Riverwood International Australia Pty Ltd v McCormick

Federal Court of Australia|1998-01-28|Before: Madgwick J, Mansfield JJ, Lindgren J

REASONS FOR JUDGMENT LINDGREN J Introduction 1 The respondent ("Mr McCormick") ceased being employed by the appellant ("Riverwood") on 8 May 1998. He had been employed in the same business for thirty six years and eleven months, although by a succession of employers. 2 Upon termination of his employment, he received an after tax payment of $17,135.05 for "salary/wages", annual leave and long service leave. Nearly six months later he received a "without admissions" payment of a further $5,810.51, representing five weeks' payment in lieu of award or statutory entitlement to a period of notice, and eight weeks' payment for any award redundancy entitlement (the relevant award was the Graphic Arts General (Interim) Award). 3 Mr McCormick contended that he had a contractual entitlement to a much greater sum as a redundancy payment pursuant to the terms of his contract of employment. The amount he claimed on this account in his statement of claim was three weeks' ordinary pay for each completed year of service and a pro rata payment for each completed calendar month. He particularised this claim on the basis of 110.75 weeks' pay at $652.50 per week before tax, giving an amount of $72,264.38 before tax, from which would have to be deducted the whole or part of the sum of $5,810.51. In fact, Mr McCormick's claim also included other amounts which he contended had been payable to him on severance, making a total of $87,514.27, from which he deducted the sum of $5,810.51 mentioned earlier, giving an amount claimed of $81,703.76. The amount referred to in the primary judge's judgment as the amount of the claim is $76,435.74. I need not be concerned further to understand the arithmetic. 4 The learned primary judge upheld Mr McCormick's claim on two alternative bases: first, that the express terms of the contract of employment imported by reference the terms of a redundancy agreement negotiated between Riverwood and the Printing and Kindred Industries Union ("the PKIU") (of which Mr McCormick was not a member); secondly, that it was an implied term of the contract of employment that Mr McCormick had an entitlement to a redundancy payment in accordance with that redundancy agreement. Background facts 5 The history of Mr McCormick's employment in the business is somewhat complex. 6 On 9 May 1961, Mr McCormick commenced employment in the "packaging systems" division of a cardboard packaging business. In addition to the packaging systems division there was a "cartons" division. In the late 1980's the business was owned by companies associated with Mr Richard Pratt (they included Visy Board Pty Ltd and Visypack Pty Ltd) to which I will refer as the "Pratt companies". 7 The first of three written redundancy agreements to be mentioned was entered into on 28 October 1988 and was between the Pratt companies and the PKIU. It contained certain provisions that purported to burden and to benefit employees of the Pratt companies. It has not been suggested that this or either of the two later redundancy agreements gave Mr McCormick contractual rights directly, that is, by reason of its own terms and of his status as an employee; cf Ryan v Textile Clothing and Footwear Union of Australia [1996] 2 VR 235. 8 On a date not revealed by the evidence but prior to the sale referred to in the next paragraph, a second redundancy agreement was entered into. The parties to this undated second redundancy agreement were the Pratt companies and "the AMWU, CEPU, Printing & Kindred Industries Union". 9 In 1990 or 1991 the Pratt companies sold the business to Multiboard Packaging Pty Ltd ("MPP"), a then recently incorporated company not associated with Mr Pratt. 10 On 20 November 1992, those controlling MPP caused "Riverwood Packaging Systems Pty Ltd" ("Packaging") to be incorporated. 11 In 1993 several events occurred. On 14 May 1993, the business of the packaging systems division, in which Mr McCormick was employed, began to be conducted by Packaging. This left the remainder of the business, the cartons division, being conducted by MPP, at least for the time being. 12 There was a high degree of interaction between the activities of the packaging systems division and the cartons division. John Bradbury, although formally employed by MPP as its Human Resources Manager, also had responsibility for Packaging's human resources issues. Mr Bradbury agreed before his Honour that he had understood that from 1990 to 1993, the terms of the second (undated) redundancy agreement, although made with the Pratt companies, applied to MPP employees, including those who, like Mr McCormick, worked in the packaging systems division. Moreover, he agreed that his view was that if there had been redundancies in the packaging systems division, before or after its transfer from MPP to Packaging, the employees would have been treated as covered by the second redundancy agreement as he understood those in the cartons division were. 13 On 6 October 1993 Packaging wrote to Mr McCormick offering him employment with it. This was some five months after the packaging systems division, in which Mr McCormick had always been employed, had been transferred by MPP to Packaging. On 12 October 1993 Mr McCormick signed and returned an "acceptance" of the offer at the foot of the last page of the letter of offer, reading: "I hereby agree and accept employment with Riverwood Packaging Systems Pty Ltd under the terms and conditions outlined above." The letter was not the result of negotiation and Mr McCormick understood that its purpose was simply to formalise the new arrangement. There was no change in his day to day activities. He could recall no discussion about the terms of the letter with anyone representing Packaging. The terms of the letter are of central importance and I will discuss them below. 14 In November 1993, a third redundancy agreement was entered into. This was between MPP and the PKIU. The party to the agreement, other than the PKIU, was called "the Company" and was defined as meaning "Multiboard Packaging, Smithfield, Reservoir, Dandenong and Woodville". Mr McCormick was employed by Packaging at Smithfield, and Packaging's letter to him of 6 October 1993 had borne its Smithfield address. 15 On 18 May 1994, this third redundancy agreement was inserted in a document of MPP called "Human Resources Policies and Procedures Manual" ("the Manual"). The Manual was a loose-leaf spiral bound document. As part of the up-dating of the Manual from time to time, replaced pages were discarded. There was not in evidence a copy of the Manual as it existed at 18 May 1994, when the third redundancy agreement was filed in it. 16 On 1 December 1994, MPP changed its name to Riverwood Cartons Pty Ltd ("Cartons"). The title of the version of the Manual in evidence before his Honour was "Riverwood Cartons Pty Ltd Human Resources Policies & Procedures Manual". (Mr Bradbury testified before his Honour that he thought that the change of name occurred "about 93" and "some time in 93" and his Honour, counsel and Mr Bradbury appear to have assumed, at least at times, that this was correct.) 17 Both Packaging and Cartons were owned by an American corporation, Riverwood International Corporation. 18 There were redundancies within Cartons, and possibly also within Packaging, in 1995 and 1997. On both occasions, employees made redundant were paid in accordance with the third redundancy agreement. Mr McCormick became aware of this, apparently at the time. 19 On 30 March 1998, Cartons sold its business to Carter Holt Harvey Ltd ("CHH") a New Zealand based company. Packaging reduced the size of its operation and sold certain of its assets to CHH as well. CHH was obliged to offer employment to all employees of Cartons. So far as concerned those employees of Packaging whom Packaging did not wish to retain, CHH was entitled, but not obliged, to offer them employment also. Mr McCormick was one of these employees. 20 On 26 April 1998, after the sale to CHH, Packaging changed its name to its present name, "Riverwood International (Australia) Pty Ltd". That is, the appellant was once Packaging and is now Riverwood. 21 As noted earlier, on 8 May 1998 Mr McCormick's employment terminated. Reasoning of primary judge 22 His Honour had to consider several issues that were not before the Court on the appeal and which I need not discuss. 23 At the centre of the case is the letter dated 6 October 1993 from Packaging to Mr McCormick which commenced: "We are pleased to write to you to offer you the position of Senior Technician with our company at our Melbourne Plant". 24 The letter was on the letterhead of Packaging. Mr McCormick said he had never previously had a written contract of employment. The letter dealt, under headings, with the subjects of remuneration, superannuation, annual leave, "Company Policy and Practices", length of period of notice of termination and payment or forfeiture of payment in lieu of notice, commencement date, and medical examination. The letter did not refer to redundancy, but under the heading "Company Policy and Practices", it stated: "You agree to abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced." 25 His Honour described the reference to "Company Policies and Practices" as "somewhat obscure". He referred to the three redundancy agreements. Of the third, the one made in November 1993, he noted that its preamble stated that it was to come into effect from 7 September 1993, that is, a date prior to its own date and also prior to Packaging's letter to Mr McCormick of 6 October 1993. His Honour noted that the letter was signed by John Bradbury for and on behalf of MPP (Jubilee Division), a Brisbane-based division of MPP, and by the PKIU delegates of MPP (Jubilee Division) on their own behalf and on behalf of all PKIU members employed by MPP from time to time. It will be recalled that Mr McCormick was not a member of the PKIU. However, the term "employee" was defined in the agreement to mean, in substance, any employee of MPP from time to time. 26 The third redundancy agreement, like the two earlier ones, contained an undertaking, expressed to be by the PKIU and employees, "not to impose any bans, limitations or restrictions on [MPP] as a result of redundancies, retrenchments or relocations." It also provided that if "the parties" were not able to agree on issues of interpretation of the agreement, they would request the service of the Conciliation and Arbitration Commission and that normal work would continue while discussions and Arbitration Commission hearings were in progress. 27 His Honour held that, conformably with the Victorian Court of Appeal decision in Ryan v Textile Clothing and Footwear Union of Australia [1996] 2 VR 235, the third redundancy agreement did not, of itself, create legally enforceable rights in favour of Mr McCormick. 28 In dealing with the question of "incorporation by reference" his Honour considered that: · for several reasons, it was immaterial that the third redundancy agreement was filed in a Manual of MPP (following the later change of name, Cartons) rather than of Packaging, Mr McCormick's employer; · "virtually every document contained in Cartons' Manual provide[d] a benefit of some sort to that company's employees" and "[n]o burden of any kind is imposed, except upon the employer" (his Honour described this consideration as one "of considerable significance" in the construction of the obligation purportedly imposed by the letter on Mr McCormick to "abide by all Company Policies and Practices"); · it would be wrong to deal with Mr McCormick's claim as a claim that his employer was estopped from denying that the obligation to make a payment in accordance with the terms of the third redundancy agreement formed part of his contract of employment, since he had not pleaded a cause of action in estoppel of that kind; · the competing considerations in the present case were "finely balanced". 29 His Honour's reasons for accepting Mr McCormick's "incorporation by reference" submission proceeded along the following lines. His Honour thought it appropriate to approach the construction of the letter by regarding it as a loosely drafted commercial document, the author of which had not realised that its terms might conflict with those of the Manual which it incorporated by express reference, so that the Court's task was "to make sense, if possible" of the letter. His Honour thought that the words "abide by" in the letter imposed obligations that were "directly linked to the Manual and, accordingly, to the third Redundancy Agreement as well". But the Manual was "concerned principally, if not exclusively, with laying down employees' entitlements". Accordingly, Mr McCormick's agreement to "abide by" Packaging's "Policies and Practices" should be construed, his Honour thought, "in the context of a contract made in good faith, as imposing a like obligation on the company". 30 In the alternative, his Honour thought that Mr McCormick's contract of employment contained an implied term that if Mr McCormick was made redundant, he would "receive redundancy benefits calculated in accordance with the formula set out in detail in the various Redundancy Agreements, and in particular, that of November 1993". His Honour's reasons in this respect proceeded along the following lines: "Consistently with the approach adopted by MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd [[1939] 2 KB 206 at 227] and by Mason J in Codelfa [Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 345-346] the implication in this case is both 'obvious' and 'necessary to give the transaction such business efficacy as the parties must have intended'. The implication is 'a necessary incident of a definable category of contractual relationship' - Scally v Southern Health & Social Services Board [[1992] 1 AC 294 at 307]. I can see no reason why both Cartons and Packaging would have made redundancy payments to all employees who were made redundant throughout the entire history of their ownership of the cardboard packaging business, other than that this was what they understood they had agreed to. Fear of industrial action does not, in my view, provide the explanation." 31 His Honour said that the implied term he formulated did not, in his view, conflict with the express terms of the letter, which was not drafted so carefully and comprehensively that it should be viewed as containing an exhaustive statement of the detailed terms agreed between the parties. Again, his Honour said that he regarded the letter as "a loose and somewhat carelessly drafted commercial document which should, if possible, be construed in a manner which enables it to make sense." 32 The learned primary judge said he was influenced in arriving at both conclusions (that there was an incorporation by reference and an implied term) by (a) "the elaborate detail contained in the third Redundancy Agreement", and (b) the fact that "the terms of [the] third Redundancy Agreement appear[ed] to have been implemented in relation to every other employee, apart from [Mr McCormick], made redundant by Cartons and Packaging, in 1995, 1997 and 1998." 33 Finally, his Honour thought it "not unimportant to note" that the senior management personnel of Packaging appeared to have assumed throughout that if Mr McCormick was not offered a position with CHH at a certain meeting on 27 March 1998, he would be entitled to a redundancy payment. In order to understand this statement of his Honour's, it is necessary to know that there was another issue at trial which has not featured in the appeal: was Mr McCormick offered a position with CHH? At trial, Riverwood's case was that Mr McCormick was, and Mr McCormick's case was that he was not, made an offer of employment by CHH at a certain meeting on 27 March 1998. If he was made such an offer but declined it, he may have lost any entitlement to a redundancy payment, even in conformity with the terms of the third redundancy agreement. There was conflicting evidence as to what transpired at the meeting and his Honour found, favourably to Mr McCormick, that no such offer was made to him by CHH. His Honour said: "The possibility that [Mr McCormick] may not have had … an entitlement appears to have been considered for the first time only after the applicant brought these proceedings. That does not mean that the contention that there is no such entitlement so forcefully advanced before me lacks legal merit - only that it runs directly counter to the actual beliefs of those most centrally involved. Those beliefs should, in my opinion, be given appropriate weight." My conclusions on the appeal 34 With great respect to the learned primary judge, I do not think that either ground on which he found that the term in question formed part of Mr McCormick's contract of employment can be supported. 35 It is important, I think, to bear in mind that before us there is no question of the term's having become part of Mr McCormick's contract of employment except by incorporation through the Manual by reference or, on the other hand, by implication. There is no question of rectification of the contract; and there is no question of estoppel. 36 Mr McCormick had pleaded a different estoppel. This was that Riverwood was estopped, as a result of representations made by it to him in March 1998, from denying that he was entitled to a severance payment, whether or not he chose to apply for a position with CHH or to accept an offer of employment by CHH. In this respect, Mr McCormick relied on the silence of Mr Bradbury at the meeting on 27 March 1998. Mr McCormick had also pleaded that Mr Bradbury's silence constituted misleading or deceptive conduct within s 52 of the Trade Practices Act 1974 (Cth). His Honour found it unnecessary to consider either of these claims because of his conclusion that Mr McCormick succeeded on his contractual claim. Incorporation by reference 37 I start with the proposition that the word "you" in the letter should not be construed to mean "you and the Company". Neither party seems to have suggested that it should be construed in that way. The author used the expression "the Company" in the letter and so was mindful of the possibility of using it, yet did not do so in the critical paragraph. 38 The letter was presented to Mr McCormick by Packaging as a fait accompli. A purpose of the paragraph which suggests itself was, as a matter of more abundant precaution, to remind Mr McCormick that he must accept, and had no right to object to, Packaging's "Policies and Practices", present and future. 39 On its face, the expression "Company Policies and Practices" refers to things that from time to time answer the description of a "policy" or "practice" of Packaging, whether contained in a document or not. The opposing view seems to be that Mr McCormick (and, for such significance as it might have, Packaging as well) was undertaking to abide by any stipulation of any kind that Packaging might choose to insert in a document called "Policies and Practices". This seems to be an extreme view that should not be embraced unless necessary. 40 The use of the words "all", "them" and "any new ones" in the paragraph is clearly against the view that the paragraph is referring to a document and in favour of the view that it is referring to individual policies and practices. 41 The relevant part of the definition of "policy" in the Macquarie Dictionary is: "1. a definite course of action adopted as expedient or from other considerations: a business policy 2. … 3. action or procedure confirming to, or considered with reference to, prudence or expediency: it was good policy to consent. 4. prudence, practical wisdom, or expediency. …" The same dictionary defines "practice", relevantly, as follows: "1. habitual or customary performance: normal business practice. 2. a habit or custom. …" 42 Although not conclusive, these definitions lend some support to my understanding of the meaning of the paragraph: Packaging must retain the right to lay down and alter, from time to time, such stipulations as it finds expedient in its interests, even if they have some impact on Mr McCormick, who is being required to accept this state of affairs. Of course, the paragraph must be construed in the context of the letter as a whole and Packaging would not be entitled to require Mr McCormick to submit to a policy or practice that would detract from the rights given to him expressly in the letter. 43 In my respectful opinion, the construction that I have outlined above is not an alarming one and reflects the plain meaning of the language used, which, in my view, is not ambiguous. 44 What is the case for construing "Policies and Practices" as referring to the Manual? It seems to me that there is only one consideration favouring this view: the capitalisation of initial letters can sometimes suggest the title of a document. But this is an insecure foundation for the view propounded. On any reckoning the expression "Policies and Practices" was an inept way of referring to a "Human Resources Policies and Procedures Manual" and, in any event, in my view the capitalisation is clearly outweighed by the other matters that I have mentioned and will mention. 