Russell v RCR Tomlinson Ltd [No 2]
[2016] WASC 240
•9 AUGUST 2016
RUSSELL -v- RCR TOMLINSON LTD [No 2] [2016] WASC 240
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2016] WASC 240 | |
| Case No: | CIV:1229/2010 | 15-17 DECEMBER 2015 & 4 APRIL 2016 | |
| Coram: | TOTTLE J | 9/08/16 | |
| 52 | Judgment Part: | 1 of 1 | |
| Result: | Order for rectification made | ||
| B | |||
| PDF Version |
| Parties: | DAVID WILLIAM RUSSELL RCR TOMLINSON LTD |
Catchwords: | Practice and procedure Construction of court orders Where plaintiff had three causes of action Where at original trial one cause of action succeeded and other two were dismissed Where defendant appealed to Court of Appeal Where no cross appeal regarding the two causes of action dismissed by the trial judge Where appeal allowed and matter remitted for retrial Whether all three causes of action remitted for retrial or only the cause of action at issue in the appellate proceedings Whether ambiguity required before regard may be had to reasons of court when construing orders Whether res judicata, issue estoppel or Anshun estoppel arose Equity Rectification Whether employment agreement should be rectified to reflect common intention of parties Whether parties had common intention that retirement benefit should be payable on termination of employment by employer within five years of commencement Turns on own facts Contract Breach of contract Employment contract Construction of term providing for retirement benefit Whether proper construction required five years' service before benefit payable Turns on own facts Misleading and deceptive conduct Trade Practices Act 1974 (Cth) s52 Whether representation in fact made Whether representations made in the course of negotiations for an employment contract are made 'in trade or commerce' Meaning of 'in trade or commerce' |
Legislation: | Trade Practices Act 1974 (Cth) s 51A, s 52 and s 82 |
Case References: | Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58 Australian Energy Ltd v Lennard Oil NL (No 2) [1988] 2 Qd R 230 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 Dalecoast Pty Ltd v Guardian International Pty Ltd [2003] WASCA 142 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 Juengling v Wells [2009] WASCA 125 MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152 McKay v Commissioner of Main Roads [2013] WASCA 135 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990 Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 Polyaire Pty Ltd v K-Aire Pty Ltd (No 4) [2007] SASC 36 Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] FCA 430 RCR Tomlinson Ltd v Russell [2015] WASCA 154 Repatriation Commission v Nation (1995) 57 FCR 25 Russell v RCR Tomlinson Ltd [2012] WASC 405 Sertari Pty Ltd v Quakers Hill SPV Pty Ltd [2014] NSWCA 340 Smith v Comcare [2014] FCA 811 Walker v Salomon Smith Barney Securities Pty Ltd [2003] FCA 1099; (2003) 140 IR 433 Westpac Banking Corporation v Wittenberg [2016] FCAFC 33 Yates Property Corporation Pty Ltd v Boland (1998) 89 FCR 78 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
RCR TOMLINSON LTD
Defendant
Catchwords:
Practice and procedure - Construction of court orders - Where plaintiff had three causes of action - Where at original trial one cause of action succeeded and other two were dismissed - Where defendant appealed to Court of Appeal - Where no cross appeal regarding the two causes of action dismissed by the trial judge - Where appeal allowed and matter remitted for retrial - Whether all three causes of action remitted for retrial or only the cause of action at issue in the appellate proceedings - Whether ambiguity required before regard may be had to reasons of court when construing orders - Whether res judicata, issue estoppel or Anshun estoppel arose
Equity - Rectification - Whether employment agreement should be rectified to reflect common intention of parties - Whether parties had common intention that retirement benefit should be payable on termination of employment by employer within five years of commencement - Turns on own facts
Contract - Breach of contract - Employment contract - Construction of term providing for retirement benefit - Whether proper construction required five years' service before benefit payable - Turns on own facts
Misleading and deceptive conduct - Trade Practices Act 1974 (Cth) s52 - Whether representation in fact made - Whether representations made in the course of negotiations for an employment contract are made 'in trade or commerce' - Meaning of 'in trade or commerce'
Legislation:
Trade Practices Act 1974 (Cth) s 51A, s 52 and s 82
Result:
Order for rectification made
Category: B
Representation:
Counsel:
Plaintiff : Mr A J Power
Defendant : Mr J L Snaden
Solicitors:
Plaintiff : King & Wood Mallesons
Defendant : Clayton Utz
Case(s) referred to in judgment(s):
Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58
Australian Energy Ltd v Lennard Oil NL (No 2) [1988] 2 Qd R 230
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Dalecoast Pty Ltd v Guardian International Pty Ltd [2003] WASCA 142
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546
Juengling v Wells [2009] WASCA 125
MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152
McKay v Commissioner of Main Roads [2013] WASCA 135
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990
Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457
Polyaire Pty Ltd v K-Aire Pty Ltd (No 4) [2007] SASC 36
Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] FCA 430
RCR Tomlinson Ltd v Russell [2015] WASCA 154
Repatriation Commission v Nation (1995) 57 FCR 25
Russell v RCR Tomlinson Ltd [2012] WASC 405
Sertari Pty Ltd v Quakers Hill SPV Pty Ltd [2014] NSWCA 340
Smith v Comcare [2014] FCA 811
Walker v Salomon Smith Barney Securities Pty Ltd [2003] FCA 1099; (2003) 140 IR 433
Westpac Banking Corporation v Wittenberg [2016] FCAFC 33
Yates Property Corporation Pty Ltd v Boland (1998) 89 FCR 78
- TOTTLE J:
Introduction
1 In this action the plaintiff, Mr Russell, claims he was entitled to be paid a 'retirement benefit' in an amount equal to his annual salary and superannuation benefits upon the termination of his employment with the defendant, RCR, 'otherwise than for cause', that is, in effect, otherwise than for misconduct. Mr Russell was employed by RCR as the executive general manager of its subsidiary, RCR Positron Pty Ltd. RCR terminated Mr Russell's employment otherwise than for cause on 16 December 2009. It did not pay the retirement benefit.
2 The claim arises from an Executive General Manager Services Agreement (the Services Agreement) executed by the parties on 4 March 2009.
3 Mr Russell contends that on a true construction of the Services Agreement the retirement benefit was payable if RCR terminated his employment otherwise than for cause and that the failure to pay the retirement benefit was a breach of the Services Agreement.
4 In the alternative, Mr Russell contends it was both his and RCR's intention that RCR would only be entitled to terminate his employment otherwise than for cause by providing notice and by paying the retirement benefit and that the Services Agreement should be rectified to reflect that common intention.
5 In the alternative to his claims based on the Services Agreement, Mr Russell claims he was induced to enter into the Services Agreement by a representation made to him by Mr John Noordhoek, RCR's Chief Executive Officer, to the effect that in the event that RCR terminated his employment otherwise than for cause RCR would pay him the retirement benefit. Mr Russell contends that the representation was misleading and that had he not relied upon it he would have accepted an alternative offer of employment and, as a consequence of not accepting the alternative offer, he has suffered loss.
Preliminary point
6 Mr Russell's claims have been the subject of an earlier trial and judgment. In Russell v RCR Tomlinson Ltd [2012] WASC 405 the Trial Judge held that the Services Agreement did not bear the construction for which Mr Russell contended and that there was no breach of contract but held that he was entitled to an order that the Services Agreement be rectified. Mr Russell's claim for damages for misleading or deceptive conduct, as it was then formulated, was rejected. I note at this point that the misleading and deceptive conduct claim was reformulated when the matter came before me for retrial. As reformulated, it involved factual allegations as to reliance on the relevant conduct that were not raised before the Trial Judge.
7 RCR appealed against the order rectifying the Services Agreement made by the Trial Judge. Mr Russell did not cross-appeal in relation to the rejection of his breach of contract claim or his claim for damages for misleading or deceptive conduct. The Court of Appeal upheld the appeal and ordered a new trial: RCR Tomlinson Ltd v Russell [2015] WASCA 154. The Court of Appeal found that the Trial Judge had made a fact finding error in respect of what was said in a meeting held on 4 March 2009.
8 At the retrial, there was some dispute as to whether the only issue to be determined was the rectification claim or whether all of Mr Russell's claims had been remitted for retrial. Before me all the claims were advanced subject to RCR's defences that the remittal for retrial did not extend to the breach of contract or the misleading or deceptive conduct claims and that Mr Russell was prevented from advancing those claims by the doctrine of res judicata and by various estoppels.
Summary and structure of these reasons
9 I have concluded that the only claim remitted for retrial was the rectification claim and that Mr Russell is entitled to an order rectifying the Services Agreement.
10 In case I am wrong in reaching the conclusion that the only matter remitted for retrial was the rectification claim, I have made a provisional assessment of Mr Russell's breach of contract and misleading and deceptive conduct claims. My provisional assessment is that had they been remitted for retrial the breach of contract claim would have failed and the misleading and deceptive conduct claim would have succeeded.
11 In these reasons I will:
(1) outline the factual background against which the issues must be determined;
(2) explain why I have concluded that it is only the rectification claim that has been remitted for retrial;
(3) explain my reasons for holding that Mr Russell is entitled to an order rectifying the Services Agreement; and
(4) set out the reasons for my provisional assessment of:
(a) the breach of contract claim; and
(b) the misleading and deceptive conduct claim.
12 Much of the factual background was not controversial. I find it to be as follows.
13 Mr Russell is an electrical engineer with extensive experience as a project manager. In February 2008 he accepted a position with a business known as Positron Group to act as its project manager on a mining project in South Australia known as the Prominent Hill Project.
14 RCR acquired the Positron Group business in 2008.
15 By early 2009 Mr Russell's work on the Prominent Hill Project was coming to an end. He gave notice of his intention to resign from RCR Positron and started looking for another position. He was approached by a Mr Pratt of Nilsen Resources Ltd. Mr Russell and Mr Pratt had a number of discussions, in the course of which Mr Pratt offered Mr Russell a position as a project manager with Nilsen Resources. I return to the terms of the offer later.
16 By 2009 RCR had been a listed company for a number of years. Mr Noordhoek had been its Chief Executive Officer since 2007. Before that, he had been RCR's Chief Operating Officer.
17 In 2009 five Executive General Managers (EGMs) reported to Mr Noordhoek. Each EGM was responsible for an area of RCR's operations. Some of the EGMs had been employed by RCR for a number of years. The terms of employment of the EGMs were contained in agreements known within RCR as 'Executive General Manager Services Agreements'.
18 Executive General Manager Services Agreements were put in place in 2006 by the then CEO of RCR, Mr John Linden. At that time Mr Linden was concerned about the possibility that RCR might be the subject of a takeover and he wished to ensure that members of the senior management team were afforded some protection in the event that their employment was terminated following a takeover. Against that background RCR executed Executive General Manager Services Agreements with the EGMs then employed by it.
19 Three important features of the Executive General Manager Services Agreements were as follows.
(1) If the manager resigned from his employment after a certain number of years of service he would be entitled to payment of a sum equal to his annual salary and superannuation benefits.
(2) If RCR terminated the manager's employment 'otherwise than for cause' then, in addition to any other entitlements the manager would have, he would be entitled to payment of a sum equal to his annual salary and superannuation benefits.
(3) The agreements contained a non-competition provision restraining the manager from being involved in a competitive business following termination of his employment. The non-competition provision provided for a progressive reduction in the geographical area and duration of the restraint to reduce the risk of the clause being declared invalid.
20 The Executive General Manager Services Agreements executed by RCR before 2009 specified a qualifying period of either two or three years for the payment of benefits on resignation from RCR.
21 In February 2009 the position of EGM of RCR Positron was vacant. It was suggested to Mr Noordhoek that he consider Mr Russell for the position.
22 Mr Noordhoek had a professional working relationship with Mr Russell. They had worked together on the Prominent Hill Project and Mr Noordhoek wished to retain Mr Russell's services within RCR. It was common ground that in February 2009 Mr Russell and Mr Noordhoek spoke about the possibility of Mr Russell remaining with RCR and taking up the role of EGM of RCR Positron.
