Langley v AMP Capital Investors Limited

Supreme Court of NSW|2007-08-20|Before: Mr P, Harrison J

CITATION : Langley v AMP Capital Investors Limited [2007] NSWSC 937

DECISION : (1) The defendant's notice of motion filed 22 September 2006 is dismissed; (2) The defendant is to pay the plaintiff's costs as agreed or assessed.

CATCHWORDS : Separate determination of issues - quantum of bonuses

Civil Procedure Act 2005 (NSW) - ss 56 to 62 LEGISLATION CITED : Contracts Review Act 1980 (NSW) Uniform Civil Procedure Rules 2005 (NSW) - Rule 28.2

ABB Engineering Construction Pty Limited v Freight Rail Corp [1999] NSWSC 1037 Admiral I Pty Ltd v Leighton Contractors Pty Ltd [2005] NSWSC 1105 Clark v BET pcl [1997] IRLR 348 Dunstan v Simmie Co Pty Ltd [1978] VR 669 Idoport Pty Limited v National Bank Ltd [2000] NSWSC 1215 CASES CITED : Integral Home Loans Pty Ltd & Anor v Interstar Wholesale Finance Pty Ltd & Anor [2006] NSWSC 1464 Perre v Apand Pty Limited (1999) 198 CLR 180 Pioneer Park Pty Limited v ANZ Banking Group Limited [20056] NSWSC 832 State of New South Wales v Lepore 920030 212 CLR 511 Tepko Pty Limited v Water Board (2001) 206 CLR 1 Tyrrell v The Owners Corporation Strata Scheme 40022 [2007] NSWCA 8

PARTIES : Nicholas James Langley - Plaintiff AMP Capital Investors Limited - Defendant

COUNSEL : Mr A B Gotting - Plaintiff Mr P Braham - Defendant

SOLICITORS : Shanahan Tudhope Lawyers - Plaintiff Baker & McKenzie

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20147/2006 - NICHOLAS JAMES LANGLEY v AMP CAPITAL INVESTORS LIMITED

JUDGMENT (Separate determination of issues - quantum of bonuses) 1 HER HONOUR: By notice of motion filed on 22 September 2006 the defendant seeks firstly, orders that the issues of liability and quantum in these proceedings be heard and determined separately; secondly, that the issue of liability be heard and determined first; and thirdly, the plaintiff pay the defendant's costs of this motion. 2 The plaintiff is Nicholas James Langley. The defendant is AMP Capital Investors Limited (AMP). The plaintiff relied on two affidavits of Deegan Fitzharris sworn 13 October and 24 October 2006. The defendant relied on three affidavits of Bryony Binns dated 22 September 2006, 16 October 2006 and 1 November 2006.

