Ikin v The Danish Club "Danebrog" Inc [2001] VSCA 123

Court of Appeal (Vic)|2001-08-01|Before: BROOKING, BATT and BUCHANAN, JJ.A.

EMPLOYMENT - Wrongful dismissal - Written contract of employment for fixed term - Express provisions for determination of employment in certain events - Additional term not to be implied - Measure of damages.

BROOKING, J.A. (delivering the judgment of the Court):

The judge found that the plaintiff had been wrongfully dismissed and awarded $46,000 to the plaintiff, together with $9,000 damages in the nature of interest, a total of $55,000. The plaintiff appealed on the ground that the amount awarded was too low.

There was a cross-appeal by the defendant. Ground 1 of that challenged the finding of wrongful dismissal, but that finding, which, we may say, we regard as impregnable, is not now challenged.

There was a written contract of employment. By clause 2:

"2. Office and Term of Appointment The Club shall employ the Executive in the capacity specified in Schedule 2 ("the Job Title") for a period specified in Schedule 2 ("Term of Employment") from the date specified in Schedule 2 ("Commencement Date") and the Executive hereby agrees to and accepts such employment from that date until the earliest of the following dates:- (a) the expiration of the Term of Employment specified in Schedule 2; (b) at any time after the expiration of the term specified in the schedule where either party gives the other party notice in writing of its intention to terminate the agreement, such notice being reasonable notice having regard to the circumstances of the Executive's employment, but in no event being less than the period specified in Schedule 2 ("the Notice Period");

We refer to Schedule 2 mentioned in that clause which specified as the term of employment, 3 years and as the commencement date, 1 July 1996. It fixed a salary of $60,000 and a car allowance of $7,500 per annum.

Clauses 11 and 12 of the agreement were as follows:

"11. None (sic) Performance Notwithstanding the terms of this agreement, the Club may terminate the Executive at any time by giving notice in writing of its intention to do so if:- (a) regular performance review - at least every six months -has shown that the performance of the Executive, given due consideration to previous financial results, directions imposed by the Committee and agreed objectives, budgets and business plans, have materially and adversely affected the profitability and development of the Club during the preceding period of not less than 6 months. (b) becomes unable to perform his duty due to illness or accident for a period of 2 consecutive months or for an aggregate period of 3 months within a twelve month period.

Such notice being reasonable notice having regard to the circumstances and in no event being less than the period specified in the Schedule 2 (The Notice Period).

(a) becomes bankrupt or compounds with his creditors or any of them or assigns his estate for the benefit of his creditors or any of them;

(b) becomes of unsound mind or a person whose person or estate is liable to be dealt with in any way under the law relating to mental health;

(c) is convicted of any offence involving fraud or dishonesty or any other serious offence (except for a traffic offence) which is punishable by imprisonment (whether he be imprisoned or not);

(d) is in serious breach or default of any of the covenants and conditions herein contained;

(e) fails or refuses to comply with any lawful directions given to him by the Committee through the President or any person duly authorised by the Committee provided that such a direction is:-

(ii) consistent with the Job Title and Job Description of the Executive;

(iii) consistent with the Executive's normal place of work specified in the Schedule hereto.

(f) is absent from the business of the Club without leave (unless such absence is otherwise authorised by the provisions of this Agreement)

then, and in any such event, the Club may determine the Executive's employment forthwith by giving notice in writing to the Executive and thereupon the Executive's employment shall cease and determine and he shall not be entitled to claim any compensation or damages from the Club in respect of or arising from such termination."

We will not summarise clauses 7, 8 and 9, dealing with remuneration. We have already mentioned the salary and car allowance.

By its defence, the defendant denied the dismissal and alleged that the plaintiff had constructively resigned.

We should mention that among the other pleas there were those contained in paragraphs 10B and 14 of the defence. By sub-paragraph (a) of paragraph 10B this was pleaded:

"In the event the defendant wrongfully dismissed the plaintiff (which is denied) the plaintiff was entitled to reasonable notice of dismissal which upon a proper construction of the agreement was a period of one month."

That plea does not reflect any express provision of the written agreement.

Paragraph 14(e) of the defence sets out clause 12 of the agreement, dealing with summary dismissal. It relies upon paragraph (d) of clause 12 which we have already set out.

There was a counterclaim, but that was abandoned at the trial.

The judge, in assessing damages for wrongful dismissal, relied on an implied term of the agreement which had not been pleaded by the defendant or, indeed, put forward by it in the course of its final address. The defendant's counsel had advanced the striking argument that, if the plaintiff had been wrongfully dismissed, he was entitled to say, "I've been sacked and I shouldn't have been sacked and I'm entitled to some notice". The argument continued that it was then for the judge to determine the period of notice.

