McPherson v Dodd
[2004] VSC 153
•30 April 2004
| ting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 5632 of 2004
| DAVID JOHN McPHERSON | Plaintiff |
| v | |
| JOHN ARTHUR DODD and Anor | Defendants |
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JUDGE: | WARREN, C.J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29 April 2004 | |
DATE OF JUDGMENT: | 30 April 2004 | |
CASE MAY BE CITED AS: | McPherson v Dodd and Anor | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 153 | |
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INJUNCTION - Serious question to be tried - Balance of convenience - Employment law - Relationship between Managing Director and Chairman of Board.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J.L. Sher, Q.C. with Mr A.J. McLelland | Brian Ward & Parters |
| For the Defendants | Dr C.L. Pannam, Q.C. | Gadens Lawyers |
HER HONOUR:
The plaintiff, Duncan John McPherson (“McPherson”), applies for an interlocutory injunction to restrain the first defendant, John Arthur Dodd (“Dodd”), the chairman of the board of directors of the second defendant, J.A. Dodd Limited (“the company”). The company did not appear on the application.
The circumstances underlying the application are that McPherson was engaged as managing director of the company by written contracted dated 30 September 2003.
On 12 March 2003 McPherson provided a letter to Dodd purporting to terminate his employment as managing director. The letter was received by Dodd.
The terms of employment of McPherson are governed by the contract. Under clause 5 of that contract, McPherson is specifically accountable to the board of the company. Furthermore, clause 22 of the constitution of the company provides that directors of the company may appoint, remove or dismiss the managing director. However, neither the constitution nor the employment contract appears to specifically give the chairman of the company, Dodd, express authority to appoint, remove or dismiss the managing director.
Following the delivery of the letter of 12 March 2004, a discussion occurred between McPherson and Dodd on 14 March 2004. In affidavits in support of the application, McPherson deposed that Dodd agreed that McPherson should continue as managing director of the company and that the resignation (contained in the letter of 12 March 2004) would be of no effect. It was submitted, on behalf of McPherson, that thereafter McPherson continued to act as the managing director of the company.
Subsequently, by letter dated 16 April 2004, Dodd purported to accept the resignation of McPherson on behalf of the company. McPherson ceased to be the Managing Director.
These are the essential facts for present purposes.
McPherson asserts that he has not effectively resigned from the company and he seeks to restrain Dodd from terminating or purporting to terminate his employment as managing director pending trial.
There was no dispute between the parties as to the appropriate test to be applied in the granting of an injunction as in the present case.
It behoves me, therefore, to consider whether there is a serious question to be tried. In the course of argument, submissions were made on behalf of McPherson that Dodd had no authority to act unilaterally or individually with respect to the resignation or, for that matter, the termination, of McPherson. Rather, it was submitted that there was a contractual and corporate constitutional obligation on Dodd to act by way of the vehicle of the board of directors of the company. It was argued that pursuant to the authorities, the mere holding of office by Dodd as chairman of the board of directors did not of itself imply an authority which did not otherwise exist: see Hely‑Hutchison v Brayhead Limited and Anor[1], State Bank of Victoria v Parry and Ors[2]; also, Hughes and Anor v NM Superannuation Pty Ltd and Anor[3].
[1][1968] 1 QB 549, 560, 586-587.
[2](1990) 2 ACSR 15, 29.
[3](1993) 29 NSWLR 653, 663.
It was further argued on behalf of McPherson that even if Dodd had authority to receive the letter of McPherson on behalf of the company on 12 March 2004 or to agree that the employment of McPherson should be terminated, in fact, Dodd did not do so. On the basis of evidence by way of affidavit reliance was placed on the discussion already adverted to said to have occurred on 14 March 2004 between Dodd and McPherson. It was argued, therefore, that in all these circumstances Dodd was not entitled by a letter dated 16 April 2004 to purport to accept the resignation of McPherson on behalf of the company because the resignation of McPherson had lapsed and was of no effect.
On behalf of Dodd emphasis was placed on the precise wording used by McPherson in his letter of 12 March 2004:
“I write to advise that I tender my resignation effective as of today and that the obligations which I may be bound with reference to my employment contract with the company will be complied with as detailed in clauses 10-1, 12-1 and 12-2.”
It was submitted for Dodd that by virtue of the content of the letter, the act of its delivery and the terms of the provisions in the employment contract cited in the letter put an end to the employment of McPherson. Contrary to the arguments on behalf of McPherson it was submitted that the authorities reveal that it is incorrect to assert that the termination of employment is not effective unless accepted by the company: see Riordan v War Office[4]; Birrell v A.N.A.[5] also, Macken, O’Grady Sappideen & Warburton, The Law of Employment[6]. Rather, it was argued on behalf of Dodd that the issue was whether there was a later agreement to reinstate the employment of McPherson. That said, affidavits were sworn in support and against the application by McPherson and Dodd respectively. There were conflicting versions on each side of what was said at the meeting on 14 March 2004. It should be observed that there was, further, a meeting between McPherson and Dodd on 15 March 2004 at the offices of the company. Again there were divergent versions of the events and discussions at that meeting. Finally, it was suggested on behalf of Dodd that Dodd’s letter of 16 April 2003 was unnecessary but constituted no more than an appropriate recording of the legal position in relation to the employment of McPherson. On the basis of these matters it was argued for Dodd that there was no serious question to be tried.
