Fair Work Act 2009

s.394 - Unfair dismissal

[1] On 3 November 2020 Ms Tao (Tara) Zhang (Applicant) made an application for relief from unfair dismissal pursuant to s.394 of the Fair Work Act 2009 (FW Act). Ms Zhang had been employed by Spring FG Accounting Pty Ltd (Respondent) with her employment ending on 14 October 2020.

[2] On 20 November 2020 the application was subject to conciliation before a Fair Work Commission staff member (the staff conciliation). Following the conciliation the staff conciliator sent a letter to the Applicant and Respondent representatives which said, in part:

Thank you for your participation in today's conciliation in the above matter. I confirm that you reached a settlement agreement and I confirm that the terms of settlement are to be sent out by Adrian Barwick.

As this is an agreement reached between the parties, you must send your signed terms to the other party. Do not send a copy to the Fair Work Commission (the Commission) as we do not keep any record of your agreement. You should however keep a signed copy of the agreement for your records. Any resignation or statement of service (if applicable) should be sent directly to the relevant party, not to the Commission.

[3] There was otherwise nothing in that correspondence which indicated the terms of the agreement reached in conciliation.

[4] On 3 December 2020 the Commission received correspondence from the Applicant's representative which said:

We refer to the above matter and note that we act for the Applicant, Ms Zhang.

On 20 November 2020, the parties participated in a conciliation before the Fair Work Commission and reached an in principle agreement.

We wish to advise that the parties have not been able to reach an agreement following the conciliation and as such, we now request that the matter be listed before the Fair Work Commission.

Mr Hedley of the Respondent is copied in on this email.

[5] The file was subsequently referred to me for to determine if the matter should be referred for arbitration.

[6] On 4 December 2020 my Chambers wrote to the parties and indicated that if there was a binding settlement agreement between the parties the Commission would consider dismissing the application pursuant to s.587 of the FW Act. Submissions were therefore sought from the parties as to the existence of such an agreement. Submissions were subsequently received from the Respondent on 4 and 11 December 2020 and from the Applicant on 11 December 2020. In addition, the Applicant filed a statement of Ms Anika Ranchhod who had attended the staff conciliation with the Applicant's representative as an observer and note taker.

[7] As is evident, and not disputed between parties, it was agreed during conciliation that the terms of the agreement would be reduced to writing by the Applicant's representative and provided to Mr Hedley, the Respondent's representative.

[8] On 20 November 2020 Ms Ranchhod set the "proposed deed of mutual release" to Mr Hedley.[1] The proposed deed contained some non-disputed terms including:

• Payment to the Applicant of 3 weeks' pay less taxation (clause 2);

• Payment to the Applicant of outstanding leave and provision of a copy of employment records (clause 3);

• The Applicant to file a Notice of Discontinuance within 7 days of the later of payment or provision of leave & employment records (clause 4);

• Confidentiality and non-disparagement terms (clauses 8 and 9).

[9] On 23 November 2020 Mr Hedley returned the proposal to Ms Ranchhod with amendments, primarily to the release clauses.[2] The changes proposed by the Respondent were such as to render the release arising from the settlement as to only apply to the unfair dismissal claim. This involved changes to the recitals and to clauses 1 and 4 of the proposed deed.

[10] Ms Ranchhod emailed the Respondent on 26 November 2020 and indicated that the Applicant did not agree to the Respondent's proposed amendments "on the basis that none of those restrictions on release were discussed or agreed to in the conciliation..." That email attached the deed with "the customary full release."[3]

[11] Mr Hedley replied that day[4] and indicated that the Respondent was "both surprised and disappointed that your client is not prepared to limit the release to the unfair dismissal claim terms that were agreed at the Conciliation." The Applicant's representative replied[5] that "it was not correct to say that there was an agreement at the conciliation to limit the release to the unfair dismissal application." Mr Hedley replied[6] that "there was a very explicit limit to the releases to the unfair dismissal application" and that Mr Barwick who appeared for the Applicant at conciliation had "specifically stated that the FWC conciliation was not dealing with wider employment contract issues or breaches beyond the alleged unfair dismissal."

