Southern Ocean Pty Ltd v Sugar Australia Pty Ltd
[2015] VCC 428
•16 April 2015
fpat
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Case No. CI-13-05411 |
| SOUTHERN OCEAN PTY LTD (ABN 47 048 187 333) | Plaintiff |
| v | |
| SUGAR AUSTRALIA PTY LTD (ABN 82 081 245 169) | Defendant |
| and between: | |
| SUGAR AUSTRALIA PTY LTD (ABN 82 081 245 169) & ORS (according to the Schedule of parties attached) | Plaintiffs by Counterclaim |
| v | |
| SOUTHERN OCEAN PTY LTD (ABN 47 048 187 333) & ORS (according to the Schedule of parties attached) | Defendants by Counterclaim |
---
| JUDGE: | HER HONOUR JUDGE KENNEDY | |
| WHERE HELD: | Melbourne | |
| DATE OF HEARING: | 13, 14, 15, 16, 17, 21, 22, 23, 24, 27, 28 and 30 October 2014,13 March 2015 | |
| DATE OF JUDGMENT: | 16 April 2015 | |
| CASE MAY BE CITED AS: | Southern Ocean Pty Ltd v Sugar Australia Pty Ltd | |
| MEDIUM NEUTRAL CITATION: | [2015] VCC 428 | |
REASONS FOR JUDGMENT
Catchwords: CONTRACT – termination; whether plaintiff entitled to termination payments in lieu of notice under contracts or whether defendant entitled to terminate without notice; whether matters the subject of the summary dismissal clause were established; whether, even if established, defendant was entitled to rely on this provision; whether defendant entitled to judgment on counterclaim for use of iphone post termination
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs and Defendants by Counterclaim | Mr M. Rinaldi and Mr G. Pauline | A.J. Macken & Co |
| For the Defendants and Plaintiffs by Counterclaim | Mr J. Bourke QC and Mr A. Weinstock | Thomson Geer |
HER HONOUR:
1. Southern Ocean Pty Ltd (“Southern Ocean”) carries on business as a consultant engineer and constructions project manager. It provided the services of three “key personnel” to Sugar Australia Pty Ltd (“Sugar”) in connection with the design and construction of a refined sugar station at Yarraville in Victoria (“the project”): Mr Nickolas John Karantzis, Mr Peter Murray and Mr Cameron Huxley. The project commenced in/about September 2007.
2. This proceeding arises because, shortly after his appointment as the new CEO of Sugar on 18 February 2013, Mr Scott Weitemeyer purported to terminate each of the contracts with Southern Ocean in a telephone call made at 7.55 am on 22 February 2013 to Mr Karantzis (who was off site at the time). The evidence of Mr Weitemeyer is that he told Mr Karantzis he was going to take the services provided by Southern Ocean “in house” effective immediately and that he should meet with Sugar’s in house legal Counsel to sort out the details.
3. This was later followed up by correspondence of 8 March 2013 from Sugar wherein it alleged that Southern Ocean had engaged in serious and wilful misconduct such that it had no obligation to make any termination payments.
4. Southern Ocean now claims the sum of $265,765.48[1] in respect of unpaid notice, completion bonuses, and annual leave following the termination of the three agreements.
[1] This figure was based on the total figures for notice ($128,771.83) and completion bonus ($116,851.35) in the Statement of Claim and an agreed reduced annual leave figure of $20,142.30.
5. Sugar, in turn, denies these entitlements on the basis that it was entitled to summarily terminate the contracts because Southern Ocean breached the contracts and/or engaged in various acts of misconduct as follows:
·Directing a contractor (Mr Paul Mantella) to do private work and charge it to Sugar;
·Overcharging for days when work was not performed;
·Misusing an Amex card; and
·Taking unauthorised leave.
6. Sugar also now alleges that it was entitled to summarily dismiss pursuant to the relevant contracts by reason that Mr Weitemeyer considered the services being performed to be “unsatisfactory” as at 21 February 2013 (although he did not say so at the time).
7. Sugar further counterclaims (together with three related parties) for its losses as a result of the said breaches/conduct of Southern Ocean.
8. It also separately counterclaims in relation to the plaintiff’s use of an iphone post-termination in an amount of $164,160.36.
9. Sugar however generally accepts that it has the burden of proof in justifying its entitlement to summarily dismiss and also accepts the quantum.
10. The primary issue in the case was therefore whether any of the matters alleged by the defendant were sustained as a matter of fact.
11. However, Southern Ocean submitted that there was a further issue; namely whether, even if the defendant was successful, it should be permitted to rely on the alleged misconduct to justify the termination. In this respect the plaintiff submitted that, given the services were not initially terminated for cause but purportedly under the contractual notice provisions, the principles in Shepherd v Felt and Textiles of Australia Ltd[2] did not apply, and the defendant should not be permitted to now rely on the summary dismissal provisions.
[2] (1931) 45 CLR 359.
12. The issues in the case were therefore:
a)whether the defendant considered the services being performed to be “unsatisfactory” as alleged pursuant to the relevant contractual provisions;
b)whether any of the alleged acts of misconduct were established;
c)if “yes” to (a) or (b) whether the defendant is thereby entitled to justify its termination by reference to the summary dismissal provisions; and
d)whether the defendant was entitled to the sum of $164,160.36 in relation to the plaintiff’s use of the iphone post dismissal.
13. The matter was heard in two stages. At the first stage all the evidence was heard as well as most of the submissions. The defendant agreed to call evidence first.
14. The matter was then adjourned part heard until this year pending the delivery of a decision of the Full Federal Court in the matter of Melbourne Stadiums Ltd v Sautner[3] which impacted on the outcome of issue (c) above.
A BACKGROUND
[3] [2015] FCAFC 20.
Parties
Plaintiff
15. Mr Karantzis was the sole director of Southern Ocean and primary witness in the case. He possesses degrees in electrical engineering and law. He also has a masters of law degree, and is a registered trademark attorney, qualified patent attorney and registered adjudicator. He has been employed by major corporations such as BHP and had been a CEO and Chief Project Director prior to working with Sugar.
16. He was designated as the Project Director and Principal’s Representative on the project.
17. Mr Huxley was the OH&S Co-ordinator for the project. He was also called as a witness in the case.
18. Mr Murray was the Construction and Commissioning Supervisor on the project. At the time of the trial, Mr Murray was working off-shore in the oil and gas industry in the North Sea of the UK.
Merchant Protect
19. Another entity associated with both Mr Karantzis and the former CEO of Sugar, Mr Tim Hart, was Merchant Protect Australia Pty Ltd (“Merchant Protect”). This entity was formerly known as ISIGNTHIS Pty Ltd (“Isignthis”).
20. The evidence of Mr Hart and Mr Karantzis was that this was a “start up” business involving the development of an online fraud security and protection system. The evidence of both men was that, although some meetings were held in ordinary business hours, the commitment was minor as compared with time devoted to Sugar business.
21. The defendant however makes complaint about the involvement of both men in this business during “Sugar hours” suggesting that Mr Karantzis was engaged on a full-time basis as the Managing Director. It also highlights that other employees/contractors of the defendant appeared to have become involved, including Mr Todd Richards and Ms Kim Singline, who had merchant protect email addresses.
Defendant
22. Sugar is a subsidiary of both Wilmar Sugar Refining Investments Pty Ltd (“Wilmar”)[4] (the third plaintiff by counterclaim) and Mackay Sugar Ltd (the fourth plaintiff by counterclaim). Sugar is also the managing entity of a joint venture between Wilmar and Mackay Sugar Ltd.
[4] Wilmar had previously been known as Sucrogen Refining Investments Pty Ltd and, before that, CSR Refining Investments Pty Ltd. Exhibit 42 (DCB 122)
23. Wilmar is a wholly owned subsidiary of Wilmar Sugar Australia Holdings Pty Ltd which is in turn a wholly owned subsidiary of Wilmar Sugar Australia Ltd. Wilmar Sugar Pty Ltd (the second plaintiff by counterclaim) is another subsidiary of Wilmar Sugar Australia Holdings Pty Ltd.
24. The defendant refined and marketed sugar for exports and the domestic market. It had two sugar refineries: one in Yarraville (the subject of this dispute), and one in Mackay. At a sugar refinery raw sugar (imported in crystal form) is unloaded and put through a series of refining processes so the main finished product is bulk white refined sugar.
25. Mr Hart is now the CEO and managing director of Ridley Corporation Ltd having worked for corporations such as Amcor and Ford. His first qualification was a Bachelor of Science majoring in mathematics. His evidence was that he resigned from Sugar to take up a position at Ridley Corporation Ltd at around the same time as the chairman (Mr Ian Glasson) was also resigning.
26. Though Mr Hart was the CEO at Sugar for 8 years between 2005 and early 2013 when he resigned, he was called by the plaintiff.
27. As indicated above, Mr Weitemeyer was the CEO of Sugar immediately after Mr Hart, commencing on Monday 18 February 2013. His experience was largely in commodities trading.
28. Mr Grant Ritchie was an engineer at Sugar and is now Group Technical Head. He was formerly General Manager Engineering and Sustainability at Sugar. He had developed the scope of the project until it was handed to Mr Karantzis in September 2007. He then took the role over from Mr Karantzis on his termination and became project director until 2 September 2013.
29. Mr Paul Mantella was an electrician by trade who worked as an Electrical and Instrument Supervisor during the relevant time as a contractor (but is now an electrical project engineer for Sugar). He alleges that Mr Karantzis directed him to perform private work at his home and charge it to Sugar which allegation will be considered, below.
30. Mr Duncan Glasgow was Legal Counsel and Company Secretary for Sugar. He was not called as a witness in the case.
31. There were various other personnel mentioned in the course of the case who will be referred to in the relevant context.
Builder
32. Bilfinger Berger Services Australia (BBSA) was the building contractor and designer. This entity was referred to by various witnesses as being also known as Lend Lease and/or Conneq.
33. Sugar is currently engaged in ongoing litigation with Lend Lease who walked off the site following a dispute arising with the defendant.
The relevant contracts
34. The evidence of Mr Hart was that Sugar signed contracts with Mr Karantzis after an interview process whereby Sugar decided to go “outside” for its project director given Mr Ritchie was taking some leave and they wanted “commercial robustness”.
35. It appeared that Mr Karantzis originally started with a contract in August 2007 which he said was based on an hourly rate but later moved to a monthly rate basis for “designated services” in about mid 2008 (whereby services were initially provided by another Karantzis entity, Diverse IT Pty Ltd).
36. In the result, the parties accepted that relations were governed by three separate “Contractor’s Agreements” dated 1 June 2011; and (as amended in) 11 November 2011 between Sugar and Southern Ocean for each of Mr Karantzis, Mr Huxley and Mr Murray respectively (as the “Key Personnel” in each case).
37. In each case, Southern Ocean, as the Contractor, was to provide “Services” to be performed by each Key Personnel as further defined and described in the Assignment Schedules.
38. Turning to the agreement with respect to Mr Karantzis, the agreement provided for payment by delivery of a tax invoice for fees (clause 4.1). These were set at $25,190.00 monthly excluding GST which included provision for four weeks annual leave and up to ten days sick leave (clause E(1) Assignment Schedule). However, the company was not required to pay any fee to the Contractor in respect of any of the Services which were “not performed” in accordance with the Agreement (clause 4.3).
