FEDERAL COURT OF AUSTRALIA

McCormick v Riverwood International (Australia) Pty Ltd [1999] FCA 1640

EMPLOYMENT – contract – termination – whether entitlement to redundancy payment – whether redundancy agreement between employer and union incorporated by reference into contract of employment – whether implied term that redundancy payment be made.

TRADE PRACTICES – misleading or deceptive conduct – whether representation concerning redundancy payment “in trade or commerce”.

WORDS & PHRASES – “in trade or commerce”.

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

Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133 referred to

Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389 referred to

Saad v TWT [1995] AILR 4208 referred to

Chaplin v Birdogan (1998) 146 FLR 243 referred to

Martin v Tasmania Development and Resources (1999) 163 ALR 79 at 97-8 referred to

Mulcahy v Hydro-Electric Commission (1998) 85 FCR 170 referred to

Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 at 219 referred to

Ryan v Textile Clothing and Footwear Union of Australia [1996] 2 VR 235 distinguished

Gregory v Philip Morris Ltd (1987) 77 ALR 79 referred to

Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 at 840 referred to

Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 referred to

Hawkins v Clayton (1988) 164 CLR 539 at 570 referred to

Breen v Williams (1996) 186 CLR 71 at 91 referred to

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 applied

Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227 referred to

Esanda Finance Corporation v Kenghington (unreported, Supreme Court of South Australia, Prior J, 21 May 1993) referred to

Scally v Southern Health & Social Services Board [1992] 1 AC 294 at 307 referred to

Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 452-3 referred to

Hawkins v Commonwealth Bank of Australia (No 2) (1996) 70 IR 213 referred to

Cheshire & Fifoot’s Law of Contract 7^th Aust ed. 1997

Professor GR Treitel in The Law of Contract 9^th ed. 1995 at 175

Macken, McCarry & Sappideen’s The Law of Employment 4^th ed. 1997 at 184

GARY McCORMICK v RIVERWOOD INTERNATIONAL (AUSTRALIA) PTY LTD (ACN 057 776 888)

V87 of 1999

WEINBERG J

26 NOVEMBER 1999

MELBOURNE

THE COURT ORDERS THAT:

1.                  There be judgment for the applicant against the respondent in the sum of $76,435.74.

2.                  The respondent pay the applicant’s costs to be taxed, including reserved costs.

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

REASONS FOR JUDGMENT

Introduction

1                     On 9 May 1961, the applicant, Gary McCormick, commenced employment in the packaging systems division of a cardboard packaging business.  He continued in that employment for almost exactly thirty-seven years thereafter, until 8 May 1998,.  The owners of the business had included, at various times, Visy Board Pty Ltd, Visypack Pty Ltd and, as from 1990, Multiboard Packaging Pty Ltd (“MPP”).

2                     On 14 May 1993, a division of MPP was constituted as a new company, Riverwood Packaging Systems Pty Ltd (“Packaging”).  On 1 December 1994 MPP changed its name to Riverwood Cartons Pty Ltd (“Cartons”).  Both Riverwood entities were wholly owned by an American parent, Riverwood International Corporation.

3                     From its incorporation in May 1993, Packaging was responsible for the manufacture of machinery later sold to Cartons customers and used by them to package their products.  Cartons manufactured cartons which were to be used in conjunction with the machinery sold by Packaging.  Both the machinery and carton manufacturing functions had been performed within MPP before the packaging service function was spun off to Packaging. 

4                     On 30 March 1998 Cartons sold its entire business to Carter Holt Harvey Ltd (“CHH”), a New Zealand based company.  As part of the overall sale of that business, Packaging downsized its operations and sold certain of its assets to CHH as well.  It was a term of the sale of business agreement that CHH offer employment to all employees of Cartons.  CHH was also entitled, but not bound, to offer employment to those employees of Packaging whom Packaging did not wish to retain.  Cartons had many more employees than did Packaging.  Any employment offered to the employees of Cartons or Packaging was to be on terms “no less favourable than, and involv[ing] substantially the same duties as” the terms of employment with either Cartons or Packaging, as appropriate. 

5                     Immediately before the business of Cartons was sold to CHH, the officers of Packaging were Jeff Smith as National Manager, Ray Kidd as Victorian Manager, and Chris Baudinette as Sales Executive.  In addition, three technical service personnel were employed in the Packaging workshop.  They were the applicant, who was foreman, and two other fitters and turners: Peter Buscher and Ralph Waites.  In addition Bill Slattery was engaged as an independent contractor performing the same duties.  These four men were responsible for building and servicing the packaging systems machinery sold by Packaging.

6                     Though not employed by Packaging, John Bradbury, the Human Resources Manager of Cartons, performed similar human resources functions for Packaging.

7                     On 26 April 1998, after the sale of assets to CHH, Packaging changed its name to Riverwood International (Australia) Pty Ltd.  A dispute later developed between the applicant and Riverwood International as to whether or not he was entitled to a redundancy payment.  That dispute is the subject of this proceeding.

The issues before the Court

8                     The applicant’s principal cause of action is pleaded in contract.  He claims that he is entitled, under his contract of employment with the respondent, to payment of the sum of $76,435.74 by reason of having been made redundant at the time when the Cartons business was sold to CHH.

9                     The respondent disputes the existence of any contractual obligation on its part to make a redundancy payment to the applicant.  It also contends that if, contrary to its primary submission, the applicant did have a contractual entitlement to receive a redundancy payment, he was not, in any event, made redundant.  That was because he was offered a position with CHH on terms which were no less favourable than those under which he had been employed by Packaging and had refused that offer. 

10                  The applicant denies having been offered a position with CHH.  He claims that he was merely asked whether he would be interested in applying for such a position.  He decided, ultimately, that he did not wish to apply for a position with CHH.  He claims that that decision did not disentitle him from receiving the redundancy payment.

11                  The applicant also claims, in the alternative, that if it be found that he was offered a position with CHH, his rejection of that offer does not prevent him from receiving a redundancy payment.  He claims that the respondent is estopped from denying its liability to pay him his redundancy entitlement by reason of the conduct of Mr Bradbury at a meeting held on 27 March 1998.  He claims, more specifically, that the respondent ought to have corrected a misleading impression concerning the applicant’s redundancy entitlement which was conveyed to the applicant by CHH senior management at the meeting, and that by reason of the silence of Mr Bradbury when the misleading statement was made the respondent contravened the provisions of ss 52 and 53B of the Trade Practices Act 1974 (Cth).  The applicant seeks to invoke those alleged contraventions of ss 52 and 53B as a “shield” to the respondent’s contention that he rejected an offer of employment with CHH and has therefore lost any entitlement to a redundancy package which he might otherwise have had.

The threshold question – are the applicant’s claims within the jurisdiction of the Court?

12                  The only federal matter pleaded by the applicant in his statement of claim is that of misleading or deceptive conduct on the part of the respondent contrary to ss 52 and 53B of the Trade Practices Act 1974 (Cth).  The applicant pleads misleading or deceptive conduct as follows:

·                    The conduct of John Bradbury in remaining silent at the meeting of 27 March 1998 when the question of the applicant’s entitlement to a redundancy payment from Packaging was discussed.

·                    The conduct of Jeff Smith in failing to inform the applicant that Riverwood International Corporation had directed Packaging not to make redundancy payments to employees of Packaging who were offered jobs by CHH, or possibly who refused such offers.

13                  This conduct on the part of Messrs Bradbury and Smith was said to constitute misleading or deceptive conduct by silence.

14                  Section 52 of the Trade Practices Act requires that the misleading or deceptive conduct said to have been engaged in by the corporation was engaged in “in trade or commerce”.

