreement was signed, it had been explained to the banks that they had been able to secure an employment contract for four years which gave the banks security of service for four years. He agreed that most of the contracts with the banks were annual contracts but said that it was more efficient for the banks to go on dealing with the same supplier. He agreed that the contracts with the banks were negotiated at Mr Ison’s level.

He referred to discussions which he had had with Mr Bacher, as State manager, concerning the fact that the business of Security Express was going down hill drastically as a result of bank amalgamations. His whole understanding of the yard agreement was that it gave the drivers tenure for four years, not for life. This was common knowledge within the business.

The Evidence for the Respondent as to the claimed four year term

Mr Ison said that he first learned about the yard agreement at some time after it was signed, in August or September 1992. Mr Hollands, as State Manager, showed him a photocopy and told him that it had been signed by Mr Algar. He had seen a draft before it was signed and had sent it back to Mr Collins, as State Manager, for a number of amendments, which Mr Collins understood would have to be approved by the corporate office before they were made. The changes had been suggested by the industrial department, and it was a major cause of concern that they were not made. When he saw the photocopy he was concerned that the yard agreement was of indefinite duration, and was also concerned at the way in which the reference committee was controlled by the union delegate. This would make it difficult to change the business as the business needed to be changed. He said that Mr Algar did not have the right to sign the agreement. He should not have signed it without the authority of the corporate office (by which I understood him to mean the head office of Mayne Nickless) and he ought also to have involved the head office of Security Express. Mr Ison said that he later had discussions with Mr Algar about the intent of the yard agreement. All discussions were based around the fact that its term was infinite. The tenure of the drivers was not mentioned in those discussions. His concern at the time was that the agreement was of indefinite tenure. He had many discussions with Mr Ioannou on that subject. He said that there was an “aura of secrecy” about the yard agreement and “always reference to other agreements that existed but I never saw them”.

He said that there was a meeting in September 1992 to discuss the reconstruction of the Victorian operation of Security Express to retain the profitability which was needed to sustain survival. He was not happy with the yard agreement and he had a number of discussions with Mr Ioannou about renegotiating a different agreement. When these came to nothing, he decided to sign, and did sign, the agreement which was already signed by Mr Algar, and to work with Mr Ioannou to try and improve the business situation in Victoria. He was trying to get a commitment from Mr Ioannou to this end.

He said that the meeting at which he spoke was a means of communicating to the drivers that the business needed to improve, and that there was an agreement which had been struck and signed. He did not remember who introduced him, or what was said in the introduction; at that time he was concentrating on the presentation he was about to make. There was no discussion about the tenure of the yard agreement. He would have been concerned to make clear that unless there was change there would be no security in the business. He did not say anything about a four year guaranteed minimum tenure for the drivers.

He said that Mr Ioannou had said to him that the company could not make the drivers redundant without the consent of the reference committee, but that was all that he said about security of tenure. Redundancies were being considered by Security Express because the business was suffering from a continued loss of revenue. It was not competitive in some of the areas of operation so ultimately it needed to be down-sized to maintain the core operation and return to the success that it needed to return to.

He was asked to sign the amendment to the yard agreement, but did not do so because it was necessary at that stage to make dramatic, rather than incremental, changes to the business. He confirmed that he had asked Mr Mattes to rescind his signature. The reason for this was that, from a control perspective, it was important that people in Victoria agreed things with himself before doing them. This was “just another example of Bill [Mattes] going ahead and doing something that he didn’t have authority to do”.

He did not recall Mr Algar saying to him that it was necessary to give a minimum engagement period of four years. He did not recall any presentation at which Mr Algar had mentioned four year tenure for the drivers. He said, “If it was raised it would be memorable because we were of the opinion that we had an indefinite agreement”. Negotiations as to the term of contracts with the banks would have been carried out at State Manager level or higher. The banks were going through a period of change, and at state level they were concerned to have one year contracts. Only at the national level could two or three year contracts be negotiated with the banks. He had no discussions with Mr Ioannou about a four year term; discussions were all on the basis that the yard agreement was a permanent arrangement.

