Nicholas Richard Whitlam v Insurance Australia Group Limited - [2005] NSWSC 83

No judgment structure available for this case.

Reported Decision:
52 ACSR 470

New South Wales

Supreme Court

CITATION:
Nicholas Richard Whitlam v Insurance Australia Group Limited [2005] NSWSC 83
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 01/02/05, 02/02/05, 03/02/05, 04,02,05, 07/02/05, 14/02/05, 15/02/05

JUDGMENT DATE :

23 February 2005

JURISDICTION:
Equity Division
Commercial List

JUDGMENT OF:
Einstein J

DECISION:
Breach of contract case upheld. Plaintiff entitled to damages for breach of contract.

CATCHWORDS:
Representations made to plaintiff that if he resigned his directorship of defendant he would be entitled to participate under Retirement Policy to be adopted by it receiving promptly the maximum benefits to be calculated in accordance with that policy - Corporations - Directors - Entitlement of a director to receive a retirement benefit in an amount which conformed with Retirement Policy adopted by defendant corporation - Corporations - Authority of chairman to enter into contract with director relating to retirement benefits - Contract - Holding that defendant entered into enforceable contract with plaintiff whereunder he agreed to resign from his position as a director, defendant agreeing that plaintiff would be entitled to participate under Retirement Policy to be adopted by it receiving promptly the maximum benefits to be calculated in accordance with that policy - Estoppel - Alternative estoppel case made out - Character of representations made to plaintiff apt to induce in him belief that he had an enforceable entitlement against defendant to be promptly paid for the full retirement benefit if he resigned - Conduct of defendant following plaintiff's resignation as director held to be unconscionable in the circumstances - Trade Practices Act 1974/Fair Trading Act 1987 - Whether representations made in trade or commerce - Corporations - Consideration of scheme of Part 2D.2 Corporations Act 2001 - Section 200B - Section 200F - Section 200G - Section 9 definition of "remuneration" - Australian Accounting Standard Board (AASB) Accounting Standard 1017 - Related Party Disclosure - Construction - Whether appropriate to construe Retirement Policy in light of Corporations Act definitions of "remuneration" - Application to the particular circumstances - Liability - Joint obligors - Equity - Declaratory Relief - Utility

LEGISLATION CITED:
Corporations Act 2001 (Cth)
Fair Trading Act 1987 (NSW)
Superannuation Act 1976 (Cth)
Trade Practices Act 1974 (Cth)

CASES CITED:
Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540
Australian Securities and Investments Commission v Whitlam [2002] NSWSC 591; (2002) 42 ACSR 407
Beach Petroleum NL v Johnson (1993) 115 ALR 411
Blatch v Archer (1774) 98 ER 969
Claremont Petroleum NL v Cummings (1992) 110 ALR 239
Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Foran v Wight (1989) 168 CLR 385
Galaxidis v Galaxidis [2004] NSWCA 111
Gissing v Gissing [1971] AC 886
Giumelli v Giumelli (1999) 196 CLR 101
Legione v Hateley (1983) 152 CLR 406
Lincoln Mills (Aust) Ltd v Gough [1964] VR 193
Martin v Tasmania Development and Resources (1999) 163 ALR 79
NRMA Insurance Group Ltd v Spragg (2001) 38 ACSR 174
NRMA Insurance Ltd (No 1), Re (2000) 33 ACSR 595
Oran Park Motor Sports Pty Limited v Fleissig [2002] NSWCA 371
Pacific Carriers Ltd v BNP Paribas (2004) 208 ALR 213
Russo and Anor v Aiello (2003) 201 ALR 231
Sali v SPC Limited (1991) 9 ACLC 1511
Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466
Superannuation, Commissioner for v Miller (1985) 63 ALR 237
Thompson v Palmer (1933) 49 CLR 507
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 211 ALR 342
VACC Insurance Co Ltd v BP Australia Ltd (1999) 47 NSWLR 716
Village Building Co Ltd v Canberra International Airport Pty Ltd (2004) 210 ALR 114
Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Whitlam v Australian Securities Investments Commission [2003] NSWCA 183; (2003) 57 NSWLR 559
Wood v Federal Commissioner of Taxation (2003) 51 ATR 1227

PARTIES:
Nicholas Richard Whitlam (Plaintiff)
Insurance Australia Group (Defendant)

FILE NUMBER(S):
SC 50035/04

COUNSEL:
Mr A Bannon SC, Mr J Stephenson (Plaintiff)
Mr T Bathurst QC, Mr A Leopold (Defendant)

SOLICITORS:
Watson Mangioni (Plaintiff)
Mallesons Stephen Jaques (Defendant)

LOWER COURT JURISDICTION:

Einstein J

Wednesday 23 February 2005

50035/04 Nicholas Richard Whitlam v Insurance Australia Group Ltd

JUDGMENT

The proceedings

1 Mr Nicholas Richard Whitlam was chairman of the board of directors of Insurance Australia Group Ltd ["IAG"] from 19 June 2000 until 4 April 2001 and was a director from 19 June 2000 until 9 April 2001.

2 These proceedings are concerned with the circumstances in which he resigned these positions, the central focus being upon his claim that IAG failed to pay to him a retirement benefit in an amount which conformed with the policy ["Retirement Policy"] adopted by IAG (through its board) in April and May 2001 in respect of directors who had completed five years continuous service with IAG or its subsidiaries.

3 A number of technical issues arise involving statutory construction and the precise course of events relating to the board's approach and resolutions concerning retirement benefits to be paid to Mr Whitlam. Issues arise as to when the claimed benefit should have been paid and as to the quantum of the benefit.

4 In relation to the question of timing, Mr Whitlam contends that he was induced to retire by representations made on behalf of IAG to the effect that if he retired he would be promptly paid his full retirement benefit under the policy then being considered. The allegation is that those representations were made with the purpose of inducing Mr Whitlam's retirement as it is said to have been perceived that there were advantages to IAG in avoiding what it regarded as adverse publicity. Mr Whitlam contends that having induced him to retire promptly, IAG acted unconscionably, not only in delaying payment of any retirement benefit, but then by failing to pay the correct amount of the benefit. The allegation is that:

The pleadings

5 It is inappropriate to repeat the record. Suffice it to say that Mr Whitlam's claims include:

· a claim that the alleged unconscionable conduct entitles him to equitable compensation in terms of interest, stress and loss of the opportunity to promptly receive the retirement benefit;

· a claim to a timing entitlement based on contract claims;

· a claim for damages pursuant to section 82 of the Trade Practices Act 1974 (Cth) and/or section 68 of the Fair Trading Act 1987 (NSW); and

· a claim that IAG’s conduct was oppressive to, unfairly prejudicial to, or unfairly discriminatory again Mr Whitlam in contravention of section 233 of the Corporations Law.

Article 12.15 of IAG’s constitution

6 Article 12.15 of IAG’s constitution had provided that IAG “may pay a former Director … a retirement benefit in recognition of past services in the amount determined by the Directors but not exceeding the amount permitted to be paid by the Corporations Law”. [Emphasis added]

7 IAG has submitted:

· that the payment of a retirement benefit to any particular director remained discretionary having regard to the terms of this article; and

· that its board was entitled, and obliged, to exercise a discretion as to whether to make a payment to the plaintiff, and in what amount, and that this is what it did: see Sali v SPC Limited (1991) 9 ACLC 1511, at 1519-1525; NRMA Insurance Group Ltd v Spragg (2001) 38 ACSR 174, at [25].

The demutualisation

8 It is common ground that:

· IAG [then and until 18 January 2002 called "NRMA Insurance Group Ltd"] was incorporated on 30 November 1999;

· pursuant to the demutualisation NRMA Insurance Ltd [“Insurance”] became a subsidiary of IAG on 22 July 2000.

9 In explaining the demutualisation, it is convenient to simply repeat a portion of the summary given on 24 February 2000 by Santow J in the scheme of arrangement proceedings, Re NRMA Insurance Ltd (No 1) (2000) 33 ACSR 595 at 609-610:

“1.1 “The NRMA” is the name commonly given to two distinct companies, NRMA Ltd (Association) and NRMA Insurance Ltd (Insurance). Each is a public company limited by guarantee. The two are linked through provisions of their constitutions (including primarily the right of the Association board to determine the composition of the Insurance board and Association’s right to any surplus assets on a winding up of Insurance). The companies have a significant number of common members. This structure dates back to the 1920’s.

(a) Insurance will be demutualised under Pt 2B.7 of the Corporations Law, thereby converting it from a public company limited by guarantee to a public company limited by shares;

(b) all members of Association who are not already Insurance members (Association only members) will become members of Insurance;

(c) all members of Insurance, including those in (b) and Association itself, will in accordance with a prescribed share allocation formula become shareholders of a newly formed company, NRMA Insurance Group Ltd (NIGL); which in turn will become the sole shareholder of Insurance;

(d) although the memberships of members of Insurance will be extinguished under Pt 2B.7 and replaced by shareholdings in NIGL, members of Association will not relinquish Association membership and Association will retain its status as a public company limited by guarantee;

(e) Association will, however, give up all its current rights as a member of Insurance (including those described in 1.1); and

10 The demutualisation of NRMA Ltd took place on 24 July 2000.

Identification of the directors and matters of general background

11 Insofar as the proceedings concern the interaction between relevant directors at material times, it may be convenient to sketch in some matters of general background.

12 During the period 11 March 2001 until 30 June 2001, the board of IAG comprised the following persons:

“(a) Mr Whitlam (as already indicated, in the period to 9 April 2001);

(b) Mr John Astbury;

(c) Ms Maree Callaghan;

(d) Ms Dominique Collins [referred to during the proceedings as Ms Fisher];

(e) Mr Geoffrey Cousins;

(f) Mr Eric Dodd (in the period to 10 April 2001);

(g) Ms Mary Easson;

(h) Mr Neil Hamilton;

(i) Ms Anne Keating;

(j) Mr Rowan Ross; and

13 Of these directors evidence was given during these proceedings by Messrs Whitlam, Astbury, Cousins, Hamilton and Ross as well as by Ms Fisher.

