Tardent v Stirling House

[2005] NSWLC 6

Local Court of New South Wales

CITATION:	Tardent v Stirling House [2005] NSWLC 6
JURISDICTION:	Civil
PARTIES:	Timothy Tardent Stirling House (Guildford) Pty Ltd
FILE NUMBER:	6124/03
PLACE OF HEARING:	Downing Centre
DATE OF DECISION:	03/29/2005
MAGISTRATE:	Magistrate H Dillon
CATCHWORDS:	Contract - Claim for unpaid commission - Whether terms varied - Whether commission payable to employee after termination of - employment
LEGISLATION CITED:
CASES CITED:	Codefa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Ltd (2000) 172 ALR 346 Graycombe Associates Ltd v Northern Stag Industries Ltd (1976) 73 DLR (3d) 241 at 245 Jonel v Dunkel (1959) 101 CLR 298 L G Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1955) 56 SR (NSW) 81 Sellers v London Counties Newspapers [1951] 1 KB 784
REPRESENTATION:	Mr Andrew Jungwirth i/b AR Neilson for Plaintiff Mr Miles Condon for Defendant
ORDERS:	1. Verdict and Judgment for the plaintiff in the sum of $395.00.; 2. Plaintiff to pay defendant's costs in the sum agreed within 28 days or as assessed.

JUDGMENT

1. The plaintiff was, between January 2001 and August 2002, a sales representative or “accounts manager” for the defendant company, Corporate Sports Australia Pty Ltd (“CSA”). The company was then, and remains, engaged in what it calls the “corporate hospitality” industry. In plain English, its business was to sell the use of the facilities of corporate boxes in sports stadiums at major sporting events, such as the Australian Rules Grand Final, the Rugby League State of Origin Series, Rugby Union Test matches, Grand Prix racing events and the like to companies and business leaders. The accounts managers were employed to make the direct sales of “packages” to corporations for these events.

2. It is a matter of common knowledge that corporate boxes in major stadiums are furnished in a relatively luxurious fashion (compared with the facilities provided to and used by the general public), are relatively private, have excellent views of the fields and that patrons using them are provided with good quality food and drink, including bar services. It is also a matter of common knowledge that corporations use such opportunities both to reward executives and members of their staff and to entertain current and prospective clients in order to obtain or retain the loyalty of those clients and to forge closer links between the executives and their client counterparts.

3. At CSA, during the time Mr Tardant was employed by the company, accounts managers were paid in two ways. Each account manager was paid a base salary of $1000 per month gross. The rest of his or her earnings were on a commission basis. In this action, brought by way of liquidated claim, the plaintiff alleges that he was underpaid in relation to commissions he received and that he was not paid at a certain number of commissions to which he was entitled as a result of successful sales made by him on the defendant company’s behalf.

Issues for determination

4. The first major factual issue to be resolved is the construction of the contract under which Mr Tardant was employed and, in particular, whether, as he claims, Mr Tardant was employed on terms that his commission would ordinarily be calculated by reference to the cost of an entire package sold by him to a client or, as is asserted by the defendant, that it was agreed by the parties that his commission would be calculated by reference to a figure discounting the total package price by 15 per cent (for a “service charge”). Mr Tardant’s case is that he was never made aware that the figure on which his commission was calculated was to be the discounted figure asserted by the company. The defendant’s case is that, during his induction into the company, Mr Tardant had the structure explained to him in clear and precise terms by the Sales Director, Mr Clive Ospovat and accepted those terms. The plaintiff relies on what he asserts to be clear terms in a written employment contract. The defendant, on the other hand, asserts that the written contract was ambiguous in relation to certain aspects of the contract and especially the calculation of the commission payable to the plaintiff, but that the ambiguity was cured by Mr Ospovat’s briefing and the unquestioning acceptance of it by Mr Tardant. In relation to this issue, the case turns on whether Mr Tardant’s version of events is accepted as being the more probable account, and Mr Ospovat’s rejected, or vice-versa. Alternatively, the defendant asserts that the contract was varied.

5. The second major issue for determination is whether, in respect of a number of transactions or “deals”, the plaintiff is entitled to commission at all, whatever the proper method of calculating that sum may be. Mr Tardant asserts that he remains unpaid for several deals; the company claims that he has no such entitlement. Again, the contract must be construed. Here again there may be latent ambiguities in the written terms.

