Windross v Transact Communications Pty Ltd
[2002] FMCA 145
•20 August 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WINDROSS v TRANSACT COMMUNCATIONS PTY LTD | [2002] FMCA 145 |
| TRADE PRACTICES – Misleading and deceptive conduct – misleading conduct in relation to employment – representations as to the duration of employment. TORTS – Negligent misstatement. CONTRACT – Breach – implied and express terms as to notice of termination. Acts Interpretation Act 1901 (Cth), s.22 Australian National Hotels Pty Ltd v Jager [2000] TASSC 43 |
Thorpe v Football League [1974] 10 SASR 17
Westen v Union des Assurances de Paris (unreported, Industrial Relations Court of Australia, per Madgwick J, 17 December 1996)
Applicant: | KEVIN WINDROSS |
| Respondent: | TRANSACT COMMUNICATIONS PTY LTD |
| File No: | CZ7 of 2002 |
| Delivered on: | 20 August 2002 |
Delivered at: | Sydney, via videolink to Canberra |
| Hearing Dates: | 16 July & 17 July 2002 |
| Judgment of: | Driver FM |
REPRESENTATION
| Counsel for the Applicant: | Mr W Arthur |
| Solicitors for the Applicant: | Dibbs Barker Gosling |
| Counsel for the Respondent: | Mr C Robinson |
| Solicitors for the Respondent: | Chamberlains Law Firm |
ORDERS
The respondent is to pay the applicant $21,050 as damages for breach of contract, including pre-judgment interest of $1,507 up to and including 23 August 2002.
The sum of $2,493 shall be deducted from the above damages award by the respondent and remitted to the Australian Taxation Office.
The respondent is to pay the applicant’s costs and disbursements of and incidental to the application, in accordance with Schedule 1 to the Federal Magistrates Court Rules 2001 (Cth).
THE COURT CERTIFIES
That for the purposes of the Federal Magistrates Court Rules, it was reasonable for the applicant to employ an advocate for the hearing on 16 and 17 July 2002.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CZ7 of 2002
| KEVIN WINDROSS |
Applicant
And
| TRANSACT COMMUNICATIONS PTY LTD |
Respondent
AMENDED REASONS FOR JUDGMENT
(amended under the slip rule)
Introduction
The applicant is a former contract employee of the respondent. The application claims damages for alleged breaches of ss.52, 53B and 51A of the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”) as well as alleged breaches of ss.11 and 16 of the Fair Trading Act 1992 (ACT). The latter claim was brought as an associated claim: Federal Magistrates Act 1999 (Cth), s.18. The applicant also claims damages for negligent misstatement and for alleged breaches of both express and implied terms of his employment contract. Those claims were brought in the accrued jurisdiction of the Court. The applicant claims that he was induced to enter into the employment contract by representations that he would be employed for a period of at least two to three years. The applicant’s employment was terminated by the respondent after 16 months. The applicant claims that this termination was a breach of express terms of the contract regarding payment in lieu of notice and an implied term of reasonable notice.
The respondent denies that any representations made to the applicant prior to his entering into the employment contract were false and/or misleading and asserts that the termination of his employment was in accordance with the terms of his contract. The respondent denies that there was an implied term of reasonable notice. The respondent asserts that the termination of the applicant was in accordance with the express terms of the contract.
Background
The undisputed facts are that the applicant responded to an advertisement in The Canberra Times dated 18 March 2000 in which the respondent sought project officers and project leaders for the purposes of a cable rollout in the ACT. The respondent is in the business of providing digital broadband communications by cable. The applicant expressed interest in a project leader position and was interviewed by Mr Robert O’Hara and Mr Neville Smith on 14 April 2000 following an initial meeting between the applicant and Mr O’Hara on 31 March 2000.
Following the interview on 14 April 2000 the applicant commenced work through his company, Shared Vision Solutions Pty Ltd for the respondent on a short term basis from 19 May 2000.
The following day the applicant met with Mr Smith again and it was arranged that the applicant would become an employee of the respondent after he had wound down the operations of his company (there were a number of other projects being undertaken by the applicant through his company that needed to be completed). The applicant received a formal letter of offer of employment from the respondent on 14 June 2000, the letter being dated the same day. This letter, once accepted by the respondent, formed the employment contract between the parties.
Clause 17 of the letter of offer dealt with termination. The clause provided as follows:
(1)TransACT may terminate your employment summarily and without notice if you:
(a)are guilty of serious misconduct;
(b)act in a way which in the reasonable opinion of TransACT may injure or be likely to injure the business or reputation of TransACT;
(c)commit a material breach of this agreement;
(d)are convicted of a serious criminal offence; or
(e)are negligent or incompetent in the performance of your duties.
(2)Either party may terminate the employment by giving to the other party not less than one month’s written notice.
