BearingPoint Australia Pty Ltd v Hillard [2008] VSC 115

Supreme Court of Victoria|2008-04-18|Before: HABERSBERGER J

CONTRACT - Employment - Employee indicating intention to leave and work for competitor - Whether employer repudiated employment contract - Whether contract permitted employer to put employee on "garden leave" - Whether employee entitled to accept repudiation - Injunction to restrain employee from engaging in any employment, work or business other than with plaintiff during the remaining period of the employment contract - Whether granting injunction is specific performance of employment contract - Restraint of trade - Invalidity of post employment restraints.

2 The plaintiff is a wholly owned subsidiary of BearingPoint Inc, a company incorporated in the United States of America. (Although Mr Hillard had sought to join BearingPoint Inc as a defendant to his counterclaim, it was not a party in this proceeding because he could not effect service.) BearingPoint operates throughout Australia, except in Tasmania and the Northern Territory. It also has clients in the Asia/Pacific region.

3 The plaintiff asserted that, as a management technology consulting company, it competed with Deloitte as well as with companies such as IBM, Accenture, Cap Gemini and Infosys. The defendant disputed that BearingPoint and Deloitte were in the same market. He said that, whereas Deloitte competed against consulting firms which offered a full service consultancy including information management, such as PriceWaterhouse Coopers and Ernst & Young, BearingPoint now increasingly competed only against technology consulting firms. He said that information management, which relates to the management of data stored electronically, fitted in more with the broad business advisory services rather than technology services, which is a narrower area.

4 The defendant is an experienced and highly regarded leader in the information management field. Mr Hillard obtained a Bachelor of Science from the University of Melbourne. In 1988, he began working in software development at KCS Computer Services. In 1994, he joined Coles Myer Limited, performing a variety of roles focusing mainly on data warehousing (a subset of information management) and data analysis. In December 1998, he joined KPMG in the position of a manager, specialising in data warehousing. In 1999, Mr Hillard was promoted to senior manager. In late 2001, he moved from KPMG to KPMG Consulting Australia Pty Ltd, in the position of Associate Director. In 2002, that company changed its name to BearingPoint Australia Pty Ltd following a change in ownership. Mr Hillard is a member of the Australian Computer Society. In 1999, he founded the Australian branch of the Data Warehousing Institute.

5 On 1 July 2002, Mr Hillard was appointed a managing director of information management for the plaintiff. A Managing Director Agreement ("the employment contract") dated that day was signed by Mr Hillard on 28 August 2002. Although various terms of the employment contract will, in due course, need to be considered in greater detail, for present purposes it is sufficient to note the following provisions (remembering that "KCIN" was how the plaintiff was referred to in the employment contract):

The specific duties, functions and responsibilities for this position will be advised to you from time to time.

You may be required to undertake other duties, functions and responsibilities from time to time in addition to or as variations of the duties, functions and responsibilities of the position. As a consequence, or for other reasons, your reporting responsibility and/or position title may also be altered from time to time. You may also be assigned to another position, as set out in more detail later in this letter.

You are generally responsible for the leadership, management and development of KCIN's business and operations in Australia within the parameters of the Australian Business Plan, as amended and provided to you from time to time. If you are assigned to another position, this contract will continue to apply and your employer will continue to be KCIN.

You will perform your duties, functions and responsibilities in a proper and efficient manner and to the best of your ability at all times. Whilst carrying out your duties, you will devote your whole time, attention and abilities to them and will use your best endeavours to promote the business interests of KCIN and the KPMG Consulting Group.

During the carrying out of your duties, you will comply with all reasonable and lawful directions of KCIN, or any person authorised by it.

During your employment with KCIN, without the prior written consent of KCIN, you will not be engaged directly or indirectly in any other employment, business or occupation.

However, nothing in this letter prevents you from reasonable involvement in any professional or educational activity or body, subject to such activities not infringing on:

(a) the conduct of the business of KCIN or the KPMG Consulting Group; and

(b) your performance of your work related duties and responsibilities.

You will work such hours as may be required to properly discharge the duties of your position without further remuneration.

Your remuneration arrangements are set out in Schedule 1. Your remuneration will be reviewed annually, usually on June 30th on the basis of work performance ...

You will also be eligible to participate in any employee compensation and benefit plans, incentive award or bonus programs or stock option plans offered by KCIN to employees employed by KCIN in your position ("Employee Benefit Plans"), on such terms and conditions as are determined by KCIN in its sole discretion and in accordance with the terms and conditions applicable to the plan or program, as amended and in force from time to time.

At a future time, KCIN may establish an employee stock purchase plan. If an employee stock purchase plan is established by KCIN, and offered to employees employed by KCIN in your position, you will be eligible to participate in the plan, on such terms and conditions as are determined by KCIN in its absolute discretion and in accordance with the terms and conditions applicable to the plan, as amended and in force from time to time.

KCIN may, at any time, in its absolute discretion, vary or discontinue any or all of its Employee Benefit Plans and/or any stock purchase plans in whole or in part.

At any time you may terminate your employment with KCIN by giving 180 days' written notice.

At any time, KCIN may terminate your employment with it by giving you 180 days' written notice or by payment of an amount equivalent to the remuneration you would have received, calculated at the rate of your Total Remuneration as specified in Schedule 1, during the period of notice not provided to you.

In all cases where notice is required to be given, either by you or KCIN, KCIN may elect to make payment in lieu of all or part only of the period of notice. If any part of the period of notice is worked, the payment in lieu will be made in respect of the unworked part of the period of notice.

If you do not give KCIN the required notice of termination of employment required under this letter:

(a) KCIN may deduct an amount equivalent to the remuneration you would have received during the period of notice not provided by you, calculated at the rate of your Total Remuneration as specified in Schedule 1 ("the Amount") from any moneys owed by KCIN to you upon termination of employment; or

(b) KCIN, in its absolute discretion, may require you to pay the Amount to it, in cash, upon termination of employment.

If the Amount exceeds the amount of any moneys owed to you by KCIN upon termination of employment:

(a) KCIN may deduct as much of the Amount as is possible from any moneys owed to you; and

(b) you must pay to KCIN, upon the date your employment with KCIN terminates, in cash, the difference between the amount deducted from moneys owed to you and the Amount.

During your notice period of termination of employment and/or following the cessation of your employment with KCIN you will provide KCIN and/or any company within the KPMG Consulting Group with all reasonable assistance requested by KCIN and/or any company within the KPMG Consulting Group in relation to the duties, functions and responsibilities you undertook during employment with KCIN or any other matters of which you have knowledge as a result of your employment with KCIN.

There then followed over five pages dealing with that part of the employment contract headed "Post Employment Restraints".

6 Mr Hillard said that entering into the Managing Director Agreement with BearingPoint and occupying the position of managing director did not alter the nature of his work as he had been "operating at that level" for some time. It just formalised matters.

7 As a managing director of information management, Mr Hillard reported to Charles Gene Cochran, one of three directors of the plaintiff and the only one located in Australia. Mr Cochran was employed by BearingPoint and has been its senior executive in Australia and a Senior Vice President, South Asia Pacific Regional Leader, since 2005. Despite his position, Mr Cochran was subject to expenditure limits for various aspects of the business. Such additional expenditure could only be made with the approval of employees of BearingPoint Inc.

8 Mr Cochran reported to Robin Palmer, who was an employee of BearingPoint Inc, but not of the plaintiff. As an executive Vice President of BearingPoint Inc, Mr Palmer was responsible for oversight of the operations for the entire Asia Pacific region. Mr Cochran said that he reported at least quarterly to Mr Palmer about all aspects of the operations of the plaintiff's business in Australia. He said that, in 2007, Mr Palmer approved the budgets, exercised close control over employment at senior manager level and over expenditure, including "down to dealing with reimbursement of expenses incurred by staff" and made decisions and gave instructions about the strategic or operational aspects of the conduct of the Australian business. Mr Hillard said that:

Mr Palmer was very, very hands on in almost every aspect of the business, down to the acceptance or rejection of $50 expense claims.

9 In early 2007, Mr Hillard was appointed to the additional position of Global Information Management Solution Leader. His role was to assist in selling on a global stage the information management techniques and approaches developed in Australia during his time in the business. An executive from the parent company in the United States was responsible for supervision of this aspect of Mr Hillard's work.

