Sheldrick v WT Partnership (Aust) Pty Ltd
[1998] FCA 1794
•07-September-1998
Graheme Sheldrick v W T Partnership (Aust) Pty Limited, WTP (Hong Kong) Ltd trading as W T Partnership and Paul Andrew Lowndes
Contract - Trade Practices - Damages
NG 839 of 1995
EINFELD J
SYDNEY
7 SEPTEMBER 1998
Written submissions completed: 25 August 1997
CONTRACT - employment - relocation of employee overseas - identity of employer within a world wide group of companies - change of employer when new contract signed - terms - construction of contract - whether there was a term that employment be for four years or that the employer had a long term commitment to the employee -- whether term allowing three months notice of termination reflected the intentions of the parties - summary dismissal - whether conduct constituted unprofessional behaviour or misconduct - motive for conduct as a factor in determining misconduct
TRADE PRACTICES - misleading and deceptive conduct - whether representations made - representations as to future matters - whether representations made on reasonable grounds
DAMAGES - breach of contract - employee entitled to damages in lieu of three months notice - whether grossing up for Australian taxation purposes is appropriate
Trade Practices Act 1974 (Cth) ss 51A, 52, 53B, 75B and 82
Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66
Laws v London Chronicle (Indicator Newspapers) Ltd (1959) 1 WLR 698
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 839 of 1995 BETWEEN: GRAHeMe SHELDRICK Applicant
AND: W T PARTNERSHIP (AUST) PTY LIMITED First Respondent
WTp (HONG KOnG) LTD TRADING AS W T PARTNERSHIP
Second Respondent
PAUL ANDREW LOWNDES
Third Respondent
JUDGE: EINFELD J DATE OF ORDER: 7 september 1998 WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. Judgment be entered in favour of the applicant against the second and third respondents in the amount of $253,000 representing damages of $181,000 plus interest of $72,000
2. The second and third respondents will pay the applicant's costs on a party/party basis
3. The claim against the first respondent be dismissed with no order as to costs
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 839 of 1995 BETWEEN: GRAHeMe SHELDRICK Applicant
AND: W T PARTNERSHIP (AUST) PTY LIMITED First Respondent
WTp (HONG KOnG) LTD TRADING AS W T PARTNERSHIP
Second Respondent
PAUL ANDREW LOWNDES
Third Respondent
JUDGE: EINFELD J DATE: 7 september 1998 PLACE: SYDNEY
REASONS FOR JUDGMENT
1. INTRODUCTION
The applicant, Graheme Sheldrick, is a cost engineer and an associate of both the Australian Institute of Quantity Surveyors and the Institute of Arbitrators Australia. The first respondent, W T Partnership (Aust) Pty Limited (WTP Aust) and the second respondent, WTP (Hong Kong) Limited (WTPHK), are part of the corporate structure of a world wide organisation or group of construction and financial management consultants trading as `W T Partnership' (the Partnership). The third respondent, Paul Lowndes, is a director of both the first and second respondents.
In about 1981, Sheldrick commenced work for the Partnership in Sydney as an estimator for electrical services and installations. In late 1993 and early 1994, at the request of Lowndes, Sheldrick relocated to work for the Partnership in Malaysia. In May 1995 Sheldrick was summarily dismissed, purportedly on the grounds of misconduct and unprofessional behaviour.
2. THIS APPLICATION
On 6 November 1995, Sheldrick filed this application seeking damages for breach of contract and contravention of the Trade Practices Act 1974 (Cth) (the Act) arising out of his dismissal. He claimed that he had a contract of employment with the first or second respondent, or both, which included a term that he would be employed for a minimum of four years in Kuala Lumpur, that the company had a long term commitment to him, that he would be paid a Chinese New Year bonus, and that work permits and visas would be arranged for him and his family to facilitate their residence in Malaysia. He claimed that this contract was both oral and written, comprised of conversations in late 1993 and early 1994 and letters in February and April 1994 between himself and Lowndes. Sheldrick claimed that he was not paid the bonus, that the visas and work permits were not obtained, and that his dismissal was in breach of the term stipulating the minimum length of his term of employment, as a result of which he suffered damage and loss.
The case was also put on the alternative basis that on behalf of the first or second respondents, or both, Lowndes made representations to Sheldrick to the same effect as the contractual terms, but that they were misleading and deceptive, in breach of section 52 of the Act, made as to the future with no reasonable expectation that they would be carried into effect within the meaning of section 51A, or were false in breach of section 53B. Lowndes was said to have aided and abetted the contraventions of the first and second respondents and therefore to be liable under section 75B.
The respondents claimed that Sheldrick was not employed by WTP Aust after March 1994 and that from this time his only contract for employment was with WTPHK. They claimed that the contract was wholly written and comprised of letters exchanged between Sheldrick and Lowndes on 21, 25 and 26 April 1994. They denied breaching the contract, instead claiming that Sheldrick was dismissed, in accordance with the contract, for misconduct and unprofessional behaviour, in the form of a break in of a Malaysian co-worker's office and a pattern of unacceptable behaviour towards the Malaysian co-workers generally.
In response to Sheldrick's claims under the Act, the respondents denied making the representations alleged, denied that any that were made were misleading or deceptive, and stated that Lowndes lacked the authority or capacity to make the representations. If any misleading representations were made as to future conduct, they argued that there were reasonable grounds for making them.
3. BACKGROUND
3.1 The WTP group
WTP Aust was incorporated in 1982 in Australia. Since that time it has carried on business in Australia in partnership with W T Partnership (UK) Limited under the name `W T Partnership'. In 1991, WTPHK was incorporated and began to carry on business in Asia, trading as `W T Partnership'.
In 1992, W T Partnership (Asia) Ltd (WTP Asia), a shelf company, was incorporated and became the holding company for several Asian companies which carried on business in the region trading as `W T Partnership', including WTPHK, in which, at the relevant time, it had an 80% shareholding. In 1993, WTP Asia became a wholly owned subsidiary of WTP Aust. According to Lowndes' affidavit of 23 June 1997, each of the companies which comprise the group has a number of common directors and he is in fact a director of all of them. There are also Management Executive Committees for both WTP Aust and WTP Asia, but apparently not all directors of the respective companies are members of these committees.
3.2 Sheldrick
In 1995, Sheldrick was about 43 years of age, and was married with four children then aged about 22, 18, 9 and 7. He began work in the Sydney office of what became WTP Aust in about 1981 as an estimator for electrical services and installations. Although he had no formal academic qualifications, he had previously worked in fields involving the provision of electrical installation and engineering and commissioning work. He has accrued extensive experience in the fields of quantity surveying and construction cost consulting and in 1989 he was appointed an Associate in the Engineering Division. There is no dispute that from at least 1992 until his relocation to Asia, Sheldrick was employed by WTP Aust.
4. PRINCIPAL EVENTS
4.1 Before the move to Malaysia
Negotiations for Sheldrick's move to Asia began during 1993 following his visits to the Philippines at the request of Lowndes in June, August and December. Between these trips, he also worked in Sydney on technical analysis, consultancy submissions and production of promotional material which related to Partnership projects in the Philippines.
In the latter part of 1993, Lowndes was involved in the preparation of a submission to the Malaysian government for WTPHK to be involved in the construction of the new international airport at Kuala Lumpur. The government authority funding the project was the Kuala Lumpur International Airport Berhad (KLIAB). In November 1993, WTPHK's submission to KLIAB was accepted and it received an appointment to the airport construction project as part of a consortium comprising Hashim Dan Lim (HDL), a Malaysian firm affiliated with the Partnership in Kuala Lumpur, and four other local firms of quantity surveyors. These local firms, including HDL, were collectively known as JUB5. The consortium therefore comprised WTPHK and JUB5.
Throughout the latter half of 1993, there were negotiations between Sheldrick and various people, including Lowndes, about the possibility of relocating permanently to South East Asia. This possibility was evidenced by the inclusion of Sheldrick's resume in the submission to KLIAB. In the course of these negotiations, arrangements were made for Sheldrick to work for an extended period in Kuala Lumpur. However, that trip was cancelled due to significant opposition to any relocation from people described by Sheldrick as 'the young Sydney directors'. However, between October 1993 and February 1994, Sheldrick had several conversations with Lowndes in which he was told about the Partnership's long term commitment to him and his long term future in Asia.
While Sheldrick was on annual leave in January 1994, he was contacted by Lowndes and invited to travel to Hong Kong and Kuala Lumpur with his wife, at the Partnership's expense, so that they could see both cities and decide which they would prefer as a base should Sheldrick move to Asia. Although the Sydney directors were aware of Sheldrick's desire to relocate, they were apparently still opposed to the idea at this stage and Lowndes asked Sheldrick not to inform the Sydney directors of the trip. The respondents' attempt to tarnish Sheldrick by reference to this request was described by Sheldrick's counsel as "dehortative eristical sophistry". I have asked the learned authors of the Macquarie Dictionary to provide me with a personal translation of this expression. As I do not understand it at present, I can make no finding on the submission.
Mr and Mrs Sheldrick spent 12 and 13 January 1994 in Kuala Lumpur, during which time Sheldrick attended meetings with various members of the consortium and KLIAB. The Sheldricks then travelled to Hong Kong where Sheldrick again met various personnel working on projects there. Mr and Mrs Sheldrick also dined with Mr and Mrs Lowndes and further discussed the Sheldricks' relocation to Asia. Sheldrick stated that after this trip his wife formed the view that Kuala Lumpur would be a better place in which to raise their children, and so would prefer to relocate there than Hong Kong.
Sheldrick was evidently extremely keen to move to Asia, and made this known in the Sydney office. Lowndes encouraged him to be positive about relocating and was continuing to negotiate with the Sydney directors. He stated that by the end of January 1994, although the Sydney directors had not finally approved the relocation, they were close to reaching a compromise. Against this background of ongoing negotiations, Sheldrick returned to Sydney and made efforts to find a suitable replacement for his position in the Sydney office.
In the face of opposition from some Sydney directors, but with the support of others, Sheldrick returned to Kuala Lumpur on 11 February 1994 to finalise the cost plan for the KLIAB project and again to discuss his relocation. He told Lowndes that he required more specific information before he could commit to the relocation. Lowndes told him that he would immediately speak to Ashley Colley, a director of WTP Aust, to confirm the arrangements but that Sheldrick should focus on the first or second week of March as the date for his relocation. On the same day, he was given a `letter of comfort' by Lowndes which was stated to be a clarification of his position regarding employment in `our' Asian practice. Relevantly the letter, written on the letterhead of the Partnership with a Hong Kong address but without a particular corporate entity, and signed by Lowndes on behalf of `W T Partnership', stated:
The purpose of this letter is to clarify your position regarding employment in our Asian practice.
...
You have been dynamically involved in our efforts in the Philippines and more recently in Kuala Lumpur and are aware of our intention that you should relocate to Asia as soon as possible.
The catalyst to achieve this goal is the Kuala Lumpur International Airport Project and we envisage that our engagement could be for a period of approx 4 years and that you would be based in Kuala Lumpur for that period.
We anticipate that our commission on the Kuala Lumpur International Airport will be handled by you and Craig McHardy with Paul Lowndes visiting Kuala Lumpur on a monthly basis for JUB5/WTP Consortium meetings and Kuala Lumpur International Airport Berhad P.C.G. meetings.
We do not believe that your role would necessarily be full time and envisage that your overall brief would involve a responsibility to the Kuala Lumpur International Airport Project and involvement in our business in Asia generally through our Hong Kong office.
At the present moment we are operating in Kuala Lumpur under an initial letter of intent and we are confident of securing an extension to this letter of intent and a full commission. As a matter of interest, we have recently received payment in respect of our first progress claim.