[4][1959] 1 WLR 1046, 1054.
[5](1984) 5 FCR 447, 457-8.
[6](5th ed.) at 176-81.
However, the submissions between the parties as to the effect of their communications and the differences in the versions of the events of 14 March 2004 provoked a fresh allegation on behalf of McPherson, namely, that of estoppel, essentially based upon the principles described by Brennan J in Waltons Stores v Maher[7].
[7]
Taking account of the allegations that are now said to support a potential claim in estoppel I regard the plaintiff of having satisfied the onus of demonstrating a serious question to be tried. It is unnecessary, therefore, for me to determine the contractual and corporate constitutional issues raised with respect to the actions of McPherson and the authority of Dodd. That said, the arguments made on behalf of Dodd were persuasive.
I turn then to the question of the balance of convenience. A number of affidavits were relied upon by the plaintiff to demonstrate his significance in the ongoing management and standing of the company. Relying upon those affidavits it was submitted on behalf of McPherson that the interests of the company and its shareholders are paramount and should be considered by the court in weighing the balance of convenience: see Patrick Stevedores Operations No. 2 Pty Ltd v Maritime Union of Australia[8]. It was argued that it was highly desirable for the benefit of the company and its shareholders and, also, third parties such as employees of the company, that McPherson returned as managing director. It was emphasised that without him the company presently has no managing director. However, the company has placed advertisements in the printed press which, thus far, has attracted a number of allegedly suitable applicants. In the meantime, Dodd has purported to assume the role of managing director. On behalf of McPherson it was argued that his authority to do so was questionable but, moreso, that Dodd did not have sufficient knowledge of the key aspects of the company such as to have the capacity to assume the role of McPherson as managing director.
[8](1998) 153 ALR 641, 666-7.
It was submitted for McPherson that, on the affidavits, Dodd does not enjoy the confidence of an independent director, one Rahilly, that the management skills of McPherson in contrast to those of Dodd are not in question, the fact that the board commented favourably on the performance of McPherson and the prosperity enjoyed by the company under his management. It was further submitted that a substantial component of the affidavit of Dodd was preoccupied with shareholder issues. Emphasis was placed on the assertion that Dodd was actuated by a dispute with McPherson based upon shareholder issues as distinct from a dispute based upon the performance of McPherson as managing director. In those circumstances it was submitted that Dodd ought not be permitted to use the purported termination of McPherson as managing director as a tool to advance his own personal interests in that dispute between shareholders. Further, it was submitted for McPherson that if he were to return as managing director the ongoing shareholder issues, even disputes, would not impede the performance of his duties. It was emphasised that the board is not involved in the day to day management of the company and that McPherson is in the best position to manage the company prior to trial, thereby effecting preservation of the status quo. In addition, it was emphasised that the primary asset of McPherson is his interest in the company and that that was now under the management of Dodd.
In these circumstances, therefore, it was submitted that the balance of convenience is entirely in favour of McPherson.
Of course in dealing with employment disputes, the courts over the years have demonstrated a reluctance to intervene at an interlocutory stage to grant an injunction with respect to contracts for personal services: see Lumley v Wagner[9]. Against that submission it was argued for McPherson that on proper analysis the dispute in the present case is not one between master and servant but rather between shareholders or, alternatively, between managing director and chairman of the board of the subject company.
[9](1852) 1 De G M & G 604; 42 ER 687.
Nonetheless, there were matters deposed to in affidavit that revealed a bitter dispute between the principal players, McPherson and Dodd. It is apparent there is much ill‑feeling. It seems to me that it is no answer to suggest that the board of the company is not involved in the day to day management of the company. Nevertheless, if McPherson was to return as managing director of the company it seems to me that the company but, in particular, McPherson and Dodd, would face an intolerable situation. A managing director is answerable to the board. In the ordinary course of the management of a company, the board makes significant decisions with respect to the operation of the company. It would be intolerable for a situation to prevail where a chairman of the board was hostile towards the managing director and vice versa. So far as these matters affect the balance of convenience I am persuaded that it falls in favour of Dodd. With respect to the personal services aspect of the role of managing director it seems to me to be a typical case where the courts have, with much justification, demonstrated reticence and hesitation in intervening in the performance of such contracts. This is a typical case.
