Ogden v Britax Automotive Equipment Pty Ltd (ACN 007165442)
[2013] QDC 83
•1 May 2013
DISTRICT COURT OF QUEENSLAND
CITATION:
Ogden v Britax Automotive Equipment Pty Ltd (ACN 007165442) [2013] QDC 83
PARTIES:
PETER JOHN OGDEN
(plaintiff/respondent)
v
BRITAX AUTOMOTIVE EQUIPMENT PTY LTD (ACN 007165442)
(defendant/applicant)
FILE NO/S:
1362/12
DIVISION:
Civil
PROCEEDING:
Applications
ORIGINATING COURT:
District Court, Brisbane
DELIVERED ON:
1 May 2013
DELIVERED AT:
Brisbane
HEARING DATE:
27 March 2013
JUDGE:
Farr SC DCJ
ORDER:
The application is allowed.
CATCHWORDS:
APPLICATION – disclosure – application successful - Uniform Civil Procedure Rules 1999 – rule 211(1) – whether respondent failed to mitigate his loss – summary dismissal – where respondent submits issue at trial will be a determination as to whether there were justifiable grounds for a summary dismissal – where applicant submits respondents claim is for damages for breach of contract – whether mitigation of damages is in issue – where contract must be worded in such way as to ‘entitle’ or ‘promise’ payment in lieu of notice – where it is inadequate for the contract to allow employer to make such payment at discretion or infer that payment should be made
COUNSEL:
G Coveney for the applicant
A Vasta QC with J Dwyer for the respondent
SOLICITORS:
H W L Ebsworth Lawyers for the applicant
Fraser Power Lawyer and Notary Public for the respondent
Introduction
The applicant has applied for an order pursuant to rule 211(1) of the Uniform Civil Procedure Rules 1999 Queensland (UCPR) that the respondent disclose documents relevant to allegations in the pleadings that he has failed to mitigate his loss. The respondent opposes the application.
Background
The respondent was employed by the applicant between February 2001 and November 2011. In September 2006, the respondent and the applicant executed an Executive Employment Agreement, which set out the terms of the respondent’s employment.[1]
[1]See Exhibit “WR-1” to the affidavit of Warren Lesley Reeve filed 19 March 2013
The respondent was summarily dismissed by the applicant on 2 November 2011.[2] The respondent asserts that there were no grounds for summary dismissal and relies on the provisions of the Employment Agreement relating to non-summary dismissal. Relevantly, clause 17.1 of the Employment Agreement states:
“17.1 Non-Summary Dismissal
(a)In order for the Signatory to terminate his employment, the Signatory must give the Company the period of notice of termination as set out in Part 3 of the Second Schedule.
(b)In order for the Company to terminate the Signatories employment, the Company must give the Signatory the period of notice of termination as set out in Part 4 of the Second Schedule.
(c)Payment in lieu of notice can be made by the Company to the Signatory at the Companies discretion.
(d)During the notice period the Company reserves the right to require the Signatory not attend the work place or perform any or all of his duties.”
[2]See paragraph 4 of the statement of claim (admitted at paragraph 1 of the amended defence and counter claim)
The respondent has submitted that the issue at trial (apart from the counter-claim) will be a determination as to whether there were justifiable grounds for a summary dismissal under the terms of the employment agreement. He acknowledges that if the court finds that there were, then his claim must necessarily fail. If however, the summary dismissal was invalid because the grounds had not been made out, then pursuant to clause 17.1(c) twelve months notice had to be given. It is submitted that in the absence of such a period of notice, the respondent was entitled to a liquidated sum equal to 12 months earnings.
The respondent submits that this matter is to be distinguished from an action for wrongful dismissal under a contract that makes no specific provision for notice or the payment of a sum of money in lieu of notice. That is an important point on this application, for in such a case an employee may make a claim which could include a sum representing loss of wages between the date of dismissal and the date when the dismissed employee found alternative employment.
The applicant submits however, that the respondents claim is for damages for breach of contract. In that regard, the applicant relies upon paragraphs 12 and 13 of the Statement of Claim:
“12.The failure of the defendant to give the plaintiff the 12 months notice period constitutes a breach of the contract.
13.The plaintiff considers that in lieu of the notice specified in paragraph 11 hereof the plaintiff was entitled to the payment equal to 12 months of his salary, namely $130,000 plus bonuses.”
