Employment contract - Implied term to act in good faith - Implied term to give adequate notice of termination - Implied term to pay severance payment in event of redundancy - Whether terms breached - Whether contract repudiated - Effect of maternity leave - Effect of Minimum Conditions of Employment Act 1993 (WA) - Period of notice required - Psychiatric injury - Causation

Evidence Act 1906 (WA), s 79B, s 79C, s 79D

Minimum Conditions of Employment Act 1993 (WA), s 33, s 38, s 39

Judgment for the plaintiff on breach of notice term only

Addis v Gramophone Company Ltd [1909] UKHL 1; [1909] AC 488

Albrighton v Royal Prince Alfred Hospital (1980) 2 NSWLR 542

Aldersea v Public Transport Corporation [2001] VSC 169; (2001) 3 VR 499

Automatic Fire Sprinklers Pty Ltd v Watson [1946] HCA 25; (1946) 72 CLR 435

Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344

Bednall v Wesley College [2005] WASC 101

Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66

Burazin v Blacktown City Guardian Pty Ltd [1996] IRCA 371; (1996) 142 ALR 144

Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410

Campbell v Encyclopaedia Britannica Australia Ltd [2008] NSWSC 1178

Carrigan v Darwin City Council [1997] IRCA 101

Conway-Cook v Town of Kwinana [2001] WASCA 250; (2001) 108 IR 421

Creen v Wright (1876) 1 CPD 591

David Jones Ltd v Cukeric (1997) 78 IR 430

Eastwood v Magnox Electric plc [2004] UKHL 35; (2004) 3 All ER 991

Fardell v Coates Hire Operations Pty Ltd [2010] NSWSC 346

Garbett v Midland Brick Company Pty Ltd [2003] WASCA 36; (2003) 129 IR 270

Grout v Gunnedah Shire Council (No 2) (1995) 58 1R 67; (1994) 1 IRCR 499

Intico (Vic) Pty Ltd v Walmsley [2004] VSCA 90

Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115

Lau v Bob Jane T-Marts Pty Ltd [2004] VSC 69

Malik v Bank of Credit and Commerce International SA (in liq) [1997] UKHL 23; [1998] AC 20

March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506

McDonald v The State of South Australia [2008] SASC 134; (2008) 172 IR 256

Perkins v Grace Worldwide (Aust) Pty Ltd (1997) 72 IR 186

Quinn v Jack Chia (Australia) Ltd [1992] VicRp 37; (1992) 1 VR 567

R v Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-Operative Ltd (1977) 16 SASR 6

Rankin v Marine Power International Pty Ltd [2001] VSC 150; (2001) 107 IR 117

Reilly v Praxa Ltd [2004] ACTSC 41

Riverwood International Australia Pty Ltd v McCormick [2000] FCA 32; (2000) 177 ALR 193

Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104; (2007) 69 NSWLR 198

Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWSC 217; (2008) 72 NSWLR 559

Tanya Kerrison v Air International Pty Ltd [2006] AIRC 297

Taske v Occupational & Medical Innovations Ltd [2007] QSC 118; (2007) 167 IR 298

The State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371

Thomson v Orica Australia Pty Ltd [2002] FCA 939; (2002) 116 IR 186

Woods v WM Car Services (Peterborough) Ltd [1981] IRLR 347

1 Between 1995 and 2003, the plaintiff, Michelle Rogan-Gardiner, was employed in an executive position by the defendant, Woolworths Ltd. In 2002, Woolworths commenced a nationwide internal restructure of its financial services operations. This was part of a larger restructuring called Project Refresh. As part of that project, Ms Rogan-Gardiner's position was abolished. That occurred when she was on maternity leave between 28 September 2002 and 1 September 2003. Prior to her return to work, she was offered a number of alternative positions, but declined them. Further offers were made upon her return to work, which she also declined. Her employment with Woolworths then ended.

2 Ms Rogan-Gardiner has brought proceedings against Woolworths alleging breach of her employment contract. In particular, she alleges that Woolworths:

1. breached an implied term requiring it to act in good faith;
2. breached an implied term requiring that she be given reasonable notice of termination; and
3. breached an implied term requiring that she be provided with severance benefits in the event of redundancy.

3 The matter proceeded to a trial over two weeks. Having considered the evidence, my conclusions, for the reasons that follow, are that:

1. there was no breach by Woolworths of any implied good faith term;
2. there was a breach in regard to notice in that Woolworths terminated Ms Rogan-Gardiner's employment without reasonable notice on 11 September 2003;
3. there was no breach regarding redundancy benefits because the preconditions for a redundancy were not met.

4 Accordingly, Ms Rogan-Gardiner is entitled to judgment in her favour to the extent that she has made out her case on the basis that Woolworths terminated her employment without reasonable notice, but not on the other bases. I have concluded that she was entitled to be given four months' notice of termination and that damages should be calculated accordingly.

5 Ms Rogan-Gardiner's case is that she was employed as the State Accountant for Woolworths Supermarkets in Western Australia pursuant to a contract made on or about 13 April 1995. The contract was said to be partly oral and partly in writing. Insofar as it was in writing the contract comprised a letter dated 13 April 1995. It was an express term of the contract that Ms Rogan-Gardiner be paid a base salary of $65,000 per annum, provided with a fully maintained motor vehicle and eligible for a bonus to be paid of up to $19,500 per annum. Woolworths was to contribute 10% of Ms Rogan-Gardiner's base salary to a superannuation scheme and it was also agreed that she would salary sacrifice 5% of her paid salary to be paid into the same scheme. She was also to be entitled to a 5% discount on all purchases of goods and services from Woolworths during her employment.

6 Ms Rogan-Gardiner claims that it was an implied term of the contract that Woolworths would in its treatment of her, including any exercise of its rights to terminate her employment, act responsibly, fairly and in good faith. It is said that this term is to be implied as a matter of law or alternatively by reason that it is reasonable, obvious and necessary to give business efficacy to the employment contract.

7 It is claimed that a further implied term of the contract was that Woolworths was not to terminate the contract without providing reasonable notice to Ms Rogan-Gardiner. Again, this term is said to be implied either as a matter of law or by reason that it is reasonable, obvious and necessary to give business efficacy to the contract.

8 Ms Rogan-Gardiner's case is that the employment contract was subsequently varied. The first such variation was that with effect from 1 July 1999 the value of the fully maintained vehicle provided to Ms Rogan-Gardiner was increased slightly in value, from $19,500 to $19,784 per annum. This variation was made partly in writing and partly by conduct. Insofar as it was in writing, it comprised a letter from Woolworths to the plaintiff dated 9 October 1999.

9 The second variation was that with effect from 1 September 1999, Ms Rogan-Gardiner was entitled to participate in a plan entitled 'The Short Term Incentive Plan' in lieu of the bonus entitlement. Pursuant to the new plan, she was to be paid an incentive payment in September each year based on Woolworths' financial performance against its set targets for the division in which she worked in the preceding financial year. This variation was partly comprised in a letter dated 25 August 1999 and in a conversation between Ms Rogan-Gardiner and Woolworths' General Manager WA in August or September 1999.

10 The third variation was that with effect from 1 September 2002 Ms Rogan-Gardiner's base salary was increased to $103,000 per annum. That variation was contained in a letter dated 9 September 2002.

11 The fourth variation was said to be that if Ms Rogan-Gardiner's employment was terminated on the grounds of redundancy, being that her position was no longer required by Woolworths and it could offer her no suitable alternative, she would be paid a sum equal to the value of her pro rated long service leave entitlement if termination occurred after more than five years' service and a severance payment of 16 weeks pay if termination of employment occurred after more than six years' service. This variation was said to be partly in writing and partly oral. Insofar as it was in writing it was said to be contained in Woolworths' Redundancy Policy for Management. Insofar as it was oral, it was said to comprise discussions held in or about April and August 2002 between Ms Rogan-Gardiner and other employees of Woolworths in which she claimed to have been informed that the redundancy policy would apply to her employment contract.

12 The fifth variation was said to be that Ms Rogan-Gardiner was entitled to participate in Woolworths' Long Term Incentive Plan pursuant to which she would become the registered holder of 70,000 options for fully paid ordinary shares in Woolworths at an exercise price of $5.11 per option. These options were to be exercised in four tranches. In the case of the fourth tranche of 35,000 options the exercise date was on or about 1 July 2004 but was subject to a total shareholder return target for 30 June 2004 being met and Ms Rogan-Gardiner remaining in employment with Woolworths as at 30 June 2004. This variation was also partly in writing and partly oral. Insofar as it was in writing it comprised a letter dated 6 March 2000, an application for options signed by Ms Rogan-Gardiner on 5 April 2000 and a letter dated 30 June 2000. The oral component was said to comprise a discussion between Ms Rogan-Gardiner and Woolworths' General Manager WA held during or about September 1999.

13 Ms Rogan-Gardiner's case is that her employment with Woolworths continued until about 11 September 2003 when she was summarily terminated. She claims that the termination occurred because Woolworths had decided that the position occupied by her in Western Australia was no longer required and she was not offered a suitable alternative position.

14 Ms Rogan-Gardiner also claims that Woolworths, by its conduct in the period 15 April 2002 - 11 September 2003 and in terminating her employment and/or in terminating her employment in the manner referred to, did not act responsibly, fairly or in good faith. Paragraph 10 of the statement of claim details the basis for this claimed breach. That paragraph is of critical importance and reads as follows:

In breach of the term of the Employment Contract referred to in paragraph 4 the defendant by its conduct in the period 15 April 2002 to 11 September 2003 and in terminating the plaintiff's employment and/or in terminating the plaintiff's employment in the manner referred to in paragraph 9 did not act responsibly, fairly or in good faith in that:

(a) the defendant failed to interview and consider the plaintiff for the vacant position of National Financial Controller of the defendant, a position of an equivalent or higher status to that held by the plaintiff and for which she was suitably qualified which position the plaintiff would have accepted had it been offered to her;

(b) the defendant only offered the plaintiff alternative positions which:

(i) were not within the plaintiff's area of expertise and specialisation;

(ii) constituted a demotion;

(iii) did not comprise alternative suitable employment;

(iv) the plaintiff, in relation to one offer, did not have the necessary experience to fill;

(c) the defendant by letter dated 9 September 2003 informed the plaintiff that a refusal to assume the position of Corporate Auditor as to which position the plaintiff repeats paragraphs 10(b)(i), 10(b)(ii), 10(b)(iii) and 10(b)(iv) or Zone Business Analyst as to which position the plaintiff repeats paragraphs 10(b)(i), 10(b)(ii) and 10(b)(iii) would:

(i) be considered a refusal to perform suitable alternative duties;

(ii) leave the defendant with no alternative but to terminate the plaintiff's employment;

(iii) disentitle the plaintiff to severance pay;

(iv) result in a loss of entitlements under the share option scheme;

(d) the defendant failed on the plaintiff's return from 7 days sick leave on or about 9 September 2003 to provide the plaintiff with:

(i) a computer with which to work;

(ii) appropriate work or employment;

(iii) access to the defendant's computer and email systems in order to allow the plaintiff to work;

(e) the defendant summarily terminated the plaintiff's employment because the plaintiff did not accept any of the alternative positions offered to her;

(f) by reason of the summary dismissal the defendant avoided paying a severance payment to the plaintiff;

(g) neither the termination nor the summary nature of the termination of the plaintiff's employment was justified.

Particulars

(i) By reason of the facts referred to in paragraph 10(a) there were no grounds for a termination of the plaintiff's employment.

(ii) There were no grounds for a summary termination of the plaintiff's employment.

15 Ms Rogan-Gardiner claims she suffered stress, anxiety, depression and sleep disorder by reason of her termination and the manner of it. She claims that the breach of the good faith term and the consequential impact on her mental health have resulted in loss and damage to the value of her remuneration package as from the date of termination being the 11 September 2003 for a period of 18 months. She also claims damages for the negative impact to her future employment prospects, damages for the impact to her mental health, damages in a sum equivalent to the value of the fourth tranche of share options and damages for loss of a severance payment of 16 weeks taxable salary.

16 Ms Rogan-Gardiner also claims that the implied term requiring that reasonable notice be given was breached by her summary termination on 11 September 2003. She claims that by reason of the senior nature of her employment, level of remuneration, length of service, professional standing, age, qualifications and work experience, reasonable notice was a period of 18 months. She claims that as a consequence of the breach of the notice provision, she has suffered loss and damage to the value of 18 months of her remuneration package from 11 September 2003, damages for the impact to her mental health and damages for impact on future employment prospects. It is said that the summary termination has impacted on future employment prospects because the plaintiff was employed by Woolworths for a period of over eight years, was unable to provide any prospective employer with a reference for this period and that the summary dismissal claim has been defended. She says that those facts, together with the impact on her mental health, have resulted in her being unable to secure equivalent alternative employment.

17 Ms Rogan-Gardiner also claims that Woolworths breached an implied term of the contract relating to redundancy by failing to pay her any sum of money for the pro rated long service leave on her termination. It is claimed that the summary termination on 11 September 2003 occurred because Ms Rogan-Gardiner's position was no longer required by Woolworths and it could offer her no suitable alternative position. It is said that by reason of this breach she suffered loss and damage equivalent to the value of pro rated long service leave owing as at the date of termination. It is also claimed that Woolworths failed to pay the plaintiff a severance payment on termination.

18 Woolworths accepts that it employed Ms Rogan-Gardiner as from about 13 April 1995. Nor is there any dispute as to the salary and benefits to which she was entitled upon commencement (other than to say that the 5% discount on purchases was discretionary and subject to review).

19 Woolworths does not admit that there was an implied term in the employment contract that it had a duty in its treatment of Ms Rogan-Gardiner to act responsibly, fairly and in good faith. It also denies, if such a term did exist, that it extended to any exercise of Woolworths' right to terminate the contract. It does not accept that such a term is to be implied as a matter of law or by reason that it is reasonable, obvious and necessary to give business efficacy to the contract.

20 Even if a duty to act in good faith was implied, Woolworths denies that anything it did could have been in breach of such a duty. As to the failure to offer Ms Rogan-Gardiner the position of National Financial Controller, Woolworths says that that position was one of higher status than she had previously held and would have amounted to a promotion. In regard to the offered positions of Corporate Auditor and Zone Business Analyst, the refusal by Ms Rogan-Gardiner to perform the suitable alternative duties left Woolworths with no choice other than to regard her employment as having come to an end.

21 Woolworths accepts that it was an implied term that it would not terminate the employment contract without providing reasonable notice to the plaintiff. However, it denies that such a term was breached.

22 Woolworths denies that Ms Rogan-Gardiner was summarily terminated on 11 September 2003, rather it claims that on or about 15 April 2002 it gave her notice that her employment contract would terminate on 31 October 2002. This was said to have occurred at a conference of managers in Sydney during which she was informed that as part of a reorganisation of the financial services division, her position and the department which she worked in would cease to exist at the end of October 2002. Woolworths asserts that this constituted good notice and resulted in the contract terminating on 31 October 2002 by effluxion of the notice period. It says that this period of approximately six months was reasonable notice in accordance with the implied term of the contract.

23 Alternatively, Woolworths says that Ms Rogan-Gardiner commenced a period of parental leave on or about 27 September 2002. The period of that leave was 12 months and it was due to expire on 29 September 2003. Woolworths claims that the effect of s 33, s 38 and s 39 of the Minimum Conditions of Employment Act 1993 (WA) was to require Woolworths to leave the employment contract on foot until Ms Rogan-Gardiner finished her parental leave and had an opportunity to accept or reject her entitlement to any available position comparable in status and pay to that of her former position and for which she was qualified and capable of performing. Woolworths claims that the effect of this was to extend the period of notice required under the contract until the end of the plaintiff's parental leave and the plaintiff had an opportunity to accept or reject any available positions which met the requirements of the Act. Woolworths states that between 1 and 11 September 2003 Ms Rogan-Gardiner had an opportunity to accept or reject her entitlement to offered positions and that her employment then ended by expiry of the notice period after that opportunity was complete.

24 Alternatively, Woolworths says that by declining to perform the duties of any of the alternative positions offered to her by Woolworths between 1 and 11 September 2003, Ms Rogan-Gardiner repudiated the contract by effectively refusing to provide services. Woolworths accepted that repudiation on or about 11 September 2003. In these circumstances no notice was required.

25 Alternatively, Woolworths says that on or about 31 October 2002 it repudiated the employment contract by eliminating the position that Ms Rogan-Gardiner had occupied. It says that, accordingly, the contract was then at an end and Ms Rogan-Gardiner could not have been summarily terminated on 11 September 2003 from a position that no longer existed.

26 As to redundancy, Woolworths claims that the Redundancy Policy for Management was a matter of policy only and exercisable at the absolute discretion of Woolworths. It denies that there was any agreement to vary the employment contract to include redundancy entitlements or that any offer to do so was made to the plaintiff. It denies that there was any intention to enter into any such agreement with Ms Rogan-Gardiner. It also denies that there was any consideration from her to support such a variation.

27 As regards redundancy entitlements, Woolworths claims that even if the redundancy policy was incorporated into the contract, any entitlement under that policy was subject to specified pre-conditions. Those pre-conditions were that:

1. the relevant position was no longer required by reason of technological change or business unit closure or sale;
2. all efforts by Woolworths to find an alternative position which was in Woolworths' view suitable, had been unsuccessful;
3. the divisional general managers of Woolworths had agreed that termination of employment was the only appropriate course of action; and
4. the employment was consequently terminated by Woolworths.

28 If the pre-conditions were met, the rights and obligations under the policy included that Woolworths could terminate the employment with any amount of notice and would pay four weeks pay in lieu of notice, a sum equal to the pro rated long service leave entitlement at that time, upon termination of employment after more than five years of continuous service and a severance payment as set out in a scale. Continuous service did not include any period of parental leave.

29 Woolworths says that the pre-conditions for a redundancy payment under the policy were not satisfied. In particular, it says that efforts to find a suitable alternative position for Ms Rogan-Gardiner had not been unsuccessful and that all the alternative positions offered to her were, in Woolworths' opinion, reasonably suitable for her. Furthermore, the requirement that divisional managers agree that termination of the plaintiff's employment was the only appropriate course of action had not been satisfied.

30 Woolworths also denies that Ms Rogan-Gardiner has suffered the stress, anxiety, depression and sleep disorders as claimed by her to have been suffered by reason of her summary termination or the alleged failure of Woolworths to act in good faith. Insofar as she has suffered any such conditions, Woolworths says that they are not a consequence of any breach of contract on their part.

