Chawla v FAL Healthy Beverages Pty Ltd

District Court of NSW|2017-09-13

Solicitors: Reuben George Lawyers (Plaintiff) Colin W Love & Co (Defendant) File Number(s): 2016/00169811

Judgment

These proceedings raise for consideration the alleged entitlement of the plaintiff, Mr Tarun Chawla, to a payment in lieu of notice from his previous employer, the defendant, following the termination of his employment by the defendant on 27 January 2016.
The plaintiff claims that on the proper construction of the employment contract between the plaintiff and the defendant, the plaintiff is entitled to a payment in lieu of six months' notice of termination of employment calculated as six months' salary, with associated recreation leave and statutory superannuation.
The plaintiff also claims that this constitutes a debt owed by the defendant to the plaintiff and not merely a right in the plaintiff to claim damages from the defendant for breach of the employment contract.
The defendant submits that the plaintiff was not terminated under the terms of the employment contract and, accordingly, any right which the plaintiff has is only to sue the defendant in damages for breach of contract.
The issue arises because the plaintiff was employed soon after the apparent termination by his previous employer and any damages suffered were said to be minimal.

The pleadings

The plaintiff filed a Statement of Claim on 2 June 2016.
Paragraphs 5, 6 and 7 of the Statement of Claim provide as follows: "5. On or about 27 January 2016, Chawla was terminated by FAL from his employment. Particulars Email from Khaled Ahmed Refaat to Chawla dated 27 January 2016. 6. The plaintiff was employed by FAL for a total number of 65 days between 23 November 2015 and 27 January 2016, excluding the notice period. 7. By virtue of FAL terminating Chawla's employment, Chawla was entitled to be paid on termination notice in lieu of not less than 6 months salary. Particulars Clause 30.1 of Employment Agreement."
It should be noted that the entitlement of the plaintiff as particularised in the Statement of Claim was an entitlement pursuant to Clause 30.1 of the employment contract between the plaintiff and the defendant dated 23 November 2015 ("Contract").
In its Amended Defence, the defendant pleads as follows: 1. That the Contract was terminated by the defendant pursuant to the defendant's rights to terminate the employment contract set out in Clause 30.4 of the Contract: paragraph 7(d). This clause relates to terminations for cause such as for misconduct. At the final hearing, counsel for the defendant accepted that the termination of the plaintiff did not occur under Clause 30.4 of the Contract; 2. In paragraph 7(b) of the Defence, the defendant denied that the employment contract was terminated by the defendant pursuant to Clause 30.1 of the employment contract; 3. In paragraph 11 of the Amended Defence, the defendant asserts that the plaintiff has suffered no loss or damage because the plaintiff has mitigated any such loss or damage by reason of his employment with his previous employer.
In a Reply filed on 7 August 2017, the plaintiff pleads in paragraph 10 that he is not required to mitigate any loss or damage as the plaintiff does not make a claim for loss or damage but "rather makes a claim in contract". The way the case was run by the plaintiff, this was on the basis that the plaintiff's claim was in debt not for damages. It is also asserted in paragraph 10(d) of the Reply that the defendant terminated the Contract on about 27 January 2016 and has failed to provide the proper or any notice in accordance with Clause 30.1 of the Contract. In my view, this is consistent with paragraph 5 of the Statement of Claim. In paragraph 10(e) of the Reply, it is pleaded that the defendant has not made any payment in lieu "of the failure to provide proper notice pursuant to Clause 30.2 of the Employment Contract".
In the course of argument, counsel for the plaintiff accepted that if the court found that the claim which the plaintiff had was in damages and not in debt, the plaintiff could not succeed having regard to his Reply.
In my view, that was a proper concession to make on the pleadings. If the claim is not one in debt for a liquidated sum then the plaintiff's claim could only be in damages. Further, if the plaintiff does not establish his case that the plaintiff was terminated under Clause 30.1 of the Contract, then he has not established his pleading as set out and as particularised in paragraph 7 of the Statement of Claim.