During week commencing 14th February 1994, we will be meeting Accountants, Legal Advisers and our bank in Malaysia to resolve Corporate Business Development Strategy and appraise ourselves of circumstances as they will effect our individual employees in Malaysia.
We look forward to agreeing package details in the very near future based upon the Corporate Business Development and individual employee input mentioned above and agreeing transfer dates particularly in the context of your handover obligations in the Sydney office.
Although Sheldrick claimed to have told Lowndes that "that letter doesn't tell me anything", he nevertheless seems to have made the final decision to relocate without any further written commitments or arrangements.
4.2 After arrival in Malaysia
On 13 March 1994, Sheldrick and his family left Australia for Kuala Lumpur. From that date, Sheldrick worked in Kuala Lumpur in conjunction with the Malaysian partners, JUB5, on the KLIAB project. The other senior member of the Partnership contingent, with whom Sheldrick was working closely, was Craig McHardy. Although there was conflicting evidence as to who was the more senior representative of W T Partnership on the KLIAB project, in the upshot, as I find, it does not matter. Although he had relocated and commenced work, Sheldrick was still having discussions with Lowndes regarding the level of his remuneration and other benefits but the terms and conditions of his appointment had not been reduced to writing beyond the `letter of comfort' of 11 February 1994. This situation was rectified in an exchange of letters between Sheldrick and Lowndes in late April 1994. The first letter, from Lowndes to Sheldrick, dated 21 April 1994, was a `letter of appointment' which stated in part:
Further to our discussion of 13 April, 1994 concerning your appointment as an Associate Director of W T Partnership (HONG KONG) LIMITED (W T Partnership) based in Kuala Lumpur, we wish to outline the conditions which apply as follows:-
1. This appointment will be effective as from the 1st January, 1994. Notice of termination of employment will be three months on either side unless exceptional circumstances require otherwise. Misconduct, unprofessional behaviour or non performance will result in instant dismissal without compensation.
...
2. Your total Salary Package will be MR40,000 per calendar month (Malaysian Ringgit Forty Thousand Only) for 12 months. A bonus may be paid at the discretion of the Board of Directors. No payment will be made for overtime but technical time spent on projects must however be recorded for job cost record purposes. Your monthly emoluments will be reviewed in July each year in the light of your performance.
...
[original emphasis]
On 25 April 1994, Sheldrick replied to Lowndes, seeking to amend various clauses of the agreement and querying others. Relevantly, he sought to delete from Clause 1 the words `non performance' and `without compensation', and from Clause 2 the words `for 12 months'. On 26 April 1994 Lowndes replied by letter to Sheldrick, agreeing to amend Clause 2 of the agreement as requested but refusing to amend Clause 1.
4.3 Tension between WTP and JUB5
It was apparent from the evidence that tensions began to increase between the Partnership and JUB5 during the course of 1994 and into 1995. One of the issues that caused concern was the disparity in the fees paid by the client (KLIAB) to the overseas and local personnel working on the project.
It is the respondents' case that Sheldrick's behaviour caused or contributed to this tension. While he denied that allegation, Sheldrick did admit that at meetings involving the Malaysian consortium members, he did interject while the Malaysians were speaking and forcefully put his position on particular issues to the meeting. He maintained that this approach was necessary in order to protect the Partnership's position on the project. Sheldrick did admit that Lowndes had said to him on a number of occasions words to the effect:
JUB5 said you are a bit pushy. I know what its [sic] like to drive a project. I once had a client on the Hong Kong airport project who wanted me off the job.
A common thread in the evidence on both sides and in the documents was that there was some frustration on the part of the Partnership at what was perceived to be the technical and professional inadequacies of the Malaysian personnel, the Malaysian approach to accomplishing tasks, and their insistence on receiving or sharing the credit for work done by the Partnership. Sheldrick admitted that Lowndes had said on a number of occasions (but not specifically to Sheldrick in respect of any behaviour of his):
You must keep a cool head, you must be patient, you must be persistent, you must be calm with the locals. You must treat these guys with kid gloves. I know we are doing all the work (but) the fact is we can't survive here without them.
Evidently Sheldrick at least was keen for the Partnership to work on the KLIAB project in an independent capacity without the local partners at all. Referring to the JUB5 consortium members, he stated in a memo to Lowndes on 9 June 1994:
Maybe with Haji [Tuan Haji Alias from the KLIAB] on our side we could flick the boys permanently.
In February 1995 Kho Kwang Chee began work in the consortium. He became the senior member of JUB5 and was appointed the project technical director. His seniority was dictated by the insistence of the KLIAB that the senior consortium member be a Malaysian. Sheldrick stated that on Kho's arrival, Lowndes had told him:
JUB5 will be appointing a senior quantity surveyor who will be in a position of authority. We have to work with this guy. We have to continue with what we are doing plus put everything through him. For the success of the consortium we must do what we can to assist. He must look good even though at times it will be us doing all the work.
After Kho began work in the consortium, it is apparent that tension escalated between the Partnership and JUB5, to the point that by February 1995 it was envisaged that Sheldrick and McHardy would be replaced on the project by two other Partnership personnel.
Lowndes stated in his evidence, and Sheldrick did not deny, that conversations took place in which Sheldrick said words to the effect of:
JUB5 are having a meeting behind our backs.
and:
Kho is undermining our position.
Lowndes claimed to have had several conversations with Datuk Isahak, a senior member of the board of directors of JUB5, regarding the tensions between Partnership personnel and JUB5. Although Sheldrick denied it, Lowndes claimed that the source of much of this tension was directly attributable to Sheldrick's personal antagonism towards Kho. The conversations between Datuk Isahak and Lowndes regarding the tension culminated in a letter from Lowndes to Datuk Isahak on 20 February 1995 in which he stated:
Nominally, it is my intention that Mr Williams will replace Mr McHardy and Mr Shaw will replace Mr Sheldrick...
...
...I believe that a period of up to 3 months for handover, would be prudent.
Lowndes did not inform Sheldrick about this communication with Datuk Isahak.
On 20 March 1995 there was a meeting between Kho, Haji, Harbans (another senior member of JUB5), Sheldrick and Stephen Wright (another senior Partnership member) to resolve problems between the Partnership and JUB5 with regard to the management structure. At the meeting it was decided that all correspondence to and from the KLIAB was to go through Kho as the most senior member of the consortium. The day after the meeting Sheldrick wrote to Lowndes to inform him of the situation. The letter stated in part:
Paul,
Thought I should make you aware of the contents of a meeting with Haji yesterday afternoon. Apparently Kho had been to see Haji and complain that W T Partnership were undertaking/producing work without his knowledge or approval and generally to air his dirty washing.
...
Haji stated that effective lines of communication needed to be established between JUB5/WT & KLIAB and it was the Governments [sic] wish that the locals were to be the Leader & that meant Kho was to be the Leader of JUB5 & W T Partnership. Haji did acknowledged [sic] that W T Partnership had in fact been the lead consultant to date.
Haji then stated that he recognised the locals were not good enough on their own and it was expected that WT would do the work and feed it through Kho (JUB5).
...
It is quite obvious that JUB5 are out to lift their profile. Kho and Dato are meeting on a regular basis, and also having discussion [sic] with KLIAB without WT's. [sic]
On 22 March 1995 Datuk Isahak replied to Lowndes' letter of 20 February 1995 and stated:
I am happy to note that arrangement had been made to sent [sic] Messrs Bob William [sic] and Keith Shaw in exchange of Mr McHardy and Mr Sheldrick w.e.f. from 1st April 1995...
...
In your letter, you have mentioned that a period of up to 3 months for handing over, would be prudent. I have also discuss [sic] in confidence with Tuan Hj Hashim of JUB5 International and the rest of the partners and they are in agreement with your proposal of replacement and the comment they made is that 3 months for the handing over is too long and 1 month should be sufficient.
I hope you are in agreement with the 1 month handing over period so that a better working relationship could be established between Mr Kho Kwang Chee - Technical Director of JUB 5 International and your Mr William of W T Partnership for our client KLIAB.
Sheldrick was not informed of this communication either, despite the fact that any relocation or repatriation would have a profound effect on him and his family.
4.4 Breaking into Kho's office
Against this background, an incident occurred on 28 March 1995 that is central to the determination of this matter. On the afternoon of that day, between 5:30pm and 6:00pm, Sheldrick entered Kho's locked office in the consortium's premises without Kho's permission. Although there were many aspects of this incident which were contested and argued at length during the hearing, a number of facts were undisputed and it is sufficient for present purposes to relate them. I shall return to the contentious matters later.
The consortium occupied office space in central Kuala Lumpur provided by the KLIAB. It consisted of a large open area divided by low partitions into individual working spaces. Adjacent to this open area were three individual offices. One of these was occupied by Kho and the other two were occupied by McHardy and Sheldrick. The method used by Sheldrick to gain access to Kho's locked office on this particular day was by removing a glass viewing panel in the door and then reaching in to unlock it from the inside. While inside the office, it is evident that he read some papers on Kho's desk such that when McHardy entered the consortium's office area a few minutes later, he was motioned into Kho's office by Sheldrick and shown a memorandum on the desk. Both men then left Kho's office. Hazbullah, a quantity surveyor working for HDL who was in the office area at the time, witnessed this sequence of events.
The following morning, 29 March 1995, Kho informed McHardy that he had been told that Sheldrick had broken into his office. The possibility of police involvement was raised during the discussion but by whom was disputed. McHardy then telephoned Lowndes in Hong Kong and told him about the incident and the reaction of Kho. Lowndes then spoke to Kho directly, apologising on behalf of WTPHK and requesting that Kho not inform the Board of Directors of JUB5. Kho stated that he had already telephoned Datuk Isahak and informed him of the incident. In his evidence Kho stated that after he had informed his Board of Directors, his involvement in the matter was finished. He also stated that he never spoke to Sheldrick about the incident and maintained a working relationship with him afterwards.
After speaking to Kho, Lowndes then spoke to Sheldrick, informing him how serious he considered it to be and telling Sheldrick that he should leave the office for a few days. Sheldrick claimed that this conversation occurred the next day, 30 March 1995, but otherwise agreed that the substance of the conversation had occurred. Sheldrick also claimed that Lowndes telephoned him at home on the evening of 30 March 1995. Lowndes re-iterated that Sheldrick was not to return to work the next day and mentioned for the first time that Sheldrick was to be replaced on the airport project. Sheldrick complied with the instruction to remain at home on Friday 31 March and after returning to work on Monday 3 April, he continued to work at the consortium office, although he conceded that he maintained a `lower than normal profile'.
4.5 After the break in
On the weekend of 1 & 2 April 1995, Lowndes travelled to Australia from Hong Kong to attend a meeting in Melbourne. Although there was a dispute as to the nature of this meeting, it is clear that the people present were all directors of WTP Aust. A document headed `Minutes of Management Committee Meeting for WT Partnership (Aust) Pty Ltd' states in part:
4.8 GS's employment position in Asia to be terminated on the basis of gross misconduct and placing our position on KLIA at jeopardy.
PAL to forward GS's employment contract to the MEC to confirm our legal position in the event GS disputes our right of dismissal.
Sheldrick was not informed of this decision.
Lowndes claimed that on 10 April 1995 he met with Datuk Isahak in Malaysia and was told:
Sheldrick's behaviour is completely unacceptable you must remove him. In my opinion Sheldrick's entry of Kho's office was a criminal act and if not for you sending him away from the office and organising to see me to sort it out then we would have pressed charges. He is totally unacceptable.
Other evidence, to which I shall come, suggested that this account of the conversation was at least exaggerated so as to suggest that the Malaysians were driving the dismissal caravan. As will appear, I do not believe that to be so.
