McKeith v Royal Bank of Scotland Group Plc; Royal Bank of Scotland Group Plc v James

Case •

[2016] NSWCA 36

•

09 March 2016

No judgment structure available for this case.

Court of Appeal


Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James [2016] NSWCA 36
Hearing dates:19, 20, 21 October 2015
Decision date: 09 March 2016
Before: Macfarlan JA at [1];
Tobias AJA at [25];
Emmett AJA at [307]
Decision:

1 That within the periods identified below, the parties file and serve written submissions not exceeding five pages in length, together with draft orders to give effect to these reasons for judgment and to the appropriate awarding of costs both at first instance and on the appeal.
2 The appellants shall comply with this order within 14 days of the date of publication of this judgment; the respondents to reply within 14 days of receipt of the appellants’ submissions and draft orders and the appellants to reply to the respondents within 7 days of the receipt of their submissions and draft orders.
3 The parties should make every attempt to reach agreement on the outstanding issues so as to minimise those still in dispute.
4 The remaining disputed issues will be determined on the papers.

Catchwords:

CONTRACTS – contracts of employment – retrenchment on the ground of redundancy – whether employer’s redundancy policy expressly incorporated into contract of employment – whether employer otherwise promised contractually that it would continue to apply its redundancy policy – whether takeover bidder for employer contractually promised employees that employer’s redundancy policy would continue to be applied – whether promises made with contractual intention – whether consideration given – whether requests by bidder for employees to do acts and whether acts done in reliance – whether employer entitled to withhold payment of ex gratia bonuses under redundancy policy unless deeds of release were signed by employees

  PRACTICE AND PROCEDURE – contract of employment – retrenchment on the ground of redundancy – employee alleged that employer’s redundancy policy incorporated into contract of employment by a course of dealing – not necessary to plead expressly that contract varied when effect of pleaded allegation clear
Cases Cited: Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223
Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20; 92 CLR 424
Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; 218 CLR 592
Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256
Foggo v O’Sullivan Partners (Advisory) Pty Limited [2011] NSWSC 501; 206 IR 87
Goldman Sachs JBWere Services Pty Limited v Nikolich [2007] FCAFC 120; 163 FCR 62
Gould v Vaggelas [1985] HCA 75;157 CLR 215
James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland [2015] NSWSC 243
James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland (No 2) [2015] NSWSC 970
Parker v South Eastern Railway Co [1877] 2 CPD 416
Port Jackson Stevedoring Pty Limited v Salmond & Spraggon (Aust) Pty Limited [1978] HCA 8; 139 CLR 231
R v Clarke [1927] HCA 47; 40 CLR 227
Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; 177 ALR 193
Romero v Farstad Shipping (Indian Pacific) Pty Limited [2014] FCAFC 177; 315 ALR 243
Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165
UGL Rail Services Pty Limited v Janik [2014] NSWCA 436
Category:Principal judgment
Parties:

Matter No 2015/115116 (McKeith v RBS)

 

Colin McKeith (Appellant)
Royal Bank of Scotland Group PLC (First Respondent)
RFS Holdings BV (Second Respondent)
RBS Services (Australia) Limited (Third Respondent)

 

Matter No 2015/113597 (RBS v James)

  Royal Bank of Scotland Group PLC (First Appellant)
RFS Holdings BV (Second Appellant)
RBS Services (Australia) Limited (Third Appellant)
Angus James (Respondent)
Representation:

Counsel:

 

Matter No 2015/115116 (McKeith v RBS)
Mr JN West QC / Mr MJ Steele SC (Appellant)
Mr J Sheahan QC/Dr E Peden /Mr G Gee (Respondents)

 

Matter No 2015/113597 (RBS v James)
Mr J Sheahan QC/Dr E Peden /Mr G Gee (Appellants)
Mr JN West QC / Mr MJ Steele SC (Respondent)

 

Solicitors:

 

Matter No 2015/115116 (McKeith v RBS)
Harmers Workplace Lawyers (McKeith)
Allens Linklaters (Respondents)

  Matter No 2015/113597 (RBS v James)
Allens Linklaters (Appellants)
Harmers Workplace Lawyers (James)
File Number(s):2015/115116 (McKeith)2015/113597 (James)
 Decision under appeal 
Court or tribunal:
Supreme Court of New South Wales
Jurisdiction:
Equity Division
Citation:
[2015] NSWSC 243
Date of Decision:
19 March 2015
Before:
McDougall J
File Number(s):
2011/320637 (McKeith)
2011/320618 (James)

HEADNOTE

[This headnote is not be read as part of the judgment]

In September and December 2008 respectively, Mr Angus James and Mr Colin McKeith, both senior employees of the ABN AMRO Group (“ABN”), were retrenched. The retrenchments were considered and effected in the context of competing takeover offers for ABN by third parties. One of the offerors was a Consortium which included the Royal Bank of Scotland Group (“Royal Bank”). Public statements were made by ABN that if Royal Bank’s offer was successful, ABN would ensure the continued operation of ABN’s redundancy policy which dealt with severance and ex gratia payments on termination of employment.

Both employees claimed damages from ABN and Royal Bank for non-payment to them of severance and ex gratia payments to which they alleged they were entitled under the redundancy policy. Mr James succeeded at first instance, whilst Mr McKeith was wholly unsuccessful. The unsuccessful parties appealed to the Court of Appeal.

Held in relation to Mr McKeith’s claim:

(1)   Although his claim against ABN that the redundancy policy had been incorporated into his contract of employment was sufficiently pleaded, the claim failed because ABN did not itself make any contractual promise to him that its redundancy policy would continue to be applied. Rather, it was simply a conduit for such promises being made by the Consortium (and therefore Royal Bank).

(2)   Royal Bank contractually promised Mr McKeith that ABN would continue to apply its redundancy policy to him.

(3)   Royal Bank breached that contract by failing to make a severance payment to Mr McKeith in accordance with the redundancy policy but did not breach it by failing to pay him an ex gratia bonus. The redundancy policy did not confer on Mr McKeith a right to any such bonus and ABN was therefore justified in declining to pay one to him unless he signed a broadly drafted deed of release, which he declined to do.

(4)   The damages recoverable by Mr McKeith from Royal Bank were accordingly limited to his severance payment entitlement of $375,961.54, together with interest.