Services
39. Recital A recorded that the company required the services of the Contractor “from time to time” for the purpose of undertaking assignments and providing certain services. Clause 2.1 then read as follows:
2.1 Work to Be Performed
a)In consideration of payment for the Services the Contractor will perform the Services at such times as The Company may from time to time require. The Contractor will be provided with an Assignment Schedule containing the details of each assignment to be undertaken for The Company.
40. Clause 1 contained a definition section and defined “Services” as follows:
“Services” means the services to be performed by the Key Personnel of Contractor from time to time and includes the services set out in the Assignment Schedule.
41. The Assignment Schedule attached further described the Services as:
D. Description of Services
Refined Sugar Upgrade (RSU) Project Director (as defined in the RSU Roles Responsibilities documentation) or as mutually agreed in writing from time to time between the Parties
42. Neither party identified any documentation which constituted the “RSU Roles Responsibilities documentation” as referred to above (although the court raised it with Counsel in opening).
43. However, further details were provided under the “Assignment Schedule” as follows:
“General Assignment”: The Contractor shall perform the role of the Principal’s Representative with regards to the contract between the Company and its Contractor Bilfinger Berger Services Australia, in addition to the role of Project Director on the RSU project in general. The role shall have accountability for time, budget, commercial and legal performance of the various aspects of the RSU project.
44. The services were further to be performed at the Yarraville site “or as otherwise advised by The Company from time to time.” Where travel outside Melbourne was required the Company was to meet the Contractor’s travel costs (Assignment Schedule Part C).
45. Clause 4.2 further provided “Guidance” in relation to services as follows:
4.2 Guidance
a)If requested by The Company the Contractor must provide the Company with satisfactory evidence of the proper performance of the services referred to in any invoice and make the Contractor’s books and records available for inspection by the Company’s representative.
b)The Contractor will inform The Company on a weekly basis (or such other times as required by The Company) of the total hours worked and will submit to The Company as required timesheets and any other necessary reports.
Contractor obligations
46. Clause 3.1 set out the Contractor obligations which read:
3.1 The Contractor agrees to, and to ensure that the Key Personnel:
a)exercise all due care and act in the best interests of The Company at all times;
b)provide the Services in a professional manner using the highest technical standards and practices and with due care and skill;
c)provide the Services in a timely manner and in accordance with the Company’s expectations; and
d)ensure that the Services performed and work produced will be of a quality acceptable to The Company.
Termination
47. Clause 11 set out provisions for termination:
11.1 Termination
a)Either party may terminate this Agreement by giving the other 90 calendar days notice in writing
b)In the case of (a) above,
i.The Company may make payment of the 3 month’s Contractors Fee’s in lieu of notice and the Completions Bonus in Special conditions and
ii.The Company shall make payment on a pro rata basis any Annual Leave that has not been taken calculated against the Contractors Fee
Where Clause F of the Assignment Schedule is the monthly Contractor’s Fee payment sum.
c)The Company may terminate this Agreement immediately if:
i.the Client considers the Services being performed by the Contractor to be unsatisfactory;
ii.the Contractor breaches this Agreement;
iii.the Contractor engages in criminal, serious or wilful misconduct;
iv.the Contractor neglects to attend promptly to provide the Services;
v.the Contractor fails to remedy a breach in the provision of the Services within the time specified by The Company in a written notice requiring such breach to be remedied; or
vi.any action or proceeding, whether voluntary or compulsory, is taken against the Contractor having for its object the bankruptcy of the Contractor, or the Contractor enters into a composition or other arrangement with its creditors or a mortgagee or other creditor takes possession of any of the Contractor’s assets.
11.2 Consequences
In the event of termination of this Agreement by either party The Company will be liable to make payment to the Contractor only in respect of any portion of the Services that have been properly executed and not paid for at the date of termination and consistent with clause 11.1 (b) above. Otherwise, termination of this Agreement will not prejudice or affect any right that may have accrued or may later accrue to either party.
48. Clause 3.2 provided that the contractor and its Key Personnel generally agreed to comply with any relevant policies.
49. Mr Karantzis’s evidence was that he was familiar with a document entitled the Refined Sugar Station Project HSEQ manual[5] which was the Health Safety Environmental and Quality manual, specific to the upgrade project. The HSEQ manual stated that the project director had “authorisation” in relation to budget and schedule as well as overall accountability for project execution. However, he was not given any other corporate policies.
[5] Exhibit 16.
50. There were contracts in similar form for each of Mr Huxley and Mr Murray. However the material differences included that they made provision for hourly rates and, further that they contained very different definitions as to the “Services” (which was a defined term).
51. Thus, the “Services” in each case were defined as the “temporary services to be performed by the Key Personnel of Contractor from time to time and includes the services set out in the Assignment Schedule.” The Assignment Schedule for Mr Murray described the “Services” as a “Construction and Commissioning Supervisor” as further defined in a detailed position description. The Assignment Schedule for Mr Huxley described the “Services” as OH & S Co-ordinator as also defined in an attached position description.
Commencement of work
52. From September 2007 work commenced on the upgrade of the refinery at the Yarraville site. Mr Ritchie’s evidence was that the original completion date was to be November 2008.
53. However, there was extensive evidence of issues with Lend Lease who ultimately left the site in May 2011.
54. Both Mr Hart and Mr Karantzis gave evidence as to alleged problems with Lend Lease. For example, Mr Hart suggested that Lend Lease made a huge number of mistakes including failing to add silicon to concrete, building a “crooked” building, and providing inadequate indicia as to tensions on the bolts.
55. The evidence of both Mr Hart and Mr Karantzis in this proceeding was also that the delay to the project was caused by Lend Lease. This included the retention of lawyers and the need to document things meticulously in the expectation of litigation. The dispute also meant that independent experts were retained.
56. The extent to which Lend Lease was responsible for the delay may be the subject of consideration in the litigation between Sugar and Lend Lease. Suffice to say for present purposes that there was no evidence that any complaint was made about delay being attributable to Southern Ocean during the currency of the contracts. More particularly there was no evidence of any complaints being made about invoices, nor any evidence of an adverse performance assessment. To the contrary, the evidence of Mr Hart was that he conducted regular one to one meetings (some ten a year) and was always pleased with Mr Karantzis’s performance.
Termination and finalisation of the project
57. The detail surrounding the termination of the Southern Ocean contracts will be included further below.
58. As indicated already, on 22 February 2013, Mr Weitemeyer purported to terminate the services of Southern Ocean during a telephone call, including the contracts relating to Mr Karantzis, Mr Murray and Mr Huxley. Mr Richards (another contractor) was also terminated on the same day.
59. In the result, the last time Mr Karantzis attended the site was on 21 February.
60. The evidence of Mr Ritchie was that the project was subsequently completed on 18 August 2013 when the “wet commissioning” stage of the project ended (so saleable sugar could be produced).
61. This proceeding was issued on 21 October 2013.
B WITNESSES
Defendant’s witnesses
62. A large number of witnesses related to the counterclaim for the iphone which will be referred to below (Mr John Papadimitrou, Mr Allan Tremayne (in part), Mr Steven Cooper and Mr John Harden). There were generally no credit issues arising with these witnesses; Mr Tremayne in particular presented as a genuine and honest witness (who has ceased employment with Sugar).
63. There were also no credit issues with the evidence of Mr Rob Camilleri (the IT Manager at Sugar who adduced evidence as to the “online chat records”), nor with Mr Ben McLeod (a lawyer at Hebert Geer Lawyers between April 2010 and July 2013), who gave evidence about relevant diaries.
64. The defendant also called Mr Ritchie, Mr Weitemeyer, Mr Lukasz Lozinski and Mr Mantella.
65. The evidence of Mr Mantella will be considered further below. However, some general observations can be made about Mr Weitemeyer, Mr Lozinski and Mr Ritchie.
66. Mr Weitemeyer presented as a young, opinionated witness. He was reluctant to make concessions and appeared intent on seeking to advocate the defendant’s case at every opportunity.
67. There were also considerable gaps in his recollection of events, including details of dates; of the initial conversation with Mr Karantzis; and of the circumstances in which he became aware of the details of the Mantella allegation.
68. Although some gaps might be consistent with the general effluxion of time, his memory appeared to be selective. Thus he repeatedly sought to allege that he held the opinion that the performance of Southern Ocean was “unsatisfactory” at the relevant time. This was despite the fact that there was no contemporaneous objective evidence to support such an opinion.
69. He was also highly deprecatory of anything to do with Mr Karantzis and Mr Hart and was, at times, highly “personality driven” in giving evidence. For example, he discounted a previous investigation into the Mantella allegation on the basis that it was a “half-assed attempt which was controlled by Mr Hart”.
70. Although some dislike is understandable in litigation such as this, his evident animosity and partisanship suggested his evidence should be treated with care. I have therefore assessed his evidence in the light of any contemporaneous objective evidence.
71. Mr Ritchie generally presented as a competent intelligent professional. However, he also appeared intent on delivering an “agenda” frequently adding responses he apparently believed would assist the defendant. He also proffered conclusory statements which were not necessarily responsive.
72. For example, when asked about the discussion that took place at a meeting he answered that this was “about Sugar being completely dissatisfied with the performance …” rather than detailing the content of the actual conversation in terms of what was actually said.
73. His management of the Mantella issue was also somewhat puzzling. Thus, he wrote that there was “clear evidence that could lead to criminal proceedings”[6] solely on the basis of the word of a self-confessed wrongdoer, Mr Mantella. This he justified on the basis that he “believed” Mr Mantella without any apparent consideration that his evidence might be unreliable.
[6] Exhibit 1.
74. Finally, Mr Lozinski was a (relatively junior) electrical and instrumentation engineer. He appeared intent on proffering opinions as to whether others were working in circumstances where he was not really in a position to do so. The limits of his testimony will be discussed further below.
Plaintiff’s witnesses
75. The plaintiff called Mr Karantzis, Mr Hart and Mr Huxley.
76. Mr Karantzis presented as an intelligent, conscientious man, consistent with his extensive qualifications and experience.
77. Sugar, however, made a range of criticisms about the credit of Mr Karantzis. I accept that he was not a perfect witness and was, at times, longwinded and argumentative. I also accept the defendant’s criticism that he was less than forthright on some matters concerning the structure of Merchant Protect and have preferred the evidence of Mr Tremayne in relation to an aspect of the iphone claim.
78. However, it is significant that there appeared to be little attempt to disguise or hide some of the conduct complained of, (including the time spent at his home during business hours and his involvement with Merchant Protect) which was generally known to, and approved by, the then CEO of the defendant.
79. More importantly, I do not consider that significant credit issues were established in relation to the pivotal issues in the case. Instead, the evidence of Mr Karantzis on significant matters was generally consistent, cohesive and credible.
Mr Hart
80. Mr Hart presented as a mature, experienced businessman. However, the defendant challenged the evidence of Mr Hart on the basis that he generally understated his involvement with Merchant Protect.
81. Although it appears that Mr Hart was actively engaged in trying to get the Merchant Protect business started, the evidence did not establish that the time involved was as significant as the defendant sought to make out.
82. I accept that, with the benefit of hindsight, it would have been better if Mr Hart had disclosed his involvement with Merchant Protect to the Sugar board. However, his evidence was that he did not disclose this involvement to the board because he did not believe he had a conflict of interest (given it was non-competitive) and also given the relatively small number of hours involved.
