Hopper v Campbell

Court of Appeal (NSW)|2016-07-18|Before: Bathurst CJ, Meagher JA, Payne JA, Black J

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment

BATHURST CJ: I agree with the orders proposed by Meagher JA and with his Honour's reasons.
MEAGHER JA:

Overview The appellant's employment by MF Global Australia Ltd (in Liq) (MFGA) was terminated by the respondent liquidators (then administrators) for redundancy by two months' written notice given on 18 November 2011. On 2 March 2012, MFGA went into liquidation. The appellant subsequently lodged two proofs of debt with respect to unpaid remuneration, bonuses and other payments to which he claimed to be entitled. The first proof was dated 4 October 2012 and for $3,218,799 (ignoring cents). The other, dated 29 October 2013, claimed $3,712,712 (again ignoring cents). The liquidators rejected the greater part of each proof.

The background facts

MFGA was part of an international group of companies providing financial services and products. The ultimate holding company was MF Global Holdings Ltd (MFGH), a company incorporated in Delaware in the United States. In February 2011 the appellant was employed as head of MFGA's Australian agricultural commodities trading desk, earning a salary of $250,000 per annum, plus a bonus paid quarterly. That bonus was equal to 50% of the net revenue generated by that trading and was distributed among the staff of that trading desk as determined by the appellant.
At a meeting in Sydney on 18 February 2011 between the appellant, Mr Corzine, the Chairman and Chief Executive of MFGH, and Mr Fay, the Managing Director of MFGA, there was discussion concerning a change of role for the appellant which would have involved his working as a proprietary trader (one who traded on account of the MFGH group, as distinct from its clients). That trading was to be undertaken within the Principal Strategies Group (PSG) of the MF Global group managed out of its New York office.
The appellant's case in support of the amounts claimed in the proofs of debt was that an agreement was made at this meeting whereby he was to continue to be employed by MFGA but to cease working on the agricultural commodities desk and to commence working as a proprietary trader within the PSG, for a term of two years, with a guaranteed income of at least $1 million per year.
A week or so after the meeting of 18 February 2011 the appellant commenced proprietary trading in Sydney. He did so taking directions and instructions from the PSG (headed by Munir Javeri) until, in the circumstances described below, he was directed to stop trading on 2 November 2011. During short periods in 2011, the appellant conducted that trading from the group's New York office. Between March and October negotiations proceeded between the appellant and MFGH's global head of human resources (Thomas Connolly) as to the terms on which he might be employed as a proprietary trader by one of the group's United States' subsidiaries. Two draft letters of agreement were prepared. They were dated 6 May and 20 May 2011.
On 1 November 2011 MFGH announced that it, and its finance subsidiary, MF Global Finance USA Inc, had filed a voluntary petition for relief under chapter 11 of title 11 of the United States Bankruptcy Code. In consequence, on 1 November 2011, the respondents were appointed administrators of MFGA pursuant to s 436A of the Corporations Act.
During the period between March and November 2011 the appellant was paid by MFGA on a basis that was consistent with the discussion that occurred at the February meeting. He received monthly payments equivalent to an annual salary of $250,000 and, in August 2011 a payment for the March to June 2011 quarter of $174,972 (which as paid was intended to be the first of quarterly payments of $187,500).

The issue before the primary judge

Each of the proofs claimed amounts said to be due to the appellant upon the termination of his employment with effect on 18 January 2012. The liquidators allowed an amount of $385,702 (omitting cents) in respect of the first proof, and rejected the second proof in whole.
Before the primary judge, and by reference to the terms of the agreement which was alleged to have been made at the meeting on 18 February 2011, the appellant claimed to be entitled to the following amounts upon termination of his employment: (1) $1,438,222.44 being the balance of the guaranteed $2 million salary for the two year period which had not been paid either before or after 18 January 2011: Judgment at [73]; (2) $205,865 being 20% of the profits made from trading on Mr Corzine's house accounts up to the end of March 2011: Judgment at [76]; (3) $887,400 being 20% of the trading profit over $5 million made in the period from 1 April 2011 to 31 March 2012: Judgment at [77]-[78]; (4) $216,060.27 for long service leave calculated on the basis that the appellant's "ordinary" pay for the purposes of s 3(1)(b) of the Long Service Leave Act 1955 (NSW) was $1 million per annum treating the annual quarterly payments totalling $750,000 as part of the payment to which he was entitled and not as a bonus or incentive: Judgment at [79]; (5) $500,000 for redundancy pay calculated as 26 weeks' pay assuming an annual salary of $1 million: Judgment at [80].
The primary judge rejected the appellant's claim that there was an agreement made in February 2011 which entitled the appellant to any of the amounts described above. (That agreement as pleaded is set out in [20] below).

