RCR Tomlinson Ltd v Russell
[2017] WASCA 129
•11 JULY 2017
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: RCR TOMLINSON LTD -v- RUSSELL [2017] WASCA 129
CORAM: BUSS P
MURPHY JA
BEECH JA
HEARD: 16 MAY 2017
DELIVERED : 11 JULY 2017
FILE NO/S: CACV 79 of 2016
BETWEEN: RCR TOMLINSON LTD
Appellant
AND
DAVID WILLIAM RUSSELL
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :TOTTLE J
Citation :RUSSELL -v- RCR TOMLINSON LTD [No 2] [2016] WASC 240
File No :CIV 1229 of 2010
Catchwords:
Equity - Rectification - Whether open to trial judge to find that common intention was established by clear and convincing proof - Turns on own facts
Legislation:
Nil
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant: Mr I Neil SC & Mr J L Snaden
Respondent: Mr A J Power
Solicitors:
Appellant: Clayton Utz
Respondent: King & Wood Mallesons
Case(s) referred to in judgment(s):
Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365
Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603
Mander Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336
Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447
RCR Tomlinson Ltd v Russell [2015] WASCA 154
Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679
Russell v RCR Tomlinson Ltd [2012] WASC 405
Russell v RCR Tomlinson Ltd [No 2] [2016] WASC 240
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603
Shepherd v The Queen (1990) 170 CLR 573
Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 91 ALJR 108
Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164; (2014) 48 WAR 261
Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 38 WAR 488
Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21; (2015) 47 WAR 547
REASONS OF THE COURT:
Introduction
The appellant (RCR) appeals against the primary judge's decision[1] to rectify the provisions of an employment contract between RCR as employer and the respondent as employee regulating the circumstances in which a retirement benefit of the equivalent of one year's salary was payable by RCR to the respondent, Mr Russell.
[1] Russell v RCR Tomlinson Ltd [No 2] [2016] WASC 240 (primary reasons).
The grounds of appeal complain of errors in the fact‑finding process at trial. For the reasons that follow, we are not persuaded that RCR has demonstrated any error. Consequently, we would dismiss the appeal.
The contract
On 9 March 2009, Mr Russell commenced employment with RCR in the position of Executive General Manager (EGM) of RCR Positron Pty Ltd (RCR Positron). Mr Russell's employment was governed by a written contract of employment executed on 4 March 2009 (the Contract).
Clause 1.1 of the Contract defines Retirement, Retirement Benefit and Retirement Date as follows:
Retirement means the termination of this Agreement pursuant to clause 11.1(a) or 11.3 or, if during the Term, the death of the Executive General Manager.
Retirement Benefit has the meaning ascribed to that term in clause 7.
Retirement Date means the date of Retirement.
Clauses 2, 3 and 4 describe the position, define the duration of the employment and identify the EGM's duties. Clauses 5 and 6 deal with the EGM's remuneration and the right to reimbursement of expenses.
Clause 7 concerns the benefits payable on retirement and reads:
7.Retirement benefit
7.1Calculation of benefit
Upon Retirement, provided that the Retirement Date is after the fifth anniversary of the Commencement Date, the Executive General Manager is entitled to receive a payment in cash from the Company calculated on the following basis:
•one (1.0) times the total amount of Salary and superannuation payable to the Executive General Manager as at the Retirement Date.
7.2Payment of benefit
The Company will pay the Retirement Benefit to the Executive General Manager as follows:
(a)50% of the Retirement Benefit within 10 business days of the Retirement Date or such other date as the Company and the Executive General Manager agree in writing; and
(b)the balance, being 50% of the Retirement Benefit within 3 months of the Retirement Date or such other date as the Company and the Executive General Manager agree in writing.
7.3Operation
This clause 7 continues to operate and have effect after termination of this Agreement.
Clause 8 sets out the EGM's leave entitlements and cl 9 and cl 10 impose obligations on the EGM regarding 'Confidential Information'.
Clause 11 concerns the termination of employment and reads:
11.Termination
11.1Grounds for termination
The Company at its sole discretion may terminate the Employment of the Executive General Manager in the manner specified in clause 11.2 if at any time the Executive General Manager is or becomes:
(a)incapacitated by illness or injury of any kind which prevents the Executive General Manager from performing the duties specified …;
(b)guilty of wilful misconduct …;
(c)Is [sic] charged with any criminal offence …;
(d)of unsound mind …;
(e)bankrupt …;
(f)continually or significantly neglectful of his duties …;
(g)refusing or neglecting to comply with any lawful, reasonable direction or order ….
11.2 Notice of termination
Where the Company decides to terminate the Employment for a reason specified in clause 11.1 it shall do so in the following manner:
(a) for a reason specified in clause 11.1(a) by giving the Executive General Manager not less than one month's written notice or by paying one month's Salary in lieu thereof; or
(b) for any reason specified in clause 11.1(b), (c), (d), (f) or (g) by giving the Executive General Manager notice effective immediately and without payment of any salary other than the Salary and any other entitlements accrued to the date of the termination.
11.3Executive General Manager and Company to give notice
(a)The Executive General Manager may terminate the Employment by giving the Company no less than three months' written notice. If the written notice is dated prior to March 2014 the Company shall not be obliged to pay any Retirement Benefit.
(b)Otherwise than as specified in this clause 11, the Company may terminate the Employment by giving the Executive General Manager no less than one month's written notice or by paying no less than one month's Salary in lieu thereof as well as paying the retirement benefits as per clause 7.
Clause 13 is the 'non-competition' clause. By its terms Mr Russell agreed that he would not be involved in various capacities in any business that competed with any business of RCR or any business carried on by any 'Related Body Corporate' of RCR. The clause was drafted to impose a series of severable (cascading) restraints, so that the relevant geographical 'Restraint Area' ranged from 'Australia' to 'Perth' and the 'Restraint Period' ranged from five years to six months.
Mr Russell's employment is terminated
Mr Russell's employment was terminated by RCR under cl 11.3(b) of the Contract on 16 December 2009. Upon termination, he was paid an amount comprising his entitlements for salary and annual leave and the equivalent of three months' salary in lieu of notice.
Mr Russell's claims, and the course of proceedings
Mr Russell sued RCR for the sum of $297,500, being his Retirement Benefit calculated in accordance with cl 7.1, alternatively for damages. The case was put on three bases. First, he contended that on a proper construction of the Contract, in the case of termination under cl 11.3(b), the Retirement Benefit was payable regardless of how long he had been working for RCR. Secondly, in the alternative, he contended that the Contract should be rectified to reflect what Mr Russell alleged was the parties' common intention ‑ that, in the event that his employment was terminated under cl 11.3(b) of the Contract ‑ the Retirement Benefit would be payable regardless of how long he had worked for RCR. Thirdly, Mr Russell made a claim for damages for misleading or deceptive conduct.
Mr Russell's claims were tried before Pritchard J. Her Honour rejected the contractual construction claim and the misleading or deceptive conduct claim, but upheld his rectification claim.[2] This court upheld an appeal against that decision, and ordered a retrial.[3]
[2] Russell v RCR Tomlinson Ltd [2012] WASC 405 (Russell v RCR [2012]).
[3] RCR Tomlinson Ltd v Russell [2015] WASCA 154 (RCR v Russell [2015]).
The retrial was heard by Tottle J. His Honour held that, on a proper construction of the orders of this court, only the rectification claim had been remitted for trial. Consequently, it is not necessary to say anything more about the other claims which were made by Mr Russell. His Honour upheld Mr Russell's rectification claim. RCR appeals against that decision.
The primary judge's reasons
Background facts
The primary judge set out uncontroversial background facts, including the following.
Mr Russell is an electrical engineer with extensive experience as a project manager. In February 2008 he accepted a position with a business known as Positron Group to act as its project manager on a mining project in South Australia known as the Prominent Hill Project.
RCR acquired the Positron Group business in 2008.
By early 2009, Mr Russell's work on the Prominent Hill project was coming to an end. He started looking for another position.
By 2009 RCR had been a listed company for a number of years. Mr Noordhoek had been its Chief Executive Officer since 2007. Before that, he had been RCR's Chief Operating Officer.
In 2006, standard form Executive General Manager Service Agreements were put in place by the then CEO of RCR. They remained in place in 2009.
Three important features of the Executive General Manager Services Agreements were as follows.
(1)If the manager resigned from his employment after a certain number of years of service he would be entitled to payment of a sum equal to his annual salary and superannuation benefits.
(2)If RCR terminated the manager's employment 'otherwise than for cause' then, in addition to any other entitlements the manager would have, he would be entitled to payment of a sum equal to his annual salary and superannuation benefits.
(3)The agreements contained a non-competition provision restraining the manager from being involved in a competitive business following termination of his employment. The non-competition provision provided for a progressive reduction in the geographical area and duration of the restraint to reduce the risk of the clause being declared invalid.
The Executive General Manager Services Agreements executed by RCR before 2009 specified a qualifying period of either two or three years for the payment of benefits on resignation from RCR.
In February 2009 the position of EGM of RCR Positron was vacant. Someone suggested to Mr Noordhoek that he consider Mr Russell for the position. Mr Noordhoek had worked with Mr Russell on the Prominent Hill project. In February 2009 Mr Russell and Mr Noordhoek spoke about the possibility of Mr Russell remaining with RCR and taking up the role of EGM of RCR Positron.
One of Mr Russell's concerns in considering the role was the possibility that Mr Paul Dalgleish, who had been recruited to replace Mr Noordhoek as CEO of RCR, might wish to appoint someone else as EGM of RCR Positron when he became CEO.
On 27 February 2009 Mr Noordhoek provided Mr Russell with a draft Executive General Manager Services Agreement. The draft had been given to Mr Noordhoek by Ms Charmaine Higgins, RCR's General Manager Corporate Human Resources.
That evening, Mr Russell decided he was no longer interested. He sent an email to Mr Noordhoek informing him that he had decided to withdraw his interest in the position. The next morning, a Saturday, Mr Noordhoek sent an email expressing disappointment with Mr Russell's decision, and requesting that he reconsider it.
Mr Russell did reconsider his position. He and his wife reviewed the draft agreement, noting, in handwriting, changes he wanted to the draft.
On 2 March 2009 (a public holiday), Mr Russell drove to RCR's office and left the draft agreement on which he had made notes in Mr Noordhoek's secretary's in‑tray.
Later that day Mr Russell telephoned Mr Noordhoek to discuss the draft agreement. The substance of the discussions was an issue at the trial, and it was dealt with later in the primary judge's reasons.
On 3 March 2009, Ms Higgins prepared a letter offering Mr Russell the position of EGM of RCR Positron.
On 4 March 2009 Mr Russell attended RCR's office. It was not in doubt that there was a meeting between Mr Noordhoek and Mr Russell, and that Ms Higgins and Mr Philip Crighton, RCR's Company Secretary and Chief Financial Officer, were present at the end of the meeting. Ms Higgins witnessed Mr Russell signing the Contract; Mr Crighton and Mr Noordhoek signed it on behalf of RCR. What was said at the meeting, and how long Ms Higgins was present at the meeting, were in dispute and were dealt with later in the judge's reasons.
On 9 March 2009 Mr Russell started work as RCR Positron's EGM.
In May 2009 Mr Noordhoek stepped down as RCR's Chief Executive Officer and Mr Dalgleish took up that position.
In August 2009 Mr Russell heard rumours that Mr Dalgleish intended to replace him as EGM of RCR Positron. On 19 August 2009 he spoke to Mr Crighton about his concerns. After that discussion, on 20 August 2009, Mr Russell sent an email from his work email address to his personal email address which read as follows (exhibit 1 tab 10):
Spoke to Phil Crighton (Company Secretary) yesterday about all the turmoil within the EGM's with John's and Jeff's imminent resignation. Highlighted my situation with my employment contract and the lack of communication between Paul D and myself and the rumours of him interviewing in the East for a replacement for me. Phil stated that in my case I would be alright as if Paul decided to get rid of me RCR would have to pay 1 month plus 1 year. Phil got a copy of my contract and we reviewed the relevant sections, I commented that the 1 year Retirement benefit on termination might be interpreted differently and he stated that the intent was to pay one month and one year if the EGM was dismissed because someone 'didn't like the face' (not a discipline reason) and that a precedent had been set with the dismissal of a BDM and several others.