(3)In the event that notice is given by either party pursuant to clause 17(2), TransACT may in its absolute discretion, elect to:
(a)require you to continue to work for part or the whole of that notice period;
(b)continue to pay your remuneration but not require you to attend for work during a part or the whole of the notice period. As you will remain an employee during the notice period, you must not, without TransACT’s prior written consent, set yourself up or engage in private business or undertake other employment in direct or indirect competition with TransACT; or
(c)make a payment in lieu of the unworked period of the notice, such payment to be calculated by reference to your remuneration at the date of cessation of your employment.
(4)Immediately upon the termination of your employment you shall deliver up to TransACT all client lists, correspondence, documentation, papers, records, motor vehicles, charge or credit cards, security keys and all other property of TransACT which may be in your possession or under your control.
The applicant and Mr O’Hara met again on 15 June 2000 and the two discussed clause 17 of the letter of offer. Very shortly after that meeting the applicant accepted the letter of offer and commenced as an employee of the respondent on 23 June 2000.
The applicant was employed under a period of probation which was completed on 23 September 2000. An initial review of his performance was completed in January 2001. He received a bonus payment in accordance with the terms of the employment contract.
In February or March 2001 Bradley Stephen Wells was appointed a project manager with the respondent and in May 2001 he was appointed project director of the cable rollout.
A second performance review of the applicant’s performance was completed in July 2001 and the applicant received a further performance bonus in accordance with his employment contract. In early August 2001 the then chief operating officer, Mr Anthony Ronald Milton, left the respondent and Mr Wells took over some of his duties, necessitating a closer working relationship between the applicant and Mr Wells. At around this time Mr Wells became concerned about the performance of a computerised project cost control system (CMS system) operated by the applicant and, as a related issue, the work performance of the applicant. Mr Wells arranged for Mr Barry John Pippin Munroe to conduct a review of the project cost control system in early September 2001.
Mr Wells first raised some of his concerns with the applicant on 22 August 2001 and on 21 September 2001 there was a further meeting between the applicant and Mr Wells during which the applicant was presented with a formal written warning about his performance. The applicant did not accept that warning and complained about it in writing on the same day to the then chief operating officer, Michael Del Gigante.
The applicant met with Mr Del Gigante on 24 September 2001. Following that meeting the employment of the applicant was terminated on the same day.
The applicant’s case
The applicant’s claims are set out in his application and in his further amended statement of claim, filed on 5 April 2002. The applicant relies upon his own affidavits, filed on 6 May 2002, 28 June 2002 and in court on 16 July 2002 as well as affidavits by James Best Young, filed on 6 May 2002 and 28 June 2002 as well as affidavits by Mr Munroe and Mr Milton, filed on 28 June 2002.
The applicant and Mr Munroe were cross-examined on their affidavits.
In his first affidavit the applicant deposes that he was alerted to the possibility of a position with the respondent by Mr Young. He says that he contacted Mr O’Hara by telephone and met with him on 31 March 2000 when the two discussed the possibility of a position. The applicant deposes that Mr O’Hara, in this meeting, said the following words to him:
We are looking to fill positions at the senior executive level for a two to three year cable rollout project. The positions carry a substantial remuneration package.
The applicant explained to Mr O’Hara that he was interested in a position in Canberra for family reasons but that he did not wish to jeopardise the business of his company in a short term position or for a lesser remuneration than he was gaining through his company.
The applicant deposes that during his interview with Mr O’Hara and Mr Smith on 14 April 2000 Mr Smith made the following representation:
We are currently recruiting senior executives for the duration of the cable rollout. The rollout is expected to take at least two years. Or realistically it will take three years. However, while this is the expected rollout period there is a reasonably high risk factor as the project is always subject to funding. If the funding is withdrawn the project could collapse.
The applicant deposes that the nature of the work to be undertaken was discussed as well as the applicant’s personal and family circumstances. The applicant deposes that Mr Smith then made the following representation:
You’d be subject to an initial probationary period. If you get through that you’d be here for the duration of the cable rollout which will take at least two years and maybe three. We are prepared to pay around $90,000 per year, including $20,000 for a car. Bob O’Hara will be able to give you an indication of the terms and conditions that go with the job.
The applicant further deposes that on 20 April 2000 during his further meeting with Mr Smith it became clear that he would not be able to work permanently for the respondent through his company Shared Vision Solutions Pty Ltd. He then sought a higher salary more in line with the turnover in his company. The applicant deposes that on or around 15 June 2000 he discussed the letter of offer he received from the respondent the previous day. The applicant claims he sought an explanation of clause 17(2) of the letter of offer. The applicant deposes that he said to Mr O’Hara:
Can you explain to me the meaning of the termination clauses, particularly clause 17(2)? It’s my understanding that I’ll be here for at least two to three years.
The applicant deposes that Mr O’Hara responded as follows:
That clause is simply inserted to protect the shareholders if TransACT enters into receivership or in other situations which might arise where all the staff become redundant. The clause is a standard clause, it doesn’t mean anything. All the senior executives are employed for the duration of the rollout. Once you’re on board, you’ll be here for the duration.