[12] In its submissions on the matter the Respondent says that a binding settlement agreement was reached between the parties in conciliation and that it remains ready to meet its obligations under that agreement. The Respondent submits however that, in drafting the deed, the Applicant's representative has widened its scope beyond the terms of agreement made at conciliation to include a release from all of the Applicant's post-termination contractual obligations when the agreement in conciliation was limited to a release in relation to the unfair dismissal matter only.

[13] Mr Hedley further says that he waived the three day cooling off period offered by the conciliator such that agreement was made at conciliation to settle the matter of the unfair dismissal claim only.

[14] The Applicant submits that no binding settlement agreement was reached because the parties reached an in principle agreement that was subject to a deed of mutual release, the precise terms of which were yet to be agreed by the parties.

[15] The Applicant submits that at no stage was it agreed that the terms of the mutual release would they be limited to the unfair dismissal application. On this the Applicant submits that the usual intention of parties in settling unfair dismissal matters is to agree to a release in relation to employment and to the termination. In this respect it submits that it would be non-sensical for an employer to provide a release to an employee in relation to an unfair dismissal application at the time of conciliation because the employer has no cause of action against an applicant in an unfair dismissal matter.

[16] The Applicant says, further, that Mr Hedley did not waive the three day cooling off period offered by the conciliator and for this reason a final agreement could not have been reached at conciliation.

[17] The Applicant submits that the circumstances of this case are distinguishable from Australian Postal Corporation v Gorman[7] (Gorman) as no binding agreement was reached.

[18] As to the three classes of agreement identified in Masters v Cameron[8] the Applicant says that this case falls within the third class because a binding settlement agreement was subject to the parties drafting the terms and executing the deed of mutual release after an agreement was reached on its terms.

[19] The legal principles relevant to the determination of whether a binding settlement agreement has been reached between parties was considered in Singh v Sydney Trains[9]:

[46] Chief Justice Bathurst of the New South Wales Supreme Court explained the relevant principles concerning intention to create legal relations in the following way in Pavlovic v Universal Music Australia Pty Limited:[10]

"It is well established that the question of whether the parties intended to bind themselves to a contract is to be determined objectively, having regard to the intention disclosed by the language the parties have employed: Masters v Cameron [1954] HCA 72; 91 CLR 353 at 362. In cases such as the present, which do not depend on the construction of a single document, what is involved is the objective determination of the question from the communications between the parties in their context and the parties' dealings over the time leading up to the making of the alleged contract. This involves consideration of the subject matter of the communications: Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 550. As was said by Mahoney JA and McHugh JA in Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309, that includes consideration of what the parties said or wrote (at 334, 337)."

[47] The present case does not involve complexities which often arise where contractual intention is inferred from behaviour, or is imputed.[11] Whether there was a legally binding settlement reached between Mr Singh and Sydney Trains involves interpretation of the express written communications between the parties' solicitors.

[48] An offer and acceptance must precisely correspond. The following principles are relevant to this requirement:

• An acceptance corresponds to an offer if it is an unequivocal acceptance of the terms offered.[12]

• An acceptance is not an unequivocal acceptance of the terms offered if it deviates from the offer, even if that deviation is not material or important. However, as a qualification to this principle, if a new term is included in a purported acceptance of an offer and the new term is solely for the benefit of the offeror, then this can constitute a valid acceptance.[13]

• An acceptance will be effective if it does not depart from the terms of the offer, but simply repeats in the offeree's own words the effect of the offer.[14]

• Acceptance will be effective if it sets out expressly what would be implied by law in the absence of express agreement.[15] For example, an offer may contemplate that, were it to be accepted, a document would be prepared to record its terms. In proposing that a deed be prepared as part of an acceptance of such an offer, the offeree would be stating that which would be implied by law arising from the terms of the offer, namely, that it would be documented in some formal manner.[16]

• Similarly, if a purported acceptance of an offer merely includes the "machinery of working out what was meant by the offer, it is on the same plight as a request for information".[17] Such a request for information does not revoke the offer and may constitute acceptance of the offer.

