Sydney Sunny Glass Pty Ltd v McParland
[2020] FCA 1017
•24 July 2020
FEDERAL COURT OF AUSTRALIA
Sydney Sunny Glass Pty Ltd v McParland [2020] FCA 1017
Appeal from: McParland v Origin Oz Holdings t/a Nuline Glass [2019] FCCA 1534
McParland v Origin Oz Holdings t/a Nuline Glass (No 2) [2019] FCCA 1674
File number(s): NSD 1066 of 2019 Judge(s): RARES J Date of judgment: 24 July 2020 Catchwords: CONTRACTS – contractual interpretation – contracts of employment – where employee entered into a contract of employment with first employer as well as a collateral contract to obtain shares after a period of escrow during which time he would continue working for that employer – where employee transitioned prior to the conclusion of escrow period to working for second employer with “current entitlements” and first employer paid all “entitlements owing” at date of termination –– whether “current entitlements” due by second employer included obligations under collateral contract to deliver shares at end of escrow – where trial judge entered judgment jointly and severally against both employers in respect of the failure to deliver shares under collateral contract – trial judge erred in finding second employer liable under collateral contract – appeal allowed
INDUSTRIAL LAW – where second employer, through actions of its principal, dismissed employee for exercising workplace right to seek compliance with workplace safety laws from a regulator in contravention of ss 340(1)(ii) and 341(1)(c) of the Fair Work Act 2009 (Cth) – consideration of whether to order both second employer and its principal to pay separate civil penalties – appropriate to impose penalty on both for contravention of s 340 – where employee’s dismissal also contravened s 44(1) of the Act by reason of failures to comply with the requirements of s 117(1) and 117(2) – where contraventions part of course of conduct – consideration of civil penalties – application of principles and totality – penalties imposed by trial judge set aside
Legislation: Fair Work Act 2009 (Cth), ss 44, 61, 117, 323, 340, 341, 539, 546, 550, 557 Cases cited: Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 249 FCR 458
Cohen v iSoft Group Pty Limited (2013) 298 ALR 516
Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Commonwealth v Director of Fair Work Building Industry Inspectorate (2015) 258 CLR 482
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95
Hull v Thompson [2001] NSWCA 359
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361
Lee v Lee (2019) 372 ALR 383
Mayburyv Atlantic Union Oil Co Ltd (1953) 89 CLR 507
Parker v Australian Building and Construction Commissioner (2019) 270 FCR 39
Treasury Wine Estates Vintners Limited v Pearson (2019) 268 FCR 12
Wickman Machine Tool Sales Ltd v L Schuler AG [1974] AC 235
Zhu v Treasurer of New South Wales (2004) 218 CLR 530
Date of hearing: 20 February 2020 Registry: New South Wales Division: Fair Work Division National Practice Area: Employment & Industrial Relations Category: Catchwords Number of paragraphs: 123 Counsel for the Appellants: Mr D.L. Williams SC with Mr W.R. Chan Solicitor for the Appellants: Cathay Lawyers Counsel for the Respondent: Mr Willis Solicitor for the Respondent: Harmers Workplace Lawyers ORDERS
NSD 1066 of 2019 BETWEEN: SYDNEY SUNNY GLASS PTY LTD
First Appellant
SHENQIANG CHI
Second Appellant
AND: DEAN MCPARLAND
Respondent
JUDGE:
RARES J
DATE OF ORDER:
24 JULY 2020
THE COURT ORDERS THAT:
1.The appeal be allowed.
2.The cross appeal be allowed in part.
3.The orders made by the Federal Circuit Court of Australia on 13 June 2019 be varied by:
(a)deleting “and the Third Respondent are jointly and severally liable to” from order 1;
(b)setting aside orders 2, 3, 5 and 6; and
(c)adding the following order:
“2. The Third Respondent pay the Applicant the sum of $12,866.36 inclusive of interest up to 13 June 2019.”
4.The orders made by the Federal Circuit Court of Australia on 14 June 2019 be varied by:
(a)deleting from declaration 2c. all words and figures after “applicant’s” and substituting in their place “car allowance in relation to the period 15 March 2017 to 5 June 2017 in the amount of $4,229.59”.
(b)deleting from order 2 “$81,000” and substituting in its place “$56,000”; and
(c)deleting from order 3 “$7,560” and substituting in its place “$9,000”.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
RARES J:
INTRODUCTION
This is an appeal and cross-appeal from two decisions of the Federal Circuit Court relating to claims by Dean McParland, the respondent, against his two former employers and their respective principals for damages and civil penalties for contraventions of the Fair Work Act 2009 (Cth) arising from the termination of his employment on 6 June 2017.
Sydney Sunny Glass Pty Ltd was Mr McParland’s employer at the time of his dismissal. It and its principal, Shenqiang Chi, known as Sunny Chi, are the appellants, and were the third and fourth respondents below. The first and second respondents below, Origin Oz Holdings Pty Ltd trading as Nuline Glass and one of its directors, known as Benjamin Young or Benny Lau, took no part in the proceeding below and are not parties to the appeal or cross-appeal.
Nuline had employed Mr McParland until 14 March 2017 when it sold its business to Sunny Glass. Both Nuline and Sunny Glass informed Mr McParland that on 14 March 2017 Nuline would pay “all entitlements owing … in your final payment” and that from 15 March 2017 Sunny Glass would continue to offer “current entitlements” to him as its employee.
A key issue in both the trial and the appeal was the meaning of the expression “current entitlements” in the context that in March 2015, when Mr McParland agreed to Nuline’s offer of employment, he made a side agreement with Nuline or its principals (the collateral share contract).In substance, the collateral share contract was that, in exchange for him accepting a lesser salary package, they would reward him with 1 million shares in Baumart Holdings Ltd (the Baumart shares) upon its imminent listing on the Australian Securities Exchange (ASX), but the shares would be held in escrow for two years from their issue on listing. Baumart listed on 21 May 2015, but Mr McParland never received the shares. Nuline’s principals had some association with Baumart that was not the subject of findings below.
The trial judge heard evidence and submissions over four days. There was no challenge on the appeal or Mr McParland’s cross-appeal to his Honour’s credibility based findings, but there was a substantial contest in both the appeal and Mr McParland’s cross-appeal about the content and construction of the contracts that Mr McParland had made on which he sued, as well as the damages and other relief to which he was entitled.
I have approached the resolution of the appeal and cross-appeal on the basis that Bell, Gageler, Nettle and Edelman JJ restated in Lee v Lee (2019) 372 ALR 383, 396 [55], namely:
A court of appeal is bound to conduct a “real review” of the evidence given at first instance and of the judge’s reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge’s findings unless they are “glaringly improbable” or “contrary to compelling inferences” is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, “in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge”
(footnotes omitted; emphasis added)
THE LEGISLATIVE SCHEME
Relevantly, the Act provided that an employer could not terminate an employee’s employment unless the employer had given the employee written notice of the day of the termination, which cannot be before the day of giving the notice (s 117(1)). In Mr McParland’s case, the period of notice before the day that the termination came into effect had to be at least one week (s 117(2)). Each of s 117(1) and (2) was a provision that was a national employment standard within the meaning of s 61(3). An employer was prohibited from contravening a national employment standard (s 44(1)).
An employer had to pay an employee in full, at least monthly, all amounts payable to him or her in relation to the performance of work (s 323(1)). A person could not take adverse action against another person because, relevantly, the other person had exercised a workplace right (s 340(1)(a)(ii)). A ‘workplace right’ was defined in s 341(1)(c) as including the ability to make a complaint or inquiry to a person or body that had the capacity, under a workplace law, to seek compliance with that law (such as a regulator).
Each of ss 44(1), s 323(1) and 340(1) was a civil penalty provision. A person who was involved in a contravention of a civil remedy provision, including by act or omission being in any way knowingly concerned in or party to it, was deemed to have contravened that provision by force of s 550(1). The Federal Circuit Court could impose a pecuniary penalty on a person who had contravened any of those civil remedy provisions of, relevantly here, 60 penalty units (of $180 each or $10,800) for an individual and five times that number of penalty units (ie, 300 units or $54,000) for a corporation (ss 539, 546(1) and (2)).
MR MCPARLAND’S RELATIONSHIP WITH NULINE
The initial contract of employment
The trial judge accepted Mr McParland’s evidence about the oral negotiations and termination of his contracts, but did not accept his evidence about his claims of loss at the end of the relationships in question. The latter claims were the subject of the cross-appeal. Because Nuline and Mr Young did not appear, his Honour accepted Mr McParland’s affidavit evidence as to how his contracts with Nuline were formed.
