James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland

James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland - [2015] NSWSC 243 - NSWSC 2014 case summary — Zoe

[4]

Judgment

HIS HONOUR: The plaintiffs, Mr Angus James and Mr Colin McKeith, worked for ABN AMRO Australia Holdings Limited (AAAH) up until 2008. They held very senior positions. Mr James was the chief executive officer, and a director of the company. Mr McKeith was the head of global markets, and also a director.
Following the world-wide takeover of the ABN AMRO Group (AA Group) by a consortium (I set out the membership of the consortium at [9] below), the operations of AAAH were merged with the Australian operations of one of the consortium's members, Royal Bank of Scotland plc (RBS).
As a result of that merger, the employment of Messrs James and McKeith finished. In the euphemistic language used to describe such events, they were made, or their positions became, redundant.
Mr James and Mr McKeith say that, upon redundancy, they should have been paid substantial amounts of money in accordance with the redundancy policy of AAAH. Mr James claims almost $3 million for severance pay and an "ex gratia" payment on account of bonus. Mr McKeith seeks in total almost $4.4 million under the same headings.
In addition, Mr James claims that he had a right under policies announced by the consortium, to be considered as head of the merged Australian operations of AAAH and RBS. That right is said to arise from a promise of "a fair appointment process based on merit and competencies", to be applied regardless of whether the candidate was a former AAAH employee or a former RBS employee. Mr James claims that the appointment process did not meet the description that I have given. He claims almost $11.4 million in lost remuneration.
The claims are put in various ways. Messrs James and McKeith say: 1. that the redundancy policy was part of their respective contracts of employment (although the ways in which, it is said, the policy became incorporated into their respective contracts is different); 2. alternatively, that the relevant entities are estopped (on various bases) from denying that the redundancy policy formed part of their contracts of employment; 3. in Mr James' case, that there was a contract between him and the relevant RBS entities guaranteeing him a fair appointment process based on merit and competencies; and 4. alternatively, in Mr James' case, that the relevant RBS entities are estopped from denying that he was entitled to such an appointment process.
That very broad outline of the disputes has given rise to a number of detailed agreed issues. To enable those issues to be understood, it is desirable, before setting them out, to state some, essentially non-contentious, matters of background.

[5]

The factual background

AAAH was a member of the AA Group: a banking group based in the Netherlands. The parent company was ABN AMRO Holdings NV (AANV). Messrs James and McKeith were employed not by AAAH but by a related entity (another subsidiary of AANV) known as ABN AMRO Services Australia Limited (AAAS). It is however common ground that, under their respective contracts of employment, Messrs James and McKeith were required to devote their energies towards the performance of their duties in their respective positions as AAAH's chief executive officer and head of global markets.
In early 2007, RBS formed a consortium with Fortis NV and Fortis SA (together, Fortis) and Banco Santander Central Hispano SA (Santander). The consortium members incorporated a bidding vehicle known as RFS Holdings BV (RFS). RFS made an offer to acquire the entire issued and outstanding capital of AANV.
There was a rival offer, made by Barclays plc.
The consortium's offer was successful. The offer became unconditional on 10 October 2007.
The consortium's members had agreed that if their offer were successful, the various business units of AANV would be divided between them. As part of that agreement, RBS took over AANV's "Business Unit Asia". AAAH was a part of that business unit.
RBS had opened a branch office in Australia in 1999. That branch operated as "RBS Australia". It was so operating when the takeover became unconditional.
When RBS acquired (among other assets) the Business Unit Asia, it gave consideration to whether AAAH should be broken up (with parts of it sold and parts retained), or merged with the Australian operations of RBS. For a while, RBS pursued the former alternative. However, in the absence of any acceptable offer to acquire the business of AAAH (or those parts of it that RBS sought to divest), RBS pursued the alternative: amalgamating the two Australian operations.
RBS' attempts to deal with AAAH were complicated because AANV did not own all the issued share capital in AAAH. It held (directly or indirectly) some 76% of the issued shares. The remaining 34% were held by trustees, AA Employee Plans Pty Limited (AAEP) and AANZ Employee Plans Limited (together "the trustees"). The trustees held shares in AAAH on trust for employees for AAAH or its counterpart in New Zealand who had participated in an "Employee Incentive Plan" (EIP). However, ultimately, RBS decided to deal with AAAH, it was necessary for it, in doing so, to buy out the shares held by the trustees.
It was not technically difficult to buy out the shares. AANV had held a call option pursuant to which it could acquire the shares at any time, with the price to be determined by an agreed formula. In consequence of the takeover, RBS effectively acquired the benefit of that call option. The formula for determination of the price involved, as a very significant integer, a component known as "WEV". WEV in turn reflected "Return on Equity" (ROE) above a relatively modest threshold of 8.5% per annum. In 2006 and, in particular, 2007, AAAH had achieved very high profits and correspondingly high ROE. As a result, if RBS exercised the call option, it would have to pay a very high price for the EIP shares.
At all material times, AAAS had a redundancy policy in place. That policy was described as a "closed" policy. Although the existence of the policy was no doubt known to employees of AAAS, the terms of the policy were not. They were not available on the AA intranet. Ms Amelia McArdle, who was at the time employed by AAAS as deputy head of human resources, said that if an employee had asked her about the detail of the redundancy policy, she would not have disclosed it.
I shall return to the detail of the redundancy policy. It is sufficient to note, for present purposes, that on redundancy, any payment to be made: 1. would include accrued contractual and statutory entitlements; 2. could include also a "severance" payment, based on number of years of service, but capped in a way that is of no present moment (there was also a dispute as to whether the severance payment was an entitlement or a discretionary matter); and 3. might also include, on an "ex gratia" basis, a discretionary amount in respect of bonus entitlements that might become payable for the calendar year in which redundancy occurred.
The plaintiffs said that the ex gratia payment reflected a common practice in the investment banking world. They submitted that employees were often rewarded for their services not only by fixed remuneration, but also, at the discretion of the employer and depending on the financial performance of the business and their contribution to it, by bonus payments. If an employee became redundant relatively late in the calendar year (AAAH paid bonuses on a calendar yearly basis, often with deferred elements), it might be thought unjust that, as a result, he or she would lose what might otherwise have been a substantial bonus. Having said that, there were, as Mr Sheahan of Queen's Counsel (who appeared with Mr Saunders of Counsel for the defendants) submitted, other objectives also promoted by the payment of bonuses.
The existence of rival bids for AANV raised, as an issue that required consideration, the fate of the employees of the AA Group in the event that either bid succeeded. I think it was seen to be likely that one or the other of them would. As a result, the consortium gave consideration to making known to employees of the AA Group the way that, if successful, its members would deal with their future employment.
If the consortium succeeded in its bid, it was obvious that there would be job losses when the various business units, having been divided among the consortium's members, were either sold off or merged with the operations of the acquirer. From the consortium's perspective, it was desirable that there be no mass exodus of employees during the takeover process and its implementation. AA Group made announcements relating to both future employment possibilities and redundancy. It also developed a "Communication Pack" for Australia and New Zealand, to be issued (as it was issued) upon the bid's becoming unconditional. In relation to continuing employment, the Communication Pack stated: Employment Conditions Q: What do we know about the consortium's approach to employees? A: We have been positively impressed by the commitment of the consortium to the key part employees play in creating and sustaining a successful business. They are keenly aware of the need to be seen and deliver on that promise if they are to win the trust and respect of the ABN AMRO employees. The consortium has communicated a number of 'people principles' which they will apply to integration: • It is the bank's firm intention that job losses will be managed through voluntary measures, including natural turnover, redeployment and voluntary redundancy. • There will be no forced dismissals in the Netherlands. Departure through the Social Plan is not considered to be a forced dismissal. • RBS will not take initiatives of any significance in terms of the off-shoring of activities as a result of this transaction. • Existing Social Plans and Collective Labour Agreements will be honoured. • The bank commits to continue working constructively with works councils, trade unions and other representative bodies. • It is the bank's firm intention to actively retain individuals in key roles across the transaction, to ensure business continuity. • Retention of the best talent will be done through a fair appointment process based on merit and competencies, and in compliance with legal obligations.
In relation to redundancy, the Communication Pack stated: Q: Will there be redundancies? How many, where and when can we expect the first cuts? A: We anticipate there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the consortium has guaranteed to all staff that all existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made it clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the redundancy policy and practice from the consortium. To find out more about your local ABN AMRO policies please contact your local HR representative. Additionally, the consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly.
There is no doubt that these announcements were made to the staff of AAAH, and that managers (both line managers and Human Resources - HR - managers) were encouraged to discuss with staff, to the extent necessary, the matters stated. That appears from some "internal communication guidelines" within the Communication Pack itself: Internal communication guidelines Avoid written communication: The legal constraints on what can and cannot be said are onerous and anything written must be signed off by Group Communication and Group Legal. Until otherwise advised, stick to verbal communication based on the information contained within this pack. Place emphasis on listening and discussion: With no new news to share your emphasis should be on creating a forum for people to discuss the information and raise their questions. Allowing people to voice their immediate concerns will help then digest the details and also move through the process. Resist the urge to speculate: Stick to the key messages and information outlined within this pack. If you don't have the information or answer to a question it's OK to say "I don't know" and will get back to your team. Escalate key issues and questions: FAQs will be updated regularly on the Transition site but for them to be meaningful we need to know which questions are being asked by your teams. This information will also help inform tailored and targeted communication activities. Please email the Communications Team with any feedback. Be mindful of your actions: People will be looking to you for cues as how to react and behave. Pay special attention to what you do and say, informally as well as formally as people will read much more into your behaviour than usual.
Although the Communication Pack stated AA Group's understanding of the consortium's "guarantee" in relation to existing redundancy policies and practices, it does not appear that, at least initially, the AAAS redundancy policy changed from being a closed policy to one that was made available on the intranet, or otherwise accessible to employees. On the contrary, it was not for another year or more that the policy was made available on the intranet. When it was, all references to ex gratia payments (on account of bonus) had been removed.

[6]

The real issues in dispute

I set out the parties' joint statement of the real issues: Joint Statement of Real Issues for Determination Redundancy Policy issues 1 Were the terms of AAAH's redundancy policy expressly incorporated into Mr James' contract of employment? 2 Were the terms of AAAH's redundancy policy incorporated into the plaintiffs' contracts of employment by the course of dealing referred to in paragraph 22 of the Commercial List Statements? 3 Were relations between each of the plaintiffs and ABN AMRO Services conducted from at least September 2007 on the basis of a mutual understanding, encouraged by the making of the representations pleaded in paragraph 17 of the Commercial List Statements that, if they were retrenched during the period of two years after 10 October 2007, they would be treated in accordance with the redundancy procedures, plans, policies and practices of ABN AMRO Services, as those procedures, plans, policies and practices existed on 10 October 2007. If so, is ABN AMRO Services now estopped from departing from the premise that, if the plaintiffs were retrenched during a period of 2 years from 10 October 2007, they would be treated in that way? 4 Was ABN AMRO Services required by the terms of the redundancy policy to act fairly and equitably in its treatment of employees being retrenched? 5 Did ABN AMRO Services act fairly and equitably in its treatment of the plaintiffs in relation to their retrenchment? 6 Was ABN AMRO Services required by the terms of the redundancy policy to make a severance payment to employees being retrenched? 7 Was ABN AMRO Services required by the terms of the redundancy policy to give consideration, in good faith, to the making to an employee being retrenched of a severance payment or an ex gratia payment up to a pro rata amount of the average of that employee's prior two years bonuses? 8 Did ABN AMRO give consideration, in good faith, to the making to Mr McKeith pursuant to the redundancy policy of an ex gratia payment up to a pro rata amount of the average of his prior two years bonuses? 9 Did the redundancy policy permit ABN AMRO Services to require, as a condition of the making of a severance or ex gratia payment, that Mr James execute a deed of release? If so, was the release required of Mr James in September 2008 a release falling within the terms of the policy? 10 Did the redundancy policy permit ABN AMRO Services to require that, as a condition of the making of a severance payment, that Mr McKeith execute a deed of release? If so, was the release required of Mr McKeith in December 2008 a release falling within the terms of the policy? 11 Did ABN AMRO Services apply to the plaintiffs the redundancy procedures, plans, policies and practices of ABN AMRO Services as they existed on 10 October 2007? In particular, did ABN AMRO Services have a policy, practice, plan or procedure as at 10 October 2007 of: (a) Making severance payments to Director or Executive Director level employees being retrenched in accordance with the formula in the redundancy policy? (b) Giving individual consideration in good faith to the making to such employees of an ex gratia payment based on a pro rata amount of the average of that employee's prior two years bonuses? (c) Making ex gratia payments to such employees, based on a pro rata amount of the average of that employee's prior two years bonuses? 12 Were representations made to Mr McKeith in relation to the redundancy procedures, plans, policies, practices and payments which would apply to him as an employee of ABN AMRO Services if he was retrenched in late 2008 or early 2009? If so, did Mr McKeith rely on any such representations to his detriment and is ABN AMRO Services estopped from departing from the premise that, if Mr McKeith were retrenched he would be treated in a manner consistent with those representations? 13 Was a promise made to the plaintiffs by RBS and RFS that they would ensure that, if the plaintiffs' employment was terminated by reason of redundancy within two years of 10 October 2007, they would have applied to them the redundancy procedures, plans, policies and practices of ABN AMRO Services as those procedures, plans, policies and practices existed as at 10 October 2007? 14 Was that promise supported by any consideration by the plaintiffs? 15 Did RBS or RFS fail to ensure that the plaintiffs had applied to them the redundancy procedures, plans, policies and practices of ABN AMRO Services as those procedures, plans, policies and practices existed as at 10 October 2007? 16 What loss or damage was suffered by the plaintiffs? Appointment promise issues 17 Was a promise made to Mr James by RBS and RFS that they would ensure that he would be considered for positions in the new organisation created by the merger by a fair appointment process based on merit and competencies? 18 Was that promise supported by any consideration by Mr James? 19 Did Mr James rely on that promise to his detriment and are RBS or RFS now estopped from departing from that premise? 20 Was Mr James considered for the position of Chief Executive Officer of the organisation created by the merger of RBS Australia and AAAH by a fair appointment process based on merit and competencies? 21 Did Mr James suffer any loss or damage as a result of any failure of RBS and RFS to ensure that he was considered for the position of Chief Executive Officer of the organisation created by the merger of RBS Australia and AAAH by a fair appointment process based on merit and competencies? 22 If so, what is the quantum of that loss or damage?
It will be noted that some of the issues referred to "pleadings" in the respective commercial list statements. To the extent that it is necessary to do so, I will set out or summarise those quasi-pleadings when discussing the particular issues.

[8]

The redundancy policy

I set out the terms of the redundancy policy, as it applied in 2007 and up until Mr James was "made redundant": REDUNDANCY POLICY This policy will take effect on and from July 2001 and provides principles and guidelines to follow in the event that an individual or group of staff is made redundant. Guiding Principles In all cases where redundancy arises, staff will be treated fairly, equitably and consistent with the organisations values. ABN AMRO will consider alternative measures before making a staff member redundant. ABN AMRO will provide support, either through outplacement counselling or by providing access to the Employee Assistance Program where appropriate. The HR Department is responsible for the administration of all redundancies. Circumstances when this Policy Applies Staff members may be made redundant in the following circumstances: • Staff reduction due to technological change or restructure of work that is materially different to the current role. • Closure or relocation of a business unit where the work is no longer required to be performed. • Internal firm reorganisation or restructure resulting in closure of the staff member's workplace and a diminishing need for the staff to do the available work. Circumstances when this Policy will Not Apply A redundancy will not arise in circumstances where a transfer of employment takes place (the employer changes but the work and the terms of employment remain materially the same). Redundancy will not be used to manage poor performers out of the organisation. Process & Procedures In any of the circumstances identified above, the line manager and the Business Unit Head will consult with the relevant HR Adviser to identify those staff that may be eligible for redundancy. The first step will be to establish whether redeployment is possible. Redeployment will be offered when there is a match between the skills of an individual and those required of a vacant role. Where the role is in another business unit, the relevant business unit head will be consulted and the transfer will only take place if all parties agree. Where redeployment is not possible, the Payroll Manager will prepare a redundancy schedule. The HR Adviser will work with members of the HR team to prepare a redundancy schedule based on the terms of this policy, taking into account length of service. The schedule is discussed and agreed with the line manager and the business unit head. In cases where outplacement or any other special provisions are to be included, there will be set out in an attached letter. The HR Adviser will prepare the Deed of Release. The HR Adviser will notify IT to ensure that the staff member's access to Notes and other systems is terminated within the required timeframe and notices circulated. The time and date for announcement to the staff member is set and the line manager/business unit head will be present when the HR Adviser. At the meeting, the staff member will be provided with advice on the terms of the redundancy, final payment and tax liability as per the schedule and the Deed of Release. The Deed of Release should be signed and returned to HR before the final payment is made. The staff member will also return all company property (security pass, laptop, phone, pager, IT fob and Amex card). All items will be checked off against issued property and the checklist will be completed and placed on file. Where the staff member has a staff housing loan, the interest rate on the loan will immediately be adjusted to reflect the FBT benchmark rate and a grace period of three months will be available to arrange re-financing of the loan. Where a staff member has a vehicle/s packaged through a novated or associated lease or other package items such as parking or vehicle running expenses deducted from salary, all accounts will be settled as at the effective termination date. The staff member will be responsible for organising to have the novation agreement change with the lease finance provider. The HRA will check with the Remuneration team to establish if the employee is a member of the share scheme. If so, the shares will vest immediately on termination and the price will be established by taking an average over the 5 trading days immediately prior to termination date. The Remuneration team will assist with calculations and the payment will not form part of the ETP but be paid gross. At the time of exit, costs of packaged items owing will be determined, any pre-paid or allocated costs will be adjusted and any outstanding liabilities including FBT will be settled from the termination payment. The HR Adviser will also arrange for an exit interview to take place either immediately following the announcement to the staff member or at a suitable time that can be agreed. A copy of the final documentation will be provided to the Payroll Manager to prepare the final payment and to terminate the employee on the WorkForce system. Information will also be placed on the staff member's file prior to it being placed in the inactive employee section. Calculating Redundancy Terms Redundancy terms will be calculated based on the table below to determine notice and severance periods. Important points to note are: • Redundancy terms will be calculated on the package value inclusive of all superannuation but exclusive of any bonus earned in the prior year • The notice period will generally be 4 weeks unless otherwise stipulated in the contract of employment • An additional week will be added to the notice period for staff aged over 45 • Severance will be pro-rated based on part years completed, 1 additional week for each quarter worked • Part time staff will have severance calculated based on % of EFT • The redundancy payment will generally be capped at 52 weeks with the provision to increase to 78 weeks maximum for staff at Director or above or where the staff member is over 55 years of age. Extension of the cap above 52 weeks will be at the discretion of the business unit head and the HR Director. • Accrued annual leave will be included in the calculation and long service leave will be included only where the staff member has 5 or more years of continuous service. Accrued sick leave is not included in the calculation. Component Calculation Values Salary ● Salary will be calculated from the last pay date to the termination date Notice Period ● Four (4) weeks unless otherwise stipulated in employment contract ● Additional week if employee over 45 years of age ● Four (4) weeks for the first full or part year and four (4) weeks for each completed year of service thereafter Severance ● For employees with service less than two (2) years, severance will be a minimum of eight (8) weeks ● One (1) week for each quarter in a part completed year of service ● Accrued annual leave will be calculated and paid to the termination date Leave ● Long service leave will be paid where the employee has more than five (5) years of completed service ● Accrued sick leave is not paid ● Payments will be capped at fifty two (52) weeks Redundancy Cap ● May be extended to seventy eight (78) weeks if Director or above and/or over 55 years of age with sign off by business unit head and Director HR ● May be extended to seventy eight (78) weeks if Director or above and/or over 55 years of age with sign off by business unit head and Director HR Outplacement Support ● Outplacement support will be determined in consultation with the business unit manager and will depend on level and years of service ● Depending on circumstances, ex-gratia payments may be included in the calculation to a maximum based on the following formula: Ex-gratia Payments (average of prior 2 years bonus) ● Number of months worked in current year

[10]

Terms of Mr James' employment contract

Mr James was employed pursuant to an express written agreement, constituted by a letter of offer dated and expressed to be effective from 1 January 2007, and presumably accepted by him on or about that date. Mr James had in fact been employed since May 1997 and, as the offer made clear, what was negotiated in January 2007 was a "revised contract".
The contract contains the following relevant provisions: Remuneration Your total remuneration for this position will be $500,000 per annum gross, paid monthly. Your total remuneration includes your salary, the minimum contribution required under the Superannuation Guarantee Act and Fringe Benefits Tax. Salary levels are reviewed on a regular basis at the discretion of ABN AMRO and any change may take into account factors including cost of living increases and individual performance levels. ABN AMRO conducts performance reviews with all staff and, as a condition of your employment, you are required to participate. In addition, you are eligible to participate in ABN AMRO's discretionary bonus scheme. All bonus payments are subject to being in our employment and not working out a period of notice at the time payment is due. They are not regarded as being part of your total remuneration. Any bonus payment will also be subject to statutory deductions and may be delivered subject to the thresholds and rules of any incentive or deferred award programme(s) being operated by ABN AMRO as amended or substituted from time to time. Your total remuneration and any bonus payments are for all of your working hours, including hours worked in excess of your ordinary hours of work. Please note that all information regarding your total remuneration and any bonus payments is confidential. … Termination Either party may terminate the employment by the giving of twelve weeks notice in writing to the other party. ABN AMRO may elect to make a payment in lieu of such notice equal to your total remuneration for the balance of your notice period. However, in the case of misconduct, your employment may be terminated by ABN AMRO without notice or payment in lieu of notice. On termination, you will be required to return all items of property belonging to ABN AMRO which are in your possession before your final payment will be processed. ABN AMRO Policies You agree to be bound by the policies of ABN AMRO as may exist from time to time. You acknowledge and accept that it is the prerogative of ABN AMRO to vary, change or terminate existing policies as well as to devise and introduce new policies. ABN AMRO Australia operates in a Smoke Free Environment and is an Equal Opportunity Employer. … If you consider any of these terms to be unfair or unreasonable, please feel free to discuss them with us before signing this letter. Otherwise, please sign and date the attached copy of this letter and return the signed copy to us within seven days as evidence that you accept these terms and conditions. If you have any questions or would like any further information please do not hesitate to contact us to discuss the details.

[11]

The parties' submissions

Mr West of Queen's Counsel, who appeared with Mr Steele of Senior Counsel for the plaintiffs, submitted that, by reason of the letter's provisions dealing with "the policies of ABN AMRO" (AA Policies), Mr James' contract of employment incorporated, as having contractual effect, those policies as they existed from time to time. Those policies included, Mr West submitted, the redundancy policy.
It was clear Mr West submitted, that the letter of offer was intended to be a serious document, the acceptance of which would involve legal consequences. The first proposition may be accepted.
Mr West submitted, further, that by agreeing to be bound by AA Policies from time to time, Mr James both undertook an obligation to comply with whatever in fact those policies might be from time to time, and signified that he had accepted an offer from AAAS that it also, as employer, would be bound by AA Policies from time to time. Mr West relied on what the High Court of Australia (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) had said in Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 at [40] (I omit citations): This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.
Mr Sheahan relied on the fact that the redundancy policy was a closed policy, not available to employees as of course (as other policies were). He relied, further, on the facts that: the policy was not provided to Mr James when the offer of employment was made; Mr James was not required to read it; and Mr James was not required to acknowledge it individually. Mr Sheahan submitted that those facts spoke against ascribing contractual effect to the redundancy policy.
Further, Mr Sheahan submitted, the contract of employment contained no promise by AAAS to be bound by any AA Policies from time to time. (I should say that it is not in dispute that the redundancy policy fell within the class of "the policies of ABN AMRO" for the purposes of the contract of employment.)

