Young and Rubicam Mattingly Pty Ltd v Mobil Oil Australia Pty Ltd
[2001] VSC 165
•24 May 2001
| SUPREME COURT OF VICTORIA | Not Restricted | |
| COMMERCIAL AND EQUITY DIVISION | ||
No. 2029 of 1999
| YOUNG AND RUBICAM MATTINGLY PTY LTD | Plaintiff |
| v | |
| MOBIL OIL AUSTRALIA PTY LTD - and – | First Defendant |
| ANDREW THOSEBY | Second Defendant |
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JUDGE: | Warren J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7-10, 14 and 15 May 2001 |
DATE OF JUDGMENT: | 24 May 2001 |
CASE MAY BE CITED AS: | Young and Rubicam Mattingly Pty Ltd v Mobil Oil Australia Pty Ltd and Anor |
MEDIUM NEUTRAL CITATION: | [2001] VSC 165 |
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Contract – terms implied from previous written agreement – purported oral variation waiver of term of compliance.
Termination – reasonable notice – industry practice.
Words and phrases – "Annualised" and "Annual".
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr P. Bick QC with Mr A. Hanak | Holding Redlich |
For the First Defendant | Mr R. Wells | Andrew Rice |
| For the Second Defendant | Mr J. Bourke | GSM Solicitors |
TABLE [L1]OF CONTENTS
Contractual History............................................................................................................................ 2
The History of Mr Thoseby.............................................................................................................. 7
The Attempts to Re-negotiate the Agreement............................................................................... 9
The Meeting on 4 June 1996........................................................................................................... 11
Events During 1997.......................................................................................................................... 14
The Plaintiff's Claim........................................................................................................................ 15
Characterisation of the Contract.................................................................................................... 15
Waiver of the Minimum Staff Term............................................................................................. 17
Notice of Termination..................................................................................................................... 18
Remaining Matters Between the Plaintiff and Mobil............................................................... 18
The Plaintiff's Claim Against Mr Thoseby................................................................................. 19
Summary............................................................................................................................................ 20
HER HONOUR:
The plaintiff, an advertising agency, claims moneys for services pursuant to contract, alternatively, by way of quantum meruit.
The plaintiff engaged in the provision of advertising agency services. The first defendant ("Mobil") engaged in the sale of petroleum and related products. The plaintiff was engaged by Mobil to provide advertising agency services during the period from 1993 to 1997. It is the terms of the agreement between the plaintiff and Mobil that are the subject of the present dispute.
Contractual History
On 1 March 1993, the plaintiff and Mobil commenced their agreement ("the 1993 agreement"). Initially their arrangement was oral, and probably implied because a written agreement was not executed until 26 May 1995 effective for the period 1 March 1993 to 28 February 1995. It seemed that the written contract was not executed until after the expiration of the agreement due to difficulties on the part of Mobil in finalising the written expression of the contractual arrangement. After the expiration of the 1993 agreement on 28 February 1995 the parties continued their arrangement from 1 March 1995 until the end of 1997. The dispute between the plaintiff and Mobil revolves around whether the agreement between them effective from 1 March 1995 to 1997 was governed by the terms of the 1993 agreement or other terms.
The very nature of the advertising services provided by the plaintiff to Mobil involved placement of advertising in the media. It was accepted practise in the advertising industry that an agency would be paid a commission by the particular field of the media for placement of advertising. This arrangement was called in the industry a media commission. The commission was disclosed to the client. It was a term of the 1993 agreement that the plaintiff was entitled to retain any commission from the media arising from advertising placed on behalf of Mobil. It was a further term that if the media commission fell short of $400,000 per annum that Mobil would pay any shortfall. The relevant provisions were clauses 3(1)(a) and (b) respectively of the 1993 agreement. Clause 3 of the 1993 agreement provided, in its entirety, as follows:
"3. For the term of this Agreement, the Agency will be remunerated in accordance to Clauses 3(1) and (2).
(1) (a)For those services as described in Clause 1 of this Agreement for which the Agency receives a commission from the media, the Agency shall retain the commission. Subject tot Clause 3(1)(b) the Agency shall accept the Commission as full and adequate compensation for providing such services.
(b)In the event that the commission received is less than four hundred thousand dollars ($400,000.00) on an annualised basis, Mobil agrees to pay to the Agency an amount equal to the difference between $400,000.00 (on an annualised basis) and the amount of commissions the Agency is entitled to receive. This account shall be paid by Mobil 30 days after the later of expiry of the Initial Period or completion of an audit as contemplated by Clauses 3(3).
