Cook v CFP Management Pty Ltd [2006] QCA 215

[1] de JERSEY CJ: I have had the advantage of reading the reasons for judgment of Williams JA. I agree with the orders proposed by his Honour, and with his reasons.

[2] WILLIAMS JA: After a trial in the District Court the appellant was ordered to pay to the respondent the sum of $92,168.93. The basis of the claim was a contract of employment dated 29 March 2002. The respondent recovered $11,518.06 as payment in lieu of notice and $62,328.82 for long service leave; interest on those amounts was added to arrive at the judgment sum.

[3] On the appeal, counsel for the appellant contended that the learned trial judge erred in awarding the respondent anything. The main contention was that the respondent terminated the contract of employment by submitting the letter of 5 February 2003, and that, given the terms of the contract of employment and the provisions of the Industrial Relations Act 1999 (Qld), he was not, in the circumstances, entitled to either of the amounts referred to in the judgment under appeal.

[4] The contract of employment named the appellant as employer and stated that it provided staff and facilities to an associated company, Challenger First Pacific Limited. Clause 1 provided that the respondent would be employed on a full-time basis in the Brisbane office in the position of Senior Adviser. He was obliged to "comply with directions given by senior management of the Challenger Group". Clause 2 then specifically provided that his employment was deemed to have commenced on 14 April 1994 when his employment with the Group had begun.

[5] Clause 5.3 dealt with Long Service Leave and relevantly was in the following terms:

"All employees become entitled to long service leave after completing the number of years of continuous service with Challenger as defined by the relevant State Acts listed below:

Jurisdiction Period of Leave

. . .

Qld (Workplace Relations Act 1997) 13 weeks at 15 years (13 weeks for each 15 years thereafter)

. . .

You are entitled to pro-rata long service leave after 10 years service.

The remuneration basis used for calculating long service leave whilst employed is your base salary at that time. Long service leave paid out on termination is calculated on the average of your base salary plus incentive and/or bonuses for the past three complete financial years, or your current base salary, whichever is the greater."

[6] The only other clause which need be noted is cl 6.1 which deals with Termination on Notice, and is in the following terms:

"Once your Probationary Period has been completed, either party may terminate the contract by giving one calendar month's notice in writing. Without limiting clause [6.2] we may also terminate your employment immediately or by a period of notice shorter than one month by making a payment to you in lieu of notice."

Clause 6.2 detailed events which might give rise to immediate termination. Finally, with respect to the contract it should be noted that at material times the Industrial Relations Act 1999 (Qld) applied as the successor to the Workplace Relations Act 1997 (Qld).

[7] In about October 2002 the respondent became aware that the Challenger Group was proposing to sell its broking business. Then in late November or early December the respondent was informed by the CEO of Challenger International that a decision had been made to sell Challenger First Pacific Limited to Bell Potter Securities Ltd ("Bell Potter"). About a week later there was a meeting between the respondent and other employees of the appellant ("the team") with representatives of Bell Potter. Then on 15 January 2003 the respondent received a letter from Bell Potter bearing that date. That letter informed the respondent that Bell Potter proposed to wind down the broking operations of Challenger First Pacific Limited but informed him that his "employment with [the appellant] will continue on the existing arrangements." The letter went on to say that "As soon as we are able you will be offered employment with Bell Potter on our standard employment arrangements."

[8] The respondent and two other employees, Toop and Dee, were the "options team" employed by the appellant. When asked about his response to the news that Challenger was selling out to Bell Potter and the letter of 15 January 2003, the respondent said in evidence:

"We were looking at alternatives with a number of other broking firms in Brisbane and also considering the possibilities of staying with Bell Potter. So we discussed with a number of different firms and the one that became the buyer for the business that we were in. . . . We met with the fellows from Bell Potter to discuss what our situation would be and whether or not we could make sure that we kept our team together if we moved - if we stayed with Bell Potter through the takeover. . . . They couldn't give us any guarantees that the team would stay together."

