Campbell v Encyclopaedia Britannica Australia Ltd

Campbell v Encyclopaedia Britannica Australia Ltd - [2008] NSWSC 1178 - NSWSC 2008 case summary — Zoe

[63]

13 At the end of each financial year the plaintiff attended a meeting in Chicago at which he would have discussions with his immediate supervisor in head office who from 2002 was Leah Mansoor. It would appear that the relationship between the plaintiff and Ms Mansoor during the period of mid 2002 and mid 2006 was professional and candid. Indeed in 2004 when Ms Mansoor indicated to the plaintiff that she was intending to resign because of family commitments, the plaintiff made representations to the President of EBUSA in Chicago to retain Ms Mansoor's services with a flexible arrangement so that she would be able to work from her new home in Denver, Colorado. This was rather ironic having regard to the events of 2006 referred to below. Meeting in Chicago - November 2005 14 In November 2005 at the usual meeting in Chicago the plaintiff and Mr Buckle met with Ms Mansoor and Richard Anderson, the Vice President and Chief Financial Officer of EBUSA. Mr Anderson had a conversation with the plaintiff in relation to the allocation of sales in the 2005 year which he required the plaintiff to book in the 2006 year. Although the plaintiff and Mr Anderson had different views about this matter it appears to have been an amicable discussion with the plaintiff agreeing to adjust the books accordingly. 15 In the meeting between the plaintiff and Ms Mansoor the budgets for the Australian company were discussed. It is clear that the Australian operation was always profitable whilst the plaintiff was performing his duties as Managing Director, however in the 2005 year the budget target of approximately 20% return against revenue was not achieved. The plaintiff suggested in evidence that this was partially due to the collapse of the CD-Rom market. Ms Mansoor's evidence was that the discussion at this meeting included her advising the plaintiff and Mr Buckle that management were unhappy with the ongoing failure of the EBA to meet the budget numbers and that improvement must be achieved. Ms Mansoor also claimed that she said: "both of your positions in the Company are at risk unless this improves". Mr Buckle gave affidavit evidence that Ms Mansoor said that their jobs would be "in jeopardy". Mr Buckle was not cross-examined on this evidence. 16 The plaintiff claimed in his affidavit in reply that Ms Mansoor did not warn him that his job was at risk and claimed that she said: "its really important that you reach your budget this year. Please don't let me down". The plaintiff was cross-examined about the conversation at this meeting and gave the following evidence (tr 51-52):

[69]

I had reached the conclusion that David was not the right managing director for EBA although he was a very good sales person. However, I decided not to terminate David for cause for what was clearly a direct violation of EBUSA's policy in a position of trust because I did not wish to shame him and affect his resume. I decided to take the termination road and not cause him personal embarrassment as gratitude to his overall service to EBA. I made arrangements to travel to EBA's Sydney office to terminate David's employment. 18 The reference in that evidence to a "direct violation of policy" was to the fact that the plaintiff had maintained or caused to be issued a corporate American Express card for use by employees of the Australian office for business related expenses such as travel. In 2001 Mr Anderson wrote to the plaintiff advising that the company policy was changing to avoid all company-owned credit cards and that the staff were to "travel at their own expense, submit an expense report and receive prompt reimbursement". Mr Anderson requested the plaintiff to "cancel the four or five cards you have within the next week and confirm back that you have done so". There is no suggestion that any expenses incurred and paid for on the American Express card were other than appropriate business expenses. The financial officer of the Australian office, Kingsley Gunaratnam, was provided with the details of the expenses incurred on the American Express card. 19 It was in June 2006 that Ms Mansoor became aware that the plaintiff had retained or had reissued an American Express card. Mr Gunaratnam was in the habit of writing directly to the head office in Chicago in rather florid terms about the plaintiff's performance. He made complaints about the plaintiff and neither he nor head office brought these complaints to the plaintiff's attention, although towards the end of his employment the plaintiff became aware that Mr Gunaratnam was making complaints about him directly to head office in Chicago. 20 On 27 June 2006 Ms Mansoor wrote to EBUSA'a General Counsel, Bill Bowe, and to Mr Anderson in the following terms:

[101]

