FEDERAL COURT OF AUSTRALIA

 

Steven David Martin v Tasmania Development and Resources

[1999] FCA 593

 

CONTRACTS – breach of contract – contract of employment for three year term – term allowing termination on one month’s notice based on the “operational requirements” of employer – term imposing obligation on parties to seek to avert or minimise termination – termination of employee with payment purportedly in lieu of notice – no consultation –whether termination breached contractual terms

DAMAGES – breach of contract of employment – availability of aggravated or exemplary damages  - assessment of compensatory damages – allowance for effect of taxation on elegible termination payment – allowance for loss of chance of renewal of contract

TRADE AND COMMERCE – misleading and deceptive conduct – whether notice of termination contained misleading or deceptive representations by referring to “operational requirements” which did not exist – whether such conduct was “in trade or commerce”

TORT – misfeasance in public office – whether officer of respondent acted with intention to cause harm or knowingly in excess of power

 

WORDS AND PHRASES – “operational requirements”, “notice”, “in trade or commerce”

                       

Tasmanian Development Act 1983 (Tas) ss 4, 5(3)(b), 6, 15A

Trade Practices Act 1974 (Cth) s 52

Industrial Relations Act 1988 (Cth) s 170DE

Income Tax Assessment Act (1936) (Cth) Part III Div 2 Subdiv AA

 

 

 

Delaney v Staples [1992] 1 AC 687 applied

Sanders v Snell (1998) 157 ALR 491 applied

Boston Deep Sea Fishing Co v Ansell (1888) 39 ChD 339 cited

Nettlefold v Kym Smoker Pty Ltd (1996) 69 IR 370 referred to

Woods v W M Car Services (Peterborough) Ltd [1982] ICR 693 cited

Cosco Holdings Pty Ltd v Do (1997) 150 ALR 127 cited

Ridge v Baldwin [1964] AC 40 applied

Coutts v Commonwealth (1985) 157 CLR 91 applied

Byrne v Australian Airlines Ltd (1995) 185 CLR 410 applied

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 applied

Barto v GPR Management Services Pty Ltd (1991) 105 ALR 339 not followed

Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133 not followed

Wright v TNT Australia Pty Ltd (1988) 80 ALR 221 not followed

Orison Pty Ltd v Strategic Minerals Corp NL (1987) 77 ALR 141 not followed

Finucane v NSW Egg Corp (1988) 80 ALR 486 not followed

Merman Pty Ltd v Cockburn Cement Pty Ltd (1988) 84 ALR 521 not followed

Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 applied

Northern Territory v Mengel (1995) 185 CLR 307 applied

Addis v Gramophone Co Ltd [1909] AC 488 applied

Watts v Rake (1960) 108 CLR 158 cited

Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405 followed

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64applied

Lavarack v Woods of Colchester Ltd [1967] 1 QB 278 cited

Hadley v Baxendale (1854) 9 Exch 341 applied

New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 not followed

 

STEVEN DAVID MARTIN v TASMANIA DEVELOPMENT AND RESOURCES & ANOR

NO. TG 24 OF 1998

 

HEEREY J

7 MAY 1999

MELBOURNE (HEARD IN HOBART)

 

 

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	TG 24 of 1998

 

BETWEEN:	STEVEN DAVID MARTIN Applicant
AND:	TASMANIA DEVELOPMENT AND RESOURCES First Respondent   JEFFREY NORMAN KELLY Second Respondent
JUDGE:	HEEREY J
DATE OF ORDER:	7 MAY 1999
WHERE MADE:	MELBOURNE (HEARD IN HOBART)

 

THE COURT ORDERS THAT:

 

1.         There be judgment for the applicant against the first respondent for $125,810.22.

2.         The first respondent pay 80 per cent of the applicant’s costs to be taxed, including reserved costs.

3.         The applicant’s application against the second respondent is dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	TG 24 of 1998

 

BETWEEN:	STEVEN DAVID MARTIN Applicant
AND:	TASMANIA DEVELOPMENT AND RESOURCES First Respondent   JEFFREY NORMAN KELLY Second Respondent

 

JUDGE:	HEEREY J
DATE:	7 MAY 1999
PLACE:	MELBOURNE (HEARD IN HOBART)

REASONS FOR JUDGMENT

Contents

                                                                                                                                             Page

I             Introduction                                                                                                              2

II           Mr Martin’s career                                                                                                 3

III          Engagement by TDR                                                                                               3

IV          The contract                                                                                                             4

V            Government policies                                                                                                10

VI          Mr Martin’s performance                                                                                       12

VII         Mr Kelly’s preparation for the termination                                                           13

VIII       The termination                                                                                                       15

IX          Was the requisite notice given?                                                                              19

X            Were there “grounds based on the operational requirements of TDR”?            21

XI          Was there a breach of article 19(1)?                                                                      25

XII         Trade Practices Act                                                                                                 26

XIII       Misfeasance in public office                                                                                   29

XIV       Inducement of breach of contract                                                                           30

XV         Waiver                                                                                                                      30

XVI       Reinstatement                                                                                                         31

XVII      Aggravated and exemplary damages                                                                     31

XVIII    Compensatory damages                                                                                          31

XIX       Loss of chance of renewal                                                                                       33

XX         Interest                                                                                                                     35

XXI       Orders                                                                                                                      35

             

I           Introduction

1                     The applicant Mr Steven Martin was employed by the first respondent Tasmania Development and Resources (“TDR”) in the position of Manager Trade Development, Export Development under a written contract dated 25 February 1997.  TDR is a statutory authority established by s 4 of the Tasmanian Development Act 1983 (Tas).  Employment under the contract was for a period of three years from 6 March 1997.  Clause 12.3 of the contract provided:

“TDR may terminate this agreement on grounds based on the operational requirements of TDR by giving one months notice to the employee.”

2                     Following the Tasmanian State election on 29 August 1998 TDR became, for administrative purposes, part of the newly created Department of State Development (“DSD”).  The second respondent Mr Jeffrey Kelly was appointed Secretary of DSD and Chief Executive of TDR.

3                     On 21 October 1998 TDR officers acting on the instructions of Mr Kelly purported to terminate the contract under cl 12.3.  Mr Martin was required to leave the building immediately.  He was given payment purportedly in lieu of notice.

4                     On 3 November 1998 Mr Martin commenced this proceeding.  He alleges that:

(a)        The termination was in breach of contract because

(i)         the requisite notice was not given;

(ii)        there were no “operational requirements”; and

(iii)       certain stipulations in the contract as to consultation were not followed,

(b)        TDR engaged in misleading or deceptive conduct in trade or commerce, contrary to s 52 of the Trade Practices Act 1974 (Cth), and Mr Kelly was involved in such contravention,

(c)        Mr Kelly committed the tort of misfeasance in a public office,

(d)        Mr Kelly induced TDR’s breach of contract. 

II         Mr Martin’s career

5                     Mr Martin was born in the United Kingdom in 1947.  He is married with two children. He holds degrees of Master of Science from the University of Birmingham and Bachelor of Agricultural Science and Diploma of Education from the University of Melbourne.  Prior to moving to Tasmania in 1985 he had held positions as Assistant Director of The Royal Botanic Gardens in Melbourne and Chief Executive of the National Trust of Australia (Victoria).  In Tasmania he became Executive Director of the National Trust of Australia  (Tasmania).  In 1987 he moved into the Public Sector, first in the Education Department as Co-ordinator, Rural Science Education.  In 1989 he became Deputy Chief (Fruit and Ornamental Branch), Department of Primary Industry and Fisheries and later Manager Horticulture and Export Development Branch in that Department.  From 1994 to May 1996 he was Acting General Manager, Export Marketing and Industry Development in the Department of Primary Industry and Fisheries.

III        Engagement by TDR

6                     In May 1996 Mr Martin was offered a position in Melbourne as Manager of Export Development with the Victorian Government.  The Managing Director of TDR, Mr Christopher Brooks, heard of this offer and asked Mr Martin if he would leave the Department of Primary Industries and Fisheries and join TDR.  Mr Martin accepted this offer.  Between May and August 1996 Mr Martin worked at TDR establishing new export activities for a small network of specialist companies in the aquaculture field and also founding the Building Tasmania network involving companies in building, design and associated areas.  He assisted many Tasmanian businesses in preparation of funding applications to enable them to obtain government financial assistance, for example the Tasmanian Apple and Pear Growers Association, the sea urchin industry and a number of individual companies.

