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

McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James - [2016] NSWCA 36 - NSWCA 2015 case summary — Zoe

[8]

[This headnote is not be read as part of the judgment] In September and December 2008 respectively, Mr Angus James and Mr Colin McKeith, both senior employees of the ABN AMRO Group ("ABN"), were retrenched. The retrenchments were considered and effected in the context of competing takeover offers for ABN by third parties. One of the offerors was a Consortium which included the Royal Bank of Scotland Group ("Royal Bank"). Public statements were made by ABN that if Royal Bank's offer was successful, ABN would ensure the continued operation of ABN's redundancy policy which dealt with severance and ex gratia payments on termination of employment. Both employees claimed damages from ABN and Royal Bank for non-payment to them of severance and ex gratia payments to which they alleged they were entitled under the redundancy policy. Mr James succeeded at first instance, whilst Mr McKeith was wholly unsuccessful. The unsuccessful parties appealed to the Court of Appeal. Held in relation to Mr McKeith's claim: (1) Although his claim against ABN that the redundancy policy had been incorporated into his contract of employment was sufficiently pleaded, the claim failed because ABN did not itself make any contractual promise to him that its redundancy policy would continue to be applied. Rather, it was simply a conduit for such promises being made by the Consortium (and therefore Royal Bank). (2) Royal Bank contractually promised Mr McKeith that ABN would continue to apply its redundancy policy to him. (3) Royal Bank breached that contract by failing to make a severance payment to Mr McKeith in accordance with the redundancy policy but did not breach it by failing to pay him an ex gratia bonus. The redundancy policy did not confer on Mr McKeith a right to any such bonus and ABN was therefore justified in declining to pay one to him unless he signed a broadly drafted deed of release, which he declined to do. (4) The damages recoverable by Mr McKeith from Royal Bank were accordingly limited to his severance payment entitlement of $375,961.54, together with interest. Held in relation to Mr James' claims: (1) Mr James' claim against ABN failed because ABN's redundancy policy was not expressly incorporated into his contract of employment and ABN did not make any contractually binding promise to him that it would continue to apply it. (2) Mr James' claim against Royal Bank succeeded because it promised him contractually that ABN would continue to apply its redundancy policy and ABN had failed to do so as it declined to make the severance payment to which he was entitled under the redundancy policy. (3) Mr James' claim for payment of an ex gratia bonus failed for the same reasons that Mr McKeith's similar claim failed.

[19]

Breach of contract

I agree with Tobias AJA that Mr McKeith's contract with Royal Bank was breached because ABN did not pay Mr McKeith the severance amount to which he was entitled. Royal Bank's contention that ABN was not bound to make the payment because Mr McKeith refused to sign a deed of release that ABN required him to sign should be rejected because, for the reasons given by Tobias AJA, the releases sought were broader than those ABN was entitled to require to be given.
The position in relation to payment of a discretionary bonus was different because, the payment being at its discretion, ABN was entitled to require almost whatever it wished in return for its payment. The discretionary nature of the bonus was emphasised by the use in the Redundancy Policy of the words "depending on circumstances" and "may be included", as well as the expression "ex gratia payments" itself.
Whilst ABN was not entitled to act in bad faith in selecting the terms of the deed to be signed, there was no allegation that it did so. Accordingly, it was entitled to withhold payment of a discretionary bonus because Mr McKeith would not sign the form of deed that it chose to seek.
Mr McKeith also alleged that ABN breached the Redundancy Policy by failing properly to exercise its discretion by not giving consideration to Mr McKeith's individual circumstances and by applying a "blanket rule" irrespective of them. Tobias AJA demonstrates that this was not the case. Mr McKeith's position was considered but ABN decided that payment of a discretionary bonus to him (or any other departing employee) was put out of the question in late 2008 by the dire financial circumstances in which ABN and Royal Bank found themselves in the midst of the Great Financial Crisis. ABN's business decision not to pay discretionary bonuses to departing employees at that time was, on the evidence, entirely rational and responsible. The decision not to pay a bonus to Mr McKeith conformed to the Redundancy Policy's statement that bonuses might be paid "depending on circumstances".

[24]

Damages

For the same reasons as given in Mr McKeith's proceedings, Royal Bank is liable to Mr James to pay damages equivalent to the severance payment to which he was entitled, plus interest. It is not liable for damages in respect of the bonus that Mr James anticipated that he would receive.
TOBIAS AJA: The issues in these appeals arise as a consequence of the retrenchment in 2008, on the ground of their redundancy, of the plaintiffs in the proceedings below, Mr Angus James and Mr Colin McKeith. Each claimed an entitlement to be paid by their employer severance pay and an ex gratia bonus based on the pro rata average of their prior two years bonuses. On 27 March 2015 the primary judge entered judgment in favour of Mr James in the sum of $2,932,692.31 together with interest from 9 September 2008. On the same date judgment was entered against Mr McKeith: James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland [2015] NSWSC 243. On 22 July 2015 his Honour made various complex orders in relation to the costs of the proceedings before him which are not subject to appeal: James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland (No 2) [2015] NSWSC 970.
As Mr McKeith failed at trial, he has appealed the judgment entered against him (the McKeith appeal). As Mr James obtained a judgment against the three Royal Bank of Scotland parties, they have appealed the primary judge's decision in his favour (the James appeal). For convenience and where appropriate I shall refer to Mr James and Mr McKeith collectively as "the plaintiffs". I shall also, again where appropriate, refer to the appellants in the James appeal and the respondents in the McKeith appeal collectively as "the defendants".
The amount in respect of which Mr James obtained judgment comprised a severance payment of $432,692.31 and an ex gratia payment of $2.5 million. Although he failed, Mr McKeith claimed a total of $4,375,961.54 together with interest from 5 December 2008 (being the date of his retrenchment), made up of a severance payment of $375,961.54 and an ex gratia payment of $4 million. Mr James pursued before the primary judge a further claim amounting to some $11.4 million in what he alleged to be lost remuneration resulting from the failure of the defendants to consider and appoint him as head of the merged Australian operations of the Royal Bank of Scotland and ABN AMRO Holdings Australia Limited (AAAH). However, Mr James does not appeal against the rejection by his Honour of that claim.
Mr McKeith and Mr James were formally employed by ABN AMRO Services Australia Limited (AAAS). However, they relevantly worked for AAAH where they each held very senior positions. Mr James was the Chief Executive Officer and a director of the company whereas Mr McKeith was the Head of Global Markets and also a director. AAAS was a wholly owned subsidiary of AAAH.

[25]

The factual background

AAAH was a member of the ABN AMRO Group: a banking group based in the Netherlands (AA Group). The parent company was ABN AMRO Holdings NV (AANV). AAAH was a subsidiary of AANV. It was common ground that under their respective contracts of employment, Mr McKeith and Mr James were required to devote their energies towards the performance of their duties in their respective positions as AAAH's Chief Executive Officer and Head of Global Markets.
Between March and October 2007 AANV was the subject of competing takeover offers from Barclays PLC and a Consortium comprising three banks being Royal Bank of Scotland Group PLC (RBS), Fortis NB and Fortis SA, and Banco Santander Central Hispano SA (the Consortium). The Consortium members incorporated a bidding vehicle known as RFS Holdings BV (RFS). Both RFS and Barclays made competing bids to acquire the entire issued and outstanding capital of the AANV. The Consortium's offer was successful and became unconditional on 10 October 2007.
The Consortium's members had agreed that if their offer was successful, the various business units of AANV would be divided between them. As part of that agreement, RBS took over AANV's "Business Unit Asia" of which AAAH was part. When RBS acquired the Business Unit Asia, it gave consideration to whether AAAH should be broken up with parts sold and parts retained or whether it should be merged with the Australian operations of RBS which had opened a branch office in 1999 and which operated as "RBS Australia". In the absence of any acceptable offer to acquire the business of AAAH, RBS amalgamated the two Australian operations: that is, the operations of RBS Australia and AAAH as part of AANV's Business Unit Asia to form RBS Services (Australia) Limited (RBS Services).
RBS's attempts to deal with AAAH were complicated because AANV did not own all the issued share capital in AAAH. It controlled some 76 per cent of the issued shares. The remaining 34 per cent was held by trustees on trust for, relevantly, employees of AAAH who had participated in an "Employees Incentive Plan" (EIP). In its dealings with AAAH it was thus necessary for RBS to buy out the shares held by the trustees. The trustees included Messrs McKeith and James. In particular, Mr McKeith was apparently regarded by the employees of AAAH as being the main negotiator with respect to the acquisition by RBS of the shares held on trust for those employees.
AANV held a call option with respect to the trust shares pursuant to which it could acquire them at any time at a price to be determined by an agreed formula. As a consequence of the takeover, RBS effectively acquired the benefit of that call option. The formula for determination of the price involved, as a significant integer, a component which was dependent upon the profits achieved by AAAH. The higher those profits the higher the price which RBS, if it exercised the call option, would be required to pay for the acquisition of the shares. As RBS naturally sought to minimise the amount it would be required to pay for the shares, and as it fell to the trustees to seek the agreement of the employees who were entitled to benefit from the trust as to a price, it fell to Mr McKeith to, essentially, represent the trustees in those negotiations so as to ensure that the employees received a fair and proper price for their shares. In this respect it would appear that RBS was generally dependent upon Mr McKeith's efforts so as to achieve a price that was, in effect, affordable.
It was clear that if one or other of the offers was successful, the process of integrating AAAH into the business of the successful bidder would involve at least some, if not large scale, redundancies. This gave rise to concern on the part of the management of AAAH, Barclays and the Consortium as to the need to encourage staff to stay during the merger process. Departures of key staff, prompted by the uncertainty of the merger process, had an obvious potential to do real damage to the business of AAAH which the bidders were seeking to acquire. The primary judge summarised the position at [21] in the following terms: "If the Consortium succeeded in its bid, it was obvious that there would be job losses when the various business units, having been divided among the Consortium's members, were either sold off or merged with the operations of the acquirer. From the Consortium's perspective, it was desirable that there be no mass exodus of employees during the takeover process and its implementation. AA Group made announcements relating to both future employment and redundancy."
In this context, first Barclays (in June 2007) and then the Consortium (in July 2007) made announcements as to how staff would be dealt with in the event that their offer succeeded and there were redundancies. The AA Group developed a "Communications Pack" for Australia and New Zealand to be issued (and it was issued) upon its bid becoming unconditional.
In relation to continuing employment the Communications Pack stated, relevantly, as follows: "Employment Conditions Q: What do we know about the Consortium's approach to employees? A: We have been positively impressed by the commitment of the Consortium to the key part employees play in creating and sustaining a successful business. They are keenly aware of the need to be seen and deliver on that promise if they are to win the trust and respect of the ABN AMRO employees. The Consortium has communicated a number of 'people principles' which they will apply to integration: • It is the bank's firm intention that job losses will be managed through voluntary measures, including natural turnover, redeployment and voluntary redundancy. … • Retention of the best talent will be done through a fair appointment process based on merit and competencies, and in compliance with legal obligations."

[26]

The Redundancy Policy of AAAS/AAAH

At all material times AAAS and/or AAAH (it does not matter which) had a Policy in place (the Policy). It was described as a "closed" policy in that although its existence was known to the employees at AAAS, its terms were not. Nor were they available on the AA intranet. Ms Amelia McArdle, who was at the time employed by AAAS as Deputy Head of Human Resources (HR), gave evidence that if an employee had asked her about the detail of the policy, she would not have disclosed it.
It will be necessary to set out the Policy in full but for present purposes, like the primary judge at [18], it is sufficient to note that on redundancy any payment to be made: "(1) would include accrued contractual and statutory entitlements; (2) could include also a 'severance' payment, based on number of years of service, but capped in a way that is of no present moment (there was also a dispute as to whether the severance payment was an entitlement or a discretionary matter); and (3) might also include, on an 'ex gratia' basis, a discretionary amount in respect of bonus entitlements that might become payable for the calendar year in which redundancy occurred."
It was generally common ground that the third element of the Policy reflected a common practice in the investment banking world. Employees, and particularly senior employees, were often rewarded for their services not only by fixed remuneration but also, at the discretion of the employer and depending on the financial performance of the business and their contribution to it, by bonus payments. If an employee became redundant relatively late in the calendar year (and AAAH paid bonuses on a calendar year basis often with deferred elements), it might be thought unjust that, as a result, the employee would lose what might otherwise have been a substantial bonus. Nevertheless, as was submitted by senior counsel for the defendants, other objectives were also promoted by the payment of bonuses. This was a reference to the necessity to provide continuing employees with an incentive to grow, and thereby increase the profitability of, the business.

[28]

An outline of the claims and the issues there raised

Although at the end of the day it may not matter, both Mr McKeith and Mr James asserted claims to severance and bonus payments against on the one hand AAAS and, separately, against RBS and RFS jointly as representing the Consortium. The difference between the two claims was that those against AAAS alleged that as a consequence of certain representations the terms of the Policy were incorporated into the Contracts of Employment between Mr McKeith and AAAS on the one hand and between Mr James and AAAS on the other. On the other hand, the claims against RBS and RFS alleged that, as a consequence of the same representations, RBS and RFS became contractually bound to apply the Policy to Mr McKeith and Mr James on their becoming redundant. The contract so formed was independent of their Contracts of Employment.
Apart from their contractual claims each of Mr McKeith and Mr James alleged that AAAS was, as a consequence of the representations, estopped from departing from the premise contained in the representations that if Mr McKeith and Mr James were retrenched within two years from 10 October 2007, they would be treated in accordance with the redundancy procedures, plans, policies and practices of AAAS as they existed as at that date.
One significant difference between the cases of each of Mr James and Mr McKeith is that the former alleged that the terms of the Policy were expressly incorporated into his contract of employment with AAAS. The primary judge accepted that that was so. Accordingly, he did not find it necessary to deal in detail with the other bases upon which Mr James relied in his claim to be entitled to a severance payment and an ex gratia bonus determined in accordance with the Policy. However, as Mr McKeith did not suggest that the Policy was expressly incorporated into his contract of employment, it was necessary for him to rely upon a separate contract either with AAAS or with RBS and RFS jointly as well as upon an estoppel.
The parties produced to his Honour a joint statement of what were termed the "real issues" for determination. Leaving aside for the moment those relating to the issue of breach, the primary issues at trial relating to the Policy and requiring consideration on the appeal were stated in the following terms by the primary judge at [25] of his reasons: "1 Were the terms of AAAH's Policy expressly incorporated into Mr James' contract of employment? 2 Were the terms of AAAH's Policy incorporated into the plaintiffs' contracts of employment by the course of dealing referred to in paragraph 22 of the Commercial List Statements? [This was an alternative claim by Mr James if the first issue was decided against him]. 3 Were relations between each of the plaintiffs and [AAAS] conducted from at least September 2007 on the basis of a mutual understanding, encouraged by the making of the representations pleaded in paragraph 17 of the Commercial List Statements that, if they were retrenched during the period of two years after 10 October 2007, they would be treated in accordance with the redundancy procedures, plans, policies and practices of [AAAS], as those procedures, plans, policies and practices existed on 10 October 2007. If so, is AAAS now estopped from departing from the premise that, if the plaintiffs were retrenched during a period of 2 years from 10 October 2007, they would be treated in that way? … 6 Was [AAAS] required by the terms of the Policy to make a severance payment to employees being retrenched? … 9 Did the Policy permit [AAAS] to require, as a condition of the making of a severance or ex gratia payment, that Mr James execute a deed of release? If so, was the release required of Mr James in September 2008 a release falling within the terms of the policy? 10 Did the Policy permit [AAAS] to require that, as a condition of the making of a severance payment, that Mr McKeith execute a deed of release? If so, was the release required of Mr McKeith in December 2008 a release falling within the terms of the policy? … 12 Were representations made to Mr McKeith in relation to the redundancy procedures, plans, policies, practices and payments which would apply to him as an employee of [AAAS] if he was retrenched in late 2008 or early 2009? If so, did Mr McKeith rely on any such representations to his detriment and is [AAAS] estopped from departing from the premise that, if Mr McKeith were retrenched he would be treated in a manner consistent with those representations? 13 Was a promise made to the plaintiffs by RBS and RFS that they would ensure that, if the plaintiffs' employment was terminated by reason of redundancy within two years of 10 October 2007, they would have applied to them the redundancy procedures, plans, policies and practices of [AAAS] as those procedures, plans, policies and practices existed as at 10 October 2007? 14 Was that promise supported by any consideration by the plaintiffs?"

[29]

The Relevant Pleadings

As Issues 2 and 3 refer to paragraphs of the Commercial List Statements (CLS), to give them context it is appropriate to set out, as did the primary judge at [78] and [79], the relevant paragraphs of the respective CLSs of first Mr James and then Mr McKeith. Thus pars (11)-(14), (17)-(19) and (22) of Mr James' CLS were in the following terms: "11. From time to time during his employment, representations were made to Mr James to the effect that there was a Policy which applied to employees of [AAAS] whose employment was being terminated by reason of redundancy and which contained provision for severance payments to be made to such employees. Particulars The representations were made to Mr James by members of the Human Resources department of [AAAS] from time to time in the course of dealing with the position of employees whose employment was being terminated by reason of redundancy. 12. The representations referred to in paragraph [11] were made by or on behalf of [AAAS]. 13. From time to time during his employment, to the knowledge of Mr James, severance payments were made by [AAAS] to employees whose employment was being terminated by reason of redundancy, pursuant to the terms of the Policy. 14. On around 29 May 2007, Banco Santander S.A. (a company incorporated in Spain), Fortis N.V. (a company incorporated in the Netherlands), RFS and RBS (together, the Consortium) announced their intention to make an offer, acting through RFS, for the entire issued and outstanding capital of [AAAH], subject to certain conditions (the Consortium's bid). … 17. From around July 2007, representations were made to Mr James that there were redundancy procedures, plans, policies and practices which would apply to employees of [AAAS] whose employment was terminated by reason of redundancy, on which those employees could rely. Particulars The representations were partly express and partly implied. To the extent that they were express, they were in writing and were made by: (a) the publication to employees of [AAAS], on around 30 July 2007, of a Press Release by [AAAH] entitled "ABN AMRO - Offer Update" containing the words: 'The Boards welcome the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to redundancy procedures'; (b) the publication on around 16 September 2007 of a Press Release by [AAAH] entitled "ABN AMRO publishes shareholders' circular including reasoned opinion of the Boards" containing the words: 'The ABN AMRO Boards also noted that commitments made to employees and trade unions in respect of employee's rights and respecting of existing agreements including redundancy plans'; and: 'The ABN AMRO Boards welcomed the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to social plans, collective labour agreements and redundancy procedures'; (c) the publication on around 20 September 2007 of a copy of the presentation slides for a presentation by the Chairman of the Managing Board of [AAAH] to an Extraordinary General Meeting of Shareholders which included the words (at slide 16), under the heading "Proposed Corporate Governance and impact on employment Consortium Offer" of the words: 'global guarantee that all existing redundancy plans will be extended at least at same level for a period of two years after the merger becomes unconditional'; (d) the publication on around 8 October 2007 of a document entitled "AU_NZ Communication Pack Acquisition Announcement - Approved materials to be used when communicating with staff" containing the following question and answer: 'Q: Will there be redundancies? How many, where and when can we expect the first cuts? A: We anticipate that there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the Consortium has guaranteed to all staff that existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the Policy and practice from the Consortium. To find out more about your local ABN AMRO policies please contact your local HR representative. Additionally, the Consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the Consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly.' To the extent that the representations were implied, the implication arose from the publication of the aforementioned express written representations in the context of the facts pleaded in paragraphs [11] to [13], together with the absence of any reservation, qualification or caveat in relation to the applicability of those representations to employees of [AAAS]. 18. The representations referred to in paragraph [17] were made by or on behalf of [AAAS]. 19. Further and in the alternative, the representations referred to in paragraph [17] were made with the knowledge of [AAAS] and without contradiction or qualification by it. 20. On around 3 September 2008, representations were made to Mr James that, in the event that his employment was terminated by reason of redundancy, he would be entitled to severance payments calculated in accordance with the Policy of [AAAS] that applied to him. 21. The representations referred to in paragraph [20] were made by or on behalf of [AAAS]. 22. In the alternative to paragraph [10], the terms of the Policy were incorporated into the Contract of Employment by the course of dealing between Mr James and [AAAS] constituted by the matters pleaded in paragraphs [11] to [14] and [17] to [21] above." [Paragraphs 20 and 21 were abandoned at trial].
Mr McKeith's CLS was to similar effect although the particulars given in pars [11] and [17] were different. I set out, as did the primary judge, those particulars: "11. … Particulars The representations comprised: (a) statements made orally to Mr McKeith by representatives of [AAAS] from time to time in the course of dealing with the position of employees whose employment was being terminated by reason of redundancy; (b) the circulation among employees of [AAAS], including Mr McKeith, from around June 2007, in the context of the prospect of a pending takeover of the ABN AMRO group of companies, of copies of a document entitled "Redundancy Policy" which in its terms took effect on and from July 2001; and (c) a statement was made orally to Mr McKeith by Ms Kate Naughton, the Human Resources executive for the Global Markets business, in around June 2007, to the effect that the aforesaid document was the current policy of [AAAS] which applied in the case of retrenchment of employees of [AAAS]. … 17. … Particulars The representations were partly express and partly implied. To the extent that they were express, they comprised: (a) statements made orally from time to time by Mr Gary Page, the Global Head of Markets of [AAAH], during fortnightly telephone conference calls with the Global Markets Management Team, from around mid-2007, to the effect that under the Consortium bid, redundancy practices would stay in place for two years post the completion of the takeover and that the employees of [AAAS] could be confident that the redundancy policies which were then in place would be honoured for the next two years; (b) a statement made orally to Mr McKeith by Mr Jeroen Drost, Asian Head of [AAAH], in around mid-2007 to the effect that RBS would be applying existing ABN AMRO redundancy practices for two years and would set aside a pool from which to pay out any redundancies; (c) the publication to employees of [AAAS], on around 30 July 2007, of a Press Release by [AAAH] entitled "ABN AMRO - Offer Update" containing the words: 'The Boards welcome the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to redundancy procedures'; … [Subpara (d) appears to be a duplication of subpara (c)] (e) the publication on around 16 September 2007 of a Press Release by [AAAH] entitled "ABN AMRO publishes shareholders' circular including reasoned opinion of the Boards" containing the words: 'The ABN AMRO Boards also noted that commitments made to employees and trade unions in respect of employee's rights and respecting of existing agreements including redundancy plans'; and: 'The ABN AMRO Boards welcomed the efforts made by the Consortium in establishing a dialogue with the ABN AMRO employee representative bodies and the commitments made to the ABN AMRO employees with respect to social plans, collective labour agreements and redundancy procedures'; (f) the publication on around 20 September 2007 of a copy of the presentation slides for a presentation by the Chairman of the Managing Board of [AAAH] to an Extraordinary General Meeting of Shareholders which included the words (at slide 16), under the heading "Proposed Corporate Governance and impact on employment Consortium Offer" of the words: 'global guarantee that all existing redundancy plans will be extended at least at same level for a period of two years after the merger becomes unconditional'; (g) the publication on around 8 October 2007 of a document entitled "AU_NZ Communication Pack Acquisition Announcement - Approved materials to be used when communicating with staff" containing the following question and answer: 'Q: Will there be redundancies? How many, where and when can we expect the first cuts? A: We anticipate that there will be a decrease in overall headcount but it is not clear if this will be achieved through redundancies, normal attrition or voluntary severance. However, in the case of redundancy, the Consortium has guaranteed to all staff that existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional. Further, it has made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended. So staff have some certainty related to the Policy and practice from the Consortium. To find out more about your local ABN AMRO policies please contact your local HR representative. Additionally, the Consortium has stated on their website that they intend to focus all job losses on voluntary redundancy, natural turnover and redeployment. Note that departure through the social plan is not considered by the Consortium to be a forced dismissal. They also have no plans to increase the number of off-shored jobs significantly'; and (h) the publication in late November 2007 on the ABN AMRO intranet, under the heading "Policies and Procedures" of the words: 'Redundancy is dealt with at a country level (therefore there is no global policy). Please refer to HR policies and procedures on your HR BP for more detail. The Consortium have guaranteed that all existing ABN AMRO policies related to redundancies will remain in place for a period of 2 years from 11 October 2007. Further, the Consortium made clear that this two year period is a minimum guarantee, and it does not rule out the fact that it might be extended.' To the extent that the representations were implied, the implication arose from the publication of the aforementioned express written representations in the context of the facts pleaded in paragraphs [11] to [13], together with the absence of any reservation, qualification or caveat in relation to the applicability of those representations to employees of [AAAS]."
Notwithstanding the differences in each CLS of the particulars to par 17, for the purposes of determining the issues raised in the proceedings, both the trial and the appeal were conducted on the basis that there was no relevant differences between them. For convenience I shall refer hereafter to the particulars to par 17 as "the representations".

