Breach of contract
41 The remainder of the relief sought in the amended application, in the six subparagraphs of para 4, the two subparagraphs of para 5, and para 6, concerns claims arising out of the contract between the applicant and the respondent.
42 In para 4(a) of the amended application, a claim is made for damages for breach of contract, pursuant to para 38 of the amended statement of claim. Paragraph 38 contains an allegation that the applicant has suffered loss and damage, pursuant to a breach of contract referred to in para 37 of the amended statement of claim. The breach referred to in para 37 was termination of the contract of employment (alleged in para 36 to have occurred on or around 1 October 2007), in breach of a term pleaded in para 32 of the amended statement of claim. In para 32, it is alleged that the applicant's assignment to Australia "was extended on a secure, long-term ongoing basis" from (at the latest) 23 September 2003. The particulars to para 32 state that the assignment was extended in accordance with para 54A of the amended statement of claim. As I have said in [26] above, para 54A alleges that the respondent represented to the applicant, between 6 February 2002 and 23 May 2007, that his assignment to Australia was long-term and secure. I have already set out the particulars to para 54A in [26] above. Those particulars merely contain allegations of representations alleged to have been made to the applicant. Any notion that there was a variation of the contract, so as to incorporate a term to the effect that the assignment to Australia was extended on a secure long-term basis comes from para 33 or para 34 of the amended statement of claim. The former of these alleges that the Australian assignment contract was varied and that the terms of the variation became terms of that contract. The latter alleges that the Australian assignment contract as varied replaced the original contract.
43 The result appears to be that there is an allegation that the original contract under which the applicant was assigned to work in Australia was varied, or substituted, by the inclusion of a term to the effect that his assignment was on a secure, long-term and ongoing basis. There is some recognition in para 35 of the amended statement of claim that any term of this nature would be balanced by an implied term requiring reasonable notice before the Australian assignment was terminated. In para 35, it is alleged that in the circumstances, and having regard to the nature and responsibilities of the applicant's employment, a reasonable period of notice of the applicant's employment was 24 months. The particulars relied on in support of this allegation are as follows:
Reasonable notice is established from the circumstances, including that the Applicant:
(i) was 50 years old;
(ii) had been continuously employed by the Respondent (and its affiliates) from or around December 1990, with service taken to accrue from 1983;
(iii) was the CEO of AWG, latterly TWG Australasia and held the highly responsible and accountable position as locally-appointed agent of VSC;
(iv) was a specialist in the niche insurance sector of extended warranties;
(v) was remunerated at high levels;
(vi) but for the termination would have continued in the employment of the Respondent until retirement;
(vii) his wife and daughters had, with the knowledge, encouragement and support of the Respondent, settled permanently in Australia.
44 It would be remarkable if the applicant were able to establish that such a long period of notice would have been required before his employment could be terminated. The evidence discloses that the respondent is part of a world-wide group of companies, carrying on business as an insurer for the provision of extended warranties. I assume that this means that the respondent and other members of the group received income from premiums paid by consumers who were prepared to purchase warranties on items for periods greater than the periods offered by the manufacturers or dealers of those items, and from the investment of those premiums. The Australian subsidiary, the management of which constituted part of the duties of the applicant, was treated for administrative purposes as falling within the Asian division of the group. The Australian subsidiary had its office at level 2, 74 Doncaster Road, Balwyn North. There is no evidence as to the size of that office, the number of staff the applicant was required to supervise or the extent of the turnover or profit that it generated. The applicant's base salary at the time of the termination of the contract was said to have been $269,013. He also had entitlements to the provision of a car, private health cover, a rental subsidy of up to $5,633 per month and reimbursement of any costs associated with renting premises, all his telephone expenses and three business class and one economy class airfares to the United Kingdom and return each year. Having regard to the range of executive remuneration common in business in Australia, it is difficult to sustain the proposition that the applicant was remunerated at high levels. The proposition that the applicant would have continued in the employment of the respondent until retirement is speculative. The fact that the respondent had assisted the applicant to satisfy his desire, and that of his family, to settle permanently in Australia would not translate readily into the proposition that the respondent thereby brought upon itself the burden of a greater period of notice than would otherwise have been reasonable.