In cross-examination, Mr Ison said, contradicting the evidence of Mr Algar in paragraph 15 above, that there was not a problem with industrial disputation in the business of Security Express in the period between 1989 to 1991 and it was not an objective of the yard agreement to isolate the yard from such disputation. Rather, the company was concerned to have industrial agreements with its owner drivers in all its yards. Mr Collins was in charge of the negotiations for the yard agreement, but he knew that Mr Algar was involved in the process.

He said that in late 1993 when redundancies were being considered, it was the view of the industrial relations department of the company that the company’s redundancy policy overrode the yard agreement. He agreed in cross-examination that by that time he had a strategy worked out to achieve the restructuring of the business, but standing in the face of them was the position of the union delegate and the yard agreement. Nevertheless, the company had decided to go ahead and make the redundancies.

Mr Collins said that, as State Manager of Security Express, he saw a number of drafts of the yard agreement. He did not recall any provision in those drafts about the duration of the yard agreement or the tenure of the drivers. He said that Mr Algar would have written to him more than once about the discussions. It would have been outside Mr Algar’s authority to have done a deal without the approval of both Mr Collins himself and the general manager. His recollection was that none of those letters contained any reference to a four year term for the drivers.

Mr Hollands said that he saw a draft of the yard agreement within about a month of his arrival as State Manager. Some of the terms would not have got past the corporate industrial relations people. There was an indefinite term, and there was no provision for outside mediation. Neither Mr Algar nor Mr Ioannou ever accounted to him about the negotiations. He was never made formally aware that the yard agreement had been signed, and he never saw a signed copy. As he was State manager of Security Express at the time of the signing, this is surprising. If that evidence is to be relied on, it appears that the State Manager of Security Express was dependent on Mr Ioannou to tell him the terms of the document, which purported to regulate a number of routine aspects, including wages and working conditions, of the relationship between the company and the owner-drivers (see paragraph 8 above). Mr Hollands said that he was asked by Mr Ioannou to sign the yard agreement, but did not do so because he knew that it was the same agreement that he had seen in draft form and he did not have authority to sign it without reference to the general manager and, through him, to the industrial relations advisers of Mayne Nickless. He asked Mr Ioannou many times for a signed copy, and would also have asked Mr Algar. Mr Algar never openly admitted that he had signed the yard agreement.

Mr Hollands said that in November Mr Ison directed him to take a more conciliatory line with Mr Ioannou , and that was why he wrote a memorandum to Mr Ioannou acknowledging the relevance and continuing application of the yard agreement, which was vetted by Mr Ison. He said:

. . . we were really struggling for alternatives at this stage. We were making no progress. I still hadn't seen a signed copy of the agreement, still didn't know what rules that we were supposed to be managing the business under, but we had had discussions around the yard agreement with Mr Ioannou in particular, or solely in fact, probably, where somebody would say, you know, you can't do that because it's, you know, it was covered in the yard agreement, a set of rules that I had never seen.

He had no discussion with Mr Algar as to why he had signed the yard agreement; he said that it was apparent that Mr Algar and Mr Ioannou were “a tight team”. He and Mr Algar disagreed about how the business should be run, from an industrial relations viewpoint.

He said that he was present at the meeting at which Mr Ison spoke, and Mr Ison said nothing about the duration of the yard agreement or about a four year term. It was put to him in cross-examination that the purpose of that meeting was for Mr Ison to explain to the drivers that he had signed the yard agreement. He said that the general purpose of the meeting was for Mr Ison to speak about the continuous service improvement program that the company was committed to at the time, to build total quality management systems in its business.