23 Mr Russell gave the role very serious consideration and spoke to a number of people about the business, the position and the challenges it involved. He was concerned about a number of matters. These included the possibility that Mr Paul Dalgleish, who had been recruited to replace Mr Noordhoek as Chief Executive Officer of RCR, might wish to appoint someone else as EGM of RCR Positron when he became Chief Executive Officer.
24 For his part Mr Noordhoek was keen to retain Mr Russell within RCR but he wanted to be satisfied that Mr Russell had the necessary management skills. The position was a challenging one and Mr Noordhoek discussed the challenges with Mr Russell.
25 On Friday, 27 February 2009, Mr Noordhoek provided Mr Russell with a draft Executive General Manager Services Agreement which had been given to him by Ms Charmaine Higgins, RCR's General Manager Corporate Human Resources.
26 Mr Russell took the draft agreement home to consider over the weekend. Mr Russell decided that he was no longer interested in taking up the position. On the evening of 27 February 2009, he sent an email from his personal email account to Mr Noordhoek in the following terms:
Hi John,
Following on from [today's] conversation, I have decided to withdraw my interest in the position.
I believe that the delay in making the offer shows that there are some doubts about my ability to undertake the role and this indecision will, if you end up offering me the position, always linger.
The role is a difficult and challenging one with substantial obstacles needing to be overcome. Complete trust without any hesitation from either of us would be required for success.
I will continue to work to my notice of termination and complete the outstanding items on the Prominent Hill project by Friday March the 6th.
Thank you for your consideration and time over the last three weeks.
Regards
David Russell
27 Mr Noordhoek responded by an email sent the next morning, Saturday, 28 February 2009, in the following terms:
David,
Disappointed with your decision and would ask you to reconsider, employing any person is always a gamble as you know. I have 150% confidence in your ability as a Project [Manager] as I have seen you in this role, I need to get my head around you and the EGM role as I had honestly not thought of you in this role until you mentioned it. I know we can work well together as we are both straightforward people. I want to offer you the role, you may see it as lack of confidence but I want to be sure that this decision is correct and asking you to provide your views on how you would structure the business with your current knowledge base in my opinion is not [too] much to ask for me to [feel] totally comfortable. David, please reconsider as we can make a good team working alongside each other. The role is challenging and it would provide you with some headaches, [let's] fix it together. I will respect whatever decision you make though. Have an enjoyable weekend though David.
Feel free to contact me though if you wish to chat or catch up.
Regards
John Noordhoek
28 As requested, Mr Russell reconsidered his position. On Sunday, 1 March 2009, he and his wife reviewed the draft agreement. Mr Russell noted in handwriting changes that he would like to see made to it.
29 On Monday, 2 March 2009, Mr Russell drove to RCR's office in Welshpool and left the draft agreement on which he had made notes in Mr Noordhoek's secretary's 'in tray'.
30 Later that day Mr Russell telephoned Mr Noordhoek to discuss the draft agreement. Mr Noordhoek had no recollection of the telephone conversation. I set out Mr Russell's evidence as to what was said in this conversation when considering the rectification claim.
31 On 3 March 2009 Ms Higgins prepared a letter offering Mr Russell the position of EGM of RCR Positron.
32 On 4 March 2009 Mr Russell attended RCR's Welshpool office. It is common ground there was a meeting between Mr Noordhoek and Mr Russell and that Ms Higgins and Mr Phillip Crighton, RCR's Company Secretary and Chief Financial Officer, were present at the end of the meeting. Ms Higgins witnessed Mr Russell sign the Services Agreement and Mr Crighton and Mr Noordhoek signed it on behalf of RCR. There is a dispute, however, about how long Ms Higgins was present in the meeting and what was said in her presence. I make findings about this dispute in the course of dealing with the rectification claim.
33 On 9 March 2009 Mr Russell started work as RCR Positron's EGM.
34 In May 2009 Mr Noordhoek stepped down as RCR's Chief Executive Officer and Mr Dalgleish took up that position.
35 In August 2009 Mr Russell heard rumours that Mr Dalgleish intended to replace him as EGM of RCR Positron. On 19 August 2009 he spoke to Mr Crighton about his concerns. After that discussion, on 20 August 2009, Mr Russell sent an email from his work email address to his personal email address which read as follows (exhibit 1 tab 10):
Spoke to Phil Crighton (Company Secretary) yesterday about all the turmoil within the EGM's with John's and Jeff's imminent resignation. Highlighted my situation with my employment contract and the lack of communication between Paul D and myself and the rumours of him interviewing in the East for a replacement for me. Phil stated that in my case I would be alright as if Paul decided to get rid of me RCR would have to pay 1 month plus 1 year. Phil got a copy of my contract and we reviewed the relevant sections, I commented that the 1 year Retirement benefit on termination might be interpreted differently and he stated that the intent was to pay one month and one year if the EGM was dismissed because someone 'didn't like the face' (not a discipline reason) and that a precedent had been set with the dismissal of a BDM and several others.
I also had legal review of the contract over night and was informed my contract was different to the other current EGM's and that RCR would have to pay the 1 month and 1 year (apparently my contract was setup the same as a previous guy who went to Bunbury), further that Paul would be 'furious' when he found out.
Another interesting comment was that the restraint period in my contract had been 'cut and pasted' from a non employment [sic] contract and made no sense and therefore was probably unenforceable.
36 On the afternoon of 16 December 2009 Mr Russell was dismissed from his employment with RCR, otherwise than for cause. There is some controversy about the order of events that afternoon. Mr Russell recalls that Mr Garry Ramse, then RCR's Chief Financial Officer (having replaced Mr Crighton), came into his office and told him his employment had been terminated and that he was handed a letter to that effect. Mr Russell says that he had a brief conversation with Mr Ramse in which he told Mr Ramse that he was entitled to payment of the retirement benefit. Mr Russell says that approximately 15 minutes later, once he had farewelled staff in the office, he returned to his office, where Mr Ramse had been joined by Ms Higgins and there was a further discussion about the entitlement to the retirement benefit. Mr Ramse did not give evidence. Ms Higgins said she and Mr Ramse both met with Mr Russell and she was present when Mr Ramse informed Mr Russell his employment had been terminated. Ms Higgins said Mr Russell made it clear he believed he was entitled to the retirement benefit but that he did not mention any statements about the retirement benefit previously made to him by Mr Noordhoek.
37 On 8 January 2010 Mr Russell sent an email to Mr Dalgleish in the following terms (exhibit 1 tab 17):
Dear Paul,
I confirm that during my termination interview with Garry Ramse and Charmaine Higgins on 16 December 2009, I was advised that I would be paid the equivalent of 3 months salary in lieu of notice when my contract only required RCR to pay 1 month. I was further advised that I would be paid all contractual benefits. I specifically highlighted clause 11.3 (b) and the subsequently clause 7 of my Executive General Manager's Services Agreement that being 12 months salary in circumstances where RCR terminated my employment by way of mere notice, prior to the expiration of 5 years continuous service.
At the time I entered into my employment contract with RCR I did so on the basis that I would be paid 12 months salary by way of a retirement benefit should RCR terminate my services prior to 5 years continuous service where the other type of Retirement Benefit would have been payable. In exchange for the payment of the retirement benefit I took a reduction in salary and accepted a position that was subject to review and unlikely to continue long term because you were joining RCR as CEO within a few months of me entering into my contract. At the time of entering into this contract the area of the Executive General Manager's Services Agreement highlighting this provision was discussed with both Charmaine Higgins and John Noordhoek and also subsequently with the CFO and Company Secretary, Mr Phillip Crighton.
The period for the payment of my contractual entitlements has now expired and RCR is in breach of its obligations to me under my employment contract.
In addition the payment of my statutory entitlements has not been fully met as I have not been paid superannuation nor the amount covering the vehicle allowance for the period of untaken annual leave as at termination. Accordingly this now constitutes a breach of RCR's statutory obligations as an employer.
I now demand full payment of all entitlements both contractual and statutory on or before the close of business Wednesday, 13 January 2010.
Should I not receive payment in full I will not hesitate to immediately commence proceedings in the Federal Court against RCR and its Directors.
Yours faithfully
David Russell
38 RCR did not pay the retirement benefit demanded by Mr Russell. Mr Russell commenced this action on 17 February 2010.
The Services Agreement
39 Clause 1.1 of the Services Agreement defines Retirement, Retirement Benefit and Retirement Date as follows:
Retirement means the termination of this Agreement pursuant to clause 11.1(a) or 11.3 or, if during the Term, the death of the Executive General Manager.
Retirement Benefit has the meaning ascribed to that term in clause 7.
Retirement Date means the date of Retirement.
40 Clauses 2, 3 and 4 describe the position and define the duration of the employment and the EGM's duties. Clauses 5 and 6 deal with the EGM's remuneration and the right to reimbursement of expenses.
41 Clause 7 concerns the benefits payable on retirement and reads:
7. Retirement benefit
7.1 Calculation of benefit
Upon Retirement, provided that the Retirement Date is after the fifth anniversary of the Commencement Date, the Executive General Manager is entitled to receive a payment in cash from the Company calculated on the following basis:
• One (1.0) times the total amount of Salary and superannuation payable to the Executive General Manager as at the Retirement Date.
7.2 Payment of benefit
The Company will pay the Retirement Benefit to the Executive General Manager as follows:
(a) 50% of the Retirement Benefit within 10 business days of the Retirement Date or such other date as the Company and the Executive General Manager agree in writing; and
(b) the balance, being 50% of the Retirement Benefit within 3 months of the Retirement Date or such other date as the Company and the Executive General Manager agree in writing.
7.3 Operation
This cl 7 continues to operate and have effect after termination of this Agreement.
43 Clause 11 concerns the termination of employment and reads:
11. Termination
11.1 Grounds for termination
The Company at its sole discretion may terminate the Employment of the Executive General Manager in the manner specified in cl 11.2 if at any time the Executive General Manager is or becomes:
- (a) incapacitated by illness or injury of any kind which prevents the Executive General Manager from performing the duties specified …;
(b) guilty of wilful misconduct …;
(c) is [sic] charged with any criminal offence …;
(d) of unsound mind …;
(e) bankrupt …;
(f) continually or significantly neglectful of his duties …;
(g) refusing or neglecting to comply with any lawful, reasonable direction or order ….
11.2 Notice of termination
Where the Company decides to terminate the Employment for a reason specified in cl 11.1 it shall do so in the following manner:
- (a) for a reason specified in cl 11.1(a) by giving the Executive General Manager not less than one month's written notice or by paying one month's Salary in lieu thereof; or
(b) for any reason specified in cl 11.1(b), (c), (d), (f) or (g) by giving the Executive General Manager notice effective immediately and without payment of any salary other than the Salary and any other entitlements accrued to the date of the termination.
11.3 Executive General Manager and Company to give notice
(a) The Executive General Manager may terminate the Employment by giving the Company no less than three months' written notice. If the written notice is dated prior to March 2014 the Company shall not be obliged to pay any Retirement Benefit.
(b) Otherwise than as specified in this cl 11, the Company may terminate the Employment by giving the Executive General Manager no less than one month's written notice or by paying no less than one month's Salary in lieu thereof as well as paying the retirement benefits as per cl 7.
45 Clause 13 is the 'non-competition' clause. It is unnecessary to reproduce the clause. By its terms Mr Russell agreed that he would not be involved in various capacities in any business that competed with any business of RCR or any business carried on by any 'Related Body Corporate' of RCR. The clause was drafted to impose a series of severable (cascading) restraints, so that the relevant geographical 'Restraint Area' ranged from 'Australia' to 'Perth' and the 'Restraint Period' ranged from five years to six months.
46 Other than cl 24, an 'Entire Agreement' clause to which I will return later in these reasons, none of the provisions in the balance of the Services Agreement has any bearing on the issues.
Preliminary point – the extent of the remittal for retrial
Power to order a retrial and generally applicable principles
47 There was no dispute about the Court of Appeal's power to order a retrial of all the matters in issue at first instance: s 59(1) of the Supreme Court Act 1935 (WA).