31 In regard to the options, Woolworths says that the fourth tranche of options was subject to a vesting condition that a specified target for total shareholder return must be met for the period ending 30 June 2004. It says that exercise conditions provided that unvested options lapsed and were not exercisable if employment ceased before the exercise date unless the period was extended by the board of the company, in writing. Accordingly, Woolworths claims that Ms Rogan-Gardiner could not have exercised the fourth tranche of options as her employment ceased prior to 30 June 2004. It also says that the executive option plan rules precluded any claim against Woolworths for compensation for damages for loss of future rights with respect to options in the event that employment was terminated.

32 Woolworths also claims that if Ms Rogan-Gardiner has suffered any loss and damage, she has failed to take all reasonable steps to mitigate her loss in that she failed to pursue or accept reasonable alternative positions available to her. Woolworths says that between 15 April 2002 and 10 September 2003 she was offered, or told she could be considered for, various positions within the company. It says that it was at all reasonable times willing to employ her in a suitable alternative position on financial terms identical to those that existed under the employment contract. Woolworths says that any loss was caused by Ms Rogan-Gardiner's refusal to accept alternate jobs. In regards to loss of future employment prospects, it is said that any such loss was caused by her refusal to get recommended treatment for her mental health issues and her failure to look for alternative employment. Woolworths also asserts that the mental health issues were suffered prior to 11 September 2003 and were not caused or aggravated by any termination. Even if they were caused or aggravated by termination, any loss suffered by Ms Rogan-Gardiner was, Woolworths claims, caused by her refusal to get recommended treatment.

33 The issues for determination in this case are as follows:

1. was there an implied term in the contract that Woolworths would act reasonably, fairly and in good faith in its treatment of Ms Rogan-Gardiner?
2. did any such good faith term apply to termination of the contract?
3. what other conduct could it apply to?
4. was there a breach of the good faith term here?
5. was valid notice to terminate given by Woolworths in April 2002?
6. did Woolworths repudiate the contract in October 2002 by abolishing Ms Rogan-Gardiner's position?
7. what effect on the contract did the Minimum Terms and Conditions Act have?
8. did Ms Rogan-Gardiner repudiate the contract by rejecting the positions offered to her between 1 and 11 September 2003?
9. was the contract terminated on 11 September 2003?
10. was any or reasonable notice given for such termination?
11. what length of notice was required?
12. was there an implied term that a severance payment would be made in the event of redundancy?
13. did the circumstances for making such a payment arise in this case?
14. to what extent, if at all, were the losses and damage claimed by the plaintiff caused by the alleged breaches?

34 Much of the historical sequence of events was not in substantial dispute. Where dispute arose between the parties it was predominantly in regard to details of what was said or as to the interpretation of what occurred and the conclusions that could be drawn.

35 The following represents my findings based upon the evidence. Where there was a substantial dispute, I have referred to the conflicting evidence and explained how I have resolved it and why. Where there were written communications, I have relied on them to the extent that they represent an accurate record of what was said by the writer at that time.

36 It is appropriate to make some preliminary comments regarding the witnesses. Ms Rogan-Gardiner was the principal witness in her own case. She was extensively cross-examined by senior counsel for Woolworths. She presented as a determined witness with a firmly held view that she had been treated unfairly by her former employer the defendant. Sometimes this view appeared to be not merely firm but fixed, such that she refused to entertain other possibilities that were reasonably open.

37 It was clear that the proceedings had assumed great significance in Ms Rogan-Gardiner's life. The case represented an obstacle to her committing to treatment for her depression. The personal significance of the case became greater as time passed without a resolution.

38 Giving evidence can be a difficult, even traumatic, experience and allowance must be made for that. In Ms Rogan-Gardiner's case, the experience was made more difficult because she continued to suffer a depressive illness at the time of the trial that remained largely untreated. She appeared to be somewhat fragile and said she had declined medication as she did not want it to affect her recollection. Her fragility manifested itself in a breakdown in the witness box during cross-examination. The questioning at that point had been firm, but not aggressive or offensive. She was unable to continue further at that point. She subsequently completed her evidence.

39 It is important to note that one of the predisposing factors for the depressive illness was Ms Rogan-Gardiner's vulnerable personality type. The psychiatric evidence referred to narcissism and obsessionality in this regard. The evidence was that Ms Rogan-Gardiner perceived herself in a way that meant that her self-esteem was significantly dependant on her employment. A belief that others had failed to recognise her worth and reward it appropriately produced feelings of anger, indeed fury, according to the psychiatric evidence. There were times in the evidence where that anger became apparent.

40 The significant evidence for the defence came from three senior executives, Mr Anthony (Tony) Parle, Ms Julie Coates and Mr Anthony (Tony) Backshall. Each of those witnesses was cross-examined in detail. They impressed me as honest and careful in their evidence. It was apparent that, particularly by late 2003, they all considered that Ms Rogan-Gardiner presented a difficult management problem. There were some differences of views at the time as to the approach to be taken in handling the matter, but the Woolworths' witnesses were candid about this. They all said that they had made genuine efforts to accommodate Ms Rogan-Gardiner's wishes with a view to retaining her as a valued employee. I had no cause to doubt them in that regard. Their evidence accorded with letters written to Ms Rogan-Gardiner at the relevant time.

41 Ms Rogan-Gardiner is a qualified accountant with 30 years experience in the finance sector and over 20 years experience working as an accountant. She completed professional accountancy examinations at the Auckland Technical Institute in 1987. She became a member of the Institute of Chartered Accountants of New Zealand with a designation of Associate Chartered Accountant on 1 May 1989. Prior to undertaking her accountancy qualifications, she had worked in the finance industry. From February 1976 - October 1984 she worked as a bank officer with the Bank of New Zealand and from October 1984 to February 1986 she worked as an assistant accountant with Anchor Farm Products Co-operative Ltd. She studied full time from March 1986 to January 1987. In January 1987 she commenced employment as a financial accountant with Inter Pacific Equity Ltd and was responsible for the supervision of five accounting and clerical staff. In January 1988 she was promoted to the position of Corporate Accountant. In March 1989 she was retrenched from Inter Pacific Equity Ltd as they relocated their head office from Auckland to Sydney.

42 Ms Rogan-Gardiner moved to Western Australia and in May 1989 commenced employment with Sumich Group Ltd as a senior accountant. In October of that year she was promoted to the position of chief accountant with the responsibility of managing 10 accounting and clerical staff. In February 1993 she was again promoted, this time to the position of manager of finance and administration. In this role, she was responsible for all the company's statutory accounting and taxation requirements including management of the accounting, data processing, administration and credit functions of the group. She had direct supervision of four accountants and indirect supervision of 15 clerical staff. She remained in this position until she commenced employment with Woolworths.

Employment with Woolworths - Commencement and remuneration

43 Ms Rogan-Gardiner commenced employment with Woolworths on 15 May 1995 in the position of State accountant with a total salary package to the value of $100,500. On 18 April 1996, the position occupied by Ms Rogan-Gardiner was retitled 'Financial Services Manager, Western Australia'. Neither her duties nor salary changed at this time. Her role included being in charge of 40 - 45 staff members who carried out the functions of accounts payable, accounts receivable, systems/management accounting, payroll for some 6,000 employees and financial accounting. The staff who were supervised included three qualified accountants. In 1997 the role expanded to include the additional responsibility of supervising the internal audit staff. Those staff comprised a manager and two staff, together with a stock take team which comprised a manager and 30 casual staff.

44 When Ms Rogan-Gardiner first commenced employment with Woolworths her salary package included the potential to earn a bonus under an incentive bonus plan. This plan was subsequently renamed the Short Term Incentive Plan (STIP). Pursuant to this plan, eligible employees were paid a bonus of 15% of their gross annual salary if the actual net profit achieved by the company in their State was equivalent to their net profit budget. A further bonus capped at 15% would be paid to eligible employees equal to each 1% achievement over budget. This plan was substantially altered in 1999 to reflect additional financial ratios which were from then on required to be met in order for eligible employees to receive bonus payments. It was at this time that the plan was changed in name to STIP. In the last four years of her employment, the plaintiff was paid the following bonuses:

1. $24,889 for the 1999 - 2000 financial year (this was pro rated for 303 days as she was on maternity leave for part of that year).
2. $54,880 for the 2000 - 2001 financial year.
3. $25,728 for the 2001 - 2002 financial year.
4. $10,046 for the 2002 - 2003 financial year (pro rated for 82 days as the plaintiff was on maternity leave for part of that year).

45 In addition to the bonus plan, Ms Rogan-Gardiner was entitled to participate in an executive share option purchase plan. This operated until 1999. She was allocated 10,000 options under this plan in the 1996 financial year and 2,000 options in each of the 1998 and 1999 financial years. She subsequently exercised those options. The executive share option purchase plan was replaced in 1999 with the Long Term Incentive Plan.

46 On 25 August 1999, Ms Rogan-Gardiner was informed that Woolworths would be introducing the Long Term Incentive Plan under which she would be offered share options. On 6 March 2000, she received an offer in writing to participate in the plan and was offered 70,000 options. On 5 April 2000, she accepted the offer to participate by completing an application form. She applied for the 70,000 options, which had an exercise price of $5.11.

47 The options were to vest in four tranches. The first tranche of 8,750 options would vest and be exercisable on 1 July 2002. The second tranche of 8,750 options would vest and be exercisable on 1 July 2003. The third tranche of 17,500 options would vest and be exercisable on 1 July 2004. The fourth tranche of 35,000 options would also vest and be exercisable on 1 July 2004 but were subject to different conditions. Exercise of the first three tranches depended upon there being growth of Woolworths' earnings per share from one financial year to the next. In respect of the fourth tranche, exercise was conditional upon relative growth in Woolworths' accumulative index (being a measurement of its total shareholder return) over a period of 60 months.

48 Due to Woolworths achieving a growth in earnings per share above that prescribed in the conditions, the third tranche of shares vested on 1 July 2003 rather than 1 July 2004. On 10 September 2002, Ms Rogan-Gardiner exercised the first tranche of 8,750 shares. On 7 November 2003, she exercised the second and third tranches of shares totalling 26,250. She did not exercise the fourth tranche as her employment came to an end prior to the vesting date. However, that tranche forms part of the claim for damages.

49 In April 2002, Woolworths held a conference in Sydney in regard to the restructure of its financial services division. The conference was attended by financial services division managers and human resource co-ordinators from all of the State offices. Ms Rogan-Gardiner attended in her capacity as the Western Australian Division Financial Services Manager. The conference was held over two days from 15 to 16 April 2002.

50 In broad terms, the financial services restructuring involved the centralisation of transaction processing in Tasmania, the centralisation of financial services in South Australia, the centralisation of payroll in Queensland and a business support component in each region across the states of Australia. The regions did not necessarily coincide with states as some states obviously had larger populations than others. Thus, certain states contained several regions and others only one or the region was made part of a larger region. The regions were management units and would replace previous state-based structures. Western Australia would remain a single region under the new arrangements.

51 The effect of the restructure was that the Financial Services Manager position in each state, including that of Ms Rogan-Gardiner, would become obsolete. The most senior accounting position available in Western Australia would be the Regional Business Analyst which represented the remaining business support component for the Western Australian region after the centralisation of other functions to other states.

52 Tony Parle, the General Manager Finance (Supermarket Group), announced the proposed new structure at the Sydney conference. A number of documents were provided and presentations made at this conference. Mr Parle said that the purpose was to inform the managers of the proposed new structure and to provide them with the information necessary for them to communicate back to their teams in the states. Mr Parle said that he also took the opportunity to have individual meetings with each of the managers to comfort them about their job security and to identify any interest in new positions.

53 Mr Parle said that he met with Ms Rogan-Gardiner twice over the course of the two day conference. At the first meeting, he asked Ms Rogan-Gardiner which roles she would like to be considered for. She replied with words to the effect that she was only interested in the role of Manager (Financial Control Centre). He informed her that the role had already been filled by an internal candidate with strong technical skills in the area of process management and compliance and the only position that was available in the Financial Control Centre was that of Systems Accountant based in South Australia. Ms Rogan-Gardiner told him that she was not interested in that role.

54 Mr Parle then told Ms Rogan-Gardiner about the Regional Business Analyst position in Western Australia which was considered to be similar to her existing role. She responded by saying that she was not interested in the Regional Business Analyst position because it was beneath her. She then asked about the National Financial Controller position. Mr Parle informed her that the position had not been finalised but that if it did become available, she was welcomed to apply for it. He also told her that anyone with appropriate skills to perform the role would be entitled to apply for it and that the position would be based in Sydney. He asked if she would consider relocating from Perth. Ms Rogan-Gardiner said that she was not sure.

55 Ms Rogan-Gardiner's evidence in this respect differs slightly, mostly in emphasis and interpretation. She says Mr Parle had asked whether she was interested in the position of the Regional Business Analyst and she told him she was not. The reason for this, she said, was that she believed she had outgrown this type of work several years previously. She said that Mr Parle 'put forward' the position of Systems Accountant in South Australia as a second option. She said that she was not interested in this position and considered it a step backwards.

56 She said that she was upset that the positions that were offered to her were not ones that utilised her financial strengths. She had expressed interest in a management position at the Financial Control Centre in South Australia but was told by Mr Parle that the position had already been filled. She then requested a further meeting with Mr Parle on 16 April 2002 because she was concerned about the quality of the positions that had been offered to her.

57 At the second meeting, Ms Rogan-Gardiner she told Mr Parle that she wanted a job that was more appropriate to her level of experience and her desire to 'grow her strengths'. Mr Parle then suggested that she consider the position of National Financial Controller, which was second in charge to his role. He also suggested she put her name down for this role when it was offered in a few months' time. She said Mr Parle indicated that both internal and external candidates would be interviewed for this position but that she should rank fairly highly against them. She said Mr Parle also told her that he would send her a job description for the position. Mr Parle and Ms Rogan-Gardiner then discussed her willingness to move to Sydney and she indicated that she needed to first discuss the matter with her husband. She said that she did discuss it with her husband later and they had decided in particular, that the best opportunity for her career advancement and continued employment with Woolworths, was for the family to move to Sydney.

58 It should be noted at this point that at the commencement of the trial counsel for Ms Rogan-Gardiner sought to amend the statement of claim by broadening the conduct said to be in breach of the good faith term beyond that which related to the termination or the manner of the termination of the contract. In respect of that amendment certain concessions were offered. Firstly, it was accepted that the person who was later appointed to the position of National Financial Controller was better experienced and better qualified for that position than Ms Rogan-Gardiner. It was also accepted that Mr Parle had the opinion that Ms Rogan-Gardiner did not have the necessary skills for the position and it was conceded that no evidence would be led that she possessed such relevant skills.

59 The argument on behalf of Ms Rogan-Gardiner was, in effect, that she was offered the position of National Financial Controller, or led to believe that she would be considered for it, when there was no realistic possibility that this was so. The suggestion is that this conduct together with subsequent conduct leads to a conclusion that Woolworths had not acted in good faith towards Ms Rogan-Gardiner.

60 It is difficult to understand what interest Woolworths would have in encouraging Ms Rogan-Gardiner to believe that she was being offered a position (or to believe that she was suitable for a position) that she was in fact not qualified. There would be no advantage in creating unreasonable expectations that would ultimately have to be crushed. Any sense of grievance about loss of her own position could only be expected to resurface with greater intensity once the inevitable disappointment of being rejected for such a new position occurred.

61 When Mr Parle was cross-examined in this regard, he accepted that Ms Rogan-Gardiner had emphasised her financial accounting experience and that such experience was relevant to the position of the Financial Controller position. However, Mr Parle said that he believed that she was overemphasising this aspect of her experience because it appeared inconsistent with the functions of her existing position. He said that he turned the conversation more to the Regional Business Analyst role as that position was geared more to business support management accounting as opposed to financial accounting and that it was in the former area that he considered Ms Rogan-Gardiner's skills lay. Mr Parle denied making any firm offers to Ms Rogan-Gardiner. He said that the conversation in Sydney was simply an opportunity for employees to talk to him about what they had done and where he thought they might consider moving to. There was some attempt in cross-examination to suggest to Mr Parle that he did not know in any detail the nature of Ms Rogan-Gardiner's experience or skills and was not therefore in a position to be able to match her to appropriate positions. Mr Parle rejected this.

62 Mr Parle accepted that by an email dated 14 May 2002, he arranged for a job description for the National Financial Controller position to be sent to Ms Rogan-Gardiner. He said he did that because she was focussed on the role and was keen to know more about it. He said that the job description was sent to Ms Rogan-Gardiner and also to a number of other people, not because they were considered suitable but to give them an understanding of the role. He said he sent her a copy of the job description because she had expressed an interest in the position at the meeting and he had made a commitment that he would send it to her.

63 Mr Parle denied that he had at any time suggested to Ms Rogan-Gardiner that she should come to Sydney to interview for the National Financial Controller position. Ms Rogan-Gardiner was travelling to Sydney regularly at this time to complete some other work she was doing for the company.

64 Shortly after the Sydney conference, Mr Parle had contacted Ms Rogan-Gardiner to ask if she could assist with a reconciliation project in New South Wales. She agreed, and for the following few months, travelled to Sydney on a regular basis for one to two weeks at a time. This role related to the accounting in respect of liquor stores and warehouses; a division of Woolworths that was referred to as 'freestanding liquor'. She said that whilst in Sydney she began to look at accommodation in anticipation of taking up the position of National Financial Controller. She said that on one occasion, Mr Parle agreed that instead of flying her back to Western Australia for the weekend, the company would pay for a hire car so that she could look at some properties. She said that at this period she contacted Mr Parle twice as she had still not received the job description for the National Financial Controller position that Mr Parle had promised her at the meeting in April. She received that job description by email on 14 May 2002. She said that she then telephoned Mr Parle to confirm her interest in the position and he requested that she come to Sydney for an interview. She sent Mr Parle an email on 22 May 2002 asking him to confirm a time for the interview.

65 On 24 May 2002, Ms Rogan-Gardiner had a meeting with Mr Parle where she brought up the National Financial Controller position and he said that he had someone in mind for the position. She said that she was surprised by this and left the meeting confused. Following the meeting, she received a telephone call from Mr Parle in which he raised two possible alternative positions for her; one in the freestanding liquor division and the other in the mergers and acquisitions division. She said that she had previously advised Mr Parle that she was not interested in working in freestanding liquor and reiterated that when speaking to him. She said that she told Mr Parle that the reason for that was that she did not wish to work with another person who was in that division due to a prior bad experience. She confirmed her disappointment at the outcome of the meeting in an email dated 29 May 2002.

