Patrick John Bredel v Moore Business Systems Australia Ltd - [2002] NSWSC 185

No judgment structure available for this case.

CITATION: Patrick John Bredel v Moore Business Systems Australia Ltd [2002] NSWSC 185

CURRENT JURISDICTION: Equity Division
Commercial List

FILE NUMBER(S): SC 50139/00

HEARING DATE(S): 3, 4 and 5 October 2001, 4 to 8 February 2002 and 26 February 2002

JUDGMENT DATE: 28 March 2002

PARTIES :

Patrick John Bredel (Plaintiff)
Moore Business Systems Australia Ltd (Defendant)

JUDGMENT OF: Bergin J

COUNSEL : R A S Skiller leading E A Englebrecht (Plaintiff)
M F Holmes QC leading R F Crow (Defendant)

SOLICITORS: Ronald S Czinner & Co (Plaintiff)
Mallesons Stephen Jaques (Defendant)

CATCHWORDS: [CONTRACT] Terms of contract between plaintiff and defendant - whether defendant agreed to pay plaintiff 4% commission on incremental sales "for the life" of certain contracts won by the plaintiff. - [ESTOPPEL] Whether defendant represented to plaintiff that he would be paid 4% commission on incremental sales "for the life" of the contracts won for the defendant - whether defendant relied upon representation to his detriment.

CASES CITED: Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61
Courtney & Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd [1975] 1 WLR 297
Placer Development Ltd v The Commonwealth of Australia (1969) 121 CLR 353

DECISION: Summons dismissed

- 65 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

BERGIN J

28 MARCH 2002

50139/2000 PATRICK JOHN BREDEL V MOORE BUSINESS SYSTEMS AUSTRALIA LTD.

JUDGMENT

1 The plaintiff, Patrick John Bredel, seeks a declaration that “pursuant to the commercial contractual arrangements” made by him with the defendant he is entitled to be paid by the defendant commission at the rate of 4% as follows:

2 The plaintiff also claims that by accepting the plaintiff’s work and services in obtaining the contracts the defendant is estopped from denying the plaintiff’s contractual entitlement to 4% commission on these contracts. The plaintiff seeks an order that accounts be taken to ascertain the amount due and payable to the plaintiff. On the first day of the trial the plaintiff abandoned his quantum meruit claim (tr 7).

Background

3 The plaintiff was born on 17 May 1937. On 2 March 1987 he commenced employment with the defendant as a sales executive in the Lazer Printing Division. The defendant is principally engaged in the business of designing and printing business forms for clients pursuant to what has been described in the evidence as contracts for Print Management Services. Such services include the provision of electronic forms, security printing, customer communication services, corporate identity re-branding and national account management.

4 In 1988/89 the plaintiff transferred to the defendant’s Banking and Finance Division as a sales executive. During the period 1988/89-1991 the plaintiff earned an average income of approximately $70,000. His salary package was $37,000 plus a bonus and 4% commission on sales attributed to him. In 1991 his salary package was increased to $90,000 excluding any commission or bonus.

5 In about 1993 the plaintiff was promoted to the position of National Manager of the defendant’s Banking and Finance Division. His salary package, inclusive of car allowance and expenses, remained at about $90,000 per annum with a living away from home allowance of $10,000. The plaintiff’s responsibilities were split between Sydney and Melbourne with such arrangement continuing until 1995.

6 In about 1995 the plaintiff was transferred to the defendant’s Canberra office for the purpose of managing the Canberra office and to attempt to obtain the print contract for the 1996 Commonwealth Census. The plaintiff’s salary package remained at about $90,000 per annum together with an allowance of $750 per week and a bonus in the sum of $5,000 if the Canberra office budgeted sales of $11 million was exceeded. The defendant obtained the print contract for the 1996 Commonwealth Census, however the plaintiff was not paid any bonus or commission in respect of the winning of that contract.

7 In 1996/1997 the plaintiff’s health began to deteriorate and he applied for a transfer back to Sydney. That application was successful and in 1997 he was transferred to the defendant’s offices at Rhodes in Sydney with responsibility for special projects business development. The plaintiff’s remuneration remained at $90,000, consisting of salary of $67,500 per year and a guaranteed bonus of $22,500 per year.

8 In April 1997 the plaintiff suffered his first heart attack while working on a tender for the Bank of Queensland printing contract in the defendant’s Brisbane office. He apparently collapsed in his office and was transported to St Andrews Hospital in Brisbane in which he remained for five days. Dr James Cameron, cardiologist, reported on 12 May 1997 that the plaintiff had recently had problems with “hypertension, and findings on echocardiography of hypertensive heart disease”. Dr Cameron reported that the plaintiff’s cardiac condition was considered “a serious one” and suggested that the plaintiff have a period of approximately two months off work to institute life style changes, to control his hypertension and to undergo further cardiac investigation in Sydney. Dr Cameron recommended that at the end of the two month period the plaintiff should be reassessed as to his cardiac status and his ability to continue working full time. He also cautioned that the plaintiff had to change to part time employment. It is apparent the plaintiff did not take the two months leave suggested by Dr Cameron.

9 In October 1997 the plaintiff suffered a second heart attack while in Canberra on a business trip for the defendant. He attended the Woden Valley Hospital and after discharge from that hospital returned and was admitted to the St Andrews Hospital in Brisbane where he underwent a quadruple by-pass and myomectomy, sectioning of the left ventricle. After this operation the plaintiff claims he convalesced from approximately October 1997 to April 1998.

10 After three months of convalescence the plaintiff had exhausted all his sick leave entitlements and was in financial difficulties. He approached the Human Resources Director of the defendant, David Farrar (Farrar) with a request for an extension of his paid sick leave. Farrar informed the plaintiff that he could either retire or take long service leave. The plaintiff then arranged to take three months long service leave.

11 In March 1998 the plaintiff was contacted by the defendant’s then Sales Director, Barry Hughes (Hughes), and invited to attend the defendant’s conference at Pinnacle Valley in Victoria. The Pinnacle Valley conference took place in early March 1998 over a period of three days. During the conference the plaintiff had a number of discussions with the defendant’s Joint Sales Directors, Hughes and Ian Mackenzie (Mackenzie), during which he told them that he had been negotiating with the General Manager at Boral in relation to Boral changing their procurement methods. The plaintiff informed Hughes and Mackenzie that if he returned to work he would win the print management contract with Boral.

12 The conference was for three days including 3 March 1998 and the plaintiff claimed the following conversations took place:

13 The plaintiff also claims he had the following conversation with Hughes:

14 While the plaintiff was still at the conference he claims that Farrar informed him that Hughes and Mackenzie had told him that the plaintiff was going to return to work and that Hughes and Mackenzie had told him of “your agreement”. Farrar denied such conversation in his affidavit. He was not cross-examined.

15 The plaintiff claims he returned to work on 4 April 1998 and later received a memorandum from Farrar dated 25 March 1998 (Ex C1 p 195). That memorandum reads as follows.

Subject : 1998 Remuneration Plan

16 The accounts were not attached to the memo and there is no evidence that the plaintiff signed a copy of the memo as requested. On his return to work the plaintiff commenced researching, planning and negotiating a print contract with Boral. He also examined the prospect of print management contracts with Goodman Fielder, Rocla, Employment National, Austar, GE Crane and others. The plaintiff was not involved in the day to day sales of printed product or information technology products and was solely focused on persuading major corporations to embrace the concept of print management and for the defendant to be that print manager.

17 In May 1998 Colin Wells (Wells) the NSW State Manager of the defendant had a conversation with Mackenzie in which he informed Mackenzie that he has just seen Farrar’s memorandum of 25 March 1998 and that it “reads poorly because if he does secure a major contract it could be a large payout to Bredel”. Mackenzie informed Wells “look, I’m sure it’s under control. HR have signed off on it. HR is in control”.

18 On 21 August 1998 the plaintiff wrote to Mackenzie and Hughes (Ex. C p 265) referring to the “ugly subject” of salary that had arisen “as I approach the end of my initial six months following my return”. The plaintiff referred to the memo of 25 March 1998 from Farrar which he claimed set out a shipments budget of $2,000,000 and “guaranteeing a salary to be no less than my earnings in 1997”. After referring to his work activities since his return and noting that “the transitional selling of product did not eventuate” the plaintiff stated:

19 On 22 September 1998 Farrar wrote to the plaintiff in relation to his bonus potential (Ex C1 p 285). That memorandum was in the following terms.

Subject: 1998 Bonus Potential

20 On 23 September 1998 the plaintiff wrote to Mackenzie. In that letter he stated “as you know in recent weeks I have attempted to preserve my retirement benefits by preventing my salary from decreasing until the delayed Boral deal is signed”. After confirming that Mackenzie was aware of causes of the delay the plaintiff continued “it has impacted on me by the expiration of my salary guarantee”. The letter continued “I had asked that my guarantee continue until Boral is signed and a payback arranged should it not be signed. Several days ago I was informed that the remainder of my 1998 salary would be paid on the signing of a contract”. The plaintiff complained that “the controllers of my salary wish to impose conditions that (1) the contract be signed by 31 December, (2) that a minimum of $3,000 shipments be delivered in the first year and (3) that Moore reserves the right to subtract the “bonus” (restoration of salary) in the event that these shipments do not happen”. The plaintiff stated that he did not want to be humiliated.