45 In many respects, however, the question of what would have been reasonable notice of termination of the applicant's employment altogether is irrelevant. The evidence is inconsistent with the proposition in para 36 of the amended statement of claim that the respondent terminated the applicant's employment on 1 October 2007. What occurred was that, in a telephone conversation and an email on 23 May 2007, David Scott, to whom the applicant was by then reporting, informed the applicant that his assignment to work in Australia would be terminated on 1 October 2007. By reference to the terms of the contract on which the applicant relies, the effect of this was to trigger an obligation on the part of the respondent to return the applicant to his original position in England and an obligation on him to return to England and take up that position. The real question is whether, in those circumstances, notice of more than four months of the termination of the assignment to Australia (as distinct from the termination of the employment altogether) was reasonable. It is difficult to say that it was not reasonable. In addition to the factors to which I have referred in [44], it is necessary to recognise that, throughout his assignment to Australia, the applicant was in a subordinate position. He was required to report, first to Mr Powell and subsequently to Mr Scott. Part of his remuneration was in respect of his duties as a director of the respondent, which were presumably to be discharged, at least in part and most likely predominantly, by attendance at board meetings in England.
46 The termination of the contract came about in a way that is concealed, rather than revealed, by the amended statement of claim. It is clear that the applicant was very unwilling to return to England. He engaged in correspondence with the respondent about exactly what position he was to occupy if he were to return. He advanced arguments such as that a position in the Harrow office would not be his original position, because he had worked out of the Kingston office for the most part, in circumstances in which the respondent was indicating an intention to close both the Harrow and the Kingston offices and to consolidate its operations in one office somewhere else. The applicant and the respondent argued about what the title attached to the applicant's original position had been. After 20 June 2007, the correspondence was on a without prejudice basis, so that its contents are not in evidence. Eventually, by letter dated 5 October 2007 to solicitors in Sydney who were acting for the respondent, the applicant's solicitors said:
The conduct of your client in refusing to perform its contractual obligations beyond 30 September 2007 amounts to a repudiation of our client's contract of employment. That repudiation is now accepted and the contract in so far as future performance of service by our client is now terminated. It is now the intention of our client to sue both in respect of the obligations under the contract, which your client has failed to perform and, further, in respect of damages arising from the repudiation of the contract of employment by your client.
There is no specification in this letter of the contractual obligations that the respondent was alleged to be refusing to perform beyond 30 September 2007.
47 In the circumstances, the applicant has not made out a prima facie case of the allegation that the respondent terminated the contract of employment in breach of a term that the contract was to be extended on a secure, long-term and ongoing basis. The existence of such a term has not been established. In any event, an extension in those terms would be subject to an implied term that it could be brought to an end on reasonable notice. It is not possible to say that the notice actually given was less than reasonable notice. It is not possible to resolve any controversy as to whether the respondent repudiated the contract of employment by refusing to perform its obligations after 30 September 2007. There is no prima facie case for the relief sought in para 4(a) of the amended application.
48 Paragraph 4(b) of the amended application contains a claim for damages for breach of contract, said to be pursuant to para 40 of the amended statement of claim. Paragraph 40 alleges that the applicant suffered loss and damage as a consequence of the breach of contract referred to in para 39. Paragraph 39 alleges termination in breach of a term pleaded in para 25(q). That was a term alleging that "in the event of the Applicant's employment under the Australian assignment contract being terminated, the Applicant would be given a reasonable period of notice by the Respondent". It is clear from the particulars to para 40 that the applicant relies on the assertion in para 35 of the amended statement of claim that a reasonable period of notice was 24 months. That is the period particularised as the basis for calculation of the applicant's alleged loss and damage. For the reasons I have already given in [43]-[45] and [47], the applicant has not established a prima facie case that a reasonable period of notice for the termination of the Australian assignment was 24 months, or that the notice actually given to him of more than four months was less than what was reasonable in the circumstances. The applicant has failed to establish a prima facie case for the relief sought in para 4(b) of the amended application.
49 In para 4(c) and para 5(a) of the amended application, there are alternative claims for the same sums of $269,013 and £79,523. The claim in para 4(c) is said to be pursuant to para 46 of the amended statement of claim and is a claim for damages for breach of contract in those sums. The claim in para 5(a) is said to be pursuant to para 45 of the amended statement of claim and is a claim for those two sums as debts.