66 Mr Parle said that he was aware that in the email Ms Rogan-Gardiner expressed disappointment and he understood that that was because she had an expectation that they were going to talk about the National Financial Controller position when they met on 24 May 2002. He said that at that meeting he had indicated that the role in relation to that position was still being clarified, that he had sent her the job description so that she had an understanding of what it was about, but that was all that he could offer at that point. He said that they were not interviewing for the position and there was nothing more to say about it at that stage.

67 Mr Parle said he thought the issue had been resolved on 24 May 2002 and that when Ms Rogan-Gardiner sent the email of 29 May, he believed she was straying back into issues that had been canvassed previously. He said that he had made it clear to her on 24 May that he had not invited her for an interview in respect of that position. The position was not in fact filled until October 2002.

68 I accept that Ms Rogan-Gardiner had an interest in the National Financial Controller position and that Mr Parle appreciated this. However, I accept his evidence that he did not offer her this position, nor did he ever seek to create an impression that she would necessarily be eligible for it. I accept Mr Parle's evidence that the existence and responsibilities of the position were not finalised at this time and that his provision of the job description was not an indication to Ms Rogan-Gardiner that she was suitable for appointment. There does appear to have been a degree of vagueness about the nature of the position and when it would be filled. Mr Parle could, nonetheless, have made it clear to Ms Rogan-Gardiner as to whether he considered her to be a possible candidate for the position. This lack of clarity may well have encouraged Ms Rogan-Gardiner to believe that she had a chance of obtaining that position.

69 In my view, Ms Rogan-Gardiner's hopes, fed by concerns regarding her future job security and by her own view of her ability and experience, led her to mistakenly infer that she was being favourably considered for the National Financial Controller position, when that was not so. That mistaken belief was not, however, one that was deliberately created or actively fostered by Mr Parle. However, the disjunction between Ms Rogan-Gardiner's beliefs and Mr Parle's intentions inevitably resulted in confusion and disappointment. I have referred to these early events in some detail as they affected how Ms Rogan-Gardiner viewed all that followed. She thereafter doubted the sincerity of the senior officers who dealt with her and viewed offers with suspicion.

The Freestanding Liquor Finance Manager position

70 As mentioned, at the meeting with Mr Parle in Sydney on 24 May 2002, there had been discussion regarding the position of Finance Manager of Freestanding Liquor. Mr Parle considered Ms Rogan-Gardiner suitable for that position because she had done some work for the company when it had acquired the business of Liberty Liquors and that gave her relevant experience. He said that she told him in a telephone conversation that she was not interested because the position was based in Sydney and she did not want to move from Western Australia.

71 In June 2002, whilst in Sydney, Ms Rogan-Gardiner said she had an interview with Mr Parle and another executive regarding the freestanding liquor position. She said that she was told that this would be a substantial promotion and she felt that this showed that Woolworths valued her services and recognised her skills. She said that a few days later she again expressed her concerns regarding working with the person with whom she had previous difficulties. She said the Freestanding Liquor position was never formally offered to her but she conceded that this was not a position that she would have accepted had it been offered.

72 Whichever version is correct, it is clear that Ms Rogan-Gardiner declined the opportunity to pursue this position. She appears to have done so for personal reasons, either due to an inability to work with another person or because she did not wish to move interstate. She declined notwithstanding that the position would have been a substantial promotion and bring a pay rise of nearly $30,000 per annum.

Maternity leave - 29 September 2002 - 1 September 2003

73 Ms Rogan-Gardiner said that as 2002 progressed, she felt increasingly frustrated by a lack of certainty in regard to her future. She said that this became exacerbated by the fact that she became pregnant, that she was the breadwinner of her family and that she would shortly have a husband and three children to support. She said that on 1 July 2002 she informed Mr Parle that she was pregnant and was concerned that her pregnancy would affect her job opportunities. She said that Mr Parle said words to the effect that she should not worry and that they would sort it out when she returned from maternity leave. She applied for 12 months maternity leave; it was approved and commenced on 29 September 2002.

74 Prior to commencing maternity leave, a conference was held in Canberra in August 2002. Ms Rogan-Gardiner said that she met Mr Parle at the conference and inquired about the progress that had been made towards finding her a new position. She said that he replied with words to the effect that they would worry about it when she returned from maternity leave. Soon after the Canberra conference, Mr Parle contacted Ms Rogan-Gardiner and asked if she was willing to go to Tasmania for a few weeks to sort out problems they were having with the Transaction Processing Centre. She declined as she could not risk the pregnancy at that late stage.

75 In September 2002, shortly before Ms Rogan-Gardiner was due to commence maternity leave, she received a letter offering her a new service agreement. Woolworths offered these agreements to all executives to replace existing employment contracts. To encourage employees to sign the service agreement, Woolworths offered additional options with leverage in excess of $200,000. Whilst employees were not compelled to accept the offer, any new position would clearly be subject to the signing of a service agreement.

76 Ms Rogan-Gardiner declined to sign the service agreement. She said that she was concerned that her entitlements under the agreement were less than that under the existing employment contract. She later expressed some concerns in writing in response to the offer of another position in early 2003. She said in evidence that one of her concerns was that the new agreement would remove existing redundancy entitlements. Whether such entitlements existed was an issue. In any event, Ms Rogan-Gardiner did not state any such concern at the time.

77 During her maternity leave, Ms Rogan Gardiner contacted the Human Resources Manager at the Kewdale office of Woolworths on approximately four occasions between mid-October and November 2002. This person was not called as a witness but Ms Rogan-Gardiner said in her statement that she was told that Mr Parle had agreed that she would be made redundant. This may well be so, but it appears clear that the Human Resources Manager for Western Australia was not in a position to approve any such redundancies. Nor, indeed, was Mr Parle.

78 There was a redundancy policy but, in practical terms, it required a decision by the Chief Executive Officer. I will return later to the question of whether the redundancy policy ever became part of the contract of employment with Ms Rogan-Gardiner. The evidence for Woolworths was that that policy only operated in circumstances where there was no available alternative employment. The consistent view of the Woolworths witnesses was that Ms Rogan-Gardiner was a valued employee who they always believed should, if possible, be retained and was suitable to fill a number of alternative positions. Accordingly, the pre-conditions for redundancy were never met and no proposal was ever put to the Chief Executive Officer or approved by him.

79 On 9 December 2002, Ms Rogan-Gardiner contacted Julie Coates, Woolworths (General Manager Human Resources) in the corporate office in Sydney. She said that she did so because she had been told by the human resources manager in Western Australia that Mr Parle had approved a redundancy. She said that Ms Coates responded by saying words to the effect that Mr Parle did not have authority to make that decision and that the Chief Executive Officer had to approve all redundancies. She said that Ms Coates said that she understood that Ms Rogan-Gardiner was going to be offered a job in Western Australia. Ms Coates' own evidence was to the same effect. It is difficult to understand how Ms Rogan-Gardiner could maintain a belief that she was entitled to a redundancy payment in the face of this apparently authorative statement to the contrary.

80 Ms Coates contacted Ms Rogan-Gardiner on 16 December 2002 and told her that Woolworths wished to offer her a position as a Corporate Auditor and that the company valued her abilities and wished to retain her services. Ms Rogan-Gardiner viewed the Corporate Auditor's role as a demotion and did not regard it as a genuine attempt to find her a suitable position. She said that she was annoyed that Woolworths appeared to be offering any position to her in order to avoid a redundancy. She said she had not taken any auditing roles in her career and that she did not find auditing work stimulating or interesting. She said she told Ms Coates that to take up such a role would be 'going backwards' and would involve extensive travel and that this would be unfair on her husband. She said she had not received a job description and Ms Coates said she would provide a full job description and offer to Ms Rogan-Gardiner after 6 January 2003, when she, Ms Coates, returned from leave. Ms Coates said that there was no urgency for a decision given that Ms Rogan-Gardiner was currently on maternity leave.

81 Ms Rogan-Gardiner said that she was upset at being offered a role of this type, but did not say so to Ms Coates as she did not wish to appear rude. A formal offer for the Corporate Auditor's position was received by Ms Rogan-Gardiner on 15 January 2003. That position was to be based in Perth reporting to the Group Internal Audit Manager who was based in Sydney.

82 On 31 January 2003, Ms Rogan-Gardiner wrote to Ms Coates with several queries relating to the Corporate Auditor position. She said in her statement that she needed a response to those queries in order to give further consideration to the offer. On the face of it, this seems inconsistent with her view that the role did not reflect her experience and that the position was, in effect, a demotion. The queries included questions regarding the service agreement, in particular the extent to which the CEO could change the scope of the job and the circumstances in which notice of termination could be given.

83 A response to the queries was received by letter dated 21 February 2003. In that letter, Ms Coates set out the reasons why the position was being offered. She said:

The Refresh project has led to several functions being centralised, finance being one of those. This has meant that your previous state based role no longer exists in the new structure. Woolworths has made every effort to redeploy employees to suitable roles taking into consideration their knowledge, skills and experience. Where redeployment has not been possible, and only as a last resort, we have terminated employees. In relation to your own personal circumstances, these principles have been applied. We are therefore pleased to be able to offer you this position without the customary job interview.

The Service Agreement reflects the position title of the role being offered and is the standard agreement required to be signed by all Woolworths executives. As such it is written to ensure flexibility to meet both employee and business requirements eg. promotions, demotions, transfers etc. We are not prepared to change the document from its present standard format.

...

The Termination on Notice clause would be involved in most normal company instigated terminations and could include for example, but not be limited to the following:

(i) the results of any formal, written counselling process or

(ii) business restructures

84 On 19 March 2003, Ms Rogan-Gardiner declined the position and explained her reasons for doing so. Those reasons were that the position was not commensurate with her experience, that auditing involved a career change and limited progression opportunities, that the position was at a lower level than her old position and that there was limited opportunity for team work and staff development.

85 Notwithstanding that Ms Coates had told Ms Rogan-Gardiner that no redundancy had been approved or was even in contemplation, it would appear that she continued to harbour a belief that she should be given a redundancy payment. This belief appears to have strengthened her resolve not to accept any position that she considered was not an improvement to the position that she had previously occupied. She concluded her letter of 19 March 2003 by stating:

Please find suitable alternative employment for me or apply the usual redundancy package per the company policy I have been given and the precedents set in making the Financial services staff in Western Australia redundant.

It must be pointed out here that Mr Parle and Ms Coates consistently denied that there was no suitable position. Indeed they were of the view that any of the several positions offered to Ms Rogan-Gardiner were suitable. Suitability might well be something about which reasonable people can differ, however, as will shortly be seen, one factor that must be significant is whether the employee is able to retain the same level of remuneration and entitlements. Suitability can also be viewed differently by an employer and employee. The employer might be more focussed on utilising an employee's existing skills and experience to its best advantage. The employee might be more focussed on how a position assists in the achievement of long-term career goals. That difference was evident here.

86 On 2 April 2003, Ms Coates wrote to Ms Rogan-Gardiner urging her to reconsider her position and giving her until 23 April 2003 to do so. That letter states:

Your career history has not been overlooked in taking into consideration the various opportunities which have been available to you in the business since the commencement of the Finance Restructure. These opportunities have been made available to you via ongoing communication from your General Manager Tony Parle and have included discussions to consider the role of Regional Business Analyst in WA, Senior Accounting roles in SA, the opportunity to undertake a temporary acquisition project based in WA and a reconciliation project based in Sydney in order to give you the opportunity to consider a permanent move to NSW.

The company considers that the Corporate Audit role is a strategic role within the business and would allow you to use your financial qualifications and business acumen in order to actively participate in business review and improvement. Performing this role would in the company's opinion, provide further breadth to your experience and would not preclude you from taking on future roles in financial accounting. Further, the role does not require you to relocate from your home state and you salary and benefits will be maintained.

As such, the Company considers the role to be one of suitable alternative employment. It is also consistent with the Company's obligations under section 38 of the WA Minimum Conditions of Employment Act 1993 in respect of your return from parental leave. That section requires the Company to offer you the most comparable available position for which you are qualified, and which you are capable of performing.

The Company's clear desire is to enable you to continue in meaningful and rewarding employment. It is not our wish to lose your services. For this reason, the Company is prepared to give you until 23rd April 2003 in order to reconsider your position. Please let us know by then whether or not you are prepared to accept the role. Should you continue to refuse the role of Corporate Auditor, then the Company will have no choice other than to conclude that you do not intend to perform reasonable alternative duties on your return to work. This is likely to lead to the termination of your employment.

Should a termination occur, you will not be entitled to redundancy benefits. In this regard, I should point out that the Company's redundancy policies do not form part of your contract of employment. Your refusal of an offer of suitable alternative employment would also mean that redundancy pay is inapplicable.

In the circumstances, I urge you to reconsider your current stand.

87 On 14 April 2003, Ms Rogan-Gardiner responded, explaining why each of the positions that had been discussed were not acceptable to her and were not comparable, in her view, to the position of Financial Services Manager. She then went on to express dissatisfaction and, under a heading 'Unequal and unfair treatment' stated as follows:

There are 3 points worth noting on the activities that have taken place in Western Australia in the Financial Services Department. They indicate that I am being treated less favourably than other Financial Services staff members.

My role became redundant when the functions in my department were transferred in September 2002, 2 weeks prior to the start of my maternity leave period.

A number of my staff were offered positions within Woolworths which they declined, because the staff felt the positions were unsuitable for them for a variety of reasons, and all staff still employed by Woolworths were made redundant when their jobs no longer existed at the time the functions transferred to either the Transaction Processing Centre in Tasmania or the Financial Services Centre in South Australia. To state that I will be terminated when others have received different treatment under the same employer would be ignoring a precedent already set in the same set of circumstances.

Another employee in Western Australia was also in the advanced stages of pregnancy and was due to have her baby 2 weeks after mine. Like myself, she had approved maternity leave, yet, as there was no job available for her on her return from maternity leave, as at September 2002, she was made redundant.

There is also the circumstance of the Chief Accountant for Liberty Liquors, Sanjay Patel, who was made redundant in February 2002 only 8 months after Woolworths acquired the liberty Liquors group. Sanjay was offered a position in Sydney but chose not to accept it. Like myself, Sanjay had desired to continue working within the financial accounting field. He was not required to accept an auditing position in Western Australia but was paid redundancy instead. At the time of his redundancy the restructure process had already identified that there would no longer be a Financial Services Department in Western Australia.

The threat to terminate my services without payment of a redundancy payment amounts to unequal treatment and constitutes a detriment to me. I believe that the Company's attitude in this regard relates directly to my gender and family responsibilities and that the Company is taking this action in the hope of forcing me to resign, knowing that I am a breadwinner in the family and am unable to move easily given that I have a young baby. That is unfair and unlawful conduct.

Redundancy payment

For all the reasons I have already given, I do not believe the role of Corporate Auditor is comparable to the previous role I held as Financial Services Manager, as an executive of Woolworths in Western Australia.

Contrary to what you say in your letter, I believe that the Redundancy Policy is incorporated in my contract of employment. When the restructuring was discussed with me, I was handed a copy of the policy and told that it would apply to all positions made redundant in my Department. I accepted that the policy would apply to me if I were made redundant.

As I have said before, I will not accept the role of Corporate Auditor because it is not comparable alternative employment. I accordingly request the Company to offer comparable alternative employment or redundancy (including a full redundancy payment in accordance with the policy) by 30th April 2003.

If the Company attempts to terminate my services without paying me a redundancy package, I will take all necessary legal steps to protect my position.

88 Ms Rogan-Gardiner's contentions regarding redundancy were rejected by Ms Coates in her evidence. Ms Coates said that the only policy of which she was aware was a schedule for calculating entitlements in the event of severance that had not been used to her knowledge since at least June/July 2002. She said that at that time she had a discussion with the then CEO of Woolworths who instructed that no employee would have their employment terminated on grounds of redundancy unless both he and Ms Coates authorised it. In fact, Ms Coates said, the policy was to retain employees, redeploy them and only terminate for redundancy if their skills could not be utilised anywhere else within the company. Ms Coates said that throughout Project Refresh and until the commencement of 2010, only 11 executive employees had their employment terminated on grounds of redundancy. The references in Ms Rogan-Gardiner's letter to others having been given redundancy payouts almost all related to non-executive employees.

89 The reference in Ms Rogan-Gardiner's letter to a copy of a policy which she was handed, is to a document which she says she was given in August 2002 by a human resources officer in Western Australia. The only document that this could refer to is entitled 'Redundancy Policy for Management' which appears to be an extract from a larger manual bearing a date of September 1997. There is nothing to suggest that this was current in 2002 - 2003. Indeed, Ms Coate's evidence is to the contrary. In any event, that document provides that an employee would only be made redundant if a position was no longer required, all efforts to find a suitable alternative position had been unsuccessful and Divisional General Managers had agreed it was the only appropriate course of action.

90 On 12 May 2003, Ms Rogan-Gardiner received a telephone call from Tony Backshall, Woolworths Human Resources Operations Manager. Mr Backshall asked Ms Rogan-Gardiner to reconsider the offer of the position of Corporate Auditor. He offered to organise for the Woolworths Group Internal Audit Manager to come to Perth to discuss the position with her. She declined this offer because, she said, she had no intention of taking the position. She said she had no training or qualifications as an auditor and did not want to change her career at that stage. She said that she explained this to Mr Backshall and said words to the effect that if there was not anything suitable for her, they had to consider offering her a redundancy. He said that he would have to discuss this with Ms Coates and the Chief Executive Officer and he would get back to her.

91 On 11 July 2003, Ms Rogan-Gardiner sent an email to Mr Backshall expressing concern that she had not heard from him since May. On 12 July 2003, she received an email from Mr Backshall in which he apologised for the delay, explained that he still needed to speak to a couple of people and would get back to her shortly.

92 On 18 July Mr Backshall wrote in the following terms:

Since our last phone conversation on Monday 12th May 2003 in regards to your decline of our offer to you to take up the role of Corporate Auditor based in Perth, a significant amount of time and effort has been invested in looking at alternatives for you to consider.

I have been speaking to Kathryn McLay our Internal Audit Manager and Matthew Lawrance who is the National Finance and Strategy Manager for Supply Chain.

