Watson v Swatch Group Aust Pty Ltd
[2010] VCC 1067
•20 August 2010
vnj
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
EXPEDITED CASES DIVISION
Case No. CI-09-00481
| KEITH MARK WATSON | Plaintiff |
| v | |
| SWATCH GROUP (AUSTRALIA) PTY LTD | Defendant |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 23 November 2009, 19-23 & 26-30 July & 4,5 August 2010 |
| DATE OF JUDGMENT: | 20 August 2010 |
| CASE MAY BE CITED AS: | Watson v Swatch Group Aust Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 1067 |
REASONS FOR JUDGMENT
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Catchwords: Contract of employment - whether defendant engaged in conduct that is liable to mislead contrary to s53B Trade Practices Act (Cth) (1974) in relation to employment that is to be, or may be offered; whether plaintiff sustained damages for distress as a result of being directed to engage in “price fixing” against the law and contrary to the implied terms of his contract of employment; whether bonus is payable pursuant to the contract of employment or, alternatively, as represented; whether correct amount of payment in lieu of notice paid
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S J Wood with | Thexton Lawyers (until 23/7) |
| Mr M J Follett | Blue Rock Law (from 23/7) | |
| For the Defendant | Mr M P McDonald SC with | Baker & McKenzie |
| Mr T Jacobs | ||
| HER HONOUR: |
1 Mr Watson was employed by Swatch Group Australia Pty Ltd (SGA) from August 2003 as a Country Manager and Brand Manager for the Omega brand. Mr Watson claims that, during the course of his employment, he was given directions to engage in resale price maintenance, or “price fixing” contrary to s48 of the Trade Practices Act 1974 (Cth) (TPA).
2 Mr Watson makes a number of claims against SGA following his termination from employment in December 2008[1]:
(a) damages for SGA’s misleading conduct contrary to s53B of the TPA, in representing to the Plaintiff that he would not be required to break the law if he became employed by the Defendant;
(b) damages for distress, vexation, disappointment and inconvenience, as a consequence of being directed and required by his superiors over a long period of time, to break the law;
(c) the payment of a bonus, consistent with the terms of his contract of
employment, or in the alternative, as represented to him; and
(d) damages for a failure to pay the requisite amount of 3 months
notice upon termination.[1] Plaintiff’s outline of written submissions dated 3 August (POS) para 1
3 An earlier claim for premature termination damages was abandoned in closing submissions. This had been based on Mr Watson’s central thesis that the operative reason as to why he was dismissed was because of his refusal to comply with directions to engage in unlawful conduct.
4 The issue is whether Mr Watson is entitled to damages pursuant to any of his remaining claims, as set out in paragraph 2, above.
BACKGROUND
General
5 In 1990 Mr Watson commenced employment in the watch industry for Tag Heuer UK Limited. He was subsequently promoted to various positions and, in July 2000, was appointed as Brand Manager of Tag Heuer Australia Ltd. In September 2001 he was appointed General Manager, Australia for Tag Heuer which was known as LVMH Watch & Jewellery Australia Pty Ltd. From March 2003, he was relocated and engaged as Regional Sales Director with LVMH for the north-east of the United States and Canada.
6 On 12 August 2003 he executed a settlement agreement with LVMH following a dispute with LVMH which will be referred to below.
7 He then flew to Switzerland to be interviewed by Swatch and executed a contract of employment with SGA dated 15 August, 2003.
8 Subsequently, on 27 August 2003, Mr Watson executed a slightly amended version of the contract of employment with a new commencement date tied to the date that his visa was approved.
9 This contract provided for a salary of $180,000 per annum paid on the 15th of each month and contained the following clauses:
• Clause 2 was entitled “Salary” and clause 2(d) dealt specifically with bonus: “You will be eligible for an annual bonus potential of A$55,000 (pro rated for the number of months worked for the calendar year for the first year of your employment) based on agreed company and individual objectives set and achieved with your managers. This bonus is based on a calendar year and paid in April of the following year.”
• Clause 8 was entitled “Termination of employment” and provided: “Except in cases of instant dismissal, your employment with The SWATCH Group Australia Ltd. may at any time be terminated by either party giving to the other three-month’s written notice.
At any time, the company may, by giving notice in writing, summarily terminate
an employee, if the employee:
a) engages in any act or omission constituting misconduct in respect of the
duties to be performed
b) is convicted of any indictable offence which in the opinion of the company would adversely affect the ability of the employee to perform their duties under this agreement
c) wilfully causes damage to company property or is responsible for damages
being caused to company property.”
• Clause 17 was entitled “Representation of the Swatch Group Australia Ltd” and provided: “While The SWATCH Group Australia Ltd does not want to interfere in the personal lives of its employees, you should remember that the public and, in particular, customers or potential customers always think of you as a representative of The SWATCH Group Australia Ltd.
Your conduct should always be a positive reflection of the high standards of honesty, integrity, and ethical behaviour that compromise The SWATCH Group Australia Ltd reputation.
You will be required to complete an initial six (6) months probation period. The Swatch Group Australia Ltd hopes that the employment relationship will be pleasant and rewarding however, either you or the Swatch Group Australia Ltd may terminate this relationship at any time, by 3 months notice in writing to the other. The Swatch Group Australia may elect to pay you 3 months salary in lieu of notice.”
10 On commencement of employment Mr Watson was also handed a position description which described his responsibilities as including the responsibility for the costs control of the country and to recommend/execute cost reductions especially in the service division as well as to execute costs reduction programs in the service division and allocating the expenses to the brand divisions.
11 Mr Watson received salary increases such that his “”base salary” had increased to $202,623 and his “bonus potential” to $70,000 at the time of his dismissal.
12 On 27 November 2008 Mr Watson was stood down from his employment with SGA.
13 Then on 16 December 2008 Mr Watson’s employment was formally terminated, and he was paid an amount of $52,606 in lieu of notice. The letter of termination read:
“Dear Mark,
As you are aware, I have expressed our concerns with you relating to your management of the Australian business. We remain of the view that you have not managed the Australian business in a responsible fashion. You also appear to have shown poor leadership.
You have been provided with an opportunity to negotiate a settlement. Unfortunately we have not been able to agree upon your terms of exit from the business. Accordingly, we must now make a decision with respect to your ongoing employment.
Under these circumstances, we have elected to terminate the employment in accordance with your contract by making a payment in lieu of notice. Your last day of employment will be today’s date. I will arrange for a payment of 3 month’s base pay in lieu of notice. In view of your poor performance and the poor financial results of Swatch Group Australia, a decision has been made not to approve any bonus for the 2008 calendar year.
You are to return all company property immediately. We will offset from the
payments in lieu of notice any amounts owed to the Company.
You will be paid your accrued but untaken annual leave. We will advise you of the arrangements for your removal as a director of The Swatch Group (Australia) Pty Ltd.”
14 Subsequent to the termination of Mr Watson, SGA discovered that, prior to 16 December 2008, he had created and stored on the computer located in his office at SGA’s premises which he used when working for the defendant, an electronic file entitled “Fun.”[2] This material included an Attachment A which contained sexually explicit material showing multiple photographs of naked women apparently in a solarium. It appears from the nature of the material that such photographs were taken without the womens’ consent. This material had been on Mr Watson’s computer for “some time.”[3]
[2] These matters are taken to be admitted by virtue of the plaintiff’s failure to serve a notice of dispute in response to the defendant’s Notice to Admit dated 26 October 2010
[3] Amended Reply dated 20 November 2009 para 8(d)
15 SGA says that had it been aware of these matters, which constitute serious misconduct, it would have summarily dismissed Mr Watson without pay.[4] As will be seen below, I have dealt with this issue as a preliminary matter given it potentially provided a defence to the claims in paragraph 2 (c) and (d) above.
[4] Amended Defence dated 12 November 2009 para 37A.
16 SGA had also alleged that, by reason of s5(3) and (4) of the TPA, Mr Watson was unable to make claims under ss82 or 87(1) or(1A) of the TPA that extended to conduct outside Australia without the consent of the relevant Minister.[5] However, a consent under s5(3) executed by the Minister for Competition Policy and Consumer Affairs of 27 April 2010 was obtained, with the result that the defendant no longer pursues this defence.
[5] Ibid para 8B
Witnesses
Plaintiff’s witnesses
17 Mr Watson gave detailed evidence and was cross examined. He also called:
• Mr Van Gastel (Sydney boutique manager of Omega), Mr Richards (brand manager of Tissot) and Ms Walton (brand manager of Rado) to corroborate alleged “unlawful” directions given to Mr Watson; • Mr Giordano (National Customer Services Manager, SGA) to explain the adverse impact of a computer system known as “SAP” and also on the bonus question; and • Mr Barrie and Mr Catalano, contacts of Mr Watson, who suggested that Mr Watson had asked them to desist from sending inappropriate emails. 18 The evidence of these witnesses will be referred to below insofar as they are relevant. However, the most significant witness was Mr Watson himself.
19 Mr Watson was in the witness box for more than five days. Having had the opportunity to assess his demeanour and listen to his evidence, I am unable to consider him a reliable witness. I cannot be confident that his account of events and issues is complete and substantially accurate. He appeared to be actuated, and his evidence influenced by, a considerable hostility towards SGA.
20 For example, although he (understandably) could not recollect the precise details of many alleged conversations, he instead gave non-responsive answers and attempted to give conclusory evidence to the effect that “the overall objective was to stop or reduce consumer discount...” and/or that “he wanted to reduce consumer discounts.” This central thesis was constantly reiterated against various representatives of SGA (including a Mr Rollenhagen, notwithstanding that no claim was ultimately pursued against him).