Although he was State Manager at the time when the amendment to the yard agreement described in paragraph 10 above was signed, the first time he had seen a copy of it was when he was shown it prior to giving his evidence. It was put to Mr Hollands that Mr Ioannou had said in evidence that Mr Hollands “was a little bit. . . obnoxious in terms of the yard agreement” and “initially Mr Hollands pretended he knew nothing about the [yard] agreement”. To this Mr Hollands replied:

In those terms, I have always been obnoxious to the yard agreement because it was, again as I said, I had never seen it, certainly I have never seen a signed copy of it. Never seen the latest draft as I presume there would have been many changes, you know, in the preceding six months. . . . I was supposed to manage the business under a set of rules that I had never seen. I denied the existence of it. I denied the existence of a binding agreement because if I didn't have the authority to sign it, certainly nobody else had.

He said that he was “not very popular . . . with the power structure within the business, which was the reference committee, effectively”. (The members of the reference committee at that time were Mr Algar as State Operations Manager and Mr Ioannou as union delegate.) So far as he was concerned, the yard agreement had no application, because it would have to have been referred up through Mayne Nickless to be valid. This was before Mr Ison asked him to be more conciliatory

Mr Hollands said that he put it to Mr Ioannou that the yard agreement was an unending agreement, and Mr Ioannou never denied this, and his attitude was that there was nothing wrong with that. He never had any discussion with Mr Last about a contract that was to continue for a specific time. It was not true to say, as Mr Last had said in evidence, that management generally all knew that the drivers enjoyed a four year contract.

In cross-examination Mr Hollands said that he did not attend any of the meetings of drivers addressed by Mr Algar before the signing of the yard agreement.

He agreed that in late 1992 and early 1993 the company was experiencing financial difficulties, and that he had formed the view that restructuring and rationalisation would not have been possible under the yard agreement without the complete agreement of the union delegate. If the company was to restructure it would have to do so outside the yard agreement. It was put to him that he had set about restructuring outside the yard agreement, but he said that he was replaced as State Manager and this was not done to his knowledge.

Mr Hollands said that neither Mr Algar nor Mr Ioannou had ever discussed with him a four year term for the drivers. No-one had ever said to him that the drivers had a four year term of employment. A tape of a conversation was played to him, which he recognised as a conversation between himself and Mr Ioannou. He agreed that in that conversation Mr Ioannou said that Mr Algar had said in front of the drivers that “the essence of the agreement is for four years you’re guaranteed safe employment, go out and buy these trucks or buy these vehicles”. He agreed that on that basis it was incorrect to say that it was never said in his presence that the drivers had a four year term of employment. However, he said that his mindset was that the four years related only to the purchase of vehicles, and he did not interpret it in that conversation as relating to a four year agreement.

In re-examination he said that he was confident that nothing had been said about four years employment, because that would have meant that the chief problem with the yard agreement, namely the indefinite term, had been removed. If the yard agreement had had a four year term in the first place, rather than an indefinite term, it might have been acceptable to the company.

Mr Bacher said that when he arrived at Security Express there were a number of unsigned copies of the yard agreement in various files but he did not see a signed copy for some time. It was not offered freely; Mr Ioannou protected it “quite judiciously”. Mr Ioannou asked him consistently to sign it as a sign of good faith, but he saw no need to do so as it had been signed by the general manager. He had never seen a copy of the amendment to the yard agreement. His principal job instruction on his arrival was to pull the business out of a downward spiral. It was losing $20,000 to $30,000 per week and losing market share, and had a rigid, fixed labour cost structure. He explained in cross-examination that this was because the business had pursued market share and built up the number of customers on its books, but they were poorly performing customers. More labour hours had been allocated to servicing those customers. He said in cross-examination that:

. . . my appointment wasn't to enact redundancies. My appointment was to restructure that yard and find a way of freeing up its operation, and certainly I wasn't committed to a redundancy process one way or the other.

The most important thing that needed to be changed was the yard agreement, so that the business could be freed up to operate more efficiently and effectively. The yard agreement had no sunset clause, had no redundancy provision, and had no flexibility in the allocation of its labour resource. Mr Bacher said that the business was “terribly overstaffed in terms of labour hours relative to the number of customers that we were servicing, and there was no mechanism in place to challenge the way those labour hours were delivered”. The yard agreement was always purported to be a document that could not be changed.