Held in relation to Mr James’ claims:

(1)   Mr James’ claim against ABN failed because ABN’s redundancy policy was not expressly incorporated into his contract of employment and ABN did not make any contractually binding promise to him that it would continue to apply it.

(2)   Mr James’ claim against Royal Bank succeeded because it promised him contractually that ABN would continue to apply its redundancy policy and ABN had failed to do so as it declined to make the severance payment to which he was entitled under the redundancy policy.

(3)   Mr James’ claim for payment of an ex gratia bonus failed for the same reasons that Mr McKeith’s similar claim failed.

Judgment

  1. MACFARLAN JA: I agree with the judgment of Tobias AJA and add the following observations summarising the main findings that I consider to be determinative of the appeals in Mr McKeith’s proceedings and in Mr James’ proceedings.

MR McKEITH’S PROCEEDINGS

Contract claim against the third respondent (“ABN”)

Pleading issue

  1. Mr McKeith pleaded that ABN’s written “Redundancy Policy” was “incorporated” into his contract of employment with ABN by a “course of dealing”. He relied in this context on alleged representations by ABN that the Redundancy Policy would apply to employees of ABN whose services were terminated by reason of redundancy.

  2. The primary judge found that Mr McKeith was not entitled to advance this claim because he had not pleaded that his contract of employment was varied to incorporate the Redundancy Policy.

  3. I agree with Tobias AJA that the substance of Mr McKeith’s claim was pleaded and that accordingly he was entitled to advance the claim. There was no need for the pleading to allege in terms that there was a “variation” of the contract of employment because that was the effect of what was pleaded, namely, that there was a contract of employment into which the relevant policy was incorporated after the contract’s inception.

Whether ABN made promises to Mr McKeith

  1. I agree with Tobias AJA that in describing the Consortium’s attitude to ABN’s employees, ABN was the conduit for promises made by the Consortium to those employees and that it did not adopt those promises to make them also promises by ABN itself.

Other elements of Mr McKeith’s contract claim

  1. It is unnecessary to deal with these other elements as Mr McKeith’s contract claim against ABN fails by reason of the absence of any relevant promise to him by ABN.

Contract claim against the first and second respondents (“Royal Bank”)

Whether Royal Bank (as one of the members of the Consortium) promised Mr McKeith and other ABN employees that the Redundancy Policy would be applied to them if ABN made them redundant

  1. The primary judge was correct to find that Royal Bank was responsible for the relevant statements even though they were, at least in large measure, communicated, not directly by Royal Bank to ABN employees, but by ABN on Royal Bank’s behalf.

  2. As Tobias AJA holds, the statements were clearly promissory. Use in the statements of the word “guaranteed” was strong evidence of that.

Whether the promises were made with contractual intention

  1. I agree with Tobias AJA that the statements were made with contractual intention. They were made in a serious, business context and were designed to induce ABN employees to remain in its employment, this being to the advantage of Royal Bank.

Consideration – request to do an act

  1. As Tobias AJA points out, it follows from Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20; 92 CLR 424 that Mr McKeith’s contract case against Royal Bank required a finding that a request by Royal Bank that ABN employees remain in their employment was implicit in the statements for which Royal Bank was responsible. The circumstances referred to by Tobias AJA support such a finding. It does not matter that Royal Bank may not have wanted every employee of ABN to remain in ABN’s employment. It apparently wanted the bulk of them to do so and made the request to all in the expectation that not all would accept.

Consideration – acts in reliance

  1. To support a finding that Mr McKeith gave consideration for the Royal Bank’s promises, it was necessary for him to show also that he acted on the faith of or in reliance upon the promises (R v Clarke [1927] HCA 47; 40 CLR 227 at 244). Proof of the doing of what an offer seeks “by a person who knows of its existence will in general constitute prima facie evidence of acceptance of the offer” (Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd [1978] HCA 8; 139 CLR 231 at 271; and see at 274 and (1980) 144 CLR 300). A similar principle was expressed in the context of a fraud action by Wilson J in Gould v Vaggelas [1985] HCA 75; 157 CLR 215 at 238:

“Where a plaintiff shows that a defendant has made false statements to him intending thereby to induce him to enter into a contract and those statements are of such a nature as would be likely to provide such inducement and the plaintiff did in fact enter into that contract and thereby suffered damage and nothing more appears, common sense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract.”

  1. When applied to the circumstances of this case as described by Tobias AJA, this principle requires the conclusion that both plaintiffs relied upon Royal Bank’s promises. Mr McKeith has the added advantage in his case of having given express evidence of reliance.

  2. The primary judge found against Mr McKeith on the basis that he did not plead acts of reliance in relation to the offer but such an allegation was present in his pleading, albeit in relation to his estoppel claim. As Mr McKeith clearly advanced a contract claim, the claim required proof of reliance and the evidence justified a finding of reliance, I do not consider that fairness to Royal Bank required rejection of the claim.

Breach of contract

  1. I agree with Tobias AJA that Mr McKeith’s contract with Royal Bank was breached because ABN did not pay Mr McKeith the severance amount to which he was entitled. Royal Bank’s contention that ABN was not bound to make the payment because Mr McKeith refused to sign a deed of release that ABN required him to sign should be rejected because, for the reasons given by Tobias AJA, the releases sought were broader than those ABN was entitled to require to be given.

  2. The position in relation to payment of a discretionary bonus was different because, the payment being at its discretion, ABN was entitled to require almost whatever it wished in return for its payment. The discretionary nature of the bonus was emphasised by the use in the Redundancy Policy of the words “depending on circumstances” and “may be included”, as well as the expression “ex gratia payments” itself.

  3. Whilst ABN was not entitled to act in bad faith in selecting the terms of the deed to be signed, there was no allegation that it did so. Accordingly, it was entitled to withhold payment of a discretionary bonus because Mr McKeith would not sign the form of deed that it chose to seek.