6. A third issue raised by the defendant is whether Mr Tardant is estopped by his conduct from denying the defendant’s assertions as to the method of calculation of the commissions payable to him. It will only be necessary to consider this issue in the event that I find against the defendant in relation to the first issue.

Further background

7. Much of the evidence is not in contest. In late 2000, Mr Tardant was introduced to CSA and he began work there as an account manager in January 2001. The task of accounts managers was to sell packages to sporting events. On 8 January 2001, CSA sent or gave Mr Tardant a letter in which terms and conditions of the employment contract were set out. An annexure to the letter confirming his appointment as an account manager set out “the basis of [Mr Tardant’s] commission entitlement”.

8. The annexure was headed “Rates of Remuneration” and then, in respect of remuneration, stated the following:

The representative is being employed as an Account Manager, and as such receives a monthly base salary of $1000 plus commission as follows:

10% flat commission on all new business sales.
7.5% flat commission on all new sales to existing clients.

Regarding the above:

Sales only count towards target upon receipt of a 50% deposit cheque. If a lower deposit amount is received, the sale will count pro-rata towards target and commission.

Commission and basic salary are paid monthly in arrears. The sales month runs from the first working day of the month to the last working day of the month. Commission and basic salary will be paid on the third working day of each month.

Commission rates may vary for specific events.

9. It is common ground that in the letter of 8 January 2001, there is no mention of an amount on which commission was to be calculated other than those matters referred to in the annexure (which raises the questions whether, as the plaintiff asserts, the document was intended to record the whole contract or whether, as the defendants asserts, the contract was partly in writing and partly oral or, if it was entirely in writing, whether the contract was varied).

10. The rates of commission were occasionally reduced for events such as the Rugby Union Test matches in Sydney, packages that were easy to sell, and increased for packages which were more difficult to sell, such as a rugby match in Perth. Mr Tardant was paid a commission on the whole package amount in relation to each of those types of package. That is, in these cases, the commission was not reduced to take into account any “service charge” or “booking fee” which attached to the total ticket price. (Whether Mr Tardant was aware of the distinction being made by CSA is, however, in dispute.) The profit margin for CSA in relation to Rugby Union test matches was lower than in relation to other packages and hence the commission payable was reduced. Commission of five per cent was paid on the package price (exclusive of GST) for most Rugby Union tests in Australia and of 10 per cent if the Rugby Test was being played in New Zealand. In relation to a rugby international between Australia and the New Zealand Maoris played in Perth, commission of 7.5 per cent was paid on the package price (exclusive of GST). CSA distributed a memorandum to accounts managers in December 2001 outlining various conditions specifically concerning the sale of Rugby Union packages.

11. During his employment by CSA, Mr Tardant was given a monthly pay slip. Most of the pay slips tendered in evidence show a payment of the $1000 gross retainer sum, the “deals” made by Mr Tardant, ie, the names of the relevant client to whom a package had been sold by Mr Tardant, the amount on which commission was calculated, the event in question, the rate at which commission was paid, the amount of commission paid in respect of each deal, a gross pay amount, the amount of income tax deducted, the net pay and any miscellaneous deductions for advances on pay and so on. It was Mr Tardant’s practice to check his pay slips and mark off each deal.

12. Occasionally mistakes were made within CSA’s accounts section, or account managers queried or disputed the amounts they were paid. It was CSA’s practice, if accounts managers had such queries or disputes, to have them fill out a Pay Disputes Form and fax it to the Perth office where it was to be considered. On 4 July 2002 Mr Tardant submitted such a form to Perth and an adjustment was made to his pay in respect of two deal, but his claim in respect of another deal was rejected. Apart from this one instance, Mr Tardant did not query the amounts he had been paid during the time of his employment with CSA.

The evidence

The calculation of commission

13. Mr Tardant gave evidence that he met Mr David Clowes, a supervisor at CSA, before Christmas in 2000. He said that he was told by Mr Clowes that the pay structure was a base salary of $1000 per month and a 10 per cent commission on new business introduced by the salesperson and 7.5 per cent on sales to existing clients. Mr Tardant told Mr Clowes that he was interested in working with CSA. A short time later he says that he received a call from Mr Clive Ospovat, CSA Sales Manager, who offered him a job with CSA. Mr Tardant did not recall him mentioning salary or commission during this telephone interview. Mr Tardant formally joined CSA on 8 January 2001. His evidence is that he arrived at 8 a.m. at CSA’s office in Bridge St, Sydney and was handed a training manual and the letter referred to above by Mr Clowes who said, “Here’s your contract. Just sign it and give it back to me.” He received a copy later, signed by Mr Chris Darlison, the general manager of CSA.