[9] The "we" referred to therein were the respondent, Toop and Dee. The latter two also gave evidence at the trial and it is clear that the "team" wished to stay together and from early January 2003 they were involved in discussions with other stockbrokers. By a date early in January 2003 the "team" had agreed to work for another stockbroking firm, ABN Amro Morgans.

[10] On 30 January 2003 the respondent received a further letter from Bell Potter stating that his employment with the appellant would continue on the existing arrangements until the "Commencement Date", being a date about three months hence when the changeover would become complete. According to the letter, at that time the respondent would be offered a position "on the following new terms and conditions" with Bell Potter. After receipt of that letter the respondent spoke to Proven, the head of Bell Potter, during which he said he wanted to continue with his current contract with the appellant. Under cross-examination he conceded that by that time the team "had probably already made the decision to go to Morgans", but claimed that could be reversed.

[11] The trial judge did not refer to the evidence of the respondent and the others in the "team" that from about December 2002 they had been actively investigating the possibility of employment with other stockbrokers and from about mid-January 2003 had agreed to go as a team to Morgans. Those facts are of significance when it comes to determining the implications of the termination of the respondent's employment with the appellant. The failure of the judge to take those matters into account constitutes a serious error in the reasoning. As the evidence was all one way there is no obstacle to this Court now relying on it.

[12] It was against that background that the respondent sent the letter of 5 February 2003 terminating his employment with the appellant. The letter is important and relevantly it was in the following terms:

"As you know I have been offered terms of a new employment by which I am to provide services to the Bell Group. I have declined that offer.

I therefore sought information from [the appellant] regarding my continuing employment and have been informed that [the appellant], which is now controlled by the Bell Group, proposes that I should continue in your employ to provide services to the Bell Group. Moreover, I have been informed that I am in fact no longer providing services to the Challenger Group; but instead am required to provide services to the Bell Group.

This change is a substantial and material change to my employment, the terms of which were set out in a letter to me of 29 March 2002. It has been made unilaterally without consultation with me, without my consent and in spite of my having declined the offer to work for the Bell Group.

I think you will agree, upon close examination of the letter 29 March 2002 and the multiple references throughout to the Challenger Group, that the change now wrought as a result of the Bell Group's acquisition of [the appellant] is substantial and material and that [the appellant] has therefore committed a repudiatory breach of contract of employment, having terminated the service that I was employed to perform, and as such having effected a constructive dismissal of my employment.

Therefore I choose to terminate the contract as a result of [the appellant's] breach. I understand that the contract is therefore at an end and that I am free from all future obligations thereunder. I further understand that neither [the appellant] nor myself is freed from rights or obligations that accrued before termination and I therefore reserve such rights as may already have accrued prior to termination.

I will leave the workplace today and take with me my personal belongings. I will return to you any of [the appellant's] property that might be in my possession.

I require that you provide me with a statement of payments due to me on my termination, including a statement as to my payment in lieu of long service leave."

[13] Before proceeding further it is necessary to set out an extract from s 43 of the Industrial Relations Act 1999; relevantly that section provides:

"(1) This section applies to all employees . . .

(2) An employee is entitled to long service leave on full pay of -

(a) for the first 10 years continuous service - 8.6667 weeks;

(3) An employee who has completed at least 7 years continuous service is entitled to a proportionate payment for long service on the termination of the employee's service.

(4) However, if the employee's service is terminated before the employee has completed 10 years continuous service, the employee is entitled to a proportionate payment only if -

(i) dismisses the employee for a reason other than the

[14] It is obvious that the respondent had been in employment with the appellant for more than seven years but for less than 10 years. It follows that the respondent is only entitled to pro rata long service leave if the termination was occasioned by the appellant dismissing the respondent for a reason other than the respondent's conduct, capacity or performance. There was no suggestion that this was a case where the employee had been unfairly dismissed.