14 Some evidence was adduced outlining the turgid history of infighting at board level for some time prior to March/April 2001. The particular protagonists appear to have been Mr Whitlam ranged against Ms Keating as well as Mr Dodd. This infighting had become daily fodder for the media and there was evidence of media statements that certain fund managers blamed the bickering for the stagnant share price and for the company’s poor performance [Exhibit P 12 page 300]. Various members of the IAG board developed concerns about the impact which the infighting was having on IAG and, in particular, the perception of IAG within the professional investment community and the unwillingness of institutional shareholders to increase their shareholdings in IAG while the bickering continued.

15 It is unnecessary for this judgment to deal with the detail of the claims and counterclaims of the principal protagonists in terms of the perceived faults of one another. However against the above background, it is clear from the evidence that, on the balance of probabilities, Ms Keating could not be counted on to support any retirement payment being made to Mr Whitlam. The evidence before the court [for example given by Mr Astbury at transcript 201, to the effect that Ms Keating was unfavourably disposed towards Mr Whitlam; and given by Mr Ross - statement at paragraph 4 - who assumed that she would not support such a payment] generally appears to me to have likely understated Ms Keating’s opposition at that time.

16 However, there is evidence to the effect that Mr Ross had discussed the question of Mr Whitlam's possible retirement as chairman and director of IAG with all IAG directors, other than with Ms Keating, each of whom had said to him words to the effect that they would support a payment to Mr Whitlam of the maximum [sometimes called “the full”] retirement benefit to which he would be entitled under the proposed retirement benefits policy. I therefore proceed upon the basis that on the balance of probabilities, at the material time, all other directors including Mr Dodd had stated that they would support any retirement payment being made to Mr Whitlam under the proposed policy.

17 Insofar as the other directors who did not give evidence are concerned, the evidence, even beyond that given by Mr Ross [see for example Mr Astbury at transcript 201], establishes on the balance of probabilities that Ms Callaghan, Ms Easson and Mr Stanwell were generally favourably disposed towards Mr Whitlam. This confirms the finding that they would have supported the payment to him of the maximum retirement benefit in an amount which conformed with the Retirement Policy.

The facts

18 The convenient course is to move directly to the facts. The chronology is of real significance, not the least because of the extensive reliance on board papers, including advices. Attempts were made to have the Court construe the Retirement Policy by reference to such materials and to make findings as to whether or not the directors conduct was unconscionable by reference to legal advices obtained.

Reliability of witnesses

19 In dealing with the evidence, it is necessary to treat with the reliability of the evidence given by a number of witnesses. Fortunately, there are not many issues where it ultimately becomes necessary for the Court to determine a critical dispute as between versions of events given by particular witnesses.

Evidence of Mr Whitlam

20 Mr Whitlam is accepted as a witness who gave reliable evidence. His evidence may not be accepted in every detail, on every occasion and where it is not accepted, or not accepted in full, the judgment below makes this explicit. However the finding is that he gave his best recollections of the events which had taken place. Clearly, the course of events leading to this litigation has angered him considerably. Hence the proper approach to the evidence he has given is to test it against the contemporaneous materials and against the versions of evidence given by other witnesses. He has however in the main come through this testing process entirely unscathed.

Evidence of other witnesses

21 The finding is that every one of the other witnesses who gave evidence carried out his or her best endeavours to accurately recall the events which had taken place. Where there have been inconsistencies in the evidence the approach of the Court has been to reach a factual finding on the balance of probabilities in the light of all of the evidence, both oral as well as documentary. Where it becomes necessary to single out a particular piece of evidence given by a particular witness as unreliable, the judgment makes this plain.

22 February 2001

22 On 22 February 2001, a paper was delivered to the IAG board entitled "Retirement Benefits for non-executive directors" [“the 22 February paper”]. This paper [Ex DX, tab 2] in turn attached a paper by the defendant’s external solicitors, which stated, inter alia:

a director of [the defendant] who is also a director of [Association] will not be entitled to include remuneration received from Association in determining the Retirement Payment payable by [the defendant] since at no time in the last 3 years was Association a related body corporate of [the defendant]

,

the board must act in the best interests of the company as a whole

Any retirement benefit policy adopted by a company must take into account the superannuation payments that are likely to be paid to its directors since these amounts need to be included when determining the Retirement Payment payable

1 March 2001

23 At a meeting on 1 March 2001 the board considered the 22 February paper which recommended the adoption of a retirement policy to pay retirement benefits for non-executive directors on the following basis:

“(a) For any Non-Executive Director of the Company who has completed 5 years’ continuous service with the Company (including service with any of its subsidiaries) at the date of retirement, a retirement benefit equivalent to the last 3 years directors fees, employer contribution to superannuation, committee fees and fees for extra services received from the defendant and its subsidiaries.

(b) A pro-rated retirement benefit for any Non-Executive Director of the Company who has completed at least 3 years’ service but less than 5 years’ service but less than 5 years’ service at the date of the retirement, based on the following formula:

TE x 3X
3 60

TE = the Director’s total remuneration over the previous 3 years.

X = the number of months served as a Director capped at 60 months (5 years).

11 March 2001

24 On 11th March 2001, a channel 9 programme concerning Association and IAG was broadcast. The transcript was admitted into evidence as [PX 1-295 et seq]. At one point the reporter, John Lyons, commented as follows:

The evidence as to conversations

25 It is convenient before turning to the first of a number of conversations between board members to note that, for all of the detail to which the evidence descended, there ultimately does not appear to me to be any particularly serious issue concerning what actually transpired. That different witnesses would have different recollections of particular comments, which may have been made in conversations, is to be expected. But the crucial substance of what was discussed came forward in close to similar terms from almost all of the witnesses called, with perhaps one or two exceptions. Indeed it may be noted that during his opening address Mr Bathurst QC, leading counsel for IAG, submitted as follows:

the plaintiff would be paid the full amount of the retirement benefit calculated pursuant to the retirement policy

26 It is unnecessary to detail every portion of the evidence given by each of these witnesses [some of whom put on more than one written statement]. What is set out below represents the Court's findings as to the substance of the material conversations which took place. It is appropriate to note that the evidence of Mr Hamilton as to what was discussed at the board meeting of 4 April, in relation to the approach Mr Ross was to make to Mr Whitlam, is accepted as reliable.

March 2001

Messrs Astbury, Cousins and Whitlam

27 After meeting with IAG’s institutional investors to discuss market perceptions of IAG, Messrs Astbury and Cousins met with Mr Whitlam and had a conversation to the following effect:

Messrs Cousins/Astbury: “We believe you should resign, because it is in the best interests of shareholders for you to do so.”

explicitly

28 At a further meeting between Messrs Whitlam, Cousins and Astbury, there was a conversation to the following effect:

Mr Whitlam: “I have decided to resign.”

29 During subsequent conversations between Messrs Cousins and Whitlam, and between Messrs Astbury and Whitlam, the question of whether or not Mr Whitlam would or might resign was mooted. The item was clearly on his mind. Equally clearly, he had not yet made up his mind as to whether or not to resign. He had said that he was going to resign and then that he had decided not to resign.

Ms Fisher

30 Mr Whitlam also spoke to Ms Fisher about whether or not he should resign. It is fair to say that Ms Fisher accepted under cross-examination that she had some difficulty recalling parts of the precise chronology.

Mr Hamilton

31 Mr Hamilton, whose evidence is generally accepted as reliable, was party to a conversation on or about 20 March 2001 between Mr Astbury, Mr Cousins and Mr Ross where they all agreed that Mr Whitlam should be told that if he resigned he would get his retirement benefit [transcript 305.30]. It was agreed that Mr Cousins would convey the message to Mr Whitlam, although Mr Hamilton also conveyed that message separately [transcript 305.43].

Mr Cousins

32 During a conversation on or about 20 March 2001, Mr Cousins said that he proposed to say to Mr Whitlam that if he were prepared to resign, the other directors would all agree that he be paid the maximum retirement benefit allowed under the scheme that was to be adopted [transcript 305.53]. Mr Cousins made it clear to Mr Hamilton that he intended to approach Mr Whitlam with the intention of persuading him to resign at least in part on the basis that he would receive the full retirement benefit [transcript 306.19].

28 March 2001

Mr Ross

33 On this date Mr Whitlam met with Mr Ross who said:

34 Although Mr Ross could not recall clearly what had been said, it is clear that he then intended to support payment of the maximum retirement benefit to which Mr Whitlam may be entitled and that he expected that the majority of directors would likewise support such a payment.

29 March 2001 – Velez advice

35 A letter of advice was given by Mr Peter Velez of Watson Mangioni to Mr Whitlam concerning the basis on which IAG might make further payments to Mr Whitlam beyond the retirement benefit. In paragraph 4 on pages 1 to 2 of the summary, Mr Velez said:

At the foot of page 3 of his advice Mr Velez said:

This significantly reduces the size of the retirement benefit that would otherwise be payable to you.

36 Mr Whitlam read the contents of this letter [transcript 107.52-108.57; transcript 119.22-120.57] and circulated it to the other directors [transcript 120.52-57].

37 Also on 29 March 2001, IAG’s Acting General Manager, Human Resources, Mr Higgins, reported to the working party [Ex PX, 1-330]. At 1-331, Mr Higgins said:

Prior to 1 April 2001

Mr Cousins

38 Mr Cousins gave evidence under cross-examination [transcript 256] that:

· prior to 1 April, he had suggested to Mr Whitlam that if he resigned as chairman and director he would be paid the full amount of the retirement benefit;

· the board had a retirement policy [or was about to put one in place] under which Mr Whitlam would qualify and that he could see no reason why Mr Whitlam would not be so paid;

· he believed the board would support such an approach; and

· the basis of his belief that the board would support it was, in part, the conversations he had had with the other directors.

39 Board papers for a meeting on 4 April 2001 were circulated to members of the board prior to 1 April 2001 and contained an agenda item to approve the Retirement Policy.

1 April 2001 – The alleged representations

40 Evidence was given by Mr Whitlam of representations said to have been made to him on 1 April 2001 broadly in the same or similar terms by identified directors of IAG. His evidence may be shortly summarised as having been informed by those to whom he spoke [or in the case of Mr Cousins, to whom Mr Whyte spoke on his behalf], that were he to resign as a director, the particular directors would support the payment to him of a full retirement benefit as set out in the board papers. The finding is that this evidence is in general terms reliable.