21 There were also examples of exaggeration so as to suit Mr Watson’s own purposes. Thus, for example, in an email of 24 July 2003 to Ms Free, the Human Resources Manager of SGA, Mr Watson claimed to have “a number ...of other [job] opportunities” that had “surfaced in Australia within the last week…” in order to put pressure on SGA to offer him employment. However, under cross examination he conceded that they were “very light opportunities”; an initial discussion with two companies and “nowhere near” a job offer. He also agreed that a statement in an email of 8 August to the effect that as from the next week he would no longer be working for LVMH and would be travelling back to Australia to be with his family was not true.
22 At times his evidence was simply not credible. As indicated already, he admitted that he had created and stored on his work computer an electronic file entitled “FUN.” He further admitted that this file contained various sexually explicit material including that I have described already as Attachment A. In oral evidence he also accepted that in order to save these images in the fun file, he would have right-clicked on the attachment and saved it to the fun file. However, he also initially claimed that he “never seen the images before” although he later said that when he looked at the discovered documents he recalled “vaguely a couple of them, yes” and said in particular that he “vaguely remember[ed] receiving attachment E.” I did not find this evidence credible. It beggars belief that Mr Watson would go to the trouble of saving a document in a file which he had not looked at rather than simply deleting it. Moreover his “vague recollection” suggests he did look at the images despite his protestations that he was “horrified after I saw these discovered documents.”
23 These difficulties do not mean that Mr Watson is to be disbelieved in every respect. However, they do suggest that care should be taken in accepting his evidence in the absence of objective material to support his very serious allegations.
Defendant’s witnesses
24 The defendant called three witnesses:
• Mr Rollenhagen, Mr Watson’s direct superior on the Extended Management Group or “EKL” board of the parent company, Swatch Group Ltd, from May 2008 to December 2008 and the person who made the decision to dismiss Mr Watson; • Mr Gamard, Mr Watson’s direct superior, and a member of the EKL board from 2006 to May 2008; and • Mr Szabo,the Service Centre Manager of the Swatch group in Hong Kong, who travelled to Australia in late October 2008 to engage in an operations review of Australia.
25 Mr Rollenhagen, in particular, was an impressive and straightforward witness. He gave careful and responsive answers and was prepared to make concessions, where, for example, he was unable to recall events.
26 Mr Gamard was generally straightforward although there were times when his evidence appeared hurried. I will refer further to his evidence, below.
27 Mr Szabo was a straightforward witness whose evidence I have generally accepted.
Preliminary issue- Summary dismissal
28 Clause 8(a) of the contract provided that Mr Watson could be summarily dismissed for “misconduct in respect of the duties to be performed.”
29 I accept, consistent with the position of both parties,that an employer may rely on after acquired knowledge to justify summary termination of employment.[6]
[6]
30 Mr Watson relied on North v Television Corporation Ltd[7] and submitted that the clause should be interpreted consistently with common law notions of serious misconduct.
[7] Concut v Worrell (2000) 176 ALR 693 at [27]-[29] per Gleeson CJ, Gaudron and Gummow JJ.
31 SGA submitted that:
(a) the clause herein was distinguishable from the clause considered in North;
(b) both clause 17 of the contract and the position description supported a
right to dismiss in these circumstances;(c) Mr Rollenhagen’s evidence was significant to the effect that if he was aware of the inappropriate images he would have immediately terminated Mr Watson’s employment; and
(d) given Mr Watson was in a leadership/management role, he owed a fiduciary duty to SGA as described by Dixon and Mc Tiernan JJ in Blyth Chemicals Ltd v Bushnell[8].
[8] (1933) 49 CLR 66 at 81 as cited in Concut Pty Ltd v Worrell (2000) 176 ALR 693 at [25]
32 In the case of North, the relevant clause contained the word “misconduct” as well as other more apparently serious phrases such as “wilful and serious neglect of duty.”
33 However, in this case, “misconduct” is to be considered in a context where summary dismissal is also justified: namely in circumstances where an employee is convicted of an indictable offence (clause 8(b)) or wilfully causes damage to company property (clause 8(c)). I also accept that, like North, the subject matter herein is the termination by one party against the will of another of a continuing contract of employment.
34 Therefore, even if “misconduct” should not necessarily be construed as requiring the kinds of conduct which would justify dismissal at common law, the context and subject matter suggest there is a heavy burden on the employer to justify dismissal without notice.
35 Further, although I have generally accepted Mr Rollenhagen’s evidence, his evidence cannot be the determining factor in whether a summary dismissal was actually justified.
36 In terms of fiduciary duty, I accept that, as a manager, Mr Watson was in a fiduciary duty with his employer and further that the passage in Blyth suggests that conduct which is “incompatible with the fulfilment of an employee’s duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal.”[9]
[9] (1933) 49 CLR 66 at 81
37 However, where contractual and fiduciary duties co-exist, such as in a contract of employment, the fiduciary duty “must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have
38 In considering, then, the “true construction” of this contract, although clause 17 provides for “honesty, integrity and ethical behaviour” it is far from clear that the single act of storing material, even as offensive as that stored in this case, is clearly in breach. This is made particularly so given clause 17 appears concerned with the “representation” of SGA. There is no evidence in this case that Mr Watson disseminated the material so it can be said that the reputation of Swatch was adversely affected.
39 The defendant further sought to rely on a section in the position description which provided that Mr Watson was responsible for “establishing a Swatch Group spirit within the Swatch Group country organisation (efficiency, unity, cooperation) etc.” However, although I am satisfied that, contrary to Mr Watson’s claims, he had seen the offensive material, I am unable to be satisfied that he otherwise perused it such as to interfere with “efficiency, unity or cooperation.” There was evidence that he had asked people not to send inappropriate emails (from a Mr Barrie and Mr Catalano). More significantly, there is no evidence that Mr Watson generally disseminated the material or that it was accessible to other employees.
40 When the contractual relationship is considered, then, I am not satisfied that the conduct is “incompatible with”, or involves an “opposition or conflict with” or impedes “the faithful performance” of Mr Watson’s duties such as to warrant summary dismissal in this case. Further, I am not satisfied that the single act of storing the material, without more, is destructive of the necessary confidence between employer and employee.
41 This is not meant to countenance such behaviour which modern standards would condemn. Mr Watson’s incredible claim that he did not read the attachment also reflects badly on his credit. However, after considering the evidence before me, I am not satisfied that Mr Watson has engaged in “misconduct” within the meaning of clause 8(a).
42 It follows that SGA was not entitled to summarily dismiss Mr Watson.
SECTION A- TPA CLAIM
43 Section 53B of the TPA provides as follows:
“A corporation shall not, in relation to employment that is to be, or may be, offered by the corporation or by another person, engage in conduct that is liable to mislead persons seeking the employment as to the availability, nature, terms or conditions of, or any other matter relating to, the employment.”
44 The defendant says that, in particular, Mr Watson has not established–
(a) any conduct which was liable to mislead; (b) that there was reliance; and (c) loss/damage. 45 In order to assess the TPA claim it is necessary to recite further background in this matter.
Background
Prior to March 2003
46 The evidence of Mr Watson was that while he was with LVMH in Australia he had general discussions with a Mr Goldman between September 2001 and March 2003. Mr Goldman was the CEO of SGA at that time.
47 In these discussions the men spoke about what Swiss watch companies were going to do with retail prices given the Australian dollar was weak. They discussed the fact that in LVMH it was “easy” to get “these kinds of issues across the line” whereas in Swatch Mr Goldman said he had to have several meetings and “several hundred forms.” Mr Goldman told Mr Watson how “rule bound and sort of fiscally oriented” his company was and how long it took him to get “the same kind of thing across the line.”
48 At one point Mr Goldman said he was thinking of resigning and he said that he thought Mr Watson might struggle with the Swatch Group because they were so “rule bound and so straight and so fiscally oriented.” In particular Mr Goldman stated that his boss was a very “straitlaced Sri Lankan gentleman who was extremely fiscal in his approach and process driven.”
March 2003 to 10 July 2003
49 It will be recalled that in March 2003 Mr Watson was transferred to become Regional Sales Manager for the north-east of the United States and Canada. Mr Watson described the reason for this as being because he was “too much for that [LVMH] subsidiary to be able to afford” so that he was transferred to the USA which involved a demotion in terms of title; a move from Australia; and a significant salary cut of US $100,000.
50 Subsequently it appears that Mr Watson was involved in a dispute with his employer, LVMH, regarding representations he alleged were made by LVMH, including by a Mr Thakran, as to promotional prospects which would be available in the USA.
51 Thus, by correspondence of 12 June 2003 and 1 July, 2003 Deacons, then solicitors for Mr Watson, alleged that LVMH had engaged in misleading and deceptive conduct in terms of representing that there would be certain promotional opportunities if Mr Watson was to accept a role in New Jersey. The correspondence of 12 June referred to “intractable” difficulties between Mr Watson and LVMH.
52 In this context, Mr Watson forwarded an email to Mr Goldman of 8 July, some two weeks after Mr Goldman had apparently told him he had resigned, evidencing interest in Mr Goldman’s job. The email asked him for Sunil’s number (Mr Sunil Amarasuriya) “so I can call him...”
53 Mr Watson then forward his resume to Ms Andrea Free, the human resources manager for SGA, on 9 July, emphasizing his preference for Australia given his family:
“Moving to the USA has proved very difficult for my family (schools and housing) and as such they are still in Australia. For this reason, I am looking to return to Australia and would relish the opportunity of learning more about/applying for the position of Managing Director - SG-AUS/NZ. In addition to my family situation, the possibility of working within the Swatch group is extremely motivating.”
54 Ms Free responded that she had forwarded the email to Mr Hofer who was the regional HR executive who looked after Australia.
55 By correspondence of 10 July, the dispute with LVMH intensified with Deacons writing that it would be necessary for their client “to take all necessary action to preserve his entitlements.”