21 The plaintiff then met with Mackenzie. At that meeting there was a teleconference call to Farrar. Mackenzie’s evidence was that the plaintiff was “upset” about the stipulation for $3 million minimum shipments to Boral and that he informed Farrar that it could not be done. Farrar said “it has to be signed by 31 December”. The plaintiff then asked “suppose it goes into next year” to which Farrar responded “well that’s a different ball game. This is for 1998”. The plaintiff received a further memorandum from Farrar reducing the minimum shipments to $1 million but maintaining the stipulation that the contract had to be signed before 31 December 1998. That memo dated 2 October 1998 was in the following terms (Ex C1 p 289):

Subject: 1998

Bonus Potential.

22 The Boral negotiations stalled in late 1998 because the person with whom the plaintiff was negotiating at Boral, Dominic Severino (Severino), took approximately one months leave in about September/October 1998.

23 In October 1998 the plaintiff discussed with the Australian Bureau of Statistics (the ABS) representatives a planned visit by ABS representatives to Wodonga on 4 and 5 November 1998 in relation to the planned Census. That visit took place and a dinner was held at the Country Comfort Inn, Albury on 4 November 1998. A number of representatives from the defendant were present including the plaintiff, Mackenzie and his wife, and Mike Letch (Letch). Mackenzie and the plaintiff gave the “welcoming” speech and the defendant was satisfied that “relationships were good” (Ex. 4). During the dinner the plaintiff discussed with the ABS representatives the topic of the ABS reverting to the original design for the Census. If this was to be achieved it would make the choice of the defendant to provide the print management for the Census more likely because it was apparently the only company in the industry that had the machinery and the capacity to produce the Census in that particular design. This agreement was achieved during the dinner and the defendant’s minute recorded that “the importance of this method of construction is that it eliminates 99% of competitors” (Ex.4).

24 After the dinner the plaintiff had a discussion with Mackenzie in the presence of Mackenzie’s wife and Letch (the Albury discussion). The plaintiff gave evidence that he informed Mackenzie of the ABS agreement and said “Ian this means that only Moore can produce it again and like 1996 I will get you another $1.5 million profit” to which Mackenzie responded “I will see to it that you get at least $50,000 commission”. The plaintiff gave evidence that he then said to Mackenzie “Ian, on my commission, I will earn over $200,000” to which Mackenzie responded “at least $1.5 million profit, it will be worth it”. In December 1998 Mackenzie appointed the plaintiff Project Manager responsible for the research, planning and negotiation of the design and printing of the Census.

25 On 9 November 1998 the plaintiff wrote to Mackenzie in relation to his “remuneration adjustment” (Ex C p 292-295). That letter included the following:

far exceeded

normal guaranteed $90,000 p.a

26 The plaintiff recommenced negotiations in late 1998 with Severino and his new assistant, Janet Pursehouse (Pursehouse). On 10, 11 and 12 November 1998 the plaintiff arranged for and accompanied Severino and Pursehouse to Ford, Shell and Drake Personnel premises in Melbourne for the purpose of observing print management systems installed by the defendant. Severino and Pursehouse had the opportunity to speak to senior executives of those companies in relation to the efficiency and cost savings of the defendant’s systems. The members of the group then travelled to the defendant’s major printing plant at Wodonga where they examined the technology and capacity of the factory.

27 In early 1999 the plaintiff telephoned Mackenzie and informed him that he “was financially embarrassed”. The plaintiff said that he had purchased some shares and was unable to pay for them. He asked for “an advance against the Boral signing”. It is apparent that he asked for a $7,500 advance. Mackenzie informed the plaintiff that he would take it up with McDonald.

28 On about 12 March 1999 Boral issued a formal request for the defendant’s tender proposal. The plaintiff commenced preparing the proposal with the assistance of his personal assistant/typist Jenny Anderson. He claimed he worked intensively for approximately five weeks to prepare and author the proposal.

29 On about 14 May 1999 the plaintiff was contacted by telephone by an officer of Boral who requested him to arrange a formal presentation of the defendant’s tender proposal at the Boral head office on 17 May 1999. The presentation was made at the Boral premises on 17 May 1999. Also present at the presentation were Mackenzie and a logistics director of the defendant, Tim Evans. On 21 May 1999 the plaintiff attended a social function held by the defendant at the Harold Park Raceway. On the way to the function the plaintiff had a telephone conversation with Severino. Severino informed the plaintiff that he could officially announce that the defendant had won the contract with Boral. Severino advised the plaintiff that he would send a letter of confirmation to him early the following week.

30 The plaintiff immediately telephoned Anthony Duncan (Duncan), the defendant’s financial director in Melbourne. The plaintiff claims this was a lengthy conversation in which he informed Duncan that the defendant had won the Boral tender. Duncan informed the plaintiff that he did not want it to be less than 25% gross margin. The plaintiff claims the following conversation took place:

31 Sarah Kay Davis with whom the plaintiff attended the social function was present in the car while the telephone conversation took place on a speaker mobile phone. At the function a conversation took place between the plaintiff and Wells. The plaintiff informed Wells that Severino had rung him and told him that the defendant had won the contract. Wells then said “that’s terrific who else have you told”? The plaintiff informed Wells that he had just informed Duncan and Wells invited him to tell “everybody the good news”. The plaintiff then publicly announced “we have won the Boral contract”.

32 During the weekend, 22-23 May, there were numerous telephone calls between the plaintiff and Mackenzie and the plaintiff and Duncan in relation to the pricing of the defendant’s tender. It is apparent that there was a danger that the defendant might lose the bid to a competitor because of a particular pricing structure. After much discussion Duncan agreed that the basis upon which the plaintiff had negotiated with Boral could be confirmed.

33 On Monday 24 May 1999 Wells informed Mackenzie and other executives of the announcement made by the plaintiff at the social function on the previous Friday night with his permission.

34 The plaintiff gave evidence that on 24 May 1999 he received notification that the defendant had deposited $7,333 into his credit union account as “an advance on my expected bonus for my success in obtaining the Print Management deal”. The plaintiff understood that such amount was the requested $7,500 less his superannuation contribution.

35 On 27 May 1999 the plaintiff had a conversation with Pursehouse in which she informed the plaintiff that Severino had authorized her to send a letter confirming that the defendant had been awarded the print management contract with Boral. Shortly after that conversation the plaintiff received the following fax from Pursehouse at Boral (Ex C2 p 117):

36 The plaintiff immediately took the fax to Wells. He also made several photocopies and faxed one to Mackenzie in Melbourne and posted copies on several noticeboards around the office.

37 On Friday, 28 May 1999 the plaintiff received a document dated 15 May 1999 on the defendant’s letterhead (Ex C2 p 112). It read as follows:

38 John Muir (Muir), the Human Resources Manager of the defendant, and Mackenzie’s signatures were on the letter. The attachment to the letter was in the following terms (Ex C2 p 113):

1999 Sales and Sales Support Profit Participation Plans

Plan B3- New Business Development Manager Plan

Sales Role	- Nil established business - Longer sell cycle
Commission and Bonus Plan Elements	New Signings Estimated Annual Shipments Payment 0-$0.5M $0 $0.501M - $1.0M $5,000 $1.001M - $2.0M $10,000 $2.001M + To Be Negotiated

39 When the plaintiff received the 15 May 1999 letter he immediately rang Mackenzie and said, “I’ve just received your memo changing my pay scheme. This is a rort. What are you trying to do?” Mackenzie said, “Calm down, Rockie, just let the ball come onto the bat for a while.” The plaintiff, in anger, apparently hung up on Mackenzie and stormed out of the office and drove home. Whilst he was in the car he received a telephone call from Wells, during which the following conversation took place:

40 A number of days later the plaintiff returned to the office and spoke to Wells and showed him the 15 May letter. The plaintiff claims the following conversation then took place:

41 On 31 May 1999 Mackenzie as National Sales Director, issued a company announcement in the following terms (Ex C2 p 195):

Company Announcement

SUCCESS

Boral Chooses Moore

42 On 25 June 1999 the plaintiff suffered his third heart attack and was admitted to St. Vincent’s Hospital at Darlinghurst. He underwent surgery and remained in hospital for approximately six days. He returned to work on 10 July 1999 and over the next month had numerous conversations relating to his commission with Wells, Mackenzie and Simon Griffiths (Griffiths), the administrator of the pay scheme.