  4. Mr McKeith also alleged that ABN breached the Redundancy Policy by failing properly to exercise its discretion by not giving consideration to Mr McKeith’s individual circumstances and by applying a “blanket rule” irrespective of them. Tobias AJA demonstrates that this was not the case. Mr McKeith’s position was considered but ABN decided that payment of a discretionary bonus to him (or any other departing employee) was put out of the question in late 2008 by the dire financial circumstances in which ABN and Royal Bank found themselves in the midst of the Great Financial Crisis. ABN’s business decision not to pay discretionary bonuses to departing employees at that time was, on the evidence, entirely rational and responsible. The decision not to pay a bonus to Mr McKeith conformed to the Redundancy Policy’s statement that bonuses might be paid “depending on circumstances”.

Damages

  1. It can be inferred that Mr McKeith would have signed an appropriately narrow deed of release to obtain his severance payment. Accordingly, ABN had no justification for withholding the severance payment and Royal Bank (which rendered itself contractually responsible for ABN’s compliance with the Redundancy Policy) is liable to pay damages in the amount of the severance payment, together with interest. Mr McKeith’s claim in respect of the bonus he expected fails for the reasons that I have given.

MR JAMES’ PROCEEDINGS

Contract claim against ABN

  1. I agree with Tobias AJA that there was no express incorporation of the Redundancy Policy into Mr James’ contract with ABN.

  2. Moreover, it follows from the conclusions reached in relation to Mr McKeith’s contract claim against ABN that Mr James’ contract claim against ABN must fail because ABN, as distinct from Royal Bank, did not make any relevant promises to him (or other ABN employees).

Contract claim against Royal Bank

  1. For the reasons given in relation to Mr McKeith’s proceedings, the issues in Mr James’ proceedings of whether promises were made by Royal Bank, whether they were made with contractual intent, whether they incorporated requests for Mr James to act and whether he acted in reliance on the promises should all be resolved in his favour, with the resultant conclusion that he proved that Royal Bank promised him by contract that ABN would apply the Redundancy Policy to him if and when he was made redundant.

Breach of contract

  1. The same conclusions as reached in Mr McKeith’s proceedings apply in relation to those of Mr James. Mr James’ refusal to sign the deed of release proffered by ABN did not entitle ABN to withhold his severance payment as the deed of release was framed more broadly than ABN was entitled to require signed. ABN accordingly breached the Redundancy Policy in failing to make the severance payment and the Royal Bank must bear the consequences.

  2. Mr McKeith’s refusal to sign the proffered deed of release did however justify ABN withholding the bonus payment that it had foreshadowed because ABN was entitled to require the broad form of release to be signed before making that payment, the payment being an ex gratia payment, wholly within ABN’s discretion. Further, for the reasons given in relation to Mr McKeith’s proceedings, ABN did not fail to exercise its discretion properly. In particular, it did not ignore Mr James’ individual circumstances and impermissibly apply a “blanket policy”. The view that ABN took in relation to the payment of bonuses to Mr James and other departing employees was that the financial circumstances of the company at the relevant time did not justify such payments. It was open to ABN to treat this consideration as decisive.

Damages

  1. For the same reasons as given in Mr McKeith’s proceedings, Royal Bank is liable to Mr James to pay damages equivalent to the severance payment to which he was entitled, plus interest. It is not liable for damages in respect of the bonus that Mr James anticipated that he would receive.

  2. TOBIAS AJA: The issues in these appeals arise as a consequence of the retrenchment in 2008, on the ground of their redundancy, of the plaintiffs in the proceedings below, Mr Angus James and Mr Colin McKeith. Each claimed an entitlement to be paid by their employer severance pay and an ex gratia bonus based on the pro rata average of their prior two years bonuses. On 27 March 2015 the primary judge entered judgment in favour of Mr James in the sum of $2,932,692.31 together with interest from 9 September 2008. On the same date judgment was entered against Mr McKeith: James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland [2015] NSWSC 243. On 22 July 2015 his Honour made various complex orders in relation to the costs of the proceedings before him which are not subject to appeal: James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland (No 2) [2015] NSWSC 970.

  3. As Mr McKeith failed at trial, he has appealed the judgment entered against him (the McKeith appeal). As Mr James obtained a judgment against the three Royal Bank of Scotland parties, they have appealed the primary judge’s decision in his favour (the James appeal). For convenience and where appropriate I shall refer to Mr James and Mr McKeith collectively as “the plaintiffs”. I shall also, again where appropriate, refer to the appellants in the James appeal and the respondents in the McKeith appeal collectively as “the defendants”.

  4. The amount in respect of which Mr James obtained judgment comprised a severance payment of $432,692.31 and an ex gratia payment of $2.5 million. Although he failed, Mr McKeith claimed a total of $4,375,961.54 together with interest from 5 December 2008 (being the date of his retrenchment), made up of a severance payment of $375,961.54 and an ex gratia payment of $4 million. Mr James pursued before the primary judge a further claim amounting to some $11.4 million in what he alleged to be lost remuneration resulting from the failure of the defendants to consider and appoint him as head of the merged Australian operations of the Royal Bank of Scotland and ABN AMRO Holdings Australia Limited (AAAH). However, Mr James does not appeal against the rejection by his Honour of that claim.

  1. Mr McKeith and Mr James were formally employed by ABN AMRO Services Australia Limited (AAAS). However, they relevantly worked for AAAH where they each held very senior positions. Mr James was the Chief Executive Officer and a director of the company whereas Mr McKeith was the Head of Global Markets and also a director. AAAS was a wholly owned subsidiary of AAAH.

The factual background

  1. AAAH was a member of the ABN AMRO Group: a banking group based in the Netherlands (AA Group). The parent company was ABN AMRO Holdings NV (AANV). AAAH was a subsidiary of AANV. It was common ground that under their respective contracts of employment, Mr McKeith and Mr James were required to devote their energies towards the performance of their duties in their respective positions as AAAH’s Chief Executive Officer and Head of Global Markets.

  2. Between March and October 2007 AANV was the subject of competing takeover offers from Barclays PLC and a Consortium comprising three banks being Royal Bank of Scotland Group PLC (RBS), Fortis NB and Fortis SA, and Banco Santander Central Hispano SA (the Consortium). The Consortium members incorporated a bidding vehicle known as RFS Holdings BV (RFS). Both RFS and Barclays made competing bids to acquire the entire issued and outstanding capital of the AANV. The Consortium’s offer was successful and became unconditional on 10 October 2007.

