Roderick v Washington H Soul Pattinson and Company Limited (No 2)

[2020] NSWSC 1224

Supreme Court

New South Wales

Medium Neutral Citation:

Roderick v Washington H Soul Pattinson & Company Limited (No 2) [2020] NSWSC 1224

Hearing dates:

1, 4, 5, 6 and 7 May 2020

Date of orders:

10 September 2020

Decision date:

10 September 2020

Jurisdiction:

Common Law

Before:

Cavanagh J

Decision:

(1)   Judgment for the plaintiff for the sum of $1,105,329.50.

(2)   The defendant is to pay the plaintiff’s costs.

(3)   Should either party seek a variation of that costs order, I grant liberty to apply on three days’ notice.

Catchwords:

EMPLOYMENT AND INDUSTRIAL LAW — Contract — Termination without notice — Whether original written contract applied or had been varied or discharged in ongoing relationship of employment — Objective assessment of parties' mutual intention — Necessity for implied term as to reasonable notice in new contract — Determination of reasonable notice period

EMPLOYMENT AND INDUSTRIAL LAW — Contract — Remuneration — Discretionary bonuses — Employee's eligibility for payment of benefits under short and long term incentive plans — Nature and extent of employer's discretion to assess and pay bonuses — Limits on the exercise of a discretion

CONTRACTS — Remedies — Damages — Loss of chance — Loss of opportunity to obtain commercial benefit — Effect of reasonable notice period on employee's entitlement to payment of benefits under incentive plans

EMPLOYMENT AND INDUSTRIAL LAW — Contract — Repudiation — Acceptance of repudiation — Impracticality for employee to do other than accept repudiation — Party cannot benefit from its own wrong

Legislation Cited:

Corporations Act 2001 (Cth), s 211

Fair Work Act 2009 (Cth), s 119

Cases Cited:

ASIC v Healy (2011) 196 FCR 291

Bartlett v Australia and New Zealand Banking Group Ltd (2016) 92 NSWLR 639; [2016] NSWCA 30

Byrne v Australian Airlines Ltd (1995) 185 CLR 410; [1995] HCA 24

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54

Conway-Cook v Town of Kwinana [2001] WASCA 250

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Ma v Expeditors International Pty Ltd [2014] NSWSC 859

MaredelantoCompaniaNaviera SA v Bergbau-Handel GmbH (The MihalisAngelos) [1971] 1 QB 164

New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68

Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567

Rankin v Marine Power International Pty Ltd [2001] VSC 150

Roderick v Washington H Soul Pattinson & Company Limited [2020] NSWSC 1223

Washington H Soul Pattinson & Company Limited v Roderick [2020] NSWSC 1225

Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2007) 69 NSWLR 198; [2007] NSWSC 104

Sanders v Snell (1998) 196 CLR 329; [1998] HCA 64

Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4

Shea v TRUenergy Services Pty Ltd (No 6) [2014] FCA 271; 314 ALR 346

Silverbrook Research Pty Ltdv Lindley [2010] NSWCA 357

Spartalis v BMD Constructions Pty Ltd [2014] SASCFC 124

Spartalis v BMD Constructions Pty Ltd (2014) 120 SASR 575; [2014] SASCFC 124

Tallerman and Company Proprietary Limited v Nathan’s Merchandise (Victoria) Proprietary Limited (1957) 98 CLR 93

TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130

Toll (FGCT) Pty Limited v Alphapharm Pty Limited & Ors (2004) 219 CLR 165; [2004] HCA 52

Westpac Banking Corporation v Wittenberg (2016) 242 FCR 505; [2016] FCAFC 33

Texts Cited:

Mark Irving, ‘Australian and Canadian approaches to the assessment of the length of reasonable notice’ (2015) 28 Australian Journal of Labour Law 159

Category:

Principal judgment

Parties:

Melinda Rose Roderick (Plaintiff)
Washington H Soul Pattinson & Company Limited (Defendant)

Representation:

Counsel:
G McNally SC with D Stewart (Plaintiff)
D Sulan with J Entwisle (Defendant)

Solicitors:
Gillis Delaney Lawyers (Plaintiff)
Baker McKenzie (Defendant)

File Number(s):

2018/204098

Publication restriction:

None

Judgment

Introduction

Background facts

The witnesses

Evidence about the plaintiff’s performance

Original or new contract?

Reasonable notice

The STI claim

The parties’ positions

Consideration

The LTI Plans

The 2015 and 2016 LTI Awards

The 2017 LTI Award

Repudiation

Orders

Judgment

Introduction

1. This matter involves a consideration of the entitlements payable to a senior executive of a large public company following termination of her employment. These entitlements are alleged to have included payments under short and long term incentive schemes, which the defendant maintains were entirely discretionary.

2. During the period 2006 to 12 April 2018, Melinda Rose Roderick (“the plaintiff”) was employed by Washington H Soul Pattinson and Company Limited (“the defendant” or “the company”).

3. On 12 April 2018, the plaintiff’s employment was terminated without notice and, on the plaintiff’s case, without explanation. At the time, she was the second most senior employee in the company and the only woman on the board. There is no suggestion of any conduct on her part which could have justified termination in this manner.

4. A payment in lieu of notice of three months’ salary was made in July 2018, albeit, even on the defendant’s case, there was no contractual entitlement to make a payment in lieu rather than provide a period of notice. It thus could not be in dispute that, in purporting to terminate the plaintiff in this manner, the defendant acted in breach of the contract of employment. It did not give her any notice at all.

5. She claims damages from the defendant, including:

1. payment of her salary in respect of the period of notice that she says should have been afforded to her, being 24 months;

2. payment of an amount representing her alleged entitlements under a long term incentive (“LTI”) plan; and

3. payment of an amount representing her alleged entitlements under a short term incentive (“STI”) scheme.

6. The plaintiff’s case on damages is that she has lost the benefits which would have been payable to her if the defendant had given the period of notice as required by the contract. [1]

   1. Bartlett v Australia and New Zealand Banking Group Ltd (2016) 92 NSWLR 639; [2016] NSWCA 30 at [100]–[101] (Meagher JA).

7. The correct approach to an assessment of damages in a case such as this (should the plaintiff succeed at all) is to consider what period of notice the defendant should have given and then assess loss based on the salary that would have been paid during that period as well as assess any non-fixed entitlements based on the loss of an opportunity to obtain a commercial benefit. [2]

   2. Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 (“Sellars v Adelaide Petroleum”).

8. The plaintiff also pursues an alternative case that, even if the defendant was only required to give three months’ notice, she is still entitled to payment under the STI scheme and LTI plans.

9. In its annual report the defendant describes itself as a significant investment house with a portfolio encompassing many industries, including its traditional field of pharmaceuticals, as well as coalmining, building materials, copper mining and refining equity investments, property investments, telecommunications and corporate consulting. It is currently an ASX 100 company.

10. At the time of her termination, the plaintiff was employed as the Finance Director. She commenced employment with the defendant in June 2006 in the position of Chief Financial Officer. Her employment was confirmed by way of a letter to her from the defendant dated 26 June 2006.

11. The parties agree that the terms and conditions of her employment were originally as set out in the letter of 26 June 2006 (“the original contract”). That contract contained an express term requiring the defendant to give three months’ notice.

12. However, the plaintiff maintains that that original contract was discharged or varied when she was appointed Finance Director.

13. A draft new employment contract was prepared by the defendant in 2015 but never signed by the plaintiff. It was admitted into evidence (without objection from either party). Neither party submits that that document reflects the governing employment contract as at April 2018.

