Moloney v Rural Council of Murray Bridge - [2012] SADC 126

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MOLONEY v RURAL COUNCIL OF MURRAY BRIDGE
[2012] SADC 126
Judgment of His Honour Judge Slattery
5 October 2012
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
CONTRACTS - PARTICULAR PARTIES - PRINCIPAL AND AGENT - AUTHORITY OF AGENTS
TRADE AND COMMERCE - COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS
EMPLOYMENT LAW - CONTRACT OF SERVICE - TERMS OF CONTRACT - OTHER MATTERS
The Plaintiff was terminated from employment as a CEO with a rural council (the Defendant) without cause. The Plaintiff and Defendant are in dispute regarding the construction and circumstances of the termination clause of the Plaintiff’s employment contract, and the amount of post-termination payments. The Defendant accepted the burden of establishing the exercise of good faith in the discretion to decide an amount payable upon termination without cause.
HELD: Plaintiff failed on grounds of contractual construction and misrepresentation/misleading conduct, but was successful on grounds of a lack of good faith on behalf of the Defendant when exercising its discretion. Plaintiff entitled to judgment for $107,118.00.
Competition and Consumer Act 2010 (Cth) Schedule 2, s 31 ; Misrepresentation Act 1972 s 7, referred to.
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 ; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Western Export Services Inc v Jireh International Pty Ltd (2011) 86 ALJR 1; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; United Petroleum v Skorpos & Anor [2012] SASC 151; Alstom Ltd v Yokogawa Australia Pty Ltd & Anor (No 2) [2012] SASC 49; Legione v Hateley (1982-83) 152 CLR 406; Nowrani Pty Ltd v Brown [1989] 2 Qd R 582; Eshuys v St Barbara Limited (2011) 205 IR 302; Clark v Nomura International plc [2000] IRLR 766; Horkulak v Cantor Fitzgerald International [2004] IRLR 942; Keen v Commerz Bank AG [2006] CLC 844, applied.
Investors Compensation Scheme v West Bromwich Building Society [1998] 1 WLR 896, distinguished.
Franklins Pty Ltd v Metcash Trading Limited (2009) 264 ALR 15, not followed.
Woolworths (SA) Pty Ltd v Basetone Pty Ltd; Woolworths (SA) Pty Ltd v Montebello and Montebello (2006) 95 SASR 174; Craig Hargraves Investments Pty Ltd v Australian Business Insurance Advisers Pty Ltd (Craig Hargraves Investments Pty Ltd) (2011) 111 SASR 506; Hospital Products Ltd v United States Surgical Corporation (1984-85) 156 CLR 41, considered.

MOLONEY v RURAL COUNCIL OF MURRAY BRIDGE
[2012] SADC 126
INDEX
The case before the Court  3
Preliminary Matters  7
Factual Background  9
The Evidence
The contract negotiations  14
The authority of Mr Kelledy  22
Conversations about the draft contract  24
Meaning of ‘up to’  35
100 day report  39
The deterioration of the council/ CEO relationship  40
Negotiations for the CEO’s departure  50
Termination  63

The Plaintiff’s Case: Relevant legal principles  68
         Contractual construction  68
         Misrepresentation/ Misleading Conduct  81
         The exercise of the discretion  88
         Matters to be properly considered  99
Findings  102
PART 1
1.     The case before the Court

The plaintiff, Mr Damien Moloney (the plaintiff), makes a claim in damages for breach of contract, for damages arising from a misrepresentation allegedly made by the defendant’s agent upon which he relied to enter into a contract with the defendant. Alternatively he claims damages following an alleged breach of s 31 of the Consumer Code (the Code)[1] arising as a result of reliance by him upon allegedly misleading statements made to him by Mr Michael Kelledy, a solicitor retained by the defendant[2], and allegedly an agent of the defendant, as a result of which he alleges that he has suffered damage.
[1] Presumably operating pursuant to s14 of the Fair Trading Act of South Australia
[2] A Partner of Wallmans Lawyers, the Solicitors for the defendant
The plaintiff also argued that the statements made by the solicitor constituted warranties connected with the contract [3] that allegedly formed terms of the contract and that those terms were breached. The plaintiff claims damages for breach of warranty and for breach of contract.
[3] Hospital Products Ltd v United States Surgical Corporation 156 CLR 41 per Gibbs CJ.
The plaintiff claims that the termination of his employment by letter dated 12 December 2011 was wrongful and that under his contract of employment with the plaintiff he was entitled to three months notice plus one year’s notice of termination and the equivalent payment as well as all of the other emoluments of his employment.[4]
[4] Exhibit P8 – Agreed Schedule of Amounts.
The defendant council (Rural Council of Murray Bridge) denies the plaintiff’s case, and asserts that the relationship between the parties was governed by the written terms of their bargain[5]. The defendant contends that under the contract, the defendant had properly exercised the unfettered discretion given to it under clause 14.3.2 of the contract[6] to terminate the contract without cause, and the decision to make the payment of the equivalent of six months salary in discharge of its liabilities under clause 14.3.2 of the contract occurred in circumstances of good faith. The defendant denies the plaintiff’s claim for damages.
[5] Contract in writing dated 26 March 2009, Exhibit P1, Tab 7.
[6] 14.3 Termination by the provision of notice
14.3.1…
14.3.2This agreement may be terminated by the Council by giving three (3) months written notice to the Chief Executive Officer and making a payment of up to the value of one year’s remuneration if the agreement has one year or more to run, or, if the agreement has less than one year to run, a payment not exceeding the value of remuneration the Chief Executive Officer would have received if the agreement had been completed.
14.3.3…
In his Statement of Claim, the plaintiff challenged the fact of the exercise of discretion by the defendant Council to decide to pay to the plaintiff only three months of a possible maximum of twelve months provided for under clause 14.3.2.
This challenge was in the context of the plaintiff’s later pleadings of a claim for breach of contract,[7] misrepresentation,[8] and for breach of the Australian consumer law.[9] The plaintiff made no specific pleading about whether the Council exercised its discretion under clause 14.3.2 in the absence of “good faith” or in bad faith.
[7] Statement of Claim [10].
[8] Statement of Claim [11].
[9] Statement of Claim [12].
In its defence, the defendant makes general denials save and except its pleading in paragraphs 7 and 8 that in turn respond to paragraphs 6 and 7 of the Statement of Claim.[10]
[10] Paragraph 6 pleads the defendant notified the plaintiff on 13 December 2011 that his employment was terminated without cause pursuant to clause 14.3.2. That pleading is admitted in paragraph 7 of the defence in the following terms:
“7.The defendant admits paragraphs 6 of the Third Statement of Claim and says that the amount to be paid to the plaintiff upon termination without cause was as follows:
7.1    three months written notice;
7.2as the plaintiff had more than one year left on his contract of employment, the Council was obliged to consider making a further payment to the plaintiff up to the value of one year’s remuneration;
7.3the determination of the payment to be made to the plaintiff as referred to in paragraph 7.2 of the Amended Defence herein was an unfettered discretion residing in the Council, only subject to it being exercised in good faith;
7.4the defendant determined to pay the plaintiff an additional sum of three months pursuant to clause 14.3.2 of the contract of employment and acted in good faith.
Paragraph 7 of the Statement of Claim then reads as follows:
“7.On 13 December 2011, the defendant notified the plaintiff that the defendant had resolved to pay to the plaintiff:
7.1    an amount equivalent to three months total salary package in lieu of notice;
7.2    a separate payment representing three months total salary package; and
7.3    all accrued leave entitlements to 13 December 2011.
The defendant answered paragraph 7 of the Statement of Claim in paragraph 8 of the Defence which reads as follows:
“8.The defendant admits paragraphs 7 of the Third Statement of Claim and, in respect of sub-paragraph 7.2 of the Third Statement of Claim, states that this was an additional amount determined to be paid to the plaintiff in accordance with clause 14.3.2 of the contract of employment and was done so in good faith.”
Particular reference is made to the pleadings of good faith made by the defendant. There was no specific pleading in the Reply filed by the plaintiff to these paragraphs and they were effectively denied.[11]
[11] 6R101(3).
In the result, it was the defendant who raised the issue of good faith. There was no burden upon the plaintiff to “prove a negative” and it was therefore incumbent upon the defendant to discharge the burden of proof.
Regardless of the structure of the pleadings, this action proceeded on the basis that the issue of good faith (or any lack thereof) of the defendant was one of the three pillars of the plaintiff’s claim (together with contractual and statutory and common law remedies for misleading conduct/misrepresentation).
The trial progressed on the basis that the plaintiff’s case evolved to include a claim that the defendant could not discharge an obligation of good faith required of it in making its decision under clause 14.3.2. The defendant accepted the burden of proof of the good faith of the defendant in making its decision to give a further three months notice under clause 14.3.2 (as well as the mandatory period of three months under clause 14.3.1 of the contract).
For the reasons set out hereunder, I am unable to accept the plaintiff’s case based in contract and so consequentially the statutory or common law remedies derived therefrom. I find for the plaintiff in respect of the good faith claim. I find that the defendant has failed sufficiently or at all to satisfy me that the decision to provide three months notice under clause 14.3.2 was made in good faith. On the evidence, I have made an assessment of the length of notice that was appropriate upon the exercise of a discretion by the defendant in good faith.
PART 2
A first preliminary matter
Paragraph 8 of the Statement of Claim (which is admitted in paragraph 9 of the Defence) reads as follows:
7. On 13 December the plaintiff was paid:
7.1$11,762.53 for annual leave;
7.2$92,770.64 for pay in lieu of notice and severance;
7.3$6,000 for vehicle;
7.4$8,349.36 for superannuation.
The plaintiff’s case which is accepted by the defendant is that under the terms of the plaintiff’s contract of employment, there was no right for the defendant to pay to the plaintiff an amount equivalent to three months salary in lieu of notice under the obligations upon the defendant pursuant to the first limb of clause 14.3.2 of the contract. The plaintiff and the defendant have agreed an amount of damages arising from the defendant’s breach of contract in this regard and I will address that matter later.
A second preliminary matter
The Statement of Claim before the court at trial was the third version. The first version was filed on 23 December 2011, soon after the termination of the employment of the plaintiff. The first version averred the contract, the salary package, the content of clause 14.3.2 of the contract, the notice of termination, that the notice was a breach of the agreement and sought damages.
This Statement of Claim did not plead any misrepresentations/misleading conduct/warranty/breach of warranty case. It appears to have relied upon an asserted absolute contractual entitlement to receive 15 months (12 months plus 3 months) payment on a proper reading of clause 14.3.2 of the Agreement.