The plaintiff's claim 3 Between 8 April 2002 and 2 March 2005, the plaintiff was employed by AMP. During his employment the plaintiff was paid bonuses pursuant to two bonus plans maintained by AMP, known as the "short term incentive" bonus (STI bonus) and "targeted incentive plan" bonus (TIP bonus). The amount claimed for these bonuses is in the vicinity of $1.2 million. In 2003, the plaintiff's base salary was $200,000 per annum. 4 In about April 2004, AMP seconded the plaintiff to the position of Chief Financial Officer of the Diversified Utility Energy Trust (DUET), which was a joint venture between AMP and Macquarie Bank Ltd. It was a term of the secondment that if a suitable position for the plaintiff could not be found with AMP at the conclusion of the secondment, then AMP would apply its usual redundancy policies to the plaintiff. 5 On 4 December 2005, the plaintiff informed AMP that he regarded the secondment as coming to an end, and that he wished to bring forward his "exit date" and end his employment with AMP. AMP denies that the secondment was coming to an end. However, on 22 December 2005, the plaintiff nominated 20 January 2006 as his final day of employment with AMP. 6 On 20 January 2006, the plaintiff's secondment came to an end, either because of redundancy or because of his resignation. The plaintiff claims that he then became entitled to the payments due under AMP's redundancy policy. The plaintiff also says that upon his redundancy he also became entitled to TIP payments for 2005 and 2006, and all deferred TIP payments, and to be considered for an STI incentive payment for 2005 and 2006. 7 Between 20 January 2006 and 2 March 2006, notwithstanding the end of the secondment on 20 January 2006, the plaintiff continued to be engaged by AMP in a limited role, in which he was to give assistance to AMP in a piece of litigation. The plaintiff moved his offices into AMP's legal department and assisted with the litigation. AMP says that the plaintiff's continued employment during this period was subject to material terms set by AMP in late January 2006. The plaintiff denies that a settled agreement as to his employment during that period was reached. The plaintiff says that his continued engagement with AMP was pursuant to an implied agreement, the terms of which are pleaded as the "third contract" in the statement of claim. AMP denies the existence of the third contract. 8 After 20 January 2006, the plaintiff refused to act in accordance with what AMP asserts was the agreement concluded on 20 January 2006. It is AMP's case that the plaintiff, by his conduct, repudiated his contract of employment with AMP, and consequently, on 2 March 2006, AMP accepted the plaintiffs repudiation. In the alternative, the plaintiff asserts that the termination of his employment with AMP was wrongful, and seeks damages. 9 The plaintiff claim his redundancy entitlements as at 20 January 2006 or alternatively, damages for the failure to give notice of termination of his employment with AMP on 2 March 2006. His claimed entitlement includes: a. Payment in lieu of notice of redundancy ($40,382);

c. The value of deferred bonuses (to a total of either $321,000 or $627,000);

d. Bonuses to a total of $1.2 million, comprising claimed entitlements: i. under the TIP plan of $740,000 for 2005 and (pro rata) $185,000 for 2006; and

ii. under the STI plan of $220,000 for 2005 and (pro rata) $55,000 for 2006. 10 These amounts are claimed, firstly, as the plaintiff's entitlement to a redundancy payment; secondly, as damages for alleged breaches of contract; and thirdly, in the alternative by way of orders consequent upon the variation of the plaintiff's contract of employment pursuant to the Contracts Review Act 1980 (NSW) (CRA). In relation to the plaintiff's CRA claim, two oral representations are relevant to whether or not he is entitled to the payment of the TIP and STI bonuses. These representations are relevant to both issues of liability and quantum. 11 There is a further issue as to whether the plaintiff, during his employment with AMP, became involved in the establishment and promotion of a business intended to compete with AMP's business without the permission or knowledge of AMP, in breach of his contractual and fiduciary duties to AMP, so as to entitle AMP to have summarily terminated the plaintiff's employment on 2 March 2006 in any event. The plaintiff denies the allegations that he was involved in the establishment and promotion of the business RAFT while employed by AMP. He is currently employed by RAFT. 12 There is a significant factual issue between the parties as to whether or not the parties made an agreement on or about 20 January 2006 as to the terms of the plaintiff's employment after that date. AMP says that the plaintiff agreed to remain in employment with it beyond 20 January 2006 on the basis that he accept certain material terms offered by AMP. AMP says that the plaintiff breached those material terms, thereby repudiating his contract of employment, which repudiation was accepted by AMP. The plaintiff alleges that no such express agreement was reached, but that the terms of the plaintiff's employment after 20 January 2006 were implied terms, which he did not breach. 13 There is a further issue as to whether, even if the plaintiff succeeds on the other issues, he is entitled to any amount of bonus for 2005 and 2006, in light of the terms of the bonus schemes, and in particular, given that the bonuses were expressed to form no part of the plaintiff's entitlements under his contract of employment and were expressly stated not to form a contractual promise were discretionary, and were not guaranteed to be paid in any year. 14 The plaintiff submitted that if he succeeds on all other issues, there will be an issue as to the quantum of the plaintiff's bonus entitlement. This issue is the question in respect of which a separate determination is sought.

