White v Norman

Case [2012] FCA 33

FEDERAL COURT OF AUSTRALIA

White v Norman; In the Matter of Forest Enterprises Australia Limited (Receivers and Managers Appointed) (in Administration) [2012] FCA 33  

Citation: White v Norman; In the Matter of Forest Enterprises Australia Limited (Receivers and Managers Appointed) (in Administration) [2012] FCA 33
Parties: ANDREW WHITE v TIMOTHY NORMAN and SALVATORE ALGERI (AS RECEIVERS AND MANAGERS) OF FOREST ENTERPRISES AUSTRALIA LIMITED (ACN 009 553 548) (RECEIVERS AND MANAGERS APPOINTED) (IN ADMINISTRATION)
File number: VID 1018 of 2010
Judge: BESANKO J
Date of judgment: 2 February 2012
Catchwords:

CONTRACT – principles of repudiation of contract – whether end of plaintiff’s employment as chief executive officer amounted to termination under the contract or repudiation and acceptance of repudiation – whether failure to pay termination entitlements on date employment ceased constituted repudiation.

Held: The events constituted termination of the employment under the contract.

CORPORATIONS – Corporations Act – application of Div 2 Pt 2D.2 – scope of s 200F exceptions - where employment contract provided for payments of remuneration in lieu of termination notice – where plaintiff’s employment terminated without notice – whether benefits constituted benefits “in connection with” plaintiff’s retirement as contemplated by s 200A and required member approval in accordance with s 200E – whether benefits fell within s 200F(2)(a)(ii) exception – where plaintiff engaged under several employment contracts from 2003 to 2009 to hold position of chief executive officer – where benefits provided under 2009 contract – whether benefits provided as consideration for plaintiff agreeing to hold office for purpose of s 200F(2)(a)(ii) – construction of term “office” under s 200F(2)(a)(ii).

Held: The benefits were benefits “in connection with” the plaintiff’s loss of office for the purposes of Division 2 of Part 2D.2. The “consideration” referred to in s 200F(2)(a)(ii) is the consideration given by the company from time to time, and the benefits were consideration for the plaintiff holding office under the 2009 agreement. Payments of remuneration in lieu of notice within s 200F(2)(a)(ii).

CORPORATIONS – Corporations Act – construction of ss 433 and 556 of the Act - Where plaintiff’s employment ceased after appointment of receivers to company - whether plaintiff’s leave entitlements had priority under ss 433 and 556 of the Act.

Held: Some payments payable to the plaintiff were not due on or before the “relevant date” and are therefore not entitled to priority.

Legislation: Corporations Act 2001 (Cth) Division 2, Part 2D.2, ss 423, 433, 1321 and 1324
Corporations Amendment (Improving Accountability on Termination Payments) Act 2009 (No 115, 2009) (Cth)
Corporations Regulations 2001
Uniform Companies Act of 1961 (NSW)  
Cases cited:

Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435, cited
Claremont Petroleum NL v Cummings (1992) 110 ALR 239, cited
D.T.R. Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, cited
Gollin & Co Ltd v Karenlee Nominees Pty Ltd (1983) 153 CLR 455, cited
Hooker v Gilling [2007] NSWCA 99, cited
Laurinda Pty Ltd v Capalaba Park…

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AGLC
White v Norman [2012] FCA 33
Case
[2012] FCA 33
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, the case of White v Norman involved the plaintiff, Mr White, contesting the termination of his employment as the chief executive officer (CEO) of the defendant company, FEA. The dispute centred around the contractual terms of his employment, the entitlements due upon termination, and the interpretation of certain sections of the Corporations Act 2001 (Cth). Specifically, Mr White sought to clarify whether his termination constituted a breach of contract or if it was a valid termination under the contract, and he also questioned whether the failure to pay his termination entitlements on the date his employment ceased constituted a repudiation of the contract.

The court addressed several legal issues, including the principles of repudiation of a contract, the application of specific sections of the Corporations Act, and the priority of certain payments upon the appointment of receivers to the company. The court had to determine whether the termination of Mr White’s employment was a valid termination under the contract or if it amounted to a repudiation and subsequent acceptance of that repudiation. Additionally, it was necessary to interpret the scope of certain sections of the Corporations Act, particularly regarding the payment of benefits upon retirement and the priority of certain payments when receivers are appointed.

The court concluded that Mr White’s employment was terminated under the terms of the contract and not by a repudiation. Regarding the Corporations Act, the court found that the benefits provided to Mr White were "in connection with" his retirement and fell within the exceptions provided in the Act. The court also ruled that some of Mr White’s payments, such as leave of absence payments, were not due on or before the relevant date and thus were not entitled to priority under the Act. Consequently, the court determined that certain payments of remuneration in lieu of notice fell within the exceptions of the Act.

The court ordered that Mr White prepare draft minutes of order reflecting the conclusions reached in the judgment, including any claims for interest and costs. This decision provides clarity on the interpretation of employment contracts and the application of the Corporations Act in similar circumstances.