The issues on appeal

The appellant does not challenge that conclusion. Instead in this Court he contends for a more limited agreement under which from late February 2011 he undertook proprietary trading as an employee of MFGA in return for a salary calculated at an annual rate of $1 million and an annual bonus equal to 20% of the trading profit over $5 million generated from that trading.
In his written submissions, the appellant puts the argument for that more limited contract in two ways. First, it is said that at the February 2011 meeting an agreement was struck that he would commence his new role as proprietary trader immediately, on a salary of $1 million paid by MFGA with an additional entitlement of 20% of the profits he generated over $5 million. Alternatively, it is said that by the conduct of the parties following that meeting, it was agreed that the appellant would change his employment role to proprietary trading, both from Sydney and New York, and that in return MFGA would pay him a salary of $1 million.
On the basis of one or other of these agreements, the appellant presses his claims to the following amounts (which do not include all of the amounts claimed before the primary judge): (1) $237,115.91 being the balance of the appellant's unpaid income claim to 18 January 2012. That amount has two components. The first is an unpaid monthly salary payment claim of $12,528. The second is the amounts due by way of quarterly payment from October 2011 totalling $224,587.91; (2) $887,400 or in the alternative $665,550 being 20% of the trading profit over $5 million made in the period from 1 April 2011 to January 2012; (3) $216,060.27 for long service leave. That amount is calculated on the basis that the whole of the payments made by MFGA were payments of "ordinary" pay; (4) $500,000 for redundancy pay, again calculated on the basis that the appellant's annual salary was $1 million.
The second of the ways in which the argument for a more limited contract is made does not include as a term that the appellant was entitled to a bonus or profit share calculated by reference to the profit made from the proprietary trading.
The appellant contends on appeal that the primary judge erred in not addressing and finding for him on the basis of one or other of these agreements. In response, the liquidators submit that this more limited agreement was neither pleaded nor argued, nor dealt with by the primary judge, and that it cannot be raised for the first time on appeal.
Accordingly the following issues arise:
whether the appellant's more limited contract claim was pleaded or argued at first instance, and wrongly rejected by the primary judge (grounds 1, 2, 3, and 4);
if that claim was not pleaded or argued and wrongly rejected, whether the appellant should be permitted to pursue it for the first time on appeal;
if that claim may be made, whether there was such a more limited contract. Specific questions are said to arise as to whether the parties agreed to be bound immediately to that limited agreement (ground 5); Mr Corzine's authority to make such an agreement (ground 6); the quantification of any bonus or profit share from the proprietary trading (ground 7); and the quantification of the remaining entitlements claimed as per [15] above (ground 8).

