Willis v Health Communications Network Ltd
[2007] NSWCA 313
•6 November 2007
NEW SOUTH WALES COURT OF APPEAL
CITATION: Peter Willis v Health Communications Network Ltd [2007] NSWCA 313
FILE NUMBER(S):
40673/06
HEARING DATE(S): 8 October 2007
JUDGMENT DATE: 6 November 2007
PARTIES:
Peter Willis
Health Communication Network Limited
JUDGMENT OF: Mason P Tobias JA McColl JA
LOWER COURT JURISDICTION: District Court
LOWER COURT FILE NUMBER(S): DC 4065/05
LOWER COURT JUDICIAL OFFICER: Finnane DCJ
LOWER COURT DATE OF DECISION: 26 September 2006
COUNSEL:
A: J de Meyrick
R: R Goot SC
SOLICITORS:
A: Bryan Gorman & Co, Sydney
R: Clayton Utz, Sydney
CATCHWORDS:
EMPLOYMENT LAW – Termination of employment – Whether payment in lieu of notice should include superannuation that would otherwise have been due for notice period - EMPLOYMENT LAW – Contract of employment – Whether unpublished redundancy policy impliedly incorporated into contract of employment by law - – Whether unpublished redundancy policy impliedly incorporated into contract of employment by custom - PRACTICE AND PROCEDURE – Court of Appeal – Whether supplementary submissions filed after hearing without leave can be taken into account
LEGISLATION CITED:
Superannuation Guarantee (Administration) Act 1992 (Cth)
CASES CITED:
Alexander v Standard Telephones & Cables Ltd [1991] IRLR 286
BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
Carr v Finance Corporation of Australia Ltd [No 1] (1981) 147 CLR 246
Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337
Chapmann v Caska [2005] NSWCA 113
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur (Australia) Ltd (1986) 160 CLR 226
In the matter of an application by the Chief Commissioner of Police (Vic) [2005] HCA 18; (2005) 79 ALJR 881
Dwyer v Commonwealth of Australia (1995) 31 ATR 48
Kirwan v Cresvale Far East Ltd (In liq) [2002] NSWCA 395
Liverpool City Council v Irwin [1977] AC 239
Reynolds v Southcorp Wines Pty Ltd [2002] FCA 712; (2002) 122 FCR 301
Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; (2000) 177 ALR 193
Scally v Southern Health & Social Services Board [1992] 1 AC 294
DECISION:
Parties directed to file written submissions within 14 days of the date of this judgment on
1) the costs of the appeal
2) the costs of litigating the superannuation issue in the District Court
3) whether any such costs should be paid on an indemnity basis
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40673/06
DC 4065/05MASON P
TOBIAS JA
McCOLL JATuesday 6 November 2007
PETER WILLIS v HEALTH COMMUNICATION NETWORK LTD
Judgment
MASON P: I agree with Tobias JA.
TOBIAS JA: On 13 April 2005 the appellant, a qualified accountant employed by the respondent as its Chief Financial Officer since 10 December 1999, was summarily dismissed and his employment terminated. Pursuant to the terms of his contract of employment he was only paid six months’ salary in lieu of notice. He thereafter pursued two claims against the respondent.
First, he asserted that he had in fact been made redundant when his employment was terminated and was therefore entitled, pursuant to his contract of employment, to redundancy pay equivalent to 3.5 months’ salary. Second, he claimed that in breach of his contract of employment the respondent had failed to pay to his account with HESTA Superannuation Fund (a complying fund) his entitlement to a 9% superannuation contribution with respect to the six months’ salary which he had received in lieu of notice. The respondent rejected both claims.
Accordingly, on 20 September 2005 the appellant instituted proceedings in the District Court of New South Wales by way of Statement of Liquidated Claim. The proceedings were heard by his Honour Judge Finnane QC who, on 26 September 2006, rejected each of the appellant’s claims and entered a verdict for the respondent. Pursuant to leave granted on 4 April 2006, the appellant appeals to this Court from that decision.
The relevant facts
On 10 December 1999 the appellant accepted an offer from the respondent to employ him as its Chief Financial Officer on the terms and conditions set out in a letter from the respondent to the appellant dated 6 December 1999 (the 1999 letter). That letter made provision, inter alia, for the appellant’s total gross remuneration, the notice each party was required to give to the other of termination of employment and certain terms with respect to the receipt by the appellant of confidential information. Finally, under the heading “Other Terms and Conditions” it provided that:
“Additional terms and conditions of your employment are set out in the Company’s document ‘Terms and Conditions of Employment’ dated December 1999, a copy of which has been provided to you.
If you are in agreement with the above and the enclosed Terms and Conditions, please sign and return the duplicate copy of this letter.”
Under the notation “I have read and accept the enclosed Terms and Conditions of Employment”, the appellant signed a duplicate copy of the 1999 letter which he dated 10 December 1999.
Following each annual review of the appellant’s remuneration, the respondent provided to the appellant a letter relating to that review setting out variations to his “contract of employment dated 6 December 1999”. Each of those variation letters provided that it should be read in conjunction with
“your contract of employment dated 6th December 1999 provided that where there is any inconsistency between the two, the contents of this letter will prevail.”
As a consequence of a review of the appellant’s remuneration effective 1 July 2002, the respondent wrote a variation letter to the appellant dated 26 November 2002 (the 2002 letter) in which the period of notice of termination of his employment was varied from that contained in the 1999 letter so as to provide as follows:
“Notice Period on Termination
The notice period for yourself or HCN to terminate your employment has been extended from three months to six months. In the case of termination by HCN, HCN may make payment in lieu of all or part of this period of notice at its discretion.
