Bruce v A W B Ltd

Bruce v A W B Ltd - [2000] FCA 594 - FCA 2000 case summary — Zoe

[62]

9 There is no doubt that before the Agreement of Employment was entered into the parties agreed that if the applicant were to be employed, he would report to the Managing Director and be on the Executive Committee. The question is whether the parties intended those matters to be part of the contract notwithstanding that they were not mentioned in the formal written contract. Particularly important in this regard is the evidence of Mr Lamming, which I accept in its entirety. He prepared the Specification on the instructions of Dr Ryan. It stated that the appointee "will report to the Managing Director and will form part of the Executive Management team". These two aspects of the position were new. The Senior Manager, Information Technology, had formerly reported to the Senior Manager, Corporate Affairs, and was not on the Executive Committee. The changes were part of the redesign made in order to attract someone with ability to strategically integrate IT with the respondent's business needs. The applicant told Mr Lamming he wanted to advance his career with a significant organisation in which he would be head of IT and part of the company's executive management team. He added that at Amcor he had reported to the managing director and had sat on the executive committee. At their first meeting Mr Lamming told the applicant the position had those two characteristics, and that this was an "upgrade" of the position of Senior Manager, Information Technology, because it involved a report to the Managing Director. Mr Lamming gave the applicant a copy of the Specification. Mr Lamming's evidence was that the respondent, particularly Dr Ryan, was aware that reporting to the Managing Director and being on the Executive Committee was central to the applicant's acceptance of the position. In all those circumstances I have concluded that the parties did not intend the terms of their agreement to be found solely in the written agreement, and that there were terms of the contract that the applicant would report to the Managing Director and would sit on the Executive Committee.

[64]

Clause 2 11 Unless clause 2 in combination with clause 8(a) or (c) of the written agreement produce a different result, the respondent was not entitled to dismiss the applicant, because the applicant's conduct on 28 November amounted to more than an insistence that the respondent comply with the terms of the contract. The respondent relies on clause 2 to answer the claim that by altering the applicant's reporting conditions and removing him from the Executive Committee it was in breach of essential terms of the contract. Under clause 2 the applicant's "duties" were as set out in the duty statement "or as directed by the Managing Director". The respondent contends that reporting to the Managing Director and being a member of the Executive Committee are "duties" within clause 2 which Mr Lawrenson was entitled to direct the applicant no longer to perform. The applicant refused to perform his duties (ie to report to the General Manager, Corporate Division and no longer to be a member of the Executive Committee), and was thus in breach of his contract which entitled the respondent under clause 8(a) to terminate the agreement without prior notice. In the alternative, the respondent contends that the applicant's conduct on 28 November evinced his "wish to break this contract prior to maturity", thus activating clause 8(c). 12 Clause 8(f) shows that the Managing Director is empowered to change the applicant's responsibilities under the contract, and that any such change may be "a significant change". No breach of contract is committed by the determination that there should be such a change. The change is contemplated by the contract. If the applicant does not like the change, and it is a significant one, he may terminate the contract, and the respondent must pay him nine months salary as compensation. Otherwise the employment continues with the applicant discharging the changed responsibilities. Despite the use of the word "responsibilities" in clause 8(f) and the word "duties" in clause 2, the clauses are in my view to be read together. Clause 2 empowers the Managing Director to change the applicant's duties, and clause 8(f) deals with the case where the change is a significant one, and gives the applicant the option of terminating the contract or electing to continue under the changed conditions. The "duties" of the position in clause 2 are the acts and things the holder is bound to do. One of the meanings of "responsibility" given in the Shorter Oxford English Dictionary is "a charge, trust or duty for which one is responsible". In an employment context, reporting to the Managing Director and sitting on the Executive Committee are duties in the ordinary sense of the word. Since the written agreement is not the whole of the contract, but merely contains standard terms and conditions, I do not regard "duties" in clause 2 as limited to the six matters listed in the duty statement. They are supplemented by the other duties that are part of the contract though not appearing in the written agreement. Reporting to the Managing Director and sitting on the Executive Committee are essential terms of the contract. But clause 8(f) contemplates a change to essential terms. The words "significant change" suggest that. So does the fact that the clause affords the applicant an opportunity to terminate the contract if he does not like the change, and that nine months salary is payable as compensation. Clause 2 thus empowered Mr Lawrenson to make the changes he did to the applicant's duties/responsibilities. Though it is not necessary to decide the point, it follows from what I have said in par 10, that they were significant changes in his responsibilities which would have entitled the applicant to terminate the contract. But he did not do so. 13 Did the applicant's conduct on 28 November constitute "serious misconduct" within clause 8(a)? I do not accept the applicant's submission that the word "including" introduces a self‑contained definition of the words, so that only corrupt practice, wilful neglect or consistent and repetitive "breaks" of the respondent's policies or instructions can constitute serious misconduct. Cf Dilworth v Stamps Commissioners [1899] AC 99 at 105. The context supports the view that "including" introduces a non‑exhaustive list of things that constitute serious misconduct. See in particular the words "any serious misconduct". 14 In Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 2 All ER 285 at 287, 289 Lord Evershed MR said:

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See The Contract of Employment (1976) at 217. Clause 8(a) seems to me more or less to re‑state the position at common law. The particular examples given ‑ corrupt practice, wilful neglect and consistent and repetitive breaches of policies or instructions ‑ identify conduct that, at common law, would justify summary dismissal. The words "serious misconduct" reflect the common law position that mere misconduct is not sufficient. The conduct must be serious enough to justify summary dismissal. It must constitute a repudiation of the contract or one of its essential conditions. See North v Television Corporation Ltd, at 608‑609. Thus in the Laws Case, the conduct of an employee in leaving a meeting against the orders of the managing director, but at the request of her immediate supervisor, did not show an intention no longer to be bound by the contract, and the summary dismissal was therefore wrongful. 16 In determining whether the applicant's conduct in the period between 1 and 28 November constituted serious misconduct, that is to say whether by it he committed a serious breach of contract or evinced an intention no longer to be bound by the contract, assistance can be derived from the cases that have considered whether a party's insistence upon an erroneous view of the construction of a contract amounts to a repudiation or renunciation of the contract. As is apparent, I do not agree with the applicant's view of the effect of the restructure. But I do not regard it as an untenable view, so as to lead to the conclusion that a persistence in it showed an intention no longer to observe the contract. Cf Morris v Baron & Co [1918] AC 1 at 41 and Summers v The Commonwealth (1918) 25 CLR 144 at 152. Although the solicitors' letter of advice does not deal with clause 2, there is a respectable, though erroneous, argument that in the context of the duty statement the words "or as directed by the Managing Director" did not authorise the alteration of terms such as the two in question. In DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 432‑433 Stephen, Mason and Jacobs JJ, with whom Aickin J agreed, said:

[72]

To a similar effect are the observations of Lord Wilberforce, Lord Keith of Kinkel and Lord Scarman in Woodar Ltd v Wimpey Ltd [1980] 1 WLR 277. See also Scharmann v APIA Club Ltd (1983) 6 I R 157 at 164. 17 The evidence does not disclose conduct on the applicant's part amounting to serious misconduct, that is to say conduct constituting a serious breach of contract or evincing an intention no longer to be bound by the contract. Over the period of nearly a month the applicant and Mr Lawrenson exchanged views as to whether the restructure amounted to a breach of contract. Each obtained legal advice which supported his own view of the position. I have no doubt that the applicant's view, though it has not prevailed, was bona fide held. Although the legal advice on which that view was ultimately based did not attempt to deal with the problem created by clause 2, there was in fact a tenable construction of the written agreement and the incorporated duty statement that supported the applicant's view. The parties were having a genuine dispute as to whether the contract permitted Mr Lawrenson unilaterally to alter its terms in significant respects. In those circumstances, the Court should hesitate to find that the applicant's conduct had that quality that constituted serious misconduct in the sense described. Aside from expressing his views about the effect of the restructure on the contract, the applicant did not do any act which amounted to a breach of the varied contract. He did not insist upon reporting to the Managing Director. Indeed, the only evidence that bears on this aspect of his employment is that on 22 November he reported to Mr Doyle, the person to whom he was required to report under the restructure. The last Executive Committee meeting under the old regime was on 20 November, and there appears to have been no further meeting before the applicant's employment was terminated. Thus there is no evidence that he physically asserted a right to attend Executive Committee meetings after the restructure. In all these circumstances, I do not regard his conduct as amounting to serious misconduct, misconduct sufficiently serious to justify summary termination of the contract, conduct constituting a serious breach of the contract, or as showing an intention no longer to be bound by it. Nor do I regard it as amounting to "consistent and repetitive breaks" of the respondent's policies or instructions. Although on several occasions the applicant expressed his views as to the legality and morality of the restructure, there was in fact no "break" in the sense of any actual failure to carry out his duties in accordance with the restructure. As I have said, such evidence as there is supports the view that by reporting to Mr Doyle the applicant was acting in accordance with the restructure pending the outcome, whatever it was to be, of his exchanges with Mr Lawrenson about the effect of the restructure on the contract. Further, even if the applicant's forceful expressions of his opinions of the restructure amounted to a "break of AWB policies or instructions", those repeated expressions did not in my view amount to "consistent and repetitive breaks". Those words contemplate a persistent course of disobedience, and not, as in the present case, a repeated statement of an employee's legal stand on a particular contractual dispute. Cf Re Barrett and Women's Hospital Crown Street [1947] AR (NSW) 565 at 571. Accordingly, the respondent was not entitled summarily to terminate the applicant's employment under clause 8(a).

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Judgment (76 paragraphs)

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Cases Cited (6)