[12]

Decision

In my view, the redundancy policy did have contractual effect as between Mr James and AAAS. It acquired that contractual effect because, as was submitted for Mr James, it was incorporated into the contract of employment between them.
I accept, as Mr Sheahan submitted, that there are indicia to the contrary: 1. the policy was a closed policy, not made available to employees; at most, they would be told of its existence and that it applied to them; they would not be told "the mechanics or the components of that" (see Ms McArdle at T185.33-34); 2. the policy stated that it "provides principles and guidelines to follow in the event that an individual or group staff is made redundant"; and 3. the policy contained an aspirational statement as to the way in that employees would be treated on redundancy: not something necessarily to be found in a document intended to have contractual effect.
However, clearly enough, one of the objectives sought to be achieved by AAAS in its contract with Mr James was the imposition on Mr James of an obligation to obey AA Policies as they existed from time to time. Looking at the matter objectively, it is difficult to conclude that the parties would have intended that one of them - the employee, Mr James - would be bound by his employer's policies from time to time, but that the other - the employer - would not be bound.
To my mind, the undertaking by the employee to be bound by the employer's policies as they exist from time to time makes sense only if, implicitly at least, the employer also undertakes to be bound by, or to observe, the terms of those policies. As a matter of common sense, such policies might impose obligations on either or both of the employer and the employee. Thus, they might be for the benefit of either or both of those parties.
The language of the relevant provision in the contract of employment is the language of contract: the employee agrees to be bound by the relevant policies. That language suggests that the employee is agreeing to be bound by policies as if, or because, they form part of the contract of employment. On that basis, the policies would also, and equally, bind the employer. That follows, at least as to the redundancy policy, because it sets out things to be done by each of them. The obligations are not merely unilateral.
I accept, as Mr Sheahan submitted, that the prefatory words of the redundancy policy suggest that it was intended to operate as stating "principles and guidelines" to be followed in the event of redundancy. However, when one moves past those introductory and aspirational words to the detail of the policy, it does far more than that.
First, the policy states the circumstances in which it will, and will not, apply. Where it is said to apply, the "process and procedures" to be followed are set out in terms of obligation. There is no suggestion that either employer or employee is at liberty to ignore them.
Next, the policy obliges "the Payroll Manager" to prepare "a redundancy schedule". It is however clear that this is something to be done by "[t]he HR Adviser". That duty is imposed on the HR Adviser as a matter of obligation: he or she "will work with" others to prepare the schedule "based on the terms of this policy…". Perhaps the Payroll Manager was one of those with whom the HR Adviser would work to prepare that schedule.
Other applicable matters "will be set out in an attached letter". The HR Adviser "will prepare the Deed of Release". The language of obligation is repeated thereafter, throughout the succeeding steps contemplated by the policy.
Further, the policy sets out in terms of obligation the way in which redundancy terms are to be calculated: they "will be calculated based on the table below…". Further, they "will be calculated on the package value… but exclusive of any bonus…".
Thus, I do not accept Mr Sheahan's submission, that the function of the policy was only to bind Mr James to the obligations on employees set out in it (for example, to return all company property). The terms in which those "obligations" (as Mr Sheahan described them) are expressed are the same terms used to spell out what it is the employer should do: just as the employee "will" do the various things specified for employees to do, so, too, the employer "will" follow through various steps said to be incumbent on the employer to perform.
Mr Sheahan submitted that the redundancy policy did not confer a benefit of a kind ordinarily found in employment contracts. I do not know if that submission was based on some a priori assumption as to what employment contracts generally, or invariably, provide. There was no evidence of any common form of contract of employment, either in the world of investment banking or more generally.
However, what can be said about the redundancy policy is that it deals, among other things, with the discharge of obligations that in my understanding generally are to be found in employment contracts: the payment of salary up to the date of termination; the payment of salary on account of notice; and payments on account of accrued annual leave and (in some circumstances) long service leave entitlements.
It may be - I do not know - that severance payments and payments on account of bonus expectations are not found in employment contracts generally. As I have said, there is no evidence on the point. But I am not prepared to assume that such provisions are not to be found, either generally or at least from time to time, in the contracts of people employed to work in the business of investment banking. Nor am I prepared to assume that they are not to be found, either ordinarily or from time to time, in the employment contracts of those employed at a very senior level in large commercial enterprises. To the extent that one may take notice, judicial or otherwise, of what appears in the press, a contrary impression might be gained; but I put no reliance on this observation.
A case discussed in submissions was the decision of the Full Court of the Federal Court of Australia in Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193. The respondent employee in that case had worked in the same business, although for different employers, for many years. The changes of employer occurred because the business in which the employee worked had been sold from time to time, and because of corporate reorganisations.
After the last relevant change of employer, and after the employee had been working for the new employer for some five months, the employer wrote to the employee offering him a position as "Senior Technician with our company at our Melbourne Plant". The letter had not been the result of any negotiation. Its purpose was to formalise the employment relationship then in place.
The employee accepted the letter by signing a copy, underneath a statement whereby he agreed and accepted employment with the employer on the terms and conditions outlined in the letter. One of those terms or conditions was that the employee agreed "to abide by all company policies and practices currently in place, any alterations made to them, and any new ones introduced".
The primary judge held that redundancy policies contained in a manual, which policies did not come into existence until after the letter was signed and returned, were incorporated into the contract of employment. The Full Court by majority (North and Mansfield JJ, Lindgren J dissenting) upheld the decision of the primary judge.
North J noted at [97] "that the major part of the manual was devoted to specifying items which made provision for the benefit of the employee". His Honour said at [98] that "[i]n the main the provisions are expressed in the language of obligation". I interpose to note that what his Honour regarded as "language of obligation" was very similar to the language in Mr James' contract. For example, in Riverwood, there was a provision: When an employee is called for jury duty, the company will make up the difference between the jury fee and the ordinary rate of pay for the hours or days lost.
Further, North J concluded at [101], [102], although there were aspects of the manual that imposed "minor administrative obligations on the employee", the principal concern of the manual at least was "laying down employees' entitlements".
North J (at [108]) considered that it followed, from the ordinary English meaning of the expression "abide by", that "the natural meaning of the term under consideration, viewed in the context in which the contract of employment was made, imposed upon [the employer] an obligation to make the redundancy payments in accordance with the provision in the manual".
North J was not concerned at the prospect that the employer could unilaterally and to the detriment of the employee vary the benefits provided under the manual. His Honour said at [111]: In any event, the purported agreement to abide by alterations or additions to the policies and practices of Riverwood did not create a legally binding obligation on Mr McCormick to accept any unilateral alteration or addition. A purported agreement which leaves the content of the agreement entirely at the discretion of one party is not contractual in nature. Any alteration or addition to the company policies and practices could only achieve binding contractual effect if there was separate agreement to such alterations or additions, either by way of variation of the existing agreement or by way of entering into a new agreement.
It would follow, I think, that his Honour's reasoning was to this effect: 1. the employee was entitled to receive, and the employers was bound to give, the benefit of policies from time to time applicable; 2. the employer could not use the power to make and vary policies as a means of altering unilaterally the terms of the contract of employment; and 3. any alteration to the terms of employment would require bilateral agreement.
Mansfield J at [146] referred to dictionary meanings of "abide by", including "to be bound by" or "to comply with"; or "to accept the consequences of"; or "to accept and continue to observe…".
Those meanings led his Honour to the view, at [147], that the expression "abide by" could "encompass the circumstance where there may be an existing or proposed bilateral or multipartite mutual obligation, which one person agrees to accept or adhere to".
At [150], Mansfield J expressed his agreement with the reasoning of the primary judge. The primary judge had concluded that the presumed (objective) intention of the parties, in relation to policies of the employer in the manual as they applied to the employee, was that the employee was contractually entitled to the benefit of those policies.
It may be accepted that the language of the contract under consideration in Riverwood is not the same as the language under consideration in Mr James' case. However, as Mansfield J indicated at [146], there is an overlapping of meaning between the expressions "to abide by" and "to be bound by". That overlapping meaning is that the person who agrees to abide, or to be bound by, certain policies agrees to accept them and to perform them in so far as they fall on him or her to be performed.
I accept that the Court's task, in construing a contract, is to decide what, objectively, the parties intended, as it appears from, among other things, the language that they employed. It seems to me to follow that although dictionary definitions cannot be decisive of the outcome, nonetheless the ordinary English meaning of words may provide some guidance to ascertaining that presumed objective intention.
One of the dictionary meanings of "bind" is "to subject to a specific legal obligation" (Oxford English Dictionary online). Translating that into the passive mode, one could say "to be subject to a specific legal obligation" or "to become subject to a specific legal obligation". Indeed, the same source says, of the expression "to be bound" that it signifies "to be under obligation, to have it as a duty, moral or legal, to do something".
However, the expression "to be bound" must be considered and construed in its context. That context is to be found in the letter of 1 January 2007. With more specificity, that context is the offer of (continued) employment set out in that letter.
The letter commences by referring "to recent discussions". It states the delight of its signatories "to confirm your current terms and conditions of employment with [AAAS]". However, the last paragraph of the letter indicates that Mr James was free to negotiate, in particular as to any terms that he considered "to be unfair and unreasonable". If he did not wish to do so - that is to say, if he accepted the terms offered - he was asked to "sign and date the attached copy of this letter and return the signed copy to us… as evidence that you accept these terms and conditions".
So viewed, it seems to me that the letter should be regarded as containing an offer by AAAS of the terms on which Mr James would continue to be employed in the position of chief executive officer (of AAAH). Those terms and conditions included: 1. terms and conditions that Mr James was obliged to perform; and 2. terms and conditions that AAAS was obliged to perform.
The letter dealt with the subject of "Termination", and with obligations on termination. However, it is clear from the redundancy policy (which both existed and was known to exist at the time the letter was proffered and accepted) that what was said as to "Termination" did not exhaust the topic. Specifically, it did not deal with the question of what might happen, over and above the limited provision set out, should Mr James become (or be made) redundant. AAAS knew this. So too, in my view, did Mr James.
I accept that at all times relevant to Mr James, the redundancy policy was a closed policy and not one to which, in the ordinary way at least, employees would gain access. It is nonetheless the fact, as to Mr James, that he knew of the existence of the policy. In general terms, he had some knowledge that in some circumstances the policy might provide for an employee made redundant to receive an ex gratia payment. His knowledge was derived from his role as a "line manager" who had discussed and agreed the redundancy schedule with the relevant "HR Adviser" in specific cases.
Thus, to the common knowledge of AAAS and Mr James as at 1 July 2007, what the contract of employment stated as to payments that might be made on termination of employment did not exhaust the universe of known (at least as to their existence) available possibilities.
Further, a significant purpose of the redundancy policy was to provide for benefits, of the various kinds described in it, to be paid to employees who were made redundant. There is obvious value to an employer in having a defined code to deal with its monetary obligations where an employee, through no fault of his or her own, is retrenched because his or her position has become redundant. There is, equally, an obvious advantage to the employee in that unhappy situation.
In those circumstances, the proposition that the employee might be bound to accept whatever the redundancy policy provided for him or her in the circumstance or redundancy, but that the employer was not bound to offer that provision, does not strike me as one which the Court should be quick to adopt. Particularly as to ex gratia payments, the employer's position is sufficiently protected because the making of such a payment is said expressly to be "[d]epending on circumstances".
Even if the policy be regarded as having contractual force, the making of such an order is clearly discretionary. To put it another way, on this analysis AAAS was not obliged to make a redundancy payment regardless of circumstances. It was however obliged to consider in good faith whether or not to do so.
The letter of 1 July 2007 was an offer of the terms on which AAAS would (continue to) employ Mr James. On that approach, the offered terms included its policies, or more accurately AA Policies, as they might exist from time to time. When Mr James accepted the offer, he was bound by its terms; and so was AAAS. More specifically, AAAS became bound to offer to Mr James the benefit of AA Policies from time to time, just as Mr James became bound to observe them.
The evidence does not make it crystal clear that the redundancy policy was a policy of AAAS. However, as I have said, the hearing proceeded on the basis (relevantly for present purposes) that it was an AA Policy: a policy of the kind referred to in the "policies" clause of the letter of offer. And again as I have said, the redundancy policy had been in force for about six years as at 1 January 2007.
I conclude that the redundancy policy, as it stood at the time when Mr James' employment was terminated, was incorporated into his contract of employment. In that character, it was binding alike on Mr James and AAAS.

[13]

Second issue: incorporation by a course of dealing

The issue as stated refers to para 22 of the Commercial List Statements to identify the course of dealing. However, that paragraph in each case does no more than incorporate other paragraphs: specifically, paragraphs 11 to 14 and 17 to 21.
To give content to issue 2, I set out paras 11 to 14 and 17 to 21 of Mr James' Commercial List Statement. Redundancy Policy incorporated into contract of Employment by course of dealing 11. From time to time during his employment, representations were made to Mr James to the effect that there was a redundancy policy which applied to employees of ABN AMRO Services whose employment was being terminated by reason of redundancy and which contained provision for severance payments to be made to such employees. Particulars The representations were made to Mr James by members of the Human Resources department of ABN AMRO Services from time to time in the course of dealing with the position of employees whose employment was being terminated by reason of redundancy. 12. The representations referred to in paragraph [11] were made by or on behalf of ABN AMRO Services. 13. From time to time during his employment, to the knowledge of Mr James, severance payments were made by ABN AMRO Services to employees whose employment was being terminated by reason of redundancy, pursuant to the terms of the redundancy policy. 14. On around 29 May 2007, Banco Santander S.A. (a company incorporated in Spain), Fortis N.V. (a company incorporated in the Netherlands), RFS and RBS (together, the Consortium) announced their intention to make an offer, acting through RFS, for the entire issued and outstanding capital of ABN AMRO Holdings, subject to certain conditions (the Consortium's bid). … 17. From around July 2007, representations were made to Mr James that there were redundancy procedures, plans, policies and practices which would apply to employees of ABN AMRO Services whose employment was terminated by reason of redundancy, on which those employees could rely. Particulars The representations were partly express and partly implied. To the extent that they were express, they were in writing and were made by: (a) the publication to employees of ABN AMRO Services, on around 30 July 2007, of a Press Release by ABN AMRO Holdings entitled "ABN AMRO - Offer Update" containing the words: "The Boards welcome the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to redundancy procedures"; (b) the publication on around 16 September 2007 of a Press Release by ABN AMRO Holdings entitled "ABN AMRO publishes shareholders' circular including reasoned opinion of the Boards" containing the words "The ABN AMRO Boards also noted that commitments made to employees and trade unions in respect of employee's rights and respecting of existing agreements including redundancy plans." and: "The ABN AMRO Boards welcomed the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to social plans, collective labour agreements and redundancy procedures"; (c) the publication on around 20 September 2007 of a copy of the presentation slides for a presentation by the Chairman of the Managing Board of ABN AMRO Holdings to an Extraordinary General Meeting of Shareholders which included the words (at slide 16), under the heading "Proposed Corporate Governance and impact on employment Consortium Offer" of the words: "global guarantee that all existing redundancy plans will be extended at least at same level for a period of two years after the merger becomes unconditional"; (d) the publication on around 8 October 2007 of a document entitled "AU_NZ Communication Pack Acquisition Announcement - Approved materials to be used when communicating with staff" containing the following question and answer: "Q: Will there be redundancies? How many, where and when can we expect the first cuts? A: We anticipate that there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the consortium has guaranteed to all staff that existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the redundancy policy and practice from the consortium. To find out more about your local ABN AMRO policies please contact your local HR representative. Additionally, the consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly." To the extent that the representations were implied, the implication arose from the publication of the aforementioned express written representations in the context of the facts pleaded in paragraphs [11] to [13], together with the absence of any reservation, qualification or caveat in relation to the applicability of those representations to employees of ABN AMRO Services. 18. The representations referred to in paragraph [17] were made by or on behalf of ABN AMRO Services. 19. Further and in the alternative, the representations referred to in paragraph [17] were made with the knowledge of ABN AMRO Services and without contradiction or qualification by it. 20. On around 3 September 2008, representations were made to Mr James that, in the event that his employment was terminated by reason of redundancy, he would be entitled to severance payments calculated in accordance with a redundancy policy of ABN AMRO Services that applied to him. Particulars (a) The representations were partly oral and partly written. (b) To the extent that the representations were oral they were made in a conversation between Mr James and Ms Amelia McArdle on behalf of ABN AMRO Services to the effect that Mr James would be entitled on termination of his employment by reason of redundancy to severance payments in accordance with a document entitled "Joe Bloggs, Final Payment To: 09-Sep-08 #1037", which payments had been calculated in accordance with normal practice in such cases. (c) To the extent that the representations were written, they were made by: the provision to Mr James by Ms McArdle of a copy of the aforesaid "Joe Bloggs" document; and the provision to Mr James by Mr John McCormick of a form of Deed of Release dated 2 September 2008 between Mr James and ABN AMRO Services, which deed provided for the making of severance payments to Mr James calculated in accordance with the "Joe Bloggs" document. 21. The representations referred to in paragraph [20] were made by or on behalf of ABN AMRO Services.
Mr McKeith's Commercial List Statement is to similar effect, although the particulars given of paras 11, 17 and 20 are different. I set out those particulars (omitting what appears to be a duplication of one matter): 11. … Particulars The representations comprised: (a) statements made orally to Mr McKeith by representatives of ABN AMRO Services from time to time in the course of dealing with the position of employees whose employment was being terminated by reason of redundancy; (b) the circulation among employees of ABN AMRO Services, including Mr McKeith, from around June 2007, in the context of the prospect of a pending takeover of the ABN AMRO group of companies, of copies of a document entitled "Redundancy Policy" which in its terms took effect on and from July 2001; and (c) a statement was made orally to Mr McKeith by Ms Kate Naughton, the Human Resources executive for the Global Markets business, in around June 2007, to the effect that the aforesaid document was the current policy of ABN AMRO Services which applied in the case of retrenchment of employees of ABN AMRO Services. … 17. … Particulars The representations were partly express and partly implied. To the extent that they were express, they comprised: (a) statements made orally from time to time by Mr Gary Page, the Global Head of Markets of ABN AMRO Holdings, during fortnightly telephone conference calls with the Global Markets Management Team, from around mid-2007, to the effect that under the Consortium bid, redundancy practices would stay in place for two years post the completion of the takeover and that the employees of ABN AMRO Services could be confident that the redundancy policies which were then in place would be honoured for the next two years; (b) a statement made orally to Mr McKeith by Mr Jeroen Drost, Asian Head of ABN AMRO Holdings, in around mid-2007 to the effect that RBS would be applying existing ABN AMRO redundancy practices for two years and would set aside a pool from which to pay out any redundancies; (c) the publication to employees of ABN AMRO Services, on around 30 July 2007, of a Press Release by ABN AMRO Holdings entitled "ABN AMRO - Offer Update" containing the words: "The Boards welcome the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to redundancy procedures"; … [Subpara (d) appears to be a duplication of subpara (c)] (e) the publication on around 16 September 2007 of a Press Release by ABN AMRO Holdings entitled "ABN AMRO publishes shareholders' circular including reasoned opinion of the Boards" containing the words: "The ABN AMRO Boards also noted that commitments made to employees and trade unions in respect of employee's rights and respecting of existing agreements including redundancy plans." and: "The ABN AMRO Boards welcomed the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to social plans, collective labour agreements and redundancy procedures"; (f) the publication on around 20 September 2007 of a copy of the presentation slides for a presentation by the Chairman of the Managing Board of ABN AMRO Holdings to an Extraordinary General Meeting of Shareholders which included the words (at slide 16), under the heading "Proposed Corporate Governance and impact on employment Consortium Offer" of the words: "global guarantee that all existing redundancy plans will be extended at least at same level for a period of two years after the merger becomes unconditional"; (g) the publication on around 8 October 2007 of a document entitled "AU_NZ Communication Pack Acquisition Announcement - Approved materials to be used when communicating with staff" containing the following question and answer: "Q: Will there be redundancies? How many, where and when can we expect the first cuts? A: We anticipate that there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the consortium has guaranteed to all staff that existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the redundancy policy and practice from the consortium. To find out more about your local ABN AMRO policies please contact your local HR representative. Additionally, the consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly"; and (h) the publication in late November 2007 on the ABN AMRO intranet, under the heading "Policies and Procedures" of the words: "Redundancy is dealt with at a country level (therefore there is no global policy). Please refer to HR policies and procedures on your HR BP for more detail. The consortium have guaranteed that all existing ABN AMRO policies related to redundancies will remain in place for a period of 2 years from 11 October 2007. Further, the consortium made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended." To the extent that the representations were implied, the implication arose from the publication of the aforementioned express written representations in the context of the facts pleaded in paragraphs [11] to [13], together with the absence of any reservation, qualification or caveat in relation to the applicability of those representations to employees of ABN AMRO Services. … 20. … Particulars (a) The representations were partly oral and partly written. (b) To the extent that the representations were oral they were made in two conversations between Mr McKeith and Ms Amelia McArdle on behalf of ABN AMRO Services to the effect that Mr McKeith would be entitled on termination of his employment by reason of redundancy to severance payments in accordance with a document provided to him at that time; (c) To the extent that the representations were written, they were made by: 1. the provision to Mr McKeith by Ms McArdle of a written advice setting out what his redundancy package would be if he were retrenched in October 2008; and 2. the provision to Mr McKeith by Ms McArdle of a further written advice setting out what his redundancy package would be if he were retrenched in March 2009.

[15]

The principles and the authorities relied upon

What, precisely, the plaintiffs mean by the expression "course of dealing" is unclear. The concept was explained in their written closing submissions as being "a manifestation of an objective intention by the parties to incorporate the terms of the policy into the contracts of employment of the employees".
The classic case of incorporation by a course of dealings occurs where parties have had numerous contractual dealings over a period of time, with each dealing effected by a separate contract. The circumstances may give rise to an inference that the parties intended or accepted that documents given by one to the other, at or shortly after the time each contract was made, were to have contractual effect. In those circumstances, it may be concluded that the terms stated in those documents should be incorporated into the parties' contracts. That is clear from the leading English case, Henry Kendall and Sons v William Lillico and Sons Ltd [1969] 2 AC 31.
In that case, the parties had had a long history of contractual dealings. The contracts were made orally in each case. After each oral contract was concluded, one party sent to the other a document containing what it said were the terms governing the contract that had just been made. The failure of the recipient to object to those terms, as terms of the contract, justified the inference that they were incorporated into the individual oral contracts.
Lord Morris of Borth-y-Gest (at 90) stated the consequences with his customary clarity: Over the course of a long period prior to the three oral contracts which are now in question [the purchaser] knew that when [the vendor] sold they did so on the terms that they had continuously made known to [the purchaser]. In those circumstances it is reasonable to hold that when [the purchaser] placed an order to buy they did so on the basis and with the knowledge that an acceptance of the order by [the vendor] and their agreement to sell would be on the terms and conditions set out on their contract notes to the extent to which they were applicable.
Lord Guest spoke to similar effect at 104.
Thus, in Carter, Peden and Tolhurst, Contract Law in Australia (LexisNexis, Fifth Edition, 2007), the authors say at [10-18] that: A course of dealing occurs when the contract at issue between the parties is preceded by a series of transactions over time. Such a course of dealing may have the effect of incorporating terms into a contract.
A similar approach was taken in Hays Personnel Services (Australia) Pty Ltd v Motorline Pty Ltd [2008] QCA 375. Holmes JA, with whom Keane JA and McMeekin J agreed, said at [18] that time sheets provided by one party to the other, as part of their course of dealing prior to making the contract on which the plaintiff sued, could be regarded as incorporated into that contract. See also, to similar effect, McLure P in La Rosa v Nudrill Pty Ltd [2013] WASCA 18 at [35], [43], and Buss JA in the same case at [68].
In the present case, the plaintiffs do not allege a course of conduct prior to the making of their respective contracts, except to the very limited extent that Mr James referred to his knowledge arising from his participation, as line manager, in two redundancies. Mr James referred to two occasions which, he said, occurred in about 2001. He referred also to a third occasion in about 2006, but agreed in cross-examination that he may have been mistaken in thinking that any ex gratia payment, on account of bonus, was made on this third occasion.
It is not clear from the case pleaded for Mr McKeith that any of the matters on which he relies to support his case of incorporation by course of dealing occurred prior to the making of his contract. Certainly, in the course of cross-examination, Mr McKeith referred to occasions when he, as line manager, had been involved in redundancies. That evidence (at T144,148-149) was silent as to when it was that those events took place.
Mr West referred to three decisions which, he submitted, showed that the question of incorporation by course of dealing could not be limited in the way that the authorities to which I have referred might suggest. The cases relied upon were: 1. the decision of Hely J in Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301; 2. the decision of Austin J in In the matter of ACN 050 541 047 Ltd [2002] NSWSC 586; and 3. the decision of the Court of Appeal of this State in Willis v Health Communications Network Ltd (2007) 167 IR 425.
Reynolds is a difficult case. Hely J observed at [56] that the parties paid "[l]ittle attention… in evidence or argument… as to whether the 'Termination of Employment' policy of the respondent, or the benefits payable pursuant to that policy, were terms of the applicant's contract of employment". His Honour noted that, with one presently irrelevant exception, both parties had appeared to proceed on the assumption that the policy was incorporated into the contract of employment.
Hely J concluded at [62] that it was open to the Court to infer that the relevant policy had been incorporated into the contract of employment. His Honour relied on some particular facts, "and in particular from the fact that severance payments were made to the applicant in conformity with the 'Termination of Employment' policy without any suggestion that they were gratuitously made".
No doubt because the parties proceeded on the assumption that the policy was incorporated into the contract of employment, Hely J did not expressly refer to the principles by which incorporation from a course of dealing may occur. Nor did his Honour discuss the point that, at least in the ordinary case, what must be proved is a course of dealing that takes place over a period of time prior to the making of the contract in suit.
In my view, the decision in Reynolds should be regarded as one that is responsive simply to its particular facts. It should not be taken as authority for a wider proposition that, absent variation, terms arising from a post-contractual course of dealing may be incorporated into that existing contract (rather than into a new contract made after that course of dealings has occurred).
To jump ahead for a moment: I add that in Willis, Tobias JA (with whom Mason P and McColl JA agreed) said at [64] that Hely J had dealt with the issue on the basis that the redundancy policy was an implied term of the contract by operation of the business efficacy rule. Although, if I may say so with respect, I am not sure that this is a correct reading of the reasons given by Hely J for deciding that the policy was incorporated into the contract of employment, it does show that the decision in Reynolds should be treated, as I have said, as one which depends entirely on its own facts.
In La Rosa, McLure P said at [43] that incorporation based on prior dealings is not the same as implication in fact or implication based on trade custom or usage. What is involved is, rather, inference based on prior conduct.
It may be that the decision in Reynolds can be explained upon the basis that Hely J held, in effect, that the relevant policy had been incorporated into the contract of employment by way of variation, with that variation being inferred from a course of dealings. That would be consistent with the analysis of North J in Riverwood referred to at [57], [58] above. If that is the correct understanding, then, given that no case of variation was pleaded or argued before me, Reynolds is of no assistance to the plaintiffs.
ACN 050 541 047 Ltd was not a case where there was an issue between parties as to incorporation of a term into a contract by a course of dealings. It was, rather, a case where the administrator of a company sought (to quote from Austin J at [1]) "either advice and directions from the court, or a declaratory order… to the effect that [the administrator] would be justified in making redundancy payments" with a certain level of priority to employees who the administrator dismissed or who, prior to the appointment of the administrator, the company had dismissed.
Austin J said at [34] that it was appropriate to give the direction sought, but not to make a declaration of right.
As is apparent from [26], [27] of his Honour's reasons, there was evidence before Austin J that the letters of employment of the individuals in question "did not fully represent the terms and conditions of employment". There was also evidence "that the policy and practice of the company was that employees made redundant were entitled to a payment" calculated in a certain way.
Equally, it is apparent from what Austin J said at [30], [31] that there was "[s]ome general corroboration" that the company did have such a policy and practice, and that this policy and practice had been communicated to some former employees.
Austin J referred at [26] to the decision of Hely J in Reynolds. His Honour drew from that decision the proposition that: An entitlement to redundancy benefits, distinct from any requirement to provide notice of termination or payment in lieu of notice, may arise by implication from the employer's adoption of a termination policy, even though the remainder of the contract of employment is in writing…
Austin J did not decide the case before him on the basis that the redundancy terms had been incorporated by a course of dealings into the contracts in question. His Honour's decision was founded on the proposition that there had been a variation of those contracts. That too is consistent with the reasoning of North J in Riverwood.
I add that unless Austin J intended the reference to "implication" to be read as "inference" (which is what Hely J did, as appears in particular from Reynolds at [62]), then for the reasons indicated, I would respectfully disagree with his Honour's observation that the decision in Reynolds was based on implication. Austin J referred to Reynolds at [40] to [45] in this context. I do not read those paragraphs as providing any support for the proposition that there was any process of implication in fact, as opposed to inference drawn from proved facts.
Austin J concluded at [33]: In those circumstances the adoption of the redundancy policy, communicated to [the employees], and their continuing to work with knowledge of the policy when they might have terminated their contracts by resigning had the effect of constituting a variation of their contracts of employment, supported by valuable consideration, and therefore valid and enforceable."
When the decision in ACN 050 541 047 Ltd is read as a whole, it does not go so far as Mr West submitted. Specifically, in my view, that decision provides no support for any proposition beyond the (in principle, incontestable) proposition that a contract may be varied by a course of dealings where there can be spelled out, from the course of dealings, a corresponding intention to vary the terms of the contract and consideration for the variation that is "offered" and "accepted".
I return to the decision in Willis. To my mind, that decision provides no support for this aspect of the plaintiffs' cases.
That case, as Tobias JA observed at [63], differed significantly in its facts from the facts in Reynolds. And, as his Honour pointed out at [65], the appellant employee in that case "relied only upon implication by operation of law", from which "it would follow that the observations of Hely J in Reynolds are of no assistance to him".
By way of a third strike, Tobias JA then said: In any event, there was no relevant course of dealing between the appellant and the respondent that would support an implication based on the presumed intention of the parties that the Policy was incorporated into the appellant's contract of employment.