Although Sheldrick had by this time become aware that he was going to be removed from the airport project, it appears from the documentary evidence that he was unaware of the level of dissatisfaction with him generally and in regard to the break in of Kho's office in particular. In a letter to Lowndes dated 12 April 1995, he stated:
Paul,
The 3 months then 1 month requirement from JUB5 and events of two weeks ago has come as a real shock. Personally, I am extremely disappointed and somewhat exasperated...
The pending relocation is naturally of personal concern on two particular fronts viz. When & Where?
I understand from our conversation on Monday, that you do not have the answers at the moment and with good fortune these may crystallize over the coming weeks.
Both Marilyn & I recognise our commitment to you and your request that we stay flexible and ideally we would like, where possible, to balance this flexibility with our children's educational needs.
...
You have stated that you consider your negotiating position with Dato to be weak and there is a desire from JUB5 to have me replaced, therefore if this cannot be achieved, then so be it!
I would be most appreciative if during your next visit we could spend some time in private as I would very much like to know your plans as they relate to GS.
In the meantime, I will continue on, "business as usual" as you instructed.
On 8 May 1995 Lowndes received a letter signed by the heads of all members of JUB5. It stated:
Dear Sir,
Further to our meeting on 10th April 1995, we wish to clarify that the performance of your Mr Sheldrick, for various reasons, does not meet the expectations of JUB5 International.
You have been aware for some time of our dissatisfaction in this regard. Your Mr Williams has taken up his position as the replacement for Mr Sheldrick and we would now appreciate your urgent attention in removing Mr Sheldrick from the KLIAB project.
Lowndes forwarded this letter to the directors of WTP Aust and on 16 May 1995 sent a letter to Sheldrick notifying him of his termination:
Dear Mr Sheldrick,
W T Partnership (Hong Kong) Limited, hereby notifies you of the termination of your employment with WTP (Hong Kong) Limited.
The termination of your employment is in accordance with clause 1 of your employment contract of 21st April 1994. The grounds for your termination are for unprofessional behaviour and misconduct. The main incident constituting your misconduct and unprofessional behaviour occurred on the 14th day of March 1995 when you entered the locked office of a senior member of one of WT Partnership's joint venture partners on the KLIAB project.
In our conversation on 16th March 1995 I expressed grave concern over this matter and the way our joint venture partners would perceive your conduct. Our involvement in the KLIAB project has now been jeopardised as a result of your unprofessional behaviour in this instance and generally.
We regret that this action has been necessary. We request that you do not attend our project office again and that you vacate the WT Partnership apartment in Kuala Lumpur by the end of May 1995.
It is common ground that in the period between Lowndes' return from the Melbourne meeting and this letter, Lowndes maintained to Sheldrick that no decision had been made with regard to his future. The mistake in the dates of the break in and the subsequent conversation is extraordinary considering the importance and savagery to the Sheldricks of this letter but no point was made about the error and nothing seems to turn on it.
4.6 After the dismissal
Sheldrick wrote to Lowndes on 17 May 1995 detailing his disappointment at the decision to dismiss him and lack of consultation, and denying the allegations made against him. He also telephoned Lowndes to discuss the letter of termination. During that conversation a meeting was arranged for 21 May 1995 at the Shangri-La Hotel in Kuala Lumpur. Following that meeting, Sheldrick sent a letter by facsimile to the Board of WTPHK setting out the terms on which he would be prepared to sever his ties with WTPHK on a permanent basis, settling any disputes between them. The total figure claimed by Sheldrick in that letter was MR550,393 plus payment of his American Express credit card bill. In a reply dated 29 May 1995, Lowndes rejected this proposal and stated that only the legal entitlements as set out in the contract would be paid. These entitlements included the costs of relocation to Australia but the salary pay-out figure was based on termination without notice due to misconduct. Sheldrick subsequently left Kuala Lumpur with his family and moved back to Australia.
5. CREDIBILITY
The events at the centre of this application occurred between two and a half and five years before the hearing at which the various witnesses were asked to recall what had happened. It is impossible that anybody could accurately recollect the precise details of conversations and events that had occurred years previously, despite the person's best efforts and intentions. Conversely, contemporaneous documents do not suffer from the same drawbacks, and in this case, where there is a conflict, I have preferred the documentary evidence. This is especially so where it has been necessary to discern the attitude and state of mind of a person.
I was not overly impressed by either of the main witnesses, Sheldrick or Lowndes. In my view, each gave evidence which was tailored to support his case and both were willing to embellish their evidence in significant respects to bolster their respective cases. The brief examples which follow illustrate these findings and further support my decision to rely more heavily on the documentary evidence.
5.1 Sheldrick
Sheldrick gave evidence that he has been chronically unemployed since his return to Australia and has been treated by a psychologist for depression resulting from his unemployment. His claim for damages is partly based on these factors and I will return to them in more detail in due course. For the purposes of commenting on his credibility, I would say only that this claim seems to be at best an outright embellishment of the truth in regard to his employment status.
For the unequivocal evidence is that Sheldrick has been employed as a consultant, to a variety of firms, almost continuously since his return from Malaysia. At the time of the hearing, he had earned approximately $100,000 in the preceding twelve months. In final submissions he argued that he considered himself to be unemployed because his consultancy work did not have the benefits, primarily the security, which attach to full time employment. This statement is very possibly, although not necessarily, true but I cannot accept that Sheldrick is, or even sees himself as being, chronically unemployed while he earns of the order of $100,000 per annum. His claim of depression for this reason is difficult to describe in restrained terms.
Similarly, Sheldrick claimed damages based on loss incurred and damage suffered as a result of WTPHK not providing the necessary work permits and visas for his employment in Malaysia. In consequence, he said, he and his family were forced to leave Malaysia every two to three months for a few days and then return, to satisfy immigration requirements. Sheldrick claimed that these trips were extremely stressful and that he feared for his family's safety while passing through Malaysian immigration control. I found these statements to be somewhat less than candid. Sheldrick himself agreed that he and his family used these `outstation' trips to holiday at Asian resorts and on one occasion they travelled home to Australia to visit his family and attend a wedding. At all times he carried the card of a member of the KLIAB whom he could contact in the event of difficulties with immigration at the airport. It seems that he may also have carried a letter explaining his identity and bona fides. I accept that at times the requirement to leave the country may have been an inconvenience, and this is attested to by the contemporaneous letters to the KLIAB, written by Sheldrick, asking them to obtain the appropriate visas. Nevertheless it is my view that Sheldrick's credibility generally was damaged by his evident willingness to inflate his claim for damages by overstating the gravity of his problems.
5.2 Lowndes
Lowndes' account of the corporate structure of the Partnership, and his highly technical hair-splitting account of which entity was doing what, especially his equivocation and ambivalence about which company met in Melbourne on 1 April 1995 and purported to dismiss Sheldrick summarily, and what was decided then, were at best reconstructions in hindsight of what he would have liked to happen or believe. Much of this evidence was unlikely to be true, as will become clear later when these matters are dealt with in more detail. Moreover, Lowndes' attitude to Sheldrick in connection with and after the dismissal and, as already mentioned briefly, his effort to cast onto the Malaysians the weight of responsibility for the dismissal contrary to the facts, did not cast Lowndes in a good light.
5.3 McHardy
McHardy was in a difficult position. He has remained employed by the Partnership and manifested an obvious desire to please and give evidence favourable to them, particularly in relation to his evidence as to the specific corporate entities which make up the Partnership and his understanding of the operation of the entire group. It was clear that his understanding prior to giving evidence was that he had been employed by a single employer for the entirety of his 13 years with the Partnership, but by the time he came to the witness box, he had been told or come to believe that this evidence was not favourable to the respondents. The result, in my opinion, was that his evidence in this regard was contrived, in much the same way as Lowndes' evidence on the same point was not credible. Although he probably had some sympathy for Sheldrick at the time of the dismissal, even if he did not especially admire his people-handling skills, my impression was that McHardy's evidence was slanted towards the respondents whenever he had to supplement his actual memory with speculation or reconstruction.
5.4 Kho
I was impressed by the honesty and forthrightness of Kho's evidence. He was not evasive and displayed a refreshing willingness to answer as best he could the questions put to him. Of course he had no direct interest in the result of the litigation. Where there was a conflict, I preferred his evidence to that of Lowndes, McHardy or Sheldrick.
5.5 Other witnesses
Wright, Philip Johnstone (WTP Aust company secretary), Amnah Shaari (a Malaysian immigration consultant used by WTPHK) and Roderick Brooks (another immigration consultant) all attempted, in my view, to recollect the events in question as best they could, although they too suffered from the disability of having to recall minutiae several years old. It was apparent that where genuine recollection may have been lacking, those witnesses who maintain some interest in the litigation (for example, by virtue of the fact that they are still employed by the one of the respondents) were more likely to recall events in a light favourable to the party calling them. The expert accountants, Scot Menzies and Robin Humphreys, no doubt gave evidence to the best of their professional ability, but each was asked to make certain assumptions by the party who called them, resulting in a differentiation in quantifying Sheldrick's claims which did not always reflect indisputable facts.
6. CONTRACT
6.1 Who employed Sheldrick?
Although it did not become entirely clear to me why this question was so hotly disputed in relation to the claim in contract, the matter requires determination if only in deference to the emphasis placed on it by the parties. It was common ground that Sheldrick was employed by WTP Aust until March 1994. Sheldrick submitted that he continued to be employed by WTP Aust thereafter and that his relocation to Asia was in reality a secondment, rather than a cessation of employment with WTP Aust and commencement with WTPHK. The respondents claimed that from 11 March 1994 or thereabouts, Sheldrick's employment with WTP Aust was terminated and that he was then employed solely by WTPHK. Although Sheldrick submitted that the certificate was inconclusive and inconsistent with the true nature of the employment relationship, the respondents' argument relied in part on a group certificate lodged by WTP Aust in respect of Sheldrick's employment in 1994 declaring a cessation of his employment with WTP Aust on 11 March 1994. It is unlikely that his employment by the Partnership lapsed for the three weeks between then and when he started in Malaysia, so that that date may not be precisely correct.
Nevertheless, the letters of 21, 25 and 26 April 1994 between Sheldrick and Lowndes are incontrovertible evidence that Sheldrick entered into an employment contract with WTPHK on or just prior to his arrival in Malaysia. The first of these letters referred specifically to WTPHK and, as Sheldrick obviously read this letter carefully, as evidenced by his detailed and informed queries in his letter to Lowndes on 25 April 1994, there can be no doubt that Sheldrick was entering, and was aware that he was entering, into a contract with that company. Further, WTPHK filed an `Employer's Return of Remuneration and Pensions' in respect of Sheldrick's employment for the period from 1 April 1994 to 31 March 1995. Also, the termination letter that Sheldrick received in 1995 purported to terminate his employment with WTPHK, and the correspondence he sent to Lowndes regarding the termination and severance payments was addressed to WTPHK. In the result, Sheldrick accepted at the hearing that there was an employment relationship between himself and WTPHK from April 1994.
The only question, therefore, is whether Sheldrick's employment by WTP Aust continued, in tandem with his employment by WTPHK, while he was in Asia. Sheldrick submitted that employment by WTPHK was not inconsistent with remaining employed by WTP Aust throughout the period he was in Malaysia, that WTPHK was in reality merely a vehicle utilised by WTP Aust for accounting and administrative purposes, and that he had in fact merely been seconded to WTPHK. In fact, the evidence led me to doubt whether he ever turned his mind to this matter at the time, if only because in relevant senses the agreement to relocate was apparently more beneficial to him than his latest contract with WTP Aust prior to his relocation, entered into on 2 December 1992, which amongst other things provided for termination on one month's notice. If Sheldrick had merely been seconded to WTPHK, and was actually employed by the two companies at the same time, WTP Aust could presumably have summarily dismissed him for misconduct committed while he was employed by another member company of the group, especially by one of its subsidiaries. If that event had occurred and the dismissal was subsequently found to be unjust or unfair, he may well have been limited to one month's pay in lieu of notice with no available argument about a four year term or a long term commitment. In addition, of course, Hong Kong tax rates were substantially below Australian rates.