43 While the plaintiff was still in hospital he wrote a letter to Griffiths dated 28 June 1999, but which he apparently completed on 29 June 1999, when he was in hospital (Ex C2 p 133-138). It was a hand written letter in the following terms:

As you can see the remuneration plan “changed” one week before Boral landed. Previously it was 4% of incremental sales. To put that into perspective over a six year contract of approx $40,000,000 the commission payable was – wait for it - $1,600,000 (over the period of the contract).
Although this was for 1998 it rolled over to 1999 when the remainder of all sales personnel had their remuneration continued when the new company was formed.
My “new” salary and commission was received on Friday 28 May (even though it was dated 15.5.99) the same day I announced the Boral win.
Please have a close read of Plan B3 attached. Under Commission and Bonus Plan elements are the payment for “new signings ”. I point out the words “ estimated annual shipments ” as opposed to actual invoiced sales.
As agreed with Jim, Ant, and Ian Mackenzie during a meeting with the general manager of Boral and the procurement manager of Boral on 16.6.99 at Box Hill the “ estimated annual shipments ” are between $6 million and $8 million per annum on an initial 3 years contract with 1 x 1 x 1 options.
Obviously the first year will not reach the full “estimated annual shipments” level, of 6-8 million and a compromise should be reached – say half that in year 1 ramping up to full $6 mill in year 2 and $8 mill in year 3.
The option period payments would be negotiated either at a discount now or when the options are exercised at the end of the initial 3 years.
At my age I probably do not have the next six years in my rangefinder so a negotiated settlement is preferable. As you can see the figures for estimated annual shipments are
First million $5,000

Second million $10,000
$6 million to be negotiated
$8 million
Just extending the figures at the $10,000 per million rate for the first 3 years would be:
Year 1 = $3 million (est) = $5,000 + $10,000 + $10,000= $25,000
Year 2 = $6 million (est) = x 10,000 = $60,000
Year 3 = $8 million (est) = x 10,000 = $80,000

Total: $165,000

This is of course appreciably less than the original 4% incremental which for the same figures over the same time frame would amount to $680,000 to say nothing for the 3 years options.
I would also point out that 17% S G & A (apart from 8% nett profit) leaves a pool of $2,720,000 for these figures to be drawn from.
As you can see there are some interesting points to discuss, as well as some legal positions to be clarified. Such as
1. Which remuneration plan is operative?
2. Is the contract for 3x1x1x1 as defined in new signings?
3. Does the remuneration plan call for lump sum settlement?
4. Is there room for negotiation?
5. Have you run this past Mallesons?
6. Has anyone else, other than me, given the ramification of this any thought?
I will speak to you to-day, Tuesday 29.6.99.

44 On 2 July 1999 the plaintiff wrote to Muir and Mackenzie in the following terms (Ex C2 p 141):

45 One conversation between Mackenzie and the plaintiff, which the plaintiff claims occurred in early July 1999 (the July ’99 assurance) included the plaintiff informing Mackenzie that he would have “them in court for this”. The plaintiff claims the following conversation then took place:

Mackenzie: I will make sure you are covered.

46 On 26 July 1999 Muir telephoned the plaintiff and said, “Can you state your position as to the commission payable for the Boral contract?” As a result of this conversation the plaintiff wrote a memo to Muir and Mackenzie dated 6 August 1999 making a claim which he described as “based on conservative projection estimates” and “pursuant to the memorandum dated 25 March 1998”. That claim was for 4% commission on the incremental estimated sales to Boral over the following three years totalling $676,600.

47 On 18 August 1999 the plaintiff received a memorandum from Muir which was copied to Mackenzie and the Managing Director, Jim MacDonald (MacDonald) in the following terms (Ex C2 p 178):

48 In about August 1999 Nelson Siva (Siva) was appointed Sales Director in place of Mackenzie. The plaintiff had several conversations with Siva concerning the topic of commission and claims he informed Siva that he had rejected the defendant’s attempt to limit his earnings and that he still considered himself on 4% commission. Siva informed the plaintiff that he knew nothing about it and that it was before he was employed.

49 In about August or September 1999 the plaintiff was contacted by John Perkins (Perkins), the defendant’s State Manager in Queensland, Perkins enquired of the plaintiff whether he was still friendly with a senior manager of the Bank of Queensland as the tender for that contract was coming up. The plaintiff informed Perkins that he was still friendly with the senior manager and Perkins said to the plaintiff, “John, don’t retire on me. I want you to do the tender again. It’ll be worth plenty to you and you’re the only one that can do it”. The plaintiff suggested to Perkins that he have Siva appoint the plaintiff as Project Manager. Shortly after this conversation Siva appointed the plaintiff as Project Manager with responsibility for researching, planning and negotiating a Print Management Contract between the defendant and the Bank of Queensland. The plaintiff subsequently worked on the tender proposal and finalized it for delivery to the Bank of Queensland. He personally delivered the tender proposal to the Bank of Queensland and gave an explanatory presentation.

50 On 9 September 1999 the plaintiff forwarded a memorandum to Siva in the following terms (Ex C2 p 182):

51 The plaintiff received a letter from Mallesons Stephen Jaques (Mallesons) dated 14 September 1999 in early October advising him that they acted for the defendant who had referred the plaintiff’s memorandum of 2 July 1999 to Muir to them (Ex C2 p 188). That letter then stated:

52 On 20 October 1999 the plaintiff’s solicitor Ronald Czinner (Czinner) wrote to Mallesons in terms which included the following (Ex C2 p 189)

53 Czinner enclosed a number of documents with his letter including the plaintiff’s memo of 6 August 1999 and requested Mallesons to seek instructions and provide an early reply to the plaintiff’s memoranda. Mallesons responded to Czinner on 24 November 1999 apologizing for the delay and advising that Ron Wadey (Wadey), Secretary of the defendant, would be forwarding a memorandum to the plaintiff addressing matters that the plaintiff had raised with the defendant. Mallesons advised that it was the defendant’s desire to try and resolve the matter directly with the plaintiff and Mallesons further participation would be the subject of further instructions.

54 On about 26 November 1999 the plaintiff received a memorandum from Wadey in the following terms (Ex C2 p 206):

incremental business sold in 1998 over 1997

applicable however only if the contract with Boral was executed before 31 December 1998.

Your memo dated 2 July to John Muir/ Ian Mackenzie

Your memo dated 6 August 1999 to John Muir/ Ian Mackenzie

- even assuming the scheme ran post 1998 (which it didn’t) incremental sales for 1999 would represent the increase 1999 over 1998 not the increase over 1997 – similar comments apply to the subsequent calculations.

· There is absolutely nothing to support a commission being payable past the initial year (1998), certainly not for the term of the contract and or extended contract and accordingly the content of this memo is refuted completely as being non compliant with the terms of your remuneration scheme.

· The Boral contract remains unsigned!

Your memo dated 9 September 1999 to Nelson Siva

MNO for 2500 12,500(as negotiated)

TOTAL BONUS PAYABLE 37,500
(less any advance commission)

55 After receipt of this memorandum the plaintiff had a telephone conversation with Wadey in which the plaintiff claims the following was said:

56 On 2 December 1999 the defendant was advised by letter from the Bank of Queensland that it was the successful tenderer for the Bank’s Print Management Contract. On 2 December 1999 the plaintiff received a memorandum from Wadey in the following terms:

57 The plaintiff responded to Wadey’s memorandum of 26 November 1999 on 20 December 1999, in which he also referred to Wadey’s memorandum of 2 December 1999. He concluded that letter after discussion of each of the matters raised in Wadey’s memorandum by saying, “I do hope the door, closed in the 2-12-99 memo, will open again and we can look to further successes in the year 2000”. In December the defendant also announced that the Bank of Queensland had chosen the defendant for a two year print contract of approximately $1.5 million per annum.

58 On 27 January the plaintiff was handed a letter from the defendant dated 19 January 2000 in the following terms (Ex C2 p 233):

59 The business development plan attached to the letter provided for a “sign-on bonus” of $1,000 up to $0.1m estimated annual gross profit (EAGP), $5,000 for $0.1 to $0.2m EAGP, $10,000 for $0.2 to $0.5m EAGP and $20,000 for above $1.0m EAGP. EAGP was defined as ”the company’s last reported actual total GP% times the customer’s estimated annual purchases as evidenced by a sales contract signed by both the customer and the company.” It also advised that payments would only be made against written application, made within four weeks of the sales contract date and authorised by the Sales Director.

60 On 28 January 2000 the plaintiff wrote to Siva rejecting what he described as “the retrospective alteration of my remuneration downwards on such a massive scale”. On 21 February 2000 the plaintiff’s cardiologist, Dr Cameron, wrote a report in which he advised that he believed the plaintiff should be considered for permanent disablement in view of his previous cardiac history and ongoing symptoms. He recommended the plaintiff be considered for retirement on medical grounds. On 16 March 2000 the plaintiff notified the defendant of the necessity of his early retirement on medical grounds and that his last day of employment would be 22 March 2000.

61 The defendant won the Census contract and the plaintiff attended the signing of that contract on the last day of his employment with the defendant. On 5 April 2000 the defendant, in purported compliance with the business development plan attached to the letter of 19 January 2000 paid the plaintiff a bonus of $20,000 for “bringing in the Census contract” which had an EAGP in excess of $1m. After tax the plaintiff received $10,600.

