Murphy v Westpac Banking Corporation

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FEDERAL COURT OF AUSTRALIA

Murphy v Westpac Banking Corporation [2014] FCA 1104

Citation: Murphy v Westpac Banking Corporation [2014] FCA 1104
Parties: LOUISE MURPHY v WESTPAC BANKING CORPORATION
STUART MOORE v WESTPAC BANKING CORPORATION
DANIELLE LAVARS v WESTPAC BANKING CORPORATION
COREY WITTENBERG v WESTPAC BANKING CORPORATION
WILLIAM LAWSON v WESTPAC BANKING CORPORATION
LUCKY POULOS v WESTPAC BANKING CORPORATION
PAUL SMITH v WESTPAC BANKING CORPORATION
File number(s): NSD 1157 of 2009, NSD 384 of 2010, NSD 31 of 2010, NSD 90 of 2010, NSD 690 of 2010, NSD 1980 of 2011, NSD 1839 of 2011
Judge: GRIFFITHS J
Date of judgment: 14 October 2014
Catchwords:

CONTRACTS – contracts of employment – misleading or deceptive conduct – ss 52 and 53B of Trade Practices Act 1974 (Cth) – retention incentive scheme – whether employer disclosed true nature of scheme to employees – whether alleged non-disclosure of scheme amounted to deceit or negligence on part of employer – whether employee enjoyed contractual rights to bonus or incentive – relevance of discretion to award bonus or incentive – whether implied term that such discretion cannot be exercised capriciously, arbitrarily or unreasonably – whether withholding of incentives from employees a discretion so exercised – whether implied term of mutual trust and confidence – application of Commonwealth Bank of Australia v Barker [2014] HCA 32; (2014) 88 ALJR 84 – whether scheme induced employees not to seek alternative employment – whether incentives available to employees upon retrenchment

CONTRACTS – contracts of employment – seconded employees – application and interpretation of secondment policy – whether seconded employees in temporary or permanent position

CONTRACTS – contracts of employment – termination – whether reasonable notice given – meaning of “reasonable notice” – whether change in employee duties over time effects contractual variation of notice provisions – application of Quinn v Jack Chia (1991) 1 VR 567

CONTRACTS – contracts of employment – wrongful dismissal claims – whether employer redundancy policy forms part of terms and conditions of contract of employment – construction and interpretation of redundancy policy – whether application of policy varies over time – whether employee secondment affects application of redundancy policy – whether payment in lieu of notice acceptable

DAMAGES – measure of damages – breach of contract of employment – damages in respect of contractual bonuses – quantification of the value of a lost opportunity

TORTS – negligence – whether representatives of employer owed duty of care to employees – whether employer acted with reasonable care – quantification of loss on the part of employee

Legislation: Evidence Act 1995 (Cth) s 128(1)(a)
Federal Court of Australia Act 1976 (Cth) s 51A
Trade Practices Act 1974 (Cth) ss 52, 53B
Cases cited:

Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; (2008) 238 CLR 570
Banditt v The Queen [2005] HCA 80; (2005) 224 CLR 262
Barker v Commonwealth Bank of Australia [2012] FCA 942; (2012) 229 IR 249
Buckingham v Pan Laboratories (Australia) Pty Ltd(in liq) [2004] FCA…

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Details
Case
[2014] FCA 1104
Decision Date

CaseChat Overview and Summary

The case of Murphy v Westpac Banking Corporation involved several employees who were seconded from St George Bank (SGB) to Westpac Banking Corporation (Westpac) and who subsequently sought to recover lost entitlements. The dispute was heard in the Federal Court of Australia. The central issues included whether the employer disclosed the true nature of a retention incentive scheme to employees, whether the employer's non-disclosure constituted deceit or negligence, and whether employees enjoyed contractual rights to bonuses or incentives. Another issue was whether there was an implied term that the employer could not exercise its discretion capriciously, arbitrarily, or unreasonably. Additionally, the court had to determine whether the secondment policy applied to seconded employees and whether reasonable notice was given to employees upon termination.

The court found that the retention incentive scheme claims should be rejected as there was insufficient evidence to support claims under the Trade Practices Act 1974 (Cth) or the torts of deceit and negligence. The court also held that the retention incentive policy had contractual force, but only Mr Wittenberg was entitled to recover damages for the 2008/2009 financial year. The court rejected claims related to the Management Target Incentive Plan (MTIP) and the Short Term Incentive Award (STIA) on the grounds that the claimants were either ineligible to participate or had not suffered a loss. Regarding the Discretionary Incentive Payment (DIP), the court found that Mr Poulos had not established any breach of his contractual entitlements.

In terms of the orders, the court directed the parties to seek agreement on proposed short minutes of order and to file their respective submissions if agreement could not be reached. The court also noted that liberty to apply for further orders was available upon 48 hours' notice.

Orders

Orders of the court

1. The parties are to seek to agree proposed short minutes of order which give effect to these reasons for judgment and also deal with costs by 11 November 2014.

2. If agreement cannot be reached, the parties should file and serve by 11 November 2014 their respective proposed short minutes of order together with an outline of written submissions in support, which are to be in normal font and format and must not exceed 20 pages.

3. The parties should indicate in their outline of written submissions whether or not they request a further oral hearing before final orders are made.