7                     In the latter half of 1996 consultants Cullen Egan Dell engaged in an organisational review and assessment of TDR.  They recommended that Mr Martin’s position be upgraded.  Mr Martin was appointed Manager, Trade Development at a level known as level 8.  He was offered a contract.  With the assistance of his accountant he negotiated a salary package.  Before signing the contract he spoke to the Manager, Human Resources, Ms Peggy Wheller, and asked her what “operational requirements” meant.  On Mr Martin’s evidence she said that it meant major structural change involving the abolishment of the whole department and its activities.  Ms Wheller had no recollection of saying this.  While she was generally an impressive witness, I accept Mr Martin’s evidence on this point.  The contract was signed on 25 February 1997.

IV        The contract

8                     The contract recites that TDR has offered the employee the position of Manager Trade Development, Export Development, that the employee has accepted the position on the terms and conditions set out in the agreement and that the employee’s employment with TDR is also subject to the General Conditions of Employment Award.  By cl 2 the appointment is for a period of three years from 6 March 1997 and the employee is accountable to the General Manager Export Development.  By cl 3 TDR is to advise the employee in writing no less than three months prior to the date of termination whether it intends to advertise the position or offer reappointment, and if so on what terms.  Within one month of receiving such an offer of reappointment the employee is to advise TDR in writing whether the offer is accepted or rejected.  By cl 4 the “description and responsibilities of the position” are set out in Schedule 1.  That Schedule contains the following:

“Primary Objective:

To facilitate the expansion of external trade by Tasmanian business.

Specific Accountabilities:

·          Manage interstate and overseas trade enquiries.

·          Assess and match selected Tasmanian industry resources, product services and capabilities with identified opportunities outside the State.

·          Plan, co-ordinate and assist with interstate and overseas marketing activities and promotions.

·          Assess and recommend strategies for market development and provide a marketing support function to other divisions in relation to the above.

·          Develop a product range to support and enhance business export opportunities.

·          Initiate and maintain strategic alliances with Austrade, the Department of Foreign Affairs and Trade and other organisations involved in facilitating trade development.

Level of Responsibility:

Required to project manage a broad range of projects and initiatives that fall within the scope of the section.  Required to represent the TDR at senior levels with industry and government agencies.  Responsible for the career development and performance management of staff.

Direction/Supervision Received

A high degree of independence in planning own daily activities and short term priorities in accordance with the strategic plan.  Medium and long term priorities are to be developed and discussed with the General Manager.  The incumbent is provided with direction by the General Manager Export Development and is expected to operate with minimal supervision.

Knowledge and Skill:

·          The ability to use judgement and prepare recommendations in relation to marketing strategies, strategic planning, market research and competitor assessment.

·          Strategic and analytical skills for problem solving.

·          Well developed written and oral communication skills.

·          Ability to deal with clients and industry representatives at a senior level.

·          Management experience with proven commercial success in an international environment.

·          Knowledge of foreign languages, whilst not essential, is desirable.

·          Proven project management skills.

·          Excellent interpersonal skills.

Qualifications:

·          Tertiary qualifications in a relevant discipline.

·          Appropriate industry experience, preferably in a management position.

Occupational Health and Safety

and Equal Employment Opportunity:

 

TDR is committed to high standards of performance in relation to Occupational Health and Safety and the provision of Equal Employment Opportunity.  All employees are expected to participate in maintaining safe working conditions and practices as well as promote and uphold the principle of fair and equitable access to employment/promotion, personal development and training and the elimination of workplace harassment and discrimination.

TDR has a smoke free working environment.”

9                     Clause 5 deals with hours of duty and cl 6 with remuneration and benefits, which are set out in Schedule 2.  These include a remuneration of $73,000 per annum subject to annual review, plus certain superannuation benefits.  Clause 7 provides for leave entitlements, which are set out in Sch 3.  Clause 8 provides for the employee’s performance to be reviewed at least once annually in accordance with policies and procedures prevailing at that time.  Clauses 9 and 10 deal with certain obligations of the employee, including provisions as to conflict of interest and ownership of intellectual property.  Clause 12.3 has already been quoted.  The whole of cl 12 is as follows:

“12.     Termination

12.1     TDR may terminate this agreement without notice if the employee:-

(a)        has wilfully and without good cause refused, disobeyed or ignored a lawful direction given by TDR;

(b)        is guilty of wilful and serious misconduct;

(c)        engages in any employment for reward which interferes with or conflicts with the employee’s performance of this agreement without the prior written approval of TDR;

(d)        is convicted of a crime or offence punishable by imprisonment for a term of six months or more.

12.2     Subject to the provisions of clause 12.6 TDR may terminate this agreement if the employee:-

(a)        except by reason of temporary illness, is unfit to discharge or incapable of discharging the duties of the employee’s office efficiently;

(b)        is not discharging the duties of the employee’s office efficiently or satisfactorily or in the best interests of TDR or the State;

(c)        is not qualified either temporarily or otherwise for the efficient and satisfactory performance of the duties of the employee’s office.

12.3     TDR may terminate this agreement on grounds based on the operational requirements of TDR by giving one months notice to the employee.

12.4     Where the employee’s appointment is terminated under cl 12.3, TDR may approve a severance payment calculated on the basis of the matters set out in Schedule 4.

12.5     The employee may terminate this agreement by giving TDR not less than three months notice in writing.

12.6     This clause operates subject to any provisions of the Industrial Relations Act 1984 (Tas) and the Industrial Relations Act 1988 (Cth) as amended from time to time in so far as they deal with termination of employment and also subject to the Termination of Employment Recommendation 1982 which the General Conference of the International Labor Organisation adopted on [sic] June 1982 as set out in schedule 10 and schedule 11 respectively of the Industrial Relations Act 1988 (Cth).”

10                  The severance payment referred to in Sch 4 provides for the following payments, depending on the year of the contract in which the termination takes place:

Year of employment               Months remuneration

first                                          nine

second                                     six

third                                         three

11                  Before turning to the Termination of Employment Recommendation 1982 referred to in cl 12.6, I note my view as a matter of construction that the contract incorporates the relevant parts of the ILO Recommendation of 1982 itself; the reference to schedules 10 and 11 of the Industrial Relations Act 1988 is merely an indication as to where that document may be found.  By contrast to the earlier part of cl 12.6, the latter part manifests an intention that the ILO Recommendation is to be contractually binding in its 1982 form and not as varied from time to time by Tasmanian or Commonwealth legislation.  Thus it is not to the point that on 25 November 1996 Sch 11 of the 1988 Act was deleted by the Workplace Relations Act 1996 (Cth). 

12                  Schedule 10 is headed “Convention Concerning Termination of Employment at the Initiative of the Employer”.  Article 4 provides:

“The employment of a worker shall not be terminated unless there is a valid reason for such termination connected with the capacity or conduct of the worker or based on the operational requirements of the undertaking, establishment or service.”

13                  By article 7 it is provided that the employment of a worker

“shall not be terminated for reasons related to the worker’s conduct or performance before he is provided an opportunity to defend himself against the allegations made, unless the employer cannot reasonably be expected to provide this opportunity.”

14                  Article 8 provides that a worker who considers that his employment has been unjustifiably terminated shall be entitled to appeal against that termination to an “impartial body” such as a court, labour tribunal, arbitration committee or arbitrator.  By article 9 such body shall be empowered to “examine the reasons for the termination and the other circumstances relating to the case and to render a decision on whether the termination was justified”.  Article 9.2 deals with the burden of proof.  Article 9.3 provides that in cases of termination stated to be for reasons based on operational requirements the bodies referred to in article 8

“shall be empowered to determine whether the termination was indeed for those reasons, but the extent to which they shall also be empowered to decide whether these reasons are sufficient to justify that termination shall be determined by the methods of implementation referred to in Article 1 of this Convention.”

15                  Article 1 provides that the provisions of the Convention shall be given effect by laws or regulations, insofar as they are not otherwise made effective by means of collective agreements, arbitration awards or court decisions or in such manner as may be consistent with national practice.  Article 10 provides that if an article 8 body finds that the termination is unjustified it may order payment of adequate compensation or such other relief as may be appropriate. 

16                  By article 11, a worker whose employment is to be terminated shall be entitled “to a reasonable period of notice or compensation in lieu thereof, unless he is guilty of serious misconduct”.  Article 13 provides that when the employer contemplates terminations for reasons of an economic, technological, structural or similar nature, the employer is to provide “the workers’ representatives concerned” with relevant information.  This relevant information includes the reasons for the contemplated terminations, the number and categories of workers likely to be affected and the period over which the terminations are to be carried out.  Additionally, the employer is to give “in accordance with the national law and practice” the workers’ representatives concerned as early as possible an opportunity for consultation on measures to be taken to avert or minimise the terminations and measures to mitigate the adverse affects of any terminations on the workers concerned, such as finding alternative employment. 