The applicant deposes that on the strength of that representation he signed the letter of offer to establish the employment contract and commenced duties as an employee on 23 June 2000. The applicant further deposes as to his developing dispute with Mr Wells and his final discussion with Mr Del Gigante which led immediately to his termination. Under cross-examination, the applicant gave his evidence clearly and with authority. He impressed me as a thoughtful man with a generally reliable memory. He conceded under cross-examination that although his company generated gross revenue of approximately $130,000 in the financial year ended 30 June 2000 he drew a salary from the company of only $54,000 for that year. In addition, substantial expenses incurred by the company meant that only a marginal profit was generated.
The applicant was questioned about diary entries he made concerning his discussions with Mr O’Hara on 14 April and with Mr Smith on 20 April. He resisted suggestions that these diary entries may not have been made contemporaneously. The applicant conceded that he made no diary entry concerning the discussion he had with Mr O’Hara on 15 June 2000 when the two discussed the letter of offer. The applicant sought to explain the absence of any diary note about this discussion on the basis that he saw no need to make any note because he was satisfied with the explanation offered by Mr O’Hara.
The applicant also conceded that he had had a hostile conversation with a Ms Michelle Bain concerning a complaint from a supplier about payment delays in which he spoke angrily to Ms Bain. He conceded that when Ms Bain’s supervisor sought to speak to him about this matter he told the supervisor (Mr Pillage) to “fuck off”.
The applicant conceded that he had a poor working relationship with Mr Wells. He gave evidence that he had complained about Mr Wells to Mr Del Gigante but the latter had taken the side of Mr Wells and had terminated his employment.
The applicant gave evidence that he was shocked and upset by the manner of his termination and his abrupt exit from the premises of the respondent. He was required to gather up his personal possessions and was escorted from the premises on the day of his termination. The applicant said that he had never been treated in this way previously in his long employment history. The applicant also gave evidence that it had taken him approximately two years to rebuild the operations of his company which had been completely wound down during the initial phase of his engagement with the respondent.
Mr Munroe gave evidence by videolink from Brisbane concerning his review of the computerised project cost control system known as CMS. His evidence is that the CMS system operates properly but he conceded that incorrect data would be produced if incorrect or incomplete data were entered into the system.
The respondent’s case
The respondent filed a defence on 5 April 2002. It relies upon affidavits by Mr Wells and Mr O’Hara, filed on 12 June 2002 and an affidavit by Mr Smith, filed on 21 June 2002. Each of these deponents was cross-examined on their affidavit. Much of Mr Wells’ evidence related to his concerns about the CMS system and the applicant’s work performance, in particular his use of the CMS system. He gave crisp, concise and clear answers to questions. In answer to a question from me Mr Wells told me that he is an ex army man and that he was extremely concerned by the applicant’s challenge to his authority in September 2001. He told me that Mr Windross was sacked when he took matters into his own hands concerning the dispute between the two and went over his head to Mr Del Gigante. He also gave evidence that he was opposed to the payment of the second performance bonus to Mr Windross but that Mr Milton insisted upon it prior to his departure from the respondent.
Mr Smith deposed that in the course of his interview with the applicant on 14 April 2000 he said the following to the applicant:
We expect that the rollout will take two to three years. The position will last for the duration of the rollout… but I should say that the position, like all our jobs, is subject to further equity being injected into the company. If that doesn’t happen, and it is always on the cards, we could all be out of a job…
He deposed that the applicant appeared to be anxious to obtain a job with the respondent and appeared keen on getting a job in Canberra for family reasons.
Mr Smith rejected suggestions that he made any representation that the applicant would be employed for two to three years.
Mr O’Hara is the human resources manager of the respondent. He deposed that when he met the applicant on 31 March 2000 the applicant indicated to him that he was looking for a job in Canberra and that he told the applicant there were three contract manager positions available that carried a good salary. He deposed that he told the applicant that these positions would exist for around two to three years, depending on the duration of the rollout.
Mr O’Hara deposed that during the interview conducted on 14 April 2000 Mr Smith said that the jobs would last for the duration of the rollout and that that was expected to take two to three years. He deposed that once again the applicant expressed a keen desire to get work in Canberra for family reasons.
Mr O’Hara deposed that Mr Windross came to see him in mid June 2000 in his office and that he asked him a number of questions about the letter of offer that he had received. Mr O’Hara deposed that he said the following concerning clause 17(2):
It’s the same clause as in my contract and in everyone else’s with the exception of the executives, which are worded slightly differently… it is stock standard in the industry.
Mr O’Hara denies that he spoke the words attributed to him by Mr Windross. He was unshaken in that denial under cross-examination.
Mr O’Hara admitted that he was friendly with the applicant and admitted suggesting to him that he obtain legal advice when he spoke to him on the day of his dismissal.
In answer to questions from me Mr O’Hara stated that the period of notice given to employees pursuant to clause 17(2) varied. Sometimes the period of notice was the minimum period of one month, as in the case of the applicant. On other occasions a longer period of notice was given, including a period of three months given to a Ms Barry who was employed at a similar level to the applicant.