The employment contract between the plaintiff and the defendant

Exhibit B in the proceedings was the Contract dated 23 November 2015 between the plaintiff and the defendant. Under Clause 39.1 of the Contract, the Contract was to be governed by and interpreted in accordance with the laws of New South Wales.
Relevant clauses in the Contract to these proceedings include the following: 1. DEFINITIONS 1.1 In this Contract, unless otherwise indicated by the context: Contract means this Employment Contract; Act means the Fair Work Act 2009 (Cth), as amended from time to time; Company means FAL Healthy Beverages Pty Ltd; and … 4. ENGAGEMENT 4.1 You will commence work with the Company on 23 November 2015 ("Commencement Date") and will continue until determined by notice in accordance with clause 28. 4.2 You are engaged on a permanent full-time basis as Global Chief Financial Officer. Your position description is attached in Schedule 2. … 5. TERMS AND CONDITIONS OF EMPLOYMENT 5.1 The terms and conditions under which you are employed by the Company are set out in this Contract and the Act. This Contract should be read in conjunction with the Act. … 30. TERMINATION OF EMPLOYMENT 30.1 Either party may terminate this Contract by giving the other party not less than 6 months' written notice of termination. This notice period can be extended or reduced by mutual agreement in writing between the parties to this Contract. 30.2 Where your employment is terminated at the initiative of the Company, the Company may choose to pay out the whole, or part, of your notice period in lieu of requiring you to work out the notice period, at your rate of pay that you would have received had the Company required that you work out the notice period. 30.3 Where you fail to provide the correct notice, the Company may withhold from any monies owing to you on termination an amount, which is equivalent to the period of notice that would otherwise have applied to the period of employment. 30.4 Notwithstanding clause 28.1, the Company may dismiss you immediately without notice if you engage in serious misconduct or wilful, or deliberate, behaviour that is inconsistent with the continuation of employment, including: 30.4.1 a material breach of this Contract; 30.4.2 wilful neglect in the performance of your duties; 30.4.3 wilful violation of any law or rule of a regulatory body; 30.4.4 deliberately diverting customers or business away from the Company; 30.4.5 accepting bribes or secret commissions; 30.4.6 refusal to comply with a lawful and reasonable direction given to you by the Company or any other person duly authorised by the Company; 30.4.7 dishonest behaviour and/or acting in a way that is inconsistent with the best interests of the Company. 30.4.8 deliberately providing false or misleading information to the Company, or any of its customers or suppliers; 30.4.9 if you are convicted of a criminal offence which, in the reasonable opinion of the Directors of the Company, may have the effect of bringing the Company into serious disrepute or affects your ability to meet your obligations under this Contract; 30.4.10 theft or misappropriation of company property; 30.4.11 abuse of alcohol or drugs whilst at work or on company property; 30.4.12 acting in a way which in the reasonable opinion of the Company may injure or be likely to injure the business or reputation of the Company; 30.4.13 failure to comply with the policies and procedures of the Company such that the non-compliance amounts to serious misconduct; or 30.4.14 conduct that causes imminent, and serious, risk to the health, or safety, of a person; or the reputation, viability or profitability of the Company's business. 30.5 During any period of notice of termination given by either party, the Company may direct you to cease performing, or vary, your normal duties and direct you not to attend work or contact clients, customers, suppliers, agents or employees of the Company.
It is to be noted that in Clause 30.4 of the Contract there is a reference to "Notwithstanding clause 28.1…". Having regard to Clause 4.1 of the Contract as set out above, it seems clear that this should be a reference to "Notwithstanding clause 30.1" and that there is an error in the Contract.
Schedule 1 to the Contract provides that the plaintiff was to be employed at an annual salary of $225,000. Clause 4.2 of the Contract states that the plaintiff was employed as Global Chief Financial Officer.