The applicant also relies upon paragraph 11(b) of its defence:
“11.As to paragraph 13 of the Statement of Claim, the defendant:
…
(b)Says that, to the extent that the plaintiff has suffered loss and damage and is entitled to any amount of damages as alleged, which is denied, the plaintiff:
(i)has a duty to mitigate his loss and damage;
(ii)has failed to take steps to mitigate his loss and damage; and
(iii)any such loss and damage was caused or in the alternative, contributed to, by the plaintiff’s failure to mitigate his loss and damage.”
The applicant has also referred to paragraph 28 of the respondents reply:
“28. In respect of paragraph 11(b)(i), (ii) and (iii) of the amended defence, the plaintiff:
(a)denies that the has a duty to mitigate his loss in a claim for liquidated damages arising from a contractual entitlement on termination; or
(b)denies that he has failed to mitigate his loss; and
(c)particulars of mitigation are a matter of evidence that will be dealt with in the process of disclosure of documents and evidence given by the plaintiff at trial; and
(d)are otherwise not matters of material fact required to form part of these pleadings.”
The respondent has not made any disclosure of documents relevant to the allegation that he has failed to mitigate his loss.
Is Mitigation in Issue?
The respondent asserts that the question of mitigation does not arise because his claim is for payment in lieu under a contractual obligation on the employer to make the payment. The applicant accepts that if that is found to be the correct categorisation of this claim, then the issue of mitigation is irrelevant as it does not arise in such circumstances. The principles in that regard are well understood.[3] The applicant further accepts that if the issue of mitigation does not arise then the provisions of rule 211(1) UCPR have no application as this application would relate to an irrelevant issue.
[3]See Abrahams v The Performing Rights Society (1995) ICR 1028
The applicant submits however, that the determination as to whether a clause gives a contractual right to damages is dependant upon the facts of a particular case. It is submitted that the key issue in this case will be whether the contract conferred an entitlement to payment in lieu of notice, or merely provided the employer with an election as to whether or not to make payment in lieu.
I agree that this is the principle issue for determination in this application.
This Application
This application seeks to compel the respondent to make discovery of documents relating to a business he allegedly commenced after his employment with the applicant ceased.
The applicant argues that such documents are relevant to the question as to whether the respondent has done anything to mitigate his loss.
The respondent asserts that this is a claim that can be categorised as one akin to that seeking a liquated sum specified in an executive employment agreement and accordingly, the issue of mitigation of damages is not applicable.
Relevant Authorities
The respondent places heavy reliance upon Abrahams v The Performing Rights Society[4]. In that matter the employment contract relevantly was in the following terms:
“In the event of termination of your employment by the Society, either at the end of a fixed term contract period or at any time during the final two years of such period, you would be entitled, other than in the case of dismissal for gross misconduct, to a period of notice of two years or an equivalent period in lieu;”
In that matter the English Court of Appeal held that the terms of the contract conferred an entitlement on the plaintiff to be paid two years in lieu, and that such sum was in the nature of a contractual debt or liquidated damages, and therefore, was not subject to principles of mitigation. Lord Justice Hutchison in that matter concluded that the provision in the contract for payment in lieu gave rise to a contractual entitlement. His Honour said:[5]
“It seems to me that, as a matter of principle, where there is a liquidated damage clause which is valid – ie cannot be impugned as a penalty – there is no room for arguments on mitigation of damages – a concept relevant only in cases where damages are at large.”
[4]Supra
[5]See page 11
The applicant however distinguishes this matter from Abrahams because the word “entitled” exists in the employment contract in Abrahams. In support of that argument, the applicant has referred to the matter of Cerberus Software Ltd v Rowley[6], in which the relevant employment contract contained the following termination clause:
“18. Termination of employment
1.Employment under this contract shall continue unless and until determined by the employer under Clause 17 above and Appendix 1 or by either party giving to the other not less than six months notice of termination.
2.Notice may only be given as to expire at the end of a monthly pay period. It is agreed that the employer may make a payment in lieu of notice to the employee. The employee shall not be entitled to any other benefit other than pay or money in lieu of such benefits in respect of any period for which he has been paid in lieu of notice.”
[6][2001] EWCA Civ 79
The Court in that matter expressly distinguished the above provisions from those in Abrahams, and noted:[7]
“It gives either party the right to terminate the contract on not less than six months notice of termination but the all important words are ‘it is agreed that the employer may make a payment in lieu of notice to the employee’. In my judgment that means that the employer is given the right to elect whether or not to make a payment in lieu of notice. Where the company is given the choice whether to pay or not to pay, (sic) the language is totally inconsistent with a contractual right given to the employee to insist that he be paid six months salary in lieu of notice. In my judgment the Industrial Tribunal and the Employment Appeal Tribunal erred in so construing this contract. This contract expressly provided that the employment would continue unless and until determined by either party giving the other not less than six months notice of termination. The company ignored that and chose to terminate summarily. In doing so, it was in breach of the obligation to give six months notice.