[30]

The Pleading Issue

In each of the CLSs of Mr James and Mr McKeith pars 11 to 22 were pleaded under the heading: "Redundancy Policy Incorporated into Contract of Employment by course of dealing"
In each CLS par 22 was, as recorded above, in the following terms: "The terms of the Policy were incorporated into the Contract of Employment by the course of dealing between Mr McKeith and [AAAS] constituted by the matters pleaded in paragraphs [11] to [13] and [17] to [21] above."
Having pleaded the incorporation of the Policy into the respective contracts of employment of Mr McKeith and Mr James, (in the case of Mr James par 22 is an alternative to his primary claim that the Policy was expressly incorporated into his "Contract of Employment"), this aspect of the CLS culminates at par 29 in the case of Mr McKeith and par 27 in the case of Mr James, with the assertion that the employment of each was terminated by AAAS in the case of Mr McKeith on 5 December 2008 and in the case of Mr James on 9 September 2008 and in each case "by reason of redundancy". Each CLS then proceeded to assert the failure of AAAS to make a severance payment to each of Mr McKeith and Mr James alleging that that failure was contrary to the terms of the Policy and in breach of his contract of employment.
The expression "Contract of Employment" was defined earlier in the CLS as being a written employment contract dated 21 February 2005 in the case of Mr McKeith and 1 January 2007 in the case of Mr James. The pleading is thus to the effect that the Policy of AAAS was "incorporated" into the "Contract of Employment" of each of Mr McKeith and Mr James by "the course of dealing" constituted by the representations.
The primary judge rejected the "course of dealing" case advanced by the plaintiffs. After referring to a number of authorities (at [83]-[110]) as to the meaning of that concept, his Honour determined that the "course of dealing" cases established, in effect, the proposition that, absent a pleaded case of variation, post-contractual matters could not amount to a course of dealing. As in the present cases the representations contained in par 17 of each CLS were all post-contractual matters, they could not be relied upon as constituting a "course of dealing" having the effect of incorporating the Policy into each plaintiff's contract of employment, there being no pleaded variation of those contracts.
At [115] his Honour noted that the plaintiffs had neither pleaded nor proved that before their respective employment contracts were made, they dealt with AAAS on a basis from which it could be inferred that each party intended that the Policy would apply as a term of each contract. It is apparent from his Honour's finding that post-contractual matters could not amount to a "course of dealing" which could be incorporated into a prior contract of employment, that the position may have been different if the plaintiffs had pleaded and argued a case of variation.
His Honour's rejection of the incorporation of the Policy into the plaintiffs' contracts of employment on the basis that that could only occur if they had pleaded that their contracts were varied, in my view was in error. The CLS made clear that post-contractual dealings or representations were relied upon as incorporating the Policy into the plaintiffs' contracts of employment. It was not necessary for the CLS to use the word "vary" if facts were otherwise pleaded which, if established, supported a case for variation. The allegation in par 22 of each CLS that the terms of the Policy were incorporated into the "Contract of Employment" was capable of giving rise to a variation of the contract provided consideration was given and proved.
The "course of dealing" relied upon in each CLS related to the post-contractual representations which his Honour found (at [114]) had been made and proved. Although under the heading "Promissory estoppel", in par 23 of the CLS of Mr McKeith it was alleged that in reliance upon the representations Mr McKeith, inter alia, did not pursue the possibility of alternative employment but remained with AAAS throughout the merger process until his employment was terminated. His so doing amounted to an allegation of fact that was capable of constituting consideration although whether it did or not is a matter which it will be necessary to consider. However, I note that the CLS of Mr James did not contain a claim of promissory estoppel and therefore did not contain an allegation in terms of par 23 of the CLS of Mr McKeith.
Thus in pleading terms, in my view, a case of variation was one which the defendants should have understood was asserted at least by Mr McKeith. Although at [120] of his reasons the primary judge stated that variation was "not the case that the defendants came to Court to meet" and was not the case that the plaintiffs pressed in final address, nevertheless it is apparent that in effect their case did plead a variation to their contracts of employment. This is so notwithstanding the fact that at par 22 of each CLS the plaintiffs appeared to have tied the representations to the incorporation of the Policy into their "Contract of Employment", a term which was defined in par 10 in the McKeith CLS and par 9 in that of Mr James.
However, as the plaintiffs submitted on the appeal, the expression "course of dealing" is not a term of art. It was clear from the pleading that they were asserting that as a consequence of the representations which, so it submitted, were intended to have contractual effect, it was unnecessary to resort to a formal plea of variation for the representations to result in the Policy becoming part of contractual terms applicable to the plaintiffs' employment. I note that the plaintiffs did not distinguish between Mr McKeith and Mr James with regard to this issue.
It is true that at [114] his Honour held that the dealings relied upon after the contracts of employment were made occurred "in a context which does not suggest that they were put forward as intended to have contractual content". That is a finding which needs to be addressed but in my view it does not bear upon the pleading point upon which the plaintiffs failed.
The plaintiffs may have been on firmer ground in alleging, as they did as against RBS and RFS, that the representations and the fact that they remained in the employment of AAAS and did not seek alternative employment, gave rise to a contract independent of their "Contract of Employment" whereby if they were retrenched, the Policy would be applied to them. Thus, their claims against RBS and RFS, as representatives of the Consortium, although founded upon the same representations, allege, so it would seem, a contract constituted by the promises contained within the representations the consideration for which was the continuation by Mr McKeith and Mr James in the employment of AAAS. However, this basis of the plaintiff's claims did not involve the pleading point which related to their claims only against AAAS based on their Contracts of Employment
Accordingly, in my view the primary judge erred in rejecting the "course of dealing" claims on the basis of a deficient pleading.

[32]

Mr James - the express incorporation issue

As noted by the primary judge at [29], Mr James was employed pursuant to an express written agreement constituted by a letter of offer dated, and expressed to be effective from, 1 January 2007. It contained the following relevant provisions: "Remuneration Your total remuneration for this position will be $500,000 per annum gross, paid monthly. Your total remuneration includes your salary, the minimum contribution required under the Superannuation Guarantee Act and Fringe Benefits Tax. Salary levels are reviewed on a regular basis at the discretion of ABN AMRO and any change may take into account factors including cost of living increases and individual performance levels. ABN AMRO conducts performance reviews with all staff and, as a condition of your employment, you are required to participate. In addition, you are eligible to participate in ABN AMRO's discretionary bonus scheme. All bonus payments are subject to being in our employment and not working out a period of notice at the time payment is due. They are not regarded as being part of your total remuneration. Any bonus payment will also be subject to statutory deductions and may be delivered subject to the thresholds and rules of any incentive or deferred award programme(s) being operated by ABN AMRO as amended or substituted from time to time. Your total remuneration and any bonus payments are for all of your working hours, including hours worked in excess of your ordinary hours of work. Please note that all information regarding your total remuneration and any bonus payments is confidential. … Termination: Either party may terminate the employment by giving of twelve weeks notice in writing to the other party. ABN AMRO may elect to make a payment in lieu of such notice equal to your total remuneration for the balance of your notice period. However, in the case of misconduct, your employment may be terminated by ABN AMRO without notice or payment in lieu of notice. On termination you will be required to return all items of property belonging to ABN AMRO which are in your possession before your payment will be processed. … ABN AMRO Policies: You agree to be bound by the policies of ABN AMRO as may exist from time to time. You acknowledge and accept that it is the prerogative of ABN AMRO to vary change or terminate existing policies as well as to devise and introduce new policies. ABN AMRO Australia operates in a smoke Free Environment and is an Equal Opportunity Employer…"
It is also necessary at this point to set out the Policy in greater detail as it applied in 2007 up until Mr James was "made redundant": "This policy will take effect on and from July 2001 and provides principles and guidelines to follow in the event that an individual or group of staff is made redundant. Guiding Principles In all cases where redundancy arises, staff will be treated fairly, equitably and consistent with the organisations values. ABN AMRO will consider alternative measures before making a staff member redundant. ABN AMRO will provide support, either through outplacement counselling or by providing access to the Employee Assistance Program where appropriate. The HR Department is responsible for the administration of all redundancies. Circumstances when this Policy Applies Staff members may be made redundant in the following circumstances: • Staff reduction due to technological change or restructure of work that is materially different to the current role. • Closure or relocation of a business unit where the work is no longer required to be performed. • Internal firm reorganisation or restructure resulting in closure of the staff member's workplace and a diminishing need for the staff to do the available work. Circumstances when this Policy will Not Apply A redundancy will not arise in circumstances where a transfer of employment takes place (the employer changes but the work and the terms of employment remain materially the same). Redundancy will not be used to manage poor performers out of the organisation. Process & Procedures In any of the circumstances identified above, the line manager and the Business Unit Head will consult with the relevant HR Adviser to identify those staff that may be eligible for redundancy. The first step will be to establish whether redeployment is possible. Redeployment will be offered when there is a match between the skills of an individual and those required of a vacant role. Where the role is in another business unit, the relevant business unit head will be consulted and the transfer will only take place if all parties agree. Where redeployment is not possible, the Payroll Manager will prepare a redundancy schedule. The HR Adviser will work with members of the HR team to prepare a redundancy schedule based on the terms of this policy, taking into account length of service. The schedule is discussed and agreed with the line manager and the business unit head. In cases where outplacement or any other special provisions are to be included, there will be set out in an attached letter. The HR Adviser will prepare the Deed of Release. The HR Adviser will notify IT to ensure that the staff member's access to Notes and other systems is terminated within the required timeframe and notices circulated. The time and date for announcement to the staff member is set and the line manager/business unit head will be present when the HR Adviser. At the meeting, the staff member will be provided with advice on the terms of the redundancy, final payment and tax liability as per the schedule and the Deed of Release. The Deed of Release should be signed and returned to HR before the final payment is made. The staff member will also return all company property (security pass, laptop, phone, pager, IT fob and Amex card). All items will be checked off against issued property and the checklist will be completed and placed on file. Where the staff member has a staff housing loan, the interest rate on the loan will immediately be adjusted to reflect the FBT benchmark rate and a grace period of three months will be available to arrange re-financing of the loan. Where a staff member has a vehicle/s packaged through a novated or associated lease or other package items such as parking or vehicle running expenses deducted from salary, all accounts will be settled as at the effective termination date. The staff member will be responsible for organising to have the novation agreement change with the lease finance provider. The HRA will check with the Remuneration team to establish if the employee is a member of the share scheme. If so, the shares will vest immediately on termination and the price will be established by taking an average over the 5 trading days immediately prior to termination date. The Remuneration team will assist with calculations and the payment will not form part of the ETP but be paid gross. At the time of exit, costs of packaged items owing will be determined, any pre-paid or allocated costs will be adjusted and any outstanding liabilities including FBT will be settled from the termination payment. The HR Adviser will also arrange for an exit interview to take place either immediately following the announcement to the staff member or at a suitable time that can be agreed. A copy of the final documentation will be provided to the Payroll Manager to prepare the final payment and to terminate the employee on the WorkForce system. Information will also be placed on the staff member's file prior to it being placed in the inactive employee section. Calculating Redundancy Terms Redundancy terms will be calculated based on the table below to determine notice and severance periods. Important points to note are: • Redundancy terms will be calculated on the package value inclusive of all superannuation but exclusive of any bonus earned in the prior year • The notice period will generally be 4 weeks unless otherwise stipulated in the contract of employment • An additional week will be added to the notice period for staff aged over 45 • Severance will be pro-rated based on part years completed, 1 additional week for each quarter worked • Part time staff will have severance calculated based on % of EFT • The redundancy payment will generally be capped at 52 weeks with the provision to increase to 78 weeks maximum for staff at Director or above or where the staff member is over 55 years of age. Extension of the cap above 52 weeks will be at the discretion of the business unit head and the HR Director • Accrued annual leave will be included in the calculation and long service leave will be included only where the staff member has 5 or more years of continuous service. Accrued sick leave is not included in the calculation Component Values Calculation Salary ● Salary will be calculated from the last pay date to the termination date Notice Period ● Four (4) weeks unless otherwise stipulated in employment contract ● Additional week if employee over 45 years of age ● Four (4) weeks for the first full or part year and four (4) weeks for each completed year of service thereafter Severance ● For employees with service less than two (2) years, severance will be a minimum of eight (8) weeks ● One (1) week for each quarter in a part completed year of service ● Accrued annual leave will be calculated and paid to the termination date Leave ● Long service leave will be paid where the employee has more than five (5) years of completed service ● Accrued sick leave is not paid ● Payments will be capped at fifty two (52) weeks Redundancy Cap ● May be extended to seventy eight (78) weeks if Director or above and/or over 55 years of age with sign off by business unit head and Director HR ● May be extended to seventy eight (78) weeks if Director or above and/or over 55 years of age with sign off by business unit head and Director HR Outplacement Support ● Outplacement support will be determined in consultation with the business unit manager and will depend on level and years of service ● Depending on circumstances, ex-gratia payments may be included in the calculation to a maximum based on the following formula: Ex-gratia Payments (average of prior 2 years bonus) ● Number of months worked in current year

[34]

The Primary Judge's Reasons

The primary judge concluded (at [36] and [76]) that the Policy had contractual effect because, as it stood at the time when Mr James' employment was terminated, it was incorporated into his Contract of Employment. It was binding alike on both Mr James and AAAS.
His Honour's reasons for so finding can be summarised as follows:

It was not in dispute that the Policy fell within the class of "the policies of ABN AMRO" for the purposes of the Contract of Employment and that given the obligation of Mr James to be bound by those policies, the Policy thereby had a contractual effect as between Mr James and AAAS. In acquired that contractual effect because it was incorporated expressly by reference;
Looking at the matter objectively it would be difficult to conclude that the parties intended that Mr James would be bound by his employer's policies from time to time but that the employer would not be bound;
An undertaking by an employee to be bound by the employer's policies as they exist from time to time makes sense only if, implicitly at least, the employer also undertakes to be bound by the terms of those policies;
The language of the relevant provision in the Contract of Employment was that of contract: the employee agrees to be bound by the relevant policies. Such language suggests that the employee is agreeing to be bound because the policies form part of his contract. On that basis the policies would also bind the employer. The obligations are not merely unilateral;
The Policy imposes obligations upon the employee as well as upon the employer. The language of obligation is to be seen throughout the steps contemplated by the Policy;
The submission of the defendants that the function of the Policy was only to bind Mr James to the obligations of employees set out in it such as the obligation on termination to return all company property, should be rejected as they are expressed in the same terms irrespective of whether the obligations fell upon the employer or the employee;
Although the language was not the same, the decision of the Full Court of the Federal Court of Australia in Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; 177 ALR 193 and, in particular, the judgment of Mansfield J provided some support for the construction adopted. The expression "to be bound" in the relevant part of Mr James' Contract of Employment needed to be construed in the context in which it is to be found being the letter of 1 January 2007. The letter should be regarded as containing an offer by AAAS of the terms on which Mr James would continue to be employed in the position of Chief Executive Officer of AAAH, which terms and conditions included those which Mr James was obliged to perform and those which AAAS was obliged to perform. Although the letter dealt with the "subject of termination" and with the obligations on termination, it was clear from the Policy which both existed and was known to exist at the time the letter was proffered and accepted by Mr James, that what was said under the heading "Termination" did not exhaust the topic and, specifically, did not deal with the question of what might happen over and above the limited provision set out should Mr James become redundant;
The most significant purpose of the Policy was to provide for benefits of various kinds to be paid to employees who were made redundant. There was value to an employer in having a defined code to deal with its monetary obligations where an employee, through no fault of his or her own, is retrenched and thus becomes redundant.
In those circumstances the proposition that the employee might be bound to accept whatever the Policy provided for him or her in the circumstance of redundancy but that the employer was not bound to offer that provision was not one which the Court should be quick to adopt. As to ex gratia payments, the employer's position was sufficiently protected as such payments were expressed to be "[d]epending on circumstances";
Although AAAS was not obliged to make a redundancy payment regardless of circumstances, it was obliged to consider whether to do so in good faith. [This appears to relate more to the making of an ex gratia payment than to a severance payment].

