Total recommended bonus is $22,500.
29 In the cases of the other employees, the general format was that used in the case of Mr Pascoe.
30 On 20 May 1998 (two days after the winding up order), Mr Maguire wrote to the receivers and managers, enclosing recommendations he made concerning these senior managers. In short, and in respect of each of these employees, he adopted the Waldo memorandum and expanded upon it. Subsequently, in June 1998, Mr Maguire provided further information, generally similar in nature, concerning Mr Stephen (the tenth respondent, then head of the National Customer Service Centre for Galaxy) and Ms Heyward.
31 The receivers and managers rejected the recommendations, but in a practical sense, the liquidator later adopted them. He indicated that he accepted, or would accept proofs of debt; and he defended that decision in the litigation.
32 Focusing then on the position of Mr Maguire, when he started his employment, in 1995, there was no written contract of employment, and no agreement as to the quantification of his bonus, but the parties then reduced their agreement to writing, in the deed. At that stage, they had still not agreed about the quantification of his bonus: see [9]. Thereafter, he and Mr Gamble discussed what criteria might be adopted, not just for Mr Maguire, but also more generally, and then Mr Orrick produced the document set out at [11]-[12]. Galaxy then paid Mr Maguire, and others, generally in accordance with the terms of that document, although it only paid Mr Maguire a 25% (guaranteed) bonus, without explanation or discussion.
33 In respect of the 1995-1996 year, and subsequent years, there were discussions about how bonuses should be computed. No firm recorded agreement was reached in respect of the 1996-1997 year, until after that year had ended, although Mr Maguire said, without challenge, that there was some informal agreement. After the year ended, detailed calculations were made, showing how each employee's bonus was calculated: in general, by reference to achievements of the branch managed by the employee in question. In respect of the 1997-1998 year, before the first appointment of the receivers and managers, the same pattern seems to have been emerging: the managers, as a group, expected to be paid a bonus, computed by reference to what they achieved, measured broadly against what they had been told they were expected to achieve, but the mechanism had not been fixed, and the company did nothing to suggest that this assumption was incorrect.
34 The appellants contended that there was no binding agreement for Galaxy to pay any employee any sum by way of "bonus": there was only an unenforceable "agreement to agree". Santow J, whose judgment is at (2001) 39 ACSR 483, (2002) 20 ACLC 73, concluded that, in respect of each of the employees in question, the written contract of employment, which admittedly had actually been executed or performed in large part, contained an implied term that Galaxy would pay the employee a reasonable sum by way of "bonus", upon the adequate performance by that employee of his or her work; and he regarded the course of conduct of the parties as giving content to the criterion of what was reasonable in the circumstances.
35 I think it is plain that, on the face of the deed, the parties to that deed intended that Mr Maguire should be paid a "bonus" (upon adequate performance by him), not as a matter of discretion, but of right. In the absence of anything further expressed in the deed, it required the parties to do all that was reasonably necessary to secure the performance of the contract, and to enable Mr Maguire to have the benefit of it: Secured Income Real Estate (Australia) Pty Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, 607; and the parties did this, until the first appointment of the receivers and managers.
36 Thus, during the 1995-1996 year, the document mentioned at [11]-[12] was prepared, and generally acted upon. During 1996-1997 the documents mentioned at [21]-[22] were prepared and acted upon. During the year 1997-1998, and until the first appointment of the receivers and managers, the parties acted on the basis that because of the financial position of Galaxy, it would be appropriate to fasten upon a new set of criteria, but the employees would (upon adequate performance) be entitled to be paid a bonus. Mr Maguire was involved in the planning relating to this, not just on his own behalf, but also on behalf of others.
37 In addition, after liquidation, he prepared a request that he be paid a bonus, and Mr Rose, a director of Galaxy, accepted this as his recommendation. Broadly speaking, it followed the same pattern as the recommendation based on the Waldo memorandum, concerning the others.