Ms Mansoor then said, "James Buckle is aware that I'm taking this action. He will be taking on the role of acting MD". I said, "Leah, obviously I am quite shocked by this. All the feedback I've had is that I am doing a really good job not just here but in my sales role in the Asian markets. As you know we are on track to meet all our targets. No one has ever said to me that EB is looking for a new vision. I take it that the termination is not based on any suggestion of misconduct or poor performance". She said "no, we have sought advice from our lawyers as to your entitlements and that advice is that you will get three (3) months notice". I said, "I intend to seek my own advice about that". I went on to say, "Leah, I don't believe it is fair or ethical to summarily terminate a long-term employee because of a so called change of vision. There must be some reason for this. Can you at least tell me off the record what that reason is". She replied "As I've said, there is no ulterior motive and I want you to know, this is not a cost cutting measure and you are not being made redundant". I went on to say "That isn't really much comfort to me. There is no one at EB that knows the Asian markets as well as I do. Asia is extremely important to EB. I hope you bear that in mind and perhaps if you want a new vision for the Australian office part of that should be promoting sales in Asia". She said, "I would be interested in that. Would you like to put that proposal in writing." 29 Ms Mansoor accepted that most of what the plaintiff said in his affidavit about this meeting was correct although she claimed it was not her "exact wording". She claimed that she advised the plaintiff that head office did not believe he was performing as well as expected. Staff Meeting - 3 August 2006 30 On 3 August 2001 the plaintiff provided a proposal in writing to Ms Mansoor suggesting that he take up a role as Director of Sales in Asia. Ms Mansoor advised the plaintiff that his emails and files would be frozen and also advised him that she had called a staff meeting to make a formal announcement about the change in his position. Ms Mansoor's evidence in relation to that meeting was that she said to the staff:

[102]

You are probably wondering why I am here. I am in Sydney to undertake a restructuring of the office. Chicago has taken a decision to put more resources into developing our Asian business. I have had discussions with David Campbell and it has been agreed with him that he will step down as Managing Director. EB and David agree that it is not practical for one person to hold both Managing Director and Asia business development position, therefore, James Buckle will assume the role as Acting Managing Director and EB and David are discussing his future possible role focusing on Asia. 31 The plaintiff's version of what was said by Ms Mansoor at the staff meeting was slightly different and included that Ms Mansoor said that "these changes are consistent with other changes which have been made in EB offices worldwide". 32 After the staff meeting Ms Mansoor advised the plaintiff that she had formed a view that any further discussions about his future role should be left to their respective lawyers. Although the plaintiff tried to engage Ms Mansoor in further discussion about a prospective role for him with the defendant she suggested that it would be better if he left the office and went home. He was then escorted off the premises. The plaintiff subsequently provided some assistance to Mr Buckle by meeting with him and answering questions about the business. Proceedings commenced 33 The plaintiff commenced these proceedings on 3 November 2006. The matter was heard on 3, 4 and 5 November 2008 at which time Mr AJ McInerney, of counsel, appeared for the plaintiff and Ms PM Sibtain, of counsel, appeared for the defendant. Construction of the contract 34 The contract of employment in relation to the plaintiff's role as Business Development Manager made provision for two methods of termination. The first was termination without notice in the event of misconduct by the plaintiff. The second was a mutual right of termination by giving one month's notice. When the plaintiff was appointed as Director of Sales - Asia Pacific those same provisions formed part of his contract of employment in that role. The letter of 13 March 2000 appointing him referred specifically to that letter being "an addendum to your original letter of employment". A further term agreed orally and recorded in the file note was that the provision in relation to the second method of termination was amended to increase the period of notice from one month to three months. 35 The letter appointing the plaintiff to the position of General Manager/Managing Director, effective from 22 May 2000, made no reference to the previous letters or to his job description or KPIs nor did it fix the remuneration to be paid to the plaintiff for that role. Rather the letter stated that discussions were to occur regarding the plaintiff's remuneration with Mr Davis the then Senior Vice President Marketing & International based in Chicago, Ms Mansoor's predecessor. The letter also made no reference to the plaintiff's appointments as a director and secretary of the defendant and Britannica Asia Pacific Pty Limited. 36 The defendant submitted that the notice provisions in the letters in relation to the plaintiff's employment as Director Sales-Asia Pacific applied to the plaintiff's appointment as General Manager/Managing Director. At the time the plaintiff was appointed as General Manager/Managing Director, the parties did not set out in detail the terms and conditions of the plaintiff's role as General Manager/Managing Director.