[49] Ultimately the question is whether a "reasonable recipient of the acceptance would have regarded it as corresponding to the offer or whether they would have taken the acceptance to be qualifying the original offer such that it would amount to a counter-offer or, at any rate, not an unconditional acceptance of what was originally offered."[18] Put another way, the language used by the offeree in their acceptance of the offer must be such as would convey to a reasonable person in the position of the offeror a clear and definite decision by the offeree to be bound by the terms of the offer, leaving nothing further to be negotiated.[19]

[50] A purported acceptance which does not correspond to the offer does not necessarily reject the first offer; it is, nevertheless, a counter-offer capable of acceptance.[20] A counter-offer accepted by the original offeror creates a binding agreement.[21]

[51] Conduct of the parties after the making of the supposed agreement is relevant. Such conduct may be considered in order to determine whether the prior dealings between the parties gave rise to a binding contract.[22]

[52] The phrase "'in principle' agreement" or similar is often used when negotiating the settlement of litigation and generally indicates that there is no intention yet to enter into a binding contract.[23] However, such words must be construed in the context in which they appear and the commercial setting in which the parties were operating.[24] In each case, "much will depend upon the individual circumstances of each case as to whether those words demonstrate that the parties had or had not reached a consensus on the essential terms of their bargain and whether they intended to be immediately bound by them".[25]

[53] If parties who have been in negotiations reach agreement on terms of a contractual nature and also agree that those terms will be dealt with by subsequent formal documentation, there are several categories into which such negotiations fall.[26] First, the parties reach finality, intend to be immediately bound, and propose restatement of the terms of settlement in a fuller or more precise form but not different in effect. Secondly, the parties have completely agreed all terms but performance of one or more terms is conditional on execution of a formal document. Thirdly, the parties did not intend to make a concluded bargain at all, unless and until they execute a formal contract. Fourthly, the parties intended to be bound immediately and exclusively by agreed terms while expecting to make a further contract in substitution containing, by concept, additional terms.[27]

[54] When parties do reach an agreement of the first or fourth category referred to in Masters v Cameron and Baulkham Hills, they will be bound by the terms of their bargain, notwithstanding a later disagreement between the parties about the terms to be included in a deed or written agreement between them.[28]

[20] I have applied these principles in the determination of the matter before me.

[21] It is apparent from the notes taken by Ms Ranchhod - and not disputed by the Respondent in this respect - that discussion of the terms of settlement included that there would be a "mutual release". There is nothing in Ms Ranchhod's notes of the conciliation that suggest there was any discussion of the extent of the mutual release - just that it was a "usual term". There is certainly nothing in the notes to suggest that it was discussed or agreed between the parties that the release would only be in relation to matters associated with the unfair dismissal.

[22] A mutual release only has meaning if there is a two way exchange in that release. If it was that the Applicant agreed to release the Respondent from all claims arising from the unfair dismissal and the release only had effect in relation to the unfair dismissal application there is nothing that the Respondent could release the Applicant from. The mutuality of a release only has meaning if the Respondent provides some release to the Applicant from claims it could make against her.

[23] The Applicant sought a full release from all claims in relation to her employment whilst the Respondent, ultimately, proposed to release her only for a claim it might make in relation to the abandonment of her employment.[29] However, there is no evidence that this was a matter discussed or contemplated during the conciliation.

[24] Objectively viewed and given the actions of the parties immediately following the conciliation I accept that there was no meeting of the minds as to the basis on which the agreement was reached, specifically in relation to the "mutual release" terms. This is evidenced by the Respondent's rapid response to the draft deed provided by the Applicant's representative in which Mr Hedley altered the release clause from that which the Applicant believed had been agreed. The proposed deed as worded by the Applicant was not agreed to by the Respondent, and the amended deed proposed by Mr Hedley was not agreed to by the Applicant.

[25] Whilst it may be that terms such as a mutual release clause might be considered machinery matters such as they may be considered to have no material effect on whether an agreement had, in fact, been reached, in this case the release provisions of the deed have a material impact on the Applicant and Respondent. For this reason, in this case, the clause cannot be considered to be mere machinery.

