Irving v Jones Lang LaSalle Australia Limited and another

[21] The reaction to Reich appears to be a reaction to the conclusion in that case that conduct in breach of a contract may render a contract unfair. There is a perception that the true remedy (or the only remedy) in such a case should be for breach of contract at common law. However, the conclusion in Reich is inescapable given the broad terms of the section and was explicitly acknowledged to be so by Mason P at [29] in Sydney Water Corporation Ltd v Industrial Relations Commission (NSW) (2004) 61 NSWLR 661; 141 IR 14. As Kirby P (as he then was) observed in Walker v Industrial Court (NSW) (1994) 53 IR 121 at 134-135, it is not unusual in our legal system for one set of circumstances to give rise to a number of remedies, but the existence of alternatives has never excluded a person from pursuing rights expressly conferred by statute. The existence of other remedies in this context (such as statutory claims for redundancy payments or common law claims for breach of contract) does not control or limit the ample language of the section (in Walker, Kirby P considered a predecessor to s 106, s 88F(1) of the Industrial Arbitration Act 1940 (NSW) (Repealed)). Notably, not one of those who seeks to impugn Reich has attempted to reconcile their argument with the clear words in ss105 and 106. In our view, it cannot be done. 124 The foregoing passage in Truelove emphasises that it is by no means unusual for one set of circumstances to give rise to more than one remedy which may be found in either the statutes or at common law. Nor is it impermissible, where this occurs, for an applicant to pursue a remedy for unfair contract under s106 even though the same set of circumstances may disclose a breach of contract. So much was made clear in Sydney Water Corporation Ltd v Industrial Relations Commission (NSW) (2004) 61 NSWLR 661 at [40] where Mason P observed:

Section 106 is available to a party whether or not in breach of contract, and whether before or after termination has been effected. Walker makes this clear in the reference (at 149) to a contract being unfair because of the limited or discriminatory rights conferred in the particular case on an employee at the stage of his or her dismissal. (See also per Kirby P at 134 and Incitec v Industrial Court of New South Wales (1992) 45 IR 155 at 156-7 per Gleeson CJ .) But it simply does not follow that a contract of employment is unfair because or whenever it leaves the employee to remedies under the general law. There would need to be a finding that those remedies were relevantly "unfair" generally or in regard to the contract at hand before the Commission's remedial jurisdiction would be enlivened, assuming that such a finding is within the contemplation of the section. I doubt that it is, although it is unnecessary to resolve that matter finally. 125 Fourthly, the claim for shares, unvested at the time of termination of the applicant's employment, relies upon work he performed during 1999 and 2000. Any entitlement to shares for work done during 2001 is a separate consideration. Moreover, the applicant makes no claim for any shares that might have been earned for work satisfactorily performed during that latter period. 126 The PB-S plan contained express exceptions during the 1999, 2000 and 2002 calendar years for the termination of employment on the ground of redundancy. The fact that the memorandum forwarded to the applicant on 22 June 2001 was silent on whether a redundancy constituted an exception to the condition of continued employment for the vesting of shares, should not, in my opinion, have prevented the shares from vesting at the time of the applicant's termination of employment. The exception operated for all years, except 2001. In any event, the stated rationale in the plan for the vesting of shares contingent upon continuing employment, that is, the retention of valued employees, does not, as a matter of logic, apply to those employees who are made redundant. Finally, the applicant had met the necessary criteria which, had his employment continued, would have resulted in the vesting of the shares upon completion of his work satisfactorily for the years 1999 and 2000. In all these circumstances, fairness dictates that the applicant should have received the value of those shares when he was made redundant. I therefore find that the failure of the contract to provide for the vesting of the shares in the event of termination of employment on the ground of redundancy was unfair. Superannuation