83. This explanation was acceptable. Moreover, Mr Hart generally presented as a forthright witness whose evidence was generally coherent and plausible.
84. Significantly, his support for the work ethic and integrity of Mr Karantzis was generally unshaken notwithstanding a forceful cross examination. This was highly significant given he was Sugar’s CEO at the relevant time.
Mr Huxley
85. Mr Huxley presented as a genuine straightforward witness. Unlike others in the case, he was ready to make concessions and cautious in giving opinions he was not in a position to offer.
86. A highly troubling aspect of his testimony was his evidence about Mr Glasgow.
87. Thus, under examination in chief he gave evidence of a phone call he received from Mr Glasgow a few weeks after the events of 22 February 2013. In that phone call Mr Glasgow asked him if he was aware that Mr Karantzis had lodged an adjudication application to which Mr Huxley said yes. The conversation then continued:
“He told me that he felt that, in an interview - in a meeting I’d had with him earlier in February, that I’d been guarded in some of the responses I gave to questions he put to me, and that if I was prepared to sign a statement answering further questions that he’d put to me, that he would pay me out all of the money that I was due under the terms of my contract…”
88. Mr Glasgow also said that if Mr Karantzis were to win (at trial) and pay the money due to Mr Huxley, he would have to return the money.[7]
[7] Note, as conceded by plaintiff’s Counsel, (Transcript, 23 October 2014, page 926-928 ) this evidence was not to be admitted as tendency or coincidence evidence (See also section 95 of the Evidence Act 2008 (Vic)). Although it was relevant to the Huxley claim, it was not used as tendency or coincidence evidence.
89. Under cross examination, it was suggested to Mr Huxley that the conversation arose in circumstances where he was asking about whether Mr Karantzis had been paid up until 22 February 2013 because he had not been paid up until that time. The cross examination continued:
Mr Bourke: Then he used the expression, "Can we talk off the record"?
Mr Huxley: I don't recall.
Mr Bourke: He said, “I'll pay you up to 22 February 2013 and your notice period.” He mentioned that, didn't he?
Mr Huxley: Yes, I believe so.
Mr Bourke: He didn't mention the bonus, though?
Mr Huxley: I believe he did.
Mr Bourke: Okay. He said, “If you'll make a statement for Herbert Geer which includes matters around Mantella working at John Karantzis' house”?
Mr Huxley: I don't recall that.
Mr Bourke: He said to you, “If I do this and John Karantzis later pays you the money, you'll reimburse me”?
Mr Huxley: That's correct, yes.
Mr Bourke: It had nothing to do with whether or [not the] case will be won and lost, it was whether you were going to get paid. He was saying, "I don't want to be doubling up"?
Mr Huxley: No. He made specific reference to a meeting that we'd had earlier in February at the office of Herbert Geer where he felt that I had been guarded in my responses to him and the questions that he was asking me. The reality was I wasn't being guarded, I just didn't have anything further to say.
90. The matters raised in the course of this evidence raise potentially serious matters as to the conduct of Mr Glasgow as a Legal Counsel, even on the basis of the matters put by Senior Counsel for Sugar.
91. These matters are of limited relevance to the current issues in dispute. Mr Glasgow was also not called nor was he represented in this proceeding.
92. It is sufficient to find however, that, given Mr Huxley appears not to have taken up any inducement (on either the “put” version or his own version) his reliability and honesty are considerably strengthened.
93. I also note that the defendant abandoned any allegations to the effect that Mr Huxley engaged in overcharging in closing.
C OTHER PRELIMINARY MATTERS
1) Diaries
94. An issue arose as to the whereabouts of certain work diaries which Mr Karantzis alleged would detail various matters including his annual leave.
95. The evidence of Mr Karantzis was that he believed his work diaries up until the end of 2011 were sent off to Herbert Geer. The 2012 diary was left behind on his desk chair on the day before he finished up while the 2013 diary was on his desk.
96. Under cross examination, Mr Karantzis also denied placing the diaries in the boot of his car on the day that he left.
97. The defendant put into evidence a typed note prepared by Mr Ritchie of 22 February 2013 which included the following:[8]
“JK immediately rang Kim Singline (KS), Project Administration Officer, and instructed her to gather his laptop, a red file and a calendar from his office; she did so and put these in the boot of her car.
After interviewing Kim, approx. 1400 she confessed to doing this, and offered to show me. I sighted the laptop, glanced at the contents of the file and the calendar. KS was crying and asked if she could go home. I rang Duncan Glasgow and he was aware of the red folder (mostly personal financial information of JK) and said it was OK to allow her to leave with these items.” (emphasis added)
[8] Exhibit 1.
98. This is consistent with the evidence of Mr Karantzis that he did not take his diaries away with him (but only arranged removal of a laptop, red file and calendar).
99. The evidence of Mr McLeod was that he visited the Yarraville site in February 2012 in order to inspect documents related to the Lend Lease litigation. He recalled seeing diaries belonging to Sugar personnel. Mr McLeod stated that he flagged certain documents and these documents were later couriered to the office of Herbert Geer. He said that he did see some diaries but did not recall what a description of these diaries were.
100. The defendant also filed a supplementary affidavit of documents in this proceeding, sworn by Mr Glasgow which included the following statement:[9]
“Out of an abundance of caution to make the position clear, having made all due and proper enquiries, the Defendant and Plaintiffs by Counterclaim do not have and have not had in their possession, power and control, the work diaries from 2011 – 2013 of John Karantzis, Peter Murray and Cameron Huxley.”
[9] Supplementary Affidavit of Documents, sworn 2 October 2014, paragraph 5.
101. The evidence of Mr Karantzis, consistent with the contents of Mr Ritchie’s notes, suggest that he did not remove the diaries which were last held by the defendant/ the defendant’s agents.
102. It is true that Mr Glasgow states that his “inquiries” suggest the defendant never had the diaries in its possession. However, Mr Glasgow was not called to give evidence in the case, particularly as to the content/adequacy of any such inquiries. In such circumstances I am prepared to draw an inference that any evidence as to such enquiries would not have assisted the defendant.[10]
[10] Jones v Dunkel (1959) 101 CLR 298.
103. I therefore accept that Mr Karantzis’ diaries were last held by the defendant or its agents though their precise whereabouts now is unknown.
2) Burden of Proof
104. In accordance with section 140 of the Evidence Act 2008 (Vic), the relevant standard of proof is the balance of probabilities.
105. Pursuant to section 140(2)(c) the court is also directed to take into account the gravity of the matters alleged in deciding whether it is satisfied to the requisite degree.
106. However, the defendant submitted that this cautionary approach should not be given undue weight. In particular, in relation to the Mantella allegation, it was suggested (citing Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd[11]) that the fraud, “in which two people took part” had been confessed by one of them such that the probability that there was a fraud is already above 50%. Furthermore, that the evidence in this case had a cumulative effect.[12]
[11] (1992) 110 ALR 449.
[12] Closing Submissions of Sugar Australia Parties, paragraphs 24-27.
107. However, although Mr Mantella may have confessed to a fraud, it is the defendant who must establish whether there was actually a fraud “in which two people took part”. The case is also distinguishable from Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd[13] where the issue had resolved itself into a choice between competing and mutually inconsistent allegations of fraud. In this case, there is no such choice between “inconsistent” allegations of fraud. Rather the serious issue for determination is whether Mr Karantzis has been involved with a fraud as well as Mr Mantella.
[13] (1992) 110 ALR 449 especially at page 451.
108. It is also important to assess the admissible evidence in relation to each allegation rather than any cumulative impact.
109. The court will therefore take into account the gravity of the matters alleged bearing in mind that reasonable satisfaction should not be produced by “inexact proofs, indefinite testimony, or indirect inferences”.[14] However, the standard of proof is still proof on the balance of probabilities.
D TERMINATION and “UNSATISFACTORY PERFORMANCE”
[14] Briginshaw v Briginshaw (1938) 60 CLR 336 at page 362
Issue
110. Pursuant to paragraph 16(l) of the Third Further Amended Defence and Counterclaim (TFADC) the defendant pleaded the contents of clause 11.1(c) of the Agreements. Then at paragraph 107 of the TFADC the defendant pleaded that:
107. Further and in the alternative, as at the date when Sugar Australia terminated the Southern Ocean Agreements with immediate effect, as it was entitled to do, it considered that the services being provided under each of the Southern Ocean Agreements were unsatisfactory.
111. The defendant’s allegation was not particularised.
112. However in closing submissions the defendant stated that it relied on the evidence of Mr Weitemeyer, as corroborated by Mr Ritchie, to the effect that, as at 21 February, he was “entirely” dissatisfied with Southern Ocean’s performance, and had therefore decided to dismiss Southern Ocean.[15] Further the fact that this opinion was never communicated did not matter as there was no such requirement in the clause or at law.
[15] Closing Submissions of Sugar Australia Parties, paragraph 37.
113. In paragraph 93 of the Reply and Defence to Amended Defence and Counterclaim (“RDADC”), Southern Ocean:
(a) denied paragraph 107; and
(b) said further that Sugar:
(i) at no time during the period of the Southern Ocean Agreements told Southern Ocean that it considered that the services being provided under the Southern Ocean Agreements were unsatisfactory; and
(ii) did not purport to terminate the Southern Ocean Agreements on the basis that it considered that the services being provided under the Southern Ocean Agreements were unsatisfactory.
114. In submissions Southern Ocean further submitted that, as a matter of “construction” or “business efficacy”, there needed to be some objective justification for any such opinion which did not exist in the circumstances of this case.[16]
[16] Outline of Closing Submissions on behalf of the Plaintiff and the Defendants by Counterclaim, paragraphs 36-45.
115. Sugar in turn rejected any suggestion that such opinion would need to be reasonably held suggesting that “capriciousness” would be the only limit if there be any limit at all.
116. Sugar also suggested that it was entitled to form the view in any event.
117. It is therefore necessary to determine whether Mr Weitemeyer actually formed the requisite view, and if so, whether any view no matter how unreasonably held would suffice or whether some limits should be placed on clause 11.1(c)(i)/8.1(b)(i) as a matter of construction.
118. I should add that I have presumed that the opinion of Mr Weitemeyer, if actually held, would equate to that of Sugar[17] as it was not suggested otherwise. Mr Weitemeyer also appears to have been the person who managed and controlled the actions of Sugar in relation to the Southern Ocean contracts.
[17] And see generally Australian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd [2015] VSCA 9
119. Before resolving these issues, however, it is necessary to turn to the evidence.
Evidence
120. When Mr Weitemeyer commenced as CEO of Sugar, he received no handover or induction and was not aware of when Lend Lease had walked off the site. He knew Lend Lease had walked off the job, but did not have any of the details.
121. He claimed he wished to inspect the construction site and was told (by an unidentified person) that Mr Karantzis was the only one with the keys because the locks had been changed and Mr Karantzis was not able to be reached and was not on site. Mr Weitemeyer thought this was “odd”.
122. Mr Weitemeyer then spoke to various (unidentified) people “particularly” the executive team and did not receive any “favourable feedback” about Mr Karantzis. He also found it “odd” that Mr Karantzis was reporting directly to the CEO rather than the executive leadership, who had the expertise (Mr Ritchie and Mr Hodges).
20 February 2013 – Hart meeting
123. On 20 February 2013 Mr Weitemeyer spoke to Mr Hart. The versions of this conversation slightly differ in emphasis but the essence of the discussion was similar in that the report was favourable.