Mr O’Hara gave evidence that it was Mr Del Gigante who decided that that the applicant should be given the minimum period of notice of one month. He gave evidence that it was further decided that the applicant would receive payment in lieu of notice.
Consideration and findings
Much of the evidence in this matter was taken up with contested assertions about the work performance of the applicant and the performance of the CMS system. That evidence is essentially irrelevant. The applicant was terminated without reasons and his employment contract did not require that reasons be given. The reasons or lack of reasons for his termination are not in issue. What is in issue is whether the applicant was misled by the respondent about the period of time he could expect to be employed, whether the respondent was required to give a longer period of notice of termination to the applicant than one month and whether, even if one month was a sufficient period of notice, the applicant was paid all that he was entitled to pursuant to the contract of employment.
The applicant’s case is that misleading and false representations were made to him on three occasions, those being the discussion with Mr O’Hara on 31 March 2000, the interview on 14 April 2000 with Mr Smith and Mr O’Hara and the third being the discussion between the applicant and Mr O’Hara on 15 June 2000. The applicant’s case is that it was represented to him on each of these occasions that he would be employed for at least two and possibly three years and that these representations were false and misleading contrary to the Trade Practices Act and the Fair Trading Act. It is further alleged that the representations were made negligently.
There is no dispute that Mr O’Hara and Mr Smith represented to the applicant that staff were being sought by the respondent for the duration of the cable rollout in Canberra and that this rollout was expected to take two to three years. The only qualifications placed upon this representation were that the company required funding to undertake the rollout and that all positions were subject to that funding being received. Further, the positions were subject to a probation period.
There is no real dispute between the parties about what was said to the applicant on 31 March 2000 and on 14 April 2000. I find that the respondent through Mr O’Hara and Mr Smith represented to the applicant that should he be employed by the respondent he could, subject to the completion of probation and the company’s receipt of funding, expect in the ordinary course of things to be employed for between two to three years. There was nothing false or misleading in those representations. The respondent was clearly looking for staff for the duration of the cable rollout and intended that in the ordinary course staff would be retained for two to three years. There was nothing in those representations that could be taken to be a representation of tenure for a specified period. They were simply an expression of general intent concerning the duration of the job.
There is a contest of evidence about what was said by Mr O’Hara on 15 June 2000. Both Mr O’Hara and the applicant rely upon their memory as to what was said. Mr O’Hara kept no notes and the applicant made no diary note, in stark contrast to his diary notes of the earlier discussions on 31 March 2000 and 14 April 2000. The applicant impressed me as a cautious man who took care to document matters that were of concern to him for future reference. It is, therefore, surprising that he made no note of the discussion of 15 June 2000. I accept that he went to see Mr O’Hara on that day because he was concerned about the termination clause in his letter of offer. Following the representations in the two earlier discussions he had formed the view that he could expect in the ordinary course of things to be employed by the respondent for two to three years. It was apparent from the termination clause that he could be sacked on as little as one month’s notice. He sought clarification of that clause.
I also accept that the applicant was reassured by what he heard from Mr O’Hara because he entered into the contract of employment immediately, or very shortly, after that conversation. The applicant would have me believe that he was reassured because Mr O’Hara represented to him that notwithstanding the plain words of the termination clause he could expect his employment to continue for at least two to three years. However, I find it impossible to believe that the applicant would not have documented such an important qualification to the terms of his employment contract. It is far more likely that Mr O’Hara said what he claims to have said in his affidavit. That may have been sufficiently reassuring to the applicant to cause him to enter into the employment contract, on the basis that he was reassured that he was not being singled out in his employment contract and that he resigned himself to accept a term of the employment contract that he would almost certainly be unable to alter.
I find that the applicant entered into his employment contract with the respondent in the knowledge that his employment could be terminated on as little as one month’s notice without reasons. Although it is apparent that both the applicant and the respondent anticipated that in the ordinary course the employment of the applicant would run for two to three years, there was no representation made of tenure in the job for any specific term. There is a distinction between a representation concerning the duration of a position and a representation that the employee would hold the position for its duration: Sheldrick v WT Partnership [1998] FCA 1794. The applicant had found the offer of employment with the respondent highly attractive, both because of the attractive remuneration package offered, the fact that the employment was in Canberra, and the fact that the employment could run for two to three years. I find that the applicant decided to accept the risk that his employment might be terminated in a shorter period. At the time, that risk appeared small as there was no reason to expect that such an early termination would occur.
I find that while the representations made to the applicant on 31 March 2000 and 14 April 2000 concerning the anticipated duration of employment were a factor in the applicant’s decision to accept the contract of employment there was nothing false or misleading in those representations. They were accurate, honest and genuine expressions of general intent.
This case can be distinguished on its facts from O’Neill v MBF [2002] FCAFC 188. In that case the representations related personally to the prospective employee’s likely tenure in the job, not the likely duration of the job itself. In addition, the representations in that case were clearly the inducement that caused the applicant to take the job. Here, the representations were but one factor in the applicant’s decision to accept employment. Other factors were a more convenient location, better pay and more security of income. It was these factors that proved decisive when the applicant realised he could be dismissed on one month’s notice.