127 The summons seeks a variation to the contract that any payment in lieu of notice made to the applicant should include employer superannuation contributions in addition to his base salary as well as an amount equivalent to likely bonuses. The respondents contend that this claim is incompetent on the basis that the summons does not allege that the applicant's contract was unfair because it lacked a term in relation superannuation. In my opinion, however, it is implicit in the variation sought that the applicant alleges that his contract of employment was unfair because it failed to make provision for such a term. I intend to consider this claim on that basis. 128 The respondents contend further that the claim should fail because the respondents' obligations to pay the applicant superannuation contributions extend only in respect of the applicant as an employee. Following his termination of employment, the applicant took over control of his superannuation by procuring the transfer to his own fund of the benefits the subject of the funds to which his employer had contributed. This also impacted on the failure on his part of the applicant to mitigate his loss since following termination the applicant had the opportunity to obtain alternative employment in respect of which his new employer would be required under statute to make superannuation contributions on his behalf. 129 As I have already found, the payment of six months in lieu of notice to the applicant was fair and reasonable, taking into account several factors including his length of service which I assessed as 45.5 months. I also found that the respondents' failure to include for the first three months of the notice period, a component for likely bonus payable operated unfairly against the applicant. One of the factors which I took into account in forming this conclusion was the existence of the restraint clause which prevented the applicant from, for example, seeking work with another employer in his field of expertise. Similarly, the applicant, being constrained by the terms of his contract, from obtaining comparable work with another employer, was therefore denied the opportunity to seek employment and receive a salary that would have included employer superannuation contributions. In these circumstances, it is my opinion that, having been prevented by the respondents by reason of the restraint clause, from seeking employment in his chosen field and receiving a salary including superannuation contributions, that the payment to the applicant of six months in lieu of notice should have fairly included employer superannuation contributions. 130 I therefore find that the term of the applicant's contract, which required the parties to that contract to give the other six months notice in writing in the event of termination, was unfair in that it did not provide for employer superannuation contributions to be paid as part of the payment to the applicant of six months in lieu of notice. Mitigation

131 The issue of mitigation, given my findings in relation to the various alleged heads of unfairness, only assumes significance in relation to those findings concerning the failure of the respondents to make fair provision for a bonus payment and superannuation contributions during the notice period: see English v Aradlay Insurance Brokers at [38]. 132 Although s 106(6), which deals with an applicant's efforts to mitigate loss, did not come into effect until 24 June 2002 (that is, after the applicant filed the summons), no issue has been taken in these proceedings as to its application. I therefore intend to consider whether the sub-section applies to the applicant's circumstances. I also note in this regard that in any event the Court would not be precluded from a consideration of the circumstances in the light of general principles of mitigation: English v Aradlay Insurance Brokers at [38]. 133 The respondents contend that after the applicant left the employ of the second respondent, he took no steps to mitigate his loss. Reliance is placed upon a decision of the Full Court of the Supreme Court in Harding v Harding (1928) 29 SR (NSW) 96 to suggest that because the applicant here has failed to mitigate his loss he should not be entitled to any monetary orders consequent upon findings of unfairness. 134 In the decision, Campbell J found that the plaintiff, instead of pursuing comparable employment with another employer had attempted to establish his own business, apparently without success. The decision makes it plain that there was otherwise no impediment which prevented the plaintiff from seeking gainful employment. At 105-106, Campbell J observed:

I recognise that generally the onus is on the defendant to show that the dismissed servant might have obtained equivalent or at least suitable employment within the period of notice, but where the dismissed servant himself proves that he sat by for the full period of the omitted notice, and occupied himself unremuneratively on some concern of his own, without making any enquiry or effort about other employment, and the evidence supplies no reason for thinking that such employment could not be obtained, or that it would be even difficult to obtain, and the jury, after proper direction, then gives full wages for the full period of the required notice, I think the verdict would be open to the inference that the jury must either have misapprehended their duty or have acted on a wrong principle. 135 In contrast, the present applicant was restrained from pursuing employment or other work in competition with the respondents for a period of 12 months after he was made redundant. It is no satisfactory answer to this burden upon the applicant's capacity to seek competitive and comparable employment elsewhere, to assert that the applicant could have, at any time, sought to have the restraint clause declared invalid by making appropriate application to the Supreme Court. In my opinion, the sub-section applies in a context where an applicant's endeavours to seek comparable employment following termination are not fettered by a restraint clause imposed by a previous employer which operates to prevent or severely inhibit the applicant from mitigating his loss. 136 The available evidence suggests that the applicant actively pursued his own business interests in the field of property development, during the period in which the restraint clause operated. He earned $1,550. Given this very modest amount, I disregard the amount in the exercise of my discretion to make any money orders: see English v Aradlay Insurance Brokers at [36]. Orders sought

137 In my opinion, the applicant is entitled to orders under s 106(5) in his favour in relation to the following items:

(i) a monetary amount equivalent to a bonus payment to the applicant for the first 2.5 months immediately following his termination of employment, that is, from 17 October 2001 until 31 December 2001;

(ii) a monetary amount equivalent to a bonus payment to the applicant for the period 1 January 2001 until 16 October 2001;

(iii) a monetary amount equivalent to the current market value of the 2,662 shares granted under the PB-S plan to the applicant in lieu of partial bonus which were forfeited as a result of his termination of employment on 16 October 2001;