As a result of these discussions, I am very pleased to be able to offer to you, for your consideration, the role of Zone Business Analyst, Supply Chain West, based in WA. This role has a direct reporting line to the National Performance and Planning Manager based in Supply Chains National Office here in Strathfield NSW.

...

Michelle, this is a great opportunity for you to be a part of and add enormous value to what is going to be a very exciting time in Supply Chain, with the development of the new state of the art Perth Regional Distribution Centre due to open in October 2004.

The role will enable you to utilise and broaden your existing skill set and experience, whilst still giving you the opportunity for further advancement in the company when appropriate opportunities present themselves and you wish to take advantage of them.

Michelle, the Company's clear desire is to enable you to continue in meaningful and rewarding employment. It is not our wish to lose your services. At this point in time, both the role of Corporate Auditor and Zone Business Analyst are available and offered to you for consideration. Can you please read and give careful consideration to the position description and Business Analyst Activities Plan as Matthew Lawrance will contact you during the course of next week to organise a time to meet and discuss this role further.

93 Ms Rogan-Gardiner considered that this was not a position comparable to her previous position as it was neither a managerial nor executive role. On 1 August 2003, she wrote to Mr Backshall explaining that she felt that neither the Corporate Auditor nor the Zone Business Analyst positions were at a comparable level to her previous position. At this time, Ms Rogan-Gardiner said she was feeling very stressed about her future and as a result decided to return to work early in order to bring matters to a head. In her letter, she said that she intended to return to work on 1 September 2003.

94 On 6 August 2003, Mr Backshall sent an internal memorandum to Ms Coates outlining the present position and the issues as he saw them. As the plaintiff has placed some emphasis on this memo, I will set the relevant parts out in full:

Listed below are some of the issues for us to consider before making a call on how we handle and my recommendation.

ISSUES:

• Can't verify what it is Michelle has been told by Tony Parle in relation to Redundancy.
• It appears from the timeline todate and her version of events, that communication with her, prior to us getting involved in December 02 has been pretty loose, in particular around the issue of not only redundancy but also the role of National Financial Controller reporting to Tony Parle.
• It appears that she was asked to apply for it, was issued with a PD, then had to chase Tony Parle for an interview, which when it happened, was not an interview at all and culminated in her being told by Tony that he was looking for an external recruit and consequently appointed Peter King.
• Michelle allegedly being told by Tony at the National conference in August last year when approached by Michelle in regards to what was happening with her and his reply of 'we will worry about it when you get back from maternity leave'
• Us being able to prove that the Corporate Audit role was a real role and not one that was concocted to get her back into the workplace and potentially avoid paying a redundancy.
• Michelle claims that both roles offered to her are beneath her and don't give her an opportunity to further develop and take up other opportunities.
• Michelle has also stated she is not prepared to relocate based on her family situation and understands that to move forward she would need to move out of WA.
• Has issues with Service Agreement and to date has refused to sign.
• Her claim that we are discriminating against her based on her family circumstances and her gender, she believes we are trying to put her in a position where she resigns.

• I don't have the degree of confidence that the Auditor Role was a real role and I think Kathryn Mclay would support that view.
• I have a degree of discomfort in regards to the role Tony Parle has played and how he has played it and believe that a number of holes could be 'punched' in it by a half smart lawyer. I believe that from day 1 of the restructure announcement Michelle knew that the only way she would be able to continue to play a Senior role in Finance would be if she relocated and I don't believe it has ever been her intention to do this if asked or offered. The heart of this I believe is her ego and the fact that she wasn't asked and given the opportunity to say no.
• She was offered the roles of RBA WA IT Accountant SA, neither of these in her eyes were senior enough.
• You would also assume from what transpired in regards to the Financial Controller role reporting to Tony, which would be the role she would have wanted to be offered, and the way Tony has handled it, that he couldn't have been to keen to have her their anyway, if he was I believe he would have ensured it happened.
• The difference in dollars between us terminating her or making her redundant is just under $30000. Under either of these scenarios she loses $237000.00 options after exercising them.
• I believe we are on good ground in regards to how we have treated her in relation to her family circumstances and how we intended treating her going forward if she accepted the Supply Chain role.
• I believe we could prove that this role is suitable alternative employment, with still the opportunity for growth.
• The fact we want to continue her employment and that we can prove we have given her counsel around not resigning or putting us in a position of terminating, due to the financial impact on her, in relation to her options, goes to the fact we are looking after her interests and being transparent.
• We have given her the same counsel around redundancy and the fact that she will lose access to the TSR component of her options.
• So I believe she is on shaky ground stating that we are discriminating against her based on her gender/family situation and trying to force her to resign.
• We have stated on more than one occasion in writing and verbally that we wish to retain her services.
• The call we need to make is that when you consider all that has transpired, do you want to force her to work for us and what value will it add to either party.
• She will be hard to manage going forward both locally and remotely.
• It will end up in litigation, which will tie up You, me, Tony Parle, legal counsel, and the outcome will more than likely be that we pay redundancy.
• It will end up in a common law court not commission as there is no redundancy standard for WA and the common law precedent will if we lose will probably be to pay 6 months based on her position and length of service, this would equate to approx $52000.00 plus costs
• The redundancy calculation come out at $53534.00.

95 There are no doubt some potentially embarrassing features of this memo. It appears to contain concessions that there was some doubt as regards whether Ms Rogan-Gardiner had ever been offered a redundancy payment and as to whether the Corporate Auditor position was 'a real role'. However, in cross-examination Mr Backshall said that this memo was an expression of his own views at that point in time and was written for the purposes of discussion. He wrote it without having an opportunity to speak to Mr Parle. He said that the Corporate Auditor role was not 'real' only in the sense it was created especially to accommodate Ms Rogan-Gardiner's desire to remain in Western Australia, the rest of the audit team being based in Sydney. He said whether that role was functional depended substantially on Ms Rogan-Gardiner being an active and willing participant in the arrangements. He said it was a role created to facilitate a return to work by Ms Rogan-Gardiner, not to avoid paying a redundancy payment. In the event that Ms Rogan-Gardiner did not take up the position, that role would not be filled in Western Australia.

96 On the other hand, the memo appears to confirm that Woolworths had gone to considerable effort to try to accommodate Ms Rogan-Gardiner and either find, or create, a position that met her needs and its desire to retain her services. That Woolworths would expend such effort as part of an extended and concerted plan to avoid paying her a redundancy payment strains credibility.

97 In my view, both Woolworths and Ms Rogan-Gardiner began to doubt whether the other was acting in good faith as the offers continued to be made and rejected. From Ms Rogan-Gardiner's perspective, she came to firmly believe the offers were not genuine and were made only to deny her a redundancy payment. From Woolworths' perspective, Ms Rogan-Gardiner was being intransigent and unreasonable in her refusals and there was a determination not to offer a redundancy payment in circumstances where it was not considered justifiable. Perhaps this resulted in the offers continuing past the point at which Woolworths could reasonably have hoped Ms Rogan-Gardiner would continue to be a worthwhile future employee in any role.

98 Mr Backshall's memo reflects a degree of pragmatism in that regard. His suggestion that a redundancy payment may be a viable option is not, in my view, an acceptance that Woolworths had any obligation in that regard. Rather, it was advanced as a practical option for resolving what seemed to be an intractable problem. In any event, Woolworths did not pursue any alternative options, rather it maintained its stance that the positions offered were suitable.

99 On 18 August 2003, Ms Rogan-Gardiner received a letter from Mr Backshall. He set out the history of offers of alternative employment made to her and reiterated Woolworths' desire to retain her services and to enable her to continue in meaningful and rewarding employment. He noted the intention to return to work on 1 September 2003 and extended the offers of the Corporate Auditor or Zone Business Analyst positions to 29 August 2003.

100 On 27 August 2003, Ms Rogan-Gardiner's solicitors wrote to Woolworths on her behalf. That letter maintained that Ms Rogan-Gardiner was entitled to a redundancy payment and, in regard to the offered positions, stated as follows:

Contrary to the suggestion in your letter, my client has only been offered 2 full time positions (Corporate Auditor and Zone Business Analyst Supply Chain West). Neither of these positions:

1. Is at the same level or status as my client's former position;
2. Is at a level that warrants payment of the remuneration package at the level my client was receiving; or
3. Offers my client a continuing career path in her chosen area of financial accounting.

My client has, accordingly, declined both positions.

My client has recently engaged the services of SC Yarrow Pty Ltd, a human resource management specialist, to assess each of the positions using the Hay evaluation Methodology. My client's former role (Financial Services Manager) is a 677 Hay point job, justifying a current remuneration package in the region of $153,000 per annum. The Corporate Auditor position scores 431 Hay points justifying a current remuneration package in the region of $89,000 per annum, whilst the Zone Business Analyst position scores 342 Hay points justifying a current remuneration package in the region of $73,000 per annum. The conclusion is that both these positions are at an operational level, whereas my client has always been in a position at management level.

This confirms my client's view, expressed to the Company, that the positions are not similar in status and do not represent suitable alternative employment for her.

My client confirms that she will not accept either position offered to her.

The Company is not entitled to direct my client to accept these positions and it is quite incorrect to suggest, as you do in your letter, that if she does not commence working in one of those positions on 1 September 2003 she will be considered to have resigned.

101 It should be pointed out at this stage that evidence was called by the plaintiff from Mr Yarrow with a view to establishing that the Corporate Auditor and Zone Business Analyst positions did not involve the same level of skill and expertise as did the abolished position of Financial Services Manager. Mr Yarrow described the offered new roles as being significantly lower in terms of responsibility and level of skill required based upon the job descriptions provided to him. However, Mr Yarrow accepted that job descriptions were not always particularly accurate and that where there was a restructure, the nature of a new position needed to be assessed sometime later. He also accepted that if a position involved responsibility for a new distribution centre (being relevant to the Zone Business Analyst in Western Australia) this would cause his rating of that position to be higher.

102 There was also some evidence that Woolworths' own ratings of the three positions in question largely reflected Mr Yarrow's views. However, again, the accuracy of these ratings was open to question. Nonetheless, on the basis of this evidence and that of Mr Yarrow, there is good reason to infer that the Corporate Auditor and Zone Business Analyst positions were lower in level of responsibility and managerial standing than the Financial Services Manager position, though it is difficult to say exactly how much lower.

103 To some extent, this lends credence to Ms Rogan-Gardiner's expressed concerns that the offered positions did not offer her equivalent standing and opportunity as her former position had done. Yet in circumstances where there had been a restructure and movement of some responsibilities to management centres in other states, the fact that there was no equivalent position in Western Australia was to be expected. In these circumstances, what could Woolworths reasonably be expected to do if Ms Rogan-Gardiner declined higher level opportunities in other States and expressed a wish to remain in Western Australia? In my view, what could be reasonably expected, if Woolworths genuinely wished to retain her services, was that it would offer her a position which, whilst not necessarily at the same level, she would have the skills and experience to perform, was the closest comparable position available and which would not involve a loss of benefits. Ms Coates and Mr Backshall consistently maintained that this is what Woolworths did.

104 In discussions with Ms Rogan-Gardiner and in correspondence, the undertaking was given on behalf of Woolworths that her salary and entitlements as an executive would be maintained. Ms Rogan-Gardiner accepted that both Ms Coates and Mr Backshall told her that those entitlements would include the options due to vest in June 2004. However, Ms Rogan-Gardiner said that she considered that opportunities for future salary increases in the new positions would be limited as her existing salary would be higher than the grading of those positions. She accepted that she was told she would be eligible for salary reviews as an executive, but considered this to be an empty promise.

105 It is difficult to accept that a decreased prospect of salary increases was a significant factor in the rejection of the offered positions. One reason for this is that Ms Rogan-Gardiner accepted that by 2003, salary increases were marginal in any event and had been effectively replaced by the option incentive plans. Furthermore, to decline any executive position would put at risk access to the options vesting in 2004 that, on any view, were worth substantially more than any possible salary increase. This was a risk that Mr Backshall said he had been concerned to ensure that Ms Rogan-Gardiner understood.

106 In the circumstances, in my view, the Corporate Auditor and Zone Business Analyst positions offered were comparable in terms of salary and benefits. The loss of opportunity for the same level of responsibility and future promotion were functions of the restructure and Ms Rogan-Gardiner's desire to stay in Western Australia. Accordingly, whilst the positions were not equivalent to that previously occupied by her, they were, nonetheless, the 'most comparable' positions that were available in Western Australia.

107 On 1 September 2003, Ms Rogan-Gardiner reported to work at Woolworths' Kewdale offices. She was provided with an office and computer, but no work to perform. At 9.15 am on that day, Ms Coates and Mr Backshall telephoned her. They said that she was required to tell them which of the offered positions she was accepting. She said that she did not intend to resign and would not accept either the Corporate Auditor or Zone Business Analyst position as they were operational and not management positions. They asked her why she had come back to work and she said words to the effect that she had come back in order to work in a position that was equal in status and pay to her previous role. They said that they were offering her ongoing employment and were not demoting her as they were offering her an executive salary with a bonus and an option entitlement, which were the same conditions that she had previously enjoyed. She said words to the effect that there was very little chance for advancement in either of the proposed roles. She said that she was concerned that although her pay would remain the same, it would not have the potential to increase as it would have done in her previous role. She said that she would contact her solicitor to get advice as to her rights and obligations. Ms Coates said words to the effect that the offers of ongoing employment were reasonable and that Woolworths had done everything that it was obliged to do. Ms Rogan-Gardiner said that she would get back to them later in the day.

108 Ms Rogan-Gardiner said that at this stage she was very distressed and upset by the situation and went to see her doctor. She was declared unfit for work from 2 September 2003 until 9 September 2003. On 9 September, Ms Coates wrote to Ms Rogan-Gardiner. That letter states, in part, as follows:

As stated on Monday the 1st of September in our phone conversation, we regard you as a continuing employee of Woolworths Limited. As a result, we consider it appropriate to communicate with you directly to negotiate the terms and conditions of your return to work from maternity leave. We do not believe it is appropriate to discuss these matters only with or through your solicitor.

...

The role of Corporate Auditor, with a direct reporting line to Corporate office in NSW, would enable you to work with both Senior Executives and Line Management in WA. This would increase even further your experience and knowledge of the WoW Group, as well as opportunities for your further development as they arise.

With the role of Zone Business Analyst - Supply Chain West, again your skills and expertise would be invaluable. This role has a direct reporting line to Paul Hill, the National Performance Manager for Supply Chain.

As stated in our phone conversation on Monday the 1st of September, this particular role in WA is critical as we are about to commence the construction of the first of the new Regional Distribution Centres as part of the Supply Chain Development Plan and phase 2 of Project Refresh. Our Supply Chain and IT strategy as part of phase 2 Project Refresh will have a combined expenditure of one billion dollars over the next 5 years with the objective of driving 4 billion dollars in costs out of our business.

WA is the start of this significant investment. You can play an active part in helping to manage the transition to this state of the art facility. The particular responsibilities associated with the role of Zone Business Analyst - Supply Chain West means that it is inappropriate to compare the role with other Business Analyst roles in different Zones.

With either of these roles you will continue to be managed as an Executive in the Woolworths Group, retaining all of your entitlements, including the following:

• Current salary
• Salary reviews as per company policy and based on performance
• 40% STIP payable based on performance hurdles being met
• LTIP
• Fully maintained company vehicle.

...

Michelle, please let me assure you again that you are a valued employee of Woolworths. At all times, we have been clear about the fact that we wish to retain you as an employee and an Executive within the Woolworths Group. That remains our position.

...

You currently have 35,000 unvested options under the EOP which will potentially vest on 1 July 2004. Each of these options has a strike price of $5.11. As a result, these unvested options are potentially worth approximately $230,000 assuming that the current share price is maintained. They could even be worth more if the share price increases.

We want to give you the opportunity to access this very substantial potential reward. However, your entitlement to the 35,000 unvested options under the EOP will be forfeited if you leave employment prior to 1 July 2004, no matter whether the cessation of your employment is ultimately classed as a redundancy, a resignation, or some other form of termination.

In the circumstances, Woolworths is prepared to give you one further opportunity to agree to perform the duties of either Corporate Auditor or Zone Business Analyst - Supply Chain West.

However, we must insist that you confirm by 5:00 pm Perth time on Friday 12th September 2003 that you are prepared to agree to perform the duties of either Corporate Auditor or Zone Business Analyst - Supply Chain West

If we have not received your agreement to perform the relevant duties by 5:00 pm Perth time on Friday 12th September 2003, then we will have to presume that you are not prepared to perform any of the suitable alternative duties which have been offered to you. This will leave us with no choice other than to regard your employment as having come to an end.

109 Ms Rogan-Gardiner again saw a doctor that day and was provided with a further medical certificate for the period 10 September 2003 to 15 September 2003. However, she reported to work on 10 September and wrote to Ms Coates. That letter reads as follows:

As per our previous discussions, I am not accepting either position of Corporate Auditor or Zone Business Analyst - Supply Chain West. Neither of these roles is at the senior accounting level of my previous position of Financial Services Manager, Western Australia.

I am seeking suitable alternative employment in a senior accounting role and have come to work today for the purpose of taking up such a position, as I did on 1st September. Please provide me with a senior position as I have requested.

I look forward to hearing from you.

110 Ms Rogan-Gardiner then telephoned Mr Backshall and was told that she should speak to her solicitor as Woolworths had asked its solicitor to contact hers. She said that she left the office at around 11.30 am to contact her solicitor.

111 The following day, 11 September 2003, Ms Rogan-Gardiner's solicitor wrote to Woolworths. That letter confirmed that her position was unchanged and that she would commence litigation if the company terminated her employment. She attempted to phone Mr Backshall several times that morning. She spoke to Mr Backshall and Ms Coates by conference call at about 12.30 pm. She said that Mr Backshall asked her whether her position had changed since the day before. She confirmed that it had not and asked what the next step was. She then received a letter by facsimile. That letter has been described as a letter of termination. It reads as follows:

Dear Michelle

We are pleased that you have presented yourself to our Regional Office in Kewdale for work.

As per our correspondence to you dated Tuesday 9th September 2003, we have offered you two roles we believe to be suitable alternative employment, which utilise your skills and experience.

In response to your fax dated 10th September 2003 informing us of your decision not to accept either of the roles, and our telephone conversation with you today, 11th September 2003, where you confirmed the above, we must inform you that your employment with Woolworths Limited has ceased.