48 In McKay v Commissioner of Main Roads [2013] WASCA 135, at [357] Murphy JA said the exercise of the power to order a retrial or a retrial limited to certain issues depends upon the demands of justice and the starting point is that, if there is to be a new trial, it ought to be of the case as a whole unless the court thinks it will do more injustice by setting the matter at large again. His Honour went on to say that where the court considers that it is difficult to 'disjoin' the issue which makes the retrial necessary from other issues in the case, or if there is a real chance that the primary court erred in the wider case, it will be appropriate to order a retrial of all issues.
49 In Juengling v Wells [2009] WASCA 125, at [140] Newnes JA observed that whilst each case will depend on its particular circumstances, generally the starting point is that if there is to be a new trial it ought to be of the case as a whole unless the appellate court considers that more injustice would be done by setting the whole matter at large again.
A question of construction
50 The question of which issues the Court of Appeal remitted for retrial is to be determined by construing the orders made by the Court. Those orders were as follows:
1. The appeal be upheld.
2. The Order made by her Honour Justice Pritchard on 25 September 2013 (25 September 2013 Order) be set-aside in its entirety.
3. Matter No. CIV 1229 of 2010 be remitted for re-trial by a differently constituted court of the trial division.
4. The respondent shall pay the appellant's costs of the appeal, including the costs of the appellant's application in an appeal dated 4 October 2013 seeking a stay of execution of the 25 September Order, in a sum to be taxed if not agreed.
5. The costs of the trial are reserved to the judge who presides at the re-trial.
51 The question of construction is what is constituted by 'Matter No. CIV 1229 of 2010'. Does it comprehend all of the issues before the Trial Judge as Mr Russell contends or, as RCR contends, is it limited to the rectification claim?
52 In summary, Mr Russell supports his construction of the order with submissions to the following effect:
(i) There is no ambiguity in the Court of Appeal's order and because it describes the 'Matter' by reference to its first instance action number, 'CIV 1229 of 2010', it must be inferred that the Court intended to remit for retrial all of the issues that arose at first instance.
(ii) It was open to RCR to make submissions at the time the Court of Appeal delivered its judgment that the remittal should be limited to the rectification claim but no such submissions were made.
(iii) Construing the order as remitting all claims for retrial reflects the ordinary practice, as described by Murphy JA in McKay v Commissioner for Main Roads.
(iv) The error in the fact finding process identified by the Court of Appeal 'infects all three of the plaintiff's causes of action' with the result that all three should be retried.
53 In summary RCR's submissions in support of the construction of the order for which it contends are to the following effect:
(i) The Court of Appeal's order must be construed in the context in which it was made, and the 'matter' remitted for a new trial is the issue that remained in dispute between the parties, namely the rectification claim. The Court did not intend to confer on Mr Russell the opportunity to re-agitate his other claims, in other words to give Mr Russell 'a second bite at the cherry'.
(ii) The general proposition established by authorities such as McKay v Commissioner for Main Roads is not that a retrial will ordinarily cover the whole of the case from which the appeal was brought, but rather that a retrial will ordinarily cover the whole of the case advanced on appeal (that is, not only those aspects of an appeal that succeed). It was contended that an order for retrial does not resuscitate causes of action that failed at first instance and were not the subject of an appeal or cross-appeal.
(iii) The fact finding error did not infect the Trial Judge's disposition of the breach of contract or misleading and deceptive conduct claims.
(iv) The reference to 'Matter No. CIV 1229 of 2010' is ambiguous. In this respect RCR relies upon Repatriation Commission v Nation (1995) 57 FCR 25, a the decision of the Full Court of the Federal Court of Australia (Black CJ, Jenkinson & Beaumont JJ), in which it was held that an order remitting 'the matter' to the Administrative Appeals Tribunal was susceptible of more than one meaning, that is either the whole question in dispute or the specific issue before the Federal Court on appeal. In that case the Full Court held that the 'matter' was limited to the issue determined by the Court on appeal.
54 To construe the order made by the Court of Appeal it is necessary to consider the '25 September 2013 Order' made by the Trial Judge to which the Court of Appeal referred in par 2 of its orders. The 25 September 2013 Order was as follows:
1. The Contract between the parties entered into on 4 March 2009 be rectified to read as follows:
Clause 11.3(b) be amended to read:
Otherwise than as specified in this clause 11, the Company may terminate the Employment by giving the Executive General Manager no less than one month's written notice or by paying no less than one month's Salary in lieu thereof as well as paying the retirement benefits as per clause 7 Retirement Benefit calculated in accordance with clause 7.1 and in the manner provided for in clause 7.2 regardless of the date on which Retirement occurs.
Clause 7.1 be amended to read:
Upon Retirement, provided that either the Retirement date is after the fifth anniversary of the Commencement Date or that the Retirement is pursuant to clause 11.3(b), the Executive General Manager is entitled to receive a payment in cash from the Company calculated on the following basis:
• one (1.0) times the annual total amount of Salary and superannuation payable to the Executive General Manager as at the Retirement Date.
3. The defendant pay the plaintiff interest at the rate of 6% per annum on the amount of $148,750 from 5 January 2010 until 16 March 2010 and then on the amount of $297,500 from 16 March 2010 until the date of payment under order 2, such amount to be paid in immediately available funds at the same time as the payment under order 2.
4. The defendant pay the plaintiff's costs of the action to be taxed if not agreed.
Principles applicable to the construction of court orders
55 It is an open question whether the orders of a court must contain an ambiguity before resort can be had to the reasons for judgment for the purpose of construing the orders: Sertari Pty Ltd v Quakers Hill SPV Pty Ltd [2014] NSWCA 340 [81] (Tobias AJA, McColl & Barrett JJA agreeing). The authorities on this question were reviewed by Santow JA in Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58 [128] - [140]. That case concerned the construction of an injunction. At [129] Santow JA expressed the following view:
To pose the question as simply, can ambiguity in court orders be resolved by reference to their external context, obscures the point of what an order sets out to do. The purpose of a court order is, ordinarily, to give effect to a judgment. The judgment is not some kind of penumbral context surrounding the order. Rather the judgment is the source of the order. A court order derives from its originating judgment, as a transfer of land derives from the underlying contract. The order must therefore conform to the judgment, with only such latitude as the judgment allows. Likewise the transfer must conform to the contract. To speak therefore of the originating judgment as providing context for resolving ambiguity understates the primacy of that judgment as a source of the interpretation of the order.
56 Santow JA outlined the divergence of opinion expressed in the authorities: one line of authority suggests that courts should only have resort to reasons for judgment as an aid to interpretation when there is ambiguity; another line of authority is to the effect that the meaning of words in an order should be considered by reference to the reasons for judgment - the reasons themselves finding context in the overall proceedings.
57 At [140] Santow JA summed up the position as follows:
(a) Orders must conform to the judgment which gave rise to them, within the latitude conferred by that judgment. That originating judgment is not just an aid to construction. Rather it is the primary reference point. In that respect construing orders is not like resorting to extrinsic circumstances or external context to resolve ambiguity in a clause in a contract.
(b) Where orders are ambiguous, that ambiguity must be resolved first by reference to the originating judgment, unless the language of the orders proves intractable.
(c) Orders may also need explication by reference to the proceedings in which the judgment is given, particularly the pleadings. This recognises that a range of orders and their possible meanings may conform to the judgment.
(d) While orders should ideally be self-explanatory, language is inherently ambiguous so permitting that resort to resolve ambiguity.
(e) Orders should so far as practicable be self-contained. But incorporation by reference is permitted where that to which reference is made is readily accessible and likely to be familiar to the parties, like an LEP. The cardinal principle is that the person to whom an order is directed should readily understand what is required of him by that order. Incorporation by reference may actually assist that understanding, if concision is thereby achieved without loss of clarity.
58 The Full Court of the Supreme Court of Queensland in Australian Energy Ltd v Lennard Oil NL (No 2) [1988] 2 Qd R 230 had recourse to the reasons for judgment in construing a declaratory order even though there was no ambiguity.
59 In Yates Property Corporation Pty Ltd v Boland (1998) 89 FCR 78, Drummond J (with whose reasons Sundberg & Finkelstein JJ agreed) referred to Australian Energy Ltd v Lennard Oil NL (No 2) and said:
It is impermissible, in my view, as well as being quite unrealistic, to attempt to read, that is, to understand an order in isolation from the context of the reasons for it being made. The Full Court of the Supreme Court of Queensland, in Australian Energy Ltd v Lennard Oil NL (No 2) [1988] 2 Qd R 230 held that, in interpreting an order framed in unambiguous language, regard should still be had to the reasons given by the Court for making the order because they form part of a context in which the order was made. The case for referring to the reasons for an order where there is any suggestion that the order may be expressed in unclear terms is a fortiori. (78-79)
60 In Polyaire Pty Ltd v K-Aire Pty Ltd (No 4) [2007] SASC 36 Besanko J expressed the opinion:
[I]t would be a very rare case in which, in construing orders of the Court, it would not be appropriate to consider at least the reasons for judgment. If on considering the orders in light of the reasons for judgment the meaning of the words is clear then effect must be given to those words [41].
61 More recently in Smith v Comcare [2014] FCA 811 Robertson J at [65] expressed the view that:
In construing orders it is generally permissible to have regard to context and, in particular, the reasons for judgment when determining the meaning and effect of a court order: see Wende v Horwath (NSW) Pty Ltd [2014] NSWCA 170 at [60] - [65] per Basten JA and at [248] per Barrett JA, Beazley P agreeing, citing Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58.
62 In the absence of any compelling reason based in principle or policy why resort should not be had to the reasons for judgment in construing orders made by a court giving effect to those reasons, I favour the approach outlined by Santow JA in Athens v Randwick City Council. In my view, it is correct to regard the judgment as the source of the order rather than, to use Santow JA's words, as 'penumbral context surrounding the order'.
63 Thus, in construing the orders made by the Court of Appeal in this case, in my view, it is permissible to have regard to the reasons for judgment without finding any element of ambiguity in the orders.
Reasons for concluding only rectification claim remitted
64 The word 'matter' has a protean quality. In other contexts it has been said not to be confined to a 'cause of action' and that the identification of the 'matter' is a question of substance not form: Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457, 473 (Barwick CJ). By s 4 of the Supreme Court Act 1935 (WA) 'matter' is defined to include 'every proceeding in the Court, not in the cause'.
65 Order 3 of the Court of Appeal's orders is expressed as remitting 'Matter No. CIV 1229 of 2010' for retrial and on its face this would suggest that what has been remitted is all that was in issue between the parties at first instance.
66 In my view, however, when regard is had to the Court of Appeal's reasons and to substance and not form, the words, 'Matter No. CIV 1229 of 2010' should be read down and construed as extending only to the rectification claim. My reasons for that conclusion are as follows.
67 First, order 3 of the Court of Appeal's orders flows from order 2 of those orders, which set aside the Trial Judge's order for rectification and provided the procedural mechanism, the remittal for retrial, required to determine the dispute between the parties. The 25 September 2013 Order, which was set aside by order 2 of the Court of Appeal's orders, did not refer to the breach of contract or the misleading and deceptive conduct claims. As order 2 of the Court of Appeal's orders was confined to setting aside the order for rectification and did not deal with the other claims there is no reason why order 3, which gives effect to order 2, should be construed as embracing anything more that the rectification claim.
68 Secondly, it is clear from the Court of Appeal's reasons at [1] and [10] that the Court was concerned only with the rectification claim and that there was no challenge to the rejection of the breach of contract and the misleading or deceptive conduct claims. Other than by way of a brief passing reference to the rejection of those claims by the Trial Judge, they did not feature in the Court of Appeal's reasons. The rectification claim was the sole focus of the reasoning that resulted in the Court of Appeal holding that the Trial Judge had made a fact finding error in relation to discussions that took place at the meeting on 4 March 2009. The issue of what was said in the course of that meeting involved issues of witness credibility and reliability that, as the Court of Appeal observed at [95], could not be resolved on the written record of the evidence and for that reason a retrial was required.
