Tooheys v Blinkhorn

[2008] NSWSC 499

CITATION:	Tooheys v Blinkhorn [2008] NSWSC 499
HEARING DATE(S):	16 May 2008
JUDGMENT DATE :	26 May 2008
JURISDICTION:	Equity
JUDGMENT OF:	White J
DECISION:	See para 89 of judgment.
CATCHWORDS:	CONTRACTS - offer and acceptance - offers of redundancy packages to employees - mistaken calculation - whether acceptances gave rise to binding contracts.
CASES CITED:	Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1996) 40 NSWLR 631 Taylor v Johnson (1983) 151 CLR 422 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 Godecke v Kirwan (1973) 129 CLR 629 The Council of the Upper Hunter County District v Australian Chilling & Freezing Co. Ltd (1968) 118 CLR 429 Tinn v Hoffmann & Co (1873) 29 LT 271 Manchester Diocesan Council for Education v Commercial & General Investments Ltd [1970] 1 WLR 241 Spectra Pty Ltd v Pindari Pty Ltd [1974] 2 NSWLR 617 White Trucks Pty Ltd v Riley (1948) 66 WN (NSW) 101
PARTIES:	Tooheys Pty Ltd v Leonard Blinkhorn & Ors
FILE NUMBER(S):	SC 2289/08
COUNSEL:	Plaintiff: R Goot SC Defendant: D Shoebridge
SOLICITORS:	Plaintiff: Malleson Stephen Jaques 1st & 9th Defendants: CFMEU (NSW Branch) 2nd to 8th Defendants: Turner Freeman Lawyers

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Monday, 26 May 2008

2289/08 Tooheys Pty Ltd v Leonard Blinkhorn & Ors

JUDGMENT

1 HIS HONOUR: The question in this case is whether the plaintiff and the defendants entered into contracts by which the plaintiff is bound to make redundancy payments to the defendants in amounts substantially above those to which the defendants would be entitled under their award.

2 The defendants are employed by the plaintiff as brewery technicians. They were all offered redundancy. They were required to make a decision either to remain with the plaintiff and transfer to a new area of employment, or to pursue redundancy. Seven of the defendants signed letters dated 31 January 2008 stating that they wished to accept a redundancy package as outlined in calculations attached to the letters and acknowledged their understanding that their final day of employment with the plaintiff would be 31 May 2008.

3 The redundancy calculations attached to the letters dated 31 January 2008 contained material errors. After most of the defendants had signed and returned the letters accepting the outlined redundancy package, the plaintiff purported to rescind the “estimate” provided on 31 January 2008. The defendants contend that the letters of 31 January 2008 were offers which, on acceptance, gave rise to binding contracts. One defendant claims to have accepted the redundancy package by shaking hands on a deal.

Background to Proceedings

4 The plaintiff is a manufacturer and distributor of beer. It is part of the Lion Nathan group of companies. Its main brewery is located at Auburn. In early 2007, the Lion Nathan group decided to implement a project known as “Project Key”. As part of Project Key, changes are to be made to the equipment and technology of the Brewing Department. As a result of those changes, 11 brewery technician positions within the Process Services Department at the Auburn Brewery were identified as being surplus to the plaintiff’s requirements. The defendants were all employed in the Brewing Department. They were offered the choice of redundancy or transferring to the Packaging Department at a lower wage.

5 The plaintiff, the Liquor Hospitality and Miscellaneous Union (“LHMU”) and the Construction Forestry Mining and Energy Union (“CFMEU”) are parties to an industrial award called the Tooheys Pty Ltd (Auburn Brewery) Enterprise Award 2004. Clause 1.1.1 of the award states that it “sets out the terms and conditions of your employment at the Auburn Brewery.” Clause 11.2 of the award provides:

“Redundancy

11.2.1 Redundancy means a situation where your employment is terminated by Tooheys, the termination being attributable, wholly or mainly, to the fact that the position filled by you is, or will become, superfluous to the needs of Tooheys.

11.2.2 The redundancy formulae shall be as follows:

(a) three weeks pay for the first year of service up to 15 years, four weeks per annum thereafter

(b) four weeks in lieu of notice

(c) five weeks ex gratia ”

6 It was common ground that the award was applicable to the terms and conditions of employment of each of the defendants, in the sense that the award stipulated the defendants’ minimum terms and conditions of employment. Three of the defendants had signed individual employment agreements pursuant to which they had the option to revert to the rates of pay and conditions of employment under the award.

7 The Lion Nathan group also had what was called a “broader organisational redundancy policy”. The policy stated:

“ People who are entitled to a redundancy payment are people who are employed on a permanent basis by any company within the Lion Nathan Group at the time that the redundancy occurs.
...
The redundancy pay is in addition to all other accrued payments to which an individual has become entitled to [sic] such as annual leave and long service leave.
What redundancy pay applies for people covered by a collective agreement?
Any person, who is bound by the terms and conditions of a collective agreement (CA), will be entitled to the redundancy provisions set out in that agreement. The provisions in the CA will prevail in lieu of this policy.
The redundancy provisions contained in a CA do not extend to people in that location who are not covered by that CA. The redundancy provisions only apply to people who are legally bound by all of the terms and conditions of the CA. If a person who was covered by a CA is promoted to a role that is no longer covered by a CA, they will move on to the Lion Nathan redundancy policy at the time they move into their new role.
The current Collective Agreement’s [sic] across Lion Nathan can be accessed by clicking on the following link:
Collective Agreements
What redundancy pay applies for people not covered by a CA?
Lion Nathan provides redundancy pay that is calculated on the basis of one month per year of employment, pro rated for any uncompleted year. There is a minimum payment of three (3) months redundancy pay (to support people who have been employed for less than three years). There is a maximum payment of twelve (12) months redundancy pay. ”

8 By a memorandum dated 2 May 2007, the plaintiff asked for provisional expressions of interest from its brewery technicians as to whether they wished to take redundancy. The memorandum stated that:

“ Once Project Key is fully underway, a limited number of redundancy packages will be offered, and it is possible that more or less people will express interest in redundancy than there are actual redundancy packages available. We believe that the earlier we understand our people’s preferences, the more opportunity we have to take these preferences into account when planning for change. ...

