Zafiriou v Saint-Gobain Administration Pty Ltd [2014] VSCA 331

1 The appellant, Mr Zafiriou, was formerly employed by the respondent, Saint-Gobain Administration Pty Ltd ('Saint-Gobain'). On 26 October 2010, Mr Zafiriou's employment was terminated and he received a payment in lieu of four weeks' notice of termination together with accrued leave entitlements. He was also offered an ex gratia payment representing five months' salary but declined to accept it because terms accompanying the offer would have prevented him from making a further claim.

2 In February 2011, Mr Zafiriou instituted proceedings in the Supreme Court claiming an entitlement to some $745,000 pursuant to a provision in his written contract of employment which provides for a severance payment if his employment was terminated 'for reasons of redundancy/retrenchment'.

3 Mr Zafiriou alleges that the true reason for the termination of his employment was a desire to effect a restructuring of the company and this required his retrenchment.

4 At the time his employment was terminated Mr Zafiriou was advised that the reason was due to unsatisfactory work performance. As to this Mr Zafiriou maintains that the reason put forward was a sham adopted in order to avoid liability for a redundancy payment.

5 Alternatively, Mr Zafiriou claims that his employment could only have been terminated for unsatisfactory performance if Saint-Gobain complied with disciplinary and termination procedures contained in policies incorporated into his contract of employment.

6 Following a twelve day trial, Emerton J concluded, in consequence of comprehensive and clearly expressed reasons, that Mr Zafiriou's employment was not terminated for reasons of 'redundancy/retrenchment' and that his primary claim should be dismissed. Her Honour further held that the incorporated policies did not require further formal warnings and opportunities for improved performance to be given to Mr Zafiriou as a pre-condition to termination of his employment pursuant to the written contract. Nevertheless, for completeness she further found that even if the relevant disciplinary policy applied it could have been complied with within four months.

7 In consequence of these findings, her Honour dismissed Mr Zafiriou's claim. She also awarded costs against him including, in part, costs on a special basis.

8 Mr Zafiriou subsequently instituted an appeal against her Honour's judgment and initially contended:

(a) that her Honour erred in her conclusions with respect to the issue of redundancy and made findings which were against the weight of the evidence;[1]

(b) that her Honour applied the wrong test in assessing whether there was a proper basis for Saint-Gobain to terminate Mr Zafiriou's employment;[2]

(c) that disciplinary and termination policies provided for in the incorporated documents were required to be applied prior to the termination of Mr Zafiriou's employment;[3]

(d) that her Honour erred in her conclusion as to the further consequences of the failure to comply with the incorporated documents;[4] and

(e) that her Honour erred in the exercise of her discretion as to costs.

9 The appeal has been materially complicated after its institution by the discovery by Saint-Gobain of further documents relating to the matters in issue which were not made available at trial.

10 On 18 April 2012, prior to the trial, Lansdowne AsJ made orders that Saint-Gobain give particular discovery of documents being:

(a) PowerPoint slides allegedly presented during the meeting with Blackwoods in December 2010, attended by Saint-Gobain's senior managers being relevant to performance complaints made against Mr Zafiriou or Saint-Gobain by its major customer, Blackwoods;

(b) communications within Saint-Gobain's management team regarding Mr Zafiriou's (i) alleged poor performance; (ii) role as affected, or otherwise, by the restructure to either Saint-Gobain's ceramics or abrasives business; (iii) consideration by Saint-Gobain of the redundancy of Mr Zafiriou's role or Mr Zafiriou's retrenchment.

11 Following judgment, Mr Zafiriou's solicitors came into possession of a set of PowerPoint slides which Mr Zafiriou alleges were created by Saint-Gobain's personnel and presented at the meeting referred to above. Mr Zafiriou alleges that these slides demonstrate that concerns expressed by the Managing Director of Saint-Gobain about Mr Zafiriou's handling of a key customer of Saint-Gobain (Blackwoods) were unfounded, thereby supporting the conclusion that his employment was, in reality, terminated for reasons of redundancy.

12 On 29 November 2013, the Court of Appeal granted leave for Mr Zafiriou to amend his grounds of appeal and for evidence regarding the newly discovered PowerPoint slides to be adduced in the appeal.

13 In March of 2014, Saint-Gobain, by its solicitors, discovered further documents which Mr Zafiriou alleges demonstrate that the termination of his employment for reasons of redundancy was being considered by Mr Chaur well in advance of the actual termination.

14 On 14 May 2014, the Court of Appeal granted leave by consent to Mr Zafiriou to further amend his grounds of appeal and for evidence regarding the newly discovered additional documents discovered by Saint-Gobain to be adduced in the appeal.

15 Mr Zafiriou now places primary reliance upon the following grounds of appeal:

1. Had the Appellant been in the position to tender the PowerPoint slide presentation as an exhibit at the trial there was a significant prospect that the Trial Judge would have found, and the Court of Appeal should determine, that Mr Chaur did not have legitimate concerns about the performance of the Appellant to justify his termination as performance based, by reason of alleged delivery complaints made by Abrasives major customer, Blackwoods.
2. The judgment of the learned trial judge is rendered unsafe by the Respondent's failure to make discovery before trial of the various relevant discoverable documents, which have only been discovered by the Respondent after the trial, on 19 March 2014, and were not able to be relied upon by the Appellant at the trial.
3. Further or alternatively, had the Appellant been in the position to rely upon the various relevant discovered documents, which were only discovered by the Respondent after the trial, at the trial, there was a significant prospect that the trial judge would have found, and the Court of Appeal should determine, on the weight of the evidence, that the Appellant's employment was terminated because in fact his position as General Manager Commercial Operations for the Respondent was intended to be made redundant by the Respondent.[5]

16 For reasons which I will explain, the critical issue in this appeal is raised by ground 15, namely whether the fresh evidence has rendered the trial judge's conclusions unsafe.

17 In Commonwealth Bank of Australia v Quade,[6] the High Court explained the principles applying to the receipt of fresh evidence in cases where there has been a significant failure by the successful party to provide proper discovery at trial.

The application to that category of case of the general rule that a new trial should only be ordered on the ground of fresh evidence if it is 'almost certain'[7] or 'reasonably clear'[8] that the opposite result would have been produced if the evidence had been available at the first trial would, particularly where the failure was deliberate or remains unexplained, serve neither the demands of justice in the individual case nor the public interest in the administration of justice generally. In so far as the demands of justice in the individual case are concerned, it would cast upon the innocent party an unfairly onerous burden of demonstrating to virtual certainty what would have happened in the hypothetical situation which would have existed but for the other party's misconduct. In so far as the public interest in the administration of justice generally is concerned, it would be likely to ensure to the successful party the spoils of his own default and thereby encourage, rather than to penalize, failure to comply with pre-trial orders and procedural requirements.

It is neither practicable nor desirable to seek to enunciate a general rule which can be mechanically applied by an appellate court to determine whether a new trial should be ordered in a case where misconduct on the part of the successful party has had the result that relevant evidence in his possession has remained undisclosed until after the verdict. The most that can be said is that the answer to that question in such a case must depend upon the appellate court's assessment of what will best serve the interests of justice, 'either particularly in relation to the parties or generally in relation to the administration of justice'.[9] In determining whether the matter should be tried afresh, it will be necessary for the appellate court to take account of a variety of possibly competing factors, including, in addition to general considerations relating to the administration of justice, the degree of culpability of the successful party,[10] any lack of diligence on the part of the unsuccessful party and the extent of any likelihood that the result would have been different if the order had been complied with and the non-disclosed material had been made available. While it is not necessary that the appellate court be persuaded in such a case that it is 'almost certain' or 'reasonably clear' that an opposite result would have been produced, the question whether the verdict should be set aside will almost inevitably be answered in the negative if it does not appear that there is at least a real possibility that that would have been so.[11]

18 This appeal thus raises the question whether there is a real possibility the fresh evidence might produce an opposite result to that reached at trial. Mr Zafiriou asserts that not only is there such a possibility but that the fresh evidence proves his case on the balance of probabilities.

19 The following outline of facts is largely taken from a summary agreed by the parties.[12]

20 Mr Zafiriou was employed as Company Accountant with Flexovit Abrasives Australia Pty Ltd on 20 July 1987. In 1999, that company became Saint-Gobain Abrasives Pty Ltd ('Abrasives'), following its acquisition by a French based conglomerate, the parent company of Saint-Gobain.

21 From October 2000, Mr Zafiriou held the role of General Manager - Commercial Operations with Abrasives, reporting to the Managing Director.

22 From 2005, Mr Zafiriou also held the role of General Manager for a related business, Saint-Gobain Industrial Ceramics Pty Ltd ('Ceramics'), in which he reported to a Mr Laurent Tellier, based in Shanghai. Under internal 'recharge' arrangements, Abrasives passed on 30 per cent of Mr Zafiriou's salary cost to Ceramics, to reflect the time being spent by Mr Zafiriou in performing the Ceramics duties.

23 Mr Zafiriou and Saint-Gobain signed an employment agreement on 16 September 2005. That agreement, subject to annual revisions in remuneration, continued to govern the relationship between the parties as at the date of termination of Mr Zafiriou's employment.