10 The plaintiff's information management team, which Mr Hillard led, employed approximately 140 people across Australia. Mr Cochran said that the team had "lost significant numbers" in 2007. Mr Hillard had two junior managing directors under him, Frank Farrall, who was appointed a managing director in April 2006, and Kevin Moysey, who was appointed to that position in March 2007. In December 2007, both of these men resigned within a day of one another, effective mid-March 2008. Both intended to work at Deloitte. Five senior managers worked under the managing directors, often from the site of the client. Four of these managers had resigned from BearingPoint since December 2007, and at least two of them are going to work for Deloitte. The only remaining senior manager, David Moser, has been employed in Mr Hillard's role at BearingPoint. A number of other employees at manager level and below have resigned since December 2007 and many of them have moved to Deloitte.

11 Within his team, Mr Hillard was responsible for the acquisition and building of BearingPoint's information management business. This he achieved by applying his field of specialisation to find solutions and ways to implement them to the information management issues clients presented to him. An intimate understanding of the nature of a client's operations was required to provide strategic advice. In effect, Mr Hillard was a face of the company, and a trusted source of information about how a project would be managed.

12 When he was active at BearingPoint, Mr Hillard had regular contact with clients and potential clients both formally and informally as a means of generating business. Thus, Mr Hillard's role involved extensive business development activities, including presenting at conferences and workshops and maintaining a wide network of contacts in the industry, although, by Mr Hillard's own admission, these activities did not always fulfil those purposes. Mr Hillard claimed that he had had contact with most of the large potential clients within the market in the last two years as an employee of BearingPoint. He said that he would have had contact with between 200 and 300 clients in any two year period.

13 By December 2007 Mr Hillard's salary had increased considerably from the figure nominated in the 2002 employment contract. In addition, pursuant to that agreement Mr Hillard was eligible to participate in "any employee compensation and benefit plans, incentive award or bonus programs or stock option plans" offered by BearingPoint to employees in his position.

14 In 2005, BearingPoint Inc established a Managing Director Compensation Plan to commence on 1 January 2006. One of the components of the Plan was the award of RSUs. Basically, an RSU represented a promise by BearingPoint Inc to issue to the recipient on a future date one share of its common stock or cash equal to the value of one share of such common stock.

15 By a letter dated 12 July 2005, Harry You, the Chief Executive Officer of BearingPoint Inc, informed Mr Hillard that he had been awarded RSUs to the value of US$485,000. An initial grant of 17,743 RSUs, which represented 30% of the value of his award based on a grant date value of US$8.20 per share of BearingPoint Inc's common stock, vested on 1 January 2006. Enclosed with the letter was a Restricted Stock Unit Agreement for Non-US Employees ("the RSU agreement"), which Mr Hillard said he signed in Melbourne and returned to BearingPoint Inc in the United States. The terms of the RSU agreement will be considered in more detail in due course.

16 By an email dated 18 November 2005, Mr You advised Mr Hillard of his salary or "target compensation" for the year 2006. It was broken up into base compensation and reserve compensation. Base compensation was paid as part of the normal salary. Reserve compensation was also part of the normal salary, but was paid at a later time. The lag was usually about a quarter of a year. Mr You also advised Mr Hillard of the performance awards potentially available to him, in addition to his salary, should he achieve certain performance ratings. They included a cash payment of $107,593 if Mr Hillard achieved a rating of EE - Exceeds Expectations.

17 By an email sent on 18 November 2006, James Monastero, an Executive Vice President and Chief People Officer of BearingPoint Inc, wrote to all managing directors advising that the company did not expect to meet its overall 2006 business plan and that, as a result, the previously communicated awards of incentives would not be forthcoming and instead, there would be a 10% performance bonus. Mr Hillard said that he was not paid this reduced amount until about June 2007.

18 By an email sent on 6 January 2007, Mr Monastero advised Mr Hillard of his salary for the year 2007 and of the performance awards potentially available to him, in addition to his salary, should he achieve certain performance ratings. They included a cash payment of $112,110.34 if Mr Hillard achieved a rating of EE - Exceeds Expectations. An Interim Review by BearingPoint Inc dated 23 July 2007 confirmed that Mr Hillard had achieved the EE rating to that date. A Leadership Intelligence 360O Feedback Survey by the same company dated 26 November 2007 contained nothing to alter the rating of Mr Hillard from EE. Mr Cochran agreed that, up to 17 December 2007, Mr Hillard's performance continued to merit an EE performance rating.

19 In addition, in March 2007, Mr Hillard was granted a performance cash award of $80,000 as an extra incentive bonus as one of the top performing managing directors around the world. As Mr You said in his letter to Mr Hillard dated 16 March 2007, the award was a recognition of Mr Hillard's "importance to our organisation and its future". Mr Hillard said that he signed and returned the acceptance form for that award.

20 Mr Hillard said that he had been paid neither the $112,110.34 nor the $80,000. He later agreed in cross-examination that these amounts were not yet payable. In any event, they were not part of his counterclaim.

21 During late 2007, Mr Hillard became dissatisfied with his work at BearingPoint and with his relationship with Mr Palmer. His ability to have any input into the remuneration of staff within his team had been taken from him by Mr Palmer. Mr Palmer had also, without notice, increased the charge-out rates of his staff, including approximately doubling Mr Hillard's own charge-out rate. BearingPoint Inc also introduced a cap on the liability of BearingPoint to its clients.

22 Mr Hillard also became dissatisfied with the changed nature of his global role. When he was given the global role, Mr Hillard was supposed to spend half of his time on it. His domestic targets were reduced by half as a result. Mr Palmer approved Mr Cochran's recommendation in that regard. However, by late 2007, Mr Palmer was seeking to have the targets from before Mr Hillard took on the global role reinstated for 2008, such that he would be required to substantially increase his domestic work load. This change was being considered by the global executive team. Mr Cochran said that there was an intention to make a commensurate down-sizing of the global role to allow for this to happen. Mr Hillard felt this would reduce his global role to a title only, if not require that he hand it to someone else.

23 Mr Hillard gave evidence that he was often approached to join other firms informally during meetings. However, it was only in September 2007 that he began actively seeking alternative employment as a result of his dissatisfaction with the changes in his position with the plaintiff. Mr Hillard first met with someone from the Boston Consulting Group about potentially joining that firm. Soon after, he met with someone from a venture capital organisation about joining that entity.

24 Mr Hillard said that, in late September 2007, he spoke with Deloitte for the first time when he was contacted by Peter Bars, a Deloitte partner. He and Mr Hillard had been colleagues at KPMG. They discussed Mr Hillard leaving BearingPoint and joining Deloitte. A meeting with Gerhard Vorster, the National Managing Partner Consulting of Deloitte, was arranged, but it had to be postponed as Mr Hillard was sick.

25 On 11 October 2007, Terry Shipham, one of the four person leadership team of the plaintiff, emailed Mr Cochran to tell him that it was rumoured that a number of employees of the plaintiff were going to Deloitte in the near future. Mr Cochran called Mr Vorster to discuss the rumour. Mr Vorster met with Mr Cochran on 12 October 2007 at the BearingPoint office. According to Mr Cochran, when he put the rumour to Mr Vorster, he neither confirmed nor denied it. Mr Vorster indicated that a number of people were potentially wanting to join Deloitte from various organisations including from BearingPoint and that he was hiring "aggressively". Mr Cochran said that he explained to Mr Vorster that BearingPoint would seek to enforce all of its rights under its employment contracts.

26 Mr Cochran spoke with Mr Hillard and other BearingPoint employees about the meeting. According to Mr Cochran, Mr Hillard responded by saying that he did want "to look for other options outside of BearingPoint" and that he was "considering" Deloitte but had not committed to anyone. Mr Cochran said to Mr Hillard that he wanted him to stay at BearingPoint and told him to wait until some potential changes that might be happening in the global organisation unfolded.

27 On 7 November 2007, Mr Hillard attended the postponed meeting with Mr Bars and Mr Vorster of Deloitte. It was followed by a dinner with Mr Bars and another Deloitte partner, but not Mr Vorster. Mr Hillard said that the two substantive topics of the discussion with Mr Vorster and Mr Bars were an overview of the business of Deloitte and how Mr Hillard would fit into that organisation.