Accordingly, the claim under the Trade Practices Act and the Fair Trading Act fails.
The negligence claim also fails. The leading Australian authority on negligent misstatement is the High Court decision in Shaddock v Parramatta City Council (1980-81) 150 CLR 225 per Mason J at p.250 where his Honour said:
Whenever a person gives information or advice to another upon a serious matter in circumstances where the speaker realizes, or ought to realize, that he has been trusted to give the best of his information or advice as a basis for action on the part of the other party and it is reasonable in the circumstances for the other party to act on that other information or advice, the speaker comes under a duty to exercise reasonable care in the provision of the information or advice he chooses to give.
In the present case I am able to conclude that the respondent’s servants or agents were placed under a duty of care in giving information to the applicant about the employment position he was seeking. This was clearly a serious matter. Mr O’Hara and Mr Smith knew or should have known that the applicant was seeking information from them as a basis for deciding whether to seek or whether to accept one of the advertised positions with the respondent. It does not matter that the information was provided orally. At least on the occasion of the meetings on 14 April 2000 and 15 June 2000 the information was conveyed in a formal setting.
However, there was no breach of the duty of care. Mr Smith and Mr O’Hara exercised reasonable care in informing the applicant about the likely duration of the cable rollout and, hence, the likely duration of employment with the respondent. The information provided to the applicant was neither wrong nor misleading. There is no basis for any claim of damages in negligence in respect of the conversations I have found occurred between the applicant and Mr O’Hara and Mr Smith.
The contract claim
The applicant’s claim in contract is put on two bases: first, that there was a breach of an implied term of the contract that reasonable notice of termination would be given; secondly, it is put on the basis that the express terms of the contract were breached in that the applicant did not receive his full entitlements under clause 17(3)(c) when read with clause 7 of the contract.
I consider first the claim of breach of an implied term of reasonable notice. The applicant makes the following submissions in relation to the implied term. First, Mr Arthur submits that there is a term implied by the general law that an employee’s employment may be terminated on reasonable notice: Lister v Romford Ice and Cold Storage Co Ltd [1957] 1 All ER 125 at 143; Byrne v Australian Airlines Limited (1995) 185 CLR 410 at 442. The implied term is said to be implied by law and is not subject to the business efficacy test: Australian National Hotels Pty Ltd v Jager [2000] TASSC 43 at paragraph 12. Secondly, Mr Arthur submits that the term is to be implied into all employment contracts in the absence of an express provision to the contrary: Richardson v Koefod [1969] 1 WLR 1812 per Lord Denning; Castlemaine Tooheys v Carlton & United Breweries Ltd (1987) 10 NSWLR 468 at 486-7 per Hope J. The implied term in employment contracts is said to be displaced only by an express provision which is inconsistent with the implied term: Australian National Hotels v Jager.
Thirdly, Mr Arthur submits that even where a contract of employment contains some express provisions relating to termination, the parties will be taken to have intended that it may also be terminated on reasonable notice unless the language they have chosen showed a clear intention to the contrary. Where the parties have express, detailed provisions as to the right of either party to terminate, it is ultimately a question of construction as to whether they intended those provisions to be comprehensive: McClelland v Northern Ireland General Health Services Board [1957] 1 WLR 595; New South Wales Cancer Council v Sarfaty [1992] 28 NSWLR 68 at 75.
Mr Robinson submits that Mr Arthur has misconstrued the authorities. He makes the following submissions:
As a matter of principle, where a contract is silent as to its duration and the circumstances in which it may be brought to and end by the parties without breach, any action or omission by one party to end the contract, would be repudiatory, giving rise to a right to damages in the other party.
Consequently, the courts have implied terms into employment contracts which are silent as to duration and the circumstances in which they may be brought to an end, that they may be brought to an end upon giving reasonable notice, ie without breach.
However the law does not imply such a term into all contracts of employment. Nor is it the law that such a term is implied unless expressly excluded, as contended by the applicant.
The true position is that the law will imply a term only in the absence of any express provision by the parties to the contract concerning how the contract is to be brought to an end.
In New South Wales Cancer Council v. Sarfaty (1992) 28 NSWLR 68 at 74 Gleeson CJ and Handley JA said:
It is now well-established that, as a general rule, if the parties to a contract of employment make no provision as to the circumstances in which it may be brought to an end, the law will imply a term to the effect that the contract is terminable by either party upon reasonable notice to the other ...
In Sarfaty there was no express term giving either party a right simply to bring the contract to an end on a period of notice, reasonable or otherwise, without cause. The parties had however, turned their minds to the issue of termination. In the contract there were express terms concerning the plaintiff's tenure, and the circumstances in which he could be removed from office. On those facts the Court of Appeal refused to imply the additional term.
In Byrne v. Australian National Airlines (1995) 185 CLR 410, the Court considered whether in light of the terms of the prevailing award requiring that termination "not be... unreasonable", there was an implied term to that effect in the employment contracts of the plaintiffs. Brennan CJ, Dawson and Toohey JJ. referred to the tests for implication of a contractual term in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283:
(1) [the implication] must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.