A Second Statement of Claim filed in January 2012 was amended to include a new para 3A which, for present purposes, need not be referred to further. The Statement of Claim before the Court at trial was not filed until April 2012 (the Third Statement of Claim).
At trial, a Fourth Statement of Claim was filed but the changes are again insignificant.
It was not until the filing of the Third Statement of Claim in April 2012 that any assertion was made by the plaintiff against the defendant (personally or through its servants or agents) of any misrepresentation/misleading conduct/warranty/breach of warranty/damages case.
In my view, there is some significance in the timing of those amendments due to other surrounding circumstances. The evidence was that in late December 2009/early 2010, Mr Andrew Short, of the firm of solicitors Minter Ellison Lawyers, was appointed to act on behalf of the plaintiff in respect of an investigation of a number of issues that had arisen in the plaintiff’s employment with the defendant. The professional fees of the plaintiff with that firm of solicitors for that work performed in 2010 was paid for by the defendant.
Thereafter, Mr Short continued to act for the plaintiff up to and including the trial of this action.
The pivotal matter in this action, namely the contractual terms/misleading conduct that (allegedly) induced the plaintiff to enter into the contract of employment with the plaintiff did not appear in the plaintiff’s pleadings in this action until the plaintiff’s third attempt at pleading his case using the same solicitor and firm of solicitors that had acted for him for over two years. Taken alone and without more, there may be little significance in this conflation of circumstances and I would not take them into account. In my view, that is not the position here; I will develop those matters further later.
PART 3
The plaintiff’s employment with the defendant
The plaintiff is an experienced CEO of regional councils.[12] He applied for an advertised position of CEO of the defendant whilst employed as the CEO of the District Council of Mallala.[13]
[12] Exhibit P1, Tab 2. Mr Moloney had previously acted as a CEO for Beaudesert Shire Council, Swan Hill Rural City Council and District Council of Mallala.
[13] Mr Moloney had held the position of CEO at Mallala Council for only two years. There is no evidence about why he wished to leave his position.
The plaintiff was interviewed for the role with the defendant by a panel including Mr Michael Kelledy, a solicitor and a partner of the firm of solicitors Wallmans Lawyers, the firm acting on behalf of the defendant and also Mr Arbon, the Mayor of the defendant Council.[14]
[14] See Exhibit P1, Tab 1.
He was the unanimous choice for the role made by the committee from amongst more than 60 candidates of whom some five or so were interviewed. Mr Kelledy and the plaintiff were known to each other through general industry connections (local government) and from the fact that Mr Kelledy acted as solicitor from time to time for the District Council of Mallala. There has been no suggestion made of any conflict of interest or duty affecting Mr Kelledy’s position on the selection panel. I will not address that matter further.
On the plaintiff’s case, an issue that arose during the process of the interview for this role was the termination of his employment as CEO with the Swan Hill Council.
The plaintiff gave evidence that he was dismissed without cause from that council. As a result he issued proceedings in the Victorian Supreme Court and he was able to achieve, in his mind, a favourable settlement that was confidential amongst those parties.
The plaintiff alleged in evidence that he disclosed those matters in the interview process. Neither Mr Kelledy nor Mayor Arbon, of the defendant, had any recollection of these matters being raised. Mr Kelledy gave evidence that the first he heard of the matter was when it was raised with him by one of the councillors of the defendant after the plaintiff was employed as CEO of the defendant.[15]
[15] T193.11
It is a little difficult to comprehend why the matter of the plaintiff’s prior employment at Swan Hill would not at least have arisen in the interview. This would seem to be a topic that, logically, would have been canvassed. However, interviewing techniques differ and the interviewing panel may have assumed that the checking of referees process may have covered that matter. There is no evidence on this issue.
The plaintiff’s private and confidential resume is in evidence.[16] That document only reports that between 2005 and 2006 the plaintiff was employed as the Chief Executive Officer of the Swan Hill Rural City Council in Victoria. There is no formal mention of the termination of that employment.
[16] Exhibit P1, Tab 2.
The plaintiff gave evidence that the importance of the experience that he had at Swan Hill was that, having been dismissed without cause, he was determined to ensure that he had the protection of a notice provision in any contract of employment that he had after that time.
The plaintiff’s unchallenged evidence was that in his contract of employment with the District Council of Mallala, he insisted upon the insertion of a term to protect his position in the event that his employment was terminated without cause. His contract with the District Council of Mallala was in evidence.[17] In particular, the plaintiff pointed to clause (viii)(b)(iv) of that contract.[18]
[17] Exhibit P1, Tab 3.
[18](iv) The Council may terminate the employment of the Chief Executive Officer for any other reasons (without notice) through payment on the part of Council to the Chief Executive Officer of an amount equal to one (1) years gross salary.
The plaintiff’s evidence was that having had the experience of the difficulties with the Swan Hill Council, he did not want a repeat of that exercise. It is of course one thing to have an intention in mind: it is entirely another matter to perfect or act on that intention. This required the agreement of the other party to the contract with different commercial interests to the plaintiff.
A review of the contract that the plaintiff had with the District Council of Mallala raises a significant issue. Clause (viii)(b)(iv) of that contract requires the payment of one year’s gross salary upon termination without cause. That is, the after tax payment to the plaintiff was the equivalent of one year’s gross salary. In ordinary terms, that is much greater than he would receive in the usual case based upon the application of a marginal tax rate.[19] The position was not as the plaintiff asserted in evidence but was far more beneficial. It is not for me to comment upon the commercial sophistication of the District Council of Mallala but this contractual term, if enlivened, was very generous to the plaintiff. It would require close analysis before being adopted elsewhere; it behoves very mature commercial consideration.
[19] Gross Salary Package Calculations
There was no evidence led on the formation of this agreement between the plaintiff and the District Council of Mallala. The parties appear to have assumed that this document was the operative document between the plaintiff and that Council.[20] As there were no submissions on the point, and certainly no evidence, I will make the same assumption.
[20] Exhibit P1, Tab 3.
Applying ordinary principles concerning the operation of the taxing statutes, as at March 2009, this package would, if implemented, reward the plaintiff with an amount of $239,300[21] together with all of the other benefits of his employment arrangements.
[21] Ibid n 19

In evidence the plaintiff said that, subsequent to the interview process, he was informed by a Mr Reid[22] that he had won the position.[23] It is not clear when this took place, however it is known that the plaintiff was interviewed on 17 March 2009[24] and by the evening of 25 March 2009 he had signed the contract of his employment in Adelaide.[25] That contract was signed by Mayor Arbon of the defendant in Adelaide on 26 March 2009.
[22] A consultant member of the panel – from Hender Consulting.
[23] T30.1
[24] Exhibit P1, Tab 1.
[25] Exhibit P1, Tab 7, T40.15.
An essential issue for determination in this matter is the circumstances surrounding the preparation and the execution of the contract of employment with the defendant. The plaintiff gave evidence that based upon his experience at Swan Hill, he wished to obviate the possibility of a summary dismissal combined with the need to fight for a payment following a termination without cause.[26] In that context he says that it was important for him to match the arrangements that he had negotiated with the District Council of Mallala.
[26] T27
The plaintiff was also mindful, in that context, of the possibility of local government elections changing the attitude of councillors towards him and perhaps affecting his employment.[27] The plaintiff had sufficient experience in local government to understand that any level of satisfaction with his performance as CEO was directly related to the identity of councillors as and when they are elected and their attitude to his performance. It was not in contest in these proceedings that there were no internal “checks and balances” or conventions that may have controlled the behaviour of councillors (or allowed that behaviour to be controlled) towards Council staff. I accept that this was a matter that operated on the mind of the plaintiff at the time of his interview.
[27] T27.23
Within a day or so of the interview, the plaintiff was informed by Mr Reid that he was the successful candidate.[28] By 19 March 2009 the plaintiff had sent to Mr Kelledy, the solicitor for the defendant, an email attaching electronic copies of his contractual arrangements (all unsigned) with the District Council of Mallala.[29] As the plaintiff recalls the position, he spoke to Michael Kelledy on 19 March 2009 about the terms of any contract that he might have with the defendant.[30] Mr Kelledy has no recollection of this conversation. Mr Kelledy intended to use his firm’s pro forma contract and was little interested in a form of contract used elsewhere.
[28] T30.2
[29] Exhibit P1, Tab 3; T30.10
[30] T30.12
In my view, the inference arising from the plaintiff’s evidence is that he moved quickly to contact the defendant’s solicitor (who he knew personally) to initiate the written contract process. The plaintiff also sent that same day a copy of the unsigned documents attached to an email to him from the District Council of Mallala dated 1 April 2006.[31]
[31] Exhibit P1, Tab 3.
The plaintiff’s evidence was that the sending of that email was contemporaneous with or shortly after a conversation between the plaintiff and Mr Kelledy. The plaintiff made no notes of the conversation and gave evidence only from memory. He said that he clearly recollected telling Mr Kelledy of the need to have a clause in the contract dealing with notice, that he would forward the District Council of Mallala contract as a precedent, and that he would want a notice provision in the draft contract.[32] Mr Kelledy had no memory of that conversation and this may be explained by the fact that he had no intention to depart from his firm’s pro forma document.
[32] T32.17
The plaintiff recalled that Mr Kelledy said that he would look at the documents. In evidence, Mr Kelledy recalled only that there was a preliminary phone conversation to make an appointment[33] and then Mr Kelledy met with the plaintiff at Mr Kelledy’s office on 25 March 2009.[34]
[33] T174.17
[34] Exhibit P1, Tab 6.
Mr Kelledy made reasonably detailed handwritten notes of that meeting. In cross-examination the proposition was put to Mr Kelledy that these notes more likely reflected an earlier telephone conversation with the plaintiff in which the plaintiff gave feedback to Mr Kelledy on the terms of a draft contract that Mr Kelledy had sent to the plaintiff on 24 March 2009.[35]
[35] Exhibit P1, Tab 5, T 194.
Mr Kelledy rejected that proposition and, on balance, I think that his rejection is correct. The notes pertain to a personal (as opposed to a phone) attendance by Mr Kelledy upon the plaintiff.[36] The entries on the page of Mr Kelledy’s notes appear to relate to a conference and there are insignia on the notes (squares and circles around particular words) that indicate a review of topics discussed preparatory to their inclusion/deletion in a formal written document.[37]
[36] The evidence of Mr Kelledy (T195.2) was that he marked his notes p/attendance. If there was a telephone attendance, then the mark would have been t/attendance.
[37] Exhibit P1, Tab 6.
It is also to be recalled that note taking is not an exact science and sometimes one word in a note may carry more significance than a phrase or a sentence. Be that as it may, the matters traversed in the notes are matters that are ordinarily to be covered in a conference preparatory to the finalisation of the contractual documents recording the parties’ agreement.