14. Mr Ospovat’s evidence was that, on Mr Tardant’s arrival in the office, he welcomed Mr Tardant and used a whiteboard to outline and explain how the commissions were calculated. He said that he had discussed this with Mr Tardant and had put up a number of examples on the board to demonstrate the method of calculation of commissions. Evidence was also given by Mr Paul Nash, the plaintiff’s managing director, that it was the custom of the company to explain the method of calculating commissions.

15. He gave further evidence that each month every account manager was given a pay slip in which all sales made by that account manager were listed together with the net sums prices on which commissions were calculated. All Mr Tardant’s pay slips were tendered. As I have already stated, he general format of the pay slips included the names of the clients to whom sales had been made, the events for they paid to attend (for example, a Rugby League game or Australian Rules game) and, critically, the amount on which commission was calculated and the rate at which commission was paid. It was common ground that the accounts managers knew the gross sales price of each package sold to clients. It is also common ground and, indeed, it is the basis of Mr Tardant’s claim, that the gross sales prices charged to clients were, in most cases, a sum 15 per cent greater than the sum which appeared in the pay slip on which commissions were calculated.

16. Mr Tardant stated that he had received pay slips in respect of each month of his employment with CSA. In his evidence-in-chief he stated that he took each pay slip home for safekeeping and would occasionally check the pay slips against his own notes to ensure that deals he had made were recorded and paid for. He also said that he had checked the commission rates and noted that the commissions appeared to have been calculated correctly. He asserted, however, that he had not checked the accuracy of the package price or “contract amount” but had not suspected that they were inaccurate.

17. In cross-examination, he was questioned about the notes he had kept and his practice of checking his monthly pay slips. He gave evidence that he kept his own files notes so that he would know which clients he had booked and how much he was going to be paid. He said that most months he cross-referenced his notes and his pay slips. He agreed that he had known the package prices (including the 15 per cent “service charge”) because he was selling a limited number of packages regularly. He asserted, however, that he had not noticed, during his time with CSA, that the amount on which commission was calculated was different from, and less than, the package prices paid by the clients whom he booked. He said that it was only after he had left the company that “the penny dropped” and that he realised that there was a discrepancy between the total package prices and the sums on which commission calculated.

18. Mr Tardant was questioned at one point about commissions paid on sales of packages to Rugby Union Tests. It is common ground that the commission paid for sales in respect of Bledisloe Cup Tests, for example, was five per cent on the total (ie, undiscounted) package price. In cross-examination, Mr Tardant claimed that he had never been told during his time with CSA that the reason for this was that Bledisloe Cup packages were very popular and easier to sell than other packages nor that CSA was making an exception to the general rule by paying commission on the total package price to boost the incentive to the accounts managers.

19. In relation to Bledisloe Cup and other important Rugby Union matches, Mr Nash’s evidence was that CSA paid a flat commission of five per cent of the total package price because, given the low rate of commission, this gave the accounts managers a greater incentive. He also gave evidence that in at least one instance, the Australian Grand Prix racing event, Mr Tardant had not been paid commission at all because it had been necessary to reduce the price of packages to below cost. In compensation, however, the company had sent Mr Tardant to the Grand Prix to mix with its clients.

Unpaid commissions

20. The second leg of the plaintiff’s case is that he was not paid any commission at all on certain deals.

21. Mr Tardant’s evidence was that, in the week before he resigned, he obtained a computer disk from Ms Williams on which was a list of his deals. He copied this list onto the hard drive of his personal computer. His evidence was that after his resignation he had carefully examined the list and found that he had made 112 sales from which CSA had deducted 15 per cent before calculating commission, 34 sales made between 14 November 2001 and August 2002 for which no commission had been paid at all, 43 contracts for Rugby Union matches for which a flat five per cent commission had been paid and five other contracts for which a flat ten per cent commission had been paid. He also stated that he had never been told by CSA during his period of employment that no commission would be paid where the purchase price was not paid by the client until after the termination of his employment.