The Defendant’s Remuneration Plans

62 The Human Resources Manager, Northern Region, of the defendant for the period August 1996 to April 1999, Louise Birnie (Birnie), reported directly to Farrar. Birnie gave evidence that during her employment with the defendant the employee remuneration plans were revised at the beginning of each year. Birnie said that the 1997 Plans for Sales and Support Staff included a Plan B for employees in business development.

63 The 1997 Plan B (Ex.14) was entitled “Plan B – Business Development Plan”. In the description of the sales role the plan referred to two types of assignments, Plan B-1 and B-2. B-1 was an assignment of less than $200,000 base business with the entire assignment consisting of unsold accounts. B-2 was an assignment between $200,000 and $400,000 base of established business plus several unsold or undersold accounts. At least 40% of the assignments were required to be “new business”.

64 The structure of the employee’s remuneration on Plan B was 60% base salary, 20% commissions and 20% APEX bonus with (1) an additional bonus opportunity referred to as a Super Achievement Bonus and (2) a further bonus opportunity for specified assignments.

65 The base salary was “individual” and was determined by sales management based on the characteristics of the sales assignment as well as the previous performance level and experience of the representative. The commission and bonus elements were separately described. The stated goal of the APEX (Account Plan Execution) Bonus was to drive future business through a “unique commitment and award process”. The process for earning the bonus included an “account planning” in which the sales manager described whether a specific revenue or profit amount was required to measure success and also fixed a specific time table for completing the event or objective. These were respectively known as account objectives and milestone events.

66 The APEX bonus was described as a flat dollar payout for successful achievement of the “pre-established milestone events and/or account objectives” in the formal account plans. These had to be agreed with the director and General Manager Corporate or Sales Development Manager by the 31 January 1997.

67 The 1998 plans are not in evidence. The 1999 plans were admitted into evidence towards the end of the trial with leave granted to the plaintiff to call any further evidence if he wished to do so or apply to further cross examine previous witnesses in relation to the late tender of this material. The plaintiff did not avail himself of this opportunity. There are eleven plans in evidence for the 1999 year.

68 Plan B2 provides for commission or bonus in two instances (1) new signings and (2) incremental business. On new signings the employee was not paid for “shipments” under $0.5 million but was paid $5,000 for annual shipments of $0.501 million to $1.0 million, $10,000 for annual shipments of $1.001 million to $2.0 million and for annual shipments of $2.001 million and above, the payment was to ”be negotiated”. This provision was also in Plan B3.

69 What was in Plan B2 and not in Plan B3 was the provision for commission on incremental business and a super achievement bonus. The employee on Plan B2 was entitled to 4% commission on gross profit of annual shipments of less then 100% of total budget, 6% on annual shipments of between 100% and 120% of the total budget and 8% commission on shipments above 120% of total budget. Additionally the employee on Plan B2 was entitled to a $20,000 bonus for exceeding the budget by $1 million and a $5,000 bonus if the budget was exceeded by $500,000, regardless of the current base.

Pinnacle Valley Conversations

70 The plaintiff relied upon the conversations at the Pinnacle Valley Conference (the Conference) as the basis for his entitlement to the declarations he seeks. His case is that he was “lured” away from his plan to retire medically unfit to resume full time employment by the offer of 4% commission on incremental sales over 1997 sales for the life of the named contracts, Boral, Bank of Queensland and the Census. It is therefore necessary to deal in more detail with both the plaintiff’s evidence and the evidence of Hughes and Mackenzie in relation to these conversations.

71 The plaintiff’s versions of the conversations have already been referred to, but to assist this analysis I will repeat them here. The plaintiff claims that there were a number of conversations at the conference, the relevant ones of which were with Mackenzie and Hughes. The plaintiff claimed that the conversation with Mackenzie was in the following terms:

72 In his affidavit of 26 March 2001 Mackenzie gave evidence that he did not recall the plaintiff telling him that he had been negotiating with Boral to have it change its procurement methods. He stated that he did not recall saying “Jesus Rocky, that would be the biggest sale in history. Can you really do it?’ and expressed the belief that he would remember saying such words if he had said them. He accepted that he did say “How long do you think it would take for you to sign them?” but gave evidence that rather than saying “the company is in trouble and that sort of money could turn it around”, he said “we are not travelling that well at present, the contract could turn it around”.

73 In his oral evidence Mackenzie said that he was not certain whether he was referring to the Boral deal or “some other deal” when he said to the plaintiff that “the contract could turn it around”. He said that “there were that many things going on, whether it was about the Boral deal or about the Census deal, I’m not certain”. However he did agree that the Boral contract was a “large contract” and that it could turn the company around (tr.339). He agreed that when he referred to turning “it” around he was referring to the profitability of the defendant (tr. 336) and that when he said “we” are not travelling that well at present he was referring to the defendant (tr.338). Mackenzie gave evidence that he did not have any conversation with the plaintiff at the Conference about his remuneration and indeed the plaintiff does not allege that Mackenzie was a party to the conversation with Hughes.

74 The plaintiff claimed the conversation with Hughes was in the following terms:

75 Hughes commenced employment with the defendant in 1995 as Manager, Strategic Customer Services, and from January 1996 until he left in September 1998 to take up the position of Finance Director with Drake International, he was the Director, Sales and Marketing. He later changed employment and at the time of the trial was employed as an accountant with an accountancy firm in Wonthaggi, Victoria.

76 There is a further feature to the evidence in relation to the alleged conversation with Hughes that arose after the commencement of these proceedings. The plaintiff was at Czinner’s office in Gladesville, on 21 February 2001 in relation to the preparation of this matter for hearing. The plaintiff’s first affidavit in the proceedings was sworn on 23 February 2001. At about 4.50pm on 21 February 2001 the plaintiff telephoned Hughes at his office in Wonthaggi and after exchanging pleasantries the plaintiff said “Barry I’m going to read a paragraph to you of my recollection of our conversation at Pinnacle Valley where you set out the conditions for my return to work”. The plaintiff then read the terms of the conversation set out in paragraph 74 above and said “is that how you remember it Barry?” to which the plaintiff claims Hughes replied “yes that is an accurate account of what was said as I remember it”. The plaintiff then said “I am at my solicitor’s office in Sydney at the moment, would you repeat that to my solicitor Ron Czinner” to which Hughes replied “okay put him on”.

77 Czinner, who also gave evidence in these proceedings, then spoke to Hughes. Czinner’s evidence was that he was present in the room with the plaintiff when the plaintiff was speaking to Hughes on the phone. When Czinner then spoke to Hughes, Czinner’s evidence was that Hughes said, inter alia, “that was an accurate account”. Czinner’s evidence was that the following conversation then took place:

78 After the telephone conversation Czinner faxed to Hughes a copy of the memo of 25 March 1998 (the 25 March memo) from Farrar to the plaintiff. The following day Czinner spoke to Hughes again. Hughes advised Czinner that he had received the fax and said “I remember it now”. Czinner claimed that Hughes said he would not provide a statement because he had been “advised” against it.

79 Hughes swore two affidavits in the proceedings, the first on 27 March 2001 and the second on 10 September 2001. In the first affidavit Hughes dealt with the conversation the plaintiff had alleged occurred at the Conference. He stated:

80 Hughes stated that he informed Farrar of his conversation with the plaintiff and that Farrar subsequently sent him a copy of the 25 March memo which, he stated in his affidavit, “accurately set out” the remuneration terms he had agreed with the plaintiff. After this affidavit was served the plaintiff and his solicitor swore their affidavits setting out the conversations of 21 and 22 February 2001 referred to above. In his second affidavit of 10 September 2001 Hughes denied that he told Czinner that he had been to see Moore’s solicitors and that he had been advised not to give him a statement. He stated that he had not been to see the solicitors until 5 March 2001. He recollected informing Czinner that he had been to see Moore. Hughes stated that in the conversation with Czinner after he received the 25 March memo he said “it seems clear and confirms the agreement made with John in respect of his remuneration for 1998”.

81 In his oral evidence Hughes said that the plaintiff was “guaranteed” his old salary of $90,000 for the first six months after his return as “in effect a guaranteed commission” so that he had “the opportunity to put himself in a position to earn a commission” (tr. 403 & 405). Hughes said that “after six months the guarantee would end and from that point John would get paid 4 per cent of incremental business sold on incremental sales”. In his cross examination Hughes gave the following evidence:

Q. Did you ever tell Mr Bredel personally that his compensation promise of 4 percent commission would end on 31/12/98?
A. The 1998 plan was for 1998, yes.

The 25 March Memo

82 The 25 March memo is headed “1998 Remuneration Plan”. It commences “as discussed, this memo is to confirm for you your remuneration plan for 1998”. The memo was written within a couple of weeks of the Conference. The plaintiff received it. If it contained an error so obvious that it was restricted to 1998 when it was not supposed to be so restricted, it is not unreasonable to expect that the plaintiff, who appears to have always been willing to speak his mind, would have complained about the error and requested that the memo be amended. Indeed this is just what he did in respect of the memo from Farrar on 22 September 1998. He discussed it with Mackenzie and Farrar issued an amended memo on 2 October 1998.