The appellant's case as pleaded and dealt with by the primary judge

As appears from Judgment [73]-[80] the issue ultimately dealt with by the primary judge was whether the appellant was entitled to the disputed items in the proofs of debt described in [11] above. In relation to the appeal from the liquidators' decision to reject those proofs, the specific question for the primary judge was whether each of the amounts claimed was an enforceable liability of MFGA: Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 340-341 (Brennan and Dawson JJ).
The basis upon which the appellant alleged that he was entitled to each of those payments was pleaded in paras 10 to 14 of the statement of claim. Those paragraphs provided: 10. On or around 18 February 2011, the Plaintiff met with John Corzine … the Chief Executive Officer of MF Global Holdings Ltd …, the parent company of MF Global Australia listed on the New York Stock Exchange, and Tony Fay the managing director of MF Global Australia and an agreement was reached to the following effect: (a) the Plaintiff would cease working on the Agricultural Commodities desk and would commence working as a proprietary trader with the house's assets; (b) the Plaintiff would be paid a guaranteed amount of $1 million in salary each year for 2 years commencing on 1 March 2011 and his employment as a proprietary trader was for a fixed period of 2 years commencing on 1 April 2011; (c) in addition to the guaranteed amount of $2 million over 2 years, the Plaintiff would be entitled to a bonus of 20% of the profits he made over the amount of $5 million each year; (d) if the Plaintiffs employment was terminated without cause within the fixed 2 year period, he would receive the remainder of the $2 million salary which had not already been paid to him; (e) the Plaintiff was guaranteed a position with a salary of at least $500,000 per annum for 1 year after the 2 year period expired; (f) the Plaintiff would be paid as a bonus 20% of the profits he made up to the end of March 2011 trading house assets on Corzine's house accounts; (g) the Plaintiff would commence in the new position working from Australia on the basis that he would visit New York sometimes and would investigate and consider relocating to New York; (h) if the Plaintiff relocated to New York he would not be out of pocket by the move; (i) the Plaintiff would continue to be paid by and be employed by MF Global Australia unless and until he relocated to New York. 11. The Plaintiff commenced work as a proprietary trader in or around February 2011 in accordance with the agreement pleaded in 10 above, trading on Corzine's house account until the end of March 2011 and thereafter on his own house accounts. 12. Between about March 2011 and June 2011, the Plaintiff investigated and considered relocating to New York but decided against it. Particulars (a) Draft contacts dated 6 and 20 May 2011 ("the 20 March 2011 agreement"). (b) Oral communications with Corzine and Munir Javeri, Global Head of Trading. (c) Email communications with Tom Connolly, Head of Human Resources, and Javeri. 13. During the course of his investigation and consideration of relocating to New York, the Plaintiff and MF Global Australia varied their agreement struck in February 2011 such that: (a) the Plaintiff was entitled to a sign on bonus of $100,000; and (b) the Plaintiff be liable to repay $100,000 of his annual salary in the event that he did not turn a profit from trading in that year. Particulars Emails and verbal communications with Javeri and Connolly 14. During the period between July and October 2011, the following matters concerning the agreement between the Plaintiff and MF Global Australia struck in February 2011 were clarified and confirmed: (a) the Plaintiff was to be paid in Australian dollars and the amounts agreed for the Plaintiff's remuneration were in Australian dollars; (b) the Plaintiff could continue to work from Sydney as long as he visited New York regularly; (c) the terms of his employment whilst in Australia were in accordance with the 20 May 2011 letter from Mr Connolly to the Plaintiff; (d) the Plaintiff would be paid monthly salary the equivalent of $250,000 per annum with the remainder of the guaranteed amount of $1 million per annum paid quarterly. Particulars Emails and verbal communications with Connolly, Javeri and Michael Blomfield, the CEO of MF Global Asian Region.
The liquidators denied that an agreement was made in the terms pleaded in para 10 (or on those terms as "clarified and confirmed" as alleged in para 14) and said that if such an agreement was made, MFGA was not a party to it.
In their outline of submissions, served before the commencement of the hearing, the liquidators maintained that the appellant's claim as pleaded must fail if the Court was not satisfied that there was express agreement as to each of the terms alleged in para 10 of the statement of claim.
At the commencement of the hearing on 17 July 2015 the appellant sought leave to amend to plead in the alternative, by para 14A, that: … between about 18 February 2011 and about October 2011, an agreement was made between the plaintiff and MF Global Australia in the terms pleaded in paragraphs 10, 13 and 14 above … by the conduct of the plaintiff and the employees and officers of MF Global Australia and other MF Global entities.