Importantly, in determining your preference, you should know that if more people volunteer for redundancy than the number of redundancy packages available, there will be no additional redundancy packages, and those in the affected areas will be given priority.

Remember, your response is simply an indication of your present preference. You will be given another opportunity to formally confirm or change your preference at a later date. ”

9 There was no explanation of the term “redundancy package”. The memorandum did not say that an employee taking redundancy would be paid his entitlement under the award, or his entitlement under Lion Nathan’s redundancy policy if that were different. The memorandum stated:

“ If you have indicated that you wish to explore a voluntary redundancy opportunity, then this feedback will include an indicative quotation and explanation of your redundancy terms. ”

10 With all but one exception, each of the defendants indicated their provisional preference for accepting a redundancy package. The other defendant indicated that he was interested in either taking redundancy or continuing employment with the plaintiff.

11 On 22 October 2007, the plaintiff wrote to all of the defendants outlining the options available to them. There was to be one person employed to work on a day shift in the Process Services Department. The defendants were invited to apply for employment in that role. Jobs were offered in the Packaging Department. If the defendants decided to move to the Packaging Department, they all faced a substantial reduction in remuneration. The reduction in annual remuneration varied from about $15,000 to $30,000. There was attached to the letter what was said to be “important information about ... the amount to be paid to you if you choose redundancy”. This information was headed “Redundancy Calculation as per Lion Nathan Redundancy Policy”. It contained no figures for annual leave or long service leave. It provided for payment of four weeks’ remuneration in lieu of notice and five weeks’ ex gratia payments. The attachment showed for each employee the commencement date of his employment and the projected termination date of 1 March 2008. It set out the employee’s remuneration. The document included notes that:

“* Redundancy component consists of 1 month’s pay per completed year of service, capped at 12 months. ...

* This calculation is accurate at the time of processing, however if leave is taken or your contract changes prior to redundancy date this will effect [sic] the final amount payable.

* If you have already been paid for the full month during which your redundancy occurs the total of your redundancy will be reduced by any excess salary. ”

The following statement was prominent at the foot of the page in bold type:

“ N.B. This redundancy calculation is an estimate only – advise [sic] of Final Dates and Calculations will be at Lion Nathan’s discretion. ”

12 The calculation included a payment schedule and a summary. Redundancy payments were set out including the tax-free component of a redundancy payment. However, the calculations bore no relationship to the stated basis on which they were calculated. Thus, in the case of the first defendant, the calculation stated he would have 24.26 years of service up to the termination date of 1 March 2008. His yearly remuneration was stated. According to the note as to how redundancy was calculated, he would be entitled to a redundancy component of 12 months’ pay, that is, the same amount as his annual remuneration. However, the calculation stated the redundancy component of his pay to be a figure which was $50,512.46 more than his annual remuneration. As the first defendant was entitled to at least the minimum benefits under the award, he was entitled to a redundancy payment of 82.04 weeks (based on 24.26 years of service) in addition to four weeks in lieu of notice and the five weeks ex gratia payments. The redundancy component in the calculation was $8,484.55 less than the amount to which the first defendant would have been entitled under the award for this component.

13 In the case of other defendants, the figures for redundancy were substantially below the stated basis of calculation of the redundancy component consisting of one month’s pay per completed year of service capped at 12 months. The figures were also below the amounts payable under the award.

14 There was no explanation for the discrepancy between the figures in the stated redundancy calculation and the description of the redundancy component, nor as to why the stated basis of calculation was not in conformity with the award.

15 The letters of 22 October 2007 set out an indicative timetable for the making of decisions. After a decision had been made as to who would be appointed to the day-shift role, it was projected that 26 November 2007 would be the cut-off date for a decision as to whether the brewery technicians would accept redundancy or move to packaging. It was projected that the final date of employment for those who opted for redundancy would be approximately March 2008.

16 Throughout late October and early November there were several meetings in relation to the final date by which employees would be required to elect to accept a redundancy package or move to the Packaging Department. There were also several meetings in relation to the calculation of leave entitlements that would become payable to those employees who elected to take redundancy. No figures for annual leave or long service leave were included in the calculations attached to the letter of 22 October 2007.

17 On 19 November 2007, a letter was sent to each of the defendants advising that the date for them to let the plaintiff know whether they would take a “redundancy package” or move to a new role in the Packaging Department had been extended to 11 January 2008. The process for expressions of interest in the day-shift role had ceased. The letters enclosed calculations of long service leave and annual leave entitlements as at 1 March 2008 for each of the employees. There was no material change to the calculation of redundancy payments, nor to the stated basis upon which redundancy payments would be made. The calculations again included a statement that:

“ * This calculation is accurate at the time of processing, however if leave is taken or your contract changes prior to redundancy date this will effect [sic] the final amount payable.

* If you have already been paid for the full month during which your redundancy occurs the total of your redundancy will be reduced by any excess salary. ”

18 Again, each calculation page included a note in bold type at the foot of the page that:

“ This redundancy calculation is an estimate only – advise [sic] of Final Dates and Calculations will be at Lion Nathan’s discretion. ”

19 There were further discussions with the Union and the employees regarding the method of calculation of leave entitlements as set out in the 19 November 2007 letters. There is no evidence of any discussions concerning either the basis for calculation of the redundancy payments or the accuracy of the calculations of redundancy payments.

20 On 14 January 2008, Mr Luke Sawyer, the operations director of the plaintiff, commenced working at the Auburn Brewery. It became apparent to him that the plaintiff would not be in a position to automate the Process Services Department by 31 March 2008 as had previously been anticipated. This delay was due to delays in bringing the new equipment in the engine room into operation. A revised project completion timeframe for automation of the department was set at 31 May 2008. The defendants had been advised on 19 November 2007 that the date for them to choose whether to take a redundancy package or to move to a new role in packaging would be 11 January 2008. That date had passed.