17                  Article 13.2 provides that the applicability of article 13.1 may be limited, by the methods of implementation referred to in article 1, to cases in which the numbers of workers where termination of employment is contemplated is at least a specified number or percentage of the workforce.  The language suggests that this article is intended to apply to relatively large scale redundancy programs. 

18                  By article 14 when the employer contemplates terminations for reasons of an economic, technological, structural or similar nature the employer is to notify in accordance with national law and practice the competent authority thereof as early as possible giving relevant information including a written statement of the reasons for termination, the number and categories of workers likely to be affected and the period over which the terminations are intended to be carried out.  The observation as to article 13 applies also.

19                  Schedule 11 is headed “Recommendation Concerning Termination of Employment at the Initiative of the Employer”.  Articles 7 to 13 are headed “Procedure Prior to or at the Time of Termination”.  Articles 7 to 10 deal with termination for misconduct or unsatisfactory performance.  Article 11 provides that an employer “may consult workers’ representatives before a final decision is taken on individual cases of termination of employment”.  Article 13(1) provides:

“A worker who has been notified of termination of employment or where employment has been terminated should be entitled to receive, on request, a written statement from his employer of the reason or reasons for the termination.”

20                  By article 19(1) it is provided:

“All parties concerned should seek to avert or minimise as far as possible termination of employment for reasons of an economic, technological structural or similar nature without prejudice to the efficient operation of the undertaking, establishment or service, and to mitigate the adverse effects of any termination of employment for these reasons on the worker or workers concerned.”

21                  To return to the body of the contract, cl 13 states, amongst other things, that the agreement supersedes all agreements between the parties in relation to the position (cl 13.3) and constitutes the entire agreement (cl 13.4).

 

V         Government policies

22                  Under s 15A of the Tasmanian Development Act 1983 the Board of TDR in each financial year is to prepare a corporate plan which is to cover a period of not less than three financial years.  The plan is to contain certain financial information and also a “statement of corporate intent”:  s 15A(2)(d).  The corporate plan and any amendment thereof is to be approved by the Minister:  s 15A(4), (8).   Except where the Minister otherwise approves, TDR “must act in accordance with its amended corporate plan”:  s 15A(10).  There was tendered in evidence the TDR Corporate Plan for the years 1998 to 2001.  Part of that plan dealing with export development lists a number of actions and denotes the responsible officer by name.  The actions for which Mr Martin was the responsible officer included the following:

Prepare annual regional trade statistics; country by country analysis of trade opportunities; make regular pro-active visits to major export companies; identify market products and service trends and distribute this information to Tasmanian Industries; enhance existing and target new opportunities, develop trade opportunities for services and value added industries; similarly develop trade opportunities for hardwood furniture into Japan and China; similarly with speciality timber products; maintain and expand Tasmanian Business Network in Asia; develop new markets for primary products, education services, building materials, aquaculture services and computer software; officer responsible for DFT Integrated Phillipines promotions; officer responsible for Thirty Island Festival and Hanover 2000; monitor and develop sister state links with Hawaii, Fujian and Cheju Islands; representative for Austrade, South China and South East Asia; organise reverse trade missions in conjunction with Government agencies and Tasmanian Industries; participate in national trade policy negotiations; attend Austrade and Department of Foreign Affairs and Trade marketing and co-ordination meetings; organise inward buyer meetings, and VIP visits; officer responsible for export development programs for specific industry sectors; officer responsible for Building Tasmania; officer responsible for Education Tasmania (export development of education); officer responsible Apple Industry Marketing Development program; responsible for exporting cultural development activity.

23                  On 5 November 1998 the Treasurer in the new government, the Honourable Dr David Creen MLC, presented his first budget.  He said there was a need to rebuild a new Tasmanian economy.  The speech spoke of a need for a “properly structured, streamlined, responsive industry development arm of government”.  The TDR was said to have been under the previous government “a spent force” which “... lacked direction, … lacked focus and … was under resourced”.  It had been “almost restructured out of existence”.  The new DSD had been structured

“for the three main drivers of economic activity in Tasmania;

·          investment and trade;

·          growth from existing State industries; and

·          tourism and marketing.”

24                  The new Department was “streamlined, flexible and able to respond quickly to industry needs”. 

25                  On 16 September 1998 the Premier, the Honourable Mr Jim Bacon MHA, sent a letter to all Tasmanian Public Sector employees.  The letter stated that the new government would operate with only seven Ministers and that the government “had to think hard about the structure of the public service we have to support us.  It is important that it be streamlined, efficient and accountable”.  The letter included the statement

“There will be no forced redundancy programs to achieve staffing cuts or artificial savings.  If functions are amalgamated over time, affected staff will be redeployed to assist the government in key areas.  If there are savings to be achieved, they will be achieved by a reduction in the number of Agency Heads.

Where there does need to be a change, my Government is committed to achieving it through consultative mechanisms involving the public sector unions.”

26                  Counsel for Mr Martin also placed reliance on a document “Labor’s Economic Policy; Getting Tasmania Moving Again” which was a policy statement issued in the election.  The document included reference to a comprehensive trade policy, “government playing a crucial role in promoting trade and this is not just limited to trade missions”.  There was said to be a need “to build further on the detailed market knowledge in those traditional countries we trade in, and maximise the minimal knowledge we have in other countries”.  It was stated that a Labor government would

·          “Provide additional staff with expertise in overseas markets to form a Market Research Unit within the Department of State Development …

·          Promote and assist in the financial resourcing of smaller, more regular and focused trade missions to our target markets and develop a greater capacity to host trade missions.”

VI        Mr Martin’s performance

27                  One of the major activities of Mr Martin at TDR, both before and after he entered into the contract, was the leading of overseas trade missions.  He engaged in five such missions, three in 1997 and two in 1998.  Typically they would take four weeks organisation, one to two weeks for the mission itself and one to two weeks subsequent work.  The last of the missions was in July 1998 involving over 30 participants visiting five countries and resulting in over $20 million worth of new orders being written or confirmed.  New opportunities were also identified in such areas as organic products, software, building materials, beef, vegetables and aquaculture services. 

28                  Mr Martin’s immediate superior was Mr Alan Campbell.  He was General Manager, Export Development & Investment Attraction from 1 December 1997 to 16 December 1998.  In evidence Mr Campbell agreed that Mr Martin was enthusiastic in the discharge of his duties and highly thought of by the clients and industries that he serviced. 

29                  Mr Martin had a large network of trade connections in Asia and skill in promoting trade in that part of the world.  He had a wide range of local industry connections.  Prominent Tasmanian business leaders gave impressive evidence as to the assistance they had received from Mr Martin.  Mr Timothy Reid is an apple grower and exporter and immediate past President of the Tasmanian Apple and Pear Growers Association.  He had close contact with Mr Martin since the early 1990s while the latter was at the Department of Primary Industry and Fisheries.  While there, Mr Martin led very successful trade missions to North Asia.  He said that when Mr Martin went to TDR the scope of trade missions broadened to include other exporters such as Incat Catamaran, timber, prefabricated housing and other building industry representatives, aquaculture and abalone.  He said that Mr Martin’s efforts had heightened the profile in Japan of Tasmania’s primary industry and had been responsible for Japanese delegations now coming to Tasmania seeking to grow cherries, strawberries, capsicum and green tea in joint ventures.  Speaking of Mr Martin’s contacts in Asia Mr Reid said:

“Now we have gained confidence in the fact that Steve has now generated such a good rapport I guess, with the people with whom we are trying to develop business that its really difficult to simply hand it over to someone else, whether it be within TDR or any other agency because you have to start from scratch if you are going to develop that relationship … Anyone doing business overseas, especially in Asia, would appreciate the importance of first building the relationship and developing the trust of people in order to do business.”

30                  Mr Dean Lisson, a commercial abalone diver and President of the Tasmanian Abalone Council, spoke highly of Mr Martin’s work for that industry.  He said:

“Mr Martin has been the only senior bureaucrat who has taken the initiative to approach the industry, one of Tasmania’s most valuable export industries.  Mr Martin has been very effective in giving his assistance to the industry and much of that assistance has come from the time when he has been with [TDR].”

31                  Mr Rinaldo Vittorio is a director of SEMF Holdings Pty Ltd which provides services for the design and management of projects such as bridge construction, pharmaceutical plants, aquaculture farms, buildings, roads etc.  According to Mr Vittorio, on a trade mission Mr Martin’s “efforts got us into the aquaculture and food market place in Asia [from which] we springboarded to aquaculture worldwide”.