I also had legal review of the contract over night and was informed my contract was different to the other current EGM's and that RCR would have to pay the 1 month and 1 year (apparently my contract was setup the same as a previous guy who went to Bunbury), further that Paul would be 'furious' when he found out.
Another interesting comment was that the restraint period in my contract had been 'cut and pasted' from a non employment [sic] contract and made no sense and therefore was probably unenforceable.
On 16 December 2009, Mr Russell's employment was terminated, otherwise than for cause.
On 8 January 2010 Mr Russell sent an email to Mr Dalgleish in the following terms (exhibit 1 tab 17):
Dear Paul,
I confirm that during my termination interview with Garry Ramse and Charmaine Higgins on 16 December 2009, I was advised that I would be paid the equivalent of 3 months salary in lieu of notice when my contract only required RCR to pay 1 month. I was further advised that I would be paid all contractual benefits. I specifically highlighted clause 11.3 (b) and the subsequently clause 7 of my Executive General Manager's Services Agreement that being 12 months salary in circumstances where RCR terminated my employment by way of mere notice, prior to the expiration of 5 years continuous service.
At the time I entered into my employment contract with RCR I did so on the basis that I would be paid 12 months salary by way of a retirement benefit should RCR terminate my services prior to 5 years continuous service where the other type of Retirement Benefit would have been payable. In exchange for the payment of the retirement benefit I took a reduction in salary and accepted a position that was subject to review and unlikely to continue long term because you were joining RCR as CEO within a few months of me entering into my contract. At the time of entering into this contract the area of the Executive General Manager's Services Agreement highlighting this provision was discussed with both Charmaine Higgins and John Noordhoek and also subsequently with the CFO and Company Secretary, Mr Phillip Crighton.
The period for the payment of my contractual entitlements has now expired and RCR is in breach of its obligations to me under my employment contract.
In addition the payment of my statutory entitlements has not been fully met as I have not been paid superannuation nor the amount covering the vehicle allowance for the period of untaken annual leave as at termination. Accordingly this now constitutes a breach of RCR's statutory obligations as an employer.
I now demand full payment of all entitlements both contractual and statutory on or before the close of business Wednesday, 13 January 2010.
Should I not receive payment in full I will not hesitate to immediately commence proceedings in the Federal Court against RCR and its Directors.
Yours faithfully
David Russell
RCR did not pay the Retirement Benefit demanded by Mr Russell. Mr Russell commenced the action the subject of this appeal on 17 February 2010.
Legal principles
The primary judge stated that the applicable legal principles were those stated by this court in the earlier appeal.[4] There was and is no challenge to that statement of principles.
The evidence
[4] Primary reasons [77] citing RCR Tomlinson Ltd v Russell [2015] [49] ‑ [54].
His Honour outlined the evidence.
The primary judge noted that in its closing written submissions RCR accepted that both Mr Russell and Mr Noordhoek gave evidence to the effect that in March 2009 they intended that the agreement would operate as Mr Russell contends.[5]
[5] Primary reasons [78].
The primary judge found that, for understandable reasons, Mr Noordhoek had a very poor recollection of events, including the 4 March 2009 meeting. Mr Noordhoek impressed the primary judge as a forthright and truthful witness who was candid and not partisan.[6]
[6] Primary reasons [85].
The primary judge summarised the following features of Mr Noordhoek's evidence:[7]
Mr Noordhoek's evidence was that it was a standard feature of the Executive Services Agreement used by RCR that an EGM would be paid an amount equivalent to one year's salary in the event that the company terminated the EGM's employment otherwise than for cause (ts 498.1). Mr Noordhoek decided he would offer Mr Russell 'the standard EGM agreement' (ts 498.2). This was a 'sweetener' Mr Noordhoek was able to offer Mr Russell to persuade him to accept the EGM position (ts 518.5). He was certain Mr Russell would have been concerned about the possibility of a restructure (ts 523.5). He wanted Mr Russell to receive a package that provided that if his employment was terminated otherwise than for cause by RCR he, Mr Russell, would receive a year's salary plus superannuation (ts 526.5) and this was his intention (ts 535.6 ‑ 536). Mr Noordhoek had a good recollection of what he intended should be in the draft agreement between RCR and Mr Russell (ts 550.3). He interpreted cl 11.3(b) of Mr Russell's contract as entitling Mr Russell to payment of one year's salary in the event that RCR terminated his employment otherwise than for cause (ts 556.9).
[7] Primary reasons [87].
His Honour observed that Mr Noordhoek thought it unlikely that he would have discussed with Ms Higgins the terms of the proposed agreement with Mr Russell generally, or, in particular, the period that Mr Russell had to serve as an employee before receiving the Retirement Benefit in the event that Mr Russell resigned.[8] The primary judge found that the discussion with Mr Russell that is referred to in Mr Noordhoek's written statement was directed to the situation in which Mr Russell resigned as distinct from RCR terminating his employment.[9]
[8] Primary reasons [89].
[9] Primary reasons [90] ‑ [92], referring to ts 543.
The primary judge found that although he considered Ms Higgins was a truthful witness, he had reservations in accepting that her recollection was as reliable and accurate as is suggested by her account of the conversations in her witness statement. In that respect his Honour referred to Ms Higgins' role as a busy manager who did not have any compelling reason to remember events in which she played a limited clerical role.[10]
[10] Primary reasons [95].
His Honour summarised the effect of part of Ms Higgins' evidence as follows:[11]
Ms Higgins agreed that the only difference between what she understood to be the standard contract for EGMs and Mr Russell's EGM was that Mr Russell's contract would provide that in the event he resigned before completing five years of service, he would not be paid the retirement benefit, whereas in other EGMs' service agreements the qualification period for the payment of the retirement benefit was either two or three years (ts 439.2). Ms Higgins understood that if RCR terminated Mr Russell's employment then he would be in the same position as other EGMs if their employment was terminated without cause: he would receive 12 months' salary (ts 439).
[11] Primary reasons [97].
Ms Higgins' recollection was that she was present for substantially all of the meeting between Mr Russell and Mr Noordhoek.[12] His Honour referred to what was said in pars 25 and 26 of her witness statement regarding the statement said to have been made by Mr Noordhoek to Mr Russell.[13] His Honour observed that Ms Higgins accepted that the Retirement Benefit to which Mr Noordhoek was referring in that discussion was the benefit payable in the event of Mr Russell resigning, and that the statement made by Mr Noordhoek was not directed to termination of Mr Russell's employment by RCR otherwise than for cause.[14] RCR challenges that finding on appeal.
[12] Primary reasons [99].
[13] Primary reasons [100].
[14] Primary reasons [101].
His Honour found that, in both her witness statement and in the course of her cross‑examination, Ms Higgins did not make any mention of a discussion about the entitlement to receive the Retirement Benefit on dismissal as opposed to on resignation.[15]
[15] Primary reasons [104].
Mr Crighton's evidence was that Mr Noordhoek told him he intended to offer Mr Russell employment on the terms of the standard Executive Services Agreement and Mr Noordhoek either told Mr Crighton, or Mr Crighton inferred, that this would entitle Mr Russell to be paid one year's salary in the event that RCR terminated his employment other than for cause.[16]
[16] Primary reasons [108] referring to Mr Crighton's statement [21] and ts 368.
When Mr Crighton reviewed the Contract before executing it, and having regard to what Mr Noordhoek had told him, he understood that Mr Russell would receive the same Retirement Benefit as other executives in the event of termination by RCR other than for cause, namely a year's salary.[17]
[17] Primary reasons [109].
The primary judge observed that he formed a positive impression of Mr Russell when he gave evidence; he was direct and responsive in answering questions.[18]
[18] Primary reasons [110].
The primary judge observed that the evidence given by Mr Russell about statements made by Mr Noordhoek regarding RCR's intentions was consistent with Mr Noordhoek's evidence concerning his subjective intention. That gave the primary judge confidence in accepting Mr Russell's evidence about what Mr Noordhoek said to him.[19]
[19] Primary reasons [111].
The primary judge gave detailed consideration to submissions made by RCR at trial as to why Mr Russell's evidence should be treated with great caution. As many of the same matters are emphasised in RCR's submissions on appeal, we will refer to them in some detail. RCR submitted to the primary judge that Mr Russell had made a number of statements before and after the commencement of the proceedings that were inconsistent with his evidence and the case presented at trial. His Honour summarised those statements as follows:[20]
(1)In the email sent to Mr Dalgleish on 8 January 2010 Mr Russell stated, amongst other things, that he discussed the retirement benefit provisions of the Services Agreement with Ms Higgins as well as Mr Noordhoek and this was contrary to his evidence at trial.
(2)The statement that Ms Higgins was a party to discussions about the retirement benefit was repeated in the statement of claim. It was alleged that the representation about the retirement benefit entitlement was made by Ms Higgins and Mr Noordhoek. This allegation appeared in successive versions of the statement of claim. It was not until the statement of claim was further amended in November 2011 that the allegation that Ms Higgins was involved in the making of this representation was dropped.
(3)In the email Mr Russell sent to himself on 20 August 2009 recounting his conversation with Mr Crighton about the possibility that he, Mr Russell, might be dismissed, he made no mention of what had been said to him by Mr Noordhoek about the retirement benefit in the discussions that preceded the signing of the Services Agreement.
(4)In the course of the meeting at which Mr Ramse and Ms Higgins told him that he was dismissed Mr Russell made no mention of the promises that Mr Noordhoek had made to him.
[20] Primary reasons [112].
As to the first of these, the primary judge found that the email referred to discussions in general and somewhat loose terms. To the extent there is an inconsistency between the contents of the email and Mr Russell's case at trial the primary judge did not consider that it bore in a material way on the reliability of his evidence.[21]
[21] Primary reasons [114].
His Honour accepted that the fact that the early versions of Mr Russell's statement of claim alleged the representation was made by both Mr Noordhoek and Ms Higgins was plainly inconsistent with Mr Russell's case at trial. The judge referred to Mr Russell's explanation that when new solicitors were engaged they reviewed the evidence with him. The primary judge found that the amendment to the statement of claim reinforced the need to assess and consider Mr Russell's evidence carefully, and that he had done so. It was a factor to be taken into account. When viewed in light of the positive view of Mr Russell in giving his evidence and the consistency between Mr Russell's evidence and Mr Noordhoek's evidence about his subjective intentions, the inconsistency arising from the amendment to the statement of claim did not lead his Honour to conclude that Mr Russell's evidence was unreliable.[22]
[22] Primary reasons [117].
As to the third matter, his Honour found there was no reason for Mr Russell to recall or refer to what had been said to him by Mr Noordhoek about the Retirement Benefit in his email to himself of 20 August 2009.[23] Similarly, his Honour found that the meeting with Mr Ramse and Ms Higgins was not an occasion on which a person in Mr Russell's position would be expected to rehearse the factual basis for his contention as to what he was entitled to be paid.[24]
[23] Primary reasons [118].
[24] Primary reasons [119].
On appeal, RCR criticises the primary judge's treatment of all of these matters.
The primary judge set out Mr Russell's account of his telephone conversation with Mr Noordhoek on 2 March 2009 as follows:[25]
Later on 2 March 2009, after the morning meeting, I called Mr Noordhoek to discuss the changes and comments I had made on the Draft Services Agreement. In the course of that conversation:
(a)I expressed my reservations about accepting the EGM position, particularly with regard to the likely restructure of Positron that I expected would be initiated by the incoming CEO, Mr Dalgleish. In my experience, it was fairly normal for a new CEO to come into a business and bring his own team of people in with him.