45 The evidence of the background against which the letter of 6 October 1993 was written is unclear. Mr Bradbury testified that the Manual was kept in his office in Dandenong but that there were other copies. He stated that when MPP changed its name to Cartons the name of the company on the Manual was changed correspondingly. 46 We know that the third redundancy agreement was filed in the Manual by 18 May 1994. A page of the Manual bearing that "issue date" stated under the heading "SICK LEAVE": "Accumulated Sick Leave shall not be paid out on termination for either Hourly or Monthly paid employees, except in the case of the redundancy of hourly paid employees and then only in accordance with the Company's Redundancy Document (See Redundancy)." 47 It may be possible to infer that the Manual existed on 6 October 1993, some seven and a half months prior to 18 May 1994, but it is impossible to know what its content would have been at that time, except that it would probably have been headed "Multiboard Packaging Pty Limited, Human Resources Policies & Procedures Manual"; that it could not have contained the third redundancy agreement (which was not entered into until November 1993); and that it may or may not have contained the second (undated) redundancy agreement. 48 I am not persuaded by what I regard as the uncertain state of the relevant evidence, to think that the author of the letter dated 6 October 1993 intended to refer in the paragraph to the Manual. 49 There was no evidence that employees were consulted before the content of the Manual was altered or even that copies of the Manual were made available to them to read. No doubt, even according to the construction of the letter that I reject, some restrictions would be implied before Packaging could treat Mr McCormick as being in breach, such as a requirement of a sufficient period of notice to Mr McCormick of a change in the content of the Manual and of cooperative action on the part of Packaging where this was necessary in order for Mr McCormick himself to be able to abide by the Manual. Nonetheless, the construction that the letter imported the terms of any redundancy agreement because it happened to have been inserted in the Manual by Packaging is, it seems to me, an unreasonable one from Mr McCormick's viewpoint. 50 According to my own construction of the letter, Mr McCormick was undertaking to abide by requirements of Packaging that answered the description "policies" or "practices", wherever they might be found. No doubt, these words could also give rise to difficulty of construction and application in particular circumstances. Moreover, they would not give Mr McCormick the protection of a substantial constraint on the unilateral imposition of terms by Packaging. But their purpose was, in my view, in general terms to "acknowledge the right of management to manage", and, accordingly, there might be some unilateral impositions by Packaging so substantial that they would be held to fall outside the notions of "policies" and "practices". The competing construction, that Mr McCormick (Packaging as well) was agreeing to abide by any obligations which Packaging might cause to be included from time to time in its own document, clearly offered him no protection at all. 51 With respect there are other considerations that tell against the conclusion that the terms of the Manual, including the third redundancy agreement, were incorporated by reference into Mr McCormick's contract of employment. But it is important in considering these that one not be distracted from the main point: that the letter has a plain, unambiguous and sensible meaning on its face and that it is not necessary to refer to the Manual at all. 52 His Honour thought that the Manual's provisions were so predominantly of a nature that imposed obligations on Packaging and in favour of employees, that the parties must have meant that Packaging as well as Mr McCormick be bound. But, firstly, this approach assumes what is to be established: that the expression "Company Policies and Practices" was a reference to the Manual at all. Secondly, there was not in evidence a Manual that existed on 6 October 1993 and that therefore could have constituted part of the background against which the letter was written and read. Thirdly, the content of the Manual in evidence, the one that existed at the time of termination of Mr McCormick's employment on 8 May 1998, is a mixture of diverse provisions. Some are exhortatory; some are directed to administrative staff rather than the general workforce; some are expressed in terms not susceptible of enforcement (eg "the Company requires that at all times employees of the Company transact business in accordance with the highest standard of corporate conduct"), while others are more precisely expressed (eg the employer's obligation to pay promptly monies due upon the death of an employee, and the obligation on an employee, upon termination of employment, to return keys, corporate American Express cards, mobile phones and Shell petrol cards). Assuming, contrary to my view, that the paragraph in the letter referred to the Manual, I do not think that the Manual is so much directed to the protection of employees that the paragraph can operate sensibly only if the letter is construed as obliging Packaging as well as Mr McCormick to abide by the Manual. 53 The construction which I reject may be thought to be supported by the consideration that the parties, acting reasonably and fairly, must have intended that Mr McCormick have a contractual right to recover the amount of the redundancy benefits provided for in the third redundancy agreement. But an alternative view is that the third redundancy agreement was not intended to affect legal, as distinct from industrial, relations or, that it was intended to create, relevantly, legal rights enforceable only at the instance of the PKIU or of the PKIU and its members. I do not think that considerations of fairness or reasonableness require a departure from what I perceive to be a plain and sensible construction of the paragraph in the letter. 54 The third redundancy agreement inserted in the Manual is a self contained agreement, the parties to which are the PKIU and "the Company". The expression, "the Company" is defined to mean "those operating entities listed in Schedule A of [the] Agreement". Apparently a copy of Schedule A was not included in the Manual but it does not seem to have been in dispute that MPP was identified in it. Nor is the execution page included in the Manual but another copy of the Redundancy Agreement in the Appeal Book shows the form of execution which I described earlier. 55 In the version of the Manual as at 8 May 1997, and apparently from that date to 8 May 1998 when Mr McCormick's employment ended, the provision in the Manual that immediately preceded the third redundancy agreement was as follows: "EMPLOYMENT REDUNDANCIES Where terminations of employment are as a result of redundancy the terms and conditions of the company redundancy policy shall apply. Such situations must be discussed with the General Manager, Human Resources before any action is taken. For calculation see copy of Redundancy Agreement attached." 56 The PKIU had an important role under the third redundancy agreement. For example, the agreement contained the following provisions: "4. CRITERIA FOR THE SELECTION OF REDUNDANT EMPLOYEES ………………………………………………………………………………… It is acknowledged that in compiling the list of employees to be made redundant, that the Company may not be in possession of all relevant factors and therefore the Company is prepared to discuss with the Union any specific case which becomes known after the time of the announcement. 5. NOTICE Prior to redundancies taking effect, the Company will give the Union and the affected employee four (4) weeks notice. Where this is not appropriate, the employee will receive four (4) weeks pay in lieu of notice." "10. RELOCATION Where an employee is required to relocate his/her place of employment as a result of a plant relocation, he or she shall be given four (4) weeks' notice of the requirement to transfer. During this period of notice, discussions on the relocation will be convened and finalised between the Company and Union. These discussions will include negotiations of a disability payment where the relocated employees are disadvantaged through extra distance travelled or extra time spent travelling. These discussions will be by form of a hardship committee of four (two employer representatives and two Union representatives). The committee will consider any genuine issues of hardship which may preclude an employee from relocating." "14. UNDERTAKINGS BY UNIONS AND EMPLOYEES i. In the light of undertakings made by the Company in this Agreement, the Union and employees will undertake not to impose any bans, limitations or restrictions on the Company as a result of redundancies, retrenchments or relocations. ii. In the event of the parties not being able to reach Agreement on issues of interpretations of any clause of this Agreement, the parties agree to request the service of the Conciliation and Arbitration Commission. Normal work will continue while discussions and Arbitration Commission hearings are in progress." 57 These passages illustrate difficulties that can arise from construing the paragraph in the letter in the manner suggested by Mr McCormick: as a result of the mere filing by Packaging of a document in the Manual, the PKIU came to have a role to play in the contractual relationship between Packaging and Mr McCormick. No doubt, in this instance, Mr McCormick does not find this objectionable: the PKIU won the redundancy benefits in question and Mr McCormick, not a member of the PKIU, would be getting something for nothing in any event. But the fact that Mr McCormick's employer was able unilaterally and without his knowledge to give the PKIU a role in relation to his contract of employment illustrates the difficulty in accepting that the parties, in particular Mr McCormick, were agreeing to abide by the content of any page or pages, whatever the nature of their contents, that Packaging might insert in the Manual from time to time. Consistently with the same construction, Packaging could unilaterally vary the content of Mr McCormick's contract of employment by removing from the Manual the pages on which the third redundancy agreement appeared. Indeed, according to that view, it is only the employer's misfortune in having omitted to do so just before Mr McCormick was made redundant that has left it liable to him. But a general, though narrower, construction of the terms "policy" and "practices" of the kind suggested by me earlier, is more reasonable in providing at least some basis on which a court might limit the employer's contractual power over its employee. 58 On the appeal, counsel for both parties put arguments with which I do not find it necessary to deal, but in respect of which I make the following observations. 59 There is no substance in Mr McCormick's submission that for each undertaking in a contract there must be a particular "reciprocal" undertaking or an identifiable separate consideration. Accordingly, it is not necessary that Packaging have undertaken to abide by "Company Policies and Practices" in order that Mr McCormick be bound to abide by them. 60 There is no substance either in Riverwood's submission that there is inconsistency between the letter's provision for termination by four weeks' notice or the forfeiture or payment of four weeks' pay on the one hand, and the third redundancy agreement's provision for payment of certain amounts to longer term employees in the case of redundancy, on the other hand. I do not think the paragraph in the letter providing for termination by no less than four weeks' notice on either side, or the forfeiture or payment of four weeks' pay, purports to be an exhaustive statement of the parties' rights in respect of termination. 61 There is no substance in Mr McCormick's submission that certain parts of the Manual, notably the detailed provisions dealing with the supply of motor vehicles to certain employees, appear to give contractual rights and that this makes the construction of the paragraph in the letter for which Mr McCormick contends to be more likely to be correct. For all that is known, the letters of appointment of employees entitled to be supplied with a motor vehicle (Mr McCormick was not one of them) may have incorporated the provisions by reference or the provisions may have become terms of the contracts of employment of those employees in other ways, such as pursuant to an oral agreement or an agreement implied from a course of conduct. 62 Submissions were made based on other cases in which courts have concluded that the terms of the particular industrial agreements in question did or did not become part of an individual contract of employment. With respect, I have not found those cases particularly helpful. It is not in question that Mr McCormick and Packaging could have agreed that the terms of an industrial agreement be incorporated into Mr McCormick's contract of employment: the question is whether they did so. Implication of terms 63 There is no warrant for saying that there is implied by law in all contracts of employment a provision for the making of a special payment by the employer to the employee where the employer terminates the employment because the employee's services have become redundant to the employer's needs (cf Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 30; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 448). 64 Was the relevant term implied in fact? 65 The term which the learned primary judge concluded was implied was formulated by his Honour as follows: "he shall receive redundancy benefits in accordance with the formula set out in detail in the various Redundancy Agreements, and in particular, that of November 1993." 66 With respect, it is important, I think, to formulate an implied term by reference to the circumstances that existed at the time when the contract was made, that is, in this case, in October 1993. Presumably, the term implied becomes: "You will be entitled to redundancy benefits in accordance with the current redundancy agreement between [the Pratt companies] and [the PKIU] and any subsequent redundancy agreement replacing it entered into between your employer at any time and from time to time and any union for the benefit of employees, including yourself." 67 The grounds on which a term is to be implied in a contract have been variously stated and, with respect, I do not think that any of them support the implication of such a term. I do not think, for example, that if asked in October 1993 whether the term in question formed part of their contract, both parties would unhesitatingly have said "Of course" or "It goes without saying" or "Obviously" (cf Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227 per Mackinnon LJ; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 121; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 442). Nor do I think it was necessary to give business efficacy to the contract to imply the term in question; the contract operates reasonably and effectively without it (cf BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (PC) at 282-3; Hawkins v Clayton (1988) 164 CLR 539 at 573). A court must not find a term to be implied merely in order to make the contract "reasonable or fair or prudent" and it is important to recall that "[t]he necessary foundation for the creation of contractual rights and obligations is the agreement of the parties" (Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 401 per Brennan J). 68 A sensible effect can be given to Mr McCormick's employment contract without the implication of a term of the kind proposed. The letter of 6 October 1993 does not refer to redundancy and provides for Mr McCormick to be given four weeks' notice of termination of employment or four weeks' pay in lieu of notice. While I do not think it inconsistent with that provision to find that the parties agreed that additional benefits were to be paid to long term employees where the termination of their employment occurred as a result of redundancy, it is an altogether different thing to say that it goes without saying that the parties must have intended a provision of that kind to be part of their contract. 69 The term implied by his Honour was not: "That Packaging will abide by the Manual." Mr McCormick did not submit on the appeal that that term, rather than the one proposed by his Honour, should have been implied. Nor do I think that it was obvious or necessary for business efficacy that Packaging was undertaking contractually to abide by the Manual. Only if the expression "all Company Policies and Practices" is construed as referring to the Manual could it be said that the Manual was referred to in the letter at all. As mentioned earlier, I do not think that that construction is warranted. But even if it were, the fact that there was a unilateral right to vary the content of the Manual from time to time, tells against the suggestion that Packaging was impliedly undertaking to Mr McCormick to abide by its contents as they might exist at any moment. Effect of the making of redundancy payments 70 In my view, the fact that redundancy payments were made in conformity with the redundancy agreement to other employees does not aid Mr McCormick on the question of the construction of the paragraph in the letter or the implication of a term. 71 The payments were made in 1995, 1997 and 1998, well after the making of the contract of employment in October 1993, and so do not form any part of the factual matrix against the background of which the contract was entered into. 72 There are several reasons why the making of the payments after the making of the agreement are not probative in relation to the question whether the third redundancy agreement's provision for the making of a redundancy payment formed part of Mr McCormick's contract of employment. First, the payments may have been evidence of the employer's wish in the interests of industrial peace to conform to the terms of an industrial agreement with the PKIU, rather than evidence of its view that the redundancy agreement was a term of individual contracts of employment in question. Secondly, for all that is known the redundancy payments may have been made only to members of the PKIU. Thirdly, even if the making of the payments was evidence that officers of the employer understood that there was an obligation on the employer enforceable at the instance of the employees in question to make the payments, those officers may have been mistaken. They may, for example, have erroneously thought that the redundancy agreement itself gave the employees a right to compel the employer to make the payment. Fourthly, they may have thought that there was a contractual obligation on the employer to make the payments, but one enforceable by the PKIU and not by the individual employees. 73 I do not find it necessary to discuss the interesting question of the admissibility of post-contract conduct as relevant to the issue whether an admitted contract contains a particular term. Conclusion 74 There is a further way in which Mr McCormick's case might have been put which does not depend on either incorporation of the terms of the third redundancy agreement through the Manual by reference or the implication of a term. The argument is as follows: 1. By the letter, Packaging was offering to vary the existing contract of employment by, relevantly, agreeing to abide by (honour) its policies and practices as they existed from time to time upon Mr McCormick's agreeing also to abide by (honour) them; 2. By signing and returning the "agreement and acceptance" at the foot of the last page of the letter, Mr McCormick agreed to abide by (honour) those policies and practices, and in doing so, both accepted Packaging's offer and provided the consideration for its own undertaking to abide by (honour) the policies and practices; 3. It was one of Packaging's policies and practices to pay redundancy benefits calculated in accordance with the third redundancy agreement. This approach to the present problem is analogous to that which might arguably be taken when invitations to tender or to join an association are issued, stipulating "you agree to be bound by" stated terms and conditions of tender or the terms of the association's constitution. In such cases it is arguable that the invitation is one for the invitee to become bound on the understanding and basis that the invitor will also become bound. 75 I do not mean to imply that the argument just outlined would necessarily have succeeded. If my brethren had not been of the view that the appeal should be dismissed, I would have favoured inviting the parties to make submissions on the point. If the argument had not prevailed, I would have proposed that the matter be remitted to the learned primary Judge for the purpose of his determining the non-contractual issues of estoppel and misleading or deceptive conduct as pleaded which he did not find it necessary to decide. I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: RIVERWOOD INTERNATIONAL AUSTRALIA PTY LIMITED

