Keays v J P Morgan Administrative Services Australia Limited

Introduction 8 This is an appeal by Mr Colin Keays against an order made by a judge of this Court dismissing his claim against JP Morgan Administrative Services Australia Ltd ("JP Morgan"). Mr Keays' claim arose out of his employment by JP Morgan. The trial judge ordered that Mr Keays pay JP Morgan's costs of the proceeding but refused to make an order that those costs be assessed on an indemnity basis. JP Morgan appeals against the trial judge's refusal to order that its costs be assessed on an indemnity basis. 9 Mr Keays was described by the trial judge as a very experienced and successful senior executive who specialised in the sales of interest rate derivative products. He was recruited from Deutsche Bank Australia ("Deutsche") in late 2005 to work for JP Morgan. JP Morgan was described by the trial judge as the management company of a well-known Australian merchant bank which is part of a worldwide group of companies of the same character. The trial judge found that Mr Keays' employment by JP Morgan commenced on 14 March 2006 and was terminated on 5 June 2008. 10 At the trial, Mr Keays' claims against JP Morgan were based on repudiation and breach of the contract of employment, and misleading or deceptive conduct contrary to ss 52 and 53B of the Trade Practices Act 1974 (Cth) ("the Trade Practices Act"). The trial judge found one instance of repudiatory conduct by JP Morgan, but in respect of that conduct he found that Mr Keays had affirmed the contract of employment. In other respects he rejected Mr Keays' claims. 11 Mr Keays was 47 years of age in late 2005 when he first had discussions with JP Morgan about the prospect of being employed by it. His claim for damages was based on the premise that he should be paid all of his expected remuneration until 4 January 2018 when he would be 60 years of age. The claim was formulated for a substantial figure. The trial judge said that it exceeded $6 million. The trial judge declined to assess damages in the event that he was wrong that Mr Keays had not established liability because, he said, having regard to the various postulates about the calculation of damages, or their potential mitigation, any attempt to do so would be unduly speculative.

The Facts 12 I will recount the facts by reference to the trial judge's reasons noting those facts which are challenged on appeal. A number of Mr Keays' claims which were rejected by the trial judge are not in issue on the appeal and I will not recount the facts in relation to those claims. 13 Mr Keays graduated from the University of Western Australia in 1982 with the degree of Bachelor of Economics. He had worked for Wardley Australia Limited (later taken over by HSBC) ("Wardley"), Citigroup and Deutsche. He said that at Wardley he was one of the first people to operate in the derivatives market. After working for Wardley for about 13 years, Mr Keays was approached by Citigroup and offered a position in charge of derivative sales. He gave evidence before the trial judge that after he commenced employment on that understanding, the position was not made available and he was given a lesser role. The trial judge said that this experience contributed to Mr Keays' insistence, when he was approached by JP Morgan, on having a written position description as the basis for his employment. 14 Mr Keays commenced working for Deutsche in 1996. His first position was as "associate director" in charge of derivative sales for New South Wales. He progressed to "director". His position at the time he left Deutsche was Head of Interest Rate Derivatives. The trial judge recorded the fact that Mr Keays' earnings increased (taking into account base salary, bonuses and stock entitlements) from $575,000 in 1998 to $715,000 in 2000 and 2001, fell back to $660,000 in 2002 (without a "stock bonus"), rose again to $843,750 in 2003 and were finally $1,174,500 (a "stellar year") in 2004. Mr Keays left Deutsche in late 2005 before bonuses for that year were announced and he forfeited stock entitlements at the same time. Those matters were addressed in the arrangements he made with JP Morgan. 15 A matter which is important in this case is the distinction between "public" and "private" side operations of a merchant or investment bank. The trial judge described the distinction in a way which is accepted by both parties: The term 'private side' refers to confidentiality arrangements made within merchant and investment banks, normally under the supervision of a compliance department, whereby 'insider knowledge' acquired in the course of developing, proposing and constructing transactions for clients is kept confidential until released generally into the market. By way of example relevant to the present case, someone working on the private side at JPM is taken to know all the information held by JPM (and its related companies globally) and to be restricted accordingly. Those operating on the 'public side' are not (nor presumed to be) privy to such information unless they are 'wall-crossed' for particular transactions or dealings, when they come under specific restrictions concerning those transactions or dealings. Those on the private side are, subject to some very limited exceptions, always on the private side. Those on the public side, by contrast, only work under private side restrictions when wall-crossed for particular transactions. The separation between private side and public side operations is generally (and was at JPM) reflected by a physical separation of working space and strictly restricted access to private side areas and operations. (Keays v J P Morgan Administrative Services Australia Pty Ltd [2011] FCA 358 at [5].) 16 While he was employed at Deutsche, Mr Keays worked on the public side. His evidence before the trial judge was that, initially at least, there was no private side operation at Deutsche. The trial judge said that, during his career, Mr Keays developed a reputation for putting together derivatives product solutions tailored to the particular circumstances of his clients. Except when he was wall-crossed, Mr Keays was not restricted at Deutsche in the way he could propose solutions. The trial judge said that Mr Keays clearly felt comfortable operating in that fashion and was successful at it. 17 The trial judge found that during his employment with JP Morgan, Mr Keays operated on the public side, although he was wall-crossed from time to time. That meant that he was free, generally speaking, to devise derivatives product solutions for, and market them to, both JP Morgan's clients and the clients of other banks in an unrestricted way. Except when wall-crossed, he was not attributed with any insider knowledge that those in JP Morgan on the private side might have had about that, or any other, client. At the same time, he was not, except when wall-crossed, privy to information that might have been turned to account in tailoring specific solutions to the needs of clients for whom JP Morgan might be working on transactions not yet known to the market. 18 The trial judge found that Mr Keays preferred the public side method of operating. His superiors at JP Morgan came to the view that JP Morgan's interests would be better served if Mr Keays was moved to the private side. Mr Keays did not agree with this and considered that it would jeopardise his earnings. 19 The circumstances leading up to Mr Keays' employment by JP Morgan were as follows. In late 2005 Mr Keays was approached by a representative of Highland Partners, a consultancy firm engaged by JP Morgan to assist it to recruit a replacement for Mr Andrew Barnett, who had recently left JP Morgan. Mr Barnett's position had been on the public side. Some exploratory meetings were held and Mr Keays was shortlisted by Highland Partners. 20 In November 2005, Mr Russell Taylor was the Head of Institutional Credit Sales for JP Morgan and Mr Stuarte Dagg was the Head of Rates, Trading and Risks. Messrs Taylor and Dagg interviewed Mr Keays on 1 November 2005. Mr Keays made a request for a job description for the position which was the subject of the interview. He referred to his experience at Citigroup. 21 Mr Taylor prepared a job description and forwarded it to Highland Partners on 10 November 2005. It was then provided to Mr Keays. The trial judge found that the document sent to Highland Partners and provided to Mr Keays was the third iteration of the job description. The position title was to be "Head of Corporate Derivative Marketing" and that was the title given to Mr Keays when he commenced employment. The job description contained, among other statements, the following: The 'Head of Corporate Derivative Marketing' role will be a wall straddling position with the opportunity to have desks on the Investment Bank (private side) floor and one in the dealing room. It is expected the person will attend virtually all IB planning sessions, weekly meetings and client and transaction briefs in an effort to identify and educate both the IB specialist staff and customers of derivative needs, opportunities and hedging solutions. The IB bankers will rely heavily on the skills and product knowledge of the marketer to assess timing of involvement and dialogue with clients, types of risk management products suitable that may cover FX, rates, credit and equities. This person will be the essential link between the execution team and markets businesses and the Investment banking clients. 22 The first sentence of the above paragraph refers to "wall straddling". The trial judge said that this was not the same as wall-crossing. The trial judge found that apart from the reference to "wall straddling", the above paragraph generally identified work that would be carried out from the private side, either on a permanent basis or being wall-crossed for the purpose. He found that an earlier iteration of the job description had actually described the position as a "private side position", rather than a "wall straddling" position, but it was otherwise in very similar terms to that shown to Mr Keays. The trial judge found that further paragraphs in the job description identified work that could be done either on the public side only or on either the public or private side. 23 The trial judge found that the use of the term "wall straddling", the earlier idea of describing the position as a private side one, and the emphasis given to the private side contribution in the above paragraph, were all inappropriate in the operating context of JP Morgan at the time. The trial judge appears to have accepted Mr Taylor's evidence that he abandoned his first inclination to call the position a private side position because the position was one which involved reporting to him and his position was on the public side. It would not be appropriate for a private side position to be reporting to a public side superior. In the circumstances, Mr Taylor modified the initial description of the position as a private side position to one where it was described as a "wall straddling" position. However, even that proposal was discontinued after a short time, in part in response to Mr Keays' own views. 