In early March 2015, Mr McParland negotiated the terms of his future employment with Nuline, principally through Sam Lau, one of its directors. In the course of those negotiations, Nuline proffered Mr McParland two versions of an offer of employment that each included a proposal for salary and other remuneration. Each version contained an entire agreement clause. Nuline and Mr McParland discussed what salary would be payable to him. On 9 March 2015, after reviewing the first offer of employment at a salary of $100,000 per annum, Mr McParland emailed Mr Lau noting that the offer had made no mention of the Baumart shares saying:
I kow [sic] you have stated for me to take your word but this needs to be in the contract. If the shares can’t be in the contract, then I believe my salary should change to $120,000 pa, including car, home computer & bonus (This is my current contract with K&K) & no shares to be given...I have already dropped $20,000 to come & work for you, + my bonus I receive at the end of each year (Between $8,000 and $12,000) that’s a minimum of $28,000 & a maximum of $32,000 drop in salary p.a.
(emphasis added)
On 12 March 2015, Mr Lau emailed Mr McParland and they agreed that his salary and wages would be paid fortnightly. Mr Lau acknowledged that, if he came to work for Nuline, Mr McParland’s remuneration would drop at least $20,000, plus bonuses from his current salary but wrote:
However, in return, we promised to reward you with 1,000,000 shares of the company once the company is listed on the ASX.
The shares will not be listed under your name and will be in escrow for two years and you will not be able to trade them for that period. This is done to prevent employees taking a quick profit by selling the company shares as soon as they receive them and leave the company.
The main reason that we requested a small drop in your salary, but will reward you with a large volume of company shares, is that we are looking for a business partner, not only an employee. We want a business partner who’s prepared for the challenge and confident enough to run the business and make the business very profitable.
It is in the best interests of the company to honour our commitment to reward highly capable and motivated senior management with a large volume of company shares, therefore, you can rest assured that we will do what we promised.
(emphasis added)
As events turned out, that promise was not honoured, but Mr McParland was not to know.
The evidence was inconclusive about who were the persons that Mr Lau called “we”, making the promise about rewarding Mr McParland with the Baumart shares. On 23 March 2015, Mr McParland signed the second version of the offer of employment (the Nuline contract). Relevantly, it provided that:
·he was to be remunerated with a base salary of $135,000 per annum, inclusive of leave loading and 9.25% superannuation, plus a $500 weekly car allowance (cl 3);
·either party could terminate it on one day’s written notice (cl 15); and
·the Nuline contract constituted “the entire agreement with respect to your employment and supersedes all prior representations and agreements concerning your employment with the company” and any variations to it had to be in writing signed by both parties (cl 22).
Crucially, the Nuline contract made no mention of the Baumart shares. However, his Honour found that Nuline and Mr McParland also made the collateral share contract, that formed part of his overall employment contract. His Honour made that finding despite the provisions of the entire agreement clause in the Nuline contract.
The car allowance
On 1 December 2015 Mr Lau became a bankrupt. Mr Young told Mr McParland that the car that he was using was Mr Lau’s and that Mr McParland had to return it. Mr Young told Mr McParland to get a car in his own name and that Nuline would pay all his expenses for it.
On 7 January 2016, Nuline wrote a letter “To Whom it May Concern”. That letter stated that:
·Mr McParland was a valued employee of Nuline;
·Nuline had decided that he would be entitled to a car allowance to cover the cost of obtaining a work vehicle in addition to his salary;
·the vehicle was to be used predominantly for business purposes; and
·the allowance would be payable upon his acquiring a car.
On 15 March 2016 Mr McParland took out a loan with Macquarie Leasing Pty Ltd to purchase a 2015 Holden Calais wagon for $49,641 on the basis of his discussion with Mr Young.
His Honour found that the parties varied the Nuline contract by conduct in respect of Mr McParland’s entitlement to a car allowance. Mr McParland said in his affidavit of 12 September 2018 that Nuline and Sunny Glass paid him $1550 per month as a car allowance until the end of his employment. However, Mr McParland acknowledged in his affidavit of 30 November 2018 that he was mistaken about this since the payment of that allowance ceased when his employment with Nuline ended on 14 March 2017.
However, the trial judge did not refer in his reasons to the facts that Mr McParland had never received a $500 weekly car allowance and that he had used the car that was connected to Mr Lau in lieu of receiving that allowance.
Nuline and Sunny Glass begin negotiations
In late 2016, Nuline entered into discussions with Sunny Glass and Mr Chi with a view to Sunny Glass acquiring and taking over Nuline’s business. In about December 2016, as Mr McParland said in his affidavit of 16 November 2018, he had a conversation with Mr Chi in which he told Mr Chi that he would receive 1 million shares from Baumart in May or June 2017, as agreed in his contract, so that Mr Chi could be satisfied that he (Mr McParland) wanted the business to do well.
The trial judge found that Mr Chi had asked Mr McParland whether he had the Baumart shares and that he had replied, “No, not yet. They are being held for me until around May or June 2017”. Mr Chi also told Mr McParland that he (Mr Chi) was supposed to receive some shares in Baumart at the same time.
His Honour also found that, in about early March 2017 the principals of Nuline and Sunny Glass agreed to Sunny Glass, in effect, acquiring or taking over the business and employees of Nuline. On 8 March 2017, Rob Thrift, as a director of Nuline, wrote to Mr McParland on Nuline letterhead with a copy sent to Sunny Glass (the 8 March letter). Other employees of Nuline received letters in similar terms. The 8 March letter stated:
Dear Dean
Termination of your employment by reason of change of ownership
The purpose of this letter is to confirm the outcome of a recent review by Nu Line Glass (The Employer) on the 28th February 2017 of its operations at its Smithfield NSW factory, and the verbal notice given to all employees on this day.
Nu Line Glass will be ceasing it operations in Smithfield as of the 14th March 2017. The new employer Sydney Sunny Glass will be taking over all production and lease agreements as well as some assets from Nu Line Glass at the above site on the 15th March 2017.
The decision is not a reflection on your performance.
Your new employment will restart with Sydney Sunny Glass on the 15th March 2017 and your new position will continue with the new employer.
Based on your employment arrangements, your notice period is 2 weeks. Therefore, your employment will end on 14th March 2017 with all entitlements owing paid in your final payment.
We thank you for your valuable contribution during your employment with us. Please contact me if you wish to obtain a reference in the future.
(emphasis added)
On 9 March 2017, Mr Thriftwrote another letter to Mr McParland and, likewise, other employees of Nuline, with a copy sent to Sunny Glass in the following terms (the 9 March letter):
Dear Dean,
Transfer of employment by reason of change of ownership
The purpose of this letter is to confirm the outcome of a recent review by Nu Line Glass (The Employer) on the 28th February 2017 of its operations at its Smithfield NSW factory, and the verbal notice given to all employees on this day.
Nu Line Glass will be ceasing it operations in Smithfield as of the 14th March 2017. The new employer Sydney Sunny Glass will be taking over all production and lease agreements as well as some assets from Nu Line Glass at the above site on the 15th March 2017.
Your current employment will continue on with all current entitlements and your hourly rate unchanged as agreed by Sydney Sunny Glass. Should Sydney Sunny Glass management decide to make changes to your position, they may do so at their own discretion and through discussion with you
Nu Line Glass would like to thank you for your contribution during your employment with us. Please feel free to contact me during business hours should you have any questions or concerns prior to this transition period.
(emphasis added)
On 14 March 2017, Sunny Glass wrote to Mr Thrift in the following terms (the 14 March letter):
Dear Rob
Takeover of employment in Nu Line Glass by transfer or ownership
The purpose of this letter is to confirm the operation of Sydney Sunny Glass (incoming employer) at Smithfield factory and the verbal notice given to all your employees on this day.
Sydney Sunny Glass is going to operate in Smithfield at 15th March 2017. All production and lease assets from Nu Line Glass at above site will be taken over by Sydney Sunny Glass.
Sydney Sunny Glass will continue to offer current entitlements and unchanged working hourly rate to current employees of Nu Line Glass, Sydney Sunny Glass authorize to decide to make changes to working position, may do own discretion base on employee performance during three months’ probation to make change on salary after above period and through discussion with employees.
Sydney Sunny Glass would like to thanks for all your assistance and attention this transition period.
Yours faithfully
James Liu
Associate General Manager
Sydney Sunny Glass
His Honour found that Mr Thrift forwarded a copy of the 14 March letter to Mr McParland by email on about the same day. These three letters together comprised the written terms of Mr McParland’s employment contract with Sunny Glass (the Sunny Glass contract).
Mr McParland gave evidence in his affidavit of 16 November 2018 that he had a discussion with Mr Young in about March 2017 about the position with his car loan repayments. He asked Mr Young, "What about the loan repayments, Benny?" to which Mr Young replied, "Don't worry, Baumart will pay your car now, let Sunny [viz: Mr Chi] settle and we will discuss with him later". Mr McParland denied what Mr Chi had averred in his affidavit, that he had told Mr Chi that Nuline only paid him (Mr McParland) for petrol. But, Mr McParland said that in about October or November 2016 he had told Mr Chi, in answer to Mr Chi's inquiry as to who owned the car, "That's my car. It is a company car".