69 Thirdly, the fact that the Court of Appeal's judgment did not refer to the Trial Judge's reasons for rejecting the contractual claim and the misleading or deceptive conduct claim and that its orders did not disturb the Trial Judge's findings about those claims or the consequences that flow from them would, if the remittal is construed as extending to all claims, leave open the possibility of inconsistent first instance decisions on the contractual and misleading or deceptive conduct claims.
70 Fourthly, in this case there are no considerations of the nature identified in the passage of the judgment of Murphy JA in McKay v Commissioner for Main Roads cited above that make it difficult to 'disjoin' the issues. There was no overlap in the reasoning, or in the relevant evidence, which led to the rectification claim being accepted by the Trial Judge and the other claims being rejected. It was the requirement to resolve issues of witness credibility and reliability in relation to the rectification claim that necessitated a retrial.
71 The fact finding error identified by the Court of Appeal did not bear on the Trial Judge's resolution of the breach of contract claim or the misleading or deceptive conduct claim.
72 The Trial Judge resolved the issue of contractual construction on which the breach of contract claim depended against Mr Russell on the basis that there was no ambiguity in the relevant contractual provisions and thus reference to surrounding circumstances was not permitted. In case her conclusion on the absence of ambiguity was wrong, her Honour went on to consider whether reference to the surrounding circumstances resulted in a different outcome but concluded it did not. The surrounding circumstances considered by her Honour did not include what had taken place at the meeting on 4 March 2009. Thus, the factual findings about what took place at that meeting were not relevant to either basis upon which the breach of contract claim was considered by the Trial Judge and rejected. The misleading or deceptive conduct claim failed before the Trial Judge because the evidence did not support the conclusion that Mr Russell suffered any loss by relying on the pleaded representations, that is, a reason quite unrelated to the fact finding error identified by the Court of Appeal.
73 Fifthly, on an objective analysis of the Court of Appeal's reasons for judgment it is not possible to identify a reason for the remittal for retrial of Mr Russell's breach of contract or misleading or deceptive conduct claims.
74 Sixthly, construing the remittal as limited to the rectification claim reflects the general principle that there should be finality in litigation and accords with the interests of justice. Absent an appeal a party is bound by an adverse decision. In the circumstances of a case such as the present case where the action involved claims that were separate causes of action with no material evidentiary overlap an injustice is worked on an appellant if, as a result of a successful appeal on one claim, a respondent is permitted to re-argue the separate and distinct claims the subject of the earlier adverse judgment against which the respondent had not appealed.
RCR's estoppel arguments
75 As I have held that all that was remitted for retrial is the rectification claim, it is not necessary for me to consider RCR's invocation of the doctrine of res judicata and related estoppels.
The claim for rectification
76 Mr Russell's claim for rectification is founded upon the alleged existence of a common intention that RCR would only be entitled to terminate his employment, where none of the grounds for termination in cl 11.1 of the Services Agreement applied, by providing notice and paying the Retirement Benefit.
Applicable legal principles
77 There was no dispute about the applicable principles. At [49] - [54] of the Court of Appeal's judgment (RCR Tomlinson Ltd v Russell [2015] WASCA 154), the Court stated the principles in the following terms:
[49] The equitable doctrine of rectification enables a court to rectify an instrument if it does not reflect the intention of the party or parties to it. The parties' intention refers to what the parties intend to be given effect to by the instrument. The object of rectification is to reform the instrument so that it reflects the true agreement of the parties or the intention of the sole party.
[50] A claim for rectification requires proof of disconformity between the common intention of the parties, continuing to the time of execution of the instrument, and the terms of the instrument.
[51] Disconformity between the continuing common intention and the instrument may result from a mistake in recording the parties' common intention, or from a mistake about the meaning or effect of words deliberately chosen. In either case, rectification is available.
[52] Courts begin with the presumption that an instrument reflects the true agreement of the parties to it. A party seeking rectification must displace that presumption by demonstrating that the instrument does not reflect the true agreement of the parties. The need to displace that presumption is often said to require that the party seeking rectification must establish the parties' common intention by clear and convincing proof.
[53] The parties' common intention refers to the actual subjective intention of the parties. However, in order to constitute a common intention the intention of the parties must have been disclosed in some way, although not necessarily by a direct communication, that gives rise to an outward expression of accord between them.
[54] The parties' common intention must be clear and well-defined enough to be stated in words that can be incorporated into the instrument. (footnotes omitted)
The evidence
78 In its closing written submissions RCR accepted that both Mr Russell and Mr Noordhoek gave evidence to the effect that in March 2009 they intended that the Services Agreement would operate as Mr Russell contends; that is, that it would provide for the payment of the retirement benefit in the event of dismissal otherwise than for cause at any time (RCR's closing submissions par 76).
79 RCR submitted, however, that the evidence of common intention fell short of the clear and convincing proof required for rectification.
80 Apart from Mr Russell himself, the three RCR employees involved to varying degrees in the making of the Services Agreement were Mr Noordhoek, Ms Higgins and Mr Crighton. They each gave evidence. Mr Noordhoek and Ms Higgins were called to give evidence by RCR and Mr Crighton was called to give evidence by Mr Russell.
Mr Noordhoek
81 In his capacity as the CEO of RCR Mr Noordhoek led a busy and stressful professional life in early 2009. Thus it was understandable that his recollection of events was poor. When he gave evidence Mr Noordhoek said that he had a very poor recollection of the 4 March 2009 meeting.
82 Mr Noordhoek's witness statement, tendered as his evidence in chief, gave no indication of the poor state of his recollection of what was said at the meeting on 4 March 2009. In the witness statement Mr Noordhoek's account of the conversation on 4 March 2009 was prefaced with the words 'we had a conversation to the following effect' and what was recounted appeared to be a verbatim account of the words used. This created the impression that Mr Noordhoek had a much better recollection of the conversation than he did. Indeed, when he gave evidence, he said that he could not remember whether the conversation recounted in his witness statement took place at the 4 March 2009 meeting or at some other time.
83 In cross-examination Mr Noordhoek said that the words in the detailed account of the conversation that appeared in his witness statement had come from the lawyers who prepared the statement and to whom he had given the gist of the conversation.
84 The approach adopted in Mr Noordhoek's statement to the recounting of conversations to which a witness was a party is widely used, but great care must be taken to ensure that what appears in a witness statement prepared in this way accurately reflects what the witness actually remembers as opposed to the interpretation of the witness's recollection adopted by the lawyer preparing the statement. In this instance it was clear that the account in Mr Noordhoek's witness statement of his conversation with Mr Russell on 4 March 2009 was not an accurate reflection of his recollection. The fact that Mr Noordhoek signed the witness statement is cause for some concern. I will return to the substance of Mr Noordhoek's evidence about the conversation on 4 March 2009 later.
85 Notwithstanding the concern expressed in the preceding paragraph, Mr Noordhoek impressed me as a forthright and truthful witness. His manner was entirely candid and he answered questions fully and without hesitation. He was not partisan. He made appropriate concessions about the paucity of his recollection of what was said at the 4 March 2009 meeting but on issues on which he was certain, he was firm and unequivocal in his evidence.
86 Mr Noordhoek was the person who made the decision about whether to employ Mr Russell and the terms of his employment (ts 491.9).
87 Mr Noordhoek's evidence was that it was a standard feature of the Executive Services Agreement used by RCR that an EGM would be paid an amount equivalent to one year's salary in the event that the company terminated the EGM's employment otherwise than for cause (ts 498.1). Mr Noordhoek decided he would offer Mr Russell 'the standard EGM agreement' (ts 498.2). This was a 'sweetener' Mr Noordhoek was able to offer Mr Russell to persuade him to accept the EGM position (ts 518.5). He was certain Mr Russell would have been concerned about the possibility of a restructure (ts 523.5). He wanted Mr Russell to receive a package that provided that if his employment was terminated otherwise than for cause by RCR he, Mr Russell, would receive a year's salary plus superannuation (ts 526.5) and this was his intention (ts 535.6 - 536). Mr Noordhoek had a good recollection of what he intended should be in the draft agreement between RCR and Mr Russell (ts 550.3). He interpreted cl 11.3(b) of Mr Russell's contract as entitling Mr Russell to payment of one year's salary in the event that RCR terminated his employment otherwise than for cause (ts 556.9).
88 Mr Noordhoek spoke to Mr Crighton about the offer he proposed to make to Mr Russell. He did so not to obtain Mr Crighton's approval of it but to get his thoughts on the offer (ts 491.8).
89 Mr Noordhoek could not recall any occasion on which he consulted anyone in the Human Resources Department about what terms should be contained in an Executive General Manager's agreement. He was not a big fan of human resources and only consulted those in human resources when it was absolutely necessary (ts 503.5 - 503.9). Mr Noordhoek thought it unlikely he would have discussed with Ms Higgins the period that Mr Russell had to serve as an employee before receiving the retirement benefit in the event that Mr Russell resigned (ts 505.2).
90 In his witness statement Mr Noordhoek gave the following account of the discussion he had with Mr Russell about his entitlement to the retirement benefit on 4 March 2009:
Russell: 'What is the intent behind the retirement benefit provision in the agreement?
Me: 'The retirement benefits clause was inserted into all executive manager services agreements by RCR's former chief executive officer, John Linden, as he wanted to protect senior managers at RCR in case the company was ever taken over by a third party, and at the election of that third party, the senior managers were terminated.'
Russell: 'Why is the length of service five years in order to receive the retirement benefit?'
Me: 'The agreement requires five years of service prior to you being entitled to receive your retirement benefit, as you have only been employed at RCR for a short time.'
91 In answer to a question from me about the extent of his recollection Mr Noordhoek said:
Your Honour, I have a recollection of a meeting. And I have a recollection - the only thing I recollect during the meeting was a question that David did ask me particularly about the retirement benefit clause, and that's the only point that I really do remember. And David asked - the question that was posed to me at the time from David, I interpreted him saying - and why I remember it so realistically and of this part of it was I interpreted David's conversation as that, 'If I left after six months, would I get the retirement benefit?' And, you know, I said, 'There's no way in the world you're going to get the retirement benefit if you, on your volition, elect to leave.' And that's the only recollection that I have of the meeting in any detail (ts 542 - 543).
92 Mr Noordhoek did not know whether this conversation took place at the 4 March 2009 meeting, but he said Mr Russell's question was directed to a situation in which he, Mr Russell, resigned as distinct from the company terminating his employment (ts 543.3).
Ms Higgins
93 In March 2009 Ms Higgins had overall responsibility for the human resource management of RCR's 3,800 employees. The Human Resource Department comprised a team of four. Ms Higgins worked long hours, '[m]ore than likely over 12 hours most days' (ts 471 - 472).
94 Ms Higgins' witness statement was prepared using the same approach for recounting conversations as was used in Mr Noordhoek's statement. Evidence of conversations was prefaced by the phrases 'words to the following effect were spoken' or 'words to the effect of … were spoken' followed by an apparently verbatim account of what was said in the conversations.
95 Although I consider that Ms Higgins was a truthful witness, I have reservations in accepting that her recollection was as reliable and accurate as is suggested by her account of the conversations in her witness statement (to which she largely adhered in cross-examination). My reservations arise from the following facts: Ms Higgins was a busy manager; she did not recall making any relevant contemporaneous notes; she was first asked to recall what had taken place at the meeting on 4 March 2009 in about March 2010; and, there was no compelling reason for her to have remembered events in which she played a limited, clerical role.
96 Ms Higgins agreed her role in relation to the preparation of the Services Agreement was merely to act as a functionary, that is, to make such amendments to the draft agreement as were required by Mr Noordhoek and Mr Russell (ts 434). She delegated the word processing aspect of this task to her personal assistant, Ms Deborah Graham (exhibit D1 par 12, par 19).