…The claim was for damages for breach of contract, ie damages for wrongful dismissal. The measure of damages is the amount that the employee would have earned had the employment continued according to contract but then the ordinary rule applies that the employee must minimise his loss by using due diligence to find other employment.”
[7]Paragraphs 14 and 15
The applicant has submitted that the present case is far more akin to Cerberus than to Abrahams for the reason that the employment agreement in this matter does not entitle the employee to payment in lieu of notice, but rather, provides to the employer the discretion to make a payment in lieu of notice. The applicant submits that it is this absence of entitlement which distinguishes those two cases and thus distinguishes Abrahams from this matter. Unfortunately for the respondent, upon examination of these cases, I tend to agree.
My attention has also been drawn to the matter of Reilly v Praxa Ltd [2004] ACTSC 41 a single Judge decision of the ACT Supreme Court. In that matter, the relevant clause in the employment agreement stated:[8]
“In the event that Praxa gives notice and requires that the employee ceases duties immediately, Praxa will make payment in lieu of notice. …”
Justice Gray found that that matter was more akin to Abrahams than Cerberus as there was an obligation to give and pay six months pay in lieu of notice rather than there being discretion to do so[9].
[8]Paragraph 6
[9]Paragraph 32
The respondent has referred me to the decision of Earney v Australian Property Investment Strategic Pty Ltd[10] in support of his submission that this is a matter which is not subject to principles of mitigation of loss. Unfortunately the facts in that matter do not support that submission. In that matter, the relevant provisions of the contract were contained in clauses 8.2, 8.3 and 8.4:
[10][2010] VSC 621
8.2 Termination
The Company may terminate the Employment upon giving the Employee three months written notice for failure to perform the position to the satisfaction of the Company. Such notice will not be given without a prior warning to the Employee detailing the areas of under performance and time period for rectification. Should the Company not desire the Employee to work out the notice period, payment in lieu will apply. This clause does not apply to a termination during the probation period or to Summary termination detailed in clause 8.3.
8.3 Summary Termination
The Board may terminate the Employment immediately by giving written notice to the Employee and without being required to provide any compensation or payment in lieu of notice if the Employee;
a) engages in serious or gross misconduct;
b) breaches any duty or responsibility referred to in sub clause 1.5 or breaches clause 7;
c) commits an act of fraud or dishonesty;
d) engages in conduct that puts any AFS License at risk;
e) is absent from the companies premises (or does not or is not able to perform their duties and responsibilities) for a period of not less than three months for any reason.
8.4 Change of Control
If a third party acquires control of at least 50% of the issued shares in MacarthurCook Ltd in the period up to 30 June 2010 and the Employees employment is terminated during this period other than for cause, then the Employee shall be entitled to a termination payment equal to 12 months base salary.
The respondent has drawn my attention to paragraphs 102 and 103 of that judgment. Paragraph 103 states:
“I do not accept the defendant’s submissions in this regard. The termination payment was an agreed liquidated sum, to be paid on the occurrence of the event specified in clause 8.4. In these circumstances the termination payment is not subject to principles of mitigation of loss.”
The respondent’s reliance on that paragraph is ill-founded in that it clearly relates only to a termination payment that arose in circumstances envisaged by clause 8.4. In fact, in that case, Hargrave J found that the provisions of clause 8.2, which deal with the issue of a payment in lieu of notice, should not result in an order for such a payment as the provisions of clause 8.4 had application. He made no other relevant finding in relation to clause 8.2.
Conclusion
The applicant has submitted that each case must necessarily depend upon the wording of its own individual employment contract. I agree with that submission. The respondent submits that the applicant’s interpretation is a distortion of the English language and results in a non-sensical outcome. Unfortunately for the respondent, the applicant’s interpretation appears to be the correct interpretation upon consideration of the relevant authorities. The effect of those authorities is that the contract must be worded in such a way so as to “entitle” or “promise” the payment of a specified sum in lieu of notice. Wording that simply allows the employer to make such a payment at his or her discretion or that infers that such a payment should be made is inadequate in the circumstances.
In this case, clause 17.1(c) confers a discretion on the applicant to make a payment in lieu. It does not confer a contractual right on the respondent to a specified sum. The respondents claim must therefore be categorised as a claim for damages and as such the principles of mitigation apply. Rule 211(1) therefore has application and requires compliance.
Order
The application is allowed.
I will hear submissions as to the nature of the order required and to the issue of costs.
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