22. Evidence was given by the defendant, however, and accepted by the plaintiff, that in relation to four of Mr Tardant’s deals, no deposits were ever made by clients, namely ING Bank, FCL Transport, Ipex Information, RG Capital Radio. (By inference, it would appear that in all other cases listed in the schedule deposits were paid by clients at some time after Mr Tardant left CSA.) Mr Tardant accordingly abandoned his claim in respect of commissions claimed in the sum of $2481.00.

23. A point of contention between the parties was whether or not accounts managers were expected to bear responsibility for ensuring that deposits were obtained from clients pursuant to deals made. The evidence from each of the relevant defendant’s witnesses was that accounts managers not only were expected to “chase cheques” but that, as Mr Nash stated, they generally preferred to do so because this gave them control over the process, an important consideration given that commissions were not paid until deposits were received.

24. Mr Tardant’s evidence, on the other hand, was that deposits were the concern of management and, in particular, the Perth office. His evidence was that it was not the general custom of accounts managers to follow up deals by reminding clients of the need to make a 50 per cent deposit within a specified time but that this would be done, when necessary, by others in the administration of the company.

25. Mr Nash gave evidence that this was not the case. He said that commissions were not earned simply on the initial effort of making a sale but were “compensation for after sales service”. He said that the rationale for the rule that no commission was payable unless a deposit was received was that “ the sale has not really been concluded until the deposit is received.” His evidence was that ordinarily a 50 per cent deposit was sought from a client and that the accounts managers were paid their full commissions whether or not the company ultimately received the balance of the amount due from the client. He estimated that accounts managers spent about 80 per cent of their time selling and 20 per cent chasing up deposits.

Unpaid commissions

26. Both Messrs Tardent and Darlison gave accounts of Mr Tardant’s last day at CSA. Mr Tardant’s version is that he spoke to Mr Darlison on 9 August 2002 and told him, in effect, that he had had enough of other accounts managers “poaching” his clients. He said that Mr Darlison had expressed surprise and disappointment with his decision and had given him a list of his sales. He said that Mr Darlison had asked him for whom he was going work and that he had said, “No one”.

27. In many respects, Mr Darlison’s version was in accord with Mr Tardant’s. He did, however, give evidence that Mr Tardant had told him that he wanted to work for the United Nations. Mr Darlison said that he advised Mr Tardant to take some leave and think the decision through before leaving. He also said that he had shown Mr Tardant a print-out of the commissions Mr Tardant would forego by leaving CSA without notice and said that he had told Mr Tardant, “Look at all the money you will be kissing goodbye if you leave.” Mr Tardant had refused to reconsider and had left CSA that day for good.

28. Mr Darlison said that once Mr Tardant left the responsibility for getting in the deposits for sales made by him was assigned to administrative personnel in Sydney and Perth. He stated that this responsibility ordinarily lay with the accounts managers. He said that in his experience the accounts managers find this task difficult and frustrating and preferred to devote their time to making sales. Nonetheless, they ordinarily spent about a day per week chasing deposits because the receipt of the deposit triggers the commission for them. He also gave evidence that ordinarily accounts managers who had given notice spent much of their last two weeks at work chasing deposits.

29. Mr Tardant’s evidence was that the accounts managers did not chase deposits but left this task to the administration in Perth.

Other relevant evidence

30. The written form of contract signed by Mr Tardant contained a condition that, in short, provided that he would not engage, directly or indirectly, in competition with, or assist a competitor of, CSA for a period of six months after the termination of his employment with CSA. Mr Tardant was cross-examined about the timing of his claim against CSA and admitted that it had coincided with his receiving a solicitor’s letter from CSA warning him to desist from engaging in competition with it.

31. It is also of relevance that, after these proceedings were brought by Mr Tardant, CSA took steps to amend the standard form of contract offered to accounts managers to make the method of calculation of commissions far more explicit and to eliminate any ambiguity concerning that issue and any other raised by Mr Tardant’s claim.

32. Mr Tardant gave evidence that on the day he left CSA he had spoken to Mr Darlison.

Findings of fact

The contract and commission calculation

33. In my opinion, the written contract upon which the plaintiff relies appears, on its face, to constitute a complete record of the agreement initially reached by the parties, in relation to the payment of commission at least. See, for example, LG Thorne & Co Pty Ltd v Thomas Borthwick & Sons (Australasia) Ltd (1955) 56 SR (NSW) 81. (I will come to the separate issue of unpaid commissions below.) The contract runs for six pages and appears to cover most conditions which a contract of employment would be expected to deal with, even to such things as a dress code, a non-smoking policy and an obligation to comply with anti-discrimination legislation. Significantly, the form of contract requires a written acceptance of the terms.