In its terms that proposed amendment did not contend for an agreement other than in the terms pleaded in paras 10 and 14 of the statement of claim. In other words the conduct of the parties after February 2011 was relied on as evidence of a contract in the same terms but formed subsequently. In making that application, the appellant's counsel stated: The plaintiff's case, your Honour, is that the agreement was struck at that meeting of 18 February. The plaintiff, in the alternative, says that if, for some reason, your Honour was to find that there was not either an intention to create legal relations or in some other way an agreement struck at that stage, that by the parties acting in accordance with what was said at that meeting, that that agreement was made by their conduct. In relation to that, your Honour, the defendants say that that's not part of the pleaded case - that's a new case. For my part, your Honour, I don't accept that, but for abundant caution I'm going to apply after the adjournment to amend …
Towards the end of his oral argument, the appellant's counsel described the proposed para 14(a) as a conclusion arising from facts already pleaded. That conclusion was that "the contract on which the plaintiff claims was formed in the alternative by not just what was said on 18 February, but what happened thereafter".
The liquidators opposed the amendment application. They submitted: Our case is, your Honour, that we wish to make a lot more further inquiries to deal with the case that is now sought to be put - namely whether, by course of dealing between February and October 2011, an agreement was reached, because the inquiries that have been made to date - and the case that we have come to meet to date is to prove that the subsequent conduct is clearly inconsistent with an agreement having been reached at the meeting on 18 February 2011. So, true it is that subsequent conduct has been investigated post 18 February, but that was for the purposes of determining whether there was an agreement reached, as alleged, on 18 February 2011.
In the course of argument, the primary judge indicated that the price of an amendment was likely to be an adjournment. In reply, the appellant's counsel said if that was so "then we would seek to proceed without the amendment". At the conclusion of the argument (and after the liquidators' counsel had made clear that if the amendment was pressed they would seek an order that the hearing be vacated), the primary judge delivered short reasons in which he stated that he would have granted leave to amend, had the appellant sought it, but on terms that the proceedings be adjourned. The primary judge also made the following observation with respect to the case that remained open to the appellant without the amendment: It is apparent, from the face of the pleadings that the Plaintiff already contends that events subsequent to the agreement are relevant to it, and the Plaintiff already contends, in paragraph 14 of the pleading, that several matters concerning the agreement were clarified and confirmed by events during July and October 2011.
In concluding, the primary judge also observed that the pleading included "a significant number of pleaded facts that go to the matters which, it seems to me, the amendment was intended to address".
At Judgment [7] the primary judge made reference to the application for the proposed amendment: Mr Hopper at one point proposed an amendment of his pleaded case, so as to be able to rely on subsequent conduct of the parties as giving rise to such a contract. However, Mr Hopper did not press that amendment when it became apparent that a potential consequence of it would be that the hearing of the proceedings would be vacated to allow the liquidators to investigate and respond to the amended case and he could be required to pay the costs thrown away. Mr Hopper's case therefore stands or falls on the basis of the arrangement alleged to have been reached at the meeting in February 2011, as confirmed or clarified by subsequent conduct, rather than on any contract formed only by subsequent conduct. [Emphasis added].
The distinction there made describes the appellant's case as one based on the agreement pleaded in paras 10 and 14 of the statement of claim either formed at the meeting in February 2011, or as a result of what was said at that meeting and the subsequent conduct of the parties. That claim would not include an agreement in those terms made by subsequent conduct alone or an agreement made in different terms and by such subsequent conduct.
At Judgment [59] having described the contract relied on as that "set out in paragraphs 10 and 14 of [the appellant's] Statement of Claim" the primary judge recorded the following contention as to how that pleaded contract supported the money claims described in [11] above: … that [the appellant's] base or non-discretionary salary was AUD$1 million per annum, with $250,000 paid in monthly instalments and the remaining $187,500 paid quarterly [meaning four quarterly payments of $187,500]; this amount was guaranteed for two years from 1 April 2011 unless he was terminated with cause; he was entitled to a bonus of 20% on profits he made over $5 million each year; and he would be paid as a bonus 20% of the profits he made up to the end of March 2011 trading on Mr Corzine's account.
The primary judge was not satisfied that such an agreement was made, either as a result of what was said at the meeting on 18 February 2011, or by reason of the conduct of the parties, including their conduct at that meeting as well as after that date. That later conduct included the appellant's working as a proprietary trader and the making of salary payments by MFGA in accordance with the amounts referred to by Mr Corzine: Judgment at [60]-[61], [63].