Prior to the meeting of 25 March 2009, the defendant council formally met and resolved to appoint the plaintiff to the CEO position. It also resolved to authorise the Mayor to finalise negotiations with the plaintiff to secure a ‘…commencement date as soon as practicable…’.[38] The decision of the Council and the information regarding the authority of the Mayor was communicated to the plaintiff via letter from Mr Kelledy dated 24 March 2009. [39] The letter is instructive and relevantly reads as follows:
[38] Exhibit P1, Tab 5.
[39] Ibid.
24 March 2009
Mr Damien Moloney
1 Cameron Street
GAWLER SA 5118
Dear Damien
Chief Executive Officer position – Rural City of Murray Bridge
I write to advise that the council at its special meeting yesterday evening, 23 March 2009, unanimously agreed to support the unanimous recommendation of the CEO selection panel to offer you the position of Chief Executive Officer with the Council.
The Council also authorised the Mayor to finalise any negotiations with you with a view to securing your commencement date as soon as reasonably practicable…
In the circumstances, I should be grateful if you would carefully consider the draft contract of employment enclosed with this letter and advise me of any issues or concerns that need to be clarified so we can move to execution as soon as possible…
The letter enclosed a proposed form of contract in the style used by Wallmans Lawyers for such positions. It contained clause 14 that read as follows:
14.     TERMINATION OF AGREEMENT
14.1   Summary termination
…
14.2   Termination due to illness or capacity
…
14.3   Termination by a provision of notice
This agreement may be terminated by the Chief Executive Officer by giving the Council a period of three months notice in writing, unless otherwise negotiated with the Council.
This agreement may be terminated by the Council by giving three months notice to the Chief Executive Officer and making a payment of up to the value of one year’s remuneration if the agreement has one year or more to run, or, if the agreement has less than one year to run, a payment not exceeding the value of remuneration the Chief Executive Officer would have received if the agreement had been completed.
In addition to any right of termination and without derogating from any right available in this agreement, the Chief Executive Officer’s employment may at any time be terminated by the mutual agreement of the parties on whatever notice and terms the parties may then agree.
In the draft that was sent to the plaintiff, there were some clauses that required a finalisation of agreements for completion. [40]
[40] For example, clause 2.1 – commencement date and expiry date.
By an email of 19 March 2009 the plaintiff had sent to Mr Kelledy a copy of the unsigned contract that he had with the District Council of Mallala. He forwarded to Mr Kelledy an email sent to himself from the Finance Manager of the District Council of Mallala dated 1 November 2006. That email was confirmatory of the materials passing between the District Council of Mallala and the plaintiff in late 2006. The plaintiff did not produce in evidence a duplicate signed copy of his contract of employment with that Council. In his email of 19 March 2009[41] the plaintiff said that he would drop in a hard copy of last year’s contract variation “tomorrow morning”.[42]
[41] Exhibit P1, Tab 3.
[42] Exhibit P1, Tab 4.
The plaintiff’s evidence was that these documents were forwarded to Mr Kelledy at the time that he was notifying Mr Kelledy that he would insist upon an arrangement with the defendant similar to or the same as the arrangements that he had with the District Council of Mallala. His evidence was that at the forefront of his mind was the fear that he had of a repetition of the experience that he had with the Swan Hill Council. He said that this was paramount and it was a very significant issue for him. His evidence was also that these were matters that had been raised a number of times by this time so that no‑one on the defendant’s side could be in any doubt of the importance of these matters to him.[43]
[43] T 27.5, T 29.28, T 32.10, T 38.13
Conversely, Mr Kelledy recalled having received the District Council of Mallala contract from the plaintiff at the time that he drew the draft contract[44] but he said that he made no reference to it.[45] The clear impression that I obtained from Mr Kelledy’s evidence is that the terms and content of the plaintiff’s contract of employment with the District Council of Mallala were of no particular moment. The terms to be offered to the plaintiff were within the standard pro forma contract tailored to the specific circumstances of the plaintiff but not to his personal wishes.
[44] Exhibit P1, Tab 5.
[45] T 194.5.
The position of Mr Kelledy was that he was using a pro forma document within the records of Wallmans Lawyers. He had informed the court that he acted for 62 of the 68 councils in South Australia. In performing tasks such as drawing a contract for the retainer of the plaintiff, he would use a document out of the precedent bank of documents of the firm of solicitors and that he would have no regard to a document with which he had not had any association. Inferentially, he had not prepared or been involved in the drawing of the contract between the plaintiff and the District Council of Mallala in respect of the plaintiff’s position as CEO.
Another observation that may be made is that the Mallala contract appears to be an agglomeration of other documents. It is set out clumsily, the paragraph numbering has no numerical or sequential logic and the document is not professionally presented. It appears to have been put together by an industrial relations consultant, not by a solicitor and certainly not by Mr Kelledy. It is quite unclear on the evidence who may have drawn the District Council of Mallala contract with the plaintiff. It is therefore of little surprise that Mr Kelledy made no reference to it when he prepared the draft contract on instructions from the defendant.[46]
[46] T 194.5.
In cross-examination, the plaintiff did not put any proposition to Mr Kelledy that at some stage in the negotiation process it was beholden upon him to obtain instructions upon the term as it was set out in the plaintiff’s contract with the District Council of Mallala.[47] The same position pertains to the evidence of Mayor Arbon. Neither witness deposed to any need to seek instructions upon or to consider any terms outside of those terms of the solicitors draft. This includes any variation of that draft.
[47] Clause (viii)(b)(iv).
The letter from Wallmans Lawyers to the plaintiff of 24 March 2009 makes it plain that having accepted the recommendation of the selection panel and having made the decision to offer to the plaintiff the position of Chief Executive Officer, the defendant council had authorised the Mayor to finalise any negotiations with the plaintiff with a view to securing his commencement date with the defendant as soon as reasonably practicable.[48]
[48] Exhibit P1, Tab 5.
In my view, this correspondence makes clear that the Mayor of the defendant was authorised by the defendant to complete the negotiations assisted by the firm of solicitors Wallmans Lawyers. In cross-examination, Mr Kelledy was asked whether he had been ‘tasked by the Council to conduct negotiations on its behalf’.[49] Mr Kelledy agreed to that proposition.[50]
[49] T194.18
[50] Ibid.
The plaintiff contends that this response given by Mr Kelledy is evidence, without more, of the ability of Mr Kelledy as an agent of the defendant to bind his principal, the defendant, in any contractual negotiations had with the plaintiff.[51]
[51] In Nowrani Pty Ltd v Brown [1989] 2 Qd R 582 it was held that, in the absence of express authority, a solicitor engaged to complete a contract on behalf of a client has no authority to agree to a variation in the client’s contract. The mere fact he is a solicitor confers no implied or ostensible authority to make contracts on behalf of a client. However, in Legione v Hateley 152 CLR 406 Justices Mason and Deane held that it was within the ostensible authority of a solicitor to make a binding representation as to a contract on behalf of a client, commenting that, within reason, a solicitor is to be regarded by others as having the authority which he or she has purported to exercise in negotiations.
In my opinion, this conclusion does not follow as a matter of fact or as a matter of law. The letter of 24 March 2009 from Mr Kelledy to the plaintiff made it clear that the Council’s mouthpiece in negotiations was Mayor Arbon. There is no indication in the letter that Mr Kelledy and Mayor Arbon had equal authority to bind the Council, actually or ostensibly. The letter discloses that it was Mayor Arbon who carried the authority of the defendant Council. Anything done by the solicitor, Mr Kelledy, was in the usual course, always subject to the instructions that he receives from his principal, the defendant Council, through Mayor Arbon.
Second, the answer given by Mr Kelledy to the above question does not necessarily or at all raise the spectre of any actual or ostensible authority reposed in Mr Kelledy.[52]
[52] A client may hold out a lawyer as his medium of communication in business negotiations by allowing him to make offers and communications on his behalf as per Magripilis v Baird [1926] St R Qd 89 at 91. However, without express authorisation, the granting of a contract variation falls outside the lawyer’s ostensible and implied authority as decided by Lucas J in George v Pottinger [1969] Qd R 101 at 107.
The relationship between the firm of solicitors and the Council is one of solicitor and client. The plaintiff was very familiar with the status of that relationship both personally and in his experience as CEO of a number of Councils.
In the ordinary course, a solicitor will, in that capacity, conduct negotiations on a contract on behalf of a client. That is a solicitor’s role. It does not give rise to authority generally to bind a client without instructions, although that position will vary according to the facts of the matter.[53]
[53] For example, it has been held that the mere fact that a person acts for a client as a lawyer does not confer any authority on the lawyer to institute legal proceedings (Hawkins Hill Gold Mining Co v Briscoe (1887) 8 LR (NSW) Eq 123 at 129), to make binding contracts (Smith v Webster (1876) 3 Ch D 49), to incur unusual expenses (Re Blyth and Farnshawe (1882) 10 QBD 207 at 210) or to receive notices (Singer v Trustee of the Property of Munro [1981] 3 All ER 215 at 218).
In my view, that answer, without more, is insufficient to identify that Mr Kelledy had express or implied/ostensible authority to bind his client.
He was not held out by the Council to have any particular authority to bind it (apart from upon its instructions as its solicitor). The terms of the letter of 24 March 2009 gainsay any such proposition.[54] The defendant certainly did not clothe Mr Kelledy with authority to give a warranty that bound his client and the terms of which became incorporated in any contract executed by his client, the defendant.
[54] Exhibit P1, Tab 5.
The draft contract forwarded to the defendant was in the form usually used by Wallmans Lawyers. That document, proffered on 24 March 2009, did not contain a clause that reflected the terms of clause (viii)(b)(iv) of the plaintiff’s agreement with the District Council of Mallala. There was no clause within the proffered document that provided the absolute and very generous entitlement as is given by clause (viii)(b)(iv) of the plaintiff’s former contract with the District Council of Mallala. Clause 14.3.2 is drawn in very different terms and on a quite different approach to the definition of parties’ rights and responsibilities.
There is a difference of recollections concerning the phone call preparatory to the meeting on 25 March 2009 between the plaintiff and Mr Kelledy. The plaintiff recalls a long conversation on a number of topics.[55] Having received the draft of the contract the plaintiff said that he and Mr Kelledy[56] discussed a number of things[57] such as shifting costs, cars, start and end dates, a holiday before commencing, annual leave, rostered days off, probationary periods, rolling contracts or not.[58]
[55] T33 – 37
[56] T33.30
[57] T34.32
[58] T36-38
The plaintiff recalls a specific conversation about clause 14. He gave evidence that at the time of the conversation he had the draft in his hands and, I find, he was aware of the difference between that document and the content of the contract with the Mallala District Council.