34. The term “10% flat commission on all new business sales”, read literally appears to refer to the price at which packages were sold to clients. There were at least two latent ambiguities inherent in that term despite the superficial clarity of the condition. First, packages were sold to clients, from 1 July 2000, at certain prices plus GST. On a wide reading of the condition, (although Mr Tardant does not claim this) commission might been payable on the package price inclusive of GST because that was what the client ultimately paid. As far as a client would be concerned, the “sale” would have included GST.

35. Second, there was no documentary evidence adduced showing that the packages included a 15 per cent “service charge” or “booking fee”. No evidence was given as to how this figure was arrived at or why the gross package price included a “service charge”. The most obvious and commonsensical inference is that it constituted some form of, or part of, CSA’s profit margin on sales. Nevertheless, by not including a reference to the “service charge” or “booking fee” in its documentation, and distinguishing between a “sale” and a “service charge”, CSA left its contract open to the interpretation the plaintiff seeks to place on it, notwithstanding its real intentions.

36. It is unnecessary, in my opinion, to imply a term that commissions would be calculated by reference to a package or sales price less 15 per cent for service charge to give the contract business efficacy. See, for example, Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337.

37. The real question of fact concerning the contract is whether the defendant sought to vary the contract by importing a condition that commissions would be payable according to the formula it relies upon and Mr Tardant accepted that variation. The resolution of that question depends on whether Mr Tardant’s evidence that he was never informed by Mr Ospovat of CSA’s intended approach to payment of commissions is accepted on the balance of probabilities or whether the defendant’s evidence is regarded as the more probable.

38. In my opinion, at various points in his evidence , Mr Tardant was an unpersuasive witness. Mr Tardant presented him as a person who kept good records of his deals, separate from the records he created on his employer’s systems. He cross-referenced and checked his transaction records against those of his employer and on one occasion successfully sought an adjustment. He was well aware of the prices at which he sold packages to clients of CSA, he checked his monthly pay slips to ensure that he had been paid his due commissions and yet claimed in evidence not to have noticed any discrepancy or difference between the amounts he was actually paid and the amounts he should have been paid had the arrangement he believed to be the case obtained in practice. In my opinion, this evidence is so implausible that it cannot be accepted as the truth of the matter. In my opinion, Mr Tardant, an evidently careful and scrupulous examiner of his pay slips, was well aware at all relevant stages during his employment with CSA that his commission was (in most cases) calculated on the basis of the package charge reduced by 15 per cent.

39. While that passage of evidence clearly damaged Mr Tardant’s credibility as a witness, there were a number of other occasions in cross-examination when he appeared to prevaricate. For example, he was questioned at a little length about the five per cent commission payable on Rugby Union packages. He claimed not to have had any real understanding of why a low commission rate applied to these packages. This really defies belief. The circular sent out by Mr Nash in December 2001 concerning rugby packages made it clear that accounts managers had to qualify for the right to sell rugby packages. The only rational reason for CSA to require such qualification can be that these packages were so easy to sell that accounts managers had to be required to sell more difficult packages first to earn the reward of easy commissions. The manner in which Mr Tardant gave his evidence on this point struck me as disingenuous. There were other such passages, but it is unnecessary to illustrate the point by referring to each of them.

40. The fact that Mr Tardant, by his own admission, starting working in competition with CSA shortly after his departure from his old employer, apparently in breach of his contract, may have been some motivation to bring this action. If so, it does not enhance his credit but it is difficult to draw a conclusion on this point either for or against him.

41. On the other hand, both Messrs Nash and Ospovat struck me as truthful and forthright witnesses. Mr Nash appeared to bear little ill will towards Mr Tardant and spoke of him respectfully as a valued and apparently likeable employee, notwithstanding their dispute. He gave his evidence in a frank and open manner and appeared to make reasonable concessions under cross-examination. His evidence that it was not the Perth office’s function to chase deposits but rather the accounts managers’ seemed to me both to be candid and to accord with common sense.