MR MCPARLAND’S EMPLOYMENT WITH SUNNY GLASS
Mr McParland had held the position of general manager at Nuline. Following the change of employer, he became one of two deputy general managers of Sunny Glass.
Soon after the takeover Mr McParland became concerned about some of the work practices appearing in the factory that he considered endangered safety of employees who were working, principally, with architectural glass. He had a number of conversations with Mr Chi between 5 and 14 April 2017 in relation to safety and work practice issues, each conversation being prompted, as the trial judge found, by what appeared to be unsafe work practices.
On 13 April 2017, a particularly serious incident occurred when glass spilt out of a container that a crane held suspended in the air in circumstances where the remote control for the crane had been left unattended. Another worker picked up the remote control mistakenly thinking that it operated a different crane. The worker used the control causing the dangerous spill of glass from a height onto the factory floor. Mr McParland observed that someone could have been killed because of that circumstance and that it ought not to have occurred. Mr McParland said that Mr Chi had not taken kindly to Mr McParland drawing the unsafe work practices to his attention on 14 April 2017. Mr Chi denied that he had yelled aggressively at Mr McParland on this occasion, but the trial judge did not accept Mr Chi’s evidence on this, and most other, matters.
Mr McParland became sufficiently concerned that, on 19 April 2017, he contacted WorkSafe NSW, the regulator, and made an anonymous complaint about the unsafe work practices that he had seen at the Smithfield factory.
On 20 April 2017, Mr McParland emailed Mr Chi and others saying that, for family reasons, he would be heading to Tasmania to join his family on 26 April 2017 and would take three days leave for that purpose. He reminded them that he also had annual leave due for the week of 29 May 2017 from which he would be returning to work on 5 June 2017.
Mr McParland seeks medical help and a new job
On 24 April 2017, Mr McParland attended a general practitioner, Dr Monesh Diddee. Dr Diddee recorded that Mr McParland reported being anxious, very stressed, having poor sleep, low mood and problems adjusting to changes at work. He reported that he was not coping with the new director’s management practices, but was not feeling suicidal or homicidal. Dr Diddee noted in his records that he had counselled Mr McParland at length and had diagnosed “adjustment disorder/depression”.
Prior to 1 May 2017, Mr McParland had arranged a job interview with a prospective new employer.
Mr McParland returned to Dr Diddee on 1 May 2017. The doctor prescribed the antidepressant and antianxiety drug, Zoloft, and wrote a medical certificate that stated that Mr McParland was: “…suffering from a medical illness – Depression / Anxiety – and will be unfit for attendance” from 1 to 28 May 2017, inclusive.
On 4 and 5 May 2017, Mr McParland sent text messages pressing Mr Young of Nuline about when the Baumart shares would be put into his name.
Mr McParland attended again at Dr Diddee’s rooms on 8, 15 and 25 May 2017 and obtained further medical certificates from the doctor saying he was unfit for work.
On 10 May 2017, Mr McParland applied for a job with a business operated by a subsidiary of CSR Limited, called Viridian, in response to an advertisement.
On 24 May 2017, Mr McParland sent an email with a curriculum vitae to another person through whom he was seeking employment.
On 25 May 2017 Dr Diddee certified that he had examined Mr McParland that day and, in his opinion, his patient would be fit to return to full duties from 5 June 2017.
By 27 May 2017, Mr McParland made arrangements with a recruiting officer of CSR to be interviewed on 7 June 2017 for the position with Viridian.
His Honour found that Mr Young and Sok Teoh of Baumart had provided Mr McParland with comfort to leave Sunny Glass because of what they had been telling him in response to his inquiries during the course of May and June 2017 about his imminent receipt of the Baumart shares.
The circumstances of Mr McParland’s termination
In the meantime, Mr McParland made inquiries with a work colleague at Sunny Glass as to whether his anonymous complaint to WorkSafe had resulted in any action by the regulator. He ultimately ascertained that WorkSafe had visited the factory on 15 May 2017. On that occasion, WorkSafe issued Sunny Glass with a number of improvement notices requiring workplace health and safety concerns to be addressed on or before 5 June 2017. His Honour found that Mr Chi was upset and galled by the issue of those notices and that he formed the view that Mr McParland had been responsible for the regulator’s attention.
On 5 June 2017, Mr McParland returned to work but did not encounter Mr Chi on that day.
On 6 June 2017, Mr Chi entered Mr McParland’s office and began shouting at him. He told Mr McParland to get out and that there was no job for him. The trial judge rejected Mr Chi’s characterisation of the meeting as one in which Mr McParland had quit his job. His Honour accepted Mr McParland’s evidence, together with that of an independent witness, Ms Wild, that, during an angry conversation, Mr Chi terminated his employment and that he had to leave.
The trial judge found that Mr Chi had denigrated Mr McParland for having exercised his workplace right to bring such practices to the attention of the regulator and, in the belief that Mr McParland was the source of that complaint, had dismissed Mr McParland by way of payback. His Honour arrived at that conclusion having taken into account that Mr McParland was looking for alternate employment in the period leading up to 6 June 2017.
Moreover, the trial judge found that Mr Chi knew that Mr McParland was entitled to two weeks’ notice, as provided in the 8 and 14 March letters but had dismissed Mr McParland summarily, without any period of notice. His Honour found Mr Chi accessorily liable under s 550 of the Act for all of Sunny Glass’ conduct, including its failure to pay Mr McParland any moneys (including pay in lieu of notice) due to him following his dismissal.
Mr McParland’s damages claim
On 21 June 2017, Mr McParland entered into a contract of employment with Viridian, commencing on 26 June 2017, to be a production supervisor at a lower salary of $80,000 per annum, with the opportunity to earn bonuses and penalty rates. He remained employed there until at least the time of the trial. His Honour found that when Mr McParland completed a health assessment questionnaire for Viridian on 14 June 2017, he untruthfully answered the following question in the negative:
Q4. Mental health – Do you currently have OR have you EVER had any of the following?
“Have you ever had any mental health issue requiring medication (anti-depressants, sedative or sleeping tablets) or counselling?”
His Honour found that Mr McParland was aware of Dr Diddee’s 1 May 2017 diagnosis that he had an adjustment disorder and depression and had been prescribed antidepressant and anxiety medication. He also found that Mr McParland gave other false responses in the questionnaire, namely that he had never experienced depression, anxiety or insomnia, that all the information he provided to Viridian was correct and that he had not provided any misleading particulars.
His Honour found that a report by a clinical psychologist, Louise Morrow, dated 22 November 2018, on which Mr McParland relied, did not establish that the major depressive disorder from which Mr McParland suffered was caused by, or related to, the circumstances of the termination of his employment on 6 June 2017.
The trial judge found that Ms Morrow had not received a complete history for Mr McParland and was not aware of Dr Diddee's diagnosis of 1 May 2017 and his prescription of Zoloft. He noted that Ms Morrow had opined that no definitive causative factor had been identified in relation to depression, but that certain factors were believed to play a role. His Honour did not accept her statement that in considering the development of Mr McParland's psychological disorder, “apparent contributing factors” included, relevantly, his summary dismissal by Mr Chi. The trial judge found that most of the factors to which Ms Morrow referred were largely unrelated to the circumstances of the termination of Mr McParland’s employment. His Honour formed an adverse view of Mr McParland’s credibility on matters relating to the cause, nature and extent of any psychological condition which he alleged. He found that the circumstances of his termination of employment had not exacerbated or contributed to any psychological condition that Mr McParland continued to suffer or experience after 6 June 2017.
In addition, his Honour found that Mr McParland did not suffer hurt, loss of enjoyment of life, humiliation or distress as a result of his termination, and was not entitled to any compensation under those heads pursuant to s 545(2)(b) of the Act. The trial judge arrived at this finding because, he reasoned, by 6 June 2017, Mr McParland was preparing to leave Sunny Glass and his determination to do so was "set in stone".
His Honour found that Mr McParland was only entitled to compensation for a notice period of two weeks by reason of his unlawful termination. He rejected Mr McParland's other claims for compensation. He found that Mr McParland would have commenced employment with Viridian on 26 June 2017, irrespective of whether he had been terminated by Sunny Glass on 6 June 2017, even though his new employment was in a lower position and for a lesser base salary.
The trial judge’s conclusions on liability
The trial judge gave the following reasons for finding that Sunny Glass had breached its contract of employment with Mr McParland (at [36], [37], [39]–[41]):
It is of no moment then, when objectively considering the actions of the applicant, Sunny Chi and Eric Chi after 15 March 2017, that a reasonable person might question why the applicant continued in employment with Sunny Glass, without complaint, in circumstances where, from the time of the commencement of such employment with Sunny Glass, the wage and other remuneration paid to him was less than that which he asserted he was entitled to be paid at the end of his employment with Nuline. A reasonable person would ask why the applicant continued to work for Sunny Glass in such circumstances.