The plaintiff’s case is that the conversation occurred on 24 March 2009, the date the draft was received or in the early part of 25 March 2009. The essential feature of the plaintiff’s case is that in the telephone conversation, he recalls asking about the meaning of the expression ‘up to’ in subclause 14.3.2 and his evidence was as follows:
…I asked what he meant by that and Michael told me categorically that that was in there to stop me getting paid more than 12 months because he felt that if it wasn’t in there, then I could be entitled to two, three or payout of the whole contract if I was terminated without cause and he said it had to be read in terms of the second part of that clause whereby if you’re terminated in the last 12 months you get the payment of the rest of it, the remaining part of the contract and therefore that clause put in there specifically and that was what the Council had requested.
QDo you recall if you were told what you’d get in the first four years, and what you’d get in the balance of the contract in the last year of a contract.
AOnly along the lines that I’ve just said, that it had to be read in total and that “up to” meant a maximum of 12 months. Sorry, the minimum of 12 months, you’d get a maximum of 12 months.[59]
[59] T38.27 – T39.6
I asked the plaintiff to clarify that answer. At T39 line 13 he said that what was said to him was that it was a minimum of 12 months. That was repeated. At T39 line 13, when asked about Mr Kelledy’s response Mr Moloney gave the following evidence:
QDo you recall if you made any response to Mr Kelledy.
AI said that’s – yes, I said that’s fine, that’s the way I interpret it, I just wanted to make sure that that’s the way it was interpreted.”
Notwithstanding the effluxion of time, it is very difficult to accept this evidence. On the plaintiff’s case, in the conversations that were occurring between the plaintiff and Mr Kelledy, the plaintiff was attempting to negotiate a contract that provided to him the safety net of a period of 12 months notice in the event that his contract was terminated without cause. But that is not the evidence that he has given. To suggest that there was an agreement to a minimum of 12 months suggests also that there was a maximum somewhere above the 12 month figure and, the plaintiff, on his case, was attempting to negotiate a term of a contract giving a 12 month notice period. There was never any suggestion in the oral evidence or in any documentation that any of the parties contemplated a notice figure of above 12 months and so to speak of a ‘minimum’ is not consistent with the evidence of either the plaintiff or the defendant.

Mr Kelledy assumed (by inference) that the conversation with the plaintiff on 24 March 2009 or 25 March 2009 occurred before the face to face meeting of 25 March 2009. Mr Kelledy’s file was not made available to him to check any notes that he might have made of any conversation before the face to face meeting.
It has been difficult to know what to make of the absence from the evidence of this file. Mr Kelledy was unable to assist the court from memory and his file was not made available to assist him. But the plaintiff did not call for discovery or production of the file as may have been expected in those circumstances. I gained the impression from what was said to me by Mr Short that no disclosure of the full file had been made. In the absence of a request by the plaintiff for disclosure or production of the solicitors file, it is impossible for the court to draw any particular inference and the court is left to assess the evidence as it stands.
Mr Kelledy’s recollection is that the conversation was relatively brief and that the major attendance was the conference on 25 March 2009 at the office of Wallmans Lawyers.
Mr Kelledy made notes of the meeting of 25 March 2009.[60] He disagreed with the suggestion by the plaintiff through his counsel that these were notes of a telephone conversation with the plaintiff preparatory to the meeting with the plaintiff later on 25 March 2009.[61]
[60] Exhibit P1, Tab 6.
[61] The inference arising from this proposition is that the principal negotiations were conducted over the telephone and that the purpose of the conference later at the solicitors offices was to confirm contents and execute the contract document.
Mr Kelledy pointed to a number of features of the notes but especially the handwritten entry “P/” next to the word “attendance” printed on the document. This was a standard form. The use of this expression by him denoted a personal and not a telephone attendance. If the circumstances were a telephone attendance the handwritten note inserted would have been a “T/” before the same word.[62]
[62] T49.1
In my view, the version of events that was given by Mr Kelledy is to be preferred. This is despite the fact that I formed the view that both witnesses attempted to give their evidence in an honest and forthright manner. There are a number of indicia that point to the accuracy of the version of events given by Mr Kelledy. Overall the common sense of the situation favours the version given by Mr Kelledy. He needed to get his instructions, he has no recollection apart from his notes and these confirm negotiations/discussions in a conference setting.
The evidence given by Mr Kelledy was that the plaintiff was in a great hurry to finalise the terms of the deal. There was an oblique reference to some problems that the plaintiff was having at the Mallala District Council but these were not pursued in cross-examination. The objective review of the chronology discloses that the plaintiff signed a contract within days of being officially informed that he had won the role. This was notwithstanding that he had been asked if he wished solicitors to “vet” the contact and he refused that request. The plaintiff alleges that he had a number of conversations that were vital but made no note of them and did not consider it necessary to confirm what was said to him in writing. He did not trouble himself to confirm any of these alleged discussions via an email letter so that all parties were “on the same page” and were of one mind about those contractual intentions.
Through his counsel, the plaintiff purported to criticise the notes made by Mr Kelledy and to characterise them as notes of discussions of other matters extraneous to the contract. The notes do record discussions about extraneous matters as well as the contact itself. In the usual course of things, it is to be expected that discussions at such a time range across a number of topics, including the contact that was given to the plaintiff in draft and that was not in any way materially altered. There is no note of any particular stipulation being raised by the plaintiff or any discussion upon it, the instructions sought and any confirmation of the explanation given. The note records a number of matters inside and outside of the “four corners” of the written contract but none on the topic or issue that is central to the plaintiff’s case.
Part of the plaintiff’s submission in this regard centred on the fact that there was, allegedly, an anomaly in the wording of clause 14.3.2 because, as it was asserted, the second limb of the clause provided for a mandatory fixed payment according to how many months of employment were left under the contract when it was terminated in the final year. In contra distinction, the first part of the clause gave to the council a discretion as to the amount of payment of up to one year ie. 0-12 months salary in the event of a termination without cause prior to the final year of the contact. Even though this submission is correct, it is not an answer to the defendant’s factual case on the formation of the contract. That is a question of fact. The plaintiff did not lead any evidence to the effect that the plaintiff recognised this issue and raised it with the defendant or that it operated upon his mind on 25 March 2009.
A response of the defendant was that the words ‘not exceeding’ contained within clause 14.3.2, carried with them a discretion reposed in the council in the amount to be paid. I am unable to accept that submission and it is not supported by authority.[63]
[63] In the Will of Woolcott; Woolcott v Woolcott [1905] VLR 599 where the Directors sued the discretion given to the Trustee was to employ funds not exceeding a particular amount as they saw fit. A discretionary provision was included within the clause (as they saw fit).
The court does not have a general supervisory jurisdiction over the making of contracts.[64] The court will not, except in particular circumstances which are not relevant here, relieve against bad bargains. Merely because a contract may have potentially adverse consequences does not mean that it would not otherwise have been entered into absent some conduct on the part of the defendant.
[64] Bridge v Campbell Discount Co Ltd [1962] AC 600 at 626.
In my view of the evidence, the more likely scenario of the events as they transpired on 25 March 2009 is that the contents of the draft was discussed, some minor amendments were made to the documents after instructions were obtained, the final version was engrossed and executed by the plaintiff. Mr Arbon executed the final engrossment on 26 March 2009 at the offices of the council’s solicitor.
I accept the evidence given by Mr Kelledy that all of the essential and important attendances were concentrated into the time that was available on 25 March 2009. A reference to Exhibit P12 discloses that on that day, consistent with Mr Kelledy’s version, there were telephone attendances upon Mr Arbon and the plaintiff. Mr Kelledy’s evidence was that he took instructions from Mr Arbon, the Mayor in the course of that day.[65] That is consistent with what would usually be understood to be the role and function of a solicitor in the position of Mr Kelledy. There is no evidence that Mr Kelledy was clothed with the authority of the defendant to negotiate terms and commit (or not) the defendant in his discretion.
[65] T201.28
There are time charge records shown on the face of P12 of attendances on the plaintiff, Mayor Arbon, conferences in attending the settlement of the final terms of the deal and then a series of further attendances. These entries independently record the flow of events as they were described by Mr Kelledy and are corroborative of the version of events that he gave.
The plaintiff also gave evidence that after the alleged telephone conversation, the final contract documentation was printed and produced to him for signature. When that occurred (in the office of the solicitors) he was asked if there were any other matters of concern to him. In evidence, he gave the following response:
....I said, ‘No, there was only the one thing that I thought was a bit strange. I just can’t remember what clause that is but I’ll go to it because it actually allowed for 12 days personal leave which was very unusual, normally it’s 10’. I asked him about that, he said, ‘That must have been a typo, consider it a bonus.’ And then he freely said to me, ‘oh and by the way’, he gave me a wink, ‘and by the way, I’ve done better than the 12 months in that clause, you’re actually entitled to 15 months because you have to be given three months notice and I said, ‘That’s fantastic.’[66]
[66] T40.23-34
This evidence of the plaintiff asks me to accept two matters. First, that the solicitor was prepared to overlook the fact that, potentially, for the next five years the plaintiff would receive the equivalent of two extra weeks paid leave when, arguably, that was not the intention of the defendant. Notwithstanding, Mr Kelledy was not prepared to do anything or did not feel obliged to do anything about that and as a matter of good fortune for the plaintiff, he would receive an unintended bonus from the defendant. This all occurred in circumstances where Mr Kelledy was not prepared to correct what he saw as a typographical error in the contact or to obtain any instructions on the point.
Second, the inference that the solicitor for the defendant, a senior lawyer highly experienced in the field of local government[67] was in effect looking to the plaintiff’s interests and not the defendant’s best interests in procuring for the plaintiff under clause 14.3.2 a guaranteed fixed period of notice of 15 months.
[67] T178.9.
The solicitor, Mr Kelledy, emphatically denied that these conversations ever occurred. There is no entry in his contemporaneous note of those issues ever being raised in any conversation. [68] Mr Kelledy was also emphatic that if such a matter had been raised, then he would have discussed it with the plaintiff, sought instructions and at the very least would have noted them. He would also have obtained whatever instructions that he did require from the Mayor of the defendant to deal with those matters. He did not do so.
[68] Exhibit P1, Tab 6.
The plaintiff then gave the following evidence about what then transpired in the conversation on that day:[69]
[69] T38.13-T39.36
Q.    Was there any discussion about clause 14.
A.    Yes there was.
Q.    What do you recall about that.
A.I made it very specific that clause 14 was very important to me, I made it clear that I had no problems – you’ll notice there’s different sections that that. I had no problems with being terminated for let’s just say inappropriate behaviour. I had no problems being terminated for poor performance but I did have a problem with being terminated for actually doing a good job and I made it clear that the minimum I was after there was 12 months.