14. The defendant says that the parties remained bound by the original contract. Although it did not give notice (three months) in accordance with that contract, it paid an amount in lieu subsequently, such that it says that the breach is of no consequence. She is not entitled to damages.

15. Further, the defendant says that, having regard to the LTI plan rules and the operation of the STI scheme, the plaintiff was not entitled to payment of any additional benefits, having been terminated prior to the assessment by the defendant of benefits payable under the STI scheme and LTI plans.

16. The parties filed an agreed statement of facts and issues (with some slight variation). Many of the facts are not in dispute.

17. The hearing proceeded over five days. The plaintiff was represented by Mr McNally SC with Mr Stewart and the defendant was represented by Mr Sulan of Counsel with Mr Entwisle. Counsel appeared by video link and the witnesses gave evidence in the same way.

18. The plaintiff relied on her own affidavits of 23 November 2018, 5 July 2019, 30 September 2019 and 17 April 2019. She was cross-examined. The defendant adduced evidence from Mr Warwick Negus, a Board member who was head of the Remuneration Committee of the defendant for a time, and Mr Ian Bloodworth, the company secretary. The defendant did not call its CEO, Mr Todd Barlow, although one paragraph of an affidavit of Mr Barlow, which had been served but was not relied on by the defendant, was tendered by the plaintiff.

Background facts

19. On 26 June 2006, the plaintiff commenced employment with the defendant in the position of Chief Financial Officer. As set out in the letter confirming the offer of employment, her total remuneration package was $250,000 per annum. The plaintiff continued in that position until October 2014 when she was appointed Finance Director. At that time she was also appointed a director of the defendant and 12 related companies. Her role as Finance Director incorporated all of the duties she had previously performed as CFO. She was also required to perform other additional duties.

20. There is no evidence that between 2006 and 2014 there were any performance-related issues or any other issues which might be relevant to these proceedings. Indeed, it is a curious feature of this case that despite the defendant maintaining that the plaintiff was terminated for performance issues, there is not one document in evidence for the period before or after her termination in which there is any reference to her performance (other than the STI assessment forms). This absence includes the minutes of the Board and the Remuneration Committee. Even the termination letter does not refer to any performance issues as being the reason for her termination.

21. In September 2014, the plaintiff attended a meeting at the office of the Chairman. The Chairman asked her to become a member of the Board. According to the plaintiff, Mr Hawker — the Chair of the Nomination Committee of the defendant — said that he wanted her “here” long term and wanted her to become the Finance Director which he described as an “executive director position”.

22. On 25 September 2014, the defendant issued an ASX announcement referring to the plaintiff’s appointment to the Board. The 2014 Annual Report contains the following:

“Ms Melinda Roderick will join the Board on 1 November 2014 as a Finance Director. Melinda has over 24 years accounting and operational experience having previously held senior financial roles within the financial services and insurance sectors including eight years as an external auditor within a chartered accounting practice.

She joined WHSP in 2006 as the Chief Financial Officer and has a comprehensive understanding of the Company’s complex accounting matters. In this role she has provided valuable input to the Board.”

23. Following the plaintiff’s appointment, there were two executives on the Board: Mr Peter Robinson (described at the time as the Executive Director) and the plaintiff. They were the only two executives who reported directly to the Board. They were the two most senior executives in the company.

24. In October 2014, the plaintiff had a further conversation with Mr Robinson as follows:

“Robinson:   ‘With your new role as Finance Director I have asked David Wills to draft a new executive director employment contract for you.’

[Plaintiff]:   ‘Thank you’.

Robinson:   ‘I have also spoken to the Chairman and agreed with him that it is now appropriate in your new role that you will report directly to the Board’.”

25. By letter dated 27 October 2014, the defendant confirmed its invitation for the plaintiff to join the Board as an executive finance director. The letter set out the basis of her appointment to the Board and information relevant to her position as an executive director of the defendant. As set out in the letter, no director’s fees were payable to her as she would be an executive director. The plaintiff signed the acknowledgement on 29 October 2014 as follows:

“Acknowledgement

I, Melinda Rose Roderick, confirm that the arrangements for my appointment as a director of Washington H Soul Pattinson and Company Limited as detailed above are acceptable to me.”

26. On 5 November 2015, the defendant issued its annual report. An annual report was issued for each year that the plaintiff remained employed by the defendant. In the remuneration report for key executives (which formed part of the annual report) the plaintiff was described as follows:

“Ms M R Roderick – Finance Director and Chief Financial Officer from 1 November 2014, formerly Chief Financial Officer.”

27. In either January or February 2015, the plaintiff was provided with a draft executive employment agreement, which had been prepared by solicitors for the defendant. The plaintiff made handwritten comments on the document, although it is not clear when she made those comments. The document was never agreed to or signed. The plaintiff says that she approached the then Head of the Remuneration Committee of the defendant, David Willis, on at least two occasions to arrange a meeting regarding her suggested amendments and comments but no meeting ever eventuated.

28. Further evidence emerged during cross-examination of the plaintiff on this issue on which I will comment later in this judgment.

29. On 4 December 2015, an annual general meeting took place. At the meeting, the defendant sought shareholder approval under ASX Listing Rule 7.2 for the company’s LTI plan and the issue of performance rights and options under that plan. Set out in the explanatory notes to the notice of the annual general meeting is a summary of the key terms of the LTI plan. Item 6 in the explanatory notes related to the grant of performance rights to Mr Barlow, who had become the CEO and Managing Director of the defendant following Mr Robinson’s retirement as Executive Director at the end of March 2015. Item 7 related to the grant of performance rights to the plaintiff and relevantly provided:

“The non-executive Directors of the Company believe that the Long Term Incentive Plan is an appropriately designed equity-based employee incentive scheme that links executive reward to increases in shareholder value and acts as a retention tool for key executives. …

The Board has considered the application of Chapter 2E of the Corporations Act to the issue of performance rights to Ms Roderick and considers that the financial benefit given by such grant of performance rights constitutes reasonable remuneration to Ms Roderick for the purposes of section 211(1) of the Corporations Act:

(a) given the circumstances of the Company; and

(b) Ms Roderick’s role and responsibilities at the Company.

Given the above, the Company is not seeking shareholder approval pursuant to section 208 of the Corporations Act in addition to the approval being sought under the ASX Listing Rules.”

30. Having regard to s 211 of the Corporations Act 2001 (Cth), it must be that the defendant considered that the performance rights issued to the plaintiff (both in 2015 and 2016) constituted reasonable remuneration for the plaintiff, having regard to its own circumstances and the plaintiff’s role and responsibilities.

31. On 10 December 2015, the defendant wrote to the plaintiff regarding a remuneration review for the period commencing 1 January 2016. The defendant referred to the introduction of the STI plan and LTI plan in respect of certain senior executives. The plaintiff was invited to participate both in the STI and LTI plans.

32. On the same day, 10 December 2015, the defendant wrote to the plaintiff inviting her to participate in the group’s LTI. It annexed the terms of the invitation and the plan’s rules. The plaintiff signed an application form and other documents evidencing her acceptance of the invitation on the terms set out in the accompanying documents.

33. On 10 March 2016, Mr Barlow prepared a memorandum in respect of the revised STI structure. There followed a memorandum of 11 April 2016 setting out the operation of the STI scheme. Unlike the LTI, no plan rules were formulated in respect of the STI scheme.