VII      Mr Kelly’s preparation for the termination

32                  Mr Kelly holds the degree of Bachelor of Arts in Social Science and Master of Business Administration.  After some work in management consulting he came to Tasmania in 1990 where he was for three years General Manager of the Hotels and Property Division of the Cascade Brewery Company Limited.  He joined TDR in 1993 and then resigned in August 1996.  He did not return to Tasmania until September 1998.  In the meantime he resumed his practice as a management consultant and also lectured part-time at the University of Canberra in the Faculty of Management in general management, organisational change, strategy and leadership.  On 16 September 1998 he returned to Tasmania as Secretary of DSD and Chief Executive of TDR. 

33                  After the August election the new government restructured the existing thirteen Departments of State into seven.  DSD was created as a new department.  The responsible minister was the Premier.  As well as TDR, DSD incorporated many other areas such as museums and galleries, Antarctic affairs, sport and recreation, tourism and major projects.  Mr Kelly gave consideration to how the department might be “properly and efficiently organised”, including “assessing the organisational structure of TDR”.  He sought information particularly from managers within TDR.  In the early part of October he “formed the view that the positions held by Mr Martin and Mr Wilmott were unnecessary and that two other positions within TDR were redundant”.  He invited comment from the managers involved who reported directly to him, namely Mr Brooks and Mr Koo.  He told those who “needed to know” that the positions were to be abolished.  Mr Kelly considered that in the case of Mr Martin two factors were “particularly important”.  The first related to the number of levels which would be in the position remaining in the new organisational structure namely

·          Chairman TDR

·          CEO (Mr Kelly)

·          Chief Executive ITD (Mr Brooks)

·          General Manager Marketing and Export (Mr Campbell)

·          Mr Martin

34                  The new structure would have one less level.  Secondly, a new strategy had been adopted which did not include undertaking large trade missions interstate and overseas.  There would be “small focussed missions” undertaken by the Premier or his representative and supported by Mr Brooks or Mr Kelly.  The objective would be to encourage business people to come to Tasmania to meet with those who worked within the industries of interest.  Mr Kelly said that one of the effects of this strategy change was that a large portion of the duties carried out by Mr Martin “evaporated” and those which still needed to be carried out could just as easily be performed by others within Investment Trade and Development (whether under Mr Campbell’s section or otherwise).  Some management operational administration and planning previously undertaken by Mr Campbell would now be carried out by Mr Kelly himself and Mr Brooks.

35                  About one week before 21 October 1998 Mr Kelly directed Mr Brooks to implement the decision that Mr Martin’s position, amongst others, be abolished.  A meeting was convened on the morning of that day between Mr Kelly, Mr Brooks, Mr Koo, Mr Graham Marshall and Mr Paul Leitch.  Mr Kelly told the group that Mr Martin and the other persons concerned should be invited to resign, if they did not wish to do so then their employment would be terminated.

VIII     The termination

36                  Immediately after the State election Mr Martin went on leave.  He returned to work on 4 October.  Work continued much as before.  There was no suggestion of any organisational change.  On 14 October he met Mr Kelly for the first time since the latter had taken up the position of Chief Executive.  He had conversations with Mr Brooks who had rejoined the department as CEO in charge of investment trade and marketing replacing Mr Koo.  On the morning of 20 October one of Mr Kelly’s secretaries rang Mr Martin and asked if he could be available for a meeting on the following morning with Mr Kelly.  On the next day Mr Martin continued discussions with Mr Campbell about organisational structure arrangements, including possible project options should TDR obtain greater funding.  At about 11.00 am Mr Martin received a phone call inviting him to go to the dining room.  There he found Mr Marshall and Mr Brooks.  Mr Brooks said he had “a rather unpleasant duty to perform”.  As he said this, he slid a letter across the table to Mr Martin and said that the organisation wished to terminate Mr Martin’s employment immediately. 

37                  The letter was in these terms:

“Dear Stephen [sic],

I regret to inform you that the Department has terminated your contract of employment pursuant to Clause 12.3, operative immediately. 

In accordance with clause 12.4 of your contract, the Agency will pay you the amount set out in the attached schedule. 

You should be aware of the new Tax Office arrangements for Eligible Termination Payments which require you, within thirty days, to advise the Department on how you want this component paid.  Information detailing this process has been enclosed to assist you, and I confirm that your formal advice on the payment options is required by Friday, 20 November 1998.

I have also enclosed a standard Deed of Release for your signature and return today.

Yours sincerely,

Jeff Kelly,

Chief Executive”

38                  Mr Martin read the letter.  He asked:

39                  “For what reason?”

Mr Brooks replied:

“For operational reasons.”

Mr Martin said:

“Do I have any other choices in the matter?”

Mr Brooks’ response was to slide a prepared letter of resignation across the table and say:

“It might be better if you signed this.”

Mr Martin asked if he had any time to consider this.  Mr Brooks said:

“This is to take effect immediately and you are to leave now.”

Mr Martin asked:

“What do I do about my things at the office?”

40                  Mr Brooks said that he could come back later and get them.  Mr Martin said in evidence that his mind “was in a whirl”.  He believed that what was happening was not right and the proper processes were not being followed.  He decided to get out of the building with as much dignity as he could.

41                  Mr Martin was given a few more minutes to consider the options of the letter of resignation or the sack.  He told Mr Brooks that he would take Mr Kelly’s letter terminating his employment and frame it.  Mr Brooks said that the Human Resources Manager, Mr Paul Leitch, was available to explain the payout conditions in his contract.  Mr Marshall left the room to get Mr Leitch.  A few minutes later Mr Leitch arrived with some documents and a cheque.  The deed of release referred to in Mr Kelly’s letter had either been provided with the letter or was brought by Mr Leitch.  Mr Martin said that he would like to get his things and he was told again that he was to leave the building immediately and that he could return after 5.00 pm.  He said they did not need to worry but they did give him an assurance that he could clean out his desk on Show Day, subject to Mr Campbell being available.  Mr Brooks left and Mr Leitch gave Mr Mart`in a cheque for $48,008.00 and some other papers together with a Cabcharge voucher.  Mr Martin was required to hand over his corporate credit card and carpark entry card.  Mr Leitch then accompanied him to the lift.  Mr Martin got out on the seventh floor and immediately saw Mr Campbell and asked him whether he knew what had happened.  Mr Campbell said he did not.  He went to his room and spoke to Mr McShane, collected his papers and said he would be back later that day.  As he left the building he passed Mr Kelly in the foyer.  Mr Kelly ignored him. 

42                  At 5.00 pm Mr Martin arrived back to his office to find Mr Campbell sorting through his papers.  His computer was gone and his security card did not work.  Mr Martin spoke to Mr Campbell who agreed to come in the next day, which was the Show Day holiday, at 10.00 am to allow him to clean up.  Mr Campbell said that he knew nothing in advance about what had happened.  He said that two other officers had also gone that day.  Mr Campbell repeated that he had no concerns about Mr Martin’s performance and the whole exercise came as a surprise. 

43                  On the next day Mr Martin went in to his office with his wife and two young sons to clear out his belongings.

44                  The failure to give Mr Martin any notice meant that he could not, as a current employee at TDR, investigate other potential areas of employment inside the government including the Department of Primary Industries and Fisheries, Parks and Wildlife. 

45                  The letter of resignation Mr Martin was asked to sign was addressed to the Chief Executive of TDR and simply said:

“I wish to tender my resignation from Tasmania Development and Resources, effective Wednesday, 21 October 1998.”

46                  The Deed of Release he was asked to sign was expressed to be between TDR and himself.  It recited that Mr Martin had been employed by TDR pursuant to a contract dated 6 March 1997 and that he left the employ of TDR as from 21 October 1998, and was to be paid certain moneys on the termination of his employment. 

47                  The operative part of the deed was as follows:

“The Officer hereby covenants that in consideration of the payment by TDR to Stephen David Martin $48000.57 being all moneys to which he is entitled, exclusive of any outstanding claims for payment, pursuant to the terms and conditions of employment with TDR (of which he hereby acknowledges receipt) the Officer hereby accepts such money as having been paid in full satisfaction of all or any claims, and hereby released TDR from all actions, claims and demands whatsoever, arising out of, or in respect to, his employment with TDR or the termination thereof.”

Mr Martin has never signed this, or any other, deed of release or the letter of resignation.

48                  On 29 October Mr Kelly sent an e-mail to all DSD staff.  It included the following:

“I am sure you have all seen recent media reports about the departure of three senior staff members from the Department.  It is regrettable but understandable that, from time to time, changes must occur within organisations to allow for future growth or positive changes in strategy and direction.

Some structural flexibility and staff changes are inevitable for an organisation undergoing the extensive re-energising that was considered necessary with the establishment of the new Department of State Development.

Having said that, however, I want to reiterate something I told you on my arrival.  That is, that there would be no ‘across-the-board’ redundancies as a result of the new organisational changes.  I have had discussions with Mr Greg Vines from the CPSU who sought such an assurance and I was happy to give him that undertaking.