Asked why this was so, he replied, “Because Mr Ioannou wouldn’t allow it”. He had been told that there was a reference committee, but it never met. He had a number of meetings with Mr Ioannou in an attempt to bring about change, but was always told that the only way the business could move forward, in terms of downsizing the labour force, was if the company paid out the drivers on the basis that the yard agreement was an agreement for life. There was never any suggestion that the drivers had security for a term short of jobs for life.

Mr Ryan was at all relevant times a corporate industrial relations officer with the company providing industrial relations advice to business entities, or divisions, within the transport division, of which Security Express was one. He had not seen the yard agreement before it was shown to him at the hearing. He said that there was no obligation on divisions to send their agreements to the corporate office, although most did send them in to ensure that they complied with company policy. He had never seen a clause like clause 18.1 providing “this Agreement shall be in effect for an unlimited tenure and will continue in force”

The drivers who were dismissed brought proceedings in the Australian Industrial Relations Commission (“the Commission”) under section 127A of the Industrial Relations Act 1988 to review the terms of the yard agreement. The transcript indicates that on 17 January 1994 Mr Hinkley of counsel, opening for the drivers, tendered Mr Algar’s letter of 18 June 1992 and said:

the relevance of [that document] is no more than that the [yard] agreement . . . envisaged the parties would operate pursuant to it for a period of four years in respect of new vehicles, and what this memorandum does is to identify the company’s commitment to have the agreement operate in respect of those who did not have new vehicles but to have that agreement operate in respect of being for four years also.

That proceeding was adjourned until 28 January 1994 when Mr Bell of counsel replaced Mr Hinkley. The transcript shows that he said in opening:

I wish . . . to encapsulate . . . the principal complaint of the owner/drivers. Now, your Honour, the first and most important of those complaints is that the applicants in this case are the signatories to a written agreement, which provides that they will be afforded work by Security Express on certain terms and conditions for an unlimited period.
There will be evidence before the commission that representations were solemnly and definitely and clearly made by Mayne Nickless representatives at about the time that the agreement was negotiated; that the agreement would operate on an unlimited basis or for at least four years. Now, it may be that the reference to four years in those representations acts as some qualifier upon the otherwise indefinite duration of this agreement, such as to cut it down, but certainly so far as the owner/drivers were concerned they felt that they had at least four years tenure, if not more.

These are the only passages from that transcript to which I was referred, and they constitute the earliest references to a four year term of which documentary evidence has been produced (discounting Exhibit 2 which bears no date in any case).
The Claim of a Four Year Minimum Term

In Clause 5 of the second further amended statement of claim (“the statement of claim”) it is claimed that “it was an express term of [the service agreement] that that agreement would be in force for a minimum period of four years from 19 June 1992”. In the Particulars to that clause it is said:

that the term was oral and was proposed in statements made by Mr Algar to members and officers of the union, including Mr Ioannou on many occasions, including at a number of meetings held in Royal Parade, Parkville, from late 1991 to mid 1992;
that the term was communicated in person by Mr Ioannou to the plaintiff on a number of occasions; and
that it was accepted by the plaintiff signing the yard agreement or alternatively was accepted by Mr Ioannou on behalf of the plaintiff.

It is necessary to examine whether this claim is proved. The submission of the plaintiff was that it was proved by the evidence of Mr Algar and Mr Ioannou, and corroborated by the former drivers and former executives who were called for the plaintiff.