38 The appellants submitted, and I am content to assume, that Galaxy did not, either before the first appointment of the receivers and managers, or afterwards, either through its board of directors, or through the receivers and managers, accept the recommendations for the payment of bonuses. (The liquidator did so, later on, in the sense that he accepted or said he would accept the employees' proofs of debt.) However, the obligation of Galaxy under the deed, to secure the performance of the contract, was not to act through its board of directors, but to act effectively. On the evidence, it had acted mostly through its officers rather than formally through its board throughout the relevant period (although it is also clear that individual directors had concurred in what happened, and likely that the criteria adopted for 1996-1997 were at least approved by the board), in agreeing on relevant criteria, and on the amounts payable, and the company had actually paid the bonuses purportedly agreed to on its behalf, in respect of the years 1995-1996 and 1996-1997.
39 There is nothing in the deed providing that the criteria upon which bonuses would be paid would be agreed upon annually, or at any other interval, or that the criteria would be fixed by the board, and not otherwise; and for what it is worth (not as an aid to the construction of the deed: McGill v National Australia Bank Ltd [2001] NSWCA 221), the subsequent conduct of the parties pointed in the same direction.
40 Equally, there is nothing in the deed that suggests that if there was no expressed agreement by some specified date in a given year, fixing the criteria for computing the "bonus" for that year, no bonus would be payable, or that Mr Maguire's only remedy would be an action for damages for breach of contract - with the consequence, in the present circumstances, that he would be an unsecured creditor, rather than a priority creditor.
41 I agree with the conclusion reached by Santow J, that in the case of Mr Maguire, the effect of the deed was that Galaxy was bound to pay him, not just a base salary, but also a sum of money called a "bonus". It is clear that the parties intended to enter into a binding contract, which was actually executed over a period of more than two years, and clear that they intended that Galaxy pay Mr Maguire (subject to satisfactory performance) something by way of "bonus", as a matter of right, and not discretion. A "bonus" of 25% of base salary was guaranteed for the first year, and the language of clause 10 of the deed points generally to the conclusions that (subject to satisfactory performance) a "bonus" would be paid, as of right.
42 The amount of the bonus was not fixed at the time of the execution of the deed, so that the law imposed an obligation to pay a sum that was reasonable in the circumstances, to be assessed having regard to the evidence showing what value the parties themselves put on Mr Maguire's services: Way v Latilla [1937] 3 All ER 759, Powell v Braun [1954] 1 WLR 401, and Woodhouse v ADA Manufacturing Co Ltd [1954] SASR 263. Thus, in Way, as assessment was made of a reasonable share by way of "participation" in the profits from a mining venture; and in Powell and in Woodhouse, assessments were made of the reasonable shares of the profits from the businesses in question, paid instead of salary or wages.
43 In the case of Mr Maguire, the position is also affected by the penultimate paragraph of clause 10.1 of the deed, linking the criteria for his "bonus" entitlement to the criteria to be used in relation to other employees, and by the course of the conduct of the parties: they examined the results achieved by Mr Maguire and those other executives, compared them to the figures set out in various budgets and business plans prepared by Galaxy, and then proceeded to consider whether each employee should be taken to have earned his or her bonus, as a matter of right (subject to satisfactory performance).
44 For the 1995-1996 year, Galaxy fixed upon one criterion only, namely the maximisation of the number of new subscribers: see [11]; for the 1996-1997 year, it fixed upon different criteria, and spoke of a change in those criteria in the future: see [21]-[23]; and during the course of the 1997-1998 year, a different set of criteria again was discussed: see [24]-[29]. During that year, a large number of business plans were formulated, and it seems that all concerned treated these as setting out Galaxy's instructions from time to time as to what it wanted its staff to achieve, and as going to show what Galaxy would take into account when deciding whether an individual employee had earned a "bonus", and to what extent; that is, what Galaxy and the employee would regard as reasonable for this purpose. Both Galaxy and the employees had an expectation that (subject to satisfactory performance) the employees would be entitled to be paid a reasonable sum by way of a "bonus", as a matter of right, and all that had to be worked out was whether the bonus had been earned, and if so, what sum was to be paid.
45 Assuming that no agreement was ever reached, binding upon Galaxy, as to what criteria would be fixed upon for the 1997-1998 year, Galaxy's obligation was to pay (subject to satisfactory performance) a reasonable sum for the "bonus", and the circumstances that the parties treated as significant should now be treated as significant, when considering what amount was reasonable. This is how the liquidator approached the case, and how Santow J treated it, dealing with the case as an appeal under s1321 of the Act from the liquidator's decision. To that extent, the decisions of the liquidator and of Santow J are beyond appeal.