  3. The Consortium’s members had agreed that if their offer was successful, the various business units of AANV would be divided between them. As part of that agreement, RBS took over AANV’s “Business Unit Asia” of which AAAH was part. When RBS acquired the Business Unit Asia, it gave consideration to whether AAAH should be broken up with parts sold and parts retained or whether it should be merged with the Australian operations of RBS which had opened a branch office in 1999 and which operated as “RBS Australia”. In the absence of any acceptable offer to acquire the business of AAAH, RBS amalgamated the two Australian operations: that is, the operations of RBS Australia and AAAH as part of AANV’s Business Unit Asia to form RBS Services (Australia) Limited (RBS Services).

  4. RBS’s attempts to deal with AAAH were complicated because AANV did not own all the issued share capital in AAAH. It controlled some 76 per cent of the issued shares. The remaining 34 per cent was held by trustees on trust for, relevantly, employees of AAAH who had participated in an “Employees Incentive Plan” (EIP). In its dealings with AAAH it was thus necessary for RBS to buy out the shares held by the trustees. The trustees included Messrs McKeith and James. In particular, Mr McKeith was apparently regarded by the employees of AAAH as being the main negotiator with respect to the acquisition by RBS of the shares held on trust for those employees.

  5. AANV held a call option with respect to the trust shares pursuant to which it could acquire them at any time at a price to be determined by an agreed formula. As a consequence of the takeover, RBS effectively acquired the benefit of that call option. The formula for determination of the price involved, as a significant integer, a component which was dependent upon the profits achieved by AAAH. The higher those profits the higher the price which RBS, if it exercised the call option, would be required to pay for the acquisition of the shares. As RBS naturally sought to minimise the amount it would be required to pay for the shares, and as it fell to the trustees to seek the agreement of the employees who were entitled to benefit from the trust as to a price, it fell to Mr McKeith to, essentially, represent the trustees in those negotiations so as to ensure that the employees received a fair and proper price for their shares. In this respect it would appear that RBS was generally dependent upon Mr McKeith’s efforts so as to achieve a price that was, in effect, affordable.

  6. It was clear that if one or other of the offers was successful, the process of integrating AAAH into the business of the successful bidder would involve at least some, if not large scale, redundancies. This gave rise to concern on the part of the management of AAAH, Barclays and the Consortium as to the need to encourage staff to stay during the merger process. Departures of key staff, prompted by the uncertainty of the merger process, had an obvious potential to do real damage to the business of AAAH which the bidders were seeking to acquire. The primary judge summarised the position at [21] in the following terms:

“If the Consortium succeeded in its bid, it was obvious that there would be job losses when the various business units, having been divided among the Consortium’s members, were either sold off or merged with the operations of the acquirer. From the Consortium’s perspective, it was desirable that there be no mass exodus of employees during the takeover process and its implementation. AA Group made announcements relating to both future employment and redundancy.”

  1. In this context, first Barclays (in June 2007) and then the Consortium (in July 2007) made announcements as to how staff would be dealt with in the event that their offer succeeded and there were redundancies. The AA Group developed a “Communications Pack” for Australia and New Zealand to be issued (and it was issued) upon its bid becoming unconditional.

  2. In relation to continuing employment the Communications Pack stated, relevantly, as follows:

“Employment Conditions

Q: What do we know about the Consortium’s approach to employees?

A: We have been positively impressed by the commitment of the Consortium to the key part employees play in creating and sustaining a successful business. They are keenly aware of the need to be seen and deliver on that promise if they are to win the trust and respect of the ABN AMRO employees. The Consortium has communicated a number of ‘people principles’ which they will apply to integration:

•    It is the bank’s firm intention that job losses will be managed through voluntary measures, including natural turnover, redeployment and voluntary redundancy.

…

•   Retention of the best talent will be done through a fair appointment process based on merit and competencies, and in compliance with legal obligations.”

The Redundancy Policy of AAAS/AAAH

  1. At all material times AAAS and/or AAAH (it does not matter which) had a Policy in place (the Policy). It was described as a “closed” policy in that although its existence was known to the employees at AAAS, its terms were not. Nor were they available on the AA intranet. Ms Amelia McArdle, who was at the time employed by AAAS as Deputy Head of Human Resources (HR), gave evidence that if an employee had asked her about the detail of the policy, she would not have disclosed it.

  2. It will be necessary to set out the Policy in full but for present purposes, like the primary judge at [18], it is sufficient to note that on redundancy any payment to be made:

“(1)   would include accrued contractual and statutory entitlements;

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

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

  1. It was generally common ground that the third element of the Policy reflected a common practice in the investment banking world. Employees, and particularly senior employees, were often rewarded for their services not only by fixed remuneration but also, at the discretion of the employer and depending on the financial performance of the business and their contribution to it, by bonus payments. If an employee became redundant relatively late in the calendar year (and AAAH paid bonuses on a calendar year basis often with deferred elements), it might be thought unjust that, as a result, the employee would lose what might otherwise have been a substantial bonus. Nevertheless, as was submitted by senior counsel for the defendants, other objectives were also promoted by the payment of bonuses. This was a reference to the necessity to provide continuing employees with an incentive to grow, and thereby increase the profitability of, the business.

Identification of the relevant parties

  1. As noted above, the Consortium relevantly included RBS who was the first appellant in the James appeal and the first respondent in the McKeith appeal. The bidding vehicle incorporated by the Consortium members was RFS, the second appellant in the James appeal and the second respondent in the McKeith appeal. As noted at [31] above AAAS (and AAAH) changed its name to RBS Services (Australia) Limited and is the third appellant in the James appeal and the third respondent in the McKeith appeal.

An outline of the claims and the issues there raised

  1. Although at the end of the day it may not matter, both Mr McKeith and Mr James asserted claims to severance and bonus payments against on the one hand AAAS and, separately, against RBS and RFS jointly as representing the Consortium. The difference between the two claims was that those against AAAS alleged that as a consequence of certain representations the terms of the Policy were incorporated into the Contracts of Employment between Mr McKeith and AAAS on the one hand and between Mr James and AAAS on the other. On the other hand, the claims against RBS and RFS alleged that, as a consequence of the same representations, RBS and RFS became contractually bound to apply the Policy to Mr McKeith and Mr James on their becoming redundant. The contract so formed was independent of their Contracts of Employment.