15                  There has been a measure of debate over the question as to when conduct can be said to be “in trade or commerce”. 

16                  In Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 the High Court held that this phrase has a restrictive operation.  In a joint judgment, Mason CJ and Deane, Dawson and Gaudron JJ said at 603:

“[I]t is plain that s 52 was not intended to extend to all conduct, regardless of its nature, in which a corporation might engage in the course of, or for the purposes of, its overall trading or commercial business.  Put differently, the section was not intended to impose, by a side-wind, an overlay of Commonwealth law upon every field of legislative control into which a corporation might stray for the purposes of, or in connection with, carrying on its trading or commercial activities.  What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character.”

17                  Their Honoursheld that misleading information given by one employee of a builder to another employee concerning the safety of a grate was not information provided “in trade or commerce” in the sense intended by the Act. 

18                  Prior to Concrete Constructions, in Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133, Wilcox J had held that a statement made in the course of employment negotiations was capable of being conduct “in trade or commerce”.

19                  In Barto v GPR Management Services Pty Ltd (1991) 33 FCR 389, Wilcox J reaffirmed the general approach which he had previously taken in Patrick.  He held that the conduct of a corporation which occurs in the course of negotiations with a prospective or present employee in respect of that person’s employment contract is conduct capable of falling within s 52 of the Trade Practices Act.  His Honour referred to the statements of the majority of the High Court in Concrete Constructions, and admitted to some difficulty in discerning precisely what activities the majority would regard as being “in trade and commerce” and what activities it would not.  His Honour stated at 393:

“It is clear enough, on the one extreme, that conduct which is not inherently a commercial activity, such as driving a truck or giving information about the safety of a building site, is not conduct “in trade or commerce” simply because, in the particular case, it is performed in the course of a larger activity for commercial gain.  It seems equally clear, on the other extreme, that conduct which would plainly be conduct “in trade or commerce” if carried out vis-à-vis a stranger does not lose that characteristic simply because the party with whom the corporation is dealing happens to be an employee.”

20                  His Honour continued at 393-4:

“It is easy to understand the policy reasons underlying Concrete Constructions.  A contrary result would have led to s 52 being used as a vehicle for the recovery of personal injury damages in a large number of industrial and motor accident cases; even cases where the respondent was not negligent, but only if it happened to be a “corporation” as defined in s 4 of the Trade Practices Act …

The present case falls between the two extremes which I have mentioned.  On the one hand, this case is not concerned with the conveying of routine information such as a truck driver’s handsignal or a foreman’s statement about bolt-fixing; actions which are not intrinsically commercial and which could occur in a non-commercial context.  This case is concerned with information alleged to have been conveyed in the course of negotiations for the variation of a contract.  On the other hand, the information was “internal”, in the sense that the recipient was a person already employed by the informer.  And, although the context was “commercial” in nature, the relevant conduct was not the sale of the goods or services by virtue of which the corporation endeavoured to make profits, but something related to its capacity to effect such sales.”

21                  His Honour went on to hold that the making of an employment contract was part of the total activities in trade or commerce of a corporation, and was “intrinsically commercial conduct”.  He continued at 394-5:

“In the present case the relevant negotiation was conducted with someone who was already an employee of the company.  In that sense, the transaction was “internal”.  But I do not think this matters.  Negotiations for an initial employment contract, with a person who is not presently an employee, and negotiations for a variation of that contract, with a person who is an employee, do not differ in their intrinsic character.  In each case the negotiation is commercial in nature and undertaken for the purpose of the company’s overall trading activities.”

22                  Wilcox J noted that Patrick, together with three other decisions of this Court which had mentioned it without disapproval, had been cited to the High Court in Concrete Constructions.  Yet nothing was said by the majority in that case to suggest that Patrick was wrongly decided. 

23                  The approach adopted by Wilcox J has since been followed by Ireland J in Saad v TWT [1995] AILR 4208 and also by Ashley J in Chaplin v Birdogan (1998) 146 FLR 243.

24                  A different view has been taken by Heerey J in two recent decisions, Martin v Tasmania Development and Resources (1999) 163 ALR 79 at 97-8 and Mulcahy v Hydro-Electric Commission (1998) 85 FCR 170. 

25                  In Martin his Honour found that the manner in which a notice of termination was expressed, referring to “operational requirements” which did not exist, was not conduct “in trade or commerce”.  His Honour referred to Concrete Constructions, and then turned to the decision of Wilcox J in Barto.  His Honour said, at pars 75-77:

“[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; 85 ALR 442) 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 New South Wales 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 person’s 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.”

26                  In Mulcahy Heerey J dealt with various claims made by the applicants against their former employer, the Hydro-Electric Commission.  The Commission maintained a Retirement Benefits Fund Scheme, established by the Retirement Benefits Act 1970 (Tas).  The applicants claimed to be entitled to the benefit of the provisions of the successor to that Act, the Retirement Benefits Act 1983 (Tas).  Among the claims which they made against the Commission under the Trade Practices Act were claims that it had engaged in misleading and deceptive conduct in breach of s 52, and in unconscionable conduct in breach of s 51AA(1).  His Honour concluded that as the relationship between the Hydro-Electric Commission and the various applicants was that of employer and employee, there were no trade or commercial dealings between them in the relevant sense.  His Honour referred to Concrete Constructions as authority for that proposition.  In Mulcahy his Honour did not refer to either Patrick or Barto.  Nor did his Honour refer to any other decision of this Court dealing with this issue.  Mulcahy went on appeal to the Full Court, but the issue with which I am presently concerned did not arise – see (1998) 85 FCR 248.

27                  It is unnecessary for me to form a concluded view as to whether the approach taken by Wilcox J in Barto should be preferred to the approach taken by Heerey J in both Martin and Mulcahy. 

28                  The conduct of which the applicant presently complains took place in circumstances very different from the “internal communications” which were in issue in Concrete Constructions.  The conduct occurred in the context of a commercial transaction – the sale of a business to a purchaser with a right to a “second option” on recruitment of Packaging’s employees, and with an obligation to afford any such transferring employees no less favourable terms and conditions than they had previously enjoyed.  Such conduct bears little resemblance to the type of conduct which the majority in Concrete Constructions regarded as falling outside the ambit of the expression “in trade or commerce”, such as the giving of a misleading hand signal by the driver of a corporation’s trucks.  As their Honours observed at 604:

“Nor, without more, is a misleading statement by one of a building company’s own employees to another employee in the course of their ordinary activities.  The position might well be different if the misleading statement was made in the course of, or for the purposes of, some trading or commercial dealing between the corporation and the particular employee.”

29                  Whatever difficulties there may be in applying the broad statements of principle laid down by the High Court in Concrete Constructions, it may at least be said that the mere fact that the misleading statement was made by one employee to another does not, of itself, prevent it from falling within the ambit of the expression “in trade or commerce” in s 52.  As Toohey J observed (at 613) the words “trade or commerce” are of wide import.  But their focus is on commercial activity, the providing of goods and services for reward.  While the word “in” is narrower than the expression “in connection with”, and suggests something akin to “as part of” trade and commerce, the circumstances surrounding the sale of the business by Cartons to CHH, and in particular the question of which of Packaging’s employees would be taken on by CHH, are matters closely related to, and in the course of, trading or commercial dealing.