[104]

38 This was not a variation to the contract of employment as Director-Sales Asia Pacific. Had the parties intended to make the plaintiff's employment as General Manager/Managing Director subject to the same termination provisions as his employment as Director-Sales Asia Pacific, all that was needed was the provision that had been included in the letter just two months earlier making it an addendum to the earlier letter. They did not do so and it seems to me that was because they intended that the plaintiff would have a more generous arrangement under his contract as General Manager/Managing Director particularly in respect of any termination of his employment. The contract was silent as to termination other than termination by way of redundancy. In the absence of an express term it is appropriate to imply a term into the contract that the defendant would give reasonable notice of termination except in circumstances justifying summary dismissal: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 429. 39 The next step is to determine what was reasonable notice in the circumstances of this case. The plaintiff relied upon a number of cases in support of the submission that a reasonable period of notice in the circumstances of this case would be in the range of 6 to 12 months: Savage v British India Steam Navigation Co (1930) 46 TLR 294; Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567; Rankin v Marine Power International Pty Ltd (2001) 107 IR 117; Dyer v Peverill (1979) 2 NTR 1; Caulfield v Broken Hill City Council (1995) 60 IR 221; and Hem v Cant (2007) 159 IR 113. Although some of these cases have some similarities to the facts of this case, the question of what is reasonable notice will depend upon the facts of the particular case. 40 Ms Sibtain submitted that if I were to imply a term as to reasonable notice, then a period of three months is appropriate. In support of this submission Ms Sibtain relied upon the provision in the contract requiring three month's notice in relation to redundancy. It is true that the provisions in relation to redundancy refer to three month's notice, however the package provides for the equivalent of nine months salary. 41 The plaintiff stepped into the breach when Mr Neilson left the defendant in 2000. The plaintiff's role as General Manager/Managing Director had the added burden of having to perform the role of Director-Sales Asia Pacific at the same time. The plaintiff's role was extremely important. His obligations and duties outlined earlier were pivotal to the successful operation of the defendant in Australia and the Asia/Pacific region. The provisions of the contract provide some guidance as to what may be reasonable because the parties considered that a package equivalent to nine months salary was reasonable for termination on a redundancy basis. Taking all these matter into account I am satisfied that reasonable notice in the circumstances of this case is nine months. 42 I have reached the conclusion below that the defendant made the plaintiff's position redundant and in those circumstances the plaintiff is entitled to the additional 6 months of the package contained in his contract dated 16 May 2000. However if that is wrong the plaintiff is entitled to succeed on this aspect of his case. The defendant failed to provide nine months notice and only paid the plaintiff the equivalent of three month's notice. The plaintiff is entitled to damages in the amount of the difference between what he was paid and what he would have been paid if the defendant had complied with the terms of its contract with the plaintiff.

[107]

However, it is within the employer's prerogative to rearrange the organisation structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions. It is inappropriate now to attempt an exhaustive description of the methods by which a reorganisation of that kind may be achieved. One illustration of it occurs where the duties of a single, full-time, employee are redistributed to several part-time employees. What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organisation, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Milk Co-Operative case. 47 Ms Sibtain submitted that it is important to determine whether the restructure came first causing the termination in which case, she submitted, there would be a redundancy, or whether the dismissal or removal of the plaintiff came first causing the reallocation of the plaintiff's duties in which case, she submitted, there would be no redundancy. Ms Sibtain submitted that what motivated the restructure was the termination of the plaintiff for under performance. It was submitted that the evidence establishes that as from 27 June 2006 the head office in Chicago formed the view that the plaintiff was not performing his obligations in a way that satisfied head office and in those circumstances it was decided to let him go, as Ms Mansoor put it. On balance I am satisfied that although the plaintiff was obviously motivated to remove the plaintiff from his position what it did was to make the position that he held redundant. 48 Ms Mansoor advised the staff on 3 August 2006 that it had been decided that it was "not practical for one person to hold both" positions that the plaintiff held. That meant that the plaintiff's "dual" role was no longer to be performed by anyone and thus, it seems to me, that particular position was made redundant. The plaintiff's obligations were broken up and two positions were created, the Managing Director position and the Director-Sales position, with the latter position being broken up even further. The plaintiff is entitled to the balance of the redundancy package. 49 The plaintiff made an alternative claim of constructive dismissal that in the circumstances, is unnecessary to decide. The parties are to bring in short minutes of order together with an agreed costs order. The matter is listed at 9.15 on 14 November 2008 for the filing of those short minutes and any costs argument if the parties are unable to otherwise agree. ***********************

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