However, I reserve the right to select my senior management team.

Inevitably, there will be further changes over time.  If there were not, I would be worried.  We now belong to a dynamic organisation full of professional people who will move on as other opportunities present themselves.

…

Jeff Kelly”

49                  Prior to termination Mr Kelly made no written record of the decision to terminate nor any written analysis of the reasons.  Mr Kelly regarded Mr Martin’s termination as having “nothing to do with an assessment of his performance on the job”.  He had no consultation at all with Mr Martin’s immediate superior Mr Campbell, or with any industry leaders or important trade contacts.  Mr Kelly agreed in cross examination that his decision to terminate Mr Martin was taken for no other reason than the formation of an opinion that it was for operational reasons.  His decision was based on no performance review or material which specifically related to Mr Martin’s effectiveness to the organisation.  He deliberately denied Mr Martin the opportunity of participating in any decision as far as his future was concerned.  It did not occur to Mr Kelly that Mr Martin might have been able to provide him with valuable information which would have enabled him to redeploy Mr Martin or reorganise his position.  It did not occur to Mr Kelly to redeploy Mr Martin.  He regarded the Corporate Plan as of no relevance since it was a document of the previous government.  He did not read Mr Martin’s contract.  He was advised that he could honour the obligation to give one month’s notice by making a payment of one month’s salary.  He made no effort to match up Mr Martin’s duty statement in his contract with the reorganisation of the TDR.

IX        Was the requisite notice given?

50                  Counsel for the respondents argued that under cl 12.3 the termination and the notice were “several”.  It was not the month’s notice which effected the termination, he said, but the decision to terminate on the grounds specified.  I do not agree.  The clause gives TDR the right to terminate “by” giving one month’s notice.  The giving of notice is something which the contract requires TDR to do if it is to exercise the right conferred by cl 12.3.  I now turn to the question whether the payment of money in lieu of notice satisfied the contractual requirement. 

51                  In Delaney v Staples [1992] 1 AC 687 at 692 Lord Browne-Wilkinson, with the concurrence of all other members of the House of Lords, said:

“The phrase ‘payment in lieu of notice’ is not  a term of art.  It is commonly used to describe many types of payment the legal analysis of which differs.  Without attempting to give an exhaustive list, the following are the principal categories.

       (1)     An employer gives proper notice of termination to his employee, tells the employee that he need not work until the termination date and gives him the wages attributable to the notice period in a lump sum.  In this case (commonly call [sic]‘garden leave’) there is no breach of contract by the employer.  The employment continues until the expiry of the notice: the lump sum payment is simply advance payment of wages.

       (2)     The contract of employment provides expressly that the employment may be terminated either by notice or, on payment of a sum in lieu of notice, summarily.  In such a case if the employer summarily dismisses the employee he is not in breach of contract provided that he makes the payment in lieu.  But the payment in lieu is not a payment of wages in the ordinary sense since it is not a payment for work to be done under the contract of employment.

       (3)     At the end of the employment, the employer and the employee agree that the employment is to terminate forthwith on payment of a sum in lieu of notice.  Again, the employer is not in breach of contract by dismissing summarily and the payment in lieu is not strictly wages since it is not remuneration for work done during the continuance of the employment.

       (4)     Without the agreement of the employee, the employer summarily dismisses the employee and tenders a payment in lieu of proper notice.  This is by far the most common type of payment in lieu and the present case falls into this category.  The employer is in breach of contract by dismissing the employee without proper notice.  However, the summary dismissal is effective to put an end to the employment relationship, whether or not it unilaterally discharges the contract of employment.  Since the employment relationship has ended no further services are to be rendered by the employee under the contract.  It follows that the payment in lieu is not a payment of wages in the ordinary sense since it is not a payment for work done under the contract of employment.

The nature of a payment in lieu falling within the fourth category has been analysed as a payment by the employer on account of the employee’s claim for damages for breach of contract.  In Gothard v. Mirror Group Newspapers Ltd. [1988] I.C.R. 729, 733, Lord Donaldson of Lymington M.R. stated the position to be as follows:

‘If a man is dismissed without notice, but with money in lieu, what he receives is, as a matter of law, payment which falls to be set against, and will usually be designed by the employer to extinguish, any claim for damages for breach of contract, i.e. wrongful dismissal.  During the period to which the money in lieu relates he is not employed by his employer.’”

52                  This passage was cited with approval by Gleeson CJ, Gaudron, Kirby and Hayne JJ in Sanders v Snell (1998) 157 ALR 491.  In that case the respondent was employed by the Norfolk Island Tourist Bureau under a contract which did not provide for a fixed term.  Clause 9(a) provided that if, in the opinion of the bureau, the employee was absent from duty without authority or was guilty of misconduct the bureau could dismiss the employee by giving him one month’s notice in writing of its intention to terminate the appointment or on payment of one month’s salary in lieu of such notice.  Clause 9(b) provided:

“Subject to 9(a) above, two months notice of intention to determine the employment shall be given by either the bureau or the employee.”

53                  The employer purportedly terminated the contract under cl 9(b).  Their Honours said (at par 16):

“The contract being cast in these terms, it is not possible to imply in it some term that would permit the bureau to make payment to the respondent in lieu of notice except in the cases specifically identified in cl 9(a) – absence or misconduct.  To imply such a term would fly in the face of the express provisions of the agreement.  It follows that for the bureau to terminate the contract of employment under cl 9(b) without first giving the notice stipulated in that clause would be a breach of the contract, unless the parties agreed to the contract being terminated in this way.”

Later (at par 19) their Honours said that the termination

“was a breach of the contract, for it brought the contract to an end then and there, without first giving the stipulated notice.  This was not a case of an employer giving notice of intention to terminate the contract in two months, paying the employee in advance for those two months and saying to the employee that he or she need not attend work during that time.  The payment that was made to the respondent was payment in lieu of notice in the sense of being a payment made after the contract was brought to an end and intended to be set off against, and to extinguish, the damages that ordinarily would be payable for the wrongful termination of the agreement.”

54                  While it is true that no other provision in cl 12 of the present contract speaks of payment in lieu, as did cl 9(a) in the Sanders contract, I am nevertheless satisfied that the same result follows.  Notice and pay in lieu of notice are not the same thing.  As the example of Mr Martin shows, an employee who is given actual notice will often be in a much better position that an employee who is shown the door, albeit with money in his pocket.  The former has the opportunity to make enquiries for new employment from a position of current employment and is saved the distress and humiliation of unexpected and virtually unexplained termination.  If TDR had wished to have the right to terminate on payment of salary for the period of notice as well as actual notice, it could have so stipulated, but did not.

X         Were there “grounds based on the operational requirements of TDR”?

55                  Since TDR is relying on cl 12.3 to justify its termination of the contract, the burden is on TDR to show that the circumstances predicated by that clause did in fact exist.  While an employer who has dismissed an employee on the ground of misconduct is entitled to defend a wrongful dismissal claim by reliance on misconduct of which the employer only became aware subsequently (see Boston Deep Sea Fishing Co v Ansell (1888) 39 ChD 339), cl 12.3 in my view operates differently.  To illustrate by an extreme example, if TDR were to terminate employment on the grounds of alleged misconduct and it subsequently emerged that the employee was totally innocent, TDR could not then say “Well, in any case there were operational requirements”.

56                  The expression “operational requirements” appears in the Industrial Relations Act 1988 (Cth).  It was considered by Lee J sitting as a judge of the Industrial Relations Court of Australia in Nettlefold v Kym Smoker Pty Ltd (1996) 69 IR 370.  At the time relevant to his Honour’s decision s 170DE(1) of the Industrial Relations Act 1988 provided:

“(1)     An employer must not terminate an employee’s employment unless there is a valid reason, or valid reasons, connected with the employee’s capacity or conduct or based on the operational requirements of the undertaking, establishment or service.”

57                  His Honour said (at 373):

“The Act does not define the term ‘operational requirements’.  Obviously it is a broad term that permits consideration of many matters including past and present performance of the undertaking, the state of the market in which it operates, steps that may be taken to improve the efficiency of the undertaking by installing new processes, equipment or skills, or by arranging for labour to be used more productively, and the application of good management to the undertaking.  In general terms it may be said that a termination of employment will be shown to be based on the operational requirements of an undertaking if the action of the employer is necessary to advance the undertaking and is consistent with the management of the undertaking that meets the employer’s obligations to employees.”

