Carmelo San Gil v Alcatel Australia Limited - [2002] NSWIRComm 186 - NSWIRComm 2002 case summary — Zoe

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Carmelo San Gil v Alcatel Australia Limited

[2002] NSWIRComm 186

Industrial Relations Commission (NSW)|2002-08-06|Before: Kavanagh J, Mr P

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Source facts

Court

Industrial Relations Commission (NSW)

Decision date

2002-08-06

Before

Kavanagh J, Mr P

Catchwords

05/17/2002
05/23/2002 DATE OF JUDGMENT: 08/06/2002

Source

Original judgment source is linked above.

Catchwords

05/17/200205/23/2002 DATE OF JUDGMENT: 08/06/2002

Judgment (85 paragraphs)

[1]

Industrial Relations Commission of New South Wales in Court Session

[2]

CITATION : Carmelo San Gil v Alcatel Australia Limited [2002] NSWIRComm 186 APPLICANT: PARTIES : Carmelo San Gil RESPONDENT: Alcatel Australia Limited FILE NUMBER: IRC2635 of 2000 CORAM: Kavanagh J CATCHWORDS : Section 106 - claim of unfair contract of employment - representations made that applicant's earnings from targeted sales would attract commission payments - representations as to areas of responsibility for sales varied by respondent from commencement of the contract of employment - only partial commission payment made - notice provision also varied then reinstated - unfairness found. Claim brought for "loss of opportunity" as basis of Application for Order of Court for restitution - value of claim "just in the circumstances" based on claim for options which would have been granted during prior employment had applicant not resigned. Application for loss of opportunity claim rejected - contract found unfair - contract varied and orders given for payment on termination of further notice and payment for commission owed and which would have been earned during extended notice period. Such order held "just in the circumstances" LEGISLATION CITED : Industrial Relations Act 1996 Port Macquarie Golf Club Limited v Stead & Anor (1995-1996) 64 IR 53 CASES CITED : Westfield Holdings v Adams [2001] NSWIRComm 293 Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 David Jones Limited v Cukeric (1997) 78 IR 430 HEARING DATES: 05/16/2002; 05/17/2002; 05/23/2002 DATE OF JUDGMENT: 08/06/2002

[36]

Name: SAN GIL, Carmelo Staff No.125005 Service Period DD MM YEAR Salary p.a. 150868.00 Terminated 31 3 2000 Original Salary p/m12572.33 Start Date: 1 7 1999 Allowance p/m 0 SAC % 20.00% DOB: 20 7 1955 HECS(y/n): n Age: 44.73 $ 3 Months Additional Pay 0.00 Pro-Rata Bonus 0 6,666.67 Pro-Rata Commission 0 30,000.00 Salary in lieu (months) 4 50,289.33 Tax free part 0 Taxable part 50289.33 Redundancy Pay Weeks 7 20,309.15 Tax free part 7287.00 Taxable part 13022.15 Unused annual leave (days) 13.78 7,997.68 Long service leave (weeks) 0.00 LSL taken (weeks) 0.00 Leave loading 0.00 Sub-total 115,262.83 Less Rollover to Asgard, Lum Sum C 25,594.48 Less Rollover to Inspired Solutions, Lum Sum C 37,717.00 Total gross 51,951.35 Less Tax -8,385.94 Net pay 43,565.41 Submissions: As to Unfairness 33 The applicant submits the facts before the Commission in Court Session support a finding the contract entered into between Alcatel and the applicant was unfair in its terms and in its conduct, such as would warrant a declaration of unfairness. The applicant submits the contract was unfair on its face and in its operation such as to warrant a declaration of unfairness and an order that the contract be set aside. The representations of the respondent as to the applicant's duties, it is argued, were not met by the respondent and such is sufficient to establish a finding of unfairness. It is the applicant's submission, in changing the job description and removing from him his responsibilities, the Mobile Telephone Division and later the Systems Business, the promised representation of $90,000 as commission payment based on targets set for sales in those two areas was not achievable. The representations therefore as to income generated from the performance of the contract were also unfair. Further the applicant submits the contract contained an expressed notice of termination provision of a "minimum of one month's notice." This, submits the applicant, is a manifest unfairness as a term of the contract in the circumstances of the applicant's termination.