28 In further cross-examination of Mr Hillard, he agreed that there was discussion of the nature of the BearingPoint business, including the number of people in Mr Hillard's team, as well as the structure of BearingPoint and the possibility that BearingPoint Inc was not committed to retaining the Australian business. Mr Hillard agreed that he told Mr Vorster and Mr Bars about the reaction within BearingPoint Inc to a group of managing directors leaving the Swedish branch and joining Deloitte. The Spanish operations were also discussed, especially in regards to the friendly take over by another firm of BearingPoint Inc's business in that country. The share price of BearingPoint was discussed, including whether it was less than the break up value of the business. Mr Hillard also discussed the possibility of a substantial number of BearingPoint's employees, in particular Mr Farrall and Mr Moysey, moving across to Deloitte as a group. According to Mr Hillard, there was limited discussion about the restraints he would be under if he were to leave BearingPoint and it was noted that the non-compete clauses were likely to be enforced. Mr Hillard agreed that he had emphasised to the Deloitte's representatives that clients were loyal to individual managing directors, rather than the company, as a means of selling his own market value. When asked why he was discussing the affairs of his current employer with people controlling a competitor of his employer, Mr Hillard said that he recalled "being careful not to say anything that was not publicly available".

29 Soon after, Mr Hillard told the managing directors in his team about the initial meeting with Mr Vorster. At this meeting, they indicated to him that they would also be interested in moving to Deloitte. Mr Hillard said that he discussed with Mr Farrall and Mr Moysey the idea of going to Deloitte as a group. He said that he was not keen on the idea but they persuaded him to raise it with Mr Vorster, and he later did so.

30 On or about 12 November 2007, a further meeting was held between Mr Vorster and Mr Cochran. Mr Vorster expressed some interest in Deloitte pursuing an "amicable acquisition" of the BearingPoint business and he pointed out that a number of its managing directors were considering leaving anyway. Mr Cochran told Mr Vorster that he would facilitate a meeting between him and Mr Palmer if he wanted to move the discussion forward. Mr Hillard and others were informed of this meeting. Mr Cochran noted that Mr Hillard was positive about the idea.

31 Mr Hillard held a further meeting over lunch with Mr Vorster towards the end of November 2007. The idea of a number of the plaintiff's employees moving as a group to Deloitte together was again discussed. Mr Hillard said that possibly up to 80% of his team was mentioned, including three managing directors. According to Mr Hillard, he also said to Mr Vorster that he had an individual contract to abide by, and that other staff would have to be approached separately. However, Mr Hilliard said that the bulk of the time at this meeting was spent on discussing his role with Deloitte - his reporting, his autonomy, the type of work he would do. He said that he also indicated to Mr Vorster what his income expectations were. Mr Hillard said he was "very satisfied" with the conclusions of the discussion and that the conversation ended positively.

32 On or about 1 December 2007, at a meeting at Deloitte's premises, Mr Bars offered Mr Hillard a non-equity partnership with Deloitte. There was also a discussion about an equity partnership with Deloitte. No specific date for the taking of an equity partnership was discussed at this time. The previous range of remuneration mentioned by Mr Hillard was said to be acceptable. There was discussion about his role as leader of an information management practice. Mr Hillard gave evidence that he did not accept the offer, but he did tell Mr Bars that he was enthusiastic about what was proposed and the move to Deloitte was attractive to him. He said that it was agreed that they would have to discuss his obligations with his current employer.

33 On 6 December 2007, Mr Hillard telephoned Mr Cochran and said that he had had a verbal offer from Deloitte and that, as he believed it was the right decision for him to make, he intended to resign from BearingPoint. According to Mr Hillard, Mr Cochran said he was "not surprised" by this, but asked that he not take further steps until the following week as there were changes within BearingPoint pending that may affect the decision. The changes within BearingPoint included the possible removal of the global CEO, changes within the Executive Committee, including Mr Palmer's possible departure from the company, and changes in the structural arrangements involving BearingPoint. Mr Hillard said he would wait, and that he had not officially resigned. Mr Hillard said that after this discussion with Mr Cochran, he spoke with Mr Moysey and they agreed they should both go to Deloitte. At about this time, he had a similar conversation with Mr Farrall. Mr Hillard said that he did not discuss their respective resignation dates during either discussion.

34 By a general circular sent on 9 December 2007 by BearingPoint Inc, all RSU recipients were advised that they had until midnight on 15 December 2007 in which, in effect, to elect to cash in all or some of their RSUs by converting them into common stock and then selling them to Morgan Stanley under an off-market arrangement. Mr Hillard said that he elected "to liquefy" all of his 17,743 vested RSUs, on or around 10 December 2007.

35 On 11 December 2007, Mr Palmer called Mr Hillard shortly after the replacement of Mr You as Chief Executive Officer of BearingPoint Inc. Mr Hillard said that he raised with Mr Palmer his concerns about the continuing viability of BearingPoint. Mr Palmer assured him that the Australian entity would not be disposed of, provided it did not lose any money.

36 Also on 11 December 2007, Mr Hillard received an emailed letter from Mr Vorster confirming an offer of a non-equity partnership in Deloitte from a date to be confirmed. The email was sent by Damian Dooley who described himself in his covering letter as "Gerhard Vorster's HR Director for the national Deloitte Consulting practice". The letter enclosed the Deloitte Partnership Agreement for Mr Hillard's "review". It also stated that the offer was

subject to satisfactory completion of the below listed processes and associated forms which are enclosed for your completion:

Compliance with the terms of this offer and with the Partnership Agreement.

The letter set out some of the rights and obligations of Mr Hillard should he accept the offer. The letter also contained the following paragraph:

Should you accept this offer, you hereby represent, warrant and acknowledge to the Firm that:

you have obtained, or have had the opportunity to obtain, the advice of legal counsel and that you are unaware of any legal constraints or circumstances that would prevent you from joining the Firm in accordance with the terms of this offer;
there are no oral or written contracts or agreements between you and any current or former employer;
you acknowledge that, as a Partner of the Firm, you will be expected to comply with the standards and requirements of the Firm;
you have not solicited, approached or made any commitment to any employees or other personnel of your current or previous employers about future employment opportunities with the Firm, and you will not take any such action unless approved by the Firm;
you have not conveyed or disclosed, and you will not convey or disclose, to the Firm any information that you have received in confidence from or held in confidence for your current or previous employers;
you will not announce or disclose your new association with the Firm without the prior approval of the Firm; and
you have not advised any client of your professional transition, or solicited clients on behalf of the Firm, and you will not advise any client of your professional transition or solicit clients on behalf of the Firm without the prior approval of the Firm.

Mr Hillard said that he did not read the letter in depth because he did not want to sign a Partnership Agreement and the letter referred to such an Agreement. He said that he believed that if he signed that letter he would have been committing himself to join Deloitte as a non-equity partner.

37 Similar letters of offer to both Mr Farrall and Mr Moysey respectively were attached to the email sent to Mr Hillard. Mr Dooley's email relevantly stated:

Please find enclosed draft letters of offer for yourself, Frank Farrall and Kevin Moysey for your review and consideration prior to your meeting tomorrow.

Mr Hillard could not explain why this was done other than to suggest that Deloitte did not have the private email addresses of his colleagues. Mr Hillard said that he did not recall doing anything with these other documents. He also said that he did not recall discussing the form of this offer from Deloitte with either Mr Farrall or Mr Moysey.

38 Arrangements had been made for a meeting to take place on 12 December 2007 between Mr Hillard, Mr Farrall and Mr Moysey and staff of Deloitte, including Mr Vorster. For an unexplained reason, Mr Farrall and Mr Moysey did not attend. Instead, Mr Hillard met with Mr Vorster and another senior Deloitte executive. Mr Hillard said that, prior to the meeting, he had told Mr Vorster that he was not happy with the letter of offer and that he was not ready to sign a partnership agreement. Mr Hillard also said that he raised with Mr Vorster his concern that BearingPoint and specifically Mr Palmer had a reputation for being litigious, especially involving those who prematurely departed BearingPoint.. He told Mr Vorster that he wanted to know that he was covered legally whatever the outcome and Mr Vorster agreed. Mr Hillard said that he had asked Mr Vorster for "a legal indemnity" to be included in the revised letter of offer because no matter what happened he did not want to be "at legal risk". Approximately one year before, Mr Palmer and Mr Hillard had discussed Mr Palmer's tactic of suing former employees whether or not it would succeed. From this, Mr Hillard said that, regardless of his contractual obligations, Mr Palmer was likely to pursue him legally. Mr Hillard said that he had not discussed his concerns about the letter of offer with either Mr Farrall or Mr Moysey.