58                  This last mentioned concept was earlier discussed by his Honour in terms which approved the statement of Lord Denning in Woods v W M Car Services (Peterborough) Ltd [1982] ICR 693 that it is an implied term of an employment contract that an employer be “good and considerate” to its employees.  Lee J continued (at 372):

“By giving effect to the [ILO] Convention the Act seeks to establish a balance between the right of an employer to duly manage an enterprise in which labour is employed and the right of an employee, and of the community, not to have the asset represented by the capacity of employees who provide such labour, whether skilled or unskilled, depreciated by incompetent or capricious management of labour by an employer.”

59                  The employee in Nettlefold was a young woman employed as a kitchen hand/waitress at an hotel.  Her employment was terminated because, as his Honour found, the employer engaged a new chef who wanted to arrange for some other person to do the work she had done.  His Honour said (at 374):

“In this case the regular and systematic nature of Ms Nettlefold’s work, the expectation that if she carried out her duties as required the employment would continue, and the adverse impact of dismissal upon a young person for whom redeployment would not be certain, required Smoker in the exercise of good management to assess whether the allocation of Ms Nettlefold’s duties to the person engaged by the new head chef justified the termination of Ms Nettlefold’s employment.”

60                  However the Industrial Relations Act 1988 was legislation concerned with the workforce at large, most of whom are not employed under contracts for a fixed term.  The traditional protective approach reflected in the judgment in Nettlefold is not necessarily appropriate in a setting like the present case where a three year contract for employment at a relatively high remuneration is individually negotiated with professional advice.  Moreover, the hardship which might occur by termination on the grounds of operational requirements is tempered by the obligation on the employer to make the Sch 4 payments.  So in the present case I think the context suggests the expression “operational requirements” is to be construed in a way that gives considerable latitude to the employer to make decisions as to how the enterprise might be better run in the light of changing external conditions and internal management policies.  In particular, I do not think “operational requirements” necessarily requires consideration as to the possible redeployment of the employee concerned: see Cosco Holdings Pty Ltd v Do (1997) 150 ALR 127 at 146.  However, in the present case that possibility is relevant to other issues, including the practical consequences of complying with the obligation as to one month’s notice, or consultation under Sch 11 article 19(1). 

61                  Counsel for Mr Martin argued that

(i)         the operational requirements of TDR as a whole had to be considered;

(ii)        the Corporate Plan listed many responsibilities of Mr Martin that continued to be an important part of TDR’s functions;

(iii)       Mr Martin was effective, hard working and highly regarded by those within TDR and by clients;

(iv)       if the emphasis was to change from outward to inward trade missions, Mr Martin was already, under the Corporate Plan, the responsible officer for the latter and was well qualified to manage them;

(v)        in any case Mr Martin had wide ranging responsibilities, by no means confined to trade missions;

(vi)       at the date of the hearing all Mr Martin’s tasks were still being carried out within TDR;

(vii)      there was no financial imperative; an extra $1 million was available for staff and the Premier’s letter did not suggest financial stringency in the DSD’s area;

(viii)      Mr Kelly did not consult the Corporate Plan and considered it as having no relevance;

(ix)       Mr Kelly was not aware of the Premier’s letter;

(x)        Mr Kelly did not consult the budget review papers;

(xi)       Mr Kelly did not read Mr Martin’s contract;

(xii)      Mr Kelly did not attempt to match up Mr Martin’s duty statement with the reorganisation of TDR;

(xiii)      Mr Kelly made no enquiries as to Mr Martin’s job performance; Mr Kelly considered that irrelevant; and

(xiv)     Mr Kelly did not consider redeployment of Mr Martin.

62                  With the exception of (i), all the foregoing are factual propositions which are sufficiently supported by the evidence.  I make findings accordingly.  However, I do not think it follows from their acceptance that TDR’s grounds for terminating the contract were not “based on (its) operational requirements”.

63                  There was some forceful criticism by counsel of the quality of Mr Kelly’s decision-making process.  However, it is not my function to review the merits of Mr Kelly’s decision or the way it was reached.  Rather I have to be satisfied that the grounds for the termination were based on – that is to say related to or caused by – the needs of TDR for the carrying on of its operations, as seen by Mr Kelly as its Chief Executive.  I am concerned with what were the actual grounds.  If, for example, the true grounds were personal malice then it would not matter if the label of  “operational requirements” were attached.

64                  I do not find any basis for attributing Mr Kelly’s decision to malice against Mr Martin.  There was some evidence of an incident at a work-related social gathering at which Mr Martin went up to a group of people including Mr Kelly with the object of congratulating him, but Mr Kelly construed this as a rude interruption on Mr Martin’s part.  However, at most this was a mutual misunderstanding of a trivial and transient nature.

65                  Certainly Mr Kelly could have handled Mr Martin’s termination in a more sympathetic and civilised fashion.  Mr Martin was a loyal and competent officer of TDR.  His only crime was to be successful in a form of activity – outward trade missions – which Mr Kelly thought no longer useful.  The treatment Mr Martin got was little better than might be afforded an employee caught thieving.  Mr Martin and his family were caused anguish and distress which was quite unnecessary.  Nevertheless, I am satisfied that no part of Mr Kelly’s decision was motivated by personal animosity or ill-will towards Mr Martin.  To the extent that Mr Kelly treated Mr Martin in an unnecessarily humiliating fashion, the explanation is more likely to be Mr Kelly’s insensibility to the human feelings of those affected by his actions.  The reasons Mr Kelly gave in evidence relating to the reasons for termination – essentially to achieve a flatter management structure and to change the emphasis to inward trade missions – were genuinely held by him.  In particular, in cross-examination Mr Kelly forcefully conveyed his strong conviction as to the preference for inward missions.  I conclude these were in fact operational requirements.  I do not think cl 12.3 should be construed to mean that TDR’s operations must, as a matter of unavoidable necessity, dictate the termination.

66                  Nor do I think “operational requirements” necessarily involved an obligation on TDR to consider whether Mr Martin could be re-deployed.

67                  I find that, had the requisite notice been given, there would have been grounds based on the operational requirements of TDR, within the meaning of cl 12.3.

XI        Was there a breach of article 19(1)?

68                  I have set out above the provisions of Sch 10 and 11 that were relied on by counsel for Mr Martin.  Most of them are replicated in other terms of the contract.  However article 19(1) (par 21 above) in my opinion imposes a discrete obligation.  Counsel for the respondents argued that article 19(1) was simply a “motherhood statement”.  I disagree.  It is an express term of the contract, dealing with a serious subject matter, and Mr Martin is entitled to appropriate relief if it has been breached. 

69                  At common law, an employer was not obliged to give an employee a hearing before termination:  Ridge v Baldwin [1964] AC 40 at 65, Coutts v Commonwealth (1985) 157 CLR 91 at 121, Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 443.  That principle would apply not only to termination for misconduct but also to termination conditioned on the existence of some particular circumstance, such as under cl 12.3.  Article 19(1) however imposes a positive obligation of consultation.  It recognises the industrial reality that a person like Mr Martin, thought to be surplus to requirements, upon being consulted, might be able to contribute valuable information and insights which might lead to such a decision being reconsidered, thus averting the termination.  There having been no consultation whatsoever with Mr Martin and no attempt to consider redeployment, I find the termination was in breach of the term constituted by article 19(1). 

XII      Trade Practices Act

70                  Section 52 of the Trade Practices Act 1974 (Cth) prohibits a corporation from engaging in misleading and deceptive conduct in trade or commerce.  Mr Martin’s case is that Mr Kelly’s letter of 21 October 1998 was misleading in asserting that the termination was necessary on the basis of operational requirements, whereas in truth it was not.  As a result, it is said, the letter was “the warrant” for Mr Martin to be shown out of the building.  It justified his dismissal “in the eyes of the hierarchy of the TDR”.  Accordingly the letter caused him great damage.  It is further said that the contract promised procedural fairness in the event of termination and fair and equitable access to employment which TDR “had no intention of affording”.

71                  Assuming for the purposes of argument that the representations mentioned were misleading and deceptive and that they caused damage to Mr Martin in the way he alleges, can it be said that the representations were made “in trade or commerce”?

72                  The leading case is the decision of the High Court in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594.  The appellant was a builder.  The respondent was an employee who suffered injury when a foreman wrongly told him that grates at the entry points of an air conditioning shaft were fixed by bolts and that it was safe to remove them in the manner explained by the foreman.  The respondent fell down the shaft when one of the grates gave way, it allegedly not being fixed by bolts or otherwise.  The majority of the High Court (Mason CJ, Deane, Dawson and Gaudron JJ) rejected the argument that the foreman’s misrepresentation was not in trade or commerce simply because the respondent was not a “consumer”.  The heading of Pt V of the Trade Practices Act “Consumer Protection” did not necessarily mean that the protection of s 52 was restricted to consumers: at 601-602.  The majority then posited two possible constructions of s 52.  On one, the expression “in trade or commerce” could encompass conduct in the course of activities which were not of their nature of a trading or commercial character but which were undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business.  The alternative construction (at 603) would confine “in trade or commerce” only to conduct “which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character” or to “the central conception” of trade and commerce and not to “the immense field of activities” in which corporations may engage in the course of, or for the purpose of, carrying on some overall trading or commercial business.