34. As part of the operation of the STI scheme, the plaintiff was required to undertake a self-assessment, which she completed for the year ending 31 July 2016.

35. On 10 October 2016, Mr Barlow made recommendations in respect of the plaintiff’s entitlement to the STI plan. Although parts of his memo are redacted, there is reference to his assessment or grading of the plaintiff.

36. On 12 October 2016, the Remuneration Committee of the defendant met and recommended that the plaintiff be awarded $170,082 in respect of STI payments for the seven months ending 31 July 2016. Further, the Committee made recommendations in respect of the LTI plan for the year ending 31 July 2017.

37. It was also agreed that the plaintiff would be remunerated and the fixed amount of her salary would be $690,000 per annum.

38. In each of 2016 and 2017, the plaintiff received payments through the STI scheme. That is, she was assessed as having satisfied the conditions of the scheme and entitled to payments.

39. In each of 2015 and 2016, the plaintiff was invited to apply for and did apply for and was issued performance rights through the LTI plans. A proportion of those rights first vested in September 2018.

40. The defendant issued a corporate governance statement for the year ending 31 July 2017. Under the heading “Principle 1 — Lay solid foundations for management and oversight” and following discussion under the sub-heading “Diversity”, it made the following statement:

“Board Reviews

The Chairman is responsible for monitoring and assessing the performance of individual Directors, each Board Committee and the Board as a whole. The Chairman interviews each Director and provides feedback regarding their performance. At this interview each Director is invited to comment on the performance of the Board as a whole and the performance of other Directors. The Board as a whole continuously monitors the efficiency and effectiveness of its operations on an informal basis.

The performance of each Director of the Company was assessed, as set out above, during the year.

Senior Executive Reviews

The performance of the MD is evaluated by the Board with reference to the overall performance of the Company and of its subsidiaries and associates in which the MD represents the Company. Both qualitative and quantitative measures are used to evaluate performance.

The Board evaluates the performance of the Finance Director. The MD evaluates the performance of the other senior executives. The Board also reviews the performance of these executives via the monthly Board reports and their attendance at Board meetings.

The performance of the senior executives of the Company was assessed, as set out above, during the year.”

41. In September 2017, the defendant published amendments to its LTI plan. The plaintiff was granted further performance rights under the new LTI plan.

41. In October 2017, the defendant or its recruitment consultant prepared a draft confidential position specification for the position of Chief Financial Officer. It must be that the defendant was at least considering the termination of the plaintiff at that time as the plaintiff’s role incorporated the role of CFO. It is notable that, in the new role, the CFO would report to the CEO. There is no suggestion of reporting directly to the Board or being on the Board.

42. On 1 October 2017, the defendant published its rules in respect of the new version of the LTI plan.

43. At the AGM on 8 December 2017, the directors unanimously recommended the reappointment of the plaintiff as a director and the plaintiff was re-elected. The grant of further LTI performance rights to the plaintiff was approved.

44. On 12 April 2018, the plaintiff’s employment was terminated without notice. In addition to being spoken to she received a letter delivered by hand. The defendant appointed a person as CFO the next day, I infer, as a result of the search it had been undertaking since at least October 2017.

45. On 18 April 2018, the defendant made an ASX announcement that the plaintiff had resigned. She had not resigned.

46. On 13 July 2018 the defendant made a payment to the plaintiff of $172,000 gross, being an equivalent to three months’ salary. No further payments have been made to the plaintiff.

47. On 3 July 2018, the plaintiff commenced these proceedings. On 8 April 2019, the plaintiff amended her statement of claim and, on 4 May 2020, sought leave to further amend her statement of claim. On 4 May 2020, I granted the plaintiff leave. [3] The defendant was granted leave to file and did file an amended defence on the last day of the hearing (7 May 2020).

    3. Roderick v Washington H Soul Pattinson & Company Limited [2020] NSWSC 1223.

48. By memo dated 31 August 2018, Mr Barlow provided a remuneration review for the Remuneration Committee.

49. On 12 September 2018, there was a meeting of the Remuneration Committee chaired by Mr Negus. Mr Barlow was in attendance as the Managing Director. The Committee resolved to recommend to the Board STI payments. In the minutes of the meeting, the committee considered the LTI rights to be granted in respect of the year ended 31 July 2019.

50. There is a section “Other Business” which was again partially redacted as follows:

“Melinda Roderick LTI rights

It was noted that Ms. Roderick had been granted a total of 34,867 LTI rights in respect of the years ended 31 July 2016 and 2017 which were unvested.

[Redacted]

It was RESOLVED to recommend to the Board that the rights be forfeited and that the letter be sent to Ms. Roderick.”

52. The Board met on 12 September 2018. It resolved to adopt the recommendations of the Remuneration Committee which had met earlier that day. On 12 September 2018, the defendant wrote to the plaintiff including the following:

“We hereby advise that the Board has determined for the purposes of clause 10.1 and 10.3 of the LTIP Rules that you will not be permitted to retain any of the Unvested Performance Rights. Accordingly, the Unvested Performance Rights will, on the date of this notice, automatically lapse under clause 11 of the LTIP Rules.”

53. On 24 April 2020, the plaintiff informed the defendant that it would be withdrawing its claim to redundancy payments set out in the statement of claim.

54. On that same day, the plaintiff commenced proceedings in the Federal Circuit Court claiming a redundancy payment under s 119(1)(a) of the Fair Work Act 2009 (Cth). In those proceedings, the plaintiff names the defendant as well as five directors as defendants. The plaintiff seeks the imposition of pecuniary penalties against the defendants.

55. Subsequent to commencement of the Federal Circuit Court proceedings, the defendant and the directors filed a summons seeking orders restraining the plaintiff from pursuing those proceedings. I deal with that application in a separate judgment. [4]

    4. Washington H Soul Pattinson & Company Limited v Roderick [2020] NSWSC 1225.

56. The plaintiff has not obtained employment since her termination in April 2018.

The witnesses

57. Much of the plaintiff’s evidence is uncontroversial. Most of the background facts are not in dispute. The documents speak for themselves. To a large extent, the plaintiff merely sets out the background facts and her own views as to the operation of the STI scheme and LTI plans. She disputes some evidence adduced by Mr Negus, the principal witness on behalf of the defendant.

58. The defendant did not rely on a number of affidavits which it had apparently served and to which the plaintiff responded in her own affidavits. The plaintiff did depose to a number of conversations of relevance to which I will refer later in this judgment.

59. The main areas of cross-examination of the plaintiff related to:

1. her knowledge of the content of the annual reports and the inclusion of the statement that she would be entitled to 3 months’ notice on termination;

2. the fact that the draft new contract was never finalised and a challenge to her suggestion, which emerged in cross-examination, that there had been a discussion about 12 months’ notice and that the information in the annual reports was inaccurate;

3. her knowledge or acceptance of the statement by senior counsel in opening that the defendant was a top 100 ASX listed company when was she was employed (when in fact it did not become an ASX 100 company until after her employment ceased);

4. whether there was any real change in the nature of her role and duties after she was appointed Finance Director;

5. her search for work; and

6. her motivation in respect of withdrawing the redundancy claim in these proceedings and pursuing the redundancy claim in the Federal Circuit Court, including naming individual directors as defendants.

60. There was an issue in the hearing as to the extent to which evidence of belief, intention and conduct should be admitted, having regard to the principles which must be applied in making findings as to the existence and terms of the contract. Evidence was dealt with on a case-by-case basis having regard to the objections of the parties.