All other terms and conditions of employment as outlined in your existing contract dated 6th December 1999, remain the same.”
Of particular significance to the issues in the appeal was a variation letter dated 11 January 2005 (the 2005 letter) following the appellant’s July 2004 remuneration review and which was relevantly in the following terms:
“Following the July 2004 remuneration review I wish to confirm your new remuneration details.
HCN now uses a ‘total remuneration’ approach for packaging salaries and benefits.
Effective 1 July 2004, you will receive a total fixed remuneration package (‘TFRP’) of $227,788.20 per annum, which is inclusive of fringe benefits taxation, or other tax or government impost payable upon any benefit taken in lieu of salary, and compulsory employer superannuation contributions in accordance with HCN’s obligations from time to time.
…
Your TFRP currently consists of the following breakdown:
____________________________________________
Base $208,980.00
Superannuation (9%) $18,808.20
Total (Gross) $227,788.20…
HCN will contribute superannuation in accordance with the applicable superannuation legislation, to a complying superannuation fund.
…
Remuneration Review
…
All other terms and conditions of employment as outlined in your existing contract dated 6 December 1999, and subsequent letters dated 26 November 2002 and 10 October 2003 remain the same.”
As appears from the 1999 letter, there was incorporated into the appellant’s contract of employment with the respondent, the latter’s document entitled “Terms and Conditions of Employment” referred to in that letter as being dated December 1999. The evidence established that there was no such document so dated. However, there was a document entitled “Terms and Conditions of Employment” dated August 1995 (the 1995 Conditions). It initially appeared common ground between the parties that that was the document referred to in the 1999 letter. Relevantly it did not contain any terms or conditions bearing upon the issues in the appeal.
In January 2000, the respondent promulgated a document entitled “Terms and Conditions of Employment” (the 2000 Conditions) which was no doubt intended to take the place of the 1995 Conditions. The coversheet of that document stated that
“The Company and all of the employees of the Company are parties to this agreement and shall be bound by the Terms and Conditions herein stated except to the extent varied by separate agreement or by the operation of any law or industrial award.”
Unlike the 1995 Conditions it contained the following provision under the heading “POLICIES”:
“Employees are expected to abide by all policies published by the Company’s Board from time to time, including without limitation the Company’s policies concerning trading in shares and inside information.”
The appellant, amongst others, was in early 2000, party to the drafting of a document entitled “Redundancy Policy”, the first and only version of which was dated 9 August 2000 (the Policy). Its provisions relevant to this appeal were as follows:
“Background
Redundancy is termination of an employment contract by the Company following the Company’s decision that the job being performed by the employee is abolished and the employee is surplus. This can arise from many situations such as introduction of technological change, economic downturns, company mergers, take-overs or restructuring.
There are many issues to be taken into consideration in reaching the decision to offer a redundancy package to an employee. …
The policy outlines Health Communication Network’s approach to managing employee redundancy.
Policy
1. Health Communication Network recognises that redundancy has a significant impact on the individual employee made redundant and will aim to
· ….
· Provide an appropriate redundancy payment
· …
· …
2.Redundancy packages are offered [where] the Company decides to abolish specific permanent jobs.
3.Temporary and casual employees are not covered by this policy. …
4.Health Communication Network will, as a minimum, meet its statutory requirements with respect to redundancy payments. Given the differences between the various states and territories within Australia regarding these, the following schedule shall be adopted by the Company for all Australian-based employees.
| Period of Continuous Service | Redundancy Payment |
| … | |
| 5 years but less than 6 years | 3.5 months |
These amounts do not include payment in lieu of notice for the redundancy nor any payment for outstanding leave entitlements or salary.
3.A month’s payment will be the standard gross monthly payment made to the employee, based on their usual hours of work, even if these are not standard hours. It will include any allowances normally paid …
…
6.To arrive at the employee’s Eligible Termination Payment (ETP) for taxation purposes, the redundancy payment together with the payment in lieu of notice will be combined to form the ETP. …”
The evidence before the primary judge was that between October 2000 and February 2005 approximately 33 employees were made redundant and received redundancy pay pursuant to the Policy. Ms Sonia Johnson, the respondent’s Human Resources Manager, deposed that the Policy was applied to every case where an employee was made redundant during the period referred to.
According to an email dated 28 November 2004 from Ms Johnson to the appellant, the respondent did not have a “clear published redundancy policy” although it had consistently applied the draft policy to all redundancies. It had not been published to employees on the intranet as the respondent wished to have the right to decline to apply it “in hard times”. However, to protect the employees, Ms Johnson considered that it was time to place the Policy on the intranet as the respondent’s redundancy policy. Her email continued:
“Executives have the 6 month term clause in their contracts but staff do not have any clear redundancy entitlements if we don’t publish it. Of course, if we do publish it we are committed to it going forward if we stay as HCN in good times and bad.”
The email then asked the appellant whether she should make the Policy official by placing it on the intranet.
By email of the same date, the appellant advised Ms Johnson that he wished to discuss the implications of her suggestion. He said
“I am not sure that staff would be protected by putting the policy on the intranet however it is a policy that we have consistently applied in recent years and so it can’t do any harm to do what you are suggesting.”
The appellant copied his email to Ms Johnson to the respondent’s Company Secretary and General Counsel, Mr Richard Ulrich. In his affidavit (he was not cross-examined) Mr Ulrich deposed that it was his understanding that the Policy applied to all employees including executives. Nevertheless he referred to the Policy as a “practice” as he understood that, although it had not been formally adopted by the respondent’s Board, it had been applied to all employees if and when they were made redundant in accordance with its terms.