Their Honours drew a distinction in seeking to identify the intentions of the parties, between formal contracts and those not reduced to writing or only partly so, where greater flexibility was necessary. In the latter situation, with which the Court was faced in Byrne, their Honours referred to, and adopted the test of Deane J in Hawkins v Clayton (1988) 164 CLR 539 at 573 where his Honour said:
"... in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties." (my emphasis)
Their Honours rejected the implication of the term contended for, as unnecessary to give effective operation to the employment contract. In the course of their judgment their Honours did say:
In the absence of any provision in the award and of any express provision in the contract of employment the law would regard it as a legal incident of the contract that it should be terminable upon reasonable notice or summarily for serious breach. (my emphasis).
In the recent decision of Australian National Hotels Pty Ltd v Jager [2000] TASSC 43, the Tasmanian Court of Appeal considered the relevant authorities in relation to the implication of a "reasonable notice" term in a contract of employment. In Jager the contract was for an indefinite duration, had no express term as to termination and the employee was paid monthly. Section.47(2)(c) of the Industrial Relations Act 1984 (Tas) provided:
...a term or period of service of employment to which this Division applies that is of indefinite duration is terminable by either party by (a) a week's notice, if the wages are payable weekly;....; or (c) a month's notice in any other case.
Evans J, delivering the judgment of the Full Court said:
It follows from the approach taken by the members of the High Court in Byrne v Australian Airlines Ltd that as s47(2) applies to the parties' contract of employment with the effect that the contract is terminable on one month's notice by either party, there is no opening for the implication of a term as to the giving of reasonable notice of the termination of the respondent's employment into the contract, it not being necessary.
In this case there are express provisions dealing with termination in the employment contract. Clause 17(1) deals with circumstances in which the Respondent has the right summarily to dismiss the applicant. Clause 17(2) grants each party an unqualified right to bring the contract to an end "..by giving to the other party not less than one month's written notice".
In each of the authorities referred to above and relied upon by the applicant, the Court has rejected the implication of a term providing for termination on reasonable notice, because there were express contractual terms or a statutory provision governing termination. Furthermore, in light of Sarfaty, it is not necessary that the express terms provide for termination on notice, as long as the intention of the parties to deal with tenure and termination in its express terms, is discernible from the evidence of the agreement.
Mr Robinson further submitted that the contract in this case was effective without an implied term of reasonable notice and that the words “not less than one month” meant one clear month, ie a fixed term of one month excluding the day on which notice was given: Re Railway Sleepers Supply Co (1885) 29 ChD 204; McInerney v Hest Australia [1998] 3753 SADC.
In further written submissions, Mr Arthur joins issue with Mr Robinson on the interpretation of these authorities. He submits as follows:
The respondent’s submission is not a complete and accurate reflection of the law. The respondent relies on part of the statement of principle contained in the joint judgment of Gleeson CJ and Handley JA in New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 at 74. By selectively quoting the passage, the judgment is misrepresented. Gleeson CJ and Handley JJ continue their consideration of McClelland v Northern Ireland General Health Services Board (1957) 1 WLR 595 and go on to say:
…However, some of the speeches in McClelland go further and indicate that, even where a contract of service contains some express provisions relating to termination, the parties will be taken to have intended that it may also be terminated on reasonable notice unless the language they have chosen evinces a clear intention to the contrary. Other things being equal, the courts have shown a strong inclination to impute such an intention to the parties. Even so, as McClelland shows, where, as in the present case, the parties have expressed detailed provisions as to the right of either party to terminate, it is ultimately a question of construction as to whether they intended those provisions to be comprehensive…
The applicant submits that, in finding that there was no implied term that the plaintiff’s employment could be terminated on reasonable notice, the Court in Safarty was construing the contract in the manner most beneficial to the terminated employee.
The respondent’s submission [concerning Byrne v Australian National Airlines] is not relevant to the matter before the Court in these proceedings. The respondent’s submission goes to the question being considered by the Court in Byrne v Australian National of whether a provision contained in an award that the “termination of employment by an employer shall not be harsh, unjust or unreasonable…” is an implied term in the contract of employment. With respect to the respondent, the applicant’s case is that the applicant is entitled under the existing terms of his contract to termination on reasonable notice. In Byrne at 429, Brennan CJ, Dawson and Toohey JJ found that:
at common law a contract of employment for no set term is to be regarded as containing an implied term that the employer give reasonable notice of termination except in circumstances justifying summary dismissal… (however)…(t)he claim which the appellants advance is not a claim for wrongful dismissal based upon a failure to give reasonable notice. It is a claim for damages for loss of employment for, it would seem, an indefinite period…
The judgment of McHugh and Gummow JJ in Byrne is also apposite, in relation to the implication of terms by law. Their Honour state at 449 that:
…Many of the terms now said to be implied by law in various categories of case reflect the concern of the courts that, unless such a term be implied, the enjoyment of rights conferred by the contract would or could be rendered nugatory, worthless, or, perhaps, be seriously undermined.