Q.Was there any reference to the words “up to” in clause 14.3.2.
A.Yes, I asked what he meant by that and Michael told me categorically that that was in there to stop me getting paid more than 12 months because he felt that if it wasn’t in there, then I could be entitled to two, three or payout of the whole contract if I was terminated without cause and he said it had to be read in terms of the second part of that clause whereby if you’re terminated in the last 12 months you get the payment of the rest of it, the remaining part of the contract and therefore that clause put in there specifically and that was what council had requested.
Q.Do you recall if you were told what you’d get in the first four years and what you’d get in the balance of a contract, in the last year of a contract.
A.Only along the lines that I’ve just said, that it had to be read in total and that “up to” meant a maximum of 12 months. Sorry, the minimum of 12 months, you’d get a maximum of 12 months.
HIS HONOUR
Q.I’m sorry, I don’t understand that. Was it a minimum – “up to” meant a minimum of 12 months or a maximum –
A.A minimum 12 months, yes, your Honour, a minimum 12 months.
XN
Q.Do you recall if you made any response to Mr Kelledy.
A.I said that’s – yes, I said that’s fine, that’s the way I interpret it, I just wanted to make sure that that’s the way it was interpreted.
Q.Was anything said about a general contract, a standard contract.
A.Yes, at the end of that conversation, Michael said “Well, I’ll draft up –“ – sorry, “This is a general draft document, I’m sure you’ve seen these before and I said, “Yes, that’s fine. If you make those minor changes of which the extra 10 days, rostered days off and the starting date etc. I’d be happy to come in and sign it.”
Q.Do you recall any reference to the possibility of you taking your own advice.
A.If I remember correctly, he asked me whether I would be seeking any further advice and I said, no I was happy with what he told me.
Q.What was to happen from there.
A.The contract would be slightly amended as per our discussion and I was happy to come in and sign it the following day or that day, if I remember correctly, yes I was happy to come in and sign it that day.
Mr Kelledy does not recall whether this discussion occurred.[70] It is necessary to resolve that evidentiary impasse and attempt to elucidate the facts sufficiently so as to decide what actually occurred. The difficulty faced is that I am satisfied that both Mr Kelledy and the plaintiff gave their evidence in a way that did not suggest either of them were embellishing the truth, were deceptive or were forgetful.
[70] T194.25-29
My task therefore is to resolve the impasse having regard to the available objective facts and the inferences that are available to me from the whole of the evidence.
The first point is that on a number of occasions Mr Kelledy asked for access to his relevant file but that such access was not forthcoming.[71]
[71] T193.17-20
I have previously said that no challenge was made by the plaintiff about this and no call for production/discovery occurred.
Leaving that matter aside, it is necessary to identify that Mr Kelledy’s comments about clause 14.3.2 (if he made them) are entirely accurate. Absent any particular term of limitation, a CEO whose contract is terminated without cause, may seek damages in the equivalent amount of several years salary. These matters are determined according to the particular facts of the contract in question.
Mr Kelledy also accurately informed the plaintiff (again, if the conversation occurred) of the operation of clause 14.3.2 in the event of termination without cause in the final twelve (12) months of a contract. That is, the second part of clause 14.3.2; in so far as it operated in the last twelve (12) months of the contract qualified the operation of the first part of the sub-paragraph.
That much is completely accurate and no contrary proposition could or has been put by either party.
However, the plaintiff then went on to give the following evidence:[72]
Q.Do you recall if you were told what you’d get in the first four years and what you’d get in the balance of a contract, in the last year of a contract.
A.Only along the lines that I’ve just said, that it had to be read in total and that “up to” meant a maximum of 12 months. Sorry, the minimum of 12 months, you’d get a maximum of 12 months.
HIS HONOUR
Q.I’m sorry, I don’t understand that. Was it a minimum – “up to” meant a minimum of 12 months or a maximum –
A.A minimum 12 months, yes, your Honour, a minimum 12 months.[73]
[72] T38.38 - T39.11
[73] T39.4
I have earlier addressed this evidence in another context. In my view (again, if the conversation occurred) the logic of the situation dictates that Mr Kelledy did say that “up to” must be read in the context of the maximum amount that could be sought to be paid under the contract. The obverse of that position would lead to the very problem that Mr Kelledy said should not happen, ie. an open ended position in the event that the CEO was terminated without cause in the first four years of the contract.
And, indirectly, that is the position for which the plaintiff contends, ie. a minimum of 12 months without stating a maximum amount.
I am therefore unable to accept the plaintiff’s version of events on that matter as it lacks logic. If it was accepted, it would create the very problem that the contract was drafted to avoid. I think that the plaintiff was told precisely what was in the contract namely “… ‘up to’ meant a maximum of (up to) 12 months…”.[74]
[74] T39.4
In making these findings, I am mindful that clause 14.3.2 is in two parts. The first part requires the defendant Council to give to the plaintiff as Chief Executive Officer three months written notice of the termination of his contract with the Council, without cause. The second part requires the defendant Council to exercise its discretion to make a payment of up to the value of one years’ remuneration if the agreement has one year or more to run and I include within that second part, the payments to be made under the clause to the plaintiff in the event that the agreement has less than one year to run.
The topic about which the plaintiff was giving evidence was not connected to the first part of the sub-clause. I am satisfied that there was no confusion in the mind of the plaintiff that when he gave evidence about a “minimum” payment, he was referring to twelve months plus three months. This was because there was never a contention between the plaintiff and the defendant that the amount of three months written notice was required to be given by the defendant to the plaintiff under the first part of the clause and I dealt with that matter earlier in these reasons. The topic of the evidence being given by the plaintiff only related to the question of the remuneration to be paid by the defendant to the plaintiff under the second part of the clause.
The terms of the contract signed by the parties did not carry any amendment between the draft submitted to the plaintiff and the final draft. If the plaintiff’s version were to be accepted, it would have been necessary to insert the word “minimum” into the first part of the clause and delete the words “up to”. This did not occur in a context where the plaintiff identified in evidence the inclusion of the words “up to” and hence, the maintenance of those words in the final executed document. For these reasons, I prefer the version of events given by Mr Kelledy.
On the question of the execution of the documents and the conversations surrounding them, the evidence of the plaintiff was as follows:
Q.What do you remember taking place when you attended at Wallmans to sign the contract on 25 March 2009.
A.I was greeted by Michael and Natasha Jones and was told to come into basically a little room area at the back of the reception and that happy to see me and you know, was all smiles and everyone was happy and Michael said, “Natasha, can you go and get the revised contract”, which she did and he said, “Was there anything else that concerned me.” I said, “No, there was only the one thing that I thought was a bit strange.” I just can’t remember what clause that is but I’ll go to it because it actually allowed for 12 days personal leave which was very unusual, normally it’s 10. I asked him about that, he said, “That must have been a typo, consider it a bonus.” And then he freely said to me, “Oh and by the way”, he gave me a wink, “and by the way, I’ve done better than the 12 months in that clause, you’re actually entitled to 15 months because you have to be given three months notice” and I said, “That’s fantastic.”.[75]
[75] T40.15-34
I have earlier addressed the rostered day off issue. However, properly analysed, what the plaintiff alleges was said by Mr Kelledy is in fact correct. But that was the position under the draft. The maximum amount that the plaintiff could always have had achieved from a dismissal without cause under the contract is 15 months salary.[76] In truth, Mr Kelledy had not proffered any more to the plaintiff in the final contract than existed in the earlier draft.
[76] P1 tab 3 subclauses 14.3.1 and 14.3.2

As well, the evidence of the plaintiff about what was discussed at the meeting does not corroborate the “minimum/maximum” dichotomy created by the plaintiff’s earlier evidence.[77] I am unable to accept the plaintiff’s evidence and I am fortified in my view by the fact that, properly construed, (and accepting only for the sake of discussion that the plaintiff’s evidence is accurate) none of what was said by Mr Kelledy as deposed to by the plaintiff was in any way inaccurate. It does not attract the epithet “misleading”. It is not a misrepresentation. I am unable to accept the plaintiff’s case on those issues as a matter of fact.
[77] T39.4
Looking at the matter from a different perspective namely the position of Mr Kelledy, he had no authority to bind his client to any fixed period of notice under the first limb of clause 14.3.2. The contract that he proffered on 24 March 2009 contained the standard terms of his firms precedent in relation to the appointment of CEO’s of local government organisations.[78] That contract, in Mr Kelledy’s view, reposed a discretion in the defendant about the amount to be paid to the CEO in the events that may transpire, the CEO is terminated without cause. That discretion allows a payment of up to one year’s salary. For all of these reasons, I am unable to accept the version of events given by the plaintiff.
[78] Exhibit P1, Tab 5
PART 4
The plaintiff commenced his work as the CEO with the defendant council on 22 June 2009. In his first year of employment the plaintiff fulfilled every expectation of his position and received a sufficiently satisfactory annual review to win a substantial pay rise and an extension of his leave entitlement.[79] The plaintiff produced a report called the “100 day” report. The plaintiff gave evidence that a production of such a report was usually done by an incoming CEO to inform the council about what he had identified during the first 100 days of his tenure.
[79] T42.17
The 100 day report was prepared by the plaintiff but it was not tendered in evidence and no challenge was made by the defendant to the oral evidence given by the plaintiff about its contents.
That evidence was that the plaintiff’s 100 day report identified serious deficiencies in the defendant’s financial, accounting and reporting functions all of which required urgent attention. The plaintiff also gave unchallenged evidence that his report was delivered to the defendant, that it was considered and that the defendant resolved to implement the recommendations contained within the report.
The plaintiff’s unchallenged evidence was that after receiving the authority of the council after it had considered the 100 day report, he proceeded to implement the recommendations. There was no challenge by the defendant about the seriousness of the matters identified by the plaintiff in his 100 day report concerning the operation of the defendant.
In the period from July 2010 to December 2011 the plaintiff’s relationship with the defendant council and some of its councillors deteriorated sharply. The defendant learned in 2010 from councillor Nutt (who did not win re-election at the 2010 elections) that Councillor Phillips, amongst others, had made allegations against the plaintiff of corruption and improper conduct on his part.[80]
[80] T42.29
As a result of these allegations surfacing (they are denied by the plaintiff) Mr Kelledy, the solicitor for the council, was asked by the council to conduct an investigation and to report. Mr Kelledy produced a report dated 15 October 2010.[81] No evidence was led concerning this report and I was told by both counsel that its contents were so inconclusive as to be unhelpful.
[81] Exhibit P5.