39 At the meeting on 12 December 2007, Mr Hillard was given another letter, bearing a large imprint of the word "draft" in each page, in place of the letter of offer with which Mr Hillard had been dissatisfied. He said that he had requested the revision without obtaining legal advice. The letter, which was dated 12 December 2007, read as follows:

I am pleased to offer you a position, as a Non-Equity Partner, in the Australian partnership of Deloitte Touche Tohmatsu (the Firm) effective immediately. Your remuneration is to be confirmed and I note that it is to be an amount no less than your current salary.

This offer is subject to satisfactory completion of:

Your execution of the Partnership Agreement (a copy of which was sent to you yesterday).

Deloitte acknowledges that acceptance of this offer by you may result in an unavoidable breach of any restraint of trade provisions set out in your current employment contact. In the event that such a breach occurs and a claim is filed against you, Deloitte will indemnify you to the extent that any loss or damage you may suffer is a direct result of that unavoidable beach. This indemnity is subject to you allowing Deloitte to have sole control of the defence of any such claim.

Please note that you must comply with the Firm's policies governing the independence of its practitioners from the interests of our clients. A full copy of the Firm's current policy will be provided upon your commencement.

To confirm your acceptance of this offer, please sign and return the Acceptance of Offer of Non-Equity Partnership attached to this letter.

The indemnity in the third last paragraph had not appeared in the letter of offer dated 11 December 2007.

40 At the meeting, Mr Hillard signed the second page of the letter which read as follows:

By executing this acceptance, I confirm that I have read the attached Letter of Offer and that I accept the offer of Non-Equity Partner with Deloitte Touche Tohmatsu in that letter in accordance with its terms and agree that I shall be bound by the terms of the Partnership Agreement and any subsequently executed Partnership Agreement.

This was virtually the same wording as the concluding part of the letter of 11 December 2007. Mr Hillard pointed out, however, that the third condition on the first page of the letter of 12 December now read:

This offer is subject to satisfactory completion of:

Your execution of the Partnership Agreement (a copy of which was sent to you yesterday).

Previously, in the letter of 11 December the third condition to which the offer was subject had read:

Compliance with the terms of this offer and with the Partnership Agreement.

Mr Hillard also said that, because the letter contained an imprint of the word "draft", he believed it was not a binding letter, but rather an indication of intent. He said that Mr Vorster had pointed the imprint out to him and it had played some part in his decision to sign. Either he or Mr Vorster had described the second letter as "a letter of intent".

41 Later that day, Mr Hillard was also emailed his revised letter of offer. At the same time, he was also sent copies of the revised letters addressed to Mr Farrall and Mr Moysey. Again, all three letters were in similar terms. Mr Hillard again said that he did not know why their documents had been sent to him or why they had been recast in the same form as his.

42 Mr Hillard said he was "very dissatisfied" with his work at BearingPoint. He was "very unhappy" that his team were "departing in huge numbers". He was "very unhappy" about the control over his business by Mr Palmer. He was also concerned about the ongoing viability of BearingPoint. With that background, Mr Hillard said, he was not overly concerned about the level of his remuneration at Deloitte, which was yet to be determined. Mr Hillard said that he was confident enough in his own professional ability that he would be remunerated appropriately.

43 Mr Hillard said that he did not want to be bound, at this time, to join Deloitte. He believed that the letter of intent addressed this concern. Mr Hillard took the letter of intent to be non-binding as well as being dependent on him agreeing to the Partnership Agreement. Mr Hillard said he was not yet ready to sign up to Deloitte finally at this time and that he did not want anything to upset his existing employment contract. He said that the Deloitte representatives agreed that he was not to do anything in breach of his employment contract and that the timing of his move was not critical.

44 Mr Hillard said he wanted a document even if it was not binding because he was concerned about becoming a "pawn in some type of game" over the possible acquisition by Deloitte of the BearingPoint business. Mr Hillard said that he was leaving his options open at that point. He was waiting to see what effect the change of CEO at BearingPoint Inc would have. There was also a strong rumour that another company would take over the Australian business. On the other hand, if Deloitte did acquire the Australian business then it would have been to his advantage not to have signed the Partnership Agreement because his employment conditions would have continued.

45 Mr Hillard denied that he had requested that the letter of 11 December 2007 be changed because he could not give the warranties requested of him in the previous letter. He said that he believed that he could have given the required warranties.

46 Mr Hillard said that it was his intention at the time of signing the letter of intent to Deloitte to give his notice of resignation at the end of December 2007, depending on the status of BearingPoint at that time. He also said he intended to give the notice period stated in his employment contract. He did not agree with the suggestion that he wanted to leave at the earliest opportunity. He said:

I desired to have a clean exit from BearingPoint and I assumed we would have a discussion when I resigned about ... how long that would be and what would need to be done.

In re-examination, Mr Hillard said he anticipated that a lesser period of notice would be negotiated, depending on the handover of his clients and completion of the work he was doing. Mr Hillard denied that the cashing in of the RSUs or the timing of the departure of Mr Farrell and Mr Moysey played a part in the timing of his decision to leave BearingPoint.

47 Later on 12 December 2007, Mr Hillard spoke by telephone with Mr Farrall for 20 minutes. Initially, Mr Hillard said that he did not "recall" having a conversation with either Mr Farrall or Mr Moysey between 6 and 12 December 2007. When shown his telephone records, Mr Hillard agreed that he had spoken with Mr Farrall and that he had told him what he was doing.

48 Mr Farrall and Mr Moysey also received letters from Deloitte on 12 December 2007 and both of them signed the letters on the same date. Mr Hillard gave evidence that, unlike him, neither Mr Farrall nor Mr Moysey have been placed on garden leave and both remained active in BearingPoint pending their departure to Deloitte to take up the offers of non-equity partnerships.

49 On or about 13 December 2007, Mr Vorster suggested to Mr Cochran that the sale of the business was of interest to the Board of Deloitte. He asked for Mr Palmer's contact details.

50 On the same date, Mr Cochran spoke with Mr Hillard. According to Mr Cochran, he told Mr Hillard that Mr Vorster had initiated a call with Mr Palmer and that they were in the process of discussing potential outcomes. Mr Hillard said that he was interested in those conversations and agreed that he would wait to see what happened. He said that he told Mr Cochran that he had not signed a Partnership Agreement with Deloitte, but that he had signed a letter of intent to join Deloitte. He said he was not resigning immediately because he was not yet committed to Deloitte. He added that, until he did, he was committed to serving his clients at BearingPoint and managing his team. Mr Cochran said that he foreshadowed to Mr Hillard a call from Mr Palmer to Mr Hillard, in which Mr Palmer would aggressively attempt to talk him out of leaving. According to Mr Hillard, Mr Cochran told him that he had just had his own very difficult conversation with Mr Palmer.

51 On 13 December 2007, Mr Palmer telephoned Mr Hillard. According to Mr Hillard, Mr Palmer opened the conversation by telling him about certain organisational changes instigated by the new CEO. Mr Palmer said that he knew Mr Hillard was considering leaving and he did not want these changes to trigger Mr Hillard's resignation. Mr Hillard said that he confirmed with Mr Palmer that he had signed a letter of intent with Deloitte but that he had not resigned from BearingPoint for a number of reasons. According to Mr Hillard, Mr Palmer said that Mr Vorster had made an offer for the BearingPoint Australian business that morning but that he was not going to "negotiate with a gun to his head". Mr Hillard said that he told Mr Palmer that one of the reasons he was not resigning at this time was that he did not want to be that gun. Mr Hillard said that Mr Palmer expressed disappointment about him leaving, bearing in mind all the support Mr Palmer had given him. Mr Hillard said that he told Mr Palmer that he was committed to looking after his clients and managing his staff for as long as he remained at BearingPoint. He said that Mr Palmer went on to threaten to sue Mr Hillard personally for breach of his employment contract, and advised him to seek legal advice and told him that it was not wise to take on "this cost and risk". Mr Hillard said that he was shaken by the threat and that he immediately called his wife to tell her that "BearingPoint are going after our house".