In early 2005 the respondent was taken over by Primary Health Care Limited (PHC) and on 24 February 2005 it was delisted from the Australian Stock Exchange. The Chief Executive Officer of PHC was Dr Edmond Bateman and its Chief Operating Officer was Mr James Bateman, his son. Subsequent to the takeover, PHC’s management team undertook a review of all aspects of the respondent’s business (the review). According to Mr Bateman, as a result of the review it was decided to make a number of changes including the termination of the employment of a number of the respondent’s employees including the appellant and his immediate superior, Mr Michael Gregg, the respondent’s Chief Executive Officer.
Accordingly, on 12 April 2005 Mr Bateman informed the appellant that he would be receiving a letter notifying him of the termination of his employment and giving him six month’s notice. Mr Bateman indicated that the appellant would be expected to “work out your notice period”. When the appellant asked whether he would be receiving a redundancy payment, he was informed that he was not entitled to any such payment. There was a conflict in the testimony of the appellant and Mr Bateman as to some aspects of the conversation which then occurred, which his Honour did not resolve. Thus, although Mr Bateman acknowledged that the appellant had been co-operative and helpful during the review, he denied the following evidence of the appellant deposed to in para 12 and 13 of his affidavit sworn 17 March 2006:
“11.On Tuesday, 12 April 2005, Mr James Bateman …said ‘In accordance with your contracts, I am giving you six months notice as from today’.
12.I asked him ‘What does that mean? Have I done something wrong? Have I performed badly or not co-operated in the review of changes that have been made? He replied, ‘No, I’m just giving you notice’.
13.I then said to him ‘Well, that means I’m being made redundant’. He replied ‘No, it’s just what normally happens to the top people after an acquisition’. "
Thereafter the appellant received a letter signed by Dr Bateman dated 11 April 2005 which, relevantly, stated as follows:
“We hereby give you notice of termination of employment with your last day being 10 October 2005.
At this time, we wish you to continue to work your period of notice.”
Mr Bateman’s evidence was that on the evening of 12 April 2005 he observed Mr Gregg’s personal assistant removing documents from Mr Gregg’s office and placing them in a locked “To be shredded” bin. In addition he observed the appellant and Mr Gregg in a number of closed-door meetings which he regarded as unusual. These incidents caused him concern. After discussing his concerns with his father, Dr Bateman, it was decided to immediately terminate the employment of the appellant and Mr Gregg the following day “to prevent damage to the business” of the respondent.
Accordingly, during the afternoon of 13 April 2005 Mr Bateman met with the appellant and read out a letter advising of the immediate termination of his employment. He was then asked to return all property of the respondent in his possession such as mobile phones, personal digital assistants, keys etc. According to Mr Bateman, the appellant again asked whether he would receive a redundancy payment to which Mr Bateman responded
“You will be paid in accordance with the letter you have just been given.”
That letter relevantly provided as follows
“I refer to our letter dated 11 April 2005 in relation to the Notice of Termination of your employment with the company (‘the Notice’) and subsequent events.
I now require you to vacate the offices of HCN immediately.
…
We will comply with our obligations under your employment contract.”
The appellant’s evidence was that first, he had nothing to do with the alleged shredding of documents from Mr Gregg’s office and, second, that the closed-door meeting which caused Mr Bateman concern was perfectly innocent. He denied that he was guilty of any conduct which might possibly damage the respondent’s business and that Mr Bateman had no grounds for peremptorily dismissing him. He therefore asserted that he had been made redundant and was accordingly entitled to a redundancy payment in accordance with the Policy.
The appellant also gave evidence that after the takeover and prior to his dismissal, more and more of his responsibilities had been taken over by others and that after his dismissal no-one was appointed to the position of Chief Financial Officer of the respondent. He therefore claimed that in terms of the Policy, the job which he performed had been abolished and he had therefore become “surplus”. Messrs. Bateman denied this but the primary judge did not resolve the issue.
The decision of the primary judge
After stating the facts in summary form, the primary judge articulated his reasons for his decision in the following paragraphs of his judgment:
“13.I have no doubt that the plaintiff genuinely believes that he is entitled to benefits from the company redundancy policy. I find as a fact that before the takeover of the first defendant, it had adopted the redundancy policy contained in exhibit A and that the plaintiff was entitled to the benefits of that policy. If he had been made redundant, the plaintiff would have been entitled to the payment of redundancy benefits. However, in my opinion, he was entitled to a redundancy payment only if he could show that he was made redundant in accordance with the terms of policy.
14.‘Redundancy’ is defined in the company’s policy document, to which I have already referred, as ‘termination of an employment contract by the company following the company’s decision that the job being performed by the employee is abolished and the employee is surplus’.
15.What the plaintiff believes, is that many other employees were given benefits under this policy, and he also should have been given these benefits. However, the directors of the company decided to dismiss him. I accept the evidence of Dr Edmund Bateman that he decided to do this because he decided that the plaintiff was not acting accordance with his duties as an employee. He was not making the plaintiff redundant, by abolishing his position. He was dismissing the plaintiff for what he saw as misconduct.
16.There is no doubt that the plaintiff believes that Dr Bateman was making him redundant, but the facts are otherwise. The action is not one for unlawful dismissal and the plaintiff is entitled to a verdict in relation to this matter only if he can show on the balance of probabilities that he was made redundant and was not paid for that redundancy. In my opinion, he was not made redundant, but was dismissed.
17.His second claim is to the payment of the employer’s superannuation contribution assurance to The Superannuation Guarantee (Administration) Act, 1992.