83 It is common ground that the defendant does not hold a copy of the 25 March memo signed by the plaintiff. The plaintiff gave evidence that he did not sign the memo. The plaintiff’s evidence in relation to the 25 March memo included the following:

Q. Following that conference you received a memo dated 25 March 1998 from the company, didn’t you.

Q. And that set out the terms of your employment?

Q. That document was an important document at that time?

Q. You wanted that document?

Q. And that document you understood, was to set out the conditions of your employment?

Q. In relation to commission?

(tr.66)

84 The plaintiff was taken to correspondence that he had written to the defendant referring to the 25 March memo and he gave the following evidence:

Q. I want to suggest to you that you are either confused or that is a deliberate lie, Mr Bredel?

Q. You are looking at the letter, aren’t you?

Q. If you look at that letter, 141, you made no mention of the conversation at the Pinnacle Valley Conference, did you?

Q. The basis of your claim is this letter which you regarded as to be thrown in the garbage or inconsequential?

(tr. 114)

85 The plaintiff was taken to a further letter that he had written to Wadey on 20 December 1999 in which he stated (Ex C2 p 211-214):

86 The plaintiff was asked whether he understood that the conditions of remuneration were to be found in Farrar’s 25 March 1998 memo (although the plaintiff’s letter had wrongly referred to it as 28 March). He once again answered “only the 4% commission he mentioned” (tr.115). The plaintiff was taken to a number of other letters he had written to the defendant after March 1998 and conceded that none of them contained any mention of the conversations at the Conference (tr.144-145).

87 After the 25 March memo was sent to the plaintiff, Birnie wrote an email to Farrar dated 1 April 1998 in which she advised she was in receipt of a copy of the memo and that she had a couple of “queries on the compensation plans”. She asked whether the plaintiff was on “an Account Director plan” as the memo did not make it clear. She asked whether he was only paid “on SOE” (sales order entry) (Ex C1 p 199). Birnie asked:

2. Am I correct in saying that these people only get paid commission on sales that they put through the system and there is no double dipping with the sales rep who has the account they are working on? Colin thinks the rep is also getting the commission.

88 Farrar wrote in reply by email dated 2 April 1998 in terms which included the following (Ex C1 p 199):

89 At the conclusion of the email Farrar informed Birnie that the plaintiff and the defendant had a list of the accounts they were responsible for. It is apparent from the evidence that such a list was not attached to the 25 March memo and Birnie’s request for a copy of such a list brought a letter from the plaintiff to Mackenzie in the following terms:

URGENTLY

90 There were thirty entities on the list including Boral. The pay period for March expired on 15 April and there is no mention in the list of the ABS or the Census which did not eventuate until October 1998. Although the plaintiff’s evidence in relation to when he wrote that letter was unhelpful I am satisfied that it was written in about April 1998.

The Albury discussion

91 In his affidavit Mackenzie denied this conversation took place. In his cross examination he resisted the suggestion that it did take place on the basis that at the time of the Albury discussion the pricing and various specifications had not been fixed and thus it would be unlikely that the “profit” could or would have been discussed (tr.356). However he was pressed further and agreed that the plaintiff could have said that he would get “another $1.5 million profit” (tr. 357). He then gave the following evidence:

Q. And I suggest to you, you said you will see to it that you get at least 50,000 commission, dollars?
A. No.

Q. And Mr Bredel said, “Ian on my commission I will earn over 200,000”?
A. No.

Q. That wasn’t said?
A. I can not remember that.

Q. Could it have been said?
A. It could have been said but I just can’t remember it.

92 Letch gave evidence that in the discussion between the plaintiff and Mackenzie after the dinner, the plaintiff said that if Moore was successful in obtaining the contract “the subject of commission cropped up” but he could not remember “how much it was for”. He said Mackenzie “agreed, he said yes” but once again Letch said “I am not sure how much it was for” (tr.216-217). His recollection was that the plaintiff had brought the topic up in the conversation. In cross-examination Letch said that the plaintiff had approached him in 2001 to ask him to give evidence about the Albury discussion. He said that the plaintiff “told me what he thought and I told him what I thought had happened” (tr. 225). That was the extent of Letch’s memory of the Albury discussion.

93 The Albury discussion occurred during 1998 when on both parties’ cases the 4% commission was operative. The plaintiff originally relied on this conversation to support his submission that the defendant knew that the 4% commission continued into the year 1999 and/or alternatively led him to believe that the 4% commission would be paid on the ABS contract if he secured it for the defendant. However during the plaintiff’s cross-examination the plaintiff seemed to abandon reliance upon this discussion as an “assurance”.

94 He started from the position that this conversation “was not the only one he relied upon” (tr.137. 35) and moved to the position that it was not “the one he was relying on” (tr. 138.4) and finally stated that this was not relied upon and was “conversational” (tr. 143.15). Prima facie this was a remarkable abandonment, however when it is seen in the context of Mr Holmes QC’s cross-examination it is understandable that the plaintiff moved away from reliance upon the alleged conversation. This was of course prior to Mackenzie giving his evidence.

95 Mr Holmes questions were focused upon the letter that the plaintiff had written to Mackenzie on 9 November 1998 in relation to his “remuneration adjustment”. This was a letter written only four days after the alleged conversation and yet there was nothing in that letter mentioning the so-called “assurance” in respect of the plaintiff’s commission, nor was there any mention of the Conference conversations. It was after this letter was drawn to the plaintiff’s attention that the plaintiff gave evidence that it was the July ’99 conversation with Mackenzie that he was relying upon and not the Albury discussion (tr.143) because it was only “conversational”.

1999 Remuneration Review

96 The usual time for reviewing plans and packages for employees at the beginning of the year was delayed in 1999 until April/May of 1999. Griffiths was employed with the defendant between 1990 and November 1999. For the majority of that time, excluding 1998, he was the National Sales Administrator with responsibility for the administration of the sales remuneration scheme of the defendant. In 1998 he was the Financial Systems Manager and did not have a role in the fixing of employee remuneration.

97 In April 1998 Griffiths was aware that the plaintiff had suffered a heart attack and was convalescing after surgery. He was also aware that the plaintiff had contemplated retirement on medical grounds. He was informed by Hughes that the plaintiff would be returning to work and would be working at Rhodes with responsibility for Special Projects, Business Development reporting directly to Mackenzie.

98 Griffiths returned to his role as National Sales Administrator on 1 January 1999. He received from his predecessor a spreadsheet containing all the information necessary to enable the pay person to pay the employee at the end of the pay period. That information included salary, commissions, revenue budgets and gross profit budgets.

99 Griffiths gave evidence that “in about mid April 1999” the plaintiff telephoned him and informed him that he was “going to sign the Boral contract very shortly” and he would be entitled to a very large commission payout. Griffiths recollection was that the plaintiff said that the commission payout was to the value of $1.6 million. Griffiths asked the plaintiff whether he had anything to substantiate this claim to which the plaintiff responded that there was a memo from Farrar that “has 4% commission against my sales”. The plaintiff informed Griffiths that he wanted to be sure that the defendant was aware of the magnitude of the payout and that they had in fact discussed it with their solicitors, Mallesons.

100 Soon after this conversation Griffiths went to Muir and obtained access to the plaintiff’s file. He obtained a photocopy of the memorandum from Farrar to the plaintiff dated 25 March 1998. Griffiths took this memorandum to Mackenzie and informed Mackenzie that he had been talking to the plaintiff. Griffiths informed Mackenzie that the plaintiff had claimed he was going to “get the Boral contract” and that he was entitled to a large commission. Mackenzie informed Griffiths that he wished to speak to McDonald about the plaintiff’s request for an advance of $7,500 and that they could go and see him together.

130 The book claims that the plaintiff made a profit of $80,000 a week after expenses and by late 1966 after barely 6 months in the “business” he had $250,000 stored in Sydney in safe deposit boxes and was owed several hundred thousand dollars more on sales of heroin already made in New York. The description of the plaintiff’s life in those years, if even half true, is a description of a very dishonest person indeed. However, the plaintiff claims that these years have been put behind him and he has operated honestly since he rehabilitated himself in 1982.

131 It is apparent that the defendant became aware of some of the plaintiff’s past in about 1996. It is clear from a letter from Mallesons Stephen Jaques to Farrar dated 19 September 1996 (Ex. F) that it was aware of the false statements in relation to the plaintiff’s birth date, his conviction on 6 May 1996 for making a false statement in writing for the purposes of obtaining an Australian passport and allegations that between 1967 and 1980 he had suffered a “number of convictions” in the USA, UK and France relating to a number of “serious offences, including importation of drugs, theft, fraud, making false statements to procure passports and handling stolen property”(Ex.F). It is also clear from this letter that the defendant was aware that the plaintiff’s “birth name” was John Wesley Egan.