[26] In Curtis v Darwin City Council[30] the Full Bench said the fact that a draft deed is prepared which goes beyond the terms of the agreement reached does not mean that the agreement is not binding.[31]

[27] However, in A. Zoiti-Licastro v Australian Taxation Office[32] the Full Bench said, in a matter where the mutual release clause was at issue:

[12] It is clear that the settlement agreement drafted by the ATO's solicitors contained mutual releases and those had not been specifically agreed in the discussions on 3 March. There were other terms included as well, such as a request for confidentiality. But the appellant's focus on the settlement document seems to us to miss the point. The real question is what was agreed on 3 March between counsel. It is clear enough that a completed agreement was reached and that it was not conditional in any sense on an agreement being signed. Terms relating to mutual releases and confidentiality could hardly be said to be unusual. Even so, if they were objected to the proper course would be for the appellant to simply indicate that they were not part of the agreement. No such indication was given, at least not until after 31 March 2005.

[28] In the case before me I accept that at the conciliation conference there was not agreement on the terms of the mutual release, hence agreement of the complete terms necessary for a final agreement was not made. I should comment that I would make this finding even if Mr Hedley is correct in his statement that when he raised breach of contract issues the Applicant's representative said they were only dealing with the unfair dismissal claim. This is because there was evidently no agreement on the extent of the mutual release, and this was quickly conveyed by the Respondent and its counter-proposal rejected by the Applicant.

[29] My conclusion is not affected by any consideration of whether Mr Hedley did, or did not, waive the three day cooling off period. Even if he did there is nothing to suggest that the parties walked away from the conciliation with an agreement on the terms of settlement.

[30] For these reasons I am satisfied that no final agreement was reached at conciliation. For this reason the case falls into the third class as set out in Masters v Cameron such that a concluded bargain was not reached_._ The unfair dismissal application is therefore not settled.

[31] This case highlights the need for caution in the use of terms such as "mutual release" or that a settlement document will contain the "usual terms" - regardless of the sophistication or otherwise of the parties involved. It is important that parties participate in settlement discussions and that they leave those discussion fully understanding the terms of the agreement reached such that what is put in writing later is of no surprise. In making this observation I do not suggest that in this, or in any other case, an attempt has been made to obfuscate the true nature of specific terms of an agreement but rather caution that "shorthand" should be avoided.

[32] The application for relief from unfair dismissal of the Applicant will be referred for programming for arbitration.

[7] [2011] FCA 975.

[8] [1954] HCA 72; (1954) 91 CLR 353.

[9] [2017] FWCFB 4562 at [45]- [54].

[10] [2015] NSWCA 313 (Pavlovic) at [15].

[11] See, for example, Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 (Brambles).

[12] Redowood Pty Ltd v Mongoose Pty Ltd [2005] NSWCA 32 (Redowood) at [84].

[13] Boreland v Docker [2007] NSWCA (Boreland) at [76]-[78].

[14] Boreland at [76]; Cavallari v Premier Refrigeration Co Pty Ltd [1952] HCA 26; (1952) 85 CLR 20 at 26-27.

[15] Brookfield Australia Investments Limited v Lucas Stuart Pty Limited [2012] NSWSC 1130 (Brookfield) at [34].

[17] Brookfield at [35], applying Howe v Connell [1997] NSWSC 432 and Stevenson v McLean (1880) 5 QBD 346.

[18] Redowood at [76], applying Carter v Hyde [1923] HCA 36; (1923) 33 CLR 115.

[20] Capital Securities No. 1 Pty Ltd v Saliba [2016] NSWSC 1093 (Saliba) at [77].

[21] Evans Deakin Industries Ltd v Queensland Electricity Generating Board (1984) 1 BCL 334.

[22] Saliba at [53]-[54], applying B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9149 per Glass JA.

[23] Stephenson v Dwyer [2006] NSWSC 1439 at [37].

[24] Donaldson Coal Pty Ltd v Pacific National (NSW) Pty Ltd [2007] NSWSC 1446 (Donaldson Coal) at [91].

[27] Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 (Baulkham Hills).

[28] Zoiti-Licastro v Australian Taxation Office (2006) 154 IR 1 at [10]-[12]; Howe v Connell [1997] NSWSC 432.

[29] Exhibit A1, annexure D, amendment to clause 4.

[30] [2012] FWAFB 8021.

[31] [2012] FWAFB 8021 at [78].

[32] PR967544 (25 January 2006).

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