52 It would appear that, following his telephone discussion with Mr Hillard, Mr Palmer exchanged emails with April Samuelewicz, BearingPoint Inc's Managing Director of Operations and Human Resources for the Asia Pacific region. One email from Mr Palmer to Ms Samuelewicz read as follows:

Ok, definitely need timing on RSU settlements and to see if we can hold them up at least for Hillard who verbally told me has accepted an offer with Delloitte [sic] which means he already has violated his MD and RSU agreement.

53 Later on the same day, Mr Palmer again emailed Ms Samuelewicz:

Need a legal opinion on enforceability so we can clearly articulate the implications for him personally and damages we will be able to claim against him individually. I will fly there next week and use my powers of persuasion.

54 Mr Palmer called Mr Hillard again on 14 December 2007. This time, his tone, according to Mr Hillard, was friendly and calm and much more relaxed. Mr Palmer said he would be considering the offer from Deloitte to purchase the business.

55 Mr Hillard said that over the next few days, he continued performing his normal role. He had numerous client meetings and even forwarded to Mr Palmer a request for approval of one engagement, which Mr Palmer approved.

56 On the morning of Monday 17 December 2007, a letter signed by Mr Cochran was handed to Mr Hillard by Francine Viola Mamouney, the Human Resources Leader - South Asia Pacific of BearingPoint. It stated:

Your employment with BearingPoint Australia Pty Ltd

In your recent discussions with Robin Palmer you indicated that you have accepted employment with Deloitte Consulting. BearingPoint regards this communication as notice of your voluntary resignation.

BearingPoint will be seeking to get you to change your mind and remain an employee of BearingPoint and Robin Palmer will be discussing this with you this week.

However, in the interim, in light of your resignation, BearingPoint believes it best to remove you from active client facing work and, in accordance with your contract of employment, your employment will terminate in 180 days from today's date on 14 June 2008.

We hope to have positive discussions with you and convince you to remain with BearingPoint, however, until further notice from myself or Robin Palmer you will not be required to attend the office. We are also instructing you not to contact any BearingPoint clients, prospective BearingPoint clients that you are aware of, or employees of BearingPoint without the authorisation of myself or Robin Palmer.

Given that you have voluntarily resigned and have been removed from active employment, please note that your RSU settlement will be deferred pending the outcome of further discussions with Robin Palmer.

57 Mr Cochran said that the contents of the letter reflected instructions he received from Mr Palmer. The letter was prepared by Truman Hoyle, a Sydney firm of solicitors, and the solicitors for the plaintiff and BearingPoint Inc. Mr Cochran said that he was not involved in the discussions with the solicitors and he did not make any suggestions about, or raise any objections to, the content of the letter. Mr Cochran said that the letter was typical of those provided to employees known to be leaving and going to competitors. He also said that he was not familiar with the terms of Mr Hillard's contract.

58 Mr Cochran said that he did not make, and was not part of, the decision to defer Mr Hillard's RSU settlement. The reference in the letter to deferral was included as a result of what Mr Cochran was told by Mr Palmer. Mr Cochran pointed out that Mr Hillard's election was not deferred, it was still in force. What was deferred was "the actual settlement of the RSUs". He said that he did not query the "decision that was taken by the US by my boss". He said that he thought it was a reasonable decision because the RSUs could be deferred at any time for any reason and as Mr Hillard was leaving to go to a competitor, he thought it was "a legitimate reason".

59 Ms Mamouney received the letter to Mr Hillard by email from Mr Cochran in Sydney on the morning of 17 December 2007. She said that she was told that it had been prepared by Truman Hoyle. Ms Mamouney said that she was answerable to Ms Samuelewicz, who instructed her on "hiring and firing". On the relevant day, Ms Samuelewicz asked Ms Mamouney to retrieve the laptop from Mr Hillard and to tell him that he was on "garden leave".

60 Ms Mamouney handed Mr Hillard the letter signed by Mr Cochran, and after he had read the letter, she indicated that he had been placed on "garden leave" pending further notice and asked him to return his laptop computer. Ms Mamouney said that Mr Hillard asked what he should say to his clients, the global leadership team in the US and his immediate team members. He said that he had a client meeting that afternoon but as it was just a technical update he could have one of his managers handle it. Ms Mamouney said that she told Mr Hillard that as he was starting his two weeks of annual leave on Friday, he should take until Thursday as "unplanned leave" and that the garden leave would start on 8 January 2008. An email was then drafted to be sent to "everybody". Mr Hillard said to Ms Mamouney that he wanted to clarify that he had not tendered his resignation from the plaintiff, and that he had only signed a "letter of intent" from Deloitte. He said he had not signed a partnership agreement with Deloitte. Ms Mamouney said that she would pass that on to Mr Palmer.

61 As instructed, Ms Mamouney collected Mr Hillard's laptop computer and asked that he leave his office. Retrieving the laptop was a step taken when an employee was terminated from BearingPoint, but was not limited to that situation, according to Mr Cochran. Mr Hillard's office was packed up on the same day by people other than Mr Hillard and his belongings were put in boxes. According to Mr Hillard, Ms Mamouney told him that his laptop was going to be scanned. Mr Hillard was not immediately allowed to remove personal records from his laptop relating to his personal taxation although he asked for such access.

62 Without his laptop, Mr Hillard said, he could not perform his role. The only means of accessing the intranet of BearingPoint was by a desktop within a BearingPoint office, or remotely via a laptop registered with BearingPoint. The intranet of BearingPoint gave access to an email system, client files, directories, work product and information about projects and proposals of the company. Mr Hillard had a back-up of his laptop at his home, although this was neither up-to-date nor comprehensive and did not give access to intranet information including client files.

63 Mr Hillard initially denied in cross-examination that he had spoken to either Mr Farrall or Mr Moysey after receiving the letter on 17 December 2007. He then said that he recalled receiving a call from Mr Moysey while he was still in the car park. He said that he told Mr Moysey that he could not speak with him. Mr Hillard was "very concerned" that the letter had said not to have contact with his fellow employees and he wanted to seek legal advice on his situation. Further, he said that Mr Farrall was on annual leave and "completely out of contact". However, when shown his telephone records, Mr Hillard agreed that at just before 11 a.m. on 17 December 2007, he had called Mr Farrall briefly, and that Mr Farrall had then called him back. Mr Hillard said that during the conversation, he told Mr Farrall that he had received the letter and that they spoke about the termination of his contract with the plaintiff. He conceded that Mr Farrall may have said something about resigning. Mr Hillard agreed that he and Mr Farrall and Mr Moysey had discussed all leaving BearingPoint at around the same time.

64 Mr Hillard and Mr Cochran spoke by telephone at about 11.30 a.m. on 17 December 2007 about the letter. According to Mr Cochran, Mr Hillard called him. He said that he told Mr Hillard that, in the light of what Mr Hillard had done, BearingPoint felt that the steps set out in the letter were justified but that he still wanted to talk to Mr Hillard at a convenient time "to try and talk him out of leaving and get him to come back in to the business". Mr Hillard responded that he would enter into the discussion but that he felt that he had "made up his mind" already. According to Mr Hillard, Mr Cochran had called him to see how he was. Mr Hillard said that Mr Cochran told him that he had warned Mr Palmer that Mr Hillard had no ambitions to take an executive role and that to remove his global role would leave Mr Hillard with no career progress within the company.

65 Later on 17 December 2007, Ms Mamouney emailed Mr Hillard advising him that she had communicated to Mr Palmer Mr Hillard's statements that he "had not formally tendered" his resignation, but rather that he "had signed a Letter of Intent with Deloitte's", and had "not progressed to signing any form of Partnership Agreement with them". Ms Mamouney said that Mr Palmer's "understanding on the resignation issue is that you had indicated to him verbally that you had accepted employment with Deloitte and that this in [sic] the process of being confirmed in writing with formal notification". She further said that, now that he knew about the letter of intent, Mr Palmer had asked that Mr Hillard forward a copy of it to her. This was never done. Mr Hillard said that he took advice on this issue.