[35]

The Parties' Submissions on the Appeal

The defendants submitted that the language in Mr James' contract of employment as contained in the letter of 1 January 2007 not only required him to be bound by the policies of ABN AMRO as may exist from time to time but also acknowledged that AAAS might "vary, change or terminate existing policies". It was submitted that such language was primarily directed to binding the employee to observe the employer's published policies on operational matters, legal compliance, discrimination and harassment etc. The question was whether a reasonable person in the position of the parties would have understood the Policy to be part of the contract.
It was submitted that the language in the letter was not apt to bind AAAS and Mr James to the terms of the Policy. This was particularly so as it was a "closed policy" and it was hardly consonant with contractual principle to treat a document intended to be kept secret from one of the parties as a source of contractual rights and duties. A fortiori, if it is changeable at the discretion of the party that keeps it secret. The terms of the Policy itself suggest that it had an intended operation other than being a source of contractual rights and duties. It was to provide a set of guidelines or directions for members of AAAS's HR team. It expressly provided "principles and guidelines to follow in the event" that an employee was made redundant. It contained a series of aspirational and directional statements as opposed to contractual promises to employees.
Alternatively, it was submitted that the reference to "policies of ABN AMRO" in the letter of employment did not encompass a Policy. This is at odds with his Honour's observation at [35] that it was not in dispute that the Policy fell within the class of "the policies of ABN AMRO" for the purposes of the contract of employment.
Mr James submitted that the reliance by the defendants on the "ticket" cases to the effect that a party will only be bound by the terms of an unsigned document if they have been given "reasonable notice" of its terms, is contrary to the proposition that parties may agree that the terms of an unsigned document will form part of their contract without it being necessary for "reasonable notice" to have been given of its contents: Parker v South Eastern Railway Co [1877] 2 CPD 416 at 421 per Mellish LJ.
In the present case Mr James submitted that he expressly agreed to be bound by the policies of AAAS so the case is not one which turns on whether he was given sufficient notice of their import. Thus in Riverwood the policies in question were held to be binding on employer and employee alike notwithstanding that, as Mansfield J observed at [149], the employee "did not give evidence of knowing the detailed content of any specific policies": see also UGL Rail Services Pty Limited v Janik [2014] NSWCA 436.
In any event, Mr James was aware that the Policy existed and that it made provision for benefits of various kinds to be paid if he was made redundant even though he was unaware of its detail. Accordingly, the "secrecy" associated with its contents has little force in terms of determining whether, objectively, it was intended to give rise to contractual obligations. In any event, as found by his Honour at [69], Mr James knew of the policy derived from his role as a "line manager" who had, over the years, discussed and agreed redundancy schedules for specific employees who reported to him.
Furthermore, the Policy only operated on retrenchment at which point it was contemplated by its terms that the employee would be advised of what it provided as to their redundancy terms and what it required of both employer and employee.
As to the defendants' submission based on the right of the employer to vary the terms of, or even terminate, any policy, Mr James submitted that that was not something which would ordinarily prevent the policies being intended to have contractual effect whilst they were in force. Thus in Riverwood at [152] Mansfield J (who formed the majority with North J) considered the fact that it was contemplated by the policy clause in the relevant letter that the appellant might change its policies from time to time or introduce new policies, did not signify that it did not intend to be contractually bound to the respondent to comply with its policies from time to time. His Honour observed that the employer's power to change its policies or introduce new policies from time to time would be constrained by an implied term that it would act with due regard for the purposes of the contract of employment so that it could not act capriciously and, arguably, unfairly towards the respondent.
In response to the defendants' submission that the secrecy and mutability of the Policy undermined the primary judge's observation at [71] that there was "obvious value" to both parties in having a "defined code" to deal with monetary obligations on redundancy, Mr James submitted that the Policy, which was known to exist, provided assurance to both employer and employee that retrenchments would be dealt with in an orderly and consistent way, rather than arbitrarily or idiosyncratically.
As to the defendants' submission that the Policy objectively was to be understood as providing aspirational and directional guidelines to the HR team rather than creating obligations, Mr James contended that his Honour correctly noted that once one moves beyond the sentence in the policy relied upon by the defendants which states that the Policy provided "principles and guidelines", the language of the Policy was that of obligation not aspiration. Furthermore, the document sets out in detail the process to be followed in the event of a redundancy and, in particular, what monetary and other benefits are to be made available to employees on retrenchment in circumstances where each of the relevant heads of monetary payments is not framed in discretionary terms except for the ex gratia bonus which is. This was common ground.
In reply the defendants emphasised that Mr James' contract of employment did not contain an express promise by AAAS to implement any or all policies: the obligation to be bound by the policies was imposed only upon Mr James. It was no more than common sense that he would be bound by policies of which he had notice at the time of formation of the contract and by those that were developed during the course of his employment and which were notified to him; this is simply a case of an employee being obliged to comply with the lawful directions of his employer. It would be contrary to common sense to hold Mr James liable for breach of contract for a failure to comply with policies which were not available to him and of the contents of which he was unaware. The language of obligation used in the Policy related to a set of directions from the HR staff as to how they were to proceed. The closest the Policy came to imposing an obligation on the employee was by reference to the return of company owned property which would occur in any event and merely recognises an existing obligation of employees in the context of the termination of their employment.
It finally was submitted that Mr James misunderstood the purpose of knowledge of the content of policies touching on employment arrangements. If a contract contains terms entitling an employee to certain rights then the employee need not be aware of the rights at the time of its formation or breach in order to later enforce them. However, deliberate unavailability of a policy is highly pertinent to whether the policy should be taken, objectively, to have been intended by the employer, when making an offer of employment, to be binding on the employer.
Again, the express reservation of the power to vary the terms of a policy tells strongly against any so-called "entitlements" being entitlements at all. The express power to vary or terminate policies, taken with the terms of the Policy and its "closed" character, demonstrated an objective intention that it was not intended to be contractual in the sense of imposing obligations upon the employer.

[36]

Was the Policy expressly incorporated into Mr James' Contract of Employment?

In Riverwood the applicant employee executed a written contract of employment with the respondent employer. It provided that "[y]ou agree to abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced" (the Policy Clause). At the time the employer utilised a loose-leaf spiral-bound Human Resources Policies and Procedures Manual (the Manual). The major part of the Manual addressed matters which were for the benefit of the employees of the employer, although there were a few instances of burdens being imposed on employees.
After the employee executed the contract the employer inserted a Policy into the Manual which provided for certain payments to be made to employees whose services were terminated on the ground of redundancy. The employer terminated the employment of the employee on the ground of redundancy but did not make any payment pursuant to the Policy. The employee commenced proceedings against the employer alleging, amongst other things, breach of contract. The trial judge found that the Manual was incorporated into the contract of employment by reference and that it contained an implied term that the employee would receive redundancy benefits if his position was made redundant. An appeal to the Full Court of the Federal Court was dismissed by majority (North and Mansfield JJ), Lindgren J dissenting.
As the primary judge recognised, there were a number of differences between the present case and Riverwood. In the latter North J held that it was both permissible and necessary to examine the provisions contained in the Manual in order to ascertain the intentions of the parties. In other words, even before the Policy was added to the Manual, its terms were relevant for the purpose of determining whether it imposed obligations on the employer as well as upon the employee.
In this respect, as noted above, a major part of the Manual addressed matters which were for the benefit of the employees, although there were a few instances of burdens on the employees. On the basis that the Manual provided benefits for employees then the obligation on the employees to abide by the terms of the Manual had little relevance where the benefits were to be provided by the employer. In these circumstances, one can understand why the majority construed the Manual as imposing upon the employer the obligation to provide those benefits.
Thus at [90] North J noted that the provisions of the Manual could be classified into those which were expressed as creating obligations on Riverwood, some of which were specific and some of which were general and some of which were defined by reference to provisions of State laws or awards; those concerned with process or administration; and those expressed as limiting the benefits to be enjoyed by the employee or limiting the conduct in which the employee may engage, being either specific or general in their nature.
Importantly, at [91] his Honour set out the specific obligations expressed to oblige Riverwood to, amongst other things, make redundancy payments. Thus his Honour concluded at [98] that from his analysis of the provisions of the Manual the major part of it was devoted to specifying items which made provision for the benefit of the employees of Riverwood and which were expressed in the language of obligation. His Honour thus agreed with the trial judge that the Manual was concerned principally, if not exclusively, with laying down employees' entitlements.
North J then turned to the provision in the contract of employment that required the employee to "abide by" the company's policies and practices being those contained within the Manual. He held that the use of that expression in relation to the Manual was apt to embrace both compliance with the obligations imposed by it as well as acceptance of the benefits conferred by it. His Honour continued (at [107]): "The association of the expression 'abide by' with the reference to the manual, essential characteristics of which have been analysed earlier in these reasons, suggest that the clauses intended to oblige Mr McCormick to comply with his obligations is also to signify that Mr McCormick has accepted an offer from Riverwood to the effect that it would comply with the obligations imposed on it by the manual. Thus the clause reflected the parties' intention to offer and accept mutual obligations in accordance with the provisions of the manual …"
At [108], his Honour said: "Thus in my view the natural meaning of the term under consideration viewed in the context in which the contract of employment was made imposed upon Riverwood an obligation to make the redundancy payments in accordance with the provisions of the manual." (Emphasis added.)
Mansfield J noted (at [125]) that the redundancy agreement was included in the Manual in its entirety. Accordingly, in contrast to the present case, the employee would be aware of its detailed contents. At [127] his Honour noted that the employer's submission both before the trial judge and on appeal, focused upon the obligation expressed in the policy clause in the letter as being upon the employee alone who agreed to "abide by all company policies and practices" and upon the fact that the employer had not been a party to any of three prior redundancy agreements which did not give rise to legally enforceable contractual rights. The issue was whether the present redundancy agreement acquired a legally binding status by being included in the Manual. That question was answered in the affirmative by the trial judge and concurred in by Mansfield J who concluded that the entitlement to redundancy pay was incorporated by reference into the contract of employment.
At [142]-[144] his Honour discussed the contents of the Manual, noting that it covered a wide range of matters intended to apply in respect of a range of employees. In a general sense it was correct that most of the Manual's contents related to employee benefits and how they were to be exercised. However, other contents imposed obligations on employees with respect to such matters of discrimination, sexual harassment and substance abuse.
His Honour considered (at [146]) that the expression "You agree to abide by" was not without ambiguity. It may mean that the employee agrees "to be bound by" or "to comply with" the policies as Riverwood contended. It may also mean that he agrees "to accept the consequences of" the policies. The definitions in the dictionaries encompass the circumstance where there may be an existing or proposed bilateral or multipartite mutual obligation which one person agrees to accept or adhere to. It is not therefore an expression which necessarily conveys in the circumstances that there is no obligation on the part of the person laying down the policies or procedures to conform to them even where the policy clause in the present case was prefaced with the word "You".
His Honour (at [147]) thus considered that the relevant clause was ambiguous or susceptible to more than one meaning which required him to have regard to the facts existing when the letter of employment was signed. The significant facts known to the employee at the time were that the employer had policies which included the application of the redundancy agreement to its employees and that those policies were contained or partly contained in the Manual. The evidence of the employee was that he had a general understanding of the existence of some redundancy agreement but did not specifically know of the Manual. It could be readily inferred, Mansfield J noted [at [149]), that the employee apprehended that Riverwood had some policies and procedures, for that was what the policy clause in the letter referred to.
At [150] his Honour considered that in light of the factual matrix, he shared the conclusion of the trial judge that the letter incorporated by reference the terms set out in the Manual from time to time including the redundancy agreement. He further agreed with the conclusion that the presumed intention of the parties, by reason of the policy clause in the letter, was that the employee would receive the benefits of the policies of Riverwood in the Manual as they applied to him including under the redundancy agreement. The agreement "to abide by" those policies, in the circumstance, meant that the employee would receive or enjoy the benefits provided for by those policies.
Finally, Mansfield J concluded (at [151]) that he did not consider that the contents of the Manual demonstrated, as Riverwood contended, that it did not intend to be contractually bound to comply with its policies (subject to their alteration). His Honour considered that there were certain policies where such an intention was clear from the context; one example was the expectation of Riverwood that its employees would maintain the highest standards of corporate conduct but nevertheless it agreed not to criticise any employee for adverse consequences which flowed from adherence to that standard. His Honour observed that it was most unlikely that Riverwood envisaged that it could blithely ignore its part of that policy or at least could do so with legal impunity. A further example was its health safety and environment policy which contained mutual obligations. Thus in general its policies were expressed in terms which were entirely apt to be treated as expressing mutually enforceable obligations; they were clear, precise, direct and mainly dealt with matters which one might expect to be encompassed within a particular employment contract.
In my view Mr James gains no assistance from the majority decision in Riverwood which, if anything, is counter indicative of the primary judge's finding that the Policy was expressly incorporated into Mr James' contract of employment and had contractual force in that it was binding upon AAAS.
Both parties relied to different degrees upon the decision of the Full Court of the Federal Court of Australia in Goldman Sachs JBWere Services Pty Limited v Nikolich [2007] FCAFC 120; 163 FCR 62. In that case the issue relevant to the present circumstances was whether a lengthy document entitled "Working with Us" (WWU) was, in whole or in part, incorporated into the respondent's contract of employment. That contract was constituted by a letter of offer which set out various terms and which the respondent accepted by signing the letter as was required. When he did so he had in his possession the WWU.
At [19] Black CJ noted that the appellant contended at trial and initially on appeal, that the WWU was not incorporated into the contract of employment and that the provisions relied upon by the respondent in respect of which he alleged the appellant was in breach did not constitute a term or condition of that contract. However, the appellant accepted during the hearing of the appeal that some sections, but not those in issue, did form part of the contract of employment. According to the Chief Justice, that distinguished the case before him from Riverwood where there was a question whether any of the content of a document had been incorporated into the contract of employment.
At [21] the Chief Justice noted that the language and content of the WWU spoke also of a contractual purpose as the appellant accepted. Some of the language and content was clearly contractual. His Honour observed at [22] that the difficult question was not whether the WWU had any contractual effect for that was ultimately conceded, but whether the portions relied upon by the respondent and found to be terms of the contract by the trial judge did indeed have that character. The trial judge held that they did and the Chief Justice agreed with that finding.
However, I note that the portions relied upon by the respondent in that case and which were found to be terms of his contract of employment, comprised a statement in the WWU that "JBWere will take every practicable step to provide and maintain the safe and healthy working environment for all people" as well as statements concerning harassment and providing for grievance procedures all of which were found to be of a contractual character. Accordingly, the relevant provisions of the WWU, the subject of the litigation in Goldman Sachs, concerned issues of health and safety, harassment and grievance procedures, all of which one would expect to find in most contracts of employment. Nevertheless Marshall J (at [161]) found that the grievance procedure section of the WWU was not contractual as the complaints procedure was couched in the language of "aims" and "guiding principles", not of absolutes or guarantees. The language was plainly aspirational and there was no magic which turned the steps in the complaints process into a contractual obligation binding Goldman.
The third member of the Court, Jessup J, who dissented on the facts, noted (at [179]) that as its name suggested, the WWU was a document which contained information about many aspects of employment within the Goldman organisation. At [260] his Honour remarked that the second limb of the respondent's case in contract depended upon the incorporation of certain provisions of the WWU into his contract of employment, his case being one of express incorporation, the parties agreement to which was to be inferred. At [261] his Honour referred to a passage in the judgment of the trial judge (Wilcox J) in which he observed that the document contained numerous provisions which purported to be promises made by Goldman or purported to grant specific entitlement to employees. Many of those provisions, the trial judge noted, related to matters that one would normally expect to find covered by a contract of employment. I would agree with that observation given the nature of the provisions in question.
At [262] Jessup J noted that Wilcox J had considered Riverwood referring to a number of passages in the judgments of the trial judge and members of the majority in that case. Wilcox J had observed that it was difficult to accept "that the parties did not attend, at least, that the obligations customarily found in employment contracts would be contractually binding". He considered it significant that the WWU was sent to the respondent with his letter of offer, that he was required to familiarise himself with its terms and it was in his possession when he accepted the offer.
At [283] Jessup J observed that at a general level he would reject the proposition that the absence of any specific reference to the WWU in the respondent's letter of offer should of itself have been fatal to his case. The question which the trial judge had to decide was what the parties intended, looked at objectively. That required consideration of all the relevant circumstances. Jessup J considered, as Wilcox J had pointed out, that a most relevant circumstance was that the WWU had been sent to the respondent with his letter of offer.
Although Wilcox J applied Riverwood to the circumstances of the instance case, Jessup J was of a different view. At [285] his Honour referred to the reasons of the majority in Riverwood to the effect that there were two circumstances of critical importance to the conclusion that the parties had expressly agreed that the Manual should be incorporated into the relevant contract of employment. The first was the strong predominance of provisions in the Manual beneficial only to the employee; the second related to the scope of the word "abide" in the respondent's contract of employment to convey also the meaning that he would accept the benefits to which he was entitled under the Manual and that, correspondingly, Riverwood itself would comply with the provisions of the Manual at least to the extent that they purported to grant those benefits. Jessup J therefore indicated (at [287]) that he read Riverwood as a judgment which turned entirely on its own facts.
At [288] Jessup J noted that a significant respect in which the facts in Goldman differed from those in Riverwood was that in the former the secondary document upon which the respondent relied was given to him at the time he was offered employment whereas the appellant's Manual was not, at least specifically, given to the respondent employee. Thus in Riverwood the "abide by" term was not only important but was critical. In Goldman the respondent had the benefit of the circumstance that Goldman provided him with a copy of the WWU at the very time it was offering him employment on stated terms.
At [289] his Honour concluded his consideration of Riverwood by referring again to the two critical circumstances of which one was the strong predominance of provisions beneficial only to the employee in Riverwood's Manual. In this respect his Honour considered that the WWU could not be described as predominantly concerned to specify benefits or entitlements of the employee: it specified many such entitlements but contained numerous directions and requirements which might be considered burdensome for an employee and/or beneficial for the employer. This was the factual difference between his Honour and the majority.
An important consideration that Jessup J noted, was the fact, referred to by his Honour at [293], that the respondent was asked to sign off only on certain specific aspects of the WWU. The limited nature of the formal sign-offs was, and his Honour so considered, a significant circumstance for the purpose of inferring what the parties intended on the question of which parts of the WWU would be binding as part of a contract of employment.
I would agree with that observation, but in my view it carries the present matter no further. On the other hand, however, as the defendants submit, the deliberate unavailability of the Policy is significant when contrasted with the availability of the Manual in Riverwood and of the WWU in Goldman Sachs.
Further, I have some difficulty in accepting the comments of the primary judge in the present case at [49] that it may be, though he did not know, that severance payments and payments on account of bonus expectations are not found in employment contracts generally. Having stated there was no evidence on the point he continued: "But I am not prepared to assume that such provisions are not to be found, either generally or at least from time to time, in the contracts of people employed to work in the business of investment banking. Nor am I prepared to assume that they are not to be found, either ordinarily or from time to time, in the employment contracts of those employed at a very senior level in large commercial enterprises".
In my view in the absence of any evidence to the contrary which, I would have thought, could have been called by Mr James, I would not assume that an employer's policy would normally be found in a contract of employment of those who worked in the business of investment banking, irrespective of their seniority. Nor, with respect, do I agree with the primary judge's finding at [68] of his reasons that notwithstanding that Mr James' contract of employment dealt with the subject of "Termination" and with the obligations of termination, nevertheless what was there said as to "Termination" did not exhaust the topic.
In this respect it is to be noted that Mr James' contract under the heading "Remuneration" provided that he was eligible to participate in ABN AMRO's discretionary bonus scheme. It is understandable that a contract of employment of the nature of that offered to Mr James would contain provisions relating to his remuneration and the circumstances in which the parties could terminate their relationship under normal circumstances. Retrenchment on the ground of a redundancy would not, in my view, necessarily be one of the provisions that one would expect to find in a contract of employment even in the merchant banking industry.
One would have thought that retrenchment on the ground of redundancy would only occur in exceptional circumstances and that if it was to be covered at all by the contract of employment, it would be covered explicitly as it was in the contract of employment the subject of the decision of this Court in UGL Rail Services Pty Ltd v Janik at [39]. The requirement under the heading "ABN AMRO Policies" that Mr James agreed to be bound by the policies of ABN AMRO as may exist from time to time in circumstances where, at least so far as the Policy was concerned, it was neither nominated nor provided to Mr James and was not available to him on request, leads me to the conclusion that, looked at objectively, it was reasonable to conclude that the parties did not intend that the Policy should form part of Mr James' contract of employment.
Mr James next relied upon the decision of the Full Court of the Federal Court of Australia in Romero v Farstad Shipping (Indian Pacific) Pty Limited [2014] FCAFC 177; 315 ALR 243. In that case Romero was an employee of the respondent (Farstad). The latter had a workplace harassment and discrimination policy which set out the process for investigating bullying and sexual discrimination. Romero complained that the captain of the ship of which she was second officer had bullied and sexually discriminated against her. Relevantly for present purposes, the issue for determination before the Full Federal Court was whether the policy formed part of Romero's contract of employment. As the headnote states, the evidence before the Court was to the following effect: (a) Romero had been presented with a copy of the policy on disc to read and sign at her induction at the commencement of her employment with Farstad; (b) she was required to read and acknowledge the policy on her posting to other of Farstad's ships; (c) her letter of engagement confirming her employment contained a statement that "all Farstad Shipping Policies are to be observed at all times"; (d) the policy itself stated that it applied to all Farstad employees, contractors and visitors; all employees "shall" be made aware of the policies; (e) the policy contained numerous passages that were framed in mandatory language concerning its application to all staff; (f) the policy contained mutual rights and obligations.
Farstad did not comply with the processes in either the policy or the enterprise agreement in the course of investigation of Romero's complaint against the captain. It was held that the policy was consistent with Farstad's occupational health and safety obligations expressed in other statutes and, further, that it was intended to form part of Romero's terms and conditions of employment. The Court (Allsop CJ, Rares and McKerracher JJ) applied Goldman Sachs. Romero's letter of engagement was set out at [26] of its reasons. It contained the following statement: "In addition, all Farstad's shipping policies are to be observed at all times". The policy itself was headed "Workplace Harassment and Discrimination". Its contents were set out in some detail by the Court which emphasised those parts which, amongst other things, imposed obligations upon Farstad or its employees. Thus, for instance, cl 2.5 provided that the Company: "will establish, train and maintain Harassment and Discrimination Contact Officers to provide employees throughout the business with access to people with whom they can discuss concerns about workplace harassment and discrimination and receive guidance on the options available to deal with their issues".
Clause 2.6.4 provided that if an employee decides to make a formal complaint, the employee's Manager must investigate the complaint. There were other provisions framed in mandatory terms imposing obligations upon officers of Farstad when a complaint alleging harassment or discrimination was made.
At [33] the Court observed that an important question was whether Romero's contract of employment, as reflected in the accepted letter of engagement, also included the policy (as one of the Farstad policies). On its face, their Honours considered that the policy appeared to bind both the employee and employer. It noted that the primary judge had observed that this question was a vexed one as there was considerable divergence of views in the handful of cases on the point.
After referring (at [34]) to the appropriate approach to the question as dictated by the High Court in Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52; 219 CLR 165 at [40]-[41], the Court noted (at [35]) that in approaching the task of ascertaining the parties' intention the starting point will be the language of the contract but that regard must be had to the purpose and object of the transaction. At [38] ff the Court cited passages from the trial judge and the Full Court in Riverwood. It also referred to statements by the Chief Justice and Marshall J in Goldman Sachs. Reference was also made to the decision of Schmidt J in Foggo v O'Sullivan Partners (Advisory) Pty Limited [2011] NSWSC 501; 206 IR 87 at [116]-[119], a case to which I shall return.
At [49] the Court noted the submission of Farstad that the policy was not contractual or part of the contract of employment. Rather than it being aspirational, as suggested by the trial judge, Farstad submitted that the policy "was directive" in the sense that it consisted of directions to employees, directions in the details of how matters of workplace harassment and discrimination would be handled. At [52] the Court recorded Farstad's contention that it would be unlikely for this particular policy to constitute a contractual component because there were already in existence bullying laws, work health and safety, Commonwealth and State occupational health and safety laws at the time of the relevant events. The Court (at [53]) considered that the better view was to the contrary. The existence of legal obligations on the part of both parties might be thought to be a good reason for contractually binding the parties to a specific method as to the manner in which those statutory obligations were to be observed. The legislation necessarily dictated that the obligations were serious being an added reason why one would expect the promises to be binding. The Court's conclusion was stated in the following terms: "[55] In situations where clear language is used and sufficient emphasis is placed upon the need for compliance (implicitly by both parties) with the terms of a company policy, then especially where that goes to fundamental conditions of employment, such as payment and the method of compliance with external statutory obligations, objectively viewed, the parties would be expected to regard such terms as contractually binding. [56] The language used in this instance, taking the policy as a whole, makes it clear that there is an expectation by the company that there will be mutual obligations. In return for the employee complying with the terms of the policy, the employer gives a responsive assurance that complaints of noncompliance by other employees will be treated in a certain way."
At [59] their Honours rejected the argument against the policies being incorporated due to the power the employer may have to unilaterally vary a policy. The Court considered it clear from cases such as Riverwood that this will not necessarily indicate that a company's policy is not part of a contract of employment. I agree with that proposition.
The Court further supported its conclusion in the following paragraphs of its reasons: "[60] It is relevant that the Policy was the subject of an education program at, or contemporaneously with, the offer of employment and was provided to the employee and that the employee was required to sign the Policy. It is also relevant that the benefit provided is consistent with the nature of the benefit which would be expected to be provided by statute and, therefore, a benefit ordinarily conferred in employment contracts. Further, it is relevant that there was regular reinforcement of policies on an ongoing basis. None of those matters, taken alone, may be decisive, but the cumulative effect of those features of this relationship point towards the incorporation of the Policy into the contract of employment. … [62] The Policy in this instance was part of the employment contract. The wording of the letter of offer taken with the importance of the Policy terms, the education of employees to reinforce the terms of the Policy are all factors leading to that conclusion. While some parts of the Policy may have been aspirational and some parts directive, Farstad's obligations in relation to dealing with serious complaints of sex discrimination and bullying were contractual promises given in exchange for employees being obliged to comply with the behavioural requirements imposed on employees by the Policy."
The Court's comments at [60] cited above are in contrast to the facts of the present case. In Romero the relevant policy was the subject of an education program attended by the employee at or contemporaneously with the offer of employment and she was required to sign the policy. Accordingly, she was fully aware of its contents. Furthermore, unlike the present case and as will appear, the benefit provided by the policy was considered by the Court to be consistent with the nature of the benefit that would be expected to be provided by statute and, therefore, a benefit ordinarily conferred in employment contracts. In my view that cannot be said of the Policy in the present case.
In Foggo v O'Sullivan Partners, Mr Foggo was employed by O'Sullivan in a senior executive role. His contract of employment contemplated him receiving a performance incentive bonus which was to be paid in O'Sullivan's sole discretion in accordance with certain arrangements and applicable policies. The contract expressly contemplated the deferred vesting of bonus payments above $250,000 for up to three years. O'Sullivan informed Foggo that it had determined to pay him a bonus of $300,000, half payable in the June 2010 payroll and half payable in the June 2011 payroll but conditional upon him remaining in employment with O'Sullivan and not having given notice of resignation as at the time of payment in June 2011 to join a competitor.
Foggo disputed O'Sullivan's right to impose those conditions. At around the same time O'Sullivan sought to implement new employment agreements for its staff and the proposed contract for Foggo included conditions about bonus payments. Foggo refused to sign the new agreement. O'Sullivan did not pay the first tranche of the bonus in June 2010 informing Foggo that the bonus had not been paid because it was waiting for Foggo to sign an amended form of the new employment agreement. Foggo notified O'Sullivan of a grievance pursuant to the latter's recently introduced grievance policy. The parties met to discuss the grievance whereupon Foggo was informed that he was not required to sign a new employment contract. However, O'Sullivan later determined that the grievance policy was not the appropriate mechanism and declined to follow it.
The issue relevant for present purposes was whether O'Sullivan was bound to comply with its grievance policy. Foggo and other employees had been advised that O'Sullivan had implemented a number of new policies including a grievance policy. As a consequence of not receiving his bonus, Foggo raised three grievances pursuant to the policy of which the first was that his bonus had not been paid in accordance his contract of employment, being the bonus which he had been promised. He claimed that the new grievance policy applied to his complaints given that he had been advised by O'Sullivan that it was an explicit part of his employment contract.
One issue was whether O'Sullivan was bound by its own grievance policy to deal with Foggo's grievances in accordance with that policy. Schmidt J held that it was. As Foggo was bound to comply with the grievance policy and given the conduct of both parties in accepting that the policy thereby had contractual force vis a vis Foggo, it followed that O'Sullivan was also contractually bound to observe the policy unless it exercised its express right to review, vary or withdraw it.
Her Honour dealt with the issue of whether the grievance policy had contractual force so far as O'Sullivan was concerned at [113] ff. O'Sullivan asserted that Foggo was bound by the policy when it was promulgated to its employees. Foggo accepted that this was so and had acted in accordance with the policy in relation to his concerns about the failure to pay his bonus and a new contract he was required to sign. For its part, O'Sullivan initially acted in accordance with the policy but later advised Foggo that the policy would not be further applied relying on its right to withdraw or vary it. Schmidt J dealt with the issue in the following terms: "[116] That a reasonable person, in the circumstances, would have understood that the defendant, as well as Mr Foggo, was contractually bound to observe the grievance policy which it had implemented, unless varied or withdrawn, must be accepted. The policy envisaged that in the event that an employee had a grievance, he or she would advise the defendant, which would then take the steps specified in the policy to seek to resolve that grievance. That a reasonable person would understand that the employee was obliged to adhere to what the policy required of him or her, but that the defendant was not obliged to take the steps which the policy envisaged it would take, may not be accepted. That would defy both logic and common sense. … [119] That a term which requires an employer, as well as the employee, to adhere to a policy which the employer has devised and implemented and which the employee is contractually obliged to observe, by express provision, would be implied in order to give business efficacy to the contracted contract, is immediately understandable. In the case of the policy here in question, it is evidence that the contract could not operate reasonably and effectively without such an implied obligation. … [120] … The defendant promulgated the policy, advising that it had contractual force. Mr Foggo accepted that view of his contractual obligations and acted accordingly, adhering to the policy, as did the defendant, at least initially, thereby resolving one of the grievances he had raised, in the initial discussion which the policy envisaged would take place."
In my opinion the decision of Schmidt J in Foggo does not assist Mr James. O'Sullivan accepted that Foggo was contractually bound to observe the grievance policy and if he was and implemented it as he did then it would be nonsensical, as her Honour observed, that O'Sullivan could regard itself as not bound to implement that process whilst it remained part of the policy.
A number of conclusions may be drawn from the foregoing. First, Riverwood was a case decided purely on its own facts. Secondly, the relevant part of the Manual which was found to be critical to the conclusion of the majority in that case was the strong predominance of provisions beneficial only to the employee. Thirdly, in Goldman Sachs some of the provisions of the WWU which the respondent sought to have incorporated into his contract of employment were clearly contractual in nature but not the complaints process on which the respondent relied. The case turned on its own facts. Fourthly, the same observation may be made about Romero and Foggo. The nature of the relevant policy provisions in these cases is quite different from that relied on by Mr James. No principle can be derived from the authorities called in aid by Mr James of his claim that the Policy was incorporated into his contract of employment so that AAAS was bound to give effect when it terminated his employment on the ground of redundancy.
Accordingly, the secret terms of the Policy and the relevant text of Mr James' contract of employment when properly construed, would not lead a reasonable person in the position of Mr James to conclude that AAAS intended to be contractually bound by the Policy upon the basis that it was expressly incorporated as a term of Mr James' contract of employment.
Accordingly, I am unable to agree with the primary judge's conclusion at [76] of his reasons that the Policy, as it stood at the time Mr James' employment was terminated, was incorporated into his Contract of Employment and was thus binding upon both Mr James and AAAS. It follows that the judgment entered by his Honour in favour of Mr James based upon breach of the Policy as a term of his Contract of Employment must be set aside unless it can be justified on other grounds.