24 The trial judge found that Mr Keays did not resist the description and that he was certainly happy to be wall-crossed from time to time for specifically-identified transactions. He found that Mr Taylor subsequently came to the view that it would not be appropriate for a wall-straddling position to report to a public side superior any more than it would be for a private side position to do so. The trial judge found as follows (at [13]): As a result, the wall straddling proposal never came into operation. Although the job description was not amended before Mr Keays' employment commenced, both he and JPM understood that the position was not a wall straddling one but a public side one. 25 In November 2005, Mr Robert Priestly was the Australian CEO of JP Morgan. He interviewed three people for the position of Head of Corporate Derivative Marketing, although Mr Keays was the leading candidate. He met with Mr Keays on 2 November 2005. The trial judge found that it was a short time after this that the idea that the position should be a wall straddling one was abandoned within JP Morgan, a circumstance which Mr Keays accepted, agreeing to "be brought over" the wall as and when required. Mr Priestly and Mr Keays met again on 28 November 2005. There was a discussion about remuneration and status which, at that time, were the outstanding matters. 26 A formal offer of employment was made to Mr Keays by JP Morgan by letter dated 14 December 2005. Mr Keays countersigned the letter on the same day. Mr Keays gave three months' notice of resignation to Deutsche and was immediately relieved of the requirement to attend work for that period. Mr Keays described that outcome as "gardening leave", which in his experience accorded with market practice. 27 In the letter dated 14 December 2005, the offer of employment to Mr Keays was "initially in the position of Head of Corporate Derivative Marketing, in the Credit and Rates Markets division". Mr Keays was to report to Mr Taylor, Managing Director, and his title would be Managing Director. 28 Mr Keays' base salary was to be AUD325,000 per annum, including superannuation contribution and a sign-on guarantee of AUD500,000. In addition, he was to be paid a "sign-on" guarantee and a bonus guarantee in respect of the 2006 performance year. The provisions of the letter in relation to the bonus guarantee are important. They were as follows: Bonus Guarantee: It is a further condition of your employment that on or around the end of January 2007 a minimum bonus payment of approximately USD450,000 will be made to you in respect of the 2006 performance year. This will be paid to you in the form of cash, restricted shares of JP Morgan Chase Common Stock ("Restricted Stock") and/or stock options. Vesting of restricted stock is conditioned on your continued employment as of each vesting date, and the terms and conditions set forth in the associated award agreement. Should your employment with the firm be terminated for reasons other than gross and wilful misconduct, prior to the payment of this bonus, then this bonus will be included in your final termination payment. Further, you are not entitled to the bonus guarantee, or any part thereof, should you resign from the firm prior to the payment date in January 2007. 29 Mr Keays submits on the appeal that even if his contract of employment was lawfully terminated by JP Morgan on 5 June 2008, he is nevertheless entitled to the value of $175,000 worth of Restricted Stock Units issued to him under these provisions. It will be necessary to consider the proper construction of the provisions in the letter dated 14 December 2005 dealing with the bonus guarantee. 30 The letter dated 14 December 2005 dealt with the issue of the termination of Mr Keays' employment. It provided that Mr Keays could terminate the contract of employment by giving JP Morgan three months' written notice, and that JP Morgan could terminate the contract of employment by giving Mr Keays three months' notice of termination or payment in lieu. The trial judge found that a three-month period of notice conformed to what the evidence disclosed was common practice at this level of seniority in the merchant banking sector at least in New South Wales. The period of notice was referred to in the evidence as "gardening leave". 31 The trial judge noted that the letter of employment did not set out the specific responsibilities of Mr Keays' position. However, the trial judge said that he was satisfied that, as modified in discussion with Mr Keays between 10 and 28 November 2005, the agreed responsibilities and duties applying to the position of Head of Corporate Derivative Marketing were as set out in the job description provided by Mr Taylor to Highland Partners on 10 November 2005 which was given to Mr Keays to meet his request for such a written statement, except that the paragraph set out above (at [21]) was "effectively inoperative". The trial judge said that he was satisfied the reference to a "wall straddling position" was treated by the parties as excised from the job description and the accompanying private side requirements were removed. The trial judge was satisfied that Mr Keays' position was on the public side which was wall-crossed as required. He noted, and it seems accepted, Mr Priestley's evidence that the position could never have been a wall straddling position because that was a designation reserved for people like Mr Priestley himself who authorised "wall crossing"; not those who were "wall crossed" like Mr Keays. 32 The job description also identified the management of foreign exchange sales as one of the responsibilities of the position. 33 The trial judge found that the job description as modified became part of the contract of employment evidenced by the letter dated 14 December 2005. He found that JP Morgan did not have a contractual right to require the appellant to work on the private side. He also found that JP Morgan's conduct in 2008 in removing the management of foreign exchange sales from Mr Keays was a breach of the contract of employment and indeed repudiatory conduct (at [42]). JP Morgan, by notice of contention, challenges these conclusions. 34 Mr Keays commenced his employment with JP Morgan on 14 March 2006. In accordance with arrangements discussed with him and referred to in the job description, he assumed responsibility for foreign exchange sales as well as other derivatives marketing. He operated from the public side and was wall crossed on a number of occasions. The trial judge noted that, according to Mr Keays' evidence, he generally met his targets. 35 The trial judge said that although his job remained unchanged during the first two years, there were changes to his lines of reporting. 36 By way of background to the events leading up to the termination of Mr Keays' employment, the trial judge noted that Mr Priestley became co-CEO in July 2002 and sole CEO in 2003. He found that Mr Keays' recruitment was part of a methodical process under Mr Priestley's stewardship to build JP Morgan's business, and that JP Morgan was in an expansion phase. 37 In late 2007, Mr Jeffrey Herbert-Smith was recruited from Citigroup to work at JP Morgan at the level of managing director as Head of Fixed Income. Mr Keays was to report to him following Mr Herbert-Smith's commencement on 25 February 2008. Before he commenced, Mr Herbert-Smith and Mr Keays met over lunch. Mr Herbert-Smith described his plans for the area of the business he would supervise at JP Morgan. One of his proposals was to bring in someone else to look after foreign exchange sales. Furthermore, he wanted to move Mr Keays to the private side. The trial judge found that Mr Keays, on his evidence, showed immediate resistance to the idea of losing responsibility for foreign exchange sales. Nevertheless, when Mr Herbert-Smith commenced, the plan was implemented. Mr Jani, with whom Mr Herbert-Smith had worked at Citigroup, was employed by JP Morgan and given responsibility for foreign exchange sales. The trial judge found that Mr Keays protested to Mr Herbert-Smith and Mr Priestley but to no avail. 38 The trial judge found that, at about this point, Mr Keays had two concerns about the proposed changes in arrangements. One was the reduction in his apparent level of responsibility, and the other was the potential effect on his earning capacity. Mr Keays felt that the likelihood of substantial bonus payments, which generally represented the majority of his earnings, would be jeopardised by both aspects of Mr Herbert-Smith's plan for his responsibilities. Mr Keays also disagreed, as a matter of business methodology, with the private side model proposed by Mr Herbert-Smith for how he should discharge his principal function of selling derivatives products. The trial judge found that Mr Keays accepted that he had the capacity to perform a role of the kind envisaged by Mr Herbert-Smith, but that he would be operating outside of his "comfort zone". 39 The trial judge found that although Mr Keays lost his foreign exchange responsibilities, which were transferred to Mr Jani, and that he therefore lost some of the responsibilities identified in his job description, he did not, however, suffer any immediate financial prejudice. The trial judge also found that he may never have done so. The trial judge noted the evidence of Mr Herbert-Smith and Mr Priestley to the effect that the proposed changes other than those concerning the foreign exchange responsibilities, would have been to Mr Keays' "overall benefit financially". 40 Although Mr Keays could do nothing about the loss of responsibility for foreign exchange sales, he declined to accept the other changes proposed to him. The trial judge found that there followed a period of time in which Mr Herbert-Smith attempted to persuade Mr Keays to a change of mind but this was resisted. As part of those discussions, Mr Keays requested that his proposed role be set out in writing. Mr Herbert-Smith provided a written description of the role on 28 May 2008. Although it included many responsibilities then being discharged by Mr Keays, and included also some attention to foreign exchange risks and solutions, it was to be a position entirely on the private side. 41 On 28 May 2008, Mr Keays sent to Mr Herbert-Smith an email in the following terms: In anticipation of our 2:30pm meeting today, I thought you should have the following heads up. I have read and carefully considered the job specifications provided last week for the new role. Whilst I appreciate the position may work, I cannot accept that role. I am ready to re-commence the role that I was employed to do, as described by the job specs that I agreed to before signing my original employment contract. As you have mentioned previously that this was not negotiable, then I can only surmise that my original role has been terminated, and as such assume that you will have placed me on a redundancy list. regards Colin 42 Shortly afterwards, there was a meeting between Mr Keays and Mr Herbert-Smith. The trial judge found that each reiterated, and maintained, the position he had already taken. Mr Herbert-Smith did not have authority to agree that Mr Keays be treated as redundant. However, he was prepared to support the idea and agreed to "speak to HR about whether that's possible or not". The trial judge inferred that each of Mr Keays and Mr Herbert-Smith anticipated that some additional payment would be offered to Mr Keays if he was treated as "redundant", although they may not have shared a common idea of the possible scale of such a payment. 