Re North Sydney District Rugby League Football Club

[2000] NSWSC 634

Reported Decision: (2000) 34 ACSR 630

New South Wales

Supreme Court

CITATION:	MURRAY v. DONNELLY & ANOR [2000] NSWSC 634
CURRENT JURISDICTION:	EQUITY
FILE NUMBER(S):	SC 1673/00
HEARING DATE(S):	13/06/00
JUDGMENT DATE:	6 July 2000
PARTIES :	Graham Murray - Pltf Max Christopher Donnelly - 1st Dft North Sydney District Rugby League Football Club Ltd - 2nd Dft
JUDGMENT OF:	Bryson J at 1

COUNSEL :	J. Johnson for Pltf P. Wood - 1st Dft
SOLICITORS:	Nash O'Neill Tomko for Pltf Henry Davis York for 1st Dft
CATCHWORDS:	CORPORATIONS - administration - appeal from rejection of proof of debt - proof of debt - EMPLOYMENT - SPORT and RECREATION - Rugby League coach - the plaintiff appealed against rejection of proof of debt under Deed of Company Administration for Norths Rugby League Club - by written agreement of 3/2/099, Norths agreed to contract plaintiff as coach - contract was to be a later document to be entered into by 30/11/99 - no contract was entered into and Norths passed into Administration and joint venture with Manly and impliedly repudiated the agreement - plainitff obtained employment as coach of Easts at lower remuneration - question whether employment had commenced before Administration - found it had not - questions of construction of agreement - question of implications about the term of the proposed employment and termination on notice - assessment of damages for breach by accepted repudiation - decision on terms of parties' documents - appeal allowed and admitted to proof for $65,000 damages.
CASES CITED:	Tanning Research Laboratories Inc v. O’Brien (1990) 169 CLR 332 New South Wales Cancer Council v. Sarfaty (1992) 28 NSWLR 68 Cutter v. Powell (1795) 6 Term Rep 320, 101 ER 573
DECISION:	Appeal allowed, admitted to prove for $65,000

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J.

THURSDAY 6 JULY 2000

1673/00 IN THE MATTER OF NORTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB (ADMIN APPTD) CAN 003 009 159 AND THE CORPORATIONS LAW

GRAHAM MURRAY v. MAX CHRISTOPHER DONNELLY & ANOR

JUDGMENT

1 HIS HONOUR: The plaintiff Mr Murray claims: (1) a declaration that he is entitled to participate in and prove in the administration of the company under the Deed of Company Arrangement dated 25 October 1999 as a Non-Player Employee; and (2) an order that the Administrator admit the plaintiff as a priority creditor under the Deed in the amount of $690,000. 2 The company, North Sydney District Rugby League Football Club (referred to as Norths), is in administration under a Deed of Company Arrangement made on 25 October 1999. The first defendant Mr Donnelly is the Administrator under the Deed. The summons named Norths as the Second Defendant, but Norths has not appeared, has not been shown to have been served, is not a necessary party and should be dismissed from the proceedings. 3 The plaintiff is appealing to the Court under s 1321 of the Corporations Law against the administrator’s rejection of his Proof of Debt. An appeal against rejection by an Administrator of a Proof of Debt brings the plaintiff’s claim before the Court for hearing de novo: see Tanning Research Laboratories Inc v. O’Brien (1990) 169 CLR 332 at 340-1. The proceedings are not a true appeal against the decision of the liquidator, or judicial review of that decision; I am not limited to consideration of whether or not grounds stated by the liquidator for rejection were correct, and consideration of the claim starts again. The issue in the proceedings is whether the liability referred to in the Proof of Debt is a true liability of the company enforceable against it. 4 The plaintiff Mr Murray made an agreement with Norths in writing on 3 February 1999 and his Proof of Debt arose out of that agreement. Mr Murray has a long history of association with rugby league. He was a professional player from 1976 to 1983 and a part time coach from 1985 to 1990. He also worked as a high school mathematics teacher. He left teaching at the end of 1990 and since then has worked as a professional rugby league coach; he was head coach of the Illawarra Steelers from 1991 to 1995; head coach of the Hunter Mariners in 1996 and 1997; and head coach of the Leeds Rhinos in the United Kingdom in 1998 and 1999. He is now the head coach of the Eastern Suburbs District Rugby League Football Club Ltd, referred to as Easts and also as the Sydney Roosters, under a written agreement which is dated 3 February 2000 but relates to an engagement commencing on 3 November 1999 and continuing until 31 October 2001. 5 The Agreement between Mr Murray and Norths contemplated a further contract by which Mr Murray would be contracted to the Club as its coach. The recitals and the first clause are:

WHEREAS
A. The coach has expressed a desire to be contracted to the Club
B. The Club desires to contract the coach
IT IS AGREED AS FOLLOWS:
i) Both the coach and the Club hereby agree that on or before 30 November 1999 both parties shall execute a contract with the Club.