(b)I also expressed concern about the length of the restraint period referred to in the Draft Services Agreement. It didn't make any sense to me that I could be prevented from working in the industry for up to 5 years after my employment ended with RCR.
(c)It is my recollection that Mr Noordhoek used words to the effect that in the event of my employment being terminated by RCR as part of a restructure, then RCR would not seek to enforce the restraint period for more than 12 months. He further stated words to the effect that I would be appropriately reimbursed during the restraint period, because I would be paid a retirement benefit equivalent to 1 year's salary and superannuation, if my employment was terminated at any time by RCR other than for cause.
(d)Mr Noordhoek also stated words to the effect that RCR would prepare my services agreement to ensure that I would be paid the retirement benefit on these terms.
[25] Primary reasons [121] citing statement of Mr Russell [39].
Mr Russell's evidence was that before the meeting on 4 August 2009, Ms Higgins gave him a copy of a letter regarding his conditions of employment, a clean copy of the Contract with a draft watermark, and also a draft document on which he had written his comments, and on which other handwritten comments were written.[26]
[26] Primary reasons [123].
The primary judge outlined Mr Russell's evidence as to what occurred at the meeting of 4 March 2009 as follows:[27]
[27] Primary reasons [126]; referring to pars 48 ‑ 51 of Mr Russell's statement.
Mr Russell said that when he met Mr Noordhoek on 4 March 2009 the following discussion took place (exhibit P2, at pars 48 ‑ 51):
48During my discussion with Mr Noordhoek on 4 March 2009, we had a copy of the services agreement open in front of us. We did not discuss every clause in the services agreement. I indicated to Mr Noordhoek which clauses I wanted to discuss in light of my ongoing concerns.
49I sought assurances from Mr Noordhoek that, in the event that my employment was terminated by RCR, other than for cause, then I would still be paid the retirement benefit described in clause 7.1 of my services agreement (Retirement Benefit), even if this occurred before the completion of the 5 year period referred to in that clause.
50Mr Noordhoek responded by stating words to the effect that:
(a) if RCR terminated my employment, other than for cause, then I would be paid the Retirement Benefit as described in my services agreement, regardless of when my employment was terminated; and
(b)the clauses in my services agreement that dealt with my Retirement Benefit were common to the services agreements of other executives at RCR and were intended to protect senior personnel from a take-over of RCR, a major restructure or management change that occurred prior to the completion of a contract period.
51I also asked Mr Noordhoek why clause 7.1 of my service agreement provided for a period of 5 years before I would receive the Retirement Benefit if I retired, when I knew the equivalent clause in the services agreements of various other RCR executives stipulated only 3 years. Mr Noordhoek responded with words to the effect that the change from 3 to 5 years was in accordance with a decision of the RCR Board.
Discussion of the restraint period in my services agreement
52.In the course of the same discussion on 4 March 2009, I asked Mr Noordhoek why the restraint period in my services agreement had been retained in its original (draft) form, to provide a restraint period of up to 5 years and within the whole of Australia. I had queried this provision in the Draft Services Agreement during our telephone conversation on 2 March 2009, as the period seemed excessive.
53.Mr Noordhoek referred to the Retirement Benefit in my services agreement as the 'gardening clause', which he explained with words to the effect that it operated where a person resigns and is then paid by his employer for a period where they are not required to work. He said words to the effect that a person on 'gardening leave' would be paid to do the 'gardening' whilst they were waiting for a contractual restraint period to expire.
His Honour recorded Mr Russell's evidence that when he went to the meeting he was still concerned and needed reassurance that he would be paid the Retirement Benefit if his employment was terminated by RCR if he had not completed five years' service.[28] His Honour outlined other aspects of Mr Russell's evidence as follows:[29]
In cross-examination Mr Russell accepted that in the course of the 4 March 2009 meeting Mr Noordhoek told him he would have to be employed for five years before he qualified for payment of a retirement benefit (ts 313.7). He also accepted that the reason why he sought an assurance from Mr Noordhoek that the retirement benefit would be paid in the event that he was dismissed without cause by RCR, within five years of being employed, was because it was clear to him that cl 7.1 required a period of service of five years before the retirement benefit became payable (ts 316.6). When asked why he did not ask for clause 7.1 to be amended he said that he did not see the need because he had read cl 11.3(b) (ts 318.2). In re-examination Mr Russell said that in the meeting Mr Noordhoek reassured him that he would be paid the retirement benefit if RCR terminated his employment within the five year period by reference to cl 11.3(b): Mr Noordhoek said, 'There it is. You will be paid' (ts 326.7).
Factual findings
[28] Primary reasons [127], referring to ts 326.
[29] Primary reasons [128].
His Honour made the following findings of fact:[30]
[30] Primary reasons [129].
(1)In the course of their telephone conversation on the morning of 2 March 2009 Mr Russell said to Mr Noordhoek that he had reservations about accepting the EGM position and was concerned about the possibility of a restructure. Mr Russell also expressed his concern about the restraint period in the non-competition clause. Mr Noordhoek told Mr Russell RCR would not enforce the restraint for a period of more than 12 months and that Mr Russell would be remunerated in that period because he would be paid the retirement benefit of one year's salary and superannuation if RCR terminated the employment other than for cause. Mr Noordhoek told Mr Russell the Services Agreement would be prepared to ensure that the retirement benefit would be paid on that basis. This finding is supported by Mr Russell's unchallenged evidence which was not contradicted by any other evidence. Mr Russell's evidence was not glaringly improbable or inconsistent with facts established by objective evidence and I have no reason to reject it.
(2)Mr Russell met Ms Higgins before he met Mr Noordhoek and she handed him a copy of the draft Services Agreement and the original draft on which handwritten amendments had been made. In making this finding I rely on Mr Russell's evidence that this occurred and I draw an inference that it occurred from the process by which the Services Agreement came to be prepared. It is unlikely that Mr Russell would have met Mr Noordhoek without having first taken the time to review the revised draft Services Agreement. It was natural for him to approach Ms Higgins for the document as she had carriage of the task of preparing and amending it. The fact Ms Higgins cannot remember meeting Mr Russell prior to the meeting with Mr Noordhoek is not a reason for not accepting Mr Russell's evidence. There was no reason why Ms Higgins would remember meeting Mr Russell. The meeting had no importance for her.
(3)Based on Mr Russell's evidence I find that when Mr Russell met Mr Noordhoek on the morning of 4 March 2009 he had concerns that the non-competition clause providing for a maximum restraint period of five years had not been amended in the draft Services Agreement. He was also concerned that cl 7.1 of the document provided that the Retirement Benefit would only become payable after Mr Russell had been employed for a period of five years.
(4)Mr Russell's concerns about the possibility of his employment being terminated in the event of a restructure initiated by Mr Dalgleish coupled with the non-competition clause in the Services Agreement led him to seek reassurance from Mr Noordhoek on 4 March 2009 about RCR's approach towards the non-competition clause and his entitlement to payment of the retirement benefit if RCR terminated his employment without cause. If Mr Russell accepted the terms on offer he was exposing himself to the risk that he might be employed for a short period then dismissed but be prevented by the non-competition clause from being able to obtain employment in Australia in his field of expertise for a significant period: precisely the risk that materialised. At the risk of repetition, the non-competition clause had not been amended in the draft Services Agreement provided to Mr Russell on 4 March 2009. In those circumstances there is nothing unlikely or improbable in Mr Russell pressing Mr Noordhoek for further assurances on the entitlement to the retirement benefit in the event that RCR terminated his employment other than for cause, even though assurances to the same effect had been given by Mr Noordhoek in the course of the telephone conversation two days earlier on 2 March 2009. I find that in response to Mr Russell's expressions of concern Mr Noordhoek told Mr Russell that if RCR terminated his employment, other than for cause, he would be paid the retirement benefit regardless of when his employment was terminated. I find that Mr Noordhoek explained the relation between the retirement benefit and the non-competition clause by reference to the term 'gardening leave' as set out in the passage of Mr Russell's witness statement to which I have referred earlier in these reasons.
(5)In the course of the meeting on 4 March 2009 Mr Noordhoek identified cl 11.3(b) as the clause that entitled Mr Russell to payment of the retirement benefit in the event that RCR terminated his employment other than for cause regardless of whether Mr Russell had been employed for five years. I also find that Mr Noordhoek intended that the retirement benefit would be paid by RCR in those circumstances and that he thought that cl 11.3(b) of the Services Agreement conferred that right upon Mr Russell. I make these findings on the basis of: Mr Russell's evidence that Mr Noordhoek referred specifically to cl 11.3(b) as the source of the entitlement; Mr Noordhoek's evidence he intended the retirement benefit to be paid to Mr Russell in those circumstances; and, Mr Noordhoek's evidence that he considered that cl 11.3(b) had that effect.
(6)As to the conflict between the evidence of Ms Higgins and Mr Russell in relation to the extent of the period during which Ms Higgins was present at the meeting between Mr Russell and Mr Noordhoek on 4 March 2009, I have concluded it is more likely that Mr Russell's recollection is substantially correct. I have formed this view after scrutinising Mr Russell's evidence carefully. My reasons are, first, Mr Russell had more of a reason to remember the meeting than Ms Higgins did. Secondly, all prior discussions about the terms of Mr Russell's prospective employment with RCR had been between Mr Russell and Mr Noordhoek. Ms Higgins had played no part in those discussions. There was no obvious role for her to play in the meeting on 4 March 2009 and, on her evidence, she played no role. Thirdly, Ms Higgins was a very busy manager. I think it unlikely that she would have attended a meeting unless there was a positive need for her to do so, and there was not. Fourthly, Mr Noordhoek was not 'a big fan' of human resources and it is unlikely that he would have invited Ms Higgins to attend. Mr Noordhoek relied on Ms Higgins to prepare and amend the document, but he did not need her assistance in the discussions or negotiations with Mr Russell.
(7)I have found that Mr Russell and Mr Noordhoek discussed the retirement benefit before Ms Higgins joined the meeting and I find that the topic was revisited when she was present. In Ms Higgins' presence Mr Noordhoek told Mr Russell that he would not be entitled to the retirement benefit if he resigned from RCR before he had been employed for five years. I make this finding despite my finding that Ms Higgins was present for only part of the meeting because each of Ms Higgins and Mr Russell gave evidence that Mr Noordhoek made a statement to that general effect. I have referred to the relevant passages of the evidence of Ms Higgins and Mr Russell that support this finding in the preceding sections of these reasons. Mr Noordhoek also remembered making a statement to that effect, albeit he did not know whether he made the statement in the 4 March 2009 meeting. I have also referred earlier to Ms Higgins' limited recollection that there was some discussion about whether the retirement benefit would be payable to an executive general manager on dismissal. Ms Higgins could not remember what was said, if anything, about the 'qualifying part'. The fact that Ms Higgins has even a limited recollection of such a discussion supports the conclusion that what she can remember Mr Noordhoek saying about the requirement for five years' service was said about the entitlement to the retirement benefit if Mr Russell resigned. I would add that Mr Russell's concerns about his entitlement to the retirement benefit were such that I think it is entirely likely that the topic was discussed between him and Mr Noordhoek when they were on their own and again in Ms Higgins' presence. RCR submitted that Ms Higgins' evidence about Mr Noordhoek's statement negated the existence of a common intention that Mr Russell would be entitled to payment of the retirement benefit if RCR terminated Mr Russell's employment otherwise than for cause, regardless of when the employment was terminated. I do not accept that submission. When regard is had both to the totality of Ms Higgins' evidence about what she heard Mr Noordhoek say and her understanding of the EGM agreements and to Mr Noordhoek's evidence of his intentions, I am comfortably satisfied that the statement made by Mr Noordhoek related to the circumstance of Mr Russell resigning within five years not to the circumstance of his employment being terminated by RCR otherwise than for cause within five years.