(c)In the event the Agency receives commission from the media in excess of $400,000.00 (on an annualised basis) the Agency and Mobil will in good faith take this additional remuneration into account when determining the remuneration applicable in any new Agreement between Mobil and the Agency.
(d)The parties acknowledge and agree that the Agency's remuneration of commission received from the media of $400,000.00 (on an annualised basis) has been determined on the basis that the Agency has agreed to provide and dedicate certain of its personnel and for such period of time as set out hereunder:-
· Group Account Director - 50% (expressed as a · Account Director - 100% percentage of · Account Manager - 100% chargeable hours · Secretary - 35% per annum) · Strategic Planner - 10% · Media Director - 10% · Media Group Head - 35% · Media Buyer - 35% · Secretary - 20% · Finance Manager - 10% · Account Clerk - 25% · Administrative Assistant - 5% (e)Where the Agency is unable to comply with Clause 3(1)(d) the parties shall negotiate in good faith as to an appropriate adjustment in any payment Mobil is obliged to make in accordance with Clause 3(1)(b).
(2)For any and all other services for which the Agency does not receive a commission from the media, the Agency will be entitled to charge Mobil on the following basis:
(a)For work done within the Agency, such work will be charged at the agreed rate as per the production cost manual (Schedule 1) or, if no fee is specified, on the basis of time spent at the Agency's previously agreed hourly rates.
(b)For any services obtained from outside the Agency, such work will be charged at gross invoice cost plus a service fee of six (6) per cent.
(c)For travel and accommodation charges, courier, facsimile, postage, telephone (other than local calls) and other reasonable out of pocket expenses incurred directly for Mobil's purposes such charges shall be charged at actual cost.
(3)The Agency shall allow Mobil or its selected representative access to relevant original documentation for the purposes of auditing the accounts and supporting documentation upon the giving of reasonable notice. The cost of this audit shall be the responsibility of Mobil."
Hence, under the 1993 agreement the plaintiff was assured of a minimum commission payment of $400,000 per annum arising from providing advertising services for Mobil. It was a further term of the 1993 agreement that the minimum media commission sum of $400,000 was determined on the basis of the provision of specified personnel services for allocated periods e.g. a fulltime account director, 35% of the hours of a secretary per annum, 25% of the hours of an account clerk. In total, the plaintiff agreed to provide the services of 12 designated positions for specified percentages of hours per annum.
After the expiration of the 1993 agreement on 28 February 1995 the plaintiff and Mobil continued their arrangements in accordance with the terms of the 1993 agreement. The plaintiff was dissatisfied with this state of affairs as it was bound pursuant to the minimum staffing clause of the agreement to maintain staffing levels so as to service the Mobil account that it regarded as uneconomic. It considered that compared with standard industry practise the agreement was not sufficiently remunerative particularly in relation to the applicable extraction rate. Hence, between mid 1995 and during 1996 the plaintiff set about negotiating a different contract. In the interim, the plaintiff and Mobil for all intents and purposes continued as if the 1993 agreement remained on foot, at least until the beginning of June 1996.
It was the case of Mobil that whilst the 1993 agreement remained effectively on foot until 4 June 1996 but thereafter the plaintiff and it agreed to a variation. The variation was said to have been partly in writing constituted by a letter of offer from the plaintiff to Mobil dated 17 May 1996 and an oral acceptance by Mobil given on 4 June 1996. It was alleged by Mobil that the variation was negotiated and agreed to by one Andrew Thoseby, the second defendant, then an employee of the plaintiff.
The plaintiff denied the variation and all knowledge of it. Mr Thoseby was joined as the second defendant to the proceeding well after its commencement. The plaintiff claimed that if the defence of Mobil was proved, it was entitled to commensurate damages against Mr Thoseby based on breach of employment contract, alternatively, the disclosure of confidential information.
The plaintiff continued to provide services to Mobil during 1997. However, Mobil substantially reduced its advertising expenditure. The plaintiff claimed it suffered loss as a consequence because of the very fact that the media commission was reduced.
Ultimately, Mobil terminated its arrangement with the plaintiff by notice given on about 24 November 1997 and from that date the plaintiff appeared to cease to provide all services to Mobil.
Arising from these circumstances the plaintiff made claims against Mobil as follows:
(1)On the basis that it was entitled to a reasonable notice period of three months, payment of the shortfall of media commission moneys under the media commission clause up to the end of February 1998, an amount of $272,475.
(2)Alternatively, on the basis that it was entitled to payment of shortfall moneys under the media commission clause up to the date of termination of 24 December 1998, an amount of $205,808.33.