132 In response to this attack on his credibility some of the witnesses were asked about their observations of the plaintiff during the years they had worked with him. Letch gave evidence that he had not known the plaintiff to tell him a lie in any dealings regarding the defendant’s business. Wells gave evidence that in the years he had known the plaintiff, 1987 to date, he had always found him honest in any business dealings he had with him.

133 The plaintiff submitted that I should accept that he has put what he described as his “turbulent” years behind him and that he is a man whose word can now be accepted. In cross examination he was asked “you are a person who frequently makes false statements if you believe it to be to your advantage?” to which he responded “not for 20 years” (tr. 85.23). The defendant submitted that even that statement was false because the defendant had suffered a conviction in 1996 for making a false statement in relation to a passport. The plaintiff’s evidence in re-examination explaining the facts leading to his 1996 conviction for making a false statement demonstrates that as recently as 1996 he was willing to continue representing that his age was that stated in his passport when he knew it was not. He did so in circumstances that he thought were to his advantage.

134 The approach that I intend to adopt is to review all the evidence relevant to the issues before me. In deciding the probabilities where there is conflict between the plaintiff and the witnesses for the defendant, on matters pivotal to any of those issues, I intend to take into account the plaintiff’s previous tendency to make false statements if he believed it to be to his advantage.

1998 Plan

135 Both parties relied upon conduct prior to and after the plaintiff returned to work in 1998 in support of their competing submissions as to the terms of the contract between the plaintiff and the defendant during the period 1998 to 2000 when the plaintiff retired. Reliance has been placed on Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61. The relevant principles from Brambles applicable to this case are (1) that pre-contractual conduct may be considered on questions of construction, if the contract is ambiguous and the pre-contractual conduct casts light on the genesis of the contract, its objective aim, or the meaning of any descriptive term, (2) that post-contractual conduct may be considered on the question of whether a contract was formed, (3) that post-contractual conduct may not be considered on the question of what a contract means as distinct from the question of whether it was formed and (4) that the construction of a contract is an objective question for the court and the subjective beliefs of the parties may be considered in determining the estoppel claim but not in relation to deciding the terms of the contract (per Heydon J pars [24]-[27]).

136 The plaintiff claimed in his evidence and final submissions that the 25 March memo was “rejected” and was ”inconsequential” and/or “inoperative”. He referred to it as a “bed of quicksand” and a “magnet for error”. His suggestion that he “threw it in the draw” was a correction to his evidence that he threw it in “the garbage”. The plaintiff claims the terms of the conversations at the Conference, with Hughes in particular, were the terms of his compensation plan that entitle him to the declarations he seeks.

137 It is difficult to reconcile the plaintiff’s claim that the 25 March memo was inoperative and rejected, with the plaintiff’s own correspondence both in 1998 and 1999. In his letter to Mackenzie on 21 August 1998 (Ex. C1 p 265) he wrote “I have a letter from David Farrar (attached) dated 25.3.98 setting out a shipments budget of $2,000,000 and guaranteeing a salary to be no less than my earnings in 1997”. There was no mention of the Conference conversations nor was there any suggestion that the “attached” memo was inoperative or rejected.

138 In his letter to Mackenzie of 9 November 1998 (Ex. C p 292-295) the plaintiff referred to the “plan formulated by David Farrar”. Once again there was no suggestion that it was inoperative or rejected. In fact the contents of that letter lead to the irresistible conclusion that the plaintiff regarded the “plan formulated by David Farrar” as operative and was seeking to change the “plan”. There is also no mention of any conversations at the Conference.

139 In his letter of 2 July 1999 to Muir and Mackenzie the plaintiff referred to his “previous” arrangement and attached the 25 March memo stating “see attached letter from David Farrar, Human Resources Director, 1998”. Far from suggesting the 25 March memo was inoperative, the plaintiff was seeking to have it continue instead of the Plan B3 which he stated had been unilaterally imposed on him.

140 In his letter to Muir on 6 August 1999 (Ex. C p 175) the plaintiff made a claim for commission “pursuant to Memorandum dated 25 March 1998”. There was no mention of the Conference conversations. In his letter to Wadey dated 20 December 1999 the plaintiff once again referred to “conditions of my remuneration set out in David Farrar’s letter of 28-3-98”. Although the date was incorrect there is no doubt that the plaintiff was referring to the 25 March memo. In none of these letters was there ever any suggestion that the contents of the 25 March memo did not reflect the basis upon which he agreed to return to full time employment.

141 I reject the plaintiff’s evidence that he regarded the 25 March memo as “inoperative” and I do not accept the submission that it was “rejected” by the plaintiff. The evidence is in my view overwhelmingly against such a position.

142 There are few facts in issue about the conversation with Hughes at the Pinnacle Valley conference. The pivotal issue is whether Hughes said the words “until the end of this year”. Much time at the trial was spent dealing with this issue. Both the plaintiff and his solicitor, Czinner, swore affidavits about the telephone conversation with Hughes, and Hughes was cross-examined upon it. Hughes maintained that he said those words. If Hughes had not said those words and the plaintiff understood that the “plan” was to be indefinite it is most unlikely that the plaintiff would have relied on the 25 March Memo in his correspondence in the manner I have described.

143 There is a curious aspect to the plaintiff’s evidence. The plaintiff claimed in his affidavit that the conversation with Hughes at the Conference included the statement “after that 6 month period your base salary will revert to $67,000 per annum plus a bonus component of $23,000, if you can do the deal before Christmas”. When the plaintiff received the memo from Farrar dated 22 September 1998 he wrote to Mackenzie on 23 September 1998 and subsequently met with him. The plaintiff complained that the “controllers” of his salary had imposed unacceptable conditions one of which was that the contract had to be signed by 31 December 1998. It is curious that such a complaint was made if, as the plaintiff says, Hughes had told him at the Conference that the bonus of $23,000 would be paid if the Boral “deal” could be done by Christmas. This supports the evidence of Hughes that he did not say those words to the plaintiff at the Conference.

144 Perhaps even more importantly on this aspect of the evidence is the plaintiff’s letter to Griffiths dated 28 June 1999 complaining about the “change” to his remuneration plan one week before “Boral landed”. He stated that “previously it was 4% on incremental sales” followed by the statement “although this was for 1998 it rolled over to 1999”. This in my view is a clear acknowledgement by the plaintiff that he understood that the plan was “for 1998”. Having regard to this evidence I am of the view that the suggestions that Hughes did not tell the plaintiff the plan was “until the end of the year” and that the 25 March memo was not operative is entirely disingenuous. I reject both propositions.

145 I am satisfied that the plaintiff’s compensation plan for 1998 was as stated in the 25 March memo and the memo from Farrar to the plaintiff dated 2 October 1998 and the letter containing the list of accounts (Ex. 1). That plan relevantly entitled the plaintiff “for 1998” to 4% commission on the incremental business sold beyond the amounts sold in 1997 to the accounts contained in the list ultimately agreed. There is nothing in this memo and I am satisfied nothing in the conversations at the Conference that would entitle the plaintiff to the declaration that he is entitled to 4% commission on incremental sales over 1997 for the life of each of the contracts.

1999 and 2000 Plans

146 The plaintiff claimed in his letter of 28 June 1999 to Griffiths that the 1998 plan “rolled over” into 1999. However in his final submission (at par 10.7 page 39) the plaintiff stated: “there is no dispute that the bonus component expired on 31 December 1998 and no claim is made for that bonus”. The plaintiff therefore would have it that only parts of the plan “rolled over”.

147 The defendant claims that the plan finished at 31 December 1998 and all that the plaintiff was entitled to was a base salary of $68,000. The plaintiff’s pay slips demonstrate that he was paid a salary at the rate of $90,000 up to the end of August 1998 and at the rate of $68,000 from September 1998 to the end of May 1999.

148 What occurred on or after 14 May 1999 was that the plaintiff’s compensation package was structured in the manner for which the plaintiff himself had advocated in his letter to Mackenzie on 9 November 1998. That is an important letter. Its stated purpose was “discussing my remuneration adjustment”. This was an acknowledgment by the plaintiff that he knew there was to be an “adjustment” to his remuneration. In my view it can also be viewed as an acknowledgment that the 25 March memo was for the 1998 year. The adjustment happened each year that the plaintiff worked with the defendant and it is probable that the expectation was that the “adjustment” would happen at the usual time rather than at the delayed time in April/May 1999.

149 The plaintiff stated that he had been on the flat or “guaranteed” salary for the last five years because the commission he would otherwise have been entitled to would have, as he put it, “far exceeded any salary plan”. The letter then stated that “the plan formulated by David Farrar had included a commission component for product” (emphasis added). The use of the past tense is important. It is used in the context of the explanation that followed that in the previous 6 months there had been no opportunities that involved product, but there had been opportunities that involved “project development”. This is evidence that the plaintiff understood that the commission component was for 1998 and that there was nothing that had presented itself that would allow him to qualify for that commission.

