Riverwood International Australia Pty Ltd v McCormick

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