124. Thus, Mr Weitemeyer accepted that, although he could not recall the exact wording, it was along the lines that Mr Karantzis was good at his job.
Karantzis meeting
125. At some stage on 20 February 2013 Mr Weitemeyer also spoke to Mr Karantzis face to face for the first time.
126. Mr Weitemeyer claimed this was a 10 or 15 minute brief “meet and greet”. He described it as an introductory meeting because he “knew nothing” about the project. The only thing he recalled asking was how long until the project would be completed. Mr Karantzis said March 2014. He did not put any concerns he might have had to Mr Karantzis.
127. Mr Karantzis’s version was that he “walked” Mr Weitemeyer through the details of the project and discussed when it was to be completed which was mid July 2013. Further, Mr Weitemeyer informed him there was an internal review going on. One of the options was to internalise the project to save costs which meant there would not be a role for Southern Ocean. However they were also considering if they were going to proceed with the Lend Lease litigation and if they were going to proceed, Mr Karantzis and some other contractors might be necessary. There was no discussion of any unsatisfactory performance or misconduct.
128. To the extent it is necessary I accept and prefer the account of Mr Karantzis which is supported by objective evidence. Thus, it is consistent with a document entitled “RSU Project Status” dated 12 February 2013 prepared by Mr Karantzis which gives 26 July 2013 as the expected completion date. It is also consistent with other documentation which suggested that an internal review was being undertaken (see below).
21 February 2013
129. Mr Weitemeyer’s evidence was that he then decided to get his executive team together. He claimed that he had also become aware that there were cost overruns and delays of months and months.
130. A meeting then occurred on 21 February 2013 (a Thursday). Those present were Mr Ritchie, Mr Weitemeyer, Mr Russell Obotomey, Mr Hodges, Mr Gregory, Mr Glasgow (legal) and Mr Tremayne (HR).
131. Mr Weitemeyer’s evidence was as follows:
Mr Weitemeyer: Excuse the language, Your Honour, but I walked in and I basically said, "What the f… is going on here?" because it was clear that there was a situation that was completely unacceptable. Then I proceeded to ask the leadership team, "Is there any reason why we can't do this ourselves?" in particular Grant Ritchie and Rowan Hodges. There was absolutely unanimous feedback that we could manage the project in‑house ourselves. Then I said to Grant Ritchie that it's now his responsibility to work with Rowan Hodges and I wanted Mr Karantzis and Southern Ocean gone immediately.
132. Critically, he also claims that at that point in time his opinion of the “services” of Southern Ocean was that they were “completely unacceptable”. When asked if he would be looking at bringing things in house if he had been happy with the services of Southern Ocean he answered (unsurprisingly) “no”. Further that he wanted the contracts terminated immediately because of “unsatisfactory” performance, it was entirely “unsatisfactory”.
133. Despite this suggestion, there appears to be absolutely nothing said about the actual performance of Southern Ocean (or the actual services performed by any of its key personnel) in the meeting even on Mr Weitemeyer’s own account.
134. Mr Ritchie’s evidence was that prior to this meeting, on 21 February 2013, Mr Weitemeyer had a discussion with him as to his role and said he was looking to terminate the current project management and asked if he would be in a position to take on the project to which he responded “positively”.
135. Mr Ritchie’s version of the larger meeting not long after, was that Mr Weitemeyer spoke to Mr Ritchie in the presence of the entire leadership team “to discuss the process, the decision and the process” although he provided little detail of what was actually said. Under cross examination he said that he was “somehow” asked to be present but thought that the “decision had been made” prior to the meeting and the discussion was mostly around how this process was going to be executed the following day. He did not recall any debate as to whether Mr Karantzis should stay.
136. However, when asked if there was discussion about internalising the program he said he was “not sure” and did not have a recollection of using the word “internalising”. He then went on to allege that the meeting was “about” Sugar being completely dissatisfied with the performance of the existing management team on the project.
137. Mr Ritchie, then, did not appear to have a precise recollection as to what was actually said at the meeting. As indicated already his suggestion that the meeting was “about” performance was also conclusory and unhelpful.
138. Mr Tremayne’s evidence was that he was called in for the later part of the meeting and requested to provide a process to action the ceasing of the contracts.
139. In terms of objective evidence there were some notes of this meeting which appeared to be made in the handwriting of Mr Obotomey. These notes contain no reference to performance and, contrary to the evidence of Mr Ritchie, appear to suggest that the issue of whether to retain Mr Karantzis was still a live issue given the notation “what about if John stays”. However a final third point contains the reference “GR to lead project with internal resources”.
140. Critically, there was absolutely no contemporaneous objective evidence to suggest that Mr Weitemeyer formed a particular view as to the actual services of Southern Ocean at that time. To the contrary, the objective evidence suggested that Sugar believed it was simply utilising the notice provisions.
141. Thus, in an email from Mr Tremayne of 21 February 2013 addressed to those present at the meeting he says:
“John will be advised that the company is exercising its right to terminate his contract and those of Peter Murray and Cameron Huxley who are engaged through his business. It will take effect immediately…
They will be requested to invoice up to 22nd February 2013 for outstanding hours, and the company will document in a letter early next week their proposed entitlements which will need to be agreed and a payment method organised (likely a standard invoice…..” (exhibit G)
22 February conversation
142. At around 7.55am Mr Weitemeyer tried to find Mr Karantzis on site, and when he could not he called him with Mr Glasgow in his office but not on speaker. This was only the second time he ever spoke to Mr Karantzis.
143. He told Mr Karantzis he was going to take the services he and Southern Ocean provided “in house” effective immediately. He also said he had received a complaint that was being investigated but it had no effect on the decision, and they would let him know once they had come to a conclusion. Mr Karantzis asked what the complaint was about, and Mr Weitemeyer responded that it was under investigation and they would advise once there was an outcome.
144. He did not refer to any clause numbers and did not even suggest that he had actually read the contracts.
145. He agreed that he told him to meet with Mr Glasgow to “sort out the details” . However, when later asked whether he left an email from Mr Karantzis for Mr Glasgow to deal with his (non-responsive) answer was that “the termination was made when I made the phone call….He was terminated immediately. As far I was concerned, entirely “unsatisfactory” performance” and that he was not paying a cent more to anyone than he needed to pay.
146. The evidence of Mr Karantzis was that Mr Weitemeyer advised him that he had decided to terminate the agreements effective immediately. He then raised an issue of the complaint but said it was under investigation and was not related to his choice to terminate. He said the reason for the termination was to internalise the project and internalise the costs (though under cross examination he did not recall if the word “costs” was actually used but he understood that was what was meant by “internalise” given the earlier discussion). He was also told to complete the termination process with Mr Glasgow.
147. Given the concession of Mr Karantzis under cross examination and a subsequent email from Mr Weitemeyer of 24 February 2013 (wherein he said that he never mentioned costs, just that “we wanted to do internally”), I accept that costs were not explicitly mentioned in the phone call. Otherwise the versions of the call are substantially similar.
148. There were also some notes made of this call by Mr Glasgow which state:
Note of Call to JK
SW + JK:
Arrow
On site: in today what time.
- Review take it all inhouse & do it immediately
- Meet with me
- Termination provision work through with
- Southern Ocean- same applies
- complaint
149. By email of 22 February 2013 at 8.38am Mr Karantzis wrote to Mr Glasgow stating that “I understand Sugars position” and asked when he was free to discuss a number of matters including notice periods for the contracts.
150. By email of 22 February 2013 at 9.30am Mr Glasgow wrote:
John,
Thanks. Also thanks for the heads up.
Sugar will honour the contracts. Unfortunately Robbie isn’t in today so can’t get the copies of yours and the others contracts.Could you invoice for the month to date for all 3 that are employed under your company. Then once I have reviewed the contracts can I arrange a suitable time. Due to the suddenness I haven’t been able to reschedule to enable that to happen until the week after next. Is that OK.
Regards, Duncan
151. Mr Karantzis then responded at 11.45am that he would consider this “the Clause 11(a) written notification of termination” and would prepare invoices and submit accordingly.
152. By return email of 12.07pm Glasgow advised that “Yes, that would be appropriate”.
153. On 22 February 2013 Mr Karantzis then forwarded a series of invoices quantifying termination payments, including completion bonus and holiday payments in respect of each contract.
Discussion with Murray/Huxley
154. The evidence of Mr Ritchie was that he had a discussion with Mr Murray and Mr Huxley on 22 February 2013. Mr Ritchie said the company had made a decision to take over the management of the project and their services would no longer be required. Mr Murray said he was “not surprised”. They were then given an opportunity to gather their belongings and left the premises under supervision.
155. Mr Huxley’s evidence was that Mr Ritchie told them their contracts had been terminated; it was “wrapped up as part of the whole Southern Ocean thing, that the decision had been made to reduce staff numbers and that was the end of our employment”. He did not mention any misconduct; he said it was a “business decision to reduce staff numbers” (which he maintained under cross examination).
156. Mr Ritchie’s evidence was that a few days later he received a phone call from Mr Huxley wherein he said he was different from Mr Karantzis and working in the best interests of the project and needed his job. Mr Ritchie said he was not in a position to reinstate him.
157. Mr Huxley’s version of this later conversation was that Mr Ritchie said despite receiving positive feedback he was not in a position to offer his job back. It was still part of the “Southern Ocean thing,” that Wilmar, the new owner, had given a direction to reduce staffing by 10-15% and contractors were the first to go. It was a business decision and nothing to do with misconduct. Under cross examination he said he did not recall saying he was “different” to Mr Karantzis and denied suggesting he should not be “tarred by the same brush”. He maintained that Mr Ritchie said it was a business decision and they had to reduce staff costs with contractors the first to go.
158. For reasons already identified I prefer and accept the evidence of Mr Huxley to the extent there is a divergence in these accounts. It is also consistent with some other objective material below.
Costs issues
159. By correspondence of 22 February 2013 from Wilmar containing an “announcement” Wilmar wrote:
Further to my announcement on 31 January, I wish to announce more organisational changes which have been made to Wilmar’s Australian sugar business.
As previously announced, Wilmar’s Australian sugar business, will consist of three business units – Cane Products, Sweeteners and BioEthanol. These will be headed by Craig Doyle, Scott Weitemeyer and Garry Mulvay respectively.
As part of the proposed restructure, a full review of all roles and functions across the business has identified a number of further rationalisation opportunities in both corporate and business units. Business unit heads will make announcements in the near future to provide further details about how these changes will be implemented in their business units.
160. When asked whether he knew about the “announcement” days before Mr Weitemeyer said he only knew about it on the day, although he accepted that he knew a review was going on. He denied that there was any directive to reduce staff by 15% which was “complete rubbish”, and said “it was just about running the business efficiently”.
161. Mr Ritchie accepted that a reduction of some 10-15% was contemplated for Sugar when the restructure occurred, but only if contractors were included.
162. The evidence of Mr Hart was that Wilmar had started considering costs issues prior to his resignation. Wilmar had taken the opportunity to look at “totally revamping the cost structure inside the business, including a fairly substantial redundancy program…”
163. This was consistent with evidence of Mr Karantzis that Mr Richards and Mr Roland Tan were also terminated on the same day; and further that Mr Greg Christensen and Mr Phil Lane also left.
164. It will also be recalled that both the chairman and Mr Hart had recently resigned which Mr Karantzis suggested was part of Wilmar rationalising and a “changing of the guard.”