21 On 23 January 2008, Ms Jane Humphreys, an Operations Capability and Culture Leader, advised the seventh defendant, Mr Tynan, that:

“ Payroll have come back to me and I have spent all afternoon reviewing their information and calculations. There are still inaccuracies. I have scheduled a meeting with them next Tuesday as I’m offsite for the rest of this week and Monday is a public holiday.
This is becoming increasingly frustrating for everyone so I appreciate your patience – my intent is to ensure the next calculation we provide you with is accurate so I will persist with payroll until I’m satisfied with what they produce. ”

22 On 31 January 2008, the plaintiff wrote to all of the defendants. The letter was headed “Reminder Re: Redundancy or Transition to Packaging”. Each letter (apart from the letter to the second defendant, Mr Emerson) stated as follows:

“ This letter acts as a reminder about the upcoming date we require your decision about remaining with Tooheys and transitioning into our Packaging Department or, accepting a Redundancy Package.
In the case that on or before February 8th 2008 , you do not indicate your preference to remain with Tooheys ( and transfer to Packaging ) or pursue Redundancy Package, we will assume you wish to stay with Tooheys and will transfer to Packaging.
Should you choose to pursue Redundancy, it has been agreed that the Engine Room will be fully automated ( with one day role ) by 31st May 2008 . As such, 31st May 2008 will be your final day with Tooheys.
You will find your updated calculation attached to this letter. This calculation is based on your end date being May 31st 2008.
Please contact Gary Faulkner or Jane Humphreys should you have any queries.
We look forward to you [sic] response on or prior to February 8th 2008 . Please nominate your preference below and return to Gary Faulkner. ”

23 The letter was signed by Mr Faulkner, the Brewing Manager. Each employee was required to tick one of the following boxes:

“ □ I ___________________ wish to remain with Tooheys and accept a position within the packaging Department as a Brewery Technician.
□ I ____________________ wish to accept a redundancy package as outlined in the attached calculation and understand my final day of employment with Tooheys will be 31st May 2008. ”

24 The “attached calculation” followed a similar format to the previous calculations. This time it was headed “Redundancy Calculation as per Tooheys Redundancy Policy”.

25 Whilst the format of the document was the same, there were many changes. The new “Termination Date” was 31 May 2008. Instead of simply stating a “Yearly Rate” and a reference to the last bonus paid, the remuneration was divided between “Yearly Rate”, “Shift Allowance” and “Last Bonus”. The explanation for this appears to be that calculations of annual leave were based on annual salary plus shift allowance, whereas calculations of long service leave were based on annual salary plus shift allowance, plus bonus. Salary for redundancy was annual salary plus shift allowance. There had been slight movements in these figures (compared with the previous yearly rate) from those advised in October and November 2007, presumably attributable to pay increases.

26 There was also a change to the statement as to how the redundancy component was made up. In the case of all defendants (except the eighth defendant) it was stated that the “Redundancy component consists of 3 weeks per year up to 15 years and 4 weeks thereafter”. Each calculation sheet included provision for payment of four weeks’ salary in lieu of notice and five weeks’ ex gratia payment. This was in accordance with the award.

27 However, there was no correlation between the stated basis for calculating the redundancy component and the figures in the schedule. There were discrepancies in all of the calculations.

28 The redundancy components for each of the defendants was said to consist of three weeks per year up to 15 years and four weeks thereafter. The fourth defendant, Mr Thompson, would be better off if he were paid according to the Lion Nathan redundancy policy for a person not covered by a Collective Agreement, namely, by being paid one month per year of service up to a maximum of 12 months’ redundancy payment, if he also was entitled to payment in lieu of notice. However, in his case, as in the case of all of the other defendants, he would be better off if he were paid the stated amount of redundancy payment set out in the calculations attached to the letter of 31 January 2008 than if he were paid either in accordance with the award or the published policy.

29 The calculations attached to the letters of 31 January 2008 were published by the plaintiff by mistake. The mistake arose because the calculations were made using an Excel spreadsheet and were not checked. Instead of calculating the number of weeks of redundancy to which each employee would be entitled, being three weeks for each of the first 15 years of service and four weeks per annum thereafter, each employee’s redundancy component was calculated on the basis that he would have completed 32.68 years of service.

30 The calculation sheets attached to the letters of 31 January 2008 included the same notation in bold type at the foot of the page as had the previous calculations. The calculation sheets also included the same notes as had the previous calculations. These stated that the calculation was accurate at the time of processing but if leave were taken or the employee’s contract changed prior to the redundancy date, this would affect the final amount payable; and that if the employee had already been paid for the full month during which his redundancy occurred the total of his redundancy payment would be reduced by any excess salary.

31 Mr Sawyer deposed that the calculations attached to the letter of 31 January 2008 were not reviewed for accuracy by himself, Ms Humphreys or Mr Faulkner as various problems with the Process Services Department employees’ annual and long service leave entitlements remained unresolved. He said that on that basis he was of the view that there would necessarily be discrepancies in the calculation of the 31 January “estimates” until those issues were finalised and the plaintiff would have to reissue a further estimate in the near future. However, he did not communicate these reservations to the defendants. The attachment to the letters stated that the calculations were accurate at the time of processing. The defendants (apart from Mr Emerson) were required to make their decision by 8 February 2008 whether to accept a position within the Packaging Department or accept “a redundancy package as outlined in the attached calculation”.

32 On 31 January 2008, Ms Humphreys told Mr Sawyer that the letter to the eighth defendant, Mr Stewart Virgona, had not gone out because there was an error in the calculation of his redundancy entitlement and the letter would not be released until the next week. There had been no change to the stated method of calculating Mr Virgona’s redundancy component from being one month’s pay per completed year of service. He had only been employed from 1 June 2007. At that stage, the plaintiff had not appreciated that there was an error in how they had calculated the redundancy component for the other employees.