66 Mr Hillard said that he told Deloitte of the letter of 17 December 2007 on that day. He also sought legal advice from Horton Rhodes, a Sydney firm of solicitors, at the suggestion of Deloitte. The same solicitors gave advice to Mr Farrall and Mr Moysey. Although Mr Hillard agreed that Mr Moysey resigned on 18 December 2007 and Mr Farrall on the following day, he said that he did not know for certain that it was going to happen. He said that he knew it was likely. Each of them was required to give three months' notice.

67 On 18 December 2007, at the request of Mr Palmer, Ms Mamouney spoke with Mr Hillard about attending a meeting with Mr Palmer and Mr Cochran. Mr Palmer said it could be in Sydney or Melbourne. Mr Hillard said that he stipulated that no "legal matters" were to be discussed, that the meeting should take place away from the plaintiff's premises, and that he be advised who would be in attendance at the meeting and of the agenda for the meeting. Ms Mamouney informed him that the first two matters were agreed to by Mr Palmer. Ms Mamouney did not agree that Mr Hillard asked to be provided with an agenda for the meeting. Ms Mamouney said that nothing was said to her by Mr Hillard about Mr Palmer abusing him or threatening him in their telephone conversation on 13 December. According to Mr Hillard, he told Ms Mamouney that his last conversation with Mr Palmer "had not gone well".

68 The meeting on 20 December 2007 was cancelled by Mr Hillard when Mr Palmer and Mr Cochran were on their flight from Sydney to Melbourne to meet with him, Mr Palmer having flown in from the United States of America. Instead, a letter purporting to terminate the employment contract because of a claimed repudiation by the plaintiff of the contract was faxed by Mr Hillard to Mr Cochran at that time. That letter stated as follows:

I refer to your letter to me of 17 December 2007, and to Francine Mamouney's email to me of the same date.

You letter stated that I "voluntarily resigned". This is false. I had not resigned from BearingPoint at all, and my offer with Deloitte was conditional upon me accepting and signing their partnership agreement. This was later acknowledged in Francine's email to me.

Your letter followed a phone call from Robin Palmer last Thursday during which he verbally abused me and threatened to sue me for conditionally accepting the offer from Deloitte.

You have purported by your letter to put me on garden leave in what you say is in accordance with my employment agreement. There is no provision of my employment agreement that allows you to remove me in the way you have from contact with clients, employees or my duties generally. I have a right to perform my work. Equally, you say that my employment will cease on 14 June 2008 by reason of my "voluntary resignation" and that you have determined to suspend the settlement of my RSU. I regard these actions that you have taken as a repudiation of your obligations under my employment agreement with BearingPoint, and I elect to accept that repudiation. As a consequence, my employment is now at an end, and I expressly reserve all my rights against BearingPoint for this breach, including in respect of my Restricted Stock Units.

Please ensure that all of my entitlements are paid.

69 The plaintiff responded to Mr Hillard's fax of 20 December 2007 by a letter from its solicitors, Truman Hoyle, that same day in which it was made clear that the plaintiff regarded the employment contract as continuing in force, and the plaintiff would accordingly continue to pay Mr Hillard his remuneration pursuant to the relevant term.

70 The next time there was any contact between the plaintiff and the defendant was when Mr Moser called Mr Hillard around Christmas to find out why he had left BearingPoint. In early January 2008, Mr Moser was appointed to Mr Hillard's position, backdated to 1 January 2008. According to Mr Cochran, the global CEO of BearingPoint Inc had made the final decision on this appointment. Mr Palmer and a number of other people were also involved in the decision. Mr Moser was not as experienced as Mr Hillard, nor did he have established client connections to match Mr Hillard, in the view of Mr Cochran. On Sunday, 6 January 2008, Mr Moser called Mr Hillard to let him know that he had been appointed to Mr Hillard's former role at BearingPoint.

71 On 3 and 10 January 2008, the plaintiff's solicitors sought undertakings from Mr Hillard that he would not contact clients of the plaintiff nor take up employment with Deloitte until the expiration of the contractual notice period, and that he would not solicit other employees to leave their employment with the plaintiff. By letters dated 8 and 14 January 2008, Mr Hillard's solicitors advised that he would not give the undertakings requested. By the second letter, they also advised that he intended to commence work with Deloitte on 23 January 2008. Mr Hillard said that, in mid-January 2008, he settled his remuneration package with Deloitte. He said that he was yet to sign the Deloitte partnership agreement as he had intended to sign it on the morning of 23 January 2008, when he started work at Deloitte.

72 On 18 January 2008, Mr Palmer sent an email to a number of BearingPoint employees including Mr Cochran, Mr Moser and Ms Mamouney giving an "Update" on "Australia MD's". The following passage appeared towards the end of his two page email:

On the MD defections we are holding them, by way of various legal vehicles to remain employees of BearingPoint, through their required notice period per their MD agreement. There will be court activity related to this next week. The effect of this should be that this will prevent them from starting with DTT for 3 months from resignation date for the 2 more junior MD's and for Rob until June 2008.

73 This proceeding was issued on 22 January 2008. The plaintiff's application for an interlocutory injunction came before the Court on 24 January 2008. Mr Hillard gave certain undertakings about not taking up employment with Deloitte and not approaching clients, and the hearing was adjourned to 30 January 2008.

74 By a letter dated 29 January 2008, Mr Hillard wrote to Mr Cochran to give notice of termination in 180 days, in the event that his employment contract had not been brought to an end by his acceptance at BearingPoint's repudiation, or that notice of termination had not already been given.

75 On 30 January 2008, the adjourned interlocutory injunction application came before me sitting in the Practice Court. The matter was then fixed for final hearing before me commencing on 11 February 2008, which at the request of the parties subsequently became 18 February 2008. Mr Hillard continued his undertakings pending my determination.

76 Mr Cochran agreed that he has had no direct communication with Mr Hillard since 20 December 2007, and that he had not attempted to contact Mr Hillard. Mr Cochran said that he had not received any indication from Mr Hillard that he would or would not remain with BearingPoint, although he was told that Mr Hillard would begin work at Deloitte. Mr Cochran agreed that, since 20 December 2007, the plaintiff had not made any requests to Mr Hillard for assistance in any aspect of its business, including providing guidance to his successor and information about the relationships that Mr Hillard had nurtured at BearingPoint. This decision was reached with the benefit of legal advice. Mr Cochran said that BearingPoint was unclear as to what Mr Hillard could and would legally do to assist the company, given his letter of 20 December 2007 purportedly accepting BearingPoint's repudiation of the employment contract. He said that if the Court held that Mr Hillard's employment contract continued until 14 June 2008, then he would seek input from Mr Hillard about the sales opportunities that he had been pursuing and the relationships that he had had, and direction from Mr Hillard to Mr Moser about the team and its future strategy. Mr Cochran explained that he would not ask Mr Hillard to help in any "direct client facing work". However, he said that, because of their past close relationship, he was "comfortable" that he and Mr Hillard could work out a satisfactory method of operating, especially as Mr Hillard would not be asked to come to the office full time.

77 Mr Hillard confirmed that he had had no contact with BearingPoint. Mr Hillard agreed that he had a good working relationship with Mr Moser and Mr Cochran and that he would have no difficulty speaking to either of them about BearingPoint matters in the next few months.

78 Mr Hillard said that he had been offered equity partnership from 1 July 2008, pending appropriate performance. Mr Hillard conceded, however, that, had he given notice on 31 December 2007, this would not have left any time to prove himself qualified to be admitted to equity partnership if he had been required to serve his 180 day notice period in full.

79 Essentially, the parties agreed that there were six major issues raised by this proceeding:

(a) whether the plaintiff repudiated the employment contract by its conduct between the telephone conversation Mr Hillard had with Mr Palmer on 13 December and Ms Mamouney giving Mr Hillard the letter on 17 December 2007;

(b) if the employment contract was repudiated by the plaintiff, whether the defendant was entitled to accept the repudiation and treat it as at an end;

(c) if the employment contract was not terminated, whether the defendant should be restrained from breaching it or whether that would be tantamount to specific performance of an employment contract;

(d) whether the post employment restraints were valid and lawful;

(e) if they were, whether, in the circumstances, the defendant should be restrained from breaching the post employment restraints;

(f) whether the defendant was entitled to claim damages from the plaintiff in respect of the deferral of the settlement of his RSU entitlements.