61. Evidence emerged during cross-examination that was plainly not expected by the defendant and might have been included in the plaintiff’s affidavits. It was put to the plaintiff during cross-examination that certain discussions of which she gave evidence during cross-examination did not occur. The defendant was given leave to call evidence in response which it did, in part.

62. The plaintiff gave evidence by AVL. There were some difficulties with the technology but it was generally satisfactory. I formed the view that the plaintiff was intent on being considered in her evidence in the sense that she sometimes sought further clarification of the questions and sometimes provided very lengthy answers.

63. I found her to be a credible witness. I do not accept that she was making up any evidence as to conversations. Whilst there are some differences between her recollection of certain conversations and the recollection of witnesses adduced on behalf of the defendant, the differences are not significant. I might also say that, bearing in mind the differences of opinion as to the extent to which evidence of statements and conversations as to contractual terms might be admissible, is not that surprising that some evidence which emerged in cross-examination was not contained in the original affidavits.

64. The principal witness called by the defendant was Mr Warwick Negus. I found aspects of Mr Negus’ evidence surprising. He was a member of the Board and Chair of the Remuneration Committee. However, he did not work with the plaintiff and his evidence relating to performance was really a recitation of what he had heard from others. It is unfortunate that the defendant chose to present evidence said to be supportive of shortcomings in the plaintiff’s performance in this manner.

65. The Chairman and Managing Director were not called. The defendant obviously made a decision not to call other persons who might have been able to adduce more specific evidence on any performance shortcomings.

66. On a number of occasions, Mr Negus made statements that were not entirely accurate. Indeed, cross-examination commenced with Mr Negus accepting that a statement he made about the decision to terminate was not entirely accurate.

67. He initially said that the plaintiff reported to the managing director when the defendant’s own documents specify that she reported directly to the Board. He seemed to be unaware of this. He quite directly rejected the suggestion that she reported to the Board albeit, he accepted that his evidence was inconsistent with the defendant’s own documents as to who evaluated the plaintiff’s performance.

68. He said that to receive a payment under the STI plan, an individual needs to remain employed by the defendant through the end of the financial year and up to the time of assessment, as if to explain why the plaintiff did not receive any benefit in 2018. He could not identify any document which supported that view.

69. When challenged as to his belief that the plaintiff had not been performing in circumstances in which he had recommended to the shareholders a reappointment to the Board in 2017, he said that it was not her performance as a director but her performance as CFO in which she was failing. Again, there is no evidence from Mr Barlow to this effect and Mr Barlow’s assessments against her KPIs do not suggest that he viewed that she was “failing”.

70. When pressed on her failings, he admitted that he did not have day-to-day dealings with her and said that the person who was working with her to determine the failings was really the Chief Executive. He acknowledged that Mr Barlow’s assessment of the KPI of statutory reporting and market information criteria suggested an improvement in 2017 when compared to 2016. He also agreed that Mr Barlow had given her an “A” in 2017 for general finance function, compared to a “B” for the same KPI in 2016.

71. It is difficult to accept Mr Negus’ opinion that the plaintiff was “failing” in her CFO function when the managing director gave her the highest grading possible.

72. When it was put to him that he administered the STI with a large degree of discretion, he said, “No, we communicated very clearly to the employees how it would work.”

73. There was no communication to the plaintiff that the entitlement to an STI benefit was entirely at the discretion of the defendant and that she needed to be continuously employed up to the time of the assessment to obtain any STI benefit for the year.

74. Mr Negus maintained that, although payment of the STI was based on financial performance up to the end of the financial year, being 31 July, it was also necessary that the employee be employed at the time of making the decision, that is, after the results are announced and performance would be considered right up to when the Remuneration Committee had its meeting.

75. When originally asked about the ASX announcement on which the Company specified that the plaintiff had resigned, he said that the announcement was made in that way with her knowledge:

“It was done with the consent of Melinda and it was specifically worded that way so that it didn't cruel her chances of future employment.  It was done to confirm that she had left our organisation.”

76. When the subject was again raised with him, presumably after Mr McNally had obtained instructions from the plaintiff, the following exchange occurred:

“Q. I want to suggest to you that that is simply not true?

A. That's ‑ well she was aware that we were going to say that she had resigned.  You know, I don't ever recall seeing an announcement from the company saying that they'd terminated somebody.  So it was done with her consent.

Q. When you say it was done with her consent, who spoke to her and who obtained that consent to your knowledge?

A. I would say that the company secretary would have ‑ would have spoken to her.

Q. You would say?  Does that mean you don't know if anyone spoke to her about it?

A. I ‑ well it was ‑ it was discussed at the time when the ASX announcement was made, that she was aware that we were saying resigned as opposed to terminated.

Q. When you say it was discussed that she was aware, how was she aware?

A. I think she was made aware by the company secretary.  He's responsible for putting announcements out.

Q. But you don't know that do you?

A. Well it could have been the chief executive.  I suspect it was the company secretary.

Q. What I want to suggest to you is that nobody from the company to your knowledge contacted Ms Roderick and obtained her consent to the release of that particular piece of information?

A. That's not to my knowledge, no.”

77. Whilst being cross-examined on the operation of the STI scheme and the possibility of a payment on a pro rata basis, he was taken to the report of the Remuneration Committee in the 2018 Annual Report which included an amount in respect of the plaintiff.

78. That amount obviously represented a pro rata calculation up to the time of her termination. That is, the 2018 Annual Report published well after her termination included a sum for an STI benefit to the plaintiff for 2018 which was obviously not paid to her. Despite Mr Negus being the Chair of the Remuneration Committee at the time and despite him having signed the report, he professed uncertainty as to why the particular number was contained in the report, suggesting that it might be for accounting purposes.

79. Mr Negus was quite adamant that the plaintiff was not entitled to any STI benefit in 2018 because she was not actually employed at the time of the Remuneration Committee’s consideration. Yet in the Annual Report for 2018, provision is made for payment of the STI benefit to the plaintiff on a pro rata basis. It is difficult to understand why the defendant would be including an amount representing the amount payable to the defendant if it was sure that she had no entitlement to any payment at all.

80. I accept that Mr Negus had a belief in what he was saying and that he may have had difficulty recalling some of the detail. However, he made a number of statements which are otherwise unsupported or from which he moved away during the course of cross-examination.

81. I prefer the evidence of the plaintiff to the extent that there is any conflict between Mr Negus’ recollection and that of the plaintiff as to conversations.

82. The defendant was granted leave to adduce evidence from the company secretary, Mr Ian Bloodworth, in response to evidence from the plaintiff that emerged during cross-examination. One of the key facts relied on by the defendant on objective intention was the presence in the annual reports of a statement that, on termination, the plaintiff would be entitled to three months’ notice. The plaintiff said that the inclusion of this statement in the annual reports was incorrect and that she had discussed this with Mr Bloodworth. He was called to refute this but, having regard to his affidavit and his oral evidence, in my view, the differences with the plaintiff are not substantial. Just as she said in cross-examination, she did raise the issue with Mr Bloodworth, although he could not recall it being raised more than once.

Evidence about the plaintiff’s performance

83. On the defendant’s case, the question of the plaintiff’s performance as Finance Director is relevant to her entitlement to both the STI and LTI benefits. It is relevant to the STI benefit as, if I accept the plaintiff’s submissions, it will be necessary to value the loss of the benefit which depends, in part, on how her performance might have been matched against five KPIs.