33 On the afternoon of 5 February 2008, Mr Sawyer was informed by the Payroll Department that there had been an error in the calculation of the employees’ redundancy pay. On the evening of 5 February, Mr Sawyer telephoned the second defendant, Mr Emerson, who was the union delegate at the plant. There had been earlier discussions with Mr Emerson that day referred to later in these reasons. Mr Sawyer told Mr Emerson that errors had been discovered in the redundancy calculations and that the effect of the error was that everyone had been attributed redundancy pay as if they had 32 years of service with the plaintiff. Mr Sawyer said he would do his best to have a revised estimate out to everyone by 6.00pm on the following night.

34 On the morning of 6 February 2008, Mr Sawyer told the second, fourth and sixth defendants (Messrs Emerson, Thompson and Trevedi) that there was an error in the redundancy estimates. He apologised for the error and said that he would do everything possible to obtain updated estimates that day. At 11.25am, Mr Sawyer sent an email to the defendants with the subject “Redundancy calculation error”. He advised that:

“ In following up on some queries late yesterday, we became aware that the estimate provided to you last Friday was wrongly calculated and contained serious errors. Accordingly, Tooheys rescinds that estimate, and will provide you with a corrected estimate later today.
Please accept my sincere apologies for this mistake ... ”

35 Prior to that email, six employees in the Process Services Department had returned signed forms to Mr Bob Kirkbride, Team Leader, electing to take redundancy. In the case of one of those employees, the seventh defendant, Mr Tynan, there is an issue as to whether any offer contained in the 31 January 2008 correspondence had been withdrawn prior to his returning the form. The first defendant, Mr Blinkhorn, was absent on leave until 11 February 2008. He returned to work on 11 February 2008 and was handed the 31 January letter and attached calculations. He signed and returned the nomination form to his supervisor electing to take redundancy. The plaintiff takes no issue that Mr Blinkhorn did not comply with the time limit, and in the case of Mr Blinkhorn, does not contend that any offer had been withdrawn prior to his acceptance. The plaintiff accepts that Mr Blinkhorn should be treated as being in the same position as the other defendants, apart from Messrs Tynan and Emerson.

36 Mr Emerson did not return a signed acceptance of the alleged offer in the 31 January 2008 letter. He contends that at a meeting held on 5 February 2008 agreement was reached between him and Mr Sawyer whereby it was agreed that Mr Emerson would take redundancy on the basis of the calculations in the letter of 31 January 2008 plus an additional $140,000.

37 On 15 February 2008, Mr Sawyer advised the union representative, Ms Moriarty, that the previous “estimates” had been revoked and the plaintiff would not consider any of the employees’ elections to be binding, but would issue revised and corrected calculations in order for them to make their decision. He offered to provide an independent audit of the calculations. The defendants and their union denied that the plaintiff was entitled to withdraw offers of redundancy which had been accepted.

38 On 21 February 2008, the plaintiff issued what it called a “corrected redundancy estimate”. The plaintiff said that the attached estimate was not a final calculation of the defendants’ redundancy payments and that the defendants would receive their final calculation at the time their employment ended. The letter attached a redundancy calculation in a form which was relevantly the same as the form of 31 January 2008 save for figures. It included the same note at the foot of the page referred to previously and included also other notes to the same effect as those included in the calculation attached to the letters of 31 January 2008. Save in respect of four defendants, it is agreed that the calculation attached to the letter of 21 February 2008 is an accurate calculation of the redundancy payment to which those defendants would be entitled under the award.

39 The reductions were substantial. In the case of the first defendant the redundancy component was reduced by about $64,000; in the case of the second defendant, by about $71,000; in the case of the third defendant, by about $56,000; in the case of the fourth defendant, by about $150,000; in the case of the fifth defendant, by about $147,000; in the case of the sixth defendant, by about $163,000; in the case of the seventh defendant, by about $166,000; and in the case of the ninth defendant, by about $60,000.

Issues

40 Apart from particular issues concerning the second defendant, Mr Emerson, and the seventh defendant, Mr Tynan, the principal issues are whether the letters of 31 January 2008 were offers capable of giving rise to binding contracts for the plaintiff to make redundancy payments in the amounts set out in the attached calculations. If the answer to that question is yes, there is an issue as to whether on the proper interpretation of the letters and the attached schedules the amounts payable are the figures contained in the schedules or amounts which would be payable using the formulae set out in the schedules.

41 The plaintiff also claimed that if the acceptance of the 31 January 2008 letters gave rise to otherwise binding contracts, those contracts are liable to be rescinded or should be rectified for mistake. None of the defendants said that he was aware the plaintiff had made a mistake in the figures presented. None of the defendants was cross-examined with a view to establishing that he appreciated that the plaintiff had made a mistake in its calculations. There was evidence that many years previously, the plaintiff had offered workers amounts substantially above their redundancy entitlements to encourage them to take redundancy. Some defendants deposed that they assumed that the plaintiff had increased its earlier offer of redundancy to ensure that the offer of redundancy was accepted. Ultimately, the plaintiff did not submit that any contracts could be rescinded or should be rectified for unilateral mistake.

42 The claim that the contracts were voidable, or liable to be rectified for common mistake, was not formally abandoned. The plaintiff submitted that the defendants entered into the contract by mistake because they assumed the redundancy component had been calculated in accordance with the formula contained in the award which was repeated on the attached sheet. No defendant gave evidence to that effect and none was cross-examined with a view to eliciting an admission to that effect. There is no evidence that the defendants made any assumption other than that if they elected to take the redundancy package they would be paid the amounts of redundancy, payment in lieu of notice and ex gratia payments set out in the attachments. In short, the claim to avoid or rectify any contract for common or unilateral mistake was not seriously pursued.

43 No issue was raised as to there not being consideration for the alleged contracts. The plaintiff submitted that the letters of 31 January 2008 should be construed on the basis that the plaintiff had no obligation to make any payments in addition to the award and had no obligation to offer alternative employment to the defendants. However, the question of whether the plaintiff had any obligation to offer alternative employment to the defendants was not raised as an issue either at the directions hearing, or in the affidavits, or in the parties’ written submissions delivered before the hearing, when the issues for trial were identified. It was common ground that if the acceptance of the plaintiff’s letters of 31 January 2008 could otherwise give rise to contracts, the defendants’ election not to take up alternative employment was sufficient consideration.