18.Dr Bateman required him to leave the premises immediately and paid him 6 months pay in lieu of notice. If he had continued to remain in the premises and been paid for six months work, the employer would have had to pay the superannuation contribution provided for under this legislation. However, that requirement extends to an obligation to pay a contribution in respect of salary or wages paid. A payment of money in lieu of notice, in my opinion, is not a payment of salary or wages. Accordingly, there the plaintiff has no legal entitlement to the payment of the superannuation contribution.”
The issues on the appeal
The redundancy issue
The primary judge made two findings of relevance to the appeal with respect to this issue. The first (at [13]) was that he found “as a fact” that the respondent had adopted the Policy and that the appellant was entitled to the benefits of that Policy if in fact he had been made redundant in accordance with its terms. Although his Honour did not expressly state that the appellant was entitled to the benefits of the Policy because he found it to be a term of his contract of employment, nonetheless it is clear from the transcript of the argument before him that he was “convinced” that the Policy formed part of the appellant’s contract of employment, being “a term of it”.
The respondent’s Notice of Contention challenged that finding, asserting that the Policy was neither expressly nor impliedly incorporated into the appellant’s contract of employment. It further contended that his Honour provided no reasons for his finding that it was so incorporated, a contention which is regrettably correct.
The second finding (at [15] and [16]) was that because Dr Bateman dismissed the appellant for what he perceived to be his misconduct, it followed that the appellant could not have been made redundant even if there were no grounds for such a dismissal. By dismissing him for perceived misconduct, Dr Bateman was not making the appellant redundant by abolishing his position. In other words, his Honour considered that the appellant was either dismissed for perceived misconduct or his contract terminated because he was redundant, these categories being mutually exclusive.
The appellant submitted that they were not and that his Honour was bound to determine whether he was in fact guilty of misconduct justifying his summary dismissal and, if he was not, whether objectively he had been made redundant because his position as Chief Financial Officer had been abolished, it being contended that after his dismissal that position was never refilled.
Whatever the merits of the foregoing submission of the appellant which in my view has a great deal of force, any error by the primary judge with respect to that matter is only relevant if the antecedent question raised by the respondent’s Notice of Contention is determined in the appellant’s favour. In other words, whether or not the appellant was in fact made redundant within the meaning of the Policy can only be determined if the Policy was in fact incorporated into or otherwise part of the appellant’s contract of employment. To that antecedent issue I now turn.
The respondent submitted that:
(a)the appellant’s contract of employment relevantly comprised the 1999 letter, the 2002 letter, the 1995 Conditions and the 2005 letter.
(b)the Policy did not come into existence until August 2000 and was not referred to, either expressly or impliedly, in any of the documents referred to in (a) above.
(c)the only document which might be construed as referring to the Policy was the 2000 Conditions, but those were never adopted as part of the appellant’s contract of employment in substitution for the 1995 Conditions. It was only the latter that the appellant acknowledged in writing as forming part of his contract of employment; he had never acknowledged that those terms and conditions had been replaced by the 2000 Conditions.
(d)it therefore followed that there was no express incorporation of the Policy into the appellant’s contract of employment.
The respondent further contended that:
(a)at common law contractual terms can be implied either by law or in fact; the latter relates to terms implied in accordance with the assumed intention of the parties by the application of what has been referred to as the business efficacy test: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266; Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347. Such terms are unique to the particular contract in question: Codelfa at 345; Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 448.
(b)terms implied by law are, in general, implied in all contracts of a particular class or which answer a given description: Codelfa at 345; Byrne at 448;.
(c)there is no warrant for the proposition that there is implied by law in all contracts of employment a provision for the making of a special payment by the employer to the employee where the employer terminates the employment because the employee’s services have become redundant to the employer’s needs: Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; (2000) 177 ALR 193 at 204 [63] per Lindgren J (dissenting).
(d)although a contractual term may be implied on the basis of custom or usage, this is only so where there is evidence that the custom
“is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract.”
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur (Australia) Ltd (1986) 160 CLR 226 at 236; Byrne at 423; 440 where McHugh and Gummow JJ observed that the existence of a custom or usage sufficient to justify the implication of a term into a contract rests on the presumed intention of the parties with the result that it must be so well-known and acquiesced in that persons making a contract in the situation of the parties can reasonably be presumed to have imported it into their contract.
In reply, the appellant acknowledged that the Policy was neither expressly incorporated into his contract of employment nor implied either under the business efficacy principle or by way of custom or usage. Rather, the appellant submitted that the Policy became a term of the appellant’s contract of employment by operation of law. The factual bases in support of that submission were asserted to be the following:
The appellant was party to the drafting of the Policy in August 2000 in order to address the situation where the respondent had taken over several other companies and needed to terminate the contracts of employment of a number of surplus employees;
Except for temporary and casual employees and those on fixed term contracts, the Policy in its terms applied to all employees at all levels in all circumstances of redundancy;
Payments under the Policy were exclusive of and paid in addition to, notice and all other entitlements;
The Policy was applied consistently to all employees up to the time that the respondent was taken over by PHC and in particular was applied to between 28-33 employees including executive staff who had been made redundant but paid in accordance with the Policy prior to the takeover;
After the takeover the Policy was also applied to the termination of the employment contracts of a number of employees excluding only the appellant and the respondent’s Managing Director, Mr Gregg;
Those whose responsibility it was to terminate staff were aware of the Policy as was the respondent’s Board although it was never formally adopted by the Board;
Although the Policy was not published on the staff intranet, it was commonly known to at least those employees who were beneficiaries of the Policy and was consistently applied to all those employees made redundant.