[17]

Decision

In my view, the plaintiffs have not proved any relevant course of conduct from which it can be inferred that the redundancy policy was incorporated into their contracts of employment. In Mr James' case, this conclusion is irrelevant, because I have concluded that there was an express incorporation of the redundancy policy into his contract of employment.
At a level of some generality, it may be said that the various representations or statements particularised were made. It is not necessary to go to the detail. The simple fact is that the dealings relied upon occurred, in almost every case, after the contracts of employment were made, and in a context which does not suggest that they were put forward as intended to have contractual content. The situation is far removed from the "course of dealing" cases, of which Henry Kendall is a prime example.
The plaintiffs have neither pleaded nor proved that, before their respective contracts were made, they dealt with AAAS on a basis from which it could be inferred that each party intended that the redundancy policy would apply as a term of each contract of employment.
In circumstances where no case of variation was pleaded or in terms argued, I conclude that the post-contractual matters on which the plaintiffs rely do not amount to a course of dealing that, in either case, had the effect of incorporating the redundancy policy into the contract of employment.
I should note that Mr West did submit, in relation to this and other issues where it was said that the case advanced by the plaintiffs had not been pleaded, that the material facts were pleaded and that, in a Commercial List Statement, it was unnecessary to ascribe a legal character to those facts.
It is of course correct to say that a statement of contentions in Commercial List litigation (the present proceedings were entered in the Commercial List) is not a "pleading". It is also correct to say that Practice Note SC Eq 3 requires a statement of contentions to avoid formalities. However, it does require the plaintiff to state with adequate particulars the allegations that it makes, and to identify the legal grounds for the relief claimed (para 9).
As has been observed on many occasions, quasi-pleadings in the Commercial List fulfil the essential functions of pleadings properly so called, in that they are required to notify the opposing party of the case sought to be made against it and to bring the parties to issue on the real questions in dispute. See, by way of example, Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 6) (2007) 63 ACSR 1, [276]-[284].
I accept, as Mr Sheahan submitted, that if the matter were to be considered under the rubric of "variation", it would be necessary for some inkling of this to have been given in the Commercial List Statements. I do not think that the defendants should be asked to infer, simply because facts have been alleged which, arguably, might show variation of the plaintiffs' contracts of employment, that the plaintiffs were making out a case of variation when those facts were said explicitly (and only) to result in incorporation by a course of dealing. Variation is not the case that the defendants came to Court to meet. And, as is apparent from the plaintiffs' written closing submissions in reply, it is not the case that the plaintiffs pressed; see at paras [2] to [4]: 2. At [6], RBS submits that there was no allegation by the plaintiffs of any "variation" to their contracts of employment to incorporate the terms of the redundancy policy. Also, at [4]-[5], RBS' submissions proceed on the basis that it is necessary for the plaintiffs to make good a pre-contractual "course of dealing". 3. These submissions reflect a misunderstanding of the plaintiffs' case. 4. What is pleaded is that the terms of the policy were incorporated into the plaintiffs' contracts of employment by a "course of dealing". The dealings referred to, as pleaded, essentially comprise representations that were made to them by or on behalf of AAAS during 2007 and 2009, to the effect that AAAS had a "redundancy policy", which gave rise to entitlements on retrenchment, the terms of which would be applied to the plaintiffs if they were retrenched within 2 years of 10 October 2007.
I conclude that the plaintiffs have not shown that the terms of the redundancy policy were incorporated, by a course of dealing, into their respective contracts of employment.

[19]

The relevant facts

The starting point, in relation to the particulars given in Mr James' Commercial List Statement, is that there is no doubt that the publications to which he referred were made, and that they contained the words particularised. It is also correct to say, as is asserted at the end of the particulars given for Mr James, that the representations were never qualified or withdrawn. It was never suggested that they had no applicability to employees of AAAS.
Further, and to the extent that it is relevant, the consortium must have known that the representations were being made. Indeed, in my view, the consortium wanted the representations to be made, because its members wanted AA Group employees to have a clear understanding of the employment policies that would apply if the consortium's offer were successful. The members of the consortium, including RBS, did not withdraw or qualify the representations in any way. Nor did they or it suggest to employees of any of the AA Group companies that the representations were not serious, or did not represent a genuine commitment by the members of the consortium, or that employees should not rely upon them.
To the extent that the particulars given by Mr McKeith repeat the substance of the representations alleged by Mr James, the same may be said.
In addition, Mr McKeith particularised oral representations, and a further representation said to have been made in late November 2007.
As to the oral representations particularised by Mr McKeith: there is evidence that the representations were made, substantially as they have been particularised. This was not controversial and it does not seem to me to be necessary to descend into the detail.
As to the further written representation alleged by Mr McKeith: again, there is no doubt that it was made, in the terms set out. Again, there is no suggestion that the representation was ever withdrawn or qualified, or that it was suggested to employees of AAAS that they should not rely upon it. I might add, in passing, that the very fact of publication of the representation on the AA intranet might suggest the contrary.
In short, I find that the facts pleaded and particularised in each case have been proved.

[20]

The parties' submissions

The submissions for the defendants did not challenge, as a matter of fact, that the representations particularised had been made, in or substantially to the effect of the terms alleged. Rather, the approach taken in submission was to seek to characterise those representations as follows (para 9 of the defendants' written closing submissions): At best for the plaintiffs, Services conducted its relations with each of Mr James and Mr McKeith on the basis of an assumption and understanding that it would consider the "guidelines" and "principles" in the "closed" redundancy policy when making any decisions concerning the payments to be made to employees (including Mr James and Mr McKeith) dismissed on the grounds of redundancy.
The real thrust of the defendants' attack on this aspect of the case was directed at reliance.
Mr Sheahan submitted that, for common law estoppel by convention, it was necessary to show both reliance and detriment. He relied on the decision of McLure P (with whom Buss and Newnes JJA agreed) in Birla Nifty Pty Ltd v International Mining Industry Underwriters Ltd [2014] WASCA 180 at [118]. In that paragraph, her Honour said (and I omit citations): The weight of binding authority is that for common law estoppel by both representation and convention: (1) reliance and detriment are separate but related material facts; (2) reliance means the claimant has to show that he acted or refrained from acting (that is, changed his position) on the basis of the representation or common assumption; (3) detriment must be shown to exist and be tested at the time when the defendant attempts to resile from the representation or common assumption. Thus, detriment must exist after, and as a consequence of, the reliance.
Her Honour expanded on the concept of detriment at [119], [120]. She said in the former paragraph that detriment had to be real or material. In the latter paragraph, by reference to the plurality judgment in Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 88 ALJR 552 at [88], her Honour said that the concept of detriment should not be regarded as narrow or technical. Analysis of detriment was "part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances".
The pleaded case for Mr James asserted that, in reliance upon (among others) the representations particularised in para 17 of his Commercial List Statement, and on the understanding encouraged thereby, he: 1. communicated with staff of AAAS, after 11 October 2007, in relation to their position in the event of redundancy; and 2. considered his own position, after that date, in the same event.
Mr McKeith's pleaded case is slightly different. He said that in reliance upon (among others) the representations particularised in para 17 of his Commercial List Statement, he: 1. assured staff of AAAS that if they were made redundant, they would be entitled to payments in accordance with the redundancy policy as it then stood; and 2. did not look for alternative employment, but remained with AAAS throughout the merger process until his own employment was terminated on 5 December 2008.
Mr James' evidence on this point was essentially unchallenged. He said in substance that he saw the communications in question, and that he worked with Ms McArdle and Ms Gail Williamson of AAAS to disseminate to staff of AAAS the essence of the commitments stated in the communications. (Ms Williamson was head of communications for AAAH.) His affidavit gives the detail of the actions that he undertook in this regard. Since there is no contest, I do not think it necessary to set out the detail.
Ms McArdle agreed in cross-examination that she did work with Mr James and Ms Williamson in informing staff of the redundancy commitments that had been given. Ms Williamson did not give evidence.
It is not suggested that the detail of the redundancy policy was communicated to staff at this time. Rather, what staff were told was that the existing policy (I interpolate, whatever it might be) would be maintained for a period of at least two years from 11 October 2007, and that it would apply (I interpolate again, however its terms might dictate) in their event of their being made redundant.
If Mr James gave evidence that he relied upon the communications or the understanding engendered thereby in considering his own position, I was not referred to that evidence in the course of submissions.
As to Mr McKeith, his evidence is likewise substantially unchallenged. However, in his case, his evidence is that he received copies of what, as events have shown, was the redundancy policy in about July 2007. Ms Kate Norton, who reported to Ms McArdle in the HR department, confirmed to him that it was the current policy.
Further, in paras 67 and 68 of his affidavit affirmed on 23 May 2012, Mr McKeith said: 67. I continued in my employment after mid 2007 in the belief that, if the Consortium's bid succeeded, then the commitment made as to redundancies would be honoured in the event that my position was made redundant. I assumed that, in that event, my redundancy payout would include an "ex gratia" bonus payment. That assumption was based on my understanding of the historic practice of AAAH in relation to redundancies, my record of performance over many years in senior roles at AAAH and my knowledge that the operations of AAAH during 2007 had been profitable. 68. If the commitment by the consortium had not been made, I would have looked for alternative employment from mid 2007 onwards. I did not do so because I relied on that commitment and the expectation that I would get an ex gratia payment on redundancy.
The submissions for the plaintiffs did not really canvas the question of detriment. They appear to have proceeded on the basis that it was necessary to show only that the parties said to be conventionally estopped had conducted their contractual relationship on the mutually understood and assumed basis that existing policies as to redundancy would continue to apply for at least two years from 11 October 2007.
The issue of detriment, in connection with conventional estoppel, was not touched on in the plaintiff's written closing submissions in reply.

[21]

Decision

I have set out above relevant paragraphs from the reasons of McLure P in Birla Nifty.
Her Honour referred to, among other cases, the decision of the High Court in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641. In that case, which concerned an asserted common law estoppel (or estoppel in pais), Dixon J (with whom McTiernan J agreed) discussed the basis on which the law would hold one party disentitled to depart from an assumption, as to the existence of rights, that it caused the other party to make. His Honour said at 674 that: The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations.
A little later at 674, his Honour said that "the basal purpose of the doctrine" of estoppel "is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting".
Dixon J explained that the law sought to protect "the real detriment or harm… which would flow from the change of position if the assumption were deserted that led to it". Thus, as his Honour pointed out, there must be some "original change of position [which] will operate as a detriment".
Dixon J said at 674-675, of the party asserting the estoppel: His action or inaction must be such that, if the assumption upon which he proceeded were shown to be wrong and an inconsistent state of affairs were accepted as the foundation of the rights and duties of himself and the opposite party, the consequence would be to make his original act or failure to act as a source of prejudice.
As I noted at [134] above, McLure P in Birla Nifty at [119] referred to the plurality judgment in Australian Financial Services at [88]. It is worth setting out the paragraph in full (although without footnotes): [88] Detriment has not been considered to be a narrow or technical concept in connection with estoppel. So long as it is substantial, it need not consist of expenditure of money or other quantifiable financial detriment, as Robert Walker LJ observed in Gillett v Holt. His Lordship went on to say that the requirement of detriment must be approached as "part of a broad inquiry as to whether repudiation of an assurance is or is not unconscionable in all the circumstances." In the context of mistaken payments, the question is whether it would be unconscionable for a recipient who has changed its position on the faith of the receipt to be required to repay.
Two things appear from this paragraph. The first is that although detriment need not be financial, it must be substantial. The second is that the assessment of substantiality is to be undertaken as part of the process of considering whether it is, or is not, unconscionable to permit someone who has represented that a certain state of affairs exists to repudiate that assertion. It would follow that the question of detriment necessarily requires a consideration of the impact upon the representee of withdrawal or repudiation of the represented state of affairs.
To my mind, neither Mr James nor Mr McKeith suffered detriment simply because, in reliance upon the repeated publication of the representation as to extension of the redundancy policy, he informed staff members of what their position would be in the event of redundancy. Although in a different context, Mr West submitted that the plaintiffs had added their names to, and staked their credit on, the representations, I do not think that this amounts to detriment. Mr West did not point to any evidence to suggest that Mr James or Mr McKeith might have incurred some reputational or financial risk as a result of doing this (to the extent that their actions could be so characterised).
No doubt, if Mr James or Mr McKeith communicated the stated policy to employees, it would have been a source of comfort to employees. Those employees would be entitled to think that communications coming from such exalted personages demonstrated, among other things, that Messrs James and McKeith believed that what they were saying did represent the position of AAAS (and, for that matter, the position of the consortium in general and RBS in particular).
Those staff members may have thought, further, that Messrs James and McKeith believed that they had good reasons for so representing the position of AAAS, the consortium and RBS. But all that does is show that staff members to whom communications of the kinds asserted were made would have understood: 1. that Messrs James and McKeith were acting as conduits for the dissemination of the information; and 2. that Messrs James and McKeith believed, on reasonable grounds, that the information disseminated was accurate.
Since that hypothetical position reflects entirely the state of affairs that prevailed at the time, it cannot amount to detriment. It could not be suggested that Mr James or Mr McKeith did not have reasonable grounds for thinking that what he passed on to employees was in truth the position of AAAS, the consortium or RBS. There is no suggestion that they passed on the position inaccurately (and if they did, that of itself could not be a source of relevant detriment in any event). There is no hint in the evidence that any staff member who might have been caught out by the change of position in late 2008 ever sought personally to attach responsibility or blame to Mr James or Mr McKeith.
Accordingly, I conclude that neither Mr James nor Mr McKeith has suffered detriment, simply by informing staff of the consortium's stated position (and that of RBS) as to redundancy.
Nor do I think that Mr James has shown that he suffered detriment, in the requisite sense, simply because he "acted" on the understanding said to have been engendered by the representations in "considering his own position… in the event of redundancy". The pleading does not assert (for example) that, as a result of the representations and the understanding reasonably engendered by them, Mr James decided to stay rather than to go. It does not assert that he turned down some other available opportunity of employment. I do not think that the mere intellectual activity of considering one's position, without any indication of the factors involved in or the consequences of that consideration, is sufficient to demonstrate detriment in the requisite sense.
The position is different in Mr McKeith's case. His consideration of the state of affairs went further. He said that he did not pursue the possibility of alternative employment. I have set out the relevant paragraphs of his affidavit.
Mr McKeith was cross-examined on this evidence. However, that cross-examination (at T148-149) went more to his evidence of understanding of the policies than to the question of reliance, as asserted at (in particular) para 68 of his affidavit.
I accept the evidence of Mr McKeith, that he relied on the understanding engendered by the representations in question (those that are said to found the conventional estoppel) by deciding to remain with AAAH, in the employ of AAAS, rather than to seek alternative employment.
There is no evidence as to what alternative employment might have been available to Mr McKeith from 11 October 2007 and in (say) the first half of 2008. There is no doubt that he was, and was regarded as, extremely capable. He held a very senior position at AAAH. He seems to have performed the duties of that position in a satisfactory way, if the size of his bonus payments are any guide. RBS wanted to retain him, because it saw him as a valuable employee. It may be that Mr McKeith would have been an attractive "catch" for another investment banking firm.
If Mr McKeith had resigned, that would not have triggered the operation of the redundancy policy. In terms, that policy applied to employees whose positions were made redundant, so that they lost their jobs. At the relevant time, there was no suggestion that Mr McKeith's position was, or was about to become, redundant. Nor did he cease to hold that position because someone else was appointed to it in preference to him. RBS wanted Mr McKeith to stay on, at least in the short term, until the question of sale could be resolved and (if there were no sale) to assist in the integration of the operations of AAAH with those of RBS' Australian branch. Internal emails of RBS show that Mr McKeith was regarded as a key employee for the latter purpose: to the extent where RBS was prepared to offer him a $3 million guaranteed bonus for the 2009 calendar year if he remained employed.
There was no evidence that the terms of the redundancy policy were applied to individuals who left voluntarily in circumstances where their positions had not become redundant. (I should perhaps add, by way of caution, that if there were such evidence, I was not referred to it.)
Even accepting that Mr McKeith decided to stay on rather than to resign, the "expectation" to which he deposes in para 68 of his affidavit ("that I would get an ex gratia payment on redundancy") is not an expectation that is relevant to the circumstances under discussion. The implicit assumption is that, by staying on, Mr McKeith would qualify for a redundancy payment. RBS wanted him to remain in employment (although in a smaller role, with lesser responsibilities). The job loss that in fact occurred reflected his own decision not to accept the employment offered to him. And for the reason I have given, he could not have made that decision on the faith of a rational or reasonable belief that, in consequence, he would qualify for a redundancy payment.
In short, I do not see such a relationship between the state of affairs assumed on the faith of representations made by AAAS, the consortium and RBS on the one hand, and the position assumed by Mr McKeith on the other, as to make it unconscionable for the representors to be permitted to withdraw from the represented state of affairs.
I conclude that the conventional estoppel case, the subject of issue 3, has not been made good by either plaintiff.

[27]

The factual background

It is convenient to summarise some matters of background.
After the termination of Mr James' employment, Mr McKeith was the most senior employee remaining at AAAH. Attempts to sell the business of AAAH had failed. RBS had decided to merge the operations of its Australian branch with those of AAAH.
Mr McKeith was seen as an important person to retain, at least in the short term. The reasons for this included his knowledge of the AAAH business as well as his own undoubted abilities. Further, Mr McKeith was seen as an important person for the purpose of doing a deal with employees of AAAH for whom shares were held under the EIP. It was only by buying out those interests that RBS could obtain complete control of AAAH.
For those and, perhaps, other reasons, RBS offered Mr McKeith a senior position in the merged business operations. The responsibilities were not to be as great as those that he had exercised at AAAH. Nonetheless, his importance was seen as significant, and he was offered (as well as a substantial salary) a guaranteed bonus of $3 million to induce him to remain employed as part of the merged operations.
Mr McKeith, not unnaturally, considered his alternatives. Mr Steven Williams, who was to become the CEO of the merged operations, understood that Mr McKeith would want to do this. Mr McKeith sought advice from Ms McArdle as to the amount of any redundancy payment he might receive should he leave the employ of AAAS on various different dates. I discuss the evidence, including the calculations that Ms McArdle made and provided to Mr McKeith, in connection with issue 12.
Further, and as I have pointed out already: 1. there were representations made to employees of the AA Group that, if the consortium's takeover bid succeeded, all existing redundancy policies and practices would remain in place for at least two years following completion of the takeover: RBS and RFS must have known (at the very least) of those representations; 2. Mr McKeith was aware of those representations; and 3. neither RBS nor RFS had communicated to employees of AAAS any withdrawal or qualification of the representations that had been made, at least until 24 November 2008 when RBS published on the intranet a version of the redundancy policy that contained no reference to the discretion to make ex gratia payments on account of bonus. Three days later, on 27 November, RBS or AAAS republished that policy on the intranet with some questions and answers, one of which stated that "no ex gratia payment will be made to any employee… as part of their redundancy payment"; and 4. by July 2007, Mr McKeith had become aware of the terms of the redundancy policy of AAAS, because he had been given a copy of the document, and its authenticity had been confirmed to him.

[28]

How the topic of ex gratia payments was considered

The negotiations in relation to employees' shareholdings under the EIP were effectively finalised by mid October 2008. At that stage, Mr McKeith decided that he would not remain with the merged organisation. He gave unchallenged evidence that he told Mr Williams in mid October 2008 of his intention to leave. However, Mr McKeith offered to stay until the end of March 2009. He said that he told Mr Williams, among other things (affidavit affirmed 23 May 2012, para 182): I am prepared to help out with the integration until say the end of March 2009 and then take a retrenchment package at that time, but I would like to agree the terms and numbers now… . This would help you with the integration and getting to know the members of my team better…"
Mr McKeith said that he had another conversation with Mr Williams in early November 2008, in which Mr Williams said that "we will not take up your offer to stay on until March 2009". Mr Williams did, however, ask Mr McKeith to stay on "for a few weeks" to assist the person who would take over the role that had been offered to Mr McKeith.
Mr McKeith said (same affidavit, para 184; and I repeat that his evidence on this point was unchallenged) that as part of this conversation, he said to Mr Williams: I would like to agree a separation date and the terms of my redundancy package. I am happy with the terms that were given to Angus, which was just the ABN AMRO policy. … If I am to leave in November this year, then I should receive the equivalent to the average of my last two years bonus pro-rated… which is an amount of approximately $3 million".
Mr McKeith said that Mr Williams replied: Okay, I will get back to you with some paperwork.
On the chronology of events given by Mr McKeith, these conversations took place before the publications on the intranet of 24 and 27 November 2008. Mr McKeith said that it was not until some time after the conversations to which I have referred that Mr Williams said that RBS could not honour the AAAS redundancy policy, and that he would not recommend the full ex gratia payment sought by Mr McKeith.
RBS developed a blanket policy in relation to the payment of bonuses to departing staff: "leavers", in RBS-speak. The policy, which apparently was formulated in early November 2008, but which was not then announced to staff, was that "leavers" would not be paid a bonus; that AAAS would not "use a tight bonus pool to pay a leaver"; and that "no ex gratia payment will be made to any employee… as part of their redundancy payment".
So far as the evidence goes, that blanket policy was formulated by a number of very senior employees of RBS: Mr Steven Daniels (who held a global position in HR), Ms Winnie Fung (another senior HR manager, based in Hong Kong), Mr Donald Workman (to whom Mr McCormick reported), Mr McCormick and Mr Williams. Messrs Workman and McCormick gave evidence. Mr Daniels, Ms Fung and Mr Williams did not.
Mr Workman said (affidavit sworn 4 September 2012, para 73) that the decision not to make ex gratia payments to departing AAAH executives was taken in a telephone call between those just mentioned on 7 November 2008. In this conversation, according to Mr Workman: During that telephone call we agreed that no ex gratia bonus payment would be made to any former AAAH executive as part of their redundancy payment. At this time the outlook for global financial markets was very bleak and, as a result, I considered that it would be inappropriate for an ex gratia bonus payment to be made to any individual who was leaving the organisation. The bonus pool was already under enormous pressure from the need to retain and incentivise those who were remaining at RBS.
That policy was to be applied only to those who left. Remaining employees were paid bonuses. Mr Williams received a substantial bonus in 2008. Bonus payments to all staff made during that year totalled $86.6 million. That figure was about 60% of the amount paid in 2007. Whether this reduction in the total amount of bonuses paid during the year reflected the "no ex gratia payments to leavers" policy, the performance of the business, the significant redundancies already effected, or some other factor or combination of factors, is a matter of speculation.
The decision taken on 7 November 2008, not to make ex gratia payments on account of bonus as part as of a redundancy package, had been presaged about a month earlier. A senior employee of AAAS, Mr David Dawes, had decided to leave. There was consideration (of a kind) given to making him an ex gratia payment. Mr Daniels wrote in an email of 17 October 2008 that "we are not and have not paid [sic] bonus for exits". Five days later, on 22 October, Mr Daniels reiterated his position, stating that among other things '[t]he bonus pool is under pressure".
A day later, on 23 October 2008, another senior employee of RBS, Mr John Hourican, said in an email that "we are not going to use a tight bonus pool to pay a leaver. This is offensive to the remaining staff." Mr Hourican added that he could not support the payment of ex gratia amounts "irrespective of previous policy".
The blanket policy was communicated to Ms McArdle when she was copied in on an exchange of emails on 18 November 2008. She was informed that: The non-payment of ex gratia payment for everyone irrespective of seniority has been discussed by Donald Workman and Steve Daniels and they agreed that this is the right approach. … Donald has confirmed no ex gratia payment to all impacted staff.
As I have noted, that blanket policy was communicated to staff via the intranet on 24 and 27 November 2008.
It is clear, and I find, that to the extent that consideration was given to whether or not an ex gratia payment should be made to Mr McKeith on account of his bonus expectations, it went no further than, and its outcome was dictated by, the blanket policy that had been adopted (but not then communicated to him or other employees) on 7 November 2008.

[29]

The parties' submissions

Mr West submitted that, although the decision to make an ex gratia payment on account of bonus was discretionary, the discretion should be exercised on a case by case basis taking into account the purpose for which it was given. He identified the relevant purpose as involving recognition of the fact that, for Mr James, Mr McKeith, and other senior employees of AAAS, the greater part of the total reward for their services came from discretionary bonus payments.
Mr West submitted that it was self-evidently unfair that a senior employee, who might confidently expect to be paid a bonus for a particular calendar year by reason of his or her contributions to the business and its success, should lose that entitlement because he or she (or his or her position) became redundant in the course of that calendar year. Thus, he submitted, the employee's contribution to the business, and the need to achieve fairness, should be paramount in the consideration of the exercise of the discretion.
Mr West submitted, further, that a blanket decision not to make ex gratia payments to departing employees, regardless of their particular circumstances, contributions to the business, and legitimate expectations of bonus reward, was not an exercise of the discretion at all, let alone one undertaken in good faith. More fundamentally, he submitted, it was an alteration to the redundancy policy itself.
Underlying this aspect of the submissions was the proposition that the essential function of the bonus was to reward employees adequately for their contributions to the business in any particular year. However, Mr Sheahan submitted that the bonus formed no part of remuneration at all (having regard to the terms of the contracts of employment from Messrs James and McKeith). Further, he submitted, the payment of bonus had at least two functions other than increasing the reward to particular employees. One further purpose was to assist in the retention of capable staff. Another was to provide staff with incentives for future performance.
Those various purposes, Mr Sheahan submitted, were reflected in the ex gratia payment provisions of the redundancy policy (T422.29-.33): In part, an ex gratia payment on redundancy may, it's true, reflect a purpose of rewarding past performance. That will be the obvious reason for doing so, but it's also obvious that it's no longer going to have any purpose of incentivising the particular employee to perform in the future, and it is no longer going to have any purpose of retention.
Next, Mr Sheahan submitted, the discretion to make ex gratia payments was not merely a matter that concerned the interests of the employee. As with bonus payments themselves, Mr Sheahan submitted that, in relation to redundancy payments, "the employer's interests are very much in play, the employer's legitimate interest" (T422.40-.41).
It followed, Mr Sheahan submitted, that even accepting for the moment that the employer owed a duty of good faith in considering the exercise of the discretion to make an ex gratia payment, nonetheless the employer could take into account its own legitimate interests.
In doing so, Mr Sheahan submitted, it was open to AAAS to consider its own financial position and to consider the question of fairness as between remaining and departing employees. Under this question, Mr Sheahan submitted, it was open to AAAS to consider the impact, on continuing employees, of the making of a large "bonus" payment to a redundant senior employee. Those continuing employees, he submitted, would be "conscious of the fact that their bonus pool was constrained by the financial stringency confronting the company", but would see that pool being depleted by an ex gratia payment of millions of dollars to a departing executive (T423.3-.11).
Mr Sheahan submitted, as will be apparent from what I have just said, that it was legitimate for the employer to take into account its own financial circumstances. That, he submitted, was precisely what had been done by those employees whose deliberations I have summarised above.
Mr West submitted in answer that there was no pleading to the effect that the ability of the employer to make an ex gratia payment to Mr McKeith was constrained by "financial stringency". Further, he submitted, there was no evidence to support this proposition apart from a few very general references. At most, he submitted, what emerged from the evidence was that the decision that had been made was to use the existing bonus pool (for 2008) to pay bonuses only to remaining employees.
This topic was one of those (for two others, see at [221], [226] below) in relation to which the decision of Lord Mansfield in Blatch v Arthur (1774) 1 Cowp 63; 98 ER 969 and its lineal descendant, the decision of the High Court in Jones v Dunkel (1959) 101 CLR 298, received some attention.