43 The trial judge found that there was a short formal meeting on 5 June 2008. Mr Keays was provided with a letter of that date terminating his employment. The letter began as follows: This letter confirms the recent advice given to you by Jeff Herbert-Smith that your position has been made redundant. Your employment with J.P. Morgan Administrative Services Australia Limited (JPMorgan) will conclude 5 June 2008. You will not be required to attend work after 5 June 2008. 44 The letter was divided into five sections. The first section dealt with "Benefits and Compensation". Under the subheading of "(a) Compensation", the following appeared: Upon the termination of your employment and based on your current Total Remuneration, you will be paid: • 3 months' pay in lieu of notice; and • a severance payment equal to 12 weeks pay. All payments will be made less appropriate Australian taxes. In addition, you will receive statutory payments for any accrued and unused annual leave and long service leave (if applicable) less appropriate Australian taxes. 45 Section (iv) was headed "Long Term Incentive Plan Awards" and provided as follows: With respect to a position elimination, the terms and conditions of outstanding awards of Restricted Stock / Units and stock options / stock appreciation rights under LTIP granted on or after January 1, 2003 for heritage JPMorgan Chase employees or on or after July 1, 2004 for most other employees require the execution of the enclosed Release. If this Release is not executed, outstanding LTIP awards granted on or after January 1, 2003 for heritage JPMorgan Chase employees or on or after July 1, 2004 for most other employees will be forfeited as of the termination date. For awards granted before January 1, 2003 for heritage JPMorgan Chase employees or before July 1, 2004 for heritage Bank One employees, you are not required to execute a Release. Such awards will be treated in accordance with their terms and conditions applicable to a position elimination. Please refer to your Award Agreement(s) and the respective terms and conditions for additional information. If you are a participant in the Deferred Compensation Plan, contact the Deferred Compensation Call Centre by calling (1-212) 552-5100. 46 Section 5 is entitled "JP Morgan Code of Conduct" and includes the following: Subject to your executing the deed of release enclosed with this letter and returning it to me, the payments outlined in section (I) of this letter will be made to you. 47 The Deed of Release which accompanied the letter was dated 5 June 2008. It was signed by JP Morgan but not by Mr Keays. It contained the following Recitals: Background A. Mr Keays was employed by JPM on or about 14 March 2006. B. Mr Keays' employment with JPM is to terminate on 5 June 2008 for reason of the redundancy of his position. C. Following a series of negotiations the parties have agreed to resolve all matters between them arising out of their employment relationship upon the terms and conditions noted in this Deed. 48 Clause 2 of the Deed of Release was relevantly in the following terms: 2. Return of Deed Release and Payment 2.1 Provided JPM is in receipt of this deed duly executed by Mr Keays within 28 days of original signing, JPM will pay to Mr Keays: 2.1.1 the sum equal to 12 weeks' pay based on a total remuneration of AUD375,000 per annum 2.1.2 an additional sum equal to 12 months' pay in lieu of notice 2.1.3 an additional amount in respect of any accrued but unused statutory entitlements as at 5 June 2008 2.2 … 2.3 Notwithstanding any contrary provision in this deed, Mr Keays acknowledges and agrees that, in respect of any long term incentive plan ('LTIP') awards ('Awards') in which he may have participated as an employee of JPM: 2.3.1 In respect of Awards granted on or after 1 January, 2003, the terms and conditions of the LTIP provide that, in order for entitlements under such Awards to vest following termination of employment, rather than being subject to forfeiture, Mr Keays must execute a deed of release in respect of such termination, such requirement being satisfied by execution of this deed. 2.3.2 In respect of Awards granted prior to 1 January, 2003, such requirement does not apply and vesting of such Awards will be in accordance with the terms and conditions of the relevant LTIP pertaining to termination of employment. 2.3.3 Nothing in this deed alters or waives the terms and conditions of any relevant LTIP and any vesting of Awards will take place in accordance with and subject to the terms and conditions of the relevant LTIP. For that purpose, Mr Keays must comply with any requirements of the LTIP relating to vesting of Awards, including as to supply of information and documentation. 2.3.4 JPM has provided Mr Keays with information relating to the impact of termination on vesting of Awards and contact details of persons able to provide further information or clarification required by Mr Keays. Mr Keays has investigated and satisfied himself as to this issue and as to the terms and conditions of the relevant LTIP(s), relying on his own skill and judgement and legal and accounting advice in doing so. 49 Mr Keays refused to execute the Deed of Release. As the trial judge noted, Mr Keays' right to some of the payments referred to in clause 2.1 did not depend upon execution of the Deed of Release. Neither the unilateral announcement in the letter of 5 June 2008 nor the terms of the Deed of Release, could have that result. 50 JP Morgan paid Mr Keays his statutory entitlements and an amount representing three months' pay in lieu of notice on or about 22 July 2008. It did not pay him anything in respect of severance pay on account of the redundancy of his position. He did not receive anything for his unvested shares. 51 On 2 September 2008, Mr Keays commenced the present proceedings. 52 The trial judge held that providing Mr Keays with the Deed of Release to sign on 5 June 2008 was not an anticipatory breach of contract because the contract was brought to an end on 5 June 2008, independently of the provision of the Deed of Release. 53 The trial judge held that JP Morgan's conduct in removing from Mr Keays, upon the engagement of Mr Jani, his responsibility for the management of foreign exchange sales was repudiatory conduct but that, in the circumstances, Mr Keays had affirmed the contract of employment. He retained the right to sue for damages arising from that conduct, but, said the trial judge, there was no basis disclosed by the evidence upon which any conclusion would be available that Mr Keays was likely to lose any particular level of remuneration as a result of the alteration of his duties. His employment came to an end before any loss was suffered and the trial judge said that it was not clear that any loss would necessarily be suffered if his employment had continued. In the circumstances, there was no case for relief for breach of contract arising from the circumstance that his earlier responsibility for the management of foreign exchange sales had been removed from him. JP Morgan, by notice of contention, challenges the trial judge's conclusion that its conduct was repudiatory, while Mr Keays, in his notice of appeal, challenges the conclusion of the trial judge that he affirmed the contract of employment. 54 The trial judge held that Mr Keays' employment was "directly and expressly" terminated by the letter to him on 5 June 2008. The cessation of Mr Keays' employment, when it occurred, corresponded with his proposed solution to the impasse which developed when he declined Mr Herbert-Smith's invitation to take up a position on the private side. The trial judge said that Mr Keays could not be forced to agree to that proposition because he had a contract upon which he was entitled to rely, which sufficiently identified his position as a public side one. However, there was no repudiation of the contract constituted by Mr Herbert-Smith's proposal that Mr Keays work on the private side. Mr Keays was not forced to do that. His contract was terminated instead. The trial judge said (at [45]): If JPM had a right to terminate the contract, and acted in accordance with it, there could be no repudiation. It did have such a right under the express terms of the contract. The contract was terminated by JPM on 5 June 2008 by written notice to that effect. Termination of the contract by JPM in that way was legally effective. That was not repudiation as the law understands the term. Moreover, there was no other breach of contract involved unless JPM then, or later, refused to honour its obligations to make a relevant payment, or afford a relevant entitlement, as a result of the contract coming to an end. 55 Mr Keays contends on appeal that the act of JP Morgan in removing from him responsibilities for the management of foreign exchange sales, the act of "directing" him to work on the private side or, at least, changing his position from a public side one with wall-straddling as required, to a private side one and the act of making payments to him upon its purported termination of the contract of employment conditional on the execution of a Deed of Release were either individually or, taken together, repudiatory acts by JP Morgan which he accepted by leaving his place of employment. He contends that he is entitled to sue for damages for such repudiation and his damages are to be assessed without regard to the repudiatory conduct. He relies on Commonwealth of Australia v Amann Aviation Pty Limited (1991) 174 CLR 64 and Walker v Citigroup Global Markets Australia Pty Ltd (2006) 233 ALR 687 ("Walker v Citigroup Global Markets") in support of that proposition. 56 The trial judge went on to consider Mr Keays' claim under ss 52 and 53B of the Trade Practices Act. A number of representations were in issue at the trial but only one is relevant on the appeal. Mr Keays contends that JP Morgan made a representation about the job description to the effect that the position was on the public side with Mr Keays being brought "over the wall" only when necessary for particular transactions and that it would remain so except with Mr Keays' agreement. Although I am unable to identify an express finding to that effect by the trial judge, it appears that his Honour found that such a representation was made by JP Morgan. 