[37]

The claim by Messrs McKeith and James against AAAS regarding severance and bonus payments based on a "course of dealing"

As already noted, and leaving to one side the estoppel case advanced by the plaintiffs and Mr James' express incorporation case, Messrs McKeith and James' contractual claim against AAAS regarding severance and ex gratia payments was founded on the proposition that the Policy was incorporated into the contract of employment of each of them by a "course of dealing". That "course of dealing" was said to be constituted by the representations pleaded in paragraphs 11 and 17 of each plaintiff's CLS. At [130] the primary judge found that the facts pleaded and particularised in those paragraphs had been proved. The defendants do not challenge that finding.
Due to the primary judge's finding at [76] that the Policy was expressly incorporated into Mr James' contract of employment and thus binding on AAAS, the second issue identified by his Honour based on incorporation of the Policy by a "course of dealing" became irrelevant to Mr James' case. So did the claim pleaded in par 49 of Mr James' CLS that the representations gave rise to a contractual obligation on the part of RBS and RFS to apply the Policy to him if he was made redundant before 10 October 2009. Each of those issues formed the primary case of Mr McKeith but were also advanced by Mr James in a Notice of Contention in the event that he was unsuccessful in upholding the primary judge's finding of express incorporation.
I have already referred to the pleading submission advanced by the defendants to the effect that the representations, being post-contractual, could not amount to a "course of dealing" in accordance with the authorities on that subject, a submission his Honour accepted. From his Honour's perspective, the plaintiffs could only succeed on this part of the case if they had pleaded a variation of their contracts of employment supported by consideration.
In this respect it is important to note that the claim against AAAS is, as a matter of necessity, founded upon the incorporation of the Policy into the contracts of employment entered into between each of the plaintiffs and AAAS. In order to make that case good there is a threshold issue, namely, that the representations upon which the plaintiffs rely as constituting a "course of dealing" were in fact made by or on behalf of AAAS.
In this respect pars 12 and 22 of the CLS pleaded that the representations referred to in par 11 and those referred to in par 17 were made "by or on behalf of" AAAS. If they were not and AAAS was merely the conduit of representations made by the Consortium, relevantly RBS and RFS, then the plaintiffs' case against AAAS fails at that point. It is therefore necessary to first determine that issue for it is only if it is determined in favour of the plaintiffs that it is necessary to determine whether the Policy had been incorporated, whether by way of a "course of dealing" or otherwise, into the plaintiffs' contracts of employment with AAAS.
The determination of this issue, which was not advanced before the primary judge but which was accepted by senior counsel for the plaintiffs as being an issue which could be determined on appeal without prejudice to his clients, requires a consideration of the terms of the representations upon which the plaintiffs rely. In this respect I would note that in its written submissions on the issue of whether the Policy was incorporated into the employment contracts of the plaintiffs the defendants, after dealing with the topic of the failure of the plaintiffs to plead a variation and supporting consideration to support their "course of dealing" argument, concluded those submissions with the following statement: "10 In any event, the trial judge correctly found (based on factual findings) that there was no relevant intention on the part of the third respondent [AAAS] to be bound by the Policy, and that alone means the appellant [McKeith] could not succeed on the contract (and guarantee) claim".
Although not a direct response to the issue as to whether the representations were made by or on behalf of AAAS, it essentially takes the point that AAAS, in conveying the representations, did not intend to be bound by them. The finding of the primary judge to which reference is made is not identified but I think it is to be found at [114] of his Honour's reasons where he said this: "At a level of some generality, it may be said that the various representations or statements particularised were made. It is not necessary to go to the detail. The simple fact is that the dealings relied upon occurred, in almost every case, after the contracts of employment were made, and in a context which does not suggest that they were put forward as intended to have contractual content." (Emphasis added)
I would interpret that part of the statement of his Honour which I have emphasised as a finding that AAAS, being the only party against whom the "course of dealing" claim was made, was not making the representations relied upon on the basis that they were promises which could be attributed to it as having contractual force. In my view there is merit in that finding.
For the plaintiffs to succeed against AAAS on this part of their respective claims, it was necessary for them to establish that each of the representations which were made to the effect that the Policy would apply to employees of AAAS whose employment was terminated by reason of redundancy, were in fact made by or on behalf of AAAS and not by AAAS on behalf of the Consortium unless it could be established that those representations had been adopted or endorsed by AAAS: Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; 218 CLR 592 at [40].
Paragraph 11 of the CLS was accepted by the defendants as being a direct statement of fact. The particulars to that paragraph therefore take that point no further. AAAS had indeed adopted a Policy from July 2001 and had applied it from time to time over the years in circumstances not currently relevant. Paragraph 14 of CLS pleads that on or around 29 May 2007 the Consortium announced its intention to make an offer, acting through RFS, for the entire issued outstanding capital of AAAH. Paragraph 17 of the CLS then asserts that from around July 2007, that is some two months after the Consortium's bid was made, representations were made to Mr McKeith (and Mr James) that, in effect, the redundancy policy then in place would apply to employees of AAAS whose employment was terminated by reason of redundancy which it was contemplated would occur during the course of the implementation of the takeover. The particulars to par 17 then set out the representations, express or implied, relied upon.
The particular (a) statement was made by an officer of AAAH [not AAAS] to the effect that the Consortium proposed that the redundancy practices would stay in place for two years post completion of the takeover. Particular (b) refers to a statement again by an officer of AAAH to the effect that RBS would be applying existing ABN AMRO redundancy practices for those two years. Particular (c) is a press release by AAAH (not AAAS) in which the Boards (of which entity is unknown) welcome the efforts made by the Consortium in establishing a dialogue with ABN AMRO employees with respect to redundancy procedures.
Particular (d) was also a press release by AAAH to the same effect. Particular (e) was again a press release by AAAH referring to the commitments made to employees and trade unions in respect of employees' rights and respecting existing agreements including redundancy plans, a clear reference to commitments by the Consortium. This is made clear by the second part of Particular (e) whereby the ABN AMRO Boards welcomed the efforts made by the Consortium in dealing with these issues including redundancy.
Particular (f) related to a presentation by the Chairman of the Managing Board of AAAH again referring to a global guarantee that all existing redundancy plans would be extended for a period of two years after the merger became unconditional; clearly a reference to a guarantee not by or on behalf of AAAS but by the Consortium. Particular (g) involved the publication of a document on 10 October 2007 which was the date upon which the bid became unconditional. The answer to the question posed was that in the case of redundancy, the Consortium "has guaranteed to all staff that existing ABN AMRO policies and practices relating to redundancies would remain in place for a period of at least two years after the bid goes unconditional". The second part of the answer refers to what the Consortium had stated on its website, being an indication of what it, rather than AAAS proposed. Finally, Particular (h) restates the Consortium's guarantee that all existing ABN AMRO policies relating to redundancies will remain in place for a period of two years from 11 October 2007 that being the day following the day the bid became unconditional.
Paragraph 18 then asserts that the representations referred to in par 17 were made by and on behalf of AAAS. In my view that was an incorrect assertion of fact.
To the extent to which the various representations contained commitments or guarantees that existing redundancy policies would remain in force for a period of two years after the bid became unconditional, they were the commitments and guarantees of the Consortium and not AAAS. To the extent to which the representations were made by AAAH on behalf of AAAS (as the employer of the relevant employees), it was merely acting as the conduit of the representations with respect to the question of redundancies which were made by the Consortium, relevantly, RBS and RFS. This must be so for once the Consortium's bid was accepted (as it was on or about 10 October 2007) it became a matter for the Consortium as to how it would deal with the question of future redundancies of employees of AAAS. The effect of the takeover was that the governing mind, as it were, of AAAS changed and was controlled by the Consortium, in particular RBS as acknowledged by the primary judge at [455] of his reasons.
Furthermore, it was not open to AAAS to adopt the commitments, promises or guarantees of the Consortium as that issue was essentially out of its hands. In my view the relevant promises contained in the representations were those of the Consortium and that AAAH was merely conveying to the employees of AAAS the promises, commitments and guarantees which the Consortium was prepared to make to the employees of ABN AMRO in general and AAAS in particular.
It follows from the foregoing that there was no "course of dealing" between the plaintiffs and AAAS which could result in the tenure of the Policy being incorporated into their respective Contracts of Employment as alleged in par 22 of their CLS's. This is because the representations relied upon as constituting the "course of dealing" were not made by or on behalf of AAAS. This claim could only be made against AAAS as it was the only party to the Contracts of Employment other than the plaintiffs.
That is not to say that the AAAS employees, including the plaintiffs, necessarily entered into an independent contract with the Consortium (relevantly RBS and RFS) to the effect that the redundancy policies of ABN AMRO including that of AAAS would be applied to employees who were made redundant in the two years following the merger. Such a case was pleaded and is dealt with below. However, the Consortium's representations could not and did not form part of the contract of employment of the plaintiffs or the other employees of AAAS.
That the representations were those of the Consortium was confirmed by the primary judge at [125] of his reasons where, in the context of the plaintiffs' estoppel case, he said: "Further, and to the extent that it is relevant, the consortium must have known that the representations were being made. Indeed, in my view, the consortium wanted the representations to be made, because its members wanted AA Group employees to have a clear understanding of the employment policies that would apply if the consortium's offer were successful. The members of the consortium, including RBS, did not withdraw or qualify the representations in any way. Nor did they or it suggest to employees of any of the AA Group companies that the representations were not serious, or did not represent a genuine commitment by the members of the consortium, or that employees should not rely upon them."
The finding of the primary judge contained in the above paragraph was not challenged. Even if the representations were made by AAAH and/or AAAS, they were made on behalf of the Consortium.
For the foregoing reasons, in my view the claims of Messrs McKeith and James against AAAS based on pars 11 to 22 of the CLS must fail.

[38]

The plaintiffs' conventional estoppel claim

Under the heading "Estoppel by Convention" Mr McKeith pleaded the following in his CLS: "25 From at least September 2007, relations between Mr McKeith and ABN AMRO Services were conducted on the basis of a mutual understanding that, if employees of ABN AMRO Services (including Mr McKeith) were retrenched during the period two years after the Relevant Date, he would be treated in accordance with the redundancy procedures, plans, policies and practices existed at the Relevant Date. 26 That understanding on the part of Mr McKeith was encouraged by ABN AMRO Services by the making of the representations pleaded in paragraph [17] above. 27 For his part, Mr McKeith acted on that understanding in: (a) his communications with the staff of ABN AMRO Services on and after the Relevant Date in relation to their position in the event of redundancy; and (b) did not pursue the possibility of alternative employment but remained with ABN AMRO Services throughout the merger process until his employment was terminated on 5 December 2008. 28 In the premises of paragraphs [25] to [27] above, ABN AMRO Services is estopped from departing from the premise that if Mr McKeith were retrenched during a period of two years from the Relevant Date, he would be treated in accordance with the redundancy procedures, plans, policies and practices of ABN AMRO Services as those procedures, plans, policies and practices existed at the Relevant Date."
Mr James' conventional estoppel claim was similar. It is pleaded in pars 23 to 26 of his CLS. However, his par 25(b) is in different terms to Mr McKeith's par 27(b) but not in a manner currently relevant.
In the case of each of the plaintiffs, the relevant understanding was founded upon the representations. The estoppel claim thus depended upon the representations being made by AAAS. For the reasons already given, that was not so. As the estoppel was only pleaded against AAAS it follows by parity of reasoning that the promises contained in the representations were not made by AAAS but by the Consortium, essentially RBS and RFS. It follows that the estoppel by convention claim of the plaintiffs fails.

