Tokyo Network Computing Pty Ltd v Tanaka - [2004] NSWCA 263

CITATION: Tokyo Network Computing Pty Ltd & Anor v Tanaka [2004] NSWCA 263 revised - 04/08/2004

HEARING DATE(S): 02/08/2004

JUDGMENT DATE:
2 August 2004

JUDGMENT OF: Mason P at 14, 19; Handley JA at 1; Tobias JA at 15

DECISION: Appeal dismissed with costs.

CATCHWORDS: CONTRACT - master and servant - unilateral reduction in salary - fundamental breach - MASTER AND SERVANT - contract for minimum term at fixed salary - unilateral reduction in agreed salary - fundamental breach - rescission

CASES CITED: Carr v JA Berryman Pty Ltd [1953] 89 CLR 327
Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] 166 CLR 623
Marriott v Oxford and District Co-Operative Society Ltd [1970] 1 QB 186 CA
Rigby v Ferodo Ltd [1988] ICR 29 HL
Stratton v Illawarra County Council [1978] 2 NSWLR 494

PARTIES :
Tokyo Network Computing Pty Ltd (First Appellant)
KDDI Australia Pty Ltd (Second Appellant)
Yoji Tanaka (Respondent)

FILE NUMBER(S): CA 40056/04

COUNSEL: J Simpkins SC/A Gotting (Appellants)
A Sullivan QC/N Manousaridis (Respondent)

SOLICITORS: Abbott Tout (Appellants)
Elson Pow & Associates (Respondent)

LOWER COURTJURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 5126/02

LOWER COURT
JUDICIAL OFFICER : Bryson J

CA 40056/04

MASON P
HANDLEY JA
TOBIAS JA
2 AUGUST 2004

TOKYO NETWORK COMPUTING PTY LTD & ANOR v YOJI TANAKA

CATCHWORDS

CONTRACT – master and servant – unilateral reduction in salary – fundamental breach

MASTER AND SERVANT – contract for minimum term at fixed salary – unilateral reduction in agreed salary – fundamental breach – rescission

FACTS

The first appellant contracted to employ the respondent as its Chief Executive Officer for a minimum term of three years at a fixed salary. The first appellant’s Board of Directors resolved, over the objection of the respondent, to reduce his salary by 10%. The respondent treated this as an anticipatory breach and purported to rescind the contract. The trial Judge held that the resolution was an anticipatory breach and that the respondent had validly rescinded. The employer appealed. HELD: The unilateral reduction in the agreed salary is a breach of contract by the employer which goes to its root and the Board resolution that this be done was an anticipatory breach which entitled the employee to rescind: Rigby v Ferodo Ltd [1988] ICR 29 HL, at 33 applied. In the present case there was nothing in the contract of employment to displace this general rule. Accordingly the appeal was dismissed.

ORDERS

Appeal dismissed with costs.

CA 40056/04

MASON P
HANDLEY JA
TOBIAS JA
2 AUGUST 2004

TOKYO NETWORK COMPUTING PTY LTD & ANOR v YOJI TANAKA

Judgment

1 HANDLEY JA: This is an appeal from a decision of Bryson J who awarded damages for wrongful dismissal against the first appellant, Tokyo Network Computing Pty Ltd, and specific performance against the second appellant, KDDI Australia Pty Ltd. Specific performance was ordered of a contract for the sale of the respondent’s shares in the first appellant, Tokyo Network, created by Mr Tanaka’s exercise of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2004] NSWCA 263
Decision Date: 2 August 2004

CaseChat Overview and Summary

Tokyo Network Computing Pty Ltd (the employer) appealed a decision of the District Court of New South Wales concerning a dispute with its former employee, Mr Tanaka. The central issue revolved around the employer's unilateral reduction of Mr Tanaka's salary during the currency of his employment contract, which Mr Tanaka alleged constituted a fundamental breach of his contract, entitling him to resign and claim damages for wrongful dismissal.

The Court of Appeal was required to determine whether the employer's action in reducing Mr Tanaka's salary amounted to a repudiation of the employment contract. Specifically, the court had to consider whether such a reduction, without the employee's consent, was so significant as to deprive the employee of substantially the whole of the benefit which it was intended he should obtain from the contract, thereby justifying his termination of the contract.

The court affirmed the established legal principle that a unilateral and substantial reduction in an employee's salary by an employer constitutes a fundamental breach of the employment contract, amounting to a repudiation. This principle is rooted in the concept that the agreed salary is a core element of the employment bargain, and its significant alteration without consent fundamentally alters the employer's obligations. By reducing Mr Tanaka's salary without his agreement, the employer evinced an intention no longer to be bound by the essential terms of the contract, thereby giving Mr Tanaka the right to treat the contract as at an end.

The appeal was dismissed, and the employer was ordered to pay Mr Tanaka's costs.

Orders

Orders of the court

Appeal dismissed with costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

CITATION:	Tokyo Network Computing Pty Ltd & Anor v Tanaka [2004] NSWCA 263 revised - 04/08/2004
HEARING DATE(S):	02/08/2004
JUDGMENT DATE:	2 August 2004
JUDGMENT OF:	Mason P at 14, 19; Handley JA at 1; Tobias JA at 15
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	CONTRACT - master and servant - unilateral reduction in salary - fundamental breach - MASTER AND SERVANT - contract for minimum term at fixed salary - unilateral reduction in agreed salary - fundamental breach - rescission
CASES CITED:	Carr v JA Berryman Pty Ltd [1953] 89 CLR 327 Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] 166 CLR 623 Marriott v Oxford and District Co-Operative Society Ltd [1970] 1 QB 186 CA Rigby v Ferodo Ltd [1988] ICR 29 HL Stratton v Illawarra County Council [1978] 2 NSWLR 494
PARTIES :	Tokyo Network Computing Pty Ltd (First Appellant) KDDI Australia Pty Ltd (Second Appellant) Yoji Tanaka (Respondent)
FILE NUMBER(S):	CA 40056/04
COUNSEL:	J Simpkins SC/A Gotting (Appellants) A Sullivan QC/N Manousaridis (Respondent)
SOLICITORS:	Abbott Tout (Appellants) Elson Pow & Associates (Respondent)

LOWER COURTJURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 5126/02
LOWER COURT JUDICIAL OFFICER :	Bryson J