  2. Apart from their contractual claims each of Mr McKeith and Mr James alleged that AAAS was, as a consequence of the representations, estopped from departing from the premise contained in the representations that if Mr McKeith and Mr James were retrenched within two years from 10 October 2007, they would be treated in accordance with the redundancy procedures, plans, policies and practices of AAAS as they existed as at that date.

  3. One significant difference between the cases of each of Mr James and Mr McKeith is that the former alleged that the terms of the Policy were expressly incorporated into his contract of employment with AAAS. The primary judge accepted that that was so. Accordingly, he did not find it necessary to deal in detail with the other bases upon which Mr James relied in his claim to be entitled to a severance payment and an ex gratia bonus determined in accordance with the Policy. However, as Mr McKeith did not suggest that the Policy was expressly incorporated into his contract of employment, it was necessary for him to rely upon a separate contract either with AAAS or with RBS and RFS jointly as well as upon an estoppel.

  4. The parties produced to his Honour a joint statement of what were termed the “real issues” for determination. Leaving aside for the moment those relating to the issue of breach, the primary issues at trial relating to the Policy and requiring consideration on the appeal were stated in the following terms by the primary judge at [25] of his reasons:

“1   Were the terms of AAAH’s Policy expressly incorporated into Mr James’ contract of employment?

2   Were the terms of AAAH’s Policy incorporated into the plaintiffs’ contracts of employment by the course of dealing referred to in paragraph 22 of the Commercial List Statements? [This was an alternative claim by Mr James if the first issue was decided against him].

3   Were relations between each of the plaintiffs and [AAAS] conducted from at least September 2007 on the basis of a mutual understanding, encouraged by the making of the representations pleaded in paragraph 17 of the Commercial List Statements that, if they were retrenched during the period of two years after 10 October 2007, they would be treated in accordance with the redundancy procedures, plans, policies and practices of [AAAS], as those procedures, plans, policies and practices existed on 10 October 2007. If so, is AAAS now estopped from departing from the premise that, if the plaintiffs were retrenched during a period of 2 years from 10 October 2007, they would be treated in that way?

…

6   Was [AAAS] required by the terms of the Policy to make a severance payment to employees being retrenched?

…

9   Did the Policy permit [AAAS] to require, as a condition of the making of a severance or ex gratia payment, that Mr James execute a deed of release? If so, was the release required of Mr James in September 2008 a release falling within the terms of the policy?

10   Did the Policy permit [AAAS] to require that, as a condition of the making of a severance payment, that Mr McKeith execute a deed of release? If so, was the release required of Mr McKeith in December 2008 a release falling within the terms of the policy?

…

12   Were representations made to Mr McKeith in relation to the redundancy procedures, plans, policies, practices and payments which would apply to him as an employee of [AAAS] if he was retrenched in late 2008 or early 2009? If so, did Mr McKeith rely on any such representations to his detriment and is [AAAS] estopped from departing from the premise that, if Mr McKeith were retrenched he would be treated in a manner consistent with those representations?

13   Was a promise made to the plaintiffs by RBS and RFS that they would ensure that, if the plaintiffs’ employment was terminated by reason of redundancy within two years of 10 October 2007, they would have applied to them the redundancy procedures, plans, policies and practices of [AAAS] as those procedures, plans, policies and practices existed as at 10 October 2007?

14   Was that promise supported by any consideration by the plaintiffs?”

The Relevant Pleadings

  1. As Issues 2 and 3 refer to paragraphs of the Commercial List Statements (CLS), to give them context it is appropriate to set out, as did the primary judge at [78] and [79], the relevant paragraphs of the respective CLSs of first Mr James and then Mr McKeith. Thus pars (11)-(14), (17)-(19) and (22) of Mr James’ CLS were in the following terms:

“11.   From time to time during his employment, representations were made to Mr James to the effect that there was a Policy which applied to employees of [AAAS] whose employment was being terminated by reason of redundancy and which contained provision for severance payments to be made to such employees.

Particulars

The representations were made to Mr James by members of the Human Resources department of [AAAS] from time to time in the course of dealing with the position of employees whose employment was being terminated by reason of redundancy.

12.   The representations referred to in paragraph [11] were made by or on behalf of [AAAS].

13.    From time to time during his employment, to the knowledge of Mr James, severance payments were made by [AAAS] to employees whose employment was being terminated by reason of redundancy, pursuant to the terms of the Policy.

14.    On around 29 May 2007, Banco Santander S.A. (a company incorporated in Spain), Fortis N.V. (a company incorporated in the Netherlands), RFS and RBS (together, the Consortium) announced their intention to make an offer, acting through RFS, for the entire issued and outstanding capital of [AAAH], subject to certain conditions (the Consortium’s bid).

…

17.    From around July 2007, representations were made to Mr James that there were redundancy procedures, plans, policies and practices which would apply to employees of [AAAS] whose employment was terminated by reason of redundancy, on which those employees could rely.

Particulars

The representations were partly express and partly implied. To the extent that they were express, they were in writing and were made by:

(a)   the publication to employees of [AAAS], on around 30 July 2007, of a Press Release by [AAAH] entitled “ABN AMRO – Offer Update” containing the words:

‘The Boards welcome the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to redundancy procedures’;

(b)   the publication on around 16 September 2007 of a Press Release by [AAAH] entitled “ABN AMRO publishes shareholders’ circular including reasoned opinion of the Boards” containing the words:

‘The ABN AMRO Boards also noted that commitments made to employees and trade unions in respect of employee’s rights and respecting of existing agreements including redundancy plans’;

and:

‘The ABN AMRO Boards welcomed the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to social plans, collective labour agreements and redundancy procedures’;

(c)   the publication on around 20 September 2007 of a copy of the presentation slides for a presentation by the Chairman of the Managing Board of [AAAH] to an Extraordinary General Meeting of Shareholders which included the words (at slide 16), under the heading “Proposed Corporate Governance and impact on employment Consortium Offer” of the words:

‘global guarantee that all existing redundancy plans will be extended at least at same level for a period of two years after the merger becomes unconditional’;

(d)   the publication on around 8 October 2007 of a document entitled “AU_NZ Communication Pack Acquisition Announcement – Approved materials to be used when communicating with staff” containing the following question and answer:

‘Q:    Will there be redundancies? How many, where and when can we expect the first cuts?