41 The finding is that he also asked for support from these persons in relation to any amount, additional to the retirement benefit, which he could legally be paid. It is unnecessary to reach a finding as to what was said in each case on this issue, but it is certainly not clear that there was a universal acceptance of the proposition that he could be paid an amount additional to the full or maximum retirement benefit payment.

42 As foreshadowed above, there were also meetings/conversations between Mr Whyte [speaking on behalf of Mr Whitlam] and Mr Cousins. Mr Cousins said that he would support a retirement benefit payment to Mr Whitlam if he voluntarily resigned. He also said that he believed that the majority of the board would support such a payment.

43 Mr Whitlam had directly raised with Mr Cousins the possibility of an additional payment being made to him beyond any retirement benefit because of the work that he had done as to demutualisation. Mr Cousins had said that there was no potential for any such additional payment to be made to Mr Whitlam.

44 Under cross-examination, Mr Cousins accepted that in early April 2001 at the time he was communicating with Mr Whyte, he had been having discussions with other board members. In the course of those discussions some of those board members had communicated to him that if Mr Whitlam resigned as chairman and director, as far as they were concerned he would be paid the full amount of the retirement benefit. [transcript 254]. His evidence included:

“Q. The directors you did speak to were Mr Hamilton?
A. Yes.

Q. Mr Astbury?
A. Yes.

Q. Mr Ross?
A. I am not certain. I believe so.

Q. Each of them indicated to you that if Mr Whitlam resigned as chairman and director, as far as they were concerned he would be paid the full amount of the retirement benefit under the proposed retirement policy?
A. Yes.

Q. And on or prior to 1 April did you also speak to Ms Collins or Ms Fisher?
A. Yes.

Q. And did she indicate the same message to you?
A. I'm uncertain about that.

Q. You don't have a recollection of any director you did speak to on or before 1 April indicating that they wouldn't support that?
A. No.

[transcript 254]

…

Q. And you thought that if Mr Whitlam resigned promptly that would achieve a benefit for the company?
A. Yes.

Q. You believed that if Mr Whitlam was going to resign a quick resignation would be preferable?
A. Yes.

Q. You expected, did you not, that if he did resign quickly, in return he would expect a quick payment of the retirement benefit?
A. Yes.

Q. Having regard to what you'd said to Mr Whyte?
A. Yes.

Q. And what you understood other directors were likely to be saying to [Mr Whitlam]?
A. Yes.

…

Q. Hence I suggest to you achieving a quick resignation of Mr Whitlam from the board could properly be seen as providing the company with a benefit, in your view at that time?
A. Yes.

45 Counsel for Mr Whitlam has correctly drawn attention to certain internal inconsistencies in some of the evidence given by Mr Cousins. It is also true that certain sections of the evidence given by Mr Cousins, under cross-examination, appear inconsistent with the general tenor of the evidence of other witnesses, in particular where Mr Cousins under cross-examination at one point gave evidence that the retirement benefit was not being offered to Mr Whitlam in return for his resignation [transcript 271.4]. Likewise at another point under cross-examination, he gave evidence that he had not understood that on or about 1 April 2001, Mr Whitlam was speaking to a number of directors about the topic of his retirement and the retirement benefit [transcript 255.12]. Neither of these answers are accepted as reliable.

46 Somewhat curiously some of his oral evidence given under cross-examination was arguably inconsistent with his own written statement where he had said that at the time of his conversation with Mr Whyte, he was seeking to persuade Mr Whyte that it was in the interests of IAG and its shareholders for Mr Whitlam to resign as a director of IAG.

47 In my view Mr Cousins evidence does require to be carefully assessed against that given by the other witnesses. Where it conflicts with the evidence of Mr Hamilton or Mr Astbury, the evidence given by them is accepted as the more reliable. It is clearly very possible that Mr Cousins recollection is not now as sharp as it once may have been in relation to all of these conversations. He accepted that in certain instances his recollection of detail in terms of conversations was unclear (transcript 255.20 and 277.56]. In any event he accepted under cross-examination that he had had conversations with Mr Whyte on 1 April 2001, which he expected to be passed on to Mr Whitlam in connection with the payment of his retirement benefit [transcript 256.4 and 253.34].

Ms Easson

48 On the morning of 1 April 2001 Mr Whitlam had a telephone conversation with Ms Easson to the following effect:

Ms Fisher

49 Mr Whitlam left a telephone message for Ms Fisher during the morning of 1 April 2001 to the following effect:

Mr Hamilton

50 Commencing in March 2001, Mr Hamilton was also involved in a series of conversations with Mr Whitlam prior to his resignations, first as Chairman, and later as director of IAG. During the same period Mr Hamilton also had conversations with Messrs Cousins, Ross and Astbury in which they or he or all four of them said words to the effect that Mr Whitlam needed to resign in the interests of IAG and that if he were to resign, each of them would support a decision to pay him the maximum benefit under the proposed retirement benefit policy.

51 During a telephone conversation of 1 April between Messrs Hamilton and Mr Whitlam, Mr Hamilton said words to the effect:

Mr Astbury

52 During a telephone conversation which took place on 1 April 2001 between Messrs Astbury and Mr Whitlam, Mr Astbury whose evidence is generally accepted as reliable, said words to the effect:

53 Mr Whitlam mentioned an advice he had received from his solicitors and then sent the advice by facsimile to Mr Astbury. Later on the same day Mr Asbury telephoned Mr Whitlam and said:

54 Under cross-examination, Mr Astbury gave the following evidence:

“Q. You felt able to state words to the effect of those which you have agreed you said to Mr Whitlam on 1 April as he records in paragraph 25 of his statement, didn't you?
A. Yes.

Q. And you felt so able having regard to the discussions with other directors of IAG which you had had prior to you making that statement?
A. To some extent.

Q. And you use the language "we" in that statement, "We will formally adopt". That was referring to what you regarded as a majority of directors of IAG?
A. Yes, I felt it was the board that would adopt the policy.

Q. It was a mere matter of formality having regard to the conversation you had had with other directors?
A. As regards adopting the policy, yes. [transcript 97]

…

[transcript 203.1]

55 Mr Astbury referred to his conversation and the statements of other directors as being part of an agreement that led to Mr Whitlam’s resignation [transcript 206.15]. Mr Astbury believed that if Mr Whitlam was going to resign, a quick resignation would be preferable [transcript 207.14] and that achieving a quick resignation by making the representations to Mr Whitlam regarding the retirement benefit was properly regarded as giving the company a benefit [transcript 207.31]. Mr Astbury assumed prompt payment and assumed that Mr Whitlam would also assume prompt payment [transcript 209.4]. Mr Astbury considered that he was encouraging Mr Whitlam to resign promptly and that the quid pro quo was prompt payment of the retirement benefit [transcript 209.13].

Ms Callaghan and Mr Stanwell

56 On 1 April 2001, Ms Callaghan and Mr Stanwell assured Mr Whitlam that if he chose to resign from his position as chairman and director of IAG, Mr Whitlam would be paid the full amount of the retirement benefit [Paragraphs C.17, C.18 and C.19 of the amended summons, paragraphs 16, 17 and 18 of the defence and paragraphs 10, 17, 28, 29 and 30 of the statement of Mr Whitlam, dated 27 May 2004, being exhibit P5].

Mr Ross

57 During a telephone conversation which took place on 1 April 2004 between Messrs Ross and Whitlam, Mr Ross said words to the following effect:

58 Mr Whitlam has given evidence that in reliance upon these representations he resigned as a chairman of the board, effective on 4 April. This evidence is accepted as reliable.

59 Mr Whitlam issued a press release that he was standing down as chairman of the IAG Board and would remain a director of IAG for the immediate future.

3 April 2001

60 3 April 2001 was the date of Mr Whitlam’s letter of resignation as chairman of the IAG Board with effect from 4 April 2001.

Ms Fisher

61 During a telephone conversation between Ms Fisher and Mr Whitlam, Ms Fisher said words to the following effect:

Mr Higgins

62 Mr Higgins prepared a paper to the Board relating to retirement benefits, which was dated 3 April 2001 [Ex PX, 1-379]. In it he recommended (at 1-381) that, for non-executive directors who had completed 5 years' continuous service at the date of retirement, there be a retirement benefit "equivalent to the to the last 3 years' directors fees, employer contribution to superannuation, committee fees and fees for extra services received from [the Defendant] and its subsidiaries" (emphasis added). He also said (at 1-380), substantially repeating the statement in his 29 March paper but adding the word “received” so as to reflect the terms of the policy recommended by him:

4 April 2001

63 At a meeting of the board on 4 April 2001, Mr Ross was appointed chairman of the board pending an executive search for a new chairman. Mr Whitlam did not attend the board meeting on 4 April 2001, although still being a director of IAG on 4 April, he received a copy of the board papers for that meeting [transcript 121.13].

Conversations after 4 April 2001

Mr Astbury

64 Mr Astbury gave evidence which is accepted as reliable in relation to a number of conversations to which he was a party after 4 April 2001:

“Q. Would you agree that you were party to a number of conversations either at the meeting of 4 April or shortly after with, for example, Mr Cousins, Mr Ross and Mr Hamilton that Mr Ross should approach Mr Whitlam and basically find out when he was going to resign as director?
A. Yes.

Q. And you understood from those discussions or expected that Mr Ross would reinforce, if it needed any reinforcement, to Mr Whitlam that he would be paid the full retirement benefit if he resigned promptly as a director?
A. Yes.

Q. Mr Ross told you that that is what he was going to say to Mr Whitlam?
A. Yes.

Q. Do you recall whether he said that to you in the presence of other directors?
A. I don't recall.

Q. You assumed he was saying it to other directors?
A. Absolutely, yes.

Q. Your state of mind was in effect that Mr Ross was delegated that task because he was the new acting chairman?
A. Yes.

Q. And you understood that he was going to, in his capacity as acting chairman of the company, approach Mr Whitlam to encourage him to resign promptly as a director and reinforce to him in that context the promise or assurance of payment of the full retirement benefit?
A. Yes.