30                  The conduct of Messrs Bradbury and Smith which is complained of by the applicant is within the class of negotiations concerning terms and conditions of employment recognised as being “in trade or commerce” in Barto.  The fact that this conduct occurred during discussions concerning the termination of the applicant’s employment with Packaging, whether by transfer to CHH or by outright termination, and if the latter, on what terms, suggests that consistently with Concrete Constructions, it is, relevantly, conduct amenable to s 52 of the Trade Practices Act.  The contrast between this conduct and that found by Heerey J in Martin and Mulcahy not to be “in trade and commerce” is, in reality, quite striking. 

31                  It follows, in my view, that federal jurisdiction is attracted by the claim under s 52 of the Trade Practices Act.  It is unnecessary to deal separately with the claim under s 53B of the Act.  The remaining causes of action pleaded by the applicant are plainly with the scope of the accrued jurisdiction of the Court.

32                  Even if I were to find that the claim under s 52 of the Trade Practices Act could not be sustained because the relevant conduct was not engaged in “in trade or commerce”, it would not necessarily mean that the attached claims would fall outside the jurisdiction of the Court.  The trade practices claim, though brought merely as a contingency, cannot in my view be regarded as “colourable”, ie made for the improper purpose of “fabricating jurisdiction” – see Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 at 219.  It follows that the claims brought by the applicant fall within the jurisdiction of this Court.

Did the applicant have a contractual entitlement to a redundancy payment?

The letter of 6 October 1993

33                  By 14 May 1993, when Packaging was incorporated, the applicant had been employed in the cardboard packaging business for over thirty-two years.  That business had changed hands on several occasions during that period.  Each time it was sold, oral representations were made to all employees that they would continue to be employed on the same terms and conditions as before. The applicant submitted that his contract of employment with the respondent was in part, at least, oral, based upon these representations. 

34                  On 6 October 1993, a letter was sent to the applicant offering him the position of Senior Technician with Packaging.  That letter represents the only written contract of employment tendered in this proceeding.  The applicant said that he had never been provided with a written employment contract prior to receiving the letter of 6 October 1993. 

35                  The letter of offer included an attached copy to be signed by the applicant and returned to Packaging.  It dealt specifically with the following subjects:

·                    Remuneration;

·                    Superannuation;

·                    Annual Leave;

·                    Company Policies and Practices;

·                    Notice Period;

·                    Commencement Date;

·                    Medical Examination.

36                  The letter made no reference to any entitlement to a redundancy payment.  However, in that part of the letter headed “Company Policies and Practices” the following sentence appeared:

“You agree to abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced.”

37                  The letter was signed by Raymond Parnis, a former commercial manager of Packaging.  The attached copy was signed by the applicant on 12 October 1993.  He thereby accepted the terms and conditions set out in the letter. 

The reference to “Company Policies and Practices”

38                  The reference in the letter to “Company Polices and Practices” is somewhat obscure.  Among the documents tendered in this proceeding are three versions of what are described as “Redundancy Agreements”. 

39                  The first of these is dated 28 October 1988, at a time when the business was still owned by various entities associated with Mr Richard Pratt.  These included Visy Board Pty Ltd and Visypack Pty Ltd.  The preamble to that first “Redundancy Agreement” reads as follows:

“The following sets out the details of the redundancy provisions agreed between the Company and the Printing & Kindred Industries Union (the Union).  This Agreement shall come into effect from this day and shall remain in effect until replaced by any other agreement as may be reached between the Company and the Union and shall replace any existing Redundancy Agreements.”

40                  The “Redundancy Agreement” provides that where an employee is made redundant he shall be paid three weeks’ ordinary pay for each completed year of service, with a pro-rata payment for each completed calendar month.  It provides that there shall also be an annual leave loading, long service leave and sick leave as stipulated. 

41                  The second “Redundancy Agreement” is undated, but also purports to be signed on behalf of the Pratt group of companies.  It follows that it must have come into existence prior to 1990, when MPP acquired the business.

42                  The preamble to the second “Redundancy Agreement” reads as follows:

“The following sets out the details of the redundancy provisions agreed between the Company and the (AMWU, CEPU, Printing & Kindred Industries Union (the Union)).  This Agreement shall come into effect from this day and shall remain in effect until replaced by any other agreement as may be reached between the Company and the Union and shall replace any existing Redundancy Agreements.”

43                  This second “Redundancy Agreement” contains essentially the same terms and conditions as the earlier version, including the identical redundancy provisions.

44                  The third “Redundancy Agreement” tendered is dated November 1993.  It purports to have been made between MPP and the Printing and Kindred Industries Union.  The preamble signifies that the “agreement” shall come into effect from 7 September 1993.  It is signed by John Bradbury for and on behalf of MPP (Jubilee Division) – a Brisbane based division of MPP – and by the Union delegates of MPP (Jubilee Division) on their own behalf, and on behalf of all PKIU members employed from time to time by the company.

45                  All three versions of the “Redundancy Agreement” contain the following clause:

“14.     UNDERTAKINGS BY UNIONS AND EMPLOYEES

i)                    In the light of undertakings made by the Company in this Agreement, the Union and employees will undertake not to impose any bans, limitations or restrictions on the Company as a result of redundancies, retrenchments or relocations.

ii)                  In the event of the parties not being able to reach Agreement on issues of interpretation of any clause of this Agreement, the parties agree to request the service of the Conciliation and Arbitration Commission.  Normal work will continue while discussions and Arbitration Commission hearings are in progress.”

The Human Resources Polices and Procedures Manual

46                  Cartons maintained a Human Resources Policies and Procedures Manual (“the Manual”) throughout the period leading up to the sale of its business in 1998.  A copy of the Manual was tendered before me.  It contained a section dealing specifically with redundancies. 

47                  On 18 May 1994 the following entry was inserted into the Manual:

“Employment – Redundancies

Where terminations of employment are as a result of redundancy the terms and conditions of the company redundancy policy shall apply.  Such situations must be discussed with the General Manager, Human Resources before any action is taken. 

For calculation see copy of Redundancy Agreement attached.”

48                  The “Redundancy Agreement” attached was the third agreement, that of November 1993.  It is included in the Manual in its entirety. 

49                  In a different section of the Manual, under the heading “Leave policy”, further reference was made to the issue of redundancy.  The entry in question reads as follows:

“Accumulated Sick Leave shall not be paid out on termination for either Hourly or Monthly paid employees, except in the case of redundancy of Hourly paid employees and then only in accordance with the Company’s Redundancy Document.  (See Redundancy).  In no case shall a Monthly paid Staff or Management employee be paid out Sick Leave on termination.”

The Redundancy Payment Advice

50                  Also tendered before me was a “Redundancy Payment Advice” issued to the applicant by Packaging.  The Advice was expressed to be “Subject to Confirmation”.  It calculated the applicant’s “redundancy payment” as amounting to $101,011.32.  This figure was arrived at  in accordance with the formula contained in each of the various Redundancy Agreements.  It was common ground before me that the Advice was an indicative statement only, and not to be treated as an admission on the part of Packaging that the applicant had an entitlement to this sum, or any part thereof. 

Past practice of Cartons and Packaging

51                  It appears from the evidence that there had been redundancies within Cartons, and possibly also within Packaging, in 1995 and in 1997.  In both instances all employees made redundant received payments calculated in accordance with the formula set out in the Redundancy Agreements to which I have referred. 

52                  When the Cartons business was sold to CHH in 1998, several Packaging employees were made redundant.  They included Ray Kidd and Malcolm King.  Bill Slattery, who was an independent contractor, also had his services terminated.  It is noteworthy that they all, including Mr Slattery, received redundancy payments calculated in accordance with the formula contained in the Redundancy Agreements.