As I have noted, the appellant’s case was founded on the incorporation of the Policy into his contract of employment by operation of law. However, reliance by the appellant upon the factual bases referred to in the preceding paragraph and said to support an implication in law illustrates the flaw in the appellant’s argument. This is because those facts could only be relevant to a submission that the Policy was either expressly incorporated as a term of the contract or implied therein as a matter of fact in accordance with the business efficacy test referred to in [31(a)] above. Implication in law of a redundancy policy could not apply only to the appellant’s contract but would be implied as a legal incident of all employment contracts: Liverpool City Council v Irwin [1977] AC 239; Codelfa at 345; Byrne at 451-452. In other words, implication in law would result in a general right of all employees to an entitlement to redundancy, a proposition which, at least at the present time, should be rejected (see [31(c)] above).
I interpolate here that the foregoing constituted the appellant’s submissions at the time the Court reserved judgment in the appeal. However, in a subsequent addendum to his written submissions provided to the Court without its leave, the appellant drew attention to the notation on the coversheet of the document comprising the 2000 Conditions (see [10] above) and to the trial transcript references to the tendering and admission into evidence of that document. It was in effect submitted that those references, combined with the coversheet notation, justified a finding that the 2000 Conditions had been incorporated into the appellant’s contract of employment. If so, that contract included the policy clause referred to in [11] above and, therefore, on the authority of Riverwood resulted in the Policy also being incorporated into the contract.
As leave to file the addendum was neither sought nor granted, authority requires that it should be ignored: Carr v Finance Corporation of Australia Ltd [No 1] (1981) 147 CLR 246 at 258 per Mason J; In the matter of an application by the Chief Commissioner of Police (Vic) [2005] HCA 18; (2005) 79 ALJR 881 at 890 [53]-[54] per Kirby J; Dwyer v Commonwealth of Australia (1995) 31 ATR 48; Kirwan v Cresvale Far East Ltd (In liq) [2002] NSWCA 395 at [340] per Young CJ in Eq; Chapmann v Caska [2005] NSWCA 113 at [19] per Beazley, Giles and Tobias JJA. As Mason J said in Carr and Kirby J in ex parte the Commissioner of Police, the notion that supplementary submissions can be filed without leave is misconceived and this is so even if the other party to the proceedings consents. It should not occur.
However, even if I were prepared to entertain these submissions I would reject them. First, the transcript references relied on by the appellant do not contain any concession by then counsel for the respondent that the 2000 Conditions were the “Terms and Conditions of Employment dated December 1999” referred to in the 1999 letter.
Second, the notation on the coversheet to the 2000 Conditions had no operative effect with respect to a contract of employment which pre-dated those Conditions (such as that of the appellant) unless and until the employee concerned expressly or impliedly agreed to their incorporation into his or her contract.
Third, and critically, there was no evidence from the appellant that the “enclosed Terms and Conditions of Employment” which he had read and accepted when he signed a duplicate copy of the 1999 letter on 10 December 1999 were the 2000 Conditions rather than the 1995 Conditions or that he had otherwise agreed to the incorporation of the former into his contract of employment in substitution for the latter. As the onus was upon the appellant to establish the relevant terms and conditions of that contract, that onus was not discharged insofar as it was sought to allege that the 2000 Conditions were the “Terms and Conditions of employment dated December 1999” referred to in the 1999 letter or otherwise had become incorporated therein.
I return now to the appellant’s primary case and a consideration of the authorities upon which the parties’ placed reliance. Byrne was a case where two airport baggage handlers had been dismissed from their employment by an airline operator for pilfering. They alleged that the dismissals were in breach of an award made under the Industrial Relations Act 1988 (Cth). They sought damages at common law for, inter alia, breach of contract. It was held first, that the obligation of the employer to observe the award arose by force of the statute and not because it was imported into the plaintiffs’ contracts of employment independently of the parties’ intention. Second, that the relevant provision of the award was not an implied term of the contracts of employment because its implication was not necessary for their reasonable and effective operation in all the circumstances; and third, that the evidence did not establish that there was any custom or usage justifying the importation of that provision as a term of the contracts of employment or that the parties had contracted upon the basis that there was.
In their joint judgment, McHugh and Gummow JJ (at 438) referred to the following remarks of Hobhouse J in Alexander v Standard Telephones & Cables Ltd [1991] IRLR 286 at 292 where his Lordship said (omitting citations):
"The so-called 'normative effect' by which it can be inferred that provisions of collective agreements have become part of individual contracts of employment is now well recognised in employment law (…). However, serious difficulties still arise because the principle still has to be one of incorporation into the individual contracts of employment and the extraction of a recognisable contractual intent as between the individual employee and his employer. The mere existence of collective agreements which are relevant to the employee and his employment does not include a contractual intent (…). The contractual intent has to be found in the individual contract of employment and very often the evidence will not be sufficient to establish such an intent in a manner which satisfies accepted contractual criteria and satisfies ordinary criteria of certainty."
Apart from an implied term based upon custom or usage on the one hand and upon the business efficacy principle on the other, it was contended in Byrne that employment contracts were a class of contract whose inherent nature required, as a matter of law, incorporation of an obligation upon the employer in terms of the relevant provisions of the award. In other words, it was submitted that those provisions were imported as a term of the contract of employment independently of the intention of the parties. McHugh and Gummow JJ rejected this submission. They observed (at 448) that in contrast to a term implied by application of what they referred to as the business efficacy test and which was unique to the particular contract in question, terms implied by law were, in general, implied in all contracts of a particular class or which answer a given description.