(3)Alternatively, payment pursuant to quantum meruit for the services rendered by the plaintiff to Mobil from 1 March 1997 to 31 December 1997, an amount of $370,541.
The proceeding was fixed for trial on the issue of liability only. There was dispute between the parties as to the quantum of damages in any event and that matter was to be determined, if necessary, at a later time.
Mobil acknowledged that it and the plaintiff were bound by the terms of the 1993 agreement by virtue of the fact that after the agreement expired the parties continued their arrangements as if the 1993 agreement remained on foot. However, Mobil claimed that it and the plaintiff were so bound only up until 4 June 1996.
Mobil allege that on 4 June 1996 the agreement was varied orally as a result of a conversation between one of its employees, Mr Higgs and the representative of the plaintiff, Mr Thoseby. Mobil alleged that the oral variation was to the effect that the media commission and minimum staff compliance terms would cease to apply after 4 June 1996 but that otherwise the parties would continue to be bound by an agreement constituted by the terms of the 1993 agreement until they agreed otherwise.
Mobil claimed that, if the agreement was not varied on 4 June 1996 the plaintiff was nevertheless only entitled to be remunerated in accordance with the agreement. As a consequence, Mobil claimed that the plaintiff had not fulfilled the staff compliance clause during 1997. Mobil claimed, therefore, that insofar as a media commission was owed by it to the plaintiff for 1997 Mobil was entitled to have the amount reduced in accordance with the commission adjustment clause. The plaintiff admitted that the staff compliance term had not been met but alleged that Mobil had full knowledge of the non-compliance and waived the obligation. The plaintiff claimed, therefore, that the commission clause did not apply.
Mobil claimed, further, that if it was bound to pay the media commission to the plaintiff it was bound to do so only on an "annualised basis". Mobil claimed that between 1993-1997 its media spending was in excess of $19.4M, a total that led to an averaged out media commission amount of over $400,000 per year between 1993‑1997. Thus, notwithstanding that the media commission received by the plaintiff fell below the $400,000 threshold figure in the years 1993/1994, 1996/1997 and 1997 when the media commission was calculated on an annualised basis the plaintiff had been paid a media commission in all years including 1997 in excess of the threshold amount of $400,000. The plaintiff disputed the construction of "annualised basis" asserted by Mobil. These were the defences of Mobil. I turn to consider the position of the second defendant, Andrew Thoseby.
The plaintiff alleged that if the court found that the agreement was varied orally on 4 June 1996 then that variation was effected by Mr Thoseby in breach of his duties as an employee and furthermore, that he breached confidential information. It was the case of the plaintiff that in such circumstances Mr Thoseby was liable to it for any loss that it suffered if Mobil was successful in its defence of the proceeding.
The History of Mr Thoseby
Mr Thoseby commenced employment with the plaintiff on 7 August 1995 as a group account director. His major responsibility was the Mobil account of the plaintiff. He was an Arts graduate with experience in account management and marketing. He negotiated a salary package with the plaintiff of $150,000 per annum. His terms of employment in a letter of offer from a director of the plaintiff, Mr Ingall, dated 7 August 1995 stipulated direct reporting responsibility to Mr Ingall and compliance with an employee manual. The latter document was uncontroversial and dealt with employment obligations such as leave and the like. Both the letter of offer and the employee manual imposed an obligation of employee confidentiality post employment concerning " … any confidential information relating to the company or its business or any trade secrets … ".
The level of authority and autonomy of Mr Thoseby came to be significant. He claimed that Mr Ingall told him upon interview that he would have full autonomy and authority to negotiate agreements on behalf of the plaintiff. Indeed, Mr Thoseby regarded this as consistent with his status with his previous employer.
Mr Ingall refuted the status claimed by Mr Thoseby. Mr Ingall said that decisions on behalf of the plaintiff with respect to any binding agreement had to be made by at least one director who had responsibility for the relevant advertising account, in this instance, Mr Ingall himself. Mr Thoseby was never a director of the plaintiff. Furthermore, Mr Ingall described the practise of the plaintiff to have its business affairs conducted through its board of management. Mr Thoseby was appointed to the board of management of the plaintiff in May 1996. Having had the opportunity to observe both Mr Ingall and Mr Thoseby I am satisfied that the latter did not have authority to commit the plaintiff to binding agreements. Rather, that was a matter for the board of management and a director such as Mr Ingall. My assessment was borne out by the minutes of board of management meetings and the evidence of other plaintiff employees who were also members of the board of management at the relevant time. Ultimately, my view was reinforced by the fact that the Mobil account was one of the most significant accounts of the plaintiff involving a multi million dollar turnover in advertising and commensurate commissions of hundreds of thousands of dollars. I considered it implausible that a contract of such significance and value could be finally cemented without approval at company director and board level.