Subsequent certification of Redundancy Agreement

53                  After the business was sold to CHH in March 1998, the third Redundancy Agreement was certified.  It became legally enforceable thereafter at the behest of any CHH employee.  This was said by the applicant to provide support for his contention that before the business was sold the third Redundancy Agreement had been understood by the Riverwood entities to apply to their employees.

The competing submissions

54                  The applicant’s primary submission was that the third Redundancy Agreement had been “incorporated by reference” into his employment contract of 6 October 1993.  The reference in the letter to “Company Policies and Practices” was said to be a reference to the Manual which, it will be recalled, included within it the third Redundancy Agreement. 

55                  In the alternative, the applicant submitted that it was an implied term of his contract of employment that upon being made redundant he would receive a redundancy payment.  That implied term arose by reason of the fact that Packaging, and its predecessors, had invariably made redundancy payments to employees who had been made redundant in accordance with the formula set out in the Redundancy Agreements. 

56                  The respondent, on the other hand, submitted that the reference to “Company Policies and Practices” in the letter of 6 October 1993 could not be regarded as “incorporating by reference” any entitlement to a redundancy payment.  The obligation, as expressed in the letter, was imposed upon the applicant alone.  It was he, and not the respondent, who agreed to “abide by all Company Policies and Practices”.  The respondent had agreed to nothing in that regard. 

57                  The respondent drew attention to the fact that the applicant had not been a party to any of the three Redundancy Agreements which were produced.  The third of those agreements, that of November 1993,  had been signed by the union delegates of MPP (Jubilee Division) on their own behalf and on behalf of all PKIU members employed from time to time by the company.  The applicant had never been associated with the Jubilee Division of MPP.  Nor, on the evidence, had he ever been a member of the PKIU.

58                  The respondent submitted further that the Redundancy Agreements had no contractual status, but were binding “in honour” only.  They were “industrial” agreements, not legally binding contracts.  Packaging, and its predecessors, undoubtedly had made redundancy payments in the past, but only in order to avoid industrial strife, and not because they were bound to do so.

59                  The respondent relied heavily upon a decision of the Victorian Court of Appeal in Ryan v Textile Clothing and Footwear Union of Australia [1996] 2 VR 235.  There the Court dealt generally with the status of unregistered collective agreements – ie, agreements not certified or registered under Federal or State legislation dealing with industrial relations.  The MPP Redundancy Agreement of November 1993 was, of course, an unregistered collective agreement. 

60                  Brooking JA considered first the question whether a trade union could, in making an agreement with an employer dealing with terms and conditions of employment, do so as agent for some or all of its members.  His Honour identified the principles which allow a union to contract as an agent on behalf of employees who would be regarded as the principals.  He observed at 238-9:

“It is clear that to make a contract on behalf of a principal an agent must contract on behalf of a principal who is then ascertainable:  Trident General Insurance Co. Ltd. v. McNiece Bros. Pty. Ltd. (1988) 165 C.L.R. 107 at 113 per Mason C.J. and Wilson J.  This rule lies formidably in the way of the adoption of the view that a trade union has entered into a collective agreement as agent for its members.  For usually the intention will be to benefit future as well as present members of the union, and the future members cannot be identified as principals when the collective agreement is made.  Other difficulties include the source of the union’s authority from its supposed principals and the closely related matter of the withdrawal of authority.”

61                  His Honour then referred to the decision of Gray J in this Court in Gregory v Philip Morris Ltd (1987) 77 ALR 79.  There Gray J held that it was a term of the applicant’s employment that he be a member of a particular union, and that he should not be dismissed unfairly or unreasonably.  Gray J stated at 93-4:

“In the present case, the local agreement, although entered into by the unions concerned, was negotiated on their behalf by employees of the respondent and not solely by officials of the union.  The agreement is signed on behalf of the unions by members of the closed shop committee.  As I have already stated, before any such signature, the terms of the agreement, or any variation of it, were the subject of decision by the employees concerned.  In these circumstances, it is much easier than in the normal case to construe the agreement as having been entered into by the union concerned, or by the negotiators, as agents for the employees.  It is even easier to find that the terms of the local agreement became part of the terms of the contract of employment of the applicant when the applicant himself was a negotiator in respect of variations to the local agreement ….”

62                  Brooking JA expressed doubt, at 240, as to the basis upon which Gray J had arrived at this conclusion.  His Honour did not, however, state in terms that he considered the decision in Gregory to be incorrect. 

63                  Brooking JA also expressed doubt, at 243, as to whether the agreements under consideration in Ryan were intended by the parties to be legally binding.  Moreover, he doubted whether there was consideration moving from the union for the employer’s promises, and whether they were sufficiently certain to be enforced.  His Honour referred extensively to United States authority in this regard. He noted that the relevant agreements had been reached in settlement of an industrial dispute.  Doubtless the employer, the unions and the unionists all expected that they would be carried into effect.  However, as his Honour observed at 249:

“As regards consideration, there is no doubt that, as a matter of industrial reality, the agreements were arrived at by a process of collective bargaining.  Common sense and fairness require that the court strive to uphold them as legally enforceable.  But, as has often been observed by writers on labour law, legal doctrines may at times seem inadequate to cope with the realities of industrial relations.”

64                  Finally Brooking JA said at 251:

“The question of the identity of the parties to the agreement, the question of consideration and the question of intention to make a legally binding contract are often closely interrelated … That is certainly so in the present case.  In my opinion the Homfray agreements, unsupported by consideration, were intended by the unions and the company to have practical industrial, as opposed to legal, consequences.”

65                  Hayne JA, with whom Tadgell JA agreed, concluded that an industrial agreement reached between a union and an employer, and then registered pursuant to the relevant industrial legislation making such agreements enforceable, could properly be described as an industrial instrument even though (for a number of reasons) it may not amount to a contract.  While the unions concerned, and the employer, may have intended to make an arrangement that would be binding, they were not to be taken as having intended to reach an agreement enforceable at law, but rather an agreement that would or might have significance in future industrial relations between the parties.

66                  Hayne JA stated that the fact that the parties could properly regard the arrangement as constituting the employer’s undertaking that it would, in future, provide redundancy benefits at the level agreed might justify the legitimate expectation of the parties that this would be done, but did not necessarily mean that they were to be taken as contemplating that those expectations were to be capable of enforcement by resort to the courts.  His Honour observed that had the parties wished to ensure that the relevant agreements were enforceable at law they could have registered them under the appropriate industrial legislation.  The fact that they had not done so was a powerful reason for holding that they were not enforceable.  Hayne JA said at 273:

“It is desirable to draw together the three questions of intention to create legal relations, parties and consideration for, as I have said, I do not think that they can be considered as three separate and isolated questions.  In my opinion the true analysis of what was said and done in relation to Homfray is that the arrangement that was struck was struck between union and employer and, the union having provided no consideration for the employer’s promise no contract was made.  Because the union gave no consideration for the promise of the employer, the parties did not make a bargain of the kind that could be enforced in a court and in my view their conduct is to be taken as demonstrating that they did not intend to do so.”

Conclusion

67                  The reasoning of the Victorian Court of Appeal in Ryan, which I regard as correctly stating the relevant principles, strongly suggests that the unregistered Redundancy Agreement entered into between MPP and the PKIU in November 1993 created no legally enforceable rights, of itself, in favour of the applicant.  The PKIU, in entering into that agreement, did not act as the applicant’s agent.  Nor did it purport to do so. 

68                  That is not, however, the end of the matter.  A fundamental issue which must be addressed is whether the third Redundancy Agreement acquired a legally binding status by being included in Cartons’ Manual, and by being referred to in the manner described in Packaging’s letter of offer to the applicant of 6 October 1993.