24 As at 30 June 2010, Mr Zafiriou's responsibilities at Abrasives included IT, Company Secretary, ACCC compliance, insurance, legal affairs, occupational health and safety and the management of the motor vehicle fleet, as well as responsibility for warehousing, distribution, logistics, supply chain, customer service, and New Zealand conversion operations. He was also involved in three restructuring projects, namely Project Cooper (which involved the closure of a manufacturing facility in Lidcombe, New South Wales), Project Spartan (which involved centralising the distribution and customer service functions for the east coast in Melbourne) and the High Jump IT project (which involved the labelling and scanning of products to improve warehouse efficiency). Project Cooper and the High Jump project were completed in September 2010, and Project Spartan was completed in early October 2010.

25 During the course of his employment, and since his appointment as General Manager - Commercial Operations, the duties performed by Mr Zafiriou had varied from time to time, eg in March 2010, production planning and demand planning were added to Mr Zafiriou's responsibilities.

26 A new Managing Director, Mr Steven Chaur, was appointed by Abrasives in May 2010, with the appointment taking effect from 1 July 2010.

27 Over the course of approximately his first 100 days in the role, Mr Chaur prepared a document entitled '100 day plan', which he circulated to senior executives of Saint-Gobain's parent company. Mr Zafiriou contends that documents discovered by Saint-Gobain after trial show that documents were prepared during this period proposing Mr Zafiriou's role would be eliminated and his duties redistributed to other employees. Saint-Gobain contends that the major changes proposed in the '100 day plan' were to the sales and marketing areas of the Abrasives business, not to the areas managed by Mr Zafiriou. The '100 day plan' included indicative costs to make two sales and marketing executives redundant. It did not include any indication or proposal that Mr Zafiriou was to be made redundant.

28 The '100 day plan' included a proposal to change Mr Zafiriou's position/title to General Manager Supply Chain, with changes to his duties including a loss of responsibility for IT and New Zealand conversion operations and the gaining of responsibility for grain procurement. Saint-Gobain contends that Mr Zafiriou's other duties were to remain unchanged. Mr Zafiriou disputes this.

29 At a meeting on 12 August 2010 Mr Chaur advised Mr Zafiriou that Mr Zafiriou's role would no longer have responsibility for IT, with that responsibility passing to the Chief Finance Officer.

30 There had been no written variation to Mr Zafiriou's employment contract to effect a change in his position to a new position/title of 'General Manager Supply Chain'.

31 Until the termination of his employment, Mr Zafiriou continued to use the title 'General Manager - Commercial Operations' in his emails, correspondence and business cards and was not instructed to the contrary.

32 Prior to the termination of employment, there had been no formal warnings of any proposed termination on performance grounds or formal performance improvement plans issued to Mr Zafiriou. No steps had been taken under Saint-Gobain's disciplinary policy.

33 In the period prior to the termination of employment, an issue arose concerning Abrasive's delivery performance for a major customer, Blackwoods. The issue centred on Blackwoods's dissatisfaction with Saint-Gobain's DIFOT (Delivery In Full and On Time) performance. It was critical to Saint-Gobain's business that Blackwoods be kept happy.

34 Following a series of complaints by Blackwoods, and at Mr Chaur's request, Mr Zafiriou compiled a report concerning the resolution of the Blackwoods's issues, relating to alleged late and/or incomplete deliveries, which he presented to Mr Chaur and others from the management team on 25 October 2010. Mr Chaur gave evidence that he was not satisfied that the presentation contained any plan to address Blackwoods's concerns. Mr Zafiriou contested this view.

35 In October 2010, Mr Chaur was advised by the Human Resources Manager, Ms Pam White, of the cost of terminating Mr Zafiriou's employment, both on the basis of paying four weeks' notice and on the ground of redundancy/retrenchment. When Mr Chaur was told the latter figure, he said words to the effect of 'Wow- that's a big amount'. Mr Chaur also gave evidence that if he had wished to make Mr Zafiriou redundant he could have sought approval to do so as part of the '100 day plan'.

36 On 25 October 2010, following Mr Zafiriou's presentation on the Blackwoods DIFOT issue, Mr Chaur sent an email to his superiors proposing the termination of Mr Zafiriou's employment.

37 Mr Chaur terminated Mr Zafiriou's employment in a meeting on 26 October 2010. Mr Chaur told Mr Zafiriou that the reason for termination was unsatisfactory performance. Mr Chaur expressly maintained to Mr Zafiriou at the meeting that the employment was not terminated on the ground of redundancy. Other performance based reasons which Mr Chaur gave as a basis for terminating Mr Zafiriou's employment included:

(a) Mr Zafiriou's failure to meet Mr Chaur's expectations regarding the quality and timing of reports;

(b) Mr Chaur's perception that Mr Zafiriou had created a silo within the business and did not want to be accountable to someone managing him;

(c) Mr Chaur's belief that Mr Zafiriou was not customer focussed.

Mr Zafiriou did not agree that these performance concerns were genuinely or reasonably held by Mr Chaur.

38 A formal letter of termination was sent to Mr Zafiriou on 1 November 2010.

39 Following the termination, the then Supply Chain Manager, George Mihailidis, was appointed as General Manager Supply Chain, initially on an acting basis, and then on a permanent basis. Saint-Gobain maintains that the duties that had been performed by Mr Zafiriou were not performed by a single employee, but were distributed among a number of persons. Mr Zafiriou contends that the role to which Mr Mihailidis was appointed was different in many significant respects from the role held by Mr Zafiriou, and on a lower salary, and that this demonstrates that Mr Zafiriou's position had been made redundant. Saint-Gobain contends that this reallocation of duties occurred following, and as a consequence of, the termination of Mr Zafiriou's employment and did not therefore bear on the question of whether Mr Zafiriou had been made redundant. Mr Roger Freeman was appointed as Acting General Manager of Ceramics following the termination, and held that position until Ceramics closed its manufacturing operations in August 2011.

40 It is convenient to say something more about the conceptual framework within which the trial judge dealt with the redundancy claim.

41 First, clause 22 of the contract of employment relevantly provided:

22.1 This contract may be terminated by either party, by giving the period of written notice specified in the table below. This shall not prevent the employer from summarily dismissing the employee for serious misconduct or other justifiable cause.

Over 1 year and up to the completion of 3 years

....

22.4 If the employer terminates the employee's employment for reasons of redundancy/retrenchment, no compensation other than a payment, as detailed below, shall be payable.

42 As the trial judge observed, the contract of employment contemplated two alternative means of termination. Either the employee was entitled to the written notice specified in the table under clause 22.1 or, if the employer terminated the employment for reasons of redundancy/retrenchment, the employee was entitled to the benefits specified under clause 22.4.

43 Secondly, the contract defined redundant employee as follows:

an employee whose employment is terminated as being surplus to existing requirements by reason of the closing down or reorganisation of the whole or part of the employer's operation or by amalgamation of the employer's operations with the operations of another employer.

44 I respectfully agree with her Honour that the concept of redundancy/retrenchment required Mr Zafiriou to establish on the balance of probabilities:

that his employment or position became surplus to the requirements of Abrasives by reason of a 'closing down, reorganisation or amalgamation'. The 'closing down, reorganisation or amalgamation' must have been the cause of Mr Zafiriou's employment or position becoming surplus to requirements, not its consequence.[13]

45 Thirdly, the essence of Mr Zafiriou's case on the redundancy issue at trial was as follows:

1. Mr Zafiriou's final position is, therefore, that the termination of his employment was the culmination of a restructuring process which began soon after Mr Chaur's appointment and ended with Mr Chaur concluding that there was no longer a need for Mr Zafiriou's position. According to Mr Zafiriou, Mr Chaur simply did not want a single person performing the collection of duties that made up Mr Zafiriou's position. These were a collection of odd responsibilities that added up to a 'mini CEO' position, and Mr Chaur did not want a 'mini CEO' in the company. Mr Chaur decided to abolish the 'mini CEO' position and replace it with a position that was one of a series of equal direct reports focused upon supply chain management without the Ceramics responsibilities, the ACCC responsibilities and the corporate

functions. Abolishing the 'mini CEO' position amounted to a redundancy.[14]

46 Fourthly, a central issue at trial was whether Mr Chaur devised a plan to make Mr Zafiriou redundant. On the evidence at trial, Mr Zafiriou submitted that such a plan was devised in the last days of his employment. He now contends that the fresh evidence demonstrates that such a plan can be traced back to a much earlier date.

47 Fifthly, the question of whether there was a basis for Mr Chaur to hold performance concerns with respect to Mr Zafiriou bore logically upon the probabilities of the existence of a sham. As the trial judge put it:

1. The question for the Court is not whether Mr Zafiriou's performance justified his dismissal, but whether Mr Chaur's concerns about Mr Zafiriou's performance were contrived in order to justify a performance-based termination. The question then is whether there was a basis for Mr Chaur to hold performance concerns so as to displace or negate the suggestion that the concerns he identified were contrived. [15]

48 Sixthly, the fact that there was a redistribution or restructure of positions after Mr Zafiriou's employment was terminated begged the question whether this occurred as the result of a pre-existing plan to make him redundant or whether it occurred as of necessity following his dismissal on performance grounds.