Meeting on 10 July with Mr Hofer
56 Mr Watson then met with Mr Hofer on 10 July, in New York. In that interview he was introduced to Mr Rentch. Mr Watson’s evidence was highly descriptive and somewhat vague as to what Mr Hofer actually said in this interview. He claims that Mr Hofer described Swatch as a “very rule-bound company” compared with LVMH and “fiscally-oriented, monthly report oriented” which was “well known in the trade.” He also claimed that he was told that Mr Rentch was in charge of a full team of in-house lawyers and that Swatch had internal lawyers for different issues that cropped up.
57 Ultimately, Mr Hofer indicated that there was at that time an internal candidate for the SGA position and Mr Watson claims he was left with a “feeling” that they favoured this candidate.
Events leading up to Contract
58 Mr Watson followed up the meeting with Mr Hofer with an email of 14 July expressing his “strong interest” and stating that Australia would be his preferred location “due to family constraints.”
59 Mr Hofer replied with reference to an “ongoing internal discussion” in relation to the SGA job although this was “not set in stone yet” but noted that if there was a move in this direction it would start a rotation chain and he saw a “very good option for other further discussions.”
60 However, Mr Watson continued attempting to “sell himself” for the Australian role by email of 19 July.
61 Meanwhile, on 22 July Deacons stated that their client was “left with no option but to take all necessary action to recover his entitlements” although this would be held in abeyance pending a response to a proposal.
62 Mr Watson thereafter continued to “push” for the SGA job in emails of 24 July and 25 July and said that by that stage his family were already in Australia.
63 Despite his dispute with LVMH Mr Watson claims that Mr Thakran, of LVMH, had raised an “opportunity” in Asia although there is no objective evidence of any such opportunity and Mr Thakran was ultimately not called as a witness. In such circumstances I accept the submission of SGA that any statements allegedly made by Mr Thakran were hearsay. Moreover, Mr Thakran was one of the persons who had spoken to Mr Watson regarding his opportunities prior to going to the US and accordingly appeared to be the subject of Mr Watson’s “misleading and deceptive” claims.
64 Then on 8 August, 2003 Mr Watson wrote to Mr Hayek junior, CEO of the parent Swatch Group Ltd, stating that he was generally interested in opportunities within Swatch “but it is the Australian position that I would ask that you consider me for.” Also “from early of the next week” he stated that he “will no longer be working for LVMH watch and jewellery and will be travelling back to Australia to be with my family. My reason for leaving the company is family related.”
65 However, in oral evidence Mr Watson claimed this was an untrue statement which he made because he believed the fact that he was working for LVMH would stand against him.
66 At some stage prior to 12 August, he was then invited to be interviewed in Switzerland.
67 Then on 12 August he signed terms of settlement with LVMH and ended that employment. These terms were not in evidence although Mr Watson acknowledged that they may have contained a restriction upon him being employed elsewhere within the LVMH group.
68 In his oral evidence Mr Watson claims that he executed the terms even prior to being interviewed by Swatch in Switzerland because he was “hedging my bets a little bit. I wasn’t sure that I was going to get the job with Swatch Group, but I’d been told by Mr Hofer quite directly that if I got in front of Mr Hayek, then I was home in a way, that I would get the job, so I was reasonably confident that I would get the position with Swatch Group and the opportunity to take a settlement with LVMH was quite a reasonable one as well.”
69 It was therefore apparent that, prior to execution of his employment contract with SGA, Mr Watson was no longer employed by LVMH.
70 On about 15 August, he was then interviewed in Switzerland and executed the first contract of employment.
Conduct/ Representation
71 Mr Watson relies on an implied representation that SGA represented to him that if he became employed by and worked for the Swatch Group in Australia “he would not be required or directed to undertake tasks that were contrary to law, or that might otherwise expose him to civil penalty.” He says this representation should be implied from the following:[11]
[11] Third Further Amended Statement of Claim dated 8 February 2010 (TFASOC) at para 7
(a) the plaintiff’s knowledge about the defendant and the Swatch Group of Companies including that it was the largest maker and seller of watches in the world and the biggest and most significant competitor to Tag Heuer;
(b) discussions with Mr Goldman from 2001 to mid 2003;
(c) discussions and emails with Mr Hofer and Ms Free in April 2003 and the
conduct of the first interview with Mr Hofer; and(d) that at no time was the plaintiff warned that he might be “directed/ required
to undertake tasks that were contrary to law.”In relation to employment
72 A preliminary issue raised by SGA was whether anything prior to 15 August 2003 could be conduct “in relation to employment” since no representations were made to Mr Watson regarding the terms and conditions applicable to the particular position of managing director/ country manager until he met with Swatch Group executives on 15 August.
73 In my view, no conduct prior to the mid July meeting with Mr Hofer can be considered to be conduct “in relation to employment that is to be or may be offered” as it largely consisted of inquiries made with Mr Goldman driven unilaterally by Mr Watson. There was nothing to suggest that anyone from SGA was engaging in any conduct in relation to employment that “may be offered” at this time.
74 However, by the time of the interview with Mr Hofer on 10 July, there appeared to be a possibility that Mr Watson might be appointed to the country manager position. Although there was an internal candidate for the position at this time, this was not said to be “set in stone.”
75 In my view then, the employment of Mr Watson in the ultimate position was certainly a possibility by 10 July such that it “may be offered” pursuant to s53B.
76 It follows that any conduct prior to mid July is incapable of constituting conduct “in relation to employment that is to be, or may be, offered” pursuant to s53B although I will endeavour to consider all the matters raised by Mr Watson in any event.
Whether representation
77 In my view there is no conduct from which the representation alleged may be implied.
78 The corporate structure and size conveys nothing about what tasks Mr Watson might be directed to undertake.
79 The discussions with Mr Goldman, even if in relation to employment pursuant to s53B, were vague and generalised in the extreme and take the matter no further. Any communication to the effect that Swatch was “rule bound” and ‘fiscal” says nothing about whether Mr Watson might be required to engage in tasks that were contrary to law. Moreover, the “rule-bound” statement appears to have been made in the context of the internal policies that might bind a Swatch employee rather than relating to any external laws.
80 Similarly the statements made by Mr Hofer are also of no consequence and, again, appear more directed to the internal workings of the company. The suggestion of being “fiscally-oriented” again says nothing about whether an employee would be directed to breach the law but rather says more about
81 Even if I were then to consider the matters alleged cumulatively (including the alleged “lack of a warning”), no representation to the effect alleged can be implied and it is artificial to do so. Although it may well be hoped that employees would not be directed to engage in tasks that were contrary to law, no representation, implied or otherwise, can be spelt out of the generalised statements made (or not made) to Mr Watson.
82 The case is also distinguishable from the case of McGrath and Another v Australian Naturalcare Products Pty Ltd [12] relied upon by Mr Watson. In that case, there had been clear and unequivocal assurances given. This is not the case on the present facts.
[12] (2008) 165 FCR 230 especially at [134]
83 Accordingly, the TPA action claim fails because the alleged representation is not established.
Whether reliance
84 Mr Watson’s oral evidence (initially) was that he wanted to go to Swatch primarily because of the size of the company and the size of the responsibility Even when prompted about whether anything in the “culture” attracted him he emphasized size and stability. In his own words:
“it was the world’s largest watch company, they were very stable and very
secure, and my family at that point could remain in Australia as well.”
85 However, Counsel sought to rely on some evidence of Mr Watson, given only after a number of days in examination, where he sought to say that if he knew then what he now knows about the fact that he was required to repeatedly “engage in unlawful conduct” then he would have stayed with LVMH.
86 However, I give this evidence no weight. The evidence was self-serving and lacked probative force, particularly given the circumstances in which it was given (namely, days into an examination-in-chief[13]). Moreover, as will be seen below, I am not satisfied that Mr Watson was directed to engage in
[13] And see Allstate Life Insurance Co v ANZ (1996) 64 FCR 73 at 76
unlawful conduct in an y event. 87 Counsel for Mr Watson also submitted that I should find that one of the reasons he signed the terms of settlement and left his employment with LVMH was because of what he thought his role at Swatch would be.
88 Firstly, on the chronology above, Mr Watson executed the terms of settlement regardless of whether he even had any job at Swatch at all.
89 Secondly, he had effectively surrendered the option of any ongoing employment with LVMH given the seriousness of the allegations he had made against that entity and the “intractable” nature of their differences. I also do not accept Mr Watson’s protestations that LVMH did “not want him to leave.”
90 Third, even if he was influenced by what he thought his role at Swatch would be, the contemporaneous evidence suggests Mr Watson was primarily influenced by the fact that the job was in Australia which suited his family. To the extent other factors played a part, Mr Watson’s own evidence was that size and stability played some part. He made no reference to the “law- abiding” nature of SGA notwithstanding being given ample chance to say so.
91 Further, I do not accept the suggestion that I should draw such an inference because the plaintiff had “alarm bells ringing in his head” in the first week of his employment.[14] For reasons set out below, I am not satisfied that any unlawful direction was given at this time (or at any other time). Moreover, I am not satisfied that I can rely on Mr Watson’s suggestions that he was “flabbergasted” by any action of the defendant at this time which suggestions are not supported by any objective evidence.
[14] POS para 132
92 Mr Watson relied on Hanave Pty Ltd v LFOT Pty Ltd[15], and suggested that the representation was objectively likely to induce reliance. However, both the objective evidence as well as the initial oral evidence suggest that the “law- abiding” nature of SGA played no part in Mr Watson’s decision-making process at all. In such circumstances, I am not prepared to infer that the representation, if made, acted as an inducement.
[15] (1999) 43 IPR 545
93 In these circumstances I am not satisfied that Mr Watson relied on the alleged representation even if it was made.
94 It follows that, even if there was conduct in breach of the TPA, I am not satisfied that Mr Watson suffered any loss or damage “by” that conduct pursuant to s82.
Damage
95 It is unnecessary for me to consider the question of damage at length given my findings above. However, I will shortly summarise my views.