84. It is relevant to the LTI claim, as the defendant says that its decision in respect of the forfeiture of the LTI benefits was made, at least in part, with regard to her poor performance.

85. The only evidence relating to poor performance came from Mr Negus. There is no document that makes any reference to “poor performance”. Having said that, in its termination letter the defendant specifically stated that the plaintiff was being terminated with immediate effect because “she was not the right fit”. The defendant said that it required someone with a different skill set. The defendant did not say in its letter that her termination was related to poor performance. Yet it has presented a case on the basis that it was. Perhaps not being the right fit is code for performing poorly.

86. As I comment when considering the STI claim, there was a difference between the assessment of the plaintiff and the assessment of the managing director, Mr Barlow, when matched against the five KPIs. However, there is no evidence from Mr Barlow, or anyone on behalf of the defendant, raising any performance issue with the plaintiff any time prior to her termination. In 2017, Mr Barlow assessed her performance as an “A” in the very area that Mr Negus volunteered she was “failing”.

87. The plaintiff says that she specifically asked whether her termination was based on performance and was told that she had done nothing wrong:

“On 12 April 2018 I was summonsed to a meeting with [Robert] Millner; Warwick Negus … Chairman of the Board’s Remuneration Committee; and [Todd] Barlow. A conversation to the following effect took place:

Millner:   ‘Melinda, your services are no longer required by the company, and you are being terminated effective today.’

Me:   ‘What?’

Millner then repeated the substance of what he had said to me. I then asked:

Me:   ‘Is this some performance based decision?’

Barlow:   ‘No, you’ve done nothing wrong.’

Negus:   ‘It’s something that’s been happening for a while.’” [5]

5. Affidavit, Melinda Rose Roderick, 23 November 2018 at par 43.

88. The person who is said to have made that statement, being Mr Barlow, was not called. No explanation was offered as to why he was not called. In accordance with Jones v Dunkel,[6] I would merely infer that his evidence would not have made the defendant’s case any better.

    6. (1959) 101 CLR 298; [1959] HCA 8.

89. Instead, the defendant relied on Mr Negus who was present during the short termination meeting.

90. He gave relevant evidence on the performance issue in three different respects. Firstly, he stated in para 6 of his affidavit of 28 August 2019 the following, in relation to his meetings with Mr Barlow:

“From time to time, these discussions naturally include the performance of key personnel, so I was aware that since commencing as Chief Executive Officer in April 2015, Mr Barlow had developed concerns about the plaintiff’s ability to adequately perform her role.”

91. This evidence and the more detailed evidence in para 7 of that affidavit was admitted only as to his belief, not as the truth of the fact.

92. Secondly, Mr Negus disputed the plaintiff’s version of the termination conversation in his affidavit of 28 August 2019 as follows:

“12. I have read the affidavit of the plaintiff dated 23 November 2018 (Plaintiff’s First Affidavit), including its description of the events of 12 April 2018 at paragraphs 43 to 46. The plaintiff’s description of these events is not accurate.

13. After being told that the defendant had decided to terminate her employment, the plaintiff asked whether this decision was related to her recent sick leave. Mr Barlow made it clear to the plaintiff that the decision had nothing to do with her illness or absence from work and he confirmed that the decision related to her performance.

14. Paragraph 43 of the Plaintiff’s First Affidavit refers to me telling the plaintiff that ‘It’s something that’s been happening for a while.’ This is accurate. …”

93. It is difficult to know what to make of Mr Negus’s statement that Mr Barlow confirmed that the decision related to her performance when there is no evidence of any earlier discussion with the plaintiff about poor performance or that she might be terminated based on performance.

93. Thirdly, Mr Negus refers to his discussions with Mr Barlow regarding the plaintiff’s self-assessment for the purposes of the STI plan. He says that there was a substantial disparity between the plaintiff’s assessment and Mr Barlow’s assessment. He says that he discussed these disparities when reviewing the plaintiff’s performance and considering the STI payment.

94. Mr Negus also said that it was customary for the Board to have conversations about staff at the start of the Board meeting so the only people not present would have been the plaintiff and the company secretary. He referred to comments made by the chairman and the fact that these discussions took place on a number of occasions. He also referred to the discussion that he says took place during the meeting of the Remuneration Committee on 12 September 2018. He says there was a discussion about the nature of the plaintiff’s termination and the reasons why she was terminated.

95. The plaintiff responded to Mr Negus’ evidence in her affidavit of 30 September 2019 as follows:

“9. In response to paragraph 19 of the Negus Affidavit, I was never aware that Mr Barlow had assessed my performance. I would not expect Mr Barlow to assess my performance as I reported to the Board.

10. In response to paragraph 19 of the Negus Affidavit, at no stage whilst I was employed as the Finance Director did Mr Barlow or any other Board member provide me with key performance indicators or key performance objectives.”

97. She was not challenged on this evidence during cross-examination.

98. I prefer the evidence of the plaintiff to the extent that there is any conflict between Mr Negus’s recollection and that of the plaintiff as to conversations.

99. I accept that the plaintiff was not informed that her employment was being terminated for performance-related issues. There is no evidence of performance issues being raised with her prior to that time. The termination letter does not refer to poor performance.

100. On the defendant’s case, it was having discussions about the performance of its second most senior employee over a lengthy period without raising them with her, until she was terminated without notice and asked to leave the premises immediately.

101. Of course, there may have been discussions about her performance held in confidence. It may be that the defendant considered that it could do better or that the plaintiff was not the right fit and that it could do better in terms of value for its money. After all, it had obviously gone on to hire a person to act only as CFO for considerably less than it was paying the plaintiff (particularly having regard to her claimed STI and LTI benefits). That person reported directly to the CEO and was not on the Board. The defendant’s actions in terminating the plaintiff at the time that it did and in the manner that it did would have saved the defendant a considerable sum.

102. Mr Negus’s statement that the plaintiff was failing in her CFO duties is not supported by the assessment undertaken by Mr Barlow in 2017. It is one thing to consider that the company could do better or there were aspects of performance that could be improved but the assertion that she was failing in her duties is not supported by any other evidence and the documentary evidence is to the contrary. According to the defendant’s published methodology for assessing the entitlement to an STI benefit, a grade of D represents underperformance. The plaintiff did not receive even one D in the years that she was assessed for an STI benefit.

103. There may have been confidential discussions as to the plaintiff’s performance but they did not involve the plaintiff.

104. I accept that Mr Negus was really giving evidence based on what he understood from other persons but, when tested, his recollection of detail was lacking and inconsistent.

105. Further, on a close analysis of the whole of Mr Negus’s evidence, he makes no direct and specific statement that the plaintiff’s entitlement to an STI benefit was actually discussed at the meeting of the Remuneration Committee on 12 September 2018. There is no mention of it in the minutes. He only refers to the STI benefit in his affidavit of 28 August 2019 as follows:

“22. The defendant did not make any payment to the plaintiff on the termination of her employment in relation to the STI plan for the 2018 financial year. Tab 3 of WMN1 contains a copy of Mr Barlow’s Remuneration Overview 2018. I read this document before attending the Remuneration Committee meeting on 12 September 2018. Tab 4 of WMN1 contains a copy of the minutes of the Remuneration Committee. I attended and chaired that meeting.”

106. He does not say that there was any consideration or recommendation in respect of the plaintiff’s entitlement. Of course, the copy of the minutes presented to the Court is redacted.