The evidence relied on to support Sheldrick's contention that he remained employed by WTP Aust was, firstly, that his superannuation arrangements remained in place in Australia in that after his move to Malaysia, his superannuation contributions continued to be made in Australia, by way of salary sacrifice or deduction from his Malaysian salary, to the same superannuation fund he had contributed to until 1994. Johnstone's evidence was that this superannuation arrangement was not indicative of a secondment but a normal arrangement made for or with employees who left the country to take up employment with a different entity in the group. Further, he stated that he had a conversation with Sheldrick prior to his departure in which he informed Sheldrick that his employment with WTP Aust would cease when he was paid his leave entitlements and that Sheldrick had replied that he understood that to be the position. Sheldrick denied that there was any mention of termination by WTP Aust and that he thought he was an employee of a global entity, W T Partnership.
Secondly, an internal memo from Colley described Sheldrick's move to Asia as a secondment:
...
RE: GRAHEME SHELDRICK - SECONDMENT OVERSEAS
Although the "jungle drums" may have already begun to beat in respect of Graheme's pending move, we felt that you should be made aware of the circumstances surrounding our decision to ask Graheme and his family to relocate themselves in S.E. Asia.
...
Sheldrick also relied on the fact that this memo, written by a director of WTP Aust, referred to `our decision' to ask Sheldrick to relocate. Sheldrick submitted that this reference, in addition to the use of the heading `secondment', made it clear that Sheldrick was to remain employed by WTP Aust.
Thirdly, in addition to his claim, despite Johnstone's evidence to the contrary, that he was not informed that his employment with WTP Aust would cease, Sheldrick said that he was never aware that Lowndes was representing any entity other than WTP Aust during negotiations regarding the move. His confusion over Lowndes' capacity was compounded by the fact that the letterhead on which correspondence was written prior to Sheldrick's move did not identify a specific corporate entity, although in a number of cases the letterhead did identify a Hong Kong office address. Although it would thus have been difficult for Sheldrick to determine for himself on whose behalf Lowndes was acting, obviously if he had ever turned his mind to the question, he could simply have inquired as to the position or even insisted or made it a condition of relocation that his employment with WTP Aust was preserved or continued.
Lowndes claimed that at all times during the course of the negotiations with Sheldrick over the move to Asia, he was representing WTPHK, a fact of which, he further stated, Sheldrick was well aware given his experience in the Philippines when he became aware of Lowndes' various roles in the Asian practice. He also knew of the animosity over the relocation proposal between the Australian practice which was opposed to it and the Asian practice which, through Lowndes, was attempting to secure his services.
Finally, Sheldrick submitted that it was clear that WTP Aust remained his employer in reality because it was WTP Aust which made the decision to terminate his employment in its resolution at the meeting held on 1 April 1995 in Melbourne. This evidence, Sheldrick argued, destroys the case of the respondents that he was employed only by WTPHK. The respondents submitted that no such resolution was passed at the meeting on 1 April 1995 and that WTPHK made the ultimate decision to terminate Sheldrick's employment. Although it is relevant only to the question of the identity of Sheldrick's employer (and the parties' credibility), this issue was argued at great length and requires further consideration.
6.2 The Melbourne meeting
As already set out, the minutes of the Melbourne meeting which Lowndes attended on 1 April 1995 record the passing of a resolution that Sheldrick's employment be terminated on the basis of the Kho office incident. In his first affidavit dated 4 October 1996, Lowndes gave evidence that the meeting, which he then termed a meeting of the directors of WTP Aust, passed a `resolution' to that effect. As all the directors present at the meeting were directors of WTP Aust, this series of events would, prima facie, establish that it was WTP Aust who made the decision to terminate Sheldrick's employment, and may give rise to the inference that WTP Aust was therefore Sheldrick's employer.
However, in his later affidavit of 23 June 1997, Lowndes sought to clarify the situation by stating that the meeting was not a meeting of the directors of WTP Aust but rather a meeting of the Management Executive Committee of WTP Aust at which he was present by invitation. There was no written record of who was in attendance or in what capacity, and no specific reference in the minutes to Lowndes being present by invitation. Lowndes stated that the meeting's interest in the Kho incident stemmed from WTP Aust's majority shareholding in WTPHK through WTP Asia, and that WTP Aust had not `resolved' to terminate Sheldrick's employment in the technical sense of the word but had rather expressed the consensus opinion of the Management Executive Committee on the issue.
This shift in the evidence of Lowndes was not unfairly termed `a fairytale' by Sheldrick's counsel. It was sought to be justified by the respondents as being a clarification of the precise corporate structure of the group, after insufficient attention to detail and precision had been paid to the matter by Lowndes in his first affidavit due to the fact that the issues were not yet crystallised and the importance of such issues of corporate identity was not manifest. I do not understand, even now, why this matter was of such importance to the case in contract as to call for such an elaborate reconstruction of incomprehensibility. It will suffice if I merely reject the explanation and Lowndes' evidence of it. It is a telling fact that Lowndes' affidavit expanding these claims was not filed until the beginning of the hearing.
In my view, the initial lack of attention to detail by Lowndes in setting out the corporate structure and management of the group reflected not a failure to appreciate the issues in the litigation but at best a lack of understanding of the legal structure of his own group and its various entities. At worst it was an attempt to present himself in the most favourable light. It was probably both. Ignorance about the group's structure seems to have been common to almost all employees and directors of the various companies all over the world, no matter their seniority or years of service. One stark example of Sheldrick's misunderstanding of the situation was embodied in the exchange of letters regarding his employment in Malaysia. The letter of appointment closed: "We welcome you as a member of WTP...". Sheldrick replied: "Last statement of letter ? - I am in my 15th year of membership with WTP!". Significantly, Lowndes responded by stating in his reply of 26 April 1995 "Last statement - refers to WTP (Hong Kong) Limited (see paragraph one)." McHardy as well was quite uninformed and confused about the situation and Johnstone, the company secretary of WTP Aust who should have known, did not assist. However, while this odd and quite unsatisfactory situation may have significant ramifications for the corporate governance of the group, it is not directly relevant to which entity or entities employed Sheldrick.
After resiling from the proposition that the Melbourne meeting resolved to terminate Sheldrick's employment, Lowndes attempted to explain that the actual decision to terminate was taken by the Board of Directors of WTPHK. However, there was no record of any meeting at which such a decision was made, an anomaly explained by Lowndes as that he had circulated the relevant material to the various WTPHK directors and discussed it with them individually, after which a `cobbled together' meeting on 15 or 16 May 1998 determined that Sheldrick's employment should be terminated. I am unable to accept this very strained and extreme explanation. It is most unlikely that the summary dismissal of a longstanding senior employee would have occurred in this way. In my view, the real decision to terminate Sheldrick's employment was made on 1 April 1995 in Melbourne by the Board of Directors of WTP Aust, or the Management Executive Committee on its behalf, and this decision was then adopted by WTPHK and implemented by Lowndes in its name. Although WTP Aust evidently thus had significant control over and participation in the affairs of WTPHK, the fact is, however, that WTPHK is a separate legal entity with whom Sheldrick had a contract of employment.
6.3 The influence of WTP Aust
Lowndes admitted in his first affidavit that the Management Executive Committee of WTP Aust maintained a close interest in the day to day affairs of WTPHK. He later resiled from that proposition and maintained that any interest was because of WTP Aust's 80% shareholding in WTPHK through WTP Asia. I have no doubt that WTP Aust exercised a great deal of control over the activities of its subsidiaries. In fact I believe that if WTPHK had formally decided to terminate the employment of Sheldrick, approval or ratification by WTP Aust, whether by the Management Executive Committee or by a meeting of the directors, would have been sought before it was put into effect. If this were not the case, it would be difficult to understand why a meeting of WTP Aust, whichever of its organs met in Melbourne on 1 April 1995, was the first forum where the matter of Sheldrick's dismissal from WTPHK was considered.
This question may also be examined from the other end. If Sheldrick had wished to terminate his employment with the Partnership, he would undoubtedly have approached, and had to approach, WTPHK, doubtless through Lowndes. In all likelihood, the question would have been referred to WTP Aust for determination but in law and reality it would be a decision that would have to be taken, at least jointly, by or in the name of WTPHK as his sole or joint employer. The fact that Sheldrick addressed all correspondence regarding the dismissal to the Board of Directors of WTPHK through Lowndes, including the correspondence regarding an acceptable severance arrangement, certainly reflects an understanding on his part that his only employment arrangement was with WTPHK and that he did not maintain a separate ongoing relationship with WTP Aust. Although he may have misunderstood the arrangement initially, it was certainly pointed out to him on 26 April 1995 and he did nothing about it. Moreover, at no time after his dismissal did he ask to resume his supposed contract of employment with WTP Aust or call upon WTP Aust to provide him with work or pay.
At the end of the day, however, the question of who employed Sheldrick is strictly a legal matter to be determined in light of all of the evidence and circumstances, and the ignorance or misunderstanding or mistaken perceptions of people as to the operation of the corporate group are of little moment. It is difficult to comprehend why the Partnership would utilise an arrangement whereby Sheldrick was in fact employed by two different companies or why he would want such an arrangement. After all, the contract he entered into with WTPHK was substantially similar to those he had operated under while employed by WTP Aust, albeit with significant improvements from his point of view.
To my mind, the only reasonable explanation is that his contract with WTP Aust ceased and was replaced by a new contract with WTPHK. The fact that Sheldrick and many others, including all or most of the directors of the various companies, saw the Partnership as a single global entity is not relevant. Ultimately, the evidence that Sheldrick relied on to support his contention that he remained employed by WTP Aust was simply a number of individual factors which were either equivocal or not consistent with the proposition. There was no direct evidence of employment with WTP Aust and the group certificate directly supported the more likely proposition that his employer changed in March 1994 or thereabouts from WTP Aust to WTPHK. I find that there was no contract of employment between WTP Aust and Sheldrick after March 1994.
6.4 The terms of the contract with WTPHK
So far as Sheldrick's contract of employment with WTPHK was in writing, it was set out in the series of letters which passed between Sheldrick and Lowndes in April 1994. The respondents claimed that these letters contained the entirety of the agreement, while Sheldrick submitted that other terms had been incorporated by oral representations made by Lowndes during the course of the negotiations over the move to Asia.
6.4.1 Four year term or long term commitment
Sheldrick contended that the contract contained a term that he would be employed in Kuala Lumpur by WTPHK for four years, or alternatively that WTPHK had a long term commitment to him. Sheldrick submitted that only such a term would reflect the intentions of the parties and give meaning to the agreement. To establish this claim, he pointed to his persistence in requiring the Partnership to make a long term commitment to him regarding his move to Asia, which Lowndes recognised in a memo to Colley dated 26 January 1994:
The critical factor from a G.S. standpoint is a long-term commitment and we will need to give G.S. and his family a definitive date that they can organise themselves around.
On 11 February, in response to a request for clarification of his position from Sheldrick, Lowndes provided the `letter of comfort' earlier extracted. Sheldrick claimed that this letter had contractual significance. In his written submissions, he stated:
The letter was written with an appreciation of the significance so far as concerns Sheldrick of a long-term commitment and that is precisely what the letter provided by conveying "that you would be based in Kuala Lumpur for that period". The letter refers to "a period of approx. 4 years". It is clear that the letter was intended to convey to Sheldrick the long-term commitment which he was seeking by reference to the period of 4 years.