96 Even if the alleged representation was made and there were no reasonable grounds for making it at the time[16], Mr Watson has not demonstrated that he has suffered any loss at all. This is because, in the light of my findings below, he was never actually directed to engage in any unlawful conduct. The alleged representation was not, in the result, untrue.
[16] Pursuant to s51A as relied upon by Mr Watson
97 Further, given that the predominant part of the damages claim was based on the premise that Mr Watson would have remained with LVMH, it would fail at the outset given my finding that he did not have the option of further employment with LVMH.
98 Insofar as the claim is based on a “distress” element, it would also fail given the lack of any evidentiary basis for such a claim, as referred to below.
99 In these circumstances, I am not satisfied that any loss was suffered by reason of any alleged misleading conduct.
Summary
100 The claim based on s53B is not sustained as there was no representation made as alleged.
101 In the alternative, Mr Watson did not rely on any such representation.
102 Finally, Mr Watson has not substantiated any loss in any event.
103 The claim based on s53B is thereby rejected.
SECTION (B) - DISTRESS CLAIM
Preliminary
104 Mr Watson claimed that there were various directions given to him to engage in unlawful conduct which were contrary to two terms he said were to be implied into the contract[17] as follows:
(a) that SGA would not require or direct Mr Watson to undertake tasks during his employment that were contrary to law or that would otherwise expose him to civil penalty (the “unlawful act term”);
(b) the defendant would not, without reasonable and proper cause, act in a manner likely to destroy or seriously damage the relationship of trust and confidence between the plaintiff and the defendant (the “trust and confidence term”).
[17] SFASOC para 3(c) and (d) and 26
105 The plaintiff then said that such a breach would give rise to a stand alone claim for damages for distress suffered as a consequence of these breaches during the currency of the employment.[18]
[18] POS para 26
106 The defendant formally denied the existence of the two terms and also denied that any such “unlawful” directions had been given.
107 Further, the defendant also submitted that:
(a) damages for distress, disappointment and vexation are not available on
the basis of Baltic Shipping Company v Dillon[19];(b) there was no evidentiary basis for the claim.
[19] (1993) 176 CLR 344
108 There would appear to be good grounds for suggesting that the “unlawful act term” should be implied into a contract of employment on the basis of the principles in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council.[20] However, there is conflicting authority in Australia as to whether there should be an implied term of trust and confidence.[21]
[20] (1977) 180 CLR 266
[21] And see discussion and cases summarised in recent decision of Guthrie v News Limited [2010] VSC 196 at [215] Per Kaye J
109 Nevertheless, for the purposes of resolving Mr Watson’s claims, I have presumed, without formally deciding, that the two alleged terms exist, and, further, that a direction by a superior to undertake tasks contrary to law or that might otherwise expose him to civil penalty would be in breach of those terms.
110 The issues then become:
(a) whether any “unlawful direction” was given;
(b) whether damages for distress would be legally available; and
(c) whether there is an evidentiary basis for the claim.
Whether unlawful directions given
111 Mr Watson produced a table of alleged directions/complaints[22] and invited the court to find that the relevant directions had been given.
[22] “Directions And/Or Complaints And/Or Discussions Regarding Retail Price Maintenance Activities”
112 In particular Mr Watson alleged that the directions, if carried out, would have involved him breaching s96(3) and more particularly relied upon s96(3) (a), (b) and (d) of the TPA.
113 Pursuant to s96(1) a corporation engages in the practice of resale price maintenance if that corporation does an act referred to in any of the paragraphs of subsection(3).
114 Mr Watson alleged that SGA was a supplier of goods to retailers and specified in relation to every watch a recommended retail price. The directions, if carried out, would have allegedly involved SGA engaging in acts of resale price maintenance pursuant to s96 (3)(a), (b) and (d) which read as follows:
“(3) [Act of resale price maintenance] The acts referred to in subsections (1)
and (2) are the following:(a) the supplier making it known to a second person that the supplier will not supply goods to the second person unless the second person agrees not to sell those goods at a price less than a price specified by the supplier;
(b) the supplier inducing, or attempting to induce, a second person not to sell, at a price less than a price specified by the supplier, goods supplied to the second person by the supplier or by a third person who, directly or indirectly, has obtained the goods from the supplier…
(d) the supplier withholding the supply of goods to a second person for the
reason that the second person:
(i) has not agreed as mentioned in paragraph (a); or
(ii) has sold, or is likely to sell, goods supplied to him or her by the supplier, or goods supplied to him or her by a third person who, directly or indirectly, has obtained the goods from the supplier, at a price less than a price specified by the supplier as the price below which the goods are not to be sold…”
115 Pursuant to s96(7) a reference to the selling of goods at a price less than a price specified by the supplier shall be construed as including references to the advertising, displaying and offering of goods for sale at a price less than that specified.
116 Mr Watson’s case was that he would be an accessory to any contravention by SGA and would be liable under the TPA for those contraventions with a maximum penalty being a $500,000 fine.[23]
[23] See ss75B and 76 TPA
117 In considering whether directions were given it is necessary, then, to characterise which persons were “superiors” to Mr Watson.
Relevant superiors
118 Although Mr Watson gave evidence of a huge range of alleged conversations with various Swatch employees, Counsel accepted that the only persons ultimately pursued as “superiors” were Mr Gamard, Mr Urquhart, Mr Amarasuriya, Mr Hayek Junior and Mr Savioz. A former claim against Mr Rollenhagen was not pursued. SGA accepted that these men were superiors with the exception of Mr Savioz.
119 In alleging that Mr Savioz should be included, Counsel for Mr Watson relied upon the terms of the original contract which provided for “dual reporting” for Mr Watson to the regional responsible of the Group Management Board and to “the Omega Headquarters in Biel.” Given Mr Savioz was based in Switzerland, it allegedly followed that Mr Watson was to report to him.
120 However, the contract did not clarify which persons at Omega Headquarters were included and I do not accept in this context that anyone based at Omega headquarters in Biel was a superior to Mr Watson. Such a construction could mean that a relatively junior member of staff would be a superior provided she/he was based at Omega Headquarters.
121 In terms of the evidence before the court, Mr Watson claimed that he was answerable to Mr Savioz. However, the evidence of Mr Rollenhagen was that, in his capacity as brand manager of Omega, both Mr Watson and Mr Savioz reported to the Vice President of Sales so that both were “colleagues” with different areas of responsibility: Mr Watson with a geographic responsibility for Australia and Mr Savioz responsible for the travel retail business with international customers. Moreover, in his capacity as country manager, Mr Watson directly reported to a member of the group management board so this position was “far superior” to that of Mr Savioz as head of Omega Travel retail.
122 Counsel for Mr Watson suggested that I should discount the evidence of Mr Rollenhagen which was only “opinion” evidence. However, if this were so, Mr Watson’s evidence would also suffer from the same defect, which would not assist the plaintiff. In any event, I do not regard Mr Rollenhagen’s evidence as “opinion” evidence. Rather it was evidence of what a member of the Swiss parent’s board had observed about the chain of command. Moreover, even if it was “opinion” it was received without objection and given by a person who would be expected to have the requisite knowledge. Given my difficulties with Mr Watson’s evidence generally as compared with Mr Rollenhagen, I also accept and prefer it.
123 It follows that I am unable to be satisfied that any alleged “directions” of Mr Savioz were given by a “superior.”
Relevant evidence before the court
124 Much of the oral evidence was not supported by any documentary evidence save for some handwritten notes which will be referred to below. However, Mr Watson was inviting the court to make serious findings that SGA had directed him to engage in conduct that would expose him to a civil penalty in a particular way, namely by means of engaging in the acts referred to in s96(3) on behalf of SGA.
125 Some general observations may also be made.
126 Firstly, it is true that not every person alleged to have given directions was called by the defendant. Although it may be proper in some circumstances to thereby infer that evidence of such persons would not assist the defendant, Jones v Dunkel[24] does not enable the plaintiff to fill gaps in the evidence. Pursuant to Briginshaw v Briginshaw[25] the court should also take into account the gravity of the matters alleged.
[24] (1959) 101 CLR 298
[25] (1938) 60 CLR 336
127 Secondly the acts defined in s96(3) are defined in relation to a particular person namely a “second person.” Vague generalised statements about what should be done with unidentified “retailers” do not come within the provision.
128 Third, the evidence of Mr Gamard was that the concept of “discounting” was also used in the context of wholesaler discounting (being the price to be paid to SGA by a retailer). However, Mr Watson did not always distinguish the two.
129 Fourth, simply because agents of the defendant were “unhappy” about consumer discounting and expressed their wish for Mr Watson to do some thing about it, does not necessarily constitute a direction in terms of s96. This is particularly so given the objective evidence suggested that whatever Mr Watson was asked to do, he was told, and understood, that he should obtain legal advice before doing it. It is also significant in this regard that Mr Watson himself appeared to acknowledge that certain lawful acts might have the effect of reducing consumer discounting such as “reducing retailer margin” and “rationalising dealerships”; which actions he had highlighted as “major achievements” with LVMH in his resume.
130 Fifth, it should be recalled that Mr Watson held an extremely senior position with a general responsibility for what was occurring in Australia. The objective evidence further supports this as there were many occasions wherein the evidence is more properly characterised as an inquiry as to whether Mr Watson could provide a strategy in relation to a retailer but only insofar as that strategy was within the law.
131 Finally, many of these conversations happened some time ago. Given doubts about the reliability of Mr Watson’s evidence and the natural gaps one would expect after the effluxion of time, considerable care is to be taken in acting on the basis of Mr Watson’s evidence alone. This is particularly so given much of it was vague and conclusory.
132 In terms of the handwritten notes, they were not always made contemporaneously as Mr Watson conceded that some were made within an hour “or a day” of the relevant event. There are also a number of difficulties with these notes since, even at their highest, many are not legible and purport to contain summarised versions of conversations. As described by Mr Watson they also contained “notes to myself”.