[39]

The plaintiffs' claim against RBS and RFS regarding severance and bonus payments

This claim is pleaded in pars 47 to 52 of Mr McKeith's CLS and in pars 49 to 54 of Mr James' CLS. Essentially they are in the same terms. It is appropriate to set out the relevant terms of the pleading (as amended by consent during the course of the appeal): "47. From around July 2007, the members of the Consortium, including RBS and RFS, jointly and severally, promised employees of ABN AMRO worldwide, including Mr McKeith, that: (a) if those employees continued in the employment of ABN AMRO Services; then (b) if their employment was terminated by reason of redundancy within two years of the Relevant Date they would ensure that those employees would have applied to them the redundancy procedures, plans, policies and practices of their ABN AMRO employers as those procedures, plans, policies and practices existed at the Relevant Date. (the Consortium's First Promise) Particulars The promise was express and was published to employees of ABN AMRO, including Mr McKeith, in various written communications made during the period July to October 2007. As to those written communications, the particulars to paragraph [17] are repeated. 48. After July 2007, with knowledge of the Consortium's First Promise, Mr McKeith continued in the employment of ABN AMRO Services. 49. Mr McKeith's employment was terminated by reason of redundancy within two years of the Relevant Date. 50. Mr McKeith did not have applied to him the redundancy procedures, plans, policies and practices of ABN AMRO Services as those procedures, plans, policies and practices existed at the Relevant Date in that: (a) he was not made a Severance Payment; (b) he was not made a Bonus Payment, notwithstanding that his performance in the year in which he was terminated was satisfactory; (c) consideration was not given in good faith to the making of a Bonus Payment to him on the basis of his individual circumstances and performance in the year in which he was terminated; and (d) he was not treated fairly and equitably. Particulars The particulars to paragraph [33] are repeated. 51. In the premises of paragraph [50], RFS and RBS failed to ensure that Mr McKeith had applied to him the redundancy procedures, plans, policies and practices of their ABN AMRO employers as those procedures, plans, policies and practices existed atthe Relevant Date. 52. As a result of that failure on the part of RFS and RBS, Mr McKeith has suffered loss. Particulars (a) Severance Payment; (b) Bonus Payment; and (c) in the alternative, loss of the opportunity to obtain a Bonus Payment." The "Relevant Date" was 10 October, 2007 when the Consortium's bid became unconditional.
The issues which arise with respect to this claim concern first, whether the promises were made by RBS and RFS; secondly, whether the promises were intended to have contractual effect; thirdly, whether the promises were supported by consideration; and, fourthly, whether Mr McKeith and/or Mr James continued in the employment of AAAS in reliance upon what is referred to in the pleadings as the Consortium's First Promise.
This last issue overlaps with the third. In the course of argument the conduct of Mr McKeith relevant to the third and fourth issues was recast to also allege that he acted not only on the understanding encouraged by the representations to continue in the employment of AAAS but also that he did not pursue the possibility of alternative employment. That of Mr James was also recast to allege that he acted on the same understanding in considering his own position after the Relevant Date in the event of redundancy.
The primary judge dealt with these claims at [400] ff. As noted, the claims are founded upon the representations contained in the particulars to par 17 of each plaintiff's CLS. Apart from Particular (b), all the statements referred to in the particulars were published to the staff of AA Group or ABN AMRO worldwide. The statements contained representations that the Consortium was committed to and guaranteed that all existing redundancy plans would be extended for a period of two years after the merger became unconditional. It thus included the Policy.
At [403] his Honour observed that in form, the statements were made by companies within the AA Group. However, he accepted that they were statements that represented (and were intended to represent) the Consortium's position. Its members knew that the statements were being made and no attempt was made at the time to qualify or withdraw them. The defendants accepted, as did the primary judge at [411], that "the statements were promissory in nature and seriously made" in the sense that they should be regarded as promises made by the Consortium and its members individually as to how they would deal, inter alia, with redundancies.
However, according to his Honour (at [404]), the real question was whether the statements were intended to be contractual: that is, whether they were offers which were intended, upon acceptance (by whatever means), to lead to a concluded contract. Thus, notwithstanding that the statements were promissory, were to be taken seriously and, as his Honour observed at [410], arose as a consequence of the Consortium takings pains to match the terms offered by Barclays which had announced its intentions in relation to redundancies and staff appointments, nevertheless at [413] his Honour remarked that the promises did not of themselves necessitate the conclusion that they were to be taken as offers to enter into contractual relations.
Before dealing with this issue the primary judge referred to what he regarded as the relevant authorities. The first case he considered was the decision of the English Court of Appeal in Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256, being what his Honour described (at [401]) as the classic example of a "unilateral contract"; that is, one where an offer is made to the world at large or to a particular class of people and which is "accepted" by fulfilment of the conditions specified for acceptance even though the fact of acceptance may not be communicated to the offeror. Like his Honour I do not consider that the label "unilateral contract" assists at least in the present case.
The primary judge's citation of passages from the judgments of their Lordships make it clear that the latter regarded the well known advertisement in question as constituting an offer capable of being accepted by anybody who performed the stipulated conditions. At [425] his Honour drew from the judgments in Carlill the following propositions: "(1) to see whether an offer made to all the world (or to an identified class of offerees) is intended to lead, on acceptance, to a concluded contract, it is necessary to look at the terms of the offer and the context in which it was made; (2) an individual within the class of offerees may accept the offer by performing the acts for which the offer calls; and (3) the very performance which constitutes acceptance of the offer will also constitute consideration for the offer, sufficient to support a legally binding contract."
The second case considered by his Honour was that of the High Court in Australian Woollen Mills Pty Ltd v The Commonwealth [1954] HCA 20; 92 CLR 424. In that case the Commonwealth Government announced in June 1946 that it would pay a "subsidy" to manufacturers of woollen goods, on wool purchased and used for local manufacture after 30 June 1946. In June 1948 the Government announced that subsidies would not be paid on wool purchased after 30 June 1948 and that "adjustments" would be made up until December 1948. One of the questions raised in the case was whether the first announcement by the Government was an offer which the plaintiff had accepted by its conduct in buying wool for local manufacture.
The Court (Dixon CJ, Williams, Webb, Fullaghar and Kitto JJ), dealt with this question at 456-463. As the primary judge observed at [428] of his reasons, their Honours (at 456) characterised the contract on which the plaintiff sued as "of that type which is commonly said to be constituted by an offer of a promise for an act, the offer being accepted by the doing of the act". Their Honours then referred to the fact that such contracts are described as "unilateral" contracts observing that the term was open to criticism on the ground that it was unscientific and misleading. Rather, the position in such cases is simply that the consideration on the part of the offeree is completely executed by the doing of the very thing which constitutes acceptance of the offer. Carlill was then given as an example.
The essence of the Court's decision on this issue was as follows (at 456-457): "In cases of this class it is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo. One simple example will suffice to illustrate this. A, in Sydney, says to B in Melbourne: 'I will pay you £1,000 on your arrival in Sydney'. The next day B goes to Sydney. If these facts along are proved, it is perfectly clear that no contract binding A to pay £1,000 to B is established. For all that appears there may be no relation whatever between A's statement and B's act. It is quite consistent with the facts proved that B intended to go to Sydney anyhow, and that A is merely announcing that, if and when B arrives in Sydney, he will make a gift to him. The necessary relation is not shown to exist between the announcement and the act. Proof of further facts, however, might suffice to establish a contract. … These further facts throw a different light on the statement on which B relies as an offer accepted by his going to Sydney. … The necessary connection or relation between the announcement and the act is provided if the inference is drawn that A has requested B to go to Sydney. … It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. In such cases as the present, therefore, in order that a contract may be created by offer and acceptance, it is necessary that what is alleged to be an offer should have been intended to give rise, on the doing of the act, to an obligation."
At 458 their Honours stated the following test as determining whether a contract has been made. They said: "A test which has not seldom been applied in such cases in order to determine whether a contract has been made or not is to ask whether there has been a request by the alleged promisor that the promisee shall do the act on which the latter relies. Such a request may, of course, be expressed or implied. … At the same time, it can hardly be denied that the presence or absence of an implied request to do the act may often provide a useful test for determining whether there has been a true offer and a true acceptance such as to bring a contract into existence … We are really applying the same test if we ask whether the 'offer' was made in order to induce the doing of the act."
At [433] of his reasons the primary judge set out the propositions that he drew from the decision in Australian Woollen Mills: "(1) if an offer to all the world, or to a class of offerees, is intended, on acceptance, to give rise to a legally binding contract, it is necessary to show that the offer was propounded as consideration for the doing of an act, and that the act was done in consideration of the offer; (2) it is therefore necessary to find some express or implied promise in the offer that is made, so that there may be found an acceptance, by conduct, referable to that promise; (3) for a contract to arise, more is required than that the act for which the offer calls is done; it must also be shown that the act was done in reliance on, or in response to, the offer; (4) if it can be seen that there was a request by the offeror, that the offeree do a certain act, and that the offeree relied on this request by doing the act, it may be possible to find a contract; but (5) before there can be a contract, it must be shown that the offer was one which, viewed objectively, was intended on acceptance (by the doing of the act) to give rise to a legally enforceable obligation." I would not cavil with these propositions apart from that in paragraph (4) as the High Court made it clear that the request referred to could either be expressed or implied.
Before dealing with the primary judge's reasons for rejecting the plaintiffs' claim based on what he referred to as a "unilateral contract", it is appropriate to sketch in some further background facts. I do this in the context of the plaintiffs' submission that each of Mr McKeith and Mr James responded to, and relied upon, the commitment or guarantee contained in the representations by not only conveying to the staff of AAAS the existence of that commitment and guarantee but also that they themselves continued their employment with AAAS and, in the case of Mr McKeith, did not pursue the possibility of alternative employment.
At [160] his Honour expressly accepted the evidence of Mr McKeith that he relied on the understanding engendered by the representations by deciding to remain with AAAH, in the employ of AAAS, rather than to seek alternative employment. In my view reliance on the part of Mr McKeith was thereby established. Mr James' case was that with knowledge of the commitment and guarantee contained in the representations he also continued in the employment of AAAH through AAAS.
In this respect it is to be noted that par 47 of Mr McKeith's CLS and par 49 of that of Mr James pleaded that the the members of the Consortium including RBS and RFS jointly and severally promised employees of ABN AMRO worldwide including Messrs McKeith and James that: "(a) if those employees continued in the employment of ABN AMRO then (b) if their employment was terminated by reason of redundancy within two years of [10 October 2007] they would ensure that those employees would have applied to them redundancy procedures, plans, policies and practices of their ABN AMRO employers as those procedures, plans, policies and practices existed at [10 October 2007]." The particulars to par 17 of each CLS were relied upon to support those promises.
At [458] of his reasons the primary judge expressed the view that those promises were not made as offers intended to be capable of acceptances to form the basis of a contract notwithstanding that he accepted that they were made seriously. Significantly, he accepted that they were intended to allay the fears of staff as to their futures. His Honour thought it inherently implausible, notwithstanding in the case of the redundancy promise the use of the word "guarantee" and, I would add, "commitment", that any employee of the ABN AMRO Group who continued to work for his or her particular employer up until the takeover offer became unconditional and thereafter, thereby entered into an individual contract with one or other of the members of the Consortium.
The validity of that finding needs to be read against the findings made by his Honour at [125]. Those findings, which are recorded above at [146] in connection with the conventional estoppel claim, I repeat for convenience: "Further, and to the extent that it is relevant, the consortium must have known that the representations were being made. Indeed, in my view, the consortium wanted the representations to be made, because its members wanted AA Group employees to have a clear understanding of the employment policies that would apply if the consortium's offer were successful. The members of the consortium, including RBS, did not withdraw or qualify the representations in any way. Nor did they or it suggest to employees of any of the AA Group companies that the representations were not serious, or did not represent a genuine commitment by the members of the consortium, or that employees should not rely upon them."
Although the primary judge dealt in more detail with this issue in the case of Mr McKeith, he did not do so in the case of Mr James as he had already held that the Policy was expressly incorporated into Mr James' contract of employment. As in my view his Honour was in error in so doing, it is necessary to deal with the present issue in more detail in relation to Mr James' claim under this head.
In this respect the position of Mr James was said by the defendants to be different to that of Mr McKeith. As the primary judge noted at [140] of his reasons, if Mr James gave evidence that he relied upon the communications or the understanding engendered thereby in considering his own position, his Honour was not referred to that evidence in the course of submissions. It was not suggested that Mr James gave express evidence that in response to, or in reliance upon, the commitment and guarantee contained in the representations, he decided to remain in the employment of AAAH/AAAS.
Nevertheless Mr James pleaded in par 50 of his CLS that with knowledge of the representations he continued in the employ of AAAS. He also pleaded in par 56 that he continued in that employment in the knowledge of what was referred to as the Consortium's Second Promise, namely, that if the employees of ABN AMRO continued in their employment until 10 October 2007, they (RBS and RFS) would ensure that those employees, of which Mr James was one, would be considered for positions in the new organisation created by the merger. However, that plea did not detract from that in par 50.
At [157] his Honour observed he did not think that Mr James had shown that he had suffered detriment in the requisite sense simply because he "acted" on the understanding said to have been engendered by the representations in "considering his own position … in the event of redundancy". The words quoted are taken from par 25 of Mr James' CLS pleaded with respect to his estoppel claim against AAAS. However, notwithstanding that he did not give express evidence to support the allegations so pleaded, in my view it can be inferred from his continuing in the employment of AAAH/AAAS that he did so because it was natural for him, as well as others, to have understood, as his Honour observed at [458], that the commitment of the Consortium as to the application of the Policy was intended to allay any fears as to his (or their) futures.
Thus, even if he had other motives for remaining in the employment of AAAH/AAAS after the merger, such as the Consortium's Second Promise, he must have proceeded on the basis and with the knowledge that if he did not succeed in obtaining the permanent position he was seeking, he would be made redundant but would, in that event, be entitled to have the Policy applied to him.
It is, I think, of assistance to return in further detail to the "Communication Pack for Merger" provided to, amongst others, Mr McKeith and Mr James by Mr Stephen Blaney, Regional Head of Communication, Asia ABN AMRO. Mr Blaney operated out of Hong Kong. Particular (g) to par 17 of the CLS sets out the Consortium's position with respect to redundancies. The commitment or guarantee contained in that particular needs to be read against the background of other aspects of the Communications Pack, the contents of which were conveyed to the AAAS staff including the plaintiffs.
Under the heading "Redundancies", it was noted that it was anticipated that there would be a decrease in overall headcount as indicated by the Consortium but it was not clear whether this would be achieved through redundancies, normal attrition or voluntary severance. Redundancy was thus a possibility, if not a probability. Under the heading "Employment Conditions" the following was stated: "● General Q: When will I know if I have a job in the new organisatino or not? A: It is too early to say who will have a job in the new organisation. The structure and organisation of the different areas in the bank will become clearer when the integration plans are known, however, specific information on job security or loss may not be known for some months. While the appointments process is not yet clear they will be communicated as a priority as soon as they are announced by the integration teams. Q: Will jobs be lost when ABN AMRO is acquired? When? A: While the ownership of the bank will change, initially following completion of the offers ABN AMRO remains ABN AMRO with the same organisational structure and the same focus - serving our customers well and enhancing the success of our businesses. The daily jobs we all do remain the same and we expect our business operations will carry on more or less as before. It is too early to say what the impact in the longer term will be. The degree of separation and/or integration varies across Bus. There will be some loss of existing jobs and that is regrettable. There will also be new career opportunities for employees. We should remember that the Consortium are offering a significant price for ABN AMRO's assets and a core component of these assets is our knowledge and skills as employees. Additionally, with regards to the Consortium, their plan is focused on getting the businesses fit for long term growth and sustainable job creation. There will be little change in the short term as we go through the process of creating the transition plans and then consulting on them with relevant stakeholders, including the appropriate employee representative bodies such as Works Councils. However, they recognise the importance of removing uncertainly as quickly as possible and it will be a priority. … Q: Will there be redundancies? How many, where and when can we expect the first cuts? A: … However, in the case of redundancy, the consortium has guaranteed to all staff that all existing ABN AMRO policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional." There then follows the question and answer set forth in Particular (g).
The document then continued following the statement in Particular (g): Q: What will happen to staff whose jobs are lost? A: It is the Consortium's firm intention to focus all job losses on voluntary redundancy, natural turnover and redeployment. They intend to do all they can to retain good people and will ensure that their appointment process is solely based on merit and competencies. ABN AMRO employees can expect to become part of growing and successful businesses where new investment in jobs is far more certain. An employment office will be created to identify and manage redeployment opportunities for employees across the operations of the banks, within the Netherlands and other appropriate territories. Their intention is to facilitate employee choice via access to the wide range of opportunities that will be available across the businesses. The Consortium intends to invest in this area to ensure that all employees are aware of the opportunities available to them in the new combined businesses. To find out more about your local ABN AMRO policies please contact your local HR representative."
Finally, and importantly, under the heading "Retention" the following appeared: "Q: Why should I stay? A: While we will encounter changes that will potentially be unsettling for many of us, this period provides us with many opportunities for professional and personal growth. It can be viewed as the occasion to start looking forward and planning for our future. The Consortium's plans are focused on getting the ABN AMRO businesses fit for long term growth and as part of that, harnessing the experience and expertise of the ABN AMRO workforce. … Q: How secure are the commitments of the acquirer? A: We have been positively impressed by the commitment of the Consortium to the key part employees play in creating and sustaining a successful business. They are keenly aware of the need to be seen and deliver on that promise if they are to win the trust and respect of the ABN AMRO employees."
In my view the commitment and guarantee contained in Particular (g) needs to be read against the background or context of the other parts of the Communications Pack which I have set out above. Generally speaking those parts seek to encourage the employees of AAAH/AAAS to continue in their employment upon the basis that if they did so, but were later retrenched on the ground of redundancy, the Policy would apply to them. It is in that context that the fact that Mr McKeith and Mr James continued their employment should be regarded. What was said in the Communications Pack applied to all staff including them.
As senior employees, Mr McKeith and Mr James would have been as concerned as any other employee as to their future and it was not suggested that in this respect the statements which I have extracted above from the Communications Pack were not applicable to them. As with other staff, they were then encouraged to continue to participate in the future of the bank under its new ownership.
So much seems to have been acknowledged by the primary judge when at [21] of his reasons he observed that: "[f]rom the consortium's perspective, it was desirable that there be no mass exodus of employees during the takeover process and its implementation".
The upside of that desire or encouragement was the representation that the Consortium was committed to, and would guarantee, the application of the Policy to those employees who, in time, were made redundant and that that position would continue for a period of two years from the date the Consortium's bid became unconditional.
Nevertheless the primary judge rejected this aspect of the plaintiffs' claim upon the basis that they had established no more than that the relevant promises were made and that they remained in employment but had failed to establish that any decision, conscious or unconscious, to remain in employment rather than leave was one taken in response to, or in reliance upon, the promise constituted by the commitment and guarantee of the Consortium that the Policy would apply in the manner referred to. In so holding his Honour (at [444]) regarded the case of Mr McKeith and Mr James as falling within the example given by the High Court in Australian Woollen Mills where their Honours postulated an offer made by A to B: if you travel to Sydney I will pay you £1,000 on your arrival there. If B goes to Sydney and nothing more is shown, there would be no contract and this was so even if B knew of the offer before travelling to Sydney. This is because, as the High Court observed, there is no relation between A's offer and B's act.
At [445] his Honour remarked: "The pleaded acts of acceptance do not seem to me to satisfy the requirement that what is relied on as acceptance must be not just the doing of the act contemplated by the offer, but the doing of that act with reference to, or in reliance upon, the offer."
I interpose that this finding, in my view, is inconsistent with his Honour's finding of reliance on the part of Mr McKeith at [160] of his reasons to which I have referred at [166] above. There is no doubt that, especially in the case of Mr McKeith but not to the exclusion of Mr James, RBS and RFS wished to retain as many of the senior staff as practicable to ensure a smooth transition to the integrated entity. What I have written at [34] and [180] above is applicable to the issue under discussion especially given his Honour's unchallenged findings at [21] of his reasons.
The primary judge then turned to the pleadings noting at [448] that in neither case was there any pleading of reliance or that anything was done on account of, or in response, to the promise contained in the representations and, in particular, that referred to in Particular (g). The problem with the pleading was that par 48 of the CLS merely alleged that each of Mr McKeith and Mr James continued in the employment of AAAS "with knowledge of the Consortium's First Promise" rather than asserting that they so continued in reliance upon that promise. In other words, there was no pleading of material facts that would support the proposition that their continuance in employment was undertaken as a quid pro quo for the promise. Accordingly, on the pleaded case and for the reasons given in Australian Woollen Mills, his Honour held (at [449]) that the plaintiffs' cases failed.
It is true that the pleading is somewhat deficient but nevertheless in my view if the facts proved that a contract came into existence as a consequence of Mr McKeith and/or Mr James remaining in their employment with AAAH/ AAAS in reliance upon the relevant promises, then the deficiency in the pleading should not prevent the finding of a contract.
At [451]-[455] the primary judge dealt with the evidence of Mr McKeith and Mr James to the effect that following receipt of the Communications Pack that was distributed shortly before the Consortium's offer became unconditional, they had discussions with senior executives of AAAH and other staff members informing them of the statements which the Consortium had made in relation to redundancy including that a fair appointment process based on merit and competency would be adopted and redundancy dealt with in accordance with existing practice.
At [454] his Honour remarked that the difficulty with this aspect of the plaintiffs' cases was that, in doing what they did (and there was no challenge to their evidence in this regard), they were doing no more than their respective roles required. They were simply performing their duties in an appropriate manner and in regard to the circumstances that then prevailed. His Honour then concluded: "[456] In those circumstances, I conclude that there was not the necessary relationship between the promises and the acts relied upon as performance so as to bring the parties into a contractual relationship even if the promises were intended, on acceptance, to give rise to legal relations. Neither Mr James nor Mr McKeith has pleaded or proved that what he did, was done in response to any implied request to be found in the promises. On the contrary, in my view, the proper inference is that what each of them did was done as an ordinary incident of his duties."
The difficulty I have with his Honour's conclusion is that neither Mr McKeith nor Mr James pleaded with respect to their contract claim against RBS and RFS that with knowledge of the Consortium's representations, they took steps to convey the contents of the Communications Pack to the relevant employees of AAAH although, as his Honour acknowledged at [455], they did. In other words, they did not plead that the conveyance of those statements to the staff constituted consideration for the promises pleaded in par 47 of the CLS. Rather, the contrary, the consideration pleaded in par 48 was that each of them with knowledge of the Consortium's promises, continued in the employment of AAAS.
It is true, as I have noted above, that they did not specifically or in terms plead reliance: but in my view the evidence established that their continuation in the employ of AAAH/AAAS was due to their acceptance of, and therefore Mr James' implicit and Mr McKeith's express reliance upon the commitment and guarantee of the Consortium that in the event that they became redundant, the Policy would be applied to them. In a case such as the present the authorities establish that proof of, on the one hand, an offer calculated to induce certain conduct on the part of the offeree and, on the other hand, of the engaging in that conduct on the part of the offeree with knowledge of the offer, give rise to a rebuttable presumption that the conduct was undertaken in reliance on the offer: Port Jackson Stevedoring Pty Limited v Salmond & Spraggon (Aust) Pty Limited [1978] HCA 8; 139 CLR 231 at 271-273 per Mason and Jacobs JJ.
In that case their Honours accepted that when conduct is relied on as an acceptance of, and as consideration for, an offer, the acceptor must be shown to have acted in reliance on the offer. But proof of performance of the conditions of an offer by a person who knows of its existence will in general constitute prima facie evidence of its acceptance. Their Honours did not consider that that proposition was in conflict with anything that was said by the High Court in Australian Woollen Mills. They then noted that in that case the Court was directing its attention primarily to the character of the statement relied on as an offer. It did not suggest that oral evidence of reliance on an offer was necessarily or generally required.
Particularly in the case of a promise made in circumstances involving commercial relations (which in my view would include employment in the banking industry), that the offeree has acted in reliance on the offeror's promise is much more compelling than inferences sought to be drawn in other situations. Common sense and knowledge of human affairs, their Honours remarked, indicated the evident probability in that case of the offeree acting in reliance on the offeror's promise when he acted in the manner contemplated by the promise with knowledge of its existence. In my view those principles are applicable to the present case and, in particular, to the position of Mr James.
It follows in my view, that his Honour erred insofar as he considered that the plaintiffs' case must fail upon the basis that all they did in response to the contents of the Communication Pack was to convey its contents to other staff members.
At [457] his Honour returned to the question of whether the promises contained in the representations were intended to be capable of acceptance so as to give rise to a contract. At [458] (which I have recorded at [168] above), he expressed the view that the promises were not so intended. Rather, they should be understood to have been statements of intention, albeit seriously made, as to the manner in which employees would be treated if the Consortium's takeover offer was successful (at [459]).
In my respectful view his Honour was in error insofar as he held that the relevant promises did not, considered objectively, constitute an "offer" of a contractual nature. The many references in the representations of the Consortium's "commitment" and "guarantee" that the Policy would be applied to those who were retrenched on the ground of redundancy, in my view clearly conveyed an intention to be bound by those statements in the event that redundancies occurred.
As the plaintiffs submitted, in making the representations, RBS/RFS were seeking to encourage staff to remain during the merger process on the basis that, if they were retrenched after the takeover had been implemented so that they were redundant to the merged operations, they could be assured that they would receive the entitlements provided by and in accordance with, the provisions of the Policy.
As already noted it was not in issue that the representations were promissory in nature and intended to be taken seriously. They were more than mere statements of intention to be cast aside at the whim of the party making them. To do so would have made them misleading and engendered false expectations in those employees to whom they were directed on what was a subject of particular concern to them, namely, their future employment. As his Honour acknowledged at [458], they were intended "to allay the fears of staff as to their futures".
Relevantly, as was submitted by Mr McKeith, the words of "commitment" and "guarantee" are redolent with obligation. In my view, in accordance with authority, a reasonable person would understand, given the context in which the statements were made, that the language employed by the Consortium was intended to have a contractual effect where the employees to which the representations were directed continued in their employment for the benefit of enhancing the success of the bank's businesses and providing a seamless transition to the merged entity. I would accept Mr McKeith's further submission that had the Consortium intended to communicate a mere statement of intention as his Honour held, it could have done so in terms. Instead it used words of obligation in a context where the expression "guarantee" in particular was calculated to be objectively understood as a binding promise.
Although the representation referred to in Particular (d) accepted there would be a decrease in the overall headcount, it was sought to achieve this through normal attrition or voluntary severance but, if necessary, redundancies. However, in the case of redundancies the Consortium "guaranteed" to all staff that all existing ABN AMRO policies and practices relating to redundancies would remain in place for a period of at least two years after the bid went unconditional. In my view the words employed by the Consortium, being words of obligation, conveyed more than mere statements of intention which could be reneged upon in whole or in part at any time.
His Honour at [458] stated that it struck him as being inherently implausible that any employee of the ABN AMRO Group who continued to work for his or her particular employer "up until the takeover offer became unconditional" thereby entered into an individual contract with one or other of the members of the Consortium. However, the promises contained in the Communication Pack were made on 10 October 2007 on the day the bid became unconditional. The email from Mr Blaney attaching the Communication Pack had attached to it the Group announcement concerning the Consortium's offer becoming unconditional. The email was sent at 10.24 pm on 10 October. Accordingly, the argument for the plaintiffs was not that contracts were made with individual staff members who continued to work only until the takeover became unconditional but related to those who continued to work after the takeover offer became unconditional until, within the following two years, they became redundant.
In my view there is nothing inherently implausible with that scenario given that the Policy would apply only to those employees who were in fact made redundant which would be a relatively small number compared to the overall workforce: in other words, a promise under the contracts would only be implemented in relation to those who in fact became redundant. And even then, the ex gratia bonus component was discretionary and "[d]epended on circumstances".
In any event, given the desire of the Consortium, as his Honour accepted, to allay the fears of the workforce with respect to their futures, it is entirely unsurprising, and was appropriately commercial in circumstances where it was the desire of the Consortium to retain as many of the existing workforce as possible given their competency and experience, that the Consortium intended their promise with respect to the application of the Policy to be contractually binding with respect to those employees who continued their employment in the businesses the subject of the takeover.
Although at [461] his Honour considered that there was a lack of specificity in the offer constituted by the promises contained in the representations as to what should be done to constitute its acceptance, in my view it was apparent from the terms of the "offer" that it was intended to be "accepted" by existing employees continuing their employment until such time, being within two years of the bid becoming unconditional, as a decision was made to render them redundant. The two years, I would infer, was related to the lengthy transition period which the takeover contemplated as being necessary to complete the integration of the merged businesses. I would, with respect, therefore disagree with his Honour's finding of lack of specificity.
At [462]-[465] the primary judge held that it was insufficient that, of itself, performance by the employee of the (impliedly) requested act in response to the relevant promises would bring about a concluded contract. In particular, he did not consider that the implied act, being the continuation of their employ, was sufficient to bring about "acceptance" of the relevant "offer". If the offer was to be regarded as contractual, what must be done to accept it, his Honour observed, should be reasonably apparent.
In the present case the only method of acceptance that could be spelt out of the promises was the simple act of continuing in their employment. His Honour considered that the performance of that act was not something that in many, if not the great majority, of cases could be seen as referable to the "offer" in the sense that it was done on the faith of, or in reliance upon, the offer given his observation that many employees may have had many different motives for continuing in their employment. This may be so in some cases, but taking into account the whole of the circumstances to which I have referred (including in the case of Mr McKeith, his express evidence), in my view an inference of relevant reliance can and should be drawn.
Although at [465] the primary judge considered that the difficulty of establishing a clear and unequivocal mode of acceptance indicated to him that the "offer" was not one which was intended to be capable of giving rise to legal relations, in my view the offer was so intended. In this respect there is some difficulty in a case such as the present of categorising what occurred in terms of the conventional contractual theory of offer and acceptance. The real questions were: was a promise made and what were its terms; did the promisor intend to be bound by it; was the promise only applicable to those who continued in their employment for the benefit of the businesses having been encouraged to do so (as noted at [139] above); did those employees who continued in their employment do so because of, or in reliance upon, the promise. In my view, each of these questions should be answered in the affirmative.
Although the defendants relied heavily, as did the primary judge, upon the statements of principle of the High Court in Australian Woollen Mills, in the present case the Consortium made a clear promise that it would apply the Policy to those employees who continued in their employment but who became redundant within two years of the bid becoming unconditional. So much was common ground. The implicit requested act of acceptance of the offer or promise to apply the Policy to those who became redundant was that they continue in their existing employment with AAAH/AAAS until a decision was made or to their future and so as to ensure, in the meantime, the smooth continuation of the business during the transition period. In the case at least of Mr McKeith and Mr James they did so: Mr McKeith expressly, and Mr James impliedly, on the faith of, or in reliance upon, the Consortium's promise made to allay their fears as to their future employment prospects. Thus necessary relationship between "offer" and "act" required by Australian Woollen Mills, existed.
It follows in my view that the necessary reliance or quid pro quo constituted by Mr McKeith and Mr James remaining in the employ of AAAH/AAAS provided the necessary consideration or a quid pro quo for the Consortium's promise and was thus sufficient to support a contract. I would therefore accept the following submission made by Mr McKeith: "Accordingly … what the Consortium "bargained for" in making the guarantee included inducing ABN AMRO management to deploy that promise in encouraging staff to remain with the Bank during the merger process and thus having individual employees consider their employment options on the basis that they were assured that, if they stayed and were retrenched, the existing redundancy policy would be applied to them. That is what the Consortium "bargained for" and that is what it got."
Finally, I note that at [466] his Honour observed that the plaintiffs, and all other members of the ABN AMRO Group worldwide who remained in their employment, did so pursuant to existing contracts. I am prepared to accept that that was at least so with respect to the plaintiffs. But they were not bound to do so and, subject to the giving of notice, could have terminated their employment. They did not. They continued in their employ in circumstances where, given their experience and responsibilities in the relevant business, they, and in particular Mr McKeith, did so for the benefit of the Consortium.
In their written submissions the defendants accepted that continuing in employment when not required to do so (as was the case here) was capable of amounting to good consideration but only if sought and given as part of the bargain. That proposition is clearly correct. But it was satisfied as I have indicated at [209] above.
On the other hand, contrary to the defendants' submission that the plaintiffs' continued employment was equivocal and, therefore, was not referable to any express or implied request to do so, in my view the making of the representations could only have been for the purpose of encouraging the employees, and particular senior employees such as the plaintiffs, to continue their employment to enable the takeover to be implemented with minimum disruption to the businesses.
Accordingly, the finding at [160] whereby his Honour accepted the evidence of Mr McKeith that he relied on the understanding engendered by the representations by deciding to remain with AAAH and in the employ of AAAS rather than to seek alternative employment, is inconsistent with his Honour's suggestion at [466] that he remained in his employment only because of the terms of his existing contract.
As his Honour found at [161] and [162], RBS wanted to retain Mr McKeith because it saw him as a valuable employee. He held a very senior position in AAAH. Furthermore it wanted him to stay on, at least in the short term, until the question of the sale of AAAH could be resolved and, if there were a sale, to assist in the integration of the operations of AAAH with those of RBS's Australian branch. His Honour noted at [162] internal emails of RBS which revealed that Mr McKeith was regarded as a key employee for this purpose to the extent that it was prepared to offer him a $3 million guaranteed bonus for the 2009 calendar year if he remained employed.
As Mr McKeith submitted on his appeal, his continued employment and, therefore, his position as a director of the two trustee companies (one the Australian trustee the other the New Zealand trustee) which held the minority shareholding of approximately 24 per cent in AAAH on trust for employees of AAAH who had participated in EIP, was of particular significance given the necessity for RBS to negotiate with the trustees as to the price it would have to pay to acquire that shareholding. Mr James was a director of the Australian trustee from 27 June 2006 until he was retrenched on 10 September 2008. There was evidence from Mr James (at B5/1796 P-Q) that after the Consortium's bid was successful and became unconditional on 10 October 2007, he and Mr McKeith were concerned to protect the interests of the minority shareholders of AAAH during the merger process. Both Mr James and Mr McKeith were involved in negotiating the buyout of the EIP and the integration of AAAH and RBS Australia (B5/1818Q). These factors merely added to those which demonstrated the desire of RBS for the plaintiffs to continue in their employment post merger.
For the foregoing reasons in my opinion Mr McKeith and Mr James have established a contract between each of them and RBS and RFS whereby in consideration of each continuing their employment with AAAH/AAAS, in the event that either was made redundant before 10 October 2009, the Policy would be applied to them. Issue 13 referred to at [44] above should be answered in the affirmative. In the circumstances it is unnecessary to deal further with the estoppel claims referred to in Issues 3 and 12.