97 Ms Higgins agreed that the only difference between what she understood to be the standard contract for EGMs and Mr Russell's EGM was that Mr Russell's contract would provide that in the event he resigned before completing five years of service, he would not be paid the retirement benefit, whereas in other EGMs' service agreements the qualification period for the payment of the retirement benefit was either two or three years (ts 439.2). Ms Higgins understood that if RCR terminated Mr Russell's employment then he would be in the same position as other EGMs if their employment was terminated without cause: he would receive 12 months' salary (ts 439).
98 Ms Higgins has no recollection of meeting Mr Russell on 4 March 2009 before the meeting with Mr Noordhoek. I refer below to Mr Russell's recollection of meeting Ms Higgins to obtain a copy of the draft Services Agreement before meeting with Mr Noordhoek on the morning of 4 March 2009.
99 Ms Higgins' recollection was that she was present throughout the meeting between Mr Russell and Mr Noordhoek other than for a period towards the end of the meeting when she left to arrange for a copy of the Services Agreement to be formatted correctly and printed without the 'Draft' watermark. Her recollection is that she returned to the meeting a short time later and the Services Agreement was signed. In her witness statement Ms Higgins said that the meeting lasted approximately 15 minutes. In cross-examination she said it may have taken 20 minutes or 25 minutes. She said her best recollection was that she was in a room with Mr Noordhoek and Mr Russell for a period of time.
100 Ms Higgins gave evidence about a statement made by Mr Noordhoek to Mr Russell at the meeting on 4 March 2009 to which RCR attaches particular significance. In her evidence in chief (exhibit D1), Ms Higgins said:
25. At the 4 March 2009 meeting, Noordhoek and Russell also discussed Russell's retirement benefit. Russell asked Noordhoek about the number of years of service that he would have to be employed with RCR before he was entitled (upon the termination of his employment) to be paid the retirement benefit (which was provided for in clause 7 of the Agreement). Noordhoek said to Russell words to the following effect:
'The retirement benefit was put in place by our previous Chief Executive Officer, John Linden and each Executive General Manager has a different retirement benefit entitlement depending on their years of service with the company. In this case, as you have only been employed by RCR for a short period of time, it is necessary for you to be employed for 5 years before you are entitled to your retirement benefit.'
26. Russell did not say anything further about the application of the retirement benefit clause (clause 7 of the Agreement) and we discussed other unrelated matters. Russell did not request that changes be made to the requirement in his Agreement for him to complete 5 years of service with RCR before becoming entitled to the retirement benefit. In fact, he did not request any changes to the Agreement at all and none were made. The retirement benefit was not discussed any further in my presence.
101 In cross-examination Ms Higgins accepted that the retirement benefit to which Mr Noordhoek was referring in the discussion recounted in her witness statement was the benefit payable under cl 7 of the draft agreement; that is, the benefit payable in the event of Mr Russell resigning after completing five years' service (ts 439.1). The statement made by Mr Noordhoek was not directed to the circumstance which was the subject of the common intention, namely the termination of Mr Russell's employment by RCR otherwise than for cause.
102 Ms Higgins said the only clause discussed in the meeting by reference to its number was cl 7. She said that had there been a discussion about cl 11, she would have recorded that in her witness statement (ts 440.3).
103 In re-examination Ms Higgins was asked to what extent the question of the executive's entitlement to receive the retirement benefit ondismissal came up during the 4 March 2009 meeting. Her answer and the subsequent passage of evidence were as follows:
I remember it being part of general conversation but not a particular - specific but generally it came up in conversation.
Well, what generally came up?---The entitlement - I remember the entitlement being discussed generally. I don't remember of the detail about the qualifying part, but I remember the entitlement being discussed.
And do you recall in what circumstances was it discussed that the entitlement would be payable?---I don't remember that part of the discussion. (ts 470.4, emphasis added)
104 In her witness statement Ms Higgins made no mention of a discussion about the entitlement to receive the retirement benefit on dismissal as opposed to on resignation, nor did she do so in the course of cross-examination.
Mr Crighton
105 Mr Crighton was the Chief Financial Officer of RCR between January 2006 and October 2009. He was RCR's company secretary from March 2006 until October 2009. His office was a few feet away from Mr Noordhoek's office and they shared a secretary.
106 Understandably, Mr Crighton's recollection was also affected to a degree by the passage of time (for example, he was uncertain whether he had more than one discussion with Mr Noordhoek about the terms Mr Noordhoek intended to offer Mr Russell) but I am satisfied that he was a truthful witness and that I can rely on the substance of his evidence.
107 Mr Crighton was familiar with the terms of the standard EGM agreements and the provision for the payment of a retirement benefit if the executive resigned after accumulating a nominated period of service or if the executive's employment was terminated by RCR otherwise than for cause.
108 Mr Crighton said Mr Noordhoek spoke to him about offering Mr Russell the position of EGM of RCR Positron but the decision was Mr Noordhoek's to make. Mr Crighton acted as a 'sounding board' for Mr Noordhoek (ts 366.6). Mr Crighton said Mr Noordhoek told him he intended to offer Mr Russell employment on the terms of the current EGM services agreement and Mr Noordhoek either told Mr Crighton, or Mr Crighton inferred, that this would entitle Mr Russell to be paid one year's salary in the event that RCR terminated his employment otherwise than for cause (exhibit P3, Mr Crighton's witness statement at par 21 and ts 368.8).
109 Mr Crighton joined the 4 March 2009 meeting in order to execute the Services Agreement in his capacity as company secretary of RCR. He said he reviewed the document before executing it and, on the basis of what he had been told by Mr Noordhoek and from his review, understood that Mr Russell would receive the same retirement benefit as all of the other executives in the event of termination by RCR otherwise than for cause, namely a year's salary.
Mr Russell
110 I formed a positive impression of Mr Russell when he gave evidence. He was direct and, aside from occasional moments of tension, responsive in his answers to questions in cross-examination.
111 The evidence given by Mr Russell about statements made by Mr Noordhoek about RCR's intentions was consistent with Mr Noordhoek's evidence concerning his subjective intentions and this gives me confidence in accepting Mr Russell's evidence about what Mr Noordhoek said to him.
RCR's submissions about the reliability of Mr Russell's evidence
112 RCR did not submit that any aspect of Mr Russell's evidence was untruthful but submitted that his evidence must be treated with great caution for two reasons. First, because subjective, hindsight-assisted evidence about a plaintiff's state of mind should be tested most closely and thus should only be received with the greatest caution. Secondly, because Mr Russell had made a number of statements before and after the commencement of the proceedings that were inconsistent with the case presented at trial. Those statements were as follows.
- (1) In the email sent to Mr Dalgleish on 8 January 2010 Mr Russell stated, amongst other things, that he discussed the retirement benefit provisions of the Services Agreement with Ms Higgins as well as Mr Noordhoek and this was contrary to his evidence at trial.
(2) The statement that Ms Higgins was a party to discussions about the retirement benefit was repeated in the statement of claim. It was alleged that the representation about the retirement benefit entitlement was made by Ms Higgins and Mr Noordhoek. This allegation appeared in successive versions of the statement of claim. It was not until the statement of claim was further amended in November 2011 that the allegation that Ms Higgins was involved in the making of this representation was dropped.
(3) In the email Mr Russell sent to himself on 20 August 2009 recounting his conversation with Mr Crighton about the possibility that he, Mr Russell, might be dismissed, he made no mention of what had been said to him by Mr Noordhoek about the retirement benefit in the discussions that preceded the signing of the Services Agreement.
(4) In the course of the meeting at which Mr Ramse and Ms Higgins told him that he was dismissed Mr Russell made no mention of the promises that Mr Noordhoek had made to him.
113 Mr Russell was cross-examined about the reference in his email to Mr Dalgleish of 8 January 2010 to discussions with Ms Higgins about the Executive General Manager Services Agreement. He conceded the obvious point that his recollection in 2010 of the events of March 2009 was better than it was on the day on which he gave evidence (ts 297.5). In re-examination Mr Russell said that he discussed the draft Services Agreement and the amendments that had been made to it with Ms Higgins before meeting with Mr Noordhoek (ts 328 - 329).
114 I accept Mr Russell's evidence that he discussed the draft Services Agreement with Ms Higgins before meeting Mr Noordhoek on 4 March 2009. It is possible that their discussions touched upon the issue of the retirement benefit although the substantive discussion about the retirement benefit was between Mr Russell and Mr Noordhoek. Thus, in so far as the email might suggest that Mr Russell discussed the entitlement to the retirement benefit in any substantive way with Ms Higgins, it was inconsistent with Mr Russell's case at trial. It is evident, however, from the language used by Mr Russell in his email to Mr Dalgleish that he was not giving a precise and detailed account of the discussions that preceded the execution of the Services Agreement. The email referred to the discussions in general and somewhat loose terms. To the extent that there is an inconsistency between the contents of the email and Mr Russell's case at trial I do not consider that it bears in a material way on the reliability of his evidence.
115 The fact that the early versions of Mr Russell's statement of claim alleged that the representation about the entitlement to the retirement benefit was made by Mr Noordhoek and Ms Higgins is plainly inconsistent with Mr Russell's case at trial (which was that the representation was made by Mr Noordhoek). Mr Russell said that the amendment to the statement of claim to delete the reference to Ms Higgins being involved in the making of the representation was made following a change in the solicitor (not the firm of solicitors) who had conduct of the matter on his behalf. The new solicitor reviewed the evidence with him to ensure that it was accurate and correct.
116 It is not uncommon for pleadings to be amended in the course of preparation for trial. An amendment to a factual allegation may reflect an unreliable recollection but it may also reflect the bringing of a more focussed mind to bear on the issues in the course of preparing for trial. The statement of claim was amended several months before the first trial to reflect the case ultimately run at trial.
117 The amendment to the statement of claim reinforces the need to assess and consider Mr Russell's evidence carefully and this I have done. The amendment is one of several factors to be taken into account in my assessment of the reliability of Mr Russell's evidence. When I reflect upon the amendment in the context of both the positive view I formed of Mr Russell when he gave his evidence and the consistency between Mr Russell's evidence of what was said to him by Mr Noordhoek about the terms of the Services Agreement and Mr Noordhoek's evidence about his subjective intentions in respect of the terms of the Services Agreement, it does not lead me to conclude that Mr Russell's evidence is unreliable.
118 There was no reason for Mr Russell to record or refer to what had been said to him by Mr Noordhoek about the retirement benefit in his email to himself of 20 August 2009. The fact that he did not do so does not reflect adversely on the reliability of his evidence.
119 Likewise, no adverse conclusion about the reliability of Mr Russell's evidence is to be drawn from the fact that in the meetings on 16 December 2009 Mr Russell did not refer to the statements he says were made to him by Mr Noordhoek about the entitlement to the payment of the retirement benefit. This was not an occasion on which a person in Mr Russell's position would be expected to rehearse the factual basis for his contentions as to what he was entitled to be paid. Ms Higgins' evidence is that it was clear that Mr Russell believed that he was entitled to the payment that he now claims.
Mr Russell's account of the events of 2 and 4 March 2009
120 Mr Russell dropped off the draft agreement with his handwritten notes and amendments on it in Mr Noordhoek's secretary's 'in tray' at RCR's Welshpool office on the morning of Monday, 2 March 2009. Later that morning he had a telephone conversation with Mr Noordhoek.
121 Mr Noordhoek had no recollection of this conversation. Mr Russell's account of the conversation was as follows (exhibit P2, witness statement of Mr Russell, at par 39):
Later on 2 March 2009, after the morning meeting, I called Mr Noordhoek to discuss the changes and comments I had made on the Draft Services Agreement. In the course of that conversation:
(a) I expressed my reservations about accepting the EGM position, particularly with regard to the likely restructure of Positron that I expected would be initiated by the incoming CEO, Mr Dalgleish. In my experience, it was fairly normal for a new CEO to come into a business and bring his own team of people in with him.
(b) I also expressed concern about the length of the restraint period referred to in the Draft Services Agreement. It didn't make any sense to me that I could be prevented from working in the industry for up to 5 years after my employment ended with RCR.