42. Mr Ospovat presented as a fairly tough but straightforward South African who appeared to be genuinely indignant when it was suggested to him that he had manufactured his evidence concerning Mr Tardant’s induction and the explanation given by him concerning commissions and examples being written on a whiteboard.

43. Demeanour is a notoriously difficult type of evidence to assess. To rely on it alone to determine the relative truthfulness or reliability of witnesses is an exercise fraught with hazard, especially in a case of word against word. In this case, however, not only did both Mr Nash and Mr Ospovat give evidence that it was CSA’s practice and custom to induct newly recruited sales staff but this accords with commonsense. Any competent business or organisation will not only put new recruits through some sort of induction process but will continuously train and develop them. This, of course, has benefits for both the organisation and the staff members themselves. In this case, evidence was given of weekly sales meetings in which marketing tactics were discussed as well as other matters. It is highly unlikely, in my opinion, that an organisation of CSA’s type would simply have a new sales representative sign a written contract and expect them to go to work immediately without any further orientation and induction.

44. Furthermore, it would obviously be to CSA’s advantage to pay commission on a lesser amount than a greater amount. It would be odd, indeed, if an employer chose not to reveal the commission arrangement it intended to apply not only to Mr Tardant but presumably to other accounts managers. To do so would lead inevitably to confusion and disenchantment in the organisation. Put simply, it would constitute bad management of an elementary kind. Neither Mr Ospovat nor Mr Nash appeared to be so entirely deficient of business skills that they would make such an error of judgment. Mr Ospovat’s evidence concerning his usual method of explaining the commission structure by use of examples confirmed this impression. In my view, Mr Ospovat’s evidence that he introduced Mr Tardant to the commission system and explained it clearly is the more reliable.

Unpaid commissions

45. Mr Darlison appeared to me to give straightforward evidence concerning his conversation with Mr Tardant. Both Messrs Tardant and Darlison agree that Mr Darlison showed Mr Tardant a printout of his sales. If CSA took the view (rightly or wrongly) that accounts managers forfeited their rights to commissions if they left before deposits were received from their respective clients, that corroborates Mr Darlison’s version of the conversation he had with Mr Tardant. The defendant admits that no commissions were paid in respect of the items claimed in Mr Tardant’s schedule referred to above. The only question, therefore, is whether Mr Tardant is entitled to commission in respect of those transactions.

Analysis

46. I have been assisted by counsel for both parties with extensive submissions in both oral and written form. Although I have given each of them close attention and consideration, I do not think it is necessary to deal with each. I will therefore deal here only with those I consider germane to the decision I must reach.

Was the contract varied?

47. It is trite law to suggest that the parties’ intentions are the critical factor in determining whether a purported variation of a contract modifies or replaces a term of the original agreement. See, for example, Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Ltd (2000) 172 ALR 346. In this case, the evidence proves, on the balance of probabilities, that Mr Tardant had explained to him CSA’s method of calculating commission and did not demur. He received monthly pay slips and examined them. He had a full opportunity to compare the sums on which commissions were being calculated with the package prices and, in my opinion, it is more likely than not that he did so. He never questioned the method of calculation and only questioned the actual sum paid in one instance. It is reasonable to infer from this conduct that Mr Tardant had agreed with CSA to be paid according to its formula and that there was an intention on both sides to vary the written contract (insofar as that was necessary) to give effect to the variation.

The unpaid commissions

48. The question here is how the contract ought be constructed. The key terms in the written contract, which do not appear to have been varied in any way by the further agreement of the parties, are:

Sales only count towards target upon receipt of a 50% deposit cheque. If a lower deposit amount is received, the sale will count pro-rata towards target and commission.
Commission and basic salary are paid monthly in arrears…

49. (At the risk of pedantry and although neither party makes anything of the point, I note that paragraph (a) is self-contradictory in that the first sentence states that, before a sale will count towards commission, a 50 per cent deposit is required but then allows, in the second sentence, for a lesser amount to be paid and commission to be paid.)

50. The written contract is silent on the issue of who was to be responsible for gathering in the deposits. Further, nothing in the written contract explicitly supports the proposition that any commissions actually earned are forfeited upon an account manager departing CSA, with or without proper notice. If anything, paragraph (b) suggests that the reverse may be true. By paying accounts managers in arrears, CSA was able to maintain cash flow by delaying the payment of commission until deposits are banked from clients. This in turn suggests that even after leaving CSA an account manager may be owed a substantial sum in relation to sales effected before his or her departure.