150 It was after reference to the three “special Projects”, the Census, Boral and ANZ, as “project developments” which the plaintiff claimed would consume his time, that the plaintiff asked that his salary “be restored to its normal guaranteed $90,000p.a “. This letter demonstrates that in any “adjustment” to be made to his remuneration the plaintiff did not want the “commission component for product” that “had” been included in the plan formulated by David Farrar. Rather he was advocating a salary which was “guaranteed” irrespective of product or project development. This was consistent with the position that had previously pertained when the plaintiff was on a “guaranteed” salary and no commission was payable to him.

151 The plaintiff then added what might be seen as two sweeteners to his proposal. The first was that he was willing to have “milestones or hurdles” applied with a provision that if they were not reached there could be a “payback” that would presumably come out of that part of the guaranteed bonus component of the salary. The second was that “any success fee for contracts in excess of say $3 million to be negotiated”. This was an invitation to the defendant to firstly allow for a success fee but not for any contracts under $3 million or perhaps some other figure the defendant may suggest as appropriate. Any contracts under that figure or such other figure the defendant suggested as appropriate would be catered for by the “guaranteed salary”. He wanted the defendant to include a term within the adjusted arrangement that any payment of a success fee for contracts over $3 million was “to be negotiated”.

152 The guaranteed salary was important to the plaintiff because he was, as he stated in the letter, “anxious to preserve my level of salary for an average over the last three years”. This related to a calculation of payments that might be made to the plaintiff should he retire on the basis of “permanent disablement”. The plaintiff understood that such payments would be made monthly and involved a calculation, a factor of which involved averaging the salary for the last three years of employment prior to retirement. The plan “formulated by David Farrar” which “had included a commission component for product” was not allowing a preservation of the plaintiff’s level of salary as he had wanted. It was so important to the plaintiff to have these suggested adjustments made to his remuneration that if the defendant found it “too hard” the plaintiff advised that perhaps “retirement and consultancy fees could be examined”. However he concluded by saying that he did “prefer the salary adjustment back to what it has been for the past five years”.

153 The plan B3 provided for a payment to the plaintiff on “new signings”. The advance of $7,500 was “against the Boral contract” which it was anticipated would be “signed” soon. The “estimated annual shipments” achieved would govern the amount the plaintiff had to pay back or the further amount to which the plaintiff might be entitled.

154 Mr Holmes QC relied upon the terms of the plaintiff’s letter of 28 June 1999 to Griffiths to submit that it is more probable than not that the version of the conversation given by McDonald and Mackenzie is what occurred at the time the plaintiff’s compensation was reviewed in 1999. It was submitted that the plaintiff’s statement in his letter of 28 June to Griffiths “over a six year contract of approx $40,000,000 the commission payable was – wait for it $1,600,000” is evidence that this was the first time that the plaintiff had informed Griffiths that the commission would be $1.6 million. Mr Holmes submitted that if the plaintiff had already informed Griffiths that he would earn $1.6 million commission he would hardly be asking Griffiths to “wait for” the news of the figure in that letter. Griffiths did not accept this proposition and suggested that even if the plaintiff had already informed him of the suggested $1.6 million expectation he would still have used the term “wait for it”. I find this difficult to accept in the context of the evidence given by Griffiths.

155 It was submitted that on this evidence it is highly improbable that Griffiths knew of the $1.6 million figure until late June 1999 and that it is highly improbable that he would have said to McDonald and Mackenzie, as he claimed he did, that the plaintiff was on a compensation plan which provided him with “4% on incremental business which based on a $40 million dollar contract with Boral alone, that’s 1.6 million”. It was submitted that it is equally highly improbable that McDonald would have said “there’s no way I’ll pay him that much”.

156 Griffiths gave evidence that the plaintiff informed him about the $1.6 million in a telephone conversation in April with the suggestion that the plaintiff wanted to ensure that the defendant was aware of such a large possible payment to the plaintiff if the Boral contract was signed. The plaintiff does not refer to such a communication in his 28 June letter. This seems odd if the plaintiff had specifically telephoned Griffiths to ensure that the defendant and its solicitors were aware of the $1.6 million possibility. When this is added to the use of the term “wait for it” in the context of the whole letter I am satisfied that more probably than not Griffiths was not aware of the $1.6 million claim until late June 1999 and that Griffiths did not mention such a figure to McDonald or Mackenzie at the meetings at which the plaintiff’s compensation plan was reviewed.

157 There are some peculiarities to the way in which the plaintiff’s salary was reviewed in 1999. The suggestion by Mr Crow in final address that the plaintiff’s salary was increased twice is one that I cannot accept on the evidence. It is probable that there was an intention to increase his salary to $70,000 and place him on plan B2. However, that salary of $70,000 and plan B2 was never notified to the plaintiff.

158 The delay in the plaintiff receiving the letter of 15 May 1999 is also peculiar. As I have said I am satisfied that Mackenzie probably did not sign the letter until about 24 May 1999. Although Mackenzie did not explain why he did not discuss the contents of the plaintiff’s package with him prior to the letter being sent, the package was not a great deal different from that for which the plaintiff had advocated in November 1998. Certainly he had wanted a guaranteed salary of $90,000 and this was a guaranteed salary of $80,000. He had suggested that he would not have a success fee for any contracts under $3 million. The Plan provided for a payment to the plaintiff on new signings of $5,000 for estimated annual shipments between $0.5 million and $1 million and $10,000 for estimated annual shipments between $1.001 million and $2 million with a requirement that estimated annual shipments over $2 million were “to be negotiated”.

159 The fact that the letter to the plaintiff of 15 May 1999 was countersigned when the letters to the other employees were not was raised with Mackenzie in his cross-examination He said that in 1998 all the letters were countersigned and that in 1999 Muir had probably taken it upon himself to sign the other letters that had been decided by 1 May 1999 because he, Mackenzie, was travelling a lot at that stage and was probably not available to countersign the letters. There was also the delay in the reviews and he thought that Muir signed the letters so that the reviews could be implemented. Muir was not cross-examined as to why the letter was countersigned.

160 Griffiths was asked whether or not the “incentive or bonus” part of a remuneration package was capable of “rolling over” to the next year. He said it was a matter for the sales directors and that it also related to the nature of the business. He said it depended on “how the patch and territories were changed”. He expressed the view that if an employee had started the work on a particular account but that person’s “patch or territory” had changed he/she may still receive the incentive or bonus even though another employee was then in charge of that territory. He said it was “quite possible” it would be “rolled over” but there was not “any firm fast rule that said at this point we cut off and start again at the discretion of the organisation”.

161 There is no issue that McDonald said in response to Mackenzie’s request for approval to “advance” $7,500 to the plaintiff that the Boral contract had not been signed. It was Mackenzie who then went into “bat” for the plaintiff, as McDonald put it in his evidence, to persuade McDonald to approve the payment. He said it would have been “signed” last December if Severino had not gone on leave. He said “John will get Boral”.

162 This discussion proceeded from the premise that there was to be some payment made to the plaintiff on the signing of the Boral contract. If the provision for the payment on the Boral contract terminated on 31 December 1998, it is prima facie strange that McDonald was resisting a payment on the basis that the Boral contract had not been signed. One would have expected the resistance to be on the basis that the plaintiff was not entitled to a payment for Boral because the provision within his remuneration package entitling him to such a payment had terminated on 31 December 1998. However McDonald’s evidence was that he was willing to advance the $7,500 to the plaintiff on the basis of the new remuneration package, that is $80,000 and Plan B3, notified in the letter of 15 May 1999.

163 The plaintiff’s submission is that the defendant scurried around after the announcement of the successful Boral bid informally on 21 May 1999 at the social function at Harold Park to create a plan that would do him out of an entitlement of 4% commission on the incremental sales to Boral over the 1997 sales. One thing that is very clear in this case is that the review of the plaintiff’s compensation plan for 1999 was handled very poorly. There was no discussion with the plaintiff prior to him receiving the news of the change in the letter of 15 May 1999. His reaction was immediate and “furious”. He claims in this case that he had been assured that he would be paid the 4% commission on the named contracts for “the life of the contract”.

164 There is no doubt that the defendant was entitled to review the plaintiff’s remuneration for 1999. I am also satisfied that the plaintiff understood that is just what was to be done as evidenced by his 9 November 1998 letter to Mackenzie. Even if the peculiarities of the way in which the plaintiff’s salary was reviewed lead to a conclusion that the defendant was motivated to remove the 4% commission, it must be remembered that it was the plaintiff who asked for the change. In his letter in relation to his “remuneration adjustment” on 9 November 1998 he requested restoration of a “guaranteed salary” which I am satisfied was intended to be in exchange for removal of the bonus and commission. His review was consistent with what he had asked for except that the difference between $80,000 and $90,000 was not guaranteed, it had to be earned by new signings with a bonus for contracts over $2 million to be negotiated.