46 The appellants took another point, submitting that the deed spoke of "profitability criteria", "in future years". However, as the evidence I have summarised makes clear, Galaxy fixed upon criteria for the years 1995-1996 and 1996-1997 which did not pay any regard to profitability, and nothing that was said about the criteria that might be selected for the 1997-1998 year referred to profitability; and the deed did not specify at what point profitability might become a relevant factor. At best from its perspective, it seems that if and when the operations of Galaxy became profitable, criteria linked to profitability would be selected, and that until that stage was reached, other performance based criteria would be chosen. Given Galaxy's financial state at the time, it was not reasonable to fix a criterion related to the possible profitability of Galaxy during that year.
47 Another strand to the appellants' case was to submit that no "bonus" was payable unless the employee in question was still actually employed by Galaxy at the end of the financial year 1997-1998; and their employment ended, or should be taken as having ended, before then. Proceeding on the basis that there was an express term to similar effect for each of the 1995-1996 and 1996-1997 years, and assuming that there was an implied if not an express term to that effect for the 1997-1998 year, I do not consider that this line of defence was made good. The employment of Mr Maguire only terminated before the end of the financial year because of Galaxy's insolvency, and Galaxy cannot be heard to rely on its own breach of contract, vis a vis Mr Maguire, to constitute a non-fulfilment by him of a condition precedent to his otherwise qualifying for payment of his "bonus".
48 In summary then, the liquidator regarded Mr Maguire's claim as being one for "wages", as defined, that is, for money due under the deed by way of accrued legal right to be paid a reasonable sum; Santow J dismissed the appeal from this decision; and I agree. But even if this view was wrong, I take the view that a reasonable sum was payable by way of "bonus", and that the sum claimed by Mr Maguire and accepted by the liquidator was "wages …payable by the company in respect of services rendered to the company by" Mr Maguire as an employee, within the meaning of s556(1)(e) of the Act.
49 I turn to the position of Mr Waldo, the second respondent. He was employed pursuant to the terms of a contract formed by exchange of letters, containing this passage:
Bonus: You will earn a 50% bonus based on goals to be agreed within two months after your commencement of services. Your bonus will be guaranteed to 25% in year one.
50 No "goals" were in fact agreed upon. Mr Waldo was not paid a bonus in either 1995-1996, or 1996-1997, because he did not meet the targets set for him, or his branch, that is, the targets mentioned in the documents otherwise relevantly set out at [11] and [21]-[22]. The evidence about him, individually, is sparse, but it seems clear that, generally, he was treated as if he was one of the group of senior managers, embraced by the terms of the documents just mentioned, and that he was treated in similar fashion in 1997-1998, until the appointment of the receivers and managers. He then prepared the Waldo memorandum: see [27]. This was, of course, a self serving document so far as it concerned him, and what he said about others no doubt needs to be read in that light.
51 However, the memorandum set out a series of figures recording what his branch had achieved, comparable to the goals that had been set, following the same general format mentioned at [28].
52 The terms of Mr Waldo's contract differed from the terms of Mr Maguire's, and the facts are different, in that Mr Waldo was, so to speak, treated as one of the group of senior managers, whereas Mr Maguire attended to the affairs of Galaxy in relation to that group, but otherwise the positions of the two men seem to be relevantly indistinguishable.
53 The position of each of Messrs Zuravle, Orrick, Pascoe, Burns and Stephen, the fourth, fifth, seventh, eighth, ninth and tenth respondents, is generally similar to that of Mr Waldo. Each was employed under a contract, the terms of which are quoted by Santow J at 7 of his reasons for judgment; and I see no sensible basis for any relevant distinction.
54 Ms Heyward, the sixth respondent, is in a different position. Her contract of employment provided:
A bonus plan will be in place designed to generate a bonus of $15,000 based upon achievement of pre-set parameters, which will be agreed upon us during the next three months.
55 However, no agreement was reached. Her "bonus" was a fixed sum each year, subject to performance. The liquidator accepted that her performance was adequate for that purpose, and I see no basis for thinking that this was wrong.
56 I propose that the appeal be dismissed with costs.
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