The answer lies in an examination of the applicant’s particular circumstances both as at, and after, 15 March 2017. As to both the applicant’s claimed but un-delivered share entitlement, and his underpayment of wages and other remuneration before 15 March 2017, it is likely that after 15 March 2017 the applicant was not wanting to prejudice his actually having the shares transferred to him. The value of the shares far outweighed any temporary underpayment of wage and other entitlements. The applicant no doubt appreciated that he was in a vulnerable position. Notwithstanding assurances from Benny Young that the shares would be transferred to him, the applicant had no control over when or how that would be done. It is understandable that in such circumstances the applicant decided to go quietly, and not rock the boat by complaining to Sunny Glass about his entitlements.
…
When considering all of the surrounding circumstances of the change of employment contextually – and having regard to the principle of objectivity as discussed above – it is considered that a reasonable person, having knowledge of all of the relevant facts, matters and circumstances, would believe that it was part of the employment contract between the applicant and Sunny Glass that the applicant’s terms of employment with Sunny Glass would replicate the terms of employment which governed his contractual relationship with Nuline.
The terms of the applicant’s employment with Nuline, as referred to in paragraphs 13 and 14 above, and as found by the Court, were as follows:
a) the Applicant would be paid a base salary of $135,000 per annum; and
b) Nuline would make superannuation contributions into a complying superannuation fund nominated by the Applicant, on a quarterly basis, at a rate of 9.25% of the Applicant’s base salary; and
c) the Applicant would receive a $500 weekly car allowance; and
d) Nuline would cause 1,000,000 fully paid up shares in Baumart Holdings Limited to be transferred to the applicant within two years of the date on which Baumart was listed on the ASX. Baumart was listed on the ASX on 21 May 2015.
e) the payment of “a car allowance to cover the costs of obtaining a work vehicle in addition to Dean’s salary”.
Such finding is also supported by relevant and compelling credibility findings on point.
(italic emphasis in original, bold emphasis added)
The trial judge found in his reasons on liability, delivered on 5 June 2019, that each of Nuline and Sunny Glass had a contractual obligation to transfer the Baumart shares to Mr McParland, and that each employer was in breach of that obligation.
On 13 June 2019, his Honour ordered that Nuline and Sunny Glass are "jointly and severally liable to pay to [Mr McParland] the sum of $240,000 as damages for breach of contract” in respect of the failure to transfer the Baumart shares, together with interest. His Honour gave no reasons for imposing joint and several liability.
In his reasons on penalty, delivered on 14 June 2019, his Honour found that Sunny Glass had contravened s 323(1) of the Act by failing to pay Mr McParland's base salary in full, which he had found to be $135,000 per annum, his car allowance, superannuation and the value of the Baumart shares.
The trial judge also found that, contrary to s 340(1)(a)(ii), Sunny Glass had taken adverse action against Mr McParland because he had exercised a workplace right, being his right under s 341(1)(c) to make a complaint, relevantly, to a regulator to seek compliance with a law or a workplace instrument.
The trial judge also found that Nuline, as Mr McParland’s former employer had contravened s 323(1) by failing to pay Mr McParland's base salary in full which he also found to comprise $135,000 per annum, car allowance, superannuation and to transfer the Baumart shares to him.
THE APPEAL
Mr McParland’s submissions on liability
Mr McParland argued that his Honour correctly made his findings about the terms of his contract with Sunny Glass. He contended that where the letters of 9 and 14 March 2017 promised that his employment with Sunny Glass would continue with “current entitlements” that expression necessarily included, first, the express terms of the Nuline contract and, secondly, his rights under the collateral share contract. He submitted that Sunny Glass had promised that if he worked for it, it would reward him with the same payments and rights as he had when he worked for Nuline. He argued that the collateral share contract was in the nature of a “golden handcuff” that had the purpose of retaining him as an employee of “the business” for the two years of the escrow, which had not expired when he accepted Sunny Glass’ offer of 14 March 2017. Thus, he contended, Sunny Glass benefited from his working for it and became liable to fulfil Nuline’s obligation to transfer the Baumart shares to him once the escrow ended.
Consideration – principles
The principles for the construction of a contract of employment are not in doubt. First, it is necessary to determine what the terms of each of the Nuline contract, the collateral share contract and the Sunny Glass contract were. Employment relationships are not purely contractual, as Rares, Cowdroy and Kerr JJ held in Cohen v iSoft Group Pty Limited (2013) 298 ALR 516 at 526–527 [35]–[38], namely:
The meaning of a commercial document and of a contract is determined objectively: Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at 178-180 [38]-[41] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462 [22] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ. The construction of such a document or contract must be determined by what a reasonable person in the position of the parties would have understood its terms to mean. That process involves consideration not only of the text of the documents, but also of the surrounding circumstances known to all the parties, as well as the purpose and object of the transaction. As Lord Wilberforce explained, in a frequently cited passage from his speech in Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 at 995-996 (that was approved in Pacific Carriers 218 CLR at 462 [22] and Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45 at 52-53 [10] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ):
In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this, in turn, presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.
The objective theory of contract must also apply to ascertaining who were the parties to the contract. Additionally, the contract must be construed as a whole with a view to reconciling and harmonising, if possible, apparent inconsistencies in expression. If words or expressions are used that are repugnant or have been transposed or omitted, the [Court] can construe the contract to give it the effect that, objectively, can be seen as what the parties intended: Fitzgerald v Masters (1956) 95 CLR 420 at 436-438 per McTiernan, Webb and Taylor JJ. Dixon CJ and Fullagar J expressed the principle there with typical lucidity there by rejecting a construction that (95 CLR at 427):
… the parties did not intend to contract otherwise than by reference to the terms of a document which they mistakenly believed to exist. … It seems indeed almost absurd to say that the parties, having agreed on everything essential, intended that the agreement should be nullified if effect could not be given to cl. 8.
Employment relationships are not purely contractual and can be affected by statutory provisions and the incidents of a fiduciary relationship: Concut Pty Ltd v Worrell (2000) 176 ALR 693 at 697-698 [17] per Gleeson CJ, Gaudron and Gummow JJ. In that case, an employment relationship had existed over a lengthy period. Initially, the employee had worked for a related company of the employer. However, in 1980 he began working for the employer with which he signed a service agreement in 1986 that was the subject of the dispute. The High Court held that the service agreement was not properly characterised as a new and discrete contract that had replaced and terminated the earlier oral agreement. Gleeson CJ, Gaudron and Gummow JJ said (176 ALR at 698 [19]):
The relevant principles are well settled. In FCT v Sara Lee Household & Body Care (Aust) Pty Ltd [(2000) 172 ALR 346 at 350-1 [22]; 74 ALJR 1094 at 1098], Gleeson CJ, Gaudron, McHugh and Hayne JJ said:
When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts. For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration. For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists.
Their Honours went on [(2000) 172 ALR 346 at 351 [23]; 74 ALJR 1094 at 1098. See also (2000) 172 ALR 346 at 360 [81], 362 [95], 363 [100]; 74 ALJR 1094 at 1105, 1106, 1107 per Callinan J.] to refer to the judgment of Taylor J in Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd [(1957) 98 CLR 93 at 143-4]. Taylor J had rejected submissions that (a) "it is impossible by a subsequent agreement, merely, to vary or modify an existing contract” and (b) "[an] agreement which purports to vary an existing contract operates … first of all to abrogate entirely the existing contractual relationship and, then, to reinstate the terms of the old contract as varied or modified by the new agreement” [compare Meek v Port of London Authority [1918] 2 Ch 96]. His Honour, to the contrary, accepted the propositions that (a) the earlier contract might be rescinded altogether, the determining factor being the intention of the parties disclosed by the later agreement; (b) partial rescission is a variation, not the destruction, of the contractual relationship between the parties; and (c) the earlier contract may be varied by way of (i) partial rescission with or without the substitution of new terms for those rescinded and (ii) the addition of new terms with or without any partial rescission at all [(1957) 98 CLR 93 at 144]. In Tallerman, Kitto J [(1957 98 CLR 93 at 135. See also at 122-3 per Williams J.] spoke in terms which involved acceptance of propositions (a) and (b) as identified above, adding that while “in strict logic” a variation may be a new contract, “the discharge of an old contract is a matter of intention”. [Emphasis added.]
In applying those principles, their Honours concluded that the service agreement did not entirely supplant the earlier agreement, but, rather, supplemented it, finding (176 ALR at 699 [20], [22]):
… the text of the service agreement itself, as well as the surrounding circumstances, indicate that such a conclusion would not be in accord with the manifest intention of the parties.