[38]

35 While the respondent admits significant management changes did occur during the year 1999, at all times, the respondent argues, organisational charts indicate, incorporated into those changes, was a role, at a senior level, for the applicant. As the applicant's position was always given consideration the respondent submits there could be no finding of unfairness in the employment contract. Consideration: As to unfairness 36 As to the claim for a finding of unfairness in the contract and/or in the performance of the contract, the court is guided by the principles enunciated in Port Macquarie Golf Club Limited v Stead & Anor (1995-1996) 64 IR 53 as recently endorsed in Westfield Holdings v Adams [2001] NSWIRComm 293 (Full Bench, Wright J, President; Walton J, Vice President; Boland J, published 21 December 2001). The Full Court of the Industrial Court of New South Wales in Port Macquarie Golf Club Limited v Stead examined s275 of the Industrial Relations Act 1991 which is a similar provision to s106 of the Industrial Relations Act 1996 and held (at 59): (6) Unfairness may arise either from the terms of the contract or arrangement itself, the surrounding circumstances and/or from the manner of performance or operation of the contract or arrangement: Barry v Incitec Limited (1991) 45 IR 143 at 146; Incitec Limited v Industrial Court of New South Wales (1992) 45 IR 155 at 157-158; and Baker v National Distribution Services Ltd (1993) 50 IR 254 at 270-271. In applying the test for unfairness this Commission sitting in Court Session must take (at 59-60): (7) . . . the commonsense approach characteristic of the ordinary juryman by applying standards providing a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement, bearing in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement: Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 at 374: A & M Thompson Pty Ltd v. Total Australia Limited [1980] 2 NSWLR 1 at 13; and Baker at 271-272.

[41]

39 I am satisfied the applicant, in addressing the effect of his decision to change employment, took into account all the financial effects of his decision to leave Madge Networks. On 27 November 1998 per an e-mail to Messrs Harricks, Young of Alcatel and Mr Keayes, of Mitchell Sutton-Gallagher, the applicant set out some 12 conditions which he thought had to be negotiated before he accepted the position: 1. As per the offer letter and conditions of employment, I need to undergo a medical examination. Tim harricks is arranging this at the mascot Medical Centre, . Prefered time is Tuesday, December 1 at about 4 pm. 2. I will resign formally as soon as possible after the "clear" report on the medical. 3. My preference is that the move will be kept confidential at Madge until the end of December. 4. I understand that the move will not be announced at Alcatel until shortly before I commence work. This is in view of some sensitive internal HR issues. 5. I need to be an employee of Madge until the end of January. A significant value of options, shares and bonus are conditional on this. 6. My first day as an "employee" of Alcatel will be Monday, February 1. 7. I will be available to work on behalf of Alcatel from Monday January 18. 8. Employment during the period, January 18 to January 19 will be by way of consulting contract with Inspired Solutions Pty. Ltd. ACN 003586490. 9. For this period, the daily contract rate will be equivalent to the proposed OTE of $270,000 divided by the number of working days in 1999. 10. Alcatel has agreed to a bonus and commission "guarantee" for the first 3 months of employment i.e. February to April inclusive. During this period the monthly salary will be equivalent to $270,000 divided by 12. 11. I propose to join the Alcatel/STC Superannuation Fund as a Full member. 12. On a regular basis, I will be making additional pre tax contributions to the Inspired Solutiuons Superannuation Fund. This is a compliant fund and makes annual reports to both the ATO and the ISC. (emphasis added)

[58]