Letter of 8 March 2013
165. By correspondence of 8 March 2013 from Mr Glasgow on behalf of Sugar to Mr Karantzis, Sugar wrote as follows:
We refer to your discussion on 22 February 2013 with Scott….
At the time of your discussion with Scott he advised that a complaint had been received and was being investigated. One of the complaints has been investigated. As such Sugar Australia is aware that you had a direct number of staff members working on the Refined Sugar Upgrade (RSU) Project to undertake renovation work on your own personal dwelling during the hours they were employed to work for Sugar Australia, you allowed or encouraged them to charge Sugar Australia for the time they spent working on those renovations, and you did so without informing Sugar Australia of those activities and without Sugar Australia’s permission.
In light of your role as the RSU project Director and your senior position in Southern Ocean, Southern Ocean through your actions has committed a serious breach of its contractor agreements with Sugar Australia, and engaged in serious and wilful misconduct. On that basis, Sugar Australia has terminated all three of the contractor agreements with Southern Ocean with immediate effect pursuant to clause 11.1(c)(iii) of Karantzis’ Agreement and clause 8.1(b) of Murray’s Agreement and Huxley’s Agreement.
In these circumstances, Sugar Australia has no obligation to make any further payment to Southern Ocean for payment in lieu of notice, completion bonuses, or (in respect of the Karantzis Agreement) holiday pay.
In addition, Sugar Australia considers that in light of your actions, clause 4.3 of the Karantzis Agreement (non-performance) applies, and it is not obliged to pay Southern Ocean monthly fees, for the period of 16 February to 22 February 2013 being the date of termination of Karantzis’ Agreement.
Sugar Australia will consider whether there are any outstanding monthly fees owing to Southern Ocean in respect of work performed under Murray’s Agreement and Huxley’s Agreement and is continuing to investigate whether there was relevant non-performance by those individuals.
Sugar reserves its position on whether clause 4.3 in each of the respective agreements applied so as to render other fees already paid recoverable from Southern Ocean.” (emphasis added)
Resolution
Whether requisite “consideration” established
166. The only evidence in support of the relevant “consideration” (pursuant to clauses 11.1(c) (i) and 8.1(b)(i) of the contracts) were the conclusory oral statements of Mr Weitemeyer that, as at 21 February 2013, his opinion of the “services” of Southern Ocean was that they were “completely unacceptable”.
167. It may be true that Southern Ocean did not directly contradict this evidence. However, Mr Weitemeyer was generally challenged about his process of decision-making, including his knowledge of the announcement from Wilmar and the need for cost cutting, as well as his failure to tell anyone about his alleged opinion.
168. Mr Weitemeyer’s evidence was unconvincing. It was also highly self-serving such that it should be treated with considerable care.[18] This is particularly so in this case, as there is no objective evidence to support a finding that he actually formed the requisite views.
[18] Hoyts Pty Ltd v Burns (2003) 201 ALR 470; Rosenberg v Percival (2001) 205 CLR 434; Fabcot Pty Ltd v Port Macquarie-Hastings Council [2011] NSWCA 167 especially at [184]-[185].
169. As opened by Senior Counsel, Mr Weitemeyer had not even looked at the contracts. There was no reason in such circumstances for him to have really turned his mind to whether the “Services” being performed were “unsatisfactory.” Rather, his evidence appeared to be no more than a convenient reconstruction of his state of mind some considerable time ago.
170. Even on Mr Weitemeyer’s own account, there was nothing to suggest that Sugar had communicated a view that the services of Southern Ocean were unsatisfactory. To the contrary, the key factor appeared to be a desire to take the services “in-house”. Further, although Mr Ritchie sought to suggest that the meeting of 21 February 2013 was “about” Sugar being dissatisfied with performance, his recollection was less than strong, and was generally to the effect that the decision had “been made”. He also could not discount that the word “internalising” had been used.
171. An examination of the surrounding objective evidence provides no support for the existence of any such opinion. To the contrary, it suggests that Sugar intended to simply “exercise its rights” consistently with the ordinary notice provisions. This is apparent from the terms of the email of Mr Tremayne of 21 February and the emails of Mr Glasgow of 22 February. It would be expected and natural for these communications to refer to the issue of performance if the requisite opinion had really been held (as is now alleged).
172. Even several days after 22 February, the correspondence of 8 March 2013 does not suggest that the decision was based on any consideration as to unsatisfactory performance. Rather it specifically states that the “basis” for the decision to summarily terminate was because Mr Karantzis allowed or encouraged employees to charge Sugar Australia for the time they spent working on his renovations. It was further only “in light of [these] actions” that the clause 4.3 “non-performance” clause was also said to apply rather than any other dissatisfaction.
173. No final view of any kind appeared to have been reached in relation to the Murray/Huxley agreements with Sugar “continuing to investigate” whether there was “relevant non-performance” of those individuals.
174. In the absence of evidence to the contrary from Mr Glasgow, it can be inferred that he wrote the correspondence on instructions. Sugar itself has also put up Mr Weitemeyer as being the person who managed and controlled the actions of Sugar in relation to the Southern Ocean contracts such that his state of mind equates to that of the company. It is highly improbable that this letter would have been expressed in this way if Mr Weitemeyer had really formed the view he now alleges to have held.
175. The preponderance of the objective evidence also suggests that the real reason for his decision was to reduce costs. This is supported by the Wilmar correspondence; the notes of the 21 February meeting (citing “internal resources”) as well as the evidence of Mr Huxley.
176. However, regardless of the real reason, I am simply unable to be satisfied, on the state of the evidence before me, and on the balance of probabilities, that Mr Weitemeyer actually turned his mind to, and determined that, the Services being performed by Southern Ocean were unsatisfactory. I say this having had regard to my general assessment cited earlier in these Reasons; his evidence in relation to this matter; the absence of any contemporaneous manifestation of any such “opinion”; and given the terms of the surrounding objective evidence.
177. This is sufficient to dispose of the issue. However, even if I was to accept the evidence at its highest, I would be unsatisfied that any “consideration” had actually taken place pursuant to clauses 11.1 (c)(i) and 8.1(b)(i) of the contracts at all.
178. The relevant clause in each contract required Sugar to consider whether “the Services” (as a defined term) being performed by the Contractor were unsatisfactory. Although it was necessary to look at the performance of the company, Southern Ocean, it was thereby necessary to consider the “Services” being performed by the relevant Key Personnel which was defined differently in relation to each of the contracts.
179. The assertion of Mr Weitemeyer was simply that “the services” of Southern Ocean were unacceptable. I am unable to be satisfied from this generalised oral statement that he gave any consideration at all to the very different services actually being performed by Mr Karantzis (as Project Director and Principal’s Representative) and/or Mr Murray (as Construction and Commissioning Supervisor) and/or Mr Huxley (as OH & S Co-ordinator).
180. In such circumstances I am unable to be satisfied that Mr Weitemeyer actually undertook any consideration of the actual performance of the “Services” as defined with respect to each of the Key Personnel such as could amount to a consideration for the purposes of clauses 11.1 (c)(i) and 8.1(b)(i).
181. Sugar has not established that, on the balance of probabilities, it considered the Services being performed by Southern Ocean to be unsatisfactory for the purposes of clause 11.1 (c)(i) and 8.1(b)(i) of the contracts.
Whether other limits on consideration under clause 11
182. Given I am not satisfied that the consideration took place, it is unnecessary to consider clauses 11(c)(i)/8.1(b)(i) further. However, even If Mr Weitemeyer’s assertions were to be accepted as amounting to the requisite consideration, there would remain the issue of whether, if such a decision was made, it could be made regardless of any limitations. I will briefly consider this matter given it was addressed by the parties.
183. In construing the contracts it is important to note that the relevant clauses provide an opportunity to effect summary dismissal without the giving of the notice period contemplated by clauses 11.1(a)/8.1(a).
184. It is important in such context to consider whether some limit should be placed on the clauses so as to ensure that the notice provision is given work to do.
185. In this context in construing a commercial contract, the High Court has recently stated:[19]
“the objective approach [is] to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract.”
[19] Electricity Generation Corporation (t/as Verve Energy) v Woodside Energy Ltd & Ors (2014) 251 CLR 640 at page 656.
186. Additionally, in Plenary Research Pty Ltd v Bioscience Research Centre Pty Ltd[20] the Court of Appeal quoted with approval the statement of Hoffman LJ in William Sindall Plc v Cambridgeshire County Council[21] that:[22]
It is of course a principle of construction that words capable of bearing a very wide meaning may have to be given a narrow construction to reconcile them with other parts of the document. This rule is particularly apposite if the effect of general words would otherwise be to nullify what the parties appear to have contemplated as an important element in the transaction.
[20] [2013] VSCA 217.
[21] [1994] 1 WLR 1016.
[22] [2013] VSCA 217 at page 29.
187. Further, in the employment context, the New South Wales Court of Appeal had cause to consider a clause governing a performance bonus in the decision of Silverbrook Research Pty Ltd v Lindley.[23] The employer in that case had agreed to establish set objectives, assess the employee’s performance and, provided her performance satisfied the objectives, to pay the performance bonus. However, these obligations were subject to clause 4.3 which stated that the decision as to whether [the employee] should receive the bonus was “entirely within the discretion” of the employer.
[23] [2010] NSWCA 357.
188. Despite the apparent unlimited nature of the discretion given by clause 4.3, the Court (per Allsop P, Beazley JA agreeing) said (at [5]-[6]):
“The relevant discretion should be understood against the proper scope and content of the contract. This was a bargained for bonus to be assessed against set objectives. Such a clause should receive a reasonable construction and not permit the appellant to choose arbitrarily or capriciously or unreasonably that it need not pay money the set objectives having been satisfied…
The discretion is to be exercised honestly and conformably with the purposes of the contract. There may be many circumstances in which it would be legitimate, and conformable with the purposes of the contract, not to pay the bonus…….What however would not be permitted is an unreasoned, unreasonable, arbitrary refusal to pay anything, come what may. This would be a denial of the very clause that had been agreed…..(emphasis added)
189. The court thereby generally upheld the trial judge’s finding on the damages claim (although it varied the quantum on the basis of an ex gratia payment received).
190. As a matter of ordinary construction, there must be some limits placed on the ability of Sugar in this case to terminate on the basis of some subjective “consideration”. In the absence of any limits it would otherwise be free to effectively subvert the ordinary notice provisions contemplated by clause 11.1(a)/8.1(a).
191. In such circumstances I consider that the “consideration” must have some reasonable basis so as to protect the contractor from arbitrary exploitive conduct. Otherwise Sugar would be free to assert any subjective consideration no matter how capricious, to defeat the notice requirements.
192. I am therefore of the view that, as a matter of ordinary construction, any consideration would need to be genuinely held on reasonable grounds. At the very least, it should not be arbitrary or capricious.
193. Given these limitations, it is necessary to turn again to the evidence in this case.
194. If there really is a decision, for reasons given above, it appears to have been made without any reference to, or analysis at all of, the contracts, including any assessment of the actual performance of the “Services” as defined therein with respect to each of the Key Personnel.
195. It is true that the project was delayed and was above budget. However, any decision about performance also appeared to have been made in a context wherein Mr Weitemeyer had been CEO for some 2 days; with favourable feedback from the CEO (Mr Hart); and with no adverse performance reports. Mr Weitemeyer also admitted that he had “no detail” about the Lend Lease dispute and further that he “knew nothing” about the project immediately prior to his decision (as at 20 February).