107. The meeting was raised in further examination-in-chief as follows:

“Q. I just want to ask you about a different meeting, on 12 September 2018, you were the chairman of the remuneration committee; do you recall that?

A. I do.

Q. And the subject of Ms Roderick's LTIs and STIs was discussed; do you recall that?

A. I do.

Q. Just doing the best you can, can you just tell his Honour who said what?

A. So, when I chaired REM committee, we worked with an agenda and I would normally introduce the subject and talk to the subjects, issues that I thought were relevant and then I would open it up for discussion. On the subject of LTIs there were two decisions to make, one in relation to the 2018 LTIs. And one in relation to the 16 and 17 LTIs. So, the decision on the 18th, the 2018s was the pro rata decision and then on the 16 and 17s was the decision to forfeit the performance rights.

Q. And can you remember what was said about the reasons if any for that decision?

A. This meeting was, first of all, it was five months after the termination date, so Melinda had not been working in the company for some time. We discussed the nature of her exit from the company, the reasons why she was terminated. We talked about the objectives of the plan which was long term and continued contribution to the success of the company. We would have discussed what we felt was a generous remuneration package. And of course the, you know, the service condition on the plan itself, so, those, they were the things that we discussed and that led to the recommendation to forfeit the rights.

Q. Can I just ask you to take up Court book volume 3 and on the top right hand corner, you'll have page 930 and can I just ask you to identify those as the minutes of the meeting that you were the chairman of, that you've just spoken about?

A. Yes, it is.

Q. And just going through to 933, where it's other business, do you see a heading "Melinda Roderick LTI rights"?

A. Yes.

Q. And was that ..(not transcribable).. the ultimate decision made following the discussion you've just referred to

A. Yes, that's that's where the discussion took place. There's a redaction in my copy of that.

Q. Thank you. And can I just ask you about a separate meeting and maybe to do this by looking over to the next page.

HIS HONOUR: Sorry, do you say there is – sorry, Mr Sulan.

Q. Mr Negus, did you say there's a correction in your copy or a redaction in your copy?

A. A redaction, your Honour.

SULAN

Q. And just if you go over to page 934 and do you see that this is the minutes of a board meeting also of the same date?

A. Yes.

Q. And can I just ask you to look at 935.

A. Yes.

Q. Can you just explain to his Honour what discussion, if any, took place at that board meeting regarding these issues?

A. So – so the membership of the REM committee and the membership of the board was the same group of people, so we would have closed the remuneration committee and the chairman would have opened the next committee immediately following, and we would have formally adopted the recommendations from the remuneration committee. So I don't – I don't believe that there were any – there was any further discussion because it was the same group of people.”

108. As is plain from his answer, he specifically only referred to the LTI plan. He did not add to this in any answers he gave in cross-examination.

109. I accept that there were confidential discussions about the plaintiff. I accept that there must have been discussions about her performance, but I do not accept that she was failing or that her performance was poor. Having regard to some inaccurate statements by Mr Negus, which I assume were inadvertent, I am not prepared to make findings based on his recollection of conversations with others about the plaintiff. Indeed, I specifically limited some of his evidence, such that it could not be used to prove the truth of that which he asserted.

110. In circumstances in which the defendant was making a decision about payment of STI benefits to the plaintiff two months after she had commenced these proceedings, when (as it contends) it viewed her performance as having been poor, I can think of no explanation as to why there would not have been a minute recording the decision and that it was based on poor performance.

Original or new contract?

111. The central issue is whether, as at the date of termination, the parties remained bound by the original contract, perhaps as varied, or whether that contract had been discharged and the relationship was governed by a new or different contract, albeit not yet in writing.

112. The plaintiff submits that her role and duties had changed to such an extent that the original contract should be taken as discharged and that the employment relationship was governed by a new contract. [7]

     7. Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567.

113. The plaintiff submits that the parties demonstrated an intention to enter into a new contract of employment, commencing at the date of her appointment as Finance Director. The plaintiff relies on the conversations and correspondence between the parties as supporting her position.

114. The plaintiff submits that the fact that the draft new contract in writing had not yet been executed does not lead to the conclusion that the original contract still applied. The plaintiff also points to the significant change in her remuneration structure as supporting her position.

115. The defendant submits that the parties remained bound by the original contract, the draft provided to the plaintiff not having been agreed. The defendant points primarily to the content of the annual reports and the existence of the unsigned or draft executive agreement as evidence of common intention that the original agreement applied. The defendant says also that the plaintiff’s evidence as to change in her executive function was limited, bearing in mind that she was appointed a director pursuant to a separate letter without remuneration. Her new duties were said to be a function of her being appointed a director and thus would not be relevant to the enquiry in this case.

116. It could hardly be disputed that the defendant intended that there would be a new contract of employment. It sent one to the plaintiff for signing. It must follow that on the defendant’s case, the parties demonstrated by their conduct an intention to remain bound by the original contract, until such time as they executed a new contract.

117. If the parties remained bound by the original contract then there could be no scope for the implication of a term as to reasonable notice. The original contract contained an express term as to notice and there is no scope for implying a term inconsistent with the express term of the contract.

118. In Westpac Banking Corporation v Wittenberg,[8] Buchanan J conveniently identified the task in a case such as this as follows:

“[257]   The search, accordingly, in a case where it is said that a contract of employment has been replaced in an ongoing relationship of employment (or even that its terms have been varied), is for an imputed mutual intention that such a change in the contractual landscape has occurred.” (Emphasis in original.)

8. (2016) 242 FCR 505; [2016] FCAFC 33 at [257].

119. The defendant made the following submission in respect of the correct approach to the determination of the issues:

“Second, the relevant mutual intention may be found in the objective intention attributed to the parties by reference to their conduct. This reflects the general principle that extrinsic evidence of post-contractual conduct is admissible to establish the fact that a contract was entered into, or that an existing contract has been varied or abandoned. What is required is an objective assessment of the state of affairs between the parties, with the word ‘intention’ used to describe what would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened.” (Emphasis in original.) (Citations omitted.)

120. I accept that submission as to the principles to be applied. I am required to assess the state of affairs between the parties on an objective basis having regard to their words and conduct and the circumstances existing at the time.

121. It is accepted by the defendant that the original contract did not contain a payment in lieu of notice (“PILON”) term and there is no scope for implying such a term into the original contract.

122. The common law does not afford a right to terminate a contract of employment on payment in lieu of reasonable notice. [9] The positon in this matter is analogous to the position best summarised in Sanders v Snell,[10] as follows:

“[16] … The contract being cast in these terms, it is not possible to imply in it some term that would permit … payment to the respondent in lieu of notice …

…

[19] … That termination was a breach of the contract, for it brought the contract to an end then and there, without first giving the stipulated notice. This was not a case of an employer giving notice of intention to terminate the contract in two months, paying the employee in advance for those two months and saying to the employee that he or she need not attend work during that time. The payment that was made to the respondent was payment in lieu of notice in the sense of being a payment made after the contract was brought to an end and intended to be set off against, and to extinguish, the damages that ordinarily would be payable for the wrongful termination of the agreement.” (Citations omitted.)

9. Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2007) 69 NSWLR 198; [2007] NSWSC 104 at [150].

10. (1998) 196 CLR 329; [1998] HCA 64 at [16], [19].