69                  The fact that the third Redundancy Agreement found its way into Cartons’ Manual, and not into any Packaging Human Resources Policies and Procedures Manual, seems to me, in the circumstances of this case, to be of little consequence.  The evidence clearly establishes, in my view, that Packaging was regarded from the time it was incorporated as being merely an offshoot of Cartons.  No distinction was ever drawn between either company’s terms and conditions of employment.  John Bradbury, who signed the third Redundancy Agreement on behalf of Cartons, though notionally employed by Cartons alone, acted at all times as Human Resources Manager for Packaging.

70                  It is important to note that virtually every document contained in Cartons’ Manual provides a benefit of some sort to that company’s employees.  No burden of any kind is imposed, except upon the employer.  That is a matter of considerable significance.  The obligation purportedly imposed upon the applicant to “abide” by all Company Polices and Practices must, in my view, be understood in light of this fact. 

71                  I accept that the word “abide” has, as one of its primary meanings, when combined with the word “by”, “to remain faithful to or act upon”.  The respondent submitted, not without considerable force, that an obligation couched in such terms could not impose upon Packaging any legal duty which required it to act upon its own policies and practices.

72                  The respondent also submitted that it is not the case that every statement made or adopted by the parties in connection with their contract is necessarily a “term” of the contract – that is, an enforceable undertaking.  While modern developments in the doctrine of estoppel raise the possibility that a non-promissory statement made by a contracting party may, in appropriate circumstances, be treated as if it were a term of the contract, the applicant had not pleaded his principal cause of action in estoppel.  It would be wrong, therefore, to deal with the matter on that basis. 

73                  The respondent submitted further that even if a party was intended to be, and was in fact, induced to enter a contract by such a statement, that is not in itself sufficient to make the statement a promise.  The greater the imprecision of the statement, the less likely it is to be promissory.  The fact that a statement is in writing does not, of itself, establish its promissory character.  It must be shown that the statement was incorporated in the contract at the time the contract was made.

74                  In ascertaining the meaning of an expression contained in a contract such as the requirement that the applicant “abide” by all “Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced”, the approach to be adopted differs from that taken in statutory interpretation.  It must rest on the premise that the contract was made in good faith with the object of at least potential mutual benefit by due performance. 

75                  The Court approaches the task of ascertaining the meaning of the parties’ expressions from an objective point of view.  In the case of a disputed clause in a commercial agreement “the essential question is what would reasonable business people in the position of the parties have taken the clause to mean” – Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 at 840 per McGarvie J.  In Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201Lord Diplock said:

“… if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.”

76                  The parties may be bound by the meaning reasonably to be inferred in the circumstances, even if it does not conform to the interpretation advanced by either.  It is not necessary that a statement should be subjectively intended to be a term of a contract in order to be one; it is enough if it can reasonably be so understood.

77                  In Cheshire & Fifoot’s Law of Contract 7^th Aust ed. 1997 it is stated that:

“In interpreting the expressions of the parties, the court will consider them in their context.  Except to the extent to which evidence is inadmissible, the court will as a matter of course take into account the objective background of the transaction, that is, its factual matrix, genesis and aim, and the common assumptions of the parties.” (see p 345)

78                  The actual terms of a contract are those which the parties intended to incorporate in that contract.  They comprise the terms expressed by the parties as well as terms which it must be inferred were intended though not expressed.  The law may infer such an intention from the nature and context of the transaction.  The difference between inferred terms based on actual intention, and implied terms based on presumed intention is not always easy to discern – see Hawkins v Clayton (1988) 164 CLR 539 at 570 per Deane J; Breen v Williams (1996) 186 CLR 71 at 91 per Dawson and Toohey JJ.  Particular terms will be considered in the light of all of the facts which bear upon their meaning. 

79                  In Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Mason J, with whom Stephen, Aickin and Wilson JJ relevantly agreed, dealt with the circumstances in which there would be implied into a written contract terms which are not recorded therein.  His Honour noted at 345 that a written contract may incorporate terms contained in other documents into the contract itself.  Terms may also be implied in a contract to give it business efficacy – that is, to make it workable. 

80                  Mason J stated at 346:

“The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract.  In each case the problem is caused by a deficiency in the expression of the consensual agreement.  A term which should have been included has been omitted.  The difference is that with rectification the term which has been omitted and should have been included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it – it is not a term that they have actually agreed upon. …

For obvious reasons the courts are slow to imply a term.  In many cases, what the parties have actually agreed upon represents the totality of their willingness to agree; each may be prepared to take his chance in relation to an eventuality for which no provision is made.  The more detailed and comprehensive the contract the less ground there is for supposing that the parties have failed to address their minds to the question at issue.  And then there is the difficulty of identifying with any degree of certainty the term which the parties would have settled upon had they considered the question.

Accordingly, the courts have been at pains to emphasize that it is not enough that it is reasonable to imply a term; it must be necessary to do so to give business efficacy to the contract. …”

81                  His Honour then referred to the celebrated passage in the judgment of MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227 where his Lordship formulated the test for implied terms as follows:

“Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying …”

82                  Mason J continued at 347:

“The conditions necessary to ground the implication of a term were summarized by the majority in B.P. Refinery (Westernport) Pty. Ltd. v Hastings Shire Council [(1977) 52 ALJR 20 at 26)]: “(1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.””

83                  His Honour then turned to the parol evidence rule, and the limits which that rule imposed upon the process of implying terms into written contracts.  He continued at 348:

“On the other hand, it has frequently been acknowledged that there is more to the construction of the words of written instruments than merely assigning to them their plain and ordinary meaning … This has led to a recognition that evidence of surrounding circumstances is admissible in aid of the construction of a contract.”

84                  Finally, his Honour observed at 352:

“The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning.  But it is not admissible to contradict the language of the contract when it has a plain meaning.  …

Consequently when the issue is which of two or more possible meanings is to be given to a contractual provision we look, not to the actual intentions, aspirations or expectations of the parties before or at the time of the contract, except in so far as they are expressed in the contract, but to the objective framework of facts within which the contract came into existence, and to the parties’ presumed intention in this setting.  We do not take into account the actual intentions of the parties and for the very good reason that an investigation of those matters would not only be time consuming but it would also be unrewarding as it would tend to give too much weight to these factors at the expense of the actual language of the written contract.”

85                  It is in the light of the principles set out above that I must determine whether the applicant has made good his contention that his contract of employment entitles him to a redundancy payment if he is made redundant.  His case is put on two separate bases:

(a)                incorporation by reference, or

(b)               implied terms. 

86                  In favour of the applicant’s contention are the following factors:

·                    The applicant’s written contract of employment with Packaging dated 6 October 1993 expressly incorporates “Company Policies and Practices”.  These are contained in Cartons’ Manual, and include the third Redundancy Agreement.  The Manual is, as I have found, applicable also to Packaging.

·                    Although the words of incorporation contained in the written contract purportedly impose upon the applicant alone, and not upon his employer, an obligation to “abide by all Company Policies and Practices”, an obligation expressed in those terms makes no sense given that the Manual does little more than set out a series of employees’ entitlements.

·                    An entitlement to redundancy pay may arise as a result of an express incorporation into a written contract of employment of a severance pay provision in a company’s policies and procedures manual – Esanda Finance Corporation v Kenghington (unreported, Supreme Court of South Australia, Prior J, 21 May 1993).