[30]

Decision

I have to say, at the outset, that I have some difficulty in understanding how it can be said that Mr McKeith's employment came to an end in circumstances of redundancy.
As a matter of plain English, the word "redundant" denotes "of no continuing utility", or "surplus to requirements". The termination of an individual's employment may be said to involve redundancy in at least two situations: 1. the position is abolished, and there is no other suitable work available; or 2. in the case of a merger there are (as with Mr James) two rivals for the one position, only one of whom is to be appointed.
Neither of these circumstances seem to apply to Mr McKeith's case. His employment came to an end because he did not take up the role offered. Instead, he resigned.
The parties did not really address the question of how it could be said that the circumstances in which Mr McKeith's employment came to an end involved redundancy. They argued this issue on other grounds, to which I now turn.
In dealing with the issue as argued, I start with the proposition that, on the evidence, it is clear that such consideration as was given to making an ex gratia payment to Mr McKeith on account of bonus for the calendar year 2008 was limited to, and directed solely by, the blanket policy decision taken on 7 November 2008. That is to say, the proper conclusion, on the evidence, is that those who were responsible for making the decision took the view that the only relevant consideration was that blanket policy.
Mr Sheahan strove valiantly to suggest that consideration - indeed, detailed consideration - was given to the particular position of Mr McKeith and his rights. However, when one goes to the evidence on which Mr Sheahan relied (most of which comes from emails in the period mid-October to early November 2008), it is clear that the outcome was dictated by the policy to which I have referred.
At one time, Mr McCormick and Mr Williams argued that Mr McKeith should be considered an exceptional case, and that consideration should be given to making him an ex gratia payment on account of bonus. However, what emerges from the earlier emails is that Mr McCormick and Mr Williams (and, it would seem, Mr Workman) supported this idea "as we need [Mr McKeith] to drive through and influence the buy in of up to 700 people to close out EIP and get the integration really moving plus other real tangential business benefits" (the quotation comes from an email sent by Mr McCormick on 17 October 2008).
It was not until 7 November 2008, Mr Sheahan submitted, that the blanket policy took over and dictated the outcome - adverse to Mr McKeith - of consideration of the making of an ex gratia payment.
I accept that in October 2007, consideration was given to making a substantial ex gratia payment to Mr McKeith. However, after 7 November 2007, only the blanket policy to which I have referred was perceived to bear upon the exercise of the discretion. After that date, there was no thought given to whether, in Mr McKeith's case, there were particular considerations that should outweigh the factors underlying the blanket policy. To put it another way, no one appears to have raised the question of whether Mr McKeith might (or should) be an exception to that blanket policy. The reason may be simply that the policy was a blanket policy. If this is the reason, it supports the conclusion that the blanket policy overruled every other consideration, including those that normally would be taken into account in deciding whether to make an ex gratia payment on redundancy.
Further, I do not accept that the evidence supports the proposition that AAAS was unable to make any ex gratia payment to Mr McKeith. The evidence goes no further than showing that a policy decision was taken to keep the bonus pool for existing employees. The reasons underlying that decision may well have been valid. But the reflection of those reasons in a blanket policy, that controverted the hitherto existing redundancy policy and denied to all redundant employees the possibility of any ex gratia payment, is at best an abdication of the discretionary exercise. More accurately, it represents a fundamental change to the redundancy policy itself.
As Mr West submitted, the question of "financial stringency" had not been flagged on the pleadings. Paragraph 38 of Mr McKeith's Commercial List Statement asserts that it was a term of the redundancy policy that, in the event of retrenchment, AAAS would give consideration in good faith to making him "a Bonus Payment". The only relevant answer made is that the policy (which AAAS said was not a policy at all, but merely "guidelines") stated that an ex gratia payment may be made "[d]epending on circumstances".
If it were intended to make out a case that relevant circumstances included, as a general proposition, considerations of financial stringency, and that those considerations were taken into account in Mr McKeith's case, that is something that should have been made clear. As Mr West submitted, had this been flagged as an issue to be raised, it would have had an impact on the discovery that the defendants were asked to give. It would have focused Mr McKeith's attention on the financial position of AAAS in particular, and RBS in general, at the relevant time. Instead, as Mr West submitted, what has happened is that the question of financial stringency has fallen to be assessed on the basis of a few scraps of evidence (my words, not his).
Mr West submitted that this unfortunate position was all the more significant bearing in mind that proof of financial stringency was essentially within the power of the defendants, not the plaintiffs.
RBS suffered an enormous loss for 2008: £24.1 billion. For the same year, AAAH lost $313 million, which resulted in $57 million of negative equity. Mr Place said, and it must be correct, that AAAH relied on its parent's blanket guarantee to allow it to report as a going concern (T207.35-.38).
However, as I have said, those matters did not stop AAAS from paying bonuses. It paid a total of $86.6 million in bonuses for the calendar year 2008. Thus, it is clear that the deteriorating financial situation of AAAH and RBS did not stop AAAS from giving away a substantial amount of money - equal to about 28% of the amount of its overall loss - by way of bonus payments.
There was further decision taken on 7 November 2007: to direct the bonus pool to existing rather than exiting employees. However, as I have said, that decision itself was at best a fetter on the discretion.
There were some suggestions in the evidence of Mr Workman that the ultimate shareholders of RBS might have been displeased, were bonus payments to be made to departing individuals. By the end of 2008, the majority shareholder was in effect the government of the United Kingdom. But that government's stated position was that it "wants RBS to operate on a commercial basis and intends to act as an arm's length commercial shareholder".
Further, and as Mr West submitted, when the relevant proposition had not been flagged on the pleadings and when some of the relevant decision-makers were not called (Mr Williams, Mr Daniels and Ms Fung), the Court should not infer, in favour of RBS or AAAS, that the decision was dictated by inability to pay. That position is strengthened, as Mr West rightly submitted, because the decision-makers who were called did not say unequivocally and in chief that the decision was based on inability to pay.
I conclude that AAAS did not give good faith consideration to making an ex gratia payment, on account of bonus, to Mr McKeith as part of his redundancy package. I reach that conclusion because, in summary (of what appears above): 1. the decision was dictated by the blanket policy formulated on 7 November 2008 not to make any ex gratia payments on account of bonus to departing employees; 2. instead, as an incident of that decision, a decision was made to keep the bonus pool for remaining employees; 3. no consideration was given to the particular circumstances of Mr McKeith, in particular as to whether he ought be regarded as an exception to the blanket policy or its derivative; and 4. to the extent that the decision may have been dictated by considerations of financial stringency, and to the extent that (absent any pleading) it is open to AAAS to rely on this, the evidence does not support the proposition that the decision, in Mr McKeith's case, was justified because of the poor financial position of AAAH or the RBS Group generally.

[31]

Relevant provisions of the redundancy policy

The redundancy policy makes three references to a "Deed of Release". Those three references appear after the statement of the circumstances in which the policy applies and does not apply, and in a boxed section which, it might be thought, deals with the procedures to be followed when, a member of staff who may be eligible for redundancy having been identified, "redeployment is not possible".
In those circumstances, the HR Adviser is "to prepare a redundancy schedule based on the terms of this policy…". (The previous reference to the Payroll Manager preparing a redundancy schedule may be itself redundant; but no one suggested that this was of any significance.) The redundancy schedule is to be "discussed and agreed with the line manager and the business unit head". It is obvious, from what follows, that all this is done before the employee learns of his or her fate.
For convenience, I repeat the next three paragraphs of this section of the redundancy policy, although I accept that references to the "Deed of Release" are to be construed in the context of the policy as a whole (which is set out at [27]): In cases where outplacement or any other special provisions are to be included, these will need to be set out in an attached letter. The HR Adviser will prepare the Deed of Release. The HR Adviser will notify IT to ensure that the staff member's access to Notes and other systems is terminated within the required time frame and notices circulated. The time and date for announcement to the staff member is set and the line manager / business unit head will be present with the HR Adviser. At the meeting, the staff member will be provided with advice on the terms of the redundancy, final payment and tax liability as per the schedule and the Deed of Release. The Deed of Release should be signed and returned to HR before the final payment is made."
This section of the policy then deals with what might be thought to be matters of administration or procedure (and I do not intend what follows to be exhaustive): 1. return of company property; 2. making appropriate provisions in respect of any staff housing loan; 3. making appropriate provisions in respect of any motor vehicle or other salary-packaged items; 4. making provisions for any entitlement under the EIP; and 5. a final adjustment of amounts owing one way or the other, to "be settled from the termination payment".
Shares held under the EIP are to "vest immediately on termination" and, it seems, to be bought back "by taking an average over the five trading days immediately prior to termination date". The payment "will not form part of the ETP [eligible termination payment] but be paid gross".
The next section of the redundancy policy deals with the calculation of redundancy terms. It is there that the methods of calculation of, among other things, severance and ex gratia payments are set out.

[32]

Relevant provisions of Mr James' deed of release

The draft deed was dated 3 September 2008, and had been signed by Mr McArdle and Mr McAlpine on behalf of AAAS before it was given to Mr James. It identified the parties as AAAS and Mr James. The recitals stated the duration of Mr James' employment, and that his employment would come to an end as a result of redundancy.
Clause 2 confirmed that: Mr James' Employment will come to an end as a result of the redundancy of his position on the Termination Date.
Clause 3 dealt with "Payment by the Company". It read: 3. Payment by the Company 3.1 Payment (a) Conditional upon Mr James executing and returning this Deed to the Company, and returning all Company property in accordance with clause 4 within seven days of the date of this Deed, the Company will pay to Mr James within seven days of the Termination Date: (i) an amount of $115,384.62 gross, being an amount equal to 3 months' fixed remuneration in lieu of notice; (ii) an amount of $432,692.31 gross, being a severance payment; (iii) an amount equal to his accrued statutory entitlements as at the Termination Date; and (iv) an amount of $2,500,000 gross, being an ex-gratia payment. (b) Applicable tax will be deducted from the payments in (a). 3.2 Method of Payment The Company may make the payments referred to in clause 3.1 by way of electronic funds transfer or by cheque. 3.3 Equity Investment Program - Funded Plan (EIP) Any shares granted to Mr James under the ABN AMRO Australia EIP will be dealt with in accordance with the rules of that Plan.
Clause 4 dealt with the return of company property.
Clause 5 dealt with releases to be given, by Mr James to AAAS and others, and by AAAS to Mr James: 5. Release 5.1 Release by Mr James Subject to the payment of the monies referred to in clause 3.1(a), Mr James releases the Company and its Related Bodies Corporate and each of their company officers and employees, past and present, from all claims and liabilities of any nature and under any system of law (including costs, whether or not the subject of a court order) in relation to, connection with, or arising from: (a) any office held by Mr James in the course of the Employment; (b) the Employment, including the termination of the Employment; and (c) any other matter which was known, or ought to have been known, to Mr James at the date of his execution of this Deed. 5.2 Release by the Company Subject to Mr James providing the releases in clause 5.1, the Company releases Mr James from all claims and liabilities of any nature and under any system of law (including costs, whether or not the subject of a court order) in relation to, connected with, or arising from: (a) any office held by Mr James in the course of Employment; (b) the Employment, including the termination of the Employment; and (c) any other matter which was known, or ought to have been known, to the Company at the date of its execution of this Deed.
There followed provisions relating to further assurance, confidentiality, ongoing obligations, future cooperation and the like.

[33]

The parties' submissions

Mr West submitted that, on the proper construction of the relevant provisions of the redundancy policy, the deed of release was to be "a document which would be concerned with HR matters and with securing the redundant employee's acknowledgment that by the receipt of the final payment arrived at on the redundancy schedule he has received all of his entitlements and benefits…" under the policy.
He noted that neither the deed of release nor any particular term of it was said to be tied to any specific component of a redundancy payout: whether that might be statutory or contractual entitlements; a severance payment; or an ex gratia payment. This, Mr West submitted, was significant. He submitted that the parties would not have intended that a wide-ranging deed of release should be a lawful requirement of receipt of any entitlements whatsoever, including those vesting by statute or under contract.
Turning to the terms of Mr James' draft deed of release, Mr West noted the very wide-ranging releases to be given by Mr James pursuant to cl 5.1. Those releases were given not only to AAAS, but also to its related bodies corporate and the officers and employees, past and present, of all those entities. By contrast, as Mr West submitted, the only reciprocal release was that offered by AAAS alone.
The release that Mr James was required to give extended, Mr West submitted, well beyond a settlement of his entitlements (including discretionary payments) under the redundancy policy. It comprehended any claim "in relation to, connected with or arising from" any office held by Mr James in the course of his employment; the employment itself, including its termination; and anything else of which Mr James knew or ought to have known at the time of execution of that deed.
Mr West submitted that paras (a) and (b) of cl 5.1 must have been intended to address separate topics, notwithstanding that, on a quick reading at least, they appear to cover the same ground. Thus, Mr West submitted, a release in relation to, connected with or arising from any office held by Mr James in the course of his employment must be something different to, and presumably wider than, a release in relation to, connected with or arising from that employment itself, which would include its termination.
In this context, Mr West noted that Mr James was not only a director and officer of AAAS and AAAH. He was a director of AAEP, one of the trustees that held shares issued on trust for employees under the EIP. In that capacity, he had fiduciary obligations not only to AAEP but also, Mr West submitted, to those employees for whose benefits the shares were held on trust. Mr West noted that, as RBS itself had recognised, the process of buying out those shares, which would include arriving at a fair value, was likely to be complex.
In short, Mr West submitted that the terms of Mr James' draft deed of release went well beyond the obvious purpose that, under the redundancy policy, deeds of release were required to serve.
Mr Sheahan submitted (and I should say that all his submissions on this and other issues arising out of the redundancy policy were put on the assumption, which was not acknowledged to be correct, that the redundancy policy had binding contractual force) that there was no limitation on the purposes that the deed of release might serve. He submitted that the terms of the draft release required of any employee, including Mr James, were at the discretion of AAAS, and hence subject only to the acknowledged (on the assumption to which I have referred) limitation that the discretion be exercised reasonably and in good faith, and for the purposes for which it was given.
Mr Sheahan submitted that both as a matter of construction and as a matter of common sense, a release on the terms of the draft deed could not operate more widely than on the hitherto existing legal relationship between Mr James and AAAS. He submitted that there was nothing in the text of the redundancy policy to justify the proposition that the proper function of the deed was only to acquit AAAS in respect of any claim under that policy.
In reply, Mr West submitted that AAAS had not pleaded that it was entitled, as part of its discretion in relation to redundancy, to require a deed of release in whatever terms it (acting reasonably) saw fit. He submitted that AAAS should not be permitted to raise that defence, because, had it been pleaded, the defendants' witnesses (including Ms McArdle) might have been cross-examined further as to how it was that the draft deed came to be prepared in the terms that it expressed.
To the extent that there was evidence on the topic, Mr West submitted, correctly, that at no point had Ms McArdle suggested that the terms of the deed formed any part of her thinking when she made a recommendation as to an ex gratia payment to be made to Mr James. Nor did the internal documentation of RBS, relating to the redundancy package, suggest that the calculation of the package was based in any way upon the precise terms to be sought from Mr James in the draft deed of release.
In part, the differing submissions put by Mr West and Mr Sheahan reflected their differing approaches to the effect of an offer of a redundancy package. It will be necessary to return to this. For present purposes, the following matters may be noted.
Mr West submitted that what AAAS was required to do was to exercise the discretion given to it under the redundancy policy, to assess whether to make a redundancy payment to any employee to whom the policy might apply. If that were done, and a redundancy payment were assessed, then the assessment of that payment became binding as a matter of contract. It was open to AAAS to require, in exchange for payment of the amount thus settled, a deed of release conforming to the terms of the policy. However, once the discretion had been exercised to make a redundancy payment and to arrive at its amount, the exercise of discretion could not be made conditional on, or undone by rejection of, a deed going beyond the legitimate purposes that, as a matter of construction, appear from the policy itself.
Mr Sheahan, on the other hand, submitted that the process was different. On his analysis, what happened was that AAAS would determine what might be an appropriate redundancy payment, and then make an offer to the employee, on the terms of the letter and draft deed of release that, the policy indicated, were to be prepared. It followed, Mr Sheahan submitted, that there would be no binding obligation to make the payment unless and until the terms on which it was offered (being those set out in the letter and the draft deed of release) were accepted.

[34]

Decision

To my mind, when one reads the redundancy policy as a whole, it is clear that the deed of release that may be required, as a condition of payment, is to be no more than a deed which releases each of the parties - the departing employee and AAAS - from the obligations (including discretionary obligations) specified in the redundancy policy. Such a construction does not make the deed a mere token or cipher. It achieves a number of purposes: 1. importantly, from AAAS' perspective, it constitutes an acknowledgment and acceptance, by the departing employee, that the amount to be paid, as set out in the redundancy schedule, represents the full extent of his or her entitlements under that policy; 2. more specifically, the deed constitutes acknowledgement by the employee of the propriety, or acceptability, of the exercise of the discretion to make an ex gratia payment on account of bonus; 3. as part of the process of settlement of accounts, it acknowledges that the amount to be paid as a termination payment includes all adjustments of the kind referred to in the policy and summarised above; the effect of this is to discharge both the departing employee and AAAS from any further obligation or claim in respect of that adjustment process; and 4. in more general terms, and no doubt having regard to the likely "settlement" procedure, which would be for a final settlement where all items of property and the like are handed over, the deed is executed and the payment is made, it operates as a confirmation that the procedures relating to termination on the ground of redundancy have been followed and that each party has complied with its obligations under them, and that the employee will have no further claim against the employer in respect of the termination of his or her employment.
So regarded, the deed of release has real significance for both the departing employee and AAAS. It protects the departing employee against further claims, in respect of the various matters referred to in the policy itself. And it protects AAAS by giving it the departing employee's acknowledgment that all his or her entitlements have been met, that he or she accepts, as appropriate, whatever discretionary components there may be in the redundancy package, and that he or she has no further claim arising out of the redundancy.
I think it is important, as Mr West submitted, that any special conditions relating to the termination of the particular employment were contemplated to be dealt with in the "attached letter" (presumably, the letter informing the employee of his or her fate, and attaching the redundancy schedule and the draft deed of release). That suggests, again as Mr West submitted, that the deed of release was intended to be of a relatively formal or generic nature, and that any special conditions relating to the termination were to be dealt with in the letter. The departing employee's acceptance of the redundancy package would constitute or demonstrate acceptance of any special conditions stated in that letter.
In those circumstances, it seems to me, the draft deed presented to Mr James as a condition of payment of his redundancy payment went well beyond what AAAS was reasonably entitled to require of him. I accept, as Mr Sheahan submitted, that as a matter of principle, it is open to an employer to impose conditions on the grant of a discretionary payment, where those conditions are not contrary to the terms of the contract of employment. However, in my view, the particular draft deed submitted to Mr James cannot be characterised as something that AAAS, acting reasonably and in good faith, could conclude it was entitled to require of Mr James.
The first point is that, contrary to Mr Sheahan's submission, the releases are not "mutual". As I have noted, the releases that Mr James was required to give extended beyond AAAS to all its related bodies corporate and to all their officers and employees, past and present. The only releases offered to Mr James came from AAAS. The related bodies corporate and their officers and employees, past and present, offered nothing. Nor did AAAS fill the gap by offering an indemnity in respect of any claim which any of those other releasees might make against Mr James.
The next point is that the releases that Mr James was required to give extended well beyond any acknowledgement of the propriety or sufficiency of the redundancy payment that was offered to him, and the other matters specified in the redundancy policy.
The width of the deed of release is of real concern, bearing in mind that on any view, the releases that Mr James was required to give would effectively bar him from seeking indemnity or contribution from AAAS (or any of its related bodies corporate) in the event that, for example, disgruntled employees for whom shares were held under the EIP decided to take action against the trustees and their directors. As matters stood as at 3 September 2008, it was (to put it neutrally) by no means clear that there would be a peaceful resolution, as between RBS and those employees, of the desire of RBS to buy out the shares held by the trustee for members of the EIP.
One matter that, to the knowledge of the parties, had the potential to lead to disputation, arose out of the price formula. As I have noted, the call option could be exercised at a price that would be very heavily influenced, in favour of the shareholders and against the holder of the call option, by ROE. The higher the ROE, the higher the price: that was, in effect, the way the formula worked. RBS was very keenly aware of this. Internal emails show that RBS was giving very close consideration to a number of courses of action which, if implemented, would have the effect of driving down the ROE, and thus enabling it to buy out the shares at what it considered to be a more reasonable price. Matters under consideration included (by way of example only), loading various costs relating to the acquisition onto the balance sheet of AAAH, and taking steps to deprive AAAH of what was in effect the ability, for a small fee, to leverage its business dealings by utilising its parent's balance sheet capacity.
I do not for a minute want it to be thought that I am expressing a concluded view that any of the matters under consideration by RBS was in any relevant sense improper. It is sufficient to note that, in some cases at least, their propriety was not self-evident, and that the possibility of litigation, should any of those steps be put into place, could not be overlooked.
Further, it was at least possible that any steps taken by Mr James and his fellow directors of AAEP, to agree with RBS a buyout price for the shares held under the EIP, could lead to disputation unless all entitled employees were consulted and placated.
Mr James' deed of release was not in one or other of the standard forms that AAAS customarily demanded of departing employees. I return to this question in connection with issue 11. The deed required of Mr James had been specifically drafted by RBS' then external legal advisers, on instructions from Ms McArdle or someone else in the HR Department.
The releases that were sought of Mr James went well beyond agreement to and acceptance of the ex gratia payment included in the redundancy schedule. The releases were sought as part of the price for payment of his statutory and contractual entitlements. And they were sought as part of the price for the severance payment that was to be made. In this context I repeat that Mr Sheahan accepted that if (as I have concluded is the case) the redundancy policy had contractual effect, there was no element of discretion attached to the making of a severance payment calculated as part of the redundancy schedule.
I return to the possibility of dispute. It was not merely hypothetical. On 21 June 2007, whilst the takeover battle remained unresolved, the directors of AAEP had been given legal advice from Clayton Utz as to their duties. One of the matters covered in that advice was the topic "Duties of directors of a trustee company". The advice stated that: … the better view is that it is the trustee company (rather than the directors of that company) which owes direct fiduciary duties to the relevant beneficiaries. Nevertheless, if the directors of [AAEP] were to pay insufficient attention to the interests of the beneficiaries, those beneficiaries could seek remedies against the company for breach of trust.
The author of that advice attended the board meeting of AAAH held on 28 June 2007. It is clear from the minutes that the advice was provided to all directors of AAAH.
The trustees obtained further legal advice from Clayton Utz. That advice was tabled at a board meeting of AAAH held on 6 July 2007. It pointed out what should have been in any event obvious, that Mr James' involvement went well beyond those of an ordinary employee (including, if there is such a thing, an ordinary CEO). It pointed out that there was a real potential for disputes, including allegations of breach of fiduciary duty, in which Mr James and the other directors might be involved.
The potential for dispute was reinforced by a letter of 11 September 2008 written by Messrs McKeith and Dawes, as directors of and on the letterhead of AAEP, asserting in no uncertain terms, and for reasons very clearly given, that RBS had been acting inappropriately, and that its actions might have an adverse impact on the interests of employees under the EIP.
The letter of 11 September 2008 asserted that it was the clear view of the majority of the directors of AAEP "that RBS's various actions have caused significant damage to the value of" EIP shares. Some seven specific complaints were made, including "RBS restricting balance sheet support for AAAH's securitisation business…". They were said to be "only a selection from the significant number of reports of the detriment caused by RBS's conduct which are regularly brought to the attention of certain members of AAAH's management team… and which give rise to serious concerns about the impact of RBS' conduct on the interests of [participants in the EIP]".
The letter proposed, as a way of resolving the complaints, that RBS make an offer for EIP shares, at a value which, it may be inferred, was significantly higher than RBS thought was reasonable.
The letter further warned that if a satisfactory resolution were not reached, AAEP "will have no alternative but to take steps to ensure that it is able to fulfil [its] fiduciary obligations" towards beneficiaries of the EIP, and to protect their interests "by whatever means" were available.
The reply, written by Mr Brian Crowe (who according to his letterhead was the chief executive of RBS) simply rejected the demands and "declined" the offer to buy out the shares at the stated price.
It was not suggested to Mr McKeith that the letter, of which he was a signatory, was a bluff, or bluster, or that the grievances expressed in it were not genuinely held. Of course, RBS took the position that there was no misconduct for which it could be called to account. It may well have been right in that. The simple point is that, both before and after the time that Mr James was made redundant, and certainly at the time when the draft deed of release was proffered to him, there was a real likelihood of dispute, in which he, as former CEO and director of AAAH and as a former director of AAEP, might well be embroiled. Had he signed the release offered to him, he would have signed away all right of recourse, or contribution or indemnity, from (among others) AAAH, AAEP and RBS.
In my view, a deed which had that effect went well beyond any legitimate purpose contemplated by the redundancy policy. Accepting for the moment the proposition that the deed could properly be required to document the termination of the relationship of employee and employer, and the discharge of responsibilities owed by each to the other arising out of that employment, it simply does not follow that it was legitimate to require the employee to sign away rights of the kind to which I have referred, in a situation where it was at least possible that those rights could be called upon.
As I have said, I conclude that the deed of release required of Mr James went beyond what was contemplated by the terms of the redundancy policy, on their proper construction and on their application in the events that prevailed at the time Mr James was made redundant.

