Robyn Alice Lindley v Silverbrook Research Pty Limited

Robyn Alice Lindley v Silverbrook Research Pty Limited - [2009] NSWDC 396 - NSWDC 2009 case summary — Zoe

[13]

Recital B of the agreement says: "Silverbrook has agreed to employ Lindley on the terms and conditions set out in this Agreement and Lindley has agreed to serve Silverbrook on that basis". Operative part 1.1 says: "Silverbrook appoints Lindley to the Position on the terms and conditions of this Agreement and Lindley accepts that appointment". Under the heading 'Duties of Executive', 2.1 provides: "Lindley must: (a) devote the whole of her time, attention and skill during normal business hours, and at other times as reasonably necessary, to the duties of the Position; (b) faithfully and diligently perform the duties with reasonable care and skill and exercise the powers consistent with the Position; (c) comply with all reasonable directions given to Lindley by each of the directors of Silverbrook (d) promote the interests of Silverbrook; and (e) at all times act to a high standard of professional behaviour." Under the heading 'Remuneration', the following appears: "3.1 Silverbrook will pay to Lindley each fortnight one twenty sixth of the Annual Salary exclusive of superannuation contributions. Lindley may sacrifice a proportion of her remuneration to non-cash benefits as agreed to by Silverbrook from time to time. 3.2 Lindley's remuneration will be reviewed annually by Silverbrook on each anniversary of the Commencement Date or in accordance with the policy of Silverbrook for annual review of salaries, whichever is the later. Silverbrook shall not be obliged to increase Lindley's salary at any time." Under the heading 'Annual Performance Bonus' the following appears: "4.1 Lindley will be eligible to receive the Annual Performance Bonus subject to clause 4.2 and 4.3. 4.2 Silverbrook will assess Lindley's performance against set objectives at the end of each quarter commencing from the date of her employment. Provided her performance satisfies the set objectives and subject to clause 4.3, one quarter of the Annual Performance Bonus will be paid to Lindley within 21 days of the end of the quarter. 4.3.1 The decision as to whether Lindley should receive the Performance Bonus is entirely within the discretion of Silverbrook. Lindley must be in the employ of Silverbrook at the time bonuses are determined to be eligible to receive the Annual Performance bonus". (Emphases added)

[30]

Plaintiff's arguments 22. Mr Sheller contended that Silverbrook had breached clauses 3.2 and 4.2 and by reason of Silverbrook's breaches, although Silverbrook, had it gone through the processes envisaged by the contract, may not have granted pay increases or bonuses, we shall never know, because Dr Lindley had lost the opportunity to have those increases and bonuses. This lost opportunity was more than negligible, and is compensable, and ought to be assessed in the way the High Court considered appropriate for lost commercial opportunities in Sellars v Adelaide Petroleum N.L. and Others (1992-1994) 179 CLR 332 at 355 (Mason CJ, Dawson, Toohey and Gaudron JJ). Mr Sheller also referred me in this context to Chaplin v Hicks [1911] 2 KB 786 and Lime Telecom Pty Limited v Powertel Limited [2009] NSWSC 590 at [56]- 69]. He submitted that the starting point for the damages assessment is the calculation of the benefits which Dr Lindley would have received had there been reviews of salary, objectives set, and a judgment of performance against objectives. He submitted I should find any review of performance, had it occurred, would have been favourable; any objectives set would have been readily achievable. Considering Silverbrook's discretion not to give salary increases or bonuses, Mr Sheller submitted the only way Dr Lindley could fail in these proceedings was if I were to find on the balance of probabilities that the discretion would always have been exercised against her. He invited me to find at the worst that it would only have been exercised adversely to her from time to time, but that even that finding was not available. Mr Sheller submitted that if I find Dr Lindley would have achieved the objectives had they been set, and performed favourably on reviews of her performance, it was not now open to Silverbrook to deny her pay increases and bonuses just because the discretion could have been exercised against her. He invited me to reject Ms Lee's evidence that she would have exercised her discretion against Dr Lindley regardless of whether performance assessments had occurred, and regardless of whether objectives had been set and she had achieved them all. He referred me to Hoyts Pty Ltd v Burns [2003] HCA 61 at [54], where an injured plaintiff had given evidence at trial of what she would have done if appropriately warned of a tortious risk, and where the Court (at [54]) said: "[E]vidence of what a claimant would have done if a non-existent warning had been given by a hypothetical sign is so hypothetical, self serving and speculative as to deserve little (if any) weight, at least in most circumstances." 23. He also referred me to C.G.U. Workers Compensation (NSW) Ltd v Garcia (2007) 14 ANZ Ins Cas 61-746 at 76-366 to 76-367 [130]-[138], especially at [134] where Mason P (Hodgson and Santow JJA agreeing) said a duty of good faith may be implied in specific classes of contracts to give business efficacy. Whether it could be implied, depended inter alia on "whether the enjoyment of the rights expressly confirmed would or could be rendered nugatory, worthless or perhaps be seriously undermined" [136]. Mr Sheller referred me to [168] where Santow JA (with whom Hodgson, JA, agreed) said: "Thus while the duty to act in good faith may be implied in certain contractual contracts, such as employment, there is as yet, as the law currently stands, no general contractual term, implied in law, requiring the exercise of good faith on contractual performance". Mr Sheller also referred me to an article called " Good Faith in Australian Contract Law ", (2003) 19 J Con L 155 at 157 (J W Carter and E Peden), and another called " When Common Law Trumps Equity; The Rise of Good Faith and Reasonableness and the Demise of Unconscionability " (2005) 21 J Con L 226 at 238-9 (E Peden). 24. Mr Sheller calculated the sum of money Dr Lindley would have been paid had her salary been increased by 5% per annum for the term of the contract, was $110,382.56. He calculated that a payment of a $40,000 bonus per annum for the term of the contract would have amounted to $190,000. As at the date of trial he calculated interest (I assume at rates allowed under the Civil Procedure Act, 2005) at $28,817.57 for salary and $62,126.56 for bonuses. The grand total for all sums was, to the time of trial, $391.321.69.