49 Her Honour's reasons demonstrate why on the evidence before her she was not satisfied that there was at any time a plan to make Mr Zafiriou's position redundant as part of a restructure or reorganisation of the company.

1. I am not satisfied that there was at any time a plan to make Mr Zafiriou's position at Abrasives redundant as part of a restructuring or reorganisation. Although Mr Zafiriou was considered by senior management overseas to represent a potential problem for Mr Chaur,[16] there is no evidence that either Mr Chaur or the overseas leadership (or Mr Chaur in conjunction with or with the encouragement of the overseas leadership) had set upon a path of removing Mr Zafiriou from Abrasives once Mr Freeman [the former Managing Director] retired. The 100 day plan did not make provision for Mr Zafiriou's position to be made redundant. It provided for Mr Zafiriou to retain his duties, with the exception of IT and the small New Zealand manufacturing operations. Otherwise, all of his duties, including those to which Mr Zafiriou referred in his evidence as giving his role its 'commercial' character, remained with Mr Zafiriou.[17] Mr Chaur gave evidence that when he prepared the 100 day plan, 'Mr Zafiriou wasn't on my radar for redundancy' and the content of the 100 day plan bears this out.[18]

50 Her Honour specifically found there was no evidence of a pre-existing plan to replace Mr Zafiriou with one of his subordinates.

1. Despite the possible financial motive, there is no evidence of a pre-existing plan or proposal to replace Mr Zafiriou with Mr Mihailidis at Abrasives. The 100 day plan placed Mr Zafiriou in the role of GM - Supply Chain and Mr Mihailidis in the role of manager of supply chain. The two positions were distinct, both conceptually and in practice. Mr Chaur gave evidence that the supply chain manager was responsible for production planning. By contrast, the role of GM - Supply Chain was a role with much greater responsibilities and reach: as Mr Chaur told the Court, it was to look after all the warehouses, the production planning, all of the procurement team and 'that side of the operation'. Nonetheless, I accept that the role of GM - Supply Chain performed by Mr Mihailidis was not the same as the role performed by Mr Zafiriou (either under the title of GM - Commercial Operations or under the title GM - Supply Chain). That role was refashioned to some extent when Mr Zafiriou left and Mr Mihailidis took over. However, I find that the change was driven by Mr Zafiriou's departure, rather than the other way around.[19]

51 Her Honour also found that Mr Zafiriou's case required her to reject Mr Chaur's evidence and that to the contrary she accepted Mr Chaur's evidence that there was no pre-existing plan to make Mr Zafiriou redundant.

52 Her Honour also found specifically that Mr Chaur's concerns over Mr Zafiriou's performance were genuine[20] and that Mr Chaur was a credible witness who gave cogent and consistent evidence.

53 The documents discovered after trial are said to be material to the resolution of two major issues in the case.

54 First, there is a group of documents relating to discussions and the exchange of information between Mr Chaur and Pam White, the Human Relations Manager, in July 2010 concerning the possible restructuring of the business.

55 Secondly, there are the PowerPoint slides which Mr Zafiriou claims were presented to Blackwoods in December 2010 and are said to bear on his claim that there were no objective problems with his performance in 2010.

56 The first group of documents commences with the record of a proposed meeting between Mr Chaur and Ms White for 3½ hours on 20 July 2010, in order to 'go through structure/successions etc'.

57 Next, there is a copy email from Ms White to Mr Chaur dated 20 July 2010 which attaches a proposed organisational chart for the company. There are six divisional managers under the Managing Director: Chief Financial Officer, Human Resources Manager, General Manager - Manufacturing, Supply Chain Manager, General Manager - Sales, and General Manager - Marketing. At that time, the management structure provided for some ten divisional heads, including Mr Zafiriou in the position of General Manager - Commercial Operations. On the face of it, this position disappears in the proposed organisational chart.

58 The next day Ms White obtained redundancy calculations for three of the existing managers including Mr Zafiriou. The calculations were expressed to be preliminary but the clear inference is that they had been requested by Mr Chaur. The calculations were further revised and provided again to Ms White later that day. They showed Mr Zafiriou as being entitled to a payout of some $725,000 in the event of redundancy. In consequence of the '100 day plan' both of the two other managers the subject of the calculations were ultimately made redundant.

59 The following day a summary document was prepared which identified the proposed redundant positions as General Manager - Commercial Operations, Commercial Manager, and Product Manager BDM Construction Products. Calculations were made as to offsetting the redundancy costs by way of salary savings. The document postulated that the re-structuring could occur for a low net cost.

60 Lastly, this set of documents included a copy email from Mr Chaur to Ms White dated 4 August 2010, the subject of which is 'structure'.

I spoke for two hours to Gonzague this morning re the proposed changes - it's all systems 'go'. Steven.

61 The reference to 'Gonzague' is to Mr De Pirey, who was Mr Chaur's superior in the parent company overseas.

62 As I have already noted, on 22 October 2010 Mr Chaur asked Mr Zafiriou to prepare a detailed report on complaints made by Blackwoods concerning DIFOT. Mr Zafiriou prepared the report and made a presentation of it on 25 October 2010.

63 At trial, Mr Chaur identified the following major elements of unsatisfactory performance by Mr Zafiriou:

• failure to manage DIFOT performance in respect of Blackwoods;
• failure to meet Mr Chaur's expectations in respect of the quality and timing of reports;
• a willingness to engage in email communications with employees critical of other managers; and
• a cultural clash.

64 The fresh evidence relates to a meeting in December 2010 that Mr Chaur and other senior managers of Saint-Gobain attended with Blackwoods in Sydney to address DIFOT issues. Mr Zafiriou alleges that at that meeting the representatives of Saint-Gobain made a PowerPoint presentation which has been obtained since trial and which recorded among other things that:

• Slide 3: out of 630 items alleged not to be delivered on time, 325 were incorrectly recorded by Blackwoods and were not late delivered by Saint-Gobain as claimed by Blackwoods;
• Slide 6: sales analysis showing that sales in 2010 were somewhat higher than in 2009;
• Slide 11: showing the Saint-Gobain DIFOT percentage was consistently in the low to mid 90s[21] for the relevant period of the year 2010 and showed no signs of deterioration.

65 Mr Zafiriou submits that the slides demonstrate that Saint-Gobain relied on essentially the same explanations as provided by Mr Zafiriou concerning Blackwoods's complaints.

66 In turn, Mr Zafiriou submits that the initial group of documents coming from July 2010 shows that his redundancy was squarely 'on the radar' at the time Mr Chaur prepared the '100 day plan' and that it was proposed to replace his position.

67 The documents also contradict evidence from both Mr Chaur and Ms White given at trial that details of Mr Zafiriou's redundancy entitlements were not supplied to Mr Chaur until October 2010.

68 This inconsistency and other matters, including the circumstances in which the documents failed to be properly discovered in the first instance, might be regarded as forming a potentially fertile basis for cross-examination in a case where Mr Chaur's credit was a central issue.

69 Likewise, the PowerPoint slides are relied on by Mr Zafiriou as demonstrating that one of the primary planks upon which Mr Chaur founded complaints of concern as to poor performance had no proper basis. They are also relied on as a potential foundation for cross-examination as to credit.

70 Mr Zafiriou goes so far as to further submit that the fresh evidence is sufficient to prove his case and that the weight of the evidence as a whole supplemented by the fresh evidence should satisfy this Court that the decision of the trial judge should be reversed.

71 I do not accept this submission. The case for Mr Zafiriou is ultimately conjectural in the sense that it requires inferences to be drawn from proven facts. It seeks to establish that the basis of the termination stated by Mr Chaur was a sham. The significance of the fresh evidence falls to be considered in the light of the evidence as a whole (which was detailed and extensive) and bears critically upon the credibility of Mr Chaur's evidence as to the reason for terminating Mr Zafiriou's employment. It might be regarded as tending to prove a pre-existing plan to make Mr Zafiriou redundant and as tending to disprove that he was guilty of poor performance but it is not conclusive proof of Mr Zafiriou's case as to these matters.

72 I do not accept that these issues can be satisfactorily resolved in evidentiary terms on the papers. Nor would it be procedurally fair to decide the case adversely to Saint-Gobain without first giving its witnesses the opportunity to give oral evidence addressing the documents which are now relied upon.

73 Further, the weight of the fresh evidence viewed against the evidence as a whole is itself highly contentious. As counsel for Saint-Gobain submitted, the material is on one view consistent with the conclusions reached by the trial judge. Amongst other considerations, counsel highlighted the following:

(a) The organisational structure described in the proposed organisational chart is in substance that which was adopted in the '100 day plan' on 29 July 2010 and other subsequent iterations of it. Under the 29 July plan Mr Zafiriou was described as General Manager - Commercial Operations but had supervisory control over the National Customer Service Manager, the Supply Chain Manager and the National Warehouse Manager. These are the same functional streams identified in the first document as being under the supervision of the person there described as 'Supply Chain Manager' namely customer service, warehousing and procurement.