196. Indeed the only foundation for any such decision was apparently generalised dissatisfaction with the “situation”; “unfavourable” hearsay reports of various unidentified persons; impatience that he could not access the site; and speaking to Mr Karantzis (not Murray or Huxley) for no more than 15 minutes (without raising any issue of performance).
197. Despite this Mr Weitemeyer alleged that he wanted all of the contracts terminated immediately because of some unparticularised “unsatisfactory” performance.
198. In such circumstances I would also be satisfied that, if any opinion was held that the relevant “Services” being performed” were unsatisfactory, such an opinion was so unreasonable no reasonable person could form it.
199. I am also satisfied that any such “consideration” was arbitrary and capricious. In particular, any decision to form the requisite view under these contracts has been made on the basis of an arbitrary “across the board” reaction. There also been, at best, only a peremptory consideration.
Decision in Bartlett
200. Following the conclusion of evidence, the defendant also sought to rely on a decision of Bartlett v Australia and New Zealand Banking Group Limited.[24] In that case, the plaintiff failed in his damages claim for summary dismissal in circumstances where the ANZ relied on a provision in the contract which permitted it to summarily terminate “if, in the opinion of ANZ” the employee engaged in serious misconduct.
[24] [2014] NSWSC 1662. At the time of writing, this matter is on appeal before the New South Wales Court of Appeal.
201. The decision is apparently on appeal. In any event, I do not consider that the decision assists the defendant in the present case. Critically, although the plaintiff was unsuccessful in that case, this was on the basis that the court was satisfied that the ANZ held the requisite opinion that the employee had engaged in serious misconduct.[25] This was sufficient to dispose of the proceeding and makes the decision distinguishable from the current case.
[25] Bartlett v Australia and New Zealand Banking Group Limited [2014] NSWSC 1662 at [144].
202. It was true that, in obiter, the judge suggested that he was not satisfied that any term should be implied that the opinion be reasonable and not arbitrary or capricious.[26] However, he does not appear to have considered whether there were any appropriate limits as a matter of ordinary construction. Moreover, he was not satisfied that the opinion was unreasonable or capricious in circumstances where the lengthy chronology and course of a proper investigation showed “care” in identifying whether the misconduct had occurred.[27] This can be compared with the current case where no proper investigation has occurred.
[26] Bartlett v Australia and New Zealand Banking Group Limited [2014] NSWSC 1662 at [143].
[27] Bartlett v Australia and New Zealand Banking Group Limited [2014] NSWSC 1662 at [148].
Summary
203. The evidence does not establish the existence of the requisite consideration pursuant to clause 11.1(c)(i)/8.1(a) of each of the contracts.
204. In the alternative, I would also be satisfied that any decision should be reasonable or, at least, not capricious or arbitrary as a matter of ordinary construction. Given the decision made was unreasonable and/or capricious or arbitrary, it would follow that no valid decision can be relied upon by the defendant.
E ALLEGED MISCONDUCT
1 Mantella direction
Allegation
205. The essence of the allegation was that Mr Karantzis, on behalf of Southern Ocean, directed Mr Mantella to attend at his house, 13 Miller Street Richmond, Victoria “during Sugar Australia working hours” and “invoice Sugar Australia in respect of the hours he spent at 13 Miller Street…”[28]
[28] TFADC, paragraph 88.
206. According to Mr Hart, the allegation originated when one of the managers overheard a discussion “in a lunchroom” where it was intimated that Mr Mantella had done some work at Mr Karantzis’s home on Sugar’s account. Mr Clark subsequently investigated the matter and reported with 90-95% certainty that what was done by Mr Mantella was paid for. The defendant now complains about the efficacy of this investigation and relies on this complaint to justify its termination.
207. In examining this allegation it is necessary to consider the evidence of Mr Mantella, of Mr Karantzis, and of any surrounding documentation.
Evidence of Mr Mantella
208. Mr Mantella, an electrician by trade, gave oral evidence and was independently represented.
209. He sought and obtained a certificate under section 128 of the Evidence Act 2008 (Vic) in relation to evidence relating to all discussions, works, and charges for electrical works conducted by him at 13 Miller Street Richmond. His Counsel accepted that he was potentially exposed to criminal offences of obtaining property by deception, false accounting, making a false document and obtaining financial advantage for another.
210. He was employed by Sugar in June 2008 and under examination claimed that Mr Karantzis organised for Mr Mantella to get him this job. He worked thereafter as an electrical and instrument supervisor paid at $71 per hour plus GST, later $78.50 plus GST.
211. He claimed to have a conversation with Mr Karantzis in early 2011, wherein Mr Karantzis said he was doing an upstairs extension to his property. Mr Mantella offered to do the extension to pay Mr Karantzis back for getting him the job. The work was to be done after hours. There was no discussion about payment for the work which was to be done as “a favour”.
212. By email of 19 April 2011 Mr Karantzis provided Mr Mantella with the plans.
213. Mr Mantella reviewed the plans and did a “take off”. He assessed that the job was larger than he had originally thought.
214. He claimed there was later a “meet and greet” with the builder on 16 June 2011.
215. He commenced work on the house in July 2011. He initially tried to do the work after hours but this changed because the work was too extensive.
216. In early October 2011 he claimed he had a discussion with Mr Karantzis at Sugar’s Yarraville site. He said the work was too extensive to do after hours and he needed more time. He further claimed that Mr Karantzis said: “do it during Sugar hours, doing a few hours here and there, and to charge Sugar Australia.” Mr Mantella said okay, but knew it was wrong and was not completely happy. However he said he had “already started the job and I felt pressured by Mr Karantzis” who was the project director.
217. During the course of his evidence, Mr Mantella identified various hours he worked at the site during “ordinary business hours” and claimed he charged Sugar Australia for these hours. He did this with the assistance of text messages although there were no formal timesheets and much of his evidence consisted of his recollection of what hours he thought he had worked. The text messages suggest that a large volume of the work related to October – December 2011. This also accorded with the defendant’s pleading which Mr Mantella adopted.
218. Using this methodology his evidence was to the effect that he worked (usually some three hours per day) on various days.
219. He claimed that if he charged for all the work he did the charge would be approximately $4,000.00 to $5,000.00, at a total of around 60 hours work.
220. He also alleged that at the Christmas lunch on or about 21 December 2011 Ray Clark questioned him about filling in his timesheet correctly while at Miller Street. He “lied” and said he had been. He then had a conversation with Mr Karantzis wherein he said that Mr Clark had questioned his hours and Mr Karantzis said to charge him for a day’s labour.
221. He sent only two formal invoices for the job in the name of Reachlek Electrical Services (Mr Mantella’s contracting business name).
222. Firstly, an invoice of 19 October 2011 for “services rendered including the supply of material at 13 Miller Street Richmond between the dates of 10th to the 19th of October” which contained the description: “Supply and install for initial electrical works ‘Rough In’ to refurbishment and addition to the mentioned residence” with a total figure of $1,056.36.
223. The invoice on its face appears to include labour. However, Mr Mantella claimed it was for material only.
224. The second was dated 3 January 2012 which was described as for “services rendered including the supply of material at 13 Miller Street Richmond for the week ending, 23 December” and with the description: “supply and install for completion of electrical works ‘Fit Off’ to refurbishment and addition to the mentioned residence”. The invoice was a total of $1,471.46 with $624.00 designated for labour. His evidence was that he did not charge Sugar for that day.
225. He claims that he and Mr Huxley “often discussed” how he was not happy with the arrangement of working at Miller Street and the work being charged to Sugar.
226. He also claimed that he told Mr Lozinski about the arrangement.
227. Under cross-examination, Mr Mantella became unclear as to when he really had the pivotal conversation with Mr Karantzis about charging Sugar. After some suggestion that he could not “recall exactly” he alleged that he believed the “conversation I had with Mr Karantzis in October was actually in July”. When it was suggested that Mr Karantzis was away in Europe in July he then said “it must have been earlier” and prior to doing any work.
228. He agreed that it is not possible to work out from any document how many hours were worked at Miller Street. He agreed that the way he charged was that he put “Miller Street hours” within the total he recorded. Further, that mostly he had “estimated” three hours per day.
229. He agreed that others signed off on Sugar timesheets (not Mr Karantzis) who should have more of an idea of when he was on site.
230. He agreed that Mr Karantzis did in fact pay him around $6,500.00 but says this was equivalent to material only, plus one day’s labour. He accepted that there was some $4,000.00 to 5,000.00 worth of labour expended in relation to the job.
231. He agreed that having “confessed” to Mr Glasgow that he had effectively wrongly charged Sugar, the matter was not referred to the police. In fact, he was offered an employed position once the RSU upgrade was complete, as an electrical project engineer for a period of 18 months from 1 October 2013 until 31 March 2015 on $115,000.00. He was also never asked to pay back the money, and in fact was paid an ex gratia payment of $8,520.00 in September 2013. However he denied reaching an agreement with Mr Glasgow to make a confession.
232. The defendant also tendered a series of various emails provided to Mr Glasgow in February 2013 that Mr Mantella claimed he had “intended to send to SAPL management”. They are said to have been drafted at various times including in mid-2011. Although they contain reference to the allegation, they also contain generalised complaints about Mr Karantzis generally, and evince a considerable dislike of Mr Karantzis.
Evidence of Mr Karantzis
233. Mr Karantzis gave evidence of undertaking the renovation to his home at Miller Street. He received a quote from Philip Building Group of 31 March 2011 for $298,918.00 which included $9,404.00 for electrical works. He received 2 other quotes although the successful quote was from Pearce Building with a total of $245,418.00. This builder later indicated the costs of electrical work was $9,636.36.
416. Furthermore, it seems likely that further documents exist which were not produced. For example, the plaintiff produced a “Transcript of Live Chat”[75] which recorded an online text chat between Mr Karantzis and Telstra representatives which occurred on 2 February 2014. The documents produced by Telstra make reference to this online chat,[76] but the transcript was not produced by Telstra.
Chronology
Change of ownership forms following termination
[75] Exhibit 19 (1181).
[76] Exhibit 18, Annexure E, page 1 of 3.
417. The day after he finished up, Mr Karantzis claimed that he went to Telstra Melbourne Central and organised to have a new phone (the 0416 888 776 number) put in his wife’s name. This was because Mr Tremayne had told him that he may or may not be able to keep the relevant number. Further, that if the phone number was not transferred the account would be cancelled.
418. However, Mr Tremayne denied telling Mr Karantzis that the phone number would be cancelled if it was not transferred. Rather, if Mr Karantzis had not wanted the relevant number it would have been cancelled, but Mr Karantzis had represented that he wished to keep the number.
419. To the extent it is necessary I prefer the account of Mr Tremayne on this issue given he was an impressive witness generally. His version is also consistent with the subsequent acts of the defendant in failing to cancel the phone.
420. While at the Telstra store, Mr Karantzis enquired about the process to transfer the relevant number to himself, and was given a “Change of Ownership Application Form” and shown how to fill it out by a person at the store called “Janish”.
421. Then at 3:49pm on Tuesday 26 February 2013, Mr Tremayne wrote to Mr Karantzis as follows:
John,
I understand your phone plan is paid by Sugar Australia.