[35]

Relevant provisions of Mr McKeith's deed of release

Mr McKeith's deed was in form a deed poll, not a deed inter partes. The deed was said to be made in favour of AAAS and all its related bodies corporate, all of whom were to be comprehended within the expression "ABN AMRO".
The deed recited Mr McKeith's period of employment, the termination of his employment "due to redundancy", and an agreement "to settle all claims arising from" that employment, "including the termination of that employment".
Clause 1 provided for a payment to be made to Mr McKeith as set out in Annexure A. It included statutory and contractual entitlements and a severance payment. There was no provision for an ex gratia payment on account of bonus. Clause 1 read: 1. PAYMENT TO THE EMPLOYEE In consideration of ABN AMRO agreeing to pay the Employee an amount of $375,961.54 (gross) calculated in accordance with Annexure "A" to this Deed, less applicable tax, within 7 days of the delivery of this Deed duly executed by the Employee to ABN AMRO, the Employee covenants as follows:
The amount identified in cl 1 is for the severance payment only.
Clauses 2, 3 and 4 dealt with "release and indemnity", and their consequences: 2. RELEASE & INDEMNITY The Employee releases and indemnifies, and will keep indemnified, ABN AMRO and all of its directors, secretaries, officers, employees and agents in relation to all claims which the Employee now, or at any time in the future may have against ABN AMRO, arising from or related in any way to the Employee's employment with ABN AMRO and the termination of that employment. 3. AGREEMENT NOT TO COMMENCE PROCEEDINGS The Employee undertakes not to commence any proceedings against ABN AMRO arising out of or in any way related to the Employee's employment by ABN AMRO or the termination of that employment. 4. BAR TO PROCEEDINGS This Deed may be pleaded in bar by ABN AMRO to any proceedings commenced, continued or taken by the Employee or on the Employee's behalf, in relation to the Employee's employment with ABN AMRO or the termination of that employment.
The released party, "ABN AMRO", offered no reciprocal or mutual release.

[37]

Decision

The draft deed proffered to Mr McKeith provided that the covenants to be given by him were in consideration of payment of part only of a redundancy package, namely the "Severance Payment" portion.
No doubt, that reflects the fact that the only other payments offered were those to which Mr McKeith was entitled either under statute or as a matter of contract.
Although the release that Mr McKeith was asked to give was not drafted in as much detail as that which Mr James was asked to give, it was, nonetheless, extremely wide in its terms. What was to be released (and the release is backed up by the provisions of cls 3 and 4) was any claim arising from or related in any way to his employment, or to the termination of that employment.
As was the case with Mr James, the release was offered to AAAS and its related bodies corporate. It did not, however, extend to past or present officers and employees of those various entities.
Further, and conspicuously, the released entities did not themselves offer a release to Mr McKeith. Nor did AAAS offer any indemnity in respect of claims that the released entities might make against Mr McKeith.
As I have indicated already, Mr McKeith was heavily involved in the EIP and the negotiations to buy out the shares held by AAEP. Again, there was the threat of disputation in relation to those shares. The effect of the release (if given) could well be that Mr McKeith might forfeit any claim to contribution or indemnity from AAAS or its related bodies corporate in respect of any claim that might be made against him. However, he did not have the protection of a corresponding release from those entities, in the event that a claim were made against them which they sought, in whole or in part, to pass on to him.
Put shortly, the draft deed, if executed and delivered, would have stripped Mr McKeith of any claim that he might have against his employer and its related bodies corporate, but did not give him equivalent protection in respect of any claim that they might bring against him. Nor did it give him any protection in respect of claims that others might bring against him, arising out of his performance of the various duties and incidents of his employment.
So viewed, the draft deed in my view went beyond what could properly be required on the proper construction of the redundancy policy, considered in the context of events occurring around the time it was submitted to Mr McKeith, 26 November 2008.

[39]

The agreed statement as to what had been done

It might have been thought that documentary evidence in the former category would not be susceptible of much in the way of dispute. However, the parties' closing submissions (including written submissions in chief and in reply, and oral submissions) revealed deep differences as to what (if anything) might be inferred from those documents. That did not seem to me to be satisfactory. Accordingly, I directed Counsel to confer and to produce an agreed statement (so far as they were able) of what was shown by those documents.
The agreed statement was tendered by consent. Omitting formal parts and citations, it reads as follows: 1. The exhibits contain documentary records relating to the retrenchment of 45 individuals at Director or Executive Director level, from positions of employment in Australia, with AAS or (in 5 cases) related companies, which occurred between July 2001 and September 2008. 2. In most cases, the documents do not provide a complete picture as to how the payments to be made to such employees on retrenchment were decided upon. 3. The documents indicate that: a. It was the practice to pay to such employees on retrenchment severance payments calculated in accordance with the Redundancy Policy. b. Such employees were required to sign a Deed of Release in connection with their retrenchment, which set out the payments to be made to them and contained a release (occasionally mutual releases) by the employee of the employer company, its related bodies corporate and their officers, employees and agents from all claims arising from or related in any way to the employee's employment with the employer and termination of that employment. c. The discretion under the Redundancy Policy in relation to the making of an ex gratia payment was sometimes exercised in favour of such an employee and sometimes not. 4. Of the 45 individuals in question: a. At least 16 appear to have received an ex gratia payment on retrenchment: i. 7 of whom received an ex gratia payment which approximated the formula in the Redundancy Policy; ii. 4 of whom received an ex gratia payment, the amount of which was significantly less than the maximum amount provided for in the Redundancy Policy; iii. 1 of whom received an ex gratia payment, the amount of which was significantly more than the maximum amount provided for in the Redundancy Policy; and iv. 4 of whom received an ex gratia payment, in respect of which there is insufficient information to ascertain how that payment relates to the maximum amount provided for the Redundancy Policy. b. 6 received a bonus payment on retrenchment pursuant to a contractual entitlement; c. At least 17 do not appear to have received an ex gratia payment on retrenchment; d. There is contention between the parties as to whether or not a further 6 can reasonably be inferred to have received an ex gratia payment on retrenchment. 5. If it becomes important for its reasons that the Court determine with any greater precision: a. The number or proportion of such employees who can be inferred to have been made an ex gratia payment under the Redundancy Policy; or b. How any particular ex gratia payment was determined in the case of any particular individual, then the parties stand on their written submissions in that regard.

[40]

Summary of the contemporaneous documents

Leaving aside statements made by persons who may have been thought to have an interest in presenting their view of what the procedures etc ought be rather than what they were (for example, statements made by Mr McKeith at a time when he had decided not to remain in employment), the contemporaneous documentary evidence consists of the following: 1. a letter written by Mr John McAlpine, then the "Head of Human Resources" for AAAS, to a retrenched employee dated 4 August 2006. That employee had apparently requested an ex gratia payment. Leaving aside formal matters, Mr McAlpine stated the policy as follows: Re: Your Request for an Ex Gratia Payment … The position regarding ex gratia payments is: 1. According to our redundancy policy, pro rata bonus is not paid on retrenchment. 2. It is, as you have noted, possible for us to exercise discretion to vary this. 3. It is our obligation to exercise any discretion fairly and equitably. 4. From time to time in recent years, we have exercised that discretion, but very unusually. 5. In order to remain consistent, unless there is an individual reason to vary the redundancy policy to pay pro rata bonus as an ex gratia payment, we do not. We have reviewed the position and, based on our knowledge of your circumstances, we believe there are no grounds to vary the policy. Although Mr McAlpine did not give evidence, there is no reason to think that, in the letter in question, he did anything other than state his understanding of the policy at the time the letter was written. I infer, from the fact that the addressee was one of the 45 individuals whose records appeared in the relevant exhibit, that she was, as the index to that exhibit states, someone who had been employed at "Director Level or Above". That inference is strengthened having regard to the description of the records in para 1 of the statement of agreed facts and the fact that the exhibit to which that statement relates contains only 45 sets of records. 1. On 16 November 2007, Ms Fung quantified the amount payable to Mr James on redundancy on a basis that was entirely consistent with implementation of the procedures etc, in relation to ex gratia payments, asserted by the plaintiffs. Although Mr Sheahan submitted that Ms Fung, as an employee of RBS, might not have had a detailed knowledge of the relevant procedures etc, I would not infer that someone at her level of seniority had not taken whatever steps she regarded as sufficient to enable her to state with confidence the outcome of the application of the redundancy policy to Mr James. She was not called, and thus has not been heard to say that she was mistaken or ignorant in what she did or said. 2. On 1 October 2008, Mr Williams identified the "AAAH good leaver policy" in terms that included "(for Directors and above) the average of the previous two years bonus pro-rated for time served in current year". Again, Mr Sheahan submitted that Mr Williams might not have been thoroughly conversant with the procedures etc. I see no reason to think that someone in his position, CEO of the merged organisation, would not have taken whatever steps he regarded as appropriate to satisfy himself that what he wrote was correct. Again, Mr Williams has not been called to say to the contrary. 1. Ms McArdle made a broader statement of the policy, in an email of 20 October 2008. She said, and it is incontestably correct, that the policy in relation to ex gratia payments was "something to be determined by the business in light of custom and practice, timing of exits and engagement of staff going forward (i.e. perceived treatment of exiting employees)". 2. Two days later, in another email, Ms McArdle explained to Mr Williams that the relevant policy was: The ex gratia would be reflected in practice around the seniority in the organisation and timing (i.e. reflective of contribution to year to date that should the role not be redundant be compensated in bonus for contribution. The syntax may be a little confused, but the essential message is clear enough. 1. On 22 October 2008, Mr Williams, in response to a request from Mr McCormick for a summary to assist in the calculation of redundancy packages for Mr McKeith and Mr Dawes, stated among other things that: The redundancy policy within ABN Aus is one month for each year served. Historically, discretionary ex gratias have been made to senior individuals who are 'good' leavers equivalent to the average of the previous two years bonus pro-rated for their time in the current year. 1. Mr Williams essentially restated that understanding in another email written some 8 days later. 2. On 31 October 2008, Mr McKeith sent an email to Mr Williams referring to his request that "my conditions of termination are handled using the same precedence [sic] which have been used many times before under the AAAH policy of discretionary payments…". Mr Williams sent that email to Messrs Workman and McCormick adding a covering message which stated, among other things, that: … the historic discretionary approach previously adopted within AAAH (average of last two years bonus) and… his seniority, attitude and behaviour to date, and indeed the commitment he is prepared to give moving forward, warrants this treatment. 1. On 3 November 2008, Mr McKeith stated his understanding in an email to Mr Workman: a policy of making, among other things, an ex gratia payment of the average of the last two years' bonus pro rated for the current year "as the standard formula". Neither Mr Workman nor Mr Williams (who was copied in on the email) contradicted it. Mr Workman was called to give evidence. He did not say that, to his understanding, the statement of policy was incorrect. 2. On 6 November 2008, Ms Rosalind Wong of RBS Human Resources, who worked for Ms Fung, referred to "the legacy ABN practice of paying ex-gratia equivalent to average of last 2 years bonus… plus severance". 3. Ms Wong reiterated that view, or understanding, in an email sent the next day to Ms Fung. Ms Fung did not reply saying that Ms Wong was mistaken. 4. On 10 November 2008, Mr Dawes sent an email to Ms McArdle and, the next day, an email to Mr Workman, which referred to: ABN AMRO's consistent practice… to make redundancy payments based upon… in addition to a pro rata performance bonus … the average of the bonuses received during the preceding two years. Mr Dawes said that the practice "is very well known within the business". There was no contradiction. Mr Workman did not canvass the proposition in his evidence.
There was at least one other email referred to in submissions. Since it was sent by Mr McKeith to the chairman of AAAH, at a time when Mr McKeith was asserting his position, I will not trouble to set it out. In that email, Mr McKeith reiterated his view as to what the practice was.
When Ms McArdle was asked to calculate the termination payment to be made to Mr James, she recommended an ex gratia payment of the pro rata amount of the average of his prior two years' bonuses. In her affidavit sworn 21 November 2014, she said (para 6) that she thought that this was "appropriate… because of the time of year that he was being made redundant and because he was the CEO".
In similar vein, when Mr McKeith asked Ms McArdle to work out what his redundancy package would be, on various assumptions as to the date of termination, she produced three separate calculations. Each of those included an ex gratia payment of the pro rata amount (as at its assumed date) of the average of his prior two years' bonuses.
I accept that Ms McArdle was doing her job, not stating, in a definitive or binding way, the relevant procedures etc of AAAS. Nonetheless, she was a senior HR employee. She was the only HR employee called. Her duties included the calculation of redundancy packages for, among others, departing senior employees. Clearly, she thought that it was consistent with the existing procedures etc that such packages should include an ex gratia payment calculated in the way that I have described.

[41]

Some comments on the agreed statement

I do not propose to consider in any detail the 45 individual records. The parties have had an opportunity to prepare an agreed statement of what those records disclose. They have had the benefit of assistance from their respective clients, who know far more about the individuals and the circumstances of their terminations than does the Court. If the parties are unable to get more out of the records than they have stated, the Court is in no better position to attempt to do so.
I do however observe that, of the six individuals referred to in para 4(d), one was an employee of ABN AMRO Asset Management. As to the other five, were it necessary to make a decision, I would conclude that the better view is that they did receive a payment on account of bonus entitlements: in other words, an ex gratia payment, in respect of bonus, that may or may not have corresponded to a calculation of the kind to which Ms McArdle referred.
Even if those five are added to the 16 who appear to have received an ex gratia payment, the position would be no more than that: 21 may have received an ex gratia payment; 17 did not receive an ex gratia payment; and 6 received a bonus that does not appear to have been paid on an ex gratia basis.
There are some further comments that may be made. Of the 17 individuals who did not receive an ex gratia payment, four or five appear to have been retrenched either early in the relevant year (so that the loss of any expectation of bonus was not significant), or to have been perceived as poor performers (in some cases, they did not receive any bonus in the year before their retrenchment). Further, for two of those 17 individuals, the documents in evidence simply do not permit any conclusion to be drawn as to what (if anything) was paid on retrenchment, or what was the justification for whatever (if anything) was paid.
In those circumstances, I take the view that the best evidence of the procedures etc is that emerging from the contemporaneous documents that I have referred to at [295] to [299] above.

[42]

Conclusions

I conclude, as to ex gratia payments made as part of a redundancy package for employees at Director or Executive Director level, that there was a practice of considering whether to make an ex gratia payment on account of bonus up to a maximum of the average of the prior two years' bonuses, prorated for the length of time served in the year of redundancy.
Whether or not, in any individual case, such an ex gratia payment would be made would be decided, as Ms McArdle said in one of her emails, "by the business in light of custom and practice, timing of exits and engagement of staff going forward (i.e., perceived treatment of exiting employees)".
In practice, any payment would reflect the seniority of the individual and the timing of redundancy (which in turn would take account of that individual's contribution to the business in the year of redundancy).
The policy was not applied invariably. On any view of the documentary material, there were cases when it was not applied. Whether those cases can be explained because the individuals were not "good leavers", or had performed poorly, is something that the evidence does not explain.
In general, however, at least for very senior employees, the starting point appears to have been in effect a presumption that there would be an ex gratia payment - that is to say, the approach indicated in Ms McArdle's calculations for Mr James and Mr McKeith. Nonetheless, whether that starting point would mature into an offer of a redundancy payment including such an ex gratia element would depend, among other things, on the line manager or business unit manager of the individual in question.
Those conclusions might be thought to be inconsistent with Mr McAlpine's statement of "the position regarding ex gratia payments" in his letter of 4 August 2006 ([295(1)] above). I do not regard that statement as particularly persuasive. The starting point, according to Mr McAlpine, is that "according to our redundancy policy, pro rata bonus is not paid on retrenchment". However, the policy itself makes it very clear that, depending on "circumstances", there may be an ex gratia payment included in the package up to the maximum appearing from the calculation set out.
To be fair to Mr McAlpine, the very next statement in his letter recognises the discretion, and follows that up with an acknowledged obligation to exercise the discretion fairly and equitably. But to my mind, overall, the letter is not a fair representation of what is stated in the redundancy policy.
It may have been that the letter was written in an attempt to head off a claim by the employee in question. Since Mr McAlpine did not give evidence, that possible explanation must remain speculative. It is enough to say that in my view, to the extent that the statement is inconsistent, either in outline or in matters of emphasis, with the detail of the procedures etc emerging from the other documents to which I have referred, then the latter should be preferred.
It does of course follow from what Mr McAlpine said (and I do not think it was contentious) that AAAS understood that it was obliged to exercise the discretion, in any individual case, "fairly and equitably". The exercise was required to take into account, and be consistent with, the purposes for which the discretion was given.

[46]

The case advanced at trial

There was an important variation between the pleaded case as to reliance and the case advanced at trial. The pleaded case is that Mr McKeith relied on the representations said to have been made to him by not pursuing the possibility of alternative employment, but instead remaining in the employ of AAAS after those representations were made and up until 5 December 2008.
The case advanced at trial was that Mr McKeith relied on the representations in deciding not to take up the position that he was offered by AAAS, to remain working for AAAH (with a guaranteed bonus for 2009 of $3 million).
Further, it might be thought from even a careful reading of the pleaded case that Mr McKeith was asserting that Ms McArdle had represented to him what his entitlements would be on redundancy ("representations were made [that] in the event… of redundancy, he would be paid…"). However, in written closing submissions in reply, Mr West submitted at para 53 that the representations alleged "were not as to what Mr McKeith would actually be paid on retrenchment per se, but what he would be entitled to under the terms of the redundancy policy".
That is significant. Whether it represents a change in the pleaded case, or is merely an interpretation of the pleaded case that, with careful thought, is reasonably arguable, is a matter that does not require a decision.
By September 2008, Mr McKeith, as I have said above, had received a copy of the redundancy policy and had had its authenticity confirmed to him. Mr McKeith is plainly an intelligent and capable man. I have no doubt that he read the policy. It must have been apparent to him that the making of ex gratia payments was discretionary, "depending on circumstances", and (if to be made) calculated in accordance with the formula set out.
I mention this now because, it seems to me, it provides the real explanation of Mr McKeith's not entirely consistent evidence as to what it was he understood was represented to him by Ms McArdle.
The submission to which I have referred at [319] was put in answer to the submission that, to Mr McKeith's knowledge, Ms McArdle was neither representing, nor had the authority to represent, Mr McKeith's entitlement. Whether or not want of authority was pleaded, it is clear enough, as I shall show, that Mr McKeith did understand that Ms McArdle had no authority to determine the amount of his redundancy package, and that what she was providing him was in essence an indication of what he would get if the policy were applied in full.
In short, on the case as it was finally put, the representation can have been no more than a representation of what the redundancy payment would be, if calculated at various assumed termination dates and on the assumption that the discretion to make an ex gratia payment, in accordance with and to the limit of the formula in the policy, were exercised in Mr McKeith's favour.
On that characterisation, what Ms McArdle said was in substance and at the time entirely accurate: if AAAS exercises the discretion in full in your favour, this is what you would get on the various dates.
The underlying premise is that the circumstances in which Mr McKeith's employment terminated would amount to redundancy, so as to engage the policy. As I have said, I have some doubt about that. But since the parties did not raise it as an issue, I shall deal with this aspect of the case by considering and reaching a decision on the submissions that each advanced.

[49]