Q. Did he report to you that he had done that at some stage in the period shortly after 4 April?
A. I don't recall.

Q. Do you recall there was a board meeting coming up on 10 April?
A. Yes.

Q. Which did occur, obviously?
A. Yes.

Q. And you recall discussion you were having with other directors in the period prior to that was to the effect that it would be highly desirable to have Mr Whitlam's resignation as a director effective before that meeting?
A. Correct.

Q. So far as you were concerned there was some urgency about that ideally?
A. Well, it fitted in to the schedule of the board meeting so that we could then apply the policy to Mr Whitlam and promptly pay him.

Q. Yes, and make an announcement to the stock market?
A. Agreed.

[transcript 217- 218]

The retirement policy is adopted subject to sign-offs

65 The IAG Non-Executive Directors Retirement Policy was adopted by the IAG board at its meeting on 4 April 2001 (subject to certain sign-offs). The Retirement Policy [as conditionally adopted at the 4 April 2004 board meeting] was in the same terms as earlier proposed in the 22 February paper.

66 The resolution included the following with respect to sign-offs:

67 Mr Hamilton under cross-examination gave evidence which is accepted as reliable to the effect that when Mr Ross was elected as acting chairman on 4 April, as Mr Hamilton understood it, Mr Ross was to approach Mr Whitlam further in relation to securing his resignation as director. This was discussed, so Mr Hamilton believed, on 4 April at the directors meeting. His evidence included:

“Q. What was discussed was that he would attempt to persuade Mr Whitlam to resign promptly in the interests of the company?
A. Yes.

Q. And to confirm to him if necessary that he would be promptly paid the retirement benefit in accordance with the policy which had just been approved?
A. Yes.

Q. Did he subsequently report to you that he had approached Mr Whitlam along those lines?
A. Yes.

[transcript 312]

68 This evidence is accepted as entirely reliable in terms of what had been said at the board meeting and what was later reported to Mr Hamilton.

69 Mr Astbury also accepted that it was likely that there was discussion at the board meeting as to how to secure Mr Whitlam’s resignation as a director [transcript 223.20, and 217.21 to 217.45] and that it was possible that those discussions were to the effect that Mr Ross would approach Mr Whitlam to see if he could secure his resignation as a director in return for payment of the retirement benefit [transcript 222.33 to 223.25].

70 Mr Ross gave no evidence on that topic to contradict Mr Hamilton’s evidence and it is appropriate to infer that his evidence on that topic would not have assisted IAG.

71 After the board meeting on 4 April 2001, Mr Ross issued a news release which contained the following statement [transcript 205.27]:

“Mr Ross thanked outgoing chairman, Mr Nicholas Whitlam, on behalf of the Board.

5 April 2001

72 On 5 April 2001 Mallesons furnished an advice [PX 2-27] to NRMA Insurance Group Ltd, concerning the paper entitled "Retirement Benefits for non-executive Directors", dated 3 April 2001 and prepared by Mr Higgins. This letter was in the following terms:

“Attached to this letter is a paper titled “Retirement Benefits For Non-Executive Directors” dated 3 April 2001 and prepared by Mr Thomas Higgins.

We confirm that the attached paper is consistent with advice that we provided to NRMA Insurance Group Limited (“NIGL”) on 22 February 2001 and, we understand, was contained in the papers for the 1 March 2001 Board meeting. We did not, in our advice, cover taxation implications and have made no comment on that section of the attached paper.

In addition, we confirm that the recommendations made in the attached paper and the worked examples in Attachment 1 to the paper are within the statutory payment limits prescribed in the Corporations Law and, to the best of our knowledge and experience, are in line with market practice generally.

Meeting between Messrs Whitlam and Ross

73 At about 2pm on 5 April 2001, Mr Whitlam met with Mr Ross at his request. The conversation was to the following effect:

but I can assure you that you will be paid that amount.”

[To the extent that Mr Ross denies saying the words " but I can assure you that you will be paid that amount", Mr Whitlam's evidence is the more reliable and is accepted]

7 and 8 April 2001 – “The second Ross representation”

74 Mr Whitlam has given evidence that on 7 April and 8 April 2001 Mr Ross on behalf of IAG stated to him that if he resigned his position as director of IAG prior to the next meeting of the board scheduled for 10 April, he would receive the retirement benefit pursuant to the Retirement Policy which IAG had adopted on 4 April 2001 [“the second Ross representation”].

75 The findings with respect to the content of these conversations is as follows:

Conversation of 7 April 2001

76 In this conversation words to the following effect were said:

“I am calling you because I think it would be in the interests of the company if you were to stand down as a director as soon as possible. When we spoke on Thursday, you said that it was your intention to stand down sooner rather than later.”

“Well, that is my intention.”

Mr Ross:

all the arrangements are in place

ensure

I don’t want to burn my bridges

whatever that number is. You have my assurance on that

77 The finding is that there were a number of similar telephone conversations between Mr Whitlam and Mr Ross on 7 and 8 April 2001, generally covering the same ground and in similar terms to that set out above.

Final conversation of 8 April 2001

78 In this conversation words to the following effect were said:

upon your undertaking

my undertaking

I am relying upon your undertaking that my retirement benefit will be paid in full and promptly

you have my undertaking on that

79 The likelihood of the newly elected chairman [effectively a caretaker chairman] making these statements without having discussed the matter at the board meeting of 4 April would seem negligible.

80 I note also the admission to what is pleaded in C27 of the amended summons:

“On 7 April 2001, and 8 April 2001, Mr Ross on behalf of the defendant further stated to the plaintiff that if the plaintiff resigned from his position as director of the defendant prior to the next meeting of the Board scheduled for 10 April 2001, the plaintiff would receive the Retirement Benefit pursuant to the Retirement Policy which the defendant had adopted on 4 April 2001 (“the Second Ross Representation”).”

9 April 2001

81 As at 9 April 2001 Mr Whitlam had been a director of at least one subsidiary of IAG for a continuous period of greater than five years.

Reliance

82 Mr Whitlam has given evidence that his resignation as a director on this date was also reliant on the above described representations now including the second Ross representations of 7 and 8 April 2001.

83 The Court's finding is that this evidence is reliable. This finding takes into account the evidence given by a number of the witnesses who were called as to the alternative possibilities which may have been open to Mr Whitlam were he not to resign as a director. The clear evidence given by a number of witnesses was that had Mr Whitlam determined not to resign as a director, it was possible that he would have remained on the board for a considerable time. Mr Whitlam himself was strongly cross-examined on the matter, it being put to him that he effectively had no alternative but to resign and that he would have resigned even had the subject representations not been made to him. He denied this proposition. This denial is accepted. The finding is that the reliance element in his case is clearly established. His actions were reasonable in the circumstances. He clearly relied upon the representations made to him not only as a significant factor but as the material factor in reaching his decision to resign as a director. The finding is that but for those representations having been made to him the balance of probabilities is that he would not have resigned as a director at the time when he did. The matter is returned to below.

10 April 2001

84 Prior to the meeting of IAG's board of 10 April 2001, IAG received a sign off in relation to the Retirement Policy from Mallesons Stephen Jaques.

85 The minutes of the meeting of 10 April 2001 include a statement by Mr Stanwell updating the board on developments in relation to the directors’ retirement allowance since the board meeting of 4 April 2001. The minutes included a note by him "that a legal sign-off had been obtained from Mallesons Stephen Jaques, Solicitors and that sign-offs were in the process of being obtained from John Egan of Egan and Associates and Mercers (as a second, independent expert in the field)”. He further advised that discussions were also taking place with KPMG (as the company's auditors).

IAG board resolves that Mr Whitlam is entitled to participate under the Retirement Policy

86 On 10 April 2001, the board of IAG noted its approval of the Retirement Policy and resolved that Mr Whitlam was entitled to participate under the Retirement Policy. The IAG board decided to defer calculation of the exact amount of retirement benefits due to Whitlam under the Policy until the board meeting to be held on 3 May 2001.

87 The precise terms of the relevant minutes were in the following terms:

“Mr Stanwell advised the Board that the consensus of a meeting held late on 9 April 2001 attended by Mr RA Ross, Mr IF Stanwell, Mrs ME Easson, representatives of KPMG and representatives of Mallesons Stephen Jaques was that:

1. the policy was proper and appropriate, subject to the requisite sign-offs being obtained;

2. Mr NR Whitlam, who had resigned as a director of the Company since the last meeting of the Board, was entitled to participate under the policy; and

3. that the matter should be brought before the next scheduled meeting of the Board (that is, on 3 May 2001) when it was hoped that all sign-offs and calculations would be available. KPMG should sign off on the calculations relating to Mr Whitlam.

IT WAS RESOLVED

88 Each of the directors agreed that by the resolution of 10 April 2001, the board had exercised its discretion in determining that Mr Whitlam was entitled to the benefit of the retirement policy and that the only outstanding matter was calculation of the amount which was an application of a formula and which did not involve any further exercise of discretion on the part of the board. [Astbury at transcript 214.16, Cousins at transcript 276.35, Hamilton at transcript 309.45–311.29, Ross at transcript 335-337, Fisher at transcript 355-356]

89 It is likely that the board meeting on 10 April 2001 was a specially scheduled meeting, possibly scheduled in connection with the receipt of Mr Whitlam’s resignation notice on 9 April 2001 [transcript 221.52].

ASX Announcement

90 On the same day, the board announced to the ASX that Mr Whitlam would be entitled to participate in the Retirement Policy and would be paid an amount calculated in accordance with that Retirement Policy [1-446-447]:

“ Chairman’s departure

Following extensive discussions with directors regarding his position, Mr Whitlam announced on Sunday April 1 that he was stepping down as Chairman and that he intended ultimately to resign as a director of the Company as he believed that this was in the Company’s best interests
…

Directors retirement benefits

At its meeting on Thursday, 11 August 2000, the Board Committee resolved to recommend to the Board the exploration of a retirement benefit plan for non-executive directors, in line with market practice at similar companies. At its meeting on Monday, 27 November 2000 the Board Committee reiterated its support-in-principle for the adoption of such a plan.

At the meeting on Wednesday 4 April, the Board considered the plan and approved it, subject to sign-offs from expert advisers.

will be

91 The reference to “extensive discussions” referred to in the ASX announcement included the discussions which the directors of IAG had with Mr Whitlam on 1 April 2001 [transcript 208.4 and 263.21].