Ultimately, the plaintiff retrenched Mr Thoseby. Notice of the retrenchment was conveyed personally by Mr Ingall to Mr Thoseby who left the plaintiff in October 1996. Mr Ingall was satisfied with the performance of Mr Thoseby throughout his employment with the plaintiff and rated him highly. After Mr Thoseby was retrenched Mr Ingall was supportive of the attempts by Mr Thoseby to regain employment. It did not appear on any basis that the retrenchment of Mr Thoseby was related to the events that led to the dispute between the plaintiff and Mobil. However, the relationship between the plaintiff and Mr Thoseby seemingly soured when the plaintiff learned that Mr Thoseby provided a statement of evidence to the solicitors acting for Mobil without notice to the plaintiff.
The Attempts to Re-negotiate the Agreement
It was common ground that at least up until 4 June 1996 the plaintiff and Mobil regarded themselves as bound by an agreement in accordance with the terms of the 1993 agreement. There was general recognition of the need for a further formal agreement between the parties, particularly on the side of the plaintiff. The 1994 agreement deviated from standard advertising industry practise in its stipulation of a minimum staff clause. The plaintiff wanted to change the requirement and substitute a fee for service provision. The plaintiff wished to do so for two reasons. First, because the minimum staffing clause required it to provide staff to service the Mobil account that were unsuitable, unnecessary and uneconomic. Secondly, the actual staffing requirements of the Mobil account required creative and production staff not included in the minimum staffing clause. Thirdly, the minimum staffing clause rendered the account less profitable to the plaintiff, especially when compared with the advertising industry standard of fee service charging. Fourthly, the requirements of the minimum staffing clause had not been met by the plaintiff and it wanted the agreement to reflect the true needs of the Mobil account.
As a consequence of these imperatives, Mr Ingall, the vice chairman and a director of the plaintiff instructed Mr Thoseby the then group account manager of the plaintiff for the Mobil account, to negotiate a new agreement between the plaintiff and Mobil.
As a result of the instruction of Mr Ingall, in late 1995 Mr Thoseby set about discussing with Mobil the future arrangements between it and the plaintiff. The person responsible for the advertising account of Mobil with the plaintiff was Mr William Higgs. He was the advertising and communications manager for Mobil. His supervisor was Ms Trudi Giles, who later became known as Trudi McGowan.
In December 1995 and January 1996 Mr Thoseby discussed matters with Mr Higgs. They both expressed the view that there was no need for a continuation of the minimum staffing clause or the media commission clause. On 9 February 1995 Mr Thoseby wrote to Mr Higgs setting out an analysis revealing that the actual staff cost to the plaintiff of servicing the Mobil account was $847,425 whilst the income derived from the account by the plaintiff was $735,000, hence, a loss of $112,425. In the letter, Mr Thoseby proposed a new agreement whereby the plaintiff would receive media commissions (with a minimum entitlement), a prescribed service fee and production costs. In other words, Mr Thoseby proposed the scrapping of the minimum media commission and the minimum staff clauses. Mr Thoseby could not recall whether he had shown the letter of 7 February 1996 to Mr Ingall.
As a result of the letter, a meeting was convened on 20 March 1996 between Mr Thoseby, Mr Higgs and Ms Giles. At that meeting support was given to the approach of Mr Thoseby in the preceding letter. On 25 March 1996 Mr Thoseby reported to Mr Ingall on the progress of the discussions with Mobil. Mr Ingall had no recollection of the report by Mr Thoseby. However, it was noted in the diary of Mr Thoseby. I was satisfied that Mr Ingall was told where discussions were up to at that point. These events were followed by a further letter from Mr Thoseby to Mr Higgs dated 29 March 1996 re-stating an offer on behalf of the plaintiff to Mobil of a new agreement consisting of payment to the plaintiff of retained media commissions, a prescribed service fee and production costs. Mr Thoseby enclosed with the letter of 20 March 1996 a further letter of the same date tantamount to a heads of agreement to be signed by Mr Higgs. It was never signed. Mr Thoseby said in his evidence that he sent a copy of the letter of 29 March 1996 to Mr Ingall at the same time as it was sent to Mr Higgs. Mr Ingall could not remember seeing the letter. I accept that Mr Thoseby sent a copy to him.