Their Honours (at 449) acknowledged that there was force in the suggestion that what now would be classified as terms implied by law in particular classes of contract had their origin as implications based on the intentions of the parties but later became so much a part of the common understanding as to be imported into all transactions of the particular description.
Their Honours also referred (at 451-452) to the decision of the House of Lords in Scally v Southern Health & Social Services Board [1992] 1 AC 294 which concerned an action by a medical practitioner whose terms of employment with the Board had been negotiated by representatives of his professional body. His action against the Board alleged breach of contract in respect of the failure of the Board to inform him of certain rights which he had enjoyed but which had been exercisable only within a particular period. The question which arose was whether the law would imply into his contract of employment an obligation on the Board to notify him of the rights in question. Was the term a “necessary incident” of a definable category of contractual relationship?
Their Honours noted (at 452) that the House posed this question and answered it in the affirmative. According to their Honours, their Lordships held that:
“Where a contract of employment, negotiated between employers and a representative body contained a particular term conferring upon the employee a valuable right contingent upon his or her acting as required to obtain the benefit, by which the employee could not be expected to be aware unless the term was brought to the attention of the employee, there is an implied obligation on the employer to take reasonable steps to publicise the term.”
In Byrne the plaintiffs relied upon this concept of necessity. They submitted that employment contracts were a well-recognised “class” of contract and that the law imported various incidents into the relationship of employment such as the entitlement of the employer to terminate the employment at will on giving reasonable notice and to dismiss summarily for misconduct.
However, their Honours held (at 452-453) that there was no “necessity” to import into the plaintiff’s contracts of employment the relevant provisions of the award as was the case in Scally. There was nothing to suggest that those contracts were not workable and effective before the introduction into the award of the provisions in question. It was not a case where such provisions were necessary “lest the contract be deprived of its substance, seriously undermined or drastically devalued in an important respect”.
These observations are, in my opinion, directly applicable to the present case. As is acknowledged in Macken & Ors “The Law of Employment” 5th ed (2002), Lawbook Co at 190, the entitlement to severance or redundancy pay may arise as a result of the incorporation into the contract of employment of a severance pay provision in a company’s policy or procedural manual. Alternatively, an employee may have a contractual entitlement to severance pay on the basis that the terms of a redundancy agreement reached between the employer and the relevant union formed part of the terms and conditions of his or her employment.
Thus in Riverwood the relevant contract of employment provided, amongst other things, that the employee agreed
“to abide by all Company Policies and Practices currently in place (in its Policies & Procedures Manual], any alterations made to them, and any new ones introduced [referred to in the judgments as the policies clause].”
After the employee, McCormick, had executed his contract of employment, the employer inserted a redundancy policy into its manual. It provided for certain payments to be made to employees whose services were terminated on the ground of redundancy. The employer terminated McCormick’s employment on the ground of redundancy but declined to make a payment to him pursuant to the policy. He therefore commenced proceedings in the Federal Court of Australia against the employer alleging, inter alia, breach of contract.
North and Mansfield JJ held that the trial judge was correct when he found that the policies clause incorporated the manual into McGormick’s contract of employment by reference and that the contract contained an implied term that he would receive redundancy benefits if his position was made redundant.
Their Honours also held that the expression “abide by” in the policies clause embraced both compliance by the employee with the obligations imposed by the manual and an acceptance by the employee of the benefits conferred thereby.
I have already referred (in [30(c)] above) to the passage in the judgment of Lindgren J that there was no warrant for an implication by law into all contracts of employment of a provision for the making of redundancy payments. His Honour then determined whether in the case at hand, such a term was to be implied in fact, holding that although the parties could have agreed that the terms of the redundancy policy be incorporated into McCormick’s contract of employment, they did not in fact do so.
On the other hand the majority, North and Mansfield JJ, agreed with the trial judge that the policies clause in McCormick’s contract of employment imposed an obligation upon him to abide by the policies and procedures in place at the company from time to time. As a matter of construction the clause was broad enough to impose an obligation upon the employer to abide by the terms and conditions in the policies and procedures documents because the vast majority of obligations imposed were upon the company rather than the employee. Their Honours rejected the submission on behalf of the employer that the obligation of the employee to “abide by” the company policies and practices involved an acceptance by McCormick of all the burdens contained in the manual but did not entitle him to receive the benefits referred to therein.
Accordingly, the redundancy provision was incorporated by reference into the contract of employment. It was therefore unnecessary for their Honours to consider whether the provision was an implied term of that contract whether in law or in fact.
In my opinion the decision in Riverwood is of no assistance to the appellant as it was not suggested (until the appellant, without leave, filed an addendum to his written submissions after judgment in the appeal had been reserved) that the 2000 Conditions (as distinct from the Policy) were incorporated into his contract of employment. Only that document contained a provision similar to the policies clause in McCormick’s contract of employment.
On the other hand, the statement of Lindgren J to which I have referred and with which, with respect, I agree is consistent with the principles expounded by McHugh and Gummow JJ in Byrne which, when applied to a case such as the present, rejects the implication by law of a term into all contracts of employment that the employee should be entitled to redundancy payments in accordance with an adopted redundancy policy of his or her employer.
Although redundancy policies may be becoming more frequent, they certainly are not universal. In the present case, there can be little doubt from the evidence that so far as the executives of the respondent responsible for the application of the Policy were concerned, they did not regard it as having contractual force. Those persons included the appellant.