92 IAG received a facsimile from the Australian Securities and Investments Commission [“ASIC”] concerning the validity of board resolutions to approve the payment of certain retirement benefits to directors, including Mr Whitlam, and requesting certain documents and responses to a number of questions.

11 April 2001

93 IAG responded to ASIC’s facsimile.

17 April 2001

94 IAG received a further facsimile from ASIC requesting further documents and setting out ASIC’s preliminary position on the Policy and payment of benefits to Mr Whitlam.

23 April 2001

95 Mallesons responded to ASIC’s further facsimile on behalf of IAG.

96 IAG received a letter from Mr Snodgrass indicating that, unless the Board gave a written undertaking to ASIC and the shareholders that there would be no payments to directors before the next general meeting, there would be a members’ requisition seeking to amend the IAG constitution so as to prohibit any payment or other benefit proposed to be made to any director in connection with that person’s retirement from the Board without shareholder approval.

97 IAG sent a facsimile to Mr Snodgrass indicating that the matter would be considered at the 3 May 2001 board meeting.

30 April 2001

98 IAG received a further facsimile from Mr Snodgrass.

99 During a conversation between Messrs Whitlam and Ross, Mr Ross said words to the effect:

1 May 2001

100 IAG sent a further facsimile to Mr Snodgrass.

101 On 1 May 2001, a KPMG report came forward.

2 May 2001

Shareholders requisition is received

102 On 2 May 2001, a shareholders requisition was received seeking a general meeting to amend the IAG Constitution so that no retirement benefit could be paid unless approved by the company in general meeting. There was no proposed carve out in respect of Mr Whitlam’s benefit. On the contrary, the assumption was that the resolution was specifically directed at preventing the payment of the benefit to Mr Whitlam which had been announced to the market on 10 April 2004 [PX 2-83, Hamilton at transcript 318.37].

Board paper

103 On the same day, a board paper entitled “Retirement Benefit to Mr Nicholas Whitlam” provided an update on the Retirement Policy. [PX 2-13]. This paper confirmed that at its meeting 4 April 2001, the board had passed resolutions that, subject to receipt of external sign-offs, a policy with respect to retirement benefits for non-executive directors be adopted with immediate effect, to apply to non-executive directors on the basis dealt with in those resolutions at that meeting. The paper went on to add:

“The following external sign-offs have been received by NIGL:

a) John V Egan Associates Pty Limited (to be attached as Attachment A and tabled at the meeting);

b) William M Mercer Cullen Egan Dell dated 10 April 2001 and 1 May 2001 (attached as Attachment B); and

c) Mallesons Stephen Jaques dated 5 April 2001 and 1 May 2001 (attached as Attachment C).

104 The same paper [at PX 2-14] was attached as attachment D to a letter from KPMG dated 1 May 2001, setting out details of Mr Whitlam’s remuneration from NIGL and its related bodies corporate during the 3 years up to his retirement.

105 The 2 May 2001 advice from the defendant’s external solicitors, inter alia, concluded:

106 There then followed an opinion that the costs of the meeting would seemingly have to be borne by the defendant. The costs of that special general meeting were estimated to be in the amount of $1,392,500 [Ex PX, 2-14].

107 At the foot of page PX 2-14 of the 2 May 2001 board paper entitled “Retirement Benefit to Mr Nicholas Whitlam”, Mr Brown, the defendant’s newly appointed chief executive officer, referred to the exclusion, in KPMG’s calculations of the plaintiff’s retirement benefit, of remuneration that was paid to the plaintiff by Association and noted that a:

“Decisions to be taken by the Board

Based on the matters set out in this board paper and its attachments, the matters to be taken into account by the Board are as follows:

1. Whether a retirement payment should be made to Mr Whitlam pursuant to the April board resolutions and, if so, the amount of that payment.

(a) whether employer-funded superannuation contributions (other than “salary sacrifice” contributions) should not be taken into account in determining the maximum retirement payment applicable to Mr Whitlam in the Board’s discretion; and

(b) whether the policy adopted in the April board resolutions should be amended to delete employer contributions to superannuation, other than “salary sacrifice” contributions.

3. Which of the options referred to on page 3 should be adopted in respect of any release of any amount from the superannuation fund in respect of Mr Whitlam’s retirement benefit.

5. Whether to give the undertaking sought by Mr Snodgrass.

Representatives of KPMG (Paul Reid) and Mallesons Stephen Jaques (John Atkin and David Fredlander) will attend the meeting on this item.”

“The options available to directors include:

a) to reach a determination as to Mr Whitlam’s retirement benefit on the basis that the retirement benefit is to be paid by NIGL with no contribution from the superannuation fund, since no superannuation amount is presently payable to Mr Whitlam under the Rules of the fund;

b) to reach a determination as to Mr Whitlam’s retirement benefit, but defer a decision as to how much of that benefit is to be paid by NIGL and how much by the superannuation fund, and also defer payment of that benefit, until the possibility of an amendment to the Rules of the fund to facilitate the payment of a superannuation benefit on resignation from either of the participating employers is fully explored;

c) to reach a determination as to Mr Whitlam’s retirement benefit, but defer payment of the amount of $152,729 which KPMG have identified as the superannuation benefit reasonably attributable to Mr Whitlam’s service as a director of NIGL until the possibility of an amendment to the Rules of the fund is fully explored, on the basis that that amount would only be paid by NIGL if it could not be paid from the fund; or

[Advice to Mr Bathurst, tab 7 at pages 3 of 40 - 4 of 40]

Directors could take into account any risk that, if they determine to pay a reduced retirement benefit to Mr Whitlam, he may seek to bring a claim against NIGL for some or all of the retirement benefit contemplated by the April board resolutions by reference to principles of estoppel or the prohibition on misleading or deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth). While the decision in

Sali v SPC

, noted above, establishes that a director would not generally have a contractual entitlement to receive a retirement benefit under a directors’ retirement policy, that decision expressly notes that no estoppel argument was put in that case.”

[emphasis added]

108 Evidence was given that the effect of the advice to the board was that IAG was entitled to make an immediate payment to Mr Whitlam in the amount of the benefit calculated by KPMG and approved by the board without deduction [Mr Astbury at transcript 233.3, 235.5 to 235.20 and 237.10]. IAG was told by its lawyers on 3 May 2001 that it was entitled to pay the amount of the retirement benefit notwithstanding the existence of the requisition [Mr Astbury at transcript 235.17 and 364.41; Mr Ross at transcript 339.21 to 339.39].

109 IAG has submitted as follows:

sign-offs

Ex PX, 2-60

Pre 3 May board meeting - the KPMG calculations

110 Prior to the 3 May 2001 board meeting dealt with below, KPMG calculated the retirement benefit which it advised was equivalent to the amount set out in the Policy. Attachment B [Ex PX, 2-34] to the board papers of 2 May 2001, entitled “Retirement Benefit to Mr Nicholas Whitlam” [Ex PX, 2-13] comprised the advice from KPMG as to the correct calculation of Mr Whitlam’s retirement benefit, in accordance with the Policy.

111 Schedule A to the KPMG advice provided a break down of the total payments received by Mr Whitlam during the period 1 April 1998 to 31 March 2001 from entities within the broader NRMA group, which includes payments received from Association. These amounts included payments made by those entities to the NRMA Staff Superannuation Plan on account of salary sacrifice by Mr Whitlam but excluded the notional amount of employer contributions required to fund Mr Whitlam’s entitlements under the Plan [Ex PX, 2-34 to 2-35]. (KPMG later recognised that the treatment of salary sacrifice contributions was a matter of law – Ex DX, tab 54.)

112 The payments in Schedule A of the KPMG advice were reconciled with information disclosed in the published financial statements of Association, Insurance and NRMA Building Society Limited and the individual financial statements of SGIO Insurance Limited (“SGIO”) and Insurance Manufacturers of Australia Limited (“IMA”) over the 1998, 1999 and 2000 financial years (2-35). KPMG also noted that the footnotes to note 12 of the defendant’s 1999 annual report [Ex PX, 2-48] and note 13 to its 2000 annual report [Ex PX, 2-52] (both of which were signed by Mr Whitlam) stated:

113 Nevertheless, KPMG adopted an approach which was favourable to Mr Whitlam in taking such sums into account when calculating the retirement benefit that might be paid to the plaintiff under the Policy on account of remuneration received from the entities which had become subsidiaries of the defendant (as opposed to remuneration received from Association).

114 For the 2001 financial year, KPMG included payments vouched to the defendant’s payroll system for the period to 31 March 2001 and also took into account an additional $45,000 payment which was resolved by the Board on 4 April 2001 as payable in relation to Mr Whitlam’s services on IAG’s due diligence and listing committees.

115 The KPMG advice notes that “[IAG’s] retirement payment policy excludes amounts paid to a … Director in respect of services as a director of Association” [Ex PX, 2-36]. Consequently, Schedule B to the KPMG advice separately identified components of the remuneration paid to the plaintiff by entities within the broader NRMA group using figures extracted from IAG’s finance department. In this regard, KPMG excluded remuneration paid to Mr Whitlam for service on the Project Outlook steering committee and the Project Outlook due diligence committee on the basis that these fees were paid for and expensed by Association [Ex PX, 2-36].

116 Schedule C to the KPMG advice is a reconciliation of the total remuneration paid to Mr Whitlam over the three year period so as to calculate what, in the opinion of KPMG, was the final maximum retirement benefit that could be paid to the plaintiff under the Policy. KPMG calculated this amount to be $637,858, less any amount payable to Mr Whitlam under the Plan [Ex PX, 2-37]. KPMG also advised that the rules of the Plan did not trigger a benefit payment under the Plan’s rules because Mr Whitlam remained as a director of Association. As a result, KPMG indicated that “[h]aving regard to the principles underlying the Board’s formulation of its policy on paying retirement benefits, it may be pertinent for the Board to consider whether the existing rules of the Plan continue to be appropriate…[and] [i]f the rules are seen to be inappropriate, then the Board would need to initiate action to seek a change to the Plan’s rules…” [Ex PX, 2-37]. KPMG then provided a calculation of the amounts IAG would need to pay in the event that the rules of the Plan were amended to allow a benefit payment to be made from the Plan on Mr Whitlam’s resignation from the Board [Ex PX, 2-38].