133 There are also some occasions on which a note is made that appears inherently improbable. Thus, one of the notes of an alleged conversation during Mr Watson’s induction, contains the notation “crazy! Legal!” in a circle. It appears most unlikely that Mr Watson would actually make a reference to “crazy/legal” in the presence of his employer as his evidence purported to suggest.
134 The notes also, at times, contain different coloured pens/pencils. Mr Watson claimed that he often came back to his notes and corrected them with a different pen if he had a different pen in his hand. However, this tends to emphasize that notes were made at different times and in circumstances where they were not necessarily accurate.
135 Overall, I am not prepared to accept that the notes contain a fully accurate record of any particular conversation particularly given Mr Watsons’ tendency to “summarize” and offer opinions.
136 It follows that I have primarily considered Mr Watson’s oral evidence in
Relevant alleged “directions”
Mr Amarasuriya
137 There are two sets of “directions” alleged against Mr Amarasuriya.
Induction conversation
138 Firstly Mr Watson gave evidence that during his induction “they” (Mr Amarasuriya and Mr Goldman) told him that the discount levels were too high and that head office hated the discounting of their prized brand (Omega) and that it was going to be something Mr Watson was going to have to “put a stop to.”
139 Overall, his version of the induction conversation appears more in the nature of a general complaint. Although I accept that Mr Amarasuriya/ Mr Goldman might have been making general complaints about discounting there is nothing to suggest that they directed Mr Watson to “make it known” to a particular retailer or retailers that the defendant would not supply them unless they agreed not to sell at a discount price and/or that they directed Mr Watson to “induce” particular retailers not to discount. There is also no suggestion that they asked him to withhold supply.
140 Mr Watson alleges that he had a further conversation with Mr Amarasuriya in about September 2003 where he allegedly said “surely there’s something we can do about that” after being told that Myer were having a 30 per cent discount sale. This can hardly constitute a direction but is more in the nature of an inquiry.
141 The matters alleged to have been said by Mr Amarasuriya do not constitute an unlawful direction.
Mr Urquhart
142 There are three sets of alleged directions given by Mr Urquhart.
October 2006
143 Mr Watson claims that at a brand manager’s conference in Crans Montana there was discussion of opening an Omega boutique in Sydney. Mr Watson says that at this conference Mr Urquhart said that, as part of the opening strategy, “that I should consider closing other Omega stores in the neighbourhood”.
144 However, as indicated earlier, asking someone to “consider” something is hardly a direction to do it.
13 December 2006
145 The plaintiff then relies on an email of 13 December 2006 wherein Mr Urquhart writes to Mr Watson indicating that he “might want to close down some others.”
146 However, this email follows an email chain that originates in an email from Mr Watson himself of 12 December wherein he announces that he had recently “closed Salera’s jewellers…” and adds that “we have, of course sought legal advice and we are fully compliant.”
147 In this context there is nothing at all wrong in suggesting what Mr Watson “might” want to do. There is nothing in this to suggest a direction to engage in unlawful conduct.
June 2007
148 Mr Watson relies on some discussions wherein Mr Urquhart is alleged to have complained about retailers discounting and about the close proximity of a number of retailers to the new Omega boutique. A complaint, however, does not constitute a direction.
149 A more significant conversation allegedly occurred immediately prior to a party for the opening of the Omega boutique in Sydney. Mr Urquhart asked the sales person why she had not sold a watch and the salesperson said that the proposed customer had been offered a 25 per cent discount around the corner at Hour Glass. Mr Urquhart then allegedly said “Mark, you’ve got to close Hour Glass.”
150 Mr Van Gastel, who was heading the new boutique at the time, gave evidence that he also heard Mr Urquhart say “Mark close them down.” However, he did not know if it was a direction or a throwaway comment or a jestful comment.
151 Mr Watson alleged he had a further conversation with Mr Urquhart the next day wherein Mr Urquhart said he had had a conversation with Mr Hayek Junior and that they both agreed that the Hour Glass should be closed. In response Mr Watson said that you could not close somebody just because they offered somebody a discount. It was not a good enough reason. However, Mr Watson claims that Mr Urquhart allegedly said in response “well find one.”
152 I accept, given the corroboration from Mr Van Gastel, that Mr Urquhart said words to the effect “close them down.” However, this was in the context of a launch and was not clearly to be taken seriously as a direction, as appears to have been accepted by Mr Van Gastel. In considering whether it was really a direction it also needs to be considered in the context of the alleged conversation which was said to take to place on the following day.
153 In considering the conversation the next day, the following matters are in my view significant:
(a) even on Mr Watson’s version he immediately informed Mr Urquhart that he
could not close Hour Glass by reason of discounting;(b) although Mr Watson alleges that Mr Urquhart then asked him to “find one” there is little objective evidence to support this further direction. Although this conversation may well be one of the most significant conversations relied upon, there appear to be no notes of this alleged conversation. There is also no evidence or suggestion that there was follow up by Mr Urquhart;
(c) the objective evidence suggests that, although the account with Hour Glass was later closed, this was done much later by correspondence of 19 September 2007 under Mr Watson’s own hand. In that correspondence he states to Hour Glass that “both you and our company are fully aware that your account was closed due to parallel exporting, despite numerous warnings.” The lead up emails do not suggest that discounting played any part in this decision.
(d) Mr Gamard’s oral evidence was that parallel exporting or “transhipping” was taken “very seriously.” This position is corroborated by an early email of 23 May 2007 from Mr Gamard to Mr Watson which states “Are we transhipping? Surest way to get fired.” Mr Gamard said that the Hour Glass account was closed because of transhipping and the closure did not have anything to do with the issue of consumer discounts. I accept this evidence, particularly given this position is supported by the objective evidence.
154 In these circumstances, including the lack of objective material, I am unable to be satisfied that Mr Watson’s version of his conversations with Mr Urquhart can be relied upon. More particularly, the objective evidence and time frames suggest that Mr Urquhart is unlikely to have directed Mr Watson to “shut down” the account but, rather, is likely to have accepted any advice from Mr Watson in June 2007 that he could not close the Hour Glass account because it had offered somebody a discount.
155 More particularly, even if Mr Urquhart used the words “find one” as is alleged, this is perfectly consistent with a request for Mr Watson to “find” a lawful reason. In these circumstances, I am not satisfied that Mr Urquhart gave a
156 Mr Watson has not established that Mr Urquhart gave him a direction to engage in unlawful conduct.
Mr Hayek
157 The only complaint made against Mr Hayek was that in a general presentation in September 2007 in Crans Montana Mr Hayek’s “message” was for brand managers to “carry out the global guidelines of the [Omega] brand which were to have consistent pricing and reduce discounting.”
158 The evidence was generalised in the extreme. Even at its highest it does not constitute a direction to Mr Watson to engage in unlawful conduct contrary to s96(3).
Mr Gamard
159 There was alleged to be many conversations with Mr Gamard wherein he allegedly directed Mr Watson to put a stop to consumer discounting.
160 Mr Gamard generally denied the conversations insofar as they were put to him.
161 In my view many lacked the necessary specificity to constitute a direction as alleged, for example:
•
a complaint that Mr Gamard told Mr Watson the company did not like to spend money on legal training and he should be careful when doing such training without authority;
•
saying “Angus and Coote the ones that Mr Watson can’t seem to keep under control”; and
•
asking “where we were on discount control?” or “what are you doing about it?” in November 2007.
162 There were times when Mr Watson also sought to summarise conversations such as the following:
• “on almost every occasion he spoke to me during 2005-2008 Mr Gamard asked me “whether I had put a halt to discounting; whether I had done anything about it; whether the guidelines were being implemented”; • he was “not relenting”; and • “many times he gave directions during 2005-2008 that retailer discounting had to be stopped.”
163 In my view these conversations were too vague to constitute a clear direction as alleged. None of them suggested that Mr Gamard was telling Mr Watson to “make it known to” a retailer that it would not be supplied unless it agreed not to discount. Nor was he telling Mr Watson to actually “induce” or “attempt to induce” a particular retailer or retailers into not selling below the recommended retail price. Additionally, there is absolutely nothing to suggest that he asked Mr Watson to withhold supply “for the reason” that a retailer had been discounting.
164 It is also inherently improbable that any discussions were as “unrelenting” as alleged given the evidence of Mr Gamard was that he only spoke to Mr Watson once a quarter. I accept this evidence as there was nothing to suggest that a busy member of the Swiss Board would be speaking more frequently than was necessary. It should also be borne in mind that, although the topic of consumer discounting appears to have become a topic of major importance in Mr Watson’s mind, he agreed with Counsel under cross examination that any decision to give a consumer discount had no direct impact on the income of SGA at all (as opposed to the wholesale price paid by the retailer which would have a direct impact on SGA’s “coffers”).
165 Overall, then, the directions given are insufficiently clear to constitute an unlawful direction as alleged. Moreover, I generally accept and prefer the denials of Mr Gamard given my difficulties with Mr Watson’s evidence.
166 However, Mr Watson did give evidence of what occurred at meetings in January and March 2006 during the early stages of Mr Gamard’s Australian role. Given there was evidence from two other witnesses in relation to these meetings I will consider these meetings further below.
January and March 2006
Examination
167 Mr Watson initially alleged that in January 2006 Mr Gamard and he had a meeting with Mr Zamel, the owner of Zamel’s jewellers wherein Mr Gamard asked Mr Zamel why he “felt the need to discount our wonderful watches.” Further that he told him to “stop discounting.” Mr Zamel then said this was the Australian market given they had to compete and Mr Gamard replied saying “it’s the rules of the Swatch Group that you are not allowed to discount our brands. We’ve got to find a way.”
168 Further, that there was a separate meeting in March 2006 involving Ms Walton, the Rado brand manager, wherein Mr Gamard was complaining about retailers discounting. Mr Watson then told him “you cannot put a stop discounting: It’s the law.” Mr Gamard then allegedly said “you’ve just got to stop those f…..g retailers from discounting. The law in this country is stupid. It’s your job to put a stop to it.” He also claimed that Mr Gamard was “banging his fist on the table” during this meeting.