(c) It is my recollection that Mr Noordhoek used words to the effect that in the event of my employment being terminated by RCR as part of a restructure, then RCR would not seek to enforce the restraint period for more than 12 months. He further stated words to the effect that I would be appropriately reimbursed during the restraint period, because I would be paid a retirement benefit equivalent to 1 year's salary and superannuation, if my employment was terminated at any time by RCR other than for cause.
(d) Mr Noordhoek also stated words to the effect that RCR would prepare my services agreement to ensure that I would be paid the retirement benefit on these terms.
122 Mr Russell said that the telephone conversation lasted approximately 20 minutes and a further meeting was organised for 4 March 2009 (exhibit P2, at par 40).
123 On 4 March 2009 Mr Russell went to RCR's Welshpool office to meet with Mr Noordhoek. He said that on arrival he went to see Ms Higgins. He said Ms Higgins gave him a copy of a letter regarding his conditions of employment and his remuneration as well as a clean copy of the Services Agreement with a draft watermark. Mr Russell recalls Ms Higgins also gave to him the draft document on which he had written his comments on the previous Sunday. Mr Russell recalls that there were other handwritten comments and changes on the document and he assumed that those had been made by Mr Noordhoek.
124 Mr Russell said he sat in the human resources office area and compared the documents. He noticed several things he had asked to be changed had not been changed. As an example, he cited the restraint period in the non-competition clause.
125 Mr Russell took the letter, the clean copy of the Services Agreement and the draft agreement with the handwritten notes on it to Mr Noordhoek's office which was about 30 metres from the human resources area. Mr Russell was adamant Ms Higgins did not accompany him to Mr Noordhoek's office.
126 Mr Russell said that when he met Mr Noordhoek on 4 March 2009 the following discussion took place (exhibit P2, at pars 48 - 51):
48 During my discussion with Mr Noordhoek on 4 March 2009, we had a copy of the services agreement open in front of us. We did not discuss every clause in the services agreement. I indicated to Mr Noordhoek which clauses I wanted to discuss in light of my ongoing concerns.
49 I sought assurances from Mr Noordhoek that, in the event that my employment was terminated by RCR, other than for cause, then I would still be paid the retirement benefit described in clause 7.1 of my services agreement (Retirement Benefit), even if this occurred before the completion of the 5 year period referred to in that clause.
50 Mr Noordhoek responded by stating words to the effect that:
(a) if RCR terminated my employment, other than for cause, then I would be paid the Retirement Benefit as described in my services agreement, regardless of when my employment was terminated; and
(b) the clauses in my services agreement that dealt with my Retirement Benefit were common to the services agreements of other executives at RCR and were intended to protect senior personnel from a take-over of RCR, a major restructure or management change that occurred prior to the completion of a contract period.
51 I also asked Mr Noordhoek why clause 7.1 of my service agreement provided for a period of 5 years before I would receive the Retirement Benefit if I retired, when I knew the equivalent clause in the services agreements of various other RCR executives stipulated only 3 years. Mr Noordhoek responded with words to the effect that the change from 3 to 5 years was in accordance with a decision of the RCR Board.
Discussion of the restraint period in my services agreement
52. In the course of the same discussion on 4 March 2009, I asked Mr Noordhoek why the restraint period in my services agreement had been retained in its original (draft) form, to provide a restraint period of up to 5 years and within the whole of Australia. I had queried this provision in the Draft Services Agreement during our telephone conversation on 2 March 2009, as the period seemed excessive.
53. Mr Noordhoek referred to the Retirement Benefit in my services agreement as the 'gardening clause', which he explained with words to the effect that it operated where a person resigns and is then paid by his employer for a period where they are not required to work. He said words to the effect that a person on 'gardening leave' would be paid to do the 'gardening' whilst they were waiting for a contractual restraint period to expire.
127 Mr Russell said he was 'still somewhat apprehensive' when he met with Mr Noordhoek. He said the 'restriction on his working', a reference to the non-competition clause in the draft Services Agreement, had not been changed and the restraint was a period of between one and five years and he needed reassurance he would be paid the retirement benefit if his employment was terminated by RCR if he had not completed five years' service (ts 326.5).
128 In cross-examination Mr Russell accepted that in the course of the 4 March 2009 meeting Mr Noordhoek told him he would have to be employed for five years before he qualified for payment of a retirement benefit (ts 313.7). He also accepted that the reason why he sought an assurance from Mr Noordhoek that the retirement benefit would be paid in the event that he was dismissed without cause by RCR, within five years of being employed, was because it was clear to him that cl 7.1 required a period of service of five years before the retirement benefit became payable (ts 316.6). When asked why he did not ask for clause 7.1 to be amended he said that he did not see the need because he had read cl 11.3(b) (ts 318.2). In re-examination Mr Russell said that in the meeting Mr Noordhoek reassured him that he would be paid the retirement benefit if RCR terminated his employment within the five year period by reference to cl 11.3(b): Mr Noordhoek said, 'There it is. You will be paid' (ts 326.7).
Factual findings on the rectification issues
129 I make the following findings in relation to the rectification issues:
(1) In the course of their telephone conversation on the morning of 2 March 2009 Mr Russell said to Mr Noordhoek that he had reservations about accepting the EGM position and was concerned about the possibility of a restructure. Mr Russell also expressed his concern about the restraint period in the non-competition clause. Mr Noordhoek told Mr Russell RCR would not enforce the restraint for a period of more than 12 months and that Mr Russell would be remunerated in that period because he would be paid the retirement benefit of one year's salary and superannuation if RCR terminated the employment other than for cause. Mr Noordhoek told Mr Russell the Services Agreement would be prepared to ensure that the retirement benefit would be paid on that basis. This finding is supported by Mr Russell's unchallenged evidence which was not contradicted by any other evidence. Mr Russell's evidence was not glaringly improbable or inconsistent with facts established by objective evidence and I have no reason to reject it.
(2) Mr Russell met Ms Higgins before he met Mr Noordhoek and she handed him a copy of the draft Services Agreement and the original draft on which handwritten amendments had been made. In making this finding I rely on Mr Russell's evidence that this occurred and I draw an inference that it occurred from the process by which the Services Agreement came to be prepared. It is unlikely that Mr Russell would have met Mr Noordhoek without having first taken the time to review the revised draft Services Agreement. It was natural for him to approach Ms Higgins for the document as she had carriage of the task of preparing and amending it. The fact Ms Higgins cannot remember meeting Mr Russell prior to the meeting with Mr Noordhoek is not a reason for not accepting Mr Russell's evidence. There was no reason why Ms Higgins would remember meeting Mr Russell. The meeting had no importance for her.
(3) Based on Mr Russell's evidence I find that when Mr Russell met Mr Noordhoek on the morning of 4 March 2009 he had concerns that the non-competition clause providing for a maximum restraint period of five years had not been amended in the draft Services Agreement. He was also concerned that cl 7.1 of the document provided that the Retirement Benefit would only become payable after Mr Russell had been employed for a period of five years.
(4) Mr Russell's concerns about the possibility of his employment being terminated in the event of a restructure initiated by Mr Dalgleish coupled with the non-competition clause in the Services Agreement led him to seek reassurance from Mr Noordhoek on 4 March 2009 about RCR's approach towards the non-competition clause and his entitlement to payment of the retirement benefit if RCR terminated his employment without cause. If Mr Russell accepted the terms on offer he was exposing himself to the risk that he might be employed for a short period then dismissed but be prevented by the non-competition clause from being able to obtain employment in Australia in his field of expertise for a significant period: precisely the risk that materialised. At the risk of repetition, the non-competition clause had not been amended in the draft Services Agreement provided to Mr Russell on 4 March 2009. In those circumstances there is nothing unlikely or improbable in Mr Russell pressing Mr Noordhoek for further assurances on the entitlement to the retirement benefit in the event that RCR terminated his employment other than for cause, even though assurances to the same effect had been given by Mr Noordhoek in the course of the telephone conversation two days earlier on 2 March 2009. I find that in response to Mr Russell's expressions of concern Mr Noordhoek told Mr Russell that if RCR terminated his employment, other than for cause, he would be paid the retirement benefit regardless of when his employment was terminated. I find that Mr Noordhoek explained the relation between the retirement benefit and the non-competition clause by reference to the term 'gardening leave' as set out in the passage of Mr Russell's witness statement to which I have referred earlier in these reasons.
(5) In the course of the meeting on 4 March 2009 Mr Noordhoek identified cl 11.3(b) as the clause that entitled Mr Russell to payment of the retirement benefit in the event that RCR terminated his employment other than for cause regardless of whether Mr Russell had been employed for five years. I also find that Mr Noordhoek intended that the retirement benefit would be paid by RCR in those circumstances and that he thought that cl 11.3(b) of the Services Agreement conferred that right upon Mr Russell. I make these findings on the basis of: Mr Russell's evidence that Mr Noordhoek referred specifically to cl 11.3(b) as the source of the entitlement; Mr Noordhoek's evidence he intended the retirement benefit to be paid to Mr Russell in those circumstances; and, Mr Noordhoek's evidence that he considered that cl 11.3(b) had that effect.
(6) As to the conflict between the evidence of Ms Higgins and Mr Russell in relation to the extent of the period during which Ms Higgins was present at the meeting between Mr Russell and Mr Noordhoek on 4 March 2009, I have concluded it is more likely that Mr Russell's recollection is substantially correct. I have formed this view after scrutinising Mr Russell's evidence carefully. My reasons are, first, Mr Russell had more of a reason to remember the meeting than Ms Higgins did. Secondly, all prior discussions about the terms of Mr Russell's prospective employment with RCR had been between Mr Russell and Mr Noordhoek. Ms Higgins had played no part in those discussions. There was no obvious role for her to play in the meeting on 4 March 2009 and, on her evidence, she played no role. Thirdly, Ms Higgins was a very busy manager. I think it unlikely that she would have attended a meeting unless there was a positive need for her to do so, and there was not. Fourthly, Mr Noordhoek was not 'a big fan' of human resources and it is unlikely that he would have invited Ms Higgins to attend. Mr Noordhoek relied on Ms Higgins to prepare and amend the document, but he did not need her assistance in the discussions or negotiations with Mr Russell.
(7) I have found that Mr Russell and Mr Noordhoek discussed the retirement benefit before Ms Higgins joined the meeting and I find that the topic was revisited when she was present. In Ms Higgins' presence Mr Noordhoek told Mr Russell that he would not be entitled to the retirement benefit if he resigned from RCR before he had been employed for five years. I make this finding despite my finding that Ms Higgins was present for only part of the meeting because each of Ms Higgins and Mr Russell gave evidence that Mr Noordhoek made a statement to that general effect. I have referred to the relevant passages of the evidence of Ms Higgins and Mr Russell that support this finding in the preceding sections of these reasons. Mr Noordhoek also remembered making a statement to that effect, albeit he did not know whether he made the statement in the 4 March 2009 meeting. I have also referred earlier to Ms Higgins' limited recollection that there was some discussion about whether the retirement benefit would be payable to an executive general manager on dismissal. Ms Higgins could not remember what was said, if anything, about the 'qualifying part'. The fact that Ms Higgins has even a limited recollection of such a discussion supports the conclusion that what she can remember Mr Noordhoek saying about the requirement for five years' service was said about the entitlement to the retirement benefit if Mr Russell resigned. I would add that Mr Russell's concerns about his entitlement to the retirement benefit were such that I think it is entirely likely that the topic was discussed between him and Mr Noordhoek when they were on their own and again in Ms Higgins' presence. RCR submitted that Ms Higgins' evidence about Mr Noordhoek's statement negated the existence of a common intention that Mr Russell would be entitled to payment of the retirement benefit if RCR terminated Mr Russell's employment otherwise than for cause, regardless of when the employment was terminated. I do not accept that submission. When regard is had both to the totality of Ms Higgins' evidence about what she heard Mr Noordhoek say and her understanding of the EGM agreements and to Mr Noordhoek's evidence of his intentions, I am comfortably satisfied that the statement made by Mr Noordhoek related to the circumstance of Mr Russell resigning within five years not to the circumstance of his employment being terminated by RCR otherwise than for cause within five years.