Further discussions ensued between Mr Thoseby and Mr Higgs in April 1996. Mr Higgs expressed the view that there was no advantage to Mobil in the new proposal. During April 1996, the plaintiff, then known as "Mattingly" merged with another entity "Young and Rubicam" and thereafter became known as "Young, Rubicam and Mattingly". The change did not effect the relationship between the plaintiff and Mobil although it meant that Mr Ingall was very busy and preoccupied with the merger at the time of April and into the month of May 1996.
Following on from their discussions, Mr Thoseby wrote to Mr Higgs on 17 May 1996 in convoluted terms endeavouring to persuade Mobil that his proposal of fee for service was better for it on the basis of the allocation of more and better plaintiff staff to attend to the needs and requirements of the Mobil account. Mr Thoseby said he discussed the general contents of the letter with Mr Ingall and sent him a copy. Mr Ingall had no recollection of this. I accept that Mr Ingall was made aware of the contents of the letter of 17 May 2001 by Mr Thoseby. Following the letter, a meeting was convened between Mr Thoseby and Mr Higgs at the premises of the plaintiff on 4 June 1996. The meeting came to be a pivotal event in the proceeding.
The Meeting on 4 June 1996
Mr Thoseby could not recall precisely where in the premises of the plaintiff the meeting of 4 June 1996 occurred. Mr Higgs recalled that the meeting was at the premises of the plaintiff but at one point he and Mr Thoseby moved from the office of the latter and moved upstairs in the building to another room. No explanation was provided for the move between levels in the building. In any event, Mr Higgs said that in the process of moving he and Mr Thoseby had a conversation on a stairway. Mr Higgs said that he and Mr Thoseby said that the media commission clause and the minimum staffing clause would cease to apply to the arrangements between the plaintiff and Mobil but otherwise the parties would continue on in accordance with the terms of the 1993 agreement until the parties negotiated another agreement. Mr Thoseby said that the conversation took place although he could not recall the location. He said that he and Mr Higgs said the media commission clause and the minimum staffing clause would cease to apply to the arrangements between the plaintiff and Mobil but otherwise the terms of the 1993 agreement would apply. Initially, in a witness statement adopted by Mr Thoseby as his evidence he said that the revised arrangement was to continue until a new agreement was reached. In cross‑examination Mr Thoseby shifted his ground. He said the revised arrangement was to continue until the end of 1996 by when a new formal contract would be finalised.
On the basis of these discussions Mr Thoseby said that he on behalf of the plaintiff "agreed" to vary the then existing agreement between the plaintiff and Mobil. Mr Higgs likewise said that he on behalf of Mobil "agreed" to vary the existing arrangement. It was the case of Mobil, therefore, that the oral agreement between Mr Thoseby and Mr Higgs on 4 June 1996 constituted an oral variation of the agreement between the plaintiff and Mobil. As a consequence of the variation, Mobil alleged it was not under any obligation to pay the media commission to the plaintiff after 4 June 1996.
Mr Thoseby said in cross‑examination that he told Mr Ingall of the variation after the event. He said that he had a casual discussion with Mr Ingall at some time shortly after the meeting on 4 June 1996 with Mr Higgs. It was the evidence of Mr Thoseby that Mr Ingall expressed concern in their discussion about the profitability of the Mobil account but noted that the plaintiff was partly protected by the minimum commission clause. Upon Mr Ingall stating this view, Mr Thoseby said he told Mr Ingall that the clause was irrelevant for two reasons. First, because the minimum media commission for the year would exceed $400,000 in any event and because the minimum staffing requirement would not be met. Secondly, because he, Mr Thoseby, had agreed with Mr Higgs that neither the minimum commission clause or the minimum staffing clause would apply. Mr Ingall refuted in very strong terms that he was told of the oral variation. He said in his evidence that if the plaintiff released the minimum commission charged it lost a financial safety net. It was the case of the plaintiff that it knew nothing of the oral variation inserted by Mobil until receipt of a letter dated 29 October 1998 from the internal counsel of Mobil to the solicitors for the plaintiff. The letter included the following paragraph:
" …
During 1996, Mobil and your client negotiated a variation to the informal contract that had come into existence. You client's Mr Andrew Thoseby and Mobil's Mr Bill Higgs specifically agreed that, in return for Mobil's not being required to have a minimum spend per annum, your client would not be obliged to dedicate the number of personnel to the Mobil account as was set out in the Agreement. Your client withdrew key personnel from the Mobil account, in part performance of the agreement reached between Mr Thoseby and Mr Higgs. Mobil has documentation which supports this variation to the agreement.