80 The first issue to consider is whether BearingPoint repudiated the employment contract. What constitutes repudiation was recently considered by the High Court of Australia in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd.[1] In the majority judgment, Gleeson CJ, Gummow, Heydon and Crennan JJ said:

The term repudiation is used in different senses.[2] First, it may refer to conduct which evinces an unwillingness or an inability to render substantial performance of the contract. This is sometimes described as conduct of a party which evinces an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with the party's obligations.[3] It may be termed renunciation.[4] The test is whether the conduct of one party is such as to convey to a reasonable person, in the situation of the other party, renunciation either of the contract as a whole or of a fundamental obligation under it.[5] (In this case, we are not concerned with the issues that arise where the alleged repudiation takes the form of asserting an erroneous interpretation of the contract. Nor are we concerned with questions of inability as distinct from unwillingness.) Secondly, it may refer to any breach of contract which justifies termination by the other party.[6] It will be necessary to return to the matter of classifying such breaches. Campbell J said this was the sense in which he would use the word "repudiation" in his reasons. There may be cases where a failure to perform, even if not a breach of an essential term (as to which more will be said), manifests unwillingness or inability to perform in such circumstances that the other party is entitled to conclude that the contract will not be performed substantially according to its requirements.[7] This overlapping between renunciation and failure of performance may appear conceptually untidy, but unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives. In contractual renunciation, actions may speak louder than words.[8]

81 Counsel for Mr Hillard submitted that the employment contract was repudiated by BearingPoint:

(a) directing Mr Hillard to go on garden leave, and thus depriving him of work and sterilising his ability to work;

(b) stopping, or procuring a stoppage of, the settlement and sale of Mr Hillard's RSUs;

(d) through Mr Palmer threatening Mr Hillard in their telephone conversation on 13 December 2007;

(e) appointing another employee to Mr Hillard's role to carry out all his duties and functions as managing director; and

(f) not abiding by the dispute resolution clause requiring consultation before commencing this proceeding.

Mr Young QC, who appeared with Mr Archibald of counsel for the defendant, conceded during argument, however, that neither of grounds (e) or (f) could be relied on, because they occurred after Mr Hillard had purported to accept the alleged repudiation by his letter of 20 December 2007. It was, however, submitted that they gave context to the other conduct and were relevant to the question of the injunctive relief sought by BearingPoint. Mr Young also submitted that it was implicit in the set of directions contained in the letter of 17 December 2007 that BearingPoint was going to appoint another employee to perform Mr Hillard's role.

82 It was submitted on behalf of Mr Hillard that each of grounds (a) to (d) constituted a repudiation of the employment contract because it represented:

(a) a breach of a condition of the employment contract, or a breach of an "intermediate term" of the employment contract in a sufficiently serious manner; and

(b) a renunciation of the employment contract, by evincing an intention not to perform and be bound by its terms or by showing an intention "to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way".[9]

83 Counsel for BearingPoint submitted that there is no repudiation "if there was never any clear renunciation of the contract, or if genuine attempts to perform it, or to cure any breach, were being made".[10] Further, they submitted that repudiation is "not to be lightly found or inferred".[11] BearingPoint's actual intention is not relevant. Rather, the question is whether:

viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental term or obligation under it.[12]

Whether or not BearingPoint's conduct justifies a conclusion of repudiation involves looking in some detail at the various grounds relied on by Mr Hillard.

84 The first ground of the alleged repudiatory conduct is the argument that, by its letter of 17 December 2007, BearingPoint wrongfully directed Mr Hillard to go on garden leave for the duration of his 180 day notice period, thus depriving him of work and sterilising his ability to work. "Garden leave" is a colloquial or euphemistic term for an employer insisting that an employee, who has given notice, stay away from work for the duration of the notice period, whilst continuing to pay the employee's remuneration.

85 It goes without saying that if the employment contract contained an express term permitting BearingPoint to direct Mr Hillard to go on garden leave then it would not be a breach of that contract to have given that direction. Equally, an express term that BearingPoint was obliged to provide work for Mr Hilliard would also put the issue beyond doubt. Both sides approached the matter, correctly in my opinion, on the basis that there was no express term in the employment contract either permitting or prohibiting the direction to go on garden leave.

86 There are a number of cases which deal with the question of the lawfulness of garden leave, in the absence of an express contractual term. In William Hill Organisation Ltd v Tucker, Morritt LJ said that one proposition clearly demonstrated by the earlier cases was that:

the question whether there is a "right to work" is one of construction of the particular contract in the light of its surrounding circumstances.[13]

In that case, it was held that the contract of employment should be construed as giving rise to an obligation on the part of the employer to permit the employee to perform the duties of the post, to which it had appointed him, during the period of his notice.[14] Morritt LJ gave three reasons for reaching this conclusion. First, the post of the employee, namely senior dealer with a bookmaker employer specialising in the limited field of spread betting, was "a specific and unique post". Secondly, the skills necessary to the proper discharge of such duties required their frequent exercise in order that they could be enhanced and preserved.[15] The third reason was to be found in the terms of the contract, in particular the obligation imposed on the employee to work the hours necessary to carry out his duties in a full and professional manner.[16] His Lordship said that in all cases involving garden leave the first question that must be posed was:

Does the consideration moving from this employer extend to an obligation to permit the employee to do the work or is it confined to payment of the remuneration agreed?[17]

87 In Wesoky v Village Cinemas International Pty Ltd, Merkel J stated that:

The question of whether an employer is required as a matter of contractual obligation to provide an employee with work or merely to pay the employee the amount required to be paid under the employment contract when the employee is ready, willing and able to perform the work is a vexed one. Although the question in each case is one of construction of the contract in question, where the contract provides that benefits accrue to the employee as a consequence of the work, courts have more readily implied a contractual obligation on the part of the employer to provide the work, unless the employer has an express contractual right not to do so.[18]

His Honour said that relevant circumstances surrounding the consultancy agreement in that case were that Mr Wesoky was employed for a specific and substantial project; that a new and unique overseas post was created for him to enable the project to reach fruition; that the nature of his employment was such that maintenance of his skills required continuing work in, and contact with, the cinema exhibition market; that Mr Wesoky's company, ICFC, agreed to procure him to "devote substantially the whole of his time, attention and skills during normal business hours" to Village International and not engage in activities in conflict with his duty to Village International; and that Mr Wesoky's company was offered the opportunity to purchase a five percent equity in "all new cinema exhibition investments in Europe" falling under his direction and management during the currency of the agreement.[19] In holding that Village International's instruction to Mr Wesoky that he no longer participate in its business activities in Europe was a breach of its contractual obligation,[20] Merkel J said as follows:

Thus, the present case is one where a significant aspect of the promised remuneration depends on the employer providing the opportunity, or not depriving the other contracting party of the opportunity, to earn it. Consequently, an obligation to afford the other contracting party the opportunity of doing so is readily implied ... Such an implication is also supported by the specific and unique overseas posting undertaken by Wesoky and ICFC to advance their employment and interests, ... the nature of Wesoky's employment and by the express contractual requirement that ICFC procure Wesoky to devote substantially the whole of his time and skills in business hours to his employer's activities.[21]

88 In Ramsey Butchering Services Pty Ltd v Blackadder,[22] a decision of the Full Court of the Federal Court, the majority, Tamberlin and Goldberg JJ, held that the contract of employment of a boner at an abattoir did not impose a duty to provide work. Their Honours said that:

At common law there is no obligation upon an employer under a contract of employment to provide work to an employee unless the contract specifically requires that such work be provided, or unless it is necessary for the employee to continue to be employed in order to maintain a particular profile, such as an actor, or unless the nature of the work for which the employee is employed is such that the employee's career and future prospects depend upon the employee working in a particular way, or unless the level of the employee's remuneration depends upon the extent of the work the employee is able to undertake. ...
The common law position was explained in Turner v Sawdon & Co [1901] 2 KB 653. AL Smith MR said (at 657):

"It is within the province of the master to say that he will go on paying the wages, but that he is under no obligation to provide work. The obligation suggested is said to arise out of the undertaking to engage and employ the plaintiff as their representative salesman. It is said that if the salesman is not given employment which allows him to go on the market his hand is not kept in practice, and he will not be so efficient a salesman at the end of the term. To read in an obligation of that sort would be to convert the retainer at fixed wages into a contract to keep the servant in the service of his employer in such a manner as to enable the former to become au fait at his work."