In my view, this submission overstated the significance of the letter by taking several phrases out of context. The letter does refer to Sheldrick being based in Kuala Lumpur for "that period", but the period being referred to is WTPHK's engagement on the airport project. The letter "envisages" an engagement of 4 years for the Partnership and that Sheldrick would be employed in Asia for the duration of the project, but there is no direct commitment to Sheldrick for 4 years. However, it is clear that the Partnership intended that Sheldrick be given some assurance that his employment in Asia was for the long term, if for no other reason than that his whole family was relocating and that his children needed security for their education. Further, although Lowndes gave evidence that he was not in a position to give any employee a four year contract due to the nature of the business in which the Partnership was engaged, and that no other employee had ever been given such a contract, he did not deny that he had several conversations with Sheldrick before his relocation in which he stressed the Partnership's long term commitment to Sheldrick.
The respondents relied on the fact that the written agreement contained no reference to Sheldrick's period of employment being for a minimum of four years. They placed considerable weight on the fact that Sheldrick did not raise the question of including a precise period in the contract, despite his detailed and careful scrutiny of the agreement evidenced by his letter of 25 April 1994 which sought to clarify several other points. The respondents also submitted that the inclusion in the written agreement of a term giving both parties a right to terminate on three months' notice was directly inconsistent with any term requiring employment for four years. Of course his failure to mention the matter specifically may also be explained by a belief that the commitment was already clear enough, but when given an opportunity to proffer that explanation, Sheldrick did not do so, preferring to argue that the three months' notice was only to have become operational after the expiration of the four year term. His view was that any contrary construction would have the effect of completely denying the intentions of the parties.
In my opinion, neither the letter of contract nor the letter of appointment could be said to incorporate a four year term into the employment contract. I accept that both parties had the intention during the negotiations that Sheldrick would relocate to Asia for the long term and that there were conversations to that effect during the negotiations. Nevertheless, the contract which Sheldrick entered into did not contain any specific reference to a fixed term, and in the detailed queries raised by Sheldrick, there was no mention of, let alone insistence on, any amendment to the contract to include a term that reflected what Sheldrick now claims was the common contractual intention of the parties. Instead, there was the explicit reference to termination being available to either party on three months' notice. Even this term reflected to some extent the gravity of relocating overseas, as it tripled the notice required to be given under his previous contract with WTP Aust.
In the event, this term operated to Sheldrick's disadvantage, but in different circumstances too numerous to list, it may also have operated to his benefit. Examples include if his family had been unhappy in South East Asia and wanted to leave, or if for other reasons they had to return home, Sheldrick would have been able to accommodate this situation on three months' notice or in exceptional circumstances even less. In evidence he dismissed such possibilities as speculative, which they were, but his refusal to confront the possible consequences of such events coming to pass and his insistence that the four year term took priority over all else rendered his arguments quite untenable. It is obvious that he could not have been held to a four year term if for reasons of, say, serious illness, the family had had to return to Australia.
Given the circumstances, I cannot draw a conclusion that the parties' intentions about the length of service were anything other than what was embodied in the letters of 21, 25 and 26 April 1994. I find that Sheldrick's contract of employment with WTPHK did not contain a term that he would be employed for four years. Although I do not doubt that the Partnership had a long term commitment to him, the contract made this commitment terminable on 3 months' written notice.
6.4.2 Chinese New Year bonus
Sheldrick claimed that his employment contract also contained a term that he was entitled to be paid a bonus equal to his monthly salary of MR40,000 on the occasion of Chinese New Year. He claimed that Lowndes raised the matter while he and his wife were dining in Hong Kong with Lowndes and his wife, during the Sheldricks' initial visit in January 1994. Sheldrick claimed that the conversation had contractual significance and that the Chinese New Year bonus became a term of the contract from that point in time. He submitted that the significance of the conversation was heightened by the context in which the representation was made. Lowndes had apparently informed Sheldrick that he could make a great deal more money in Asia than in Australia and that he would benefit enormously from moving up there. Sheldrick contended that a key factor in persuading him to make such a major move was this financial benefit, and therefore that the large bonus was especially significant to him. For his part, Lowndes denied telling Sheldrick that he would receive such a bonus and gave evidence that no one except local Asian nationals received it.
I find that there was no term in the contract that a Chinese New Year bonus was payable. Two matters were paramount in my coming to this conclusion. The first is that the written contract contains an express provision in conflict with the suggested term, namely that a bonus is payable at the discretion of the Board of Directors of WTPHK. This provision is similar to the term relating to bonuses that had been incorporated into Sheldrick's employment contracts since he began with the Partnership and pursuant to which he had been paid an annual bonus on many occasions. Sheldrick did not query this written term in his letter of 25 April 1994 and did not seek to have the term amended to reflect what he now claims was his understanding of the arrangement as to bonuses.
Secondly, Sheldrick alleged that at the time Lowndes made the representation which led to the term being included in the contract, Mrs Sheldrick was also present. It is significant that she did not give evidence. Neither was McHardy asked to address the question. Further, there was no dispute that the local custom was anything other than as described by Lowndes as could have been attested by other witnesses. Accordingly, it is unlikely that Lowndes would have led Sheldrick to believe that he would be paid a Chinese New Year bonus.
6.4.3 Work permits and visas
The alleged term as to work permits and visas is in a different category. For a job that requires a person to work in a foreign country, it would be an inherent requirement that the correct arrangements be made to allow the person to be employed legally and to move in and out of the country without undue difficulties. Lowndes did not deny that in a discussion prior to the letter of comfort he told Sheldrick that the Partnership would take care of the appropriate visa arrangements. Accordingly, although the written contract did not expressly refer to it, I find that it did contain a term that WTPHK would procure the appropriate work visas and permits to allow Sheldrick to work in Malaysia, without needing to visit "outstations" every few months.
7. BREACHES OF CONTRACT
7.1 Notice
Sheldrick claimed that his summary dismissal by the respondents was in breach of the term in his contract regarding notice. Given my findings as to the terms of the contract, WTPHK was required to give Sheldrick three months notice of termination. However, the contract also included a term that misconduct or unprofessional behaviour on the part of Sheldrick would be cause for summary dismissal. The respondents submitted that Sheldrick's dismissal was in accordance with this provision, on the basis of a continuing pattern of behaviour that aggravated the Partnership's Malaysian partners and threatened the company's position in the consortium, and culminating in Sheldrick breaking into Kho's office on 28 March 1995. Sheldrick denied engaging in misconduct or unprofessional behaviour and claimed an entitlement to three months' notice.
7.2 Misconduct and unprofessional behaviour
The respondents submitted that although in technical terms Sheldrick performed adequately in Malaysia, several instances occurred in which his behaviour and manner created problems with JUB5 and the KLIAB. They submitted that the relationships in the consortium were fragile and sensitive, given the way it had been created, and that the Partnership's position in the consortium was, at times, tenuous. There was evidently tension between the local partners and the Partnership, both because of concerns of the locals over disparate remuneration and the need for the overseas personnel to be involved in the project at all. McHardy also gave evidence of the lack of cohesion and cooperation between the members of the consortium, stemming from the lack of a formal consortium agreement and the consequent lack of a management structure.
Although the respondents admitted that Sheldrick was not the cause of these problems, they contended that against this background of tension and uncertainty over the Partnership's position, he exhibited behaviour that only exacerbated the problems. The particulars provided by the respondents of Sheldrick's unprofessional behaviour were:
(a) In the course of the performance of his professional duties at Scheduled Meetings of the consortium behaving in a manner calculated to cause offence to the Malaysian representatives on JUB-5 by:-
(b) Interjecting when Malaysian representatives were talking;
(i) Expressing himself in an overly forceful manner.
(ii) Failing to develop a relationship of trust and cooperation with the representatives of JUB-5.
(c) Creating a relationship of antagonism, tension and distrust with the representatives of JUB-5 and in particular with Mr Kho.
(d) Failing to act in accordance with the instructions of his employer to foster the relationship in (b) above and to prevent the relationship in (c) above.
(e) Failing to heed the warnings and directions of his employer that:-
(i) his behaviour at Scheduled Meetings was inappropriate and causing offence to the Malaysian representatives of JUB-5 and damaging the position of his employer in the consortium; and
(ii) he modify his behaviour accordingly;
(iii) there was tension between the representatives of JUB-5 and the WT officers; and
(iv) he act in a manner so as not to offend the Malaysian representatives and thereby diffuse the tensions.
(f) Breaking into the office of Mr Kho.
Lowndes gave evidence to support particulars (a) to (e), stating that not only did this behaviour infuriate the Malaysians and contribute to the tensions between the consortium members, but that he had explained this to Sheldrick on numerous occasions, instructing him to deal with the local partners in a particular way which would not upset or antagonise them. Despite these warnings, Lowndes claimed that Sheldrick persisted with his offensive behaviour. In cross-examination, Lowndes could not specify any particular meetings or occasions when Sheldrick had behaved in this way or pinpoint particular times when he had counselled Sheldrick that his behaviour was inappropriate and directed him to modify it. His evidence was of an undated pattern of behaviour amounting to unacceptable conduct harmful to the Partnership and the project.
While, as earlier mentioned, Sheldrick admitted to some of these allegations, especially (b), he said that he had been acting in good faith in the best interests of his employer. Further, without denying that there were some difficulties between himself and some of the Malaysian partners, Sheldrick stated that there was no evidence of any dissatisfaction expressed by the KLIAB, and that Lowndes' evidence of `continued offensive behaviour' was an exaggeration which should not be accepted. Kho gave evidence of some difficulty in establishing a day to day working relationship with Sheldrick but stated that there was no personal problem between them. The respondents actually conceded that even if particulars (a) to (e) were accepted, they would not constitute cause for summary dismissal, even cumulatively.
Having considered all the evidence relating to these matters, and having heard the witnesses, I have formed the conclusion that Sheldrick exhibited some behaviour towards the Malaysian partners in JUB5 which understandably upset them and which was culturally insensitive and perhaps personally offensive. While he was spoken to by Lowndes in general terms about such behaviour, I believe that the Malaysians were not dissatisfied with Sheldrick's performance and were prepared to tolerate his brashness, even if they complained about it from time to time and were quite happy when Lowndes decided to replace him with Williams. McHardy, of whom the evidence disclosed no Malaysian criticism, was to be replaced at the same time.
7.3 The break in
The most serious particular of unprofessional behaviour and the only particular of misconduct provided by the respondents was the break in of Kho's office by Sheldrick. The respondents submitted that this incident justified summary dismissal pursuant to Sheldrick's employment contract. In addition to the undisputed facts concerning the incident earlier summarised, there were a large number of associated issues raised and argued at length. All were relevant only for their impact on the question of whether the break in constituted misconduct, and the weight to attach to each individual finding is therefore minimal, despite the fact that the cross-examination on them occupied a significant portion of the hearing. The issues were:
7.3.1 Sheldrick's motive for breaking into the office
Although the respondents submitted that forcing entry to a locked office of another constituted misconduct no matter what the reason for doing so, they did seek to prove that Sheldrick entered Kho's office for a nefarious purpose so as to lead to an inference that his action was calculated misbehaviour. Sheldrick maintained that his motive was to retrieve the PTC1 conditions of contract, a standard reference work which contained the general contractual conditions for one of the major contracts on the airport project, which he required in order to finish the task on which he was engaged that afternoon. The respondents submitted that Sheldrick had his own personal copy and so would not have needed to obtain another one by entering Kho's office.