[40]

The Policy as applied to Mr James

Mr James' employment was terminated by AAAS on 9 September 2008 by reason of his redundancy. On or about 3 September 2008 he was offered a redundancy package on the following terms: (a) An amount of $115,384.62 gross, which was stated as being an amount equal to three months "fixed remuneration" in lieu of notice; (b) An amount of $43,692.31 gross, as severance payment; (c) An amount equal to Mr James' accrued statutory entitlements; and (d) An amount of $2,500,000 gross, being an "ex-gratia" payment. At the same time he was presented with a Deed of Release.
There are three references in the Policy to a "Deed of Release". The first states that the HR Advisor will prepare such a deed. The second, two paragraphs later, states that the staff member (the employee made redundant) will be provided with advice on the terms of the redundancy and, amongst other things, the "Deed of Release". The policy then provides that the Deed of Release: "should be signed and returned to HR before the final payment is made".
As the primary judge observed at [228] of his reasons, the three references to a "Deed of Release" appear after the statement of the circumstances in which the Policy applies and does not apply and in a box section which, his Honour thought, deals with procedures to be followed when a member of staff who may be eligible for redundancy has been identified upon the basis that "redeployment is not possible".
In those circumstances the HR Advisor is "to prepare a redundancy schedule based on the terms of this policy …" which is to be "discussed and agreed with the line manager and the business unit head". This occurred in the case of Mr James and he was duly provided with a redundancy schedule setting out the amounts to which it was said he was entitled. The Deed of Release which Mr James was required to sign was dated 3 September 2008. It had already been signed on behalf of AAAS before it was given to him. It identified the parties as AAAS and Mr James and the recital stated the duration of his employment and that that employment would come to an end as a result of redundancy.
Clause 3 of the Deed of Release set out the payments to be made by AAAS. Clause 5, which is the critical provision for present purposes, dealt with releases to be given by Mr James to AAAS and others and by AAAS to Mr James. It was in the following terms: "5. Release 5.1 Release by Mr James Subject to the payment of the monies referred to in clause 3.1(a), Mr James releases the Company and its Related Bodies Corporate and each of their company officers and employees, past and present, from all claims and liabilities of any nature and under any system of law (including costs, whether or not the subject of a court order) in relation to, connection with, or arising from: (a) any office held by Mr James in the course of the Employment; (b) the Employment, including the termination of the Employment; and (c) any other matter which was known, or ought to have been known, to Mr James at the date of his execution of this Deed. 5.2 Release by the Company Subject to Mr James providing the releases in clause 5.1, the Company releases Mr James from all claims and liabilities of any nature and under any system of law (including costs, whether or not the subject of a court order) in relation to, connected with, or arising from: (a) any office held by Mr James in the course of Employment; (b) the Employment, including the termination of the Employment; and (c) any other matter which was known, or ought to have been known, to the Company at the date of its execution of this Deed."
Mr James declined to sign the Deed of Release because, according to his evidence, he wished to seek legal advice with respect to it given its extremely wide terms. The issue which then arose was whether the provisions of cl 5 of the Deed of Release were contemplated by the Policy as being the operative component of the "Deed of Release" referred to therein.
The parties' submissions to the primary judge, generally repeated on the appeal, were essentially as follows. Mr James submitted that the release he was required to give by executing the Deed of Release proffered to him extended well beyond a settlement of his entitlements (including any discretionary payments) under the Policy. It comprehended any claim "in relation to, connected with or arising from" any office held by Mr James in the course of his employment; the employment itself, including its termination; and anything else of which Mr James knew or ought to have known at the time of its execution. As his Honour noted at [246], Mr James submitted that the terms of the Deed of Release went well beyond the obvious purpose that, under the Policy, deeds of release were required to serve.
The defendants submitted that there was no limitation on the purposes that the Deed of Release might serve. Its terms were at the discretion of AAAS and hence subject only to the acknowledged limitation that the discretion as to its contents exercised reasonably and in good faith and for the purposes for which it was given. There was nothing in the text of the Policy to justify the proposition that the proper function of the Deed of Release was only to acquit AAAS in respect of any claim under the Policy.
At [254] the primary judge held that, reading the Policy as a whole, it was clear that the Deed of Release that may be required, as a condition of payment, was to be no more than one which released each of the parties - the departing employee and AAAS - from the obligations (including discretionary obligations) specified in the Policy. In essence his Honour was of the view that the Deed of Release operated as a confirmation that the procedures relating to termination on the ground of redundancy had been followed, that each party had complied with its obligations under them and that the employee would have no further claim against the employer in respect of the termination of his or her employment.
Accordingly, his Honour considered (at [255]) that the Deed of Release was intended to protect the departing employee against further claims in respect of the various matters referred to in the Policy itself and to protect AAAS by giving it the departing employee's acknowledgement that all of his or her entitlements had been met. His Honour thus held (at [257]) that the Deed of Release as presented to Mr James as a condition of payment of his redundancy entitlements went well beyond what AAAS was reasonably entitled to require of him.
It is noteworthy that his Honour accepted the submission of the defendants that, as a matter of principle, it was open to an employer to impose conditions on the grant of a discretionary payment where those conditions are not contrary to the terms of the employee's contract of employment. I agree with that proposition. However, his Honour considered that the Deed of Release submitted to Mr James could not be characterised as something that AAAS, acting reasonably and in good faith, could conclude it was entitled to require of Mr James. There is a degree of inconsistency between those two propositions.
At [260] his Honour referred to the width of the release that Mr James was being required to give: "The width of the deed of release is of real concern, bearing in mind that on any view, the releases that Mr James was required to give would effectively bar him from seeking indemnity or contribution from AAAS (or any of its related bodies corporate) in the event that, for example, disgruntled employees for whom shares were held under the EIP decided to take action against the trustees and their directors. As matters stood as at 3 September 2008, it was (to put it neutrally) by no means clear that there would be a peaceful resolution, as between RBS and those employees, of the desire of RBS to buy out the shares held by the trustee for members of the EIP."
There were other matters referred to by his Honour which led him to the conclusion (at [265]) that the releases sought of Mr James went well beyond agreement to, and acceptance of, the ex gratia payment included in the redundancy schedule provided to him. The releases were sought as part of the price for payment of Mr James' statutory and contractual entitlements as well as for the severance payment that was to be made. In respect of those payments there was no element of discretion, particularly in relation to the making of a severance payment.
The claim for an ex gratia payment was accepted as discretionary and raised different issues. After referring to a number of factors that were then in play, his Honour concluded at [276] that the Deed of Release required of Mr James went beyond what was contemplated by the terms of the Policy on its proper construction and on its application in the events that prevailed at the time Mr James was made redundant. These included, relevantly, a real likelihood of dispute in which Mr James, as the former CEO and Director of AAAH, might well be embroiled. Had he signed the release required of him he would have signed away all rights of recourse, or contribution or indemnity from, amongst others, AAAH and RBS.
On the appeal the defendants submitted that his Honour had given two reasons for concluding that Mr James' failure to execute the Deed of Release was an answer to his claim for an ex gratia payment. The first was that on the proper construction of the Policy, the Deed of Release that might be required as a condition of payment was no more than a deed which released the departing employee and the employer from the obligations specified in the Policy. It submitted that there was nothing in the text of the Policy or its purposes to warrant a conclusion that the discretion in respect of ex gratia payments or the making of a severance payment on receipt of an executed deed must be confined to ensuring that the employee has no further claims against the employer "arising from the termination of his or her employment" as opposed to "arising from the employment".
In any event, even if his Honour was correct as to the effect of the express discretion under the Policy, it was submitted that that was no answer to AAAS's ability to require a wider Deed of Release as a condition for the making of an ex gratia payment. There was nothing capricious or arbitrary about its decision to require Mr James to execute the document in circumstances where he was to receive an ex gratia payment of $2.5 million. After all his Honour had accepted, as a matter of principle, that it was open to an employer to impose such conditions on the grant of a discretionary payment provided that in determining their terms the employer did not act capriciously or arbitrarily. There was no suggestion that AAAS so acted in the present case. In any event, it was submitted that the test was one of irrationality or perversity which was not, in any event, alleged.
The second reason given by his Honour was that AAAS was only entitled to impose a Deed of Release which was "reasonable", which fell short of caprice. His Honour also referred to the terms of the Deed of Release being determined "in good faith". However, it was submitted that Mr James' case at trial did not articulate a claim that the requirement that he sign the Deed of Release as a condition of receiving a $2.5 million ex gratia payment revealed bad faith. None of the factors which persuaded his Honour that Mr James may have been at risk of future claims against him extended to an allegation, or a finding by his Honour, that involved bad faith. It was submitted that even if Mr James had been vulnerable to complaints of breach of fiduciary duty and the like, that did not require a conclusion that proffering the Deed of Release involved bad faith.
It is significant that the submissions of the defendants as to the terms of the Deed of Release were generally directed to the discretionary aspect of an ex gratia payment. In their final written submissions on this issue the defendants contended that entitlements which did not depend on the Policy would be due whether or not the Deed of Release was signed and were in fact paid to Mr James notwithstanding his failure to sign and return the Deed of Release proffered to him. The mere proffering of the Deed could not make conditional what was not conditional. Despite its terms, its only operation was to provide an additional source of entitlement for contractual and statutory payments and a conditional right to the discretionary ex gratia payment and severance payment.
In my view the primary judge was correct in finding that the releases in cl 5.1 of the Deed of Release went well beyond agreement to, and acceptance of, the ex gratia payment included in the redundancy schedule. His Honour was also correct at [265] in finding that they were sought as part of the price for payment not only of his statutory and contractual entitlements but also for the severance payment that was to be made and which, like those entitlements, did not have a discretionary element with respect to its payment.
On the other hand I would not accept the primary judge's finding that the required Deed of Release was required to be confined to releasing each party from their obligations specified in the Policy. In my view it was open for the deed of release to extend to Mr James releasing his employer, but only his employer, from anything arising out of his employment or its termination. However, the Deed of Release proffered to Mr James went further than that and to that extent was not a release contemplated by the Policy. In particular, the terms of the release required of Mr James went much further than was necessary or legitimate as a condition of him receiving the severance payment to which he was entitled on the application to him of the Policy.
Mr James' claim to an ex gratia payment falls into a different category. I have already noted at [227] above that in my view, and provided AAAS did not act arbitrarily, perversely or irrationally, it was open to it to impose a release in the terms set out in cl 5.1 of the Deed of Release as the price for an ex gratia payment of $2.5 million. As I have indicated, the submissions of the defendants were directed towards the legitimacy of the Deed of Release as the price of the ex gratia payment rather than as the price for the making of the severance payment in respect of which the Policy does not contemplate a discretionary element in terms of whether it would be paid or not.
An ex gratia payment is not mandated and whether or not it may be paid was expressly stated to be "[d]epending on circumstances". The ordinary meaning of the term adopted by the parties to describe the payment (ex gratia) is an indication of its character as well as the surrounding provisions in the Policy. The only limitation on the exercise of the discretion is that it should not be exercised perversely, capriciously or unreasonably in the Wednesbury sense (Associated Provincial Picture Houses Ltd v Wednesbury Corp [1948] 1 KB 223).
The next question which arises is whether Mr James would have executed a deed of release which was confined in the manner to which I have referred at [236] above. Although I would accept that a deed in more limited terms would not necessarily entitle Mr James to an ex gratia payment of $2.5 million, if he was informed that in order to obtain that payment he would be required to execute a deed of release in the terms referred to, then it is apparent on the probabilities that he would not have done so, in which event AAAS would be entitled to withdraw the ex gratia payment of $2.5 million.
In their written submissions the defendants posed the following question on causation: if AAAS had done what the primary judge found was permitted (indeed required) by the Policy and proffered a narrow deed of release, would Mr James have executed the deed if the ex gratia payment was no greater than $2.5 million? If the answer is in the negative, he suffered no loss by virtue of any breach by AAAS.
It should be noted at the outset that the defendants' submission was based upon the assumption that the only relevant deed of release was one which, if executed by Mr James, would result in the ex gratia payment of $2.5 million. Although the primary judge did not address this issue it was squarely raised by para 31 of the defendants' closing submissions. The basis upon which it was contended that he would have rejected such a deed in any event was because he had reached the conclusion that he should be paid more than $2.5 million so that there was no basis for a finding that he would have signed a narrower release.
Reliance was placed upon the cross-examination of Mr James. However, in those exchanges Mr James accepted that the amount offered "didn't seem unreasonable" and that he did not initially consider that he should be paid more. However, he did so consider after taking advice from his legal advisors. It was put to him that he reached the conclusion he should be paid more than he had been offered as a consequence of which he would reject the offer that had been made to which his response was "no, not on that basis". The relevant part of the exchange concluded as follows: "Q. None of this would be happening if you had signed the deed; do you agree? A. If I had a deed that I thought was capable of signing under advice I agree with you. Q. None of this would be happening if the bank had been prepared to pay you one and a half million dollars more, you would agree? A. No, that's not the case. … Q. Did you make a counter offer? You've said you asked for more money? A. My recollection is my legal advisers wrote to RBS's legal advisers setting out the deficiencies of the deed."
The defendants in their written submissions did not refer to that part of the exchange that I have recorded in the preceding paragraph. Nevertheless they submitted that Mr James had not established that he would have accepted an ex gratia payment by executing a Deed of Release in accordance with the Policy if the amount offered to him was no more than $2.5 million.
In reply Mr James submitted that there was no reason to believe that if he had been presented on retrenchment with a Deed of Release which did no more than release AAAS from the obligations specified in the Policy, he would have done anything other than execute it. Reference was made to Mr James' evidence that the severance package offered to him in September 2008 was consistent with the Policy as he understood it; that he knew the amounts in question were "in policy" and that he thought that they "didn't seem unreasonable". Accordingly, it was submitted that there would have been no basis for him to take issue with executing an acknowledgement to that effect and his evidence did not suggest that he would have done so.
It was further submitted that the evidence made it tolerably clear that what stopped Mr James executing the Deed of Release that was proffered to him was the breadth of the releases which were being sought from him. He specifically denied that he rejected the Deed of Release on the basis that he had concluded that he should be "paid more". The reason that he had rejected it was because it had a number of "deficiencies" which were communicated by his legal advisers to the defendants' legal advisers. The "deficiencies" no doubt related to the breadth of the releases that were being sought.
It was then submitted that Mr James' evidence, after taking legal advice, that he should be paid more was to be understood in the context of the proffered payment being accompanied by the wide ranging releases in the Deed of Release in circumstances in which there was a real prospect of claims being made, for instance, by disgruntled employee shareholders arising out of the winding up of the EIP.
In response the defendants submitted that Mr James' reasons for rejecting the Deed of Release were mere speculation as the legal advice to which he referred was not in evidence. It could equally be inferred, so it was submitted, that on taking legal advice Mr James decided that he had claims to pursue against AAAS which he did not wish to give up by signing the Deed and that those claims were worth more than the amounts the Deed proposed to pay him. This was a reference to Mr James' claim that he should not have been retrenched but should have been appointed CEO of the integrated business. In my opinion that submission makes the point upon which Mr James relies. Given his desire not to be retrenched but to be appointed CEO of the reorganised business, and accepting that he had an expectation to that effect, had he signed the Deed of Release in the form which was proffered to him, he would have been giving up any claim against AAAS arising out of that expectation if it did not come to fruition.
Importantly, the submissions of both parties concentrated on the issue of whether Mr James would have signed a more narrow Deed of Release for the purpose of securing the ex gratia payment of $2.5 million. The parties did not address the issue as to whether Mr James would have executed a narrower Deed of Release if to do so would have resulted in him receiving a severance payment calculated in accordance with the Policy. It was not a small amount. It needs to be addressed.
If Mr James was informed that if he signed a more limited deed of release of the nature of that to which I have made reference, he would receive his severance payment, then the question arises as to whether, as a matter of probability, he would have executed such a document. The answer to this question goes to the issue of causation, that is, the causal connection between breach of the Policy and loss. In light of the evidence given by Mr James to which I have referred at [242] above that the severance package offered to him "didn't seem unreasonable" and that he would have signed a deed that he thought he was "capable of signing under advice", in my view it should be inferred that he would have signed such a deed rather than lose a payment in excess of $400,000.
The failure of AAAS to pay Mr James' severance entitlement constituted a breach of the contract between RBS and Mr James arising out of the representations that the Policy would apply to him, for which breach Mr James is entitled to damages for the loss of his severance payment. The measure of his damages is the quantum of that payment together with interest.
In summary, in my opinion Mr James was not entitled to receive the ex gratia payment of $2.5 million unless he executed the Deed of Release which was proffered to him. However, upon executing a deed of release of the more limited kind to which I have referred, he would be entitled to his severance payment. The failure of AAAS to make that payment unless the Deed of Release was signed by Mr James constituted a breach of the contract between he and RBS arising out of the guarantee in the Representations that the Policy would apply to him, for which breach Mr James is entitled to damages for the loss of his severance payment. Even if his damage is categorised as the loss of a chance to receive his severance payment, in my view that loss should be valued at an amount equivalent to the severance payment to which he would otherwise be entitled.
In the foregoing circumstances it follows that the judgment in favour of Mr James in the amount of $2,932,692.31 plus pre-judgment interest in the amount of $1,490,149.15 should be set aside and in lieu thereof there should be judgment for Mr James in the amount of the severance payment of $432,692.31 together with pre-judgment interest from 9 September 2008 to 27 March 2015.