Referring to the payments made by MFGA to the appellant, the primary judge considered at Judgment [62]: … [those payments were] equally consistent with anticipation of the contracts that were then under discussion. It does not seem to me that the conduct to which Mr Hopper refers allows a finding of the existence of the contract claimed to have been formed in February 2011, in itself or as clarified and confirmed by subsequent conduct. That conduct seems to me to be more readily explained as taken in anticipation of the arrangements which were then being negotiated, for Mr Hopper's employment by a US entity within the MF Global Group, on the terms broadly discussed at the February meeting, as potentially varied by the subsequent discussions between Mr Hopper and several other executives of the MF Global Group.
The agreement pleaded in para 10 of the statement of claim included that the appellant would commence in the new position working from Australia and investigate and consider relocating to New York, and that he would be employed as a proprietary trader for a fixed period of two years commencing on 1 April 2011. The primary judge was not satisfied that such an agreement was made as a result of what happened at the meeting on 18 February 2011 or struck at that meeting and subsequently clarified and confirmed by the conduct of the parties between July and October 2011 (para 14). His reasons for not being so satisfied included that the appellant's case, that it was agreed that he should undertake the proprietary trading from Australia, was not supported by Mr Fay's evidence, and was inconsistent with subsequent correspondence concerning the question from where he would undertake that trading. That correspondence did not treat this subject as having been "agreed": Judgment at [21].
His Honour also considered it "inconceivable" that the parties, and particularly the appellant, were to be taken objectively to have intended to be contractually bound before these matters were resolved. He observed at Judgment at [22]: The most obvious reason why they would not have held that intention is that it would have been entirely inconsistent with Mr Hopper's consistent position, explained to Mr Corzine at the time, that he would not agree to move to New York without discussion with his wife and her consent. It would also have been inconsistent with Mr Hopper's then recognition of the significant practical difficulties involved in a move to New York, which included the fact that he had several school age children and he and his wife owned a number of rural properties, with which he had a close involvement, including having managed those properties personally for a period prior to February 2011, after an injury to his brother-in-law, who was also his farm manager. Mr Hopper's subsequent conduct, to which I will refer below, also shows that he did not consider that he was bound to any such arrangement, unless terms acceptable to him and consistent with his understanding of the proposal were agreed.
Addressing the appellant's argument based on that agreement as "clarified and confirmed" by subsequent conduct the primary judge concluded at Judgment [64]: So far as Mr Hopper seeks to rely on subsequent dealings between the parties as either confirming or establishing a contract that had not been established by the meeting on February 2011, there were differences between the parties as to an important term of the suggested agreement as at 13 May 2011, namely the basis of the bonus payable to Mr Hopper, where Mr Hopper was pressing for a flat 20% bonus over $5 million and rejected MFG US's proposal for a group-based bonus … . As I noted above, the further draft contract dated 20 May 2011 was also not acceptable to Mr Hopper, who identified issues as to the level of rental allowance, travel and clarity around an exit after two years … . The subsequent discussions, in which Mr Hopper raised the question of his future with MF Global are inconsistent with an agreement, particularly one permitting proprietary trading from Australia, having been formed by conduct by that point. Where substantial issues had not been agreed in respect of the draft contract of 20 May 2011 or subsequently, it does not seem to me that the subsequent dealings between the parties were capable of confirming a contract that had not been concluded by the discussion in February 2011. [Emphasis added].
His Honour's reference to the appellant's reliance on the parties' subsequent dealings as "establishing" a contract perhaps goes further than the pleaded case and responds to a case which the appellant sought to make by his amendment. Whilst that may be so, his Honour was not addressing the appellant's limited contract which was alleged to have been made in circumstances where the parties were expecting to make a further contract containing, by consent, additional terms in substitution for that limited contract; and accordingly was what McLelland J described in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628 as being "a fourth class of case additional to the three mentioned in Masters v Cameron [(1954) 91 CLR 353] as recognised by Knox CJ, Rich J and Dixon J in Sinclair, Scott & Co v Naughton (1929) 43 CLR 310 at 317".
The appellant does not challenge the primary judge's rejection of his case that there was an agreement on the terms pleaded in paras 10 and 14 of the statement of claim. In his submissions in reply it is accepted "that it is unlikely that the parties would have been bound to a two year agreement for the new role without the question of location being determined" and that "on the facts as found by the primary judge the claim of a two year agreement, with the location to be Sydney and the various protections … alleged, has not been made out".
Instead the appellant contends that having rejected his claim to an enforceable agreement on those terms pleaded, the primary judge should have held that the absence of consensus as to all of the terms of that agreement did not mean that he had not established the more limited agreement that he was employed by MFGA to be a proprietary trader, in return for remuneration of A$1 million per annum.