Kho gave evidence that each senior member of the consortium had his own copy of the contract. He stated that Sheldrick and his secretary had both informed him of this fact when he began work on the project and that he then proceeded to obtain a copy for himself. Sheldrick maintained that he did not have his own personal copy and that in fact there was only one copy in the office at that time. He also gave evidence that the various folders containing the technical data for the project were scattered throughout the office area and in the individual offices.
Although it seems likely that there would have been more than a single copy of such a basic reference work, I am not satisfied, on the balance of probabilities, that Sheldrick had his own personal copy at this particular time. Even if he did possess his own copy, I am not satisfied that it was immediately available to him in his own office at the time. In my view, the copy in Kho's office was probably the nearest and most easily accessible edition available to him.
The respondents sought to establish that Sheldrick was `snooping around' because he felt threatened by Kho. Although, upon gaining entry, Sheldrick called in McHardy to look at something on Kho's desk, it was not immediately clear what Sheldrick might have hoped to find in Kho's office that was not readily available to him in the normal course of operations, as he was one of the most senior personnel in the consortium. The respondents did not elaborate on the possible motives Sheldrick might have had for `snooping around' and I have not been able to discern any. I could likewise find no evidence that Kho represented any threat to Sheldrick or his position, or that Sheldrick believed or would have had any reason for believing that he did. Moreover, I do not understand how breaking into the office would have been able to assist the resolution in Sheldrick's favour of any such perceived conflict. There is room for doubt as to whether forced entry to Kho's office was only to enable Sheldrick to get immediate access to the contract document, but the evidence is not conclusive and there is an absence of any viable alternative motive.
7.3.2 Ease of access to Kho's office
Sheldrick sought to establish that the removal of the glass viewing panel from the door to gain access was neither unusual nor difficult and was a method of access to the individual offices which had previously been used by both him and McHardy. McHardy agreed that he had used the method to enter locked offices previously but stated that he had never entered Kho's office in this way. Sheldrick also conceded that he had never before utilised this method to access Kho's office.
There was a large amount of evidence regarding the logistics of the removal of the glass viewing panel and the lengths to which a person had to go in order to perform that operation but none of this evidence was particularly enlightening or even relevant to anything of significance. McHardy claimed that it was necessary to use some sort of tool in order to remove the beading holding the glass panel in place. Sheldrick maintained that the beading came out in one piece quite easily and that the removal did not require any form of tool. Kho's evidence was that the panel was not very well secured. Given the basic consensus that the panel was only lightly fixed and that the method used on this occasion had previously been used by both Sheldrick and McHardy, it seems that gaining access in this way was not difficult.
7.3.3 Protocol for accessing offices
Sheldrick submitted that the consortium operated as a single unit, that the sharing of information and resources was therefore normal and acceptable, and that this arrangement extended to the accessing of each other's office for the purposes of work. The respondents maintained that it was unusual and reprehensible for one employee to access the office of another and that there was no `understanding' as to the use of offices in this way, especially as between a member of WTPHK and a member of JUB5.
There was lengthy cross-examination of a number of witnesses on the question of the consortium operating as a single unit. Sheldrick's evidence was encapsulated thus:
Now, in relation to the question that you were asked about the position of those offices, what was your state of mind as to the unity or divisions that existed within that square? --- We were all working together on one project as one unit.
Lowndes gave evidence that the consortium was ideally to work as one unit but that there was a distinct separation between WTPHK and JUB5. Two of the individual offices were specifically dedicated to WTPHK personnel and one to JUB5 personnel. Lowndes also sought to maintain that there was no conflict in the concept of wanting the consortium to operate as a single unit while maintaining some segregation in the office area. Similarly, McHardy agreed that the consortium was operating as a unit on one project for the KLIAB but that there was some segregation in the office area. Kho gave evidence that the consortium was not operating as a team and that there had been a lack of cooperation when he began work there. However, he accepted that if Sheldrick had required some item for the completion of a work task, he would have been entitled to retrieve it from anywhere within the consortium office area.
In my view, it is not a contradictory proposition that, despite their partnership, there was some distinction between the space allocated to WTPHK and JUB5. I accept Sheldrick's evidence that the consortium was engaged on one project in a partnership, and that WTPHK and JUB5 were working together in the interests of their client, the KLIAB. On the evidence, there could be no criticism of an employee of one of the partners entering the office of the other partner's employee in the common interest but unless there had been deliberate obstruction of the work which was not alleged or proved, breaking into the locked office of any fellow employee could not have been, and was not, within the scope of the arrangements within the partnership. Breaking into the office of a Malaysian by an Australian was in the circumstances thoughtless, insensitive and understandably unacceptable.
7.3.4 Keys to the offices
Sheldrick, Kho and McHardy each possessed a key to his own individual office and their shared secretary also possessed a key to each office. At the time Sheldrick broke into Kho's office, the secretary's keys were apparently locked in the drawer of her desk. The use that might be made of these keys was argued at length. Kho's evidence was that the keys were for the use of the secretary in circumstances where the occupier of the office was not available. Sheldrick sought to have the inference drawn that the general availability of the keys showed that access to each office by the others was commonplace and not unusual.
I cannot draw this inference. The availability to the secretary of keys for the offices seems to me to be a necessary precaution for the smooth running of the office. The fact that they were locked in her drawer when she was not present indicates that their function was not to be generally available for the use of the staff in the office, but rather to be available in the case of some unforeseen contingency during the working day when their use might be authorised by the occupier of the office or demanded by the exigencies of the problem at hand. The fact that Sheldrick had to justify an alternative method of access by his lack of a key or direct access to the key suggests that it was not expected that he would enter the locked office of someone else. Of course, commonsense and amicable working relations might have dictated an arrangement between the parties, or imposed by the leader of the team, for a key to be always available to senior personnel working out of hours.
7.3.5 Office hours
That conclusion leads to another contentious issue, namely whether the break in occurred during office hours. The respondents argued for an inference that, because it took place out of normal office hours, Sheldrick was engaged in some sinister escapade. I have said that I could discern no such impropriety. However, the evidence was in any event equivocal both as to what the office hours were and at what time the incident occurred. Sheldrick maintained that official hours were between 8:00am and 6:00pm, as set out in a memo to consortium staff in 1994 which had not been varied since. Kho stated that Sheldrick invariably left the office before he did, usually between 4:30pm and 5:00pm. Kho also stated that Hasbullah told him that he had witnessed the incident after his evening prayers, which usually finished between 5:30pm and 6:00pm. Sheldrick stated that he had been working a little later than usual because he was waiting to meet a colleague to go to a function at 6:00pm.
Although I give the matter very little importance, much less than the parties, I find that the incident did occur outside of `normal' office hours, but not particularly late. It was not as if Sheldrick had made a special trip into the office in the middle of the night wearing a trench coat, balaclava and gloves in order to break into Kho's office. I do not find anything unusual about the fact that Sheldrick was working in the office outside of `normal' office hours, despite Kho's evidence about Sheldrick's usual departure time. It is particularly understandable that he would remain in the office when he was to attend a function at 6:00pm. A further factor that weighs in Sheldrick's favour on this matter is that according to the evidence which I accept, he was aware that Hasbullah was in the consortium office area and would have witnessed his entry into Kho's office. McHardy's evidence was that Sheldrick did not react at all to his pointing out, when they were both in Kho's office, that Hasbullah was present and would have seen them.
On balance, these peripheral issues do not show that Sheldrick's conduct was anything other than what he submitted: an innocent, if as I would add careless and insensitive, attempt to gain access to a reference work he required to finish or assist with the task on which he was engaged. However, the respondents submitted that even if this were the case, and all these peripheral issues were determined in Sheldrick's favour, the incident still constituted misconduct because of the effect it had on WTPHK's position in the consortium. Sheldrick agreed in cross-examination that if the incident had placed WTPHK's position on the KLIAB project in jeopardy, then he would have been guilty of misconduct.
7.4 The context and effect of the incident
The respondents submitted that two factors contributed to and aggravated the resultant effect of Sheldrick's behaviour. Firstly, in the context of the Malaysian business environment in which the incident occurred, the break in was a more serious transgression than if it had occurred in Australia. Secondly, in light of the Partnership's apparently tenuous position in the consortium, outlined earlier, and Sheldrick's previous behaviour, the incident had a more dramatic effect than it otherwise would have had. Each side sought to adduce evidence of the events that occurred in the days and weeks following the incident which supported their version of the reaction to the incident.
The evidence of Lowndes and McHardy regarding these events paint a picture of tension and hostility between the JUB5 members and the Partnership, with the unauthorised entry into Kho's office a major focus. Lowndes admitted that he had raised with Sheldrick the possibility of police involvement and had related to him a story about an incident in Libya where a family had been forced to leave the country after a traffic accident. I accept that Sheldrick did not think his actions warranted a reaction of this magnitude and that it was Lowndes who reacted dramatically. McHardy stated that when he arrived at work on the morning after the incident, Kho approached him and said that he had been told that Sheldrick had entered his locked office. McHardy claimed that Kho threatened to call the police and said that he was going to tell the Board of Directors of JUB5. McHardy stated that he then called Lowndes to apprise him of the situation. Kho claimed that McHardy had first mentioned the possibility of calling the police. Kho's evidence was that when he spoke to McHardy on the morning of the incident, he told McHardy that he was going to report the matter to his Board of Directors and leave it to them. In his evidence in chief, he did not mention any discussion of police involvement. However, in cross examination he stated that he recalled McHardy asking him whether he would involve the police to which he had replied that he would leave the matter to his Board of Directors. He stated that he then telephoned Datuk Isahak to report the matter and that Datuk Isahak told him:
We should leave it up to them.
Kho did not mention the incident to Sheldrick, instead leaving it to be dealt with by the board of JUB5 and by WTPHK.
Where the evidence conflicts on the events which occurred in the days after the incident, I prefer the evidence of Kho. He impressed me as far too sensible a man to have even flirted with or floated the idea of a police involvement which must ultimately have proved completely futile, not to mention disruptive and, possibly, publicly embarrassing. Accordingly, I find that the question of police involvement was first raised not by Kho but by McHardy and Lowndes to placate, even ingratiate themselves with, the Malaysians, and the emphasis that has been placed on it in the evidence of the respondents is a misleading attempt to sway the Court into thinking that this incident was more serious and more seriously treated by the Malaysians than it was in fact. As I believe, this tactic was intended to have me draw a conclusion that Sheldrick's misbehaviour had placed the Partnership's survival in the consortium on a knife's edge. The tactic failed.
The respondents also relied on the conversation between Lowndes and Datuk Isahak on 10 April 1995 to show that JUB5 was not prepared to have Sheldrick remain on the project. Sheldrick's letter to Lowndes dated 12 April 1995 showed that Sheldrick was surprised at the reaction of the Malaysians as reported to him by Lowndes, but that he accepted that he might need to be replaced if JUB5 was unhappy. Sheldrick claimed that the letter dated 8 May 1995 signed by the heads of all companies in the JUB5 group seeking his urgent removal from the project, on which the respondents also placed heavy emphasis, had been procured by Lowndes approaching the JUB5 members and seeking their assistance in providing documentary support for the Partnership's decision to dismiss Sheldrick which had been made more than a month earlier but not communicated to Sheldrick. Although Lowndes denied procuring the letter, he did know about the fact such a letter was being circulated and he was extremely interested in ascertaining JUB5's formal position. In cross-examination he stated:
Mr Lowndes, the reason why you wanted that letter was because you had actually sought to obtain it to assist in supporting a case for dismissing summarily Mr Sheldrick; correct?---Datu Isahak told me that they would be writing me a letter when I met with Datu Isahak on 10 April.