In Treasury Wine Estates Vintners Limited v Pearson (2019) 268 FCR 12 at 29 [73] and 30 [77], Rares, Perry and Charlesworth JJ explained that the principles of construction of contracts, including employment relationships governed by the Fair Work Act, require the Court to have regard to the genesis of a transaction, its background, context and the market in which it occurred, as known to both parties, and “to read the agreement as a whole and construe it in accordance with established principle”.
In Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at 105–106 [25], Gaudron, McHugh, Hayne and Callinan JJ said:
Because the search for the “intention to create contractual relations” requires an objective assessment of the state of affairs between the parties (Masters v Cameron (1954) 91 CLR 353 at 362, per Dixon CJ, McTiernan and Kitto JJ; ABC v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-549, per Gleeson CJ) (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word “intention” is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened (Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 348-353, per Mason J; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) [240 CLR 45]).
It is not a search for the uncommunicated subjective motives or intentions of the parties.
In Wickman Machine Tool Sales Ltd v L Schuler AG [1974] AC 235 at 251 D–E, Lord Reid said:
The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result, the more unlikely it is that the parties can have intended it, and if they do intend it, the more necessary it is that they shall make that intention abundantly clear.
(emphasis added)
Similarly, in Zhu v Treasurer of New South Wales (2004) 218 CLR 530, Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ said at 559 [82]:
It was necessary to construe the deed poll so as to avoid it making commercial nonsense or working commercial inconvenience. Its commercial purpose – the purpose of reasonable persons in the position of TOC and the plaintiff – was relevant [Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 351, per Mason J]. That, in turn, required attention to ‘‘the genesis of the transaction, the background, the context, the market’’ in which the parties were operating, as known to both parties [Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 350, per Mason J, quoting Reardon Smith Line v Hansen-Tangen [1976] 1 WLR 989 at 995-996; [1976] 3 All ER 570 at 574, per Lord Wilberforce].
(emphasis added)
What were the terms of the contracts?
The trial judge arrived at his conclusions as to the terms and the construction of the contracts between Mr McParland and his employers by an unconventional route. His Honour accepted Mr McParland’s evidence of matters relating to the formation of each of the contracts. However, his Honour did not deal with the consequences of some of the objective facts that necessarily were inconsistent with his findings as to the terms of the contracts. First, his Honour did not deal with the undisputed fact that, throughout his employment by Nuline, Mr McParland was paid salary at the rate of $100,000 per annum without any complaint or explanation yet despite this, his Honour found that the Nuline contract was enforceable on the basis that Mr McParland’s annual salary was $135,000. Secondly, it was undisputed that Mr McParland never received a car allowance of $500 per week. Yet, his Honour made no findings, and gave no reasons, as to why Sunny Glass was not liable to Mr McParland in respect of the car allowance of $1550 per month that Nuline was paying as at March 2017 but found instead that Sunny Glass was liable to pay him an allowance of $500 per week. Thirdly, his Honour did not relate the above context of those two matters to how the collateral share contract came into existence. Fourthly, the trial judge gave no explanation of how both Nuline and Sunny Glass could be jointly and severally liable to Mr McParland under the collateral share contract.
The Nuline contract
In his reasons, his Honour dealt first with Mr McParland’s claim against Nuline and stated his findings in respect of it, before dealing sequentially with each claim by Mr McParland against Sunny Glass and Mr Chi. The trial judge seems to have proceeded on the basis (as is evident from the structure of his reasons) that, because Nuline had not appeared he could, and did, enter judgment against it based on his accepting without question, Mr McParland’s uncontested pleaded case and his evidence as against Nuline. However, those findings could not bind a third party, such as Sunny Glass, unless they were proved in relation to it on the balance of probabilities. Accordingly, the trial judge’s approach was erroneous because it failed to deal with the whole of the evidence about the terms of the Nuline contract and the collateral share contract that existed when Sunny Glass first employed Mr McParland. Nuline did not appear at the trial or contest Mr McParland’s assertions about those terms. However, that did not entitle his Honour to find that Mr McParland’s assertions against Nuline were undisputed facts when deciding his claim against Sunny Glass, in the absence of being satisfied about those facts, based on all of the evidence.
As I noted at [53] above, the trial judge dismissed the telling evidence of Mr McParland’s lack of complaint about any underpayment while employed by Sunny Glass on the basis that “it is understandable that … [he] decided to go quietly, and not rock the boat”. Yet he was only employed by it for less than three months, for much of which he was on leave. His Honour ignored Mr McParland’s, and the objective, evidence that the amount of salary (equivalent to $100,000 pa) that Sunny Glass paid Mr McParland was unchanged from that which Nuline had paid him without apparent complaint from the inception of his employment in late March 2015.
His Honour had in evidence Mr McParland’s last Nuline payslip for the pay date of 17 March 2017 that covered the period 15 to 21 March 2017. It is common ground that that payslip revealed, accurately, that Nuline was paying Mr McParland at the rate of $100,000 per annum.
Mr McParland gave no evidence as to the circumstances in which he had accepted and arranged payment of his salary to himself at the rate of $100,000 per annum for the nearly 24 months during which Nuline employed him before he agreed to Sunny Glass’ offer of employment in the Sunny Glass contract.
The trial judge’s finding that Mr McParland’s current entitlement to salary under the Nuline contract at 14 March 2017 was $135,000 per annum was glaringly improbable in light of the objective facts that, first, Mr McParland had been paid, without any complaint, a salary of $100,000 for the whole of his employment with Nuline, secondly, Mr McParland had arranged and authorised all payments of his salary and other entitlements when working for Nuline and, thirdly, his Honour’s finding that the parties had made the collateral share contract in the context of their pre-contractual negotiations and the entire agreement clause in the Nuline contract.
The pre-contractual negotiations contemplated that Mr McParland would accept a reduction in his salary (that he was receiving from his former employer) of $120,000 per annum to $100,000 per annum, if Nuline agreed to provide him with the Baumart shares as part of his overall package. Having accepted that, despite its non-inclusion in the Nuline contract, Mr McParland and Nuline made the collateral share contract, his Honour ignored the compelling inference that the quid pro quo for Nuline’s promise to provide the Baumart shares was, as the parties had discussed earlier, that Mr McParland would accept a lower salary of $100,000 per annum, which is reflected in what occurred. No commercial or other explanation emerged in the evidence as to why, first, Nuline having agreed to the terms of the Nuline contract, with the higher salary of $135,000, and the entire agreement clause, would have had any reason to be so generous as to enter into the collateral share contract for no new consideration. The trial judge reasoned that the collateral share contract was part of the “overall agreement” saying:
The fact that the varied written offer of employment from Nuline to the applicant executed by Sam Lau and the applicant on 23 March 2015 (referred to at paragraph 6 (d) above) had, by clause 22 thereof, an “entire agreement” clause, is not determinative. The inclusion of such a clause must be looked at in the context of the overall negotiations between the parties, and is subjugated to the express intentions of the contracting parties where they include, as part of their overall agreement, some other collateral terms freely agreed to between them ( Mainteck Services Pty Ltd v Stein Heurtey SA & Anor (2014) 89 NSWLR 633 at 663 [130]). As was said by Dixon CJ in Maybury v Atlantic Union Oil Co Ltd [(1953) 89 CLR 507 at 517]:
“A collateral agreement made in consideration of a main agreement cannot effectively subsist unless it is consistent with the main agreement. Once an agreement is made in writing it is treated, unless the parties are shown otherwise to intend, as the full expression of their obligations. If it is established that the writing was intended to contain only part of a fuller agreement it may be otherwise. That, however, is not the present case. But it may be established that an entirely separate agreement was made by the parties. One of them may give a collateral promise in consideration of the other entering into the principal agreement. But if such a collateral agreement is to have effect as a contract it must be consistent with the provisions of the main agreement, the making of which by the other party provides that consideration. If the promise sought to modify, control or restrict the principal agreement it would detract from the very consideration which is alleged to support the promise.”
(his Honour’s emphasis in original)
The trial judge’s reasoning was erroneous. That is because those reasons conflated the collateral share contract into, or made it become part of, the Nuline contract, first, despite the express term in cl 22 of the Nuline contract that it comprised the entire agreement of the parties and, secondly, the fact that the collateral share contract was a separate agreement, as Dixon CJ had explained in the very passage that the trial judge set out and emphasised in his reasons. The trial judge ignored the need to find that the collateral share contract was supported by separate consideration to be effective and not to modify, control or restrict the Nuline contract. Moreover, if the collateral share contract were to have become part of the Nuline contract, it was necessary for his Honour to find some consideration to support a finding that the parties entered into a binding obligation to vary the Nuline contract.
Yet his Honour gave no reasons for his finding that Nuline had agreed, for no consideration, to add to Mr McParland’s entitlements under the entire agreement comprising the Nuline contract the significant additional benefit of a promise to reward him with the Baumart shares or why, despite its apparently binding, and unvaried, obligation to pay a salary of $135,000 per annum, Mr McParland proceeded for the next two years without one word of enquiry or protest, to arrange for himself to be paid and to accept payment at the rate of only $100,000 per annum.