51. If that is so, this will depend on where the responsibility for bringing the deposit lies. Evidence was given by Mr Darlison to the effect that there was a practice that, in their last weeks at CSA, outgoing accounts managers spent a great deal of time chasing deposits. The inference to be drawn from this that it was their expectation that if they departed without a deposit having been received from the client by that time they would not be paid commission on that sale. Mr Darlison also gave evidence that he had warned Mr Tardant of this and that Mr Tardant had, in effect, decided to waive his rights in respect of sales for which deposits had not been made by the date of his departure by refusing to take leave and to think things over instead of resigning precipitately.

52. It is necessary, however, before drawing conclusions on this point, to examine the relevant law. It appears to be the general rule (emphasis added) that “an agent is no longer entitled to commission after termination of the agency relationship.” Graycombe Associates Ltd v Northern Stag Industries Ltd (1976) 73 DLR (3d) 241 at 245. An exception to the general rule will be found where there is either an express or an implied term to the contrary in the agency agreement. I think that the question here must be whether the general rule applies or whether there was an implied term to the contrary in this particular contract.

53. In Sellers v London Counties Newspapers [1951] 1 KB 784. , the English Court of Appeal considered a case in which the appellant had been employed by the respondent to sell advertising space. He was paid a wage plus commissions. He was sacked and sued for wrongful dismissal claiming, among other things, damages in respect of commissions not paid in respect of advertisements attributable to his canvassing and placed in the respondent’s newspapers after his dismissal. The terms of his contract of employment included a condition that commissions were not payable until the advertisements for which he had canvassed were placed in the respondent’s newspapers.

54. Evershed MR, in dissent, (at 790) drew a distinction between an independent contractor engaged to perform a single or limited number of transactions and an employee:

[ I]f the agent is promised a commission… then, if he does the work for which commission was promised, he becomes entitled to that commission although his principal afterwards purports to put an end to the agency.

The case of an employee seems to me, however, to be fundamentally different. In such a case, prima facie, I should have thought, the remuneration which the employer promises to pay as consideration for the services to be rendered is payable only during such time as the services are rendered in fact. If the remuneration is by way of fixed salary, this would, I imagine, be conceded as clear; but I venture to think that the principle is the same whether the remuneration is wholly by salary or partly by salary and partly by commission (as in this case) and whether the commission is calculated by reference, say, to profits made by the employer, or in any other way.

55. While the majority (Singleton and Birkett L.JJ) in that case did not disagree with these dicta as an expression of a general rule, they did not construe it in absolute terms. Singleton LJ said (at 798) “The decision in each case must depend on the contract between the parties… [I]n the present case, the postponement of time of payment of commission (or remuneration) appears to me to show that the parties contemplated that payment might not become due until after the employment had ended from one cause or another.”

56. Birkett LJ took the view that the appellant was entitled to commissions on orders he had obtained prior to his dismissal and which were printed after that date. He said (at 801-802):

I do not think that [the commissions were] strictly damages at all, but in any event it was a sum to which he was clearly entitled… If there had been a term of the contract that all right to commission ended with the termination of employment (as there might well have been if that was the intention of the parties) no question could have arisen. But when the terms of the contract which was made are examined, and in particular the provisions for the time of payment being postponed until the actual printing of the advertisement, which was a matter entirely for the defendants, and quite outside the control of the plaintiff, I find it a little difficult to regard this case as the simple case of master and servant and exactly on the same footing as the case where the remuneration was a fixed sum paid weekly…

This [salary plus commission] arrangement, no doubt, was to stimulate him to use his best endeavours and thus benefit himself and the defendants. Nothing was said to him to indicate that he was not to have the benefit from his work, if when the moment came for payment he had left the employment of the defendants; and it seems to me to follow that, if he did obtain orders for advertisement and the defendants in due course printed the advertisements, his commission was to be payable notwithstanding that he had left the employment when the advertisements were inserted.

57. There is a clear analogy to be drawn between Sellers and this case. There is nothing in the CSA written contract suggesting that commissions are only payable during the currency of an employee’s engagement by the company and I would not construe the contract in those terms. I do not think that the general rule enunciated by Lord Evershed has application in these circumstances. Here, absent an express condition to apply, I think that it is necessary to imply a condition (or conditions) to give business efficacy to the contract.

