Logan & Ors v WorldAudio Ltd & Ors

Logan & Ors v WorldAudio Ltd & Ors - [2003] NSWIRComm 87 - NSWIRComm 2003 case summary — Zoe

[14]

8 Item 1 of the schedule set out the services to be provided. Significantly, for the purpose of these proceedings three of the services to be provided were: "Implement designated aspects of the marketing and public relations plan of the Company", "Visit and promote the Company to major potential sponsors including but not limited to Commonwealth and State Government departments, local Government organisations, local pressure groups and lobbyists, SME, major advertising agencies and large corporate advertisers" and "Plan sponsorship of the Company by organisations in conjunction with marketing events." There was controversy between the parties as to the precise nature of the obligations of Logan Corporation Pty Ltd under the agreement with respect to the services to be provided. Reports made by Logan Corporation Pty Ltd to the first respondent indicated that it had involved itself in an overall sponsorship programme to raise revenue for the company and had been actively engaged in endeavouring to introduce sponsors. In December 2002 Mr Andrew Thompson wrote to Logan Corporation Pty Ltd asserting that "budget figures" that had been provided by it to the first respondent had not been met and referring to Logan Corporation Pty Ltd "as a specialist industry consultant in the area of radio sponsorship sales." The letter sought to require Mr Logan to attend weekly sales coordination meetings, provide a weekly update report as to activity levels and the like and to attend a monthly performance evaluation. Mr Logan responded by reference to the obligations of Logan Corporation Pty Ltd under the consultancy agreement, but did not specify precisely what he was referring to in this regard. On 5 December 2002 Mr Logan wrote to Mr Peter Solomon Chairman of the first respondent complaining about the actions of Mr Thompson and maintaining that Logan Corporation Pty Ltd was "honouring its commitments" in respect to the agreement. He also said: "In addition to add further value and service, Logan Corporation is now in the process of recruiting a professional representative (or personnel) to be working in an area of sponsorships, sales and marketing."

[20]

14 In support of the interlocutory orders sought in these proceedings the applicants emphasised a number of matters being: 1. That the termination of the services of Logan Corporation Pty Ltd by the first respondent would have a widespread impact upon the reputation of Logan Corporation Pty Ltd and Mr Logan personally which would impact upon other arrangements and other negotiations which were being conducted in connection with the radio industry. The termination of the services of Logan Corporation Pty Ltd for alleged non-performance could potentially destroy other business opportunities in which Logan Corporation Pty Ltd might participate. 2. Logan Corporation Pty Ltd had engaged the services of two employees, Louise O'Brien and Dennis Jones to enable it to raise advertising and sponsorship revenue for the first respondent. Although it asserted that it was not required to undertake these activities under the consultancy agreement nevertheless it did this "in order to maintain an amicable and productive relationship with the first respondent and its management." If the injunction were not granted Logan Corporation Pty Ltd would be required to terminate the employment of both these persons which would impact upon them and which would financially disadvantage Logan Corporation Pty Ltd by reason of the requirement to make payment in lieu of notice or to continue to pay wages with no work to be performed by them. 3. Notwithstanding the difficulties that had arisen between the applicants and the first respondent and between Mr Logan and Mr Andrew Thompson personally, if the relief sought were to be granted the applicants were confident that Mr Logan would be able to work "effectively" with Mr Thompson "and the other people involved with the first respondent." This was because he had worked with these persons for a long time, and it was in his interests to promote the financial viability of the first respondent in which he was a shareholder. 4. Mr Logan was entitled to participate in the allocation of 7.5 million performance based shares in the first respondent if certain performance criteria were met by that company as a result of the efforts of Mr Logan and Mr Thompson. If Mr Logan were precluded from being involved through the consultancy of Logan Corporation Pty Ltd in the promotion of the first respondent then he would be denied the opportunity to participate in the allocation of these shares.

[28]