Orders

Orders of the court

1. The plaintiff bring in draft minutes of order within seven days reflecting the conclusions reached in these reasons and any claims for interest and costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

There are other issues in dispute between the parties. The defendants contend that the plaintiff is not entitled to a consumer price index increase which forms part of his claim. They contend that the plaintiff’s claim for priority in respect of leave of absence payments (that is, annual leave and long service leave) should be rejected because such payments were not “due” on or before the “relevant date” within s 433 and s 556 of the Act. In addition, the defendants contend that the plaintiff has not calculated his claim for DR in accordance with the provisions of the July 2009 agreement, and, as a result, has overstated his claim for this item.THE FACTS At the trial the plaintiff tendered three affidavits which he had sworn and the defendants tendered an affidavit sworn by Ms Julie Francis Thatcher. The defendants are partners of Deloitte Touche Tohmatsu (Deloitte) and Ms Thatcher is a director of the Corporate Reorganisation Group of Deloitte. Neither the plaintiff nor Ms Thatcher were required for cross-examination. The parties also tendered a Statement of Agreed Facts and the facts which follow are, for the most part, based on that document. I begin by outlining the important aspects of the July 2009 agreement between the plaintiff and FEA. The agreement contains a statement that the terms of “this agreement” apply to the exclusion of those contained in the agreement “issued” by FEA on 3 October 2007. There is a statement to the effect that the chairman of FEA, who signed the letter on behalf of the company, noted that the plaintiff had first commenced employment with FEA on 26 March 2003. There is also a statement that FEA would continue to employ the plaintiff on the terms of “this agreement” subject to the termination clause in clause 20. Clause 3 of the agreement appears under the heading, “Duties” and provides as follows:You will report directly to the Board of the Company or its delegate. During your employment under this agreement, you must:•undertake to the best of your abilities such duties and exercise powers, authorities and discretions in relation to the business of the Company as the Board shall from time to time delegate to you, commensurate with your skills and experience;•in the discharge of such duties and the exercise of such powers, authorities and discretions, conform to, observe and comply with all reasonable and lawful directions, restrictions and regulations of the Company made or given from time to time;•comply with all legal requirements, statutory or otherwise, pertaining to your position as an executive of the Company and your responsibilities as an executive; and•act in good faith in the best interests of the Company. Clause 7.1 deals with NDR and clause 7.2 deals with DR. Those paragraphs relevantly provide: 7.1 Non-discretionary RemunerationYour Non-discretionary Remuneration (‘NDR’) is $485,500 per annum on a total cost to employer basis which is inclusive of a base salary subject to PAYE, superannuation (at the minimum level the Company is required to make for your benefit under statute), fringe benefits tax, except for the income protection and life insurance pursuant to paragraph 15(d), and other benefits. Your base (PAYE taxable) salary is payable monthly by direct deposit. Your NDR is reviewable on an annual basis with the increase (which for each year of the contract shall be not less than the same percentage increase as the increase in the Consumer Price Index for Hobart for the twelve months period prior to the review) taking effect from 1 April each year, …7.2 Annual Incentive Plan (Discretionary Remuneration)You will be eligible for an incentive payment of up to $409,000 per annum for financial years in each case on successfully meeting, in each financial year, key performance criteria. The key performance criteria for each year are to be determined by the Board by no later than the time at which the Company’s audited accounts for the preceding financial year are finalised. Your entitlement to any bonus for the preceding financial year will also be determined at that time.The amount of the annual incentive plan payment is reviewable on an annual basis. The increase (which for each year of the Contract shall be not less than the same percentage increase as the increase in the Consumer Price Index for Hobart for the twelve months period prior to the review) will take effect from 1 April each year …

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I will give the parties the opportunity to address this question in light of my answers to the earlier questions.CONCLUSIONS The plaintiff is to bring in draft minutes of order within seven days reflecting the conclusions in these reasons and any claims for interest and costs. If those minutes are not agreed I will relist the matter for the resolution of any outstanding issues.

Ratio Decidendi

Legal Principle Established

Clause 7.1 deals with NDR and clause 7.2 deals with DR. Those paragraphs relevantly provide: 7.1 Non-discretionary RemunerationYour Non-discretionary Remuneration (‘NDR’) is $485,500 per annum on a total cost to employer basis which is inclusive of a base salary subject to PAYE, superannuation (at the minimum level the Company is required to make for your benefit under statute), fringe benefits tax, except for the income protection and life insurance pursuant to paragraph 15(d), and other benefits. Your base (PAYE taxable) salary is payable monthly by direct deposit. Your NDR is reviewable on an annual basis with the increase (which for each year of the contract shall be not less than the same percentage increase as the increase in the Consumer Price Index for Hobart for the twelve months period prior to the review) taking effect from 1 April each year, …7.2 Annual Incentive Plan (Discretionary Remuneration)You will be eligible for an incentive payment of up to $409,000 per annum for financial years in each case on successfully meeting, in each financial year, key performance criteria. The key performance criteria for each year are to be determined by the Board by no later than the time at which the Company’s audited accounts for the preceding financial year are finalised. Your entitlement to any bonus for the preceding financial year will also be determined at that time.The amount of the annual incentive plan payment is reviewable on an annual basis. The increase (which for each year of the Contract shall be not less than the same percentage increase as the increase in the Consumer Price Index for Hobart for the twelve months period prior to the review) will take effect from 1 April each year … I have already set out the terms of clause 20.1 (at [9]). Clause 20.9 is in the following terms:If the aggregate of:(a)the amount that would, but for this provision, be payable to you under this paragraph and(b)the value of all other payments made in connection with your retirement as chief executive officer of the company,exceeds the maximum amount that could, because you are a person retiring from such board and managerial offices, be paid to you under s 200F or 200G of the Act the amount payable to you under this paragraph 20 will be reduced so that the aggregate of all benefits given, paid or payable to you in connection with your retirement are equal to that amount. Clause 25 of the agreement is in the following terms:25. Entire contract.Subject to law this Agreement constitutes your entire contract of employment with the company. It supersedes any prior understanding or agreement between yourself and the company and any prior condition, warranty, indemnity or representation imposed, given or made by you or the company.Your employment with the company will continue to be subject to the terms of this contract, unless varied or replaced by agreement in writing, despite any change to your position, duties, reporting responsibilities, or the location of your employment.