Reliance

The second and third answers upon which Mr Sheahan relied raise, in different ways, the question of reliance.
Mr McKeith's evidence was that, come September 2008, he was considering his employment position. At that time, attempts to sell parts of the business of AAAH had failed. RBS was merging the operations of AAAH with those of RBS Australia. As I have set it out above, Mr McKeith's evidence was that he discussed his position with Mr Williams; Mr Williams offered him a position in the merged operations; and Mr McKeith, as Mr Williams recognised was likely to happen, considered whether to stay or whether to go.
Mr Williams reported on those topics to Ms Fung, with a copy to Mr McCormick, by email dated 1 October 2008. In that email, Mr Williams identified, as an issue that needed to be dealt with, "how we deal with those ABN Aus seniors who are not part of the new top structure who may legitimately feel they should be". The email identified Mr McKeith as one of those "seniors". It said: In Col's case it's not reasonable to expect that he may be suitable for any other role, so we need to be clear on the basis when, how and on what terms he exists [sic; obviously, "exits"]. I suspect there may be some legitimacy around constructive dismissal. Can you let me have your views here please. AAAH good leaver policy to date has been 1 month for every year served plus (for Directors and above) the average of the previous two years bonus pro-rated for time served in current year. We're very shortly going to have to come to a landing on this policy as its [sic] going to impact many staff! … Associated with - especially in Col's case, will be the analysis he will undoubtedly do which is all around "what do I get if I stay" and "what do I get if I go". There are circumstances it [sic] would make sense for Col to stay and, other things being equal, in terms of incentivising him to stay, I am assuming we would be prepared to guarantee a March 2010 bonus (as we did in HK) but I also think we need to offer a similar guaranteed position for March 2009.
In short, it was apparent to the decision-makers in RBS that Mr McKeith, as part of his process of consideration of the offer of employment, would look at what he might get were he to leave. It is equally clear that Mr Williams at least understood that the circumstances in which Mr McKeith might leave (i.e., if he rejected the offer of employment) might amount to "constructive dismissal" so as to trigger the operation of the redundancy policy.
Against that background, Mr McKeith said, and I accept, that he consulted Ms McArdle. Ms McArdle could not remember the details of the conversations, as Mr McKeith had given them. However, she agreed that it was at least possible that such conversations had occurred. If there had been no conversation to the effect of those to which Mr McKeith deposed, it is difficult to explain why, as happened, Ms McArdle would have produced calculations of the redundancy payment that Mr McKeith might receive were he to become redundant on one or other of three specified dates.
One of those calculations assumed termination on 12 September 2008. Another assumed termination on 31 December 2008. The third assumed termination on 31 March 2009. The calculation as at 31 December 2008 referred explicitly to "Col McKeith". The other two referred to "Jimmy 09". It was not suggested that the "Jimmy 09" calculations related to anyone other than Mr McKeith.
For present purposes, the salient features of the calculations are: 1. each included an allowance for a "Severance Payment"; and 2. each included a calculated "Ex-Gratia Payment".
Each of those components varied according to the assumed date of termination.
For the calculation as at 31 March 2009, the supporting documents show that it was performed in accordance with the redundancy policy: the average of the two prior years' bonuses, pro-rated for the period of service during 2009.
The supporting documents are not available for the other two calculations. However, it is reasonably clear that in each case, the calculation was performed on the same basis.
Ms McArdle said that, although she did not recall preparing the documents, any redundancy calculations which she may have provided to Mr McKeith "were indicative only, based on certain assumptions". I accept that evidence. As Mr McKeith understood, Ms McArdle had no authority to approve, or to bind AAAS to, the making or the amount of a redundancy payment. The calculation worksheets do not suggest otherwise.
Mr West submitted that Ms McArdle had not told Mr McKeith that she regarded the calculations as "indicative only". However, for the reasons I have given at [317] to [325] in discussing the issue raised by para 53 of Mr West's written closing submissions in reply, that must be in substance how Mr McKeith understood the matter. As I have said, it is not Mr McKeith's case that Ms McArdle represented to him what he would actually be paid on retrenchment. His case is that she represented to him what he would be entitled to under the terms of the redundancy policy (if the discretions were exercised in his favour).
Since Mr McKeith understood clearly that Ms McArdle had no authority to decide the question of entitlement (I will turn in a moment to his evidence on this point), it is obvious, from the way that his case is put on this issue, that he took Ms McArdle's calculations as statements of what would be paid if the terms of the redundancy policy were followed in his case, and if the various discretions were exercised in his favour. In short, although neither Mr McKeith nor Mr West used the phrase, Mr McKeith must have understood, and the way his case is now put on this issue confirms, that the calculations were "indicative only".
It is convenient at this point to note para 155 of the submissions in chief for Mr McKeith. That paragraph refers to and quotes part of para 183 of Mr McKeith's affidavit affirmed 23 May 2012.
Paragraph 155 of the submissions reads: Mr McKeith's evidence - McKeith, 23 May 2012 [183] - was that he decided he would not take up the offer of Head of Financial Markets and Sales which he was then being offered by Mr Williams in part because: "I understood from my knowledge of the Written Redundancy Policy, the commitment made by the Consortium in relation to redundancy policies and practices and my discussions with Ms McArdle that I would receive a redundancy package calculated as set out in the First, Second and Third Written Advices".
It is by no means clear that what Mr McKeith said in the quoted subparagraph was relevant to issue 12. That issue deals with the promissory estoppel case. It is no part of Mr McKeith's pleaded promissory estoppel case that the representations on which he relies as constituting the promise included "the Written Redundancy Policy" or "the commitment made by the Consortium in relation to redundancy policies and practices". The promissory estoppel case is limited, based on oral and written representations respectively made and provided by Ms McArdle to Mr McKeith on about 9 September 2008. Neither the pleaded representations nor the pleaded reliance go beyond that, to the terms of the redundancy policy itself or to the consortium's commitment in relation to redundancy policies and practices.
Returning to the pleaded case: Mr McKeith knew that before a departing employee would be offered a redundancy package, the proposed payment had to be "discussed and agreed with the line manager and the business unit head". He knew that Ms McArdle did not have authority to decide whether or when his employment would terminate; whether an ex gratia payment would be made; or what the amount of any such payment might be.
Those matters appear clearly from a key passage in the cross-examination of Mr McKeith. Although the passage is lengthy, I set it out in full (T142.15-145.10): Q. You had seen a copy of a AAAH redundancy policy some time around 2005, you say? A. That's not correct. I'd heard of the policy. I didn't see it till 2007. Q. Seven. When you saw it, did you read it? A. Sure. Q. Can we have a look at it? It's in volume 1 of PX1 at page 29. You will see there a three page document. Can you say whether that is the redundancy policy to which you are referring? A. That's correct. Q. You will see it deals with ex gratia payments on the last page, 31, in the last box? A. Yes. Q. You understood when you read it that the payment of ex gratia amounts was discretionary on the part of AAAH under this policy? A. Yes. Q. You understood when you read it that the exercise of the discretion would depend upon the circumstances as they existed at the time the discretion was being exercised? A. Yes. Q. You understood that the policy also called the execution of a deed of release? A. Not specifically but - so I guess in - no. Q. If you go back to page 29, in the second box on the page, you will see in the third paragraph, in the second line, it says, "The HR adviser will prepared the deed of release." Do you see that? Those words? A. Sorry. Which box? The second box? Q. Yes. The second box, the third paragraph, it commences, "In cases where outplacement", and the next sentence-- A. Yep. Q. --is, "The HR adviser will prepared the deed of release"? A. Yes. Q. We take it that when you read this document, you read that sentence? A. Yes. Q. If you go down two more paragraphs, you will see a paragraph commencing, "At the meeting"? A. Yes. Q. A deed of release is referred to twice in that paragraph? A. Yes. Q. In the second sentence, it is made plain, I suggest, that a deed of release being executed is a precondition before final payment; do you agree with that? A. Yes. Q. You read all those things when you read this policy? A. I would've read them. Yes. Q. So we can take it that you understood that the policy provided for the execution of a deed of release as a precondition to payment of severance packages? A. Yes. Q. Did you forget about that subsequently, did it slip from your mind? A. It wasn't a detail that I - you know, I recall that when I - at this point. Q. Did you ask anyone for a copy of the deed of release? A. No. Q. You also understood, I suggest - I will take you to the text. In that second box on the page, again, in the second paragraph commencing, "The HR adviser", you will see it says that: "That person will work with members of the HR team to prepare a redundancy schedule based on the terms of the policy taking into account length of service." And then it says, "The schedule is discussed and agreed with the line manager and the business unit head." You read that? A. Yes. Q. You understood from it, I take it, that the ultimate decision about the package to be offered was something that had to be discussed and agreed between someone from human relations, the line manager and the business unit? A. Yes. Q. So that the authority for making decisions about severance packages resided in a group, as it were, including HR but including business personnel? A. Yes. Q. It would follow from that that an individual HR representative would have no authority to determine what a severance package for any particular employee was, as you understood it? A. No. My understanding was that HR determined the package that was going to be delivered and it went to the business head for approval for the expense to be paid. Q. What if the business head didn't approve it? A. In my experience, the business head took the HR department's recommendation. Q. What experience did you have of that? Did you participate in any such decisions yourself? A. Sure. Q. How many? A. I can't remember exactly the number but it would've been more than ten I guess. Q. Are you saying to his Honour that what you did in each case was simply adopt the schedule proposed by the HR managers? A. Yes. Q. Without discussion? A. I, I accepted that the HR department understood the policy, it understood the reason for the redundancy and I took that to be the minimum amount that, that the organisation would have to submit for the redundancy. Q. So you never suggested or discussed with the HR people the possibility of doing anything different? A. No. Q. You can say nothing, however, about what was done by other officers who were discussing redundancy determinations with HR? A. I can only talk about what I discussed. Q. Just going back to this text, you see it says, "The schedule is discussed and agreed with the line manager and the business unit head." Those words, "and agreed", didn't they not convey to you that the assent of the line manager and the business unit head were necessary? A. The request that would come to me would be this would be the package that's, that's been prepared, this is what we, we recommend based on the policy and I would be asked, you know, that - to approve that amount and that's what I did. Q. Your understanding, having read this policy, was that absent your approval, the HR representative had no authority to commit the company to the payment of any amount by way of severance to a staff member? A. That's correct. Q. When you were dealing with Ms McArdle in September 2008 in relation to those documents we saw earlier today, you had the same understanding, didn't you, that she wasn't able to give you a commitment that bound AAAH as to what your redundancy package would be; correct? A. That's right.
It is apparent from the last two questions and answers that, when Mr McKeith was dealing with Ms McArdle in September 2008, in the way that that is said to give rise to the promissory estoppel, he knew that Ms McArdle could not bind AAAH as to a payment to be made to him in the event of redundancy. It was not suggested that any different position might follow simply because the employer was AAAS rather than AAAH.
To my mind, that evidence is destructive of the promissory estoppel case. It demonstrates, and I find, that: 1. Mr McKeith knew that Ms McArdle was not making a promise of entitlement that, were it accepted, could bind AAAS; 2. Mr McKeith knew that the ultimate decision would lie with someone else, and that Ms McArdle was not signifying to him, in giving him the calculations he requested, that the decision would be made to pay the amounts indicated should Mr McKeith become redundant on any of the three dates stated; and 3. Mr McKeith understood that the calculations were no more than indications of what he would receive were he to become redundant on one or other of those dates, and were a decision to be made (by someone other than Ms McArdle) to make an ex gratia payment at the highest amount for which the redundancy policy provided.
There is other evidence that supports those findings.
I have referred at [184]-[188] above to Mr McKeith's evidence of his negotiations with Mr Williams between mid-October and early November 2008. There was no reason for Mr McKeith to seek "to agree the terms and numbers now" (in mid-October 2008), or "to agree a separate date and the terms of my redundancy package" (in early November 2008), if he understood that a binding commitment had been made in September 2008 as to what he would get were his employment to terminate on 31 December 2008 or 31 March 2009.
Mr West submitted that, since Mr McKeith had not been cross-examined on those paragraphs of his affidavit with a view to suggesting that they worked against his case on reliance, the Court should not accept that they did. I do not agree. That was evidence given by Mr McKeith in chief. The Court is entitled to make of it what it will. More importantly, it forms part of the evidentiary mosaic. The Court is entitled to consider the whole mosaic, with all the pieces in place (to the extent that they are available), in reaching its conclusion on the question of reliance.
So far, I have dealt with the first aspect of reliance: that there was no reliance because Mr McKeith understood that Ms McArdle had no authority to bind AAAS when she made the representations.
The second matter raised in relation to reliance is that Mr McKeith did not rely on the representations in any event because he had independently, and without regard to what was represented to him, decided not to take up the position that was offered to him. This matter requires consideration of evidence given by Mr McKeith and Mr McCormick.
Mr McKeith and Mr McCormick agree that there was a meeting in early May at which, among other things, they discussed Mr McKeith's position in the merged business. They appear to agree that the discussions took place in Hong Kong, Mr McKeith having flown there with Mr James to discuss matters with Messrs Workman and McCormick.
Mr McKeith said that the discussions in Hong Kong occurred on 4 and 5 September 2008, and that the particular discussions in relation to his role in the merged business were on the second day (5 September). Mr McCormick said that the relevant discussions occurred on 3 September 2008. To the extent that the difference in date matters, I prefer Mr McCormick's evidence. It is corroborated by an email that he sent to Messrs Worman and Williams and Ms Fung in the evening of 3 September 2008. It is obvious that the email was sent following, and recapitulates, the discussions between Mr McKeith and Mr McCormick as to Mr McKeith's possible position in the merged entity.
Mr McKeith said that Mr McCormick gave him a document which offered him the position of Head of Financial Market and Sales, with a guaranteed minimum bonus of $3 million, payable in March 2010 in respect of the calendar year 2009. He noted that the responsibilities were substantially less than those that he had undertaken as head of global markets for AAAH.
Against that background, Mr McKeith said that he told Mr McCormick that "[t]he role you are offering me is about a quarter of what I am currently doing so it is not really a challenge that I am interested in. I did this role years ago, why would I want to do it now?"
Mr McCormick did not suggest that the conversation (in substance, if not in precise words) was other than as stated by Mr McKeith.
On 5 September 2008, Mr McCormick sent an email to Mr Williams, apparently to update Mr Williams on his discussions with Mr McKeith. The email started by noting that: Col has pushed back on the proposal and now seems not to want an offer for 2009… .
I understand this to mean that, as Mr McCormick at least understood it, Mr McKeith had confirmed that he was not interested in the offered position.
That does indeed seem to have been Mr McKeith's attitude. He said in cross-examination (T145.31-.41): Q. You were offered a position by Mr McCormick in early September 2008? A. Yes. Q. It was really rather unattractive to you as a job; do you agree? A. It was a smaller job than the one I was doing at the time. So it, it didn't appeal. That's correct. Q. You indicated to Mr McCormick that you weren't interested in it? If that was the job, you were not interested? A. At the time I indicated I wasn't there to talk about the job, the package that he was offering. At the time I was there to negotiate the EIP.
Thereafter, RBS tried to make the offer more attractive by increasing the responsibilities that Mr McKeith would have in the position offered to him. The effect of Mr McKeith's evidence was that the expanded offer was still unattractive (affidavit affirmed 23 May 2012, para 160; T146.18-.31; it is not necessary to set out the relevant passages).
It is clear from Mr McKeith's evidence that, in early September 2009, he saw his "primary role [as being] to unwind the EIP" (T146.39-.40), "not trying to look at my employment" (T146.41-.42). He agreed that resolving "the EIP issue" was part of his thinking, and that another part was that he would leave if RBS was unable to offer him a more attractive position (T146.45-147.3): Q. Your view was in September 2008, I suggest, that you were keen to stay on, in particular to get the EIP issue resolved? A. Yes. Q. That was part of your view and it was also part of your view that if, having done that, RBS wasn't able to offer you a significantly more attractive position than the ones they had been talking about up to that point, you would prefer to take employment elsewhere? A. That's correct.
The various discussions between Mr McKeith and Mr McCormick, and Mr McKeith and Mr Williams, which underlie the paragraphs of the affidavit and passages of transcript to which I have referred, all occurred before the discussions between Mr McKeith and Ms McArdle, and the provision by the latter to the former of the worksheets, on 9 and 10 September 2008.
Mr Sheahan's submissions identified the shift in reliance between the case that was pleaded and the case that was put at trial. The pleaded case was that Mr McKeith relied on Ms McArdle's representations by not pursuing the possibility of alternative employment, but instead remaining in the employ of AAAS. As Mr Sheahan rightly noted, there was no evidence to support that pleaded case.
The case that was opened and run at trial was that Mr McKeith relied on Ms McArdle's representation in deciding not to take up the offered position. Mr Sheahan's final factual answer to that case was based on the evidence that I have summarised. Based on that evidence, Mr Sheahan submitted that Mr McKeith decided not to take the offered position simply because it did not interest him - it was much less than the role that he had performed for AAAH as Head of Global Markets (and that remained so even when the responsibilities attached to the offered position had been enhanced); it was a smaller job; it didn't appeal; and it remained unappealing even when the guaranteed bonus had been thrown into the mix.
Mr West submitted, in reply, that although there might have been several reasons why Mr McKeith did not take up the position (including that it did not interest him), the existence of possible multiple reasons did not of itself exclude reliance on the representations made by Ms McArdle as one factor influencing the decision, and hence as a matter relevant to be considered under the rubric of "detriment". Mr West noted that it had not been put specifically to Mr McKeith that, contrary to what he had said at para 183(c) of his affidavit affirmed 23 May 2012 (see at [346]), the decision was based entirely on his unwillingness to accept what, clearly enough, he perceived to be a position of reduced responsibility.
I accept that in considering detrimental reliance (as in considering questions of causation), there may be multiple factors that influence a decision to take, or not to take, a particular course of action. In an estoppel case, where it is necessary to prove detrimental reliance so as to hold the respresentor to its representation through the mechanism of estoppel, it is not necessary that the sole cause of the action or inaction said to constitute detriment should be reliance on the truth of the representation. It would be sufficient if that reliance were one of several effective causes of the decision to act, or not to act, that is said to constitute detriment.
Thus, in the present case, detriment is not disproved simply because Mr McKeith's decision not to accept the position that was offered to him had at least three causes, as explained in para 183 of his affidavit .
I have concluded that Mr McKeith did not understand that the representations made by Ms McArdle were anything more than an indication of what might be paid to him should the relevant discretions set out in the redundancy policy be exercised, in his favour, in full in the event of his redundancy. As a matter of logic, I do not think it possible to proceed and examine, on the alternative assumption that Mr McKeith had some different understanding, the respective contributions to his ultimate decision made by that understanding and by his lack of interest in the position that had been offered to him. However, assessing the evidence as a whole, I think that the better view is that Mr McKeith would not have taken the offered position in any event.
My assessment of Mr McKeith is, as I have said, that he is an intelligent and successful man, highly regarded in his chosen field of endeavour. Mr James said, more than once, that people who work, particularly at a high level, in enterprises such as AAAH do not work simply for the money. Implicit in that aspect of Mr James' evidence is that the challenges of leadership, and the challenges of performing difficult roles, offer other very real incentives to such people (among whom, of course, Mr McKeith should be numbered).
I accept that Mr McKeith stayed with AAAH for a while, to ensure that the negotiations over the EIP were concluded in a way that he regarded as satisfactory to the interests of employees for whose benefits shares were held in trust. In my view, that reflects the sense of responsibility that, undoubtedly, Mr McKeith saw as accompanying his seniority within the AAAH organisation.
Equally, Mr McKeith does not seem to me to be someone who would take a position simply because it was offered on terms that afforded him financial security. I have no knowledge of his personal financial circumstances at the time. Accordingly, I do not know (for example) whether the very substantial bonuses that had been paid to him in prior years were sufficient to afford him a life of some ease in any event. However, even if that were not so, I do not think that Mr McKeith would have taken the position offered simply because it would afford him financial security.
The impression that I have of Mr McKeith, formed both from his evidence and the documentary exhibits, is that he is a man who needs challenges. A role that did not offer him challenges would be unlikely to interest him. Particularly where, as he saw it, the culture of the organisation offering him that role was not a culture with which he felt comfortable, I do not think that he would accept the position simply because it offered a measure of financial security. As I see it, Mr McKeith is a man who, at the relevant time, had sufficient confidence in his own abilities to think that he would not lack for employment opportunities, outside the merged operation, that did offer him a significant sense of purpose and challenge. And I think that this was so even though, by the time that Mr McKeith left AAAS, the full impact of the Global Financial Crisis had hit.
In short, taking that impression into account, my view is that Mr McKeith would not have taken the position offered even if he had regarded the representations made by Ms McArdle to him as stating, in a way intended to be binding, the outcome should he not take that position.

[50]

Detriment

Whichever way Mr McKeith's case of reliance is put, the underlying assumption is that in the events that have happened, Mr McKeith suffered detriment. That must be so whether the reliance was manifested by not pursuing alternative employment (the pleaded case) or by not taking up the position offered in the merged business (the case opened and run at trial). So far, these reasons have proceeded without examining that underlying assumption.
Mr Sheahan submitted that there was no evidence to support a finding that Mr McKeith suffered detriment either by staying in employment or by not accepting the new position offered to him.
Mr West submitted that detriment was shown. That was shown, he said, because, when Mr McKeith rejected the offer of employment, he lost the guaranteed minimum bonus, any "further discretionary upside", and "the opportunity to negotiate for better terms". However, the submissions did not make any attempt to contrast the position in which Mr McKeith actually found himself, after the termination of his employment, with the position that he would have occupied had he taken up the offer of further employment.
It is clear that detriment is an essential element of promissory estoppel. In Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387, Brennan J at 428-429 set out what, in his view, were the six matters to be proved in order to establish what his Honour called an equitable estoppel: In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiffs action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant's property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiffs reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.
Detriment is important because, without it, there is nothing unconscionable in permitting a representor to resile from, or repudiate, its representation. And if detriment is shown, the Court's task is not simply to enforce the representation as though it had contractual effect. It is to mould relief appropriate to the nature of the representation and the nature of the detrimental reliance. In some cases, that may involve holding the representor to its promise. In others, it may involve no more than preventing the representor from withdrawing from its promise except on reasonable notice. In other cases again, it may involve no more than not permitting the representor to withdraw from its promise except on terms. And that is by no means an exhaustive statement of the available possibilities.
Mr West submitted that the contrast was clear, as was the detriment. Had Mr McKeith taken up the offer, he would have enjoyed the advantages that I have described. But in not taking up the offer, he received only a redundancy payment which did not include any ex gratia payment on account of bonus entitlements.
To my mind, that does not do enough to establish detriment. What is required is to contrast the actual position with the hypothetical position. The submissions put for Mr McKeith do no more than contrast one aspect of the actual position with what, it is said, was the hypothetical position.
There is a further assumption implicit in the way that the case was put for Mr McKeith. That further assumption is, that the discretion to make an ex gratia payment would have been exercised in Mr McKeith's favour, and at the maximum amount permissible under the redundancy policy. However, as I have now said more than once, this aspect of the case for Mr McKeith is put not on the basis that the representation fixed what he would actually be paid on redundancy but what he would be entitled to, under the terms of the redundancy policy, if the discretion were exercised in his favour in full.
Mr McKeith does not assert that there was a representation made that the discretion would be so exercised. Thus, the comparison between his actual position and his hypothetical position, as postulated in the submissions put for him, does not take account of the way that this aspect of his case was put.
On the evidence as it stands, and taking into account the way the case was put, I am not satisfied that Mr McKeith has proved any detriment.

[51]

Sword or shield?

I turn to the final answer: namely, that to grant Mr McKeith relief on the basis of promissory estoppel would be to permit him to enforce the promise as if it were a contract.
Mr Sheahan submitted, correctly on the authorities as they stand, that promissory estoppel cannot be used to enforce a promise as though it were contractual; or, as he put it, to outflank the necessity for consideration if a promise is to be enforced as contractual.
Mr West replied that the submission misunderstood the way that Mr McKeith put his case. He submitted that Mr McKeith was already in a contractual relationship with AAAS, through his contract of employment. The representations concerned the way in which he would be treated if that contract came to an end. Accordingly, he said, it was "an entirely conventional application of the doctrine of promissory estoppel".
The defensive nature of the doctrine of promissory estoppel appears clearly from decisions such as Saleh v Romanous (2010) 79 NSWLR 453 and Hammond v JP Morgan Trust Australia Ltd [2012] NSWCA 295.
In the former case, Handley AJA (with whom Giles JA and Sackville AJA agreed) said at [73] that "a promissory estoppel… is not the equitable equivalent of a contract, and cannot give the purchasers positive rights to rescind and recover their deposit that they would have had if the pre-contractual promise had contractual force".
Handley AJA said further, at [74], that "[a] promissory estoppel is a restraint on the enforcement of rights, and thus, unlike a proprietary estoppel, it must be negative in substance".
In the latter case, Meagher JA (with whom Basten JA and Bergin CJ in Eq agreed) said at [26] that "[a] promissory estoppel operates as a restraint on the enforcement of rights", citing, among other cases, the decision of Handley AJA in Saleh.
In view of the conclusions that I have reached, it is unnecessary to decide whether (as Mr Sheahan submitted) Mr McKeith is seeking to give promissory effect to the representations said to have been made to him. The difference between the pleaded case and the case that was run is of some significance. The pleaded case is that it was represented to Mr McKeith that, if he were made redundant, he would be paid among other things an ex gratia amount on account of bonus (in accordance with the redundancy policy).
By asserting, as the pleading does, that AAAS is estopped from departing from that alleged representation, Mr McKeith in my view was seeking to enforce the representation as though it were a contractual promise.
However, as the case was finally put, the position may be different. The representation is said to have been as to what Mr McKeith would be entitled to receive under the terms of the redundancy policy. If, thereby, it were intended to say that the representation encompassed that the discretion would be exercised in his favour, then it is open to the same objection. If, however, it were intended to say that the representation was no more than a statement of what Mr McKeith would receive if the discretion were exercised in his favour, then there is no quasi-contractual element. But equally, it could not be said that the representation was incorrect at the time it was made.
As I have said, it is not necessary to express a concluded view on this question. In circumstances where to do so would require more detailed consideration of what I perceive to be the change in the way Mr McKeith's case was put, I do not think it desirable to do so.

[53]

The announcements

The relevant facts are not in dispute. In a number of documents that were published to staff of AA Group worldwide, statements were made to the effect that all existing redundancy plans would be extended without change, or that all existing policies and practices related to redundancies would remain in place, for a period of at least two years after the bid became unconditional.
In form, the statements were made by companies within the AA Group. However, they were statements that represented (and were intended to represent) the consortium's position. The consortium's members knew that the statements were being made. They made no attempt, at the time, to qualify or withdraw them. Mr Sheahan accepted that the statements were promissory in nature, and seriously made.
The real question was whether the statements were intended to be contractual: that is to say, whether they were offers which were intended, upon acceptance (by whatever means), to lead to a concluded contract.
Although the communications on which the plaintiffs rely were made repeatedly, and over a period of some months (and accepting that the communications relied upon in closing submissions extended beyond those particularised in the respective Commercial List Statements), it is convenient to summarise what was said by taking the "Asia Communication Pack for Merger" issued on 10 October 2007. That was the day before the consortium's offer became unconditional. It is clear that the pack was distributed in expectation of an announcement of that fact. It is equally clear that the intention was to "cascade" the information contained in the pack throughout the ranks of AA Group employees within the Asian Business Unit.
Under the heading "HR Information", there were a number of sections. One of those sections dealt with "Redundancies". The document stated, among other things that: • We anticipate there will be a decrease in overall headcount as indicated by the Consortium but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. • The Consortium have communicated a number of "people principles" which they will apply to integration: … • Retention of the best talent will be done through a fair appointment process based on merit and competencies, and in compliance with legal obligations…"
The document also included a section headed "Staff FAQs" (presumably, "frequently asked questions"). Two of those questions and answers read as follows: Q: Will there be redundancies? How many, where and when can we expect the first cuts? A: We anticipate there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the consortium has guaranteed to all staff that all existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made it clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the redundancy policy and practice from the consortium. To find out more about your local ABN AMRO policies please contact your local HR representative. Additionally, the consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly. … Q: The Consortium says it is going to select on merit and competencies. What does that mean? A: It means they will select people on the basis of what they can do, and their potential, not on where they have come from or which bank they currently work for. The selection and assessment approaches adopted will identify the best candidate for the role in terms of ability, skill-set, competence and fit to the role requirements.
Although I have set out only the content of what was in effect the last statement of the consortium's intentions relating to redundancy and staff appointments, this was the culmination of a process of notification over a period of some months.
The starting point is to be found in the existence of rival bids. Barclays had announced its intentions in relation to redundancies and staff appointments. That was perceived by the board of AANV to be a matter of great significance. There was a "European Staff Council" (ESC) for staff of AA Group in Europe. Although the precise role of the ESC is not clear, plainly it was a body whose opinions, on the merits of the respective bids insofar as they impacted on staff, were considered to be important.
The consortium took pains to match the terms offered by Barclays, and in doing so to mitigate the concerns both of the board of AANV and of the ESC, in relation to job losses in the event that the consortium's takeover offer succeeded.
It cannot be doubted that, as Mr Sheahan accepted, the statements made were promissory, in the sense that they should be regarded as promises made by the consortium (and by its members individually) as to how they would deal with, among other things, redundancies and staff appointments.
Equally, it cannot be doubted, and again Mr Sheahan accepted, that the promises were intended to be taken seriously. They were intended to be disseminated to AA Group employees around the globe. That, in effect, is what happened.
However, important as those matters undoubtedly are, they do not of themselves necessitate the conclusion that the promises are to be taken as offers to enter into contractual relations. Before I deal with that question, and the necessarily related questions of "acceptance" and "consideration", I shall refer to the two cases that were cited by Counsel.

[54]

The authorities

The first case to be considered is the decision of the Court of Appeal in Carlill. It may be thought condescending to refer to the facts of that case. However, the decision of the Court turned very closely on their Lordships' characterisation of the advertisement.
The advertisement promised that the company would pay £100 reward "to any person who contracts the increasing epidemic influenza, colds or any disease caused by taking cold, after having used the ball three times daily for two weeks according to the printed directions supplied with each ball". It stated, further, that the company had deposited £1,000 with a bank.
There were further matters stated in the advertisement. It is not necessary to set them out.
There were essentially three questions for the Court. The first was whether the advertisement was an offer to enter into contractual relationships. The second, assuming that the advertisement should be so construed, was how it was to be accepted (and a subsidiary question as to whether it was necessary to communicate acceptance to the offeror). The third, on the same assumption, was whether the plaintiff had given any consideration for the offer so as, upon acceptance, to create a binding contract.
Lindley LJ dealt with the first question very simply ([1893] 1 QB 256 at 261-262) by saying that the advertisement was in terms an offer. That it was an offer and not "a mere puff" was demonstrated by the statement that £1000 had been deposited with a bank. His Lordship had no difficulty in characterising the advertisement as an offer to pay £100 to anybody who would perform the stipulated conditions, with the performance of those conditions constituting acceptance of the offer.
AL Smith LJ took the same approach. His Lordship said at 273 that the offer meant that if anyone who had performed the conditions contracted influenza, he or she would be paid £100. His Lordship referred to the deposit of £1000 at a bank, and said that this showed that there was more than a mere statement of confidence in the company's wares; the advertisement was to be read as "an offer intended to be acted upon, and when accepted and the conditions performed [one which] constituted a binding promise on which an action would lie…". That of course required attention to the question of consideration, to which his Lordship turned.
I have passed over the analysis of Bowen LJ. However, it is plain that his Lordship regarded the advertisement as amounting to an offer to contract.
Each of their Lordships identified the act of acceptance as being use of the smoke ball in accordance with the conditions of the offer (it being remembered that those fairly general conditions incorporated "the printed directions supplied with each ball").
As I have noted already, Lindley LJ said that the offers were made to anybody who could perform the conditions stated in them, and anybody who did perform those conditions thereby accepted the offer. His Lordship said, on the same page, that it was not necessary for acceptance to be communicated to the offeror. All that was required was that acceptance should be communicated before the offer was revoked. A person who acted upon the offer, used the ball as directed, contracted influenza, and made a claim for the reward would thereby communicate acceptance.
Bowen LJ took the view (at 269-270) that communication of acceptance was not necessary, because, on the proper construction of the offer, the offeror had dispensed with notification of acceptance. In any event, his Lordship said at 270, a claim for payment of the reward would amount to notification of acceptance. AL Smith LJ (at 274) agreed with what Lindley LJ and Bowen LJ had said as to the question of acceptance.
All of their Lordships were of the view that the plaintiff had given consideration for the offer. The clearest explanation of this comes from the judgment of Bowen LJ at 271. His Lordship said: Inconvenience sustained by one party at the request of the other is enough to create a consideration. I think, therefore, that it is consideration enough that the plaintiff took the trouble of using the smoke ball. But I think also that the defendants received a benefit from the user, for the use of the smoke ball was contemplated by the defendants as being indirectly a benefit to them because the use of the smoke balls would promote their sale.
I draw from the judgments in Carlill the following propositions: 1. to see whether an offer made to all the world (or to an identified class of offerees) is intended to lead, on acceptance, to a concluded contract, it is necessary to look at the terms of the offer and the context in which it was made; 2. an individual within the class of offerees may accept the offer by performing the acts for which the offer calls; and 3. the very performance which constitutes acceptance of the offer will also constitute consideration for the offer, sufficient to support a legally binding contract.
The second case is one on which Mr Sheahan relied: the decision of the High Court in Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424. In that case, the Commonwealth Government announced in June 1946 that it would pay a "subsidy", to manufacturers of woollen goods, on wool purchased and used for local manufacture after 30 June 1946. In June 1948, the government announced that subsidies would not be paid on wool purchased after 30 June 1948, and that "adjustments" would be made up until December 1948.
One of the questions raised in the case was whether the first announcement by the government was an offer, which the plaintiff had accepted by its conduct in buying wool for local manufacture. The Court (Dixon CJ, Williams, Webb, Fullagar and Kitto JJ) dealt with this question at 456-463.
Their Honours at 456 characterised the contract on which the plaintiff sued as "of that type which is commonly said to be constituted by an offer of a promise for an act, the offer being accepted by the doing of the act." Their Honours then referred to the description of such contracts as "unilateral", but pointed out that this was "unscientific and misleading" because "[t]here must of necessity be two parties to a contractual obligation".
Their Honours described a category of cases where "the consideration on the part of the offeree is completely executed by the doing of the very thing which constitutes acceptance of the offer". They cited Carlill in that context, and a number of "reward" cases.
Their Honours at 456-457 set out the basis on which a contract might be established in such circumstances: In cases of this class it is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo.
Underlying that analysis, their Honours said at 457, was the proposition that: It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. In such cases as the present, therefore, in order that a contract may be created by offer and acceptance, it is necessary that what is alleged to be an offer should have been intended to give rise, on the doing of the act, to an obligation.
At 458, their Honours referred to a common test for determining whether a contract has been made. That test, they said: … is to ask whether there has been a request by the alleged promisor that the promisee shall do the act on which the latter relies. Such a request may, of course, be expressed or implied… At the same time, it can hardly be denied that the presence or absence of an implied request to do the act may often provide a useful test for determining whether there has been a true offer and a true acceptance such as to bring a contract into existence… We are really applying the same test if we ask whether the "offer" was made in order to induce the doing of the act.
I draw from the decision in Australian Woollen Mills the following propositions: 1. if an offer to all the world, or to a class of offerees, is intended, on acceptance, to give rise to a legally binding contract, it is necessary to show that the offer was propounded as consideration for the doing of an act, and that the act was done in consideration of the offer; 2. it is therefore necessary to find some express or implied promise in the offer that is made, so that there may be found an acceptance, by conduct, referable to that promise; 3. for a contract to arise, more is required than that the act for which the offer calls is done; it must also be shown that the act was done in reliance on, or in response to, the offer; 4. if it can be seen that there was a request by the offeror, that the offeree do a certain act, and that the offeree relied on this request by doing the act, it may be possible to find a contract; but 5. before there can be a contract, it must be shown that the offer was one which, viewed objectively, was intended on acceptance (by the doing of the act) to give rise to a legally enforceable obligation.