169 Ms Walton’s evidence was a little different. She said that they were trying to explain about discounting when Mr Gamard “smashed his fist on the table and told us that our laws were stupid and we needed to fix them.”
170 Mr Watson says that later in March 2006 he also had a meeting with Mr Richards, brand manager of Tissot, and Mr Gamard wherein Mr Gamard raised the issue of Omega discounting again. Mr Watson says that he then asked Mr Richards for “help” because Mr Gamard was having a problem that we could not control Omega retailers in terms of their discounting. Mr Richards then explained that “you can’t do that in this country. Both the person that makes the instruction and the company could be liable to quite heavy fines from the ACCC.” Mr Gamard allegedly reacted by banging his fist and swearing and saying “how can you not follow what is very simply the global guidelines…”
171 Mr Richard’s evidence again was slightly different. On his evidence, after he told Mr Gamard (who was a “very animated character”) about the Australian law, Mr Gamard said “well the law’s stupid.”
Cross examination
172 Under cross examination Mr Watson said that the alleged statements where Mr Gamard was banging his fist in front of Ms Walton was “either January or March” and agreed he had no notes of any March 2006 discussion.
Re-examination
173 Then under re-examination Mr Watson added that during the January meeting Mr Gamard told Mr Watson that it was his job “to put a stop to retailers discounting and he was walking around the office and banging his fist on the table” a matter he did not allege when he first recounted this conversation.
174 The state of Mr Watson’s evidence is such that I am unable to find precisely what was said at the meetings in January and March 2006.
175 Given there are notes dated 19 January and that the evidence of Ms Walton and Mr Richards suggested a meeting took place at Glen Iris (which must have been after Swatch had moved offices in March), I am prepared to accept that a meeting took place on both occasions.
176 However, given the vagueness and conflict in Mr Watson’s own evidence I prefer and accept the evidence of Mr Gamard which was that he had no such conversation as alleged in January.
177 In terms of March the thrust of the evidence was that Mr Gamard was at that time frustrated by the Australian law. This is against his evidence to the effect that Australian laws were no different from other countries he was supervising. Nevertheless, given the evidence of the independent witnesses, it seems likely that, for whatever reason, he was frustrated with the Australian laws in March which was very soon after he had taken over the Australian role.
178 I am also prepared to accept, consistent with Ms Walton’s evidence and Mr Richard’s evidence, that he said something like “the law in Australia is stupid and it’s your responsibility to fix it.” However, such an outburst can hardly be construed as a direction to break the law. Rather, it appears to be more in the nature of a frustrated acknowledgment of the prohibitions imposed by the Australian law.
179 Having considered the alleged directions given by Mr Gamard I am not satisfied that he has directed Mr Watson to engage in unlawful conduct.
Mr Savioz
180 As indicated already, I do not accept that anything said by Mr Savioz is capable of constituting a direction to Mr Watson given he was not Mr Watson’s superior. In these circumstances no “direction” at all can be sustained.
181 There is, moreover, clear objective evidence to the effect that Mr Savioz asked Mr Watson to ensure that any action taken was in accordance with the law, for example:
•
in an email of 6 January 2005, after suggesting that we “cannot accept any discounting” Mr Savioz makes it clear that Mr Watson should “clear it with your legal counsel to make sure we can use this strategy”;
•
in an email of 23 June, 2005 Mr Savioz raises a proposal and asks Mr Watson “what do you think…” He then says that “I know there are lot of legal issues in Australia protecting the retailers, but it would be worth studying a way to give them margin only when /if they deserve it...”; and
•
in an email of 13 June 2006 Mr Savioz describes himself as being in “complete agreement” with Mr Watson about a decision. He further states “as you explained also on the phone, we must make sure that we act according to the law in closing that POS [point of sale].”
182 It follows that anything alleged to have been said by Mr Savioz should be considered in a context wherein Mr Watson was asked to obtain legal advice.
183 In any event, for reasons already given, nothing said by Mr Savioz is capable of constituting a direction by a superior as alleged.
Summary
184 I am not satisfied that Mr Watson was directed to engage in unlawful conduct by any of the persons properly identified as his superior.
Evidence of Distress
185 Even if an “unlawful direction” was given, the evidence as to Mr Watson’s alleged distress was minimal and consisted of various oral statements to the court that he, at time, felt “frustrated,” “uncomfortable”, “embarrassed”, “unhappy” or “under stress.”
186 As indicated already, I am not satisfied that Mr Watson’s evidence is generally reliable. Moreover, none of the statements appear to rise above the feelings of stress which any high-powered position is likely to produce. This conclusion is highlighted given:
• there is no evidence of him taking leave to cope with any such stress/distress, in fact, he was paid out an amount of $31,295.82 in respect of accrued but untaken annual leave on his termination; • there is no medical evidence, contemporaneous or otherwise, that he suffered any psychological problems and/or was forced to take medication for the alleged stress; • he agreed that the stress was not such that he ever applied for employment elsewhere; and • there is little, if any, evidence that he was prevailed upon against his will even if a direction as alleged was given. Rather, the evidence suggests that he was able to obtain legal advice throughout the course of his employment which advice he at times felt able to, and did, cite (e.g. in an email to Mr Savioz of 6 July 2005).
187 Moreover, there is positive evidence of actual contentment with his employment. Thus, in an email of 8 May 2006 Mr Watson says that he “loves” what he does and is “essentially happy with everything apart from my salary...” Further, in a later email 4 January, 2008 he again is “still very happy with everything” apart from base salary/car allowance.
188 This is despite the fact that Mr Watson now alleges that the unlawful directions were “relentless” during the period of Mr Gamard’s command between 2006 to May 2008. Although it may be that Mr Watson kept some distress to himself, it is not probable that if he was being prevailed upon as he now claims, that he would have chosen to write in such terms.
189 Accordingly, even if there was some breach of an implied term as claimed, Mr Watson has failed to demonstrate that he has suffered any distress beyond the ordinary stress associated with a high powered position which position he clearly “loved.”
Other submissions
190 Given I am not satisfied that Mr Watson is entitled to succeed in his claim for damages for distress it is unnecessary to consider further whether such a claim would, in any event, be legally available within the principles set out in
Baltic Shipping Company v Dillon.[26]
[26] (1993) 176 CLR 344
Conclusion
191 I am not satisfied that there has been a breach of any of the implied terms by reason of directions being given to Mr Watson to engage in unlawful conduct.
192 Moreover, even if there has been a breach, there is no evidence that Mr Watson suffered any loss in the way of distress.
193 The claim for damages for distress is rejected.
SECTION C- BONUS CLAIMS
194 The bonus claim is put in four ways[27]:
[27] POS at paras 50 and 67
(a)
that there was a failure to set bonus objectives for the 2008 calendar which was a breach of contract entitling Mr Watson to a reasonable bonus of around $110,000;
(b)
as a matter of construction Mr Watson was entitled to a reasonable bonus which was not discretionary;
(c) if, contrary to (b), the defendant retained a discretion, such a discretion miscarried in this case; and
(d)
that an estoppel arises in relation to the bonus claim by reason of alleged representations made by Mr Gamard.
(a) Alleged failure to set objectives
195 It will be recalled that clause 2(d) of the written contract provided as follows:
“You will be eligible for an annual bonus potential of $55,000 (pro rated for the number of months worked for the calendar year for the first year of your employment) based on agreed company and individual objectives set and achieved with your managers. This bonus is based on a calendar year and paid in April of the following year.” (emphasis added)
196 Although the defendant had admitted that it had set no relevant objectives, the evidence of Mr Gamard was that objectives were set. Thus his evidence was that “the budget was the objective” and that more qualitative objectives were for middle management; “the budget is the frame and it is a very clear and very detailed objective.” The budget he was speaking about was that of SGA.
197 Mr Watson himself also appears to have accepted that the bonus was “performance related.” Thus in an email of 8 May 2008 he noted that his bonus had decreased from $100,000 to $77,000 between 2004-2005. He went on to say that “I completely accept this, as the top line fiscal results of Australia were flat. This clearly demonstrates that the bonus is performance related...”
198 Accordingly, there were objectives informally “agreed” even if not formally documented as would be the case for middle management and there is no failure to set objectives.
(b) Whether bonus discretionary
199 Mr Watson points to various uses of the word “eligible” in the written contract such that, “eligible” meant “entitled”, for example, in relation to annual leave and for a car allowance. This was to be compared with the specific use of the word “discretion” where a discretion was intended, for example, in the case of managers having a discretion to waive the need for a doctor’s certificate in the case of sick leave.
200 It was said that it would be unlikely that the word “eligible” should take on different meanings within the same contract, so that, consistent with its use elsewhere, it should mean “entitled” in the context of the bonus provision.
201 I do not accept this submission.
202 The natural and ordinary meaning of clause 2(d) is that no fixed entitlement is provided. Thus eligibility is tied only to a “potential” bonus which is not a fixed amount but rather based on “agreed objectives.”
203 Moreover, any use of the term “eligible” in other parts of the contract does not convert the ordinary words of clause 2(d) into a non-discretionary clause.
204 In my view the clause clearly provides for a discretion to pay a bonus, not an entitlement.
(c) Alleged miscarriage of discretion
205 It is not enough to show a miscarriage of discretion to say that it is “incorrect” or that the court might have exercised the discretion differently.
206 Rather, consistent with the position of both parties, the discretion will only miscarry if it is exercised “irrationally, perversely or capriciously” such that no reasonable person would have exercised the discretion that way.[28]
[28] Clark v Nomura PLC (2000) IRLR 766, Horkulak v Cantor Fitzgerald International [2004] EWCA CIV 1287; and Kamp v Transurban Limited [2009] VCC 0611 at [89]
207 In considering the plaintiff’s submissions it is necessary to examine the reasons given by Mr Rollenhagen for the decision to refuse a bonus/ not recommend one. Given the decision to terminate was tied to the bonus decision, and given the complaints made by the plaintiff, some detailed background to the ultimate decision is required.