(8)On the basis of what had been said to him by Mr Noordhoek, Mr Russell was of the belief that the Services Agreement would confer an entitlement to the retirement benefit on him in the circumstances described by Mr Noordhoek and that the entitlement arose from cl 11.3(b) of the Services Agreement.
(9)Each of Mr Noordhoek and Mr Russell were mistaken about the effect of cl 11.3(b). It was submitted on RCR's behalf that it was unlikely that two experienced businessmen would have made such a mistake. Mr Noordhoek's evidence that he believed that cl 11.3(b) would entitle Mr Russell to payment of the Retirement Benefit in the event that his employment was terminated by RCR whenever that occurred was convincing. I have no doubt that he communicated his firm belief that the clause would operate in that way to Mr Russell and thereby convinced Mr Russell that the clause did operate in that way.
(10)As a result of the discussions between Mr Russell and Mr Noordhoek, Mr Russell was aware that RCR intended that the Service Agreement would operate to provide for the payment of the retirement benefit to him in the event of dismissal other than for cause at any time and Mr Noordhoek was aware that Mr Russell intended that the Services Agreement would operate in that way.
Grounds 1 ‑ 5 challenge several of the findings in par (4) ‑ (10).
His Honour concluded that it followed from those findings that there was disconformity between what the parties intended to be achieved by cl 11.3(b) of the services agreement and what that clause actually achieved and that, consequently, the Contract should be rectified so that it reflects the true agreement made between RCR and Mr Russell. Ground 6 challenges the first step of this conclusion.
The primary judge's orders
His Honour ordered that the Contract be rectified as follows:[31]
Clause 11.3(b) be amended to read:
Otherwise than as specified in this clause 11, the Company may terminate the Employment by giving the Executive General Manager no less than one month's written notice or by paying no less than one month's Salary in lieu thereof as well as paying the
retirement benefits as per clause 7Retirement Benefit calculated in accordance with clause 7.1 and in the manner provided for in clause 7.2 regardless of the date on which Retirement occurs.Clause 7.1 be amended to read:
Upon Retirement, provided that the Retirement date [sic] is after the fifth anniversary of the Commencement Date save and except for Retirement pursuant to clause 11.3(b), the Executive General Manager is entitled to receive a payment in cash from the Company calculated on the following basis:
•One (1.0) times the annual total amount of Salary and superannuation payable to the Executive General Manager as at the Retirement Date.
[31] Order of the primary judge 9 August 2016, blue AB 1 ‑ 2.
Grounds of appeal
RCR advances the following grounds of appeal:
1.His Honour erred in fact by finding (at [129(4)] of the primary judgment) that, during a discussion on 4 March 2009 about the … [Contract] the respondent was told that, in the event that he was dismissed other than for cause, he would be entitled to payment of the 'Retirement Benefit' sum for which the [Contract] provided, regardless of when that dismissal occurred.
2.His Honour erred in fact by finding (at [129(5)] of the primary judgment) that, at the time that the [Contract] was executed, the appellant intended that it should entitle the respondent to payment of the Retirement Benefit in the event that he was dismissed at any time otherwise than for cause.
3.His Honour erred in fact by finding (at [129(5)] of the primary judgment) that, during a discussion on 4 March 2009 prior to the execution of the [Contract] the '4 March Discussion'), the appellant (through its then Chief Executive Officer, John Noordhoek) identified to the respondent cl 11.3(b) of the then‑unsigned [Contract] as being the source of an entitlement to be paid the Retirement Benefit on dismissal at any time other than for cause.
4.His Honour erred in fact by finding (at [129(7)] of the primary judgment) that, during the '4 March Discussion', the respondent was told that he would need to remain employed by the appellant for at least five years before he would be entitled to payment of the Retirement Benefit upon resignation.
5.His Honour erred in fact and in law by finding (at [129(10)] of the primary judgment) that, at the time of its execution, the parties intended that the [Contract] should apply such that, upon the appellant terminating it otherwise than for cause within its first five years, the respondent would be entitled to payment of the Retirement Benefit.
6.His Honour erred in fact by finding (at [129(9)] of the primary judgment) that, at the time of its execution, the parties mistakenly believed that the [Contract] applied such that, upon the appellant terminating it otherwise than for cause within its first five years, he would be entitled to payment of the 'Retirement Benefit' sum for which it made provision.
Legal principles
In the first appeal[32] in these proceedings, we outlined the legal principles relevant to rectification as follows:
The equitable doctrine of rectification enables a court to rectify an instrument if it does not reflect the intention of the party or parties to it.[33] The parties' intention refers to what the parties intend to be given effect to by the instrument.[34] The object of rectification is to reform the instrument so that it reflects the true agreement of the parties or the intention of the sole party.[35]
A claim for rectification requires proof of disconformity between the common intention of the parties, continuing to the time of execution of the instrument, and the terms of the instrument.[36]
Disconformity between the continuing common intention and the instrument may result from a mistake in recording the parties' common intention, or from a mistake about the meaning or effect of words deliberately chosen. In either case, rectification is available.[37]
Courts begin with the presumption that an instrument reflects the true agreement of the parties to it. A party seeking rectification must displace that presumption by demonstrating that the instrument does not reflect the true agreement of the parties.[38] The need to displace that presumption is often said to require that the party seeking rectification must establish the parties' common intention by clear and convincing proof.[39]
The parties' common intention refers to the actual subjective intention of the parties.[40] However, in order to constitute a common intention the intention of the parties must have been disclosed in some way, although not necessarily by a direct communication that gives rise to an outward expression of accord between them.[41]
The parties' common intention must be clear and well-defined enough to be stated in words that can be incorporated into the instrument.[42]
[32] RCR v Russell [2015] [49] ‑ [54].
[33] Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, 350; Tipperary Developments Pty Ltd v The State of Western Australia [2009] WASCA 126; (2009) 38 WAR 488 [278]; Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21; (2015) 47 WAR 547 [164].
[34] Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329, 331 - 332; Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 [125] - [126].
[35] Maralinga (350); Mander Ltd v Clements [2005] WASCA 67; (2005) 30 WAR 46 [11], [67], [84]; Vantage Systems [165].
[36] Mander Ltd v Clements [12] - [14], [49] - [52], [85]; Tipperary Developments [281].
[37] Tipperary Developments [282] - [283]; Carlenka (340 ‑ 344).
[38] Maralinga (350 - 351); Carlenka (339 - 340); Mander Ltd v Clements [12].
[39] Pukallus v Cameron [1982] HCA 63; (1982) 180 CLR 447, 452; Carlenka (345); Mander Ltd v Clements [11]; Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407; (2009) 76 NSWLR 603 [451].
[40] Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, 346, 352; Carlenka (332); Ryledar v Euphoric [126], [180] ‑ [182], [267] - [272]; Franklins v Metcash [445], [448]; Technomin Australia Pty Ltd v Xstrata Nickel Australasia Operations Pty Ltd [2014] WASCA 164; (2014) 48 WAR 261 [132] - [134].
[41] Ryledar v Euphoric [273] - [316], esp [281], [316].
[42] Maralinga (349); Franklins v Metcash [446] - [447].
As we have said, there is no challenge in this appeal to that statement of principles. Since the first appeal was decided, the High Court has decided Simic v New South Wales Land and Housing Corporation.[43] What is said in that case is consistent with the outline in RCR v Russell [2015].[44]
[43] Simic v New South Wales Land and Housing Corporation [2016] HCA 47; (2016) 91 ALJR 108.
[44] See Simicv New South Wales Land and Housing Corporation [41] ‑ [46]; [103] ‑ [104].
RCR's submissions fix upon the principle that a party seeking rectification must displace the presumption that an instrument reflects the true agreement of the parties to it by establishing the parties' common intention to an effect different from the instrument by clear and convincing proof. RCR relies on the outline of the authorities on this principle by Campbell JA in Franklins v Metcash:[45]
[45] Franklins v Metcash [451] ‑ [457].
It is elementary that rectification is granted only upon 'clear and convincing proof' or 'convincing proof': Ryledar v Euphoric (at 638 [161] ‑ [165]); Energy World Corporation Ltd v Maurice Hayes and Associates Pty Ltd [2007] FCAFC 34; (2007) 239 ALR 457 at [13]; Australian Hardboards Ltd v Hudson Investment Group Ltd [2006] NSWCA 146 at [73]; Fitzwood Pty Ltd v Unique Goal Pty Ltd (In Liq) [2002] FCAFC 285 at [172]; Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 336F, 345C; Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190 at 195G ‑ 196A; Maks v Maks (1986) 6 NSWLR 34 at 36E; Pukallus v Cameron (1982) 180 CLR 447 at 452; Australian Gypsum Ltd v Hume Steel Ltd (1930) 45 CLR 54 at 64. What needs to be proved in accordance with that standard is not only that the written document does not correctly record the common intention of the parties, but what the common intention of the parties actually was: Slee v Warke (1949) 86 CLR 271 at 281 (per Rich J, Dixon J and Williams J); Club Cape Schanck Resort Co Ltd v Cape Country Club Pty Ltd (2001) 3 VR 526 at 531 [14]; Ryledar v Euphoric (at 632 [138], 655 [259]).
A short phrase like 'clear and convincing proof' can fail to draw attention to why the cases have repeatedly stated expressly that it is an essential requirement for rectification. A reader uninformed by the history and policy of the law concerning rectification might well be puzzled by it, and enquire 'So when do you expect a court to act on dubious or unconvincing proof?'
In Henkle v Royal Exchange Assurance Co (1749) 1 Ves Sen 317 at 319; 27 ER 1055 at 1056; [1558–1774] All ER Rep 450 at 451 ‑ 452, Lord Hardwicke LC said (though admittedly concerning a contract that the plaintiff alleged had been mistakenly written down not just once but twice) 'there ought to be the strongest proof possible'. In Fowler v Fowler (1859) 4 De G & J 250 at 264–265; 45 ER 97 at 103, Lord Chelmsford LC said:
'The power which the court possesses of reforming written agreements where there has been an omission or insertion of stipulations contrary to the intention of the parties and under a mutual mistake is one which has been frequently and most usefully exercised. But it is also one which should be used with extreme care and caution. To substitute a new agreement for one which the parties have deliberately subscribed ought only be permitted upon evidence of a different intention of the clearest and most satisfactory description. Lord Thurlow's language is a very strong on this subject; he says, "the evidence which goes to prove that the words taken down in writing were contrary to the concurrent intention of all parties must be strong, irrefragable evidence;" Lady Shelburne v Lord Inchiquin [(1784) 1 Bro CC 338 at 341; 28 ER 1166 at 1168]. And this expression of Lord Thurlow is mentioned by Lord Eldon in the Marquis of Townshend v Stangroom [(1801) Ves 328 at 334; 31 ER 1079; [1775 ‑ 1802] All ER Rep 145 at 148 ‑ 9] without disapprobation. If, however, Lord Thurlow used the word "irrefragable" in its ordinary meaning, to describe evidence which cannot be refuted or overthrown, his language would require some qualification; but it is probable that he only meant that the mistake must be proved by something more than the highest degree of probability, and that it must be such as to leave no fair and reasonable doubt upon the mind that the deed does not embody the final intention of the parties.'
This passage was quoted with apparent approval by A H Simpson CJ in Eq in Australia Hotel Co Ltd v Moore (1899) 20 LR (NSW) Eq 155 at 161 ‑ 162; 16 WN 132.
In Mortimer v Shortall (1842) 2 Dr & War 363 at 371; 59 RR 730 at 736 (Ch (Ir)), Sir Edward Sugden LC said: 'I must be certain that there has been a mistake, and that the mistake is such as ought to be corrected. I do not mean to say, that the evidence must be all one way, or that there must not be any conflict: there must, however, be such a preponderance, as will satisfy my mind.'
And (at 373; 737): 'the Court cannot act except upon the very clearest evidence.'