In my view, it is difficult to reconcile the fact that the Partnership had already decided, on 1 April 1995, to dismiss Sheldrick, with Lowndes' evidence that the decision to dismiss had been taken because JUB5 had reacted very strongly and sought Sheldrick's removal from the project. It seems more likely that to assuage the feelings of the Malaysians in their general dissatisfaction with WPTHK and to improve his own standing with them, Lowndes informed Datuk Isahak on 10 April 1995 that a decision had been taken to dismiss Sheldrick and that documentation from JUB5 supporting that position would be beneficial in implementing the decision to dismiss. This view is also more consistent with the initial reaction of Kho after the incident, which was to report the matter to his board and then leave it to them, and with the response of Datuk Isahak that Sheldrick's future was a matter for the Partnership.
Consequently, I find that although they were understandably offended, there was no overt dramatic reaction from the Malaysian partners to the Kho office break in incident. That is not to say that the Partnership did not perceive a need to deal effectively and publicly with the incident in order to minimise its effects, but merely that the response to it seems to have been left to the discretion of the Partnership and was not dictated by the Malaysians. I also find that the production of the letter from JUB5 dated 8 May 1995 was at least actively supported by Lowndes in order to bolster the Partnership decision to dismiss that had already been made. In fact, the overall response of the Malaysians to the break in appears to me to have been balanced, courteous and reasonably proportionate to the incident in question. To my mind, the Malaysians displayed a maturity and sophistication that seems to have eluded Lowndes and his colleagues.
7.5 Lowndes' motive for the dismissal
The respondents submitted that it was necessary to terminate Sheldrick's employment to salvage the Partnership's position in the consortium, as his behaviour had placed it in jeopardy. Sheldrick's response was that his actions in no way justified summary dismissal, especially in light of his major relocation to Asia and his fifteen years dedicated service to the the Partnership. The question thus inevitably arose: Why would Lowndes summarily dismiss one of his most competent operators, who was also a friend, if summary dismissal was not justified or required? In my view, it was and would not have been strictly necessary to address this question at all were it not for Sheldrick's attempt to establish a motive on Lowndes' part for his actions. He claimed that Lowndes opportunistically seized on the office incident in order to implement a decision that had already been made by 20 February 1995 to replace Sheldrick on the project in order to secure Lowndes' own position, which was at risk due to the exorbitant fees being charged to the KLIAB by Lowndes for his own services. Although it is difficult to understand how the removal of Sheldrick would secure Lowndes' position, there were several anomalies and unanswered questions which cast doubt on Lowndes' evidence that Sheldrick's dismissal had resulted from the break in.
One related to Lowndes' conduct after the incident. Firstly, he did not conduct any sort of inquiry to establish with any degree of certainty what had actually occurred. His evidence was that he spoke to Kho and McHardy and briefly to Sheldrick, about the incident, although he did not question Sheldrick as to the specific details. Further, he did not seek to obtain any written account of the incident from any of the parties involved. This lack of inquiry would have been unexceptional if not for the fact that Lowndes then proceeded, only two days after the incident, to a meeting in Melbourne which determined that Sheldrick, an employee in the Partnership group for fifteen years, should be summarily dismissed. Lowndes raised the incident at this meeting and was the only source of information regarding what had happened. Amazingly, the meeting sought no other evidence on the matter. Although he sought to deny it, I have no doubt that the meeting's resolution to dismiss Sheldrick was driven by Lowndes. This immediate, decisive and dramatic action from a person whose evidence was that Sheldrick was like a brother to him, does not sit easily with his account of events.
The second anomalous factor was that Sheldrick was not informed of any aspect of the situation. Despite the fact that a decision had been taken to terminate his employment virtually 3 months earlier, Sheldrick was deceived by Lowndes, right up to 16 May 1995, into thinking that no decision had yet been made. Especially during the six weeks between the Melbourne meeting and the letter of dismissal, Lowndes accepted without a hint of demur Sheldrick's repeated professions of commitment and loyalty to him and the Partnership, obviously made in the belief that even if he was to be removed from the airport project, another position was to be found for him in Asia. In my view, this assumption was hardly unreasonable and Lowndes' deceit is very difficult to understand if his version of events is accepted.
Also unexplained was Lowndes' lack of action in attempting to relocate Sheldrick. The respondents made no effort to explain why Lowndes did not attempt to find another position for the person he had worked so hard to bring to Asia and who had moved his family for a long term involvement. Lowndes gave evidence that he organised relocations for employees all the time and that the Partnership was constantly bidding for projects and gaining new work. In these circumstances, where it seemed that any problems with Sheldrick were not technical or professional but were personal and specific to the project on which he was working, it is difficult to see why he could not simply have been relocated. Certain it is that even if JUB5 had required Sheldrick's removal from the project to secure the Partnership's position, they would have been satisfied by his relocation to an unrelated project elsewhere in Asia. It simply cannot be the case that JUB5 could have required Sheldrick's complete dismissal from the Partnership. Lowndes was not able to give an adequate explanation for his failure to act to this end. It could hardly have been the break in alone.
Yet another anomaly was the evidence that Lowndes had engaged in a dialogue with JUB5 that had resulted in a commitment by Lowndes on 20 February 1995 to replace Sheldrick on the project with another member of the Partnership. Lowndes maintained that this arrangement was only nominal and put in place to appease JUB5 while some other arrangement could be negotiated. This too may have been unexceptional if Lowndes had kept Sheldrick informed. However, the first time Sheldrick was told about the possibility of relocation was after the break in, almost 5 weeks after Lowndes first evinced an express intention to remove him and arranged for the transfer of Williams, another Partnership employee, to the project to replace him. What makes the non-disclosure to Sheldrick even more difficult to understand is that at a consortium meeting on 10 April 1995, Williams was actually introduced to the consortium as Sheldrick's replacement. It is not at all clear why Sheldrick, as a senior member of the Partnership and a close friend of Lowndes, could not be told about a plan which would have quite dramatic consequences for him and his family, if Lowndes had a genuine intention to relocate him to a new position.
It is possible, as postulated by Sheldrick, that Lowndes removed him in this underhand fashion in order to secure his own position, but as there does not seem to me to be a causal connection between dismissing Sheldrick and securing Lowndes' position, it seems an unsatisfactory explanation. It would, after all, still have been possible for Lowndes to relocate Sheldrick to another part of Asia, while achieving the same effect on the KLIAB project and solidifying any shakiness in his own position. At the end of the day, however, this theory was almost entirely speculative and unsupported by evidence.
7.6 Conclusion on misconduct and unprofessional behaviour
The evidence as to context of the incident, the effect it had on WTPHK's position in the consortium, and the possible motives of Lowndes for dismissing Sheldrick is neither satisfactory nor unequivocal. However, in the view I have formed of these matters, it is not necessary to draw any conclusions in these regards, other than to note that the anomalies left unanswered cast some doubt on Lowndes' version of events. To the extent that Lowndes' credibility throws light on the legality of Sheldrick's dismissal, the respondents' case was not assisted by these significant weaknesses in its principal protagonist's position.
However, in Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66, Dixon and McTiernan JJ stated at 83:
In the view we take of the circumstances of the case, the motives and intentions of the respondent [employee] become all-important; for the significance and sufficiency as a justification of the other items of misconduct relied upon appear to us to depend upon the truth of his explanation or the bona fides of his acts. Further, the effect to be given to all the acts combined, which have been established against the respondent, must in the end be governed by an estimate of his honesty and motives.
Similarly, in Laws v London Chronicle (Indicator Newspapers) Ltd (1959) 1 WLR 698, Lord Evershed MR stated at 701:
...one act of disobedience or misconduct can justify dismissal only if it is of a nature which goes to show (in effect) that the servant is repudiating the contract, or one of its essential conditions; and for that reason, therefore, I think you find in the passages I have read that the disobedience must at least have the quality that it is "wilful": it does (in other words) connote a deliberate flouting of the essential contractual conditions.
Thus, whether Sheldrick's behaviour constituted misconduct justifying summary dismissal is a question of fact, depending largely on the finding as to his motives and bona fides in breaking into Kho's office, and to a lesser extent in behaving in an insensitive manner toward the Malaysian partners. In my view, Sheldrick's general behaviour was in major part brought about by circumstances arising from the nature of the relationship between the consortium partners of which Sheldrick was not the architect. Albeit driven by some intolerance and impatience at what he perceived to be a lack of competence, leadership and professionalism of the Malaysian partners, he was, in my opinion, motivated, not by malice but by a desire to preserve and improve his employer's position.
I have previously found on the balance of probabilities that Sheldrick entered Kho's office to retrieve a reference work he required for his own work. Having assessed the evidence as to the effect of this action as a factor in the seriousness of his general conduct, I do not believe that it was such as to jeopardise WTPHK's position in the consortium or that his dismissal resulted from it. To the contrary, I believe that the decision to dismiss him had been taken well before this incident and occurred for completely different reasons related to the future of the consortium. Therefore, while Sheldrick's action was thoughtless, immature and unwise, it was certainly not grounds for the summary dismissal of a dedicated, loyal and long-standing employee who had proved his commitment to his employer by relocating to Asia from Australia with his entire family and agreeing to remain there for a significant period. Consequently, I find that Sheldrick did not engage in unprofessional behaviour as particularised by his employer and that, whatever he did, did not provide grounds for his summary dismissal.
7.7 Work permits and visas
Despite repeated requests to the KLIAB regarding the provision of the appropriate work permits and visas, Sheldrick never received them and was required to leave Malaysia every two to three months to re-validate his entry permit. This was clearly a breach of the implied term in his contract that the appropriate permits and visas would be procured.
8. TRADE PRACTICES ACT
Sheldrick also claimed that the conduct of the respondents breached sections 52 and 53B of the Act, in that the representations made to him by Lowndes regarding his employment in Asia were misleading, deceptive and false.
With due abbreviations, the representations were pleaded as follows:
In or about early 1994, WTP Aust and/or WTPHK, by their servant and agent, Lowndes, represented to Sheldrick that WTP Aust and/or WTPHK intended that Sheldrick should relocate to Asia and particularly Kuala Lumpur, Malaysia, as soon as possible, for the purpose of being retained by WTP Aust and/or WTPHK for a period of four years to work in Kuala Lumpur for the Kuala Lumpur Airport Project and that WTP Aust and/or WTPHK had a long term commitment to Sheldrick upon relocation as an employee and that WTP Aust and/or WTPHK would obtain the necessary work permits and visas for Sheldrick and his family.
The respondents argued at the threshold that WTPHK and Lowndes were not subject to the operation of the Act, that without the consent of the relevant Minister (s.5(5)) -- which was obtained -- WTP Aust had no liability for contraventions of the Act which took place outside Australia, and that the relevant conduct had not been `in trade or commerce'. Given my findings on the representations to which I now come, it is not necessary to determine these questions.
8.1 Four year term or long term commitment
As applied to the alleged contractual terms about these matters, I find that representations as to Sheldrick's term of engagement in Asia were made by Lowndes in a series of conversations at the end of 1993 and in early 1994. They were certainly made in the memo from Lowndes to Colley on 26 January 1994, in the letter of comfort from Lowndes to Sheldrick on 11 February 1994, and in the letters of 21, 25 and 26 April 1994 comprising the written contract.
For the reasons expressed in relation to the contract allegation to the same effect, I do not accept that Lowndes represented to Sheldrick that he was to be employed for at least four years. However, again for the same reasons as previously, I find that Lowndes made representations to Sheldrick that the Partnership had a long term commitment to him. Although both WTP Aust and WTPHK sought to deny that Lowndes had the requisite authority to make representations on their behalf, he was evidently one of the most senior personnel in the group, as he was a director of all companies in the group, and was powerful enough to secure Sheldrick's relocation to Asia even in the face of opposition from other directors. It was Lowndes who authored all correspondence to Sheldrick regarding the move and who signed the letter of appointment to WTPHK and answered all queries regarding the contractual terms. In my view, he clearly acted with the authority of both companies when negotiating with Sheldrick over the relocation, and made the representations to Sheldrick on behalf of WTPHK. WTPHK was therefore the maker of the representations, and Lowndes aided and abetted their making.