A like analysis applies to the '100 day plan' ultimately approved in August 2010 which describes Mr Zafiriou as General Manager - Supply Chain - Ind Ceramics, but again gives him the managing role with respect to the same three functional streams.

So understood, the first document relied on does not reveal a secret plan to create a substantially different re-organisation from that which thereafter eventuated.

(b) The words 'supply chain' are broad and may denote very significant functions. Mr Zafiriou conceded as much in cross-examination at trial. The term can be used to describe almost the entire process involved in the warehousing, sorting, packing and delivery of product to a client. Mr Zafiriou agreed in cross-examination that a number of very senior managers in business across the country had the title 'General Manager - Supply Chain'.

(c) The organisational chart does not purport to list all the ancillary functions that the relevant manager might undertake. Mr Zafiriou both retained and acquired a number of such functions after the implementation of the '100 day plan'.

(d) There are difficulties in placing too much weight on labels which were identified by the trial judge.[22]

(e) The enquiries concerning redundancy payments are on one view unsurprising. They presumably informed the '100 day plan' and the decision to retain Mr Zafiriou in a senior position under it.

(f) If Mr Chaur's purpose in preparing the '100 day plan' was to prepare a sham within the framework of which Mr Zafiriou's employment would be terminated, the scheme was on one view improbably elaborate.

(g) The material contained in the Blackwoods's PowerPoint slides was already substantially available at trial.

(h) The fact the PowerPoint slides were allegedly presented to Blackwoods by way of explanation of the underlying facts cannot disprove Mr Chaur's evidence that he was dissatisfied with the manner in which Mr Zafiriou performed in terms of customer relations in the course of his ongoing dealings with Blackwoods.

(i) The documents relied on form part of a much more complex matrix of evidence. They must overcome other compelling contemporary records of the basis of Mr Chaur's actions.

Prior to the termination of Mr Zafiriou's employment, Mr Chaur sent an email to his superior, Mr De Pirey, overseas summarising Mr Chaur's reasons for his actions. This exemplifies the material Mr Zafiriou must explain away.

[omitting formal parts]

Per our conversation today, I [am] writing to you to brief you on my decision to terminate Arthur's employment and replace his role with a new incumbent before December 2010. I plan to do this tomorrow morning with Pam and Roger's assistance.

The rationale for this swift move is that Arthur is booked to go to Boston next week but I think it is best that he don't (sic) go if the end game is that he will not continue with SG in 2011. I have consulted over recent days with both Pam and Roger over my decision and thought process, as with you, and I believe that despite numerous opportunities & discussions over the past 5 months to improve his performance under new leadership, Arthur is a reluctant player in helping to move our Pacific business forward.

BACKGROUND

You are aware of Arthur's history with SGA, his disappointment at not getting the Pacific MD role recently and also his management issues with Roger Freeman. Over recent months, I have found that AZ's performance is well below my expectations for the senior role he holds and I have decided that it is unlikely that his general attitude or performance is likely to improve. Frankly, he's not even a great Supply Chain manager nor does he see himself as one. Hence, I plan to replace him with a more suitably qualified candidate to manage our supply chain operations and I have now put out the feelers to the market place (sic) on a confidential basis.

My observations are that over time, AZ has built himself a company role which far outweighs the requirements of our current company - these duties include supply chain, SGIC GM, commercial, legal counsel, company secretariat, customer service and IT. He has built his role into that of a 'mini CEO' and seems unaccountable to anyone but himself and creates 'silo's['] distancing his team from that of the rest of our business. We can not (sic) operate under this regime, where our supply chain team are like a separate & misaligned business to Abrasives. Over the past few months I have held many conversations with AZ as to my expectations of the scope of the 'GM supply chain' role and his performance - accordingly I also started to rescope his responsibility to be more in line with what I see/need the role to be doing.

When I first started in May, I took the opportunity to have a firm and honest conversation with him about his role, his future at SG and my own expectations of him in his role. I considered this discussion an opportunity for AZ to 'start a fresh' (sic) under my new leadership. Key to this was my expectation that AZ operate in a more 'transparent manner' in the business with his communication, engagement & support of the rest of the leadership group. I also expressed my desire to see a general lift in his performance to be more data & analytic in his role driven (sic) rather than simply a delegator and a person who talks in generalisations. I have not seen any improvement over the past 4 months despite further informal conversations. AZ clearly does not like to be accountable to a manager and I suspect also has not got over the fact that he did not get my role after Roger left, despite my willingness to work with and support him he just does not seem to want to be a part of a formal business regime.

Key to all of this is just his general poor attitude to our new business direction, his stubborn arrogance in dealing with his peers/customers and his lack of proactive concern for our customer supply issues. In recent weeks I have had to drive him hard to even look at responding to/resolving sales or customer enquiries in regards to deliveries, DIFOT, stock levels or customer service issues. He treats sales people and customers with obvious contempt and this is against my stated goal and vision to make SGAP a 100% customer oriented business. When requested by me to introduce a formal monthly S&OP process, he denied we even needed it.

Roger and I have compared notes over my observations and Roger confirms to me that AZ's performance has been consistent over recent years. Therefore, I suspect AZ will not change to what the business requires or expects.

KEY SUPPORTS

Key supports for my decision are:

• not customer focussed - he sees our poor customer supply issues as the 'customers fault' rather than taking corrective actions and this is the culture he's created amongst his direct team. We are consistently being criticised on our DIFOT by our major customers and there is little evidence to see we are developing plans to improve it
• Arthur lacks any form of pro-activity and only actions matters in his own time and if he sees them as being important to his needs (e.g. data for the 2011 budget preparation has been very difficult to get from him)
• lack of attention/follow up to formal business requests from the MD or other Pacific leadership group members
• Casual participation at meetings - brings no data or reports to our meetings despite constantly being asked by me to do so. Doesn't feel he needs to be accountable to the rest of the team.

• Consistent failure to supply weekly project updates to MD

• Abuse of company credit card - weekly lunches with internal staff on company AMEX. I caught him out last week at a local restaurant and upon investigation I see it is a weekly trend over many months.
• Lack of availability - seems to always be offsite somewhere and fails to advise where he is.
• Non supportive to rest of the business needs and has grown Supply Chain into an impenetrable silo
• I have asked him on numerous occasions to spend more time working at Campbellfield, to which he simply avoids
• actively sought to avoid attending the Global Conference in November. When advised it was a 'must attend' event, he then insisted that he fly in/out only to suit the conference days, rather than like most people use the trip as an opportunity to meet with counterparts in the US to share best practice - this to me is a clear sign of someone who is NOT engaged in our company

Gonzague, I need a proactive person to manage this critical part of my business and we have some strong goals to achieve. By example, the difference that Jan Schjottelvig is already making in the TW plant following Bruno's departure is outstanding and our Supply Chain operations similarly will benefit. Our supply performance is consistently the single biggest criticism ('great company, poor delivery performance and out of stocks') I get from our major customers as I meet them and Arthur's management style is not conducive to changing this performance as one of our single biggest local competitive advantages.

TERMINATION PLAN

• Under the terms of his Contract (attached - s22.1), l am legally able to terminate his employment (and without express reason) by simply giving him 1 months['] notice of my intent to do so. Either party can give this notice and it is not reliant on any performance management process.
• Given his level of remuneration {>$100k pa), he is not able to pursue SGA for unfair dismissal. However, recognising the seniority of his role and the tight job market for senior executives, my intention is to give him notice plus an ex gratia payment of 5 months pay, bringing the total termination payment to 6 months (this excludes sick leave accruals). The value of this is around AUD$140,000.00 (Pam and I are still calculating). I think this is reasonable given his length of service and fits our SG Principles
• The role is not being made redundant and will be re-filled prior to December 2010. I have already commence[d] a confidential market search for a new GM.
• AZ has a very generous contract in terms of redundancy - the last numbers provided to me were around $750,000 in redundancy if we chose to go that way. This is not an option to consider.
• I will ask George Mihailidis to care take the role until a new incumbent is found. George will also no doubt apply for the role.
• Roger will coordinate [for] (sic) me with Laurent regarding AZ's role at Ceramics once I have enacted the termination. Roger has also offered assistance with the SGIC team until the remainder of 2010.
• Arthur will exit the business upon advice of his termination (i.e. immediate exit). Pam will coordinate the recovery of any IP and other company materials. This strategy is most appropriate so that AZ does not malign the operations.

I am very disappointed that it has come to this course of action but clearly Arthur is not responding to Performance Management, nor has [he] over recent years. I feel this is the most appropriate course of action to take to move forward.[23]

74 It is not realistically possible for this Court to form a concluded judgment upon the ultimate probative significance of the fresh evidence relied upon. The real question is whether the fresh evidence raises a sufficient basis to require a further trial. After careful consideration and despite the obvious force of a number of the respondent's submissions, I have come to the view that it does. Given the fact that the documents were not discovered when they should have been, they must at this point be treated as potentially having the evidentiary significance and weight which they could have most favourable to Mr Zafiriou. The initial documents are capable of being regarded as chronologically significant in understanding the sequence of events which follow them. They also raise issues which go squarely to the credit of Saint-Gobain's principal witnesses. They thus provide a fresh basis for Mr Zafiriou's case as to restructuring in the first instance and for attack upon the opposition case by way of cross-examination of Mr Chaur and Ms White.