There was no basis for his Honour to find that the promise conveyed by Mr Lau, or in the email exchange to which I referred at [11]–[13] above, to reward Mr McParland with the Baumart shares was both a collateral contract and, at the same time, somehow part of the Nuline contract. The objective evidence, coupled with his Honour’s finding that Nuline had promised to reward Mr McParland with the Baumart shares, compelled the inference that the consideration for the collateral share contract was that the Nuline contract would be varied by reducing Mr McParland’s entitlement to salary to $100,000 per annum, as the parties had discussed earlier in March 2015 before entry into the Nuline contract. Mr McParland could have given, but did not give, evidence about why he arranged for and caused himself to be paid the reduced salary. That omission warrants the inference that such evidence would not have assisted his case that Nuline had agreed to pay him $135,000 per annum and also reward him with the Baumart shares and that both those obligations were part of his “current entitlements” for which Sunny Glass assumed responsibility when it employed him in March 2017: Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 at 384–385 [63] per Heydon, Crennan and Bell JJ; Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418–419.
In my opinion, the only inferences that can be drawn objectively are that first, Mr McParland had contracted with Nuline at a time and on terms in which there was no certainty about whether or not the Baumart shares would be allotted, and in those circumstances, they agreed that therefore he would be paid an annual salary of $135,000 if the shares were not allotted. In the event, very soon after 23 March 2015 when they made the Nuline contract, the parties varied the terms of his employment so that Mr McParland would be paid a salary of $100,000 per annum, on the basis of the collateral share contract under which he would receive the Baumart shares in two years’ time, once the escrow period expired on 21 May 2017. Secondly, Nuline and Mr McParland also agreed at the inception of their relationship to vary the $500 per week car allowance in the Nuline contract so that instead of it, Nuline would cause Mr McParland to be provided with a vehicle. In early 2016 they subsequently agreed a further variation, when Nuline required Mr McParland to return the car associated with Mr Lau. Nuline and he agreed that Mr McParland would acquire a new vehicle in his own name, as he did by leasing the Holden vehicle, in consideration of which Nuline would pay him $1550 per month to meet the lease payments and any petrol or other expenses that he incurred in running the vehicle.
Mr McParland’s current entitlements at the time that he accepted Sunny Glass’ offer of employment dated 15 March 2017 were, relevantly, that he was entitled to be paid salary at the rate of $100,000 per annum, superannuation and a monthly car allowance of $1550. The collateral share contract was, as Dixon CJ held in Mayburyv Atlantic Union Oil Co Ltd (1953) 89 CLR 507 at 517 “an entirely separate agreement”.
The collateral share contract
The collateral share contract provided that whoever was the promisor (including possibly Nuline) would cause the Baumart shares to be transferred to Mr McParland, once the two year period of escrow ended on 21 May 2017. By March 2017, the purpose of holding the shares in escrow had been satisfied substantively since Mr McParland had worked faithfully for Nuline during the two year period. Thus, at the time that Nuline wrote to him on 8 March 2017, it promised that it would pay him his “entitlements owing … in your final payment”. Nuline’s letter of 9 March 2017 referred to Mr McParland’s employment with Sunny Glass continuing with “all current entitlements and your hourly rate unchanged”. It provided that Sunny Glass, however, could make changes to his working position at its discretion during a three month probation period. Those letters were not promises by Sunny Glass but expressed a recognition on Nuline’s part that Mr McParland had no guarantee of continuing employment if he accepted an offer from Sunny Glass.
The Sunny Glass contract
Sunny Glass made the offer in its letter of 14 March 2017 in the circumstances where Mr McParland had told Mr Chi in December 2016 that the Baumart shares “are being held for me until around May or June 2017”. That was a fact known to both parties to the Sunny Glass contract at the time that Mr McParland accepted Sunny Glass’ offer of employment. Moreover, Mr McParland knew that the collateral share contract was a separate or side deal. I am of opinion that no reasonable person in the position of the parties (Mr McParland and Sunny Glass) would have understood that Sunny Glass was making an offer to transfer, or cause the transfer of, the Baumart shares to Mr McParland if he accepted its offer of employment in the 14 March letter. First, both knew that he had made a separate contract that dealt with the Baumart shares; secondly, he had told Mr Chi that someone, the identity of whom he did not disclose, was holding the Baumart shares for him until an unstated time “in May or June 2017”, a two month period in the future; thirdly, Sunny Glass’ offer allowed it to terminate Mr McParland’s employment at any time during the three month probation period, including in the 6 weeks before 1 May 2017 (bearing in mind what Mr McParland had told Mr Chi in December 2016). Had termination occurred before the end of the escrow period or, on say, 1 May 2017, Mr McParland could not have been entitled to receive the Baumart shares from Sunny Glass even if his argument were correct that, somehow, Sunny Glass had offered to transfer those shares to him. That is because he would not have any current entitlement to the shares if he were not still employed by Sunny Glass on 21 May 2017 (or some time in May or June 2017) when the escrow ended. Fourthly, Mr McParland sued, and obtained judgment in the proceeding against, Nuline for breach of the collateral share contract. That was an admission by him that Nuline, not Sunny Glass, owed him the obligation, as a “current entitlement”, of transferring or causing the transfer of the shares that he had told Mr Chi were “being held for me”.
I am of opinion that the trial judge erred in finding that Sunny Glass had offered and Mr McParland had accepted employment on terms that included Sunny Glass assuming any liability under the collateral share contract. As a matter of law, such a construction of Sunny Glass’ offer would be commercially nonsensical and produce commercial inconvenience: Zhu 218 CLR at 559 [82]; Schuler [1974] AC at 251 D–E. That finding of fact was also glaringly improbable and contrary to compelling inferences.
Sunny Glass was offering Mr McParland employment on a highly conditional basis, that included its rights to terminate him at any time during the three month probation period and to reclassify him. Moreover, he had a right to leave Sunny Glass’ employ at any time. No reasonable person in the position of the parties would have understood, having regard to the commercial purpose and the mutually known facts (including what Mr McParland had told Mr Chi about the Baumart shares), that the employment contract that would be formed by Mr McParland’s acceptance of the offer in the 14 March letter included Sunny Glass assuming an obligation to transfer or cause the transfer of the Baumart shares, which were worth about $240,000, when he could leave that employment the next day. Nor did Mr McParland’s conduct in 2017 before and after his termination evince any such understanding, since he dealt only with Nuline and Mr Young in making enquiries about when Nuline would cause the Baumart shares to be transferred to him.
In addition, Mr McParland also knew that Nuline or whomever he was dealing with had made the offer to enter into the collateral share contract on the basis that “we are looking for a business partner, not only an employee” (see [12] above) but that Sunny Glass had not suggested that it regarded him in any similar way. This is a further indication that, in accepting Sunny Glass’ offer of 14 March 2017, Mr McParland did not understand (and Sunny Glass did not know) that his “current entitlements” included any rights that he had against Nuline or anyone else under the collateral share contract.
Mr McParland said that he had told Mr Chi in December 2016 that the Baumart shares “are being held for me until around May or June 2017”. Accordingly, a reasonable person in the position of Mr McParland and Sunny Glass as at 14 and 15 March 2017 would have understood that any contractual responsibility in respect of the Baumart shares was an obligation of, and only of, Nuline or those with whom Mr McParland had dealt for the purposes of receiving those shares. The reasonable person would have understood that if Mr McParland accepted Sunny Glass’ offer of employment in the 14 March letter, it was not agreeing to assume liability to cause the Baumart shares to be transferred to him.
His Honour did not address, in such a scenario, how, given the Baumart shares were being held in escrow for Mr McParland, Sunny Glass could become responsible for the performance of the stakeholder’s responsibility to transfer the shares.
Moreover, his Honour gave no explanation as to why, if Nuline was liable to Mr McParland in respect of the collateral share contract, as reflected in his Honour’s entry of judgment against it, somehow, Sunny Glass assumed a coordinate joint and several obligation to perform that contract. No reasonable person would have expected Sunny Glass to have assumed responsibility to cause Mr McParland to receive the Baumart shares. They were shares in a company that Sunny Glass did not control or have a prior association with or and there is no evidence of how it could have become contractually obliged to indemnify or otherwise be jointly liable with Nuline or others to cause Mr McParland to receive those shares at the end of the escrow period.
Such a result is commercially unreasonable. There was no discussion at all between Mr McParland and Mr Chi or anyone else at Sunny Glass that that would occur. All the way through his employment with both Nuline and Sunny Glass, Mr McParland looked to, and spoke only with, officers of Nuline and Baumart about the Baumart shares and the collateral share contract. Mr McParland understood that, in the circumstances, the collateral share contract involved the Baumart shares that had been issued and allotted and were already being held in escrow by a stakeholder, that had nothing to do with Sunny Glass, for two years on his behalf and for his benefit from 21 May 2015.