A:   We anticipate that there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the Consortium has guaranteed to all staff that existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the Policy and practice from the Consortium. To find out more about your local ABN AMRO policies please contact your local HR representative.

Additionally, the Consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the Consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly.’

To the extent that the representations were implied, the implication arose from the publication of the aforementioned express written representations in the context of the facts pleaded in paragraphs [11] to [13], together with the absence of any reservation, qualification or caveat in relation to the applicability of those representations to employees of [AAAS].

18.   The representations referred to in paragraph [17] were made by or on behalf of [AAAS].

19.   Further and in the alternative, the representations referred to in paragraph [17] were made with the knowledge of [AAAS] and without contradiction or qualification by it.

20.   On around 3 September 2008, representations were made to Mr James that, in the event that his employment was terminated by reason of redundancy, he would be entitled to severance payments calculated in accordance with the Policy of [AAAS] that applied to him.

21.   The representations referred to in paragraph [20] were made by or on behalf of [AAAS].

22.   In the alternative to paragraph [10], the terms of the Policy were incorporated into the Contract of Employment by the course of dealing between Mr James and [AAAS] constituted by the matters pleaded in paragraphs [11] to [14] and [17] to [21] above.” [Paragraphs 20 and 21 were abandoned at trial].

  1. Mr McKeith’s CLS was to similar effect although the particulars given in pars [11] and [17] were different. I set out, as did the primary judge, those particulars:

“11.    …

Particulars

The representations comprised:

(a)   statements made orally to Mr McKeith by representatives of [AAAS] from time to time in the course of dealing with the position of employees whose employment was being terminated by reason of redundancy;

(b)   the circulation among employees of [AAAS], including Mr McKeith, from around June 2007, in the context of the prospect of a pending takeover of the ABN AMRO group of companies, of copies of a document entitled “Redundancy Policy” which in its terms took effect on and from July 2001; and

(c)   a statement was made orally to Mr McKeith by Ms Kate Naughton, the Human Resources executive for the Global Markets business, in around June 2007, to the effect that the aforesaid document was the current policy of [AAAS] which applied in the case of retrenchment of employees of [AAAS].

…

17.    …

Particulars

The representations were partly express and partly implied. To the extent that they were express, they comprised:

(a)   statements made orally from time to time by Mr Gary Page, the Global Head of Markets of [AAAH], during fortnightly telephone conference calls with the Global Markets Management Team, from around mid-2007, to the effect that under the Consortium bid, redundancy practices would stay in place for two years post the completion of the takeover and that the employees of [AAAS] could be confident that the redundancy policies which were then in place would be honoured for the next two years;

(b)   a statement made orally to Mr McKeith by Mr Jeroen Drost, Asian Head of [AAAH], in around mid-2007 to the effect that RBS would be applying existing ABN AMRO redundancy practices for two years and would set aside a pool from which to pay out any redundancies;

(c)   the publication to employees of [AAAS], on around 30 July 2007, of a Press Release by [AAAH] entitled “ABN AMRO – Offer Update” containing the words:

‘The Boards welcome the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to redundancy procedures’;

…

[Subpara (d) appears to be a duplication of subpara (c)]

(e)   the publication on around 16 September 2007 of a Press Release by [AAAH] entitled “ABN AMRO publishes shareholders’ circular including reasoned opinion of the Boards” containing the words:

‘The ABN AMRO Boards also noted that commitments made to employees and trade unions in respect of employee’s rights and respecting of existing agreements including redundancy plans’;

and:

‘The ABN AMRO Boards welcomed the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to social plans, collective labour agreements and redundancy procedures’;

(f)   the publication on around 20 September 2007 of a copy of the presentation slides for a presentation by the Chairman of the Managing Board of [AAAH] to an Extraordinary General Meeting of Shareholders which included the words (at slide 16), under the heading “Proposed Corporate Governance and impact on employment Consortium Offer” of the words:

‘global guarantee that all existing redundancy plans will be extended at least at same level for a period of two years after the merger becomes unconditional’;

(g)   the publication on around 8 October 2007 of a document entitled “AU_NZ Communication Pack Acquisition Announcement – Approved materials to be used when communicating with staff” containing the following question and answer:

‘Q:    Will there be redundancies? How many, where and when can we expect the first cuts?

A:    We anticipate that there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the Consortium has guaranteed to all staff that existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the Policy and practice from the Consortium. To find out more about your local ABN AMRO policies please contact your local HR representative.

Additionally, the Consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the Consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly’; and

(h)   the publication in late November 2007 on the ABN AMRO intranet, under the heading “Policies and Procedures” of the words:

‘Redundancy is dealt with at a country level (therefore there is no global policy). Please refer to HR policies and procedures on your HR BP for more detail. The Consortium have guaranteed that all existing ABN AMRO policies related to redundancies will remain in place for a period of 2 years from 11 October 2007. Further, the Consortium made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended.’

To the extent that the representations were implied, the implication arose from the publication of the aforementioned express written representations in the context of the facts pleaded in paragraphs [11] to [13], together with the absence of any reservation, qualification or caveat in relation to the applicability of those representations to employees of [AAAS].”

  1. Notwithstanding the differences in each CLS of the particulars to par 17, for the purposes of determining the issues raised in the proceedings, both the trial and the appeal were conducted on the basis that there was no relevant differences between them. For convenience I shall refer hereafter to the particulars to par 17 as “the representations”.

The Pleading Issue

  1. In each of the CLSs of Mr James and Mr McKeith pars 11 to 22 were pleaded under the heading:

“Redundancy Policy Incorporated into Contract of Employment by course of dealing”

  1. In each CLS par 22 was, as recorded above, in the following terms:

“The terms of the Policy were incorporated into the Contract of Employment by the course of dealing between Mr McKeith and [AAAS] constituted by the matters pleaded in paragraphs [11] to [13] and [17] to [21] above.”

