Pepe v Platypus Asset Management Pty Ltd - [2013] VSCA 38

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2010 0178

PHILIP PEPE
	Appellant
v
PLATYPUS ASSET MANAGEMENT PTY LTD (ACN 118 016 087)	Respondent

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JUDGES:	BUCHANAN, NEAVE JJA and HOLLINGWORTH AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	6 March 2012
DATE OF JUDGMENT:	6 March 2013
MEDIUM NEUTRAL CITATION:	[2013] VSCA 38
JUDGMENT APPEALED FROM:	Pepe v Platypus Asset Management Pty Ltd [2010] VSC 603 (Almond J)

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CONTRACTS — Employment contract — Terms and conditions — Construction of equity participation clause — Principles of construction — Effect of drafting changes — Surrounding circumstances — Clause did not entitle appellant to receive 5% of issued capital at end of 12 month period — Appeal dismissed

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Appearances:	Counsel	Solicitors
For the Appellant	Mr J L Bourke SC with Ms R W Sweet	Rockwell Bates Lawyers
For the Respondent	Mr P W Collinson SC with Ms J M Firkin	Ashurst Australia

BUCHANAN JA:

I agree with Neave JA and Hollingworth AJA.

NEAVE JA:

HOLLINGWORTH AJA:

Introduction

In January 2006, the respondent company (‘PAM’) was incorporated, pursuant to a joint venture between PAM Holdings Limited and Australian Unity Funds Management Limited. Thereafter, PAM operated a funds management business.

PAM engaged Bunton & Barber, a specialist recruitment firm, to recruit appropriate people to fill new positions, including the position of senior equities analyst. One of the four potential candidates for that position was the appellant, Philip Pepe.

After various negotiations in February and March 2006 concerning his employment, on 14 March 2006 Pepe signed an executive employment agreement (‘the EEA’) and the letter, dated 9 March 2006, which enclosed it (‘the covering letter’). There is no dispute that the EEA and covering letter together contain the written terms of Pepe’s employment contract.

The covering letter contained the following paragraph (‘the equity participation paragraph’):

5. Equity participation

Subject to a qualifying period of twelve months, PAM will make available to you an equity participation opportunity. Whilst the details of this opportunity remain to be finalised (the operating structure of this arrangement, taxation consequences, and our need to have a scheme which can be extended to other key staff are important design considerations) we intend to make available to you an equity stake (likely via shares however it may be via options, shares or both) 5% of the then-issued capital of PAM (as either voting or non-voting shares). The ultimate extent of any offer will be subject to your performance during this initial twelve-month period, and a vesting period of up to three years may be applied (noting however that you

will be entitled to the full economic benefit of the shares and/or options during this vesting period).

The EEA itself contained no reference to equity participation.

The EEA did contain various clauses which dealt with Pepe’s entitlements upon termination of his employment contract. Under clauses 5.2 and 5.3 of the EEA, Pepe was entitled to payment of up to 3 months’ pay in lieu of written notice.

As far as other entitlements…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] VSCA 38
Decision Date: 6 March 2013

CaseChat Overview and Summary

The case of Pepe v Platypus Asset Management Pty Ltd was heard in the Court of Appeal of the Supreme Court of New South Wales. The appellant, Pepe, was employed by Platypus Asset Management Pty Ltd, and the dispute centred around the interpretation of a particular clause in their employment contract. Specifically, the clause in question related to equity participation and whether the appellant was entitled to receive 5% of the issued capital at the end of a specified 12-month period.

The primary legal issue before the court was the correct interpretation of the equity participation clause in the employment contract. The appellant argued that the clause entitled them to 5% of the issued capital, while the respondent maintained that the clause did not confer such a right. The court had to determine the meaning of the clause by considering the principles of contract construction, including the effect of any drafting changes and the surrounding circumstances at the time the contract was executed.

In delivering the judgment, the Court of Appeal considered the language of the clause and the context in which it was written. The court found that the clause did not unambiguously confer a right to 5% of the issued capital. The court emphasised that the clause was not drafted in absolute terms and that the surrounding circumstances did not support the appellant's interpretation. Consequently, the appeal was dismissed, and the decision of the lower court was upheld. The court ruled that the appellant was not entitled to receive 5% of the issued capital under the terms of the equity participation clause in the employment contract.

Orders