Events leading to termination
208 Mr Rollenhagen became Mr Watson’s superior in May 2008.
Pre Budget meeting
209 From a very early point in time Mr Rollenhagen put Mr Watson on notice that he was concerned about costs. For example:
•
on 5 July 2008 he wrote of his concerns as to the reduction in gross margin for Omega Australia (being the difference between the price sold and the costs of importing) considering the strong dollar;
•
on 18 July 2008 he wrote to Mr Watson expressing concerns at requests for approval for increasing expenses and requesting a proposal concerning margins and cost savings; and
•
on 16 September 2008 he also raised a series of concerns including the fact that although sales were down 11.5% costs were up 15.7%.
8 October Budget Meeting
210 There then followed a significant meeting on 8 October. At this teleconference meeting Mr Watson and Rajbans Kaur, the chief financial officer in Australia, were present, as well as Mr Rollenhagen, the CEO Mr Hayek junior and the group controller, Mr Steiger.
211 Mr Rollenhagen’s evidence was that he had a set of documents with a cover page entitled “Swatch Group Service center costs reviews” dated 8 October 2008. The evidence of Mr Watson was that the Swatch Group in Switzerland
212 The documents contained the actual income statements for August 2008 together with a forecast and budget page for December 2009 in relation to the “Service Centre” in Australia. Mr Rollenhagen described this Centre as the “back office”; the financial department, controlling department, IT department, administration and logistics.
213 The figures showed that $3,335,000 had been spent to operate the back office up until August, but that there was a forecast of $6,119,000 which would be spent by the end of the year. However, on the basis that $3,335,000 was spent as at August, there should only be some $5 million spent by the end of the year ($3,335,000 X 1.5). The figures therefore appeared to show an extra $1.1 million being spent in the last four months of the year. The figures also showed that the amount budgeted for December 2009 was $6,071,000 which was what was sought in spending for the service centre in the following year.
214 During the meeting, Mr Steiger discussed these numbers and said that he could not accept that there would be a higher rate of spending in the last four months of the year. He also did not accept the 2009 budget, particularly since the higher costs associated with the introduction of the new “SAP” computer system were “one-off” and should not be repeated.
215 During the middle of the meeting Mr Rollenhagen received a phone call from Mr Hayek who said the numbers were not a serious basis for discussion and that the meeting should be stopped. The meeting was then stopped and Mr Rollenhagen and Mr Hayek agreed that Mr Rollenhagen would go to Australia to go through the numbers in detail and to work with SGA to revise the numbers to a more acceptable and realistic level. Mr Hayek raised concerns about the ability of Mr Watson to manage the company and whether he should be terminated. However, Mr Rollenhagen said he would prefer to wait until he went to Australia the next time for a review of the budget before he made a decision.
216 Mr Watson’s evidence was also that the meeting was short. In an email he wrote to Mr Rollenhagen of 8 October he referred to the meeting being a “disaster.” From this point, if not earlier then, Mr Watson was on notice that costs, and particularly costs of the Service Centre, were a critical issue.
Events leading up to the review in Australia
217 It was proposed then that Mr Rollenhagen and Mr Szabo would travel to Australia for a review.
218 Prior to this review Mr Szabo wrote to, inter alia, Mr Watson on 10 October noting that the objective was to find ways in structure, processes, and expenses that resulted in a “better net sales/primary costs scenario” with headquarters expecting a “few concrete proposals not cosmetics.” He also requested a number of documents for both SGA and the Service Centre.
219 On 10 October Mr Watson wrote to Mr Hayek stating that he accepted that as Country Manager he had “failed in [his] job to control increased costs” (although in oral evidence he claimed that this was done on advice from Mr Rollenhagen that Mr Hayek was not interested in excuses).
220 On 22 October Mr Watson raised the question of an agenda for the review. In response Mr Rollenhagen reminded him of the purpose of the visit, namely, that during the budget meeting Mr Hayek Jnr “was very unhappy with the service centre cost base in Australia relative to sales...” By further email of the same date he also noted that the “major service center cost is personnel.”
221 If Mr Watson could have been left with any doubt after the budget meeting, the concerns as to the Service Centre costs were made crystal clear during the lead up to the review in October. Although the time frames might be said to be short it should have been obvious to Mr Watson that he needed to urgently attend to costs, particularly given the CEO was “very unhappy.”
Review in Australia
222 Both Mr Szabo and Mr Rollenhagen then travelled to Australia in the last week of October and spent some five days there.
223 Mr Szabo laters described finding “a litany of management issues in virtually every area we looked at” in an email of 1 December 2009.
224 After he had completed his review Mr Rollenhagen had a meeting with Mr Watson where he told him that he found the situation to be “critical.”
225 By email of 1 November, Mr Rollenhagen then forwarded an SGA Service Centre Budget 2009 for Mr Watson’s comments.
226 By email of 4 November sent to Mr Hayek, Mr Rollenhagen attached a finalised form of the 2009 Budget which he said had “been reviewed by SG Australia management and confirmed.” A high amount of savings was identified in an amount of approximately $945,000 which not only reflected on the future but on the way things had previously been operating. Thus, for example, it was suggested that SAP licences could be reduced from 8 to 2 with a $13,000 saving.
227 A version of the 4 November email which contains notes of Mr Hayek made on 5 November was also adduced into evidence. Those annotations read: “Very good detailed report - thanks Kevin and Peter. The situation needs to be addressed very quickly - a catastrophe.”
Decision to terminate
228 Mr Rollenhagen’s evidence was that he subsequently had a further discussion with Mr Hayek as follows:
“We came back then to our discussion immediately following the budget meeting at the beginning of October as to whether or not we wanted to continue to keep Mr Watson as our country manager in Australia. He asked me my opinion about that and I told him that that after having spent a week with Mr Watson in Australia and having seen the preparation that was done and the amount of cooperation and I would say involvement in the operations, that I found that Mr Watson remained superficial in his management of the company; non-detail oriented, which I consider to be a requirement of a country manager; really unaware of the facts and the issues around how the company was being managed and therefore I could no longer support him in this position and I believed that we must make a decision to terminate his employment.”
234 bonus was made. In broad terms they came down to two main points:
229 Mr Hayek then agreed with Mr Rollenhagen and allowed him to proceed.
230 Mr Rollenhagen then suspended Mr Watson on 27 November with the decision to terminate subsequently communicated in December.
231 It will be recalled that the terms of the letter of termination included the following:
“In view of your poor performance and the poor financial results of Swatch Group Australia, a decision has been made not to approve any bonus for the 2008 calendar year.”
232 Mr Rollenhagen stated that he made the decision not to give Mr Watson a bonus because at his level of management it was very rare to terminate someone and if someone is terminated in such a way, its because of very, very poor performance, in other words the performance would not have deserved a bonus. In coming to his decision he was asked what he took into account and said:
“I took the financial results of the company into account; I took the profitability of the company into account; I took the disengagement of Mark from the business into account, the way he managed his subordinates. I took all these matters into account and determined that a bonus was not justified.”
233 In response to the question as to why Mr Watson was treated differently from other employees in that no recommendation was made for the compensation committee to determine, he stated that this was again because Mr Watson was terminated due to poor performance in his duties which poor performance had gone beyond an acceptable limit.
Mr Watson’s complaints
Mr Watson raised various complaints about the way the decision to refuse a notice and without a proper handover with Mr Gamard; and
(b) that there were various other faults in the decision itself against the
allegedly new criteria which Mr Rollenhagen chose to adopt including:
• there was an error in the financial figures underpinning the decision; •
the supposed budget and cost cutting material said to support the decision was not achieved and was unachievable;
•
the performance of SGA and the Omega brand compared with previous years was solid;
•
other comparative persons employed by the defendant received substantial bonuses at or close to their potential including those involved in the alleged “catastrophe”; and
• no attention was paid to costs beyond Mr Watson’s control. Change in rules
235 In terms of the “changing of the rules”, the complaint centred on the fact that Mr Rollenhagen concentrated on the costs of the Service Centre while Mr Gamard’s evidence was that he had used the results for SGA and Omega in his assessment of Mr Watson’s bonus in the past.
236 However, in my view this complaint is not sustainable.
237 Firstly, it is not established that there is any “change” since Mr Watson’s bonus was always tied to the performance of the subsidiary which subsidiary included the “back room” of the Service Centre. This is made abundantly clear in the original position description which, as cited already, gave Mr Watson responsibility in relation to the service division. Simply because Mr Gamard did not explicitly appear to have taken the service centre into account before did not mean that the overall “performance” criteria had altered.
238 Secondly, Mr Watson did have notice that Service Centre costs was a specific issue from, at least, 8 October. There was therefore “prior communication” contrary to Mr Watson’s submissions.
239 Further, although there was not a long period between the budget meeting and the decision to terminate, the evidence was that Mr Rollenhagen (with Mr Szabo) took the time to fly to Australia to engage in an extensive review during which time they spent a week with Mr Watson. In the result, Mr Rollenhagen formed a view that Mr Watson was “superficial” and “non detail oriented” which he regarded as a requirement of a country manager. Although others might have taken a different view, I find nothing “perverse or capricious” in Swatch’s approach, particularly given it appeared to genuinely regard the issue of costs as critical.
240 In these circumstances, even if there was a “change of the rules,” Mr Watson was given notice of such change.
Other complaints
241 The problem with the other complaints is that they require an assessment of the merits of Mr Rollenhagen’s decision. However, it is not for this court to decide whether it would have recommended a bonus for Mr Watson, but merely to ensure that Mr Rollenhagen gave genuine consideration to whether to recommend that a bonus be paid.[29]
[29] Rankin v Marine Power International Pty Ltd (2001) 107 IR 117 at [411]
242 On the evidence before the court I am satisfied that Mr Rollenhagen did properly consider whether a bonus should be paid. Moreover, that he and Mr Szabo undertook a comprehensive process of review prior to coming to the ultimate view that termination was warranted and that no recommendation was appropriate.
