The proper interpretation of clause 14.1
30I shall deal with each of these issues set out at (a) - (f) in turn.
(a)The degree to which the courts will imply terms of trust and confidence into an employment contract has, as the defendant notes, been the subject of consideration by the NSW Court of Appeal in Russell v The Trustees of the Roman Catholic Church [2008] 72 NSWLR 559 (and more recently in Commonwealth Bank of Australia v Barker [2013] FCAFC 83). Given the nature of the employer/employee relationship, the court may imply (Commonwealth Bank of Australia v Barker at [98]) that the employer will not, without reasonable cause, conduct itself in a manner likely to destroy or seriously damage the relationship of confidence and trust between employer and employee. That is because of the special nature of the employer/employee relationship, which is founded upon an open-ended agreement to provide labour or services (Ramsey v Annesley College [2013] SASC 72 at [390]), unless there is a specified period (Shepherd v Felt & Textiles of Australia Ltd (1935) 41 CLR 359 at 378 (5 year period)). The defendant's submission that there was a "guaranteed term" of one year and one day, in circumstances where there was no fixed term, is inconsistent with the intention of the parties for the continuous provision of service or services by one party to the other, without a fixed period, in circumstances in which the contract often gives to the other party a right to terminate on notice. As Blue J noted in Ramsey v Annesley College at [390], where there is a fixed or minimum period, both parties typically contemplate that the contract may be renewed upon termination, which is not the case here.
(b)The court must construe a contract as a whole, and to construe individual clauses in that context, in order to avoid repugnancy and absurdity: Walker v Citigroup Global Markets Australia Pty Limited [2006] FCAFC 101 at [77]. The inconsistencies the defendant claims arise from any other interpretation of clause 14.1(a) (for example, that the plaintiff could give a notice period for many years because of the "not less than" provision) fortunately do not fall for determination, but if they did, it would simply be a matter of construing the contract in the light of the relevant facts. There is no reason why these commercially mature parties did not embrace the clear and literal meaning of the words used, namely a notice period of not less than one year (meaning that this was a minimum period), and then a three-month notice period. The construction contended for by the defendant, of the first, 12-month termination by the plaintiff being trumped by a 3-month termination, made at any time during the 12-month notice period, possibly by either party, would involve what Kitto J described as "practical absurdity": Rawson v Hobbs (1961) 107 CLR 466 at 488.
(c)By implying a "guaranteed term" of one year and one day, the defendant is implying a contractual term that is inconsistent with an express term in the contract, namely clause 3.1. A term will not be implied where it has been expressly excluded or is inconsistent with the express terms of the contract: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 448; University of Western Australia v Gray (2009) FCR 346 at [136]; Yorkshire Water Services Ltd v Sun Alliance & London Insurance PLC [1997] 2 Lloyd's Rep 21 at 30, 33. The plaintiff's submissions in reply, which make this point without referring to these authorities at paragraph 2, should be accepted.
(d)Clause 14.1 speaks of termination as a singular and unilateral event by either the plaintiff or the defendant. To import more than one termination into the contract would lead to what the plaintiff's written submissions in reply call "progressive uncertainty" (at paragraph 7). This is because the giving of a notice of termination triggered other clauses in the contract, such as restraint after termination of employment (clause 12) and intellectual property obligations (clause 13(c)). Of course, if there was misconduct (clause 14.2), the defendant would have been entitled to terminate the contract immediately under those provisions. However, they did not do so.
(e)The word "thereafter" means the period after the initial twelve month notice period had expired. The plaintiff put no such argument and the defendant's submissions on this issue are misconceived.
(f)The use of "legal effect" by the plaintiff was perhaps unfortunate, but Mr Faulkner SC made it clear, in his oral submissions, that his point was that this event would trigger other provisions in the contract. The giving of notice in accordance with the time specified in a contract is not an extension of the contract but an exercise of the right to terminate for the period of notice provided unless (as is not the case here) the period of notice was for an unrealistic period such as several years.
31The termination of a contract is generally a unilateral act, and there is nothing in the construction of clause 14.1 to the contrary. As termination of a contract may have unpleasant sequelae, parties generally include provisions designed to protect their position after termination, and that is the case here.
32I am satisfied that, as a matter of construction of the agreement, once the plaintiff gave twelve months' notice to terminate prior to the expiry of the first two year period, the defendant could not give three months' notice to terminate after that two year period had expired. This means that the plaintiff is entitled to the wage loss he claims, and which is mathematically agreed at $153,822.25.
33A subsidiary issue is whether the notice given by the defendant did in fact conform to the terms of clause 14. Although, in view of my findings in relation to the interpretation of this clause, I am satisfied that the defendant could not give three months' notice, this issue is now not of relevance, I set out briefly my findings on this issue in the event that they are of any assistance to an appellate court.