When the plaintiff's counsel was addressing his Honour, she referred to what we have called a striking submission, and his Honour then said:

"Is it not possible to imply into the agreement something which is not explicit but a situation which would arise if it were the case that the committee has simply lost confidence? Whether for good reason or for bad, the fact of the matter was that there was a lack of confidence in him. Then in such an intolerable situation as that there must exist power to bring that situation to an end."

"The contract doesn't say it. But it must be the case that they would have the power to say, 'We cannot operate the club with this man there. We might be wrong but nevertheless that's our decision'."

This suggestion was strenuously combated by counsel for the plaintiff, who, in particular, submitted that such a term could not be implied because it would contradict the express provisions of the written agreement. His Honour, however, after this submission, observed, with regard to the implied term which he had put forward, "I cannot see myself reaching a different conclusion"; that is, not concluding that the term was to be implied.

Although the defendant had addressed first, it was, of course, open to the defendant to disclaim the term suggested by his Honour, but it chose not to do so before his Honour took time to consider his decision.

In his reasons for decision the judge said this:

"It seems to me to be self-evident that there must be a means additional to the specified ground in the terms of appointment by which a parting of the ways can be occasioned between secretary/manager and the club. The committee's responsibility towards the club, in administering its affairs on behalf of the members, is to keep in paramount consideration at all times the benefit of the club and its members. In those circumstances to say that only in the specified occasions contained in the agreement that a dismissal of an unsatisfactory manager could take place is in my view unduly restrictive and pays no heed to the reality of the situation which prevailed over all the participants to this unhappy episode. The term 'unsatisfactory manager' is not one used pejoratively concerning Mr Ikin and is simply to describe a situation which arose in my view here, as much as for reasons which upon analysis are quite petty and silly really. The committee finds it no longer has confidence in the manager. The manager finds that he is lacking support and indeed under attack from the area where he requires support most, namely the executive of the committee and the committee itself and the situation is on any view untenable for any secretary/manager and club. Under those circumstances it appears to me to be self-evident that some notion of reasonable notice should be imported into the agreement in order to bring an end to a relationship which, if allowed to continue, would simply amount to a situation where Mr Ikin's health would continue to deteriorate to a disastrous point to him. The club's affairs would continue to reel uncontrolled along the same disastrous path along which it had been reeling for some years leading up to Mr Ikin's appointment. His endeavours to reform the situation which with the undertaking of goodwill and with energy and with a display of capacity which I think indicated that he was quite suitable for his job but led to antagonisms which made the situation untenable. The question arises then as to what would amount to reasonable notice in the circumstances and I put forward the following considerations. On any view of it he would be departing from the club unreferenced, and this in the first third of a three-year appointment which he was looking forward to and entitled to expect at the time of entering into his employment at the Danish Club. In the area in which he was working the incapacity to carry with him a satisfactory reference from his immediate past employer effectively means in my view that he is out of that line of work altogether for the indefinite future. What happened to Mr Ikin was really foreseeable in my view as to the course which would occur to someone put in the position that he was in, namely that he had to find a means or the family had to find a means of keeping body and soul together in the short term. Thus Mrs Ikin was forced to return to the workforce to support the family while Mr Ikin steadied his ship and found another avenue by which he could provide for his wife and family, which is what he had to do by starting in a new line of business altogether and that is not something which can be established momentarily. It takes time. Accordingly it seems to me that a period of something in the vicinity of two-thirds of a year or eight months would be reasonable notice in the circumstances in which Mr Ikin found himself at the time of his dismissal from the service of the club."

The defendant, on appeal, has sought to uphold his Honour's approach. One asks at once what the implied term was. Can the employer alone give notice or may either party do so? This does not appear from his Honour's reasons or even from the discussion which preceded it. Perhaps more importantly, what is the event in which notice may be given? The reasons are not explicit on this question. They do not set out precisely to define the event in which notice may be given. It may be that one can take from the reasons the view that notice could be given if the committee no longer had confidence in the manager. It may be that this can be obtained also from the judge's views expressed during argument.

The implied term was of the variety considered in BP Refinery (Westernport) Pty Ltd v. Shire of Hastings[1].

Notwithstanding what has been urged by Mr Northrop on these appeals, we think that counsel for the plaintiff was plainly right in her submission put below that the term could not be implied if only because it was inconsistent with the express terms of the written agreement. We refer again to clause 2 and Schedule 2 and to clauses 11 and 12. Further, other requirements of the BP Westernport test were not met. The term was not reasonable and equitable. It was not necessary to give efficacy to the contract. It was not so obvious that it went without saying. As to the requirement that it be capable of clear expression, one can at least say, without disrespect to the learned judge, that it was not clearly expressed by his Honour, either as regards the event, or as regards the party or parties entitled to give notice. This difficulty persisted when we sought a statement of the implied term from counsel now appearing for the respondent. He began by speaking of the breaking down of the employment relationship. He then spoke of the avoidance of the continuation of an unworkable situation. Then he formulated the term as follows, "If, through no fault of the parties, the employment relationship becomes unworkable, either party is entitled to determine the contract by giving reasonable notice". On further inquiry from the Court he said that "fault of the parties" meant breach of some contractual or other legal obligation.