Termination of the Plaintiff

Exhibit C in the proceedings was an email from Mr K Refaat, the Senior Vice President of the FAL Group which included the defendant company, to the plaintiff dated 27 January 2016. There is no issue that Mr Refaat had authority to act for the defendant.
That email was to the following effect: "On 27 Jan 2016, at 2:03 AM, Khaled Ahmed Refaat wrote: Tarun There are certain companies reforms and reorganization that require my personal involvement and assuming this role going forward. Thus, regret to inform you that the company does not need your services. As such, please don't contact any of our companies nor should you request any information and refrain from contacting them as they will not accommodate you. Wishing you all the best. Regards Khaled A, Refaat Senior Vice President Finance, Investments & Procurement FAL Group Sent from my iPhone"

Agreed facts and issues

Exhibit A in the proceedings was a schedule of Agreed Facts and Issues. This provided as follows: "Agreed facts 1. The plaintiff was employed by Mad Mex Franchising Pty Ltd (Mad Mex) pursuant to an employment contract dated 21 May 2015 (Mad Mex Contract). 2. Under the Mad Mex Contract, the plaintiff was entitled to an annual salary of $170,000 plus superannuation in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth). 3. On 31 August 2015, Mad Mex and the plaintiff agreed to vary the Mad Mex Contract to increase the plaintiff's annual salary to $180,000 plus superannuation effective 31 August 2015. 4. On 19 November 2015, the plaintiff handed in his notice of resignation to Mad Mex. 5. The plaintiff was employed by the defendant pursuant to an employment contract dated 23 November 2015 (FAL Contract), whilst serving his notice period with Mad Mex with the full knowledge and consent of the defendant by virtue of its Director, Tim Xenos, during the relevant period. 6. Under the FAL Contract, the plaintiff was entitled to an annual salary of $225,000 plus superannuation. 7. On 23 November 2015, the plaintiff commenced his employment with the defendant. 8. By email from Khaled Refaat, Senior Vice President Finance, Investments & Procurement for the FAL Group (of which the defendant was a member) to the plaintiff dated 27 January 2016, the defendant terminated the plaintiffs employment. 9. The defendant did not pay the plaintiff the whole, or part, of the plaintiffs 6 months' notice period in lieu of requiring the plaintiff to work out the notice period. 10. The defendant did not require the plaintiff to work out the whole, or part, of his 6 months' notice period. 11. On 9 February 2016, Mad Mex and the plaintiff agreed to vary the Mad Mex Contract to increase the plaintiffs annual salary to $220,000 plus superannuation effective 1 January 2016, with all other terms and conditions of the Mad Mex Contract to remain unchanged. 12. From 23 November 2015 to 27 January 2016: (a) the plaintiffs gross earnings from Max Mex were $23,884.63; (b) the plaintiffs net earnings from Max Mex were $19,534.38; (c) Max Mex paid $2,269.04 by way of superannuation contributions to a fund nominated by the plaintiff. 13. From 27 January 2016 to 26 July 2016: (a) the plaintiff's gross earnings from Max Mex were $110,076.94; (b) the plaintiffs net earnings from Max Mex were $67,138.08; (c) Max Mex paid $10,457.24 by way of superannuation contributions to a fund nominated by the plaintiff. Agreed issues 14. Does the defendant owe the plaintiff an amount as a debt under the FAL Contract such that the question of mitigation does not arise?'