Determination of separate question 15 Rule 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) states: "28.2 Order for decision The court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings." (Rule 28.2. is in terms identical to the former Part 31 rule 2(a) of the Supreme Court Rules 1970 (NSW)) 16 There are a number of authorities on this topic which include Tepko Pty Limited v Water Board (2001) 206 CLR 1; Perre v Apand Pty Limited (1999) 198 CLR 180 at [436]; State of New South Wales v Lepore (2003) 212 CLR 511 at [187]; Dunstan v Simmie Co Pty Ltd [1978] VR 669 at 671.30; and per Rolfe J in ABB Engineering Construction Pty Limited v Freight Rail Corp [1999] NSWSC 1037. In Idoport Pty Limited v National Bank Ltd [2000] NSWSC 1215, Einstein J at [7]-[8] helpfully provides a compendium of cases upon this topic which I need not reproduce here. 17 In Tepko, Kirby and Callinan JJ cautioned against the severing of issues by the court. Their Honours stated (at [168] - [171]): "…we should not leave this case without making four comments. Both Mason P and Fitzgerald JA were critical of the course of limiting the issues to be tried that the primary judge adopted. In Perre v Apand Pty Ltd attention was drawn to difficulties that can be caused when that course is adopted. In light of the experience in this case, what was there said should be restated with emphasis. The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap.

The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the court's, rather than the parties', interests.

Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question.

The fourth of our comments is related to evidence compiled, committed to writing and filed in advance of the hearing. Parties frequently, either together or separately, compile "books of documents". Although most of these have the potential to be admitted in evidence, often they are defective in form. Many of them are often irrelevant, or their significance is either not recognised or adverted to during the hearing. Their status, as in the case of the letter written by Mr Rhodes, can be ambiguous. Discrimination and economy should be exercised by those who prepare cases in which documentary evidence is likely to be extensive and important. Those who conduct such cases should ensure that what is actually in evidence, and its relevance and significance, are clearly identified." [Footnotes omitted] 18 In Pioneer Park Pty Limited v ANZ Banking Group Limited [2005] NSWSC 832 (cited in Admiral I Pty Ltd v Leighton Contractors Pty Ltd [2005] NSWSC 1105 at [19] per Barrett J), Einstein J rejected an application for separation of liability and quantum. His Honour's reasons cited (at [7]) as "far and away the most significant factor" the fact that the evidence of a plaintiff was likely to be critical both as to liability and as to damages/quantum in a number of ways. Additionally, expert evidence which both parties anticipated putting on in relation to liability was also material to any assessment of loss or damage. He stated:

"It is envisaged that the same experts would be used relating to those issues both as to liability and as to quantum. Certainly, the same or very similar expertise is required and there is obviously a substantial overlap in the … [material] … the experts will need to review for the purpose of addressing the liability issues on the one hand, and the quantification issues on the other.

It is obviously illogical and inefficient for the experts to engage in that exercise on two different occasions." [8] 19 Since these decisions were handed down the Local, District and Supreme Courts in New South Wales have been effected by the Civil Procedure Act 2005 (NSW) (CPA). Sections 56 to 62 are relevant. 20 Sections 56, 57 and 60 of the CPA relevantly provide: "56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.

(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.

(1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects: (a) the just determination of the proceedings,

(b) the efficient disposal of the business of the court,

(d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.

60 Proportionality of costs In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute." 21 Recently in Integral Home Loans Pty Ltd & Anor v Interstar Wholesale Finance Pty Ltd & Anor [2006] NSWSC 1464, Brereton J suggested at [6]: "While much has been said against the resolution of separate questions in Courts of high authority, nonetheless, since the (NSW) Civil Procedure Act 2005, it is my view that the Court should take a more interventionist role in identifying and separating important issues which can resolve significant parts of the litigation expeditiously." See also Tyrrell v The Owners Corporation Strata Scheme 40022 [2007] NSWCA 8.