Introduction 76 Lindgren J has set out the introduction and background facts relevant to this appeal and I need not repeat them. Consistently with his judgment I will also refer to the appellant as Riverwood. 77 The issue to be determined is whether the respondent, Mr McCormick, was entitled to a redundancy payment as provided by the policies and procedures manual applicable to employees of Riverwood. The answer to this question turns on the meaning of part of the letter of appointment dated 6 October 1993, whereby Mr McCormick was appointed Senior Technician at the Melbourne plant of Riverwood. The relevant term read as follows: "Company Policies and Practices You agree to abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced." 78 At the time of the termination of Mr McCormick's employment there was a document applicable to employees of Riverwood entitled Policies and Procedures Manual (the Manual). This Manual contained a section entitled "Employment Redundancies" which provided: "Where terminations of employment are as a result of redundancy the terms and conditions of the company redundancy policy shall apply. Such situations must be discussed with the General Manager, Human Resources before any action is taken." 79 The company redundancy policy was set out in a document included in this section of the Manual behind a page containing the words "Redundancy Agreement". Clause 6(i) of this document provided: "6. REDUNDANCY PROVISIONS Where an employee is made redundant, the following severance payments will be made: (i) Unless the particular Award provides a greater benefit, three week's ordinary pay for each completed year of service and pro rata payment for each completed calendar month."