Reliance was also placed by the appellant upon the decision of Hely J in Reynolds v Southcorp Wines Pty Ltd [2002] FCA 712; (2002) 122 FCR 301. In that case the respondent had employed the applicant for a number of years when he was invited to accept a new role for a three year term based interstate. He agreed to take up that role provided that his salary and other benefits would not be reduced and also that he would have a position with respondent when the role was over. An officer of the respondent confirmed these matters in a letter of offer subsequently received by the applicant. However, prior to the expiry of the three year term the applicant’s employment was terminated in circumstances of redundancy. He was informed that the respondent would provide him with a redundancy payment equivalent to 12 months salary which it did. At the time of the termination of his employment the respondent had in place a redundancy policy which was published on the intranet and available to all employees. Severance payments made to the applicant conformed with that policy.
However, the applicant instituted proceedings in the Federal Court against the respondent relating to the termination of his employment alleging that it was in breach of his contract of employment by making him redundant rather than re-employing him after the expiry of his three year term as had been promised.
Hely J having found that the termination of the applicant’s employment prior to the expiry of the three year term was in breach of his contract of employment, the question arose as to whether the severance payment made to him was required to be off-set against any damages to which he was otherwise entitled.
In dealing with this issue his Honour considered whether the applicant had a contractual entitlement to the severance payment arising by reason of the premature termination of his contract of employment. He said (at 313):
“56Little attention was paid in evidence or argument in the present case as to whether the 'Termination of Employment' policy of the respondent, or the benefits payable pursuant to that policy, were terms of the applicant's contract of employment. Subject to one matter to which I will shortly refer, the submissions of both parties appeared to proceed on the assumption that this was so. Severance provisions contained in an employer's policies or procedures manual may become incorporated into a contract of employment: The Law of Employment p 190. Whether or not that has occurred is a question of fact. The only relevant facts established in this respect by the evidence in this case are the terms of the policy itself, and that it was available to employees on the intranet. In addition, there is the fact that severance payments were made to the applicant which were consistent with the policy, without any specification that they were made ex gratia. That may amount to an admission (by conduct) of an entitlement.”
His Honour continued (at 314):
“62In my view, the Court can infer from the circumstances earlier referred to, and in particular from the fact that severance payments were made to the applicant in conformity with the 'Termination of Employment' policy without any suggestion that they were gratuitously made, that by a course of dealing between the respondent and its employee, the benefits for which the 'Termination of Employment' policy provided had become a term of the contract of employment. Whether or not this is so, it is legitimate to infer that the promised appointment to a position equivalent to, or better than, EGM-Finance was to be on the terms of the respondent's 'Termination of Employment' policy.”
The facts in Reynolds are significantly different to those in the present case. Hely J held that the redundancy policy became a term of the applicant’s contract of employment because first, the policy had been made available to all employees on the intranet (this had not occurred in the present case) and, second, severance payments in accordance with the policy had in fact been made to the applicant without any specification that they were being made ex gratia (in contrast to the present case where such payments were withheld).
Accordingly in Reynolds there was found to be a course of dealing between the employer and the employee which is missing on the facts of the present case. Even so, it is clear from Hely J’s approach in Reynolds that his Honour was dealing with the issue of whether the employer’s redundancy policy was a term of the applicant’s contract of employment on the basis not that such a term was implied by law as a legal incident of that class of contract but that it was an implied term of his contract by operation of the business efficacy rule.
As the appellant purportedly eschewed any implication in fact and relied only upon implication by operation of law, it would follow that the observations of Hely J in Reynolds are of no assistance to him. In any event, there was no relevant course of dealing between the appellant and the respondent that would support an implication based upon the presumed intention of the parties that the Policy was incorporated into the appellant’s contract of employment.
Accordingly, as there is no basis for the implication of the Policy as a term of the appellant’s contract of employment either as a matter of fact or of law, it follows that the primary judge erred in finding that the Policy was so incorporated. It follows that the respondent was not in breach of any term of the appellant’s contract of employment when it declined to make him a redundancy payment pursuant to the Policy, even assuming that he was in fact made redundant when his contract of employment was terminated and/or he was dismissed on 13 April 2005.
This being so, it follows that the primary judge’s decision to reject the appellant’s claim to be entitled to a redundancy payment pursuant to the Policy was correct, albeit for reasons that differ from those which he adopted.
The superannuation issue
In para 11 of his Statement of Liquidated Claim the appellant pleaded this claim in the following terms:
“[The respondents] have paid the [appellant] the equivalent of six month’s salary in lieu of notice (as well as some other entitlements) but, in breach of contract and of law, have failed to pay him his entitlement to redundancy pay under his contract; and have also failed to pay to the HESTA Superannuation Fund his entitlement to superannuation contribution in relation to the six month’s notice period.”
Pursuant to the particulars to para 11, the appellant claimed 9% of six month’s salary being 9% of one half of $208,980, that is, 9% of $104,490, namely, $9,404.10. The figure of $208,980 was the appellant’s base salary as per the 2005 letter.
Although there is a reference in para 11 of the Statement of Liquidated Claim to a contractual claim to the payment by the respondent of a superannuation contribution, nevertheless at trial the appellant’s case was opened to his Honour not upon the basis of a contractual claim for the superannuation payment but upon the basis that the appellant was entitled to an appropriate contribution to his superannuation pursuant to the provisions of the Superannuation Guarantee (Administration) Act 1992 (Cth) (the Act).
This position was confirmed in final addresses where counsel for the appellant initially submitted that under the Act there was a salary cap or limit of $110,000 upon which an employer’s superannuation contribution was to be calculated but that as a consequence of that cap the appellant was claiming 9% of his total base salary to which, so it was alleged, he was contractually entitled. This submission brought forth a response by then counsel for the respondent that no contractual entitlement had been pleaded, only an entitlement by statute. Counsel for the appellant then withdrew the submission that the appellant was contractually entitled to 9% of one half of the full amount of his salary and proceeded to address his Honour with respect to his statutory entitlement under the Act.