(iv) a monetary amount equivalent to 9% of the applicant's salary immediately prior to his termination of employment as required by the federal Superannuation Guarantee legislation payable for the notice period of six months commencing from 17 October 2001 until 16 March 2002; 138 Interest should also be payable on these amounts from the date of the application, that is, from 26 November 2001 until the date of judgment: Abboud v NSW (Department of School Education) (No. 2) (2000) 99 IR 299. 139 In relation to the first two items, the amount of likely bonus payable should be calculated by reference to the applicant's target bonus for the calendar year 2001, namely, $125,000, as well as by reference to what other international directors in the same period received by way of actual bonuses. The documentary evidence in this regard shows that those international directors who were eligible to receive actual bonuses for 2001 were all eligible for amounts less than their target bonuses. This accords with the evidence of Stephen William Conry, an international director employed by the second respondent. According to Mr Conry, he attended a bonus presentation in about April 2002 during which he was advised that due to the performance of the business, bonuses for the 2001 calendar year would be significantly lower than that which was budgeted for. The amount payable to the applicant by way of likely bonus for 2001 should reflect this. The amount to the applicant should also take into account whether the value of any shares allocated under the PB-S plan for 2001 has been included as a percentage component of the gross bonus entitlement payable. If so, the value of those shares assessed at the current market value should be included in the gross amount in order to arrive at a final figure. Respondents' liability to pay monetary amounts

140 It remains to consider the liability of the respondent's against whom the applicant is proceeding, either jointly or severally, for monies payable to the applicant consequent upon the findings of unfairness which I have made. 141 The parties made no submissions on this issue. In my opinion, both respondents should be held jointly and severally liable to pay the monetary amounts ordered to be paid under s 106(5). The second respondent was the applicant's employer throughout the period of his employment with the JLL group. The first respondent was the principal operating company in Australia for the group. By virtue of their respective statuses within the corporate group, a sufficient foundation exists for the requirement under s 106(5) that a monetary order contemplated against a part must be "in connection with" a contract or arrangement etc to be voided or varied. The first respondent, as the principal operating company, although a non-party to the contract, also arguably stood to benefit, or, benefited, either directly or indirectly, from the receipt of monies from the applicant to which the applicant was otherwise entitled, had fair and reasonable payments been made to him following his termination of employment: see Brown & Ors v Rezitis & Ors (1970) 127 CLR 159 at 164-166 per Barwick CJ and at 170 per Menzies J. Orders

142 I make the following orders consequent upon the findings of unfairness which I have made:

The contract of employment between the applicant and the second respondent is varied from its inception to include a term that the respondents will make a payment in lieu to the applicant equivalent to all amounts which the applicant would have earned had he worked out his six months notice period including:

(i) base fixed remuneration (including any salary sacrifice benefits provided to the applicant);

(ii) likely bonus (including guaranteed bonus) for the period 17 October 2001 until 31 December 2001; and,

(iii) employer superannuation contributions at 9% of the applicant's base salary immediately prior to his termination of employment.

The contract of employment between the applicant and the second respondent is further varied from its inception to include a term that, on termination, for any reason other than serious misconduct, the respondents will pay the applicant for any pro rata bonus for the year 2001 up to the date of termination, calculated by reference to the likely bonus which the applicant would have earned for the calendar year 2001.

The contract of employment between the applicant and the second respondent is further varied to include a term that on termination, for reason of redundancy, the respondents will pay the applicant the current market value of 2,622 shares granted in lieu of partial bonus for the calendar years 1999 and 2000.

The respondents are to pay the applicant the sum equivalent to:

(i) likely bonus (including guaranteed bonus) for the period 17 October 2001 until 31 December 2001;

(ii) employment superannuation contributions for six months commencing from 17 October 2001 until 16 April 2002 at 9% of the applicant's base salary immediately prior to his termination;

(iii) likely pro rata bonus from 1 January 2001 until 16 October 2001 calculated by reference to the likely bonus the applicant would have earned for the calendar year 2001;

(iv) the current market value of 2,622 shares granted in lieu of partial bonus for the calendar years 1999 and 2000.

The respondents are to pay interest on the amounts specified in Order 4 above in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. The interest shall be payable from the date of the filing of the summons for relief on 26 November 2001 until the date of this judgment.

The respondents shall pay the applicant's costs of the proceedings in an amount as agreed or assessed.

In the absence of any agreement as to the amounts ordered to be paid in accordance with 4, 5 and 6 above, the parties have liberty to approach. That liberty should be exercised within 28 days. ___________________

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