In Australia Hotel Co Ltd v Moore (at 162), A H Simpson CJ in Eq also said: 'Where it is sought to upset a document, the Court is very chary of acting on the testimony of a single witness, especially where he comes to swear himself into a decree.'
In Joscelyn v Nissen [1970] 2 QB 86 at 98 the English Court of Appeal referred to the level of proof required as 'convincing proof'.
The requirement for clear and convincing proof in a rectification case is not in doubt.[46] However, RCR's submissions in this appeal raise questions as to the scope of the requirement of clear and convincing proof and the interaction between that principle and the well‑known principles of appellate restraint in interfering with credibility‑based findings of fact. We begin with the first of these questions.
[46] See, for example, RCR v Russell [2015] [52] and the cases cited at footnote [39] above; Simic v New South Wales Land and Housing Corporation [41], [103].
In our opinion, in a rectification claim, two things need to be shown by clear and convincing proof: that the instrument does not correctly record the common intention of the parties; and what the common intention of the parties was at the time of execution of the instrument.[47]
[47] Pukallus v Cameron (452); Australian Gypsum Ltd & Australian Plaster Co Ltd v Hume Steel Ltd (1930) 45 CLR 54, 64; Franklins v Metcash [451] and the cases there cited.
RCR submits that the requirement of clear and convincing proof has a wider scope. RCR submits that this requirement also applies to all intermediate findings of fact upon which a judge's conclusions as to the parties' common intention are based.[48] We do not accept that submission. It is contrary to both principle and authority.
[48] Appeal ts 3 ‑ 4, 5 ‑ 6, 23.
It is contrary to authority because, in the cases to which we have already referred, the requirement of clear and convincing proof is said to apply to proof of the two matters we have referred to, and not to any wider class of findings as is asserted by RCR.
RCR's submissions are contrary to principle because the requirement for clear and convincing proof is founded on the need to displace the presumption, arising from the parties' execution of the instrument, that the instrument does not reflect the true agreement of the parties.[49] That rationale for the requirement of clear and convincing proof does not sustain an extension of the application of that requirement to intermediate findings of fact. Even in the criminal law, where the standard of proof is beyond reasonable doubt, it is not necessary that intermediate facts from which an inference of guilt is to be drawn be proved beyond reasonable doubt, unless an intermediate fact is an indispensable step in reasoning to a conclusion of guilt.[50]
[49] See Maralinga (350 ‑ 351); Simic v New South Wales Land and Housing Corporation [103]; Carlenka (339 ‑ 340).
[50] Shepherd v The Queen (1990) 170 CLR 573.
A judge's conclusion as to the parties' common intention will involve an assessment of the evidence as a whole. That will generally involve an assessment of the direct evidence of the parties' communications and their respective subjective thinking, the drawing of inferences, the making of intermediate findings of fact and, finally, a synthesis of all these matters. It is only on the ultimate findings as to the parties' common intention that the requirement for clear and convincing proof applies.
It is well established that an appellant who seeks to overturn credibility‑based findings of fact faces a high hurdle. An appellate court is, in some respects, at a disadvantage compared to a trial judge who sees and hears the witnesses give their evidence. Generally, a trial judge's credibility‑based findings of fact will not be reversed on appeal unless it is demonstrated that those findings are flawed by reference to incontrovertible facts or uncontested testimony; or the findings are glaringly improbable or contrary to compelling inferences; or the trial judge has failed to use, or has palpably misused, their advantage as trial judge.[51]
[51] Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679 [43]; RCR v Russell[2015] [58].
RCR's submissions as to the relationship between those principles of appellate restraint on appeals against credibility‑based findings of fact and the need, in a rectification case, for clear and convincing proof, were not always clear or consistent.
RCR initially submitted that the need in a rectification case for clear and convincing proof meant that conventional principles of appellate restraint in interfering with findings of fact did not apply.[52] That submission is plainly untenable, and, when pressed, RCR backed away from it in the hearing of the appeal.[53] In our view, the position is as stated by Campbell JA in Franklins v Metcash[54] as follows:
The judge's finding concerning the common continuing intention of the parties is a mixed finding of fact and law. The legal element of it concerns what sort of thing counts as a common continuing intention: eg Ryledar v Euphoric at 657 [267] ff. The factual element concerns what was the subjective intention of the various people who were the relevant contracting minds, and whether those subjective intentions have been disclosed by each to the other in such circumstances that their subjective intentions are not only identical in content, but known, and known to be known, to each other. An appellate court is justified in rejecting the factual element of a trial judge's finding of common intention only in circumstances where 'incontrovertible facts or uncontested testimony will demonstrate that the trial judge’s conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings' (Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at 128 [28]), or if the decision at trial is glaringly improbable or contrary to compelling inferences (ibid at 128 [29]). The present is not a case where the judge's conclusion on common intention was an inference drawn from facts which are undisputed or which, having been disputed, are established by the findings of a trial judge (in which type of case the appellate court is in as good a position as the trial judge to decide on the proper inference: Warren v Coombes (1979) 142 CLR 531 at 551).
[52] Appeal ts 26 ‑ 27.
[53] Appeal ts 28 ‑ 29, 30 ‑ 31, 32 ‑ 33.
[54] Franklins v Metcash [430].
At trial, in a claim for rectification, the trial judge must decide whether the requisite common intention has been demonstrated by clear and convincing proof. In an appeal against a decision upholding a claim for rectification, the question will be whether the trial judge's finding of such common intention reveals error. Where the error asserted by an appellant is one of fact, in making that assessment, the appellate court will apply conventional principles as to the limits on appellate interference with credibility‑based findings of fact. That is how this court approached the first appeal in these proceedings.[55]
[55] RCR v Russell[2015] [62]; see also Technomin Australia v Xstrata Nickel [136] ‑ [141].
RCR's submissions
RCR's written and oral submissions on appeal were not made separately by reference to its six grounds of appeal. Rather, RCR advanced a number of submissions compendiously in support of its contention that the factual findings made by the judge were infected with error. In essence, RCR submits that, on the evidence as a whole, it was not open to find that a mistake in the expression of the parties' common intention had been shown by clear and convincing proof.[56]
[56] Appeal ts 2, 13 ‑ 14, 34; appellant's submissions [39].
RCR's submissions may be summarised as follows.
In its written submissions,[57] RCR identified that it challenged the following factual findings:
(a)At the meeting on 4 March 2009 Mr Noordhoek told Mr Russell that he would be paid the Retirement Benefit in the event that the appellant dismissed him, regardless of when that occurred.[58]
(b)Mr Noordhoek intended that the Retirement Benefit would be payable by reason of cl 11.3(b) of the Contract.[59]
(c)During that same meeting, Mr Noordhoek identified cl 11.3(b) of the Contract as the clause that would entitle Mr Russell to that payment.[60]
(d)Mr Noordhoek later, and in Ms Higgins' presence, told Mr Russell that he would need to serve a five year qualifying period before being eligible for payment of the Retirement Benefit if he resigned.[61]
(e)As a result of what Mr Noordhoek had said to him, Mr Russell believed that cl 11.3(b) of the Contract would entitle him to payment of the Retirement Benefit in the event that he was dismissed at any time other than for cause.[62]
[57] Appellant's submissions [10].
[58] Primary reasons [129(4)].
[59] Primary reasons [129(5)].
[60] Primary reasons [129(5)].
[61] Primary reasons [129(7)].
[62] Primary reasons [129(8)].
RCR submits that in a case in which a court must determine a party's intention at an earlier point in time, subjective evidence of what the person now says was their state of mind must be received with caution and scrutinised closely, particularly by reference to the objective facts at the time of events.[63] That general proposition is uncontroversial.[64] RCR submits that although the primary judge recognised that need, he 'manifestly' did not apply it in his treatment of the evidence of Mr Russell and of Mr Noordhoek.[65]
[63] Appellant's submissions [14]; appeal ts 14.
[64] See, for example, Simicv New South Wales Land and Housing Corporation [42].
[65] Appellant's submissions [15].
RCR organised its submissions into three main contentions.
First, RCR submits that it was not open to the primary judge, on Mr Russell's evidence, to find that the effect of the assurances given by Mr Noordhoek to Mr Russell was that Mr Russell understood and intended that the effect of the provisions of the Contract was that if Mr Russell's employment was terminated by RCR, he would be entitled to the Retirement Benefit regardless of how long he had worked for RCR. Rather, taken at its highest from Mr Russell's point of view, the effect of his evidence was that Mr Noordhoek assured him that, in those circumstances, he would be paid the amount of a Retirement Benefit, but not under the provisions of the Contract.[66]
[66] Appeal ts 35 ‑ 50; appellant's submissions [50] ‑ [53].
Secondly, RCR submits that the following circumstances, taken together, mean that a conclusion that there was clear and convincing evidence as to Mr Russell's intention was not open.
(a)In circumstances where the contractual provisions were, as Pritchard J found in the first trial, clear and unambiguous and where Mr Russell had an evident ability to read commercial documents, it was inherently improbable that Mr Russell ever misunderstood the legal effect of the documents. Moreover, his evidence in cross‑examination[67] at the retrial demonstrated that he understood the effect of the relevant provisions correctly.[68]
(b)In his evidence in his statement and in cross‑examination, Mr Russell entirely failed to explain the reasoning process by which his understanding of the effect of the provisions in the Contract altered from the understanding that he said he had prior to the meeting of 4 March 2009.[69]
(c)Most significantly, the judge's findings are inconsistent with the unchallenged evidence of Ms Higgins, supported by evidence of Mr Noordhoek and Mr Russell, that at the meeting on 4 March 2009, Mr Noordhoek told Mr Russell that he would only qualify for the Retirement Benefit once he had served five years.[70] That evidence was in general and unqualified terms. In treating it as restricted to the position if Mr Russell resigned, the primary judge 'rewrote'[71] the evidence.
(d)Mr Russell's case at trial differed materially from what was pleaded in the original statement of claim, and he failed to advance any satisfactory explanation for that.[72] Similarly, Mr Russell's letter of demand of 8 January 2010 referred to discussions with both Ms Higgins and Mr Noordhoek.
(e)Mr Russell's email to his wife on 20 August 2009 sought to give comfort to his wife in circumstances where he and his wife were concerned that Mr Russell's employment might be terminated. In those circumstances, Mr Russell referred to the relevant provisions of the Contract, and how they might be interpreted, without any reference to the assurances that Mr Russell said had been given to him by Mr Noordhoek some five months earlier.[73]
(f)Mr Russell gave evidence that he viewed the Retirement Benefit as in effect increasing his salary by $50,000 a year, on the basis that he earned it after five years, and his salary was $250,000 per year. That reflects Mr Russell's recognition that he had to work for five years to earn the Retirement Benefit.[74]
[67] ts 314 ‑ 317.
[68] Appeal ts 50 ‑ 51; appellant's submissions [31], [33].
[69] Appeal ts 51.
[70] Statement of Ms Higgins [25]; statement of Mr Noordhoek [12]; evidence of Mr Russell ts 313.
[71] Appeal ts 54, see generally 51 ‑ 61; see also appellant's submissions [24] ‑ [28].
[72] Appeal ts 61; appellant's submissions [29].
[73] Appeal ts 62 ‑ 63; appellant's submissions [35] ‑ [37].
[74] Appeal ts 63 ‑ 64; appellant's submissions [34].
Thirdly, RCR submits that it was not open to the judge to find that Mr Noordhoek intended that cl 11.3(b) would operate to mean that Mr Russell obtained the Retirement Benefit if his employment was terminated, regardless of how long he had been working for RCR.[75]
[75] Appeal ts 64 ‑ 67; appellant's submissions [43] ‑ [49].
The merits of the appeal
Preliminary observations
We begin with some preliminary observations, before dealing in turn with RCR's three main contentions.