58 As to this submission, the respondent submits the discretion vested in the Commission in Court Session by s106(5) is a broad one and should not be read down by application of principles of either common law, contract, tort or the provisions of the Trade Practices Act, 1974. The respondent submits there is no authority of the Commission in Court Session where the phrase as to compensation "just in the circumstances" warrants a reading to include quantified loss of opportunity or chance. The respondent relies on the view of Dean J in Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 (at 117-118): The hypothetical position in which a plaintiff would have been if a breach or repudiation of a contract had not occurred is not, of course, the hypothetical situation which would have existed if there had been no contract at all. To the contrary, in a case where it does not appear that the contract would not have been performed in any event, it is customary to treat that position as corresponding to that which would have existed if the contract had been fully performed (see Robinson v. Harman ( 1848) 1 Ex 850, at p 855 (154 ER 363, at p 365)). That being so, the breach or repudiation of a contract by a defendant does not ordinarily entitle the plaintiff directly to recover wasted expenditure incurred by him in procuring or performing it. In that sense, the assessment of damages for repudiation or breach of contract is not directed to the restitutio in integrum for which equity strives in, for example, a case where a contract is rescinded for fraud. There are, however, circumstances in which the doctrine of restitution or unjust enrichment overlays the ordinary general rule as to the assessment of damages and gives rise to a direct right of action to recover from the other party money paid under the contract to that other party for a consideration which has failed completely. Even in a case where the consideration has not failed completely, it would seem that that doctrine will found a direct action for the excess of money paid by the innocent party to the other party over the value of any consideration actually received if the circumstances are such that it would be unconscionable conduct on the part of the guilty party to retain the excess. It is unnecessary to pursue that question in the present case since it has not been suggested that the repudiating party (i.e. the Commonwealth) derived or retained any substantial benefit for itself at the expense of the other party (i.e. Amann Aviation Pty. Ltd). It is, however, desirable to keep in mind the importance of the doctrine of restitution or unjust enrichment as the rational basis of significant parts of the common law in determining the content of particular rules in some of the persistently grey areas of the law of damages.

[61]

61 Evidence would further satisfy the Commission in Court Session in the middle of 1997 the Madge Networks group of companies had reduced its staffing by 22 per cent world wide. The shares in Madge Networks had been low and trending downwards from about August 1997 and at the time of the applicant's employment with the respondent, Madge Networks Australia had reduced its staffing during 1999 from 30 to 15. Even if the applicant had stayed in that employment, the company would then have been a very small company in recession mode. This, it is submitted by the respondent, must have affected the applicant's earnings with regard to sales. Orders 62 Having found an unfairness in both the terms of and performance of this employment contract the court must apply its discretion to determine whether to void or vary the contract and give orders just in the circumstances. As was held in Port Macquarie Golf Club Limited v Stead (at 60) and endorsed by the Full Bench in Westfield Holdings v Adams: (8) If a contract or arrangement be found to relevantly offend one or more of the grounds, such as it being unfair, contained in s275(1) then the next question involves the exercise of a discretion, to be performed judicially, as to whether the contract or arrangement should be avoided or varied: Hodges [1985 ] 11 IR 60 at 62-63; Autobake Pty Ltd v Budd [1986] 19 I.R. 18 at 20; and Baker v National Distribution Services Ltd (1993) 50 IR 254 at 267. (9) If it be decided to avoid or vary the contract or arrangement under s.275(1) then a further discretion arises as to whether an order should be made under s.275(3) for the payment of money in connection with the contract or arrangement declared void or varied: Hodges v Streets Ice Cream Pty Ltd (1985) 11 IR 60 at 63; Autobake at 20; and Baker at 267. . . . 63 The claim for the Commission in Court Session to consider "opportunity lost" is based on the reasoning of Mason CJ, Dawson, Toohey and Gaudron JJ in Sellars v Adelaide Petroleum N.L [1992-1994] 179 CLR 332 (at 355) where the High Court held: . . . whether the deprivation occurred by reason of breach of contract, tort or contravention of s52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind.

Carmelo San Gil v Alcatel Australia Limited

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Judgment (85 paragraphs)

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Cases Cited (9)