Acceptance by the Defendants Other than the Second and Seventh Defendants

44 Separate questions arise in relation to the alleged acceptances by the second defendant, Mr Emerson, and the seventh defendant, Mr Tynan. I will first consider the position of the other defendants who returned signed acceptances (or in the case of the first defendant, is to be treated as if he had returned the signed acceptance) prior to the plaintiff’s rescinding the “estimate”.

45 There was no dispute as to the principles of law to be applied. In Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, Mahoney JA said (at 326) that the questions to be addressed were:

“ ... did the parties arrive at a consensus?; (if they did) was it such a consensus as was capable of forming a binding contract?; and (if it was) did the parties intend that the consensus at which they arrived should constitute a binding contract? ”

46 The parties’ intentions are to be ascertained objectively from the parties’ words and conduct, the terms of the correspondence and the surrounding circumstances. The meaning of the letters of 31 January 2008 is determined by what a reasonable person in the position of the parties would have understood it to mean. That requires consideration of the surrounding circumstances and the purpose and object of the transaction (GR Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1996) 40 NSWLR 631 at 634; Taylor v Johnson (1983) 151 CLR 422 at 429; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at 179 [40]).

47 Mr Goot SC for the plaintiffs submitted that the parties did not arrive at a consensus. He submitted that all that the defendants were required to do was to nominate their preference as to the options available to them, either to accept redeployment or to “pursue redundancy” by nominating that they “wish(ed) to accept a redundancy package as outlined in the attached calculation”. He submitted that such an expressed preference was not intended to be binding on the defendants. In any event, the redundancy calculations were expressed to be “an estimate only” and “final” calculations were to be issued at the plaintiff’s discretion. The plaintiff submitted that the word “outlined” used on the form of acceptance on the 31 January 2008 letter qualified the attached calculations such that those calculations did not have a promissory quality. That construction of the correspondence (so the plaintiff submitted) was reinforced by the statement at the foot of the calculation that the calculation was an “estimate only”.

48 I do not accept the plaintiff’s submission that the parties intended that an expressed preference by a defendant for accepting a redundancy package or transferring his employment to the Packaging Department was intended to be provisional and not to be binding on the defendant. Although the plaintiff spoke of a defendant’s indicating his “preference”, it also required a “decision” from each defendant as to which course he elected to pursue. In contrast to the earlier correspondence, the defendant was required to tick a box either indicating his wish to remain with the plaintiff in a position in the Packaging Department, or to accept a redundancy package. I agree with the submission of Mr Shoebridge for the defendants that in contrast to the earlier May 2007 documents inviting a provisional expression of interest, the letters of 31 January 2008 did evince an intention that the defendants’ decisions would be binding on them. The letters explicitly required the defendants to make a decision regarding their redundancy.

49 The plaintiff subsequently said that the defendants would not be bound by their decision, but only because of the mistake in the calculation of the redundancy payments. At the meeting with the union representative and delegate on 15 February 2008, Mr Sawyer said words to the effect:

“ We stand by our position that the erroneous estimates have been revoked. The calculations were clearly a mistake. But in order to be fair, we will not consider any of the employees’ elections made in relation to that estimate as binding ... ”

A statement to similar effect was made in the plaintiff’s letter of 21 February 2008. In that correspondence, the plaintiff said:

“ As you know, the Redundancy calculation estimate attached to the reminder letter was wrong and Tooheys rescinded those estimates on 6 February 2008. Following discussions with individuals and your union, Tooheys understands that you may have nominated for redundancy believing that you would be paid this incorrect figure at the time of your redundancy. In these circumstances Tooheys does not consider that you are bound by the preference you expressed at that time. ”

50 As counsel for the defendants submitted, it was implicit in this statement that absent the plaintiff’s errors, it would have considered the defendants so bound.

51 I do not consider the word “outlined” in the sentence “I wish to accept a redundancy package as outlined in the attached calculation” to indicate an absence of contractual intent. Whilst in some contexts to outline a subject may mean to sketch its main features, in the present context, having regard to the content of the calculations and supporting notes, the word does not have that meaning. The calculations were set out in detail and were said to be accurate at the time of processing. In the present context “outlined” means “set out”.

52 The primary basis for saying that there was no consensus on any particular terms as to payment of the redundancy package is the statement on each of the redundancy calculations that “This redundancy calculation is an estimate only – advise [sic] of Final Dates and Calculations will be at Lion Nathan’s discretion”.

53 This statement has to be read in the context of the other notes on the document that the calculation was accurate at the time of processing, but contract changes or the taking of leave prior to redundancy would affect the final amount payable. I cannot reconcile the statement that the calculation was accurate at the time of processing with the calculation being merely an expression of opinion as to the likely approximate calculation of the amount to be paid on redundancy (see J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 at 442), except on the basis expressed in the notes that the final amount payable would be affected if leave were taken or the employee’s contract changed prior to the redundancy date or there was an excess payment of salary. Construing the document as a whole, I take the document to mean that the redundancy calculation could be varied if the plaintiff decided to change the final date of the defendants’ employment, or if leave were taken, or if there were changes to the defendants’ contract prior to the redundancy date, or to set off any payment of excess salary.

54 The plaintiff submitted that the letters could not give rise to binding contracts because any agreement was incomplete. This was because the plaintiff had reserved a discretion to amend the redundancy calculations and there can be no contract if the promissor reserves a discretion or option as to whether he will carry out what purports to be the promise (Godecke v Kirwan (1973) 129 CLR 629 at 646-7).