57 A number of representations asserted by Mr Keays at the trial were representations as to future matters and the trial judge referred to s 51A of the Trade Practices Act. He also referred to McGrath v Naturalcare Products Pty Ltd (2008) 165 FCR 230 at 242 [44] per Emmett J; at 283 [192] and 284 [198] per Allsop J. He concluded that the effect of that decision was that, provided some evidence was adduced by the representor relating to the question of whether there were reasonable grounds for making a relevant (and established) representation, the onus of proving the absence of reasonable grounds rested with the representee. The trial judge said that, insofar as the alleged representations were representations as to future matters, JP Morgan had adduced evidence sufficient to displace the statutory presumption. The onus then was on Mr Keays to show that JP Morgan had no reasonable grounds at the time for making representations as to future matters. I infer from his reasons that the trial judge considered the representation about the job description was a representation as to a future matter. 58 The trial judge noted that Mr Keays' case was expanded in his written submissions to include an allegation that JP Morgan had always intended that his role "would be (or become) a private side one". That allegation, if made good, would negate reasonable grounds. The trial judge rejected the allegation by reference to three matters. First, he accepted that the "private side" description and "wall-straddling" descriptions were abandoned. Secondly, he found that for two years Mr Keays acted in a public position, crossing the wall as and when required. Thirdly, he found that Mr Herbert-Smith brought "new ideas into play" and favoured a different approach to that which Mr Keays was then employing. He was satisfied that Mr Herbert-Smith's plans represented "an evolution in thinking and in direction". Mr Keays challenges these conclusions on the appeal. 59 In summary, the issues on the appeal, including the notice of contention, may be grouped into four broad categories as follows: 1. Whether the job description as modified became part of the contract of employment. Although the challenge here is made by JP Morgan in its notice of contention, it is logically the first issue. 2. Whether the contract of employment was repudiated by JP Morgan and such repudiation accepted by Mr Keays. There are a number of issues here, including Mr Keays' challenge to the trial judge's conclusion that he affirmed the contract, and JP Morgan's submission, raised by notice of contention, that its conduct in removing responsibility for the management of foreign exchange sales from Mr Keays was not repudiatory conduct. 3. Whether JP Morgan had reasonable grounds for its representation about the nature of the employment position (that is, public with wall-crossing as required or private) accepted by Mr Keays. 4. Whether under the terms of the letter dated 14 December 2005, Mr Keays was entitled, on the termination of his employment, to that part of the bonus guarantee which consisted of Restricted Stock Units. 60 I will address each of these issues in turn.

the Contract of Employment and the Job Description as Modified 61 The letter dated 14 December 2005 contained terms and conditions of the contract of employment. In a section entitled "Other Terms and Conditions", documents such as JP Morgan's Code of Conduct are incorporated by reference into the contract. The trial judge referred to two of the other conditions of employment referred to in the letter dated 14 December 2005: • All agreements regarding employment, compensation and benefits must be documented and approved by Human Resources or a Director of JP Morgan. • This document represents the total employment contract between you and JP Morgan and supersedes any verbal undertakings that may have been given to you regarding employment arrangements. 62 I will refer to the first of these conditions as the requirement for writing clause and the second as the entire agreement clause. 63 There were two aspects to the reasoning of the trial judge which led to his conclusion that the job description as modified was part of the contract of employment. 64 First, he said that the entire agreement clause did not prevent the job description from being a term of the contract because the job description identified and gave content to the responsibilities of the position for which Mr Keays was being engaged. Secondly, he said that the job description as modified was approved by Mr Taylor and therefore the requirement for writing clause was satisfied. 65 It is not clear to me whether, in referring to the job description as modified, the trial judge was referring to the job description minus the paragraph referring to wall-straddling, or that document as modified and a verbal agreement between the parties that the position was a public one with wall-crossing as and when required. If the former, then the trial judge has inferred the term (that is, public side position with wall-crossing as required) from the paragraphs remaining in the job description. He did say that further paragraphs in the job description identified work that could be done either on the public side only or on either the public or private side and there was certainly evidence to support that conclusion. If the latter, then it cannot be said that the verbal agreement is documented within the requirement for writing clause. I do not need to pursue these questions because I think, on any view, the job description as modified was part of the contract of employment. 66 In this case, the letter dated 14 December 2005 referred to an offer of employment in relation to a position described as Head of Corporate Derivative Marketing. As I understand it, that is not a position that has a well-known and fixed meaning in the merchant and investment banking business. There is no reference to the responsibilities and duties of the position in the letter dated 14 December 2005, and it is necessary to go outside the terms of the letter to ascertain the meaning of the position. The Court is permitted to do that. 67 In a case where the question was what was meant by the expression "your wool" in a contract of sale and purchase constituted by two letters between the plaintiff and the defendant through his agent, the Court said it could have regard to a conversation between the plaintiff and the defendant's agent for the purpose of resolving that issue: Macdonald v Longbottom (1859) 1 EL & EL 977 ("Macdonald v Longbottom"), Lord Campbell CJ said: The only question, therefore, is, what was the subject-matter of the contract, described as 'your wool'? I am of opinion that, when there is a contract for the sale or a specific subject-matter, oral evidence may be received, for the purpose of shewing what that subject-matter was, of every fact within the knowledge of the parties before and at the time of the contract. Now Stewart, the defendant's agent, had a conversation before the contract with one of the plaintiffs, who stated what wool he had on his own farm, and what he had bought from other farms. The two together constituted his wool; and, with the knowledge of these facts, the defendant contracts to buy 'your wool'. There cannot be the slightest objection to the admission of evidence of this previous conversation, which neither alters nor adds to the written contract, but merely enables us to ascertain what was the subject-matter referred to therein. 68 In Bank of New Zealand v Simpson [1900] AC 182, the question was whether extrinsic evidence could be considered in determining the meaning of "the total cost of the works" in a written contract. The Privy Council decided that the extrinsic evidence was admissible. The Judicial Committee referred to various authorities with approval, including Macdonald v Longbottom. Lord Davey delivering the judgment of the Committee said (at 189): Of course, if the words in question have a fixed meaning not susceptible of explanation, parol evidence is not admissible to shew that the parties meant something different from what they have said. That is not so in the present case. Their Lordships think that 'the total cost of the works' may mean the cost to the owner of the completed railway, and they think that any person receiving the letter with a knowledge of the previous circular and of the conversation of the previous day according to Chapman's version (which the jury evidently believed) might and would have so understood it. Their Lordships are therefore of opinion that the evidence objected to was admissible, and the learned judge was right in the course which he took at the trial of declining to construe the contract without the assistance of the jury. 69 In this case, the job position referred to in the letter dated 14 December 2005 has virtually no meaning unless reference can be made to the extrinsic circumstances. 70 Both Macdonald v Longbottom and Bank of New Zealand v Simpson were referred to with approval by Mason J (as his Honour then was) in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 349-350. They embody a well-known and well-established principle: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462 [22]; Zhu v Treasurer of NSW (2004) 218 CLR 530 at 559 [82]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40]. 71 The requirement for writing clause is not relevant. Certainly, the words, "regarding employment" would ordinarily be given a wide meaning. However, I do not think the clause is relevant where the issue under consideration is the meaning of a term used in the contract. 72 Nor is the entire agreement clause an obstacle to the receipt of evidence of the responsibilities and duties of the position referred to in the letter dated 14 December 2005. I do not think the clause can be read disjunctively because plainly there are other documents, such as JP Morgan's Code of Conduct, which are part of the employment contract. The clause must be read conjunctively. The job description as modified is not a verbal undertaking. The position in this case is analogous to the case of an implied term in a contract where there is an entire agreement clause. The job description is as much a part of the contract as any term couched in express words (Hart v Macdonald (1910) 10 CLR 417 at 430 per Isaacs J; BAE Systems Australia Ltd v Cubic Defence New Zealand Ltd [2011] FCA 1434; (2011) 285 ALR 596 at 610-611 [61]-[65]). 73 It was open to the trial judge to conclude from the job description as modified and from the discussions between the parties in November 2005 that the parties understood and agreed that Mr Keays' position would be on the public side with wall-crossing as required. It was open to the trial judge to conclude as a matter of law that that agreement became a term of the contract of employment. No error has been shown and JP Morgan's submission to the contrary must be rejected.