[56]

Decision

I start by assuming, contrary to Mr Sheahan's submissions, that the promises, regarded objectively, were such as to be capable, on acceptance, of giving rise to a binding contract (i.e., that they are to be construed as offers to enter into a binding contract).
On that characterisation of the promises, it may be possible to spell out of them a request by the individual consortium members that staff of the AA Group should not resign, but should remain in employment until their futures could be decided.
Even on that characterisation of the promises, it would be necessary to find in the putative offer, either expressly or by implication, an indication of some mode of acceptance. Assuming that such a mode of acceptance could be found, there would then be required, to give rise to a contract, in any individual case, not just performance of that mode of acceptance, but performance done as a quid pro quo for the putative offer.
It may be that, on the proper construction of the promises (and assuming that they were intended to be offers which, on acceptance, would give rise to binding contracts), the act specified as the mode of acceptance was simply to remain in employment during and after the takeover process, and until the fate of each of the individual employees was determined.
Even on those assumptions (and I shall return to them), it remains necessary to show, in any individual case, that the decision to remain in employment rather than leave was one taken in response to, or in reliance on, the offer. It is not enough to show that: 1. the offer was made; and 2. the employee in question remained in employment.
That is shown by the example given by the Court in Australian Woollen Mills at 457. Their Honours postulated an offer made by A to B: if you travel to Sydney, I will pay you £1000 on your arrival there. If B goes to Sydney and nothing more is shown, there would be no contract, their Honours said. And that would be so even though, as is clear in the example, B knew of the offer before travelling to Sydney.
The pleaded acts of acceptance do not seem to me to satisfy the requirement that what is relied on as acceptance must be not just the doing of the act contemplated by the offer, but the doing of that act with reference to, or in reliance upon, the offer.
In Mr James' case, the pleaded act of acceptance is (Commercial List Statement, para 50): After July 2007, and until the Relevant Date, with knowledge of the Consortium's First Promise, Mr James continued in the employment of [AAAS].
Mr McKeith's pleading of acceptance of is not materially different (see para 48 of his Commercial List Statement).
In neither case is there any pleading of reliance, nor any pleading that anything was done on account of or in response to the promise. There is no pleading of material facts that would support the proposition that the asserted performance - continuing in employment - was undertaken as a quid pro quo for the promise.
On the pleaded case, for the reasons given in Australian Woollen Mills in particular at 456-458, the plaintiffs must fail.
Mr West sought to meet that difficulty by submitting that the plaintiffs had had done various things "in response to" or "on the faith of" the promises that were made.
Mr James gave evidence in some detail of actions that he had taken following receipt of the Communications Pack that was distributed shortly before the consortium's offer became unconditional. He said, in substance, that he discussed the statements that the consortium had made in relation to redundancy and the appointment process in "Management Team Meetings", and exhorted those who reported to him to pass on to those whom they supervised the messages: that there would be a fair appointment process based on merit and competency, and any redundancies would be dealt with in accordance with existing practice.
Mr James said that he had discussions to the same effect with senior executives of AAAH, and with other staff members.
Mr McKeith gave similar evidence as to steps that he had taken. He said, among other things, that he told those who reported to him, in regular meetings, that the redundancy practices would stay in place for a period of two years. He told them, further, in those meetings that appointments would be based on a fair process involving merit and competency.
The real difficulty with this aspect of the plaintiffs' case is that, in doing what they did (and there was no challenge to these aspects of their evidence), they were doing no more than their respective roles required.
Although they remained employed by the same entity (AAAS), control of that entity passed in substance to RBS after 11 October 2007. As the Communications Pack makes clear, Messrs James and McKeith were required, in the course of their employment, to make sure that employees of AAAS understood what the consortium's policies, in relation to redundancies and appointments, were. That they did. There is nothing in the evidence to suggest that they would not have done so but for the promises that had been made on those topics. To put it another way, there is nothing in the evidence to show that, in doing what they did, they were doing anything other than performing their duties in an appropriate manner, having regard to the circumstances that then prevailed.
In those circumstances, I conclude that there was not the necessary relationship between the promises and the acts relied upon as performance so as to bring the parties into a contractual relationship even if the promises were intended, on acceptance, to give rise to legal relations. Neither Mr James nor Mr McKeith has pleaded or proved that what he did, was done in response to any implied request to be found in the promises. On the contrary, in my view, the proper inference is that what each of them did was done as an ordinary incident of his duties.
I return to the questions of whether the promises were intended, on acceptance, to give rise to a contract, and of what was to be done by way of acceptance.
In my view, the promises were not made as offers intended to be capable of acceptance so as to form the basis of a contract. I accept that they were made seriously. I accept that they were intended to allay the fears of staff as to their futures. But the argument for the plaintiffs really has to be that any employee of the AA Group, who continued to work for his or her particular employer up until the takeover offer became unconditional, thereby entered into an individual contract with one or other of the members of the consortium (or, perhaps, with all three). That strikes me as being inherently implausible. Nor do I think that the implausibility is undone, in the case of the redundancy promise, by the use of the word "guarantee".
Rather, in my view, the promises should be understood to have been statements of intention, seriously made, as to the way in which employees would be treated, if the consortium's takeover offer were successful.
In this context, I think that it is not without importance that the promises were not made directly by RBS or RFS (or the consortium generally) to AA Group employees. One would normally expect to see a contractual offer coming direct from the offeror, or from someone clearly authorised by the offeror to put forward its offer. However, that is not of itself necessarily a reason for rejecting this aspect of the plaintiff's cases.
Quite apart from what I see as the inherent implausibility of the proposition that the consortium intended to enter into many thousands (or tens or hundreds of thousands) of contracts around the globe, with all the employees of the AA Group, there is a lack of specificity in the offer as to what should be done to constitute acceptance. This is not a case like Carlill, where using the smoke ball for 14 consecutive days, three times a day in accordance with the directions, was a sufficiently clear indication of acceptance. Once it was shown that the plaintiff had read the advertisement and acquired and used the smoke ball in the manner prescribed, it was easy to infer that her actions in doing so were done in reliance on, or as a quid pro quo for, the promise of a reward in the event that, thereafter, she contracted influenza.
By contrast, in the present case, the numerous employees of the AA Group around the world would no doubt have had numerous motives for remaining in their employment while the takeover battle was being fought out. The promises did not contain any specification of what should be done in response to them, apart from remaining in work. It is insufficient that, of itself, performance of the (impliedly) requested act would be sufficient to bring about a concluded contract. That is directly inconsistent with the reasoning in Australian Woollen Mills at 457.
Thus, something more must be done to bring about acceptance. But what that something more might be in this case, is entirely unclear.
In my view, if an offer is to be regarded as contractual, what must be done to accept it should be reasonably apparent. In the great majority of cases, of course, this will be obvious. Someone who wants to purchase an item from a "bricks and mortar" retailer makes the offer to purchase by tendering the purchase price. The retailer accepts the offer by accepting the tender. An offer to sell land is accepted by the mechanism of exchange of contracts. But in this case, the only method of acceptance that can be spelled out of the promises is the simple act of continuing in work. And as I have said, performance of that act is not something which in many (if not the great majority) of cases could be seen to be referable to the offer, in the sense that it is done on the faith of or in reliance on the offer.
In short, the difficulty of establishing a clear and unequivocal mode of acceptance seems to me to indicate that the offer was not one that was intended to be capable of giving rise to legal relations.
Equally, unless the acts done are to be regarded as done with reference to or in reliance upon the offer, or as a quid pro quo for the offer, they cannot constitute consideration sufficient to support a contract. The plaintiffs, and all the other members of the AA Group worldwide who remained in employment, did so pursuant to existing contracts. Just as their act, in remaining in employment, is not relevantly referable to the promises so as to constitute acceptance, nor can it be consideration for those promises. This is not a case where "the consideration on the part of the offeree is completely executed by the doing of the very thing which constitutes acceptance of the offer".
I conclude, in relation to issues 13 and 14, that there was no contract between the relevant defendants and either of the plaintiffs that, if their employment were terminated by reason of redundancy within two years of 10 October 2007, the redundancy policies and practices of AAAS as at 10 October 2007 would apply.

[57]

Fifteenth issue: failure to apply redundancy policies and practices?

Essentially for the reasons I have given on the ninth and tenth issues, the question posed by this issue must be answered "yes". In Mr McKeith's case, that answer does not assume that there was any obligation, arising out of contract or estoppel, binding RBS or RFS to apply the relevant policies and practices.
In Mr James' case, the failure occurred because AAAS imposed, as a condition of making any payment to him on account of severance and any ex gratia payment, a requirement that he execute a deed of release which went well beyond what AAAS was entitled to require, on the proper construction of the redundancy policy and in the circumstances that prevailed at the time. It appears to have been common ground, and at least implicitly the basis upon which this issue was argued, that a conclusion to the effect of that which I have just expressed would amount to a failure on the part of RBS or RFS to ensure application of the relevant policies and procedures.
I have found, in Mr McKeith's case, that RBS and RFS were not contractually obliged to ensure that the relevant policies and procedures applied to him, nor are they estopped from denying that they were so obliged. If, however, they were so obliged, then a similar conclusion would follow.
First, AAAS insisted, as a condition of the payment that it was prepared to make, that Mr McKeith should execute and deliver a deed of release that went beyond what AAAS was entitled to require.
Secondly, AAAS did not apply the redundancy policy as it existed as at 11 October 2007. Instead, it applied that policy shorn of any reference to the making of an ex gratia payment, and including instead, as a peremptory requirement, that no payment on account of bonus would be paid to anyone who left its employ.
Thirdly, and as an alternative to the second ground, AAAS did not apply the redundancy policy at all. It fettered the discretionary exercise in relation to ex gratia payment by considering that its outcome was dictated by the blanket policy to which I have referred. And it failed to consider whether, in Mr McKeith's case, there was any valid reason for relaxing or waiving the application of that blanket policy.

[58]

Sixteenth issue: loss or damage

Mr James and Mr McKeith each claims the loss of a severance payment and the loss of a an ex gratia payment (or the entitlement to have the making of an ex gratia payment properly considered).
The figures are not in dispute. As to Mr James: they are established by the worksheet calculating his entitlement on the basis that a decision had been made to make the maximum ex gratia payment on account of bonus to him. The figure for severance pay is $432,692.31. The figure for the ex gratia payment is $2,500,000.00.
I do not think that Mr James' claim for damages is to be considered as one for loss of a chance. AAAS accepts that, if the redundancy policy formed part of Mr James' contract of employment (as I have concluded it does), he was entitled to the severance payment.
As to the ex gratia payment: Mr James was entitled, under the redundancy policy, to have proper consideration of the exercise of the discretion to make an ex gratia payment to him. That discretion was exercised in his favour. The worksheet that was sent to him in my view is evidence of the exercise of discretion. The fact that communication of the exercise was accompanied by an unjustifiable demand for the execution and delivery of a deed of release that was far wider than AAAS was entitled to receive does not undermine that analysis. There is no evidence that the terms of the draft deed of release were considered by anyone involved in making the decision to offer an ex gratia payment to Mr James. Nor is there evidence to suggest that the amount of the ex gratia payment reflected in any way the provisions of the deed of release, or that some other or lesser amount might have been settled upon had a more narrow deed of release been propounded.
I have referred earlier to the dispute between the parties as to whether what happened in Mr James' case is to be characterised as communication of the exercise of the discretion, or communication of an offer on terms that included the draft deed of release. Mr West contended for the former characterisation, and Mr Sheahan for the latter.
Mr West relied on the analysis of Schmidt J in Foggo v O'Sullivan Partners (Advisory) Pty Ltd (2011) 206 IR 87 at [108]. Her Honour's analysis was effectively confirmed on appeal by Campbell JA (with whom Macfarlan JA agreed): (2012) 218 IR 331 at [57]-[59].
In Foggo, the plaintiff was employed under a contract which contemplated that he might be given performance incentive bonus payments. The contract provided that, for bonus payments above $250,000.00, payment might be deferred for three years. The defendant employer determined to pay the plaintiff a bonus of $300,000.00. It proposed to defer payment of part. It also sought to impose additional conditions as to the plaintiff's remaining in employment and not resigning to join a competitor. That decision was conveyed to the plaintiff by letter dated 28 May 2010.
Schmidt J said that in those circumstances the defendant had no right to reconsider the discretionary exercise that had been notified to the plaintiff, and that there was no "offer" on terms, which the plaintiff could accept or reject (and in fact had rejected). Her Honour said at [108]: The defendant had neither an express or implied right to reconsider the decision it had made as to the payment of a bonus, notwithstanding its characterisation of what it did as withdrawal of an "offer" to pay Mr Foggo a bonus, an offer which he had not accepted. The defendant had made no such offer, nor had it sought his acceptance of any such offer.
On appeal, Campbell JA pointed out at [53] three accepted discretionary elements in relation to bonus: The primary judge accepted that under the contract of employment of the Appellant had a number of discretions that related to the bonus of the Respondent: • a discretion whether to allocate a bonus at all; • a discretion on the amount of the allocated bonus; and • a discretion whether to impose conditions on the allocation of the bonus.
The employer contended that it had a further discretion, namely whether to pay a bonus that had in fact been allocated. However, Campbell JA concluded that, once the decision had been made to allocate a bonus, and on any terms to be attached to it (within the confines of the contract of employment), the employee had a contractual right to receive it on those terms. His Honour said at [58], [59]: [58] Mr Finch spoke, on occasions, as though the letter of 28 May 2010 was an offer that the Appellant made to the Respondent, which could become contractually binding only if he accepted it. I do not agree with that analysis. In my view, the terms of his contract of employment gave the Respondent an entitlement to have the Appellant determine the size of any bonus pool for the year ending 30 June, a right to have his performance during the period assessed against the performance of his peers, and a right to have a discretionary amount (which might turn out to be nothing) allocated from the pool by the Remuneration Committee. He also had a right to have the Remuneration Committee decide whether it would pay any performance incentive. It may also be that he was entitled to have those decisions made in accordance with certain standards of decision-making (cf [47] and [48] above), but that is not a matter of present controversy. When, and if, the Remuneration Committee made a decision to pay him a bonus, he had a contractual right to receive it in accordance with any conditions that the Remuneration Committee might have decided to attach to it. Thus, the letter of 28 May 2010 was a notification of a unilateral decision that the Appellant had a contractual power to make, but which, once made, would itself produce contractual consequences. [59] The decision of the Remuneration Committee is, in that respect, like the unilateral decision of a certifier under a building contract who creates contractual rights to be paid by his or her unilateral act of certifying that a particular amount is due. It is like the unilateral act of a company whose general meeting passes a resolution declaring a dividend, whereupon the shareholders have a legal right to be paid the dividend that has been declared: Lagunas Nitrate Co Ltd v Schroeder and Co (1901) 85 LT 22 at 23; Bluebottle UK Ltd v DCT [2007] HCA 54; (2007) 232 CLR 598 at [20]. It differs from the situation concerning a company paying an interim dividend that was considered in Lagunas Nitrate, where the relevant clause of the articles of association conferred on the directors a discretion to pay an interim dividend on account of the next forthcoming dividend. In that context "to pay" meant to actually part with the money. No provision of the articles of association stated that any consequence arose from a resolution of directors that an interim dividend would be paid if that resolution had not been acted upon, and hence the directors were free to reconsider any such resolution. By contrast, in the context of the letter that constituted the Respondent's contract of employment, the discretion that the Remuneration Committee had concerning payment of a bonus was a discretion about whether the bonus would be paid.
In my view, the situation of the plaintiff in Foggo is analogous to Mr James' situation. The decision to make an ex gratia payment was made by the appropriate officers of AAAS. In that way, the discretionary exercise for which the redundancy policy called had been considered and performed. Once it was determined (as happened) that an ex gratia payment in the particular amount was to be made, the only basis for qualifying that would be that conditions were, at the same time, imposed on the payment, which conditions fell within the confines of Mr James' contract of employment.
At the risk of repetition: there is nothing in the evidence to suggest that whoever decided that the ex gratia payment should be made decided also that it should be offered and made only on the terms of the deed of release. On the contrary, the better inference from the evidence is that the discretion to make the payment was exercised at the appropriate level of management, no doubt on the recommendation of Ms McArdle; that implementation of the payment was left to Ms McArdle; and that it was Ms McArdle who procured the preparation of the draft deed of release that was submitted to Mr James for execution and delivery. Thus, I do not accept that the relevant decision-makers determined that an offer of an ex gratia payment should be made to Mr James on terms that included the execution and delivery of the particular form of draft deed that was propounded.
Mr Sheahan noted that the letter sending the draft deed to Mr James spoke in terms of an "offer". That is correct; but the characterisation of what happened is determined as a matter of legal substance, not as a matter of form.
Alternatively, and again at the risk of repetition: the draft deed went well beyond anything upon which AAAS was entitled to insist. If (contrary to what I have said) there were some reason for thinking that the relevant decision-maker had determined, as part of the discretionary exercise, that a deed in the form propounded should be returned and delivered, that would go well beyond the bounds of the discretion, and beyond the considerations proper to be taken into account in the consideration of the exercise of the discretion.
It follows that Mr James is entitled to judgment, in respect of his redundancy claim, in the sum of $2,932,692.31, together with interest from 9 September 2008 (which, according to the "Joe Bloggs" worksheet that set out how the discretion had been exercised, is the date to which those payments had been calculated).
If Mr McKeith were entitled to receive a severance payment or an ex gratia payment, the best evidence of what those amounts might be seems to come from the "Col McKeith" worksheet as at 31 December 2008. That worksheet states the amount of the severance payment at $384,134.62, and the amount of the ex gratia payment at $4 million.
Mr Sheahan submitted that the amount of the severance payment should be a little less: $375,961.54. I do not know why the figure differs from that set out in the worksheet. On my conclusions to date, the difference is irrelevant because Mr McKeith has no entitlement to be paid anything. If it becomes necessary to reconsider the question, no doubt the parties will be able to resolve what is, in the scheme of things, a minor discrepancy.
The defendants' evidence did not address the alternative universe. In that universe, the relevant officers would have considered the question of making an ex gratia payment, but decided, by reference to considerations such as the size of the bonus pool and whatever else was properly to be taken into account (including, of course, Mr McKeith's undoubted valuable contribution to the business both generally and, through the merger/EIP buy-out process, specifically), that some lesser amount should be fixed upon. There is no way that the Court is able to put itself in the position of the decision-makers so as to say that, for example, a bonus of $4 million might not have been justified in all the circumstances, but a bonus of $X million would be.
Further, it might be thought that, given that AAAS was prepared to offer Mr McKeith a bonus of $3 million for staying on in a reduced role with reduced responsibilities, the bonus calculated by Ms McArdle in accordance with the formula (but at the maximum for which the formula provides) might not be seen as unreasonable in all the circumstances. Whether or not that is so, there is as I have said no basis on which the Court can decide that some other, lesser, amount might have been offered.
Those considerations are relevant not only to quantification of the hypothetical loss but also to the alternative "loss of opportunity" case. There is nothing in the evidence which would entitle the Court to assess the value of the lost opportunity as anything other than a payment of the amount in accordance with Ms McArdle's calculation as at 31 December 2008.

[60]

The pleaded case

The pleaded case is set out in para 55 of Mr James' Commercial List Statement and its particulars: CLAIM AGAINST RBS AND RFS REGARDING APPOINTMENT PROCESS 55. From around 29 May 2007, RBS and RFS promised employees of ABN AMRO worldwide, including Mr James, that: (a) if those employees continued in the employment of ABN AMRO until the Relevant Date; then (b) they would ensure that those employees would be considered for positions in the new organization created by the merger by a fair appointment process based on merit and competencies. (the Consortium's Second Promise) Particulars The promise was express and was published to employees of ABN AMRO, including Mr James, in various written communications made during the period May to October 2007. In particular: (a) the publication of a copy of a set of presentation slides entitled "Proposed Offer for ABN AMRO - Superior Value for Shareholders - Significant Benefits for Customers and Employees" dated 29 May 2007 which included the words (at slide 14): "Benefits for Employees … Fair appointment process based on merit and competencies"; (b) the publication on around 20 July 2007 of an Offer Memorandum for the public offer by RFS Holdings B.V. for all of the issued and outstanding ordinary shares of ABN AMRO Holdings containing the words: "The Banks intend to retain the best talent through a fair appointment process based on merit and competencies accommodating in the process any legal requirements"; and (c) the publication on around 8 October 2007 of a document entitled "AU_NZ Communication Pack Acquisition Announcement Approved materials to be used when communicating with staff" containing the following question and answer: "Q: What do we know about the consortium's approach to employees? A: … the consortium has communicated a number of 'people principles' which they will apply to integration… Retention of best talent will be done through a fair appointment process based on merit and competencies, and in compliance with legal obligations…

[61]

The evidence

There is no doubt that the three documents to which Mr James refers in the particulars were published. The real questions are: by whom and to whom were they published?
As to the first document, Mr James said that he thought that he got the slides from AANV. Certainly, he did not say that he got the document from, or that the position stated in it was communicated directly to him by, the consortium or RBS (or RFS).
The first document was not one communicated by RBS or RFS to Mr James, but was a document of or emanating from AANV. As I have said already, it seems to be relatively clear that the consortium (bearing in mind that RBS was a member of the consortium and RFS was the consortium vehicle) made the representations set out in the AANV document so as to communicate to AANV the consortium's position, in relation to ongoing employment. It seems equally clear that the consortium intended its stated position to be (as it was) communicated to AA Group employees. Finally, as I have said already, there is no suggestion that the consortium or RBS ever withdrew or qualified the stated position.
There is no doubt that the second document was published by RFS. Nor is there any doubt that it stated the position of the consortium's members in relation to appointment to positions in the merged businesses. However, as Mr Sheahan submitted, Mr James does not specifically identify this document in his affidavit evidence.
The only clear evidence of communication to Mr James (by or on behalf of RBS) of the content of that document is found in words attributed by Mr James to Mr Johnny Cameron of RBS. Mr Cameron was not called to give evidence. I accept that he said the words attributed to him. The relevant paragraphs of Mr James' affidavit read: [118] For instance, on or about 12 October 2007 (after it had been announced that the Consortium had won the bid), Colin McKeith and I went to Singapore and attended a presentation by Mr Johnny Cameron (Chairman of RBS Global Banking and Markets) to approximately 50 senior managers of ABN AMRO, in which Mr Cameron discussed the ideals of RBS, the operations of RBS and the benefits and implications of the acquisition. This presentation was part of a worldwide trip that Mr Cameron and other senior RBS executives did to ABN AMRO senior staff, globally. [119] At that presentation, Mr Cameron said words to the effect: "RBS will run a fair appointment process"
The third document particularised is the Communications Pack. Again, that is not an RBS or RFS document, and neither of those entities gave it to Mr James. He received it from Ms Gail Williamson, the head of communications for AAAH. Mr James said that to his understanding, the Communications Pack had been prepared by Ms Williamson on the basis of information from AA Group employees in Amsterdam.
Mr Sheahan submitted that the document was no more than a communication of AAAH's (or AANV's or AA Group's) understanding of the consortium's position in relation to employment. That may be; but as I have said, it is clear that the consortium made its position known to AANV, with the intention that it should be communicated to AA Group employees. Nor was the stated position ever withdrawn or varied.
However, the question is not just what was represented by the consortium to AANV, or represented by AANV or AA Group companies as the consortium's position. The question is, rather: did RBS or RFS make the appointment promise to Mr James?