[15] Because the respondent had to establish a termination by the appellant within

s 43(4)(c)(i), recourse was had to the so-called concept of "constructive dismissal". As the learned judge at first instance put it: ". . . although the Plaintiff resigned, it was in fact the conduct of CFP which brought about the end of the employment relationship." After referring to authorities from other jurisdictions the judge at first instance held that the "termination of the contract was brought about by the conduct of the employer", that is by the conduct of the appellant.

[16] The issue raised by the appeal is whether or not that finding was correct.

[17] The expression "constructive dismissal" has not been widely used in Australian jurisprudence. It has been used in a number of English decisions where the court was concerned with statutory provisions extending the meaning of "dismissal" to include circumstances where the employee was entitled to terminate or was justified in terminating the employment contract because of conduct of the employer. But the expression is not recognised by the common law, and there are no applicable statutes here extending the definition of dismissal. In most Australian cases where there has been limited reference to "constructive dismissal", the reference has essentially been to conduct on the part of the employer which would constitute repudiation of the contract.

[18] Hayne JA referred to some of the English cases dealing with the concept on pages 159-161 of his reasons in Spencer v Dowling and Anor [1996] VSC 51; [1997] 2 VR 127. At 160 he said:

"But the fundamental question presented by the so-called 'constructive dismissal' cases is whether the employer has evinced an intention no longer to be bound by the contract of employment, i.e. whether the employer has repudiated the contract of employment. No doubt the question whether conduct does evince such an intention is to be judged objectively."

[19] On the previous page (159) he stated what, in my respectful view, is the appropriate test. In considering whether or not there had been a dismissal of the complainant, he said: "Of course, that is not the form of what happened; the complainant tendered her resignation. But the point is not [to] be determined according to the form of what occurred. Was the substance of it that the respondent dismissed the complainant?" That, to my mind, is the correct approach in law. One does not look merely to the form which the termination took, but rather one looks for what was the substantial cause of the termination. If by conduct the employer had repudiated the contract of employment without giving a formal notice evidencing that the employment was terminated, the employee is entitled to give a notice in effect electing to accept the employer's repudiation.

[20] I do not consider it necessary to say more about the concept of "constructive dismissal" and whether or not it may have some role to play in Australian jurisprudence.

[21] It is now necessary to return to the facts of this case. By February 2003 when the respondent sent the critical letter, the control of the appellant company had changed from the Challenger Group to Bell Potter, but that had not affected the respondent's employment. He was still employed by the appellant and that position was to continue for at least some, albeit relatively short, time into the future. Further, the appellant along with the other people in the "team", had decided about a month before 5 February to join ABN Amro Morgans. The respondent candidly admitted under cross-examination that his reason for leaving the appellant was in order to accept an offer with Morgans. Indeed he started with Morgans the following day.

[22] The Court has to consider the position as at 5 February 2003. It is not to the point that if the respondent had not then terminated his employment under the contract of 29 March 2002, a situation may have arisen after a short while that the contract came to an end because of conduct on the part of the appellant. That would have occurred if, for example, the appellant was liquidated by those then controlling it. In fact the appellant continues to exist.

[23] The position established by the evidence is that the respondent wished to terminate the employment in order to take up employment elsewhere, and in those circumstances it cannot be said that the termination was because the appellant dismissed the respondent for a reason other than the respondent's conduct, capacity or performance. It was not the conduct of the appellant which terminated the respondent's employment on 5 February 2003.

[24] Once that position is reached it becomes clear that the respondent was not entitled to recover anything for long service leave, none had accrued in law, and neither was he entitled to recover any sum of money in lieu of notice.

[25] There is no substance in the claim for payment in lieu of notice. No analysis of facts establishes that the appellant gave a notice pursuant to cl 6. Even if it repudiated the contract by its conduct, that would not constitute the giving of notice to terminate shorter than one month.

[26] It follows that the appeal should be allowed, the judgment at first instance should be set aside, and in lieu thereof it should be ordered that the action be dismissed with costs. The respondent should pay the appellant's costs of and incidental to the appeal to be assessed on the standard basis.

[27] HELMAN J: I agree with the orders proposed by Williams JA and with his reasons.