75 The DIFOT documents also provide a fresh basis for cross-examination as to the reality of Mr Zafiriou's performance and Mr Chaur's perception and purported assessment of it. Taken together, the fresh evidence raises a sufficiently real possibility of a different outcome to warrant a retrial.

76 In so concluding, I have taken into account the many affidavits filed on behalf of the appellant and the respondent in respect of the new evidence. Those affidavits provide conflicting accounts bearing on the significance of the new evidence. The differences between the parties in this respect is a further demonstration of why the proceeding must be reheard.

77 It follows that the matter should be remitted for further hearing. Mr Zafiriou asks that it go back to another judge, whereas Saint-Gobain submits that any remitter should go to the trial judge. Whilst considerations of costs favour remitter to the trial judge, the appearance of justice requires that the matter go to another judge in circumstances where the trial judge:

(a) has expressed strong concluded positive views with respect to the credit of Mr Chaur; and

(b) has made what are, in effect, adverse findings concerning aspects of Mr Zafiriou's character.

78 Mr Zafiriou's written outline of submissions proceeds on the basis that it was incumbent upon Saint-Gobain to justify the summary dismissal of Mr Zafiriou. This proposition was not pursued in oral argument and is plainly incorrect. The contract of employment entitled Saint-Gobain to terminate Mr Zafiriou's employment upon four weeks' notice.

79 Likewise, ground 2 of the notice of appeal is misconceived.[24] The question whether there was a basis for Mr Chaur to hold performance concerns simply tended to either disprove or substantiate the suggestion that the concerns he identified were contrived and that they were a sham.

80 I turn then to the alternative claims which the trial judge discussed and which were also the subject of specific grounds of appeal.

81 Clause 6.1 of the contract of employment states:

The employee shall comply with the Employer's Policy and Procedures as displayed or advised from time to time and as amended from time to time, at the employer's discretion. The Employer's Policy and Procedures are deemed to be included in and form part of this contract, as do any subsequent Policy and Procedures and/or amendments.

82 It may be observed that in terms the clause requires the employee, not the employer, to comply with the employer's policy and procedures. Any obligation upon the employer must flow solely from the language of the relevant policy and procedure documents as a result of their incorporation into the contract.

83 Nevertheless an implied obligation to abide by the terms of the incorporated document will be imposed on the employer if read in context it objectively discloses an intention that the employer be relevantly bound by its terms as a component of mutual obligations.[25]

84 The respondent does not dispute that the incorporated documents may impose contractual obligations upon it. Rather it submits that the provisions relied upon by Mr Zafiriou do not impose such obligations in the present case.

85 Mr Zafiriou relies on two incorporated documents being a document entitled 'Termination of Employment' (the 'termination policy') and 'Disciplinary Procedure' (the 'disciplinary policy'). These documents form part of a broader basket of policy documents dealing, amongst other things, with occupational health and safety, quality issues, and human resources.

86 In summary, Mr Zafiriou contends that he was not given natural justice in accordance with the termination policy and that he was not given sequential warnings and performance management in accordance with the disciplinary policy.

87 Before turning to the documents, it is pertinent to note that the fundamental test of whether a document imposes an enforceable contractual obligation turns on the objective intention of the parties.

It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. ... That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.[26]

88 In Electricity Generation Corporation v Woodside Energy Ltd & Ors the High Court said:

[T]his Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding 'of the genesis of the transaction, the background, the context [and] the market in which the parties are operating'. As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption 'that the parties ... intended to produce a commercial result'. A commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'.[27]

89 Consistently with this approach, if the language of a contract is ambiguous the Court will seek to interpret it in a manner which does not result in a capricious or unjust outcome.

[If] the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate', to use the words from earlier authority ... [28]

90 Incorporated documents may, on their proper construction, comprise elements which are not contractual as well as other parts which state contractual obligations. In particular, incorporated documents may include aspirational policies which are not intended to be statements of contractual obligations.

91 In Keeley v Fosroc International Ltd, Auld LJ said:

On the question of construction ... where a contract of employment expressly incorporates an instrument such as a collective agreement or staff handbook, it does not necessarily follow that all the provisions in that instrument or document are apt to be terms of the contract. For example, some provisions, read in their context, may be declarations of an aspiration or policy falling short of a contractual undertaking; see eg Alexander and others v Standard Telephones and Cables Ltd (No 2) [1991] IRLR 286, per Hobhouse J, as he then was, at para 31; and Kaur v MG Rover Group Ltd [2004] EWCA Civ 1507; [2005] IRLR 40, CA, per Keene LJ, with whom Brooke and Jonathan Parker LJJ agreed, at paras 9, 31 and 32. It is necessary to consider in their respective contexts the incorporating words and the provision in question incorporated by them.[29]

92 Inconsistencies in the contractual documentation are to be resolved by giving effect to the whole if that is possible.[30] In Re Media, Entertainment and Arts Alliance; Ex parte Hoyts Corporation Pty Ltd (No 1), the High Court said:

A conflict of that kind, involving apparently inconsistent provisions in the one instrument, is to be resolved, if at all possible, on the basis that one provision qualifies the other and, hence, that both have meaning and effect. That rule is an aspect of the general rule that an instrument must be read as a whole.[31]

93 Where there is a true inconsistency between a written contract and the terms of an incorporated document the written contract will prevail.

94 The general principle was laid down in Hamilton & Co v Mackie & Sons[32] and approved in Thomas (TW) & Co Ltd v Portsea Steamship Co Ltd.[33] It was later articulated by Buckley LJ in Modern Buildings Wales Ltd v Limmer & Trinidad Co Ltd as follows:

Where parties by an agreement import the terms of some other document as part of their agreement those terms must be imported in their entirety, in my judgment, but subject to this: that if any of the imported terms in any way conflict with the expressly agreed terms, the latter must prevail over what would otherwise be imported.[34]

95 In the present case the incorporated documents relied on give rise to three preliminary issues:

• Was Saint-Gobain bound by the termination policy to accord Mr Zafiriou natural justice before terminating his employment under the employment contract?
• Was Saint-Gobain bound by the termination policy to adopt the procedures set out in the disciplinary policy before terminating Mr Zafiriou's employment?
• Did the disciplinary policy impose contractual obligations upon Saint-Gobain independently of the termination policy?

Was Saint-Gobain bound by the termination policy to accord Mr Zafiriou natural justice before terminating his employment under the employment contract?

96 The termination policy states its purpose as follows:

This procedure has been developed to provide details regarding the process to be followed when terminating an employee from the company.

97 It goes on first to state a policy and secondly to set out a series of procedures. The policy is as follows:

Scope

All employees within the organisation.

...

Policy

The Company is committed to ensuring that termination of employment will be lawful, fair and just. Employees are to be treated with respect, in a courteous and professional manner and in accordance with the principles of natural justice.

When managing the termination of employment the Company will comply with the provisions of the relevant enterprise agreements and employment contracts. ·

In accordance with the Workplace Regulations Act of 1996 the Company has no mandatory retirement age.

98 The common law does not afford a right of procedural fairness to employees whose employment an employer wishes to terminate for reasons of poor performance.[35] Statutory and award based regimes may require that an employee be given an opportunity to be heard before he/she has his/her employment terminated. But a contractual right in a case such as the present will depend entirely upon the construction of the contractual documents.

99 A policy statement such as that contained in the first paragraph under the heading 'Policy' above may be read as intended to be aspirational or contractual. As Black CJ observed in Goldman Sachs JBWere Services Pty Ltd v Nikolich:

The difficult question is not whether [the incorporated document] had any contractual effect, for this is now rightly conceded, but whether the portions relied upon by the respondent and found to be terms by the primary judge did indeed have that character or whether, on the other hand, they were at most mere representations of the firm's aspirations. [36]

100 In the present case, the language of the relevant paragraph entitled 'Policy' is that of an aspirational statement. It is to be contrasted with the language of the following paragraph and the subsequent statement of 'Procedures' to which I shall shortly come. An objective reading of the first paragraph of the 'Policy' would not lead an employee to believe he or she had an enforceable contractual right to treatment 'with respect, in a courteous and professional manner and in accordance with the principles of natural justice'.[37] The better view is that the initial policy statement does not create any enforceable contractual obligation.

101 It is true, as the appellant submits, that the phrase 'treatment in accordance with the principles of natural justice' can be read as conveying a legal obligation. In the present case, however, it is directed to non-lawyers and coupled with other general aspirations and expressed to be a policy.

102 If I am wrong about this, however, there is a further difficulty with the application of the concept of natural justice in the present circumstances.

103 Just as in administrative law the content of 'natural justice' is necessarily conditioned and informed by the statutory framework within which it is to be implied,[38] so in the contractual context its content must be constrained by the express terms of the contract.