·                    Both Cartons and Packaging, and their predecessors, have always made redundancy payments to employees in accordance with the terms of the Redundancy Agreements negotiated from time to time with relevant unions.  While these Redundancy Agreements have no contractual force per se (Ryan v Textile Clothing and Footwear Union of Australia (supra)) they may be regarded as conferring upon the applicant a legal entitlement to a redundancy payment if they, or any of them, are incorporated by reference into the applicant’s contract of employment.  Alternatively, it may be that there is to be implied into the applicant’s contract of employment a term that, upon being made redundant, he will receive a redundancy payment in accordance with these Redundancy Agreements because that is the presumed or implied intention of the parties, ie that is what the parties would have agreed upon had they turned their minds to the question.  Such a term may be implied where it is “a necessary incident of a definable category of contractual relationship” – Scally v Southern Health & Social Services Board [1992] 1 AC 294 at 307; distinguished in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 452-3 per McHugh and Gummow JJ, and in Mulcahy v Hydro-Electric Commission (supra) at 210 per Heerey J.

·                    Moreover, notwithstanding the general principles set out in Ryan, an employee may, in a given case, have an entitlement to redundancy pay on the basis that the terms of a redundancy agreement reached between his employer and a union form part of the terms and conditions of his or her employment –Hawkins v Commonwealth Bank of Australia (No 2) (1996) 70 IR 213.  Whether the employee can demonstrate that he has such an entitlement will depend upon the particular circumstances of the case.

·                    Whilst in the past it was rare for an employee to have incorporated in his contract of employment an entitlement to redundancy pay, such terms are becoming more common – Macken, McCarry & Sappideen’s The Law of Employment 4^th ed. 1997 at 184. 

87                  The factors which suggest that the applicant’s contract of employment does not entitle him to a redundancy payment are:

·                    No mention is made of any entitlement to a redundancy payment in the contract of employment, as set out in the letter of offer of 6 October 1993.  The letter deals comprehensively with many other aspects of the applicant’s entitlements, making the omission of a reference to redundancy pay particularly significant.

·                    The reference to “Company Polices and Practices” in that letter is couched in terms of an obligation which rests upon the employee, and not upon his employer.

·                    The third Redundancy Agreement between the union and MPP which is said to have been incorporated into the applicant’s contract of employment was not one which, of itself, gave rise to contractual entitlements on the part of the union or any employees – Ryan v Textile Clothing and Footwear Union of Australia (supra).

88                  The competing considerations may be seen as being finely balanced.  In the end, and after giving this matter careful consideration, I have concluded that the applicant’s contract of employment embodies both the letter of 6 October 1993, and the terms set out in Cartons’ Manual, including the third Redundancy Agreement.  The Manual is, as I have indicated, applicable also to Packaging. 

89                  Even if the third Redundancy Agreement is not incorporated by reference into the letter of 6 October 1993, an entitlement to redundancy pay in accordance with its terms is, in my view, to be implied in the contract of employment between the applicant and the respondent. 

90                  Professor GR Treitel deals with the doctrine of incorporation by reference in The Law of Contract 9^th ed. 1995 at 175.  Professor Treitel gives as an example of the operation of that doctrine:

“… where a contract is made subject to standard terms settled by a trade association.  Those terms are then incorporated by reference into the contract; if there are several editions of the standard terms, the contract is prima facie taken to refer to the most recent edition [fn Smith v South Wales Switchgear Ltd. [1978] 1 W.L.R. 165].”

91                  The parallels between that example, and the situation which arises in the present proceeding, are too obvious to require elaboration.

92                  Professor Treitel also observes that the parties may purport to incorporate one document in another by express reference, though not realising that the terms of the two documents conflict.  In such circumstances, he comments, the courts are anxious to make sense, if possible, of loosely and sometimes carelessly drafted commercial documents. 

93                  I consider that to be the approach which should be adopted when construing the obligations which arise from the use of the word “abide” in the letter of 6 October 1993.  Those obligations are directly linked to the Manual and, accordingly, to the third Redundancy Agreement as well.  The Manual is concerned principally, if not exclusively, with laying down employees’ entitlements.  The applicant’s agreement to “abide” by Packaging’s “Policies and Practices” should therefore be construed, in the context of a contract made in good faith, as imposing a like obligation upon the company.

94                  Alternatively, there should in my opinion be implied in the contract of employment the term that if the applicant is made redundant, he shall receive redundancy benefits calculated in accordance with the formula set out in detail in the various Redundancy Agreements, and in particular, that of November 1993.  Consistently with the approach adopted by MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd (supra) and by Mason J in Codelfa (supra) the implication in this case is both “obvious” and “necessary to give the transaction such business efficacy as the parties must have intended”.  The implication is “a necessary incident of a definable category of contractual relationship” – Scally v Southern Health & Social Services Board (supra).  I can see no reason why both Cartons and Packaging would have made redundancy payments to all employees who were made redundant throughout the entire history of their ownership of the cardboard packaging business, other than that this was what they understood they had agreed to.  Fear of industrial action does not, in my view, provide the explanation.

95                  I am conscious of the principle which states that the Court should not imply a term merely because it would be reasonable to do so.  Nor should the Court seek to improve the contract which the parties have made for themselves, however desirable the improvement might be. 

96                  I do not consider that the term which I find to be implied conflicts with the express terms of the contract.  Quite to the contrary.  I do not consider that the letter of 6 October 1993 is drafted so carefully and comprehensively that it should be viewed as containing an exhaustive statement of the detailed terms agreed between the parties.  I regard it rather as a loose and somewhat carelessly drafted commercial document which should, if possible, be construed in a manner which enables it to make sense.

97                  I am influenced in my finding that there has been incorporation by reference, and my finding that an implied term is warranted, by the elaborate detail contained in the third Redundancy Agreement.  I am also influenced in coming to these findings by the fact that the terms of this third Redundancy Agreement appear to have been implemented in relation to every other employee, apart from the applicant, made redundant by Cartons and Packaging, in 1995, 1997 and 1998.

98                  It is not unimportant to note that the senior management personnel of Packaging appear to have assumed throughout that if the applicant was not offered a position with CHH at the meeting of 27 March 1998, he would be entitled to a redundancy payment.  The possibility that he may not have had such an entitlement appears to have been considered for the first time only after the applicant brought these proceedings.  That does not mean that the contention that there is no such entitlement so forcefully advanced before me lacks legal merit – only that it runs directly counter to the actual beliefs of those most centrally involved.  Those beliefs should, in my opinion, be given appropriate weight.

99                  I stress that in finding that the applicant has a legal entitlement to a redundancy payment if he is found to have been made redundant I accept entirely the correctness of the reasoning of the judgment of the Victorian Court of Appeal in Ryan (supra). 

100               The facts in Ryan are, however, very different from the facts of the present case.  The applicant does not rely upon any agency between the PKIU and its members, let alone any agency between that union and himself, to make good his claim to be entitled to a redundancy payment.  He relies rather upon the incorporation by reference of the third Redundancy Agreement into his contract of employment, or an implied term to that effect, as the basis for his claim.

101               In this case there is no difficulty in ascertaining the parties.  The term concerning redundancy is sufficiently certain.  The consideration moving from the applicant was his promise to be bound by the terms and conditions of his employment.  There is no doubt that there was an intention to create legal relations at the time the letter of offer was provided to the applicant and signed by him.

102               On the evidence adduced before me, I am persuaded that the applicant is entitled to a redundancy payment if he can show that he was, in fact, made redundant. 

Was the applicant offered a position with CHH?

103               The evidence concerning this matter comes essentially from the four persons who were present at the critical meeting which took place at the applicant’s workplace at about 4.00 pm on Friday 27 March 1998.  They were:

·                    The applicant;

·                    Christopher Baudinette, formerly a sales executive with Packaging, and since April 1998, an Acting Assistant Manager with CHH;

·                    Alistair Marris, General Manager of CHH; and

·                    John Bradbury, formerly Human Resources Manager at Cartons, and since April 1998, Manager, Human Resources at CHH.