The reasoning of the trial judge 80 The trial judge held that the redundancy provision imposed on Riverwood a binding obligation to pay Mr McCormick a redundancy payment in accordance with the terms of clause 6(i). There were two alternative bases for this conclusion: (a) that the redundancy provision was incorporated by reference into the contract of employment; or, (b) that alternatively, the provision was an implied term of the contract of employment. For present purposes it is sufficient to examine his Honour's reasons for concluding that the provision was incorporated by reference. His Honour set out the applicable principles as follows: "[70] It is important to note that virtually every document contained in Cartons' manual provides a benefit of some sort to that company's employees. No burden of any kind is imposed, except upon the employer. That is a matter of considerable significance. The obligation purportedly imposed upon the applicant to 'abide' by all company polices and practices must, in my view, be understood in light of this fact. [71] I accept that the word 'abide' has, as one of its primary meanings, when combined with the word 'by', 'to remain faithful to or act upon'. The respondent submitted, not without considerable force, that an obligation couched in such terms could not impose upon Packaging any legal duty which required it to act upon its own policies and practices. … [74] In ascertaining the meaning of an expression contained in a contract such as the requirement that the applicant 'abide' by all 'Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced', the approach to be adopted differs from that taken in statutory interpretation. It must rest on the premise that the contract was made in good faith with the object of at least potential mutual benefit by due performance. [75] The court approaches the task of ascertaining the meaning of the parties' expressions from an objective point of view. In the case of a disputed clause in a commercial agreement 'the essential question is what would reasonable business people in the position of the parties have taken the clause to mean': Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 at 840 per McGarvie J. In Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201Lord Diplock said: '… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.' [76] The parties may be bound by the meaning reasonably to be inferred in the circumstances, even if it does not conform to the interpretation advanced by either. It is not necessary that a statement should be subjectively intended to be a term of a contract in order to be one; it is enough if it can reasonably be so understood. [77] In Cheshire & Fifoot's Law of Contract 7th Aust ed. 1997 it is stated (p345) that: 'In interpreting the expressions of the parties, the court will consider them in their context. Except to the extent to which evidence is inadmissible, the court will as a matter of course take into account the objective background of the transaction, that is, its factual matrix, genesis and aim, and the common assumptions of the parties.' [78] The actual terms of a contract are those which the parties intended to incorporate in that contract. They comprise the terms expressed by the parties as well as terms which it must be inferred were intended though not expressed. The law may infer such an intention from the nature and context of the transaction. The difference between inferred terms based on actual intention, and implied terms based on presumed intention is not always easy to discern - see Hawkins v Clayton (1988) 164 CLR 539 at 570 per Deane J; Breen v Williams (1996) 186 CLR 71 at 91 per Dawson and Toohey JJ. Particular terms will be considered in the light of all of the facts which bear upon their meaning." (McCormick v Riverwood International (Australia) Pty Ltd (1999) 167 ALR 689) 81 His Honour then applied these principles to the circumstances of this case. It was common ground that his Honour correctly identified the applicable principles. Riverwood, however, contended that his Honour erred in applying those principles. 82 His Honour set out the factors favouring Mr McCormick's contentions and the factors favouring Riverwood's contentions. As a factor in favour of Mr McCormick, his Honour observed that the letter of appointment expressly incorporated the "Company's Policies and Practices". His Honour found that the policies and procedures of Riverwood were contained in the Manual. He then said (at par 86): "Although the words of incorporation contained in the written contract purportedly impose upon the applicant alone, and not upon his employer, an obligation to 'abide by all Company Policies and Practices', an obligation expressed in those terms makes no sense given that the manual does little more than set out a series of employees' entitlements." 83 He also said that Riverwood and its predecessors had "always made redundancy payments to employees in accordance with the terms of the redundancy agreements negotiated from time to time with relevant unions." 84 In favour of Riverwood's contention, his Honour observed that the letter of appointment dealt comprehensively with many aspects of Mr McCormick's entitlements and the absence of reference to redundancy was thus significant, the use of the expression "you agree to abide by" suggested an obligation which related to Mr McCormick and not to Riverwood, and the redundancy agreement alleged to have been incorporated in Mr McCormick's contract of employment did not give rise to any enforceable rights between the stated parties to that agreement. 85 His Honour described the competing considerations as being "finely balanced", but concluded after careful consideration that Mr McCormick's contract of employment included the redundancy provision, as well as the other procedures contained in the Manual. 86 In conclusion his Honour elaborated his reasoning as follows: "[92] Professor Treitel also observes that the parties may purport to incorporate one document in another by express reference, though not realising that the terms of the two documents conflict. In such circumstances, he comments, the courts are anxious to make sense, if possible, of loosely and sometimes carelessly drafted commercial documents. [93] I consider that to be the approach which should be adopted when construing the obligations which arise from the use of the word 'abide' in the letter of 6 October 1993. Those obligations are directly linked to the manual and, accordingly, to the third redundancy agreement as well. The manual is concerned principally, if not exclusively, with laying down employees' entitlements. The applicant's agreement to 'abide' by Packaging's 'Policies and Practices' should therefore be construed, in the context of a contract made in good faith, as imposing a like obligation upon the company. … [97] I am influenced in my finding that there has been incorporation by reference … by the elaborate detail contained in the third redundancy agreement. I am also influenced in coming to these findings by the fact that the terms of this third Redundancy Agreement appear to have been implemented in relation to every other employee, apart from the applicant, made redundant by Cartons and Packaging, in 1995, 1997 and 1998. [98] It is not unimportant to note that the senior management personnel of Packaging appear to have assumed throughout that if the applicant was not offered a position with CHH at the meeting of 27 March 1998, he would be entitled to a redundancy payment. The possibility that he may not have had such an entitlement appears to have been considered for the first time only after the applicant brought these proceedings. That does not mean that the contention that there is no such entitlement so forcefully advanced before me lacks legal merit: only that it runs directly counter to the actual beliefs of those most centrally involved. Those beliefs should, in my opinion, be given appropriate weight.