… "
Mobil never produced any documents to support the asserted variation. Indeed, Mr Higgs acknowledged in his evidence that there were none. Furthermore, the paragraph in the letter did not stipulate a date of the variation, namely, 4 June 1996.
There were curious circumstances surrounding the oral variation alleged to have been agreed to on 4 June 1996. First, neither Mr Thoseby nor Mr Higgs ever made a written record of the asserted variation. Secondly, there was no mention of the purported variation in subsequent correspondence until 29 October 1998, a period of over two years. Thirdly, there were a number of board of management meetings of the plaintiff attended by Mr Thoseby. He said he told the meetings of the variations. Mr Ingall denied this. Other board members have no recollection of the matter. The minutes of the meetings did not record the matter. In this context it is to be recalled that the Mobil account was one of the most important of the accounts of the plaintiffs. I accept that Mr Ingall and the board of management were not told about the conversation between Mr Thoseby and Mr Higgs on 4 June 1996 and the purported variation of the agreement between the plaintiff and Mobil. Finally, there is an irresistible observation to be made. The commitment of the plaintiff to the variation did not reap it any true advantage. There was no remuneration provision substituted for the surrender of the minimum commission clause. So far as the minimum staff clause was concerned it had not been fulfilled by the plaintiff for some time a matter about which Mobil did nothing.
Following the events of 4 June 1996 the plaintiff continued to service the Mobil account. It also negotiated and tendered unsuccessfully for other Mobil advertising work. There was no advertence at any time to the purported change of arrangement between the plaintiff and Mobil.
In October 1996 the plaintiff retrenched Mr Thoseby in the circumstances earlier described. Whilst he was not altogether satisfied with his redundancy payment there was no palpable acrimony between Mr Thoseby and the plaintiff certainly not from the perspective of Mr Ingall.
Events During 1997
In 1997 the plaintiff provided a level of personnel to service the Mobil account similar to that provided previously. However, during 1997 Mobil dramatically reduced its advertising allocation without telling the plaintiff. Meanwhile, the plaintiff continued to service the account and incur staffing costs. As a result of the reduction in advertising expenditure by Mobil in 1997, the plaintiff received media commissions less than $400,000. Ultimately, the plaintiff looked to Mobil to top up the shortfall under the minimum commission clause.
On 14 November 1997 Mr Ingall wrote to Mr Higgs referring to the media commission clause, the need for a top up payment by Mobil and suggesting a compromised amount less than the stipulated $400,000.
On 24 November 1997 Mobil informed the plaintiff that it was reviewing its advertising arrangements and would terminate its current agreement with the plaintiff as of 31 December 1997. This information was confirmed in a written notice by letter dated 27 November 1997. However, Mobil invited a submission from the plaintiff for advertising services in 1998. On 26 November 1997 Mr Higgs wrote to Mr Ingall concerning the claim for outstanding top up on the media commission. He declined to pay the amount claimed and said that a new agreement was necessary. He made no mention of the purported variation negotiated with Mr Thoseby on 4 June 1996. Indeed, Mr Higgs engaged in a course of correspondence by electronic mail with his superior in the United States about the minimum commission clause again without reference to the purported variation reached with Mr Thoseby. Subsequently, the plaintiffs submitted a proposal to Mobil for advertising services for 1998 but it was unsuccessful. Hence, the plaintiffs ceased to provide services to Mobil after the end of 1997. Thereafter, correspondence ensued between the plaintiff and Mobil and later between their respective legal representatives about the plaintiff's claim for the balance of the media commission. Mobil continued to deny liability.
The Plaintiff's Claim
The plaintiff claims against Mobil the balance of the media commission. It was the plaintiff's primary case that Mobil was obliged to give three months' notice of the termination from the date of the notice, that is, three months from 27 November 1997 consisting of an amount claimed of about $272,475. Alternatively, the plaintiff claimed payment of the balance of the media commission up to 31 December 1997, the date specified in the notice of termination, consisting of an amount of about $205,808.33. A further alternative claim by the plaintiff was payment on a quantum meruit basis for services rendered by the plaintiff to the defendant for the period from 1 March 1997 to 31 December 1997, an amount in the order of $370,541.
Characterisation of the Contract
The plaintiff pleaded the contract between it and Mobil as being one in writing constituted by the 1993 agreement. However, by the end of the trial there was consensus between the plaintiff and Mobil that the proper construction of the contract was one to be implied from the conduct of the parties evincing an intention to be bound pursuant to terms identical to those of the 1993 agreement. Hence, the parties' relationship was one bound by the terms of a written agreement although their contract is properly construed as an implied contract.