104               The applicant and Mr Baudinette each gave evidence in support of the applicant’s contention that he received no offer of a job of any kind at the meeting of 27 March 1998.  Mr Marris and Mr Bradbury each gave evidence in support of the respondent’s contention that, on that date, a firm offer of a job with CHH was made to the applicant.

105               I should indicate at the outset that I accept that each of the witnesses who gave evidence before me did so honestly, and in an endeavour to recount accurately what had occurred during the course of the meeting.  It is common ground that the meeting itself was a short one, occupying no more than thirty to forty-five minutes.  No contemporaneous notes of what occurred were taken by anyone present.  There are, not surprisingly, significant differences between the parties as to what precisely was said, and by whom. 

106               Some matters seem to me to be clearly established:

·                    Prior to the meeting the applicant was unhappy about the treatment which had been accorded by CHH to Packaging employees as a result of the sale of the business.  He was also aggrieved by the fact that he had not been offered a position with CHH, treatment which he regarded as shabby.

·                    Also, prior to the meeting, the applicant was not greatly impressed with the thought of joining CHH.  He was not anxious to assume responsibilities greater than those which he had hitherto carried out.

·                    During the meeting the applicant behaved in a somewhat truculent manner.  This caused Mr Marris to have reservations as to whether the applicant truly wished to join CHH.

·                    Mr Marris had prepared a formal letter of offer which he had intended to hand to the applicant at the meeting.  That formal letter of offer was not, however, given to the applicant.  It cannot now be located.

107               The variations between the key witnesses as to what occurred are, as I have said, significant.  Both the applicant and Mr Baudinette are adamant that no offer of employment of any kind was made by Mr Marris to the applicant.  Rather, they say, there was general discussion concerning whether or not the applicant wished to be considered for a position with CHH.  Mr Baudinette had previously recommended the applicant for such a position, albeit with some diffidence.  The applicant was not his first choice.  His name was proffered only when Mr Waites declined a position which had been offered to him.  Mr Baudinette claimed that it became obvious to all during the meeting that the applicant was unsuitable for the job.  He said that he signified his views to Messrs Marris and Bradbury at the conclusion of the meeting, after the applicant left the room.  He said that Messrs Marris and Bradbury had shared those views.

108               Both Mr Marris and Mr Bradbury say that the applicant was made a firm offer of employment at the meeting.  They say that the letter of offer which had been prepared earlier was removed from the envelope in which it had been enclosed, leaving in that envelope only certain promotional material concerning CHH.  Mr Marris says he removed the letter of offer before handing the envelope to the applicant in order to make the applicant focus specifically upon whether he wished to accept the offer.  His aim was to require the applicant to ask for the letter, after he had considered his position over the weekend, to ensure that the applicant was serious about wanting to work for CHH. 

109               Both the applicant and Mr Baudinette deny that Mr Marris removed a letter from any envelope while the applicant was present at the meeting.

110               It is necessary now to set out in some detail the evidence given by each of the principal protagonists.

111               The applicant said in relation to the events of 27 March 1998 that on that date, which was the last day of the operation of the Cartons business prior to CHH taking over, he had been summoned to attend a meeting in a boardroom at the Riverwood premises.  Present at that meeting were Mr Marris, Mr Bradbury and Mr Baudinette.  The applicant was questioned by his counsel concerning the events of that afternoon:

“When you walked in, Mr McCormick, how was the meeting arranged?  Did you all sit around a table? - Yes.

Who sat on what side?  Who was next to who? – I sat on one side with Mr Bradbury beside me and opposite on the other side of the table was Mr Baudinette and Mr Marris.

Did any of Mr Marris, Bradbury or Baudinette have pens and paper with them for taking notes of what was said? – No.

Did any of Marris, Bradbury or Baudinette have, as far as you could see, papers with them? – No.

Were there any papers on the desk, Mr McCormick? – No.

Were there any envelopes on the desk? – No, definitely …

During the meeting were you given, by any of those three men, Marris, Bradbury or Baudinette, a piece of paper or an envelope? – No.”

112               The applicant said that the meeting had taken something of the order of half an hour to three-quarters of an hour.  He said that he had been called in to the meeting at the behest of Mr Marris who explained what CHH were going to do regarding the packaging side of the business.  Mr Marris had said that it was to be downgraded completely.  In New Zealand CHH did not have a systems division of the kind which Riverwood had developed.  They had just one or two employees, and used outside contractors to do most of the work.  That was the course which CHH proposed to follow after it assumed control of the cartons business.  Mr Marris had also told the applicant that there were only going to be a total of four vacancies for the packaging systems work in New South Wales and Victoria combined.  Under Riverwood there had been approximately sixteen employees carrying out the services work for Packaging.

113               The applicant said that Mr Marris had asked him how he felt about the proposed set-up.  When asked what his response had been, the applicant said:

“I told him if he wanted the truth or not.  He said, “Yes, we want to discuss it.”  I told him I wasn’t happy with the way things had been done in that I believed when Mr Kidd was out or away, that they were talking to Chris Baudinette which I considered sort of behind Mr Kidd’s back because I always thought we had to go through the chain of command, and for my position, I was leading hand in the workshop, but they had already spoken to the other three people that were under me in the workshop without saying a word to me.  I also expressed the opinion that I didn’t think that it would last 12 months the way they were setting it up because we – as I say, when I first started there, there was only Mr Kidd and myself and we built it up, and I believe talking to sales people and that, they were of the opinion that a lot of the contracts we got for the cartons, being able to offer our back-up as a systems division, helped them get some of the contracts, and I just told Mr Marris that, you know, in my opinion our big customers, some of our big customers, wouldn’t accept people not being available to help them and I couldn’t see the division as they wanted to set it up, lasting 12 months.”

114               The applicant said that Mr Marris had acknowledged that the applicant was entitled to his opinion, but that was the way in which CHH were going to conduct the business in the future.  After Mr Marris had indicated that this was the course which would be followed, he told the applicant that there were four positions originally.  Three had been filled, and there was one position left.  Mr Marris said:

“There’s one vacancy.  If you see fit to apply for that vacancy I will then discuss it with Mr Baudinette.”

115               The applicant was also told that if he were successful in getting the job he would probably have to do some computer courses so that he could handle spare parts from overseas, and that side of the business.  It was at that point, the applicant said, that he asked Mr Marris:

“Is this a job offer and will it have any effect on any redundancy package with Riverwood?”

116               According to the applicant, Mr Marris said that it was not a job offer and that the question of redundancy had nothing to do with him.  That was a matter for Riverwood.

117               The applicant told Mr Marris that he would get back to him in relation to the matters discussed, and then left the boardroom.  Prior to leaving the boardroom he was not given any envelope, or any other paper.  The applicant said that by the end of the meeting, he had decided that he would not turn up for work at CHH on the following Monday even though he had earlier thought that he would so do.

118               The applicant returned to a break-up barbecue which was being held in the workshop.  He spoke to Mr Baudinette again later that afternoon.  Mr Baudinette gave him an envelope which contained some pamphlets and other promotional material concerning CHH.  There was no letter of offer or any other such document in the envelope.

119               Over the weekend the applicant decided to turn up to work on the Monday but solely in order to complete a backlog of tasks which were outstanding at the time of the sale.  Subsequently, the applicant informed Mr Baudinette by telephone that he had decided not to take up employment with CHH. 