Repudiation of the Contract of Employment by JP MORGAN and Acceptance by MR KEAYS 74 As I have said, Mr Keays contends that the trial judge erred in not concluding that there were three acts by JP Morgan which either individually or together constituted a repudiation of the contract. He further contends that he accepted the repudiation. 75 I have identified the three acts which Mr Keays claims were repudiatory above (at [55]). It is necessary to say something more about the third alleged repudiatory act. There was a suggestion by Mr Keays that the letter was ineffective because it did not attach a cheque of three months' pay in lieu of notice, but it seems to me that this is part of Mr Keays' main argument. That argument is that payment of three months' pay in lieu of notice and statutory payments for leave were contractual and statutory entitlements which could not be made conditional upon the execution of a Deed of Release which contained matters as significant as, for example, indemnities and a non-disparagement clause. JP Morgan submits that this third act of repudiation was not pleaded by Mr Keays or pursued in the Court below. The claim itself is not clearly raised in Mr Keays' existing notice of appeal dated 9 June 2011. At the hearing Mr Keays sought to amend his notice of appeal in order to clearly raise the claim (grounds 1, 4 and 6(c)). The application was opposed by JP Morgan on the ground that the claim had not been pleaded or pursued in the Court below. The Court heard argument and said that it would rule on the application for leave to amend the Notice of Appeal as part of its determination of the appeal. 76 Before considering the submissions relevant to these arguments, it is necessary to state the relevant legal principles. They were not in dispute.

Repudiation and Election 77 In Shevill v Builders Licensing Board (1982) 149 CLR 620 ("Shevill v Builders Licensing Board"), Gibbs CJ at 625-627 (with whom Brennan J agreed) said that a party may repudiate a contract if he renounces his liabilities under it by evincing an intention no longer to be bound by the contract or by showing that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way. The repudiation may be accepted by the innocent party who may discharge himself from further performance and sue for damages (see also Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 33 per Mason J; at 40 per Brennan J). 78 In Laurinda Pty Limited v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623, Brennan J (as his Honour then was) said that repudiation is not ascertained by an inquiry into the subjective state of mind of the party in default. His Honour said (at 647): [I]t is to be found in the conduct, whether verbal or other, of the party in default which conveys to the other party the defaulting party's inability to perform the contract or promise or his intention not to perform it or to fulfil it only in a manner substantially inconsistent with his obligations and not in any other way. 79 Deane and Dawson JJ referred to Lord Wright's admonition that "repudiation of a contract is a serious matter, not to be lightly found or inferred". Their Honours went on to say (at 657-658): Lord Wright's oft-quoted admonition that 'repudiation of a contract is a serious matter, not to be lightly found or inferred' (Ross T. Smyth & Co. Ltd. v. T. D. Bailey, Son & Co) is, no doubt, a wise one. It should not, however, be allowed to cloud the fact that an allegation of repudiation of contract in a civil case does not involve an assertion that the alleged repudiator subjectively intended to repudiate his obligations. Thus, it is of little assistance in the present case to identify reasons why the lessor was unlikely to have subjectively desired to repudiate its agreement to grant a lease. An issue of repudiation turns upon objective acts and omissions and not upon uncommunicated intention. The question is what effect the lessor's conduct 'would be reasonably calculated to have upon a reasonable person' (per Lord Herschell L.C., Carswell v. Collard; Forslind v. Bechely-Crundall). It suffices that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it. 80 These principles were re-iterated by the High Court in Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 135 [44]. In the same case, the High Court addressed the circumstances in which a breach of contract by a party will give the innocent party a right to elect to bring the contract to an end. There are two relevant circumstances, being a failure to comply with an obligation agreed by the parties to be an essential term and a sufficiently serious breach of a non-essential term (at 136 [47] and 138 [49]). The Court addressed the circumstances which are relevant to determining whether a term is an essential term. Gleeson CJ, Gummow, Heydon and Crennan JJ said (at 138 [48]): It is the common intention of the parties, expressed in the language of their contract, understood in the context of the relationship established by that contract and (in a case such as the present) the commercial purpose it served, that determines whether a term is 'essential', so that any breach will justify termination. 81 In the particular context of an employment contract, a profound change to an employee's position in terms of his or her responsibilities, duties and functions may amount to a repudiation: Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567 at 575; Easling v Mahoney Insurance Brokers Pty Ltd (2001) 78 SASR 489 at 491. 82 Repudiation does not bring the contract to an end. It is the decision of the innocent party that brings the contract to an end. In Tropical Traders Limited v Goonan (1964) 111 CLR 41, Kitto J said that election was not a matter of intention. It is an effect which the law annexes to conduct which would be justifiable only if an election had been made one way or another: Scarf v Jardine; Caine v Colonial Mutual Fire Insurance Co Ltd. 83 In Sargent v A.S.L. Developments Limited (1974) 131 CLR 634 at 655-656, Mason J (as his Honour then was) said of the doctrine of election the following: It will make for greater certainty, therefore, if the present cases are regarded as cases of election. A person is said to have a right of election when events occur which enable him to exercise alternative and inconsistent rights, i.e. when he has the right to determine an estate or terminate a contract for breach of covenant or contract and the alternative right to insist on the continuation of the estate or the performance of the contract. It matters not whether the right to terminate the contract is conferred by the contract or arises at common law for fundamental breach - in each instance the alternative right to insist on performance creates a right of election. Essential to the making of an election is communication to the party affected by words or conduct of the choice thereby made and it is accepted that once an election is made it cannot be retracted (R. v. Paulson; Tropical Traders Ltd. v. Goonan). No doubt this rule has been adopted in the interests of certainty and because it has been thought to be fair as between the parties that the person affected is entitled to know where he stands and that the person electing should not have the opportunity of changing his election and subjecting his adversary to different obligations. A person confronted with a choice between the exercise of alternative and inconsistent rights is not bound to elect at once. He may keep the question open, so long as he does not affirm the contract or continuance of the estate and so long as the delay does not cause prejudice to the other side. An election takes place when the conduct of the party is such that it would be justifiable only if an election had been made one way or the other (Tropical Traders Ltd. v. Goonan). So, words or conduct which do not constitute the exercise of a right conferred by or under a contract and merely involve a recognition of the contract may not amount to an election to affirm the contract. 84 In Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 at 42-43, Deane, Toohey, Gaudron and McHugh JJ made important observations about the doctrine of election. Their Honours said that at the heart of election is the idea of confrontation, which in turn produces the necessity of making a choice. In the case before the Court, the choice was not merely one of affirming the agreement; it involved as well the abandonment of the right to rescind. Where the breach is a continuing one the abandonment of the right to rescind is not so readily concluded because it may be that all the innocent party has done is take no action to exercise the right at the time in question. Their Honours emphasised the fact that the focus is not so much on whether the innocent party acts on the basis that the contract remains on foot, as whether the innocent party was confronted with a choice and decided to abandon the right to rescind. 85 Finally, Mr Keays referred to Holland v Wiltshire (1954) 90 CLR 409 at 415 where Dixon CJ said that to give a party refusing to perform a fixed time to resile from his refusal, and to notify him that failing his doing so he will be sued for his breach, did not amount to an unconditional waiver of the refusal as a renunciation (see also Purcell v Tullet Prebon (Aust) Pty Ltd [2010] NSWCA 150 at [34]). 86 I turn now to consider the three alleged acts of repudiation by JP Morgan.