There is a remaining aspect of the balance of convenience, nevertheless, that warrants consideration, namely, the impact on third parties. On behalf of McPherson particular emphasis was placed upon the observations of the High Court in the MUA case with respect to the interests of third parties in the granting of interlocutory injunctions[10]. In that case the court observed “the rights of plaintiff and defendant are not the only rights considered in determining where the balance of convenience lies”. In the MUA case the majority of the High Court cited with approval a passage from Spry’s Equitable Remedies[11] where it was said that:
“The interests of the public and of third persons are relevant and have more or less weight according to the other material circumstances. . so it has been said that courts of equity ‘upon principle, will not ordinarily and without special necessity interfere by injunction, where the injunction will have the effect of very materially injuring the rights of third persons not before the courts.’ Regard must be had ‘not only to the dry strict rights of the plaintiff and the defendant, but also the surrounding circumstances, to the rights or interests of other persons which may be more or less involved’. So it is that where the plaintiff has prima facie a right to specific relief, the court will, in accordance with these principles, weigh the disadvantage or hardship that he would suffer if relief were refused against any hardship or disadvantage that might be caused to third persons or to the public generally if relief were granted, even though these latter considerations are only rarely found to be decisive. (Conversely, detriment that might be caused to third persons or to the public generally if an injunction were refused is taken into account.)”
[10]At 666 [65].
[11]Ibid; 5th ed. (1997) pp 402-3.
It seems to me that in weighing up whether the discretion should be exercised or not it is significant to consider the matters relied upon by McPherson with respect to the impact on third parties if the injunction sought is not granted.
There was an affidavit by one Kol, the operations manager of the building division of the company. He deposed that he was attracted to employment with the company because of the reputation with McPherson. He deposed that the company has an excellent client base which he concludes is due to the reputation of McPherson and his method of management of the company. Kol described the skills and experience of the plaintiff, his popularity with staff and the trust said to be vested in him by building union representatives. There was no objection to these matters. It was also asserted by Kol that if McPherson did not return to employment there was a risk that the building division of the company would collapse leading to a loss of 60 per cent of the staff. Kol described McPherson as “essential”.
A further affidavit was sworn by one Bartlett, manager of the civil landscape division of the company. Essentially, he corroborated and reinforced the matters deposed to by Kol in terms of his managerial abilities and popularity with staff of McPherson. An affidavit was sworn by one Woodbridge, site manager, employed by the company. Similarly, he described the management methods of McPherson in very favourable terms. He deposed as to the attitude of staff towards McPherson. There was an affidavit by another site manager of the company, one Pearce. He reinforced the view that the management of McPherson to the company is important. However, Pearce suggested an expectation on the part of the relevant building unions of the return of McPherson as managing director. Finally, an affidavit was sworn by one Gray, joint manager of Multiplex Constructions, an operating division of Multiplex Pty Ltd. He deposed to the ongoing relationship between his company and McPherson and expressed the opinion that the reputation of the company will suffer and its business operations will decline if McPherson does not resume his position as managing director.
These affidavits were not challenged, criticised or answered.
I regard the dispute between McPherson and Dodd as a difficult one. Consideration of the various affidavits by third persons, as described, are relevant and are entitled to more or less weight according to the other relevant circumstances. A difficulty lies in the non-representation of the company before the court. This, of course, can be attributed in all likelihood to the nature of the dispute between McPherson and Dodd. Analysis of the disadvantage and hardship asserted by the various third parties if the injunction is refused essentially comes down to asserted disadvantage or hardship to the company. The suggestions with respect to the unions and employees of the company are considered and factored in to all the circumstances taken into account. That said, I consider that ultimately the level of apparent ill‑feeling and the bitter nature of the dispute between McPherson and Dodd is such that the return of McPherson would risk an unacceptable and unworkable environment. This factor, in my view, tips the balance against the granting of the injunction.
It follows, therefore, that the application is refused and the summons should be dismissed.
By way of additional observation, I would urge the parties to attend mediation at the earliest practicable opportunity, and I would be disposed to make appropriate orders and directions to facilitate that course and, further, to facilitate an expeditious time table. This seems to me, in the overall, scheme of things, to be a matter where it is desirable that the parties proceed to trial if they cannot resolve their dispute at the first opportunity.
The orders I would propose to make, subject to hearing from the parties, is that the summons is dismissed.
(Discussion ensued.)
HER HONOUR:
On consideration of this matter, it seems to me that there is nothing special or out of the ordinary and it seems to me that it is an appropriate case where costs ought follow the event. The substantive orders I will make are -
1.That the summons be dismissed.
2.That the plaintiff pay the costs of the first defendant.
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CERTIFICATE
I certify that the 169 preceding pages are a true copy of the reasons for Judgment of of Warren, C.J. of the Supreme Court of Victoria delivered on 30 April 2004.
DATED this thirtieth day of April 2004.
Associate
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