To ascertain what must be done to comply with the principles of natural justice in a particular case, the starting point is the statute creating the power. By construing the statute, one ascertains not only whether the power is conditioned on observance of the principles of natural justice but also whether there are any special procedural steps which, being prescribed by statute, extend or restrict what the principles of natural justice would otherwise require.[39]

105 Although the application of these principles may be difficult in certain statutory contexts,[40] in the present case the basic structure of the contract is that the parties should have the mutual right to terminate it upon four weeks' notice. Such notice may be given by the employer in the absence of fault by an employee. It may simply be given because the employee reaches an appropriate age for retirement or for a commercial or management reason which does not involve a judgment of unsatisfactory performance or unacceptable behaviour on the part of the employee.

106 The initial statement of general policy in the termination policy could not itself readily override the express notice provisions of the contract in the absence of further specific procedural provisions. In fact however the termination policy goes on to make such provisions and, in my view, the critical question in the present case is whether or not Mr Zafiriou falls within them. In other words, it is these procedural provisions which prescribe a process to be followed which give content to the aspirations of the initial policy statement and which are potentially capable of having contractual effect.

107 As the appellant himself put it at one point in written submission:

The disciplinary policy provides a procedure which fleshes out the commitment to apply the principles of natural justice.

108 It is the portion of the termination policy headed 'Procedure' which gives specific effect to the purpose of the document first stated. I turn then to the procedural provisions of the termination policy which link to the disciplinary policy.

Was Saint-Gobain bound by the termination policy to adopt the procedures set out in the disciplinary policy before terminating Mr Zafiriou's employment?

109 The termination policy goes on to adopt and trigger the application of the procedures contained in the disciplinary policy in termination cases for a specified purpose, namely the need to meet Saint-Gobain's obligations with respect to unfair dismissal under the Workplace Relations Act 1996 (Cth) (the 'Workplace Relations Act'). Under the heading 'Procedure', the termination policy relevantly states:

Staff Dismissals

To ensure the Workplace Relations Act 1996 is not breached, employees must not be dismissed without prior approval from the Human Resources Director/Managing Director.

Please refer to HR-101 Disciplinary Procedure for details regarding the process to be followed[.]

Approval will only be given when all relevant procedures have been followed.

Where the Human Resources Director or Managing Director can establish that gross or serious misconduct has occurred, an employee shall be dismissed immediately without notice.

110 It can be seen that, unlike the initial aspirational statement of policy referred to above, these provisions are in language which is appropriate to convey contractual obligations. A reasonable employee reading the statement 'approval will only be given when all relevant procedures have been followed' would understand that Saint-Gobain agreed to apply those procedures. The termination policy thus provides a procedural bridge to the procedures contained in the disciplinary policy.

111 I do not accept the respondent's submission that the termination policy is directed soley to those managing the termination policy and does not make promises to or confer rights upon those being subjected to the process.

112 Nevertheless, Mr Zafiriou must still confront a significant threshold difficulty.

113 As the trial judge held, Mr Zafiriou's position as a highly paid executive placed him outside the scope of the purpose of these provisions.

1. The starting point for this inquiry is the Termination Procedure, for that is the gateway through which the Disciplinary Procedure becomes relevant to the dismissal of an employee. The Termination Procedure deals with a number of ways in which termination of employment may occur. It deals with dismissals under the rubric of 'staff dismissals', and refers to the Disciplinary Procedure for the process to be followed, warning that approval for a dismissal will only be given if all relevant procedures have been followed in order to ensure that the Workplace Relations Act 1996 has not been breached.
2. The application of the Disciplinary Procedure to 'staff dismissals' is therefore a function of the requirements of the Workplace Relations Act 1996. The staff dismissal policies in the Termination Procedure, and therefore the processes in the Disciplinary Procedure prefiguring dismissal, are directed to employees who are able to bring an unfair dismissal claim under that Act. Senior managers at Abrasives, especially those earning close to a quarter of a million dollars per annum, do not fall into this category of employee.[41]

114 The first answer to the claim under the disciplinary procedure provisions as adopted by the termination policy is thus simply that when the policy documents are read together, the disciplinary procedures were not intended to apply to terminations of the type here in issue. More particularly, the procedures were not intended to apply to executives of Mr Zafiriou's level of remuneration. He did not fall within the purpose of the 'staff dismissal' provisions.

115 At the date of Mr Zafiriou's dismissal the provisions were directed to meeting the employer's obligation with respect to unfair dismissal under s 385 of the Fair Work Act 2009 (Cth) (the 'Fair Work Act') being the successor to the unfair dismissal provisions contained in the Workplace Relations Act. A person who had been 'unfairly dismissed' could obtain a remedy from Fair Work Australia under pt 3-2 of the Fair Work Act. Under s 385, Fair Work Australia must be satisfied amongst other things that the dismissal was harsh, unjust or unreasonable. By s 387, Fair Work Australia must take into account:

(a) whether there was a valid reason for the dismissal related to the person's capacity or conduct (including its effect on the safety and welfare of other employees); and

(b) whether the person was notified of that reason; and

(c) whether the person was given an opportunity to respond to any reason related to the capacity or conduct of the person; and

(d) any unreasonable refusal by the employer to allow the person to have a support person present to assist at any discussions relating to dismissal;[42] and

(e) if the dismissal related to unsatisfactory performance by the person - whether the person had been warned about that unsatisfactory performance before the dismissal; and

(f) the degree to which the size of the employer's enterprise would be likely to impact on the procedures to be followed in effecting the dismissal; and

(g) the degree to which the absence of dedicated human resource management specialists or expertise in the enterprise would be likely to impact on the procedures followed in effecting the dismissal; and

(h) any other matters that the [Fair Work Commission] considers relevant.[43]

116 Critically, under s 382(b)(iii) of the Act Mr Zafiriou was not covered by the unfair dismissals scheme because of his level of remuneration.[44] He could therefore not be regarded as 'staff' in the sense contemplated by the termination policy with respect to procedures. As her Honour concluded, he was not intended to be covered by this part of the incorporated documents.

117 The context of the relevant provision also supports the view that the disciplinary procedure was not intended to fetter the exercise of the power to terminate in clause 22.1 in Mr Zafiriou's case because the reasonable onlooker would not conclude that the parties objectively intended that in dealing with a senior manager, the Managing Director (being the only person in a supervisory position above him) was necessarily required to institute a four stage sequential procedure of warnings and detailed performance management. That prescriptive procedure, whilst generally appropriate to the staff of the organisation, is on its face inappropriate to the circumstances of a senior executive as is here in issue.

118 The disciplinary procedure defined 'breach of obligation' as 'unsatisfactory performance or unacceptable behaviour'. It provided for the following:

Procedure

It is the responsibility of the immediate Supervisor/Manager to undertake disciplinary action when an employee's performance is unsatisfactory or the behaviour is unacceptable.

The Code of Conduct[45] may be used as a guide.

When a breach of the employee's obligations takes place, the immediate Supervisor/Manager shall meet with the employee, (or take the employee to the Human Resources Department) and take the following actions:

• Detail to the employee the nature of the breach.

• Allow the employee the opportunity to answer the allegations.

• Determine if a warning is warranted. If so, issue a first and final verbal warning and explain what is deemed to be acceptable behaviour.
• Recommend remedial action with timeframes for review and record accordingly.
• Advise the employee that dismissal may result if behaviour is continued.
• A Disciplinary Action Report is to be completed and placed in the employee's Personal File.

Where the employee requests, it is permissible to have someone represent him/her during this process.

There must be two company representatives at all times.

If the employee again breaches their obligations, the immediate Supervisor/Manager shall again meet with the employee.

It is mandatory for the Human Resources Department to be involved at this time, who will proceed with the following steps: (Not applicable to SGIC)[46]

• Detail to the employee the nature of the breach.

• Allow the employee the opportunity to answer the allegations.

• Determine if a warning is warranted. If so, issue a first written warning and explain what is deemed to be acceptable behaviour.
• Recommend remedial action with timeframes for review and record accordingly.
• Advise the employee that dismissal may result if behaviour is continued.
• A Disciplinary Action Report is to be completed and placed in the employee's Personal File.

Where an employee breaches their obligations a third time, it is the responsibility of the Supervisor/Manager to report to the relevant Manager who will initiate a further meeting and proceed with the following steps:

• Detail to the employee the nature of the breach.

• Allow the employee the opportunity to answer the allegations.

• Determine if a warning is warranted. If so, issue a second and final written warning and explain what is deemed to be acceptable behaviour.
• Advise the employee that dismissal may result if behaviour is continued.
• Recommend remedial action with timeframes for review and record accordingly.
• A Disciplinary Action Report is to be completed and placed in the employee's Personal File.

If an employee breaches their obligations a fourth time or the standard required is not achieved within the specified timeframe, the Relevant Manager will again be advised and arrange to meet with the employee following the outline set out below:

• Detail to the employee the nature of the breach.

• Allow the employee the opportunity to answer the allegations.

• Determine if a warning is warranted. If so, appropriate disciplinary action, which may include termination, is determined.
• A Disciplinary Action Report is to be completed and placed in the employee's Personal File.