123. There is no dispute that, if the original contract was discharged or replaced, then it would be necessary to imply a term into the new contract to the effect that the contract is terminable upon reasonable notice. [11]

     11. New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 at 74.

124. The employment relationship commenced in 2006. That relationship continued after the plaintiff was appointed Finance Director in 2014. It has often been stated that the Court should not readily assume that a change in working arrangements or in the duties of an employee involves either a variation to or discharge of an existing contract of employment. [12]

     12. Spartalis v BMD Constructions Pty Ltd [2014] SASCFC 124 at [26].

125. In Wittenberg, Buchanan J said at [261]:

“[261]   Whether changes occur incrementally and slowly, or more rapidly pursuant to an intended program of development and expansion, unless it can be said that an employer has breached a contract by an unjustified and unlawful attempt to impose change (in which case the employee has the normal remedies for breach or repudiation) it would not be readily inferred, in my view, that the entire contract of employment has been replaced by a new one. In the case of a comprehensive written contract dealing with a range of important matters, including but by no means confined to, methods and occasions for termination of the contract, that could have drastic and potentially damaging results for both parties. Such an intention should not lightly be imputed to them in a continuing relationship.”

126. On the other hand, if the circumstances demonstrate a profound alteration in the duties and responsibilities of the employee, the Court may more readily accept that a new contract replaced the old contract. [13]

     13. Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567.

127. As observed by Ashley J in Quinn v Jack Chia (Australia) Ltd:

“The passage highlights what seems to me to be a valid point — that where employer and employee agree to an alteration in the employee’s duties and responsibilities which is profound, a court should be more ready to hold (unless the original contract of employment provided for the contingency) that a new contract has replaced the old; or at least that the old contract, as varied, contained terms objectively appropriate to the new relationship created.” [14]

14. [1992] 1 VR 567 at 576.

128. It seems to me to be significant that in a number of cases relied upon there was a term in the written contract specifying that the contract would remain in force even after a change in duties.

129. The original contract in this matter contained no such term. Indeed, it is relevant that the original contract was a short-form standard contract which did not contain many of the terms which might have been expected in an employment contact for an executive director of a large public company.

130. I do not consider that the approach in Quinn establishes some new principle or is unique to its facts. In reality, Quinn is just an example of a case in which the facts and circumstances, assessed objectively, demonstrated a common intention that the old contract would no longer apply. As the change in duties was far reaching and not contemplated by the contract originally made, the parties could not have intended that the old contract still applied.

131. In Tallerman and Company Proprietary Limited v Nathan’s Merchandise (Victoria) Proprietary Limited,[15] Tayor J said:

“It is firmly established by a long line of cases ... that the parties to an agreement may vary some of its terms by a subsequent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement.”

15. (1957) 98 CLR 93 at 144.

132. The question is what the parties intended on an objective basis. [16]

     16. Toll (FGCT) Pty Limited v Alphapharm Pty Limited & Ors (2004) 219 CLR 165; [2004] HCA 52 at [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ).

133. There are limitations on the use to which post-contractual conduct can be put. It cannot be used to as an aid to interpretation of a particular term. However, post-contractual conduct may be used to demonstrate that the parties intended that a contract had been discharged and replaced by a new contract.

134. Ultimately, whether the parties intended to enter into a new contract is a question of fact.

135. There is no statement, oral or in writing, that on commencement of her new role she would no longer be bound by the original contract. However, there is a statement by the defendant, assented to by the plaintiff, to the effect that there would be a new employment contract. [17]

     17. Affidavit, Melinda Roderick, 23 November 2018 at par 18.

136. The plaintiff submits that common intention that the original contract would be discharged is demonstrated through the following evidence.

137. In October 2014, she had a conversation with Mr Robinson, then the Executive Director, in the following terms:

“Robinson: ‘With your new role as Finance Director I have asked David Wills to draft a new executive director employment contract for you’.

Me: ‘Thank you’.

Robinson: ‘I have also spoken to the Chairman and agreed with him that it is now appropriate in your new role that you will report directly to the Board.’

138. This conversation took place before she commenced her duties as Finance Director on 1 November 2014. That is she was told, with the new role, there would be a new executive director employment contract. Her response indicates her assent to this.

344. Accordingly, the plaintiff has not established any further loss arising under the 2015 and 2016 LTI Awards.

The 2017 LTI Award

354. By letter dated 8 December 2017, the plaintiff was invited to apply for a number of performance rights under a new LTI plan. As set out in the letter of invitation, each right is an entitlement, upon vesting and exercise, to the value of a share which may be settled in the form of a share or in cash.

355. The measurement period for the performance rights was 1 August 2017 to 31 July 2020.

356. Continued service during the measurement period is not a requirement in order for rights to vest.

357. However, the schedule to the letter of invitation as well as the attached explanatory booklet contain an abridged reference to rules 26.1 and 26.2 of the 2017 LTI Plan rules concerning what happens on termination of employment, as follows:

“Unvested performance rights held at the date of termination and granted in the financial year of the termination will be forfeited in the proportion that the remainder of the financial year following the termination bears to the full financial year, unless otherwise determined by the Board.

All other unvested performance rights will be retained for possible vesting based on performance during the Measurement Period.”

358. All the performance rights were awarded to the plaintiff in the financial year ending 30 June 2018. That is the same year in which the defendant purported to terminate the plaintiff’s employment. If the “date of termination” within the meaning of that term was 12 April 2018 then approximately 30% of the unvested performance rights would be forfeited (as approximately 30% of the financial year remained), unless otherwise determined by the Board. All other unvested performance rights would be retained for possible vesting based on the performance of the defendant during the measurement period.

359. The plaintiff seeks a declaration as to her entitlement with respect to the forfeiture of rights issued under the 2017 LTI Plan. The defendant does not submit that any rights have vested or have been forfeited.

360. The issue between the parties relates to the meaning of the rule as to what happens to unvested performance rights held at the date of termination and granted in the financial year of the determination. This depends on the meaning of “the date of termination”.

361. If the date of termination was 12 April 2018, then any performance rights under the 2017 LTI Plan held as of 12 April 2018 would be forfeited in the proportion that the remainder of the financial year following the termination bore to the full financial year unless otherwise determined by the Board.

362. There has been no determination by the Board otherwise. If the date of termination is 12 April 2018, then there would need to be a calculation of the percentage of the 2017–18 financial year remaining to determine the portion of the unvested performance rights which would be forfeited.

363. The very purpose of a notice provision in an employment contract is to require each party to give notice of when the contract will come to an end. The term which is implied at law is a term requiring the employer to give reasonable notice of an intention to terminate the employment contract at a certain time.

364. In those circumstances, the date of termination cannot be the date on which the employer gives notice as, if the employer is complying with its contractual obligations, it is giving notice to the employee that at some future date the employment contract will end.

365. Ordinarily, it might be expected that an employer would ensure that there is a PILON clause in the contract, such that the employer has a contractual right to pay the plaintiff rather than merely give notice that the employment contract will come to an end at some future time.

366. There was such a clause in the draft executive contract provided by the defendant to the plaintiff in 2015. If agreed to, it would have allowed the defendant to satisfy its obligations in respect of notice by payment in lieu of all or part of the notice period (clause 15.4).

367. However, neither party suggests that there would have been a PILON clause existing at the time the defendant gave notice of termination. In those circumstances, it seems to me that if there was proper performance of the contract by the defendant, the termination date would have been 12 April 2019.

368. There thus would have been no unvested performance rights held as at that date that had been granted in that financial year.

369. In the circumstances, rule 26.1 does not apply to the plaintiff. Rule 26.2 applies, such that the performance rights do not lapse at the termination of employment and continue to be held by the plaintiff with the view to testing for vesting at the end of the measurement period (subject to the issue of repudiation discussed below).