I disagree. A reading of the report discloses that information was supplied to the plaintiff indicating that quite serious allegations against him were being discussed at least amongst some councillors. The plaintiff demanded of the Mayor that these issues be discussed and resolved because he had a number of concerns including the effect of any future employment prospects and his current status of CEO.
It was a result of the plaintiff’s demands that Mr Kelledy was appointed to investigate. Unsurprisingly, as Mr Kelledy broadened and deepened his questioning of the three relevant councillors who were involved, they appear to have become more defensive and one retained solicitors as well as to involve Wendy Campana from the Local Government Association.
Nothing appears to have eventuated from the inquiry by Mr Kelledy and the options available to the council as described by Mr Kelledy on p 12 of his report were not pursued.[82]
[82] Options available to the council.
Taking the above into account, the council has the following options available to it:
§ Resolve to note the report and to take no further action;
§ To resolve censure and/or to make a vote of no confidence in councillor Phillips and to request that she provide a written apology to Mr Moloney in relation to the comments she has made in the past to other elected members which suggests Mr Moloney has acted improperly (or in a corrupt manner) and which could reasonably be interpreted as damaging to (or having the potential to damage) Mr Moloney’s reputation;
§ Resolve to make a vote of confidence in favour of Mr Moloney, recognising that the content of the subject allegations are unfounded and incapable of substantiation;
§ Requests that the Mayor hold a meeting with councillor Phillips to set out the council’s expectations of her in relation to her future communications about Mr Moloney and to request that if councillor Phillips is not permitted to modifying her behaviour, that she consider standing down from the council; or
§ Requests that the Mayor arrange for a mediation between Mr Moloney and councillor Phillips in order to work towards repairing the relationship breakdown.
I shall be present at the special council meeting convened to discuss this report and the variety of possible options (as identified above or otherwise) that the council may consider for the purpose of resolving the matter.
These events were the genesis of a long running and what became an unmanageable and bitter suite of difficulties between the plaintiff and three, and sometimes four, members of the council. There were nine elected members of council and those nine elected members were entitled to vote at any time. If there was a deadlock between councillors present and voting that the Mayor had any casting vote.[83] During his employment the plaintiff had the support of five of those members. Of the balance, one was rarely at council meetings due to chronic ill health and the other three were adverse to the plaintiff.
[83] In the course of the matters subject to this action, the Mayor was never called upon to cast a vote in respect of any issue arising concerning Mr Moloney’s employment.
In his submissions, Mr Manuel, counsel for the defendant, conceded that the behaviour of these three members of council was reprehensible. In my view, that adjective is much too kind. Accusations of a nature that only could be described as bizarre were being made against the plaintiff. On a later occasion, it was alleged by a Mr Watson that the plaintiff and another person had broken into the home of Councillor Phillips, found their way to a bedroom in which he was sleeping, produced and then pointed a Glock pistol at him, threatened him, demanded his signature on documents and then left.
This was after the plaintiff had, through the retainer of a number of consultants, investigated and reported on all areas of the council operation[84] that found that there was a very poor culture of management and very high level of risk in the operation of the council. It was necessary for there to be substantial changes in order to bring the operations of the council to contemporary standards. There was also allegedly a financial misreporting of a significant nature.[85] Council resolved to accept the report of the plaintiff and to implement his recommendations.[86]
[84] T60
[85] T61.3
[86] T61.17
For reasons that have not been explained, a campaign by the disgruntled group of councillors against the plaintiff continued throughout 2011 and reached the point where the plaintiff’s health suffered as a consequence.
By April 2011, there was correspondence between solicitors about the issue. In the inquiry conducted by Mr Kelledy, the council allowed the plaintiff to be represented by solicitors, Messrs Minter Ellison. Mr Andrew Short, a partner of that firm, represented the plaintiff. Mr Short also appeared as counsel for the plaintiff in the matter. I will deal with that matter later. The council paid for the fees paid to Mr Short’s firm in respect of the representation of the plaintiff at the enquiry. Mr Short then continued to act for the plaintiff after the completion of Mr Kelledy’s enquiry.
The parties did not lead extensive evidence about the events that transpired after Mr Kelledy’s inquiry was completed. The evidence that exists indicates that the campaign commenced by the dissident councillors did not abate. The plaintiff fulfilled his contractual requirements faithfully and well but under considerable difficulties. It was essentially left to him to develop mechanisms to deal with the problem himself.
In time, it appears that the task of fulfilling his work as a CEO as well as dealing with the attacks upon him by those councillors began to overbear the capacity of the plaintiff.
By letter of 4 May 2011, Mr Short reported to Mr Kelledy on the instructions that he had received from the plaintiff. Pertinent paragraphs of the letter were as follows.[87]
I have now spoken with Damien [Moloney] and received instructions about a possible way forward
...
At the outset, can I say that Damien is feeling much more positive about his employment. He is encouraged that council has provided him with support. He would like to continue seeing through the good work he has carried out to date.
As you know, Damien is concerned that if he is terminated without cause, his career in local government will effectively be at an end. He is willing to back his performance if provided with fair protection against the consequences of termination without cause, he would like to continue his employment.
[87] P1, Tab 8.
The following two paragraphs then deal with the consequences of the plaintiff receiving a favourable second year review (he having already received a favourable first year review) and whatever salary and increment increases may occur as a result of that favourable review. The letter then goes on to say:
“The suggested change will be to clause 14.3.2. This deals with dismissal without cause. If Damien were to be dismissed in the first three years of a new contract, then he would seek the clause give rise to an entitlement of three years of his package. If he was dismissed without cause in the fourth or fifth years of his contract, then he would receive two years payment of his package. This is in addition in each instance to a period of three months notice. In putting this forward, Damien is conscious that if dismissed without cause, his professional career will be at an end.
A public expression of support such as the proposed new contract would be a powerful motivator for Damien to both remain and continue to strongly advance council’s interest.”
In my opinion, the purpose of the letter was several fold. It confirmed the plaintiff’s intention to maintain the current contractual relationship with the defendant “if fair” protection against the consequences of termination without cause was provided to him. No mention is made of any understanding allegedly created in the 2009 conversations between the plaintiff and Mr Kelledy.
The ultimate paragraph on page 1 of the letter asks for an amendment to clause 14.3.2 of the contract in the terms there set out. The letter ends with a request for a public show of support. A curiosity of the letter is that the plaintiff is asking for what he describes as ‘... fair protection against the consequences of termination without cause...’ as a condition of proceeding with his employment with the defendant. No mention is made of a term (of 12 months notice) or of any warranty given or other conduct on the part of Mr Kelledy concerning the formation of the terms of the contact in 2009.
The plaintiff’s performance was reviewed in July 2011 by McArthur Management, a firm of personnel consultants, and a report was provided.
The content of the report of McArthur Management[88] to the council was discussed at the meeting of council on 22 August 2011. Present at the meeting as invitees were Mr Michael Kelledy and Ms Natasha Jones, both partners of the firm of solicitors Wallmans Lawyers.
[88] P1, Tab 9.
At p 283 of the minutes, the document records the following:
221.1 CEO Annual Performance Review Outcomes
Purpose
This report to the council is consequential upon the outcomes of the Chief Executive Officers performance review process (Item 217.5 – 8 August 2011). Now that the review process is complete, it is appropriate for the council to consider issues of the Chief Executive Officer’s remuneration and tenure.
Background
McArthur’s Management recently undertook the performance review of the Chief Executive Officer. This is required to be undertaken on an annual basis pursuant to clause 8 of the Chief Executive Officer’s employment contract. The review was conducted using the personal evaluation system specified in the contract and took into account the feedback of eight elected members and 15 executive and senior managers.
The results demonstrated that the Chief Executive Officer met the council’s expectations in relation to each of the performance indicators set for him and achieved an average score of 3.58 from a maximum score of 5 based on the overall rating provided by the elected members, direct reports and the Chief Executive Officer’s self assessment.
...
Further in making any determinations with respect to these matters, the council must have regard to the requests that had been made by the Chief Executive Officer (through his lawyer, Andrew Short of Minter Ellison), that the terms of his employment contract be varied to ensure security of employment with the council. Specifically, the Chief Executive Officer has requested that:
Where he receives a satisfactory second year review (which is now the case) his contract be revised for a five year term from June 2011;
Clause 14.3.2 of his employment contract which addresses dismissal without notice, be amended to give rise to an entitlement to a payment equivalent to:
(i)three years of his salary package if he is dismissed in the first three years of his contract; and
(ii)two years of his salary package if he is dismissed in the fourth or fifth year of the contract.
These two propositions, if either is accepted, have the potential to create significant financial liability for the council.
After discussion amongst council members, councillor England moved and the proposal was seconded and carried at a vote that clause 14.3.2 of the plaintiff’s employment contract which addresses dismissal without cause be retained at a 12 month payout.[89]
[89] Exhibit P1, Tab 9 Minutes p 283-284.
In evidence, Mr Kelledy confirmed that he and Ms Jones were both present at the meeting when this resolution was moved, seconded and voted upon. No evidence was led from Ms Jones on any topic in this action.
Ms Jones then wrote the next day to Mr Short of Minter Ellison[90] in a letter that said relevantly as follows:
...at its special meeting on 22 August 2011, the council resolved to offer Damien (Moloney):
1.      A revision to his current contract of employment to provide for a five year rolling term subject to a satisfactory performance effective from 1 July 2011;
2.      That clause 14.3.2 of Damien’s employment contract which addresses dismissal without cause be retained at 12 months;
3.      An increase of 4% (CPI) from the anniversary date of 22 June 2011; and
4.      An additional 10 days off over the 2011/2012 Christmas/New Year period.
This offer has been conveyed to Damien (Moloney) by the Mayor.
[90] Exhibit P1, Tab 10.
In evidence I sought clarification of the meaning ‘rolling term’ used in para 1 of the letter. I was informed that a five year rolling term was understood to mean a contract of five years which, upon a satisfactory review on an annual basis would be extended for a further year so that the contract continues to roll forward on a yearly basis as a five year contract.
The offer contained with the letter of 23 August 2011 was then left for the response of the plaintiff.
Mr Kelledy was cross-examined about the content of the 22 August minutes and the contents of this letter. Mr Kelledy apparently was aware of the contents of the letter of 23 August although it was signed by Ms Jones. Mr Kelledy gave evidence that he thought that the minutes and the letter were consistent[91] having previously thought that there may have been some inconsistencies. That is, both documents addressed the issue of what might be the maximum term of notice to be given to the plaintiff in the event that he was terminated without cause. To that extent, both documents are consistent.
[91] T206.25
Reference was also made to the letter from Wallmans Lawyers directly to the plaintiff of 30 August 2011 after a further meeting of council held on 29 August 2011. The letter was signed again by Ms Jones. [92] No evidence was led about the meeting of 29 August and no minutes of that meeting were produced in evidence.