4. Liberty to apply on the giving of 48 hours’ notice.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

Mr Lawson said that he attended a lunchtime meeting in early June 2008 with Messrs Stephens and Ioannidis, which was also attended by Mr Moore. At the end of the lunch, Mr Lawson was invited to pursue further discussions with JPMorgan and it was left to him to follow that up. Mr Lawson said that within a week of the luncheon meeting he had a further conversation with Mr Janschek. Mr Lawson said that Mr Janschek told him that he had been approached by Mr Ioannidis and another JPMorgan employee (Mr Jeff Herbert-Smith) to provide a reference check for Mr Lawson. Mr Janschek told Mr Lawson that he had recommended that JPMorgan employ Mr Lawson in its fixed income business. Mr Lawson also gave evidence that around this time he had a separate conversation with Mr Stephens, who informed him that he had given “a glowing reference” for Mr Lawson to Messrs Ioannidis and Herbert-Smith. Mr Janschek’s evidence concerning alternative employment opportunities for Mr Lawson It is convenient at this point to summarise Mr Janschek’s evidence, who was called as a witness by Mr Lawson. Mr Janschek said that he and Mr Lawson had worked together at Credit Suisse for four years up to January 2005. He confirmed that JPMorgan had approached Mr Lawson in circumstances where JPMorgan was hiring fixed income traders. He said that he had been approached in mid-June 2008 by Mr Ioannidis and Mr Herbert-Smith (with whom Mr Janschek had also worked), who inquired about Mr Lawson’s abilities and suitability. Mr Janschek deposed that, while he did not recall the exact words he used, he had conveyed to them that Mr Lawson had made money at Credit Suisse and that he considered that he would bring significant advantages to JPMorgan’s trading team. Mr Janschek also recalled Mr Lawson telling him in late June 2008 that he had decided to stay at SGB and not pursue the opportunity at JPMorgan. I accept this evidence. Mr Janschek gave evidence, which I also accept, that JPMorgan was building up a new business division in the first half of 2008 and that he had been engaged by JPMorgan in May 2008 for that purpose in the position of Vice President, Fixed Income Sales and that other people were recruited by JPMorgan at that time as part of its expansion plans. In cross-examination, Mr Janschek gave evidence that redundancies commenced at JPMorgan in December 2008, which were related to the global financial crisis (GFC). He said that the redundancies were “meaningful” and resulted in 20 per cent of his particular section within JPMorgan being made redundant. The redundancies continued in 2009. Mr Janschek also gave evidence that he played no role in the hiring or firing of employees at JPMorgan in 2008. I accept that evidence. Mr Lawson is invited to participate in SGB’s retention incentive scheme Mr Lawson gave evidence that his interest in possibly taking another job changed in mid-June 2008 when he was advised by SGB in a letter dated 18 June 2008 that he had been selected as a key executive within SGB to whom a retention incentive would apply in order to encourage him to stay with SGB during the implementation of the merger with Westpac. The letter was signed by the Managing Director and Chief Executive Officer of SGB, Mr Paul Fegan. In view of the importance of the letter, not only to Mr Lawson’s case, but also to other applicants who received similar letters, it is convenient to set out the full text of the letter:

Decision

Reasons for decision

Finally, even if (contrary to the above), the subsequent amendments were relevant to the issue of construction, I do not consider that they support the relevant applicants’ preferred construction . That is because the amendments can be viewed as doing no more than putting beyond doubt and clarifying what was the ordinary meaning of “pay” in the Policy prior to the amendments. I see no reason why the amendments should necessarily be seen as changing the previous meaning. In other words, I consider the amendments to be neutral on the central issue of construction.PART 14: SUMMARY OF PRIMARY CONCLUSIONS It is desirable if I summarise my primary conclusions. First, the retention incentive scheme claims should all be rejected (apart from the claims in contract which have been conceded by the Bank). I am not satisfied that any of the claims under the TPA or the torts of deceit and negligence were made good. Secondly, I accept that the TIP had contractual force and effect in respect of Messrs Lawson, Wittenberg, Smith and Moore and Ms Lavars and that SGB breached its contractual obligations to them in respect of the TIP, but for reasons which are given above I consider that only Mr Wittenberg is entitled to recover damages in respect of the TIP for only 2008/2009 and on a pro rata basis. None of the relevant applicants (including Mr Wittenberg) is entitled to damages in respect of the TIP for 2009/2010. Thirdly, I consider that the MTIP also had contractual force and effect. But Mr Lawson and Mr Moore are not entitled to raise any issue regarding unvested shares in the MTIP for 2007/2008 because the issue was not adequately pleaded by them. Nor are they entitled to damages in respect of the MTIP for 2008/2009 because both were assessed as ineligible to receive an MTIP award in that year. Furthermore, they suffered no loss because, even if the persons who carried out their performance assessments for that year lacked authority or applied the wrong criteria, I am not satisfied that a different outcome would have resulted if their performance reviews had been carried out by SGB managers and by reference to the MTIP Rules for 2008/2009. I also reject their claims in respect of the MTIP for 2009/2010 because neither was eligible to participate in the scheme in that year. Indeed, the MTIP had by then ceased to exist. Fourthly, I do not accept Ms Murphy’s claims concerning the STIA and, more particularly, that any award of damages in her favour for wrongful termination should include an amount in respect of that scheme for 2008/2009. The issue does not arise because I do not accept that Ms Murphy was wrongfully terminated when she was made redundant. In accordance with the HR Express Redundancy Policy, as properly construed, she was only entitled to receive six weeks’ base salary in lieu of notice. In fact, Ms Murphy received more than that in her retrenchment payment. Fifthly, while I accept that the DIP had contractual force and effect in respect of Mr Poulos, I am not satisfied that Mr Poulos has established any breach of his contractual entitlements in respect of the DIP for 2008/2009.

Ratio Decidendi

Legal Principle Established

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