[41]

Mr McKeith's Deed of Release

Mr McKeith's employment was terminated by AAAS on 5 December 2008 by reason of redundancy. A decision was taken not to give him an ex gratia payment for reasons to which I shall refer below and which are the subject of challenge by him. However, on 26 November 2008 he was provided with a Deed of Release pursuant to which he would have received a severance payment of $375,961.54 had he executed the Deed (the McKeith Deed). That Deed did not provide for Mr McKeith to receive an ex gratia payment as the defendants had exercised their discretion not to make such a payment to him in the circumstances that existed at that time, a matter to which I shall return as it is also the subject of challenge.
The McKeith Deed was in the form of a deed poll, not a deed inter partes. It was said to be made in favour of AAAS and all its related bodies corporate, all of whom were to be comprehended within the expression "ABN AMRO". Being a deed poll it was one sided. It recited Mr McKeith's period of employment, its termination due to redundancy and an agreement "to settle all claims arising from" that employment, "including the termination of that employment". Clauses 2, 3 and 4 constituted the operative provisions and were in the following terms: "2. RELEASE & INDEMNITY The Employee releases and indemnifies, and will keep indemnified, ABN AMRO and all of its directors, secretaries, officers, employees and agents in relation to all claims which the Employee now, or at any time in the future may have against ABN AMRO, arising from or related in any way to the Employee's employment with ABN AMRO and the termination of that employment. 3. AGREEMENT NOT TO COMMENCE PROCEEDINGS The Employee undertakes not to commence any proceedings against ABN AMRO arising out of or in any way related to the Employee's employment by ABN AMRO or the termination of that employment. 4. BAR TO PROCEEDINGS This Deed may be pleaded in bar by ABN AMRO to any proceedings commenced, continued or taken by the Employee or on the Employee's behalf, in relation to the Employee's employment with ABN AMRO or the termination of that employment."
As noted by the primary judge at [282], the released party, "ABN AMRO", offered no reciprocal or mutual release. As his Honour then observed at [283], the competing positions taken by the parties with respect to the McKeith Deed were generally the same as those advanced with respect of the Deed of Release submitted to Mr James.
At [291] the primary judge concluded that the McKeith Deed went beyond what could properly be required on the proper construction of the Policy considered in the context of events occurring around the time it was submitted to Mr McKeith on 26 November 2008. In particular, his Honour acknowledged that although the release that Mr McKeith was asked to give was not drafted in as much detail as that required of Mr James, it was nonetheless extremely wide in its terms. In particular, the release was offered to AAAS and its related bodies corporate as well as its directors, secretaries, officers, employees and agents although unlike that of Mr James, it did not expressly extend to past officers and employees. At [287] the primary judge remarked that the McKeith Deed did not extend to past or present officers and employees of AAAS and its related bodies corporate. This is incorrect as it clearly extended to present officers and employees.
However, as his Honour noted at [288], conspicuously, the released entities did not themselves offer a release to Mr McKeith. Nor did AAAS offer any indemnity in respect of claims that the released entities might make against Mr McKeith.
His Honour summarised his views at [290] in the following terms: "Put shortly, the draft deed, if executed and delivered, would have stripped Mr McKeith of any claim that he might have against his employer and its related bodies corporate, but did not give him equivalent protection in respect of any claim that they might bring against him. Nor did it give him any protection in respect of claims that others might bring against him, arising out of his performance of the various duties and incidents of his employment."
The defendants submitted that the primary judge's finding that the releases in the McKeith Deed went beyond what could properly be required on the proper construction of the Policy, was erroneous for three reasons. First, there was nothing in the text of the Policy or its purposes to warrant the conclusion that the discretion in respect of ex gratia payments or the making of a severance payment on receipt of an executed deed must be confined to ensuring that the employee has no further claims against the employer "arising from the termination of his or her employment" as opposed to arising from the employment.
Leaving to one side the discretion in respect of ex gratia payments, the fact that the Policy did not provide for the making of a severance payment pursuant to the exercise of a discretion was a relevant factor in determining the extent of any release where only the making of a severance payment was involved as was the case with Mr McKeith. The text of the Policy itself does not assist in determining the nature of the release which it calls for. However, in my view it was required to be proportionate to the payments which have to be made pursuant to the terms of the Policy.
I have already expressed the view that where an ex gratia payment is to be made pursuant to the exercise of a discretion, it is open to the employer as a condition of the exercise of that discretion to require a wider release than where the only payment to be made is a severance payment which is mandated and discretionary. It is no doubt for that reason that at [173] the primary judge recorded the defendants' acceptance "that, if the redundancy policy had contractual effect, AAAS was required to make a severance payment to employees who were retrenched, calculated in accordance with the terms of the policy as they might operate in the circumstances of the particular employee".
Nevertheless I would not cavil with the proposition that even where the relevant payment under the terms of the Policy is confined to a severance payment, the release required of the employee may extend to any claims of the employer not only arising from the termination of his or her employment but also arising generally from that employment. However, that does not assist the defendants in the present case for the release extended to parties other than the employer and was not mutual although as appears below, mutuality may not be required.
Secondly, it was submitted that AAAS was entitled to ask for a one way release in its favour as the price for a substantial severance payment to Mr McKeith in circumstances where, absent the Policy which called for the execution by him of the McKeith Deed, he had no legal entitlement to a severance payment on his retrenchment. It was submitted that such a requirement was neither capricious nor evidence of bad faith particularly where, as the former Head of Global Markets and in the midst of the developing Global Financial Crisis, the potential for claims against him, not yet known, was not insignificant. It was not oppressive to require Mr McKeith to give up claims against his employer and its related entities even though they did not give up claims against him.
As Mr McKeith submitted, the release which was required of him went well beyond the sort of modest release of obligations which, properly construed, the Policy contemplated. I interpose that when taken in context, it is arguable that the requirement that the "Deed of Release should be signed and returned to HR before the final payment is made" is capable of being construed as a requirement that what was contemplated was a Deed of Release by the employee but not by the employer. If this is correct, and there is some support for it, then as a matter of construction, the Policy only required a signed release by the employee in respect of any claims he or she might otherwise have under the terms of the Policy itself. Nevertheless, at the very most, it would be confined to releasing the employer only in respect of claims arising out of his or her employment and its termination.
The McKeith Deed goes further than that. It matters not whether it is capricious, arbitrary or unreasonable in the relevant sense if otherwise it extends beyond what, in the circumstances, was contemplated on the true construction of the Policy as being the extent of the release required as the price of the employee receiving his severance payment.
Thirdly, it was submitted that the regard had by the primary judge to the fact that the release barred Mr McKeith from seeking indemnity or contribution from AAAS or its related entities in the event that disgruntled shareholders for whom shares were held under the EIP decided to take action against the trustee companies and their directors, did not require the conclusion that seeking the release proffered to Mr McKeith involved either bad faith or was outside the scope of the release contemplated by the Policy.
Mr McKeith submitted that this third submission of the defendants was not to point as there is no suggestion in the Policy that there is a discretion to be exercised in relation to the formal terms of the "Deed of Release". Furthermore, the width of the McKeith Deed which he was required to sign as the "price" for the severance payment which was calculated only to compensate him for the termination of his employment through no fault of his own, only served to highlight the unreasonableness of requiring him to execute such a wide ranging document.
In my view the primary judge was correct in finding that the McKeith Deed which AAAS required Mr McKeith to sign as the "price" of receiving a severance payment calculated in accordance with the terms of the Policy, extended beyond what was required in the circumstances and, in particular, went beyond what was contemplated by the Policy which contained no guidance as to the extent of the release which it required.
In the absence of any such guidance it seems to me that the proper approach to the construction of the Policy, insofar as it required a "Deed of Release" to be signed before any payment was received by the employee, was that any such release should be proportionate to the payment which was to be made and in respect of which the Deed of Release was required to be executed. Where that payment was confined to a severance payment, as distinct from an ex gratia payment, then the McKeith Deed went beyond what was required and was thus relevantly unreasonable and beyond what, on its true construction, the Policy required.
In the foregoing circumstances it follows that Mr McKeith was entitled to the severance payment of $375,961.54 notwithstanding that he had refused to sign the Deed of Release which was proffered to him. Given the concession of the defendants referred to by his Honour at [173] and noted above at [261], to the extent to which the primary judge held that Mr McKeith was not entitled to that severance payment, he was, with respect, in error.

[42]

Was Mr McKeith entitled to an ex gratia payment?

Although Mr James was offered an ex gratia payment in the sum of $2.5 million, Mr McKeith was only offered a severance payment and no ex gratia payment. The issue which arose at trial with respect to the making of an ex gratia payment turned upon whether there was a requirement on the part of the defendants to consider in good faith the making of such a payment to Mr McKeith. At [176] of his reasons the primary judge noted that the defendants accepted that if the Policy was contractually binding, it was required to consider in good faith whether to make an ex gratia payment to an employee in the event of redundancy. Further, it was accepted that AAAS could not capriciously, arbitrarily or unreasonably withhold such a payment and that it would be required to exercise the discretion whether or not to make such a payment honestly and conformably with the purposes for which it was given.
The primary judge then dealt with the issue of whether there had been good faith consideration given to the making of an ex gratia payment to Mr McKeith. At [180] his Honour noted that Mr McKeith was seen as an important person to retain, at least in the short term. The reasons for this included his knowledge of the AAAH business as well as his own undoubted abilities. Further, he was seen as an important person for the purpose of doing a deal with employees of AAAH for whom shares were held under the EIP.
At [184] his Honour observed that negotiations in relation to employees' shareholdings under the EIP were effectively finalised by mid October 2008. At that stage Mr McKeith had decided that he would not remain with the merged organisation. He gave unchallenged evidence that he told Mr Williams, a senior executive, in mid October 2008 of his intention to leave. It is apparent that he considered himself entitled to both a severance payment and an ex gratia payment in accordance with the Policy. In relation to the latter he sought an amount of $4 million being the average of the last two years bonuses that he had received.
At [189] of his reasons the primary judge found that the defendants had developed a blanket policy in relation to the payment of bonuses to departing staff which policy was apparently formulated in early November 2008 but was not then announced to staff. At [190] his Honour noted that that blanket policy was formulated by a number of very senior employees of the defendants including Mr Stephen Daniels (who held a global position in HR), Ms Winnie Fung (another senior HR manager, based in Hong Kong), Mr Donald Workman (to whom Mr McCormick reported), Mr McCormick and Mr Williams. Messrs Workman and McCormick gave evidence although the others did not.
At [191] his Honour recorded the following evidence of Mr Workman contained in par 73 of his affidavit sworn 4 September 2012 and which related to a telephone call on 7 November 2008 between he, Mr McCormick, Mr Daniels, Mr Williams and Ms Fung. The evidence was as follows; "During that telephone call we agreed that no ex gratia bonus payment would be made to any former AAAH executive as part of their redundancy payment. At this time the outlook for global financial markets was very bleak and, as a result, I considered that it would be inappropriate for an ex gratia bonus payment to be made to any individual who was leaving the organisation. The bonus pool was already under enormous pressure from the need to retain and incentivise those who were remaining at RBS."
As his Honour noted at [192], the policy so agreed to was to be applied only to those employees who left whereas those who remained would be paid bonuses in accordance with the Policy. Nevertheless the decision taken on 7 November 2008, not to make ex gratia payments on account of bonus as part of a redundancy package had, according to his Honour at [193], been presaged about a month earlier. Apparently a senior employee of AAAS, Mr David Dawes, had decided to leave and consideration was given to making him an ex gratia payment. On 17 October 2008 Mr Daniels wrote an email that "we are not and have not paid [sic] bonus for exits". Five days later on 22 October 2008 Mr Daniels reiterated that position stating that among other things "[t]he bonus pool is under pressure".
The primary judge then recorded at [194] that a day later, on 23 October 2008 another senior employee of RBS, Mr John Hourican, said in an email that "we are not going to use a tight bonus pool to pay a leaver. This is offensive to remaining staff". Mr Hourican apparently added that he could not support the making of ex gratia payments "irrespective of previous policy".
The so-called blanket policy was ultimately communicated to staff via the intranet on 24 and 27 November 2008. His Honour's conclusions with respect to it was stated at [197] in the following terms: "It is clear, and I find, that to the extent that consideration was given to whether or not an ex gratia payment should be made to Mr McKeith on account of his bonus expectations, it went no further than, and its outcome was dictated by, the blanket policy that had been adopted (but not then communicated to him or other employees) on 7 November 2008."
If his Honour was intending to convey that prior to 7 November 2008 no consideration had been given to whether or not to make an ex gratia payment to Mr McKeith then the evidence indicates to the contrary. That issue was the subject of considerable discussion during October 2008 bearing in mind that it was not until mid-October that Mr McKeith informed Mr Williams of his intention to leave.
In his affidavit sworn 5 September 2012 Mr McCormick, who in January 2008 had been appointed as chairman of RBS Group Asia Pacific, dealt at pars 154-170 with the history of the issue of ex gratia payments. In essence, Mr McCormick's evidence including some evidence not the subject of his affidavit, was as follows:

From 7 October 2008 RBS began relying on the Bank of England Emergency Liquidity Assistance (ELA) for funding as it shares had fallen in value by approximately 39 per cent on that day and the previous day.
On or around 13 October 2008 Mr McCormick had discussions with Ms Fung and Mr Daniels about whether an ex gratia payment should be included in the redundancy payments which were to be offered to very senior employees in the organisation. Mr McCormick's view was that in the light of the broader economic environment and the situation of the bank at the time, an ex gratia payment was not appropriate, irrespective of how senior the employee was. Mr Daniels agreed.
However, Mr McCormick did consider that it may have been appropriate to make an additional payment to some of the senior executives who were leaving if that would help RBS resolve the EIP issue. On 16 October 2008 Mr Williams emailed Mr McCormick and Ms Fung with respect to redundancy arrangements for key very senior management individuals of AAAH. Reference was made to Mr McKeith after which the email continued: "Both are key in terms of still being able to very effectively contribute towards a more successful integration and in delivering the optimal outcome on the EIP which is still to be put to a vote by Participants, and as an outcome that the Trustees can have significant influence upon. It is for these reasons that I am recommending that both David and Col [McKeith] be considered exceptional cases and if necessary qualify for the additional discretionary redundancy arrangements referred to above."
On the same day Ms Fund emailed Mr Williams and Mr McCormick seeking their confirmation that they were recommending to pay the full "ex gratia" payment to Messrs McKeith and Dawes.
On 17 October 2008 Mr McCormick spoke with Mr Workman and Ms Fung. He recalled Mr Workman indicating support for a package that reflected a "financial arrangement to get the EIP and related integration issues resolved".
Following those discussions, on the same day Mr McCormick emailed to Mr Daniels stating: "David Davies = severance A$345 k plus proposed A$825 k 'extra' [= average of last 2 years bonus] Col McKeith = severance A$590 k plus proposed A$4,000; 'extra' [= average of last 2 years bonus] Donald and I are supportive as we need both of these guys to drive through and influence the buy in of up to 700 people to close out EIP and get integration really moving plus other real tangential business benefits. Steve Williams and Richard Place feel strongly on this and I trust their judgment. We are still somewhat hopeful that we can convince Col to stay in his reduced role by need to have a 'hunting license' to negotiate with them."
On 17 October 2008 Mr Daniels emailed Mr McCormick stating that: "they [Messrs Dawes and McKeith] are only entitled to their redundancy terms and we are not and have not paid bonus for exits".
On 22 October 2008 Mr McCormick received an email from Mr Daniels in which the latter stated that he was struggling to support the request for the payment to Messrs Dawes and McKeith of bonuses as the bonus pool was under pressure and it was necessary to have a clear audit trail of what the organisation was guaranteeing post the guarantees that were in place at the time of discussions with the UK Government. In the case of Mr McKeith, Mr Daniels noted that "we have already agreed a min guarantee of Aud $3M so he should be incentivised to do what's required. They are both entitled to their redundancy in line with their contract so these figures are in effect guaranteed". The reference to Mr McKeith being offered a minimum guarantee of $3 million related to a senior position which he was offered in the merged business operations which he had declined to take up notwithstanding that he was offered both a substantial salary and a guaranteed bonus of $3 million to induce him to remain employed as part of the merged operations.