Assuming you wish to retain the number, Urszula[77] has provided me with the appropriate documents (attached) to allow you to transfer over to your own account.
Thanks
Allan
[77] Ms Urszula Osowski was the executive assistant to the CEO at Sugar.
422. At 3:52pm on Tuesday 26 February 2013, Mr Karantzis responded as follows:
Alan
Much appreciated
Will action first thing in the am
Regards
423. The attached documents referred to in the email from Mr Tremayne to Mr Karantzis consisted of (1) a letter on Sugar letterhead stating that “Sugar Australia Pty Ltd has agreed that mobile phone number 0438 165 304 be transferred from its account no: 499 4508 754 to the account of John Karantzis, 13 Miller Street, Richmond 3121” and (2) an incomplete “Transfer of Ownership Application” form signed by Ms Urszula Osowski and dated 26 February 2013.
424. Mr Karantzis confirmed that he received this email[78] from Mr Tremayne. However, the form he ultimately used was the one obtained from Telstra (in store or downloaded) earlier. The email from Mr Tremayne then gave him some of the details necessary to complete the forms, such as the account number. He also changed his name on the letter to Nickolas John Karantzis which was his full correct name.
[78] Exhibit 34.
425. Mr Karantzis also wrote “transfer to prepaid” as Janish had told him there was no box to indicate that the phone number should now be a prepaid service.
426. Mr Karantzis said that he went back to the Telstra store at Melbourne Central on 28 February 2013 with the Change of Ownership documents and 100 points of ID to complete the transfer. He had also scanned these documents in order to obtain a rebate on telecommunications costs.
427. The plaintiff put into evidence a completed Telstra “Change of Ownership Application Form”.[79] The document includes a Telstra logo and printed instructions for completing the form. Handwritten details have been inserted into the appropriate spaces including the signature of Mr Karantzis and the date 28 February 2013.
[79] Exhibit K.
428. The printed instructions on the form included a section for the person completing the form to nominate a date at which the transfer should take effect. The printed instructions stated:
Transfer date relates to all services or accounts listed on the “Services to be Transferred” section of this application form. The transfer date cannot be earlier than 7 working days from the date that this form is submitted to Telstra including all required information. Telstra will attempt to transfer the services on the date you have requested, however some requests may take longer to complete.
429. In the space provided, the date 7 March 2013 was inserted in handwriting. Mr Karantzis also said that Janish had informed him that the transfer would take 7 days from date of lodgment and so he indicated that the phone should be active by 8 March 2013.
430. The document provided spaces for details of the outgoing customer. The handwritten details for Sugar Australia were inserted with a handwritten statement: “see attached Authority Form”. The attached form was in similar form to the one emailed by the defendant save that the name of the plaintiff was amended to Nickolas John Karantzis. The form also includes handwritten details as to a driver’s licence and a boat licence.
431. Mr Karantzis said that he left these forms with Janish who was to complete the transfer given the whole process was taking a lot of time and he had gone there with his three year old daughter.
432. Additionally, as part of the process he paid $100 cash for a prepaid voucher. Mr Karantzis said that it was a small thermal voucher with numbers on it that came out of the till.
Evidence of Telstra
433. The defendant called evidence from Mr John Papadimitriou, store leader of the Telstra shop at 155 Melbourne Central Shopping Centre, Latrobe Street in Melbourne.
434. Mr Papadimitriou gave evidence that a search of archived documents was conducted under his supervision for the months of January, February and March (by recalling paperwork from the storage facility and searching the store itself). However, despite such searches, they could not locate a copy of the “Transfer of Ownership Application Form”, nor was there other records one would expect including a record of any notes on the customer’s account.
435. However, this evidence was dependent on the record keeping of Telstra and was not highly probative in circumstances where I am not confident that the court was provided with all relevant Telstra records.
436. The evidence of Mr Papadimitriou was also limited to what processes/records “should have been kept”. This was in circumstances where there were disputes on the evidence as to what some of those procedures were. For example, his evidence that the transfer would occur immediately was contradicted by the printed instructions on the form above.
437. The evidence of Mr Karantzis that he attempted to transfer the ownership was otherwise generally cohesive and consistent with objective records including that:
·the documents provided by Telstra listed Mr Karantzis as “Nickolas John Karantzis” and listed a Victorian boat licence number for Mr Karantzis consistent with his account;
·the documents referred to a monthly billing date of the 8th day of each month; and
·he appears to have been able to provide a voucher number on request in a subsequent “live chat record” of 2 February 2014 consistent with him having received a prepaid voucher as he claimed.
438. I therefore accept that he made the attempts he did although they were ultimately unsuccessful in transferring the relevant number.
Wrong advice from Leading Edge
439. Subsequent to the communication with Mr Karantzis, the defendant followed up the position with the phone with Telstra’s licensed dealer, Leading Edge Telecoms.
440. Thus by email of 8 April 2013 at 10.00am Ms Osowski asked whether the phone number “0538 165 304 (John Karantzis)” had been transferred from the defendant’s account. In so doing, Ms Osowski mistakenly quoted the second digit of the phone number as “5” instead of “4”.
441. There were then two responses to Ms Osowski’s email from Leading Edge “signed” by different individuals on 8 April 2013:
·at 10.20am, Gary Pietersz stated: “I have checked service number 0438165304, and it is still with Sucrogen. Is the user staying with Telstra or going to another carrier?”; and
·at 10.32am, Snowy Long stated: “CHOWN [change of ownership] has been completed and no longer in your account.” (It now appears that Mr Long had simply looked at the 05 number).
Subsequent use of phone in 2013
442. Meanwhile Mr Karantzis had travelled overseas with the phone.
443. Mr Karantzis said that in March 2013, he went to Europe and took both the 0416 888 776 post-paid phone and the relevant phone. He also organized for a Dutch mobile phone on a contract and an unlimited data USB dongle to connect to his computer which he would use to access the internet. Mr Karantzis was shown two series of invoices[80] and confirmed that these were accounts for the Dutch phone and the USB dongle. Mr Karantzis said that this showed he had as much internet as he needed on his computer, and internet on his Dutch phone.
[80] Exhibit TT (PCB 125, 126).
444. Mr Karantzis explained that the primary reason for him keeping the relevant number was to put a message on it directing people to his new number and to answer any stray calls that may come in for him. He said his intent was to have the phone number for a short duration, some two to four months - until people were informed of his new number. He also said that it came as a surprise to him that a prepaid phone could “roam data”.
445. Despite this, the invoices adduced suggest the relevant phone number was used to make over $2,000.00 worth of phone calls and text messages during the period 23 February 2013 to 1 May 2013. This is apart from the substantial data downloading. These invoices also showed that there had been some occasions on which the phone number 0403 745 694 (belonging to the wife of Mr Karantzis) had also been used to call the phone number 0438 165 304 after 22 February 2013.
446. Mr Karantzis admitted that the phone records showed over 200 phone calls recorded on the phone in the period he was overseas including a call of 18 minutes but said that these would include inbound calls which are charged to the account by overseas providers. Mr Karantzis denied that it should have occurred to him that this level of use would cost more than $100.
447. The defendant made substantial criticism of Mr Karantzis’ credit generally on the basis of this phone use. However, although I am prepared to accept that he did not turn his mind subjectively to the issue, a reasonable person should have been aware that the usage of the phone was well exceeding any $100 prepaid limit.
Bill of 2 May 2013
448. By Telstra bill issued on 2 May 2013 Telstra invoiced Sugar in an amount of $782,783.24 which was largely constituted by data usage overseas charges for $723,938.94.[81]
[81] Exhibit N.
449. Mr Cooper (Infrastructure Manager at Sugar) stated that on 1 May 2013, Mr Peter Sarju of Telstra had earlier informed him of this large bill. He then requested that the mobile service be cancelled immediately.
450. According to Mr Papadimitriou the mobile was thereupon disconnected and went into a “quarantined state” until October at which time it was allocated to a “prepaid pack” with a designated SIM.
451. Mr Karantzis claimed to have no idea that the $750,000.00 charges had been incurred, and said he never received any warning messages.
452. The plaintiff also attempted to suggest there may have been inaccuracy in the quantum, highlighting that a number of charges appeared to relate to the time of 12.00am and also attempting to suggest Telstra had some general issue with overseas roaming, (making reference to generalised news reports).
453. However, the evidence of Mr Cooper was that because there were multiple carriers with a time stamp entry at midnight across multiple countries, the 12.00am entries appeared to be part of a “batching” in reporting (relating to data loaded up until that point in time) with nothing untoward.
454. The generalised news reports were not admissible and also did not assist in relation to this particular invoice.
455. There was also nothing to suggest that the phone was ever in the possession of a third party, nor was admissible evidence otherwise adduced to suggest that the charges were not properly incurred.
456. In such circumstances, the evidence suggests that Mr Karantzis incurred the substantial charges set out in the 2 May 2013 invoice while he was overseas.
Weitemeyer correspondence
457. On 10 May 2013, Mr Weitemeyer and Mr Karantzis exchanged emails in circumstances where Mr Weitemeyer requested payment of an outstanding bill of $5,000.00. It appeared he was not aware at this time of the recent substantial bill of 2 May 2013.
458. On 20 May 213, Mr Karantzis replied and stated:
Without Prejudice
Scott,
Haven’t heard from you.
Could you please send the below mobile bills so I can look at them please?
I changed my mobile number to 0416 888 776 on 26th February, so need to see the Telstra bill itself to understand what’s going on.
Please also send me EFT account/payment details so I have all information to hand.
459. On 23 May 2013, Mr Weitemeyer stated:
John
Thanks for your response.
Here is the detail around the account.
This is an extract from the total bill we received from Telstra
Did you keep copies of the material that you used to change the number over and if so could you please supply a copy to us. If you can assist by also advising how this was done that would be beneficial as we will raise the matter with Telstra as it may be possible to have some of it reversed”
460. There was no response to this email nor was there any mention by Mr Karantzis of his having attempted to transfer the phone earlier.
461. The defendant criticized the credit of Mr Karantzis on this basis. However Mr Karantzis’s response to this was that he was in dispute with the defendant by that time and he “didn’t tell Mr Weitemeyer a lot of things”. On his return from overseas, he also went into a Telstra store after this to make an inquiry and was told the number had been barred. He therefore just “let it go” at that time and did not take the phone issue any further.
Negotiations between Sugar and Telstra
462. Mr Cooper’s evidence was that he met with Telstra along with Mr Paul Gregory (head of finance and business services at the defendant) and Mr Glasgow about the outstanding bill in June 2013 and entered negotiations. Mr Karantzis was not involved in these negotiations with Telstra.
463. The evidence of Mr Cooper was that Telstra ultimately agreed to reduce the amount to $164,160.36 which Mr Cooper considered to be reasonable. This was also in a context wherein Telstra informed him that there was no suggestion of fraudulent hacking/use by any external party beyond the normal user of the service.
464. The plaintiff criticised the evidence of Sugar in this context (suggesting that Mr Gregory should also be called) but I accept Mr Cooper’s assessment and do not consider it was necessary for Mr Gregory to also be called.
465. By email of 15 October 2013 Mr Dowling of Telstra confirmed the presence of an “agreed credit” and asked if the remaining balance would be paid from Loyalty funds.
466. On 16 October 2013, Mr Cooper sent an email to Mr Glasgow and Mr Gregory noting that the defendant had available a credit of $209,146.00 in loyalty points with Telstra, asking whether the outstanding amount should be paid out of these loyalty points.