I turn then to that which became the pivotal issue in the case and address the conversations between Mr Thoseby and Mr Higgs on 4 June 1996. I am satisfied that a conversation took place generally to the effect described by Mr Thoseby save for the status allocated by him and Mr Higgs to those conversations. I do not accept that the conversation on 4 June 1996 constituted in any way a binding agreement or variation. I find that Mr Thoseby and Mr Higgs agreed to formulate an agreement in the future that would not include terms in the nature of the media commission clause and the minimum staffing clause. I do not accept that they reached any agreement or variation that bound the plaintiff or Mobil or intended to do so. In my view the categorisation of the discussion on 4 June 1996 as a binding agreement or variation was a construction that appeared to have been imposed or created later in time possibly suggested by Mobil's lawyers as is apparent from the letter of 29 October 1998. As to who determined the construction of the discussion of 4 June 1996 does not matter for present purposes. The fact remains that I do not accept that Mr Thoseby and Mr Higgs agreed to a variation of the terms of the 1993 agreement as was the case put on behalf of Mobil. I reach this finding on a number of grounds. Firstly, my observations of Mr Thoseby and Mr Higgs in the course of giving evidence. Secondly, the examination of the correspondence and dealings between the plaintiff and Mobil after 4 June 1996 wherein no mention was made of the purported variation until 29 October 1998. Thirdly, the general course of conduct of the plaintiff and Mobil after 4 June 1996 which continued as if the parties were oblivious to any variation. Fourth, the total non-reference in the plaintiff's board of management minutes to the fact of the purported variation. Fifth, the consistent evidence of plaintiff witnesses present at board of management meetings and who had no recollection of mention of the variation which in the overall context of the plaintiff's business would have been a significant event. Sixth, the evidence of Mr Ingall that I accept that he was not told by Mr Thoseby of the variations. Seventh, there was no apparent advantage to the plaintiff to surrender the media commission clause. Without that clause and in the absence of a substituted remuneration provision the plaintiff would have provided services to Mobil for inadequate return. Eighth, there was no need for a trade off of the two clauses, that is, the media commission clause for the minimum staff requirement because the parties had disregarded the latter requirement for some time.
I find, therefore, as a matter of fact that the arrangement between the plaintiff and Mobil after 4 June 1996 continued until termination as if pursuant to the terms of the 1993 agreement that a variation was not effected as alleged by Mobil.
Waiver of the Minimum Staff Term
In its defence Mobil asserted that even if a variation of the contract was not effected on 4 June 1996 it was not subject to an obligation to top up the media commission to the amount of $400,000 pursuant to the minimum media commission clause because the plaintiff had not met the minimum staffing provision. As a consequence, it was the case of Mobil that pursuant to clause 3(1)(e) of the 1993 agreement there was an obligation on the plaintiff and Mobil to negotiate an appropriate adjustment to the minimum media commission payable by Mobil. Mobil asserted that the adjustment was a matter to be determined as part of the assessment of damages. The answer of the plaintiff was that Mobil had waived the requirements of the minimum staffing clause.
In correspondence sent by the plaintiff to Mobil on 2 September 1994, 20 December 1994, 7 February 1995 and 19 April 1995 the plaintiff informed Mobil of the actual staffing provision by the plaintiff of the Mobil account. There was no dispute by Mobil that it received the correspondence. Furthermore, it is apparent that the letter dated 7 February 1995 was subject to a comparative analysis by an unidentified Mobil employee between the staff listed in the letter and the staff listed in clause 3(1)(d) of the 1993 agreement. It was apparent that the plaintiff was not providing staff in accordance with the requirements of clause 3(1)(d) of the 1993 agreement but that such non-compliance was a matter of no concern to Mobil. The plaintiff alleged that in all the circumstances the conduct of Mobil upon being on notice of the staffing provision information as set out in the correspondence had waived its right to compel a minimum staff compliance in accordance with clause 3(1)(d) of the 1993 agreement. On the basis of the legal principles in relation to the law concerning waiver I find that Mobil waived its rights under clause 3(1)(d) to a minimum staffing provision, see: Immer (No. 145) Pty Ltd v The Uniting Church in Australia Property Trust (NSW) (1992) 182 CLR 26; Sandra Investments Pty Ltd v Booth (1983) 153 CLR 153. It follows, therefore, that the entitlement of the plaintiff to the top up of the media commission clause was not effected pursuant to clause 3(1)(e) of the agreement by virtue of non-compliance with the minimum staffing clause, such compliance having been waived.