In the result damages have, we think, been assessed on a fundamentally erroneous basis and the plaintiff's appeal must succeed.

A number of other points have been raised by one or other of the notices of appeal. These have been dealt with in written outlines of argument and we have briefly discussed them with counsel. It would be quite unsatisfactory for us, and counsel for the respondent at all events accepts that this is so, to determine these questions and then endeavour to go on to determine the amount of monetary relief to which the plaintiff is entitled. The facts have not been found in sufficient detail.

The question of amount must be redetermined by the judge. We will remit the case for the redetermination of the amount only by the same judge, assuming, as we hope will be possible, his Honour is able to deal with the matter. No further evidence should be received; his Honour should merely hear further argument in the light of our reasons. We stress that it is desirable that his Honour should make the assessment, if this is possible.

We have been told that each side made an offer of compromise and, indeed, regrettably, in the case of the plaintiff's offer of compromise, the amount appears from the appeal book.

Paragraph 1 of his Honour's judgment will have to be set aside. We will also have to set aside paragraph 2 of his Honour's judgment, not because there is - leaving aside offers of compromise - any doubt about the plaintiff's right to costs, but because of the plaintiff's submission that his entitlement should be reassessed at an amount which will lead to his being awarded solicitor/client costs and because of the defendant's submission that the plaintiff's entitlement should be reassessed at an amount which will be relevant having regard to the defendant's own offer of compromise.

23 The two other paragraphs of the judgment dealing with costs can stand.

In the hope of avoiding a further appeal, we express some views on three of the questions argued. First, there is no reason why the judge, in making his reassessment, should not bring to account in favour of the plaintiff in the assessment of damages unpaid leave accrued to the date of dismissal. This is the matter dealt with in paragraph 11 of the appellant's outline of argument. What we have said on this point is acceptable to both parties.

The second matter concerns superannuation, and what we say here is again acceptable to both parties. The quantification of this loss is a difficult task, but the judge should have regard to the then present value at the date of dismissal of the benefits to which the plaintiff was entitled and not an arbitrary figure.

We think that we should also say something about the relevancy of the plaintiff's summary dismissal to the assessment of damages. We say nothing about the much discussed case of Addis v. Gramophone Company Ltd[2]. We do, however, say that the fact of the plaintiff's summary dismissal and his patent inability to obtain a reference from his employer bears on his ability to obtain other employment; so does the threat which, on the uncontradicted evidence, was made to him by the new accountant Mr Parkes, that he knew everybody in the hotel industry and would make it very difficult for the plaintiff to find work if he persisted with a claim. We mention those matters not by way of suggesting that they must be given great prominence, which was Mr Northrop's concern, but merely by way of indicating our view that they are relevant to the assessment of damages.

Having regard to the grounds of appeal in the appeal proper and in the cross-appeal and the determination of this Court, we think that the respondent should bear not only the costs of the appeal, as is accepted by Mr Northrop, but also the costs of the cross-appeal.

Accordingly, on the plaintiff's appeal the order of the Court is:

2. Paragraphs 1 and 2 of judgment below set aside.

(a) for assessment of amount of monetary relief to which plaintiff is entitled, such assessment, and determination referred to in sub-paragraph (b) below, to be made by his Honour Judge Hanlon unless in opinion of his Honour the Chief Judge this is impracticable. Assessment by his Honour Judge Hanlon to be made without reception of further evidence, but after hearing further submissions; (b) for determination of what order for costs should be made in lieu of paragraph 2 of said judgment having regard to any offer of compromise made in proceeding.

4. Appellant's costs of appeal to be paid by respondent.

On the cross-appeal by the defendant we make an order in accordance with these minutes:

1. Appeal dismissed on ground 1, without adjudication on ground 2.

2. Cross-appellant to pay cross-respondent's costs of appeal.

We grant a certificate to the respondent club in respect of the plaintiff's appeal.

Application has been made on behalf of the respondent club for an order that the plaintiff disgorge the proceeds of the judgment which we have set aside, and also an amount that has been paid for costs. In the unusual circumstances of this case we think we should not accede to the application, which is accordingly refused.

At a glance

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Decision date

Before

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Judgment (60 paragraphs)

Parties