In Collier v Sunday Referee Publishing Co Ltd [1940] 2 KB 647 Asquith J said (at 650):

"It is true that a contract of employment does not necessarily, or perhaps normally, oblige the master to provide the servant with work. Provided I pay my cook her wages regularly she cannot complain if I choose to take any or all of my meals out. In some exceptional cases there is an obligation to provide work. For instance, where the servant is remunerated by commission, or where (as in the case of an actor or singer) the servant bargains, among other things, for publicity, and the master, by withholding work, also withholds the stipulated publicity."

The distinction between the two classes of employment contract, those which impose a duty to provide work and those that do not, was explained by Lawrence LJ in Marbe v George Edwardes (Daly's Theatre) Ltd [1928] 1 KB 269 at 288 in the following terms:

"Contracts of employment fall under two categories; first those in which the only obligation imposed upon the employer is the payment of the agreed remuneration, and no duty is cast upon the employer to give active occupation - this no doubt is the more usual form of contract; and secondly those in which the employer engages not only to pay the agreed remuneration but also to afford to the employee an opportunity of doing the work for which he is engaged. Whether a given contract falls within the first or second category depends primarily on the express words of the contract, but may also depend upon the character of the employment, and possibly upon the amount and nature of the remuneration."[23]

There have been a number of cases in which courts have found that employers have an obligation to provide an employee with work where the employee has particular skills or talents which the employee needs to keep in regular activity, or where the employee occupies a particular unique position, or where an aspect of the employee's remuneration depends upon work being performed. ...[24]

89 Their Honours held that Mr Blackadder's case did not fall into any of the categories in which courts had been prepared to find an obligation on the part of the employer to provide the employee with work. They referred to the fact that any extra pay to which Mr Blackadder might be entitled by way of a bonus did not depend on "his individual work or productivity but rather on the output and productivity of the group of employees as a whole".[25]

90 An example of a case falling within one of the other categories is Curro v Beyond Productions Pty Ltd.[26] In that case, Ms Curro, a television presenter, had agreed with a company producing a television program that she would not engage in any other television or radio or print media presentation during the term of the agreement. The enforceability of this negative promise was raised when Ms Curro told the production company that she had accepted an offer from Channel 9 to work as a television reporter for its program "60 Minutes". The New South Wales Court of Appeal said that publicity and the opportunity of exposure before the public were important to a television presenter as well as an actor. Therefore, the Court expressed the view that Ms Curro "was entitled to be given work of an appropriate quality to keep her name and talents before the public with reasonable frequency" and the production company "had no contractual right to sterilise Miss Curro's services and keep her away from the viewing public."[27] Nevertheless, the Court dismissed Ms Curro's appeal. Meagher, Handley and Cripps JJA held that to grant the injunction was not to order specific performance because the appellant could comply with the injunctions without resuming work for the production company. Their Honours stated that Ms Curro:

would not be forced to choose between service with Beyond or idleness. Other employments would be open to her. There is no question of her being destitute. Damages would not be an adequate remedy.[28]

91 Another case referred to was Mann v Capital Territory Health Commission,[29] in which the majority, Fox and Kelly JJ, said of the appellant surgeon that:

he understandably and correctly emphasizes that he needed an adequate amount of work to maintain his skills and his standing among professional colleagues.[30]

However, their Honours refused to imply a term into the contract of employment that there was an absolute liability upon the Commission to ensure that the appellant be furnished with surgical work of a quantity and kind suitable for a senior experienced general surgeon.

92 Counsel for Mr Hillard submitted that he was entitled to be given work, indeed that he was entitled to retain his position as managing director, during the period of his notice, and that it was a breach of the employment contract to deprive him of work. They based that submission on a number of factors. First, it was submitted that Mr Hillard's contractual entitlement was to perform the role and functions of managing director and to exercise responsibility for the leadership, management and development of the information management business. None of the provisions of the employment contract about Mr Hillard's "specific duties", or his "other duties", or "assignment" to another position, or compliance with directions, Mr Young submitted, supported an implied term that Mr Hillard could be removed from his position as managing director.

93 Secondly, counsel submitted that Mr Hillard's remuneration included bonuses contingent on him continuing to work and attaining the level of performance that would entitle him to receive the extra rewards.

94 Thirdly, it was submitted that the nature of Mr Hillard's work, in a fast developing industry, required constant involvement, with the risk of falling behind and being perceived to be behind if he were not involved. As a skilled employee, it was submitted, Mr Hillard had a right to be provided with adequate work.

95 Fourthly, it was submitted that, after several years of building the information management practice at BearingPoint and promoting himself in the market place, Mr Hillard wanted from his employment both remuneration and the opportunity to keep his name and talents prominent to the market and industry. Retaining his profile and reputation was said to be a critical aspect of Mr Hillard's role and status in the industry.

96 Fifthly, there were terms of the employment contract that Mr Hillard not engage in other employment, business or occupation while employed by BearingPoint and that he work such hours as were required to properly discharge the duties of his position.

97 Finally, attention was drawn to the fact that the payment in lieu of notice provision in the employment contract referred to part of the notice period being "worked" and payment in lieu being made for a period which was "unworked". Mr Young submitted that this was an indication that Mr Hillard was entitled to work out the period of notice, performing work of the kind that he was entitled to perform under the contract, and if BearingPoint did not want that, they could pay him out.

98 In response, counsel for BearingPoint submitted that there was an implied duty upon an employee to follow lawful and reasonable directions of the employer,[31] and that a direction to go on garden leave during the period of notice was such. Counsel submitted, however, that the term "garden leave" was misleading because it covered a wide variety of situations from, at one extreme, sending the employee home with no further contact other than paying his or her salary, to the other extreme of requiring the employee to continue providing services for the employee but at home rather than at the office.

99 Mr Borenstein SC, who appeared with Mr Millar of counsel for the plaintiff, referred to two other implied terms which BearingPoint submitted were part of the employment contract and which Mr Hillard admitted in his defence. They were a duty to faithfully serve the employer and a duty to act in the employer's best interests and not to use his position for profit or seek benefit for himself or a third party.

100 Mr Borenstein pointed out that none of the specific functions and tasks performed by Mr Hillard, and about which he had given evidence, were set out in the employment contract. What general descriptions were given of his role and duties were repeated in Mr Farrall's and Mr Moysey's managing director agreements. Mr Borenstein therefore submitted that the employment contract left open a capacity for BearingPoint to change Mr Hillard's role, including his functions and responsibilities, as required in the interests of its business.

101 Mr Borenstein further submitted that it was completely unrealistic to contend that the employment contract did not allow Mr Hillard's duties to be varied or to argue that the employment contract precluded BearingPoint from modifying Mr Hillard's duties, once he had given notice, so that his replacement could progressively take over his tasks and clients. It was an entirely understandable and reasonable and legitimate response for BearingPoint to remove Mr Hillard from contact with its clients once it learned he was intending to take up a position with one of its key competitors. The same went for the prohibition on contact with staff in circumstances where BearingPoint had been put on notice by Mr Hillard's new employer that it was attempting to poach senior staff. Counsel submitted that the plaintiff's apprehension about Mr Hillard's dealings with other staff was totally borne out by the evidence about his discussions with Deloitte on 7 November 2007 and with Mr Farrall and Mr Moysey throughout this period, which included the potentiality of many defections by senior staff from BearingPoint to Deloitte.

102 Secondly, counsel for BearingPoint submitted that because of the discretionary nature of the performance bonuses potentially available to Mr Hillard, he could not argue that he suffered any financial loss as a result of being forced to go on garden leave. It was inconceivable that BearingPoint would grant Mr Hillard any performance bonus for his good work during 2007 or 2008 when he had indicated that he was resigning to take up a position with a competitor.

At a glance

Court

Decision date

Before

Source

Judgment (383 paragraphs)

Parties

Cases Cited (19)