Contractual principles applicable

In Cordon Investments Pty Ltd v Lesdor Properties Pty Ltd [2012] NSWCA 184 Bathurst CJ (with whom Macfarlan and Meagher JJA agreed) stated at [52] as follows: "[52] The principles underlying the construction of written contracts are well established and it is not necessary to deal with them at length. A contract is to be construed by reference to what a reasonable person would understand by the language in which the parties have expressed their agreement having regard to the context in which the words appear and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]; International Air Transport Assn v Ansett Australia Holdings Ltd [2008] HCA 3; (2008) 234 CLR 151 at [53]. At least in the case of ambiguity, resort can be had to the surrounding circumstances known to the parties in interpreting the particular provision: Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352; Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604."
In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, the majority of the High Court said the following at paragraph [35]: "[35] Both Verve and the Sellers recognised that this court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience" [emphasis added].
In Caringbah Investments Pty Ltd v Caringbah Business & Sports Club Ltd (In Liquidation) [2016] NSWCA 165, Bathurst CJ (with whom McColl and Macfarlan JJA agreed) stated as follows at [93]: "[93] The relevant principles of construction are well established. In Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640, the plurality reaffirmed that the meaning of the terms of a commercial contract is to be determined by what a reasonable business person would have understood them to mean. It requires consideration of the language used, the surrounding circumstances known to the parties and the commercial purposes or objects to be secured by the contract: at [35]; see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; 89 ALJR 990 at [46]-[52]."
In Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd [2017] HCA 12 the majority stated as follows at paragraphs [16]-[17]: [16] It is well established that the terms of a commercial contract are to be understood objectively, by what a reasonable businessperson would have understood them to mean, rather than by reference to the subjectively stated intentions of the parties to the contract. In a practical sense, this requires that the reasonable businessperson be placed in the position of the parties. It is from that perspective that the court considers the circumstances surrounding the contract and the commercial purpose and objects to be achieved by it. [17] Clause 4 is to be construed by reference to the commercial purpose sought to be achieved by the terms of the lease. It follows, as was pointed out in the joint judgment in Electricity Generation Corporation v Woodside Energy Ltd, that the court is entitled to approach the task of construction of the clause on the basis that the parties intended to produce a commercial result, one which makes commercial sense. It goes without saying that this requires that the construction placed upon cl 4 be consistent with the commercial object of the agreement.
It seems clear that the general principles stated above apply equally to employment contracts: Earney v Australian Property Investment Strategic Pty Limited [2010] VSC 621 at [97]; Coope v LCM Litigation Fund Pty Limited [2016] NSWCA 37 at [71] per Payne JA (with whom Gleeson and Leeming JJA agreed).

Plaintiff's submissions

The plaintiff submitted, in summary, as follows: 1. The 27 January 2016 email from Mr Refaat on behalf of the defendant to the plaintiff constituted a lawful termination by the defendant of the plaintiff's employment contract under Clause 30.1 of the Contract; 2. The defendant, through Mr Refaat, chose not to have the plaintiff work out the six months' notice period under the Contract. By doing that, the defendant thereby elected under Clause 30.2 of the employment contract to pay the plaintiff the six months' salary in lieu of notice; 3. The six months' salary payable in lieu of notice to the plaintiff was a debt, not damages that would be subject to the duty to mitigate loss; 4. Having terminated the employment of the plaintiff under Clause 30.1 of the Contract, the defendant had an option under Clause 30.2. This is emphasised by the use of the words "may choose". That option was either to elect to pay in lieu of notice or elect to have the plaintiff work out the whole or part of the notice period of not less than six months. If the defendant elected to inform the plaintiff not to turn up for work then, as there are only two options under Clause 30.2, the defendant is taken to have elected to make the payment in lieu of notice; 5. This amounted to a definitive election by the defendant. That then turned the word "may" into "must" in Clause 30.2 giving rise to an entitlement in the plaintiff which constituted a debt due and payable to the plaintiff at the time the election was made; 6. As there was a debt which was due and payable by the defendant to the plaintiff, under existing authority there was no duty to mitigate; 7. There were two steps in the letter of termination in Exhibit C. The first step was the defendant through Mr Refaat terminating the plaintiff's contract immediately, and secondly, an election under Clause 30.2 of the Contract for the plaintiff not to come to work. This thereby constituted an election by the defendant under Clause 30.2 to make a payment to the plaintiff in lieu of notice; 8. There was no reference to termination under Clause 30.4 in the email and accordingly the termination was under Clause 30.1 of the Contract; 9. If the court determines that the only entitlement of the plaintiff is to claim damages against the defendant then as the plaintiff has limited his claim to one in debt, the plaintiff's claim cannot succeed as he relies on the defendant exercising its rights under Clause 30.1; 10. If the above argument is rejected, then Clause 30.2 should be regarded as an alternative right not necessarily relying on Clause 30.1 and which applies in any situation where the plaintiff's employment was terminated at the initiative of the defendant. In those circumstances there was an election under Clause 30.2 and the election gave rise to an entitlement in debt in the plaintiff.