The appellant's argument on appeal 87 In relation to the incorporation by reference question Mr Bourke, who appeared as counsel for Riverwood, contended that the requirement in the contract of employment that Mr McCormick abide by the company policies and practices was unambiguous. It created a legal obligation on Mr McCormick to abide by the company's policies and practices, and it did not create any legal obligation on Riverwood to abide by those policies and practices. Mr Bourke contended that his Honour erred in examining the contents of the Manual to explain the meaning of the obligation to abide by its terms. The contract was clear on its face and it permitted no scope for elucidation by recourse to the contents of the Manual. In any event, he submitted that, even if his Honour was correct in having recourse to the Manual, his Honour was wrong in concluding that the Manual only, or mainly, conferred benefits on Mr McCormick and burdens on Riverwood. Consequently, his Honour was wrong in holding that the Manual was incorporated so as to impose a legal obligation on Riverwood to make a payment to Mr McCormick in accordance with the redundancy provision.

Reasoning 88 The starting point for Riverwood's argument is that there is no basis for examining the terms of the Manual to ascertain the intention of the parties in making the agreement in the terms in which it exists. 89 In my view there is no warrant for such a restrictive approach to the construction of the term of this contract of employment. The subject matter of the particular term is the policy and procedures recorded in the Manual. The nature of that subject matter is as relevant to the determination of the intention of the parties as the other elements of the term, namely, to whom the term relates and in what way the term relates to the parties. In other words, the expression of the term involves a composite concept. There is no reason to isolate one element of the concept as irrelevant to the process of determining the meaning of the term as a whole. To do so would ignore the plain wording of the term which includes all its elements. Consequently, it is both permissible and necessary to examine the provisions contained in the Manual in order to ascertain the intentions of the parties.

The Manual 90 The provisions in the Manual can be classified into the following categories and subcategories: 1. Provisions which are expressed as creating obligations on Riverwood: (a) specific obligations. (b) specific obligations defined by reference to the provisions of state law or awards. (c) general obligations. 2. Provisions which are expressed as limiting the benefits to be enjoyed by the employee or limiting the conduct in which the employee may engage. (a) specific limitations. (b) more general limitations. 3. Provisions principally concerned with setting out matters of process or administration. 91 The specific obligations which fall into category 1(a) are expressed to oblige Riverwood to: · arrange for an annual formal work appraisal process. · reimburse expenses incurred by any employee using an approved credit card for company expenses. · pay outstanding amounts due to a deceased employee to a near relative rather than to the estate of the employee. · treat as continuous service time spent on overseas transfer with related companies. · give necessary warnings and notice of the details of any misconduct prior to termination on the ground of misconduct. · make redundancy payments. · pay removal and relocation expenses for employees required to transfer within Australia. · pay annual leave loading of 17.5%. · appoint a health, safety and environment coordinator and conduct biannual health, safety and environment audits. · pay make-up pay for periods of jury duty. · pay accumulated sick leave on redundancy. · pay for leave for approved study and attendance at examinations relating to such study. · grant unpaid leave for the observance of religious holidays by members of a particular religious faith. · grant unpaid maternity leave. · supply designated motor vehicles to designated employees and pay for maintenance and petrol for such vehicles. · provide specified protective clothing for employees. · reimburse reasonable travel expenses incurred by employees on intra- or inter-state business. · pay an allowance per kilometre for the use by an employee of their own car for company purposes. · reimburse the costs of approved training. 92 The specific obligations defined by reference to the provisions of state law or awards within category 1(b) require Riverwood to: · give particular periods of notice on termination. · establish retirement ages. · provide long service leave. · provide sick leave. · grant Christmas and New Year public holidays. · set the level of wages and salaries. 93 The general obligations which fall within category 1(c) require Riverwood to: · ensure that employees health and safety are protected. · control the supply of liquor at company social functions. · act quickly on complaints of sexual harassment. · recognise the existence of trade unions and the right of employees to join. 94 The provisions in the Manual which fall into category 2(a) are expressed as limiting the benefits to be enjoyed by the employee or the conduct in which the employee may engage by providing that there is: · no right to accumulate annual leave. · no right to leave without pay. · no additional shift allowances for monthly employees. · the choice of superannuation funds is limited to two funds operated by the employer. · a prohibition on an employee giving or receiving a gift in relation to their employment. · no re-employment for a period of five years for employees made redundant. · no alcohol or illegal drugs to be used on the employer's premises. · no loan to be made by the employer to the employee. · a pre-employment medical examination for an employee. 95 The more general limitations on the conduct to be observed by an employee which fall into category 2(b) are expressed in the Manual to require the employee: · to act in accordance with the highest standard of corporate conduct. · not to engage in discrimination on grounds including age, sex, race, physical impairment, physical features, industrial activity, political belief and/or activity, religious belief and/or activity, marital status, pregnancy, status as a parent or carer, or lawful sexual activity. 96 The matters of process or administration falling within category 3 involve: · the requirement of approval from the relevant manager to hire new employees. · the procedure for authorising travel and claiming reimbursement of expenses. · the requirement for approval for undertaking training courses. · the need to keep the current addresses of employees up to date. 97 From this analysis it can be seen that the major part of the Manual was devoted to specifying items which made provision for the benefit of the employee by Riverwood. 98 In the main the provisions are expressed in the language of obligation. A random representative example relates to jury duty and provides as follows: "When an employee is called for jury duty, the Company will make up the difference between the jury fee and the ordinary rate of pay for the hours or days lost." 99 The analysis also shows that there are very few instances in which burdens are placed upon the employee. One example is the obligation on an employee not to discriminate. While doubtless this is a very important obligation, it is expressed in general terms which contrast with the detailed specification concerning benefits to be provided to the employee. 100 A number of the apparent limitations on the benefits for the employee are, in substance, the conferral of a benefit on the employee. For instance, while there is a provision limiting the right to accumulate annual leave entitlements, the substance of the provision is to provide for a process allowing the employee to seek approval for such accumulation. 101 A number of the procedural requirements impose minor administrative obligations on the employee. Thus, for instance, in order to obtain reimbursement of travel expenses the employee must first have travel authorised by a travel requisition form, and then make a claim for reimbursement on an expense claim form. While these are matters necessary for the administration of Riverwood, they do not go to the substance of the Manual and do not mark the character of the Manual as a whole. 102 In my view his Honour was correct in concluding at par 93: "The manual is concerned principally, if not exclusively, with laying down employees entitlements." This conclusion appears at the end of that part of his Honour's judgment which sets out his reasoning process. It reflects the view of the Manual which his Honour applied. His Honour's earlier observation (par 70) that "no burden of any kind is imposed [in the Manual] except on the employer" is not completely accurate. However, in the end, his Honour acted upon the proper assessment of the character of the contents of the Manual. 103 It is clear from the terms of the letter of appointment that it intended to deal with a number of major incidents of the employment relationship. It dealt with the subjects of remuneration, superannuation, annual leave, notice period, commencement date and medical examination under those headings, as well as the subject of company policies and practices. If, in dealing with the last subject, the contract was intended only to legally bind Mr McCormick to observe obligations imposed on him, the contract would in practice have the effect of binding him to comply primarily with administrative procedures such as requirements to apply for accumulation of annual leave, with the generally expressed prohibitions against discriminatory conduct and sexual harassment, and with the requirement to transact business in accordance with the highest standards of corporate conduct. On the interpretation contended for by Riverwood, the major purpose of the Manual, which was to require Riverwood to extend certain employment conditions to the employee, would be irrelevant to the particular employment contract in which the reference to the Manual was found. The question, therefore, arises whether the words "you agree to abide by" in the employment contract compel this construction of the contract? 104 Riverwood contended that by agreeing to abide by the Manual Mr McCormick agreed to comply with the obligations imposed on him in the Manual and that this was the limit of the operation of the term. That term did not have the effect of binding Riverwood to comply with the provisions of the Manual. While Mr McCormick was legally bound to comply with all aspects of the Manual relating to him, Riverwood was at liberty to choose to apply the terms of the Manual or not, at its discretion. 105 This result flowed, it was contended by Riverwood, partly by the use of the expression "abide by". The construction urged by Riverwood was that to "abide by" the company policies and practices involved an acceptance by Mr McCormick of all the burdens contained in the Manual but did not entitle him to receive the benefits referred to in the Manual. 106 However, the use of the expression "abide by" in relation to the Manual is apt to embrace both compliance with the obligations imposed by the Manual, and acceptance of the benefits conferred by the Manual. This duality of application follows from the primary meaning of the expression "abide by" given in the Macquarie Dictionary, 3rd Edition, 1997, namely, "to accept and to continue to observe [an agreement]". 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 clause was intended to oblige Mr McCormick to comply with his obligations and also to signify that Mr McCormick had 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. The fact that the clause refers only to "You" is consistent with this construction. While Mr McCormick agreed to abide by the Manual, he was in part responding to Riverwood in that he agreed to accept its compliance with its obligations under the Manual. The phraseology of the clause was proffered by Riverwood. Mr McCormick's acceptance carried with it an acceptance of Riverwood's offer to abide by the Manual by conferring the benefits provided in the manual in favour of Mr McCormick. 108 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 provision in the Manual. 109 The Manual clearly contained the terms of the third Redundancy Agreement including clause 6(i) at the date of termination of employment of Mr McCormick. It is implicit in the reasoning of the primary Judge that the Manual contained the equivalent of Clause 6(i) of the third Redundancy Agreement at the time the contract of employment was made on 6 October 1993. Further, the Manual contained essentially the same other terms at the time of contract and the time of termination. It is, therefore, not necessary to determine the effect of the inclusion of new policies or practices in the Manual after the date of the initial agreement. 110 However, Riverwood contended that the fact that the contents of the Manual could change rendered the contents of the Manual an unacceptable guide to the meaning of the expression "You agreed to abide by all Company Policies and Practices …". It submitted that the meaning of the expression could not change depending on the contents of the Manual. I am not persuaded by this submission. The evidence did not disclose any change in the essential character of the Manual. At all times it dealt overwhelmingly with matters imposing obligations on Riverwood. Thus, if there were any alterations or changes to the policies and practices of Riverwood they were not alterations or additions which, in the context of this case, lead to a different meaning of the phrase under consideration. 111 In any event, the purported agreement to abide by alterations or additions to the policies and practices of Riverwood did not create a legally binding obligation on Mr McCormick to accept any unilateral alteration or addition. A purported agreement which leaves the content of the agreement entirely at the discretion of one party is not contractual in nature. Any alteration or addition to the company policies and practices could only achieve binding contractual effect if there was separate agreement to such alterations or additions, either by way of variation of the existing agreement or by way of entering into a new agreement. 112 In my view his Honour was correct in concluding that the redundancy provision was incorporated by reference into the contract of employment. It is therefore unnecessary to consider whether the provision was an implied term in the contract of employment, and it is also unnecessary to consider a number of the other arguments raised by Riverwood on the appeal concerning the ability to take into account post contractual conduct in determining the terms of a contract of employment. 113 In the result the appeal should be dismissed with costs. I certify that the preceding thirty-five (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North.