(8) On the basis of what had been said to him by Mr Noordhoek, Mr Russell was of the belief that the Services Agreement would confer an entitlement to the retirement benefit on him in the circumstances described by Mr Noordhoek and that the entitlement arose from cl 11.3(b) of the Services Agreement.
(9) Each of Mr Noordhoek and Mr Russell were mistaken about the effect of cl 11.3(b). It was submitted on RCR's behalf that it was unlikely that two experienced businessmen would have made such a mistake. Mr Noordhoek's evidence that he believed that cl 11.3(b) would entitle Mr Russell to payment of the Retirement Benefit in the event that his employment was terminated by RCR whenever that occurred was convincing. I have no doubt that he communicated his firm belief that the clause would operate in that way to Mr Russell and thereby convinced Mr Russell that the clause did operate in that way.
(10) As a result of the discussions between Mr Russell and Mr Noordhoek, Mr Russell was aware that RCR intended that the Service Agreement would operate to provide for the payment of the retirement benefit to him in the event of dismissal other than for cause at any time and Mr Noordhoek was aware that Mr Russell intended that the Services Agreement would operate in that way.
Clause 24 - the Entire Agreement clause
130 RCR submitted that by reason of the inclusion of an 'Entire Agreement' clause in the Services Agreement (cl 24), Mr Russell 'retreated' from any representations made in the lead up to the execution of the Services Agreement and it was necessarily more difficult for Mr Russell to attribute to RCR an intention consistent with a representation explicitly disavowed.
131 Clause 24 reads as follows:
The Parties hereto covenant and agree that this Agreement embodies the sole and entire agreement and understanding between them and relevant to the subject matter herein contained and supersedes all prior understandings, deeds, agreements, conditions or representations, whether oral or written, express or implied, with reference to the subject matter hereof.
132 The equitable remedy of rectification operates outside the contract and the presence of an entire agreement clause does not preclude the reception of evidence to prove that the subject matter of the contract is not in accordance with the common continuing intention of the parties at the time they entered into it: MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152.
133 I have made findings as to the common continuing intention of Mr Noordhoek (on behalf of RCR) and Mr Russell based on their respective actual subjective intentions.
134 In order for RCR's submission that by cl 24 Mr Russell 'retreated' from any representations and 'disavowed' the prior common intention to be accorded any weight it would have to identify evidence that cl 24 actually reflected Mr Russell's subjective intention at the time he executed the Services Agreement. Clause 24 is a 'boilerplate' provision. There is no evidence that Mr Russell attributed any significance to it. It was not put to him in cross-examination that by cl 24 he was retreating from or disavowing anything. Accordingly, the presence of cl 24 in the Services Agreement does not undermine the evidentiary foundation for the factual findings I have made in relation to the parties' common continuing intention.
Conclusion in relation to the rectification claim
135 It follows from the factual findings I have made that there is a disconformity between what the parties intended to be achieved by cl 11.3(b) of the Services Agreement and what that clause actually achieved. The Services Agreement should be rectified so that it reflects the true agreement made between RCR and Mr Russell.
Breach of contract claim
136 To succeed in his breach of contract claim Mr Russell must establish that on its true construction the Services Agreement imposed an obligation on RCR to pay the retirement benefit in the event that RCR terminated his employment otherwise than for cause, regardless of when the termination occurred.
Principles applicable to construction of contracts
137 The relevant principles are well established. It is sufficient to state that a contract is to be construed objectively by reference to its text, context and purpose. Ordinarily this will be done by reference to the contract alone. If an expression in a contract is ambiguous or susceptible of more than one meaning resort may be had to evidence of surrounding circumstances to assist in the resolution of the ambiguity but those surrounding circumstances do not include evidence of the parties' statements or actions reflecting their actual, subjective intentions or expectations: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 89 ALJR 990 [46] - [50] (French CJ, Nettle & Gordon JJ).
Mr Russell's submissions
138 In outline, Mr Russell's argument proceeded as follows. Clauses 11.3(a) and (b) deal with different situations: par (a) deals with a resignation by the EGM, par (b) with the termination of the EGM's employment by RCR.
139 Mr Russell characterises the entitlement to payment of the Retirement Benefit on resignation as a 'retention incentive' and the payment of the retirement benefits under cl 11.3(b) as an 'an insurance against the risk of termination'. He submits that the objective purpose of cl 11.3 was the provision of these benefits.
140 Mr Russell points to the inclusion in cl 11.3(a) of a '5 year condition precedent' conditioning the obligation to pay the Retirement Benefit and the absence of such a condition in cl 11.3(b) as revealing an intention that the obligation to pay the retirement benefits referred to in cl 11.3(b) was not conditioned by the requirement of five years' prior employment. He argued that cl 11.3 specifies the circumstances in which the obligation to make payment arise and the proviso in cl 7.1 ('Upon Retirement, provided that the Retirement Date is after the fifth anniversary of the Commencement Date, the Executive General Manager is entitled to receive') was superfluous. Mr Russell submitted that the purpose of the cross-reference in cl 11.3(b) to cl 7 was only to identify the method of calculation of the retirement benefits, and that the cross-reference did not operate to incorporate the proviso in cl 7.1 as a condition on the obligation to pay the retirement benefits.
141 Mr Russell contended that to construe the obligation to pay retirement benefits referred to in cl 11.3(b) as not operating within the first five years of employment would be 'unreasonable, one-sided and uncommercial'.
142 Mr Russell contended that the use of the defined term 'Retirement Benefit' in cl 11.3(a) and the undefined term 'retirement benefits' in cl 11.3(b) reinforced the conclusion that they operated in different circumstances and were not subject to the same condition, that is, five years' prior service as an employee.
143 Mr Russell argued that cl 7 and cl 11.3(b) are ambiguous or susceptible of more than one meaning and thus evidence of surrounding circumstances is admissible to assist in the interpretation of the Services Agreement. The difference in terminology ('Retirement Benefit' cf 'retirement benefits') was also relied upon to submit that there was an ambiguity in the clauses.
144 Mr Russell identified the following as surrounding circumstances relevant to the construction of the Services Agreement: RCR Positron's poor financial position; its history of managerial instability; and the circumstance that both Mr Russell and Mr Noordhoek were aware of the history of the development of the 'EGM Services Agreement', including the fact that the provision of a retirement benefit was intended to protect the executive team in the event of a takeover by a third party which resulted in the termination of a senior manager's employment.
RCR's submissions
145 RCR submitted that the entitlement to a retirement benefit payment was 'as per clause 7'; that is, no entitlement arose until after the fifth anniversary of the Commencement Date. It was submitted that the words of the Services Agreement were plain and that there was no ambiguity. RCR relied upon the reasoning of the Trial Judge in Russell v RCR Tomlinson Ltd [2012] WASC 405 [28] - [55].
Assessment - breach of contract claim
146 I do not accept Mr Russell's submissions in relation to the construction of cl 11.3(b).
147 An objective assessment of text and context leads to the conclusion that cl 7 is the paramount provision in relation to the Retirement Benefit. It specifies when the entitlement to payment arises (on Retirement, provided five years of service have been completed), how the Retirement Benefit is to be calculated and when it is to be paid. Clause 7 is concerned exclusively with the Retirement Benefit. Although it is not determinative, the internal structure of the Services Agreement is consistent with cl 7 being the paramount provision concerning the Retirement Benefit. Clause 7 is found amongst other clauses dealing with the EGM's entitlements (remuneration - cl 5; reimbursement of expenses - cl 6; leave - cl 8). Whilst allowances must be made for the fact that the Services Agreement was not prepared by a lawyer, it would be an unusual approach to drafting to include provisions for a 'retention incentive' or 'insurance against the risk of termination' in a different section of an agreement from provisions dealing with other 'entitlements'.
148 The definition of Retirement, relevantly the termination of the employment pursuant to cl 11.1(a) or cl 11.3, directs attention to the subject and objective purpose of cl 11. The subject and objective purpose of cl 11 is to define the right to terminate the Services Agreement and to specify how termination is to be effected. Against that background I do not accept the submission that the objective purpose of cl 11.3 was the provision of a 'retention incentive' or 'insurance against risk of dismissal'. Clause 11.3(a) does not by its terms confer an entitlement to a benefit on the EGM. It restates (unnecessarily it may be accepted) that there is no obligation to pay the Retirement Benefit if the EGM has not been employed for five years. Clause 11.3(a) does not qualify the way in which cl 7 operates in any way.
149 Similarly, in my view, the words that appear at the end of cl 11.3(b) ('as well as paying the retirement benefits as per clause 7') do not qualify the operation of cl 7; specifically, the requirement for five years' service as a condition of the entitlement to the Retirement Benefit is not qualified. Those words do no more than restate (again, unnecessarily) that the Retirement Benefit is payable if the requirements of cl 7 have been met. One cannot construe the words 'as well as paying the retirement benefits as per clause 7' to mean 'as well as paying the retirement benefits as per clause 7 even if the Retirement Date is on or before the fifth anniversary of the Commencement Date'.
150 In my view, as both the defined term 'Retirement Benefit' in cl 11.3(a) and the reference to 'retirement benefits' in cl 11.3(b) lead back to cl 7, nothing turns on the fact that the defined term is not used in cl 11.3(b).
151 I am not persuaded that there is ambiguity in cl 7 and cl 11.3 of the Services Agreement or that they are susceptible of more than one meaning.
152 In any event, even if there is ambiguity or if the clauses are susceptible of more than one meaning, none of the surrounding circumstances relied upon by Mr Russell is sufficiently compelling to justify the construction of the Services Agreement for which he contends.
153 RCR Positron's poor financial position is a factor that might be thought to work against Mr Russell's argument: why would a company in a poor financial position confer a generous retirement benefit entitlement on a new manager?
154 Equally, viewed objectively, it is difficult to understand how a problem of management instability would be addressed by conferring a retirement benefit on a new manager without a requirement for a significant period of service before the manager became entitled to the benefit. The entitlement to payment of a retirement benefit without the requirement for a number of years' prior employment might be thought to have the potential to create further management instability.
155 In assessing Mr Russell and Mr Noordhoek's knowledge of the history of the Executive General Manager Services Agreements and their knowledge of the intention that lay behind the inclusion of the retirement benefit clauses in those agreements as 'surrounding circumstances', care must be taken to not cross the line and consider the subjective intentions and expectations of Mr Russell and Mr Noordhoek. The fact that agreements between RCR and other EGMs contained clauses entitling them to payment of the retirement benefit whenever their employment was terminated does not compel the conclusion that the intention of RCR and Mr Russell, assessed objectively, was that Mr Russell should be entitled to the same benefit.
Claim for misleading and deceptive conduct
156 The claim for damages for misleading or deceptive conduct is advanced in the alternative to the breach of contract claim and the rectification claim. It only arises for consideration if both those claims fail. Thus, in the light of my conclusions first that the misleading or deceptive conduct claim was not remitted for retrial and secondly, that Mr Russell's claim for rectification is made out, it is unnecessary for me to make any assessment of the misleading and deceptive conduct claim. I will, however, do so lest the conclusions I have reached in relation to the extent of the remittal and the success of the rectification claim are wrong. What follows is my provisional assessment of the misleading or deceptive conduct claim.
157 Section 52 of the Trade Practices Act 1974 (Cth) (TP Act) prohibits a corporation from engaging in conduct in trade or commerce that is misleading or deceptive or likely to mislead or deceive. The words 'engage in conduct' include making a representation about a future matter.
158 Where a corporation makes a representation with respect to a future matter without reasonable grounds for making the representation, s 51A of the TP Act deems the representation to be misleading for the purposes of s 52.
159 To succeed in his claim Mr Russell must establish that the representation alleged by him to have been made was made, that viewed objectively the representation was misleading or deceptive or likely to mislead or deceive and that he relied upon the representation. To obtain compensation for loss and damage under s 82(1) of the TP Act, Mr Russell needs to establish a causal connection between the misleading conduct and the loss for which compensation is claimed.