50 Paragraph 45 of the amended statement of claim refers to the matters pleaded in paras 43 and 44, and alleges that the respondent is indebted to the applicant in the sums specified. Paragraph 46 alleges that the applicant has suffered loss and damage as a consequence of the respondent's breaches referred to in paras 43 and 44. Paragraph 43 of the amended statement of claim alleges that, pursuant to a term pleaded in para 25(n), the respondent was required to pay to the applicant a sum calculated in accordance with the "enhanced redundancy package" and 12 months' salary. Paragraph 44 alleges that, in breach of a term pleaded in para 25(o), upon termination of the applicant's employment, the respondent did not pay the applicant 12 months' salary or any redundancy payments.
51 Paragraphs 25(n) and (o) of the amended statement of claim allege terms of the contract between the applicant and the respondent as follows:
(n) the Respondent would:
(i) offer to return the Applicant to his original employment position upon completion of the Australian assignment; and
(ii) if this was not possible because of prevailing economic or commercial circumstances, the Respondent would pay the Applicant 12 months' salary over and above an enhanced redundancy package ("enhanced redundancy package");
(o) the compensation payable in the event that the Respondent did not offer to return the Applicant to his original position, or where that was not possible because of prevailing economic or commercial circumstances (as referred to in paragraph 25(n) above), would also be payable in the event of termination of employment
52 In his affidavit of 24 April 2009, the applicant recounts in some detail negotiations with regard to the terms of the contract for his assignment to Australia. Even before he came to Australia, the applicant was stipulating for what he called a "safety net" in the event that the assignment was terminated and it was not possible to return him to his original position in England, or if his employment should be terminated for any reason. The safety net he sought consisted of a compensation payment of 12 months' salary if his original position in England was not available for him, and what he described as an "enhanced redundancy package" in the event of termination of his employment, consisting of statutory government redundancy pay, an ex gratia payment and payment in lieu of notice. Between late 1999, before the applicant came to Australia, and the middle of 2003, well after he had come to Australia, there were still exchanges of drafts of the terms of his contract of assignment, but no document was ever signed. In early 2003, there was correspondence between the applicant and a person called Kath McVeigh, who was anxious to ascertain what the terms of the assignment were, for the purposes of satisfying the taxation authorities in the United Kingdom and the respondent's internal auditors. There was some confusion over which draft was the correct one. In the end, negotiations appear to have petered out without anyone pressing for a signed document. The applicant relies on the fact that he continued in employment with the respondent during these discussions as being sufficient to establish that he had entered into a contract the terms of which included terms in accordance with his proposal for a safety net. The drafts on which both parties relied appear to have included the following term:
Every attempt will be made to return you to your original employment position upon successful completion of the assignment. If, after three months, this is not possible because of the prevailing Economic or Commercial circumstances, LGH will pay nine months salary as compensation over and above an enhanced redundancy package.
The above will also apply in the event of a termination of employment, closure of the Australian operation, or sale of the business.
There was also an attachment headed "REDUNDANCY PACKAGE - none of this in the original letter". This set out a redundancy package consisting of statutory government redundancy pay, with a formula for its calculation, an ex gratia payment based on one week's salary for each completed year of service, with no maximum, and a payment in lieu of notice of one week's salary for each completed year of service, with a maximum of 12 weeks.
53 Based on this evidence, I am prepared to accept that these terms were part of the contract under which the applicant was assigned to carry out duties in Australia. The difficulty the applicant has is in satisfying the requirement of a prima facie case that the occasion for payment of a year's salary or for any payment in respect of redundancy has arisen. The evidence does not enable me to determine whether there is a prima facie case that the respondent did not make every attempt to return the applicant to his original employment position upon successful completion of the assignment. Nor does it enable me to say that there is a prima facie case that such return was not possible because of prevailing economic or commercial circumstances. On the case put by the applicant, there was no redundancy involved in respect of his former position in Australia. Indeed, when notice was given that his assignment to Australia would be terminated, one of the things he was instructed to do was to assist in finding a replacement. For the same reason that it is not possible to make findings about the return of the applicant to his original employment position, it is not possible to make findings about whether there was a redundancy in respect of that position in England. The applicant has failed to establish a prima facie case for the relief sought in para 4(c) and para 5(a) of the amended application.
54 Paragraph 4(e) and para 5(b) contain claims for the sum of approximately $80,000. The former is a claim for damages for breach of contract in that sum. The latter is a claim for that sum as a debt. The former is said to arise pursuant to para 51 of the amended statement of claim and the latter pursuant to para 50 of the amended statement of claim.