Once this stage has been completed and if termination is deemed appropriates (sic), the Human Resources Manager will take the appropriate steps necessary to finalise the process. This may vary depending upon the circumstances.

...

Where termination is appropriate, notice is payable unless it is not possible for the employee to work out his/her notice.

119 The disciplinary policy defines the 'Relevant Manager' in the case of Abrasives as the Human Resources Manager.

120 After considering these provisions, the trial judge reasoned:

1. In this case, adherence to the Disciplinary Procedure would have required Mr Chaur to sit down with Mr Zafiriou on the first occasion to detail 'the nature of the breach of [his] obligations', allow him to respond, determine whether a warning was necessary, recommend remedial action with timeframes for review and so on. Thereafter, Ms White would have been required to carry out these steps a further three times.[47]
2. Insofar as the Disciplinary Procedure requires the 'supervisor/manager' or the HR manager to issue warnings, make recommendations for remedial action and set timeframes for review, it contemplates that there will be ongoing and intensive supervision of the employee. I consider it unlikely that the parties intended a senior manager to be subject to such intensive oversight. Mr Zafiriou held a position that required him to exercise a high degree of autonomy in carrying out his duties and to enjoy the trust and confidence of the managing director and his senior colleagues. He accepted that it would be unworkable to have someone looking over his shoulder while he performed his duties. In my view, his position and role within the company was incompatible with the type of oversight or supervision contemplated by the Disciplinary Procedure.[48]

121 I agree that the senior management context in which the contract of employment was intended to operate supports the trial judge's primary conclusion that the procedural guidelines contained in the disciplinary policy were not intended to be required to be applied in Mr Zafiriou's case.

122 The policy envisages performance management first by the employee's direct Supervisor/Manager and then by the Human Resources Manager. Mr Zafiriou was himself a manager subject only to the supervision of the Managing Director. The policy is not directed to this particular hierarchical situation nor to performance management of a manager having the degree of autonomy and authority which Mr Zafiriou enjoyed.

123 In summary, the termination policy should not be read as demonstrating an objective intention that the disciplinary procedure must be implemented in Mr Zafiriou's case, first because he does not fit within the stated purpose of the relevant provision of the termination policy, and secondly, because such an interpretation would not produce a commercially sensible outcome because of the seniority of the position he occupied.

Did the disciplinary policy impose contractual obligations upon Saint-Gobain independently of the termination policy to adopt performance management procedures?

124 The purpose of the disciplinary policy is said to be:

This procedure sets the guidelines[49] to be followed when disciplinary action is required.

125 In my view, the natural meaning of the word 'guidelines' is not a prescriptive controlling requirement. Subject to further specific provisions, a guideline must of its nature be subject to the right to exercise an express power contained in the contract.

126 The further statement within the procedural section of the disciplinary policy that 'the Code of Conduct (ie Current Enterprise Agreements) may be used as a guide' also supports the view that the document itself is not intended to be prescriptive.

127 A document having the character of a policy or guideline may be incorporated into a contract in a way which gives specific effect to procedural provisions within that document.[50]

128 The critical question is whether the objective intention reflected in the document read in context is to provide guidance but reserve some flexibility for exceptional cases or to provide a code.[51] In my view, there is no apparent reason to treat the document's use of the term 'guidelines' as other than intentional.

129 It follows that unless the procedures set out in the guidelines were adopted and required to be implemented by the termination policy, then Saint-Gobain was not bound to implement them.

130 For the reasons I have already stated, I do not accept that the objective intention of the termination policy was to require adoption of the procedures in the case of a senior executive such as Mr Zafiriou.

131 It follows that each of the claims made pursuant to the termination policy and the disciplinary policy must fail.

132 The trial judge took the view that the incorporated policy documents must be subservient to the employer's express right to give notice in any event.[52]

133 On one view, it is inherently anomalous that an employee whose performance is faultless might be terminated on four weeks' notice but in the event of poor performance the right to give notice would be fettered. On the other hand, because termination of employment for poor performance carries with it a potential loss of self-esteem and reputation, and ongoing stigma and economic consequences not associated with termination of employment for other reasons, I prefer the view that special procedural provisions might sensibly be made in the incorporated documents with respect to this class of termination.

134 On this approach, the notice provision contained in the employment contract and the procedural requirements contained in the disciplinary policy as adopted by the termination policy both have potential meaning and effect. The documents can be read on the basis that one provision qualifies the other.[53] The general notice provision is subject to a further procedural requirement in a specific class of cases. If this approach is taken, the critical question is simply whether Mr Zafiriou's case fell within the specific procedural requirements stated in the relevant policies. For the reasons I have given, it did not.

135 Her Honour further concluded that in any event the natural justice provision had not been breached. Grounds 10 and 11 of the notice of appeal go to this conclusion. Mr Zafiriou submits that Saint-Gobain breached an obligation not to terminate his employment on performance grounds without providing Mr Zafiriou with a clear warning as an opportunity to improve and respond to alleged concerns. Her Honour found that such warnings had been given orally by Mr Chaur. No error has been demonstrated in her Honour's reasoning, but insofar as Mr Chaur's credit will again be in issue upon any rehearing, this factual issue cannot be regarded as finally resolved.

136 Similarly, her Honour's finding that the steps contemplated by the disciplinary policy or required as a matter of fairness would in any event have been completed within four months[54] depends in part upon questions of credit and a matrix of facts which will be re-opened upon the rehearing.

137 Likewise, her Honour's finding 'on the balance of probabilities, that formal performance management would not have resulted in Mr Zafiriou keeping his job',[55] depends on a matrix of facts which will be re-opened on the basis of the fresh evidence upon the rehearing.

138 The question which thus arises is whether these factual issues should be remitted for retrial or not. Under the Civil Procedure Act 2010, the Court has an obligation to limit litigation to the real issues and to confine costs to those that are reasonably necessary in the circumstances.

139 The overarching purpose of the Civil Procedure Act 2010 in relation to civil proceedings is to facilitate a just, efficient, timely and cost effective resolution of the real issues in dispute.[56] The Court must give effect to this purpose in the exercise of its powers[57] and it must have regard amongst other considerations to the efficient conduct of the business of the Court[58] and the need to deal with a civil proceeding in a manner proportional to the complexity of the issues in dispute.[59]

140 Given my conclusion that the trial judge was correct to hold that the policy documents did not fetter the employer's power to give notice, I would not remit these subsidiary factual issues for retrial. The subsidiary questions in issue are consequential upon claims which the trial judge was correct to dismiss. I would simply dismiss the claims based upon the incorporated documents.

In a notice of contention, the respondent raises issues about the appellant's credit arising from evidence given by him in an unrelated Federal Court proceeding in 2006. The respondent contends that, having regard to that evidence, the appellant's evidence on issues of significance in the present case should have been rejected by the trial judge, to the extent that it contradicts the evidence led on therespondent's behalf. The appellant contends that the trial judge made no findings about this aspect of the evidence.[60]

141 The trial judge found the credibility of Mr Chaur to be central to her decision on the facts. Because of its conjectural nature Mr Zafiriou's claim cannot be established by his own evidence alone. The case depends in material part on

documents to which Mr Chaur was a party. There was no error in the approach of the trial judge but issues of Mr Zafiriou's credibility may (or may not) assume greater prominence upon the retrial.

142 The orders of the trial judge should be set aside in part. The claims pursuant to the incorporated documents should be dismissed. The matter should otherwise be remitted for rehearing in accordance with law by a different judge of the trial division.

143 Mr Zafiriou also appeals against the order made by the trial judge on costs.

144 Given my conclusions concerning the substantive appeal, it will be necessary to hear further submissions as to the costs of the first trial and of the appeal.

146 I agree with the judgment of Osborn JA. I add the following reasons.

147 Mr Zafiriou's employment contract provided in clause 6.1:

The employee shall comply with the Employer's Policy and Procedures as displayed or advised from time to time and as amended from time to time, at the employer's discretion. The Employer's Policy and Procedures are deemed to be included in and form part of this contract, as do any subsequent Policy and Procedures and/or amendments.

This contract may be terminated by either party, by giving the period of written notice specified in the table below. This shall not prevent the employer from summarily dismissing the employee for serious misconduct or other justifiable cause.

Over 1 year and up to the completion of 3 years

Over 3 years and up to the completion of 5 years

149 Clause 22.4 provided for compensation to be paid to an employee when the employer terminated the employee's employment for reasons of redundancy/retrenchment.

150 Mr Zafiriou's contract of employment consisted of the written contract, relevant policies and procedures that were incorporated into the contract and relevant statutory provisions.

151 As French CJ, Bell and Keane JJ stated in Commonwealth Bank of Australia v Barker:

The employment relationship, in Australia, operates within a legal framework defined by statute and by common law principles, informing the construction and content of the contract of employment.[61]

152 The employment relationship may also include the terms contained in awards and other industrial instruments.[62]

153 If policies and procedures were otherwise applicable to Mr Zafiriou's employment, it is no obstacle to their operation that they would impede the respondent's right to exercise the power of dismissal. A purpose of the statutory unfair dismissal regime and termination procedures contained in awards, enterprise agreements and policies is to prevent or review the exercise of the employer's power of dismissal in appropriate cases.