An overview of the claim and defence
160 Mr Russell alleged that in the course of his conversations with Mr Noordhoek on 2 and 4 March 2009 Mr Noordhoek represented that:
(a) Mr Russell would be paid the retirement benefit by RCR if Mr Russell's employment with it was terminated otherwise than for cause (meaning a ground specified in cl 11.1 of the Services Agreement), regardless of when that termination occurred and even if it occurred within the first five years of Mr Russell's employment with RCR (First Representation); and
(b) the restraint in the non-competition clause would not be enforced for more than 12 months if RCR terminated Mr Russell's employment (Second Representation).
161 Mr Russell pleaded that the representations were representations as to future matters within the meaning of s 51A of the TP Act.
162 Curiously, Mr Russell alleged that the First Representation constituted misleading and deceptive conduct but did not allege that the Second Representation constituted misleading or deceptive conduct or conduct likely to mislead or deceive. He alleged, however, that acting in reliance on both representations he concluded that, in the event that the Services Agreement was terminated for any reason other than a ground specified in cl 11.1, RCR would pay him the retirement benefit regardless of when the termination occurred.
163 Mr Russell alleged that if cl 11.3 of the Services Agreement did not operate in the way he contended it did, he had suffered loss and damage because he was induced to enter into the Services Agreement containing the restraints in the non-competition clause and did not accept the offer of employment from Nilsen Resources.
164 Mr Russell pleaded that his loss was the difference between the remuneration he would have received from Nilsen Resources in the period between 9 March 2009 and 10 February 2011, and the remuneration that he was paid by RCR between 9 March and 16 December 2009. Mr Russell alleged that he did not work between 17 December 2009 and 10 February 2011 as a result of the restraint in the non-competition clause in the Services Agreement.
165 In its defence, RCR denied that the representations were made. It contended that if either representation was made it was superseded by the Services Agreement. It denied that Mr Russell relied upon either representation. It also contended that the representations were not made in trade or commerce.
166 In RCR's closing submissions it conceded that if it was found, contrary to RCR's primary submission, that Mr Noordhoek did tell Mr Russell that he would be paid the retirement benefit if, at any time, he was dismissed otherwise than for cause (that is, the First Representation), then the court must conclude that the representation was misleading or deceptive or likely to mislead or deceive. A similar concession was not made in relation to the Second Representation.
Were the First and Second Representations made?
167 On the basis of Mr Russell's unchallenged and uncontradicted evidence of what was said to him by Mr Noordhoek in the course of the telephone conversation on 2 March 2009, to which I have referred in the context of my consideration of the rectification claim, I find that the First and Second Representation were made in the course of that conversation.
168 I find that the substance of each of the representations was repeated by Mr Noordhoek at the meeting on 4 March 2009. This finding is supported by the evidence to which I have referred in the course of my consideration of the rectification claim.
Were the First and Second Representations misleading?
169 The First Representation was a representation as to a future matter. Mr Russell relied upon s 51A of the TP Act. RCR conceded that the First Representation was misleading and I find it was.
170 As I have noted above, Mr Russell did not plead that the Second Representation was misleading or deceptive or likely to mislead or deceive. He did not plead that the Second Representation induced him to form any conclusion other than that the retirement benefit would be paid in the circumstances that were the subject of the First Representation. It is not necessary to determine whether the Second Representation was misleading or deceptive or to give any further consideration to it.
Was the First Representation made in trade or commerce?
171 There are conflicting authorities as to whether representations made in the course of pre-employment negotiations are made in 'trade or commerce'. The authorities from which the conflict emerges were reviewed by Buchanan J in Westpac Banking Corporation v Wittenberg [2016] FCAFC 33 [181] - [196]. At [195] his Honour expressed the view that s 53B of the TP Act 'did all the work that was necessary with respect to pre-employment negotiations and that the more limited view of the reach of s 52 was the correct one'. That view was obiter dicta. McKerracher J relevantly agreed with Buchanan J's view. White J preferred not to consider the issue.
172 More recently in Rakic v Johns Lyng Insurance Building Solutions (Victoria) Pty Ltd (Trustee) [2016] FCA 430 [62], Bromberg J declined to follow the obiter view expressed by Buchanan J in Westpac Banking Corporation v Wittenberg and followed the decision of Kenny J in Walker v Salomon Smith Barney Securities Pty Ltd [2003] FCA 1099; (2003) 140 IR 433 [185], in which her Honour, after reviewing the relevant authorities, held that misleading or deceptive conduct in the course of negotiations for employment may support a cause of action under s 52 of the TP Act.
173 In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594, 603 the majority (Mason CJ, Deane, Dawson & Gaudron JJ) held that the words 'in trade or commerce' in s 52 of the TP Act refer to the 'central conception' of trade or commerce and not to the immense field of activities in which corporations engage in the course of, or for the purposes of, carrying on some overall trading or commercial business.
174 In my view, the negotiations between Mr Russell and Mr Noordhoek fell within the central conception of trade or commerce because they concerned an agreement that related not only to Mr Russell's prospective employment but also to the protection, by means of the non-competition clause in the Services Agreement, of RCR's business and the business of any 'Related Body Corporate' for up to five years after the termination of Mr Russell's employment. The protection of a business by means of a non-competition clause is a matter undertaken in trade or commerce.
175 Accordingly, I conclude that the First Representation was made in trade or commerce.
Did Mr Russell rely on the First Representation?
176 RCR submitted that there are two reasons why the court should conclude that Mr Russell would have rejected the Nilsen Resources offer regardless of the understanding he had developed about the entitlement to the retirement benefit.
177 The first reason identified by RCR was that the EGM position was an executive level position and constituted a promotion, in effect, from the project manager positions Mr Russell had held for the previous 10 years. The EGM position commanded a significant salary, access to attractive bonus options and a more traditional 'office-based' working environment and hours of work. In contrast, it was submitted that the Nilsen Resources offer involved long hours remunerated at an hourly rate and a fly-in-fly-out roster. It was a position at the same level as Mr Russell's previous jobs.
178 The second reason identified by RCR for concluding that Mr Russell would have rejected the Nilsen Resources offer was found in Mr Russell's own evidence. It was submitted that Mr Russell conceded that he rejected the Nilsen offer because RCR's offer gave him the opportunity to step beyond the role of project manager into the realm of executive manager. The 'concession' relied upon by RCR was made in the context of the following passage of cross-examination (ts 320 - 321):
And it gave you an opportunity to step beyond the last few roles that you had as a project manager and into the realm of executive manager, didn't it?---Yes. It did.
That's why you knocked back the Neilson [sic] offer, wasn't it?---Yes.
The RCR position was simply more attractive to you than the Nielson [sic] offer, wasn't it?---Yes.
And it was more attractive – withdraw that – it would have been more attractive regardless of whether or not it came with an immediate entitlement to be paid a retirement benefit on dismissal with notice?---No. It wouldn't have.
The retirement benefit in actual fact, Mr Russell, has absolutely nothing to do with your decision to knock back Mr Pratt, did it?---Of course it did.
Now, you maintain, do you – you say, "Of course it did." You maintain, do you, that because of your concerns about Mr Dalgleish and about the potential restructuring that might affect your position as EGM, that it was this assurance that you say Mr Noordhoek gave you that got you over the line?---Yes.
But that's inconsistent, isn't it, with what you say at paragraph 57 of your witness statement. Just have a look at that. I will give you an opportunity to read it. Have you read that paragraph, Mr Russell?---Yes. I have.
It's the case, isn't it, Mr Noordhoek gave you a very positive picture of a level of support that you would get if you took up this role as executive general manager. Correct?---Yes.
And that's what got you over the line?---No. It wasn't.
Have a look at paragraph 68. It was that very positive picture that you refer to in 68 that got you over the line to accept the role of EGM, wasn't it, Mr Russell?---Again, no.
The availability or otherwise of the retirement benefit simply didn't factor in your decision making process, did it?---Yes. It did.
Can I suggest to you, Mr Russell, this is just an assertion that you make now, this idea that you would have – had you known the truth about the retirement benefit, you would have knocked back the EGM role. This is just an assertion that you make now for the first time in the nearly six years that this matter has been running solely as an attempt to plug a gaping hole in your case that the last judge pointed out for you. Do you want to respond to that?---No.
TOTTLE J: I take it you're disagreeing with the proposition?---Yes. I do.
179 In re-examination Mr Russell gave the following evidence (ts 335):
POWER, MR: So what was it that caused you to take the job with the defendant over the Nielson [sic] offer?---Well, it – the sales pitch from John Noordhoek and the retirement benefit.
Thank you?---And the security that that gave me.
180 In my assessment, Mr Russell's evidence in cross-examination that RCR contended was a concession by Mr Russell was not a concession at all. Reading the passage of the evidence as a whole, in my view it is clear what Mr Russell had been told about the retirement benefit was a factor that made the RCR position more attractive.
181 It is clear that the prospect of moving into an executive level position was an attractive aspect of the EGM position - Mr Russell said as much in the course of cross-examination. It is equally clear that this was not an ambition Mr Russell was prepared to fulfil at any cost. The fact that Mr Russell withdrew his interest in the position on 27 February 2009, and had to be persuaded by Mr Noordhoek to reconsider, is contemporaneous, objective evidence of the reservations on Mr Russell's part.
182 To establish reliance for the purposes of a claim under s 82 of the TP Act a plaintiff is not required to prove that he relied solely on the representation. It is sufficient that the representation made some 'non-trivial contribution' or was a 'substantial consideration' in entering into the contract: Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1)(1988) 39 FCR 546, 558; Dalecoast Pty Ltd v Guardian International Pty Ltd [2003] WASCA 142 [56].
183 I am satisfied that the First Representation played a significant role in Mr Russell's decision to accept the EGM position in preference to the Nilsen Resources offer and that, accordingly, he relied upon it.
What was Mr Russell's loss?
184 I am satisfied that had Mr Russell not accepted the EGM position with RCR he would have accepted Nilsen Resources' offer of employment. His loss is the difference between the income and benefits he would have received had he accepted that offer and the income and benefits he received as a consequence of accepting the EGM position: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1.
185 The terms of the Nilsen Resources offer were that Mr Russell would be employed as a senior project manager at a rate of $110 per hour plus superannuation calculated at 9% of his salary. The offer provided that he would be entitled to four weeks' annual leave paid at a rate of $75 dollars per hour calculated on the basis of 37.5 hour week. The Nilsen Resources position was 'fly-in-fly-out' with a roster of three weeks on and one week off. Mr Russell gave evidence, unchallenged in cross-examination, that these terms equated to a total remuneration package of $362,956 per annum. Nilsen Resources wanted Mr Russell to start work immediately. His employment on the Prominent Hill Project was due to come to an end on 6 March 2009, so it would have been possible for Mr Russell to start work for Nilsen Resources on 9 March 2009.
186 After his employment with RCR was terminated Mr Russell considered that the non-competition clause prevented him from working for a similar business for a period of 12 months. In fact, Mr Russell did not work for 14 months after the termination of his employment with RCR. He gave evidence that he was unable to find work in other fields. In February 2011 Mr Russell started work for Nilsen Resources as a senior project manager.
187 Mr Russell claimed loss in the amount of $337,944.30. This sum was calculated by deducting the remuneration received by Mr Russell from RCR in the period 9 March to 16 December 2009 ($357,721.36) from the remuneration he would have been received from Nilsen Resources in the period 9 March 2009 to 10 February 2011 ($695,665.66).
188 RCR did not challenge Mr Russell's evidence about the loss he claimed and made no submissions in relation to it.
189 In my assessment, Mr Russell suffered loss in the amount claimed by him.
Conclusion in relation to the misleading or deceptive conduct claim
190 Had I concluded that the misleading or deceptive conduct claim was remitted for retrial and had I not held that Mr Russell was entitled to an order rectifying the Services Agreement, for the reasons I have outlined above, I would have concluded that RCR engaged in misleading conduct in trade or commerce contrary to s 52 of the TP Act and that this caused Mr Russell to suffer loss in the amount claimed by him and specified above.
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