6   Clause 7 provides:

The parties agree to be bound by this Agreement as at the date of execution hereof notwithstanding the fact that the Contract will be formalised at a later date but in any event not later than 31st November 1999 [sic] unless otherwise mutually agreed by the parties.

7 The Agreement gives Mr Murray’s address, which on 3 February 1999 was in the United Kingdom. It provides for his coaching fee for the 2000 Season, and then for the 2001 Season and for the 2002 Season, with a proviso showing contemplation that the parties might agree to a lesser figure. The agreement also provides for bonuses, for increased coaching fees if bonuses are earned and for Norths to pay reasonable relocation expenses. There are also clauses establishing confidentiality, and a nominal consideration of $1. 8 It was not contended that this Agreement is not legally enforceable on the grounds that it is a mere agreement to agree. In my view it was correct to treat the Agreement as enforceable; it as an agreement to enter into a future agreement, referred to as “contracting” Mr Murray to Norths. The parties contemplated that they might vary some provisions they had established, or they might come to agree in greater detail, but they indicated in a sufficient although sparse way the terms on which they were to contract, with enough detail to enable the Court to establish what terms the contract was to contain. 9 Both parties to the agreement must be taken to have known that Mr Murray was contracted as the coach to the Leeds Rhinos for the 1999 Season, and to have contemplated that he would stay in the United Kingdom until that Season ended, which would be in October if Leeds achieved the best possible result and played in the Grand Final. As things fell out, Leeds’ last game in the competition was on Friday 24 September 1999, and Leeds did not play in the next round on Sunday 3 October or the Grand Final on Saturday 9 October. While still in the United Kingdom Mr Murray was in ready communication with people connected with Norths through his own mobile telephone, by fax transmission and otherwise. Mr Murray left the United Kingdom late in October 1999 and relocated himself and his family to Australia; he had a short holiday of several weeks in South Africa and arrived in Australia early in November. 10 His earlier engagements, like his engagement with Easts, usually ran from a November to the following October inclusive; this is a common arrangement in professional rugby league, but it is not invariable and it was not proved that it is a trade custom. Mr Murray would have become contracted as coach to Norths as the agreement of 3 February 1999 provided, if it were not for the financial crisis which overtook Norths in September 1999. 11 On 28 September 1999 Mr Donnelly was appointed Voluntary Administrator of the Club. He circulated an Explanatory Memorandum dated 15 October 1999 to creditors with his report under s 439A of the Corporations Law, and gave notice of a meeting of creditors for 25 October 1999. Two different proposals were put before the creditors; one involved a merger or joint venture with the Manly-Warringah District Rugby League Football Club Ltd, and another proposal which was associated with a group of members called the “Save the Bears Committee” involved raising funds to repay creditors and keeping Norths in the National Rugby League for 2000 and later years. At the meeting on 25 October the creditors adopted the proposed Deed of Company Arrangement involving the joint venture with the Manly-Warringah Club, rejected the Save the Bears proposal, and rejected the other possible courses of liquidation or ending the administration. Administration continues under a Deed of Company Arrangement made on 25 October 1999 in pursuance of this decision. 12 The objectives of the Deed are stated in cl 2.1:

2.1 Objectives of the Arrangement

The objective of the arrangement set out in this deed is to facilitate the Manly-Norths Joint Venture, and in so doing:
2.1.1 to ensure that all Players are paid their Priority Claims in full by 30 November 1999; and
2.2.2 to ensure that all other Creditors, other than the Deferred Creditor, are paid their Claims in full within three years.