… The statutory provision being considered by the Court in Australian National Hotels Pty Ltd v Jager was expressed in absolute terms, ie “a term or period of service of employment… is terminable by either party by (a) a week’s notice, if the wages are payable weekly;… or (c) a month’s notice in any other case.” The language of the statute is expressed in such a way as to leave no room for the implication of further terms. The applicant submits that had the term been expressed as a minimum stipulation, such as for example, “at least a week’s notice” or “at least a month’s notice” the Court would have had greater flexibility and arguably would not have been constrained from implying a term giving reasonable notice. On the facts in Jager, the Court found that no injustice had been done to the applicant because he had received a payment equivalent to six months salary in lieu of notice of termination of employment which was in excess of the employer’s obligations under the statute.
In my view, the law concerning the period of notice required to put an end to an employment contract is correctly set out in Macken, McCarry and Sappideen’s Law of Employment (1997) at pp164-168. The period of notice required may be specified in the contract. Alternatively, the requisite period of notice may be implied from the employer’s custom and practice. A minimum period of notice may be prescribed by legislation or an industrial award or agreement. In other circumstances the general law requires that the period of notice must be reasonable.
Where no length of notice is specified, it can be implied. There is authority that the specification of a minimum period of notice leaves room for the implication of reasonable notice of a longer period in an employment contract: Westen v Union des Assurances de Paris (unreported, Industrial Relations Court of Australia, per Madgwick J, 17 December 1996) at 19-20. It is a question of construction whether the parties intended the express provisions relating to termination to be comprehensive: New South Wales Cancer Council v Sarfaty. If the parties intended the contractual term to be comprehensive, there will be no implication of a reasonable notice term. If not, then in the absence of an implication of a specific period by reference to custom, a reasonable notice term will be implied.
In the present case clause 17(2) of the contract provides that the employment can be terminated on “not less than one month’s written notice”. This is a standard term appearing in virtually all the respondent’s employment contracts. I do not accept the respondent’s contention that the words “not less than” simply connote a period of one clear month. This is a minimum stipulation. Mr O’Hara accepted, under cross-examination, that the period of notice pursuant to clause 17(2) could be anything from one month to infinity. It is both necessary and reasonable to imply a reasonable notice term into the contract in order to give efficacy to the very broad discretion thereby conferred. The implication of a reasonable notice term is also both equitable and obvious. Without it, a party (and the employer in particular) could act capriciously. There is no inconsistency between the express term of the contract and the term of reasonable notice implied by the general law. The contract establishes a minimum standard but is otherwise silent. The fact that clause 17(2) expressly permitted the employment to be terminated on a minimum of one month’s notice leaves open the conclusion that a longer period of notice may reasonably be required in the circumstances of a particular case. Accordingly, the implied term of reasonable notice is not excluded by the express terms of the contract. I do not think that it matters, on the facts of this case, whether the implied term is implied by fact or by law. On either approach, the term of reasonable notice can be implied into this contract. I find there was a term implied into the contract between the applicant and the respondent that the applicant’s employment could be terminated on reasonable notice.
Mr O’Hara gave evidence that in some instances the minimum period of one month’s notice was given and in other instances a longer period of notice was given. The question is, what was reasonable notice in the circumstances of the termination of this applicant’s employment? What is reasonable in one case may not be reasonable in another case. Each case depends upon its own facts and circumstances: Thorpe v Football League [1974] 10 SASR 17 at 36-37.
The relevant time for considering what was reasonable notice is when the notice was given, not when the contract was made: Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd [1955] 2 QBD 722 at 735; Logan v Otis Elevator Co Pty Ltd [1999] IRCA 4 at paragraph 35.
Maken’s Law of Employment at pp.166-167 notes that the following job related factors may be relevant in determining what is reasonable:
a)the “high grade” of the appointment;
b)the importance of the position;
c)the size of the salary;
d)the nature of the employment.
Factors pertaining to the employee which are relevant include:
a)the length of service of the employee;
b)the professional standing of the employee;
c)the employee’s age;
d)the employee’s qualifications and experience;
e)his or her degree of job mobility;
f)the time needed for the employee to find alternative employment;
g)the period it was likely, apart from dismissal, that the employee would have continued in employment;
h)what the employee gave up to come to the present employer;
i)the employee’s prospective pension or other rights.
The primary purpose of giving a period of notice is to enable the employee to obtain new employment of a similar nature. Some types of employment are readily available, whilst others are not: Rankin v Marine Power International Pty Ltd [2001] VSC 150. There was evidence that Ms Barry, who was employed at a similar level to the applicant, was given three months notice. However, no direct comparison can be made between the applicant and other employees of the respondent.