Removal of the Mr Keays' Responsibility for the Management of Foreign Exchange Sales 87 The trial judge said that the removal of Mr Keays' responsibility for the management of foreign exchange sales was a repudiatory breach of contract. He did not expressly say whether it was a breach of an essential term or a sufficiently serious breach of a non-essential term. He did say that responsibility for the management of foreign exchange sales was one area expressly mentioned in the job description. He also said that in his opinion Mr Keays had a contractual right to remuneration based on those responsibilities and he clearly asserted it. 88 It is necessary to set out further provisions of the job description. In a section entitled "Business Description" the following appears: Main Product Lines are Foreign Exchange, Interest Rate Derivatives and corporate risk advisory. Client base is predominantly in Australia and New Zealand. 89 In the body of the document and next to the title "Job Description" the following statements, among others, appear: The main focus of the role will be managing a team responsible for marketing of interest rate derivatives and foreign exchange to corporate customers. From a management perspective, there is complete responsibility for what is currently a team of two - another corporate derivative marketer (to be employed) and the existing foreign exchange sales business … On the foreign exchange front, our business is currently dominated by execution of franchise business from a variety of internal and external customers. The 'Head of Corporate Derivative Marketing' will have active management and oversight of Foreign Exchange sale business in Sydney and be expected to help identify ways of growing the business with an emphasis on transitioning as much business as possible to the e-FX platform. At present there is only one associate executing this business with the likelihood of additional resources if the business opportunities expand significantly. 90 There does not appear to be any dispute that the reference to a foreign exchange sales business in the above statements was a reference to business on the public side and there was evidence to that effect. 91 JP Morgan put a number of arguments in support of its submission that the trial judge erred in concluding that its conduct was repudiatory. I have already rejected the submission that the trial judge erred in concluding that the job description was part of the contract of employment. JP Morgan also submits that the trial judge erred in concluding that the job description gave Mr Keays contractual rights to insist on work of a particular nature. At first blush, there is force in JP Morgan's submission that the Court could not determine from the job description how much foreign exchange work or interest rate derivatives work Mr Keays could assert a contractual right to perform. Finally, JP Morgan submitted that even if a contractual term, responsibility for foreign exchange sales was not the type of contractual term which, if breached, gave rise to a right to rescind. 92 I reject JP Morgan's submission. Mr Keays wanted to work on the public side, wall-crossing as required. JP Morgan agreed to that and it became a term of the contract. Management of foreign exchange sales was work on the public side and it was a significant feature of Mr Keays' job description. Bonuses and incentive awards for performance were an important part of Mr Keays' remuneration. As the job description suggested it would, foreign exchange sales in fact formed a significant part of Mr Keays' work in terms of the revenue he generated. Mr Keays' foreign exchange responsibilities were not simply reduced, they were taken away from him and given to someone else. In the circumstances, I think that there was a breach of an essential term or, at least, a sufficiently serious breach of a non-essential term. 93 As to whether Mr Keays affirmed the contract, the trial judge did not make a finding as to precisely when Mr Jani took over Mr Keays foreign exchange responsibilities. Mr Keays knew that Mr Herbert-Smith proposed that course from his discussions with Mr Herbert-Smith in January or early February 2008. Mr Herbert-Smith commenced his employment with JP Morgan on 25 February 2008. Mr Keays' evidence was that Mr Jani commenced within weeks of that date. JP Morgan, in its written outline of argument on the appeal, asserted that Mr Jani commenced work in early to mid-April 2008. 94 In connection with his conclusion that Mr Keays had affirmed the contract, the trial judge said that Mr Keays had protested immediately after the change and thereafter consistently. He said (at [42]): His efforts to reclaim the responsibilities were ongoing. Those efforts had not come to an end, or been exhausted, in the relatively short period before his employment was terminated. By his conduct he affirmed the contract of employment and retained the right to sue for damages arising from JPM's repudiatory conduct. 95 On one view, Mr Keays' continual protests might be seen as supporting his argument that he had not abandoned his right to rescind. However, read in context I do not think that the trial judge was making inconsistent findings. Mr Jani had come in and taken over foreign exchange sales. Mr Keays had assisted him during a transition period. The effect of the trial judge's findings is that Mr Keays had decided to stay in his employment (that is, he had affirmed the contract) but he would continue from that position to see if he could persuade JP Morgan to revert to the previous position. I uphold the trial judge's finding that Mr Keays affirmed the contract of employment. 96 The trial judge went on to say that there was no case for relief for breach of contract based on the removal of Mr Keays' foreign exchange responsibilities. No loss had been suffered, and it was not clear that there would have been any loss even if his employment had not been terminated. I do not understand there to be any challenge to these conclusions.

The Decision that Mr Keays' Position should be a Position on the Private Side 97 A communication by an employer to an employee that in the future he or she would be employed to perform work in a substantially different way from that agreed at the time the contract was entered into, could be a repudiation in that it might evince an intention by the employer to fulfil the contract only in a manner substantially inconsistent with its obligations and not in any other way. That is one situation. Another situation is as follows. A employs B and each party has the right to terminate the contract on a relatively short period of notice. A decides to reshape or restructure its business and that it no longer wishes to employ a person carrying out B's responsibilities and duties. It wishes to create a new position. It could terminate B's employment or it could, before doing so, try to persuade B to fill the new position. On those attempts failing, it could terminate the contract. 98 The trial judge found that in this case what occurred was the latter situation. JP Morgan went a step further and submitted that Mr Keays' case failed at the prior stage in that even a direction to Mr Keays that he work on the private side would not be a repudiation because that would not amount to performance of the contract in a way substantially inconsistent with its obligations. That followed, so it was argued, because the critical thing was the responsibilities and functions, which it was said remained the same, not whether they were performed on the public or private side. I do not need to deal with this submission because I think that the trial judge was correct for the reasons he gave. 99 Mr Keays attacked the trial judge's conclusion and suggested that Mr Herbert-Smith, on behalf of JP Morgan, had directed Mr Keays that he was to work on the private side and that the contract had been repudiated by JP Morgan. The repudiation had been accepted by Mr Keays either before or on 5 June 2008. 100 The difficulty with Mr Keays' submission before this Court is the same as it was before the trial judge, who noted that it involved an attempt "to rewrite the factual position". The trial judge found that Mr Herbert-Smith did not demand or direct Mr Keays to work on the private side. He referred to Mr Herbert-Smith attempting to "persuade" Mr Keays and to Mr Herbert-Smith's "invitation" or "proposal". The parties discussed the issue and it could not be resolved. Both parties would have been aware of the provisions of the contract of employment and, in particular, the provision for three months' notice of termination or payment in lieu. They discussed the possibility of Mr Keays being made "redundant", perhaps under the belief that that would enhance his termination benefits. They met on 5 June 2008 and Mr Keays was given the letter of termination of the same date. There is nothing in these facts which suggests a repudiation and acceptance of that repudiation, either before or, leaving aside the effect of the letter dated 5 June 2008 (which is dealt with in the next section), on 5 June 2008.

The Letter of 5 June 2008 as a Repudiation 101 JP Morgan submits that an allegation that its letter dated 5 June 2008 constituted a repudiation was neither pleaded nor pursued in the Court below. On this basis it resists Mr Keays' application to amend his notice of appeal to clearly raise the issue. 102 The Court was taken to Mr Keays' Further Amended Statement of Claim dated 21 October 2010. An examination of that document does not provide a clear answer to the question of whether the allegation was pleaded. Paragraph 25 suggests it was not, whereas paragraphs 35A-35D suggest it was pleaded. JP Morgan handed up to the Court Mr Keays' written submissions before the trial judge and those submissions certainly emphasise the first two acts as constituting the repudiation. In the trial judge's reasons he refers to a submission, which he rejects, that the provision of the Deed of Release was an anticipatory breach of the contract of employment. That seems to me to be the point, or at least close to the point, Mr Keays now seeks to raise. The gravamen of the point is that it was not open to JP Morgan to place conditions (that is, the execution of the Deed of Release) on the payment of the contractual and statutory amounts to which Mr Keays was entitled. In that sense, the letter dated 5 June 2008 and the Deed of Release go hand in hand. I would allow Mr Keays to raise the point and I would grant him leave to amend the Notice of Appeal in the manner indicated. 103 However, the argument itself must be rejected. Leaving aside the minimum bonus payment for present purposes, Mr Keays was paid his contractual and statutory entitlements by JP Morgan on 22 July 2008. Perhaps it was because JP Morgan was offering to pay additional amounts being twelve weeks' severance pay (approximately $86,539), and payment representing the value of unvested stock awards (approximately $676,000), that it sought the execution of the Deed of Release before making any payments. In any event, Mr Keays' submission should be rejected on the ground that even if JP Morgan's letter of termination dated 5 June 2008 was ineffective, it is quite clear in my opinion that, leaving aside the letter, JP Morgan had decided to terminate the contract of employment and that Mr Keays has not suffered any loss by reason of any breach or repudiation. He received his contractual and statutory entitlements. 104 An allied point made by Mr Keays was that the letter of termination dated 5 June 2008 should have included the payments to which he was entitled as a matter of contract and statute. That might have been a matter Mr Keays could have pursued by action had he needed to do so. However, it does not constitute a repudiation of the contract. 105 This case is quite different from the facts before the Court in Walker v Citigroup Global Markets. In that case there was no evidence - putting to one side the repudiatory conduct - that the employer would have terminated the contract. In this case, JP Morgan had decided to change the nature of Mr Keays' position. It was clear that if not accepted by Mr Keays (as in fact it was not), then JP Morgan would have terminated the contract (as in fact it purported to do).