I did not find either Mr Algar or Mr Ioannou to be a satisfactory witness. As to Mr Algar, I note that:

His evidence as to “back to back” four year contracts with the banks is not supported by the independent bank witnesses or by Mr Ison;
His evidence as to bank contracts is inconsistent with the provision in clause 9.1 of the yard agreement, whereby a driver may terminate on two weeks’ notice;
His claim to have written letters to Mr Ison and to several State Managers referring to the four year term, and to have kept copies of those letters in his office, is not supported by any discovered document;
He did not particularise the industrial disputes which he said were one reason for the yard agreement, and his evidence as to that matter is inconsistent with the evidence of Mr Ison;
Clause 7.2 of the yard agreement and his letter of 18 June 1992 completely negated what he said was the other reason for the yard agreement, namely to encourage owner-drivers to upgrade their vehicles;
Further, there is almost no evidence of the purchase of any new vehicles associated with the making of the yard agreement, and he could not remember whether any were purchased;
He did not give an effective answer when asked whether he had told Mr Ison and Mr Hollands that they need not worry about the yard agreement having an indefinite term, because he had done a deal on the side with the drivers for a four year minimum term;
He was inconsistent about whether his discussions with the drivers related to four years use of the vehicles or four years tenure for the drivers;
He vacillated about accepting the inconsistency between the indefinite term and the claimed minimum four year term;
He was unable to explain his statement that the minimum term related to all three tiers of remuneration, but did not abandon it;
He expressed the opinion that there was no need to include the claimed four year term in the written yard agreement, but given that, if there was such an express term, its absence from the written yard agreement has necessitated the bringing of this proceeding, that answer displays a naïveté inconsistent with his experience and his presentation generally;
He sought to play down his later business connection with Mr Ioannou.

Mr Ioannou was generally evasive, flippant and filibustering in his demeanour. He did not give any satisfactory answer to the question as to why the claimed four year minimum term was not included in the written yard agreement, or to the question as to whether he told Mr Bacher that the term of the yard agreement was four years, and not the indefinite term about which Mr Bacher was concerned. He also failed to give a satisfactory answer to the question as to why he obtained the signatures of the two additional union officials. He sought to play down his later business connection with Mr Algar. He is a plaintiff in a similar action against the defendant.

There is no contemporary document supporting the claim. Documents (apart from the yard agreement itself) which might have been expected to refer to a four year minimum term if there was such a term in the plaintiff’s service agreement include:

the six page report from Mr Algar to Mr Ison in June 1993, described in paragraph 18 above;
the letter sent by the plaintiff to the company after he was retrenched, described in paragraph 5 above;
the letter from the union of 13 December 1993, described in paragraph 25 above.

There is no evidence as to why none of those documents refers to a four year minimum term.

The first passage from the proceeding in the Commission is of no assistance to the plaintiff, dealing as it does only with the arrangements for vehicles, and not with the tenure of the drivers. The second passage is no more than an indication of the instructions which Mr Bell had received, and the plaintiff did not place significant emphasis upon it. No explanation was offered for the apparent difference between the instructions received by the two counsel.

Both Mr Algar and Mr Ioannou testified to the existence of unspecified documents evidencing the four year minimum term which have not been either produced by them or discovered by the company. As has been said, there was no complaint from the plaintiff’s legal advisers that the company had not made complete discovery.

The only relevant evidence of the plaintiff is internally inconsistent. He said that he was told by Mr Algar that when the yard agreement was signed he would have another four years. He then said that Mr Ioannou had told him his job was indefinite, but later that Mr Ioannou had told him the same thing as Mr Algar. There is no evidence, and I did not understand it to be put at the hearing, that by signing the yard agreement the plaintiff accepted an offer of an oral term to the effect that the service agreement would be in force for a minimum period of four years from 19 June 1992.

The evidence of the drivers is inconsistent. I take into account, of course, that they are speaking of events some of which occurred eight years ago, and as to which memory must necessarily be faulty. I must also take into account that seven of them, including Mr Ioannou, are plaintiffs with similar claims to that of the present plaintiff. The general tenor of their evidence is to the effect that the yard agreement contained, or would when executed contain, a term guaranteeing them job security for four years. It is not in issue that the yard agreement contains no such term. Mr Alan Gerrard expected it to be renegotiated after four years. I wonder whether Mr Drew, in stating that he had asked the same question “on numerous occasions”, was not gilding the lily overmuch. The statement of Mr Yarpuzlu is internally inconsistent. The reported statements of Mr Algar, guaranteeing employment to the drivers whether there was work for them or not, seem inherently unlikely to have been made, or, if made, believed. The owner-drivers were independent business men, who might have been expected to have some awareness of the realities of commercial operations. The purchases of new vans which were described were all made before the execution of the yard agreement.