22 However the second aspect of the orders sought by the applicants has mitigated against the grant of relief on the balance of convenience. What is sought by way of interlocutory relief would constitute, in effect, an order for specific performance of the consultancy agreement. The orders would have the effect of requiring the first respondent to continue to pay a consultancy fee to Logan Corporation Pty Ltd and to maintain Mr Logan as an approved person in this connection in circumstances where it is quite clear that there is a great deal of personal acrimony between Mr Logan and the Managing Director, Mr Thompson. That such acrimony exists is a matter of evidence and it is neither necessary nor appropriate to make any determination as to culpability or justification concerning the circumstances which have arisen. I am not able from the evidence which has been presented to the Court for the purpose of these interlocutory proceedings to make any determination that the applicants have a case which is prima facie so strong that it is inevitable or almost certain that they will succeed in demonstrating that the conduct of the first respondent and the other respondents named in the proceedings was unfair in the sense that the first respondent was not justified in purporting to terminate the consultancy agreement. In making these observations I am conscious that in proceedings of this kind it is more usual to consider whether an applicant for relief has a "good arguable case". I have deliberately put the matter in a more restrictive way for the purpose of these proceedings because, as I have said, to order the relief sought would in essence constitute an order for specific performance of the consultancy agreement. Because of matters which I regard as being significant in this context and because I have come to the view that a court would only order specific performance of a contract for personal services in exceptional cases, it is appropriate in my opinion that the applicants' case be assessed for the purpose of these interlocutory proceedings by applying a higher test than normal. In this regard I should add that although the applicants maintained Logan Corporation Pty Ltd was not responsible for and was not required as an obligation under the consultancy agreement to create budgets for and satisfy budgetary expectations for the sale of sponsorship and the generation of earnings by the first respondent, there is evidence that these activities were in fact undertaken by Logan Corporation Pty Ltd. It is not necessary at this stage to determine whether there was a contractual obligation on the part of Logan Corporation Pty Ltd to carry out this work or whether it was assumed as a result of some altruistic generosity on the part of Mr Logan. It is sufficient to observe that these issues are to be fiercely contested by the parties and, no doubt, there are arguments available to each side.

[30]

In Francis v Kuala Lumpur (at 1417-18) the Judicial Committee referred to "the general principle of law that the courts will not grant specific performance of contracts of service". This was not put as a rule of law but the Committee observed that special circumstances will be required before a court exercises its discretion to make such an order. Despite recent judicial criticism of the assumptions underlying the general principle referred to in Francis - see C H Giles Co Ltd v Morris [1972] 1 WLR 307 at 318-19 and Turner v Australasian Coal and Shale Employees' Federation (FCR at 192-3) - the claim is made in Meagher, Gummow and Lehane: Equity - Doctrines and Remedies, 2nd ed, para 2011, that "one may search in vain for a reported case in which equitable relief would have compelled the maintenance of a personal relationship or the performance of personal services (except where they are of a minor nature and an incidental part of a contract otherwise specifically enforceable ... )". In Ridge v Baldwin [1964] AC 40 at 65, Lord Reid went so far as to say that "There cannot be specific performance of a contract of service". In Chappell v Times Newspapers Ltd [1975] 1 WLR 482 at 501, Lord Denning MR treated the decision in Hill v CA Parsons & Co Ltd [1972] Ch 305 as being an exception to the general principle, but the relief granted in Hill was not really of specific performance. The order of the court was merely to restrain the employer from treating as valid a particular notice of dismissal. The invalidation of that particular notice was important to the plaintiff. In any event, the case was unusual because, as Lord Denning pointed out in Chappell "both employers and Mr Hill had complete confidence in one another". The notice of dismissal had been given under pressure from a trade union. Likewise in Irani, another "exception" relied upon by the present appellant, the injunction went to restrain the employer only from implementing a dismissal notice before carrying out the disputes procedure laid down in the plaintiff's conditions of service. The order sought in the present case does not relate to a particular notice of dismissal. It is designed to compel the respondent to restore its previous relationship with the appellant. The order falls into the category which is subject to the general principle referred to in Francis. We do not regard that principle as immutable. As was suggested in Turner, it may be that, under modern conditions and in connection with large employers, the circumstances which gave rise to the general principle will not apply. We would not wish to give any endorsement to the view that there may never be an order in the nature of specific performance of a contract of employment. But the making of such an order is a matter within the discretion of the court. Where such an order is sought, careful consideration must always be given to the likely consequences of the order. The evidence in the present case suggests that industrial difficulties would occur if Gregory were now to be re-employed. Each of the traditional reasons for denial of specific performance - a loss of confidence between the parties and the problem of supervision of the relationship - applies in this case. In the exercise of the court's discretion, an order for specific performance ought to be refused. By way of an alternative to specific performance, the appellant seeks a declaration that his employment was not lawfully terminated. There are circumstances in which the making of a declaration upon such a matter may serve a useful purpose; for example, where some ancillary benefit can thereby be obtained. But in this case, if specific performance is refused, the making of a declaration will not achieve any useful purpose . We bear in mind what was said by Barwick CJ and Jacobs J in Neeta (Epping) Pty Ltd v Phillips (1974) 131 CLR 286 at 307; 3 ALR 151 at 168: "Unless the parties are agreed on the consequences which flow from a declaration that such a contract has or has not been validly rescinded it is generally undesirable that the court should so declare without any orders for consequential relief." That comment was made about a contract for the sale of land. It seems to us that it applies even more strongly to a case where a contract of employment has been breached in circumstances of industrial tension." See also Brennan CJ, Dawson and Toohey JJ in the High Court of Australia in Byrne v Australian Airlines Ltd (1995) 185 CLR 410. ("….a court will not, save in exceptional circumstances, order specific performance of a contract of personal service." (at 428)).

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Judgment (35 paragraphs)

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Cases Cited (5)

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