Conclusion on Repudiation 106 The first alleged repudiatory act was made out, but in relation to that act Mr Keays affirmed the contract. The second alleged repudiatory act was not made out. The third alleged repudiatory act, even if made out, did not lead to any loss or damage. Mr Keays' repudiation case was dealt with correctly by the trial judge.

Misleading or Deceptive Conduct Under Sections 52 and 53B of the Trade practices Act 107 As I read the trial judge's reasons, he had relied on the three matters identified above (at [58]) as both rebutting the statutory presumption in s 51A of the Trade Practices Act, and as sufficient to mean that Mr Keays had not made out an absence of reasonable grounds for making the representation. 108 Mr Keays' challenge to the trial judge's conclusion was as follows. The Court was referred to passages in the cross-examinations of Mr Taylor and Mr Priestley respectively, and it was submitted that this evidence established that these witnesses intended right from the start that Mr Keays' position would be or would become a position on the private side. Therefore, they and JP Morgan did not have reasonable grounds for making the representation. It seems to me that this involves an invitation to this Court to reverse the trial judge's findings of fact, or at least to find that they had no sufficient basis and order a retrial. 109 The trial judge did not make express findings about the credit of the various witnesses who gave evidence before him. One might infer from various conclusions he has reached that he has accepted, in substance at least, the evidence of all the witnesses called before him. 110 I have read carefully the passages in Mr Taylor's evidence to which the Court was referred. I am not satisfied that the trial judge overlooked the evidence or misconstrued it. There is no doubt that at one point Mr Taylor considered that the position would be on the private side. However, the trial judge found that this idea and the wall-straddling idea were abandoned and those conclusions are strongly supported by the subsequent events, being the fact that Mr Keays worked on the public side for two years, being wall-crossed as and when required, and the fact that the prospect of Mr Keays working on the private side arose because Mr Herbert-Smith brought "new ideas into play". As far as Mr Priestley is concerned, "picking the low hanging fruit" off the back of investment banking clients (that is, clients on the private side) as Mr Priestley colourfully put it, is not inconsistent with a position on the public side with wall-crossing as and when required. After all, that is how Mr Keays worked for two years. Even if picking the low hanging fruit on the private side was the major reason for JP Morgan employing Mr Keays, that does not mean that it was inevitable that he would be required to work on the private side as distinct from crossing the wall as and when required. 111 Mr Keays has not shown that the trial judge erred in his conclusion that he had not shown misleading or deceptive conduct on the part of JP Morgan.

Minimum Bonus Payment 112 The part of the letter dated 14 December 2005 which deals with the minimum bonus payment is set out above (at [28]). 113 The evidence before the trial judge was to the effect that Mr Keays was allocated a bonus of $500,000 in respect of the 2006 performance year, of which USD325,000 was a cash bonus (which the appellant was paid in late January 2007), and $175,000 was a Restricted Stock Unit (RSU) Amount. Mr Keays claimed that he should have been compensated in relation to RSUs on the termination of his employment. 114 JP Morgan's submissions in relation to this claim were as follows. First, a claim in relation to the RSUs was not pursued before the trial judge and Mr Keays should not be permitted to raise it on appeal. Secondly, in any event, the claim fails on the merits. Thirdly, even if the claim ought to be allowed, the maximum claim is USD125,000, being the minimum bonus payment referred to in the letter dated 14 December 2005 of USD450,000 minus the cash bonus paid of USD325,000. In other words, the claim is to be determined by reference to the letter dated 14 December 2005, not by reference to the subsequent allocation. As I understand it, Mr Keays accepts this third submission. 115 As to JP Morgan's first submission, it seems that the condition about the minimum bonus payment is pleaded in the Further Amended Statement of claim (paragraph 27(f)(iii)), but that there is no express pleading of breach of the condition. I think the trial judge addressed the point in the following paragraphs of his reasons (at [68], [69] and [74]): Secondly, the letter of offer recorded that Mr Keays' guaranteed bonus for 2006 of USD$450,000 might also be satisfied in part by the award of JPM "Restricted Stock" and/or stock options. The letter of offer said, in connection with stock awarded for this reason: Vesting of Restricted Stock is conditioned on your continued employment as of each vesting date, and the terms and conditions set forth in the associated award agreement. The terms of the letter of offer clearly suggested that unvested stock in the first two categories would not vest after termination of employment. Some of the JPM stock, referable to replacing Deutsche stock, had vested before Mr Keays' employment with JPM came to an end; some had not. None of the stock referable to the guaranteed bonus for 2006 had vested. The "associated award agreement" referred to in the two sentences in the letter of offer which I have extracted was not put into evidence by either party. … Notwithstanding the matters to which I have referred, I am satisfied that the onus lay on Mr Keays to prove that he had an unsatisfied entitlement to the unvested stock. Mr Keays was not able to point to an entitlement to unvested stock in any of the three categories I earlier identified. As to the first two categories, the letter of offer made plain that vesting depended on continued employment. As a matter of entitlement arising from the terms of the contract of employment itself, therefore, a claim for the value of unvested stock in the first two categories cannot succeed. No other entitlement was identified. 116 Mr Keays' pleadings may not have alerted JP Morgan to the point to the extent that they should have, but the point was dealt with by the trial judge and I think Mr Keays should be permitted to agitate the point on the appeal. There does not appear to be any prejudice to JP Morgan. On the face of it, the associated award agreement is relevant to the question of vesting, rather than payment, and it is the meaning of payment which seems to be the critical issue. 117 The interpretation of the relevant provisions in the letter dated 14 December 2005 are not free from difficulty. Mr Keays referred to cases where the Court had considered whether a book entry by one party constituted payment (Manzi v Smith (1975) 132 CLR 671; Brookton Co-Operative Society Ltd v Federal Commissioner of Taxation (1981) 147 CLR 441). These cases do not really advance the matter, which depends on the interpretation of the words in the letter. Mr Keays also referred to extreme cases which might arise if JP Morgan's interpretation is correct. JP Morgan could "pay" all of the minimum bonus payment by issuing RSUs (that is, not cash) and then terminate the employee's employment before the vesting dates. Furthermore, if the proviso in the second paragraph means no more than the allocation of RSUs, then it would be ineffective other than in those cases where allocation and vesting occur at the same time. These arguments have considerable force. However, I do not think that they can overcome the fact that one would expect the notion of payment to be used consistently throughout the two paragraphs. When first used in the first sentence of the first paragraph it means the vesting of RSUs. That construction means that Mr Keays was "paid" when allocated the RSUs in January 2007, and his employment was not terminated prior to the payment of the bonus. The clause about the bonus being included in the final termination payment did not operate because his employment was not terminated prior to the payment of the bonus. Mr Keays was not employed on the vesting dates and the RSUs did not vest in him. 118 In my opinion, the trial judge's conclusion about the minimum bonus payment was correct. 119 It follows that on the basis of the above conclusions, the appeal must be dismissed.