Counsel for RCR did not submit (and it could not reasonably have been submitted) that Mr Noordhoek was not, for relevant purposes, the directing mind and will of RCR.[76]
[76] See Anfrank Nominees Pty Ltd v Connell (1989) 1 ACSR 365, 388 - 390.
The trial judge's findings of fact were influenced, to a significant degree, by the judge's assessment of the credibility of the witnesses.[77] Thus, RCR's submissions engage the principles referred to in [74] ‑ [77] above relating to appellate restraint in interfering with credibility based findings of fact.
[77] See for example, primary reasons [85], [95], [106], [110].
An unusual feature of this case is that the witnesses who worked for RCR all gave some evidence that RCR had an intention that was consistent with and supportive of Mr Russell's case for rectification. The evidence of RCR's officers and employees was to the following effect:
(1)RCR employed a standard form of service agreement for all its executives. An example of the standard executive services agreement is Mr Crighton's general manager's service agreement.[78] As all relevant RCR officers understood, the standard agreement contained a provision for a retirement benefit that provided for the benefit to be paid in two streams:
(a)if the executive resigned, the retirement benefit was payable provided that the executive had worked for a stipulated number of years (generally two or three);
(b)if the company terminated the executive's employment other than for cause, the executive was entitled to receive the retirement benefit regardless of the length of service.[79]
(2)RCR's intention was that those same two regimes would apply to Mr Russell, except that Mr Russell would need to serve five years before being entitled to the Retirement Benefit upon resignation.[80]
(3)The relevant officers of RCR, namely Mr Noordhoek[81] and Mr Crighton,[82] understood that cl 11.3 of Mr Russell's agreement would operate to produce that result.
[78] Annexure PC2 to Mr Crighton's statement Green AB 68; ts 374, 500; primary reasons [18].
[79] Agreement cl 7; Green AB 75; statement of Mr Crighton [9] ‑ [11]; ts 357 ‑ 360, 374 ‑ 375; Ms Higgins' statement [13], ts 414, 439 ‑ 440; evidence of Mr Noordhoek ts 496 ‑ 498, 500 ‑ 501; primary reasons [19].
[80] Crighton [19], [21], [25]; ts 367 ‑ 368, 372 ‑ 373, 375, 378 ‑ 379; Higgins ts 439 ‑ 440, see also 470; Noordhoek ts 496 ‑ 498, 518 ‑ 519, 525 ‑ 526, 527, 528, 535, 551, 556 ‑ 557.
[81] ts 535, 551, 556 ‑ 557. RCR's challenge, by its third main contention, to the effect of this evidence is dealt with later in these reasons.
[82] ts 372 ‑ 373, 374 ‑ 375; statement [25]; Mr Crighton's understanding continued to August 2009: statement [27].
The judge placed significant weight on the consistency between Mr Russell's evidence about statements made by Mr Noordhoek as to RCR's intention and Mr Noordhoek's evidence about what he (Mr Noordhoek) intended. His Honour observed that this consistency gave him confidence in accepting Mr Russell's evidence about what Mr Noordhoek said to him notwithstanding the inconsistent earlier statement of claim filed on Mr Russell's behalf.[83]
[83] Primary reasons [111], [117].
That approach does not reveal error. To the contrary, it was well open to place significant weight on this consistency. It is true that, because Mr Noordhoek had substantially no recollection of the discussions which had occurred more than seven years earlier, he gave no evidence that he said to Mr Russell that under the Contract Mr Russell would be entitled to a year's salary (and superannuation) if his employment was terminated without cause. But the fact that at the time of the discussions, Mr Noordhoek believed and intended that to be the case significantly increases the probability that Mr Noordhoek said those things to Mr Russell.
On the facts found by the primary judge, not challenged on appeal,[84] and on Mr Russell's unchallenged evidence, it is likely that Mr Russell would have raised the question of his right to the Retirement Benefit if RCR terminated his employment. That is because Mr Russell:
(a)knew Mr Dalgleish was taking over as CEO of RCR;[85]
(b)was concerned that Mr Dalgleish had interviewed someone else for the position of CEO of RCR Positron, may restructure RCR Positron and might not retain him in that role;[86] and
(c)consequently, was concerned as to the application of the Retirement Benefit in circumstances where his employment was terminated by RCR.[87]
[84] Appeal ts 11.
[85] Russell Statement [21]; ts 302; primary reasons [23].
[86] Russell Statement [22(d) ‑ (e)], [39(a)], evidence of Mr Noordhoek ts 523; primary reasons [23], [87], [129(1)], [129(4)].
[87] Russell statement [36], [48] ‑ [49], ts 326; primary reasons [126], [129(4)], [129(7)].
On Mr Noordhoek's evidence, if Mr Russell had raised the question with him, he would have given the response that he gave according to Mr Russell's evidence.[88] Mr Noordhoek was called by RCR, not by Mr Russell, and the primary judge, having had the advantage of seeing and hearing Mr Noordhoek give evidence, described him as forthright, truthful and not partisan.[89]
[88] ts 523, 525‑ 526, 534.
[89] Primary reasons [85].
These features of the evidence provide powerful support for the conclusion reached by the trial judge.
The structure of RCR's contentions invites attention to particular aspects of the evidence. In assessing RCR's contentions it is important to keep in mind that the task of the trial judge was to consider the evidence as a whole and to determine whether, on the evidence as a whole, he was satisfied by clear and convincing proof. As we have explained, the consistency between the evidence of different witnesses was a matter to which the judge, with respect correctly, gave weight in coming to his factual findings and ultimate conclusions. We will return to this point several times later in these reasons.
In considering RCR's contentions we have, as is required, conducted a 'real review' of the whole of the evidence at trial and of the primary judge's reasons for judgment.[90]
RCR's first contention
[90] Robinson Helicopter v McDermott [43].
We turn to RCR's first main contention. In essence, RCR contends that, taken at its highest from Mr Russell's point of view, the effect of his evidence was that Mr Noordhoek assured him that, if his employment was terminated by RCR, he would be paid the Retirement Benefit regardless of how long he had worked for RCR, but not under the provisions of the Contract. In support of its first main contention, RCR points to the content and structure of Mr Russell's written statement, and to some of his evidence given in the course of cross‑examination.
RCR submits that while many parts of Mr Russell's witness statement[91] refer to Mr Russell's examination of the draft services agreement and his discussion of the terms of the agreement with Mr Noordhoek, those parts of his statement are not expressed to relate to the effect of the terms of the services agreement. Rather, RCR's submission continues, it is not until the paragraph of Mr Russell's statement[92] that summarises the position at the end of his meeting with Mr Noordhoek that reference is first made to Mr Russell getting the Retirement Benefit under the provisions of the Contract.[93]
[91] Namely pars 15, 37 ‑ 39, 47‑ 50.
[92] Paragraph 59.
[93] Appeal ts 25 ‑ 26, 36 ‑ 38.
In our view these submissions do not reflect a fair reading of Mr Russell's witness statement read as a whole. When the statement is, as it must be, read as a whole, the substance of Mr Russell's evidence in this respect seems to us clear: Mr Noordhoek told him that if RCR terminated his employment other than for cause then, regardless of how long he had been working, he would be paid the Retirement Benefit under the Contract. The effect of Mr Russell's evidence cannot fairly be understood to mean that he was told that, in these circumstances, he would be paid the benefit notwithstanding that under the terms of the Contract he was not entitled to it. On Mr Russell's evidence, his telephone conversation on 2 March 2009 with Mr Noordhoek concluded with Mr Noordhoek telling him that RCR would prepare the services agreement to ensure that Mr Russell would be paid the Retirement Benefit on the terms discussed.[94] That makes it plain that, on Mr Russell's evidence, his discussion with Mr Noordhoek related to payment of the Retirement Benefit pursuant to the terms of the Contract. Further, the assurance Mr Noordhoek gave to Mr Russell at the meeting of 4 March 2009 included a statement that the clauses in Mr Russell's Contract were common to the service agreements of other executives, and as to what the intention of those clauses was.[95]
[94] Mr Russell's statement [39(d)], quoted by the trial judge in [121] in the passage set out in [56] of these reasons.
[95] Mr Russell's statement [50(b)], quoted by the trial judge in [126] in the passage set out in [58] of these reasons.
Thus, in our view, the discussions with Mr Noordhoek were, on Mr Russell's evidence in his witness statement, directed to payment to Mr Russell of the Retirement Benefit under the Contract, not to a payment regardless of or notwithstanding the terms of the Contract.
RCR also points to parts of what Mr Russell said in the course of his cross‑examination. In particular, it relies upon the following parts of Mr Russell's evidence:[96]
[96] ts 314 ‑ 318.
- - - and you say there was no ‑ you don't suggest that there was any doubt or ambiguity about what Mr Noordhoek said to you on 2 March?---That's correct.
Why was there any need to ask for assurances? There wasn't, was there?‑‑‑I just did.
You just did. I see. Well, let's go back to paragraph 49. The assurance that you sought, Mr Russell, is quite specific. You sought an assurance that you would get the retirement benefit even if you were dismissed 'before the completion of the five year period,' referred to in that clause, that clause being 7.1. Now, that tells me, Mr Russell, you were alive to the fact, weren't you, that clause 7 required five years of service?---Yes.
…
Yes, your Honour. Yes. The reason that you sought the assurance that you sought was because it was clear to you that under the contract - that under the terms of the contract, you needed to be there five years to get a retirement benefit. Do you accept that?---Yes.
…
Yes. And you read clause 1, did you?---The definitions?
The definitions?---Yes.
Yes. So you understood that it contained a definition of the concept 'retirement'?---Yes. I did.
Yes. And you understood, did you, that that definition covered the termination of your employment under clause 11.3?---Yes. I did.
And so I can assume, can't I, that you read 11.3?---Yes. I did.
And from your reading of 11.3, you understood that that clause established an entitlement for both parties to terminate the contract on those?---11.3 did.
Yes?---Yes.
Yes. So you understood, didn't you, that retirement, as defined, covered termination of the agreement on notice?---Yes. It did.
And obviously you read clause 7 very carefully?---Yes.
And you understood, didn't you, that clause 7 set up the entitlement to be paid a retirement benefit?---Yes.
And you understood, didn't you, that that entitlement was, as is clear in clause 7.1 subject to two preconditions, namely that there be a retirement and secondly that there be five years service?---Yes.
And what you wanted from Mr Noordhoek on 4 March was a promise - you use the word assurance, but really it was a promise. You wanted from Mr Noordhoek a promise that notwithstanding that understanding that you had about clause 7, you would still get the retirement benefit if you were dismissed on notice at any time?---Yes.
…
And the proposition I'm putting to you is that it was because of that assurance that you say Mr Noordhoek gave you that you didn't, at that point when your read again clause 7, insist on amending it?---I didn't see the need.
Yes. Well, you didn't see the need because you had gotten the assurance?‑‑‑And because I had read 11.3B.
RCR submits that the effect of this evidence is that:
(1)Mr Russell had read and understood cl 7 of the Contract prior to his conversation with Mr Noordhoek on 4 March;
(2)Mr Russell's understanding of cl 7 included that, by its terms, Mr Russell would not be entitled to the Retirement Benefit unless he had served at least five years;
(3)the assurance that Mr Russell sought from Mr Noordhoek on 4 March was a promise that, notwithstanding the understanding that Mr Russell had about cl 7, he would still get the Retirement Benefit if he was dismissed on notice at any time.[97]
[97] Appeal ts 42, 45 ‑ 46.
Further, RCR submits that Mr Russell's evidence in his statement and in cross‑examination failed to explain the mechanism by which the understanding which Mr Russell had of the effect of the agreement prior to the meeting was changed by what was said by Mr Noordhoek at the meeting.[98] Also, RCR submits that Mr Russell's evidence (at page 318 of the transcript) referring to having read cl 11.3(b) should be seen as a self‑serving attempt to ameliorate the effect of admissions he had given, and as impossible to reconcile with the earlier admissions he had made.[99]
[98] Appeal ts 49.