58. Mr Tardant’s position would only be on all fours with Sellers if he performed his side of the bargain during the course of his employment. This leads to the issue whether it was his responsibility (as the defendant asserts) to get in deposits before he became entitled to commissions or whether he satisfied the conditions of his contract of employment merely by “selling” packages to clients.

59. It was submitted by counsel for the plaintiff that I ought to draw an inference against the defendant due to its failure to call any accounts managers to corroborate management’s evidence. The “rule” in Jones v Dunkel (1959) 101 CLR 298. is neither absolute nor unambiguous, at least in its application. It appears to me that it was open to both parties to call other accounts managers and I would not necessarily expect that it would be the defendant who would call such witnesses. While counsel for the defendant did not submit that I should draw an adverse inference against the plaintiff for not calling witnesses, he contended that there was no necessary expectation that the defendant would call other witnesses and that, in any event, Jones v Dunkel can be a double-edged sword. I agree with both propositions. I do not propose to draw any inferences against either party from a failure to call other accounts managers.

60. In my opinion, the weight of evidence shows that it was CSA’s practice that accounts managers do the follow up work with clients to bring in the deposit. I accept the evidence of Messrs Ospovat and Nash on this point for the reasons I have outlined above.

61. That being the case, the evidence shows, in my opinion, that there were two necessarily implied conditions in the contract in respect of this issue. First, that all accounts managers employed by CSA were responsible for bringing in deposits and were to use their best endeavours to do so. Second, commissions were to be paid by CSA to any account manager in respect of any sales made if, due substantially to the account manager’s own efforts during the course of his or her employment, deposits were received from those clients, whether or not the account manager was employed at the time of the receipt of the deposit. (The corollary is also implied, namely, that if a deposit was received from a client following a sale but that this was not due substantially to the effort made by the account manager while working for CSA no entitlement to commission arose.)

62. There is a further distinction to be drawn between Sellers and this case, namely, that Mr Sellers had no control over whether or when the newspaper would print the advertising he had brought in whereas Mr Tardant had the ability, while he worked for CSA, to chase his clients for their deposits. (He could, presumably, have done so even after he left CSA – this would not have been in competition with CSA.)

63. Mr Tardant did not assert during the course of his evidence that any of the clients in respect of whom he had not been paid commission had in fact sent in deposits, let alone that he had pursued them for deposits which were eventually forthcoming after he left CSA. There is no evidence therefore upon which one could conclude that he was substantially responsible for deposits being paid to CSA at any time after he left the company. There the similarity between his case and Sellers ends.

64. From the business records adduced in evidence it appears that only four deposits had been paid by the time Mr Tardant left CSA in relation to that schedule of deals. Of these two were for the Australian Grand Prix and no commission was paid at all for reasons given above. It appears that Stramit Building Products (Qld) of $4345 made a deposit on 10 February 2002 for a package to a Tri-Nations international. It also appears that a company called Larox deposited $3245 on 21 November 2001 for a package to attend a one-day cricket international. (Although it appears on Mr Tardant’s schedule of commissions not paid at all this must be an error because his pay slip for November 2001 shows a commission of $513 had been paid.)

Conclusions

65. Having made the above findings, it is unnecessary for me to consider the estoppel issue.

66. The only part of Mr Tardant’s claim that appears to me to succeed is in relation to the Stramit Building Products Tri-Nations Rugby Union Test deal. Mr Tardant appears not to have been paid commission in respect of that deal notwithstanding the fact that a deposit was received during the course of his employment with CSA. On the basis of the evidence given by the management of CSA it is reasonable to attribute that to his efforts. According to Mr Nash’s evidence, the gross package price for that deal was $7900. His memorandum to staff dated 11 December 2001 stated that a flat 5 per cent commission was payable on “all Rugby bookings.” I have little doubt that Mr Tardant was well aware of this. His commission in relation to the booking must therefore have been $395.

Verdict and Judgment

67. There will be a verdict for the plaintiff in the sum of $395 and judgment accordingly.

Costs

68. I propose to vary the usual order as to costs because the defendant has been almost entirely successful in defending the matter. The plaintiff is to pay the defendant’s costs in a sum agreed within 28 days or as assessed.

Hugh Dillon
Magistrate
29 March 2004