3 May 2001

117 The Retirement Policy was confirmed at a further board meeting on 3 May 2001 in respect of all directors.

118 The minutes of the board meeting [PX 2-84] included:

119 At least by 3 May 2001 all external sign offs in relation to the retirement policy had been satisfactorily received [Mr Astbury at transcript 224.2, Mr Hamilton at transcript 315.22, Mr Ross at transcript 339.6].

120 Mr Ross gave evidence that, as at 3 May 2001, an amount had been identified [transcript 339.3].

121 The following events which also took place at the meeting should be noted:

· The Group Secretary and General Counsel, Ms Gaye Morstyn, tabled, and the board discussed, the 2 May 2001 board paper entitled “Members Requisition for Directors to Convene a General Meeting”. The Board also received oral advice from a partner of the defendant’s external solicitors, Mr Atkin, as to its obligation to convene a general meeting upon the receipt of the requisition and the apparent validity of the requisition. The board then discussed the logistical difficulties in calling a general meeting, the costs associated with convening such a meeting (particularly given the defendant’s unusually large shareholder base), the proximity of such a meeting to the defendant’s scheduled annual general meeting on 2 November 2001 and the possibility of approaching a representative of the requisitionists to negotiate a compromise arrangement [Ex PX, 2-83].

· The chairman noted that he had been approached by Mr Snodgrass with a request for an undertaking that the Board not proceed to make any payment to the plaintiff by way of directors’ retirement benefit until the matter could be considered by a general meeting of IAG. The chairman noted that he indicated to Mr Snodgrass that he was not able to give any such undertaking until he had brought Mr Snodgrass’ request before the Board on 3 May 2001. The chairman further noted that, despite this, the requisition had been received by IAG on the next day (2-84: The references to “April 2001” in the final paragraph of 2-83 appear to be typographical errors and should instead be read to understood to refer to “May 2001”).

· Mr Atkin then advised the board that it had the power to pass a resolution to apply the Policy (subject to it being satisfied as to the adequacy of any outstanding sign-offs) without the necessity of proceeding to a general meeting, if the board believed that it was in the interests of the defendant to do so. Mr Atkin further advised that, in relation to the defendant’s position as regards the plaintiff, the decision to make any payment, and the amount of any such payment, was a discretionary matter for the board (except for superannuation entitlements) subject to the Corporations Law and IAG’s constitution.

· Mr Reid of KPMG then addressed the board on the basis of calculations in relation to the plaintiff. Mr Reid referred to, and the board noted, KPMG’s letter dated 1 May 2001, which formed Attachment D to Mr Brown’s paper dated 2 May 2001 entitled “Retirement Benefit to Mr Nicholas Whitlam” [Ex PX, 2-34]. The board resolved that “[the defendant] make a request to the Secretary of the NRMA Superannuation Plan to consider an amendment to the rules of the Plan so as to allow a benefit payment to be made to a retiring director from the Plan in respect of his or her services as a Director of either [the Defendant] or NRMA Limited if he or she resigns as a Director of either of those companies”. The minutes continue: “it was agreed that the sign-off by KPMG on the basis of the monetary calculations in respect of any payment to Mr Whitlam under the Directors Retirement Policy was satisfactory and was accepted by the board” [Ex PX, 2-85].

· The board then resolved as follows [Ex PX 2-86 to 2-87]:

“(1) That subject to the Board being satisfied as to the adequacy of the final sign-off, namely from Egan Associates in its letter from John Egan dated 3 May 2001, (the consideration of which was deferred to later in the meeting), the Board confirmed its Policy in relation to directors retirement benefits and its application to all directors.

(2) To defer considering the application of its policy on retirement benefits for non-executive directors to any directors until shareholders had had an opportunity to vote on the proposed amendment to the [defendant’s] constitution at the earlier of the [defendant’s] scheduled annual general meeting in November or an extraordinary general meeting called in response to the requisition.

(3) That no payment would be made to, nor benefit conferred on, any retiring non-executive director by the [defendant] in connection with retirement from office until the time referred to in resolution 2 above.

(4) To authorise Mr RA Ross and Ms AJ Keating to approach Mr Snodgrass, as a representative of the requisitionists, or another representative of the requisitionists, seeking that person’s co-operation in obtaining withdrawal of the requisition by the other requisitionists or alternatively supporting and applying to the Court for orders permitting the [defendant] to defer convening a general meeting to consider the proposed amendment to a time no later than the date of the company’s scheduled annual general meeting.

(5) To provide logistical support to Mr Snodgrass, or another representative of the requisitionists in seeking the withdrawal of the requisition and to pay the fees of the requisitionists on any application to the Court where they support the orders sought by the [defendant].

(6) To authorise an application being made to the Court to seek orders extending the period in which the [Defendant] is obliged to convene a general meeting to consider the proposed amendment to a time no later than the date of the [defendant’s] annual general meeting.

(7) That authority be given to provide an undertaking to the effect of resolution 3 above either to one or more of the requisitionists in seeking their support, or to the Court in seeking formal orders, for deferral of any required general meeting.

· Mr Whitlam’s retirement from IAG and from Association are wholly independent events. Contrast this with the situations in both Claremont Petroleum NL v Cummings and Lincoln Mills (Aust) Ltd v Gough. Indeed, the facts suggested that Mr Whitlam’s retirement from IAG would have resulted in him being able to continue to serve on the board of Association for a longer period of time.

· Wilcox J [at 274] expressed the view that the words ‘in connection with’ did not necessarily require a causal relationship between the two things.

· In both Claremont and Lincoln Mills, the Courts were dealing with the phrase ‘in connection with’ in legislation very similar to that which is relevant to the present case. In Lincoln Mills, the statute operated against ‘compensation…(received) as consideration for or in connexion with his retirement from such office’ [at 199]. At issue was whether the benefit was paid in connection with the defendant’s retirement from his office as director. In finding for the defendant, Hudson J said, “[t]he defendant’s right to receive it and the company’s obligation to pay it was in no way dependent upon his loss of or retirement from the office of director” [at 199]. Reading Claremont in the light of Lincoln Mills, use by Wilcox J of the word "necessarily" seems to me to leave open the possibility that in a given circumstance, the lack of a causal nexus between the two events under consideration may be determinative. This does not detract from the wide import of the phrase, and does not suggest that the true character of the nature and circumstances of the payment is not to be fully investigated: cf Lincoln Mills at 199.

· It should be noted that in Commissioner for Superannuation v Miller (1985) 63 ALR 237, the Full Federal Court held that the words ‘connected with’ in the Superannuation Act 1976 (Cth) were ‘concerned with questions of causation.’ [per Davies J at 238, Beaumont J at 244 and Pincus J at 247]

· Depending upon the interval between retirements from Association and IAG, there was present both a possibility that on Mr Whitlam’s retirement from Association, the retirement benefit calculation could have included none, some or all of his remuneration from IAG during the relevant three/five period. There has been no suggestion that Mr Whitlam resigned from Association when he did in order to take the benefit of including his IAG salary in the superannuation benefit calculation.

· Hence, the timing of the superannuation payment was independent of when Mr Whitlam’s resignation from IAG occurred. Indeed, the timing was wholly dependent on his resignation from Association, which as earlier held was an independent event from his IAG resignation.

253 For those reasons the holding is that the whole of the amount of $207,006.97 ought to have been added to the lump sum payment to Mr Whitlam on his retirement from Association.

Reverting to the primary superannuation argument

254 In all of the circumstances it is strictly unnecessary to deal with the first of the arguments. It may however be appropriate, without deciding the issue, to shortly indicate the difficulties which seem to me to arguably arise from that analysis.

255 In my opinion, the plaintiff has misconceived the proper construction of sections 200B, 200F and 200G. In closing submissions, the defendant proposed its interpretation of the sections in question. In what follows, I have adopted much of the defendant’s submissions on this issue, and have also elaborated on some nuances that were not addressed in either submission.

Employer contributions of $65,775

256 The submission was as follows:

257 I was not entirely clear at to what the plaintiff meant in stating that “in calculating the payment limit [the subject contributions] are excluded”. On my analysis, the effect is simply that the $65,775 does not form any part of the payment limit. Perhaps that was being suggested. However, the following sentence in the plaintiff’s submissions “That should have released an additional $65,775 of the amount withheld by reference to the superannuation payment” does not seem to follow, as the evidence clearly shows that Mr Whitlam’s retirement benefit included the $65,775.

258 The finding in favour of the alternative superannuation argument makes it unnecessary to further deal with this issue.

Salary sacrifice amount

259 The defendant’s reply to this submission is that the $36,187 cannot be regarded as salary sacrifice contributions from Mr Whitlam. The defendant’s submissions in this regard are accepted and set out below.

260 It has not been shown that any contributions were "made by" Mr Whitlam himself within the meaning of s200G (4)(a). To the extent that he relies upon contributions made by IAG in respect of (and at the request of) Mr Whitlam, on a "salary sacrifice" basis, the result of salary sacrifice is to eliminate the gross income so sacrificed as income to which Mr Whitlam is entitled. It is remuneration which Mr Whitlam elects to forego in consideration of other benefits: see Wood v Federal Commissioner of Taxation (2003) 51 ATR 1227, at [12], summarising the effect of Taxation Ruling TR 2001/10. Those notional contributions cannot be regarded as having been by Mr Whitlam himself, where he had elected not to receive the remuneration from which they were funded. The benefit he received (apart from a tax benefit – see below) was that IAG would make contributions to the Plan in respect of Mr Whitlam. But those contributions were not "made by" him, since he had foregone the remuneration from which they were funded.

261 Mr Whitlam cannot have the tax benefit resulting from foregoing income, and then claim the contrary for the purposes of s 200G of the Corporations Act. In other words, in accordance with well established legal principle (see, e.g., VACC Insurance Ltd v BP Australia Ltd (1999) 47 NSWLR 716, at [32]), he cannot approbate and reprobate. As Schedule A to the KPMG report of 1 May 2001 shows [Ex PX, 2-39], Mr Whitlam received, apparently without complaint, group certificates showing an income figure net of the amounts which were contributed by IAG and its related bodies corporate to fund his superannuation payment. Presumably he submitted tax returns showing that he had derived the lower figures and thereby incurred lower tax. He cannot now contend that the income so sacrificed was really his money after all and thus money contributed by him to the Plan.