It would be a strained and uncommercial construction of Sunny Glass’s offer, that it would assume liability to cause Mr McParland to be provided with the Baumart shares that were worth about $250,000 as part of his “current entitlements” under a new contract, in which he was employed on a three-month probation period and could be dismissed or choose to leave at any time without cause. Moreover, there is nothing in his Honour’s reasoning, the circumstances or in commercial common sense to suggest that Sunny Glass so valued Mr McParland that it was promising him a “golden handshake” of such a magnitude without a word of negotiation or discussion about what would happen if Sunny Glass had decided to terminate Mr McParland’s employment, or if he decided to leave, before the escrow period finished.
In my opinion, the objective evidence and commercial common sense point to only one answer. Mr McParland’s relationship with Nuline, or others associated with it, was the only source of his rights in respect of the Baumart shares, and it was Nuline’s or those others’ responsibility under the collateral share contract to ensure that the Baumart shares were transferred to him at the completion of the escrow period. No reasonable person in the position of the parties would consider that Sunny Glass had assumed that responsibility. There was no evidence that Sunny Glass knew anything more about the Baumart shares than what Mr McParland told Mr Chi, which was that he would receive the Baumart shares in May or June 2017, and nothing to throw responsibility for their allocation or transfer to him on Sunny Glass.
For those reasons, I am of opinion that the trial judge erred in his finding that Sunny Glass was liable under the collateral share contract. Likewise, his Honour’s findings about the terms of Mr McParland’s contract with Sunny Glass make no sense in relation to the car allowance. That is because his Honour found, without any reasoning process, that Mr McParland’s “current entitlements” included a $500 weekly car allowance that was never paid, as well as the new substituted $1550 monthly allowance to cover the cost of leasing and running a work vehicle. In my opinion, the only inference that is commercially sensible is that as at 14 and 15 March 2017 Mr McParland was entitled to be paid a $1550 per month car allowance in respect of his leased Holden vehicle.
At the time Sunny Glass took over the obligation to make salary payments to Mr McParland, it was on the basis that his existing entitlements were for a salary of $100,000 per annum plus superannuation on that sum. That is because the objective evidence is that whatever had happened, Nuline had treated him as entitled to be paid, and he had caused it to pay him, at that rate without complaint for the whole of his period of employment with it. At the time of the takeover, the only information known to both parties (Mr McParland and Sunny Glass) was that he was causing himself to be paid a salary of $100,000 per annum. He did not complain to anyone that he was due or entitled to more than that amount. In particular, there was no objective basis on which it could be concluded that his “current entitlements” to salary under the Nuline contract, was anything other than that his salary was $100,000 per annum plus superannuation on that sum. The collateral share contract was an “entirely separate agreement”.
Therefore, his Honour’s finding, based on a salary of $135,000, that Sunny Glass had underpaid Mr McParland nearly $6000 in salary and superannuation cannot stand. His Honour’s finding that there was non-payment of a car allowance at $500 per week also cannot stand. His Honour should have found that Mr McParland was entitled, as against Sunny Glass, to a salary of $100,000 per annum and superannuation on that sum together with a payment of $1550 per month as his car allowance.
Mr McParland’s termination
In my opinion, his Honour also erred in finding that Mr McParland had suffered no loss at all through his termination. Such a finding was contrary to compelling inferences from the whole of the evidence, and his Honour’s findings as to the circumstances of the termination.
There was a substantive dispute as to the circumstances of the termination. Mr Chi denied he had terminated Mr McParland and asserted that Mr McParland had resigned. His Honour found, having seen and heard the witnesses, that Mr Chi had sacked Mr McParland on the spot and paid him nothing thereafter.
Based on the trial judge’s findings, by May 2017 Mr McParland was determined to leave his employment with Sunny Glass and would have resigned had he not been sacked, and taken the job with Viridian as he did. However, I am satisfied that Mr McParland would have tried to remain employed until he accepted Viridian’s offer, that it made on or about 21 June 2017. Accordingly, Mr McParland would have been entitled to leave on two weeks’ notice from 21 June 2017. Since he would not have been willing to serve out the two weeks’ notice and would have chosen to leave so as to begin his new job on 26 June 2017, he would only be entitled to be paid up to then.
It follows that Mr McParland suffered the loss of approximately three weeks further salary, car allowance and superannuation entitlements that he would have been paid, had he not been summarily dismissed on 6 June 2017. The parties will need to calculate the amounts of salary, superannuation and car allowance for which judgment should be entered on this claim.
PENALTIES
The trial judge’s findings on penalties
The next issue is that of penalties. The trial judge had a separate hearing and gave separate reasons on 14 June 2019 for the penalties that he imposed on Sunny Glass and Mr Chi. In those reasons, his Honour referred to a variety of principles that need to be taken into account in imposing a penalty. His Honour made adverse findings against Sunny Glass and Mr Chi because they had made no concession and had offered no apologies in the period between when his Honour handed down his reasons on liability on 5 June 2019, and the penalty hearing on 14 June 2019.
His Honour made unchallenged findings that Sunny Glass had contravened s 117(2) of the Act by not giving or paying one week’s notice and that, in addition, it had contravened s 117(1) by failing to give him notice in writing. Each contravention was a national employment standard pursuant to s 44(1).
His Honour also said that he had taken into account, in fixing penalties, a downturn in Sunny Glass’ trading. There was no information about that subject in the appeal papers but I have accepted his Honour’s finding.
The trial judge found that Sunny Glass’ conduct was not as egregious as Nuline’s, but was “close thereto”. He concluded that Mr Chi had failed to acknowledge any wrongdoing, notwithstanding that he had the opportunity to do so during the course of extensive cross-examination, had offered no apology and been lacking in contrition. He also found that Mr Chi had terminated Mr McParland because he exercised a workplace right and, correctly, found that that conduct warranted appropriate sanction.
His Honour said that he had taken into account the totality and proportionality principles. He found that the conduct complained of was deliberate and had involved senior management of Sunny Glass. He considered that each contravention was separate and ought not to be regarded as part of a single contravention.
The trial judge imposed penalties on Sunny Glass of:
·$13,500 for each of the two contraventions of ss 117(1) and (2), being 25 per cent of the maximum;
·$21,600 for the contravention of underpayment of Mr McParland’s entitlements on termination under s 323(1) being 40 per cent of the maximum; and
·$32,400 for its adverse action contravention of s 340(1), or 60 per cent of the maximum.
He also imposed a penalty of $7,560 on Mr Chi for his contravention of s 340(1) or 70 per cent of the maximum.
Consideration on penalty
The primary purpose of imposing a civil penalty is to deter the contravener and others from repeating conduct of the kind complained of. In Commonwealth v Director of Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at 505–506 ([54]–[55]) (see also Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2017) 249 FCR 458 at 479 [90] per Dowsett and Rares JJ), French CJ, Kiefel, Bell, Nettle and Gordon JJ said:
… a criminal prosecution is aimed at securing, and may result in, a criminal conviction. By contrast, a civil penalty proceeding is precisely calculated to avoid the notion of criminality as such.
No less importantly, whereas criminal penalties import notions of retribution and rehabilitation, the purpose of a civil penalty, as French J explained in Trade Practices Commission v CSR Ltd, is primarily if not wholly protective in promoting the public interest in compliance:
“Punishment for breaches of the criminal law traditionally involves three elements: deterrence, both general and individual, retribution and rehabilitation. Neither retribution nor rehabilitation, within the sense of the Old and New Testament moralities that imbue much of our criminal law, have any part to play in economic regulation of the kind contemplated by Pt IV [of the Trade Practices Act] … The principal, and I think probably the only, object of the penalties imposed by s 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.”
(emphasis added; footnotes omitted)
Two or more contraventions of s 44(1) committed by the same person are deemed, by force of s 557(1), to be a single contravention if they arise out of a course of conduct. Sunny Glass’ failures to give Mr McParland any written notice of his termination and to pay him for any period of notice in lieu of his working during that period were in one sense distinct contraventions of the national employment standards in s 117(1) and 117(2). But, in reality, those two contraventions arose because Mr Chi summarily dismissed Mr McParland thinking, wrongly, that he could do so. The dismissal without notice and failure to pay Mr McParland for any period of notice were part of the one event or course of conduct. As such, s 557(1) provides that each of those contraventions is deemed to be a single one. Cognately, and individually, the conduct comprising those two contraventions was egregious and a flagrant violation of two national employment standards.
Each of those contraventions occurred together with Mr Chi’s deliberate decision, on behalf of Sunny Glass, to sack Mr McParland on 6 June 2017 in contravention of s 340(1), because he exercised his workplace right of reporting Sunny Glass’ substantial failures to address the safety of its operations. That conduct comprised one substantive event, albeit that it resulted in a number of contraventions of the Act. Mr Chi, as the controlling mind of Sunny Glass, was aware that under its contract with Mr McParland it had no basis for dismissing him and it had no lawful justification for doing so without giving him notice to which he was entitled.