154 This Court was not informed of the number and detail of the respondent's policies and procedures that applied to its employees. In many workplaces, particular policies and procedures will apply to particular categories of employees but not to others. For instance, a salary packaging policy or a uniform policy may not apply to all employees in a workplace.

155 When a contract of employment states that it includes all the employer's policies and procedure and that they form part of the contract, it is necessary to consider objectively a number of matters. First, the employer's policies and procedures must be identified. Next, it is necessary to consider on an objective basis whether the parties intended that all or part of a particular policy or procedure would apply to a particular employee. Another matter requiring consideration is whether the parties intended that the particular policy or procedure or some part of it would have contractual effect.[63]

156 The respondent's Termination Policy was directed at ensuring that it complied with the requirements of the Fair Work Act 2009 (Cth),[64] in terminating the employment of employees.

157 The respondent's Disciplinary Procedure appears directed at compliance with relevant legislation, awards and enterprise agreements and at ensuring that procedural requirements were observed.[65]

158 The terms of the Termination Policy and Disciplinary Procedure, considered objectively, are not appropriate to apply to Mr Zafiriou's position of General Manager - Commercial Operations, reporting to the Managing Director. The termination of Mr Zafiriou's employment was not subject to the unfair dismissal provisions contained in the Fair Work Act 2009 (Cth). The Disciplinary Procedure contemplates that the employee's Supervisor/Manager would initially determine if the issuing of a warning to the employee was warranted and, if further action was required, that the Human Resources Department would be involved. These steps could not apply to an employee of Mr Zafiriou's seniority.

159 I therefore agree that the appellant had no claim against the respondent based on the Termination Policy or Disciplinary Procedure.

160 I agree that the proceeding must be reheard, save in respect of the claims based on the incorporated policies and procedures. In view of the fresh evidence that has been admitted which was not before the trial judge, it is not appropriate in the interests of justice for this Court to determine the other grounds of appeal relating to the appellant's redundancy claim.

[1] Notice of Appeal dated 6 August 2013, grounds 1, 3, 4, 5, 6 and 7.

[5] Further Amended Notice of Appeal dated 22 May 2014, grounds 15-17.

[6] (1991) 178 CLR 134.

[7] See Orr v Holmes [1948] HCA 16; (1948) 76 CLR 632, 640.

[8] See Greater Wollongong Corporation v Cowan [1955] HCA 16; (1955) 93 CLR 435, 444.

[9] Cf, eg, McDonald v McDonald [1965] HCA 45; (1965) 113 CLR 529, 533, 542.

[10] Cf Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 2 NSWLR 340, 357.

[11] Commonwealth Bank of Australia v Quade (1991) 178 CLR 134, 142-3 (citations in original).

[12] Agreed Summary dated 2 July 2014, [14]-[19], [21]-[30], [32], [34]-[35] (italicisation in original).

[13] Zafiriou v Saint-Gobain Administration Pty Ltd [2013] VSC 377 ('Reasons'), [67]; Gamboni v Bendigo and Adelaide Bank Ltd [2013] VSCA 92; Hodgson v Amcor; Amcor v Barnes [2012] VSC 94; Fosters Group Ltd v Wing [2005] VSCA 322; (2005) 148 IR 224. See also, R v Industrial Commission (SA); Ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6; Dibb v Cmr of Taxation [2004] FCAFC 126; (2004) 136 FCR 388; Jones v Department of Energy and Minerals (1995) 60 IR 304; Whittaker v Unisys Australia Pty Ltd [2010] VSC 9; (2010) 26 VR 668; Quality Bakers of Australia Ltd v Goulding (1995) 60 IR 327.

[16] Due to the fact that he had thwarted ambitions to lead the company himself and was not considered to be particularly reliable or competent.

[17] As discussed, the company secretariat role was also re-allocated to the CFO, but not as part of the 100 day plan.

[18] Reasons [203] (citations in original).

[19] Reasons [208] (citations omitted).

[23] Email dated 25 October 2010 from Steven Chaur to Gonzague De Pirey.

The learned trial judge misdirected herself at para [142] by stating that the 'question then is whether there was a basis for Mr Chaur to hold performance concerns so as to displace or negate the suggestion that the concerns he identified were contrived'. The trial judge should have concluded that whether there was a basis for such concerns is of no relevance to the question required to be determined by her Honour, which was whether such reasons as were proffered by Mr Chaur were, in fact, the true reason(s) for termination of employment, or whether in truth and in fact, on the evidence., the respondent had determined upon a reorganisation of its operations whereby the Appellant's position was effectively made redundant.

[25] Foggo v O'Sullivan Partners (Advisory) Pty Ltd (2011) 206 IR 87; [2011] NSWSC 501.

[26] Toll FGCT Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, 179 [40] (Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; citation omitted).

[27] [2014] HCA 7; (2014) 88 ALJR 447, 454-5 [35] (French CJ, Hayne, Crennan and Kiefel JJ; citations omitted).

[28] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J; citation omitted).

[29] [2006] EWCA Civ 1277; [2006] IRLR 961, cited in Sir Kim Lewinson, The Interpretation of Contracts (Sweet & Maxwell, 5th ed, 2011) 113. See also Goldman Sachs JBWere Services Pty Ltd v Nikolich [2007] FCAFC 120, [22].

[30] Australian Broadcasting Commission v Australasian Performing Right Association Ltd [1973] HCA 36; (1973) 129 CLR 99, 109 (Gibbs J).

[31] [1993] HCA 40; (1993) 178 CLR 379, 386-7 (Mason CJ, Brennan, Dawson, Toohey, Gaudron and McHugh JJ; citations omitted).

[32] (1889) 5 TLR 677.

[33] [1912] AC 1.

[34] (1975) 1 WLR 1281, 1289. See also Sabah Flour and Feed Mills Snd Bhd v Comfez Ltd [1988] 2 Lloyd's Rep 18.

[35] Intico (Vic) Pty Ltd & Ors v Walmsley [2004] VSCA 90, [3] (Ormiston JA), [17] (Buchanan JA).

[36] [2007] FCAFC 120; (2007) 163 FCR 62, [22]. See also McDonald v Parnell Laboratories (Aust) [2007] FCA 1903; (2007) 168 IR 375, [70] (Buchanan J); Van Efferen v CMA Corporation Ltd [2009] FCA 597; (2009) 183 IR 319, [42], [43] (Tracey J); Romero v Farstad Shipping (Indian Pacific) Pty Ltd [2014] FCA 439, [28]-[30] (Marshall J).

[37] See Gramotnev v Queensland University of Technology [2013] QSC 158, 212-5 (McMeekin J)

[38] Kioa v West [1985] HCA 81; (1985) 159 CLR 550.

[40] Cf Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 206 CLR 57.

[42] Apart from this ground, the considerations in s 387 are the same as those which applied under s 652(3) of the Workplace Relations Act 1996.

[43] Fair Work Act 2009 (Cth), s 387.

[44] Ibid s 382(b)(iii). The relevant high income threshold for the period commencing 1 July 2010 was $113,800. Mr Zafiriou's salary exceeded this amount.

[45] Defined as 'Current Enterprise Agreements'.

[47] As I read the policy, it strictly envisages the involvement of the Human Resources Department by the second stage and delegation of performance management to the Human Resources Manager at the third and fourth stages.

[50] Cf Riverwood International Australia Pty Ltd v McCormick [2000] FCA 889; (2000) 177 ALR 193.

[51] Cf McDonald v Parnell Laboratories (Aust) [2007] FCA 1903, [68]-[72].

[52] (1975) 1 WLR 1281, 1289. See also Hamilton & Co v Mackie & Sons (1889) 5 TLR 677; Thomas (TW) & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1; Sabah Flour and Feed Mills Snd Bhd v Comfez Ltd [1988] 2 Lloyd's Rep 18.

[53] Cf Re Media, Entertainment and Arts Alliance; Ex parte Hoyts Corporation Pty Ltd (No 1) [1993] HCA 40; (1993) 178 CLR 379.

[54] Challenged by ground 12 of appeal.

[55] Reasons [262]. Challenged by grounds 13 and 14 of appeal.

[56] Civil Procedure Act 2010 s 7.

[57] Ibid s 8.

[58] Ibid s 9(1)(c).

[59] Ibid s 9(1)(g).

[60] Agreed Summary dated 2 July 2014, [13].

[61] [2014] HCA 32; (2014) 312 ALR 356, 357 [1].

[62] Byrne v Australian Airlines Ltd (1995) 185 CLR 410 and Amalgamated Collieries of WA Ltd v True [1938] HCA 19; (1938) 59 CLR 417.

[63] The relevant cases are discussed in Ian Neil and David Chin, The Modern Contract of Employment (Lawbook, 2012) 89-92 and Mark Irving, The Contract of Employment (LexisNexis Butterworths, 2012) 232-4.

[64] Formerly the Workplace Relations Act 1996 (Cth).

[65] See s 387(b), (c),(d) and (e) of the Fair Work Act 2009 (Cth).