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: RIVERWOOD INTERNATIONAL AUSTRALIA PTY LIMITED

REASONS FOR JUDGMENT MANSFIELD J 114 This appeal concerns the entitlement of the respondent to receive a redundancy payment from the appellant under his contract of employment. I have had the benefit of reading in draft the reasons for judgment of Lindgren J. I am grateful for his Honour's description of the background to this appeal, and I am content to adopt that description. 115 The appellant's position on this appeal, although not at trial, has a certain irony. Its managing director gave evidence that if the respondent had not been offered ongoing employment with Carter Holt Harvey Ltd ("CHH"), he would have been "entitled" to a redundancy payment in the amount of the claim. Upon the basis of that "policy", the respondent paid to other employees of the appellant who were not offered work by CHH redundancy payments. At the invitation of the learned trial judge, the managing director described the payment that would have been made to the respondent if he had not been offered employment by CHH as ex gratia, but clearly it would have been made. One issue in the case was whether the respondent had been offered ongoing employment by CHH. So long as that was an issue, the appellant's attitude to the respondent was consistent. The learned trial judge found that the respondent had not been offered ongoing employment with CHH. There is no appeal from that finding. The conditions upon which the appellant said that it would have made the redundancy payment to the respondent in 1998, even on an ex gratia basis, has been found to exist. But the appellant nevertheless now insists that the respondent is not going to receive that payment. Its attitude must have changed. 116 I have reached a different conclusion to that of Lindgren J as to the outcome of this appeal. In the special circumstances of this matter, in my judgment the appeal should be dismissed. I am not persuaded that the learned judge at first instance erred in concluding that the respondent had a contractual entitlement to a redundancy payment of $76,435.74. 117 When the appellant was registered on 14 May 1993, then under the name Riverwood Packaging Systems Pty Ltd, the respondent had been working in the packaging systems division of a cardboard packaging business for some thirty-two years. From 1990, the owner of that business had been Multiboard Packaging Pty Ltd ("Cartons"). The respondent's employment was then transferred to the appellant, as the appellant provided the packaging service function of the businesses from May 1993. Both the appellant and Cartons then operated as complementary businesses under the same corporate parentage until 30 March 1998 when Cartons sold its business to CHH. The appellant at about that time also downsized its operations and sold certain of its assets to CHH. 118 It was part of that arrangement that CHH was entitled, but not bound, to offer employment to those employees of the appellant which the appellant did not wish to retain. The appellant did not wish to retain the respondent's services. It provided him with a 'Redundancy Payment Advice', calculated in accordance with the formula contained in the Redundancy Agreement in force from 7 September 1993 to which Lindgren J has referred ("the Redundancy Agreement"). It was common ground that that Redundancy Payment Advice was an indicative statement only, and was not an admission by the appellant that the respondent had an entitlement to a redundancy payment. The reasons of the judge at first instance 119 His Honour found that each time the business had changed hands over the long period of the respondent's employment, all employees were told that they would continue to be employed on the same terms and conditions as before. 120 After the registration of the appellant, and its taking over the packaging service function of the business of Cartons in May 1993, the employment of the respondent, and others, was transferred to the respondent. No particular contractual arrangements were then made. However, on 6 October 1993, the appellant sent to the respondent a letter ("the letter") offering him the position of Senior Technician. As his Honour found, the letter dealt specifically with the following subjects: · Remuneration · Superannuation · Annual Leave · Company Policies and Practices · Notice Period · Commencement Date · Medical Examination. 121 It made no reference to any entitlement to a redundancy payment. However, under the heading 'Company Policies and Practices' there appeared:

"You agree to abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced." I shall call that "the policy clause in the letter". 122 The respondent signed a copy of the letter on 12 October 1993 to signify his acceptance of its terms and conditions. 123 There had been tendered in the hearing three Redundancy Agreements. Each had a series of detailed terms, and provided for a redundancy payment of three weeks' ordinary pay for each completed year of service, with a pro-rata payment for each completed calendar month. The first is dated 28 October 1988, and was expressed to be made between the then owners of the business and the Printing & Kindred Industries Union ("the Union"). The second is undated, but must also have come into existence prior to 1990, as it too is between the owners of the business prior to 1990 and the Union and other industrial organisations. The third is the Redundancy Agreement dated November 1993. It is made between Cartons (by its earlier name Multiboard Packaging Pty Ltd) and the Union. Its preamble states that it comes into effect from 7 September 1993. It is signed by John David Bradbury ("Mr Bradbury") for and on behalf of Cartons (Jubilee Division) and by the Union delegates of Cartons (Jubilee Division) on their own behalf and on behalf of all members of the Union employed from time to time by Cartons. Jubilee Division was a Brisbane based division of Cartons. The respondent was not at any material time a member of the Union. 124 The learned judge at first instance observed that the reference in the letter to "Company Policies and Practices" is "somewhat obscure". He noted the three Redundancy Agreements. He also found that Cartons maintained a Human Resources and Procedures Manual ("the Manual") "throughout the period leading up to the sale of its business in 1998". On 18 May 1994, there was inserted into the Manual an entry as follows:

"Employment Redundancies Where terminations of employment are as a result of redundancy the terms and conditions of the company redundancy policy shall apply. Such situations must be discussed with the General Manager, Human Resources before any action is taken. For calculation see copy of Redundancy Agreement attached." 125 The "Redundancy Agreement" attached was the Redundancy Agreement. It is included in the Manual in its entirety. In the section of the Manual dealing with Leave, there is a section headed 'Sick Leave' which also includes reference to redundancy. It is in the following terms: "Accumulated Sick Leave shall not be paid out on termination for either Hourly or Monthly paid employees, except in the case of the redundancy of hourly paid employees and then only in accordance with the Company's Redundancy Document. (See Redundancy). In no case shall a Monthly paid Staff or Management employee be paid out Sick Leave on termination." 126 His Honour also found that there had been redundancies within Cartons and possibly within the respondent in 1995 and 1997. The employees affected had received payments calculated in accordance with the Redundancy Agreement. In 1998, when the Cartons business was sold to CHH, two other employees of the appellant were retrenched and received redundancy payments calculated in accordance with the formula in the Redundancy Agreement. 127 The respective submissions were then noted. Relevantly, his Honour noted the respondent's claim that the reference in the letter to 'Company Policies and Practices' was to the Manual, whereas the appellant submitted that that reference did not incorporate any entitlement to a redundancy payment. The appellant's submission, both before his Honour and on this appeal, focussed upon the obligation expressed in the policy clause in the letter as being upon the respondent alone, who agreed to "abide by all Company Policies and Practices" and upon the fact that the appellant had not been a party to any of the three Redundancy Agreements. His Honour also accepted that the three Redundancy Agreements, as unregistered collective agreements, did not of themselves give rise to legally enforceable contractual rights. That is in accordance with the decision of the Victoria Court of Appeal in Ryan v Textile Clothing and Footwear Union of Australia [1996] 2 VR 235. 128 As his Honour said, that is not the end of the matter. It remained to determine whether the Redundancy Agreement acquired a legally binding status by being included in the Manual and by being referred to in the policy clause in the letter. As the appellant was regarded at all times as an offshoot of Cartons, and no distinction was drawn between the terms and conditions of employment of employees of the appellant and the employees of Cartons, and as Mr Bradbury acted at all times as Human Resources Manager for the appellant, his Honour concluded that the fact that the Manual identifies itself as that of Cartons, and not expressly that of the appellant, was of no consequence. Again, the appellant did not gainsay that conclusion. 129 The appellant accepted that the learned primary judge correctly identified the relevant legal principles in his approach to ascertaining the meaning of the policy clause in the letter. In particular, his Honour said: · the contract of employment was made in good faith with the object of at least potential mutual benefit by due performance: cp. Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 at 607 per Mason J

· the Court's task is to ascertain the meaning of the parties' expressions from an objective point of view: Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 at 840 per McGarvie J

· the parties may be bound by the meaning reasonably to be inferred in the circumstances, even though the meaning does not confirm to the interpretation advanced by either of them: Life Insurance Co of Australia v Phillips (1925) 36 CLR 60

· if the language of the contact is ambiguous or susceptible of more than one meaning, evidence of surrounding circumstances is admissible to assist in its interpretation: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 per Mason J ("Codelfa").