Defendant's submissions

The defendant submits, in summary, as follows: 1. The termination of the Plaintiff's Contract which occurred in the present case was not a termination under Clause 30.1 of the Contract; 2. That is because the termination in the 27 January 2016 email letter was a termination made with immediate effect not one to have effect in six or more months' time. Accordingly, there was no termination of the plaintiff lawfully under Clause 30.1. Any termination which occurred was a termination by the defendant in breach of the Contract; 3. The proper way to read Clause 30.2 of the Contract is that it did not apply unless the termination was under Clause 30.1 of the Contract. That is because there is a reference to the notice period which must be a reference to the notice period provided by the defendant as referred to in Clause 30.1; 4. Clause 30.1 creates a mechanism for the termination of the Contract, breach of which by the defendant renders the defendant liable for damages; 5. Clause 30.2 of the Contract creates an exception, allowing the defendant not to give notice under Clause 30.1 and yet still not to be in breach of the Contract by complying with the options in Clause 30.2. If it does not follow the course set out in Clause 30.2, then the defendant is in breach of contract and may be liable for, among other things, consequential loss caused by the breach; 6. It is the choice of the defendant whether or not to follow the course set out in Clause 30.2. Its failure to follow the course set out in Clause 30.2 does not give rise to an entitlement to payment in lieu of notice; 7. Clause 30.2 on its face makes clear that the defendant has a discretion to undertake one of the two options set out. This is made clear by the words "the Company may choose". On existing authority, the use of the word "may" is inconsistent with an entitlement; 8. Therefore any remedy which the plaintiff has is only in damages and not in debt and the plaintiff's claim as pleaded must fail.