The Costs Appeal 120 The costs appeal is an appeal by JP Morgan Administrative Services Australia Limited ("JP Morgan"). 121 The trial judge refused an application by JP Morgan for indemnity costs, instead making an order that Mr Keays pay JP Morgan's costs of the proceedings to judgment, such costs to be taxed if not agreed. His Honour also made an order that JP Morgan pay Mr Keays' costs of JP Morgan's application for indemnity costs, such costs to be taxed if not agreed. 122 Before the trial judge, JP Morgan relied on the offer that it made to Mr Keays in its letter of termination dated 5 June 2008. Mr Keays was offered (in addition to his contractual and statutory entitlements), 12 weeks severance pay (approximately $86,539) and payment representing the value of unvested stock awards (approximately $676,000), totalling approximately $762,539. The trial judge said that there was no need to give consideration to the offer which was made in the letter of termination dated 5 June 2008. He said that such an offer would not ordinarily itself provide an adequate foundation for the award of indemnity costs if proceedings were subsequently commenced. He acknowledged the possibility of exceptions to that general statement. He said that, in the ordinary case, in order to sustain a claim for indemnity costs based on an offer of settlement, it would be necessary to show that the offer was sufficiently connected with the commencement or threatened commencement of the proceedings. The trial judge concluded that the necessary connection had not been shown in relation to the offer made on 5 June 2008, notwithstanding the fact that the offer was still open for acceptance when Mr Keays made a claim for more than $5 million by letter dated 18 June 2008. 123 His Honour did consider an offer made by JP Morgan on 29 August 2008. That offer was a renewal of the offer made in the letter of termination dated 5 June 2008. It followed the claim made by Mr Keays to which I have already referred, and a further letter from Mr Keays' solicitors dated 22 August 2008 enclosing a draft application and statement of claim. 124 JP Morgan's second offer remained open until 5 September 2008. Mr Keays' response to the offer was to file his application and statement of claim on 2 September 2008. The trial judge said that JP Morgan's second offer qualified for consideration as a possible ground for the award of indemnity costs. 125 The trial judge considered the standard by which Mr Keays' response to the second offer should be judged. He said that the discretion to award indemnity costs following rejection of a "Calderbank" offer was a general one. The mere refusal of a Calderbank offer is insufficient. His Honour addressed at some length the question of whether, in order to succeed, an applicant for an award of indemnity costs must show that the rejection of his or her offer was imprudent or unreasonable, or whether it was necessary for him or her to show that it was imprudent or "plainly" unreasonable. After reviewing the authorities, his Honour reached the conclusion that it is sufficient for an applicant for indemnity costs to show that the offeree's refusal of the offer was imprudent or unreasonable. JP Morgan does not challenge the trial judge's conclusion that the test to be applied is whether, in all the circumstances, Mr Keays' refusal of the Calderbank letter was imprudent and unreasonable. I will proceed on the assumption that that is the correct test. 126 His Honour considered the significance of whether or not the applicant for indemnity costs had given reasons as to why the claim must fail with his or her offer. His Honour referred to the decisions of NMFM Property Pty Ltd v Citibank Limited (No 11) (2001) 109 FCR 77 and Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 and said the following (at [19]): In accordance with this approach, in seeking to establish from the terms of its offer that it was imprudent or unreasonable to reject it, a respondent needs to show that the offer was accompanied by some statement of the reasons why the applicant's case would inevitably fail, or at least fall short of the offer. 127 His Honour then addressed the terms of the offer made by JP Morgan on 29 August 2008 and said (at [22]): In my view, the offer to the applicant did not identify with sufficient particularity the reasons why the application (if filed) must fail. It left to the applicant to assess his prospects without even the benefit of any pleading in response by the respondent. No detailed rebuttal had been provided by the respondent to the earlier statement advanced on behalf of the applicant in the letter from his solicitors dated 18 June 2008 setting out the matters upon which the applicant did rely. Nor was any response of that kind made to the draft application and statement of claim. Rather, by letter dated 27 June 2008, the respondent's solicitors initially sought further and better particulars of the assertions made in the letter of 18 June 2008. The next step taken by the applicant was service of the draft application and statement of claim. Then the earlier offer was simply repeated. In the circumstances, the respondent did not explain why the applicant's claim was bound to fail. 128 In the circumstances, the trial judge concluded that a sufficient case for the award of indemnity costs for the whole of the proceedings had not been made out by JP Morgan. 129 In its notice of appeal, JP Morgan contends that the trial judge erred in holding that, in order to recover indemnity costs, it needed to show that its offer was accompanied by some statement of the reasons why Mr Keays' case would inevitably fail, or at least fall short of the offer. Secondly, it contends that the trial judge erred in failing to take into account or properly take into account the extent of the compromise offered by JP Morgan, the extent of the disparity between the compromise offered by JP Morgan and the trial judge's judgment, the lack of any counter offer put by Mr Keays, the fact that the terms of JP Morgan's offer were made more than once and were abundantly clear, the fact that the offers were made by JP Morgan at the earliest possible time and the fact that Mr Keays had ample time to consider the offer made and to assess the strength of his case. Finally, JP Morgan contends that the trial judge erred in ordering that Mr Keays receive his costs of the costs application, in circumstances where JP Morgan was awarded costs and was required to bring the application to get any order for costs at all. That final contention by JP Morgan was abandoned as a separate ground at the hearing of the appeal. 130 Mr Keays filed a notice of contention contending that the trial judge's decision could be affirmed upon other grounds. He contends that even if all of the matters raised in JP Morgan's notice of appeal were accepted, having regard to all of the circumstances of the offer relied upon by JP Morgan, the period of seven days during which the 'offer' was open was less than a period than a Court would consider reasonable and would therefore not justify a departure from a normal costs order. Furthermore, he contends that JP Morgan was not required to bring an application for indemnity costs, as opposed to the usual costs order, which would have been dealt with by consent of Mr Keays upon the basis that costs should follow the event. 131 It is trite to say that in order to succeed in an appeal against an award of costs, particularly where the point at issue is the basis upon which the costs should be assessed, an appellant must show an error of the type identified by the High Court in House v The King (1936) 55 CLR 499 ("House v The King") at 504-505 per Dixon, Evatt and McTiernan JJ. 132 If the trial judge did make a House v The King type error it was to treat the failure to show that the offer was accompanied by some statement of the reasons why Mr Keays' case would inevitably fail, or at least fall short of the offer, as the decisive consideration and not consider and give weight to other matters. It seems to me that that would be an error of the House v The King type because it would be to give automatic effect to one factor rather than considering and weighing all factors relevant in the circumstances of the case. With respect, I think the trial judge did make that error. Although no doubt aware of some of the other relevant factors, the trial judge did not analyse them and weigh them in the balance. 133 It falls then to this Court to re-exercise the discretion. 134 There are a number of factors which support an award of costs on an indemnity basis in favour of JP Morgan. The offer was made before the proceeding was commenced and was in the same terms as the proposal in the letter of termination dated 5 June 2008. As matters have transpired, it was a generous offer involving a payment by JP Morgan to the respondent of approximately $762,539. Furthermore, Mr Keays, rather than putting a counter-offer, simply issued proceedings. These matters are no doubt weighty matters. 135 On the other hand, JP Morgan did not address the particular allegations in the draft Application and draft Statement of Claim in its offer. It is true that it had asked Mr Keays for particulars of his claim, but that does not detract in any significant way from its failure to provide reasons. This factor must be coupled with the fact that the offer was only open for seven days and JP Morgan said it would make no further offers. As to the latter matter, it was true to its word. It seems to me that these matters, that is, the fact that the Calderbank offer was not accompanied by reasons, the fact that it was only open for a short period, and the fact that it was made by JP Morgan before it had provided any information by way of a defence or otherwise, outweigh the matters referred to in the previous paragraph. Had the offer, or even a far less generous offer, been made during the course of the proceeding it might have been appropriate to award indemnity costs. However, that is not what happened. 136 I would exercise the discretion in the same way as the trial judge. The appeal against the costs order must be dismissed.

Conclusions 137 In the appeal by Mr Keays (NSD 575 of 2011) I would grant leave to amend the notice of appeal in terms of the document dated 16 November 2011, but I would order that the appeal be dismissed. The matters raised by JP Morgan in its notice of contention occupied some time in argument before this Court and I think the appropriate order for costs is that Mr Keays pay 85 per cent of the respondent's costs of the appeal. 138 In the appeal by JP Morgan Administrative Services Australia Limited (NSD 928 of 2011) an order must be made that the appeal be dismissed. In addition, JP Morgan should pay Mr Keays' costs of the appeal. Although I have found error on the part of the trial judge, I do not think that is sufficient reason to reduce Mr Keays' costs of the appeal. I certify that the preceding one hundred and thirty-one (131) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.