Was the appellant's more limited contract case pleaded or argued before the primary judge and dealt with albeit wrongly? (grounds 1, 2, 3, and 4)

The appellant submits, somewhat boldly, that his more limited case was within the case pleaded and argued for and, for that reason, that it ought have been dealt with by the primary judge. It is said that agreement was pleaded in the statement of claim by paras 10(a), 10(b), to the extent that it identifies an annual salary, 10(c), to the extent only that it describes the bonus entitlement, 10(i), 11, 14(a) and 14(d). That is so only in the sense that the same or similar terms to those now relied on were pleaded as some but not all of the terms of a two year employment agreement between the appellant and MFGA commencing on 1 March 2011.
However the agreement now contended for (which may or may not include an arrangement as to the payment of a profit share in relation to the proprietary trading) is not for such a fixed term and does not address the possibility of the appellant relocating to New York or his being employed by another and United States based entity within the MF Global group.
It is an agreement under which MFGA is said to have been bound to employ the appellant as a proprietary trader in another entity of the group for an indefinite period and to pay him a salary equal to $1 million per annum. It is also contended that the parties expected either to make a further contract in substitution for that agreement which contained additional terms or that their contract would be replaced by one between the appellant and another entity within the group, in the event that he decided to move to New York. (A further possibility, it seems, was that no further agreement would be reached in which event presumably the indefinite period arrangement was to come to an end.)
As the foregoing discussion makes plain, the existence of such an agreement was not pleaded in the proceedings before, or dealt with by, the primary judge. There remains the appellant's argument that such a case was made by his closing argument. This question is, in part, relevant to whether the appellant is able to make this case for the first time on appeal. That question is dealt with below. However it has been emphasised that in considering whether a particular argument or case was made at trial "no narrow or technical view should be taken" and that it is necessary "to look to the actual conduct of the proceedings": Water Board v Moustakas (1988) 180 CLR 491 at 497 (Mason CJ, Wilson, Brennan and Dawson JJ).
In his outline of final submissions it was said that the terms of the contract that affected the "monetary amounts" the appellant claimed included that his base or non-discretionary salary was "$1 million per annum", that this amount was guaranteed for two years from 1 April 2011, and that he was entitled to a bonus of 20% on profits he made over $5 million. In the context of addressing when that contract was made - either at the meeting in February 2011 or following and by reason of that meeting and subsequent conduct - it was submitted that it was open to the Court "to find that Hopper's contract with MFGA included some but not all of the terms alleged in the statement of claim".
In the course of argument, and in an exchange made with reference to this last submission, the appellant's counsel argued that the Court might not find that the terms of the agreement included that pleaded in para 10(f), concerning the payment of a bonus in respect of proprietary trading undertaken prior to 1 April 2011. In response the primary judge commented: … you say that your client's position is that the pleading in para 10 is not, in effect, an all or nothing pleading of the terms of the contract, that it is open for the Court to find that some of terms were established and others were not.
Counsel for the liquidators responded to that observation: Can I also then deal with a point that your Honour raised which is the what I'll call the all or nothing, or whether it is open to your Honour to accept that some of the terms alleged in paragraph 10 are made out, and therefore there is a contract. In respect of those terms only and not others, our primary submission is that that is not the way the case is put by my learned friend, and in any event, even if it was open to your Honour to determine the case on that basis, your Honour would not determine the case on that basis because we would say, in the circumstances of the present case, it would be quite illogical to conclude, with respect, that there was an intention to be bound, in respect of only some of the clauses that are alleged.
The appellant's counsel did not reply suggesting that it was open to the primary judge to find that there was an agreement which was not for a term of two years and under which his client was not entitled to a guaranteed salary of $1 million per year or a bonus equal to 20% of the profits generated over $5 million in each of those years. In that state of affairs it was not open to the primary judge to find that there was a more limited agreement as now contended and his Honour did not err in not addressing such a case. For that reason grounds 1 to 4 should be rejected.