13   The second claim of the plaintiff relates to whether Mr Murray has a Priority Claim and is entitled to early payment, or whether like all other creditors he is entitled to be paid as funds become payable within three years. The Deferred Creditor is the Club itself. The order of distribution is established by cl 7.3:

7.3 Distributions from the Fund

The Fund will be distributed by the Administrator in the following order of priority:

7.3.1 first, to the extent the Company has not already made these payments, in payment of all remuneration due to and costs, fees, expenses and liabilities incurred by the Administrator as voluntary administrator of the Company and as deed administrator, including the costs and expenses of, and liabilities incurred in, maintaining the Company’s business;
7.3.2 secondly, in full payment of Priority Claims by 30 November 1999;
7.3.3 thirdly, as funds become available, in payment of Claims that have not already been met in full but which would in liquidation be accorded a priority by section 556 of the Law;
7.3.4 fourthly, as funds become available, in payment of all Claims other than Claims of the Deferred Creditor, until those Claims are paid in full.

14   Clause 7.3 establishes a more complex position than that stated in the Objectives. “Priority Claims” as referred to in 7.3.2 are not limited to claims of players, and there are two different classes of priority creditors in 7.3.2 and 7.3.3. Mr Murray is not a Player as defined; it was not contended that he is. “Priority Claims” is defined in terms which refer to players (which he is not) and to employee claims (with an exception for continuing employees, and it was also accepted that Mr Murray is not a Continuing Employee as defined.). “Employee Claims” means:

… the Claims of Non-Player Employees that would have been accorded a priority in a liquidation by section 556 of the Law had a winding up order been made in respect of the Company on 28 September 1999.

15 “Non-player Employee” is defined as “an employee of the company who is not a Player”. The Administrator disputes that Mr Murray was an employee; Mr Murray claims that he was an employee and that his employment was terminated before 25 October 1999. 16 Mr Murray’s claim to priority thus depends on his claim falling within the definition of “Employee Claims”, and that depends on his having been an employee and also on his claim being one which would have been accorded priority in a liquidation under s 556 of the Law had a winding-up order been made on 28 September 1999. That is to say, Mr Murray must have been an employee before 28 September 1999 and his claim must fall within one of the classes (a)-(h) specified in s 556(1); those possibly relevant are paras (e) and (h):

(e) subject to subsection (1A) - next, wages and superannuation contributions payable by the company in respect of services rendered to the company by employees before the relevant date;
…
(h) subject to subsection (1C) - next, retrenchment payments payable to employee of the company.

17 The references to subss 556(1A) and (1C) may be disregarded. These subsections could not relate to Mr Murray. 18 Should it be established that Mr Murray was an employee before 28 September 1999 there is on the evidence no possible view that wages or superannuation contributions were payable in respect of services rendered before that date. 19 “Retrenchment payment” is defined in subs 556(2) as follows:

in relation to an employee of a company, means an amount payable by the company to the employee, by virtue of an industrial instrument, in respect of the termination of the employee’s employment by the company, whether the amount becomes payable before, on or after the relevant date; …