Consideration

It is clear that the Contract between the plaintiff and the defendant must be interpreted in accordance with general contractual principles as set out above. The court should have regard to all of the words used in the agreement including considering the various clauses of the agreement as a whole. The court should interpret the Contract in a common sense way and give the Contract a commercially sensible construction.
It seems clear from the Contract that it was intended by the parties that the plaintiff would continue working with the defendant until his services were determined by notice in accordance with Clause 30.
Clause 30 sets out a mechanism by which the parties could terminate the Contract lawfully. In addition, the Contract could be terminated where there was an unresolved conflict of interest under Clause 28 of the Contract.
Putting aside an unresolved conflict of interest under Clause 28, Clause 30 sets out the various possibilities. One possibility was the termination of the plaintiff's employment for cause immediately, under Clause 30.4 of the Contract. Although this was pleaded by the defendant in its Amended Defence, it was no longer relied on by counsel for the defendant at the final hearing.
Clauses 30.1-30.3 of the Contract provide a mechanism by which either party could terminate the Contract on the provision of written notice of termination. That required either party to give the other party "not less than six months' written notice of termination" unless the notice period was extended or reduced by mutual agreement in writing between the parties to the Contract: Clause 30.1.
The plaintiff argued that notice of termination was given to him in accordance with Clause 30.1 of the Contract. The defendant argued that notice was not given to the plaintiff in accordance with Clause 30.1 of the Contract but rather that the services of the plaintiff were terminated immediately without notice in breach of Clause 30.
This issue requires a consideration of Exhibit C which is the notice of termination email dated 27 January 2016.
The first sentence of the relevant email is as follows: "There are certain companies reforms and reorganisation that require my personal involvement and assuming this role going forward." The email then proceeds as follows: "Thus, regret to inform you that the company does not need your services."
This appears on its face to be an immediate termination of the employment Contract. This is what the plaintiff pleads in paragraph 5 of his Statement of Claim. Counsel for the plaintiff made a distinction in argument between the termination of employment and the termination of the Contract. In my view, the email, on its proper construction, makes clear to the plaintiff that his services were no longer required as an employee. No notice was given by the defendant in the 27 January 2016 email of a particular notice period. The defendant submitted that the termination effected by the email was immediate. This also seems to have been accepted by counsel for the plaintiff.
In my view, that was the correct interpretation of the email.
There was no mention in the email of providing notice by the defendant to the plaintiff in relation to the proposed date of termination. Clause 30.1 of the Contract clearly contemplates a party terminating the Contract giving the other party not less than six months' written notice of termination unless that is extended or reduced. That must mean that the termination takes effect at the end of the notice period not at the time notice is first given. In my view, as no notice period was referred to, it is inappropriate to consider that the 27 January 2016 email is an email giving notice under Clause 30.1 of the Contract.
Clause 30.1 contemplates the giving of written notice which will effect the termination of the Contract in at least six months' time. This is the point of a period of notice of termination. The email did not purport to give notice of a termination in six months' or more time but an immediate termination.
Accordingly, in my view, Clause 30.1 of the Contract is inapplicable to the 27 January 2017 email termination.
Could the defendant's actions be construed as impliedly giving six months' notice of termination under Clause 30.1? In my view, the answer to that is no. That would require reading into the email something which is not there. Both parties agreed in submissions that the termination was immediate. Having regard to the plaintiff's experience and skills, the defendant may well have formed the view that the plaintiff was likely to obtain further work promptly (as occurred) and it was therefore content simply to breach the Contract.
As the defendant did not give notice in accordance with Clause 30.1 of the Contract, it therefore prima facie committed a breach of an important term of the Contract amounting to a repudiation and giving a right in the plaintiff to sue it for damages and/or to terminate the Contract.
In relation to Clause 30.2 of the Contract, in my view the preferred construction of the clause is that it only applies where there has been a termination in accordance with Clause 30.1 of the Contract which was not the case here. The phrase "your notice period" in Clause 30.2 must be a reference to the notice period contemplated to be given under Clause 30.1. The calculation of the amount under Clause 30.2 assumes that a notice period was given under Clause 30.1 otherwise the calculation could not be made as it depends on the period of notice given.
I accept the submission on behalf of counsel for the plaintiff that the final sentence in the first paragraph of the 27 January 2016 email ("As such, please don't contact any of our companies nor should you request any information and refrain from contacting them as they will not accommodate you") amounts to the defendant not requiring the plaintiff to work out the whole, or part, of any notice period.
The issue is whether that constitutes the defendant choosing to pay out the six months' notice period to the plaintiff in lieu of requiring him to work out the notice period thereby creating a debt.
Emphasis is placed on that part of Clause 30.2 which states "the Company may choose…".