  1. Having pleaded the incorporation of the Policy into the respective contracts of employment of Mr McKeith and Mr James, (in the case of Mr James par 22 is an alternative to his primary claim that the Policy was expressly incorporated into his “Contract of Employment”), this aspect of the CLS culminates at par 29 in the case of Mr McKeith and par 27 in the case of Mr James, with the assertion that the employment of each was terminated by AAAS in the case of Mr McKeith on 5 December 2008 and in the case of Mr James on 9 September 2008 and in each case “by reason of redundancy”. Each CLS then proceeded to assert the failure of AAAS to make a severance payment to each of Mr McKeith and Mr James alleging that that failure was contrary to the terms of the Policy and in breach of his contract of employment.

  2. The expression “Contract of Employment” was defined earlier in the CLS as being a written employment contract dated 21 February 2005 in the case of Mr McKeith and 1 January 2007 in the case of Mr James. The pleading is thus to the effect that the Policy of AAAS was “incorporated” into the “Contract of Employment” of each of Mr McKeith and Mr James by “the course of dealing” constituted by the representations.

  3. The primary judge rejected the “course of dealing” case advanced by the plaintiffs. After referring to a number of authorities (at [83]-[110]) as to the meaning of that concept, his Honour determined that the “course of dealing” cases established, in effect, the proposition that, absent a pleaded case of variation, post-contractual matters could not amount to a course of dealing. As in the present cases the representations contained in par 17 of each CLS were all post-contractual matters, they could not be relied upon as constituting a “course of dealing” having the effect of incorporating the Policy into each plaintiff’s contract of employment, there being no pleaded variation of those contracts.

  4. At [115] his Honour noted that the plaintiffs had neither pleaded nor proved that before their respective employment contracts were made, they dealt with AAAS on a basis from which it could be inferred that each party intended that the Policy would apply as a term of each contract. It is apparent from his Honour’s finding that post-contractual matters could not amount to a “course of dealing” which could be incorporated into a prior contract of employment, that the position may have been different if the plaintiffs had pleaded and argued a case of variation.

  5. His Honour’s rejection of the incorporation of the Policy into the plaintiffs’ contracts of employment on the basis that that could only occur if they had pleaded that their contracts were varied, in my view was in error. The CLS made clear that post-contractual dealings or representations were relied upon as incorporating the Policy into the plaintiffs’ contracts of employment. It was not necessary for the CLS to use the word “vary” if facts were otherwise pleaded which, if established, supported a case for variation. The allegation in par 22 of each CLS that the terms of the Policy were incorporated into the “Contract of Employment” was capable of giving rise to a variation of the contract provided consideration was given and proved.

  6. The “course of dealing” relied upon in each CLS related to the post-contractual representations which his Honour found (at [114]) had been made and proved. Although under the heading “Promissory estoppel”, in par 23 of the CLS of Mr McKeith it was alleged that in reliance upon the representations Mr McKeith, inter alia, did not pursue the possibility of alternative employment but remained with AAAS throughout the merger process until his employment was terminated. His so doing amounted to an allegation of fact that was capable of constituting consideration although whether it did or not is a matter which it will be necessary to consider. However, I note that the CLS of Mr James did not contain a claim of promissory estoppel and therefore did not contain an allegation in terms of par 23 of the CLS of Mr McKeith.

  7. Thus in pleading terms, in my view, a case of variation was one which the defendants should have understood was asserted at least by Mr McKeith. Although at [120] of his reasons the primary judge stated that variation was “not the case that the defendants came to Court to meet” and was not the case that the plaintiffs pressed in final address, nevertheless it is apparent that in effect their case did plead a variation to their contracts of employment. This is so notwithstanding the fact that at par 22 of each CLS the plaintiffs appeared to have tied the representations to the incorporation of the Policy into their “Contract of Employment”, a term which was defined in par 10 in the McKeith CLS and par 9 in that of Mr James.

  8. However, as the plaintiffs submitted on the appeal, the expression “course of dealing” is not a term of art. It was clear from the pleading that they were asserting that as a consequence of the representations which, so it submitted, were intended to have contractual effect, it was unnecessary to resort to a formal plea of variation for the representations to result in the Policy becoming part of contractual terms applicable to the plaintiffs’ employment. I note that the plaintiffs did not distinguish between Mr McKeith and Mr James with regard to this issue.

  9. It is true that at [114] his Honour held that the dealings relied upon after the contracts of employment were made occurred “in a context which does not suggest that they were put forward as intended to have contractual content”. That is a finding which needs to be addressed but in my view it does not bear upon the pleading point upon which the plaintiffs failed.

  10. The plaintiffs may have been on firmer ground in alleging, as they did as against RBS and RFS, that the representations and the fact that they remained in the employment of AAAS and did not seek alternative employment, gave rise to a contract independent of their “Contract of Employment” whereby if they were retrenched, the Policy would be applied to them. Thus, their claims against RBS and RFS, as representatives of the Consortium, although founded upon the same representations, allege, so it would seem, a contract constituted by the promises contained within the representations the consideration for which was the continuation by Mr McKeith and Mr James in the employment of AAAS. However, this basis of the plaintiff’s claims did not involve the pleading point which related to their claims only against AAAS based on their Contracts of Employment

  11. Accordingly, in my view the primary judge erred in rejecting the “course of dealing” claims on the basis of a deficient pleading.

The Contract Issue

  1. The contract issue has essentially two parts. The first relates to Mr James’ claim that the Policy was expressly incorporated into his Contract of Employment (as defined in par 9 of his CLS). The second relates to the issue arising out of par 22 of the CLSs on the one hand and that arising out of pars 47 and 48 of the McKeith CLS and par 49 and 50 of the James CLS, on the other, being in each case Issues 13 and 14 referred to at [44] above.

Mr James – the express incorporation issue

  1. As noted by the primary judge at [29], Mr James was employed pursuant to an express written agreement constituted by a letter of offer dated, and expressed to be effective from, 1 January 2007. It contained the following relevant provisions:

“Remuneration

Your total remuneration for this position will be $500,000 per annum gross, paid monthly.

Your total remuneration includes your salary, the minimum contribution required under the Superannuation Guarantee Act and Fringe Benefits Tax. Salary levels are reviewed on a regular basis at the discretion of ABN AMRO and any change may take into account factors including cost of living increases and individual performance levels.