Notice of Termination
The next matter to be considered is the date when the agreement between the plaintiff and Mobil was terminated. It was the case of the plaintiff that it was entitled to three months' notice from 27 November 1997.
Mr Ingall gave evidence that it was standard advertising industry practice for three months' notice to be provided prior to termination of an agreement. He was never challenged on this point. Mobil did not lead any evidence to the contrary. In light of the nature of the arrangements between the plaintiff and Mobil and the necessity for the plaintiff to employ staff of particular numbers and expertise to service the Mobil account I consider it would have been unreasonable for the agreement to have been terminated as Mobil purported to do on 31 December 1997. In effect, Mobil purported to give the plaintiff no more than a little over one months' notice. In the overall circumstances of the relationship between the plaintiff and Mobil, I am satisfied that it was appropriate for three months' notice to be given by Mobil to the plaintiff of termination of their contract. The effective notice commenced to run from 27 November 1997, accordingly, I find that the term of notice expired on 28 February 1998.
Remaining Matters Between the Plaintiff and Mobil
It follows from my findings in relation to the contractual obligations between the plaintiff and Mobil that the latter is liable to the plaintiff up until 28 February 1998. In the event that my view with respect to reasonable notice was inappropriate I would in any event find that the agreement expired on 31 December 1997. It follows from these observations that no issue arises with respect to the claim by the plaintiff based in quantum meruit for its services rendered during the year 1997.
There was a remaining aspect of the defence of Mobil relied upon in support of the assertion that it owed no moneys to the plaintiff. Mobil contended that in clause 3 of the 1993 agreement the expression "annualised" meant averaged so that the amounts received by the plaintiff were to be averaged over the period of the agreement rather than assessed on an annual basis. Reference to the sum of $400,000 media commission being "annualised" appears in clauses 3(1)(b), (c) and (d) of the 1993 agreement. The expression "annual" is defined to mean "reckoned, payable or engaged by the year, pertaining to a year's events" (The New Shorter Oxford Dictionary); "of, for, or relating to a year; yearly" (The Macquarie Dictionary, 3rd ed.). The term "annualized" is defined to mean "convert (a quantity) to its value for one year" (The New Shorter Oxford Dictionary); "to calculate the change (an economic or financial variable) as a rate of change over a period of one year". Further, it has been held that "annual" must connote "in the year" if it is to have any meaning at all: see Ryall v Hoare (1923) 2 KB 447; Martin v Lowry (1927) AC 312. In my view it follows from the defined meaning of the expression "annualized" and "annual" that the contention of Mobil is not made out. The application of the term "annualised" in the 1993 agreement can only mean an assessment to be made each year or on an annual basis and not an assessment to be made by way of an averaging out over the term of any agreement between the plaintiff and Mobil. Hence, in my view in the context of the agreement the amount means per annum and not an amount averaged over a period of years. So much in my view is apparent by the use of the words "per annum" in clause 3(1)(d) of the agreement.
The Plaintiff's Claim Against Mr Thoseby
It follows from my findings upon the plaintiff's claim against Mobil that the claim of breach of duty by the plaintiff against Mr Thoseby falls away. However, there is the remaining matter of the claim by the plaintiff against Mr Thoseby for breach of confidential information. In the presentation of the case on behalf of the plaintiff it did not appear that the claim of disclosure of confidential information was seriously pursued. It was not opened as part of the plaintiff's case. The matter was not adverted to by any witnesses on behalf of the plaintiff. The only evidence in support of the claim of disclosure of confidential information arose from the cross‑examination of Mr Thoseby on behalf of the plaintiff. A number of questions were put to Mr Thoseby in relation to his disclosure of matters to Mobil concerning the plaintiff after the proceedings had been instituted. The thrust of the allegations was that Mr Thoseby informed Mobil or its solicitors of matters concerning the method of operation of the plaintiff such that Mobil may have been able to find itself in a stronger position for the purposes of defending the plaintiff's claim. However, the evidence did not go that far. Whilst Mr Thoseby conceded in the course of cross‑examination that he divulged information to Mobil that it would not otherwise have known I could not be satisfied that the information revealed constituted business information or trade secrets. I do not consider that the claim for disclosure of confidential information against Mr Thoseby was made out by the plaintiff.
Summary
It follows from my reasons that the plaintiff succeeds on its claim for damages constituted by the shortfall in the media commission and that the termination of the agreement between the plaintiff and Mobil did not take effect until 28 February 1998 and Mobil is liable to the plaintiff. It follows, further, that the plaintiff's claim against Mr Thoseby should be dismissed.
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