Yours sincerely

[Signature]

TONY BACKSHALL

HR Operations Manager

112 The necessity for there to be trust and confidence between an employer and an employee is a necessary basic component of an employment contract. In Woods v WM Car Services (Peterborough) Ltd [1981] IRLR 347 Brown-Wilkinson J said:

In our view it is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84.

113 A term of mutual trust and confidence has been regularly implied into employment contracts in the United Kingdom. In Malik v Bank of Credit and Commerce International SA (in liq) [1997] UKHL 23; [1998] AC 20, the House of Lords affirmed the existence of an implied obligation of mutual trust and confidence. In that case the appellants had worked for the respondent bank prior to its collapse. After the collapse it became publicly known that the bank had been involved in corruption and dishonesty. The appellants were not involved in this conduct and became aware of it only after the collapse. The appellants claimed that the stigma of working for the bank had caused them difficulties in obtaining alternative employment. It was held that as part of its general obligation not to engage in conduct likely to undermine the trust and confidence required by the employment relationship the bank was under an implied obligation to its employees not to conduct dishonest or corrupt business. Lord Nicholls said at (36):

The purpose of the trust and confidence implied term is to facilitate the proper functioning of the contract.

Although the underlying purpose of the trust and confidence term is to protect the employment relationship, there can be nothing unfairly onerous or unreasonable in requiring an employer who breaches the trust and confidence term to be liable if he thereby causes continuing financial loss of a nature that was reasonably foreseeable.

114 In Australia, the existence of an implied good faith term has been assumed in some cases: Blyth Chemicals Ltd v Bushnell [1933] HCA 8; (1933) 49 CLR 66, 81 and expressly accepted in others: Burazin v Blacktown City Guardian Pty Ltd [1996] IRCA 371; (1996) 142 ALR 144, 151. In the latter case the Full Court of the Industrial Relations Court of Australia considered that there was ample English authority for the implication of a term of trust and confidence into a contract of employment. Burazin has been cited as authority in subsequent cases for implying such a term in Australia: Thomson v Orica Australia Pty Ltd [2002] FCA 939; (2002) 116 IR 186, Carrigan v Darwin City Council [1997] IRCA 101; Perkins v Grace Worldwide (Aust) Pty Ltd (1997) 72 IR 186; McDonald v The State of South Australia [2008] SASC 134; (2008) 172 IR 256.

115 One of the more recent considerations of this issue has been by the Court of Appeal of New South Wales in Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWSC 217; (2008) 72 NSWLR 559. In that case the trial judge had considered that there were two implied terms, one to act in good faith and another not to act without reasonable and proper cause in a manner calculated to destroy or seriously damage the relationship of confidence and trust. On appeal Basten JA concluded that these were two aspects of the same obligation and went on to consider the scope of such a term in Australia. His Honour said at [32] - [33]:

Although there were said to be two implied terms, it is probably sufficient to identify them as a single obligation. Thus, in Eastwood v Magnox Electric plc [2004] UKHL 35; [2005] 1 AC 503, Lord Nicholls of Birkenhead stated at [11]:

'The trust and confidence implied term means, in short, that an employer must treat his employees fairly. In his conduct of his business, and in his treatment of his employees, an employer must act responsibly and in good faith. In principle, this obligation should apply as much when an employer exercises his right to dismiss as it does to his exercise of other powers of his which affect a subsisting employment relationship. It makes little sense, for instance, that the implied obligation to act fairly should apply when an employer is considering whether to suspend an employee but not when the employer is proposing to take the more drastic step of dismissing him.'

Recognising that an employer may act with reasonable and proper cause to pursue its own interests, whether or not they are adverse to those of the employee, and may terminate the employment at any time without cause on giving notice, casts some uncertainty on the scope and extent of the implied duties. In Australia, they have enjoyed more limited recognition than in the UK and have usually been called in aid to identify the kind of conduct of an employer sufficient to constitute 'constructive dismissal', which the employee can treat as a repudiation of the contract of employment: see Easling v Mahoney Insurance Brokers [2001] SASC 22; 78 SASR 489 at [99] (Olsson J); Thomson v Orica Australia Pty Ltd [2002] FCA 939; (2002) EOC 93-227; (2002) 116 IR 186 at [141] (Allsop J); Martech International Pty Ltd v Energy World Corporation Ltd [2007] FCAFC 35; (2007) 248 ALR 353 (Moore, Tamberlin and Gyles JJ); Hem v Cant [2007] FCA 81; (2007) 159 IR 113 at [20]- [23] (Finkelstein J); Delooze v Healey [2007] WASCA 157 at [32] (Wheeler JA, Steytler P agreeing).

116 Given that the purpose of a good faith term is to ensure the effectiveness of a working relationship between an employer and an employee, it might be thought that such a term is fundamentally inconsistent with the termination of that relationship. Such was the conclusion reached by Rothman J at first instance in Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104; (2007) 69 NSWLR 198. His Honour said at [141]:

By its nature, an act terminating the contract of employment is inconsistent with the fulfilment of the contract of employment, its continuation, and the necessity to make it efficacious. Almost by definition, the implied duty, not to act to destroy the relationship of trust and confidence, will not interfere with the right of a party to a contract of employment to terminate the contract. It may be that the implied duty of good faith can operate at the point of termination, but it cannot operate in circumstances where the termination is, as a matter of fact and as a matter of law, without cause.

117 On appeal Basten JA also referred to impediments in awarding damages for loss flowing from unfair dismissal where the claim relied upon a breach of an implied term of good faith. In this regard his Honour referred to the decision of the House of Lords in Johnson v Unisys Ltd (2003) 1 AC 518.

118 In Johnson v Unisys Ltd, it was held that in general there is no right of action at common law to recover financial losses arising from the unfair manner of dismissal. That conclusion depended, in part, on the availability of other remedies for loss of damages arising from unlawful termination. That position has also been adopted in Australia. In Aldersea v Public Transport Corporation [2001] VSC 169; (2001) 3 VR 499 [75] - [83], Ashley J of the Victorian Supreme Court held that there was not an implied term of good faith in relation to termination. In The State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371, the New South Wales Court of Appeal agreed with the reasoning in Johnson, although recognising the different applicable legislation (which was nonetheless similar to that being considered in Johnson). In Intico (Vic) Pty Ltd v Walmsley [2004] VSCA 90, the Victorian Court of Appeal rejected an implied term in relation to dismissal in the context of a right to dismiss for misconduct.

119 In Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2008] NSWSC 217; (2008) 72 NSWLR 559, Basten JA noted that the principle in Addis v Gramophone Company Ltd [1909] UKHL 1; [1909] AC 488 precluding damages for the manner of a wrongful dismissal and the distress thereby occasioned to the employee except in limited circumstances was relevant in considering the scope of the implied term of good faith. At [55] his Honour said:

However, subject to exceptions, this head of damage is excluded by the principle stated by Lord Loreburn LC in Addis, that damages are not recoverable 'for the injured feelings of the servant, or for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment': at 491. Nevertheless, damages of these kinds are recoverable, the appellant contended, on the basis of the exceptions accepted in Baltic Shipping and by Ashley J in Aldersea v Public Transport Corporation [2001] VSC 169; (2001) 3 VR 499 at [56]- [64].

120 This leads to the conclusion that where loss or damages are claimed as a result of a breach by an employer of the implied term of good faith following termination of the employment contract it will be necessary to identify an actionable breach that occurred independently of the termination. In Russell, Basten JA provided a rationale for why this limitation should exist and the difficulties in separating out the loss said to have been caused by earlier conduct where termination has then occurred:

To uphold a claim to damages because of steps taken by an employer leading up to a dismissal, has three consequences which require consideration. The first is that, because the loss will almost inevitably flow from the termination of employment, rather than the manner in which the decision to terminate was made, the effect will be to sidestep the rule in Addis and hence authorities (including Baltic Shipping) upholding the rule as the law in this country. Secondly, as recognised by the House of Lords in Eastwood, such a course is likely to be inconsistent with the statutory remedies for unfair dismissal, a principle applied by this Court in State of New South Wales v Paige [2002] NSWCA 235; (2002) 60 NSWLR 371 at [133]- [154], albeit in the context of a proposed duty of care in tort. Thirdly, as also noted in Eastwood, the provision of damages for breach of such an implied term otherwise than in relation to termination of employment, creates significant anomalies, for example, by creating a right to recover in the less serious case of suspension of employment, but not in the case of dismissal: see Eastwood at [30]-[33].

In this country, the continued adherence to Addis supports the avoidance of any variation in principle which would have anomalous consequences. Indeed, the creation of such a consequence suggests that any development of the common law having that effect is itself inconsistent with the statutory scheme with respect to unfair dismissals. Just as the legislature has limited the quantum of relief which may be obtained in a case of unfair dismissal, so it may equally be said that the legislature has limited the basis of relief to unfair dismissal, rather than providing a more general remedy for the unfair administration of an employment contract.

It follows that, even assuming success in relation to the existence of the implied term and breach thereof, there was no basis for an award in the present case of general damages for distress, humiliation, injury to feelings or loss of 'reputation' (63) - (65).

121 This conclusion is supported by the decision of the House of Lords in Eastwood v Magnox Electric plc [2004] UKHL 35; (2004) 3 All ER 991. In that case Lord Nicholls noted that whilst there were arguments in favour of the common law developing such that good faith obligations should apply to termination, this had not occurred because of the overriding difficulty that such a development along those lines would be inconsistent with statutory codes [11] - [14].

122 In Eastwood the claim was in respect of psychiatric illness said to have been caused by the employer in the manner of its use of disciplinary processes that culminated in termination. Lord Nicholls said:

If before his dismissal, whether actual or constructive, an employee has acquired a cause of action at law, for breach of contract or otherwise, that cause of action remains unimpaired by his subsequent unfair dismissal and the statutory rights flowing therefrom. By definition, in law such a cause of action exists independently of the dismissal.

In the ordinary course, suspension apart, an employer's failure to act fairly in the steps leading to dismissal does not of itself cause the employee financial loss. The loss arises when the employee is dismissed and it arises by reason of his dismissal. Then the resultant claim for loss falls squarely within the Johnson exclusion area.

Exceptionally this is not so. Exceptionally, financial loss may flow directly from the employer's failure to act fairly when taking steps leading to dismissal. Financial loss flowing from suspension is an instance. Another instance is cases such as those now before the House, when an employee suffers financial loss from psychiatric or other illness caused by his pre-dismissal unfair treatment. In such cases the employee has a common law cause of action which precedes, and is independent of, his subsequent dismissal. In respect of his subsequent dismissal he may of course present a claim to an employment tribunal. If he brings proceedings both in court and before a tribunal he cannot recover any overlapping heads of loss twice over [27] - [29].

His Lordship then said that where termination has occurred difficult questions of causation may arise:

... may give rise to difficult questions of causation in cases such as those now before the House, where financial loss is claimed as the consequence of psychiatric illness said to have been brought on by the employer's conduct before the employee was dismissed. Judges and tribunals, faced perhaps with conflicting medical evidence, may have to decide whether the fact of dismissal was really the last straw which proved too much for the employee, or whether the onset of the illness occurred even before he was dismissed [31].

123 Eastwood was referred to by Master Newnes (as he then was) in Bednall v Wesley College [2005] WASC 101. In Bednall one of the issues was whether the implied term of trust and confidence could survive the termination of the contract. It was noted that even in those exceptional cases where a cause of action in respect of the breach of the good faith provision has accrued before termination, it will be rare for there to be any financial loss attributable to that breach. At [65] the learned Master said:

The defendant also submitted that it had been established by the decision of the House of Lords in Johnson v Unisys Ltd (supra), that in general there is no right of action at common law to recover financial losses arising from the unfair manner of dismissal. That principle is subject to what was said by the House of Lords in Eastwood v Magnox Electric Plc [2004] UKHL 35; [2004] 3 All ER 991. In the latter case Lord Nicholls reiterated that if, before his dismissal, an employee has acquired a cause of action for breach of contract or otherwise, in the ordinary course that cause of action remains unimpaired by his subsequent unfair dismissal. However, an employer's failure to act fairly in the steps leading to dismissal does not itself cause the employee loss, save in exceptional cases where financial loss may flow directly from the employer's failure to act fairly when taking steps leading to dismissal, such as financial loss from suspension, or where an employee suffers financial loss from illness caused by his pre-dismissal unfair treatment. Any claim would be limited to losses of the latter kind.

124 No submissions were advanced that any differences in statutory provisions applicable in this State at the relevant time justified a different approach to that taken in Eastwood. Indeed no submissions regarding unfair dismissal laws were made at all. In any event the existence of such provisions only provided an explanation for why the common law had not developed to cover unfairness in respect of dismissal. The fact remains that the common law has not so developed and there is no reason to think that the limitation in this regard recognised in other jurisdictions does not also apply here.

125 In my view, the following principles can be distilled from the cases I have referred to:

1. an employment contract will generally include an implied term that an employer will not, without reasonable and proper cause, act in a manner calculated or likely to cause serious damage to the relationship of trust and confidence between it and its employee;
2. such a term applies to conduct during the currency of the employment;
3. the term does not apply to dismissal or the manner of dismissal;
4. where an employee claims for loss on the basis of an alleged breach of the good faith term it will be necessary to prove that such loss was caused by conduct of the employer which preceded, and was independent of, any subsequent dismissal.

126 In my view, therefore, the contract in this case did contain an implied term that each of the parties, and relevantly Woolworths, would act in good faith and would not without reasonable and proper cause act in a way that was calculated to destroy or seriously damage the relationship of confidence and trust between it and the plaintiff. That term did not apply to the termination of the contract. Any such application would be fundamentally inconsistent with termination. It would also be inconsistent with other terms of the contract which provide for the rights and obligations of the parties to terminate. Whether the term applies to events preceding termination depends upon whether the impugned conduct can be viewed as being independent of termination and as establishing a cause of action prior to the termination and one that caused loss or damage that can be proved independent of that termination.

127 Paragraph 10 of the statement of claim states that the good faith term was breached by conduct between 15 April 2002 and 11 September 2003 and in terminating the plaintiff's employment and the manner of that termination. However, for reasons I have already given, the term could not apply to termination or the manner of it. Accordingly, the plaintiff can only succeed in this respect if she establishes that Woolworths' pre-termination conduct breached the good faith term.

128 I have assumed for these purposes that the plaintiff relies on the cumulative effect of the conduct particularised in [10(a)] - [10(g)] of the statement of claim. However, it will be necessary to consider each of those items in light of the facts as I find them to be.

129 As to the National Financial Controller position, I accept that Ms Rogan-Gardiner was not interviewed or considered for that position. However, there is no significance in that because on any view that position was substantially above any she had previously occupied and it is accepted that Mr Parle had the view that she did not possess the relevant skills for that position. There is no evidence to suggest that she did in fact possess such skills and, thus, nothing to suggest that Mr Parle's view was mistaken. The person ultimately appointed to that position was accepted as having better experience and qualifications than Ms Rogan-Gardiner.

130 Ms Rogan-Gardiner was certainly interested in the National Financial Controller position. She was ambitious and viewed this position as an opportunity for career advancement. However, I do not accept that at that stage of her career she was likely to be a serious contender for the position. Nor do I accept that Mr Parle encouraged her to believe that she was likely to be a contender. In these circumstances the fact that she was not interviewed or considered for the position could not manifest any lack of good faith by Woolworths.

131 As to the offers of other positions, it is true that none of those positions was precisely equivalent to the Financial Services Manager position. At least as regards the Corporate Auditor and Zone Business Analyst positions, they also appear not to have been in Ms Rogan-Gardiner's preferred area of accounting work. They were, however, roles that she had the skills and experience to perform. The real objection was not that she could not do these jobs but that she did not wish to because they were, in her view, demotions with little opportunity for future advancement. Indeed, she said in evidence that 'it was absolutely critical to me that my resume did not reflect a demotion after coming back from maternity leave'.

132 At least one position on offer was, in fact, a substantial promotion, that is the position in the freestanding liquor division. Furthermore, the other positions offered came with an undertaking to maintain existing salary and benefits. In these circumstances it is not credible to characterise the offers as being made in breach of a duty of good faith. Indeed, in my view the offers were genuine offers made with a view to retaining the services of Ms Rogan-Gardiner on terms which might reasonably be thought to accommodate the needs of both parties.

133 In my view, Ms Rogan-Gardiner formed a fixed idea at an early stage that Woolworths was treating her unfairly. This caused her to view every offer with suspicion and to doubt the good faith of all with whom she dealt in senior executive positions within Woolworths. She measured the offers made to her against an impossible standard - that is that any new position had to be as good as, if not better than, her previous position in every respect. This caused her to undervalue the offers made to her and to lack reasonableness in her assessment of them. This stance only became more entrenched over time.

134 As to the letter of 9 September 2003 informing Ms Rogan-Gardiner that a failure to accept the Corporate Auditor or Zone Business Analyst positions would be considered a refusal to work and result in termination, in my view this was a considered position reached after lengthy attempts to accommodate Ms Rogan-Gardiner. It was the genuine belief of Ms Coates and Mr Backshall that by this stage they had done all that could reasonably be expected. It was entirely appropriate that they point out the possible consequences of termination, including the loss of entitlements under the share option scheme. There was no lack of good faith in writing and sending this letter.

135 As to the failure to provide Ms Rogan-Gardiner with work or access to a computer on her return from sick leave on 9 September, it is difficult to see how this can manifest bad faith. On any view the position Ms Rogan-Gardiner had formerly occupied had been abolished. She had declined all other positions offered. She had returned to work early and at a time of her choosing. To imply that in these circumstances Woolworths was obliged to find some work for her to do and a computer to work at, is devoid of practical reality.

136 As to the allegation that Woolworths summarily terminated Ms Rogan-Gardiner's employment because she would not accept any of the positions offered to her, in my view, the real reason was that Woolworths had formed the view that by her refusal of the positions she was effectively refusing to render any services to the company. That view has to be seen in the context of all of the communications on the subject and the length of time over which they had occurred. Woolworths may not have been right to conclude that Ms Rogan-Gardiner was refusing to work, however, I am unable to say that such a conclusion was an unreasonable one or was the product of any lack of good faith.

137 As to the claim that in consequence of the summary dismissal Woolworths avoided paying a severance payment, that is true but, given the findings made above, I am unable to conclude, as seems to be implied, that this was the objective rather than a simple consequence. In any event to the extent that this is a reference to payment arising from redundancy it assumes that there was an entitlement to such a payment. That is an issue I will deal with later.