ABN AMRO conducts performance reviews with all staff and, as a condition of your employment, you are required to participate.

In addition, you are eligible to participate in ABN AMRO’s discretionary bonus scheme. All bonus payments are subject to being in our employment and not working out a period of notice at the time payment is due. They are not regarded as being part of your total remuneration.

Any bonus payment will also be subject to statutory deductions and may be delivered subject to the thresholds and rules of any incentive or deferred award programme(s) being operated by ABN AMRO as amended or substituted from time to time.

Your total remuneration and any bonus payments are for all of your working hours, including hours worked in excess of your ordinary hours of work.

Please note that all information regarding your total remuneration and any bonus payments is confidential.

…

Termination:

Either party may terminate the employment by giving of twelve weeks notice in writing to the other party. ABN AMRO may elect to make a payment in lieu of such notice equal to your total remuneration for the balance of your notice period. However, in the case of misconduct, your employment may be terminated by ABN AMRO without notice or payment in lieu of notice. On termination you will be required to return all items of property belonging to ABN AMRO which are in your possession before your payment will be processed.

…

ABN AMRO Policies:

You agree to be bound by the policies of ABN AMRO as may exist from time to time. You acknowledge and accept that it is the prerogative of ABN AMRO to vary change or terminate existing policies as well as to devise and introduce new policies.

ABN AMRO Australia operates in a smoke Free Environment and is an Equal Opportunity Employer…”

  1. It is also necessary at this point to set out the Policy in greater detail as it applied in 2007 up until Mr James was “made redundant”:

“This policy will take effect on and from July 2001 and provides principles and guidelines to follow in the event that an individual or group of staff is made redundant.

Guiding Principles

In all cases where redundancy arises, staff will be treated fairly, equitably and consistent with the organisations values.

ABN AMRO will consider alternative measures before making a staff member redundant.

ABN AMRO will provide support, either through outplacement counselling or by providing access to the Employee Assistance Program where appropriate.

The HR Department is responsible for the administration of all redundancies.

Circumstances when this Policy Applies

Staff members may be made redundant in the following circumstances:

•   Staff reduction due to technological change or restructure of work that is materially different to the current role.

•   Closure or relocation of a business unit where the work is no longer required to be performed.

•   Internal firm reorganisation or restructure resulting in closure of the staff member’s workplace and a diminishing need for the staff to do the available work.

Circumstances when this Policy will Not Apply

A redundancy will not arise in circumstances where a transfer of employment takes place (the employer changes but the work and the terms of employment remain materially the same).

Redundancy will not be used to manage poor performers out of the organisation.

Process & Procedures

In any of the circumstances identified above, the line manager and the Business Unit Head will consult with the relevant HR Adviser to identify those staff that may be eligible for redundancy.

The first step will be to establish whether redeployment is possible. Redeployment will be offered when there is a match between the skills of an individual and those required of a vacant role. Where the role is in another business unit, the relevant business unit head will be consulted and the transfer will only take place if all parties agree.

Where redeployment is not possible, the Payroll Manager will prepare a redundancy schedule.

The HR Adviser will work with members of the HR team to prepare a redundancy schedule based on the terms of this policy, taking into account length of service. The schedule is discussed and agreed with the line manager and the business unit head.

In cases where outplacement or any other special provisions are to be included, there will be set out in an attached letter. The HR Adviser will prepare the Deed of Release. The HR Adviser will notify IT to ensure that the staff member’s access to Notes and other systems is terminated within the required timeframe and notices circulated.

The time and date for announcement to the staff member is set and the line manager/business unit head will be present when the HR Adviser.

At the meeting, the staff member will be provided with advice on the terms of the redundancy, final payment and tax liability as per the schedule and the Deed of Release. The Deed of Release should be signed and returned to HR before the final payment is made.

The staff member will also return all company property (security pass, laptop, phone, pager, IT fob and Amex card). All items will be checked off against issued property and the checklist will be completed and placed on file.

Where the staff member has a staff housing loan, the interest rate on the loan will immediately be adjusted to reflect the FBT benchmark rate and a grace period of three months will be available to arrange re-financing of the loan.

  1. I agree with Tobias AJA that the Deed of Release proposed for Mr James was not unreasonable and that there was no decision to make a Bonus Payment to him independently of the Deed of Release. The Redundancy Policy clearly contemplated that there could be a Deed of Release required. Accordingly, Mr James was not entitled to receive the ex gratia payment of $2.5 million unless he executed the deed of release that was proffered to him. However, upon executing a deed of release of a more limited kind, he would have been entitled to his severance payment. The failure of Services to make that payment unless the deed of release was signed by Mr James constituted a breach of the contract between him and RBS, for which breach Mr James is entitled to damages for the loss of his severance payment.

  2. I agree with Tobias AJA that the judgment in favour of Mr James in the amount of $2,932,692.31 plus pre-judgment interest in the amount of $1,490,149.15 should be set aside and in lieu thereof there should be judgment for Mr James in the amount of the severance payment of $432,692.31 together with pre-judgment interest from 9 September 2008 to 27 March 2015.

  3. I agree with Tobias AJA, for the reasons proposed by him, that the primary judge was correct in finding that the deed of release that Services required Mr McKeith to sign, as the “price” of receiving a severance payment calculated in accordance with the terms of the Redundancy Policy, extended beyond what was required in the circumstances and, in particular, went beyond what was contemplated by the Redundancy Policy. It follows that Mr McKeith was entitled to the severance payment of $375,961.54 notwithstanding that he had refused to sign the deed of release that was proffered to him.

  4. I also agree with Tobias AJA that Services did not breach its contract with Mr McKeith in declining to make him an ex gratia payment. Where only limited funds were available for the payment of bonuses, there was no basis upon which Mr McKeith was entitled to be singled out and paid a bonus where other employees who had been retrenched missed out. I agree that the primary judge erred in finding that Services did not exercise its discretion in good faith when it declined, in the circumstances, to make an ex gratia payment to Mr McKeith.

**********

Amendments

09 March 2016 - Minor typographical corrections to paragraph [4] in headnote and paragraph [11] of quotation.

Decision last updated: 09 March 2016

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Cases Cited

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Statutory Material Cited

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Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20
R v Clarke [1927] HCA 47
Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd [1978] HCA 8