130 After noting the factors identified by the parties relevant to whether the respondent's claim that his contract of employment by the letter entitled him to a redundancy payment, his Honour concluded:

"The competing considerations may be seen as being finely balanced. In the end, and after giving this matter careful consideration, I have concluded that the applicant's contract of employment embodies both the letter of 6 October 1993, and the terms set out in Cartons' Manual, including the third Redundancy Agreement. The Manual is, as I have indicated, applicable also to Packaging." 131 His Honour also found that an entitlement to redundancy pay in accordance with the Redundancy Agreement was to be implied into his contract of employment. As I am of the view that the entitlement to redundancy pay was incorporated by reference into the contract of employment, it is not necessary to deal with that alternative contention. 132 His Honour's reasons include the following:

"Professor GR Treitel deals with the doctrine of incorporation by reference in The Law of Contract 9th ed. 1995 at 175. Professor Treitel gives as an example of the operation of that doctrine: '… where a contract is made subject to standard terms settled by a trade association. Those terms are then incorporated by reference into the contract; if there are several editions of the standard terms, the contract is prima facie taken to refer to the most recent edition [fn Smith v South Wales Switchgear Ltd. [1978] 1 W.L.R. 165].' The parallels between that example, and the situation which arises in the present proceeding, are too obvious to require elaboration. Professor Treitel also observes that the parties may purport to incorporate one document in another by express reference, though not realising that the terms of the two documents conflict. In such circumstances, he comments, the courts are anxious to make sense, if possible, of loosely and sometimes carelessly drafted commercial documents. I consider that to be the approach which should be adopted when construing the obligations which arise from the use of the word "abide" in the letter of 6 October 1993. Those obligations are directly linked to the Manual and, accordingly, to the third Redundancy Agreement as well. The Manual is concerned principally, if not exclusively, with laying down employees' entitlements. The applicant's agreement to "abide" by Packaging's "Policies and Practices" should therefore be construed, in the context of a contract made in good faith, as imposing a like obligation upon the company. … I am influenced in my finding that there has been incorporation by reference, and my finding that an implied term is warranted, by the elaborate detail contained in the third Redundancy Agreement. I am also influenced in coming to these findings by the fact that the terms of this third Redundancy Agreement appear to have been implemented in relation to every other employee, apart from the applicant, made redundant by Cartons and Packaging, in 1995, 1997 and 1998. It is not unimportant to note that the senior management personnel of Packaging appear to have assumed throughout that if the applicant was not offered a position with CHH at the meeting of 27 March 1998, he would be entitled to a redundancy payment. The possibility that he may not have had such an entitlement appears to have been considered for the first time only after the applicant brought these proceedings. That does not mean that the contention that there is no such entitlement so forcefully advanced before me lacks legal merit - only that it runs directly counter to the actual beliefs of those most centrally involved. Those beliefs should, in my opinion, be given appropriate weight."

The appellant's contentions 133 The appellant contended that the learned primary judge erred in determining that the entitlement to redundancy pay was incorporated into the contract of employment by reference by having regard to events which occurred after the date of the contract, namely the making of redundancy payments to other employees in 1995 and thereafter, and by having regard to the belief of senior management personnel of the appellant in the period of time leading up to his redundancy. The appellant also criticised his Honour's description of the letter as

"a loose and somewhat carelessly drafted commercial document which should, if possible, be construed in a manner which enables it to make sense." 134 The appellant further submitted that the policy clause in the letter is clear and unambiguous. They submit that it imposes an obligation upon the respondent only to abide by company policies and practices, and involved no contractual burden being undertaken by the appellant. The appellant also submitted that it is highly improbable that the appellant would intend to be contractually bound by its own policies and practices, especially where the clause contemplates that it may vary those policies and practices from time to time. It said that the Manual in its terms should not have been used to inform the meaning of the policy clause at all, because it is not relevant to construing the policy clause as the content of the Manual may vary and it may not represent all the policies and procedures of the appellant, because there was no ambiguity in the policy clause in the letter, and alternatively because it was not a relevant surrounding circumstance to the making of the contract of employment. In addition, it was submitted, the Manual did not have the significance attributed to it because it was erroneously understood by the learned judge at first instance as imposing no burden upon the respondent or other employees when it clearly did so. Finally, it was contended, the policy clause in the letter did not contemplate the creation of enforceable contractual rights between the respondent and the appellant because the policies and practices could so readily be changed by the appellant, and because (at least in the case of the Redundancy Agreement) it might otherwise impose obligations inconsistent with the express terms of the letter concerning termination. 135 The appellant did not contest the finding, at least by inference, that the Manual was in existence at the time of the letter (not necessarily in its current form, as it was to use the words of counsel "a living document"). His Honour did not make that express finding, but it is in my view clear that he accepted that to be the case. The evidence 136 The managing director of the appellant, Jeffrey Richard Smith ("Mr Smith") was appointed to that position on 1 March 1998, but he had worked as its general manager from December 1997 and before that for Cartons from December 1995. He was unaware of the existence of the Manual, or of any policy of the appellant or of Cartons concerning redundancy payments, although he was in a very general way aware of the existence of some redundancy agreements. He assumed that a document such as the Manual existed, and was held by Mr Bradbury who was the Manager of Human Resources for Cartons, and also performed that role for the appellant. He was also unaware of the leave policy inserted into the Manual on 18 May 1994. 137 Mr Smith said the redundancy payments made to other employees of the appellant following the sale of Cartons' business to CHH were made ex gratia, using a formula used for earlier redundancy payments for Cartons' employees. The eligibility for those payments in 1998 depended on CHH not offering employment to the appellant's employees, including the respondent, following its acquisition of Cartons' business. He said that the respondent was not given a redundancy payment because he had been offered ongoing employment by CHH. He described that position as being "the policy" of the appellant, namely that employees of the appellant would be given an ex gratia redundancy payment of three weeks wages for each year of service, unless an employee were offered ongoing employment by CHH. He also described that policy as being adopted at the time CHH took over Cartons' business and that it was the same policy as was applied in 1997 to retrenchments of employees of Cartons. 138 Mr Bradbury had been the Manager of Human Resources for Cartons since 1990. He became aware of the two earlier Redundancy Agreements when he started that employment. He regarded them as imposing on Cartons no legal obligations nor as creating any legal entitlements, but that there was an "honour system" attached to them so that (as he expressed it) you "ignore them at your peril". 139 Mr Bradbury was responsible for maintaining and updating the Manual, and for its contents. Although he did not expressly say that the Manual existed in some form prior to 1993, it is the clear inference from his evidence that that was the case. He described how he "revamped" the Manual in 1993, albeit not in any substantial way, including changing the name of the employer on the relevant documents to Cartons' then name Multiboard Packaging Pty Ltd ("Multiboard"). One such document was the Leave policy now in the Manual, part of which refers to the Redundancy Agreement. A similar process was undertaken in respect of the Redundancy Agreement. 140 He also said that between 1990 and 1993, the benefits of the second Redundancy Agreement were regarded as applying to all employees of Cartons, and not simply those who were members of the Union. He said that "we applied exactly the same agreement right through as a matter of practice", and that after 1993 following the establishment of the appellant, that practice continued to be applied to employees of the appellant. In 1994 and 1995, when certain employees of Cartons were retrenched, they received redundancy payments calculated in accordance with the formula in the Redundancy Agreement. In some cases, they also received an additional ex gratia payment. 141 Mr Bradbury agreed with Mr Smith that those employees of the appellant who were retrenched and not offered ongoing employment with CHH after CHH had taken over Cartons' business were given redundancy payments calculated in accordance with the formula in the Redundancy Agreements. He too said that if the respondent had not been offered a job with CHH, he would have been given his redundancy payment. He described that payment to the retrenched employees as a "goodwill gesture". The Manual 142 The Manual covers a wide range of matters. It is obviously intended to apply in respect of a range of employees. Its contents encompass reference to matters such as corporate credit card usage, club fees and subscriptions , and motor vehicles. Those matters clearly relate only to more senior employees than the respondent. Many, but not all, of its contents impose responsibilities of the company in relation to its employees. His Honour said that virtually every document contained in the Manual provides a benefit of some sort to that company's employees. 143 It is overstatement to say that no burden of any kind is imposed by the Manual except upon the employer. However, later in his Honour's reasons he said that the Manual is concerned principally, if not exclusively, with laying down employees' entitlements. That feature, he regarded, as of considerable significance. 144 In a general sense, it is correct that most of the Manual's contents relate to employee benefits and how they are to be exercised: Corporate Credit Card Usage, Retirement Policy, Death of an Employee, Employment Continuous Service, Employment Break in Service, Employment Termination, Employment Redundancies, Employee Transfers within Australia, Incentive Schemes, Jury Duty, Leave (various), Management Salaries and Appointments, Motor Vehicles, Service Awards, Superannuation, Wages & Salaries, Travel, Taxis, and Training. There are however other contents which impose obligations on employees: Discrimination, Sexual Harassment and Substance Abuse. Other contents state what the employer requires, with some obligation on its part: Change of Address (it will not disclose employees' addresses), Company Conduct (it will not criticise any employee for any adverse effects that may result from adherence to its policy of transacting business in accordance with the highest standard of corporate conduct), and Health Safety and Environment. Finally, its contents include statements about the employers attitude to or policy on a range of matters: Employment References, Employment Re-employment, Pre-employment Medical Examination, Employment Recruitment and Training, Financial Assistance to Employees, Social Functions, Shift Work Monthly Employees, and Trade Unions. Consideration of submissions 145 In my judgment, the learned judge at first instance has not been shown to be in error in regarding the policy clause in the letter as ambiguous or susceptible of more than one meaning. In News Limited v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 202, the Full Court (Lockhart, von Doussa and Sackville JJ) said:

"This does not mean that an appellate court will necessarily interfere simply because it would not have been inclined to reach the same conclusions as the trial judge. The position was explained by Beaumont and Lee JJ in Minister for Immigration, Local Government and Ethnic Affairs v Hamsher (1992) 35 FCR 359 at 368-9: The material upon which his Honour made his findings consisted of documents, affidavits and uncontested oral testimony. This court is as well placed as his Honour to draw inferences from that material: see Warren v Coombes (1979) 143 CLR 531. Section 27 of the Federal Court of Australia Act 1976 (Cth) provides as follows: 'In an appeal, the Court shall have regard to the evidence given in the proceedings out of which the appeal arose, and has power to draw inferences of fact and, in its discretion, to receive further evidence, which evidence may be taken on affidavit, by oral examination before the Court or a Judge or otherwise in accordance with section 46.' However, the hearing of an appeal in this Court is neither a trial de novo nor a trial of the case afresh on the record (Duralla Pty Ltd v Plant (1984) 2 FCR 342) and the court is not obliged to proceed to make new findings of fact on all relevant issues and discharge the judgment appealed from if those findings differ from those of the trial judge and do not support the judgment. The court must be satisfied that the judgment of the trial judge is erroneous and it may be so satisfied if it reaches the conclusion that the trial judge failed to draw inferences that should have been drawn from the facts established by the evidence. The court is unlikely to be so satisfied if all that is shown is that the trial judge made a choice between competing inferences, being a choice the court may not have been inclined to make but not a choice the trial judge should not have made. Where the majority judgment in Warren v Coombes (supra) (at 552-553) states that an appellate court must not shrink from giving effect to its own conclusion, it is speaking of a conclusion that the decision of the trial judge is wrong and that it should be corrected. (See also Edwards v Noble (1971) 125 CLR 296, per Barwick CJ (at 304), per Menzies J (at 308-309) and per Walsh J (at 318-319).)" 146 His Honour correctly identified the relevant principles and reached a conclusion to that effect after considering the respective contentions of the parties. With respect, if it were incumbent upon me to reconsider that conclusion afresh (cp. State Rail Authority of NSW v Earthline Constructions Pty Ltd (1999) 160 ALR 588), I would reach the same conclusion as that reached by his Honour. The policy clause in the letter referred to "all Company Policies and Practices", by which the respondent agreed to abide. The appellant must have had certain policies and practices in mind, but it is not clear what those policies and practices were. The words "Policies and Practices" commence in the upper case. That is a technique used to distinguish a specific from a general meaning (Fowler's Modern English Usage, Oxford University Press, 2ed 1983, p 73; Modern Australian Usage, Hudson, Oxford University Press, 1993, p 66). The expression "You agree to abide by" is also not without ambiguity. It may mean that the respondent agrees "to be bound by" or "to comply with" the policies (as the appellant contends). It may also mean that he agrees "to accept the consequences of" the policies (The Macquarie Concise Dictionary, 2ed, reprint 1992, p 2). The term "to abide by" also means "to accept and continue to observe (an undertaking, promise, agreement, rule etc)": (The Macquarie Dictionary, 3ed, p 4), as well as "to stand firm by, to hold to, remain true to" (Oxford English Dictionary, 2ed, 1989, Vol 1, p 24). 147 Those definitions 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. One recent example given in The Macquarie Dictionary is of "Serb irregulars, blamed for breaching previous truces, had agreed to abide by this one". 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, as in the present circumstances, the policy clause is prefaced with the word "you". Those considerations lead me to the conclusion that the meaning of the policy clause in the letter is ambiguous or susceptible of more than one meaning. Accordingly, to ascertain the presumed intention of the parties as to the meaning of the policy clause in the letter, it is appropriate to have regard to facts existing when the letter was signed, at least in so far as those facts were known to both parties. 148 As discussed earlier, in my judgment, the significant facts known to the appellant at the time were that it had policies, that those policies included the application of the Redundancy Agreement (or its predecessors) to its employees, and that those policies were contained or partly contained in the Manual. It also knew of the contents of the Manual generally. The nature of its contents, in large measure, provided for the way its employees would be treated or the benefits for which they may be eligible. 149 The evidence of the respondent was that he had a general understanding of the existence of some redundancy agreement in existence, but he did not specifically know of the Manual. It can readily be inferred that he apprehended that the appellant had some policies and procedures, for that is what the policy clause in the letter referred to, but he did not give evidence of knowing of the detailed content of any specific policies. The degree of his knowledge is not commensurate with that of the appellant. That may often be the case in circumstances such as those confronting the respondent when he signed the letter. He had by then been employed in the business generally for many years, and by the appellant for some months. His general understanding is, however, consistent with the more specific knowledge of the appellant. In the relevant sense, in my view, the facts known by the appellant were known also to the respondent. 150 In the light of the factual matrix referred to, I share the conclusion of the learned trial judge that the letter incorporates by reference the terms set out in the Manual from time to time including the Redundancy Agreement. I further agree with the conclusion that the presumed intention of the appellant and the respondent, by reason of the policy clause in the letter, was that the respondent would receive the benefits of the policies of the appellant in the Manual as they applied to him, including under the Redundancy Agreement (subject to that policy being changed by the appellant). The agreement "to abide by" those policies, in the circumstances, means that the respondent would receive or enjoy the benefits provided for by those policies but only according to their terms, and would himself comply with the terms of those policies as they applied to him. 151 I do not consider that the contents of the Manual demonstrate, as the appellant contends, that it did not intend to be contractually bound to comply with its policies (subject to their alteration). There are certain policies where such an intention is clear from the context. One example is that whereby it expects its employees to maintain the highest standard of corporate conduct, but it agrees not to criticise any employee for adverse consequences which flow from adherence to that standard. It is most unlikely that the appellant envisaged that it could blithely ignore its part of that policy, or at least could do so with legal impunity. Its Health Safety and Environment policy also has mutual obligations. It may also be observed that, in general, its policies are expressed in terms which are entirely apt to be treated as expressing mutually enforceable obligations; they are clear, precise, direct and mainly deal with matters which one might expect to be encompassed within a particular employment contract. 152 Nor do I consider that the fact that it was contemplated by the policy clause in the letter that the appellant might change its policies from time to time, or introduce new policies, signifies that it did not intend to be contractually bound to the respondent to comply with its policies from time to time. Its power to change its policies, or to 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: eg Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 63, 137 - 138, so it could not act capriciously, and arguably could not act unfairly towards the respondent: cp. Ansett Transport Industries v Commonwealth (1977) 139 CLR 54 at 61. It might also be a power which, by implication, must be exercised reasonably having regard to the nature of the contract and the entitlements which exist under it: Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 28 NSWLR 234 at 279-280 per Handley JA. There is no issue as to the extent of any such implied constraints on the exercise of that power in this matter. Byrne v Australian Airlines Ltd (1995) 185 CLR 410 does not, in my view, point to any different conclusion in the particular facts of this appeal. It concerned the question whether a clause in an industrial award was by virtue of that character to be implied into a contract of employment (see per McHugh and Gummow JJ at 446). National Coal Board v Galley [1958] 1 All ER 91 provides an example where the terms of a contract of employment included terms incorporated by reference to a "national agreement" which it was contemplated might be altered or substituted over the period of employment. 153 That conclusion renders it unnecessary to address the contention that the subsequent conduct of the appellant or of Cartons in paying to other retrenched employees benefits under the Redundancy Agreement is not material available to assist in the construction of the letter, or of the policy clause in the letter: cp. Spunwill Pty Ltd v Bab Pty Ltd (1994) 36 NSWLR 290 per Santow J at 311-312 and the cases discussed by his Honour; White Property Developments Ltd v Richmond Growth Pty Ltd (Madgwick J, 28 January 1998, unreported); Halsbury's Laws of Australia,Vol 6, par 110-2295 and cases cited in pars 4 and 10. 154 However, the evidence of the practice of the appellant, and in the particular circumstances of Cartons, in relation to making redundancy payments to other employees after 1993 was admissible to show what the appellant's policy was subsequent to the letter. So too was the evidence of Mr Smith and Mr Bradbury. That evidence, as noted above, was that its policy did change or develop with respect to the appellant's employees made redundant at the time of the CHH purchase of Carton's business. The policy changed by the imposition of an additional eligibility criterion, namely that the retrenched employee should not have been offered employment by CHH. That policy had not, by the time the present issue arose, been incorporated into the Manual but the respondent has accepted that that policy change or refinement was made by the appellant. The respondent also accepts that the appellant was entitled to have made that change or refinement. 155 For those reasons, I consider that the learned trial judge correctly decided that the respondent was entitled to the redundancy payment claimed. 156 In my view, this appeal should be dismissed. The appellant should pay to the respondent his costs of the appeal to be taxed. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.

Solicitors for the Applicant: Mallesons Stephen Jaques

Solicitors for the Respondent: Maurice Blackburn Cashman

Trade Practices Act 1974(Cth)

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Judgment (24 paragraphs)

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Legislation Cited (2)

Cases Cited (19)