[63]

Decision

I think that Mr West was correct to accept (if he did) that the principles stated in relation to the redundancy promise case governed the appointment promise case, and that the outcome of the redundancy promise case would effectively govern the outcome of the appointment promise case.
In my view, that position is so but, in effect, a fortiori. The words relied upon to prove the redundancy promise case are promissory in nature: including a statement of a "guaranteed" process. The words relied upon to prove the appointment promise are not promissory in nature. They are, read in context, no more than statements of the consortium's position at the time, or intention, in relation to appointments to jobs in the merged businesses.
I have no doubt that the "appointment promise" statements were made seriously, and intended to be taken seriously. But it does not follow that they were promissory. In particular, it does not follow that they were promises intended to be capable of acceptance so as to constitute a binding contract.
In this context, I think that it is again not unimportant that the written statements (to the extent that Mr James says he saw and read them) did not emanate directly from RBS or RFS. The first and third of the particularised statements were made by AAAH or AANV. Undoubtedly, they conveyed (and were intended to convey) the consortium's position. But if the consortium were intending to make an offer, capable of acceptance so as to give rise to legal relations, one might expect to find the offer made by the consortium directly rather than through intermediaries.
The second document particularised was of course a document prepared by RFS, and no doubt intended to bind RBS also as a member of the bidding consortium. The difficulty with that document is that Mr James does not say in his evidence that he saw it or relied upon it.
The communication by Mr Cameron (which is not something pleaded) undoubtedly stated, and was intended to state, RBS's position in relation to employment. But again, it does not follow that Mr Cameron on behalf of RBS was making an offer to enter into a contract on the basis of the statement. Further, bearing in mind that the appointment promise case is one of a promise made to employees of the AA Group at large, capable of acceptance by any of them individually, the idea that there might be a separate contract arising out of an individual communication made by one person on behalf of RBS to another person in his own right falls well outside that pleaded and argued case.
I accept that there will be circumstances in which, even though it cannot be said precisely how, a contract may be inferred from the entire history of dealings between parties. The classical theory of contract formation, involving identified offer and acceptance and identified specific consideration, may not always be available (as Heydon JA said in Brambles at [71]). The question, as his Honour said at [81], may be put as follows: In the light of the above cases, it is relevant to ask: in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the Council and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?
In those circumstances, as his Honour had said at [25], regard may be had to conduct that occurred after the alleged contract was said to have been made to see whether in fact a contract was made.
In this case, however, the email from Mr McCormick to which Mr West referred in submissions (and other communications to similar effect) do no more than restate the consortium's, or RBS', position. They do not state a factual position consistent with the existence of a contract, or from which the existence of a contract could be inferred.
In my view, there was no statement made by RBS or RFS that, on acceptance, was capable of constituting a legally binding contract.
Further, and for essentially the same reasons as those given in relation to the redundancy promise case, I do not think that Mr James' conduct, in continuing to work for AAAH, constitutes acceptance of the purported offer.
Thus, I do not think that there was a contract made between RBS or RFS and Mr James on the terms of, or including, the appointment promise.
There is no need to delve into the detail of consideration. It appears to be common ground that the analysis in respect of issue 14 must apply also to this issue. And for the reasons given in relation to issue 14, Mr James' conduct, in continuing to work for AAAS (and in communicating, to the extent that he did, the consortium's employment policies to staff of AAAH) could not constitute consideration, in the same way as it could not constitute acceptance of, any offer that (contrary to my view) was made.

[65]

Twentieth issue: was there a fair appointment process based on merit and competencies?

The Communications Pack that had been developed by AANV (or AA Group companies) "to communicate the global HR principles… by which the people processes will be run through the transition phase" included a brief statement as to the process for selection of employees in "Levels 1, 2 and 3 (TEG or equivalent)". It was common ground that Mr James fell within that band. The stated principles were: • Only where a role is vacant or a new role is created and a speedy decision is required - business divisions can appoint people, subject to appropriate governance in each Consortium Bank, without need for assessment except where there is a legal or regulatory requirement to carry out more formal selection and assessment. • People who are not duplicative that we may want to retain and where there is only 1 incumbent for a role - no assessment required, role confirmed and person mapped to the role. • Duplicate roles where 2 or more people may be considered - degree of assessment will be dependent upon information already held on individuals and requirements of jurisdictions: - Desk assessment of CV (experience & career history), performance and talent data against role requirements. - If desk assessment is insufficient, line manager interview (with option of HR involvement) to assess fit to role. - Where a more rigorous assessment is required, independent assessment (relevant competency framework, education, career history and experience, measure of intelligence and measure of social skills). Any such assessment should be conducted by an external provider. • It is strongly recommended that independent assessment (as above) is deployed where an individual is identified as a retention target. This support our commitment to their development and also informs any redeployment.
"Desk assessment" appears to involve no more than a review of the relevant material. It was not put that Mr James' claims should have been reviewed "by an external provider".

[68]

Outline of the parties' submissions

Mr Sheahan submitted that it was unfair to permit Mr James to pursue the case that had been outlined, he submitted for the first time, in opening. In particular, Mr Sheahan submitted, it was unfair to do so when the alleged deficiencies in the appointment process had not been put to the relevant witnesses of the defendants: Mr McCormick and Mr Workman.
Mr West responded that it was not necessary to put to those witnesses the elements of want of fairness in the appointment process. That was so, he submitted, because the test was objective. What was required was, instead, that the Court compare what had been done with what, on a proper analysis, a fair appointment process based on merit and competencies should involve.
Beyond that opening skirmish, the submissions for Mr James descended into a mass of detail. Distilled to their elements, those submissions were that: 1. when Mr McCormick came to Australia to undertake a review (or due diligence analysis) of AAAH in November 2007, so as to make a recommendation on what should be done with the business, he formed an immediate although preliminary view that Mr James should not be the CEO of the merged organisation; 2. that view was based, among other things, on a "them and us" attitude, and was unfairly influenced by irrelevant considerations such as that the EIP, of which Mr James was (or was seen as) a principal architect, was unduly favourable to employees and disadvantageous to AAAH and, more widely, AANV; 3. although Mr McCormick's initial view was not then accepted, he nonetheless continued to hold to it; 4. thereafter, Mr Williams was given an opportunity to put his views as to how the merged business should be run; no such opportunity was given to Mr James; 5. when the final decision was made, Mr McCormick's recommendation, based as it was on irrelevant and unfair considerations, was accepted; and 6. Mr James had never been given an opportunity to explain the matters that Mr McCormick, in particular, thought weighed against his appointment as CEO of the merged organisation.
Mr Sheahan submitted, in outline, that: 1. it was significant that Mr McCormick's initial view (formed in November 2007) was rejected; 2. thereafter, as contemporaneous records showed, Mr McCormick maintained an open mind, and recognised that Mr James was a strong candidate for the role; 3. Mr McCormick was not the sole decision-maker; the decision was taken by five very senior employees of RBS at the time, who after discussion decided that Mr Williams was the preferred candidate; 4. before the final decision was made, Mr McCormick had done all that was necessary in reviewing Mr James' claims to the role, including previous performance reviews and other matters bearing on his suitability; and 5. the decision that was made was one that was reasonably open to the decision-makers, and did not lack any essential element of fairness or transparency; in particular, the reasons given were not spurious or irrelevant, and were held in good faith.

[69]

Decision

I hope that I do not do undue violence to the very detailed submissions put by abbreviating, so far as possible, the relevant facts. To a great extent, the material on which counsel relied is to be found in contemporaneous documents. To the extent that reliance was placed on the evidence given in chief or in cross-examination, that seems to me to have been more in the nature of giving colour to what in any event appears from those contemporaneous documents.
The starting point is that in late November 2007, Mr McCormick undoubtedly thought and recommended that Mr Williams should be appointed to the role of CEO of the merged organisation in preference to Mr James. Mr McCormick's recommendation was discussed with other employees of RBS, including Mr Cameron, Mr Workman and Mr Crowe. His recommendation was not then accepted. A decision was made to do further work on the selection process. Whilst that was happening, Mr Workman was assigned the role of assessing what RBS should do with AAAH. The options were to break up the business and sell parts of it, or to integrate the business completely.
In April and May 2008, Mr McCormick expressed positive views of Mr James in emails to, respectively, Mr Stephen Daniels (who was the HR director for RBS' Global Banking and Markets (GBM) business) and Mr Workman. In the first of those emails, Mr McCormick effectively recognised that Mr James and Mr Williams had equal and strong claims to be CEO of a merged business. In the second of those emails, he recognised that Messrs James and Williams were competitors "for the top slot" but that it might be necessary to seek external advice on, among other things, that role.
It is the fact, as Mr West submitted, that Mr Williams was given an opportunity to provide his views on how a merged operation might be conducted. That happened first of all in November 2007 when, as appears from an email of 19 December 2007, Mr Williams and his senior management team had assessed the AAAH business and made recommendations to Mr McCormick, who appears to have reached similar views.
The significance of that may be limited. Although Mr McCormick then held the view, and recommended, that Mr Williams should be appointed as CEO of the merged organisation in place of Mr James, that recommendation was not accepted. More significantly, in May 2008 (when, as appears from the emails to which I referred at [540], Mr McCormick was considering the competing claims of Mr James and Mr Williams), Mr McCormick, as he put it in an email to Mr Workman, "asked Steve [Williams] to put his best thoughts down within a week on how he would approach an integration and drive the combined business - numbers, people, governance and clients".
Mr Williams appears to have accepted that opportunity - no doubt, with some enthusiasm. On 30 May 2008, Mr McCormick sent an email to Mr Workmen attaching "an integration plan for AAAH in the event that we don't sell it". He said that the attached document "has had input from and is supported by" four people - including himself, Mr Richard Place, and Mr Williams.
Mr James was not given a similar opportunity to put his views. On the contrary, as appears from emails in April concerning appointments to staff positions in the merged operations, Mr James appears either to have been left out of what he thought was the necessary consultative process or, at the least, perceived that he had been left out.
On any view, the process that had been followed in relation to the selection of the CEO was more detailed than the communicated HR principles seem to have required. Mr McCormick had spent some nine hours' time with Mr James in November 2007, and had worked with him thereafter on the sale/integration process. I note that, whilst sale was an option and thus there was a possibility that the sold-off AAAH business might be a competitor of RBS Australia, communications between Messrs McCormick and James were, properly, less detailed than might otherwise have been the case.
Mr McCormick had ample opportunity to observe Mr James in the performance of his role, and to make an assessment of Mr James' strengths and weaknesses. Equally, Mr McCormick had ample opportunity to make an assessment of Mr Williams' claims to the CEO's role, including Mr Williams' strengths and weaknesses.
Were it not for the opportunities given to Mr Williams to set out his thoughts on how a merged business could operate, I would have no doubt that the selection process was as fair and transparent as it needed to be, and that it took adequate account of the strengths and competencies of the two candidates for the role of CEO.
It is apparent from the documents that of the five decision-makers, four at least appear to have had an open mind on the subject, and to have given adequate consideration to the respective claims of Messrs James and Williams to be CEO of the merged organisation. As to the fifth - Mr McCormick - there can be no doubt that he had preferred Mr Williams at the outset. When it came time to make a decision, Mr McCormick either adhered or returned to that initial view. But the emails to which I have referred show that in April and May 2008, Mr McCormick recognised that Mr James had a serious claim to the role, which required consideration.
On balance, I do not think that the opportunity given to Mr Williams in November 2007 is of itself proof of unfairness. At that time, Mr Williams was the head of RBS Australia. It was natural that he should be asked how he saw his organisation fitting in with either all or some parts of the operations of AAAH. Nor do I think that the evidence justifies a conclusion that whatever Mr Williams said at the time had any particular influence on Mr McCormick's thinking in April and May 2008. On the contrary, Mr McCormick's thinking appears to have been based on other factors.
It could be said that there is a hint of want of transparency. But in view of all the other matters to which I have referred, that of itself goes nowhere.
Quite different considerations apply in respect of the opportunity given to Mr Williams in May 2008. At that time, as I have said, Mr McCormick recognised that there were strong competing claims that required consideration. He gave an opportunity to one of the claimants to advance his case by putting forward what he would do with the merged business - how he would run it and what he hoped it would achieve. He gave no such opportunity to the other candidate.
I do not think that the opportunity given to Mr Williams, but denied to Mr James, was insignificant. On the contrary: it is difficult to think of anything more important (leaving aside personal or moral failings, of which there is no suggestion in this case). If one is considering who is to head a merged business and how that merged business is to function, it would seem to me to be axiomatic that the candidates for the role should each be asked how they would approach the task were they to be appointed, and how they would seek to direct and operate the merged business.
It is unclear however whether the advantage that Mr Williams was given in this respect had any significant impact on the decision that ultimately was made. The factors that Mr McCormick saw as being important were: 1. in his view, the business of AAAH under Mr James' leadership had been focused on operations within Australia; and Mr James did not have experience in working within an integrated global banking operation (nor, in Mr McCormick's view, did Mr James have any great interest in working in that way). Mr McCormick thought it was important that the merged operations in Australia should function as part of the regional and global GBM business of RBS. Mr McCormick thought that Mr Williams was better suited to doing this, because of his experience of working within the GBM business. Mr McCormick had regard to Mr James' performance reviews, which he said supported his opinion on this point (and, objectively, they did). 2. Mr McCormick took an adverse view of the way in which aspects of AAAH's business had been run. It was in Mr McCormick's view highly leveraged; a substantial part of the net profit after tax was paid out to management; there had been a number of risky loans; the performance of the business was unduly dependent on cheap funding from its parent; and the way in which the business had been run inflated the share price, for the benefit of management under the EIP. Objectively, there was a basis for those views. Whilst there was some debate in the evidence as to how highly leveraged the business of AAAH was, in my view it was legitimate for Mr McCormick to take the view that it was too highly leveraged. Mr McCormick was, after all, a very senior and highly experienced banker, and knew the way that his employer (with whose business operations the operations of AAAH were to be integrated) conducted its business. 3. Mr McCormick did not think that Mr James would work effectively with him. Mr McCormick derived that view from his experience of working with Mr James and from what Mr James' superiors had told him. Whether or not Mr McCormick was correct in this view, there was undoubtedly material which, objectively, was capable of supporting it. 4. Mr McCormick thought that if the EIP were terminated (and RBS was working to achieve this, to consolidate its control of AAAH), Mr James might not be prepared to work without the high level of incentive that had been made available under the EIP. Mr McCormick was also concerned that Mr James might not be happy running what was in effect a smaller business than the AAAH business, with fewer employees and a more narrow business focus. 5. Mr McCormick thought that, overall, Mr Williams had broader and more relevant banking experience than Mr James. Mr McCormick had confidence in Mr Williams' integrity and thought (no doubt, with good reason) that Mr Williams could work within the reporting structures of RBS. It is clear that Mr McCormick regarded "culture" as an important consideration. Mr West sought, I think a little unfairly, to portray "culture" as a "weasel word". I do not agree. It is apparent that Mr McCormick placed a very high value on the ability of employees to work in accordance with the systems, values and way of doing business that RBS had established world-wide. It was open to Mr McCormick to think that Mr James might not have so much respect for that culture as did Mr Williams. And I think it was open to Mr McCormick to give weight to this. 6. Equally, Mr McCormick did give consideration to the matters that favoured Mr James' appointment. He recognised that Mr James had a strong public profile, a proven track record, and had personal qualities that would enable him to promote the merged business within the Australian market place. However, in Mr McCormick's view, the balance of considerations favoured Mr Williams.
Mr Workman took into account very similar matters: 1. based on his experience of working with Mr James, he felt that Mr James might not work effectively within the integrated global structure of RBS' GBM business. Mr Workman thought it was important that Mr James would respect and work within RBS' management structure, but had doubts that he might do so. 2. He understood that Mr McCormick had formed the view that the business of AAAH was focused very much on Australian operations and that it did not have a global or Asian outlook. Mr Workman wanted the merged business to look out to Asia, and thought that Mr James did not have the necessary experience to achieve this. 3. Mr Workman knew that Mr Williams was able to operate well within the RBS management structure. He knew that Mr Williams had very strong experience as a banker outside Australia. He thought that Mr Williams was well qualified to perform the role of CEO. 4. Like Mr McCormick, Mr Workman did give consideration to Mr James' positive qualities. He knew that Mr James had a high profile in the Australian market. He thought that Mr James had shown the capacity to generate business for his company. He believed that Mr James both gave the appearance of being a leader, and in fact had been a good leader. Finally, and importantly, Mr Workman knew that Mr James had a strong background in the equities markets and in mergers and acquisitions.
Another element of fairness or transparency that was said to be lacking is that Mr James was not given an opportunity to comment on, or explain, the adverse perceptions of him that had been formed. I do not think that this is a valid criticism. Messrs McCormick and Workman had had substantial experience, over a period of about nine months, of working with Mr James during the abortive sale process and then during the first phase of integration. They had had every opportunity to assess his personality and character, as those matters might be relevant to the role of CEO of the merged operations. They had reviewed historical material relating to him, including comments by his superiors within the AA Group. I do not think that it was necessary for them to take up all their concerns with Mr James.
The question is finely balanced. I do not regard it as consistent with fairness or transparency that Mr Williams was given an opportunity to state how he would approach integration "and drive the combined business" whereas Mr James was not. However, given the totally uninformative nature of the pleading and the failure to give any specificity to this aspect of Mr James' case until it was opened, the significance of this is necessarily diminished. Had that matter been pleaded and particularised, the defendants might well have been able to meet it with other evidence.
The defendants have been put very much in the position of responding on the run to this aspect of the case as it was developed against them. There were other aspects of the plaintiffs' cases that were inadequately particularised but where careful attention to the affidavit evidence would have revealed (and, no doubt, did reveal) what the case was in those respects. But this is not so in respect of the appointment promise case. The case for Mr James on the appointment process emerged only through the opening, with references to the documents that were said to be relevant, and through the cross-examination of Messrs McCormick and Williams.
I accept that whether or not a fair and transparent appointment process, based on merits and competencies, was conducted is a matter to be judged objectively. But inevitably, in judging that, the consideration is driven by the evidence that is available. I do not think that it was irrelevant that the detail of lack of fairness and transparency was not put to Mr McCormick or to Mr Workman. On the contrary, I think that, had those matters been put, the Court would have been assisted by taking into account, in coming to a view, such answers as they might have given.
In my view, a decision in favour of Mr James on this aspect of his case would involve very substantial procedural unfairness to the defendants. It cannot be said that the evidence is all the one way, nor that an outcome in his favour is inevitable. As I have said, the decision is finely balanced. And the issue is complicated because the subject matter of the only significant aspect of unfairness - the failure to give Mr James an opportunity to show "how he would approach an integration and drive the combined business" - does not appear to have been one of the considerations that, ultimately, guided the decision so far as Mr McCormick and Mr Workman were concerned.
To put it another way, I think that before the Court could conclude that there was relevant unfairness, it would have to be satisfied that the element of unfairness was dispositive, in whole or in part, of the decision to appoint Mr Williams. I am not prepared to find so, on the evidence. And that view of the evidence is fortified because: 1. the relevant matter was not pleaded or particularised; 2. thus, the defendants had no real chance to consider and meet it; and 3. it was not squarely put to the relevant witnesses as a significant and relevant flaw in their decision-making.
I conclude that Mr James has not shown that the appointment process lacked relevant fairness or transparency. Nor has he shown that it did not take into account, in an appropriate way, the competing merits and competencies of him and Mr Williams.

[70]

Twenty-first issue: loss or damage

On the view to which I have come, this issue does not arise. Against the possibility that others may come to a different view, I shall however show why, in my view, Mr James has not proved that he has suffered loss.
It was common ground that the issue was to be approached as one of assessment of damages for loss of opportunity. In this case, the opportunity that, hypothetically on my conclusions, Mr James lost was the opportunity to have his claim to be appointed CEO of the merged operations considered in a fair and transparent way, and decided on the basis of competing merits and competencies.
Thus, the Court is required to consider the likelihood that Mr James would have been appointed had the process possessed the qualities that, hypothetically on my conclusions, it lacked.
There can be no doubt that each of Mr James and Mr Williams had a strong claim to the role of CEO. Mr James had been proven as a leader. He was recognised as someone who could generate business. He had a high profile, and substantial respect, within the Australia business community. The operations of AAAH had prospered under his leadership.
The business of AAAH was very substantially larger than the Australian business of RBS. Ranking of the two companies showed that, in every area where they competed (although in fact there were not all that many), AAAH was perceived consistently to have out-performed RBS.
Mr Williams did not have the breadth of experience within Australia that Mr James had. He did however have very significant international experience. And, importantly from the prospective of the decision-makers, he had very extensive experience of working within RBS' GBM business and its management structures. He was someone upon whom reliance could be placed to work within and according to the rules and values of RBS - its "culture".
Mr James was perceived as an outsider (to the RBS culture), and as someone who preferred working independently. The former point is self-evident, given that Mr James had had very little experience of working within RBS. The latter point seems to me to emerge with some degree of clarity from the evidence of a whole, although it is very much impressionistic. I do not regard it as a criticism of Mr James. On the contrary, there is much to be said for the proposition that the CEO of an Australian business should work independently to develop and advance that business.
The failure to put to Messrs McCormick and Workman the alleged deficiencies in the selection process is significant in this part of the case also. The submissions for Mr James identified a number of aspects of the process which, it was said, should have been, but were not, followed. Whether some or any of those matters would have been relevant to the ultimate decision is a matter of speculation, because the two decision-makers who were called were not asked to express a view on them.
It may be accepted that each of the candidates had a strong claim. It may be accepted that they had different skills and qualifications. It may be accepted that either would have made an excellent choice. The question is, were the matters that were said to favour the selection of Mr James over Mr Williams of such significance that, in a hypothetically fair and transparent process based on merits and competencies, they would have led to a different result?
In my view, that question should be answered "no". In the absence of exploration of the matter in any detail with Messrs McCormick and Workman, I am not prepared to conclude that, in the hypothetical universe, the former would have recommended, and the latter accepted, that Mr James be employed. None of those matters, it seems to me, would have undone what appear to have been the key determinants in their thought processes.
In those circumstances, I conclude that it has not been shown that the lost opportunity is one which had any real or valuable prospect of maturing into an offer of employment.
Again, because of the possibility that others may come to a different view, I shall set out briefly the approach to assessment of damages that seems to me to commend itself.
The starting point in the calculations took the remuneration and other rewards derived by Mr Williams during the course of his employment as CEO. That employment commenced in September 2008 and terminated in February 2012, when the position became redundant. The damages model assumed that Mr James would have been employed for the same time, and would have earned the same remuneration. I accept that assumption. It is plausible. It was not put that (for example) Mr James might have persuaded RBS to pay him more than in fact it paid Mr Williams. And to the extent that Mr James (if selected) might not have lasted until February 2012, that should be accommodated by the selection of an appropriate discount for contingencies.
Mr James and Mr McKeith started a consultancy business known as AquAsia. That business derived some income over the period from September 2008 to February 2012. To the extent that it did, it is common ground that the income earned by Mr James from the business should be set off against damages referable to the loss of income and bonuses.
Mr James also claimed that he had lost the opportunity to be employed after February 2012, as a senior person in the investment banking world. He relied on the evidence of Ms Sharon Mackie, an employment consultant. I accept that Ms Mackie sought to give truthful and accurate evidence. I am not however satisfied that it can be said, based on her evidence, that Mr James is likely to have earned anything more from February 2012 until his hypothetical retirement at age 60 (in 2023) than he has in fact earned, and is likely to earn, from the business of AquAsia.
Ms Mackie's evidence as to the roles that might have been open to Mr James was given at a high level of generality. Further, to the extent that Ms Mackie expressed a view as to the likelihood that Mr James would gain such employment, there was no connection between the very scanty factual information that she stated and the conclusion that she expressed to enable the Court to understand how, as a matter of logical application of her undoubted expertise, she moved from the premises to the conclusion. That is so both in relation to the likely positions that Mr James might be offered and the likely remuneration that he might have earned in such positions.
It could be thought, perhaps, that it was in any event open to Mr James to take up such an offer if one came his way. Ms Mackie said however that it was unlikely that offers would be put to Mr James, because he had been out of the industry for some time. I am not entirely sure that I agree. The performance of AquAsia appears to have been stellar in recent years. One would have thought that Mr James and Mr McKeith have thereby provided reminders to their colleagues and former colleagues of their abilities in the investment banking world.
Thus, I do not think that there is any allowance to be made for lost opportunity after February 2012. The evidence does not support a conclusion that Mr James might have earned more after that month, had he remained employed by RBS until February 2012 and then become redundant, than in fact he has earned and is likely to earn.
The defendants' submissions included the proposition that, even if the Court were otherwise minded to allow damages equivalent to the net "closed period" loss from September 2008 to February 2012, some allowance should be made for the fact that, over that time, Mr James and Mr McKeith had built up a successful business, the full earning potential of which did not begin to emerge until after the end of that period.
Had I come to the view that Mr James had made out a claim for damages, I would think that some allowance should be made for the fact that his earnings for the closed period were effectively depressed because, rather than seeking employment, he concentrated on working with Mr McKeith to set up an independent business. My present view is that if it were necessary to assess damages, there should be deducted, from the net closed period loss, an amount representing the value of Mr James' interest in the AquAsia business as at February 2012. The asset - his interest in the AquAsia business - was something that Mr James was able to acquire only because he was not working for RBS or for another employer. In those circumstances, I think, a principled approach to the assessment of damages requires that some allowance be made for this.
If I thought that Mr James had made out his case for damages for breach of the appointment promise, I would direct the parties to agree them or, in the absence of agreement, refer the question out. The basis on which the agreement or reference should be made or conducted would be that damages are to be assessed (before any allowances for vicissitudes) as: 1. the amount that was in fact paid to Mr Williams for the closed period by way of remuneration and bonuses (and by way of redundancy payment); 2. less such amounts as Mr James has in fact earned from the AquAsia business over that period; and 3. less the value of Mr James' interest in the AquAsia business as at February 2012.
There was an argument as to the appropriate discount to be allowed for contingencies. In respect of the closed period loss, the only relevant "contingency" is that for reasons personal to Mr James, he might not have been employed for the whole of the period. Mr West argued for what he said was the conventional 15% discount. Mr Sheahan submitted that, having regard to the views held about Mr James, the likelihood was that his employment would have been terminated earlier than February 2012. He submitted that a figure of 50% was more appropriate.
I should note also that Mr Sheahan submitted that in any event, Mr James' hypothetical employment as CEO of the merged operations was terminable on one month's notice. Thus, he submitted, damages should not be assessed beyond one month's salary and other benefits. I do not agree with this submission. It assumes that RBS would have had some reason to terminate Mr James' employment. No reason has been submitted, other than the "cultural" and related factors to which I have referred. Since those are matters to be taken into account in considering the "discount for contingencies" argument, I do not accept that damages should be limited to the loss of one month's salary and benefits.
Returning to the question of an appropriate discount for contingencies: I do think that there is a stronger than usual possibility that Mr James' employment might have been terminated, for reasons that would have seemed to RBS at least to be appropriate, before February 2012.
No doubt, in the hypothetical world where Mr James had been appointed as CEO of the merged business, he would have worked hard to fit in. I accept that he would have sought to operate in the RBS "culture". Nevertheless, I do think that there would have been a real likelihood that Mr James might not have fitted in to the RBS "culture" (or might have been perceived as not fitting in). Thus, I do think that there is a likelihood that RBS would have sought to remove him before February 2012, and to appoint one of its own in his place.
Doing the best I can, and recognising that this piles up speculation on speculation, I would assess the appropriate discount at 30%.
Accordingly, if the matter were to go to assessment of damages, the figure derived from the process described at [582] above should be discounted by 30%. Of course, there would then need to be a calculation of interest.

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Judgment (72 paragraphs)

Cases Cited (20)

Cited By (4)