[92] Exhibit P1, Tab 11.
The letter of 30 August signed by Ms Jones relevantly read as follows:
Dear Damien
Employment Contract
As requested, I provide to you written confirmation of the decisions made by the council at last nights meeting [29 August 2011].
The council revoked paragraphs 1 and 2 contained in my letter of 23 August 2011 sent to Andrew Short and subsequently resolved to offer the following:
1.      An additional two year term to your contract of employment effective from 1 July 2011;
2.      An increase of 4% (CPI) from the anniversary date of 22 June 2011; and
3.      An additional 10 days off over the 2011/2012 Christmas/ New Year period.
This means clause 14.3.2 of your employment contract remains unchanged.
Again no evidence was led from Ms Jones in relation to this letter.
In evidence[93] Mr Kelledy rejected the assertion that, read together, these letters confirm the representation allegedly made by him to the plaintiff. After further clarification in questioning, Mr Kelledy’s evidence[94] was that there was no inconsistency because of the context in which these exchanges occurred. That context was that the plaintiff had sought the removal of clause 14.3.2 entirely after the proposal in the letter of 4 May 2011 and was rejected. The outcome was that on 30 August 2011 the defendant was prepared to make the offer of an extension of two years, a salary increase and an increase in annual leave of 10 days. Of course, on any ordinary reading, the increase in annual leave is only for a period of 10 days for the 2011/2012 Christmas/New Year period and was not continuing from that date.
[93] T207.14
[94] T208.14
On about 31 August 2011, the plaintiff had a telephone discussion with Mr Kelledy after speaking with Mr Short and after doing so Mr Short sent a letter to Wallmans Lawyers of 5 September 2011.[95] The defendant’s case is the plaintiff also spoke to Mr Kelledy on about 31 August 2011 about the possibility of him leaving his employment with the defendant on favourable terms. It is not necessary for current purposes to resolve the difference because it is clear that very soon after the council meeting of 29 August 2011, and the Wallmans letter of 30 August 2011, the plaintiff commenced investigating the possibility of departing his employment with the defendant.
[95] Exhibit D2, Tab 3.
The letter of 5 September 2011[96] informs the defendant that the plaintiff was finding the conduct of the minority of council members increasingly intolerable, that such conduct is having an unacceptable impact (upon him) including in respect of occupational health and safety issues and it was now desirable for the plaintiff to explore an agreed departure from his employment.
[96] Exhibit D2, Tab 3.

The defendant’s position was that the allegations made by the plaintiff in this context were effectively conceded and the defendant led no alternative case on these matters. As none of the councillors were presented to give evidence, I have not been given any opportunity to make any assessment of them and to gauge their conduct against any objective standard having regard to the evidence led by the plaintiff at the trial of this matter.
In light of these matters, it behoves me to state what the test of good faith involved. Both parties were of the view and urged upon me that the correct approach is summarised by the decision of Justice Kaye in the Supreme Court of Victoria Commercial Division case of Eshuys v St Barbara Limited.[185]
[185] (2011) 205 IR 302; (2011) VSC 125
The material facts were that the plaintiff worked for the defendant since 2004 in the position of Managing Director and Chief Executive Officer. The business of the defendant was in gold mining predominantly in Western Australia. In 2008 the defendant decided to engage a new Managing Director.
At that time, the plaintiff and the defendant entered into a variation agreement of the plaintiff’s Employment Agreement. The terms of the variation were that the plaintiff would keep working for a fixed period until his replacement was found and the plaintiff agreed that if the replacement was found prior to the end of the fixed period, he would step down.
Importantly, and in addition to other entitlements, it was agreed between the plaintiff and the defendant that the plaintiff would be paid a final performance based completion amount of up to $1,000,000 (my emphasis). That amount of payment was at the defendant’s discretion, based on two criteria in the variation agreement.
It is immediately to be noted that the parties were ad idem that the expression of ‘up to $1,000,000’ reposed a discretion in the board. That was emphasised by the fact that the exercise of the discretion was to be based upon two criteria. It is unnecessary for present purposes to state the two criteria. The critical issue is the question of the exercise of the relevant discretion.
In the circumstances of that case, the Board of the defendant determined that no amount should be paid under the relevant clause, based upon the two criteria, but decided to make a payment of $150,000. The plaintiff claimed the defendant had breached the contract in the manner in which it had exercised its discretion. The plaintiff claimed first that there was a breach of the express contractual term or alternatively an implied term of good faith and second, that the defendant had made a determination that was arbitrary, capricious, irrational or perverse in that it had failed to take into account a number of particular factors relevant to the non-compliance with the two criteria.
Under the variation agreement, the court defined the essential question as follows:
“[38] In light of the foregoing, it is clear that the following six issues needed to be determined by me in this case:
1In deciding the amount of the performance based completion payment… did the Board perform a determination of the extent of compliance with the two criteria….
2….
3….
4What was the obligation of the Board in exercising the discretion reposed in it under the contract to determine the extent of compliance with the two criteria. In particular, was the obligation of the Board not to make a determination which was irrational and/or or perverse or which was made on unreasonable and/or insufficient grounds as alleged by the plaintiff.
5Did the Board exercise the discretion…. in accordance with that obligation.
6If the defendant acted in breach of the variation agreement in determining the performance based completion payment to the plaintiff, what is the correct measure of the damages to be awarded to the plaintiff in consequence of that breach.”
After reviewing the facts, Justice Kaye then turned his attention to the question of the alleged breach of discretion. The plaintiff there contended that the Board was required to make a determination of the extent of compliance with the criteria which was not arbitrary, capricious, irrational or perverse. For that proposition the plaintiff relied upon the decision of Justice Burton in the court of Queens Bench decision of Clark v Nomura International plc.[186]In that case, Justice Burton stated in respect of the exercise of the discretion by an employer in similar circumstances:
‘... the employer’s discretion is in any event, as a result of the authorities, not unfettered, as both sides have accepted it to be the law in this case. Even a simple discretion whether to award a bonus must not be exercised capriciously… or without reasonable or sufficient grounds… I do not consider that either of these definitions of the obligation are entirely apt, when considering whether an employer was in breach of contract in having exercised the discretion, which on the face of the contract is unfettered or absolute, or indeed even one which is contractually fettered, such as the one here considered. Capriciousness, it seems to me, is not very easy to define… .it can carry with it aspects of arbitrariness or domineeringness or whimsicality or abstractiveness. On the other hand, the concept of ‘without reasonable or sufficient grounds’ seems to be too low a test. I do not consider it is right that there be simply a contractual obligation on an employer to act reasonably in the exercise of the discretion, which would suggest that the court can simply substitute its own view for that of the employer. My conclusion is that the right test is one of irrationality or perversity (of which caprice or capriciousness would be a good example) ie that no reasonable employer would have exercised his discretion in this way… such test of perversity or irrationality is not only one which is simple, or at any rate, simpler, to understand and apply, but it is a familiar one, being that regularly applied… in reaching its conclusion what the court does is thus not to substitute its own view, but to ask the question whether any reasonable employer could have come to such a conclusion.[187]
[186] [2000] IRLR 766
[187] At [40]
These principles, as stated by Justice Burton, were followed by the Court of Appeal in its decision in Horkulak v Cantor Fitzgerald International.[188]In that case, a term of a contract of employment entitled an employer in its discretion to pay an annual discretionary bonus. The plaintiff was dismissed, claimed wrongful dismissal and succeeded and obtained an award of damages. The court rejected the employer’s contention that the court should not allow any portion of damages for the discretionary bonus. The court assessed that the amount of bonus which would have been payable to the plaintiff on the basis that he would have been ‘entitled to a fair and rational assessment of his entitlement under his contract with the employer.’
[188] [2004] IRLR 942
The Court of Appeal held that the trial judge did not err in awarding the plaintiff damages on the basis that if he had remained in employment he would have received payments, including a payment for the discretionary bonus. In so deciding, the Court of Appeal held that the trial judge had correctly considered that the plaintiff had been entitled to a bona fide and rational exercise by the employers of their discretion as to whether or not to pay him a bonus and in what sum.[189] The Court of Appeal reconfirmed the obligation upon the trial judge to conduct a determination as a bona fide and rational exercise of the discretion:[190] See also Keen v Commerz Bank AG [2006] to CLC 844 at [52] – [58] (Mummery LJ).
[189] At [106]
[190] At [46]
At paragraph 108 of his decision, Justice Kaye summarised the relevant approach as follows:
‘The principles, applicable to the exercise of the discretion… are thus common ground. Accordingly, it is not necessary for me to determine the question of the nature and content of the implied term pleaded by the parties. The principles applicable to the discretion are expressed in negative terms – not to act ‘capriciously, arbitrarily, irrationally or perversely’ or, not to reach a decision which no reasonable Board would make. Standing alone each of those standards are uninformative and relatively unhelpful. In determining whether the Board complied with its obligations under [the contract] in determining the plaintiff’s performance based completion payment. In order to give each of those standards some appropriate content, it is important to consider the particular commercial context in which the Board was required to exercise its discretion and make its decisions under [the contract]’. (my emphasis)
I am always mindful that at all times I am not permitted merely to substitute my opinion for that of the Council in coming to its decision.
There is force in Mr Manuel’s submission that the Council could be wrong but still have acted in good faith. I accept that proposition, but the difficulty that confronts my assessment here is that the defendant has not led any admissible evidence of the process by which the decision was reached, the matters that were taken into account and those matters that were ignored as irrelevant or not taken into account at all because they were not raised for consideration.
Different from the position in Eshuys,[191] where Justice Kaye was able to consider every facet of the operation of the goldmining company, the terms of the contract, the requirements upon the plaintiff and the relevant considerations by the Board having regard to the performance of the plaintiff of his obligations under the terms of his agreement, there is no evidence here of any of those matters that can assist in my determination of these issues. Justice Kaye had the benefit of hearing evidence on the full range of issues operating on the minds of the board members in that instance. Justice Kaye could then assess the approach of the board in a fully informed way in reaching his decision to reject the plaintiff’s claim in that case.
[191] Supra
It is therefore necessary to identify, as best I can, the matters that, on any objective view, are relevant to such a decision and then to assess them notwithstanding the absence of any evidence led by the defendant. It is necessary, in this context, to reiterate that the matters for consideration involve the exercise of a discretion after the termination of the employment of a Chief Executive Officer without cause.
Those matters are as follows:
1The age, antecedents, skills and experience of the plaintiff.
2The duration of the employment of the plaintiff with the defendant.
3The unexpired portion of the plaintiff’s contract of employment with the defendant.
4The performance, adverse and positive, of the plaintiff in his employment with the defendant.