In Fishlock v The Campaign Palace Pty Ltd [2013] NSWSC 531 Sackar J stated as follows at [280]-[284]: [280] The authorities in Australia (which are consistent with English authorities) indicate that in circumstances where an employee becomes contractually entitled to receive payment in lieu of notice, no question of mitigation arises. Such terms often arise when a contract provides, for example, that except in the case of serious breach the employer must provide a certain amount of notice or payment in lieu of notice. In such circumstances, an employee who is terminated without notice would simply be seeking to recover a sum as a liquidated debt, not as damages (as an example, see Fardell v Coates Hire Operations Pty Ltd [2010] NSWSC 346 at [99]-[100] and [108] per White J). [281] This type of payment is distinguishable from contracts containing a term that provides that an employer may (not must) provide payment in lieu of notice. Under such clauses, an employer who wrongfully dismisses an employee is not required to make payment in lieu of notice but is permitted to do so, and a failure to make payment in lieu gives the employee a right to damages and not a debt. Where the contract gives the employer a choice as to whether or not to provide payment in lieu of notice and the employer actually exercises that right, then the employee is again under no obligation to mitigate their loss, because the amount payable by the employer is by way of debt (for example see Reilly v Praxa Ltd [2004] ACTSC 41 at [32] per Gray J and the cases his Honour cites). [282] In the present case, the Agreement neither obliges the defendant to provide payment in lieu of notice nor does it confer on the plaintiff a right to demand payment in lieu of notice. It expressly reserves to the defendant the decision of whether or not to make payment in lieu of notice. Clause 6.12 provides: The Company may at its discretion pay the Executive the equivalent amount of the Cash Salary in lieu of any notice period relating to the termination of the employment under this Agreement. [My emphasis] [283] Clause 6.2 of the Agreement (which provides for termination of employment by the defendant "without cause") also relevantly provides (at cl 6.2(b)(iii)): … the Company may … elect to pay the Executive in lieu of the 9 month notice period … [284] The defendant in this case has not purported to exercise any contractual right to make payment in lieu of notice. In these circumstances, the plaintiff's claim is properly characterised as one for damages, which is consistent with the way in which he has framed the relief he seeks in his further amended statement of claim."
The defendant submits that the current case is similar to those cases where the employer is given a discretion to be able to choose whether or not it pays the employee moneys in lieu of notice. Accordingly, it is similar to the Fishlock case, above, and with Cerberus Software Ltd v Rowley [2001] EWCA Civ 78 and Ogden v Britax Automotive Equipment Pty Ltd [2013] QDC 83. It is said on behalf of the defendant that the Contract in the present case does not have words which suggest an entitlement in the plaintiff to the payment in lieu of notice (eg "the employer must provide payment in lieu of the notice period"): see Reilly v Praxa Ltd [2004] ACTSC 41 and Automotive, Food, Metals Engineering, Printing and Kindred Industries Union v Mechanical Engineering Services Pty Ltd (No 2) [2008] FCA 1249 especially at [7].
The cases make clear that each contract must be construed as a whole to determine the meaning objectively intended by the parties: see for example, Ogden, above, at [24].
If I had found that the termination of the plaintiff was pursuant to Clause 30.1, then in my view there is some force in the plaintiff's argument. If an employee is dismissed and the employer indicates that the employee is not to work out the period of notice then the only alternative in a contract may be payment in lieu. That seems to be the case here on this Contract. In those circumstances the words "may choose" in Clause 30.2 are meaningless because there is only the one option left. In that case, it is strongly arguable that an entitlement is impliedly created.
However, as found above, in my view the termination by the defendant in the present case did not occur under Clause 30.1 of the Contract.
Accordingly, to summarise my views: 1. The termination in the 27 January 2016 email which is Exhibit B was an immediate termination of the employment by the defendant and did not provide any notice to the plaintiff as it should have under the Clause. Therefore, the termination being immediate, it was not a termination in accordance with Clause 30.1 of the Contract; 2. The plaintiff's case pleaded a termination on 27 January 2016 (Statement of Claim paragraph 5) and particularised a termination under Clause 30.1 of the Contract. This is not established on the facts; 3. Although the 27 January 2016 email, on its proper construction, and in the light of the Agreed Facts, should be construed as the defendant not requiring the plaintiff to serve out any period of notice, this did not amount to the defendant choosing within Clause 30.2 of the Contract to pay out to the plaintiff an amount in lieu of at least six months' written notice. That is because Clause 30.2 only operates where notice has been properly given under Clause 30.1; 4. In my view, the defendant took steps neither under Clause 30.1 nor Clause 30.2 but acted in breach of the Contract and was therefore subject to a claim for damages at the suit of the plaintiff; 5. Accordingly, any right of the plaintiff was in damages and not in debt. As the plaintiff has only sued in debt and not in damages, the plaintiff's claim must be dismissed.
In the event that I am wrong in my analysis above, the quantum of the claim of the plaintiff as set out in paragraph 10 of the Statement of Claim would be established.
I therefore make the following orders: 1. Judgment for the defendant. The Statement of Claim is dismissed. 2. I will hear the parties on costs. 3. Exhibits are to be returned after 28 days.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 October 2017

At a glance

Court

Decision date

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Judgment (11 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (22)

Cited By (1)