55 This submission assumes that the words in bold at the foot of the page were unqualified by the notes. For the reasons in para [53] I do not consider that, read as a whole, the document purports to reserve such a discretion as that for which the plaintiff contends. Moreover, on no view could the final calculations be at the plaintiff’s discretion. If the letters were offers capable of giving rise to contracts to pay the calculated amounts, the plaintiff would not have a discretion to reduce the amounts after acceptance. If the statement was unqualified, that might suggest that the letters were not such offers. But on the plaintiff’s case, the defendants were to be paid according to the award (or any individual contract if that gave a greater entitlement). Again, the plaintiff would have no discretion to pay less than the award, or less than the amount payable under any individual contract of employment. In either case the plaintiff would have a discretion to offer more but not less. Those words are neutral.

56 By inviting the defendants to indicate their wish to “accept a redundancy package as outlined in the attached calculation” the plaintiff was implicitly making an offer of a “redundancy package as outlined in the attached calculation”. At no stage did the plaintiff say in terms to the defendants that if they accepted a redundancy package they would be paid their entitlement under the award. The evidence does not suggest that the plaintiff offered to pay the defendants more by annual leave or long service leave than they were entitled to under the award or under any individual contracts of employment. The offer of a “redundancy package” rather suggests that the plaintiff was offering something more than that to which the defendants would in any event be entitled if they chose not to take up the alternative employment. If that was all that was on offer one would expect the plaintiff to say so. Whilst the attachment stated the basis on which the redundancy payment was calculated, and that was in accordance with the award, the letter did not say that the payment would be in accordance with the award. The heading “Redundancy Calculation as per Tooheys Redundancy Policy” did not refer to the award. The change to the heading from the previous calculations is a neutral consideration.

57 The words “redundancy package as outlined in the attached calculation” directed attention to the figures on the attached sheet rather than the formulae stated to be the basis on which the figures had been calculated. Had the defendants compared the figures with the stated basis for their calculation they should have appreciated that the figures were erroneous, but, as noted above, the claim to avoid the contract on the ground of unilateral mistake was not pursued.

58 On the question whether the “attached calculation” referred to the figures or the notes, I think it is clear that the reference was to the figures. A review of the correspondence shows there was never a correlation between the figures provided for redundancy pay and the stated basis of calculation of those figures. It would be reasonable to expect the employees to look at the “bottom line” of what they would be paid in deciding whether to take redundancy or accept alternative employment.

59 The disconformity between what was stated in the notes as the basis of calculation of the redundancy component and the figures would not render any contract void for uncertainty and hence preclude the acceptances from giving rise to a binding contract. To the contrary, the letter will be construed so as to seek to ascertain the parties’ intention and give effect to that intention. The fact that different parts of the documents indicate different outcomes so that there is more than one possible meaning does not result in a contract being void for uncertainty (The Council of the Upper Hunter County District v Australian Chilling & Freezing Co. Ltd (1968) 118 CLR 429 at 436-437).

60 Mr Sawyer believed that there would necessarily be discrepancies between the calculation attached to the 31 January 2008 letters and the plaintiff would have to reissue a further estimate in the near future. The plaintiff did not say so when it sent out the letters. To the contrary, the attached schedule stated that the calculation was accurate at the time of processing. Mr Sawyer’s subjective belief is not relevant.

61 To recapitulate, and at the risk of repetition, the issue is whether the letters of 31 January 2008 were offers to pay dollar sums in the attached schedules in consideration of the defendants not taking up the offer of employment, or whether the letters were estimates of the sums which would be paid pursuant to the award or any individual contract of employment if the defendants elected to take redundancy rather than the offer of alternative employment.

62 The strongest factor in favour of the second construction is the statement at the foot of the attached schedules that the redundancy calculation was an estimate only and that advice of final dates and calculations would be at Lion Nathan’s discretion. However, for the reasons above, when construed in the light of the other statements of the document, in particular the statement that the calculation was accurate at the time of processing, the reference to the calculation being an estimate only is to be understood as stating that the calculation could be varied if circumstances relating to the defendants’ employment changed. The statement that advice of the final date of employment would be at Lion Nathan’s discretion is neutral although it is one of the matters which would affect the calculation. If the statement that final calculations would be at Lion Nathan’s discretion was not qualified by the notes, the statement would be wrong unless it meant that the plaintiff could increase its offer, in which case the statement was neutral as it would apply equally to either construction of the document.

63 A second consideration in favour of the latter construction is that the letter contains no express offer to pay any amount. However, it is implicit in the plaintiff’s seeking the defendants’ acceptance of a redundancy package that the plaintiff was offering to pay the amount of the package if the defendants’ elected to accept it.

64 A third consideration is that the plaintiff was under no obligation to pay more than the award or the amount payable under any individual contract on employment. That is no reason why the plaintiff could not agree to pay more than it was obliged to do in order to encourage the employees to take redundancy. As noted above, there is no issue as to the sufficiency of the consideration to support an offer to pay the amounts in the attached calculation.

65 A fourth consideration is that the amount offered to be paid as a redundancy component was stated to be three weeks’ salary for the first 15 years and four weeks per year thereafter. But that was not the basis on which the figures were calculated. The employees could be expected to rely on the figures presented as an accurate calculation rather than making their own calculations to determine the amount they would receive. This is especially so given that previous calculations, which were also stated to be accurate, bore no relationship to the basis on which it was said they had been prepared.

66 There are other factors tending to show that the letter was an offer capable of acceptance and not merely an estimate of the defendants’ entitlement under the award or any individual contract of employment. They are, first, that there was no express statement to the effect that if the employees took redundancy they would only be paid their entitlement under the award or other contract of individual employment. Secondly, notwithstanding the plaintiff’s submission to the contrary, it was intended that the defendants would be bound by their election. Thirdly, the invitation to the employees to tick a box indicating their wish “to accept a redundancy package as outlined in the attached calculation” impliedly conveyed an offer to pay a redundancy package as outlined in the attached calculation. Coupled with the fact that the employees’ decision to accept the redundancy package would be final, the language used is more indicative of an intention to contract than an intention to provide merely an estimate of sums which would be payable pursuant to the award (or any individual contract of employment) if the defendants elected not to take up the offered employment.