20 The expression “industrial instrument” referred to in the definition of “retrenchment payment” is defined in s 9 to include “a law, award, determination or agreement relating to terms or conditions of employment”. The Agreement of 3 February 1999 is an industrial instrument within this definition. 21 There is no possible view that a retrenchment payment was payable to Mr Murray in respect of termination of his employment before or on 28 September 19999. His claim to priority could be upheld only if it were established that there is an entitlement, in respect of termination of the Agreement of 3 February 1999, to a retrenchment payment as defined which became payable after 28 September 1999. 22 Mr Murray left the United Kingdom about 20 October 1999 and arrived in Sydney on Monday 1 November. About 4 October 1999 Danny Harley, who was in some way associated with Norths and with proposals for the merger with Manly-Warringah, told Mr Murray that Mr Peter Sharp would coach the first grade of the joint venture team and that he would have two other assistant coaches, and that Mr Murray would not have a job in the new organisation. Mr Harley said “I think you need to speak to the Administrator”. The decision of the creditors on 25 October signalled unmistakably that there was to be a joint venture. There were no negotiations or any other further steps towards contracting Mr Murray as coach, the events and circumstances made it obvious that that would not happen, and the joint venture and the Deed of Company Arrangement operate as a repudiation of the Agreement of 3 February 1999. 23 If Mr Murray was an employee, he has a claim on the basis of termination of his employment by interaction of the definition of “Employee Claims” in the Deed of Company Arrangement and subs 558(1) of the Law, dealing with the date of entitlement to a debt due to an employee. If he was not an employee, the Agreement was terminated with his acceptance of the repudiation, which should be taken to have occurred as at 3 November 1999 the date attributed to the commencement of his engagement by Easts. 24 The tests for identifying a contractual relationship as an employment relationship are not highly concrete; it is necessary to evaluate the parties’ contractual relationship with a view to whether the supposed employer has a contractual right to control the supposed employee’s activities, insofar as the opportunity for control exists (and in relation to highly skilled employment that opportunity may be very limited) and it is also necessary to appraise the extent to which the supposed employee is integrated into the supposed employer’s working organisation. 25 In my opinion the terms of the Agreement of 3 February 1999 did not create an employment relationship. In substance and effect it was an agreement to enter into an employment relationship at a future time and to do so by executing a contract, with provisions establishing what the principal terms of that employment relationship was to be. The Agreement does not establish when the employment relationship was to begin, except that it was to begin under a contract to be executed before the last day of November 1999, and was to relate to coaching for the 2000 Season, the 2001 Season and the 2002 Season. To fulfil this the parties would have to have established a date of commencement in time for the 2000 Season, on or before 1 January 2000, or possibly the last day of November 1999. This is clear on the face of the Agreement, and it is made even clearer by consideration of the surrounding circumstances in which it was known that Mr Murray lived in England and had an appointment as the coach of the Leeds Rhinos which would require his full attention until the Rugby League Season for 1999 ended in England. 26 However, it was contended that various things which Mr Murray did in the interests of Norths before 28 September 1999 showed that an employment relationship had arisen from the parties’ conduct by that date. In his own evidence, Mr Murray said that from 3 February 1999 he regarded himself as on the job for Norths as the new coach for the 2000 Season, with responsibilities which included liaising with management and football staff from time to time as and when necessary and appropriate to plan for the 2000 football season. In his view based on his experience, responsibilities of coaching staff do not commence at the end of the current season or the start of the playing season but well prior to those events. He said: “Plans and strategies need to be put in place well prior to the commencement of pre-season training, particularly as to the retention or non-retention of existing players, the signing of new players and the development of junior talent.” From February to July while in the United Kingdom he had regular telephone contact with management, particularly with the Chairman and the Chief Executive Officer, with telephone discussions averaging about once per fortnight, dealing with topics relevant to the preparation of Norths’ team for the 2000 Season. Concerns included current performance of the first grade team and lower grades, player retention, player signings, the proposed move from North Sydney Oval to Graham Park Gosford, his own requirements as coach, coaching staff needs, the current operational set-up and numerous other issues. 27 Early in July 1999 Mr Murray travelled from the United Kingdom to Australia (at the expense of the Leeds Club from which he was entitled to receive air travel tickets) for the purpose of attending a family funeral. During this visit he was met by the Chairman of Norths at the airport, and they had lengthy discussions about affairs dealing with the 2000 playing season. He watched a game played on Sunday 4 July 1999 and met all members of the first and second grade teams, he met the 12 top forwards on Wednesday 8 July and took time to explain to them his philosophy as a coach and what he expected of players, he again met players for a team discussion at Gosford on Thursday 9 July, and supervised a training session. He met Mr Kelly Egan, the Football Operations Manager and had discussions with him; Mr Egan became his main contact point with Norths. Mr Murray left to return to the United Kingdom on 12 July. From then on until late September he had frequent written and telephone communication with Mr Egan in preparation for the pre-season training which was due to commence in October 1999, dealing with wide ranging subjects. These included operational aspects, game scheduling and training timetables, organisation of junior representative teams, player education and discipline, training venues and facilities, training programs, rehabilitation, selection of new players, player retention and signings, coaching staff and the array of matters which would require the attention of the Football Operations Manager and the Head Coach. He received video tapes of each first grade game, viewed the tapes and regularly discussed his views of the games with Mr Egan. He sent an open letter to the coach, captain and team players which was published in the Sunday Telegraph on 22 August 1999, with inspiriting words for the encouragement of the coach and team after some discouraging events. 28 Mr Murray received no remuneration from Norths in respect of his attendances over this time, and under the terms of the agreement of 3 February 1999 there was no provision for him to receive any remuneration earlier than a coaching fee for the 2000 season. 29 Throughout this time Mr Murray was of course engaged in his duties for the Leeds Club. The Norths first grade team was coached by Peter Louis who was employed under written contract dated 22 June 1998 until termination by Deed of Release dated 6 July 1999, then by Kieran Dempsey who had been appointed First Division (second grade) coach for the period from 1 November 1998 to 31 October 1999 under a contract dated 27 January 1999. 30 There is no sign that in the period from 3 February to 28 September 1999 Norths or any officer gave Mr Murray, however gently, anything which could be seen as a command or direction, or did anything which could in any way indicate an entitlement to do so. There is no evidence of any express arrangement which could possibly have been intended to create another contractual relationship which was to operate beside the written agreement of 3 February 1999. The degree of Mr Murray’s incorporation into North’s working organisation was very slight, in my judgment; he made a few attendances about the business of the Club while he was in Australia for a few days on a journey which he undertook to attend a family funeral, and otherwise his participation, while quite extensive, was in the form of consultation and advice. The whole of what he did can be well understood as acts of preparation by him to facilitate his own carrying out of the duties which he would incur in the 2000 Season, the response produced by sincere attachment to his future employer’s purposes and success, and by ordinary courtesies. 31 No record of an employment relationship was made at any place appropriate for employment records; however, there was very little need for such a record because there was no arrangement for him to receive any remuneration. The absence of any remuneration or any arrangement for remuneration, while he had full time paid activities at Leeds, has a large place in my conclusion that Mr Murray’s activities in the interests of Norths throughout 1999 are to be explained by his goodwill and enthusiasm for success in the employment he was to undertake in the future, and are not indications that he had already entered into an employment relationship. 32 Mr Murray’s Proof of Debt was sent to the administrator by Mr Murray’s solicitors on 21 October 1999, accompanied by a letter which stated that his claim was submitted as an Employee Claim. Particulars in the Proof referred to the agreement of 3 February 1999 and the amount claimed was “$750K as per clause 2 and $15K reasonable relocation expenses”. In a letter of 24 October 1999 Mr Murray’s solicitor stated “I am instructed that Graham Murray agreed with the Club to pay one half of his assistant coach’s coaching payment totalling $50,000 per season. Accordingly, Graham Murray’s claim should be reduced from $250,000 for each of the seasons 2000, 2001, 2002 to $225,00 for each of the seasons 2000, 2001 and 2002.” There was correspondence between solicitors regarding the amount for which Mr Murray would be admitted to vote at the creditors’ meeting of 25 October 1999; this led to a decision the effect of which was limited to his voting entitlement at that meeting, and did not dispose of his claim. 33 On 29 November 1999 Mr Murray’s solicitors by letter to the Administrator’s solicitors made contentions about the basis of his claim and contended to the effect that the Agreement of 3 February was an entire contract, had no provision for timing of payment of remuneration or for termination, and the entire amount of remuneration was payable either at the date of execution or at the latest on the day at which Mr Murray commenced performance of services; and it was further contended that he commenced performing his obligations not later than Sunday 4 July 1999 when he attended the Norths game against Newcastle. The solicitors referred to subs 558(1) of the Corporations Law which is in these terms:

558 Debts due to employees
(1) Where a contract of employment with a company being wound up was subsisting immediately before the relevant date, the employee under the contract is, whether or not he or she is a person referred to in subsection (2), entitled to payment under section 556 as if his or her services with the company had been terminated by the company on the relevant date.

34 Mr Murray’s solicitors contended that for the purposes of calculation of payments due to employees under s 556 Mr Murray’s contract was deemed to have been terminated on 28 September 1999. Contentions were put supporting, as alternative propositions, that the whole claim of $675,000 (or perhaps it was intended to mean of $690,000 including the relocation expenses) was a claim for wages under s 556(1)(e); alternatively the $225,000 coaching fee for the year 2000 Season was claimed as wages; further alternatively, he claimed $50,000 for the work performed up to 28 September 1999. It was also contended that $690,000 was due as a retrenchment payment. 35 The Administrator’s solicitors’ reply of 30 November 1999 said, among other things, that the Administrator “(2) requires all details of your clients contract with Easts prior to considering whether your client should be admitted to prove as an unsecured creditor; and (3) rejects your assertions that your client is a Non-Player Priority Creditor.” The date of the reply was the date by which full payment of Priority Claims was required by clause 7.3.2 of the Deed. 36 The time at which Mr Murray’s claim arose is significant because the Deed of Company Arrangement provides for payment of claims admissible under the Deed which arose before 28 September 1999, but deferral of claims which arose later than that date. This result is produced by cll 3.9 and 6.3 of the Deed. Clause 3.9 provides:

Date for Admissible Claims
The day before which Claims must have arisen if they are to be admissible under the deed is 28 September 1999.