5The results of any annual review of the plaintiff’s performance with the defendant.
6The content of any ‘100 day’ report prepared by the plaintiff in respect of the defendant.
7The sequelae and the consequences of the attempted implementation of any such report by the plaintiff in respect of the defendant.
8The identifiable benefits to the defendant (if any) as a result of the tenure of the plaintiff.
9The identifiable detriment, if any, suffered by the defendant during the tenure of the plaintiff.
10The relevant factual history leading to the departure of the plaintiff from his employment with the defendant.
11The process of decision making and reasoning within the defendant leading to the decision to terminate under Clause 14.3.2.
12Whether and, if so, in what way the plaintiff, through the exercise of his ordinary skills and experience was, during his employment, able to identify any deficiencies in any Council systems, internal controls, legal controls, accounting and financial controls, reporting functions (internal or external), information systems and any available methods for the rectification thereof.
13The market generally identifiable for like employment in local government area in South Australia.
Considering these matters in turn, I make the following findings.
The plaintiff’s age, antecedent skills and experience are set out in Exhibit P1 Tab 2. It is an impressive resume of a person who has devoted his life to local government management and has, through education and qualifications and practical experience, gathered skills sufficient to be appointed as Chief Executive Officer of a number of significant rural councils.
The plaintiff was employed by the defendant for a five year term. As at December 2011, the plaintiff had been employed by the defendant for just about half of the term.
On the evidence of the performance reviews received by the defendant in respect of the plaintiff, he performed all of his duties with the defendant in a completely satisfactory manner and he exceeded the levels of performance standards set by the plaintiff.
The results of the annual reviews of the plaintiff were all favourable.
The 100 day report prepared by the plaintiff disclosed significant deficiencies within the defendant’s operation. Some of these deficiencies were serious matters that were required to be attended to by the plaintiff and the defendant together. I am satisfied that the plaintiff had embarked upon this process.
The sequelae of the preparation and the distribution of the 100 day report may have generated some animus within the defendant organisation but as no evidence was led on the topic I will not consider that matter further. However, this was a risk of and part of the role of the plaintiff as the Chief Executive Officer.
There are identifiable benefits to the defendant as a result of the tenure of the plaintiff. There were identifiable difficulties and problems with the operations of the defendant. The plaintiff identified them and attempted to implement a resolution of them.
I am not able to point to any identifiable detriment suffered by the defendant as a result of the tenure of the plaintiff.
The relevant factual history leading to the departure of the plaintiff from his employment with the defendant is set out above. That history is replete with the failures of the defendant (in light of the conduct of some of its councillors) to properly support the plaintiff, to identify the relevance and importance of the plaintiff to its overall operation and to show a strength of purpose in supporting the plaintiff in his role.
There is no evidence of the process of reasoning leading to the decision.
It is impossible to identify the relevant matters, except to say that in the 100 day report prepared by the plaintiff and which he attempted to implement thereafter, he identified deficiencies in council systems, internal controls, legal controls, accounting and financial controls, reporting functions and information systems. He was able to identify and commence to implement methods for the rectification of these problems. His work was incomplete.
At the date of trial the plaintiff remained unemployed. He was not challenged about the efforts that he made to obtain other employment. His evidence was that he was attempting to obtain employment in his chosen field, but had been unsuccessful. There was no challenge to the credibility of the plaintiff on these topics and I accept his evidence completely.
Considering those matters in turn, I make the following findings:
1.The age, antecedents, skills and experience of the plaintiff were matters that should have been taken into account in the exercise of the discretion. Those antecedents included employment in a number of places, especially the Swan Hill Council and the legal proceedings that followed his dismissal from that council.
2.The plaintiff had only been able to fulfil half of his initial contract with the defendant. In that context, it was relevant that the plaintiff in that period had identified a number of deficiencies in the processes of the defendant that were required to be attended to. His performance was completely satisfactory.
3.As a consequence of the matters set out in point 2 hereof, the plaintiff had some two and a half years of his contract still to fulfil.
4.The plaintiff had completely fulfilled all of the requirements of him under his contract of employment. There was no cause for complaint in respect of the plaintiff in the performance of his duties. He had satisfied or exceeded all of the key indicators of his employment arrangement. His performance as CEO was completely satisfactory.
5.The plaintiff had properly and professionally raised the deficiencies which he found. He had the full support of council to implement the changes necessary to overcome the deficiencies that he identified. He was never able to complete that work. That failure may be lain at the feet of the council because of the failure to properly discipline itself and to support the plaintiff.
6.The sequelae and consequences of attempting to implement the changes necessary as identified in the 100 day report are possibly to have been connected to the decision to dismiss the plaintiff but, because of a lack of evidence on that topic, I have placed no weight on that matter and I have excluded it as a consideration.
7.The plaintiff brought a significant level of professionalism to the operations of the defendant.
8.There was no identifiable detriment suffered by the defendant and none was forthcoming in evidence.
9.In the absence of any evidence concerning the departure of the plaintiff, the court is left with the exchanges of correspondence between the parties and the evidence of the plaintiff. That evidence discloses that the plaintiff was prepared to return to work, he having recovered from the illness which caused him to be off work on sick leave. His position is reasonable in all of the circumstances. In light of the relevant factual background in this matter, there can be no criticism of the behaviour of the plaintiff in seeking to return to work.
10.There is no evidence of any process of reasoning within the Council leading to the determination.
11.I am satisfied that the plaintiff brought the whole of his base of skills and experience to bear to identify the deficiencies within the council’s systems and that he made all necessary recommendations for the rectification of those matters.
12.In light of the current economic circumstances and employment market, there is no identifiable job available to the plaintiff and, because of the conduct of the defendant council, the plaintiff’s prospects of employment have been severely diminished.
Having made those findings, it necessarily follows that it is also my finding that the defendant has not discharged the onus upon it as pleaded in paragraph 8 of its Defence. I find that the defendant did not act in good faith in making the assessment of three months and three months under Clause 14.3.2 when it terminated the employment of the plaintiff as its CEO.
The relevant tests are satisfied for the reasons that follow. It was only well after the plaintiff went on sick leave for a condition caused by the behaviour of some councillors that the defendant abandoned its attempts to keep him in its employment as CEO by improving the terms and conditions of his contract. The defendant then made offers of settlement to the plaintiff in recognition of the role of the plaintiff as its CEO. It only significantly reduced the value of those offers when it was informed that the plaintiff wished to return to work; this was what the defendant had sought some 6 weeks earlier and nothing had changed in the interim. The decision challenged sensible and objectively defensible logic.

Because of the defendant’s deliberate decision not to call any evidence on the topic I can only make an assessment about reasonableness from an objective bystander’s point of view. The defendant’s decision was precipitate and was made without any apparent regard to any of the relevant facts of the matter. There is no evidence that the defendant undertook the required logical process of thought relating to the plaintiff’s contract, his performance and rights under it and the obligation upon the defendant council arising therefrom. It is not logically justifiable on the facts as I have found them.
Consistent with authority,[192] I am left in the position where I must assess what, objectively, would have been the result in the event that the defendant did exercise its discretion in good faith. This is not to say that the decision would necessarily have been any different. I must assess the position as:
[192] Eshuys v St Barbara 205 IR 302 at 176, 177 and 178
‘what a reasonable council, in the position of the defendant council on 12 December 2011 would have determined to be the proper amount of notice payable under Clause 14.3.2 of the contract.’
Having regard to the matters that I have set out above, and that should have been weighed in the balance by the defendant in coming to its decision, it is my view that in the good faith exercise of the discretion by the defendant, an allowance of 9 months salary under clause 14.3.2 of the contract should have been allowed together with the other benefits to which the plaintiff is entitled under the terms of the contract.
The effect of my finding is that the plaintiff is entitled to a further period of notice under clause 14.3.2 of the contract of the equivalent of 6 months salary on top of the amounts that he has already received.
The parties have helpfully reached an agreement on the value of the amount of damages under a judgment in favour of the plaintiff if I was of the view that the plaintiff has sustained any such damages[193]. The amount of (agreed) damages is in the sum of $109,018.00 (being the amount of agreed damages of $107,118.00 together with the agreed amount of $1,900.00 in respect of the provision for the motor vehicle).
[193] Exhibit P8
In the result, I reject the plaintiff’s claim in contract in respect of the alleged proper interpretation of the terms of the contract. I also reject the plaintiff’s claim under Section 7 of the Misrepresentation Act, Section 31 of the Consumer Code and for a contractual warranty.
I find for the plaintiff on his claim that the defendant has failed to exercise its discretion under clause 14.3.2 of the contract in good faith and I reject the defendant’s contentions raised in paragraph 8 of the defence.
In the proper exercise of the discretion under clause 14.3.2 of the contract, the defendant should have provided a notice period of 9 months. I give judgment in favour of the plaintiff in the amount of $109,018.00. I will now hear the parties in relation to interest and costs.

Salary =   $170,000 per annum
Superannuation (SGC) =        9% of $170,000
$15,300
Tax liability =  July 2008 – July 2009
Tax Bracket: $18,000 + 40c for every $1 over $80,000
$18,000 + (90,000 x .4)
$18,000 + $36,000
$54,000
Total cost to the council = $239,300
Eligible Termination Payments:
As a result of the terms of the Mallala contract, it is not necessary to discuss the different tax treatment applicable to eligible termination payments (ETP). That scheme would not affect the calculation of the ‘gross amount’. For the sake of completeness the relevant provisions without detail are as follows.
Section 27AA of ITAA 36 and the provisions relating to ‘eligible termination payments’ were repealed by Amendment number 15 of 2007.
From 1 July 2007 the new provisions regarding ‘employment termination payments’ came into force via ITAA 97 Division 82. As at 26 March 2009 the provisions were as follows:
Guide to Subdivision 82‑C
82‑125 What this Subdivision is about
This Subdivision defines an employment termination payment as a payment made in consequence of the termination of a person’s employment that is received no later than 12 months after the termination (though the 12 month restriction is relaxed in some circumstances).
An employment termination payment can be a life benefit termination payment (received by the person whose employment is terminated) or a death benefit termination payment (received by another person after the death of a person whose employment is terminated).
Certain types of payments are declared not to be employment termination payments.
Various other terms used in describing the taxation treatment of employment termination payments are defined in the Subdivision.
Table of sections
Operative provisions
82‑130      What is an employment termination payment?
82‑135      Payments that are not employment termination payments
82‑140      Tax free component of an employment termination payment
82‑145      Taxable component of an employment termination payment
82‑150      What is an invalidity segment of an employment termination payment?
82‑155      What is a pre‑July 83 segment of an employment termination payment?
82‑160      What is the ETP cap amount?