In the present case the applicant was 46 at the time of his termination. Prior to taking up employment with the respondent the applicant was required to work away from Canberra in order to generate sufficient income through his company to meet his needs. He had to wind down the activities of his company to nothing upon taking up an employee position with the respondent. Once his employment was terminated he had to rebuild the activities of his company in order to generate fresh income. The applicant was able to secure a contract for his company to undertake work in Perth four months after his termination.
The applicant’s position was a project leader position. This was not a senior executive position but was at least a middle management position. The remuneration package attached to the position was generous, in the order of three times average weekly earnings. The position was a skilled and important position. It was a high grade position. Taking the factors which pertain to the position with those that pertain to the applicant I find that the period of one months’ notice given to the applicant was not reasonable notice and breached the implied term in the contract of employment requiring reasonable notice to be given.
The applicant’s claim of a breach of the express terms of contract is based in part on the assertion that the minimum period of notice given should have been one clear month rather than one calendar month. In other words the period of notice should not have included the day on which the notice was given and should have run until 25 October 2001. Mr Robinson’s submissions as to the meaning of the words “not less than” in clause 17(2) of the contract support that interpretation, although he also argues, somewhat inconsistently, that a “month” means a lunar month of 28 days. I reject both submissions. The words “not less than” simply establish the minimum period of notice and consistently with ordinary usage (and s.22(1)(b) of the Acts Interpretation Act 1901 (Cth)), the “month” referred to was a simple calendar month, commencing on 25 September 2001 and ending on 24 October 2001.
The applicant was paid a lump sum pursuant to clause 17(3)(c) of his contract. I accept that the applicant was not given any financial compensation for the loss of access to a mobile telephone during the period of notice and was not paid any amount in respect of any pro rata entitlement to a performance bonus for the period of notice. The alleged loss in relation to mobile phone usage is hard to quantify, but if quantifiable would have been very modest. I do not accept the applicant’s arbitrarily determined figure of $139.70 per month. The mobile phone was provided primarily for business use in connection with the applicant’s employment with the respondent, and such use ceased upon termination. Permitted private use of the phone may have some value but I discount it as trivial. Payment of the performance bonus was discretionary and I do not accept that the applicant had any pro rata entitlement. In addition, it would seem from the evidence that following the departure of Mr Milton, the applicant was far from assured of receiving future performance bonuses.
I find that the applicant was not short paid in respect of the minimum notice period. I have found that the applicant should have been given four months notice of termination as that was what he reasonably required in his circumstances at the time of termination. Four calendar months notice would have been sufficient. The damages that the applicant should receive can be worked out on the basis of his remuneration entitlements over four calendar months, less what he received for the first month.
Damages
The measure of damages in contract is that which will put the wronged party in the position he would have been in if the contract had been performed. The implied term of reasonable notice given the circumstances of the applicant at the time of his termination required four calendar months notice of termination to be given. The applicant has submitted that he was entitled to the equivalent of $11,065 per month remuneration pursuant to his contract. I find, however, that the applicant was correctly paid his entitlements for the first month of the necessary notice period, of which the salary component was $9,167. Prima facie, he should have received a further $27,500. The applicant had an obligation to mitigate his loss and I accept the evidence presented on behalf of the applicant as to what revenue was earned by the applicant through his company following his termination over the four month period following that termination. I have excluded from that revenue the GST component and expenses incurred by the applicant’s company in earning that revenue. The net revenue he earned over the four month notice period was $7,957. Calculated on this basis, the cumulative loss suffered by the applicant over four months was $19,543.
Both parties submit that income tax needs to be deducted from a damages award in this matter. I accept the applicant’s submission that the payment the applicant should have received pursuant to the contract was an eligible termination payment, with a tax free threshold of $7,297. The balance would be taxable at the rate of 31.5%, including the Medicare levy. Accordingly, payment on four month’s notice of $36,667, less net other income received of $7,957 produces a sum of $28,710, which would attract ETP tax of $6,745. The termination payment already made to the applicant had $4,252 tax deducted from it. Therefore, only $2,493 needs to be deducted from the damages award for income tax. Of course, the Taxation Commissioner is not a party in these proceedings and has not had an opportunity to make submissions. My assessment on the tax issue is not binding on him. If I am wrong in that assessment the applicant will have to meet any additional income tax liability himself.
The applicant also claims interest. He is entitled to interest up to judgment at the rate applicable in the ACT Magistrates Court, from 24 September 2001: Pratt v Latta [2001] FMCA 84, at paragraph 49. I will order that the sum of $1,507 be added to the damages award for pre judgment interest.
I will hear the parties as to costs.
ADDENDUM
This judgment has been amended under the slip rule in consequence of correspondence received from the solicitors for the applicant, dated 21 August 2002. The solicitors pointed out, correctly, that the base salary figure used for the purpose of calculating damages was not the sum of $7,586 paid to the applicant as a lump sum in lieu of notice but the sum of $9,167, being the applicant’s agreed monthly salary. The confusion arose because the applicant had already been part paid in advance for the month in which notice of termination was given. This has necessitated a recalculation of damages and interest.
The issue of costs was argued on 20 August 2002 and will not be
re-opened.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 23 August 2002
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