Whether the appellant can make his more limited contract case for the first time on appeal?

The principles by reference to which this question is to be decided are not controversial. A point "cannot be raised for the first time upon appeal when it could possibly have been met by calling evidence below". However, when "all the facts have been established beyond controversy or where the point is one of construction or of law, then a Court of Appeal may find it expedient and in the interests of justice to entertain the point, but otherwise the rule is strictly applied": Moustakas at 497. See also Zheng v Cai (2009) 239 CLR 446; [2009] HCA 52 at [16].
The liquidators submit that they would be prejudiced if the appellant was permitted to argue for his more limited contract on appeal. They submit that argument raises factual issues not raised by the appellant's pleaded case and that it would have been open to them to lead evidence, including by cross-examining Mr Fay and further cross-examining the appellant, with respect to those issues. In response the appellant says this position is "untenable" because all of the terms of that more limited contract are terms of the pleaded agreement with the result that the same issues arise, albeit only in relation to the terms of that contract.
There are two difficulties for this submission of the appellant. Each shows that additional issues, which could possibly be met by evidence, arise on his more limited contract case. The first difficulty is that the more limited contract contended for does not represent the only available legal characterisation of the relationship between MFGA and the appellant which continued whilst negotiations proceeded between him and Mr Connolly, representing one or more of the United States based entities in the group.
One possible legal characterisation, adverted to by the primary judge (at Judgment [60]), was that the appellant continued to be employed by MFGA "on the basis on which he had previously been employed" and that under a separate and temporary arrangement MFGA agreed to pay him the guaranteed bonus that he would receive if the contract being negotiated was already in place. Another possibility was that the appellant continued to be employed by MFGA on those existing terms and at the same time was party to an arrangement with MFGA and MFGH under which his services as a proprietary trader were provided to MFGH in return for payments from MFGA equivalent to an annual salary of $250,000 and bonus of $750,000, so long as he generated a profit from that proprietary trading.
Whether there was a temporary arrangement made on one of these bases, or on some other basis, was contestable between the parties and could have been the subject of further evidence, including from Mr Fay. There would then have arisen a question as to the characterisation of the quarterly payments equal to an annual amount of $750,000, and whether they formed part of the appellant's "ordinary" pay as a continuing employee of MFGA. There also may have been a question as to whether MFGA or the appellant had ceased providing his services as a proprietary trader to MFGH by mid November 2011, when he was given notice of termination.
The second difficulty for the appellant's argument, already apparent in the discussion above, is that his more limited contract case, considered alone, also raises questions as to the characterisation of those quarterly payments, and as to whether he remained entitled to them at the time his employment was terminated by notice. MFGH and its finance subsidiary filed for chapter 11 bankruptcy on 1 November 2011 and on 2 November the appellant was instructed by the PSG that there should be "no trading". A question arises as to whether from that point in time the interim arrangement, under which his services as a proprietary trader were provided, continued to be binding and have effect.
A similar issue did not arise on the appellant's pleaded case because he was entitled to continue to be paid at the rate of $1 million per year for the two year period irrespective of whether he was in fact undertaking proprietary trading within the PSG. Nor could there be any question as to the characterisation of part of that payment as an incentive or bonus, it being part of his annual salary of $1 million.
Taking account of these matters, it was well open to the liquidators, in the event that the more limited contract case had been made at first instance, to both cross-examine the appellant and Mr Fay and, perhaps, tender other documentary evidence addressing the additional issues referred to above. For these reasons the appellant should not be permitted to make that argument for the first time on appeal.

Remaining grounds of appeal

The questions raised by grounds 5, 6, 7 and 8 do not arise because they depend on the appellant being permitted to argue for his more limited contract.

Conclusion

The appeal should be dismissed with costs.
PAYNE JA: I agree with Meagher JA.

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: 21 December 2016

At a glance

Court

Decision date

Before

Source

Judgment (12 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (9)