Three former executives of Security Express were called by the plaintiff. Mr Mattes said that Mr Ison had said that the yard agreement guaranteed employment for four years, which it does not. However, he agreed that the concern of Mr Ison and Mr Hollands had been that it gave the drivers tenure for life, not that it gave them tenure for four years. His evidence expressly connects the four year period with the purchase and standing costs of the vehicles.

Mr Theodosis and Mr Last similarly said that they had been told that the yard agreement had been for four years. The evidence of Mr Last as to the banks is inconsistent with that of the independent bank officers who gave evidence.

Counsel for the plaintiff pointed out that it was not put to any of the plaintiff’s witnesses that they had come together in an agreement to lie to the Court as to the term of the yard agreement. However, it appears to me probable that many of the witnesses, either at the time of the events or in recollection, may have confused the effect of clause 7.2 of the yard agreement (combined with Mr Algar’s letter of 18 June 1992) as to the acceptability of vehicles for four years, and the calculation of the standing costs over four years, with a provision of a four year minimum term for the drivers. The acceptability of vehicles for four years gave the impression that it would be safe to purchase a new vehicle and finance it over four years, and the awareness of that situation could easily lead to an assumption that what was guaranteed was the tenure of the driver, as well as the acceptability of the vehicle. The carefully expressed passages from the openings of both counsel before the Commission, set out in paragraphs 75 and 76 above, would tend to give some support to this view. It is, of course, a matter which counsel for the defendant put to a number of the plaintiff’s witnesses and which they denied. However, the whole point is that the process of forming the assumption in question would have been an unconscious one.

The defendant’s witnesses were adamant that there had been no oral agreement for a four year minimum term for the drivers, and that the statements said to have been made by the plaintiff’s witnesses to the effect that there was such an agreement had not been made. Their concern had been about the indefinite term of the yard agreement, and they had had no knowledge of a four year term. In the face of this fundamental conflict in the evidence, it is important to note that there was no attack by the plaintiff on the credit of any of the defendant’s witnesses save Mr Hollands. The explanation which Mr Hollands gave for the reference on the tape to a four year term was, in any case, that he took it to be a term relating to vehicles, not to drivers. I find the evidence of the defendant’s witnesses to be fair, balanced, and consistent. Given my view of the credibility of the principal witnesses for the plaintiff, and the probable explanation of the evidence of the other witnesses for the plaintiff, I accept the evidence of the witnesses for the defendant.

For all of these reasons I cannot find that there was an express oral term of the service agreement that it would be in force for a minimum period of four years from 19 June 1992. The claim of the plaintiff accordingly fails insofar as it is based on such an oral term.

The Termination of the Service Agreement

In a letter dated 3 February 1994, Mr Bacher, as State Manager, notified the plaintiff that his position with the company had become redundant. The payment to be made to him was described as constituted by “the Mayne Nickless Redundancy/Retrenchment Owner/Drivers Package”.

There is no provision in the yard agreement for dismissal on the ground of redundancy, and no basis on which the company’s redundancy policy, referred to in paragraph 10 above, could be said to be incorporated into it. The intended meaning of clause 3 of the amendment to the yard agreement, which is set out in paragraph 10, is not clear to me, but it does not appear to alter that situation (leaving on one side any question as to the validity of that amendment). Accordingly, there is no issue to be determined as to whether the termination of the plaintiff’s engagement was validly effected in terms of the redundancy policy, that policy having no application to the service agreement between the plaintiff and the company.