What penalties should be imposed in the circumstances?
As I have explained, in finding that Sunny Glass had underpaid Mr McParland his salary, car allowance and superannuation entitlements and had failed to remunerate him with the Baumart shares between 15 March 2017 and 6 June 2017, his Honour acted on a wrong factual basis for the reasons I have given. I have had regard to totality and proportionality principles and all of the circumstances, as I have found them, in arriving at the following penalties.
The only relevant underpayment in contravention of s 323(1) in that period was of the car allowance and that underpayment occurred without any awareness on the part of Sunny Glass in the circumstances. Mr McParland’s December 2016 conduct in telling Mr Chi about his arrangements concerning the car is relevant to an assessment of Sunny Glass’ and Mr Chi’s culpability in respect of their failure to pay Mr McParland the car allowance. Mr McParland did not tell Mr Chi that he was entitled to be paid the allowance and had looked to Mr Young of Nuline or Baumart to meet that obligation. I am unable to see any substantive culpability or need for deterrence, specifically or generally, of Sunny Glass for that contravention. In my opinion, the penalty of $21,600 that his Honour imposed for the contravention of s 323(1) cannot be supported.
His Honour imposed all of the penalties in the context of taking into account all of the circumstances as he had found them. Since I have found that his Honour made errors in his findings that substantively change the context, each of the penalties that he imposed cannot stand.
The underpayment of the car allowance occurred in circumstances where the contravening conduct of Sunny Glass, on the material before me, was its first contravention of the Act. That breach was not deliberate and occurred under a misapprehension, where Mr McParland was aware at all times of his entitlement to the $1550 monthly car allowance but chose never to raise this with Sunny Glass because, as his Honour found, he wanted to leave things with Mr Young so that he got the Baumart shares issued to him. I do not consider that that contravention of s 323(1) warrants anything other than a minor penalty of $1000.
The separate contraventions of s 340(1) by each of Sunny Glass and Mr Chi, in my opinion, were particularly serious. An employer must not penalise or take adverse action against an employee who exercises a workplace right, particularly to report unsafe practices. Mr McParland reasonably considered the failures of Sunny Glass to address safety issues to be life-threatening for its employees in a glass factory, where inappropriate handling of glass could injure or kill people if proper workplace safety requirements were not both in place and enforced. His action in reporting Sunny Glass to WorkSafe and its conduct in issuing improvement notices demonstrated that his concern for the safety of the factory employees was genuine and appropriate.
I do not consider that only one penalty is appropriate for the principal and accessorial contravention of s 340(1): cf: Parker v Australian Building and Construction Commissioner (2019) 270 FCR 39 at 122 [250]–[251] per Besanko and Bromwich JJ. Here, there is first, a need for personal deterrence of both the corporation and the individual and, secondly, a question as to Sunny Glass’ financial viability.
For an employer to take vengeance on an employee and summarily dismiss him or her for acting as Mr McParland did is utterly unacceptable. The message needs to be sent loud and clear to the business community that employees are entitled to act with a view to ensuring workplace safety. Mr Chi’s conduct in taking the adverse action himself and on behalf of Sunny Glass, in my opinion, is a particularly serious breach of s 340(1). The appropriate penalty for each contraventions of s 340(1) is $45,000 for Sunny Glass and $9000 for Mr Chi.
The contraventions of ss 117(1) and (2), and thus s 44(1), were part of a course of conduct that occurred on 6 June 2017. They demonstrated a deliberate and reckless disregard of Mr McParland’s entitlements as an employee and a failure to treat him in a civilised or proper way and were part of the conduct that also contravened s 340(1). He was dismissed with no notice and without any payment for the two week’s notice to which he was entitled. These were serious contraventions, but separate from and not on the scale of the adverse action. In all of the circumstances I impose a penalty of $10,000 for the single contravention of s 44(1) based on the contraventions of s 117(1) and (2). In summary, I have imposed the following penalties on Sunny Glass in respect of the following contraventions:
Contravention Penalty s 44(1) $10,000 s 323(1) $1,000 s 340(1) $45,000 Total $56,000 MR MCPARLAND’S CROSS APPEAL
Mr McParland’s cross-appeal depended on him establishing that his Honour erred first, in rejecting his claim and that of Ms Morrow, that his summary dismissal on 6 June 2017 caused or exacerbated the major depressive disorder from which Ms Morrow opined he suffered, and, secondly, in finding that Mr McParland suffered no dislocation, hurt, humiliation or distress as a result of that contravention. I have already allowed another ground in relation to his economic loss of income in the period between 6 and 26 June 2017.
I am not satisfied that there is any error in the trial judge’s assessment of Mr McParland’s and Ms Morrow’s evidence or in the rejection of his claims for loss or damage, psychiatric injury including that flowing from the summary termination.
Mr McParland gave no direct evidence as to any emotional reaction to his termination. He did not give evidence-in-chief on the topic, and I was not taken to any evidence in cross-examination of him saying anything about his feelings concerning his treatment by Mr Chi on that occasion. Of course, one might think that, ordinarily, such treatment would cause a person in his position to feel hurt and upset. But, the absence of any evidence from Mr McParland, including any statement on that topic that Ms Morrow could have included in her report had he told her, meant that his Honour had no evidence before him on which to make a finding that Mr McParland had suffered hurt, loss of enjoyment of life or other emotional or mental pain as a result of the termination. It was open to his Honour on the material before him to find that this claim had not been proved.
It may be that another judge may have viewed and made findings differently, but his Honour made an adverse credibility finding on matters relating to Mr McParland’s depressive illness, including based on Mr McParland’s disingenuity in completing his health assessment for his new employer. While his false answers to the questions about his mental state may well be understandable in relation to his dealings with a prospective employer, in my opinion, his Honour had material before him which entitled him to come to the findings about Mr McParland’s claim for personal injury and to conclude that he would not accept that Ms Morrow’s evidence supported that claim. There is no appellable error: Lee 372 ALR at 396 [55].
Mr McParland argued that I ought to follow what Rolfe AJA said, with the agreement of Sheller JA and Davies AJA, in Hull v Thompson [2001] NSWCA 359 at [21], that, prima facie, if an expert were not cross-examined on a report, there would be no basis for a judge not to accept the expert’s unchallenged evidence. However, his Honour added that the reason for qualifying his statement with the words “prima facie” was because the report could be either illogical, inherently inconsistent, or based on an incorrect or incomplete history or assumptions that were not established.
Here, Ms Morrow was not told of Dr Diddee’s diagnosis of anxiety disorder or depression at 1 May 2017, and she gave no history or other basis for connecting the circumstances of the termination to the mental illness of Mr McParland. As her report demonstrated, Mr McParland was already upset by Nuline’s and Sunny Glass’ treatment of him prior to his termination. She made no clear analysis and gave no reasoning process for why she had attributed any particular effect on his mental state to the circumstances of his termination.
Mr McParland argued that Dr Diddee had said he was fit to return to work, and that Mr McParland had not taken his Zoloft medication, despite it being prescribed for him. He contended that somehow I should infer that whatever it was that Dr Diddee had observed as to his mental state in his consultations around 1 May 2017 had disappeared by 6 June 2017, so that the cause of his condition, as Ms Morrow diagnosed in November 2018, was the circumstance of his termination.
I am not satisfied that his Honour erred, on the material before him, in concluding that Mr McParland’s summary termination was not a common sense cause of the condition that Ms Morrow diagnosed. As I have said, it may have been different if Mr McParland had given some evidence as to his own reaction to the circumstance of his termination, but he did not. He bore the onus of establishing any claim for damages on that basis. He called no evidence directly on it, nor did Ms Morrow’s report, with its incomplete history, provide a sufficient foundation for his Honour to be required to make a finding in his favour.
For those reasons, I am not satisfied that the first ground of the cross-appeal has been established, and I reject it.
CONCLUSION
The parties have agreed that Mr McParland was paid salary and superannuation to 5 June 2017 and that the amount of his unpaid car allowance between 15 March 2017 and 5 June 2017 was $4,229.59. They also agreed that the total of those entitlements for the period between 6 and 26 June 2017 is $7,370.14. Interest on those sums up to the time of the trial judge’s final orders made on 13 June 2019 at the pre-judgment rate totals $1,266.63.
In my opinion it is appropriate to vary the trial judge’s orders by substituting the total of the agreed amounts of Mr McParland’s unpaid entitlements together with interest up to 13 June 2019 of $12,866.36 so that post judgment interest will run from 13 June 2019. Similarly the amounts of the varied penalties that I have fixed will be substituted and post judgment interest will run on them from 14 June 2019.
I certify that the preceding one hundred and twenty-three (123) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate:
Dated: 24 July 2020
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