It was submitted to his Honour on behalf of Mr McKeith that not only was it unfair that a senior employee who might confidently be expected to be paid a bonus for a particular calendar year by reason of his or her contributions to the business and its success should lose that entitlement because he or she became redundant in the course of that year, but that a blanket decision not to make ex gratia payments for departing employees regardless of their particular circumstances and contributions was not an exercise of the discretion at all, let alone one undertaken in good faith. More fundamentally, it was submitted that it was an alteration to the Policy itself.
At [201] the primary judge noted that underlying Mr McKeith's submissions was the proposition that the essential function of the bonus was to reward employees adequately for their contributions to the business in a particular year. However, it was submitted on behalf of the defendants that the payment of a bonus had at least two functions other than increasing the reward to particular employees. One was to assist the retention of capable staff and another was to provide staff with incentives for future performance. It was further submitted that in relation to redundancy payments the employer's interests are very much in play and their legitimate interests were entitled to be taken into account. Accordingly, even accepting that an employer owed a duty of good faith in considering the exercise of the discretion to make an ex gratia payment, nonetheless the employer could take into account its own legitimate interests. In the present case it was therefore open to AAAS to consider its own financial position and to consider the question of fairness as between remaining and departing employees.
At [213] his Honour dealt with the issue upon the basis of the proposition that, on the evidence, it was clear that such consideration as was given to making an ex gratia payment to Mr McKeith on account of a bonus for the calendar year 2008 was limited to, and directed solely by, the blanket policy decision taken on 7 November 2008. The proper conclusion, his Honour observed, was that those who were responsible for making the decision took the view that the only relevant consideration was that blanket policy. Notwithstanding that detailed consideration was given to the particular position of Mr McKeith and his rights, the trail of emails in the period mid-October to early November 2008 made it clear that the outcome was dictated by the blanket policy.
Nevertheless at [215] his Honour noted that in the earlier emails Mr McCormick and Mr Williams argued that Mr McKeith should be considered an exceptional case and that consideration should be given to making him an ex gratia payment on account of bonus. However support for that idea was on the basis of an email sent by Mr McCormick on 17 October 2008 that Mr McKeith was needed "to drive through and influence the buy in of up to 700 people to close out EIP and get the integration really moving plus other tangential business benefits".
At [217] the primary judge stated: "I accept that in October 2007 [sic 2008], consideration was given to making a substantial ex gratia payment to Mr McKeith. However, after 7 November 2007 [sic 2008], only the blanket policy to which I have referred was perceived to bear upon the exercise of the discretion. After that date, there was no thought given to whether, in Mr McKeith's case, there were particular considerations that should outweigh the factors underlying the blanket policy. To put it another way, no one appears to have raised the question of whether Mr McKeith might (or should) be an exception to that blanket policy. The reason may be simply that the policy was a blanket policy. If this is the reason, it supports the conclusion that the blanket policy overruled every other consideration, including those that normally would be taken into account in deciding whether to make an ex gratia payment on redundancy."

[43]

Summary of conclusions

I summarise my conclusions as follows:
The defendants have failed on the pleading issue with respect to the "course of dealing" claim of the plaintiffs in that it was not necessary for them to plead a variation of their contracts of employment.
The defendants have been successful in overturning the primary judge's finding that the Policy was expressly incorporated into Mr James' Contract of Employment.
The plaintiffs' case against AAAS to the effect that the Policy was incorporated into their Contracts of Employment by virtue of a "course of dealing" between them and AAAS constituted by the representations contained in the particulars to par 17 of the CLS, fails as those representations were not made by or on behalf of AAAS as alleged in par 18 of each CLS.
The plaintiffs' conventional estoppel claim also fails as the representations relied upon to create the estoppel were not made by or on behalf of AAAS being the only entity against whom the claim was or could be pleaded.
Both Mr McKeith and Mr James have succeeded in establishing that there was a contract between each of them and RBS/RFS whereby in consideration of each continuing their employment with AAAH/AAAS to enable the takeover to be implemented in the event that either was made redundant on or before 10 October 2009, the Policy would be applied to them.
By declining to sign the Deed of Release proffered to him on termination of his employment on 8 September 2008, Mr James forfeited any right to an ex gratia payment of $2.5 million. Accordingly, he has failed to uphold the finding of the primary judge to the contrary.
However, Mr James has established that there was a breach of the contract between he and RBS/RFS which entitled him to damages in the amount of his severance payment, namely $432,692.31 together with pre-judgment interest from 9 September 2008 to 27 March 2015.
Mr McKeith has succeeded in his claim for a severance payment determined in accordance with the Policy. The failure of AAAS to pay it unless the McKeith Deed was signed was a breach of the contract between Mr McKeith and RBS/RFS. He is entitled to damages in the amount of $375,961.54 together with pre-judgment interest from 5 December 2008 to 27 March 2015.
Mr McKeith is not entitled to an ex gratia payment of $4 million or any other sum. AAAS was entitled to exercise its discretion not to make any such payment. There was no breach of contract by AAAS in the exercise of that discretion in the circumstances then prevailing or in adopting a policy on 7 November 2008 not to make such a payment to employees who were made redundant after that date. AAAS had acted bona fide and had properly considered Mr McKeith's situation prior to adopting the no-payment policy.

[44]

Conclusion

It is apparent from the foregoing conclusions that each party has had a measure of success and failure. Each of Mr McKeith and Mr James are entitled to their severance payment to which it will be necessary to add pre-judgment interest. The question of costs both at first instance and on the appeal will thus require attention.
In the foregoing circumstances the order I propose at this point is as follows: That within the periods identified below, the parties file and serve written submissions not exceeding five pages in length, together with draft orders, to give effect to these reasons for judgment and to the appropriate awarding of costs both at first instance and on the appeal. The appellants shall comply with this order within 14 days of the date of publication of this judgment; the respondents to reply within 14 days of receipt of the appellants' submissions and draft orders and the appellants to reply to the respondents within 7 days of the receipt of their submissions and draft orders. The parties should make every attempt to reach agreement on the outstanding issues so as to minimise those still in dispute. The remaining disputed issues will be determined on the papers.
EMMETT AJA: The question in these two appeals is whether Mr Colin McKeith and Mr Angus James, senior executives of ABN Amro Services Australia Limited (Services), who became redundant during 2007, were entitled to certain payments under a redundancy policy of Services (the Redundancy Policy). They claimed that Services, Royal Bank of Scotland Group plc (RBS) or RFS Holdings BV (RFS) was liable to make the payments. RBS and RFS were members of a consortium (the Consortium) that was making a bid to acquire the holding company of Services.
Mr James' employment was terminated by Services on 9 September 2008 by reason of his redundancy. Mr McKeith's employment was also terminated by Services on 5 December 2008 by reason of his redundancy. The Redundancy Policy as at the date of the retrenchments relevantly included the following terms: 1. On retrenchment, staff would be paid a severance payment (the Severance Payment); 2. Depending on circumstances, ex gratia payments could be included to a maximum based on the formula: average of prior two years' bonus dividends divided by number of months worked in the current year (Bonus Payment); On termination of their employment, by reason of redundancy, no Severance or Bonus Payments were made to either Mr McKeith or Mr James.
Each claimed to be entitled to have the benefit of the Redundancy Policy on three alternative bases as follows: 1. The terms of the Redundancy Policy were incorporated into his contract of employment with Services; 2. Services is estopped from departing from the assumption that, if he were made redundant, he would be treated on the basis of the Redundancy Policy; 3. The members of a the Consortium agreed with him that, in consideration of his continuing in the employment of Services, the Redundancy Policy would be applied to him if his employment was terminated by reason of redundancy;
Mr McKeith's first basis may be summarised as follows: 1. From time to time during his employment, representations were made by or on behalf of Services to Mr McKeith to the effect that there was a redundancy policy that applied to employees of Services whose employment was being terminated by reason of redundancy and which contained provision for severance payments to be made to such employees; 2. The representations were made by: 1. Statements made to Mr McKeith in the course of dealing with the position of employees whose employment was being terminated by reason of redundancy; 2. The circulation among employees of Services, including Mr McKeith, in the context of an impending takeover by the Consortium, of copies of a document entitled "Redundancy Policy"; and 3. A statement made to Mr McKeith in around June 2007 to the effect that the Redundancy Policy document was the current policy of Services that applied in the case of retrenchment of employees of Services; 1. From time to time during his employment, to the knowledge of Mr McKeith, severance payments were made by Services to employees whose employment was being terminated by reason of redundancy, pursuant to the terms of a Redundancy Policy; 2. From around July 2007, representations were made to Mr McKeith by or on behalf of Services or alternatively were made with the knowledge of Services and without contradiction or qualification by it to the effect that there were redundancy procedures, plans, policies and practices that would apply to employees of Services whose employment was terminated by reason of redundancy, on which those employees could rely; 3. The representations were made by statements in the following terms: 1. Under the Consortium, redundancy practices would stay in place for two years post the completion of the takeover and employees of Services could be confident that the redundancy policies that were then in place would be honoured for the next two years; 2. RBS would be applying existing redundancy practices of Services for two years and would set aside a pool from which to pay out any redundancies; 3. The Consortium had made commitments to employees of Services with respect to redundancy procedures; 4. … 5. The Consortium had made commitments to employees of Services and trade unions in respect of employees' rights and respecting of existing agreements, including redundancy plans and had made commitments to employees of Services with respect to social plans, collective labour agreements and redundancy procedures; 6. The Consortium had provided global guarantees that all existing redundancy plans will be extended at least at the same level for a period of two years after the merger becomes unconditional; 7. The Consortium had guaranteed to all staff that existing Services policies and practices related to redundancies will remain in place for a period of at least two years after the bid goes unconditional; 8. The Consortium had guaranteed that all existing Services policies related to redundancies will remain in place for a period of two years from 11 October 2007. 1. On or around 9 September 2008 representations were made to Mr McKeith by or on behalf of Services that, in the event that his employment was terminated by reason of redundancy, he would be entitled to severance payments calculated in accordance with a redundancy policy of Services that applied to him; 2. By reason of the matters alleged in paragraphs (1) to (6) above, the terms of the Redundancy Policy were incorporated into the contract of employment between Mr McKeith and Services made on 21 February 2005.
So far as Mr James is concerned, the three bases upon which he claimed to be entitled to have the benefit of the Redundancy Policy are similar to those of Mr McKeith, except as to the incorporation of the Redundancy Policy into his contract of employment with Services. Mr James's contract of employment contained a term as follows: "You agree to be bound by the policies of [Services] as may exist from time to time." He asserted that that term resulted in the incorporation of the Redundancy Policy in his contract of employment. In the alternative, if the express reference to "policies" did not have that effect, Mr James relied on almost identical circumstances to those of Mr McKeith as giving rise to the incorporation of the Redundancy Policy into his contract of employment.
I have had the advantage of reading in draft form the proposed reasons of Tobias AJA. I agree with Tobias AJA, for the reasons proposed by his Honour, that the primary judge erred in concluding that the reference in Mr James' contract of employment to "the policies of [Services] as may exist from time to time" gave any contractual effect to the Redundancy Policy. Further, I agree with Tobias AJA, for the reasons proposed, that the facts relied upon by Mr McKeith and Mr James as giving rise to the incorporation of the Redundancy Policy into their respective contracts of employment did not have that consequence. Therefore, their contractual claims against Services must fail.
The estoppel basis advanced by Mr McKeith may be summarised as follows: 1. Relying on the representations referred to in paragraph [2] above, Mr McKeith: 1. on and after 10 October 2007 assured staff of Services who reported to him that in the event of retrenchment they would be entitled to severance payments in accordance with the Services redundancy policy as it existed; and 2. did not pursue the possibility of alternative employment but remained with Services throughout the merger process until his employment was terminated on 5 December 2008; 1. In the premises, Services is estopped from departing from the representations; 2. From at least September 2007, relations between Mr McKeith and Services were conducted on the basis of a mutual understanding that, if employees of Services, including Mr McKeith, were retrenched during the period two years after the bid became unconditional (the Relevant Date), he would be treated in accordance with the redundancy procedures, plans, policies and practices of Services as they existed at the Relevant Date; 3. That understanding on the part of Mr McKeith was encouraged by Services by the making of the representations; 4. Mr McKeith acted on that understanding in the communications with the staff of Services on and after 10 October 2007 in relation to their position in the event of redundancy and did not pursue the possibility of alternative employment, but remained with Services throughout the merger process until his employment was terminated on 5 December 2008; 5. In the premises, Services is estopped from departing from the premise that, if Mr McKeith were retrenched, he would be treated in accordance with the redundancy procedures, plans, policies and practices of Services as they existed as at 10 October 2007.
The claim by Mr James based on estoppel may be summarised as follows: 1. From at least September 2007, relations between Mr James and Services were conducted on the basis of a mutual understanding that, if employees of Services, including Mr James, were retrenched during the period two years after the Relevant Date, he would be treated in accordance with the redundancy procedures, plans, policies and practices of Services as those procedures, plans, policies and practices existed at the Relevant Date; 2. The understanding on the part of Mr James was encouraged by Services by the making of the representations referred to in paragraph [2] above; 3. For his part, Mr James acted on that understanding in his communications with the staff of Services on and after the Relevant Date in relation to their position in the event of redundancy and in considering his own position after the Relevant Date in the event of redundancy; 4. In the premises, Services is estopped from departing from the premise that, if Mr James were retrenched during a period of two years from the Relevant Date, he would be treated in accordance with the redundancy procedures, plans, policies and practices of Services as those procedures, plans, policies and practices existed at the Relevant Date.
It is not in dispute that the various representations alleged were made. Nor is it in dispute that some reliance was placed on the representations by Mr McKeith and Mr James. However, the estoppel claim depends upon the representations being made by Services. For the reasons proposed by Tobias AJA, they were not made by Services but the Consortium. The estoppel was pleaded only against Services. Accordingly, I agree with Tobias AJA that the estoppel by convention claims must also fail.
The claim by Mr McKeith against RBS and RFS, as members of the Consortium, may be summarised as follows: 1. From around July 2007, RBS and RFS jointly and severally promised Mr McKeith that if he continued in the employment of Services then, if his employment was terminated by reason of redundancy within two years of the Relevant Date, they would ensure that he would have applied to him the redundancy procedures, plans, policies and practices of Services as they existed at the Relevant Date; 2. After July 2007,Mr McKeith continued in the employ of Services; 3. Mr McKeith's employment was terminated by reason of redundancy within two years of the Relevant Date; 4. Mr McKeith did not have applied to him the redundancy procedures, plans, policies and practices of Services as they existed at 10 October 2007; 5. The Redundancy Policy constituted the redundancy procedures, plans, policies and practices of Services at the Relevant Date; 6. In the premises, RFS and RBS failed to ensure that Mr McKeith had applied to him the redundancy procedures, plans, policies and practices of Services as they existed at the Relevant Date in that he was not made a Severance Payment and he was not made a Bonus Payment, notwithstanding that his performance in the year in which he was terminated was satisfactory; 7. As a result of that failure, on the part of RFS and RBS, Mr McKeith has suffered of the Severance Payment and the Bonus Payment or, in the alternative, loss of the opportunity to obtain a Bonus Payment.
The claim by Mr James against RBS and RFS, as members of the Consortium, may be summarised as follows: 1. From around July 2007, RBS and RFS jointly and severally promised Mr James that if he continued in the employment of Services then, if his employment was terminated by reason of redundancy within two years of the Relevant Date, they would ensure that he would have applied to him the redundancy procedures, plans, policies and practices of Services as they existed at the Relevant Date; 2. After July 2007, Mr James continued in the employ of Services; 3. Mr James' employment was terminated by reason of redundancy within two years of the Relevant Date; 4. Mr James did not have applied to him the redundancy procedures, plans, policies and practices of Services as they existed at 10 October 2007; 5. The Redundancy Policy constituted the redundancy procedures, plans, policies and practices of Services at the Relevant Date; 6. In the premises, RFS and RBS failed to ensure that Mr James had applied to him the redundancy procedures, plans, policies and practices of Services as they existed at the Relevant Date in that he was not made a Severance Payment and he was not made a Bonus Payment, notwithstanding that his performance in the year in which he was terminated was satisfactory; 7. As a result of that failure, on the part of RFS and RBS, Mr James has suffered of the Severance Payment and the Bonus Payment or, in the alternative, loss of the opportunity to obtain a Bonus Payment.
There are reasonably cogent reasons for concluding that the statements relied on by Mr McKeith and Mr James as constituting an agreement with RBS and RFS, as members of the Consortium, were not intended to have contractual effect and that RBS and RFS have no liability for breach of contract. However, I am persuaded by the reasons proposed by Tobias AJA that they gave rise to contractual obligations. I agree that, by remaining in the employ of Services, Mr McKeith and Mr James provided the necessary consideration for the Consortium's promises that was sufficient to support contracts. I agree that, in making the relevant statements, the Consortium "bargained for" individual employees considering their employment options on the basis that they were assured that, if they stayed and were retrenched, the Redundancy Policy would be applied to them. That is what the Consortium "bargained for" and that is what it got. For the reasons proposed by Tobias AJA, each of Mr McKeith and Mr James has established a contract with RBS and RFS whereby, in consideration of his continuing his employment with Services, in the event that he was made redundant before 10 October 2009, the Redundancy Policy would be applied to him.
I agree with Tobias AJA that the Deed of Release proposed for Mr James was not unreasonable and that there was no decision to make a Bonus Payment to him independently of the Deed of Release. The Redundancy Policy clearly contemplated that there could be a Deed of Release required. Accordingly, Mr James was not entitled to receive the ex gratia payment of $2.5 million unless he executed the deed of release that was proffered to him. However, upon executing a deed of release of a more limited kind, he would have been entitled to his severance payment. The failure of Services to make that payment unless the deed of release was signed by Mr James constituted a breach of the contract between him and RBS, for which breach Mr James is entitled to damages for the loss of his severance payment.
I agree with Tobias AJA that the judgment in favour of Mr James in the amount of $2,932,692.31 plus pre-judgment interest in the amount of $1,490,149.15 should be set aside and in lieu thereof there should be judgment for Mr James in the amount of the severance payment of $432,692.31 together with pre-judgment interest from 9 September 2008 to 27 March 2015.
I agree with Tobias AJA, for the reasons proposed by him, that the primary judge was correct in finding that the deed of release that Services required Mr McKeith to sign, as the "price" of receiving a severance payment calculated in accordance with the terms of the Redundancy Policy, extended beyond what was required in the circumstances and, in particular, went beyond what was contemplated by the Redundancy Policy. It follows that Mr McKeith was entitled to the severance payment of $375,961.54 notwithstanding that he had refused to sign the deed of release that was proffered to him.
I also agree with Tobias AJA that Services did not breach its contract with Mr McKeith in declining to make him an ex gratia payment. Where only limited funds were available for the payment of bonuses, there was no basis upon which Mr McKeith was entitled to be singled out and paid a bonus where other employees who had been retrenched missed out. I agree that the primary judge erred in finding that Services did not exercise its discretion in good faith when it declined, in the circumstances, to make an ex gratia payment to Mr McKeith.

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Judgment (45 paragraphs)

Cases Cited (14)