467. On 17 October 2013, Mr Gregory responded instructing Mr Cooper to pay the balance out of the loyalty points.
468. However, it appears that the loyalty points were not utilised in the result. Instead, Mr Cooper admitted that Mr Glasgow had instructed him not to use the loyalty points, and to pay the amount outstanding to Telstra because it would create a complication in this proceeding.
469. In the result, the $164,160.36 liability was discharged by funds which were provided by Sugar. This amount was derived partly from a cash call on its joint venturers (Wilmar and MacKay Sugar Ltd) and partly out of its existing funds.
Events in 2014
470. The subsequent conduct in relation to the relevant number in 2014 appears to have limited relevance. However, the defendant alleged that that after being served with the counterclaim, Mr Karantzis engaged in a “stratagem” to get the mobile number in his name in order to claim that he had already transferred the phone in February 2013 as he had promised to do.[82]
[82] Closing Submissions of Sugar Australia Parties, paragraph 167.
471. It is accordingly necessary to set out the relevant events.
472. Mr Karantzis said that in 2014 on the advice of his solicitors, he went to the Telstra store to see if he could get any background and further details about the phone. Once he was told he still owned the number, and given an option to activate, he attempted to go ahead with it.
473. Thus, Mr Karantzis said he spoke to Mr Andrew Tangus who said that the phone number was his and all he needed to do was show his boat licence and the transfer could be done immediately. Mr Tangus also gave him a blank SIM card and said he might need it if the activation didn’t work. However, it wasn’t activated immediately. This was consistent with the evidence of Mr Papadimitriou that on 28 January 2014 there was an order placed in the system to activate that mobile number which failed in the system because it had been allocated to a prepaid pack.
474. Mr Karantzis then went online a few days later and sought assistance. He put into evidence a transcript of an online text chat between himself and representatives of Telstra on 2 February 2014.[83] The transcript showed that Mr Karantzis had contacted Telstra after being unable to activate the relevant number in early 2014. The Telstra representatives were able to cause the relevant number to be activated. Additionally, the transcript shows Mr Karantzis enquiring as to the status of a $100 prepaid credit voucher and quoting two alternative voucher numbers. The Telstra representatives confirmed that one of the voucher numbers was correct.
[83] Exhibit 19.
475. The evidence of Mr Papadimitriou was that another order was placed on 2 February 2014 via the Telstra website to activate that mobile number via a replacement SIM card. It was successful although it activated under Caroline Karantzis’s name for reasons unknown.
476. Approximately two weeks later, Telstra made several calls to Mr Karantzis. On 20 February 2014, he returned their calls and was informed that the phone number was in his wife’s name. He said he “blew a fuse” and told them to put it back into his name as a prepaid account which he thought he had done at least on two or three occasions starting from February 2013. Mr Karantzis said they then transferred the relevant number into his name. However, a week prior to giving evidence he received an email saying it was in his wife’s name again on a post paid account but he was going to let the matter rest there.
477. The defendant put into evidence a recording of a phone call made by Mr Karantzis to Telstra on 20 February 2014[84] which was generally consistent with Mr Karantzis’s account.
[84] Exhibit 20.
478. Mr Papadimitriou also confirmed that on 20 February 2014 Telstra contacted Mr Karantzis and that during that call, a change of ownership was effected from Caroline Karantzis’s name into John Karantzis’s name.
479. Mr Karantzis admitted that he did not have any interest in using the phone by February 2014 but maintained that his purpose in transferring the phone number in 2014 was that his solicitors had advised him to seek information about the phone number and he wished to gain access to the “file”.
480. In such circumstances, I am unable to form a view that the contact with Telstra in 2014 was explicable by reason of some “stratagem” as alleged. Although it was not entirely clear why the approach was made, it appears to have been done at the request of the solicitors in a context of bitter litigation to clarify what had happened with the account.
Restitution
481. The defendant pleaded in its counterclaim that the circumstances of this matter gave rise to a claim in restitution.
482. Specifically, the defendant alleged that Mr Karantzis or alternatively Southern Ocean received a benefit from the continuing use of the phone at the expense of Wilmar or Sugar such that the sum of $164,160.36 was money paid “to the use of “Karantzis or Southern Ocean”.[85]
[85] TFADC, paragraphs 177-180.
483. It was difficult to identify precisely what the plaintiff’s response to this claim was. However, in its pleading it alleged that the defendant “should not have agreed” to make the payment and that they failed to exercise rights to avoid the payment including by electing not to terminate the account.[86]
[86] RDADC, paragraph 163.
484. In submissions, the plaintiff raised a wide ranging group of factors and suggested that there was no causal link to the amount claimed. In so saying particular reference was made to the failure to offset the liability by using loyalty points and further a failure to involve Mr Karantzis in the negotiations.
Principles
485. Although both parties referred at various times to “unjust enrichment” this concept is not of itself a separate cause of action. Rather it explains the conceptual basis of a number of established causes of action.[87]
[87] Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 at page 665; Hendersons Automotive Technologies Pty Ltd (in liq) v Flaton Management Pty Ltd (2011) 32 VR 539 at page 553.
486. Moreover, care should be taken in relying on this concept to recognise a claim which does not come within an established category; in particular care should be taken not to disturb established rights and obligations under contract.[88]
[88] Hendersons Automotive Technologies Pty Ltd (in liq) v Flaton Management Pty Ltd (2011) 32 VR 539 at page 551.
487. This is important given both sides provided wide ranging factors which were of no relevance to the question as to whether a monies paid count was established.
488. In its simplest form, an action for monies paid was established where money was paid to or for the use of the defendant; there was a request (express or implied) that the money be so laid out; and there was a refusal to pay.[89]
[89] Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 at [89]; Mason K, Carter JW and Tolhurst GJ, Mason and Carter’s Restitution Law in Australia (2nd ed), page 16.
489. However, even in the absence of a request, there has also evolved a claim based on the concept of “free acceptance” or an “incontrovertible benefit”.[90] Whatever its exact scope the phrase was originally coined by Goff and Jones and recently cited by Gleeson CJ in Lumbers as follows:[91]
“In our view the defendant will be held to have benefited from the [freely accepted] services rendered if he, as a reasonable man should have known that the claimant who rendered the services expected to be paid for them, and yet he did not take a reasonable opportunity open to him to reject the proffered services….”
[90] Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 per Deane J at pages 256-7 and per Mason and Wilson JJ at page 227; and see cases cited in Mason K, Carter JW and Tolhurst GJ, Restitution Law in Australia (2nd ed), page 157 footnote 396.
[91] Goff and Jones, The law of Restitution 7td ed, [1-1019] cited in Lumbers v W Cook Builders Pty Ltd (in liq) (2008) 232 CLR 635 at page 656.
Application
490. Returning then to the facts of this case, Sugar has paid monies in respect of Mr Karantzis’ use of the phone.
491. In my view a request can also be implied on the circumstances of this case. Thus, in using the phone to the extent he did, Mr Karantzis effectively created an obligation to pay for his useage of the relevant number. In such circumstances, I consider he was implicitly making a demand for those services to be paid for by one of the constituent members of the Sugar group (of whom he was aware as a Senior Executive).
492. Even if this is incorrect, I consider that Mr Karantzis, as a reasonable man, should have known that the Sugar entity which paid for the phone would expect to be compensated. The employment contract was at an end and there could be no reason for a member of the Sugar group to supply such a financial benefit to Mr Karantzis.
493. It is true that Mr Karantzis denied that it should have occurred to him that his level of use would cost more than $100.
494. However, in considering the concept of “free acceptance”, the court is not concerned with the actual state of mind of the parties but rather what the recipient should have known as a reasonable man.[92]
[92] Brenner v First Artists’ Management Pty Ltd [1993] 2 VR 221 at page 260.
495. I also consider that Mr Karantzis did not take a reasonable opportunity to reject the services Sugar paid for. Even accepting that he believed he had transferred the phone he should have been aware that he had exceeded the $100 limit. Leaving aside the data usage, he made over 200 phone calls exceeding over $2000 in value.
496. There were no other known defences pleaded by the plaintiff. However, some brief remarks about some of the plaintiff’s submissions may be made.
497. Thus, I do not consider that the contract should have been terminated in circumstances where Sugar relied on the statements of Mr Karantzis (and its agent) that the phone was to be transferred.
498. The agreement to pay the amount paid was also a reasonable one, given the amount of the bill which I have found was valid on the evidence before me. Thus, Sugar was able to obtain a substantial reduction in charges for data use from Telstra which was a reasonable stance to take.
499. In terms of “causation” generally, there is no such requirement in restitution. In any event, the financial benefit received by Mr Karantzis (of use of a telephone) was matched by the amount expended (in respect of the actual financial costs for that use).
500. Finally, I do not consider that the use of cash rather than loyalty funds assists the plaintiff. The fact was that Sugar made a payment to Telstra, which was owed monies in respect of the phone use in circumstances where the law required that a payment be made. Whether this ultimately derived from cash or other “available funds” through the loyalty fund is of no material consequence.
501. Overall then I am satisfied that Sugar is entitled to the amount of $164,160.36 as money paid “to the use of” Mr Karantzis.
502. In terms of the other potential plaintiffs to the counterclaim, although Wilmar Sugar Pty Ltd strictly, had legal liability, it did not make the relevant payment. The fact that Wilmar and MacKay Sugar Ltd also provided part of the funds in response to a cash call was a facet of the relations between those parties and does not substantiate a claim in restitution against Mr Karantzis.
503. In terms of potential defendants, the evidence established that Mr Karantzis used the phone but was insufficiently detailed as to whether/what extent such usage was for the purposes of his business entities. In such circumstances I am unable to be satisfied that any claim can be made against Southern Ocean or Merchant Protect.
504. It follows that Sugar is entitled to judgment on its counterclaim in the amount of $164,160.36 against Mr Karantzis in restitution.
505. It is unnecessary to consider the other causes of action alleged.
I CONCLUSION
506. I consider that the following orders should be made:
·There is judgment for Southern Ocean against Sugar in the amount of $265,765.48;
·There is judgment on the counterclaim for Sugar in the amount of $164,160.36 against Mr Karantzis;
507. I will hear from the parties on the question of costs.
SCHEDULE OF PARTIES:
| SOUTHERN OCEAN PTY LTD (ABN 47 048 187 333) | Plaintiff |
| v | |
| SUGAR AUSTRALIA PTY LTD (ABN 82 081 245 169) | Defendant |
| and between: | |
| SUGAR AUSTRALIA PTY LTD (ABN 82 081 245 169) | First Plaintiff by Counterclaim |
| WILMAR SUGAR PTY LTD (ABN 44 081 051 792) | Second Plaintiff by Counterclaim |
| WILMAR SUGAR REFINING INVESTMENTS PTY LTD (ABN 69 054 982 071) | Third Plaintiff by Counterclaim |
| MACKAY SUGAR LTD (ABN 12 057 463 671) | Fourth Plaintiff by Counterclaim |
| v | |
| SOUTHERN OCEAN PTY LTD (ABN 47 048 187 333) | First Defendant by Counterclaim |
| NICKOLAS JOHN KARANTZIS | Second Defendant by Counterclaim |
| MERCHANT PROTECT AUSTRALIA PTY LTD (ABN 82 161 323 762) | Third Defendant by Counterclaim |
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