Repudiation

370. Both parties accept that there is a difference between termination of the employment relationship and termination of the employment contract.

371. The defendant submits that whilst dismissal terminates the employment relationship, the contract of employment continues until such time as the employee accepts the repudiation constituted by the dismissal. [34]

     34. Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 427 (Brennan CJ, Dawson and Toohey JJ); [1995] HCA 24; Conway-Cook v Town of Kwinana [2001] WASCA 250 at [29].

372. The defendant submits that the plaintiff’s contract of employment came to an end by no later than 3 or 12 July 2018 because on 3 July 2018 the plaintiff sued the defendant in these proceedings for wrongful dismissal and redundancy. Further, the defendant submits that acceptance by the plaintiff of three months’ salary on 12 July 2018 evidences that she treated the contract as being discharged.

373. The point of this submission is that according to the defendant, if the employment contract came to an end in July 2018, then there is no basis on which the plaintiff can challenge the decisions of the defendant (made in September 2018) not to pay an STI or LTI benefit. That is because the determination that the 2015 and 2016 LTI Awards had not vested was correct because the plaintiff was not continuously employed up to the time immediately following the publication of the 2018 results.

374. Further, it is said the decision not to pay an STI benefit as the plaintiff did not remain employed as at September 2018 was also correct as a matter of fact.

375. As set out in the original statement of claim, the plaintiff sought a declaration that the defendant repudiated the employment contract and such repudiation was accepted by the plaintiff. The plaintiff purported to accept the repudiation by her pleadings (para 20 of statement of claim). As part of the amendments to the statement of claim, the plaintiff abandoned para 20 as well as the relief sought in respect of repudiation.

376. However, the plaintiff cannot approbate and reprobate. A party may accept a repudiation of the contract by its pleadings and terminate the contract itself. This is what the plaintiff did by her original pleading. She cannot merely amend the statement of claim subsequently and proceed on the basis that she had not accepted the repudiation.

377. Having said that, the real question in this matter is what is the consequence of that acceptance of the defendant’s repudiatory conduct.

378. The plaintiff relies on the principles set out in TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd, [35] in particular, asserting that the defendant cannot benefit from its own wrong.

     35. (1989) 16 NSWLR 130.

379. In Hayden Enterprises, there was a contract between Channel 9 and the production company for the Midday show. Although Channel 9 repudiated the contract, the contract was brought to an end by the acceptance of that repudiation by Hayden Enterprises.

380. As the Court noted, although the contract was not an employment contract, it was a contract for personal services. The Court (Hope JA, Priestly and Meagher JJA agreeing) referred to the general principle that a contract is not automatically terminated by repudiation. A contract of services is not exempted from the general principle that repudiation must be accepted before there is a termination of the contract. [36]

     36. Hayden Enterprises at 148.

381. However, as was observed in Hayden Enterprises at 148, it is generally impractical for the employee or even, in the reverse case, the employer to do other than accept the repudiation. That is the situation in this case.

382. A contract of employment is a contract for personal services. By purporting to terminate the plaintiff without notice, the defendant had demonstrated an unwillingness to comply with its contractual obligations (even on the defendant’s own case). That was repudiatory conduct. The plaintiff had little choice but to accept that repudiation, terminate the contract and sue for damages.

383. To assert that, as the plaintiff brought the contract at an end prior to 31 July 2018, she cannot now complain about the failure of the defendant to assess and pay an STI or LTI benefit is to seek to profit from one’s own breach.

384. In any event, I consider that the arguments about repudiation and damages are misconstrued, other than in respect of the 2017 LTI Plan.

385. The consequence of acceptance of the repudiation by the plaintiff is that the plaintiff has demonstrated that she was no longer willing to perform her side of the bargain, that is, turn up for work. She has thus brought the contract to an end. However, she could hardly do anything else in circumstances in which she was not allowed on the premises and was asked to leave the day she was told.

386. As the defendant has repudiated the contract, then the plaintiff is entitled to damages, representing the true value of the contractual rights which she has lost. [37]

     37. Maredelanto Compania Naviera SA v Bergbau-Handel GmbH (The Mihalis Angelos) [1971] 1 QB 164.

387. In my view, her entitlement to damages is not affected by her termination of the contract. Damages must thus be assessed with reference to the loss of entitlements that the plaintiff would have received but for the defendant’s breach. In respect of the loss of fixed salary, the matter is easily determinable. However, in respect of the STI and LTI benefits, the assessment is really the loss of the opportunity to obtain a benefit. Whether the contract was terminated by the plaintiff subsequent to breach by the defendant does not impact of the assessment of loss in those circumstances.

388. I must assess the value of that opportunity, assuming that the defendant had given 12 months’ notice.

389. The plaintiff lost the opportunity to be assessed for a benefit, not because she terminated the contract by her pleading, but because the defendant acted in breach of the contract in April 2018.

390. However, acceptance of the repudiation and termination of the contract by the plaintiff on 3 July 2018 is relevant for the purposes of the forfeiture rule in the 2017 LTI Plan. If the plaintiff accepted the repudiation and terminated the contract on 3 July 2018 — which she did, by commencing proceedings on that date — then 3 July 2018 is the relevant date for the purposes of the forfeiture rule in the 2017 LTI Plan. Unvested performance rights held under the 2017 LTI Plan would be forfeited in the proportion that the remainder of the financial year bears to the full financial year (29 days over 365 days).

391. This is subject to the Board determining otherwise (that is, waiving the forfeiture). It is not up to the Court to determine otherwise in advance. This is a matter for the Board. Unless the Board otherwise determines, she has forfeited the proportion of the rights that the period 3 July 2018 to 31 July 2018 bears to the whole year i.e. the percentage of the rights. The remaining rights remain unvested but still held by the plaintiff. It is not clear to me whether there has been a decision by the defendant that the plaintiff has forfeited some or all of her rights in the 2017 LTI Award.

392. In my view, the only 2017 LTI Award rights which could be subject to any forfeiture would be the proportion forfeited by force of rule 26.1 of the 2017 LTI Plan rules (being 29/365 days). It is matter for the defendant whether it decides to waive this forfeiture when the time comes.

Orders

393. The plaintiff is entitled to judgment calculated as follows:

Reasonable notice claim (12 months’ notice)	690,000
Balance (less three months’ notice equivalent paid)	517,500
Interest (calculated on Balance from 12 October 2018) [38]	50,676.75
Sub-total	568,176.75
STI claim	288,960.96
Interest (calculated from 12 September 2018)	29,603.08
Sub-total	318,564.04
LTI claim	198,276
Interest (calculated from 12 September 2018)	20,312.71
Sub-total	218,588.71
Total	$1,105,329.50

38. The obligation of the defendant would only have been to pay a salary on a month-to-month basis for that 12-month period. I have simply undertaken an average and selected the six-month date for the purposes of interest.

394. I have made findings for the purposes of the 2017 LTI Plan. It does not seem appropriate to make any declaration about the plaintiff’s rights. No doubt the defendant will consider her entitlement when the time comes. If either party considers that I should be making a declaration, I grant liberty to restore the matter on three days’ notice.

395. I thus make the following orders:

1. Judgment for the plaintiff for the sum of $1,105,329.50.

2. The defendant is to pay the plaintiff’s costs.

3. Should either party seek a variation of that costs order, I grant liberty to apply on three days’ notice.

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Endnotes

Decision last updated: 10 September 2020