That the appellant confined his case before the primary judge to his statutory entitlement is confirmed by the manner in which his Honour dealt with the issue in [17] and [18] of his judgment (see [24] above).
Before this Court, however, the appellant renewed his claim to 9% of one half of his total salary of $208,980, accepting that if his claim was confined to one under the Act, then the maximum amount which the respondent would be obliged to contribute was the sum of $2,896 less any amount already paid on behalf of the appellant in the relevant quarter.
Although the respondent initially submitted that it was not open to the appellant to claim an entitlement to a superannuation contribution under his contract of employment as no contractual claim was pleaded, when referred to para 11 of the Statement of Liquidated Claim, that submission was withdrawn.
The respondent nevertheless submitted that as the appellant’s contract of employment required the respondent to make superannuation contributions to the trustee of a complying fund in accordance with the Act, that contribution could not be included in any payment in lieu of notice because it was not an amount that the respondent was liable to pay to the appellant personally as distinct from his superannuation fund.
Apart from this submission, the respondent raised no other argument in opposition to the payment of superannuation at 9% of one half of the appellant’s base remuneration of $208,980.
In my opinion the respondent’s submission should be rejected. Although the 2005 letter states that the respondent will contribute superannuation in accordance with the applicable superannuation legislation to a complying superannuation fund, there is no question that the appellant’s remuneration included a superannuation contribution which exceeded that mandated by the Act and which amounted to 9% of his base remuneration. So much is made clear from the terms of the 2005 letter itself where the total gross remuneration of the appellant is stated to be $227,788.20 made up of a base salary of $208,980 and superannuation of $18,808.20. The latter sum is 9% of the former sum.
It is important to observe that it would have been open to the appellant to require the respondent to only contribute superannuation in accordance with its statutory obligation. The fact that the appellant accepted a remuneration package which provided for the making of a superannuation contribution nearly twice the minimum amount which the respondent was required by law to contribute, indicates that the appellant “salary sacrificed” by accepting an increased superannuation payment and less “cash in hand”. Furthermore, if he had worked out his six month’s notice as initially required of him, there is no doubt that he would have earned six month’s salary and six month’s superannuation calculated in accordance with the terms of his contract of employment and which would have been paid to his complying superannuation fund.
Although it is correct that any such superannuation contribution must be paid to the appellant’s superannuation fund, nonetheless that is a payment made on behalf of the appellant entirely for his benefit and one which the respondent cannot avoid merely because it will not be payable to the appellant personally. The appellant has an entitlement to the payment of 9% of his base salary to his superannuation fund and is entitled to receive the benefit of that contribution where the respondent has not required him to work out his notice but has availed itself of its contractual right under the 2002 letter to make payment in lieu of notice.
Accordingly, the appellant is prima facie entitled to an order that the respondent pay the sum of $9,404.10 together with interest to the appellant’s account with the HESTA Superannuation Fund.
The respondent belatedly concedes the superannuation issue
Subsequent to having written this judgment, the Court was informed by senior counsel for the respondent that he had been instructed that his client would within 48 hours (now expired) make a payment to the appellant’s account with the HESTA Superannuation Fund of $9,404.10 together with interest at the appropriate rate up to the date of payment. He submitted that in these circumstances the Court ought to dismiss the appeal with respect to the superannuation issue with no order as to costs. If the Court was otherwise minded to order costs on that issue in favour of the appellant, then the respondent wished to be heard on that question.
The appellant responded to the foregoing, submitting that the appeal should nevertheless be allowed on the superannuation issue and an appropriate cost order made in his favour. He would therefore regard any payment made by the respondent to the HESTA Superannuation Fund as a payment in advance of judgment.
The open statement on behalf of the respondent that it proposed to pay the disputed superannuation contribution claimed by the appellant amounts to a concession that that contribution was one to which the appellant was at all times entitled. In these circumstances, as at present advised, I see no reason why the appellant should not have his costs with respect to the litigation of that issue both in the District Court and on the appeal. Whether those costs or any of them should be paid on an indemnity basis is, given the failure of the appellant to pursue his contractual claim for superannuation contribution in the District Court, a matter upon which the parties may, if they so decide, make further submissions.
Conclusion
For the foregoing reasons the respondent succeeds on its Notice of Contention which results in the appellant’s appeal with respect to his Honour’s finding on the redundancy issue being rejected. On the other hand, the appellant is entitled to succeed on the superannuation issue. However, as the Court has now been informed that the respondent has paid the correct amount due to the HESTA Superannuation Fund, it is both unnecessary and inappropriate to formally make an order with respect to the respondent’s liability to make that payment. The Proper order will be to dismiss the appeal but such an order will not prejudice either parties’ position with respect to the costs.
As to the costs of the appeal generally, the major issue debated before the Court was the redundancy issue upon which the appellant has failed. However, the appellant having succeeded on the superannuation issue is, as I have indicated above, prima facie entitled to at least an order that the respondent pay some part of his costs of the appeal. In my opinion an appropriate order would be that the respondent pay one-fifth of the appellant’s costs of the appeal possibly on an indemnity basis. However, as I have indicated, the parties should have the opportunity of filing submissions on the question of costs generally.
At this stage, therefore, I would propose no more than to direct the parties within 14 days of the date of this judgment to file written submissions as to the costs of the appeal and the costs of litigating the superannuation issue in the District Court including whether any such costs should be paid on an indemnity basis.
McCOLL JA: I agree with Tobias JA.
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