67 It follows that in the case of those defendants who returned their signed acceptances prior to receiving notice of withdrawal of the offer contained in the letter of 31 January 2008, that the plaintiff is bound to pay the amounts set out in the calculations attached to the letters of that date. The plaintiff also acknowledges that the first defendant should be treated as if he were in that position.

68 Different considerations apply to the second defendant (Mr Emerson) or the seventh defendant (Mr Tynan).

Position of Second Defendant

69 Since 2005, there had been an unresolved issue between Mr Emerson and the plaintiff as to his level of salary. The plaintiff claimed that he was being overpaid by about $7,000 per annum. Mr Emerson disputed that this amount was an overpayment and said it reflected an agreement reached between himself and a previous manager. Mr Sawyer said it was called a “transition allowance” because the plaintiff intended that Mr Emerson would be “transitioned” to the remuneration structure under the award without the additional remuneration. The plaintiff continued to pay Mr Emerson the additional amount but the issue was unresolved.

70 Mr Emerson had been offered the one position for the day shift in the Process Services Department which would remain after the implementation of Project Key.

71 The covering letter dated 31 January 2008 to Mr Emerson was in different terms from the letters to the other defendants. It read:

“ This letter acts as a reminder about the upcoming date we require your decision about remaining in the day role, Process Services.
Should you choose to pursue Redundancy, 31st May 2008 will be your final day with Tooheys.
You have already received your updated redundancy calculation however I have attached another copy to this letter. This calculation is based on your end date being May 31st 2008.
Please contact Gary Faulkner or Jane Humphreys should you have any queries.
We look forward to you [sic] response before 8 am, Monday February 4th 2008 . Please nominate your preference below and return to Gary Faulkner. Should you not indicate your preference to remain in the day role, we will assume you wish to accept a redundancy package. ”

72 Just before 8.00 am on 4 February 2008, Mr Emerson telephoned Mr Faulkner and told him that before he could make an informed decision he needed to know whether his transition payment was going to be part of his remuneration if he took up the offer of employment in the day shift. A meeting was arranged for later that day with Mr Faulkner and a Mr Fred Sadie. Mr Emerson asked whether the company was going to retain his transition payment. Later that day Mr Faulkner told him the answer was “no”. Mr Emerson said that he disputed that outcome and wanted to seek further advice from the LHMU. He said he could not make a decision as the transition payment made up about $7,000 of his salary. Mr Faulkner told him he needed to make a decision but Mr Emerson said “No I can’t I need to speak with the union.” Mr Faulkner then said that that was fine. By these conversations the parties extended the deadline for response. Properly, it was not submitted for Mr Emerson that he was to be taken to have accepted the redundancy package because he had not nominated his preference before 8.00 am on 4 February 2008.

73 A meeting was arranged the following day at 2.30 pm. The persons present were Mr Sawyer, Mr Faulkner and Ms Jane Humphreys, for the plaintiff and Mr Emerson and Ms Moriarty, for the second defendant. Ms Moriarty is the assistant secretary of the Liquor Hospitality and Miscellaneous Union – NSW Branch. There was some dispute as to what was said at the meeting although I do not consider there to have been a substantial dispute as to essential matters. Mr Emerson deposed that the issue of the transitional payment was discussed as follows:

“ 16. ... Luke opened the conversation on the issue of the transitional payment with words to the effect:
‘We have decided to honour the transitional payment due to the fact we have paid it for about the last eight years.’
I responded with words to the effect:
‘That is great’
He then replied promptly after with words to the effect:
‘But we haven’t considered this payment in your redundancy calculations and its [sic] about $7,000.00 per year and you have been here 20 years, so it equated to around $140,000.00’.
I responded with words to the effect:
‘Really? Is this on top of the latest offer?’
Luke Sawyer said:
‘Yes’.
Tara Moriarty responded to Luke with words to the effect:
‘Can we have that in writing.”
Luke Sawyer responded with words to the effect:
‘It’s in writing.”
He extended his hand to mine and we shook hands on the deal.
17. The meeting ended shortly after. ”

74 Ms Moriarty gave evidence to similar effect. She deposed that Mr Sawyer said words to the effect of:

“ On 5 February 2008 I attended at meeting [sic] in Luke Sawyer’s office at Tooheys to discuss a member, Paul Emerson’s, transitional payment issue. This issue had remained unresolved for a long period of time.
Paul Emerson and I attended the meeting with Jane Humphreys, Gary Faulkner and Luke Sawyer. Initially Paul Emerson’s transitional payment was discussed in the circumstances should he remain employed with Tooheys.
Luke Sawyer stated using [sic] words to the effect of:
‘We have issued the wrong figure. We have realised that we have left out a payment. It’s $7,000 per year for 20 years.’
‘That’s $140,000.00’
‘So that’s on top of the previous document issued.’
...
I then asked Luke Sawyer using words to the effect of:
‘Can we please have that in writing?’
Mr Sawyer responded with words to the effect of:
‘This is in writing’
As Luke Sawyer said these words he stood up and extended his hand across his desk to Paul Emerson and shook hands. Paul Emerson and I then left Luke Sawyer’s office. ”

75 Mr Sawyer substantially agreed with these versions of events. The area of disagreement was that Mr Sawyer did not recall whether Mr Emerson asked the question “Really? Is this on top of the latest offer?” or if he responded as Mr Emerson deposed. He also believed that he shook Mr Emerson’s hand before he stated the figure of $140,000. In his affidavit he said he was not certain of this. In cross-examination he said that he was 99 percent sure. However, I do not accept that evidence. Neither Ms Humphreys nor Mr Faulkner was called. I accept Mr Emerson’s version of what was said at the meeting and as to the time and circumstances in which Mr Sawyer stood up and shook his hand.

76 Nonetheless, I think it is clear from Mr Emerson’s own version of events that in extending his hand, Mr Sawyer was confirming that his offer of an additional $140,000 to Mr Emerson’s redundancy payment was as good as if the offer were in writing. Mr Emerson did not say that he accepted the offer. I do not accept that it can be inferred from the handshake initiated by Mr Sawyer and unaccompanied by words of acceptance from Mr Emerson, that Mr Emerson there and then indicated his acceptance of the offer.