73                  The majority preferred the second view.  They said (at 604) that s 52 was

“… concerned with … the conduct of a corporation towards persons, be they consumers or not, with whom it … has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character.”

74                  Their Honours concluded (at 604-5) that the conduct of the appellant in the instant case

“… consisted of an internal communication by one employee to another employee in the course of the ordinary activities in and about the construction of a building.”

This was not conduct “in trade or commerce”.

75                  Concrete Constructions was considered by Wilcox J in Barto v GPR Management Services Pty Ltd (1991) 105 ALR 339.  The applicant alleged wrongful dismissal by his employer.  Part of the statement of claim included allegations that in negotiating the applicant’s terms of employment the employer made certain representations said to constitute a breach of s 52, including an alleged desire for the applicant to continue in its service “for many years to come”.  The employer brought a strike-out application in respect of those allegations.  After discussing Concrete Constructions, Wilcox J concluded (at 344):

“… it seems to me correct to hold that the conduct of a corporation in the course of negotiations for the employment of senior staff is conduct potentially falling within s 52.  It is true that an employment contract does not directly produce income, but the making of such a contract is part of the total activities in trade or commerce of the corporation.  Critically, it is intrinsically commercial conduct.  It is directed to the creation of a contractual relationship.”

76                  His Honour then referred to his own earlier decision in Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133, to Wright v TNT Australia Pty Ltd (1988) 80 ALR 221 (on appeal (1989) 15 NSWLR 679) and to three other first instance judgments in the Federal Court which referred to Patrick without disapproval, Orison Pty Ltd v Strategic Minerals Corp NL (1987) 77 ALR 141 at 157, Finucane v NSW Egg Corp (1988) 80 ALR 486 at 508 and Merman Pty Ltd v Cockburn Cement Pty Ltd (1988) 84 ALR 521 at 529-30.  Wilcox J concluded (at 345):

“Having regard to these authorities it seems to me that the better view is that conduct of a corporation which occurs in the course of negotiations with a prospective or present employee in respect of that persons employment contract is conduct capable of falling within s 52 of the Trade Practices Act.  Certainly, it cannot be said, without an investigation of the facts, that this proposition is so clearly untenable as to justify striking out a pleading which relies upon it.”

77                  As the last-mentioned passage makes clear, Wilcox J was deciding a strike-out application.  Even if the claim was just arguable, the application had to fail.  In the present case I am of course considering the issue at a final hearing.  But in any event I would respectfully disagree with Wilcox J.  Patrick and the other authorities referred to by his Honour were all before the decision of the High Court in Concrete Constructions.  The majority in that case clearly rejected the wider construction of “in trade or commerce”, which would extend to virtually any activity of a corporation.  It is true that a building company could not earn income unless it had workers who received instructions from foremen.  But that was not enough to bring the alleged misrepresentation within the concept of “trade or commerce”.  Similarly, TDR could not carry out its activities of promoting Tasmanian trade and development (which activities themselves I assume for present purposes to be in trade or commerce) unless it engaged staff.  Nevertheless such engagements and the necessary associated incidental negotiations, however necessary, are not in themselves of a trading or commercial nature.  They are internal affairs of TDR. 

78                  Although I do not uphold Mr Martin’s claim under the Trade Practices Act I need to deal with the submission of counsel for the respondents that I should make a finding “to the effect that the s 52 claim was made only to attract the accrued jurisdiction of the Court.  In such case the [whole] application should be dismissed”.  (Emphasis in original)

79                  In Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 at 219 a Full Court of this Court struck out claims under the Trade Practices Act which had been joined with common law claims.  The Court pointed out that where claims are brought in one proceeding under the Trade Practices Act and at common law, it did not follow from the dismissal of the former that the Court ever lacked jurisdiction to deal with the latter.  The Court continued (citations omitted):

“Nor does it follow that the Court now loses its jurisdiction to deal with the attached common law claims.  … In principle, the position is no different than it would have been if the claims under the Act had proceeded to trial and had been dismissed on the merits.  In that situation, it could not seriously be suggested that the dismissal of the claims under the Act had the effect of depriving the Court of jurisdiction to deal with any attached non-federal claim.

The position may have been different if the claims under the Act had been ‘colourable’ in the sense that they were made for the improper purpose of ‘fabricating’ jurisdiction.  … There is no room for such a suggestion here.”

80                  It is plain from the language of the Full Court that there is a high standard to be achieved by a respondent who asserts that this Court should deny jurisdiction over associated common law claims where claims under a federal statutory jurisdiction are dismissed.  In the present case that threshold is all the higher because the submission was only made in final argument after the respondents had freely embarked on interlocutory proceedings and a four day trial.

81                  The submission should be rejected.  Although I found against Mr Martin on the “trade or commerce” issue, thus making it unnecessary to explore the other Trade Practices Act issues, Mr Martin had the benefit of a first instance judgment of this Court directly in his favour.

XIII     Misfeasance in public office

82                  This tort is committed where a holder of a public office acts in that capacity either with intention to cause harm or knowingly in excess of his or her power:  Northern Territory v Mengel (1995) 185 CLR 307 at 345.  The public office holder must know that the act is beyond the power and that it involves a foreseeable risk of harm:  ibid at 19.

83                  I accept that Mr Kelly is the holder of a public office as Chief Executive of TDR:  see subs 5(3)(b) and s 6 of the Tasmanian Development Act.  However I have also to be satisfied that he acted either with intention to cause harm to Mr Martin or knowingly in excess of power.  My earlier finding as to lack of personal animosity disposes of the first possible limb.  As to the second and alternative limb, reference should be made to Sanders v Snell (1998) 157 ALR 491 at 504-507, already discussed in another context.  The appellant, a Minister in the Norfolk Island Administration, had given a direction to the Tourist Bureau of Norfolk Island to terminate the employment of the respondent.  The High Court held that in exercising his statutory power to give directions to the Bureau the appellant was bound to afford procedural fairness to the respondent:  see par 45.  But even though the appellant had been advised by two other officers that he should give the respondent “natural justice”, the High Court pointed out that neither of those persons “was a lawyer and neither of them pretended to give legal advice to the appellant” (par 47).  They counselled him to give the respondent a fair chance to put his side of the story because they thought that was the fair thing to do, not because they thought that giving a hearing was necessary as a matter of law.  All that the trial judge found was that the appellant had been given this advice but ignored it.  In the High Court’s view, this did not amount to the appellant knowing that he was acting beyond power.

84                  In the present case Mr Kelly acted honestly in the belief that he was legally entitled to direct the termination of Mr Martin’s contract in the way that happened.  His evidence that he had obtained advice to this effect was not challenged, and I accept it.  There is no suggestion that he got any advice against the course he proposed taking (as happened in Sanders), let alone legal advice. 

XIV     Inducement of breach of contract

85                  It is claimed that Mr Kelly either induced the breach of contract between TDR and Mr Martin or interfered with the contractual relations between them.

86                  However Mr Kelly was not in this regard some third party who interferes with a contract.  He was acting in his capacity as Chief Executive of TDR.  There was, practically speaking, no other way in which TDR could terminate the contract, lawfully or otherwise.  This tort is not made out.

XV       Waiver

87                  Mr Martin did not in my opinion waive his right to sue for damages for breach of contract.  The circumstances, especially his refusal to sign the proffered deed of release, point against such conclusion.  He was entitled to accept the money he did as going to reduction of damages.

XVI     Reinstatement

88                  I am only concerned with common law or equitable remedies, and not with any statutory employment law regime.  Counsel for Mr Martin correctly accepted that at common law, or in equity, reinstatement is an exceptional remedy.  The High Court has recently reaffirmed this principle in Byrne v Australian Airlines (1995) 185 CLR 410 at 410-428.  Indeed the remedy may be said to be so exceptional as to be virtually non-existent.  In the present case while Mr Martin’s employment involved his holding an important public office and required much skill and diligence, there is nothing in my view which would take the case out of the general rule.

XVII    Aggravated and exemplary damages

89                  Aggravated and exemplary damages are not available for breach of contract:  Addis v Gramophone Co Ltd [1909] AC 488.  No other cause of action has been made out.