138 The final claim is that neither the termination nor its summary nature was justified. For reasons I have given earlier, the implied good faith term cannot extend to the termination itself or the manner of it. That is not to say that termination without adequate notice will not be in breach of the contract, but that is an issue that will be considered separately.

139 Accordingly, in my view, the conduct of Woolworths in the period 15 April 2002 to 11 September 2003 did not breach the implied term to act responsibly, fairly and in good faith. The conduct of Woolworths and its senior executives were explicable and adequately justified by them. I accept their evidence in that regard. In my view their efforts to find an acceptable position for Ms Rogan-Gardiner were not lacking in good faith.

140 Redundancy is simply a term used to refer to circumstances where an employer no longer desires to have a particular job performed by anyone. An employee in such circumstances is not dismissed on account of any misconduct or fault but because the job they were doing has been abolished: R v Industrial Commission of South Australia; Ex parte Adelaide Milk Supply Co-Operative Ltd (1977) 16 SASR 6, 8 (Bray CJ). However, there is no necessary additional entitlement to benefits in the event of dismissal for redundancy. Whether there is a right to such additional benefits depends upon the particular contract.

141 An entitlement to severance pay upon redundancy can arise as a result of the incorporation into the employment contract of a provision in a company's policies or procedures manual: Riverwood International Australia Pty Ltd v McCormick [2000] FCA 32; (2000) 177 ALR 193. That, of course, depends upon there being some proper basis for such incorporation, for example an express term in the contract or an implied agreement to incorporate the policy into the contract.

142 The evidence in this case is inadequate to establish that the redundancy policy that Ms Rogan-Gardiner obtained was current or that it had ever been incorporated into the contract. However, although Woolworths denied, in its defence, that the contract ever included a redundancy clause, in final submissions it said that it did not require the plaintiff to prove this. Rather, it relied on there being no entitlement under the policy in any event.

143 The policy relied upon set out the broad circumstances in which a severance payment might be made but it was clear on its terms that whether a severance payment was made was a matter within the discretion of senior management. A number of pre-conditions were set out. They included that efforts to find an alternative suitable position had been unsuccessful. The evidence is to the contrary. At least from Woolworths' perspective there were a number of suitable alternatives. At least one alternative, the position in the freestanding liquor division, would have been a promotion. Suitability cannot be a matter entirely subjectively determined by the employee. In my view the alternatives may not have been desired but they cannot all be characterised as unsuitable.

144 A second pre-condition was that divisional general managers had agreed that termination was the only appropriate course of action. There is no evidence of this. To the contrary, the evidence is that all relevant senior management were of the view, and consistently expressed it, that there were reasonable alternatives available, that the company should seek to retain Ms Rogan-Gardiner's services and that a redundancy would not be offered.

145 In these circumstances even if it is assumed that the policy was incorporated into the contract, the pre-conditions for redundancy under the policy were not met and a severance payment was not due. Accordingly, this leg of the plaintiff's claim cannot succeed.

146 The contract of employment in this case was one of indefinite duration. That is, it would continue to exist until the parties put it to an end or one of them ceased to exist. It has long been accepted that, in the absence of any evidence to the contrary, a contract of service will contain an implied term that either party can bring the contract to an end by giving a reasonable period of notice to terminate: Creen v Wright (1876) 1 CPD 591. There was no suggestion to the contrary in this case. Indeed, it was accepted by Woolworths that there was an implied term that it could not terminate the contract without providing reasonable notice to Ms Rogan-Gardiner.

147 Where notice of termination is given it must specify when the termination is to occur, or at least make it possible for that to be ascertained: Fardell v Coates Hire Operations Pty Ltd [2010] NSWSC 346 [82]. What is a reasonable period of notice depends upon the circumstances of the case. That means the circumstances as determined at the date the notice is given, rather than the circumstances as they existed at the commencement of the contract: Rankin v Marine Power International Pty Ltd [2001] VSC 150; (2001) 107 IR 117 [228]. I will return to the question of the appropriateness of the length of notice in this case later.

148 Ms Rogan-Gardiner's case is that she was summarily terminated on 11 September 2003. That is, that she was terminated on that day without reasonable notice. Woolworths argues that she could not have been summarily terminated on 11 September 2003 because the contract related to a specific position and that position had been abolished in October 2002.

149 It is certainly true that Ms Rogan-Gardiner was employed as the Financial Services Manager (as it came to be known) and her case has been argued on the basis that she was employed in that specified position. Accordingly, the abolition of that position in 2002 was a repudiation by Woolworths of the employment contract: Reilly v Praxa Ltd [2004] ACTSC 41. The abolition was not merely a renaming (as had occurred previously) but the expression of an intention to no longer engage Ms Rogan-Gardiner to do the work of that position.

150 However, it was suggested Woolworths had given reasonable notice of termination to Ms Rogan-Gardiner in regard to the October abolition. It was submitted that notice was given in April 2002 when Ms Rogan-Gardiner was told, at the Sydney conference that her position was going to be abolished. On this view, what occurred in October 2002 was not a repudiation but a lawful termination of the contract. There appears, however, to have been no certainty as to the date this would occur and no clarity as to the consequences. It would not appear that either Woolworths or Ms Rogan-Gardiner considered the indications given at the Sydney conference in April 2002 to be, in effect, a notice of termination. Neither of them acted as if such notice had been given. Indeed to the contrary they continued to act after October 2002, and whilst Ms Rogan-Gardiner was on maternity leave, as if she continued to be an employee of Woolworths.

151 In any event, the intervention of maternity leave played a critical role in what occurred thereafter. The fact that Ms Rogan-Gardiner was on maternity leave in October 2002 when her position was abolished deferred any need to redeploy her or find her alternative employment. There was a statutory obligation, which I will come to shortly, obliging Woolworths to offer Ms Rogan-Gardiner the most comparable position available on her return to work after maternity leave. In those circumstances the fact that her position had been abolished whilst she was on leave did not, in my view, terminate the employment relationship.

152 A distinction can be drawn between an employment relationship and a contract of employment. In Conway-Cook v Town of Kwinana [2001] WASCA 250; (2001) 108 IR 421, Steytler J (with whom Wallwork and Parker JJ agreed) drew a distinction between a termination of the employment relationship, which he found in that case had occurred, and the contract of employment, which he found, notwithstanding a wrongful dismissal, continued until such time as the employee accepted the repudiation constituted by the wrongful dismissal. In many cases such a distinction may not be meaningful given that the ability of the employee to go on rendering services will be non-existent. However, in the circumstances of this case, the fact that Ms Rogan-Gardiner was unable to render services in her former position after October 2002 was immaterial since she was on maternity leave at that time. Thus, even if an employment relationship as regards the specific position of Financial Services Manager had ceased to exist following the abolition of that position, the employment contract remained on foot.

Did Woolworths repudiate the contract in October 2002?

153 For Woolworths to have repudiated the contract by abolishing the Financial Services Manager position in October 2002 it would need by that action to have evinced some unwillingness or inability to continue with the contract of employment: Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115 [44] - [49] (Gleeson CJ, Gummow, Heydon & Crennan JJ). To say that there was no longer an intention to employ Ms Rogan-Gardiner as the Financial Services Manager Western Australia might suggest repudiation. However, as I have already noted, that conclusion would ignore other relevant circumstances.

154 Given the circumstances that applied to Ms Rogan-Gardiner, and in particular the existence of the statutory obligation to offer her comparable positions on her return to work, it is my view that the abolition of her position did not involve a repudiation. The contract of employment was kept in existence at least until such time as Ms Rogan-Gardiner returned from her approved leave and had been offered available comparable positions and had had reasonable time to consider them.

155 In any event, even if the abolition of the position was a repudiation by Woolworths it could not have had the effect of ending the employment contract until that repudiation had been accepted: Automatic Fire Sprinklers Pty Ltd v Watson [1946] HCA 25; (1946) 72 CLR 435; Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410, 427 - 428 (Brennan CJ, Dawson & Toohey JJ). It is clear that on any view Ms Rogan-Gardiner did not accept any such repudiation and considered the employment contract to be in continuing existence. It may well be the case that had Ms Rogan-Gardiner accepted any of the positions offered to her prior to her return to work in September of 2003, her previous contract of employment as Financial Services Manager would have ceased and a new contract in relation to the new position would commence. However, she did not accept any of the other jobs. In these circumstances the contract persisted.

156 At the time Ms Rogan-Gardiner took maternity leave in September 2002, federal legislation had not been introduced and the Minimum Conditions of Employment Act was the only relevant source of statutory obligation. Obligations created by that Act bind all employers and their employees and are taken to be implied into contracts: Garbett v Midland Brick Company Pty Ltd [2003] WASCA 36; (2003) 129 IR 270 [81].

157 Section 38 of the Act relevantly provides:

38. Return to work after parental leave

(1) On finishing parental leave, an employee is entitled to the position he or she held immediately before starting parental leave.

(2) If the position referred to in subsection (1) is not available, the employee is entitled to an available position -

(a) for which the employee is qualified; and

(b) that the employee is capable of performing,

most comparable in status and pay to that of his or her former position.

158 The Act does not oblige an employer to keep a position open until an employee returns from maternity leave. Its effect is to impose an obligation on an employer that if a person returns from maternity leave they will be entitled to either their former position (if available) or to an available position for which they are qualified and capable of performing and which is most comparable to their former position. Clearly 'most comparable' does not mean equivalent; it means, on comparison, the position which comes nearest to the former position. This does not require that the employer create a comparable position. What is required is that the available positions be examined and, of those, the employee be offered the one that is 'most comparable' to the former position. This contemplates that there may well be a difference in regard to status and pay. That a new position was not at the same level or status as the former position would not, in itself, mean that an employer was in breach of its obligations under the Act.

159 Woolworths submitted that a person can be terminated whilst on maternity leave: Tanya Kerrison v Air International Pty Ltd [2006] AIRC 297, [147], [149]. In that case it was held that it was not unjust to terminate the employment of an employee who was on maternity leave and that there was no obligation to pay in lieu of notice as the employee was on unpaid leave at the time. However, an argument that notice ran during the period of maternity leave depends on there having been proper notice of termination. For the reasons that I have referred to earlier, I do not accept that notice of termination was given in April 2002, or indeed at any other time prior to Ms Rogan-Gardiner's return to work in September 2003.

160 In these circumstances, Woolworths had an obligation at the time Ms Rogan-Gardiner returned to work in September 2003 to offer her an available and most comparable position for which she was qualified and capable of performing. In assessing whether Woolworths complied with that obligation it will be necessary to consider all offers that were made to Ms Rogan-Gardiner.

Did the plaintiff repudiate the contract by rejecting offered positions?

161 Woolworths argues that if the effect of the Minimum Conditions Act was to keep the contract alive then it complied with its obligations by offering Ms Rogan-Gardiner the most comparable available positions in status and pay for which she was qualified. It argues that by rejecting those positions she repudiated the employment contract in that she evinced an intention to no longer be bound by that contract in effectively refusing to perform work. It is submitted that what then occurred was that Woolworths accepted that repudiation and the contract was therefore terminated. In those circumstances there would have been no breach by Woolworths of failing to give Ms Rogan-Gardiner notice of her termination.

162 Whether this argument is made out depends upon how Ms Rogan-Gardiner's actions can be characterised. The Minimum Conditions Act did not impose upon her as an employee an obligation to accept any position that was offered. Whilst there was an issue as to whether the positions that were offered were comparable with that previously occupied by her, assuming that they were the most comparable positions, she was not obliged to accept them.

163 On one view, her refusal to accept them was because she wished to put pressure on Woolworths to make a redundancy payment to her. However, she did advance cogent reasons why each of the positions was unsuitable to her. Woolworths appears to have been of the view that it did all that could be reasonably expected of it in offering her positions which were then available. Mr Parle and Ms Coates believed that they had exhausted all reasonable options. Of course the existence of options and the ability of Woolworths to amend duty statements or craft a position that best suited Ms Rogan-Gardiner's circumstances were matters within its control (subject to the commercial realities of operating a large business). Whether or not Woolworths had in fact exhausted all reasonable possibilities was not something that Ms Rogan-Gardiner could know with certainty. The rejection of offered positions in the hope that the employer will improve the offer cannot itself extinguish the obligation which kept the contract alive.

164 In determining whether Ms Rogan-Gardiner's continued refusal of offered positions was a repudiation of the contract, it is necessary to take into account the nature of those positions; how well they compare with the positions she had previously occupied, the continuing discussions between herself, Mr Parle and Ms Coates, her expressed reasons for rejecting those offers, and the timing of the offers. In regard to the last factor, it is relevant to note that whilst a number of positions had been discussed between April 2002 and September 2003 with varying degrees of seriousness, what brought the need to determine Ms Rogan-Gardiner's status was her return to work on 1 September 2003. It is at that point that the obligation to make an offer of a comparable and available position arose. In that context there was a relatively short time between the return to work and the termination. Furthermore, for almost all of the time between 1 and 11 September 2003, Ms Rogan-Gardiner was certified unfit for work and only attended at work on 1, 10 and 11 September 2003.

165 Whilst it can be accepted that Ms Rogan-Gardiner returned to work approximately three weeks earlier than had been originally intended and that this may have caught Woolworths by surprise, it did not change the nature of the statutory obligation. Woolworths may well have taken the view that it had complied with that obligation and that Ms Rogan-Gardiner was being unreasonable. The conclusion might also have been reached that given her refusals over several months Ms Rogan-Gardiner was unlikely to change her position in respect of the offered positions. However, in my view, the point had not yet been reached at which it could be said Ms Rogan-Gardiner's actions clearly constituted a refusal to work such that her actions were a repudiation of the contract. In those circumstances Woolworths retained the option of terminating the contract.

Was the contract terminated on 11 September 2003?

166 The letter sent to Ms Rogan-Gardiner on 11 September 2003 had the effect of bringing the contract to an end. It was clearly intended to do so. It required Ms Rogan-Gardiner to leave the company's premises and return any company property. She had until that point in time attended her workplace with the apparent agreement of Woolworths. Indeed, Ms Coates and Mr Parle had been engaged in communications with her up until then. For the reasons that I have previously noted this letter does not appear to me to be the acceptance of a repudiation on the part of Ms Rogan-Gardiner. Rather, it was, and was intended to be, a summary dismissal. There had been no misconduct or grounds for summary dismissal and accordingly termination in these terms breached the contractual obligation to provide reasonable notice.

167 What is reasonable notice depends on the circumstances of the case. Obviously for that reason the outcome of previous cases needs to be understood in the context of their particular circumstances. Relevant factors include the importance of the job, the size of the salary and the nature of the employment: Rankin [232]. Other relevant factors may include the length of service: Rankin [232], the professional standing of the employee: Quinn v Jack Chia (Australia) Ltd [1992] VicRp 37; (1992) 1 VR 567, 580, the employee's age, the employee's qualifications and experience: Rankin [232], his or her degree of job mobility: Rankin [229], the time it would have taken to obtain alternative employment: Grout v Gunnedah Shire Council (No 2) (1995) 58 1R 67; (1994) 1 IRCR 499, and the period it is likely, apart from the dismissal, the employee would have continued in the employment: Grout (512).

168 As regards the importance of the position formerly occupied by Ms Rogan-Gardiner, whilst she was classed as an 'executive', there were at the relevant time, some 496 executives in Woolworths. Fourteen of those executives were based in Western Australia. Whilst the position of Financial Services Manager was graded at level 23 there was evidence to suggest that that did not accurately reflect its responsibilities and that a better grading would have been 18 - 19. The position in Western Australia did not have responsibilities as large as those of similar positions in New South Wales and Victoria. Ms Rogan-Gardiner managed some 45 employees of whom seven directly reported to her. She reported to the Chief Financial Officer and the General Manager, Supermarkets in Western Australia. In these circumstances, the position could be fairly described as one of middle management. That is, one with significant operational and supervisory responsibilities but not one with responsibility for making broader strategic management decisions.

169 As regards salary, Ms Rogan-Gardiner's package in 2003 included a base salary of $103,000 per annum, superannuation, vehicle and eligibility to access incentive plans. The nature of that employment could probably be described as a State-based accounting role. At a State level it was an important position but not one, in the context of a large national organisation, that could properly be characterised as a senior executive position.

170 As regards length of service, that appears to have been five years and eight months. That figure does not take into account periods for which Ms Rogan-Gardiner had previously been on maternity leave. She commenced employment with Woolworths in mid-May 1995 and ceased on 11 September 2003. During that period she had three periods of maternity leave totalling over 20 months. It is on that basis that a total period of service of five years and eight months is calculated.

171 As to Ms Rogan-Gardiner's professional standing, there is no evidence of her standing outside Woolworths other than that she has occupied positions in medium sized businesses that could be described as senior accounting roles. It is also relevant to take into account that Mr Parle knew her to be a person with good skills and those skills appear to have been valued by Woolworths and utilised by it on special projects beyond Western Australia.

172 As to Ms Rogan-Gardiner's age, at the time of termination she was 44. She was a professionally qualified accountant and a member of CPA Australia. She had over 30 years experience in the finance sector and 20 years experience working as an accountant. It would be accurate to describe her at that point as having good financial accounting and auditing skills.

173 As to her degree of mobility it would appear that she had been willing, at least at an earlier stage, to consider the prospect of moving to another State in order to take up a position that she considered commensurate with her abilities. Whilst Ms Rogan-Gardiner never denied that she would move for an appropriate job, this appears to have been dependant upon the attitude of her husband. However, she was, as she said, the sole breadwinner and any impact on her husband's employment appears not to have been a consideration. In these circumstances I am prepared to conclude that she had some degree of mobility in terms of seeking alternative work.

174 As to the expected time it would take Ms Rogan-Gardiner to obtain alternative employment, she says that she had difficulty because she could not obtain a reference from Woolworths. Mr Backshall and Mr Parle say that she did not ask for one. Mr Parle says that had she asked for a reference he would have happily provided one. The only reasonable conclusion is that Ms Rogan-Gardiner did not seek a reference because she viewed the circumstances of her leaving Woolworths in a negative light. However, she only prejudiced her own chances of employment elsewhere by not seeking a reference from the company who had employed her since 1995.