[99] Appeal ts 49.
RCR acknowledged that some of the evidence given by Mr Russell in the course of re‑examination may be seen as capable of supporting the primary judge's findings. The following passage in Mr Russell's evidence in re‑examination is relevant:[100]
[100] ts 326.
My learned friend cross-examined you about why you sought the assurances that you did - you say you did on 4 March, having been given an assurance that you would be paid the retirement benefit if terminated ‑ if your employment was terminated without cause, on 2 March. Let me just ask you this. When you attended the meeting on 4 March, what was your frame of mind?---When I had the meeting with John Noordhoek - - -
Yes?--- - - - I was still somewhat apprehensive.
Why?---Because the restriction on my working had not been changed in the contract. It was still a restricted period, a cascading clause, of one through five years, and I needed to understand why that was left there.
All right?---I needed the reassurance.
And how did seeking - sorry - let me go back a step. The reassurance that you're talking about there is which reassurance now?---That I would be paid the five years if I was - - -
Paid the five years?--I'm sorry. Paid the retirement benefit if I hadn't been there for five years.
Right?---That was the reassurance I wanted.
And how did that reassure you?---He - at the time, I believe we discussed 11.3B, 'There it is. You will be paid.'
Who said that to you?---John Noordhoek.
And when he said that to you, what did you understand that to mean?‑‑‑Clearly, if I was terminated, I would be paid one years salary plus super.
RCR submits that this evidence in re‑examination:
(a)was the first time Mr Russell gave evidence of Mr Noordhoek having said something about the effect of any particular clause of the Contract;
(b)was expressed no more highly than to say 'I believe';
(c)consequently, could not amount to or be a component of clear and convincing proof.[101]
[101] Appeal ts 50.
For the reasons that follow, we do not accept these submissions.
The primary judge made the following findings based on Mr Russell's evidence at pages 313 ‑ 318 and 326 of the transcript:[102]
In cross-examination Mr Russell accepted that in the course of the 4 March 2009 meeting Mr Noordhoek told him he would have to be employed for five years before he qualified for payment of a retirement benefit (ts 313.7). He also accepted that the reason why he sought an assurance from Mr Noordhoek that the retirement benefit would be paid in the event that he was dismissed without cause by RCR, within five years of being employed, was because it was clear to him that cl 7.1 required a period of service of five years before the retirement benefit became payable (ts 316.6). When asked why he did not ask for clause 7.1 to be amended he said that he did not see the need because he had read cl 11.3(b) (ts 318.2). In re-examination Mr Russell said that in the meeting Mr Noordhoek reassured him that he would be paid the retirement benefit if RCR terminated his employment within the five year period by reference to cl 11.3(b): Mr Noordhoek said, 'There it is. You will be paid' (ts 326.7).
[102] Primary reasons [128].
In our opinion, when Mr Russell's evidence at pages 313 ‑ 318 and 326 of the transcript is read as a whole and in context, the judge's findings were well open.
In our view, Mr Russell's evidence at page 318 of the transcript is not inconsistent with his immediately preceding evidence. The central focus of Mr Russell's cross‑examination at page 317 of the transcript was his understanding of cl 7. In context, it was at least open to conclude that that is how Mr Russell understood the questions he was asked, even if a wider interpretation of the questions might also be available. The effect of Mr Russell's evidence as a whole was that his understanding was as follows: while cl 7 required five years of service before the Retirement Benefit became payable, cl 11.3(b) conferred a right for RCR to terminate Mr Russell's employment on one month's notice subject to paying the Retirement Benefit quantified in cl 7, and the right under cl 11.3(b) did not depend upon having done five years of service.
Contrary to RCR's submissions, in our view that is not an implausible way of understanding cl 11.3(b). It is true that, as a matter of proper construction, the words 'as per' in cl 11.3(b) mean 'in accordance with', and are unambiguous in that respect.[103] However, the proper construction of an instrument is one thing; how a non‑lawyer, even someone with some experience reading commercial documents, might plausibly understand an instrument is quite a different thing. Mr Noordhoek's understanding reflected the construction advanced at both trials by counsel on behalf of Mr Russell. That view of how cl 11.3(b) is to be read was one that could properly be put to the court. All the more so, that view was one that might plausibly have been taken by Mr Russell, or indeed by Mr Noordhoek and by Mr Crighton, both of whom took the same view.
[103] As both Tottle J and Pritchard J have found: primary reasons [151]; Russell v RCR[2012] [36] ‑ [44].
The credibility of Mr Russell's evidence in re‑examination was a matter for the trial judge to assess. In doing so, his Honour had the considerable advantage of seeing and hearing Mr Russell give evidence. For example, the trial judge had an advantage over this court in discerning the sense of the words 'I believe' used by Mr Russell[104] and in deciding what significance that phrase may have for the weight to be given to the evidence.
[104] ts 326.
RCR's first main contention relies substantially on the success of its complaints of error in the trial judge's acceptance of Mr Russell's evidence[105] to the effect that Mr Noordhoek told him that cl 11.3(b) meant that if his employment was terminated by RCR he was entitled to the Retirement Benefit. In assessing the weight to be given to that evidence, the trial judge was entitled to take into account the consistency of that evidence with the evidence of both Mr Crighton and, especially, Mr Noordhoek, as to how they understood cl 11.3 to operate. As we have said, both Mr Crighton and Mr Noordhoek gave evidence that they understood that cl 11.3 of the agreement meant that if RCR terminated Mr Russell's employment other than for cause Mr Russell was entitled to receive the Retirement Benefit regardless of the length of his service.[106] The judge put weight on that consistency.[107] Particularly in circumstances where Mr Noordhoek was called by RCR, the defendant in the action, after Mr Russell's evidence was complete, the primary judge was entitled to conclude, as he did, that the consistency between the evidence of these witnesses and Mr Russell's evidence supported the acceptance of Mr Russell's evidence.
[105] ts 318, 326.
[106] Mr Noordhoek: ts 535, 551, 556 ‑ 557; Mr Crighton's statement [27], ts 372 ‑ 373, 374 ‑ 375.
[107] See for example, primary reasons [111], [129(5)].
Moreover, Mr Russell was not cross‑examined in relation to his understanding of cl 11.3(b) generally, or in relation to his evidence at page 318 to which we have referred at [101].
In all these circumstances, RCR has not demonstrated any error in the trial judge's findings the subject of its first major contention.
RCR's second contention
That brings us to RCR's second major contention. By that contention, RCR submits that six aspects of the evidence, taken together, mean that a conclusion that there was clear and convincing evidence as to Mr Russell's intention was not open. We have set out the six matters relied on by RCR earlier in these reasons.[108]
[108] See [84].
We have already dealt with the first two matters relied on by RCR.[109]
[109] See [101] - [113] above.
The third and most significant matter relied on by RCR is its assertion that the judge's findings are inconsistent with unchallenged evidence of Ms Higgins that at the meeting on 4 March 2009, Mr Noordhoek told Mr Russell that he would only qualify for the Retirement Benefit once he had served five years. The evidence was in par 25 of Ms Higgins' statement, set out in his Honour's reasons:[110]
[110] Primary reasons [100].
Ms Higgins gave evidence about a statement made by Mr Noordhoek to Mr Russell at the meeting on 4 March 2009 to which RCR attaches particular significance. In her evidence in chief (exhibit D1), Ms Higgins said:
'25. At the 4 March 2009 meeting, Noordhoek and Russell also discussed Russell's retirement benefit. Russell asked Noordhoek about the number of years of service that he would have to be employed with RCR before he was entitled (upon the termination of his employment) to be paid the retirement benefit (which was provided for in clause 7 of the Agreement). Noordhoek said to Russell words to the following effect:
"The retirement benefit was put in place by our previous Chief Executive Officer, John Linden and each Executive General Manager has a different retirement benefit entitlement depending on their years of service with the company. In this case, as you have only been employed by RCR for a short period of time, it is necessary for you to be employed for 5 years before you are entitled to your retirement benefit."
26.Russell did not say anything further about the application of the retirement benefit clause (clause 7 of the Agreement) and we discussed other unrelated matters. Russell did not request that changes be made to the requirement in his Agreement for him to complete 5 years of service with RCR before becoming entitled to the retirement benefit. In fact, he did not request any changes to the Agreement at all and none were made. The retirement benefit was not discussed any further in my presence.'
The primary judge dealt with that evidence as follows:[111]
In cross-examination Ms Higgins accepted that the retirement benefit to which Mr Noordhoek was referring in the discussion recounted in her witness statement was the benefit payable under cl 7 of the draft agreement; that is, the benefit payable in the event of Mr Russell resigning after completing five years' service (ts 439.1). The statement made by Mr Noordhoek was not directed to the circumstance which was the subject of the common intention, namely the termination of Mr Russell's employment by RCR otherwise than for cause.
Ms Higgins said the only clause discussed in the meeting by reference to its number was cl 7. She said that had there been a discussion about cl 11, she would have recorded that in her witness statement (ts 440.3).
In re-examination Ms Higgins was asked to what extent the question of the executive's entitlement to receive the retirement benefit on dismissal came up during the 4 March 2009 meeting. Her answer and the subsequent passage of evidence were as follows:
'I remember it being part of general conversation but not a particular - specific but generally it came up in conversation.
Well, what generally came up?---The entitlement - I remember the entitlement being discussed generally. I don't remember of the detail about the qualifying part, but I remember the entitlement being discussed.
And do you recall in what circumstances was it discussed that the entitlement would be payable?---I don't remember that part of the discussion. (ts 470.4, emphasis added)'
In her witness statement Ms Higgins made no mention of a discussion about the entitlement to receive the retirement benefit on dismissal as opposed to on resignation, nor did she do so in the course of cross-examination.
[111] Primary reasons [101] ‑ [104].
The judge then made the finding in par 129(7) of his reasons, which we have already set out.
RCR submits that in making these findings the primary judge in effect 'rewrote'[112] Ms Higgins' evidence and that the findings were not open given the limited cross‑examination of her.[113]
[112] Appeal ts 54.
[113] Appeal ts 55.
In making his findings the subject of RCR's challenge, the primary judge relied on Ms Higgins' evidence in cross‑examination:[114]
[114] At ts 439 ‑ 441.
Now, by that where you say [in par 25 of your witness statement] a different retirement benefit entitlement, depending on their years of service, you are again talking about what is set out in clause 7, aren't you?‑‑-Yes. I am.
Right. And only about what is in clause 7?---Yes.
TOTTLE J: Can I take it, then, Ms Higgins, that that's the only difference between what you understood to be the standard contract for executive general managers and Mr Russell's contract was that in the event that he resigned before five years, he wouldn't get the retirement benefit, whereas in other contracts, it was a resignation after the qualification period was either two years or three years?---Yes.
Yes?---Yes.
And that's the only difference that you recall?---Yes.
Yes. There were other differences but not in Mr Russell's contract, such as probationary period and those types of things.
Yes. Yes, but - - ‑ ?---But in the services agreement.
Yes?---Yes. That's the - - -
But in relation to this - - ‑ ?---Yes.
- - - issue that we're trying to resolve. That's the only difference?---Yes.
So that if the company terminated his employment, he would stand in exactly the same position as the other executive general managers?---Yes. That's my understanding.
That was your understanding - - ‑ ?---Yes.
- - of the position at the time?---Yes.
All right. Thank you.
POWER, MR: All right. Thank you, your Honour. And just talking about the other company executive general managers, it was - we've heard some evidence about this and it was the case, wasn't it, that if the other company executive general managers had their employment terminated by the company without cause they would get 12 months?---Yes.
12 months pay?---Retirement benefit.
Yes?---Yes.
Thank you. Now, if there had been a discussion on 4 March when you were present about a particular clause in the executive services agreement, by number - a reference to it by number, you would have put that number of that clause in this statement of yours, wouldn't you So, for example, if there was a discussion about clause 10?---Yes. I would.