37   Clause 6.3 is in these terms:

6.3 Moratorium

Subject to clause 6.5, whilst this deed remains in force Creditors must not, in relation to their respective Claims:

6.3.1 begin, support or continue with any action seeking an order that the Company be wound up;
6.3.2 begin, take any further steps in, or continue with, any legal proceedings or arbitration in relation to their respective Claims; or
6.3.3 begin or continue with a proceeding against the Company in relation to any of its property, or begin or proceed with any Enforcement Process in relation to property being used or occupied by, or in the possession of, the Company except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

38   To avoid absurdity cl 3.9 must be understood to make admissible claims which arose on 28 September 1999 as well as claims which arose earlier; the definition of “Claims” and several other definitions including “Corporate Boxholders”, “Employee Claims”, “Pre-paid Season Ticketholder” and “Pre-administration Contract” show that claims which arose on 28 September 1999 are included in the workings of the Deed as well as claims which arose before that day. 39   “Creditor claims” are defined in cl 1.1 in these terms:

“Claims” means all actions, claims, suits, causes of action, arbitrations, debts, costs, demands, verdicts and judgments at law or in equity or under any statute against the Company, whether certain or contingent, present or future, ascertained or sounding only in damages, the circumstances giving rise to which occurred on or before 28 September 1999 and includes, without limitation:

(a) claims arising out of, or in connection with or relating in any way to the termination of the employment of Players and Non-Player Employees, where notice of termination is given before or during the operation of this deed; and
(b) claims arising out of, or in connection with or relating in any way to any Pre-Administration Contract, including claims that relate to breaches of or the repudiation of the Pre-Administration Contract between 28 September 1999 and the date of termination of this deed.
…
“Creditor” means any person with a Claim.

40   The definition of “Pre-Administration Contract” is:

“Pre-Administration Contract” means a contract or lease entered into by the Company on or prior to 28 September 1999.

41   The Agreement of 3 February 1999 is a Pre-administration Contract, and claims arising out of it, whether they arose before or after 28 September 1999, fall within the definition of “Claims” by the operation of subpara (b) of that definition. 42   On 13 December 1999 Mr Murray’s solicitors called on the Administrator to provide grounds for rejection of the claim as a Non-player Priority Creditor, and on 20 December the Administrator’s solicitor stated “Mr Murray is not a Non-Player Employee of Norths and does not have an Employee Claim as he had not commenced as the coach of Norths at 28 September 1999”. In further correspondence Mr Murray’s solicitor’s sought protection of his contract with Easts on the ground of confidentiality, and before a copy of the contract had been furnished the Administrator rejected Mr Murray’s Proof of Debt. In a letter of 22 February 2000 the Administrator said the Proof of Debt had been wholly disallowed and went on:

My grounds for disallowance of the whole of your formal Proof of Debt or claim are as follows

(a) in relation to your assertion to have a Priority Claim under the Deed of Company Arrangement dated 25 October 1999, I have determined that you do not have an Employee Claim as you were not a Non-Player Employee of Norths as at 28 September 1999;
(b) in relation to your Claim as an unsecured Creditor of Norths, you have accepted the termination of your agreement with Norths dated 3 February 1999 and you have now taken up employment as coach of the Sydney Roosters. I have assessed that you are entitled to 12 months’ remuneration ($250,000) in lieu of reasonable notice of the termination of your agreement with Norths, subject to your duty to mitigate your loss. I have repeatedly requested a copy of your contract with the Sydney Roosters in order to assess the extent to which you have been able to mitigate your loss. I have not been provided with a copy of that contract. I have therefore determined that you have fully mitigated your loss.

43   He went on to point out the right of appeal. 44   Mr Murray exercised the right of appeal by commencing these proceedings on 7 March 2000. On 17 March the Administrator came to know the terms of Mr Murray’s contracts with Easts because copies were exhibited to his affidavit in support of the summons, dated 14 March and served on 17 March. There were two agreements, a short agreement dated 4 November 1999 in which the parties agreed to execute a later contract, and the full contract dated 3 February 2000 relating to an engagement which commenced on 3 November 1999. The engagement was for two years, subject to possible termination, and the remuneration was a salary package of $175,000 per annum (subject to variation by agreement) with bonuses of varying amounts if Easts should be successful. 45   While these proceedings were pending the Administrator on 17 April 2000 and in conformity with directions of the Court stated grounds on which the Proof of Debt was disallowed. Part of these grounds related to the assertion that Mr Murray is a creditor with a priority claim under the Deed of Company Arrangement. When dealing with the alternative that Mr Murray is an unsecured creditor the Administrator stated these grounds:

Mr Murray’s disclosure of his contract with the Sydney Roosters has caused my client to reassess his previous disallowance of Mr Murray’s Claim as an unsecured Creditor of Norths. I am instructed that Mr Donnelly will admit Mr Murray as an unsecured Creditor of Norths in the amount of $115,000, being the amount payable to Mr Murray under the agreement dated 3 February 1999 with Norths for seasons 2000 and 2001 ($465,000 inclusive of relocation expenses less the per season amount payable by Mr Murray to his proposed assistant coach, Michael Hagen) less the extent to which Mr Murray has been able to mitigate his loss for seasons 2000 and 2001 under his contract with the Sydney Roosters ($350,000). I am instructed that Mr Donnelly will stand over part of Mr Murray’s Claim which relates to season 2002 until the status of Mr Murray’s contractual arrangements and the amount payable to him for that year are known. Please remind Mr Murray of his duty to mitigate his loss in that year.

46   On behalf of Mr Murray it was submitted that the entire amount of coaching fees under the Agreement became due and payable upon the commencement of provision of services, and that that happened in July 1999. On behalf of the Administrator it was contended that, as an alternative to adopting the assessment set out on 17 April, and as an alternative to rejecting the claim: (1) relocation expenses of $15,000 should be allowed; (2) coaching fees as agreed for 2000 should be allowed with the agreed reduction to $225,000; (3) the claim should be reduced in mitigation by remuneration from the Easts Club of $175,000 and (4) the claim should be allowed at $65,000. 47   As earlier pointed out the agreement of 3 February 1999 does not in terms provide for how long Mr Murray was to be contracted to Norths, or deal with circumstances in which either party could terminate the relationship. Clause 2, providing the amounts of remuneration which Norths was to pay in each of three years deals only with the amounts of remuneration and does not either expressly or by implication state that the relationship must continue for three years, or is only to continue for three years, or may or may not be terminated by either party, or in any way establish for how long the relationship is to continue. All it does is establish what the remuneration is to be if the relationship continues. The contract does not expressly state the timing of payment of coaching fees, though there are some expressions from which implications can be drawn. 48   For reasons stated elsewhere, I do not find that the provision of services commenced in July 1999, or ever commenced; Mr Murray never took up his position as coach and only acted in preparatory ways in contemplation that he would do so. In the language of the Agreement, he was to be contracted to the Club at a later stage when the parties were to execute a contract; he had a contractual right to reach that later stage but only when it was reached (which never happened) would he enter employment as the coach. The proviso to cl 2 shows contemplation that there would be negotiations that could affect the amount of remuneration and the manner of payment. It is extremely unlikely that persons contemplating an employment relationship would intend or would agree that the whole remuneration for services over several years would be payable in advance at the commencement of provision of services and it is very improbable that an agreement to that effect would have emerged from further negotiations. It is much more likely that some arrangement would have emerged for progressive payment, monthly, quarterly or by some other scale, during each year. I would look for a clear expression of an intention to that effect before interpreting an agreement as requiring a large remuneration payment in advance; that would be a great departure from ordinary employment practices. In my opinion none of the remuneration had become payable by the time of lodgment of the Proof of Debt. 49   Lodgment of the proof, when taken with the terms of the Deed of Company Arrangement, showed acceptance by Mr Murray that the agreement of 3 February 1999 was not going to be carried out, that no further contract would be made by the last day of November 1999, that he would not actually be contracted as coach or be paid coaching fees, and that he was entitled to claim on the footing that his contractual rights would not be observed. If there were any room for doubt about this, his acceptance of an engagement with Easts with effect from the 3 November made this result altogether clear. 50   I do not accept the contention made on Mr Murray’s behalf that the contract of 3 February 1999 is an entire contract. In the present-day context of commercial and employment practices it is very unlikely that parties would make an entire contract of the kind considered in Cutter v Powell (1795) 6 Term Rep 320; 101 ER 573. The argument would be a dangerous one for Mr Murray, as Cutter v Powell illustrates, because a possible outcome would be that he would not be entitled to any remuneration if he did not complete the engagement. The approach at the present day to an entitlement to income calculated in respect of a period is to my mind illustrated by s 144 of the Conveyancing Act 1919, and if an intention is to be imputed to parties to a contract in the present times the intention should in my opinion be structured similarly to subs 144(1) and should treat income as growing due from day to day as services are performed. 51 In my view therefore Mr Murray’s claim does not fall under subs 558(1). On 28 September 1999 his agreement was not a contract of employment, and gave him no more than a right to enter into an employment contract in the future. His services had not begun, they were not terminated on 28 September 1999 and his claim gains no advantage from subs 558(1) or s 556. 52 In an alternative submission it was contended that Mr Murray is entitled as an employee to wages of $50,000 under s 556(1)(e). In my opinion there is no basis for this claim, he was not an employee at or before 28 September 1999 and there is no basis for any entitlement to $50,000 or any other remuneration. 53 It was contended that remuneration for three years and relocation expenses, amounting to $690,000, was a retrenchment payment under s 556(1)(h). This claim fails for a number of reasons, principally that he was not an employee at the relevant time, and further that there are no circumstances in which $690,000 or any other sum would be payable to him in respect to termination of the contract of 3 February 1999. There are simply no provisions conferring any such rights on him. 54 Due to the failure to establish a claim under s 556 of the Corporations Law, Mr Murray’s claim is payable with the priority afforded under cl 7.3.4 of the Deed. 55 In my opinion it should be understood, assessing as a matter of probability what the terms of the employment contract would have been if one had been entered into, that it would have contained, either expressly or by implication, a provision for termination by either party by reasonable notice. In New South Wales Cancer Council v. Sarfaty (1992) 28 NSWLR 68 at 74 Gleeson CJ and Handley JA said:

It is now well-established that, as a general rule, if the parties to a contract of employment make no provision as to the circumstances in which it may be brought to an end, the law will imply a term to the effect that the contract is terminable by either party upon reasonable notice to the other …

Their Honours went on to cite authorities in support of the proposition, and (at 75) to discuss possible difficulties of application which would not arise in the present case. There is no reason to regard it as probable that negotiations would have produced some express provision which would have prevented termination with reasonable notice. In the context in which Norths and its Head Coach would have operated, a reasonable notice would have expired at the end of an ordinary playing season and the associated activities; that is, at the end of October in any year of the engagement. The notice would have to be of reasonable length, the principal factor affecting its length being the time necessary to make arrangements for Norths to get another coach, and for the coach to get other employment. In Norths’ circumstances as they were known in October and November 1999, and even more clearly as they are known now, the probabilities are that if Mr Murray had been contracted to Norths, Norths would have exercised its right of termination, and would have done so by giving notice of termination in about October or November 1999, and that he would not have continued to be the coach for more than one year. Norths’ financial difficulties, its new joint venture with the Manly-Warringah Club and the choice by the joint venture of other coaches make this course of action highly probable. Mr Murray’s claim should be assessed with due regard to this probability.

56   Mr Murray’s principal loss can be seen as the loss of the adjusted coaching fee for the 2000 Season of $225,000; this loss is mitigated by the coaching fee of $175,000 to which he became entitled when he was retained by Easts. A further loss which can be recognised is his loss of an opportunity to gain bonuses; it is very difficult to assess the amount of this loss and it is set off largely or entirely by his opportunity to gain bonuses under his contract with Easts. A mitigating factor in the assessment of damages is the acceleration by the award of damages of an entitlement which would otherwise probably have fallen due progressively through the 2000 Season, but as my decision comes about half way through the period I do not think that any adjustment is appropriate. A further loss is the loss of his entitlement to relocation expenses; his claim of $15,000 in this respect was not disputed. 57   In my finding Mr Murray’s Proof of Debt ought to have been allowed at $65,000. 58   Mr Murray did not accept that the grounds asserted in the Administrator’s particulars or the assessment which the Administrator was then prepared to concede are correct. In my view I should assess Mr Murray’s claim on the evidence before me on correct principles, and I do not regard the Administrator as bound by what he was prepared to concede in his particulars. The mechanism of standing over part of Mr Murray’s claim for several years is, in my view, wrong in principle, as the Court is obliged to decide his appeal now. 59   I have not yet considered costs.
60   Orders:

(1) Allow the plaintiff’s appeal against rejection of his Proof of Debt.
(2) Declare that the plaintiff is entitled to participate in and prove in the administration of the company under Deed of Company Arrangement dated 25 October 1999 as a creditor whose claim falls within cl 7.3.4.
(3) Allow the plaintiff’s Proof of Debt at $65,000.
(4) Dismiss the second defendant from the proceedings.

Last Modified: 09/26/2000