165 It is difficult to understand how the 1998 remuneration plan could “roll over” and entitle the plaintiff to 4% commission on the Boral deal. The bonus potential was the amount of the balance between $68,000 and $90,000 being $22,000 to which the plaintiff would become entitled on the signing of the Boral contract. The 4% commission was something extra to the bonus but it is important to look to the terms of the 25 March memo. The memo provided that the plaintiff was entitled to 4% commission on the incremental business sold to the accounts “in 1998” beyond the amount sold in 1997. If it was to “roll over” one unanswered question is, against which year’s sales were the incremental sales of 1999 to be measured. Was it 1998 or 1997? Another unanswered question is, to which accounts would such an arrangement relate? Would it be all, or some, or different accounts to those listed in Ex 1? These questions cannot be answered on the evidence in this case.

166 The plaintiff was paid at the rate of $80,000 and on Plan B3 until the end of 1999 when his remuneration was again adjusted by letter of 27 January 2000 which confirmed his salary at $80,000 and a new incentive plan pursuant to which he was paid until his retirement on 22 March 2000. The plaintiff submitted that the evidence demonstrates that such acceptance of salary was under protest. In his letter of 2 July 1999 the plaintiff advised Muir and Mackenzie that he had been instructed to return “all increase in salary” and requested that a figure be given to him so that he could return the increase. The defendant submitted that such a protest was hollow. The plaintiff knew the amount of the increase and did not return any “increase” to the defendant and accepted the $20,000 bonus paid to him for the signing of the Census contract, pursuant to the 2000 compensation plan notified in January 2000. The plaintiff has not made any offer in these proceedings to pay back to the defendant the amount of the increase.

167 Although the plaintiff was originally “furious” when he received the 15 May letter he continued working and accepting the increased salary. He retains those payments until today. I agree with the defendant’s submission that the protest is hollow. No real effort was ever made to pay back the increases.

168 The plaintiff also submitted that the term “to be negotiated” in Plan B3 for shipments over $2 million is so vague as to be uncertain such that the letter of 15 May 1999 was not enforceable: Courtney & Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd (1975) 1 WLR 297 at 301; Placer Developments Ltd v The Commonwealth (1969) 121 CLR 353 at 359/360. The defendant submitted that this was the very term the plaintiff had suggested in his 9 November 1998 letter to Mackenzie requesting the adjustment. It was a term that required the parties to negotiate on the amount of the payment to be made if and only if new business of estimated annual shipments above $2 million was achieved. The implication from the terms of Plan B3 is that whatever amount was negotiated it would not be less than $10,000.

169 Whether or not the plaintiff’s submissions have some force in respect of the 15 May letter, or that part of plan B3 referring to the term “to be negotiated”, ultimately has no impact on the outcome of these proceedings. That is so because, even if some terms are to be implied into the contractual relationship between the plaintiff and the defendant for the year 1999, there is nothing in the evidence that could establish that the plaintiff is entitled to 4% commission on incremental sales “for the life of” the named contracts. In the year 2000 the plaintiff’s compensation was adjusted again. The salary payments based on $80,000 were made and the bonus of $20,000 was also paid. These payments are retained by the plaintiff to this day.

Estoppel

170 The plaintiff relied upon the July ‘99 assurance he claimed Mackenzie gave him that he “would be covered” in relation to the 4% commission. He said that he stayed on with the defendant and worked on obtaining the Census contract in reliance on the assurance to his detriment. There are three issues in respect of this alleged assurance. They are firstly whether it was given, secondly whether it amounts to a contractual term between the plaintiff and the defendant and thirdly whether the defendant is estopped from denying that the plaintiff is entitled to 4% commission on the claimed contracts “for the life of” the contracts.

171 The plaintiff ties his estoppel case to what is described as the “original contract” (par 38 Amended Summons). This is a reference to the 25 March memo and/or the Conference conversations. I have already found that there is nothing in either the Memo or the Conference conversations that would entitle the plaintiff to 4% commission “for the life of” the named contracts. That in my view puts an end to the estoppel claim. However I will consider the plaintiff’s claim in respect of the alleged July ’99 assurance.

172 The defendant highlights the fact that the post July 1999 correspondence does not refer to the conversation alleged in the July ‘99 assurance. It was submitted that even assuming such a statement was made by Mackenzie it was immediately overtaken by events and the continual assertion made by the defendant of its position that the Plan contained in the 15 May 1999 letter operated for 1999.

173 The defendant submitted that it was most unlikely that Mackenzie would have said that the plaintiff would be covered for 4% when he was well aware of plan B3 that he had provided to McDonald after Griffiths had prepared it. It is inconsistent with what he had advised the plaintiff on 15 May 1999 in the letter countersigned by Muir. The defendant also relies upon the pay slips delivered to the plaintiff from 15 May 1999 for the balance of that year.

174 In his affidavit Mackenzie stated that he had a conversation with the plaintiff in the “middle of 1999” in which the plaintiff claimed “I am going to be rich from the Boral contract. I’ve got 4% on incremental sales”. Mackenzie responded “John, you know that’s rubbish”. That statement in his affidavit is inconsistent with the alleged July ‘99 assurance. However, in cross examination as to whether he did say he would make sure the plaintiff was covered he said “I tend to say yes but I really can’t be certain about that”. His evidence was that a conversation took place but he wasn’t certain of what was actually said in the conversation. He said that it “could have been said”.

175 The defendant submitted that even if Mackenzie said the words “I’ll make sure you are covered” the statement is so imprecise that the court would be satisfied that it did not form part of a contractual term between the plaintiff and the defendant. Alternatively if it was a term it was so vague and uncertain as to content as to be unenforceable. Was the plaintiff informed that he would be “covered” for just the Census contract or was it the Boral contract and the Census contract or was it for all contracts? Was the 4% commission to be paid on incremental sales over 1997 or incremental sales over 1998? None of these questions can be answered on the evidence in this case.

176 If the assurance was given I am satisfied that it is so imprecise that it would not have formed a contractual term between the plaintiff and the defendant. Even if that is wrong and the statement “I am sure you are covered” were to be a contractual term it could only have entitled the plaintiff to 4% commission on incremental sales sold in 1999 over sales in 1998 or 1997 and certainly not for the life of the contract as claimed by the plaintiff. There is nothing that suggests any entitlement to 4% commission for the life of the contract.

177 The plaintiff claimed that the detriment he suffered by staying on with the defendant from July 1999 was that he lost the benefit of a medical retirement. It is submitted that such a retirement at 75% of the average salary earned in the last three years would have meant the plaintiff was entitled to an amount of $69,750 per annum, which he claims was more then the amount he received from the defendant. From March to September 1998 the plaintiff was paid at the base rate of $90,000 per annum and then from September 1998 to 1 April 1999 at the base rate of $68,000 per annum. From 1 April 1999 to 22 March 2000 he was paid at the base rate of $80,000 per annum together with the $7,500 advance and the $20,000 bonus. I am satisfied there was no financial detriment suffered by the plaintiff in staying in employment with the defendant. I am also satisfied that the plaintiff did not lose any entitlement to retire on medically unfit grounds. That remained available to him so long as he could qualify for such a retirement. The continuation of his employment did not remove that entitlement.

178 On all the evidence before me I am satisfied that the plaintiff is not entitled to the declarations that he seeks. The Summons is dismissed. I will hear argument on costs on a date to be fixed if the parties are unable to agree on a costs order.

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Last Modified: 04/02/2002

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Citations

Patrick John Bredel v Moore Business Systems Australia Ltd [2002] NSWSC 185

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Whitlock v Brew [1968] HCA 71

CITATION:	Patrick John Bredel v Moore Business Systems Australia Ltd [2002] NSWSC 185
CURRENT JURISDICTION:	Equity Division Commercial List
FILE NUMBER(S):	SC 50139/00
HEARING DATE(S):	3, 4 and 5 October 2001, 4 to 8 February 2002 and 26 February 2002
JUDGMENT DATE:	28 March 2002
PARTIES :	Patrick John Bredel (Plaintiff) Moore Business Systems Australia Ltd (Defendant)
JUDGMENT OF:	Bergin J

COUNSEL :	R A S Skiller leading E A Englebrecht (Plaintiff) M F Holmes QC leading R F Crow (Defendant)
SOLICITORS:	Ronald S Czinner & Co (Plaintiff) Mallesons Stephen Jaques (Defendant)
CATCHWORDS:	[CONTRACT] Terms of contract between plaintiff and defendant - whether defendant agreed to pay plaintiff 4% commission on incremental sales "for the life" of certain contracts won by the plaintiff. - [ESTOPPEL] Whether defendant represented to plaintiff that he would be paid 4% commission on incremental sales "for the life" of the contracts won for the defendant - whether defendant relied upon representation to his detriment.
CASES CITED:	Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61 Courtney & Fairbairn Ltd v Tolaini Brothers (Hotels) Ltd [1975] 1 WLR 297 Placer Development Ltd v The Commonwealth of Australia (1969) 121 CLR 353
DECISION:	Summons dismissed