[45]

As to Silverbrook's arguments in [25] to [27] above: (a) Although I am satisfied Dr Lindley was well aware of the discretions Silverbrook had under the contract, it does not follow that Silverbrook was not obliged to perform its side of the bargain, and conduct salary reviews and prepare the set of objectives for bonus payment purposes (25); (b) It is true there could have been no assumptions such payments would have been made. But it was open to Dr Lindley to assume there would be salary reviews and the setting of objectives (25); (c) It is true there could not be said necessarily to have been a loss of salary, absent reviews, but that is a matter which I consider is relevant to the value of any loss of chance ([25] (d)) (d) Whilst it may be true that an absence of criticism of Dr Lindley is irrelevant to any asserted rights, as appears below, it is not irrelevant when it comes to assessing the value of a lost chance (25); (e) As appears below, Dr Lindley's failure to ask for bonuses, and her failure before 2007 to ask for a salary increase, is in my view relevant to the value of the lost chance, but does not amount to any acknowledgment she had no entitlements to them, or to a waiver of Silverbrook's obligations ([25] (f),(g)); (f) As appears below, for the reasons which I give, I have considered the prospect of payment of salary increases and bonuses had Silverbrook complied with its obligations as and when required, and concluded the lost chance had value, and that Dr Lindley did not receive what she had contracted to receive, though she did what she had contracted to do. The breaches show she did not receive what she bargained for ([25] (h), (i)); (g) For the reasons which appear above and below, I do not accept that I am bound to accept Ms Lee's evidence that Silverbrook would not have paid salary increases had reviews been conducted, or bonuses, had objectives been set. Further, as appears below, the breaches I have found are more than "procedural", and have had a significant causal affect ([26] (a)); (h) I reject the argument that I should not speculate about what would have happened had breaches not occurred. A certain amount of speculation is involved in the process of assessment of what the position would have been, absent breaches (26); see also 'Chance Would Be A Fine Thing: Proof Of Causation And Quantum In An Unpredictable World' (David Hamer, (1999) 23 Melb U L Rev 557 at 567, 574, 575; (i) I accept the contention that an employer may act unreasonably or capriciously. But it must still comply with the employment contract ([26] (c)); (j) I agree that meaning must be given to the contractual terms which bestow a discretion, and, as appears below, I have given meaning to those terms. But it does not follow that it should be assumed the discretions, if exercised, would always have been exercised against the interests of Dr Lindley ([26] (e)); (k) To the extent to which it is relevant that contracts of personal service are to be approached differently from "commercial" contracts, I have so approached this one ([27] (a)); (l) The extent to which discretionary factors operate in an assessment may be seen below ([27] (b), (c)); Rankin is in my view distinguishable. As appears at p.160 of the report, the loss there was assessed as having no value, because a discretion lay in the hands of a third party, and the third party would not have exercised its discretion in the employee's favour without a positive recommendation by the employer to the discretion holder; that recommendation would not have been given, because of the employee's misconduct; in Lavarack Diplock L.J. said at 294:

[58]

On the negative side (g) Although Ms Lee's salary more than doubled between 2003 and 2009, she began from a lower level than Dr Lindley ($150,000 vs $210,000) and she owned half of the enterprise; (h) On the one occasion when Dr Lindley requested a salary increase, in 2007, her request failed to achieve one; (i) When that request was made, Dr Lindley had worked for Silverbrook for almost four years; (j) Silverbrook had a discretion not to increase her salary, regardless of her ability and output; (k) There is the evidence of Ms Lee to the effect that: (i) She had been in charge of staff salaries; (ii) She had considered salary levels from time to time, and had consulted her fellow director about them; (iii) Though she had never carried out any 'formal' salary reviews, she had considered Dr Lindley's salary level from time to time; (iv) Even if she had conducted salary reviews, she would not have increased Dr Lindley's salary. (Of course, that is by no means the end of the matter. Ms Lee necessarily gave evidence about a hypothetical event, and, as a 50% owner of the company, with a self-interest. As I have observed, although she was not cross-examined on that evidence, that does not mean I should accept it. There are difficulties about evidence concerning hypothetical events: Ellis v Wallsend Hospital (1989) 17 NSWLR 553at 582 (per Samuels JA) Chappel v Hart (1998) 195 CLR 232 at [272] and Rosenberg v Percival (2001) 205 CLR 434 at [158];[214]. They were cases concerning patients who had sued doctors or dentists for failing to warn. Their evidence of what they would have done if warned of relevant risks is I think in a similar class to that of Ms Lee, in that it is hypothetical, and based on an assumption of something which never occurred. Whilst the evidence is admissible, it may not have great weight: Hoyts at [54]. In Culligan & Anor v ACO Pty Ltd [2009] NSWCA 290 (a claim for damages for misleading and deceptive conduct) the Court of Appeal recently said (at [81]):

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