The representations made by WTPHK through Lowndes as to its long term commitment to Sheldrick were clearly representations as to a future matter, namely the length of time for which Sheldrick would be employed by the Partnership in Asia. Pursuant to section 51A of the Act, such a representation is assumed to be misleading unless the party making the representation can show that it was made on reasonable grounds. It was common ground that Lowndes had faced significant opposition to Sheldrick relocating but had persevered to ensure that it happened. He invited Sheldrick and his wife to Asia at the company's expense to find a suitable base and invested considerable time and resources in persuading Sheldrick that the relocation would be beneficial to both parties. It would be perverse in the extreme that Lowndes undertook this effort and involved his group in this expense to relocate Sheldrick and his entire family to a place so far away from home and with all the personal disruption involved, including separation from wider family and friends, and interruption to the education of his children, if it was not his intention that they should remain there for the long term.
The evidence also showed that at the time of the representations, it was envisaged that WTPHK would be engaged for a number of years on the KLIAB project, and even if Sheldrick was not to be involved for the duration, there were numerous other Partnership projects throughout Asia on which he could be employed. There was no evidence to doubt the genuine intentions of either Sheldrick or Lowndes when they were negotiating in 1993 and 1994. I have no doubt that Lowndes intended Sheldrick to remain in Asia for the long term when he negotiated for his relocation, and although it is not clear why Sheldrick was summarily dismissed when his position on the KLIAB project became untenable, rather than being relocated to a different part of Asia, it is true to say that the Partnership's intentions concerning Sheldrick's position had changed. That such a change was possible was evidenced by the inclusion in the written contract of a term enabling termination on three months' notice. Therefore, while the representations as to a long term commitment were made by Lowndes on behalf of WTPHK, they were not misleading and deceptive in breach of the Act because they were based on reasonable grounds when they were made.
8.2 Chinese New Year Bonus
For the reasons already set out in the context of the claim in contract, I find that no representations were made to Sheldrick that he would be paid a Chinese New Year bonus. Even if such a representation had been made, it would have been made in Hong Kong by Lowndes on behalf of WTPHK and so could not possibly have attracted the operation of the Act.
8.3 Work permits and visas
I find that representations were made that Sheldrick would be provided with the necessary visas and work permits, specifically on 10 February 1994 when he had a detailed discussion with Lowndes about the relocation which precipitated the letter of comfort written the next day. As with the representations of a long term commitment, this was a representation as to a future matter, the misleading nature of which is governed by section 51A. As there was also a contractual term that work permits and visas be procured, this position is reinforced by the decision in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 at 240 where the Supreme Court of Victoria (Ormiston J) stated:
...I am persuaded that if there be an unconditional promise which forms part of the contractual obligations, then it is proper to treat the giving of that promise, at least in the ordinary case, as the making of a representation as to a future matter, being either the doing of an act or the refusing to do an act, being in each case the subject of a promise.
The evidence of Sheldrick was that he was aware that Lowndes had begun to put in place arrangements with the KLIAB for special licences to be made available to the Partnership personnel working in Malaysia on the airport project but that these arrangements had still not been finalised up to a year after Sheldrick's arrival. The evidence also showed that Sheldrick made a number of attempts to enlist the aid of the KLIAB to extend his limited visa in order that he would not have to undertake the `outstation' trips. By the time Sheldrick left Malaysia he had still not been issued with the work permit that others had apparently been granted and which WTPHK had engaged a consultant to procure for future employees in Malaysia. It should also be noted that steps had been taken to ameliorate the effects of not having the appropriate work permits and visas, in the form of the provision of a letter from the KLIAB and the business card of a member of the KLIAB.
Nevertheless, it is clear that the appropriate work permits and visas were not procured for Sheldrick during the course of his employment in Malaysia and that he and his family were therefore forced to undertake outstation trips to re-validate their temporary entry permits. Ultimately therefore the representations were false. However, two problems stand in the way of Sheldrick establishing a statutory contravention on this basis. The first is that for reasons not dissimilar to those regarding the long term commitment, it is completely unbelievable that Lowndes, and consequently WTPHK, did not genuinely intend that the appropriate work visas be procured when the representations were made. Lowndes knew that the project on which WTPHK was to be working was of the utmost importance to the Malaysian government and was being directly funded by a government authority. There can be no doubt that he and WTPHK believed that the obtaining of the appropriate visas was a foregone conclusion and so were able to represent that position to Sheldrick. There were thus reasonable grounds for this belief and consequently there was no breach of the Act in this respect.
Moreover, even if no reasonable grounds existed for the representations, and there had thus been a breach of section 52, I am not convinced, on the balance of probabilities, that Sheldrick suffered damage as a result of the non-procurement of the work permits and visas, or if there was damage, that it was causally related to any misrepresentations of Lowndes and WTPHK.
8.4 Secondment
Sheldrick also claimed that the respondents represented to him that the nature of his employment in Asia would be a secondment from WTP Aust to WTPHK. In fact, Sheldrick was not seconded and so claimed that the representation was a contravention of section 53B. In my view WTP Aust did represent that Sheldrick would be seconded, in the memo from Colley to staff members in Sydney on 24 January 1994. As it was evidently never intended that Sheldrick's relocation be in the nature of a secondment, there has been a breach of section 53B. However I cannot see how there has been any loss suffered by Sheldrick as a result of this breach.
9. DAMAGES
9.1 Notice
Sheldrick is entitled to damages in lieu of the three months' notice required under his contract. The evidence of Scot Menzies, a chartered accountant called by the applicant, was that the amount due in lieu of three months' notice is $66,480. An additional amount of $63,111 is required to compensate Sheldrick for the fact that he will be taxed on receiving this income as a lump sum in Australia. He is also entitled to interest on this sum from the date of the accrual of the action to the date of judgment which, at the relevant Supreme Court interest rates, amounts to $24,000. It was agreed that this interest component also needs to be `grossed up' because of Sheldrick's Australian taxation liability, amounting to an additional $22,000. The assumptions used by Mr Menzies were that Sheldrick would have been paid MR40,000 per month and taxed at the Hong Kong tax rate of 15%. Mr Menzies took into account MR150,000 per annum for pre-tax deductions from Sheldrick's income for such items as rent, medical benefits and school fees. The total damages in lieu of notice were calculated as $175,591.
The accountant called on behalf of the respondents, Robin Humphreys, disputed that Mr Menzies had used the correct exchange rate and also stated that, in his opinion, Sheldrick was a resident of Malaysia and therefore a Malaysian rate of income tax should have been applied. Applying those assumptions, Mr Humphreys concluded that damages in lieu of three months' notice were $93,952. Basically I accept Mr Menzies' evidence over that of Mr Humphreys, as I believe that damages now awarded will at least arguably attract Australian tax. I fix the amount under this heading at $170,000.
9.2 Work permits and visas
Sheldrick claimed that the outstation trips which he was forced to take due to the non-provision of the appropriate work visas caused him great stress and contributed to an identifiable and diagnosed disorder. I have already commented on this claim in the context of Sheldrick's credibility. While the term regarding work visas was breached, and while Sheldrick did actively pursue this issue while he was in Malaysia, it is my view that he has not suffered damage as a result. He basically used the trips for holiday breaks and relaxation and even to visit family in Australia. While there may have been some problems at immigration on some of his returns to Malaysia which would have been aggravating, the safeguards in place were more than enough comfort for him. I decline to award any damages for the breach of this term.
9.3 Costs of stress treatment
Sheldrick claimed $1,105 for treatment sessions with his doctor for a stress disorder, allegedly caused by his dismissal. He also claimed $1,420 for ten future sessions, required to complete his treatment. I am quite sceptical about this claim even though it was in part supported by Catherine Campbell, a registered and qualified clinical psychologist. Further, I am not satisfied that the information he supplied to his clinician was entirely frank and accurate and her report and diagnosis suffered as a result. There was also no evidence of any health insurance rebate. I allow the nominal sum of $1,000 under this heading.
9.4 Vexation, distress and disappointment
Sheldrick claimed $50,000 for the vexation, stress and disappointment of being summarily dismissed and having to relocate back to Australia. I accept that summary dismissal would have been most upsetting and stressful and that the unexpected need to return to Australia would not have been easy. But these affronts were temporary and there were offsetting compensations, one of which appears to have been a high level of earnings on a regular basis upon his return. I allow $10,000 under this heading.
9.5 Loss of remunerative future Asian opportunities
Sheldrick claimed $100,000 for lost opportunities in Asia because of his dismissal. He claimed that had he been employed for the full four years, he would have had much greater opportunities to pursue employment in the region. Firstly, I have found that he did not have a contract for four years, and so any lost opportunity would have to be based on any benefit he would have accrued by being given the required three months' notice. Secondly, there was no evidence to support this claim and I am not in a position to speculate about it. Moreover, the 3 months' notice provision meant exactly what it said and I cannot see how it can be extended by recourse to a claim of this kind. I reject the claim.
9.6 Motor vehicle expenses
Sheldrick also claimed that he had been underpaid in Malaysia because the Partnership had deducted motor vehicle expenses from his income when Sheldrick had never purchased or leased a vehicle. This claim was quantified at $11,634 (with an additional claim for grossing up due to tax of $11,044) but the evidence on the matter was sparse and unconvincing. I also reject this claim.
9.7 Late payment in salary
Sheldrick claimed that both he and McHardy were not paid on time in accordance with their contract and that he should be compensated for the late payment of his salary made on 5 July 1995 which included amounts due since March 1995. This claim smacked of an afterthought without substance. I disallow it.
10. CONCLUSION
The application against the first respondent is dismissed. The applicant will receive judgment against the second and third respondents in the sum of $181,000 plus interest of $72,000. As to costs, the respondents made an open offer in Court during the hearing, in the nature of a Calderbank-type offer, to settle the case for $200,000 inclusive of costs. This offer, which had apparently been made before the hearing as well, was made on 6 August 1997. Sheldrick argued that it represented an admission of liability but it manifestly did not.
In my view, this offer must be taken to include an interest component despite the fact that it was not expressly stated. If the offer had been accepted when it was made, the interest component would have been approximately $45,000 meaning that the offer was for $155,000 plus interest. I could not even guess at what the costs might then have been but my clear impression is that Sheldrick has in the event obtained more than was offered. In any event, I can discern no other discretionary reasons, as discussed by Justice Sheppard in Colgate-Palmolive Pty Ltd & Anor v Cussons Pty Ltd [1993] 46 FCR 225, or those gathered by Justice Lindgren in MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd & Anor (No. 2) [1996] 70 FCR 236, or those I discussed in Lamesa Holdings BV v Commissioner of Taxation [1997] 74 FCR 416, for not awarding costs to the successful party as applies normally or for awarding costs on any other basis, including, as I have considered, reducing the costs to be awarded to reflect the need to have cases of this limited size tried in lower courts. The second and third respondents will pay the applicant's costs on a party and party basis. There will be no order as to costs in the claim against the first respondent.
I certify that this and the preceding fifty two (52) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Einfeld
Associate:
Dated: 7 September 1998
DATE OF HEARING: 23-27 June, 6-8 August 1997
DATE OF DECISION: 7 September 1998
PLACE: SYDNEY
#DATE 07:9:1998
Appearances
Counsel for the Applicant: Mr A. Street SC and Mr M. Barko
Solicitor for the Applicant: Garland Hawthorn Brahe
Counsel for the Respondent: Mr N. Francey
Solicitor for the Respondent: McCabe Brown
3
1
0