However, in the absence of the oral term contended for by the plaintiff, the service agreement is, by virtue of clause 18.1 of the yard agreement, an agreement “of indefinite duration”. I did not understand counsel for the plaintiff to challenge the submission of Mr Fajgenbaum for the defendant that the service agreement was, in this context, analogous to a contract of employment, and accordingly was terminable on reasonable notice. Brennan CJ, Dawson and Toohey JJ said in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 429:

In the absence of anything to the contrary and putting on one side the provision in the award for notice, at common law a contract of employment for no set term is to be regarded as containing an implied term that the employer give reasonable notice of termination except in circumstances justifying summary dismissal.

No such circumstances are alleged here.

On retrenchment the plaintiff was paid $33,614.08, and a cheque was sent to him under cover of a second letter dated 3 February 1994, which read:

Enclosed is a cheque for upon [sic] your position being made redundant, as detailed below.
Normal Hours
Standard payment for week ending 4/2/94                $2,984.05
Less PPS Tax   ($268.00)
$2,716.05       (A)

In lieu
Payment in lieu of notice at fixed and labour cost     $2,182.78
Less PPS Tax   ($196.00)
$1,986.78       (B)

Redundancy payment
Start date 23-Apr-85, Redundancy date 18-Feb-94
8.8301 years * 3 weeks per year of service
(8.8301 * 3 wks
$472.75 per week fixed cost)  $12,523.29
(8.8301 * 3 wks
$618.64 per week labour cost)  $16,387.96
$28,911.25     (C)

Cheque Amount: (A) + (B) + (C) $33,614.08

Thus, omitting the amount of $2,716.05 applicable to the week ending 4 February 1994, that being the date of termination of his services, the plaintiff received $30,898.03 from the company on the termination of his engagement. It then falls to be determined first, whether this amount is to be regarded as a payment in lieu of notice, and if so, whether it corresponds to a period which could be regarded, in all the circumstances of this case, as reasonable.

Mr Fajgenbaum relied on two decisions of the Federal Court, Black v Brimbank City Council (1998) 152 ALR 491 and Furey v Civil Service Association of WA (Inc) (1999) 91 FCR 407. In Black, the first of those cases, Moore J, after a careful consideration of the authorities, concluded at 505:

Brimbank’s liability for damages arises because, it is to be assumed for present purposes, it breached the contract of employment by terminating it other than in the manner contemplated by the contract itself. This act would expose it to damages which, prima facie, are the benefits Mr Black would have derived while employed for the residue of the contractual term. However, the act which constituted the breach was also the act that founded the entitlement of Mr Black to the payment of severance entitlements under the agreement. Had the contract not been breached by its premature termination and it had run its course and the employment terminated by the effluxion of time, there would have been no payment under the agreement. The purpose of compensatory damages, whether in actions in tort or contract, is to place the injured party in the same position he or she would have been in had the contract been performed or the tort not committed: . . .
The payment of severance entitlements arose directly from the act which constituted the breach for which compensatory damages are now sought. It would, in my opinion, be inconsistent with the purpose for which compensatory damages are awarded to ignore the payment of severance entitlements directly arising from the act which constituted the breach when assessing damages flowing from it. Putting the matter slightly differently the damages are designed to put the party not in default in the same position as he or she would have been in had the contract been performed. . .

That decision was followed by Carr J in Furey directly in the context of payment in lieu of notice. After referring to and quoting the passage cited from Black in the preceding paragraph, His Honour said at 418:

I propose to take a similar approach in this matter. The fact is that the respondent paid to the applicant an amount of money when it terminated his employment. That amount was calculated by reference to a period which coincides precisely with the period of notice stipulated by s 170CM(2) and accepted by the applicant in these proceedings as being his statutory period of notice entitlement. The occasion of that payment was the respondent’s termination of the applicant’s employment. Accordingly I think that, as a matter of law, it is to be characterised as being at least part of the required amount of compensation instead of notice which it was the respondent’s obligation to pay to him under s 170CM of the Act.