Yes.
Or a discussion about clause 12?---Yes.
Or a discussion about clause 11, by number you would have put it in here, wouldn't you?---Yes.
And the fact it's not in here his Honour can assume from that that there was no discussion about a particular clause by number on 4 March when you were present?---Yes. Thank you.
RCR submits that when the following two matters are taken into account, this evidence of Ms Higgins does not support the primary judge's findings. First, Ms Higgins was being asked, impermissibly, to construe what she heard Mr Noordhoek say. Secondly, the questions proceeded on the false assumption that cl 7 applies only in the event of a resignation, whereas by the terms of the Contract it applied to all forms of termination of the employment, including by notice given by RCR.[115]
[115] Appellant's submissions [25] ‑ [26]; appeal ts 56 ‑ 57.
We accept that the questions asked of Ms Higgins were in a form that did not direct her attention to what she had heard Mr Noordhoek say, as distinct from how she had understood what he said. It is questions directed to the first of these that are of direct and immediate relevance. However, the significance of the form of questions is to be viewed in the context that the evidence was given almost seven years after the events in question. Given that passage of time, one might expect a degree of blending in a witness's mind between the effect of the words spoken, and how the witness had understood the words.
As to the second of RCR's points, as we have said, the relevant question is not governed by the proper construction of the Contract, but by what parties said and how they understood the Contract to operate.
We accept that it was not squarely put to Ms Higgins, in cross‑examination, that what, on her account in par 25 of her witness statement, she heard Mr Noordhoek say, was said by him to relate to the position upon resignation, and not to termination generally. While that was a matter to take into account in deciding what finding to make, it does not of necessity preclude the making of the finding.[116]
[116] See the discussion of the consequences of a breach of the rule in Browne v Dunn in RCR Tomlinson Ltd v Russell [2015] [70] ‑ [71].
Ms Higgins' evidence set out above was to the effect that she understood the effect of Mr Russell's Contract was that in the event that he resigned before five years, he would not get the Retirement Benefit, but if RCR terminated his employment without cause, he would be paid the 12 months' pay as the Retirement Benefit.[117] That understanding on the part of Ms Higgins is consistent with Mr Noordhoek's statement that it was necessary for Mr Russell to have been employed for five years before he was entitled to the Retirement Benefit to relate to the position in the event Mr Russell resigned. Her understanding would not have been consistent with a statement by Mr Noordhoek that it was necessary for Mr Russell to be employed for five years before he was entitled to the Retirement Benefit upon any form of termination, including termination by RCR other than for cause. Thus, this aspect of Ms Higgins' evidence of her understanding provides some support for the judge's finding that Mr Noordhoek's statement made in her presence related to the position in the event of resignation, not the position in relation to termination generally.
[117] ts 439 ‑ 440.
We do not accept RCR's submission that the significance of this evidence was undermined by her negative response to a broadly framed question in re‑examination whether there was 'a policy in place' in 2009 in relation to the payment of retirement benefits to executive managers if employment was terminated otherwise than for cause.[118] The judge was entitled to act on Ms Higgins' clear evidence directed specifically to her understanding of Mr Russell's entitlements under the Contract in the event his employment was terminated.
[118] ts 471.
Further support for that finding of the primary judge is provided by the clear and emphatic evidence of Mr Noordhoek, to which we have already referred, to the effect that:
(1)he intended that if RCR terminated Mr Russell's employment other than for cause, Mr Russell would be entitled to receive the Retirement Benefit regardless of the length of service;[119] and
(2)he recalled making a specific statement about the need for Mr Russell to have served five years in order to obtain the Retirement Benefit if he resigned.[120]
[119] ts 496 ‑ 498, 518‑ 519, 525 ‑ 526, 527, 528, 535, 551, 556 ‑ 557.
[120] ts 542 ‑ 543. We say more about this evidence, and why the judge was entitled to accept it, in dealing with RCR's third main contention.
The judge's finding in that respect is consistent with Mr Noordhoek's evidence. By contrast, a statement by Mr Noordhoek that, in order to be entitled to the Retirement Benefit upon any form of termination, Mr Russell would need to have worked for five years prior to termination would be directly inconsistent with Mr Noordhoek's clear and emphatic evidence as to what he intended.
In all these circumstances, in our view it was open to the primary judge to find that the statement which, on Ms Higgins' evidence, she heard Mr Noordhoek make about the Retirement Benefit was expressed to relate to the position in the event that Mr Russell resigned, and was not expressed to apply to all forms of termination.
For these reasons, this plank of RCR's second main contention fails.
The remaining points made by RCR in support of its second major contention can be dealt with more briefly. The matters to which RCR draws attention in its fourth and fifth points were the subject of cross‑examination, submissions and findings by the primary judge. They were matters to which the primary judge properly gave consideration in his assessment of the credibility of Mr Russell's evidence.[121] The judge weighed these matters, but also took into account the consistency between Mr Russell's evidence and Mr Noordhoek's evidence about his subjective intentions, and the positive impression the primary judge formed of Mr Russell in giving his evidence. In the end, his Honour was satisfied that Mr Russell's evidence was reliable.
[121] Primary reasons [113] ‑ [119], summarised in pars [52] to [54] above.
While these were matters properly to be taken into account, the judge having had the advantage of seeing and hearing Mr Russell give evidence, it cannot be said that they compelled a finding that the judge was not satisfied by clear and convincing proof.
RCR's final point in support of its second main contention seems to us to involve taking a part of Mr Russell's evidence in isolation and out of context. At one point in his evidence, Mr Russell said that he saw the provision for the Retirement Benefit as part of the value in the package that RCR was offering. Mr Russell said he regarded the Retirement Benefit of $250,000 as conferring an extra $50,000 a year worth of income on him if he stayed for the five years.[122] RCR submits that this evidence reflects Mr Russell's recognition that he had to work for five years to earn the Retirement Benefit. In the context of Mr Russell's immediately surrounding evidence, we do not think this part of his evidence can properly be understood in this way. Rather, Mr Russell's use of the five‑year horizon of the Retirement Benefits related to his position if he resigned; he understood the position also carried insurance against the risk of early termination, for example following the restructure, by the provision for the Retirement Benefit to be payable in the event that his employment was terminated by the company other than for cause.[123]
[122] ts 324 - 325.
[123] See, for example, ts 325 ‑ 326.
For these reasons, we do not accept RCR's second main contention. The matters to which RCR points, individually and taken together, do not persuade us that the judge's finding - that he was satisfied as to Mr Russell's intention on clear and convincing proof ‑ was not open or was erroneous.
RCR's third contention
RCR's third contention is that it was not open to the judge to find that Mr Noordhoek intended that cl 11.3(b) would operate to mean that Mr Russell obtained the Retirement Benefit if his employment was terminated by RCR, regardless of how long he had been working for RCR.[124] RCR accepts that Mr Noordhoek gave some evidence which, on its face, supports the judge's finding, but submits that the finding was 'glaringly improbable'.[125] RCR:
(1)points to other evidence of an unqualified statement by Mr Noordhoek as to a five‑year qualifying period applying to the Retirement Benefit;[126]
(2)asserts that Mr Noordhoek was 'unable' to explain why Mr Russell's Contract departed from the standard executive services agreement in that it contained materially different provisions in cl 7.1; and
(3)further asserts that Mr Noordhoek was unable to explain how cl 11.3(b) had an effect which, RCR submits, 'plainly it did not have'.[127]
[124] Appeal ts 64 ‑ 67; appellant's submissions [43] ‑ [49].
[125] Appellant's submissions [44].
[126] Evidence of Mr Russell ts 313; evidence of Ms Higgins - statement [25]; statement of Mr Noordhoek [12].
[127] Appeal ts 67.
We do not accept these submissions. In our opinion, taking into account the matters set out below, it was well open to the primary judge to accept Mr Noordhoek's evidence and to make the finding as to Mr Noordhoek's intention that he did.
Mr Noordhoek's evidence provided considerable support for the judge's finding. Mr Noordhoek said, in cross‑examination,[128] in re‑examination,[129] and again when asked questions by the trial judge,[130] that he understood and intended that the effect of cl 11.3(b) was to provide for Mr Russell to get the Retirement Benefit of 12 months' pay plus superannuation if RCR terminated his employment other than for cause, regardless of how long he had served. The primary judge found Mr Noordhoek to be a forthright and truthful witness who was candid and not partisan. Moreover, his Honour found this part of Mr Noordhoek's evidence to be convincing.[131] There is no basis in the trial record to doubt the judge's impression of Mr Noordhoek. Mr Noordhoek was called by RCR. There was no evidence or suggestion that Mr Noordhoek had any relationship with or connection to Mr Russell. Mr Noordhoek said that he had no real recollection of relevant events, including the meeting of 4 March 2009, but said he had a strong recollection of his intention that the contract provide that if RCR terminated Mr Russell's employment other than for cause, he would be entitled to 12 months' salary (plus superannuation) regardless of how long he had been employed.[132]
[128] ts 535.
[129] ts 551.
[130] ts 556 ‑ 557.
[131] Primary reasons [129(9)].
[132] ts 550, see also ts 496 ‑ 498, 518 ‑ 519, 525 - 526, 527, 528, 535, 551, 556 - 557.
Moreover, that evidence of Mr Noordhoek's intention is consistent with and supported by Mr Crighton's evidence that Mr Noordhoek told him that he (Mr Noordhoek) intended that Mr Russell's contract would have the same two streams of retirement benefits as were provided in the standard executive services agreement.[133]
[133] Statement [19], [21], ts 367 - 368, 378 - 379.
Given that it is likely that Mr Noordhoek read the Contract to see that its terms reflected the parties' discussions,[134] Mr Noordhoek's evidence as to how he understood cl 11.3(b) to operate makes sense in the context of his intention as to the effect of the Contract: on his understanding it meant that the Contract gave effect to what he intended.
[134] ts 544.
As to RCR's first point summarised in [136] above, we do not accept that the other evidence referred to by RCR was inconsistent with Mr Noordhoek's evidence as to his understanding of the operation of cl 11.3(b). We refer to what we have already said about Mr Russell's evidence,[135] and Ms Higgins' evidence.[136] RCR also points to par 12 of Mr Noordhoek's statement. That submission overlooks, or fails to grapple with, the judge's finding that Mr Noordhoek's statement did not reflect his recollection and was not worthy of any weight.[137] That finding of the judge was amply supported by Mr Noordhoek's evidence that he had no recollection of any aspect of the meeting of 4 March 2009, and that his only specific recollection was of a conversation in which Mr Russell asked whether, if he resigned, he would need to have worked five years before he became entitled to the Retirement Benefit.[138]
[135] ts 313.
[136] Statement of Ms Higgins [25].
[137] Primary reasons [82] ‑ [84].
[138] ts 530, 542 - 543.
RCR's second point does not undermine the judge's findings. Mr Noordhoek did not prepare Mr Russell's Contract; an administrative assistant did so, at Ms Higgins' request.[139] There was no evidence that Mr Noordhoek read Mr Russell's Contract against, or having in mind, the form of the standard executive services agreement, and there is no reason why he would have.
[139] Statement of Ms Higgins [12] ‑ [13], [19], ts 414; primary reasons [25], [96].
We do not accept the third point made by RCR. As we have already explained,[140] we do not accept the premise of this point: that Mr Noordhoek's evidence as to his understanding of cl 11.3(b) should have been rejected because his understanding was plainly inconsistent with cl 11.3(b) read with cl 7, properly construed.
[140] See [110].
RCR's third main contention fails.
Conclusion
For these reasons RCR has not established any error in the primary judge's findings of fact. It was open to the primary judge to conclude, as he did, that he was satisfied on clear and convincing proof that the contract did not reflect the parties' intentions. The primary judge's reasoning in support of his conclusions was cogent and does not reveal error. The appeal must be dismissed.
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