243 Mr Watson has not therefore shown that the decision was “perverse, irrational or capricious.”
244 However, out of deference to Counsel, I will consider some of the more specific complaints.
Financial error
245 Much emphasis was placed on an alleged error in the figures presented at the budget meeting. Thus it appeared that there was not really a $1.1 million “hole” since the $3,335,000 base figure for August was understated when compared with the $6,119,000 figure forecast for December. This was because some $597,000 costs for intercompany re-invoicing should have been added to the base figure so as to give a base of some $4 million. It then followed that the $6,119,000 figure for December would be consistent and there would be no increased rate of costs for the last quarter.
246 However:
(a) even if this is true, the budget meeting was a mere catalyst for the October review which formed the real foundation for the decision to terminate and refuse a bonus.
(b) as explained by Mr Rollenhagen, the budget requested for 2009 remained high notwithstanding there should have been a reduction given the absence of the SAP impact. The forecasted salary line also showed a blow out in costs to December 2009.
247 The error, if it be an error, does not establish that the ultimate decision was unreasonable, irrational or perverse.
Savings not achievable
248 Mr Watson’s complaint that the savings identified were “unachievable/ unachieved” is also not to the point. The fact was that considerable effort was put into conducting a genuine review and it is not for this court to go through “line by line” to determine whether the identified savings were actually appropriate.
249 In any event, the evidence of Mr Szabo was that the savings were ultimately made save that there were extra costs that were not foreseen being the costs of this litigation and certain depreciation costs. I accept this evidence.
Other “good results”
250 Nor it is appropriate to consider the results for other entities under Mr Watson’s supervision. It was a matter for the decision-maker, not this court, to consider which indicia it wished to assess. The decision-maker gave notice to Mr Watson that the Service Centre needed to be reviewed and I can find no “irrationality or perversity” in its approach.
Other employees
251 In terms of comparative employees, the difficulty for Mr Watson is that none of the employees identified, including Mr Giordano (who was called) were terminated. Given this was the dominant reason for the decision in relation to the bonus, a comparison with ongoing employees is unhelpful.
Costs beyond his control
252 The costs of the Service Centre were squarely made Mr Watson’s responsibility as his position description amply demonstrates. Mr Watson’s email of 10 October also acknowledged that he was responsible for controlling costs.
253 There is no “perversity” in making Mr Watson accountable on the basis of costs in incurred/ to be incurred particularly where he was put on notice that he was going to be held so accountable.
254 Moreover, as Mr Rollenhagen made clear, the decision to terminate, which led to the decision not to recommend a bonus, was not solely based on the costs issue; but also on the basis of his views as to Mr Watson’s management which showed lack of awareness and was “non-detail oriented.” It was not suggested that these views were reached capriciously.
Summary
255 The discretion to pay a bonus did not miscarry.
256 In these circumstances it is unnecessary to consider other defences raised by SGA including that no bonus was payable for part of a year and/or that the subsidiary was not responsible for the bonus (which was the responsibility of the Swiss based Compensation Committee) and/or that the storing of the illicit material should also be taken into account.
(d) Whether estoppel
Whether representation
257 Mr Watson then alleges that various representations were made to him in a context wherein he was complaining about his salary package. He says that in response, Mr Gamard, and “to a lesser extent Mr Rollenhagen” made various representations to him. He claims these were to the effect that he should “rely on his bonus each year as part of his overall salary”; that his bonus each year was “based on the previous year’s bonus” (and not related to the bonus potential in his written contract) and that instead of base salary increases Mr Watson “would receive bonus increases.”[30]
[30] POS para 70
258 Firstly there was no basis on which Mr Watson could make complaints against Mr Rollenhagen. The highest the evidence got in this regard is his allegation that Mr Rollenhagen told him that the basis of the chief financial officer’s package was what she was actually paid the year before. This is hardly a representation in relation to Mr Watson’s bonus and does not appear to have been put to Mr Rollenhagen. In any event, Mr Rollenhagen impressed as a man who would not make loose representations about another employee’s package.
259 Secondly, even if Mr Watson was told he should rely on his bonus as part of his overall salary, this goes nowhere as it does not in any way represent that a bonus would necessarily be paid, simply that his package contained a bonus component.
260 Mr Watson’s evidence, even at its highest, was otherwise vague. Thus it varied between alleging that Mr Gamard said “you should take into account what you’ve been paid the previous year”, and “it’s a question of what you’ve been paid the previous year that you need to base your future assumptions of”.
261 This could hardly substantiate a representation that he would necessarily receive an increase in his bonus payment each year. Rather, as his own correspondence of 8 May 2006 made clear, he was aware that any bonus would depend on an assessment of the subsidiary’s performance. As also explained by Mr Gamard, given the bonus was a direct consequence of the performance of the subsidiary, a person could approximately establish performance by seeing how the subsidiary was going.
262 In any event, Mr Gamard’s evidence was that the discussion about bonuses arose because Mr Watson was unhappy with his fixed base salary and wanted a bigger share of his salary to be paid on a fixed salary basis versus a variable basis. The fixed base salary was fixed and announced at the beginning of the year. However, Mr Gamard told Mr Watson that the policy for top management was that two-thirds of the compensation was fixed and one- third variable which variable part depended on performance and that before he drew any final conclusions as to his dissatisfaction with his salary he should look at his overall package (the bonus component not being assessed until March/April).
263 Mr Gamard denied suggesting that Mr Watson could “assume” an increase and said that if he had referred to his previous bonuses it was at a time when he was announcing the bonus and the bonus was known so that he could point out that the salary per se was not the issue . His message was: “Don’t worry about your salary. Worry about the performance of your subsidiary, this way you’ll make a bigger bonus.”
264 As will be seen below, Mr Watson expressed dissatisfaction with the fixed component of his salary package, consistent with Mr Gamard’s evidence.
265 It also seemed unlikely for Mr Gamard to make any representation that Mr Watson’s bonus would depend on the previous year, particularly given Mr Watson’s bonus had actually previously decreased between 2004 and 2005 (from $100,000 to $77,800). The amount of bonus payable was also decided by a third party, the compensation committee, rather than Mr Gamard.
266 Mr Gamard’s evidence is therefore consistent both with the objective evidence and the inherent probabilities and I accept and prefer this evidence to the extent it conflicts with Mr Watson.
267 In my view no representation was made to the effect that Mr Watson’s bonus would be increased and/or that it would be based on his previous year’s bonus. Rather he was told and knew, that his bonus was dependent on the performance of the subsidiary.
Whether reliance for estoppel
268 Mr Watson then says that he did two things to his detriment in reliance on the alleged representation:
(a) he did not seek to negotiate or further negotiate a higher base salary in
exchange for a lower annual bonus; and(b) he did not seek higher paying employment in other locations.[31]
[31] POS at para 72
269 The short answer to (a) is that Mr Watson clearly attempted to negotiate a higher base salary and failed.
270 Thus, for example, consistent with Mr Gamard’s evidence, on 8 May 2006 Mr Watson made complaint about his salary and requested a “good increase and adjustment in my basic salary.”
271 Later on 4 January 2008 there is another example of his complaints, again about his “base salary.” On 10 April, 2008 Mr Watson further expresses this dissatisfaction in the clearest of terms referring to the poor increase as “sickening.”
272 It can hardly be said in these circumstances that he has somehow not sought to negotiate a higher base salary; just that he has not received a higher base salary.
273 In terms of the suggestion that he did not seek higher paying employment in other locations, there is no evidence that he lost such an opportunity during the currency of his employment. In any event, his evidence on this score is equivocal since he states at one stage that he would only have “considered” leaving if he had known that the bonus could be reduced to zero.
274 Therefore, even if, contrary to my earlier finding, some representation was made to the effect alleged, Mr Watson has not substantiated that he suffered any detriment in reliance on such a representation.
275 The bonus claim based on estoppel is rejected.
SECTION D ALLEGED FAILURE TO PAY 3 MONTHS “SALARY”
276 Mr Watson alleges that clause 17, in requiring payment of “3 months salary in lieu of notice” refers to the broader concept of “salary” (including car allowance and superannuation) and not just “base salary.”
277 SGA alleges that the concept of “salary” in clause 17 refers to base salary since the concept of a “salary” in clause 2(a) was defined with reference to the base salary alone. However Counsel fairly conceded that if he was wrong on the construction of clause 17 and did not succeed on the basis that SGA was entitled to summarily dismiss for misconduct then the quantum Mr Watson would be entitled to would be that claimed of $12,285.23
278 In my view Mr Watson’s construction is correct. Clause 17 does not use the term “base salary” but “salary.” More significantly, the whole purpose of clause 17 is to enable the employer, SGA, to terminate by a payment “in lieu of” allowing the employee to work out the three month period. The purpose of the payment is therefore to make a payment which is equivalent to the payment that would be received if Mr Watson was to work out the three months. However, if he had been allowed to work out the three months he would have received all the elements of his salary package, not just the base salary.
279 Counsel for SGA then said that, consistent with Commonwealth v Amann Aviation Pty Ltd[32] the correct approach is to look at what is the minimum contractual requirement which is imposed upon the employer in circumstances where it exercises the right to bring the contract to an end.
[32] (1992) 174 CLR 64
280 However, this takes the matter no further since it begs the question as to what the minimum contractual requirement is. In my view that “minimum contractual” requirement is the payment of three months full salary for the reasons already given.
281 It follows that Mr Watson is entitled to an amount of $12,285.23
CONCLUSION
282 There will be judgment for the plaintiff for $12,285.23.
(1976) 11 ALR 599
Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 97 per Mason J
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