In response, Mr Niall, for the plaintiff, relied on Haley v Public Transport Corporation of Victoria [1998] VSC 132 in which Ashley J declined to follow the decision in Black. However, in Haley His Honour was not concerned with payment in lieu of notice, but specifically with damages only, and the finding on that issue was in the end obiter, because the plaintiff’s claim ultimately failed. At the time of the decision in Haley, the matter of Furey had not been decided, so that the application of Black to the issue of compensation in lieu of notice had not been considered. For these reasons, I consider it appropriate that I follow Furey rather than Haley.

This is not one of those cases where prima facie the termination of the engagement of the plaintiff is wrongful, and the matter is considered in the context of damages. Here, it is not in issue that, given my finding that there was no oral term as contended for by the plaintiff, termination of the service agreement on reasonable notice is lawful. The only question is whether the plaintiff was given reasonable notice. Further, in all three of the cases cited on this point, it was not in issue that the plaintiff was, if wrongfully dismissed, entitled to certain severance payments. Given that the terms of the present plaintiff’s employment were found in the yard agreement, which made no provision for redundancy, that was not the position in this case. Although the payment which was made to him was calculated in accordance with the redundancy policy of the company, the effect of my finding set out in paragraph 91 above is that that was a voluntary payment.

Accordingly, I find that, in all the circumstances of this case, the payment of $30,898.03 made to the plaintiff by the company on the termination of his engagement with Security Express is to be regarded, on the basis of the decision in Furey, as a payment in lieu of notice. I therefore turn to consider the reasonableness of the notice in question.

In the particulars of the plaintiff’s loss which are dated 22 March 2000, he claims that he “would have earned but for the termination of the contract by the Defendant the sum of $961.06 per week net of expenses for the unexpired term of the Yard Agreement”. Counsel for the company accepted that the plaintiff’s taxation returns showed him earning at that rate. Omitting the amount of $2,716.05 applicable to the week ending 4 February 1994, he received $30,898.03 from the company on his termination. That amount is 32.15 times $961.06. On that basis Mr Fajgenbaum submitted that the company had made a voluntary payment to the plaintiff which equalled 32 weeks earnings, and this amount was to be regarded as payment in lieu of 32 weeks notice.

In Crawford Fitting Co & Ors v Sydney Valve & Fittings Pty Ltd & Anor (1988) 14 NSWLR 438 at 444, McHugh JA, with whom Priestly and Clarke JJA in effect agreed, summed up in the following terms the effect of the authorities as to the reasonableness of notice on the termination of commercial agreements:

. . . the reasonableness of the period of notice depends upon the circumstances existing when the notice is given. . . . When a contract is terminable on reasonable notice, the period of notice must be sufficiently long to enable the recipient to deploy his labour and equipment in alternative employment, to carry out his commitments, to bring current negotiations to fruition and to wind up the association in a businesslike manner.

Some authorities relevant to contracts of employment are summarised in the following terms in Halsbury’s Laws of Australia vol 10 under the heading “Employment” at paragraph 165-550:
What is reasonable notice depends on all the facts of the particular case, including the status and salary of the position, the length of the employee’s service in that position, the employee’s age and educational qualifications, whether the employee had given up a secure job to take up the position, and eligibility for superannuation benefits.

The evidence of the plaintiff on these matters was that he was born in 1955 and left school after Year 8. After a period of unskilled factory work, he spent seven years as a driver in the RAAF, and then joined the company as an employed driver. He became an owner-driver for Security Express in 1985, and was thus 39 years old when that engagement was terminated in February 1994, after nine years service. No question arises as to superannuation: he was an independent contractor, and not an employee of the company.

Considering the matter as at the date when the notice was given (as to which see Crawford Fitting Co & Ors, cited in paragraph 101 above), I am satisfied that, taking into account the matters to which I have referred, 32 weeks constituted reasonable notice to the plaintiff of the termination of his services with the company.

Conclusion

For the reasons given, the plaintiff’s claim fails. Counsel may wish to make submissions as to costs.

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Kirchner v Mayne Nickless Ltd [2000] VSC 459

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[2000] VSC 459

2 November 2000