XVIII  Compensatory damages

90                  Mr Martin’s claim was for the balance of the salary and other benefits he would have received had the contract run its full term, less the amounts received, plus compensation for his loss of the chance of the contract being renewed.  Mr Martin was under an obligation to mitigate his loss by seeking other employment.  He gave evidence that he had sought other employment, but without success.  This evidence was not seriously challenged and I accept it.  The onus is on the respondents to prove that Mr Martin has failed to mitigate his loss; see Watts v Rake (1960) 108 CLR 158.  I find they have not discharged that onus. 

91                  Counsel for the respondents submitted that “the applicant has suffered no loss if no notice has been given”.  He did not elaborate on this in oral argument, but I take it that he had in mind the passage from Sanders at par 19 already quoted above to the effect that where notice is required and there is no contractual obligation on the employee to accept payment in lieu of notice, then a payment purportedly so made is to be treated as going to reduction and extinguishment of damages.  It is true that if, as in Sanders, the employment is for an indefinite period terminable on a given period of notice then the employee cannot recover as damages more than the salary he or she would have got for that period of notice.  In other words, the employee cannot be in any better position than he or she would have been had the contract been lawfully terminated by the giving of notice.  However the present case is different.  The contract was for a fixed term.  Had the contract not been wrongfully terminated, Mr Martin would have enjoyed the benefits of the contract for the remainder of the term:  Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405. 

92                  As I understood his argument, counsel for the respondents did not contend that if the termination was defective for want of notice and/or breach of article 19(1), then I should assess damages on the basis that, if there were “operational requirements” (as I have found in fact), the result would be the same.  However, even if that argument were put, the answer is that if TDR had complied with the contract and given a month’s notice and/or given Mr Martin an opportunity to be consulted, pursuant to article 19(1), it would by no means necessarily follow that the result would be the same.  On the evidence before me, Mr Martin had a powerful argument that even with the altered emphasis in TDR’s operations there was ample scope for his talents, skills and enthusiasm.  It is not to be assumed that Mr Kelly, a man with a background in scholarship as well as business administration, would shut his mind to new information and argument.  By the same token I am not persuaded – indeed the respondents did not argue – that damages should be discounted to allow for the contingency that the contract might have been validly terminated under cl 12.3 at some future time prior to the end of the term. 

93                  Apart from the foregoing, both counsel were in substantial agreement as to the method of calculation.  In abbreviated form the figures were as follows:

            Short payments up to 21 October 1998               $8,569

            Less tax                                                                1,788            $6,781

           

            Salary and other benefits for one month’s          

            notice                                                                  7,728

            Less tax                                                                1,867               5,861

            Future salary and other benefits to 6

            March 2000                                                      112,818

 

            Less tax                                                             *24,254           88,564

                                                                                                            101,206

 

            Less amount received (after ETP)                                                35,026

                                                                                                             $66,180         

                                                                                                             _______

 

(*a lesser figure than that submitted by the respondents because the tax would be spread over two years.)        

94                  Damages will be an eligible termination payment (ETP) taxable as to part at 31.5 per cent:  see Income Tax Assessment Act (1936) (Cth) Part III Div 2 Subdiv AA.

95                  The parties agreed in principle there should be a grossing up of 31.5 per cent to ensure Mr Martin receives the amount, free of tax, he would have received had the contract not been breached.  This was the approach adopted by Whitlam J in Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405 at 408.

96                  However, the actual calculations proposed on behalf of Mr Martin were erroneous in that they simply added on 31.5 per cent of $66,180.  The correct approach is to calculate what sum, reduced by 31.5 per cent, will produce $66,180.  The formula is

                                           U      

            GU         =          1 –  TP

                                            100

           

            where

                                          

            GU         =          grossed up figure

            TP          =          tax percentage

            U            =          ungrossed amount

 

            thus

 

                                       66,180

            GU         =          1 – 31.5

                                            100

 

                          =          66,180

                                          .685

 

                          =        $96,613.14

 

 

XIX     Loss of chance of renewal

97                  Counsel for Mr Martin also sought damages by way of compensation for the loss of the chance that the contract might have been renewed.  The applicable principles are discussed by Mason CJ and Dawson J in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 90-95.  Their Honours refer (at 91) to the “firmly established rule that, in an action for breach of contract, a defendant is not liable in damages for not doing that which he or she has not promised to do”:  Lavarack v Woods of Colchester Ltd [1967] 1 QB 278.  However their Honours go on to point out that this rule is subject to the rule in Hadley v Baxendale (1854) 9 Exch 341 that a plaintiff is entitled to recover such damages as arise naturally according to the usual course of things from the breach or such as may be reasonably to be supposed to have been in contemplation of both parties at the time they made the contract as the probable result of the breach.  Amann concerned a contract for the provision of aerial coastal surveillance for a period of three years.  Mason CJ and Dawson J said (at 92):

“What was in the contemplation of the parties depends upon a consideration of the terms of the contract in the light of the matrix of circumstances in which it was made.  As we have seen, performance of the contract by Amann would have placed it in an advantageous position to secure a renewal of the contract with the benefits that would entail.  The prospect of renewal was a distinct commercial benefit, inevitably contemplated by the parties as enuring to the advantage of Amannon, and by reason of, its performance of the contract.  It was not an advantage which would accrue to Amann independently of performance of the contract or incidentally.  The corollary is that the parties necessarily contemplated the loss of that prospect as the probable result of a repudiation or fundamental breach of the contract on the part of the Commonwealth.” 

98                  In the circumstances of that case their Honours thought that had the contract proceeded to completion it would have been to the Commonwealth’s advantage to have agreed to a renewal, rather than to have negotiated a fresh contract with a third party who would have been starting from scratch and thus likely to insist on large financial rewards to compensate for heavy initial expenditure.  Accordingly their Honours thought there would have been “a strong prospect of renewal” (at 94).

99                  In New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 the respondent’s contract of employment as Medical Director provided that he should retire not later than the day proceeding his 65th birthday, that he should be eligible for annual re-appointment only until the day preceding his 70th birthday, after which he should be ineligible for re-appointment.  Gleeson CJ and Handley JA said (at 80):

“There remain the issues raised by the plaintiff’s cross-appeal.  In our opinion the plaintiff is not entitled to damages for the loss of the chance that the defendant would re-appoint him as its medical director after he reached the normal retiring age of sixty-five.  Clause  6 of the contract provided that after the date the plaintiff should be eligible for re-appointment up to the age of seventy but he had no right to any further appointment.  The relevant principle is that referred to by Mason CJ and Dawson J in The Commonwealth v Amann Aviation Pty Ltd (at 92):

            ‘… where there are two or more ways in which a defendant might perform the contract, the court, in assessing damages, adopts the mode of performance which is most beneficial to the defendant.  That rule, which is a manifestation of the principle that damages will not be awarded for not doing that which there is no legal obligation to do, is well supported by authority.”

100               But in fact the High Court in Amann upheld an award of damages which included damages for loss of the prospect that the contract would be renewed, notwithstanding that there was no legal right to renewal.  The passage cited by Gleeson CJ and Handley JA comes from a part of the judgment of Mason CJ and Dawson J where the latter are summarising the argument of the Commonwealth, an argument which, as has been noted, did not prevail.  The rule that no damages in contract are recoverable for loss of a benefit not the subject of legal obligation was considered to be subject to the more basic Hadley v Baxendale principle.

101               On the evidence, Mr Martin had impressive skills.  TDR’s work within the larger DSD seems to be a matter of high priority for the government.  If Mr Martin had remained in the position until the end of the three year term, I think there is a real prospect he would have been considered a valuable asset and offered a renewed contract as cl 3 expressly contemplates.  Counsel sought $30,000 under this head; I think that is somewhat on the high side.  I would award $20,000.  Grossed up to allow for ETP in accordance with the formula discussed above, the figure becomes $29,197.08.

XX       Interest

102               Virtually all the amounts constituted by the award of damages represent loss of future payments and therefore an award of interest is not appropriate.

XXI     Orders

103               There will be judgment for Mr Martin against TDR for the amount of $125,810.22.  The causes of action raised against Mr Kelly (misleading and deceptive conduct, misfeasance in public office and interference with contractual relations) are not made out.  The application against Mr Kelly is dismissed.

104               Mr Kelly was not separately represented and no order for costs in his favour is appropriate.  However some appreciable time was taken up by issues on which Mr Martin failed.  I will reduce the order for costs in his favour against TDR by 20 per cent. 

I certify that the preceding one hundred and four (104) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.

Associate:

Dated:              7 May 1999

Counsel for the Applicant:	Mr W Ayliffe
Solicitor for the Applicant:	Ayliffe & Ayliffe
Counsel for the Respondents:	Mr P Turner
Solicitor for the Respondents:	Director of Public Prosecutions (Tas)
Date of Hearing:	10-12 March 1999, 9 April 1999
Date of Judgment:	7 May 1999