77 I also consider that Mr Emerson appreciated at the time that Mr Sawyer was making a mistake in offering an additional $140,000 as a redundancy payment on the basis of an additional $7,000 annual remuneration on the basis of Mr Emerson’s having worked with the plaintiff for 20 years. Mr Emerson denied knowing that it was a mistake, although he said it was surprising. In any event, I do not think that Mr Emerson intended that Mr Sawyer’s surprising offer of an additional $140,000 was accepted by his accepting Mr Sawyer’s handshake. There were no words of acceptance to snatch such a surprising offer.

78 When Mr Emerson left the meeting, no concluded agreement had been reached whereby Mr Emerson had accepted the offer contained in the letter of 31 January together with the additional $140,000 proposed by Mr Sawyer. The following day the offer was withdrawn before being accepted.

Position of the Seventh Defendant

79 Mr Tynan received the letter of 31 January 2008 on that day. That evening he completed the section for acceptance of the redundancy package and signed it. 31 January was a Thursday. Mr Tynan did not return the signed letter on Friday 1 February or Monday 4 February 2008. On 4 February 2008, he spoke with Ms Humphreys. He said to her words to the effect:

“ I’m accepting the offer. I want to make a time to come in and give you the paper work and to discuss with you the fact that the calculation as to my annual leave and long service leave are still not right. ”

80 Ms Humphreys said that she or other staff who needed to be present (Mr Sawyer and Mr Faulkner) were not available until Thursday 7 February. Mr Tynan made an appointment to see Ms Humphreys on 7 February. Mr Tynan did not hand over the signed letter of 31 January at his meeting with Ms Humphreys.

81 Mr Shoebridge submitted that the letter of 31 January 2008 could be accepted orally. I agree that the signing and returning of the letter of 31 January 2008 was not the only way in which the offer contained in the letter of 31 January 2008 could be accepted. I agree that the offer in the letter could be accepted orally. The letter did not stipulate an exclusive mode of acceptance and an oral acceptance would not disadvantage the offeror (Tinn v Hoffmann & Co (1873) 29 LT 271 per Honyman J at 274 and Brett J at 278; Manchester Diocesan Council for Education v Commercial & General Investments Ltd [1970] 1 WLR 241 at 246; Spectra Pty Ltd v Pindari Pty Ltd [1974] 2 NSWLR 617 at 623-624; White Trucks Pty Ltd v Riley (1948) 66 WN (NSW) 101 at 103). However, I do not accept that by those words Mr Tynan accepted the offer contained in the letter of 31 January 2008. His acceptance was not unqualified. Even though the qualification was as to the calculation of annual leave and long service leave it was not open to him to accept the offer in the letter of 31 January 2008 as to some parts and not as to others.

82 The following day Mr Tynan received a telephone call from Mr Faulkner. Mr Faulkner told him that there had been a mistake and that Tooheys was going to rescind the offer. Mr Tynan said to Mr Faulkner:

“ You must be joking. I have already accepted it and have signed the document. We have an agreement. I thought you were paying me that amount to leave the company. ”

83 Mr Faulkner’s statement that the plaintiff was going to rescind the offer was an effective withdrawal of the offer. Mr Tynan’s statement that he had already accepted the offer was not correct. It would only have been correct if his oral acceptance of the offer the previous day was unqualified.

84 The following day, 6 February 2008, Mr Tynan attended a meeting with Ms Humphreys, Mr Sawyer and Mr Faulkner. Another person was also present. At the commencement of the meeting Mr Sawyer apologised for the errors in the letter of 31 January 2008. He said that the plaintiff was in the process of generating updated estimates which he hoped would be provided shortly. Mr Tynan said he had signed up for the amount set out in the letter and was upset that Mr Sawyer continued to “mess me around”. Mr Sawyer said:

“ The redundancy estimates issued had a massive error in the calculations and that amount will not be what you are receiving if you sign this form. If you are signing up to take a redundancy package, then you are signing up to take the correct amount which, as I said, we are hoping to issue you shortly. ”

85 Mr Tynan said:

“ You guys owe me what is in that estimate because that is what I am signing up for. But there are still problems with my annual leave and long service leave and they should be amended too. ”

He then handed over the letter of 31 January 2008 containing his signed acceptance of the redundancy package outlined in the attached calculation. However, the offer had been withdrawn. Mr Tynan did not accept the offer before its withdrawal.

Eighth Defendant

86 The eighth defendant never contended that the plaintiff was contractually obliged to pay to him the amounts set out in the letter of 31 January 2008. The letter to him was not sent. The costs in relation to the eighth defendant were reserved. If any additional costs were incurred in respect of the eighth defendant they should be paid by the plaintiff.

Conclusion and Orders

87 For these reasons, the plaintiff is entitled to the relief sought in the first paragraph of the summons in respect of the second and seventh defendants. However, there should be a declaration that the letters dated 31 January 2008 addressed to the first, third, fourth, fifth, sixth and ninth defendants constitute binding obligations between the plaintiff and those defendants.

88 The plaintiff did not seek costs against any of the defendants. The successful defendants and the eighth defendant are entitled to costs.

89 For these reasons, I make the following orders:

1. Declare that the letters dated 31 January 2008 from the plaintiff to the second and seventh defendants do not constitute binding contractual agreements between the plaintiff and those defendants.

2. Declare that the letters dated 31 January 2008 addressed to the first, third, fourth, fifth, sixth and ninth defendants constitute binding contractual agreements between the plaintiff and those defendants.

3. Order that the plaintiff pay the costs of the first, third, fourth, fifth, sixth, eighth and ninth defendants.

4. Order that there be no order as to costs as between the plaintiff and the second and seventh defendants.

5. Order that the summons be otherwise dismissed.

6. Exhibits may be returned after 28 days.

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