Operation of Division 2 of Part 2D.2

262 The intent of Division 2 of Part 2D.2 of the Corporations Act 2001 is to prevent a company from paying a retirement benefit to a director which Parliament considers excessive. The Act achieves this by imposing the general requirement that retirement benefits cannot be paid without the approval of members. In order to minimise the burden to business, the Act provides exceptions to this general requirement. These exceptions allow, inter alia, for a benefit to be paid without member approval when:

· that benefit is paid in connection with that person’s retirement from the company;

· that benefit is paid for past services which the person rendered to the company or its related bodies; and

· the payment does not exceed a “payment limit” determined by a formula set out in the statute

263 In approaching these sections, one must distinguish between two types of benefits. The first is the benefit that is given by the employer company to the superannuation fund. The Act treats this benefit independently of how this benefit is later transferred, whether in whole or in part, to the retiring director. These first type of benefits are the subject of sections 200F and the definition of “prescribed circumstance” in subsection 200B(3). The second is the benefit that is given by the superannuation fund to the retiring director. These second type of benefits are the subject of section 200G, and particularly subsection 200G(4).

264 Once this distinction is recognised, the framework of Division 2 of Part 2D.2 becomes relatively simple to understand.

Benefits given by employer companies to superannuation funds

265 First, the phrase “in connection with” is one of wide import. Its application to the current case is critical to Mr Whitlam ‘s alternative superannuation argument which was explained above and it is not necessary to repeat the earlier reasons. I accept IAG’s submission that the wide definition of “in connection with” picks up benefits given to superannuation funds by employer companies where that benefit impacts upon the obligation due to the retiring director.

266 This benefit given by the employer company may have no effect on the quantum of the benefit received by the retiring director, and there is a risk of double-counting (that is, of inclusion in the payment limit both when paid by the employer company and later when paid by the superannuation fund) if this benefit is picked up at this first transaction. As such, sections 200F(1)(b) and 200B(3)(a) ensure that this first payment, from the employer company to the superannuation fund, do not fall within the section 200B general prohibition.

267 Section 200F(1)(b) states that the section 200B(1) prohibition does not apply to benefits given in “prescribed circumstances”. Section 200B(3)(a) describes a prescribed circumstance as occurring where:

(a) a company, or an associate of a company, gives a benefit to a superannuation fund solely for the purpose of enabling or assisting the superannuation fund to give to a person a benefit in connection with a person's retirement from an office in the company or a related body corporate…

268 The concluding words of 200B(3) make it clear that it is the benefit transferred from the employer company to the superannuation fund which is to be considered.

269 Up to this point, IAG’s submission on this matter has been adopted. It is appropriate to go further in analysing the proper application of section 200B(3)(a).

270 It was not made clear on IAG’s submissions whether it is put that 200B(3)(a) applies to all benefits given by an employer company to a superannuation fund or whether it applies to only certain types of transactions. In my view, the words of section 200B(3)(a) make clear that it is intended to operate only against certain types of transactions. The words “solely for the purpose of enabling or assisting the superannuation fund” demonstrate that not all benefits given by employer companies to superannuation funds will be caught. To my mind, the use of the words “enabling or assisting” means that only those benefits given by employer companies to superannuation funds which do not affect the quantum of the obligation due from the superannuation fund to the retiring director will have been given in “prescribed circumstances”. An interpretation where other benefits are included within the definition of “prescribed circumstances” - that is, where the benefit given by the employer company to the superannuation fund, in effect, increases the superannuation payout otherwise due to the retiring director – ignores the fact that Parliament has chosen to use the specific words “solely for the purpose of enabling or assisting”. Such payments do more than enable or assist a payment, and ought not to be construed as having been given in “prescribed circumstances”.

271 Here, IAG gave a $10,575 benefit to NRMA Superannuation, purportedly in relation to Mr Whitlam’s future retirement, although no detailed evidence was given on the matter. This payment would not have affected the quantum of any payment that NRMA Superannuation would have to pay to Mr Whitlam, and on the above analysis, would appear to have been given in prescribed circumstances.

Benefits given by superannuation funds to retiring directors

272 The treatment of benefits given by superannuation funds to retiring directors depends on the proper construction of section 200G.

273 Section 200G(1)(c) states that the retirement benefit plus “all other payments” must not exceed the “payment limit”. Section 200G(4) states that in relation to pension or lump sum payments, any part of a pension or lump sum payment that is attributable to certain contributions may be disregarded in determining the value of “all other payments”. Section 200G(4) is set out below:

“(4) In determining for the purposes of paragraph (1)(c) the value of a pension or lump sum payment, disregard any part of the pension or lump sum payment that is attributable to:

274 The approach taken by Mr Whitlam has been to attempt to “attribute” the whole of the superannuation payment to these three sources, and in the process, show that the whole amount should be disregarded. This is not how section 200G operates.

275 It is possible that either some or the whole of a superannuation payment cannot be attributed to a contribution made by any person. In my opinion, once a connection between the superannuation payment and retirement has been drawn, the proper approach is to take as the starting position the presumption that the whole of a superannuation payment falls within the words “all other payments” within section 200G(1)(c). The next step is to inquire whether any part of this superannuation payment is attributable to contributions made by any of the two sources in section 200G(4)(a) or (b) and if so to disregard these amounts.

276 In my view, the proper construction of the complex of provisions within section 200G does not permit the task to be approached by asking, first, whether any part of a payment is attributable to contributions made by the retiring individual, secondly, whether any part is attributable to contributions made by the company, related body corporate or associate (in the circumstances listed in section 200G(4)(b)(iii)(A)-(B)), then thirdly, to disregard the balance of what has not been allocated in the first and second steps.

277 A defined benefit scheme, as in the present case, shows why the incorrect approach should not be adopted.

278 Here, the superannuation benefit is referable to three variables:

· The time served with the employer;

· The “Final Average Salary” [‘FAS’] being the average of the retiring directors three highest annual salaries over the past five years; and

· A constant value determined by the percentage contributions made by the retiring director during his time of employment.

279 Clearly, the first two variables operate independently of any contribution made by any person to the superannuation plan. Mr Whitlam submits that if the proper approach to section 200G(4) is taken, the whole of the superannuation payment should be disregarded because the third variable is referable to contributions made by the employee. However, this approach is misconceived.

280 Ignoring the effect of the contributions “holiday”, no part of the superannuation payment is seen to be “attributable” to any contributions made by Mr Whitlam. This is because there is no direct relationship between on the one hand, any parts of the superannuation payment and on the other hand, Mr Whitlam’s retirement benefit. A simple example will demonstrate.

· In scenario 1, assume that a director has served with a company for seven years, his FAS being $100,000, his total remuneration over the seven years being $300,000 and he contributed 9% of his salary over his time of employment. Therefore, he contributed $27,000 to the superannuation fund over his time of employment.

· In scenario 2, assume that a director has served with a company for seven years, his FAS being $100,000, his total remuneration over the seven years being $400,000 and he contributed 9% of his salary over his time of employment. Therefore, he contributed $36,000 to the superannuation fund over his time of employment.

· The only difference between the two scenarios is the total contribution made by the directors to their superannuation fund. In all other respects, their situations are identical, and, assuming they are both in the same superannuation fund, they will be entitled to the same superannuation payment. This example highlights that the contributions made by Mr Whitlam to NRMA Superannuation were not made to his own account, but rather to the general funds of NRMA Superannuation. By making a larger contribution to the general funds, the member is rewarded by having a higher constant value applied to their retirement benefit calculation. However, it is clear that this constant value is not determined by the total amount of contributions made by the member.

281 For this reason “attribution” will only be established where it can be shown that the value of a contribution resulted in a similar increase in value of a pension or lump sum. In the present case, the value of the contribution resulted in an increase in the superannuation payment, however, such increase is not referrable to the value of the contribution, rather to a percentage figure that is set by the trust rules.

282 Applying the facts, no part of Mr Whitlam’s superannuation payment is referrable to a contribution made by him, or by any other person. In this regard, IAG’s submission set out below is accepted:

283 It is next convenient to turn to the remaining Project Outlook Committee Fees and Reimbursement of Project committee fees issues

Project outlook committee fees –agreement to share expense

284 This very closely fought issue may be determined shortly.

285 The nub of the matter concerns the fact that in calculating Mr Whitlam’s retirement, KPMG excluded any part of the committee fees paid to Mr Whitlam in respect of his participation on the Project Outlook Committees: the Outlook Steering Committee, the Outlook Implementation Committee and the Outlook Due Diligence Committee. Those fees totalled $30,000 for the financial year ended 30 June 1999 and $144,058 for the financial year ended 30 June 2000 (2-7, 2-8, 2-3 para 3).

286 When calculating Mr Whitlam's entitlement under the Policy, KPMG excluded $174,058, referable to Project Outlook committee fees paid by Association from its bank account to the Plaintiff in the years ended 30 June 1999 and 30 June 2000 [Ex PX, 2-34, at 2-41].

287 Mr Whitlam alleges that only 10%, or on an alternative approach none, of this sum ought to have been excluded.

288 That submission is rejected and for the following reasons:

· Association has never been either a subsidiary or a related body corporate of the defendant;

· all board fees which Mr Whitlam received in respect of his service as a director of Insurance were received from Association; and

· the Retirement policy makes clear that the retirement benefit would not include any fees paid by Association at all.

289 Mr Whitlam's submissions seek to outflank these considerations in a number of ways which may shortly be summarised as:

- at the express or implied request of Insurance;

- to import the statutory concept of "remuneration" to be found in section 200G so that the reference to “directors fees, employer contribution to superannuation, committee fees and fees for extra services received from [IAG] and its subsidiaries" should not be read literally but should incorporate the wider definitions to be found in the legislation; and

- not to read the phrase “received from” found in the Retirement Policy as involving a departure from the plain use of the word “from” in section 200G(2)(b).

290 As to (a) this is simply a matter of impression. In my view the Retirement Policy is required to be construed by reference to the express terms used within it. However if it were appropriate to go outside of the terms of the Retirement Policy and to consider the board papers in the context of which the Policy came into being, then it is clear that those papers expressly made the point that fees paid by Association were to be excluded.