55 Paragraph 50 of the amended statement of claim alleges that the respondent is indebted to the applicant in the sum of $80,000 (particularised as an approximate figure) because of breach of the term pleaded in para 25(i) in failing to compensate the applicant in respect of the introduction of the goods and services tax in Australia. In the alternative, in para 51, the applicant pleads that he suffered loss and damage as a result of the breach of contract pleaded in para 49. The term alleged in para 25(i) is a term that:
the Applicant would not incur any additional costs including "hidden tax" liabilities as a result of the Australian assignment and, without limitation, the Respondent would compensate the Applicant for the introduction of the GST in July 2000
56 In the drafts of the terms of the contract of assignment to Australia, to which I have referred in [52], there appears the following:
To ensure that you pay no more, or less, taxes as a result of your assignment, you will be taxed equalised in the UK. This means that during the assignment, you will pay hypothetical "UK" income tax to LGH. LGH will, in turn, pay your Australian taxes.
Any further UK or Australian Tax cost arising on your compensation, over and above your UK "stay at home" liability, attributable to your assignment, will be the responsibility of LGH. It is recognised that the introduction of GST in July 2000 may have impact of [sic] you, the Company will jointly review the introduction of this tax with you and ensure that this has no "cost to you".
UK hypothetical tax on your Company car will be based on the list price of the local model provided.
LGH has retained Ernst & Young to facilitate this process, both in the UK and Australia. Ernst & Young will provide you with a departure briefing and take responsibility for all UK and Australian tax returns to include the year of your departure from the UK, and return.
You are obliged to provide all necessary data and comply with both UK and Australian tax law, as advised by Ernst & Young.
57 If this is the term relied on by the applicant, it is pleaded in an imprecise way. What the clause required in relation to the introduction of GST was that both parties engage in a review to ensure no cost to the applicant. There is no evidence as to whether any such review ever took place. There is no evidence that either the applicant or the respondent ever sought to engage in such a review, or what the outcome of such a review was if it occurred. There is no evidence that the respondent did not pay anything to compensate the applicant for the introduction of GST, or as to how much it might be liable to pay if it did so. In short, there is no evidence to establish a prima facie case for the relief sought in para 4(e) or para 5(b) of the amended application.
58 By para 4(f) of the amended application, pursuant to para 54 of the amended statement of claim, the applicant seeks damages for breach of contract in the sum of $53,803. Paragraph 54 contains, in conjunction with the allegation of failure to fulfil a statutory obligation in respect of accrued annual leave, a claim based on breach of contract in that respect. In turn, by reference to paras 52 (to which I have referred in [37]) and 53, a claim is made in respect of the term of the contract alleged in para 25(s) of the amended statement of claim. It is unnecessary to determine whether there is a prima facie case for the relief sought in respect of this alleged breach of contract, because I have already found that there is a prima facie case for the identical relief sought by virtue of statutory entitlement.
59 The final claim, in para 6 of the amended application, is a claim pursuant to para 25(m)(ii) of the statement of claim for a declaration that the applicant and his family are entitled to be indemnified by the respondent in respect of any present or future taxation obligation or penalties relating to his employment with the respondent. The term pleaded in para 25(m)(ii) is alleged to be an implied term. In full, together with its particulars, para 25(m) alleges a term as follows:
the Respondent would:
(i) retain Ernst & Young to facilitate the hypothetical tax arrangement and take responsibility for all UK and Australian tax returns ("the Ernst & Young agreement");
(ii) indemnify the Applicant and his family in respect of any conduct or advice (or advice not given) by the Respondent or its advisers, including Ernst & Young, in relation to the hypothetical tax arrangement giving rise to any obligation or penalties in respect of taxation obligations (or penalties) relating to the assignment;
PARTICULARS
The term is implied on the basis that it is reasonable and equitable; necessary to give business efficacy to the contract; obvious; capable of clear expression and does not contradict any express term of the contract. Or alternatively, the term is implied on the basis that it is necessary for the reasonable or effective operation of the contract.
I have set out in [56] the express term of the contract of assignment to Australia relating to taxes. It is not obvious how the implied term alleged in para 25(m)(ii) of the statement of claim can be derived from the express term, whether to give it business efficacy or otherwise. There is no other material concerning this. There is no evidence suggesting that the respondent refuses to provide, or even whether the applicant has sought, an indemnity of the kind suggested. The applicant has failed to make out a prima facie case for the declaratory relief.