175 It would appear that in October 2007 Ms Rogan-Gardiner obtained a position with a company named Advanced Personnel Management as its Chief Financial Officer for a three month period. This would appear to indicate that she was employable. The lapse of time between leaving Woolworths and this employment is attributable to her health. Indeed, the difficulties with her obtaining and retaining long term employment appear unrelated to her leaving Woolworths but rather to her mental health and her perception that she could not cope with taking on work whilst the present proceedings remained unresolved.

176 As regards the period it was likely that Ms Rogan-Gardiner would have continued in employment with Woolworths but for the termination, it is relevant to note that she told Ms Coates that she did not know what she would be doing in five years time. She said that she did not want to take on a position that was unacceptable to her only for the purpose of being in employment at the time the 35,000 options under the executive option plan would vest. This suggests that she saw her future as being beyond Woolworths if she was not offered a position that she considered suitable. This was so notwithstanding that she was assured that her pay and conditions in any new position would match those she previously enjoyed. She made it plain that she wished to be made redundant.

177 As to Ms Rogan-Gardiner's prospective pension or other rights, it is true that had the vesting conditions been met, 35,000 options under the executive option plan would have vested sometime after 1 July 2004. However, counsel for Ms Rogan-Gardiner foreswore any suggestion that the reasonable period of notice should necessarily expand for the purpose of encompassing the option vesting date. Whilst it is relevant to take into account that had she continued in employment beyond 1 July 2004 she would have become entitled to those options, that was not a factor that appeared to be determinative in her own reasoning.

178 The purpose of notice is to give employees a reasonable opportunity to reorganise their lives. This means a reasonable period in which to secure alternative employment. A court should not impose a period of notice that is longer than the period of notice that either party would have considered reasonable had they turned their minds to it at the time: Reilly v Praxa Ltd.

179 It is relevant to note that Ms Rogan-Gardiner had refused to sign the service agreement which contained a clause to the effect that notice would be two months. She said that her concerns with the agreement were that it permitted the Chief Executive Officer to change her duties. She did not express any concern with the proposed two month notice period. This suggests that such a period was one that could be considered reasonable in the circumstances then existing. Nonetheless it is necessary to also take into account that employees were offered an incentive to enter into the service agreement by way of additional options. It can be assumed from this that the terms of the agreement represented, if only in terms of certainty, something that employees might consider was less advantageous than their existing conditions. Whether this was the length of notice is not clear. Thus, the proposed service agreement, whilst relevant, is not a factor that I have given great weight to.

180 In Campbell v Encyclopaedia Britannica Australia Ltd [2008] NSWSC 1178, it was held that reasonable notice was nine months in circumstances where the employee had been a general manager in an extremely important role that was pivotal to the success of the employer in Australia and the Asia Pacific region. He had been employed for over seven years and had a salary package in excess of $175,000 per annum plus option entitlements. In that case the company had a redundancy policy that provided for three months notice plus three months severance plus three months superannuation and it was held that this gave some guidance as to what may be reasonable notice as the parties considered nine months was reasonable for termination on a redundancy basis.

181 In Lau v Bob Jane T-Marts Pty Ltd [2004] VSC 69, it was held that six months was a reasonable notice period for a chief executive officer with a salary of $180,000 plus superannuation and use of a car. The plaintiff in that case had not been employed long, but had a legitimate expectation that he would be employed for five to seven years. Whilst he might reasonably have been expected to get another job within six months, the relatively high level of his remuneration could not be expected to be readily replicated elsewhere.

182 In Reilly v Praxa Ltd, six months notice was considered reasonable for an employee with a salary of $210,000 per annum being a base salary of $160,000 and incentive payments. That employee had been with the company for four years. In that case there was inadequate evidence of where the employee fitted within the organisation but it was held that he was in the executive hierarchy.

183 In Taske v Occupational & Medical Innovations Ltd [2007] QSC 118; (2007) 167 IR 298, it was found that nine months was reasonable notice in respect of a chief executive officer with a salary package of $200,000 per annum inclusive of statutory superannuation and a fully maintained motor vehicle. The plaintiff in that case had agreed to return to Australia from the USA to take up the role and had limited prospects elsewhere of obtaining an equivalent position.

184 In Rankin, 12 months was found to be a reasonable period in respect of the director of a company. He had a base salary of $158,286 plus other entitlements at the time of his dismissal in 1999. He had been employed for some 19 years.

185 In David Jones Ltd v Cukeric (1997) 78 IR 430, it was held that a notice period in excess of 12 months was reasonable. However, this was in the context of a statutory unfair contracts provision. In that case the employee was unaware that his employment was to be terminated until the day it was terminated, thus depriving him of any opportunity to seek alternative employment. It was also held that the company in that case had treated the employee unfairly in the restructure and in its attempts to force him to accept the settlement offer.

186 Bearing in mind all of the relevant factors, in my view, the appropriate period of notice in this case was one of four months. That period fairly reflects Ms Rogan-Gardiner's position, length of service and prospects of future employment.

187 I have found that there was a breach of the reasonable notice term. Damages for wrongful dismissal in such circumstances are generally limited to the gross amount that would have been earned during the period of reasonable notice had the contract continued: Garbett v Midland Brick [103]. It is conceded that Ms Rogan-Gardiner would have been paid a bonus (the STIP) had she remained in employment and targets had been met. Any assessment of damages for breach of the notice term should, therefore, properly include a pro rata amount for this bonus. On this basis, the amount to which Ms Rogan-Gardiner is entitled by way of damages for the failure by Woolworths to give her four months notice of termination will be equivalent to four month's remuneration inclusive of superannuation, the value of a fully maintained vehicle and a STIP bonus.

188 In the statement of claim at [15], the plaintiff also claims to have suffered loss and damage by reason of the breach of the notice provision in that she was denied the opportunity to exercise the fourth tranche of options and that her future employment prospects were detrimentally affected. As to the options, the difficulty for the plaintiff is that the options would only vest on 1 July 2004. Entitlements to those options were governed by the Option Plan Rules. Clause 2.5 of the rules provided that by applying for options, an employee agreed to be bound by the terms and conditions of the grant. Clause 5.5 provided that unvested options would lapse and be unexercisable three months after the employee ceased to be employed, unless the Board extended that period (which did not occur here). Clause 10.1 provided that the rules did not form part of any employment contract and participation did not affect the rights of an employee. Finally, cl 10.2 provided that there would be no right to compensation or future damages in respect of future rights under the plan as a consequence of termination of employment.

189 I accept that these rules applied to the options and that in signing the application document, Ms Rogan-Gardiner agreed to be bound by the rules. Furthermore, there was no precedent for the Woolworths Board giving written permission for options to be exercised prior to their vesting date. Mr Backshall explained that to do so would be inconsistent with the purpose of the option plan, which was a retention strategy, not a reward on leaving. In these circumstances, and given my conclusion that the reasonable period of notice was four months, no entitlement to the options could arise and thus no loss was occasioned.

190 As regards the claimed damage to future employment prospects, this is said to result from the lack of a reference from Woolworths, the fact that Woolworths had defended the action and because of stress, anxiety, depression and sleep disorder said to have been caused by the termination. None of those matters appear to be connected to a failure to give adequate notice. The only connection regarding the reference was that suggested by Ms Rogan-Gardiner in her evidence, namely that given the circumstances of her leaving, she did not believe a reference would be obtainable. However, she conceded that she did not ask for one and Mr Parle said one would have been provided had she asked.

191 As to Woolworth's defence of the action, it is difficult to see why this has prevented continuing employment. Ms Rogan-Gardiner said she felt unable to devote herself to a new position while these proceedings remained unresolved, but as I understood it, this was a function of her mental health rather than that she had been terminated without adequate notice.

192 As to mental health problems, the cause of these was a real issue in these proceedings. I will canvass the causation issue in more detail below, suffice to say at this point that the cause claimed was not the termination without notice, rather, it was the conduct of Woolworths as an employer between April 2002 and September 2003 culminating in the termination. That is to say, any damages for psychiatric illness could only properly be ascribed to breach of the good faith term. In this regard I acknowledge that damages are generally not recoverable 'for the injured feelings of the servant, or for the loss he may sustain from the fact that his having been dismissed of itself makes it more difficult for him to obtain fresh employment': Addis (491) (Lord Loreburn LC). However, damages of this kind can be recovered on the basis of the exceptions referred to in Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344. Those exceptions include where the breach of contract gives rise to psychiatric injury. Nonetheless there must still be a causal connection between the breach and the injury. That connection does not exist in respect of a failure to give adequate notice.

Damages - Provisional assessment for other alleged breaches

193 I have concluded that there were no breaches of the implied good faith term or the implied term regarding redundancy. In the event that I am wrong in that regard, it would be appropriate to make a provisional assessment of damages in respect of those alleged breaches if it is possible to do so.

194 In regard to redundancy, if the policy applied and a redundancy payment was offered in accordance with it then the amount of that payment would have been the equivalent of 18 weeks salary and benefits. That is calculated on the basis that the policy provides an amount of four weeks pay in lieu of notice (regardless of the amount of notice given) plus a severance payment of 14 weeks pay (where the employee is under 45 years of age and has rendered between five and six years continuous service). There would also be an entitlement for pro rata long service leave (given that over five years service had been completed). The schedule of damages does not include any assessment of such a severance payment. Rather it makes a calculation based on 16 weeks (being $54,708) and makes no reference to pro rata long service leave.

195 It is clear that any severance payment would be in lieu of a termination payment calculated by reference to reasonable notice. The evident purpose of a redundancy payment is to compensate for termination consequential on abolition of a position. Accordingly, breach of this term would only attract additional damages if the redundancy payment would, standing alone, be greater than that due for the lack of adequate notice. Even then it could only increase the damages to the larger of the two amounts. In this case the difference would be small, four months benefits being slightly less than 18 weeks benefits. It would be of no consequence at all if the amount sought in the schedule of damages is relied on. In the latter case, no additional damages would flow even if breach of the redundancy term was proven.

196 In regard to breach of the good faith term the damages said to flow from that breach are damage to future employment, psychiatric illness (stress, anxiety, depression and sleep disorders), damage for loss of opportunity to exercise options and loss of a severance payment (being for redundancy). As regards losses in respect of the options, the inability to exercise those options is unarguably a consequence of the termination and the fact that the vesting date was beyond any reasonable notice period. As regards the loss of severance payment, this too can only relate to termination and not the preceding conduct. This leaves the future employment issues and psychiatric illness. Those issues are related and give rise to a question of whether causation is established.

197 Before turning to causation, it is necessary to deal with a preliminary issue. Prior to the trial Ms Rogan-Gardiner had objected to the production of her medical records for examination by the defendant's lawyers. That position changed with the amendment to the pleadings to include reference to Woolworths' conduct between 15 April 2002 and 11 September 2003 in the allegation that there had been a breach of the implied good faith term. Given that amendment, there could no longer be any objection that the records were not relevant. They were, therefore, produced at the end of the first day of the trial. An agreed transcription of some of the handwritten notes was also produced.

198 The medical records proved to be significant in the cross-examination of Ms Rogan-Gardiner. They included notations that were apparently inconsistent with what she had said in evidence regarding her depression and with what she had told the psychiatrist who had prepared a report for the proceedings. She did not accept that the records were an accurate account of what she had told her doctors. In these circumstances the defendant sought to tender the notes. That tender was opposed. The question of admissibility was argued in closing submissions on the understanding that I would rule on it in this decision.

199 The basis of the tender was s 79C of the Evidence Act 1906 (WA). In particular, the defendant argued that the records were 'business records' and admissible pursuant to s 79C(2a). That subsection provides that:

(2a) Notwithstanding subsections (1) and (2), in any proceedings where direct oral evidence of a fact or opinion would be admissible, any statement in a document and tending to establish the fact or opinion shall, on production of the document, be admissible as evidence of that fact or opinion if -

(a) the statement is, or directly or indirectly reproduces, or is derived from, a business record; and

(b) the court is satisfied that the business record is a genuine business record.

200 The first thing that must be noted about the medical records is that they were not all from one source. They are largely the records of the general practice Ms Rogan-Gardiner attended, but they also include hospital records. No particular point was made of this, but the records cannot be considered as a single entity.

201 Parts of the records were put to Ms Rogan-Gardiner in cross-examination. Many other parts were not. Nonetheless the defendant sought to tender the whole of the records because, it was said, they were significant as much for what they did not show as what they did. In particular, whether there was any record of Ms Rogan-Gardiner presenting to her doctor symptoms of major depression in the six months following the termination of the employment contract.

202 There was no dispute as to the provenance of the records. No witness from either the general practice or hospital was called as a witness. The defendant submitted, however, that in deciding whether or not statements contained in the documents were admissible, the court could draw any reasonable inference from the form of the document in which the statement is contained: s 79C(5)(a). In this regard the concept of a business is a wide one (see the definitions in s 79B) and the application of similar provisions to medical records has been upheld in other States: Albrighton v Royal Prince Alfred Hospital (1980) 2 NSWLR 542.

203 Having examined the whole of the bundle of medical records, I am satisfied that they do constitute the business records of the medical practice and hospital concerned and are admissible under s 79C(2a). They all relate to Ms Rogan-Gardiner and to her state of health before and after the termination of her employment. In some cases they also record her statements to her doctors. The more significant of these, that is, those relating to reports of stress and anxiety and the reasons for it, were put to Ms Rogan-Gardiner.

204 In closing submissions, counsel for the plaintiff said that some records were admitted and others put to the plaintiff in evidence would not be the subject of submissions in opposition. As to the balance, it was said that insofar as they purported to record what the plaintiff had said and were 'somewhat cryptic and laconic' it would be unduly prejudicial to admit them. This was an appeal to exclude documentary evidence otherwise admissible in the exercise of the court's discretion.

205 I accept the risk of prejudice referred to by the plaintiff. However, those records not specifically referred to or put to Ms Rogan-Gardiner were only relied upon by the defendant for the limited purpose of determining whether she had reported the symptoms of depressive illness at other times. That is, they were relied on only to evidence a lack of complaint and not as a reliable account of the exact words used on occasions (other than those actually put). Accordingly, the prejudice identified is avoided by only allowing the records in question to be used for that limited purpose.

206 Accordingly, the whole bundle of medical records is accepted in evidence. However, other than where records were specifically admitted or put in cross-examination, I have only used them for the limited purpose of determining what the presenting condition was at the relevant time. Where, on the other hand, records were admitted or put, I have treated them as being admissible for the purpose of determining what was said by Ms Rogan-Gardiner taking into account the considerations in s 79D and the fact that the notes are usually a summary rather than a verbatim account of the words used.

207 Ms Rogan-Gardiner suffers from chronic depression. According to her, that has been a debilitating condition that, at times, has limited her ability to work, to socialise and to enjoy a normal family life. It has had a significant impact on her ability to engage in alternative work. Indeed, other than the lack of a reference from Woolworths, Ms Rogan-Gardiner attributed her mental health as being the principal impediment to her obtaining and holding any long term position.

208 The plaintiff called Dr Orr, a psychiatrist, who confirmed the depressive illness. He was of the view that the causes of the illness were a number of predisposing and precipitating factors. In regard to predisposing factors, Dr Orr referred to significant personality vulnerability, the experience of being made redundant in New Zealand and work-related stressors. The latter included uncertainty in relation to her work future, that uncertainty continuing whilst she was pregnant and her failure to achieve a redundancy (an outcome that she wished for). There was also a possibility that Ms Rogan-Gardiner's unplanned pregnancy and some tension with her husband in this regard may have led to post-natal depression or had at least fuelled existing anxiety.

209 Dr Orr said that Ms Rogan-Gardiner had suffered anxiety prior to her dismissal on 11 September 2003. He said that this deteriorated into a major depressive episode thereafter. He believed that the precipitator for her anxiety was uncertainty about her job situation, though hormones from pregnancy could also have been a trigger. He said it was possible she may have developed a depressive illness even if she had not been employed by Woolworths. However, in his opinion, the major trigger for that illness was the dismissal, which he described as a traumatic blow. He said it was following that, that the symptoms accelerated into depressive illness. These conclusions were based upon information supplied by Ms Rogan-Gardiner to Dr Orr and assumed the veracity and completeness of that information.

210 There were, however, reasons to doubt whether Ms Rogan-Gardiner had provided all relevant information to Dr Orr. She did not tell him initially that the pregnancy in 2002 was unplanned and that her husband had wished for her to have a termination. Dr Orr became aware of this after reading the report of the defendant's psychiatrist. He then asked Ms Rogan-Gardiner about it and she said it was not a big issue. However, in evidence, Ms Rogan-Gardiner conceded that she was distraught when she saw her general practitioner about the pregnancy in March 2002. When this was put to Dr Orr, he said that this was information he would like to have followed up and that, given this occurred before the restructure was announced, it would have been at least a predisposing, and possibly a precipitating factor for subsequent illness.

211 Medical records also revealed that on 13 May 2002 the same general practitioner had written a referral for counselling for Ms Rogan-Gardiner. The doctor had written that the reason for this was that the pregnancy had been a major source of stress. However, Ms Rogan-Gardiner denied that this was correct and said she had never attended counselling.

212 On the basis of Dr Orr's view that the dismissal had been the trigger for depressive illness he said he would expect Ms Rogan-Gardiner to be significantly worse when she went to see her doctor on 15 September 2003 than when she had seen him on 3 and 9 September 2003. However, medical records, which Ms Rogan-Gardiner accepted were correct, showed that she was feeling less stressed on 15 September 2003 and had resumed shopping and going out and had reduced headaches. She also told the doctor that she felt more able to relax and enjoy her family because her work issues were all in the hands of her solicitors. She did not see her doctor again for six months. This was not information available to Dr Orr and was not consistent with the account given to him.

213 The medical records did not reveal any expressions by Ms Rogan-Gardiner of concerns regarding Woolworths as being the cause of her illness. On the other hand, there were references to involvement in 'complicated court cases' relating to her deceased mother. Ms Rogan-Gardiner conceded that issues relating to her mother's death in October 2004 had caused her to be very angry and upset at that time. She did not report that to Dr Orr.

214 When Ms Rogan-Gardiner saw Dr Orr he asked her whether she easily dislocated her joints. He had noted that she was tall and thin and had previously had a broken wrist and considered that Marfan's Syndrome was possible. Another symptom of this syndrome is hyper-mobility. Ms Rogan-Gardiner denied any problems with being too flexible or easily dislocating joints. Yet within the previous month she had in fact asked her general practitioner for information about hyper-mobility. There was evidence that she had complained of continuing joint pain and had suffered other fractures. Indeed, on 13 August 2007 she saw Dr Orr and had earlier that day attended Fremantle Hospital complaining of significant pain to her thumb.