291 In the light of the answer to (a), the matters raised in (b) are simply irrelevant. In any event, it appears that the subject obligation to make payment of committee fees to committee members was a joint obligation of both Association and Insurance: "A covenant by two that they or one of them would pay is merely a joint covenant at law": Glanville Williams, 'Joint Obligations', Butterworth and Co, 1949 at 40. Internal arrangements between Association and Insurance were no more than that. The obligation of these companies to Mr Whitlam remained a joint obligation. Hence there is a fundamental misconception in Mr Whitlam's proposition that it is possible to sheet home to Association and to Insurance liability to pay to committee members only identified aliquot shares.

292 As to (c), I would accept that where a particular part of the board resolution as [in adopting a Retirement Policy] could be seen to include terms of art/specialised usage plainly referable to the terms used in a statute, it would likely be appropriate to construe the subject of such resolution consistently with the material provisions/scheme of such statute. However, in the present circumstances, the terms of the Policy do not use terms of art/specialised usage and in truth a close examination reveals that there is a real departure from the statutory wording. No mention is made in the Policy of any deduction for "employer superannuation contributions plus earned interest" which the scheme of Div 2 of Part 2D.2 requires. Importantly the term "total remuneration" is not used in the Policy in relation to directors who have served for more than five years. Further when the term "total remuneration" is used in the Policy (in regard to directors who have served more than three, but less than five years), no reference is made to the types of income which are listed in relation to directors who have served for more than five years.

293 Further it may be noted that section 200G refers to payments from the company and related bodies corporate. The retirement Policy refers to the company and its subsidiaries. This suggests that IAG purposely adopted a narrower approach in framing its Retirement Policy.

294 The court cannot under the guise of construing the Retirement Policy, engage in what would amount to a speculative rewriting of the Policy.

Association directors’ fees

295 Mr Whitlam’s submissions regarding these fees is set out below:

· KPMG excluded from the calculation of Mr Whitlam’s retirement benefit base directors fees received from Association totalling $236,250 (2-8). The evidence demonstrates that a substantial portion of those fees were paid by Association to Mr Whitlam in connection with the management of the affairs of Insurance at a time when Association was a related body corporate of Association. Accordingly the definition of “remuneration” in the Act and “fees received from” in the policy were satisfied for reasons previously given. Consistently with AASB 1024, the payment of those fees to Mr Whitlam was disclosed in the accounts of Insurance.

· The amount of the base fees must be allocated to reflect the portion referable to management of Insurance. Mr Whitlam’s assessment of 2/3 Insurance and 1/3 Association is supported by his evidence as well as by his reference to the fact that upon demutualisation his fees for IAG were twice those of his fees for Association (P6 para 15; P8 paras 5 and 6; T91 line 30).

296 I accept the proposition that either most or all of the Association directors’ fees received by Mr Whitlam qualify as remuneration from Insurance within the definition of the Accounting Standard and the Act. However, the finding that the Retirement Policy does not incorporate statutory definitions of “remuneration” means that these fees received from Association do not fall within any of the categories of income stated in the Retirement Policy. Accordingly, Mr Whitlam’s claim that his retirement benefit from IAG should have included amounts representing directors’ fees received from Association is rejected.

297 The plaintiff has sought to attribute his directors’ fees between Association and Insurance based on the amount of time he spent managing the separate entities. In light of the above findings there is no occasion for the Court to determine the propriety of this manner of splitting the directors’ fees between services on the boards of both companies.

Relief

Breach of Contract

298 Mr Whitlam has made good his entitlement to relief in terms of the wrongful deduction of his superannuation entitlements under the NRMA Superannuation Plan

299 Subject to the possible need to adjust the deductions for tax, for the reasons given above:

· the correct calculation of the amount of the retirement benefit pursuant to the retirement policy was $519,775.97;

· the holding is that this amount ought to have been paid to Mr Whitlam by 17 May 2001 [in my view, a reasonable time for payment of the benefit being a fortnight after the meeting on 3 May 2001].

300 Hence Mr Whitlam has made good an entitlement in terms of his breach of contract claim to be paid:

· the amount of $207,006.97 wrongfully deducted as his superannuation entitlements under the NRMA Superannuation Plan;

· Interest accordingly payable:

· on the sum of $312,769 from 17 May 2001 to 18 September 2003; and

· on the sum of $207,006.97 for the period 17 May 2001 up to date of payment pursuant to the order which is to be made.

[Presumably the quantification of the precise interest amount will come forward by agreement, in the absence of which the matter may be the subject of further submissions by the parties]

301 No submissions were advanced with respect to whether or not the deduction for tax which formed part of the calculation of 18 September 2003 would have to be adjusted in light of the findings such as those now made. The parties have leave to address on that issue.

Estoppel

302 By reason of the holding of liability for breach of contract there is no occasion for relief in terms of the alternative estoppel claim to be considered.

Declaratory relief

303 In the circumstances there is no utility in the Court travelling outside the above reasons in terms of the making of a declaration as to the proper construction of the Retirement Policy.

Short minutes of order

304 The parties are to bring in short minutes of order at which time submissions as to costs will be taken.

I certify that paragraphs 1 - 304
are a true copy of the reasons
for judgment herein of
the Hon. Justice Einstein
given on 23 February 2005
___________________
Susan Piggott
Associate

23 February 2005

11/03/2005 - typographic error: the date in paragraph 300 on page 133 reading 1May 2001 should have read 17 May 2001 - Paragraph(s) 300

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Citations

Nicholas Richard Whitlam v Insurance Australia Group Limited [2005] NSWSC 83

Most Recent Citation

Hodgson v Amcor Ltd (No 9) [2012] VSC 205

Cases Citing This Decision

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Whitlam v Insurance Australia Group Ltd [2005] NSWSC 200

Hodgson v Amcor Ltd (No 9) [2012] VSC 205

Cases Cited

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Statutory Material Cited

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ASIC v Whitlam [2002] NSWSC 591

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CITATION:	Nicholas Richard Whitlam v Insurance Australia Group Limited [2005] NSWSC 83 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	01/02/05, 02/02/05, 03/02/05, 04,02,05, 07/02/05, 14/02/05, 15/02/05
JUDGMENT DATE :	23 February 2005
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	Einstein J
DECISION:	Breach of contract case upheld. Plaintiff entitled to damages for breach of contract.

CATCHWORDS:	Representations made to plaintiff that if he resigned his directorship of defendant he would be entitled to participate under Retirement Policy to be adopted by it receiving promptly the maximum benefits to be calculated in accordance with that policy - Corporations - Directors - Entitlement of a director to receive a retirement benefit in an amount which conformed with Retirement Policy adopted by defendant corporation - Corporations - Authority of chairman to enter into contract with director relating to retirement benefits - Contract - Holding that defendant entered into enforceable contract with plaintiff whereunder he agreed to resign from his position as a director, defendant agreeing that plaintiff would be entitled to participate under Retirement Policy to be adopted by it receiving promptly the maximum benefits to be calculated in accordance with that policy - Estoppel - Alternative estoppel case made out - Character of representations made to plaintiff apt to induce in him belief that he had an enforceable entitlement against defendant to be promptly paid for the full retirement benefit if he resigned - Conduct of defendant following plaintiff's resignation as director held to be unconscionable in the circumstances - Trade Practices Act 1974/Fair Trading Act 1987 - Whether representations made in trade or commerce - Corporations - Consideration of scheme of Part 2D.2 Corporations Act 2001 - Section 200B - Section 200F - Section 200G - Section 9 definition of "remuneration" - Australian Accounting Standard Board (AASB) Accounting Standard 1017 - Related Party Disclosure - Construction - Whether appropriate to construe Retirement Policy in light of Corporations Act definitions of "remuneration" - Application to the particular circumstances - Liability - Joint obligors - Equity - Declaratory Relief - Utility
LEGISLATION CITED:	Corporations Act 2001 (Cth) Fair Trading Act 1987 (NSW) Superannuation Act 1976 (Cth) Trade Practices Act 1974 (Cth)
CASES CITED:	Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Australian Securities and Investments Commission v Whitlam [2002] NSWSC 591; (2002) 42 ACSR 407 Beach Petroleum NL v Johnson (1993) 115 ALR 411 Blatch v Archer (1774) 98 ER 969 Claremont Petroleum NL v Cummings (1992) 110 ALR 239 Commonwealth of Australia v Verwayen (1990) 170 CLR 394 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 Foran v Wight (1989) 168 CLR 385 Galaxidis v Galaxidis [2004] NSWCA 111 Gissing v Gissing [1971] AC 886 Giumelli v Giumelli (1999) 196 CLR 101 Legione v Hateley (1983) 152 CLR 406 Lincoln Mills (Aust) Ltd v Gough [1964] VR 193 Martin v Tasmania Development and Resources (1999) 163 ALR 79 NRMA Insurance Group Ltd v Spragg (2001) 38 ACSR 174 NRMA Insurance Ltd (No 1), Re (2000) 33 ACSR 595 Oran Park Motor Sports Pty Limited v Fleissig [2002] NSWCA 371 Pacific Carriers Ltd v BNP Paribas (2004) 208 ALR 213 Russo and Anor v Aiello (2003) 201 ALR 231 Sali v SPC Limited (1991) 9 ACLC 1511 Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466 Superannuation, Commissioner for v Miller (1985) 63 ALR 237 Thompson v Palmer (1933) 49 CLR 507 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 211 ALR 342 VACC Insurance Co Ltd v BP Australia Ltd (1999) 47 NSWLR 716 Village Building Co Ltd v Canberra International Airport Pty Ltd (2004) 210 ALR 114 Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 Whitlam v Australian Securities Investments Commission [2003] NSWCA 183; (2003) 57 NSWLR 559 Wood v Federal Commissioner of Taxation (2003) 51 ATR 1227
PARTIES:	Nicholas Richard Whitlam (Plaintiff) Insurance Australia Group (Defendant)
FILE NUMBER(S):	SC 50035/04
COUNSEL:	Mr A Bannon SC, Mr J Stephenson (Plaintiff) Mr T Bathurst QC, Mr A Leopold (Defendant)
SOLICITORS:	Watson Mangioni (Plaintiff) Mallesons Stephen Jaques (Defendant)