Whether the application should be granted 22 AMP submitted that the quantum of the plaintiff's bonus claims is a distinct and separate question in the proceedings, which ought to be determined separately from the other issues in the proceedings (the bonus issue). In particular, that issue ought to be determined separately and subsequent to the determination of the plaintiff's entitlement to a bonus in the circumstances. 23 The bases for this submission that this should be separately determined are firstly, that the separate question may not be required to be determined, once the other issues in the proceedings are resolved; secondly, that if the separate question is required to be decided, the scope of the controversy will be reduced by the prior determination of other issues; thirdly, that determination of the separate question will require extensive and expensive discovery and court time, which will be avoided entirely if AMP is successful in other issues in the proceedings, and which will otherwise be substantially reduced; fourthly, that the separate question is a discrete question suitable for separate determination; and fifthly, that discovery addressed to the separate question will involve AMP disclosing information concerning bonuses paid to senior executives, which is commercially sensitive to AMP, and private to those individuals, in an industry in which such information is considered and treated as highly confidential. 24 On the estimate of AMP's solicitors, there are likely to be in excess of 3,000 documents falling into the categories of discovery currently pressed by the plaintiff as a result of his as yet un-particularised claim for bonus amounts. The information that the defendant will be required to discover on the separate question includes confidential information relating to individuals, and commercial information sensitive to the defendant. It will include information such as the bonus amounts awarded to individuals, which is personal, confidential, and commercially sensitive in an industry in which remuneration levels are the single most important factor in the competition for key staff. The procedure for the award of bonuses to the defendant's staff is also confidential and commercially sensitive. It will also involve discovery of the financial performance of the defendant and its related bodies corporate in the relevant financial years, and of the infrastructure division of which the plaintiff was a member. 25 I am not satisfied that the determination of all but the calculation of bonuses will substantially narrow the issues in dispute. The issue of bonuses and the plaintiff's entitlement will be relevant in the liability trial because these were, on the plaintiff's case, the subject of two oral representations made to the plaintiff by an employee of AMP, Mr Garling. AMP says that the discretion of AMP to pay bonuses is absolute and unfettered. Whether or not this is so is not beyond doubt - see Clark v BET plc [1997] IRLR 348. It is my view that there will be an overlap of discovered documents. Some documents will relate to both liability and quantum. 26 There will be an overlap of witnesses on the issues of liability and quantum but this overlap is confined to the plaintiff, Mr Garling and Mr Bryan. Messrs Garling and Bryan are employees of AMP. They are, in a sense, parties to the proceedings. I also accept that the separation of issues may shorten court time. AMP's case would take 10 days in total, five days if the bonus issue is determined separately. However, there is the possibility of two appeals. 27 The credibility of these witnesses, particularly that of the plaintiff and Mr Garling in my view will be critical to the outcome. This heavily mitigates against the separate determination of the bonus issue, particularly where the evidence concerning the oral representations will be of importance to liability and quantum. 28 AMP's concern about the discovery of commercially sensitive information are heightened by the fact that the plaintiff is now in direct competition with the defendant's infrastructure division. The plaintiff submitted that the concerns of AMP over commercially sensitive information have no foundation in fact but, in any event, can be met by an undertaking by the plaintiff, that the plaintiff is willing to give. I accept that the calculation of bonuses and information as to which employees received the larger bonuses are of a commercially sensitive nature. Undertakings given by the plaintiff and his legal representatives will not overcome the problem. That confidentiality will be lost when the evidence is given in Court. However, it may be that confidentiality can be protected by orders of the Court if the Court thinks that it is appropriate. 29 There are factors both in favour and against the separation of the bonus issue. Overall, it is my view that there is no bright line between the issues sought to be severed. It would be unwise to do so. There would be an overlap of issues. The application for a separate determination of issues ought not be granted. I dismiss the motion. 30 Costs are discretionary. Costs normally follow the event. The defendant is to pay the plaintiff's costs as agreed or assessed.

(1) The defendant's notice of motion filed 22 September 2006 is dismissed.

(2) The defendant is to pay the plaintiff's costs as agreed or assessed. **********

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

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Legislation Cited (4)

Cases Cited (9)

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