215 Dr Orr asked Ms Rogan-Gardiner if anyone in her family had suffered from depression. She denied that anyone did. However, in evidence she conceded that her mother had suffered from depression as a consequence of chronic illness.

216 The discrepancies in what Ms Rogan-Gardiner reported to Dr Orr must significantly undermine the foundation for his opinion. This is for two reasons. First, some of the information that was not revealed was at least relevant to Dr Orr's assessment of the aetiology of the depression. Dr Orr was unable to say that it would necessarily change his view, but it would cause him to make further inquiry. Second, the discrepancies lead to a conclusion that Ms Rogan-Gardiner was not a reliable historian and may also cause doubts as to her credibility. Her explanations for why she did not reveal information to Dr Orr showed a tendency to deliberately withhold or edit. In regards to hyper-mobility, she said she did not consider it to be a problem, but would have revealed it if asked. That, of course, is inconsistent with Dr Orr's evidence. As regards pain, she said she did not tell Dr Orr about that as she was taking pain killers. As regards litigation involving her mother, she said she did not tell Dr Orr about that because she considered it to be family related stress and had nothing to do with Woolworths. That last answer is revealing. It tends to show that Ms Rogan-Gardiner attended Dr Orr with a view that only those matters that related to her employment with Woolworths were relevant. This, of course, assumed the very issue that he was seeking to determine.

217 The response of Ms Rogan-Gardiner as to why she did not tell Dr Orr of her mother's depression was unconvincing:

Dr Orr said he asked you if there was any family history of depression and that you said no. Do you accept that?---If that's what he said, yes.

Are you saying that you didn't tell him about your mother's depression because you thought it wasn't relevant because she was a special case?---I suppose I probably only thought about my immediate family, which my mother wasn't one of them at that time, she had already passed on.

So is the reason you said no because you thought he was asking about your husband and your children?---No, I thought he would have been talking about my siblings and that because we were adults. My mother's depression would have been wholly and solely something completely different to anything because I never - I was a child growing up with somebody like that.

I'm not entirely sure I've understood your answer. Are you saying you didn't tell him about your mother's depression because you didn't think that by family history he meant your parents, or is it that you're saying you didn't think her depression was relevant because she was a special case? I'm just not clear?---I'm saying that her depression was related to her chronic illness. It wasn't a life depression because she was an extraordinarily happy person. She was always happy so I didn't think that there was anything like a family history of depression.

But you knew when he asked that question that he was including your parents, didn't you?---Yeah, but I don't - - -

Sorry, is your answer yes?---Yes.

Yes. So before, when you told his Honour that you thought he was talking about your siblings, that wasn't a truthful answer?---From the point of view that I don't count my mother as having depression from anything other than her chronic illness. I don't think of it as being anything else because she was such a happy person.

Now you say the reason you didn't tell Dr Orr was because you thought her depression was a unique thing to her. It was to do with her chronic pain and so you didn't need to tell him about it. Is that correct?---Yes, and she was dead so - - -

It had nothing to do with you thinking that he was only asking you about your siblings?---I thought that that didn't make - that it was only my siblings were left.

I know that I am labouring this, your Honour.

I do want to give you another opportunity to explain that because you have given two different answers. When Dr Orr asked you if there was any family history of depression, who did you think he was asking you about?---My siblings, and I probably discounted anything for my mother.

Did you understand him to be asking about your parents?---I think he probably was.

Right, and your reason for not telling him about your mother was because you believed that her depression was related to her chronic pain?---Yes, because she was so happy (ts 297 - 299).

218 Whilst it is not necessary for a breach to have been the dominant cause of the injury, there must nonetheless be a causative link. The question is whether it has been proven that the defendant's conduct has caused or materially contributed to the harm suffered: March v E & M H Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506. I could not so conclude on the evidence. There are good reasons to suppose that other factors caused the illness which are independent of anything done by defendant. Whilst I accept that Dr Orr maintained his view that termination was the trigger factor, this was in circumstances where he was continuing to assume, in the absence of an opportunity to make further inquiry of Ms Rogan-Gardiner, that the information she provided was reliable. On the evidence available to me that is not an assumption that I could possibly make. Indeed the evidence is such that I am unable to attach any significant weight to the opinion as to the cause of the depression because the foundation for the opinion is unreliable. Accordingly, the evidence does not satisfy me on the balance of probabilities that the conduct of Woolworths caused or materially contributed to Ms Rogan-Gardiner's depressive illness.

219 In any event, Dr Orr's conclusion was that the triggering event was the dismissal. This presents the problem raised in Eastwood of the difficulty in determining the effect of pre-termination conduct where termination is said to be the precipitating event. It is not possible on the evidence to say that the pre-termination conduct had a causative effect in respect of the depression.

220 Accordingly, even if there had been a breach of the implied good faith term, the evidence does not establish that such a breach caused any recoverable damages. In these circumstances it is not possible to make any provisional assessment of damages in that regard.

221 I should note that in any event, damages arising from psychiatric injury in this case would fail the tests in Hadley v Baxendale (1854) 156 ER 145, 151. That is to say that the injury could not be said to flow according to the usual course of things from the breach. The injury could not be said to be 'a not unlikely result' of any such breach. Nor could damages for such injury be reasonably said to have been in the contemplation of the parties when the contract was made. In this regard, I note that there was no evidence to suggest that Woolworths was aware of any of the predisposing factors that made Ms Rogan-Gardiner vulnerable to depression.

222 The contract of employment did contain an implied term that both parties would act in good faith. That term did not apply to termination or the manner of it, but did apply to conduct preceding the termination. That term was not breached by Woolworths in its conduct between April 2002 and September 2003 as particularised.

223 Even if there had been a breach by Woolworths of the implied good faith term, the evidence does not establish that any injury or recoverable damages were caused by such breach.

224 The contract also contained an implied term that Woolworths would not terminate Ms Rogan-Gardiner's employment without adequate notice. I have found that the contract was terminated by Woolworths on 11 September 2003 and that no notice was given of that termination. Thus, there was a breach of that term and Ms Rogan-Gardiner is entitled to damages. Those damages are limited to the value of the salary and benefits for the appropriate notice period, which I have found to be four months.

225 Insofar as it is accepted that there was also an implied term in the contract that a severance payment would be made in the event of a position being made redundant, I have found that there was no breach of such a term. This is because the preconditions for such a payment were not met.

226 Even if there had been a breach by Woolworths of the redundancy term, damages would not flow from that breach in circumstances where the termination on notice payment exceeds what would have been paid on a redundancy in any event.

227 I will hear from the parties as to the precise terms of the orders and as to costs.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : ROGAN-GARDINER -v- WOOLWORTHS LTD [No 2] [2010] WASC 290 (S)

Costs - Whether costs should be apportioned where plaintiff not wholly successful - Order 66 r 1(3) - Turns on own facts

Order 24A r 3(a) - Offer of compromise - Whether offer not sufficiently clear - Whether costs awarded to defendant should be set off against the judgment sum

Supreme Court Act 1935 (WA), s 32, s 37

Supreme Court Rules 1971 (WA), O 24A r 3, O 24A r 10, O 66 r 1

Danidale Pty Ltd v Abigroup Contractors Pty Ltd [2007] VSC 552

Gray v Sirtex Medical Ltd [2009] WASC 126

Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) [1993] FCA 650; (1993) 47 FCR 81

Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516

Pringle v Gloag (1879) 10 Ch D 676

Re Elgindata Ltd (No 2) (1992) 1 WLR 1207

Rogan-Gardiner v Woolworths Ltd [No 2] [2010] WASC 290

Thiess v TCN Channel Nine Pty Ltd (No 5) (1994) 1 Qd R 156

X&Y (by her Tutor X) v Pal [1991] NSWCA 302

1 HALL J: On 22 October 2010 I delivered judgment in this matter: Rogan-Gardiner v Woolworths Ltd [No 2] [2010] WASC 290. The plaintiff was successful in respect of her claim that the contract of employment was breached when her employment was terminated without adequate notice. However, she was unsuccessful in respect of other claims relating to alleged breaches of implied terms to act in good faith and to make a severance payment in the event of redundancy.

2 The parties have submitted conflicting minutes of proposed orders. The primary source of dispute is in respect of costs. The defendant seeks its costs in respect of those matters on which the plaintiff was unsuccessful. Further, the defendant proposes that in respect of the reasonable notice claim it should only pay the plaintiff's costs to 16 March 2007 and thereafter the plaintiff should pay the defendant's costs. The reason for the latter submission is that an offer to compromise was made by the defendant on 16 March 2007 pursuant to O 24A of the Rules of the Supreme Court 1971 (WA). That offer was for an amount greater than will be awarded pursuant to the judgment.

3 The plaintiff opposes the orders sought by the defendant. In particular, it is submitted that the plaintiff has been substantially successful and should be able to recover her costs. As regards the compromise, the plaintiff submits that the terms of the offer were uncertain and, therefore, it cannot form the basis of an award of costs to the defendant following the making and rejection of that offer.

4 Section 37(1) of the Supreme Court Act 1935 (WA) provides that the costs of and incidental to all proceedings in the court shall be in the discretion of the court, subject to the provisions of the Act and the rules of the court. Order 66 r 1(1) of the Rules provides that subject to the express provisions of any statute and of the rules, the costs of and incidental to all proceedings shall be in the discretion of the court but, without limiting the general discretion, the court will generally order that the successful party to any action or matter recover their costs. The discretion is wide, only being limited by such fetters as are contained in the Act or rules (or any other Act) and by the fact that the discretion must be exercised judicially: Naidoo v Williamson [2008] WASCA 179; (2008) 37 WAR 516 [39] (Steytler P).

5 Costs orders are intended to be compensatory in nature. The purpose of a costs order is to compensate a party for costs that they have incurred in respect of a matter where they have proven to be successful. The rationale behind the general rule that a successful party is entitled to their costs is that this is generally a just outcome where a party turns out to have been unjustifiably brought to court or to have been unjustifiably caused to have recourse to the court: Gray v Sirtex Medical Ltd [2009] WASC 126 [62] (Le Miere J).

6 It would, however, be simplistic to assume that the party who achieves a judgment in their favour is necessarily entirely successful, or even substantially so, for the purpose of costs. The power exists to apportion costs to make orders relating to different parts of the proceedings where that is appropriate. Order 66 r 1(3) provides that where a successful party has introduced an issue upon which he or she has failed and that issue has increased the costs of the proceedings, the court may order that party to pay costs in respect of that issue. Order 66 r 2(a) provides that where there are multiple causes of action, costs may be allowed to the plaintiff on those on which he or she succeeds and to the defendant on those on which he or she succeeds, in the same manner as if separate actions had been brought.

7 It has been suggested that these rules create no more than a starting position and do not impinge upon the court's wide discretion to make orders that reflect the justice of the case: Dal Pont GE, Law of Costs (2003) 243. Nonetheless, they permit the distributing of costs according to the outcome of particular issues in the action: Dal Pont, 243; Thiess v TCN Channel Nine Pty Ltd (No 5) (1994) 1 Qd R 156, 208 (in regard to the former Queensland rule which was similar).

8 There can, however, be difficulties in assessing liability of the costs on the basis of who won or lost a particular issue. Even where the issues are capable of identification, the costs relating to each may not be readily separated. Evidence may have been led which was relevant both to a successful and an unsuccessful issue. Nor would an order that determines liability for costs to be borne by a party based on the number of issues they lost necessarily reflect the costs expended on those issues. This is because some issues may be more or less important than others, or because an issue is subsidiary to or overlaps with another. It has been suggested that it is only if it is possible to isolate an issue that was unnecessarily pursued would it be proper to deprive a successful party of all costs in respect of that issue; otherwise a more general assessment is usually made: Dal Pont, 241; Re Elgindata Ltd (No 2) (1992) 1 WLR 1207, 1218 (Beldam LJ).

9 Circumstances may exist that justify a successful party who has failed on certain issues not only being deprived of the costs in those issues but also being ordered to pay the other party's costs in relation to them: X&Y (by her Tutor X) v Pal [1991] NSWCA 302 [15] (Clarke JA) quoted in Dal Pont at page 239. However, courts are more likely to order a successful litigant to pay costs on issues upon which they have failed where those issues have been improperly or unreasonably raised: Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) [1993] FCA 650; (1993) 47 FCR 81, 84 (Keely J). This discretion is reflected in the terms of O 66 r 1(2) of the Rules. A successful party who neither improperly nor unreasonably raises issues nor makes allegations on which he or she has failed is not generally ordered to pay any part of the unsuccessful party's costs: Re Elgindata (No 2) (1214) (Nourse LJ).

10 In the present case there were three primary issues; whether there was a breach of the implied term to give reasonable notice of termination, whether there was a breach of the implied term to act in good faith and whether there was a breach of an implied term to make a severance payment in the event of redundancy. Some evidence was arguably relevant to only one of these issues. However, other evidence was relevant to more than one issue. In particular there was evidence that was relevant to an issue in respect of which the plaintiff was successful and also to an issue in respect of which she was not successful. For example, evidence relating to the restructure and job offers made to the plaintiff between April and September 2002 were relevant to the unsuccessful issue of the alleged breach of the good faith term. However, that evidence was also relevant to the breach of the reasonable notice term because in its defence, the defendant sought to argue that reasonable notice of termination had been given at the time the restructure was announced in April 2002 and that the plaintiff's employment had in fact terminated when the position that she formerly occupied was abolished later that year. Accordingly, as is evident from my reasons for judgment, it was necessary to consider that possibility and the evidence relating to it in dealing with the breach of reasonable notice provision. In these circumstances, orders that would simply award costs in respect of each issue to the successful party would be problematic. It would not be in the interest of either party to make orders that would be unclear in regards to their application to the costs incurred.

11 It is important to note at this stage that because of the rejected offer of compromise the only costs which it is suggested by the defendant should be apportioned are those incurred prior to 16 March 2007. Those costs would clearly be pre-trial costs. It is also important to note that the character of the issues changed at trial, or at least one of them did.

12 Initially the pleadings in respect of the alleged breach of the good faith term referred only to that term having been breached by termination of the employment or the manner of that termination. At trial an amendment was permitted which extended the ambit of that claim to cover the conduct of the defendant between 15 April 2002 and 11 September 2003. In opposing that amendment the defendant submitted that it had prepared its case on the basis that the alleged breach of the good faith term was limited to the act of termination and the manner of it. Thus, at the relevant time, that is prior to 16 March 2007, the breach of good faith claim was more confined and more closely aligned to the issue on which the plaintiff was ultimately successful. Indeed, on the basis of how the pleadings stood at that time, it would be difficult to say that either the breach of good faith claim or the severance payment claim so clearly increased the costs as to justify the court exercising the discretion referred to in O 66 r 1(3). Nor am I of the view that the issues upon which the plaintiff was unsuccessful were improperly or unreasonably raised. In these circumstances the appropriate order will be that the defendant pay the plaintiff's costs prior to 16 March 2007.

13 In regard to the offer of compromise, that offer relevantly provided that the defendant would pay to the plaintiff a sum which was larger than the judgment sum has proved to be and then had a paragraph which read:

The action be dismissed and the defendant pay the plaintiff's costs to be taxed if not agreed.

14 The plaintiff submits that the terms of this paragraph were contrary to O 24A r 3(9) in that if the compromise had been accepted, the plaintiff would have been entitled to apply for judgment in her favour in accordance with the terms of the offer. It is submitted that it is inconsistent with the offer stating that the action would be dismissed for the plaintiff to be entitled to judgment in her favour. For this reason the plaintiff suggests that the offer was not reasonably certain and therefore should not have costs consequences. I queried with counsel for the plaintiff whether any question regarding the certainty of the offer had been raised at the time it was made. He stated that no such question had been raised.

15 In my view there can be no realistic doubt as to the certainty of the offer. In context, reference to the action being dismissed could only reasonably have been understood as meaning that an acceptance of the offer would bring the proceedings to an end. The offer was entirely clear as to the amount that was to be paid, the interest to be payable, the obligations of the parties as to costs, that the offer was intended to resolve the entire proceedings and the length of time for which the offer was to remain open. In these circumstances, I cannot accept the submissions of the plaintiff. Accordingly, O 24A r 10(5) applies and the defendant is entitled to an order against the plaintiff for its costs following rejection of the offer.

16 There is a final issue. The defendant seeks that there not only be a set off of costs against costs but that the costs to which it is entitled should also be set off against any monies due to the plaintiff pursuant to the judgment. The parties are in agreement that judgment should be entered for the plaintiff in the sum of $59,623 plus interest. Bearing in mind what I have said earlier in respect of costs, it is likely that there will be a net amount after setting off costs that is due to the defendant. Order 66 r 7 is broad enough to permit damages to be set off against costs. That circumstances may exist where justice requires that such a set off occur has been recognised since at least 1879: Pringle v Gloag (1879) 10 Ch D 676, 679.

17 In Danidale Pty Ltd v Abigroup Contractors Pty Ltd [2007] VSC 552 Habersberger J considered a similar submission and concluded that the appropriate course was to order a stay of execution of judgment pending the taxation of costs. His Honour considered that it would not be just to expose the defendant in that case to the risk, however remote, that having paid the judgment sum to the plaintiff it could find itself unable to recover the costs awarded to it. His Honour also took into account that the stay would not prejudice the plaintiff because interest would continue to accrue during the period that the taxation of costs was taking place.

18 In the present case I am satisfied that justice requires that there be orders which will facilitate the setting off of costs due to the defendant against both costs due to the plaintiff and the judgment sum due to the plaintiff.

1. Judgment be entered for the plaintiff in the sum of $59,623 plus interest calculated at 6% pursuant to s 32 of the Supreme Court Act from 12 September 2003 to the date of payment.
2. The defendant pay the plaintiff's costs of the action on a party and party basis until 16 March 2007, to be taxed if not agreed.
3. The plaintiff pay the defendant's costs of the action on a party and party basis to be taxed if not agreed from 17 March 2007.
4. Execution of the judgment be stayed pending finalisation of the quantum of the above orders for costs, either by agreement or taxation, and the ascertainment of the amount owed by the plaintiff to the defendant for costs (after deducting the costs owed by the defendant to the plaintiff) or until further order.
5. That any net amount of costs payable by the plaintiff to the defendant be set off against the judgment sum.