120               Mr Baudinette was called in support of the applicant’s case.  He said that he had been approached by Mr Marris sometime in March 1998 and offered a position with CHH.  Mr Marris had asked him to prepare a proposal regarding the future of the Packaging Systems Division, and he had done so.  That proposal envisaged a substantial reduction in the number of employees engaged in servicing work.  Mr Baudinette proposed that two Packaging employees, Mr Busscher and Mr Waites, be offered positions with CHH.  Mr Busscher accepted an offer to join CHH, but Mr Waites decided to stay with Riverwood. 

121               Mr Baudinette then gave an account of the meeting on the afternoon of 27 March 1998.  His recollection was that at some point during that meeting Mr Marris had taken a letter out of an envelope, and given it to Mr Bradbury.  Mr Baudinette had not previously seen the letter to which he referred. 

122               The applicant had been approached by Mr Baudinette only after Mr Waites had rejected the offer made by CHH.  Mr Baudinette had discussed with Mr Marris the question of an approach to the applicant.  Mr Baudinette said in relation to his discussion with Mr Marris:

“My recollection was that we would get together to have a meeting and discuss whether we could assess his criteria to suit the position.  Mr Marris’ job was to basically provide the offer of employment for this next position.  He wanted to make sure that we did employ the right person; that we went through the right process.”

123               Mr Baudinette regarded the position which was under consideration as being different from the position which the applicant had previously occupied as foreman or leading hand.  He was asked to describe the difference between the applicant’s previous duties, and the position that might be available.  He replied:

“Yes, the position that was required to fill was a joint service role plus spare parts purchasing which had currently been done out of the head office in Sydney and the person, Mr Malcolm King, had been made redundant and I had to try to fill that position with someone who could purchase, and negotiate with customers from overseas.  That was something that Mr McCormick had never done before, well, not to my knowledge had done before, and it was also importing machines, just having do duty calculations.  It was a significantly more important position.”

124               Had the applicant taken on that new position, he would, in Mr Baudinette’s opinion, have required significant additional training. 

125               Mr Baudinette was asked what he understood to be the purpose of the meeting that he attended on 27 March.  He replied:

“It was a discussion for Gary to meet Mr Marris, for Mr Marris to be comfortable if we were to offer a position.  That was why I asked Gary to attend the boardroom to meet and we were going to discuss the criteria of the different position.”

126               Mr Baudinette disagreed completely with Mr Marris’ explanation that the purpose of the meeting was to offer the applicant a job.  Mr Baudinette insisted that he had no idea prior to the meeting that Mr Marris had a letter of offer with him.  The only time that he knew that this was the case was after the applicant had left the meeting when Mr Marris first produced the letter of offer and the information booklet, took the letter out, and gave it to Mr Bradbury.  Mr Marris then gave the information booklet to Mr Baudinette.  Mr Baudinette subsequently took the information booklet with him, and gave it to the applicant in the workshop. 

127               Mr Baudinette also recalled a conversation with the applicant immediately prior to the meeting:

“Gary asked me would it affect his redundancy, and as I stated here, I basically said I felt to my knowledge it wouldn’t affect his redundancy and that only if we offered him a job, but this was not a job interview as such.  It was merely a discussion.  An informal discussion to meet Mr Marris.”

128               Mr Baudinette insisted that throughout the meeting, while the applicant was present, no papers or envelopes were produced by Mr Marris.  Mr Marris made no offer of a job with CHH.  After the applicant left the meeting there was a discussion concerning his suitability for the position.   Mr Baudinette said to Mr Marris that he did not believe that the applicant qualified for the job, and that he would have to readvertise it.  Mr Marris had agreed that this was the appropriate course to follow.

129               Mr Marris gave evidence on behalf of the respondent.  His recollection of the events of 27 March 1998 was significantly different from that of the applicant and Mr Baudinette. 

130               Mr Marris said that after Mr Waites had declined a position with CHH he recalled discussing with Mr Baudinette what should be done.  It was at that stage that the applicant’s name came up for consideration.  Mr Baudinette had said that the applicant had the technical skills to perform the role in question.  He might, however, need a small amount of training.  The new position was not significantly different from that which the applicant had previously occupied with Packaging. 

131               Referring to the meeting of 27 March 1998, Mr Marris understood that its purpose was simply to make the applicant an offer of employment.  He had prepared for the meeting by putting together the appropriate documentation to enable such an offer to be made.  That included a standard letter of offer made to all employees.  The letter set out the terms and conditions of employment or transfer to CHH.  Mr Marris had been unable subsequently to find the original, but he said that the letter would have been similar to a standard letter of offer used for all employees. 

132               Mr Marris said he had the letter of offer with him in an envelope with the applicant’s name on it.  The envelope also contained an annual report, a company brochure and another document.  Mr Marris recalled having discussed the particular position under consideration with the applicant.  He said:

“During the discussion Mr McCormick was quite incensed and somewhat bitter in respect of how he and other people from Riverwood Packaging Systems had been treated through the acquisition process.”

133               Mr Marris said that had the applicant joined CHH, the company would have recognised the applicant’s previous thirty-seven years’ employment as giving rise to a potential redundancy entitlement. 

134               Mr Marris was then asked the following questions:

“You said that you intended to make him an offer.  Did you make him an offer of employment?  - Yes.

What did you say to him? – The issue or the process that took place, I had an envelope on the table in front of me, it had the letter of offer and everything in it.  I then moved the letter in front of me and I said to him, “Look, the only issue I have is I need you to get your head around whether you do or you don’t want to work for Carter Holt Harvey,” because he had said in our discussions, “I’m not sure if I want to work” for us and it was related to how he perceived the treatment of people through the acquisition process.  I said to him it was important that he managed to get his head around and separate the issues.  If he wanted to work for Carter Holt Harvey there was definitely a job for him.  All he need to do was the following, and I took the envelope, I removed the letter of offer from it, I had the envelope on my right, I passed the letter to my left where John Bradbury was sitting.  I then passed the balance of the envelope across the table and said, “I’ll give you the rest of the pack about Carter Holt Harvey over the weekend.  I would like you to think about the fact that if you would like to work for Carter Holt Harvey then all you have to do on Monday is ring up John Bradbury or Chris Baudinette and say, “I would like the job”, and the job is yours.”

What did McCormick say in response to that? – He said he would consider it and he took the envelope.”

135               Mr Marris agreed that the applicant had asked him during the earlier part of the interview whether his redundancy with Riverwood would be affected.  Mr Marris had replied that the redundancy at Riverwood had nothing to do with him.  He told the applicant that he had no authority to act on behalf of Riverwood.  The redundancy was something the applicant himself needed to address with Riverwood.  Mr Marris had no recollection of the applicant having asked him whether he was being offered a job prior to asking whether his redundancy would be affected  He denied the suggestion put to him that he had said that no job offer was being made, and that he had merely said:

“If you see fit to apply for that vacancy I will discuss it with Mr Baudinette.”

136               Mr Bradbury was also present at the meeting of 27 March 1998, and  was called on behalf of the respondent.  He was first asked about his understanding of the third Redundancy Agreement between MPP and the PKIU.  He said that he regarded that agreement as binding in honour only, and not as having created any legal obligations of any kind. 

137               He was then asked about the meeting of 27 March 1998.  He said that he understood that the purpose of the meeting was to offer the applicant a position.  He knew that a letter of appointment had been prepared.  He had seen that letter of appointment.  He continued as follows:

“I want to take you to the meeting.  What did Mr Marris say at the outset of the meeting about the position? – He indicated that the purpose of the meeting was to talk to Gary and offer Gary the position; that it was his belief through Chris Baudinette and myself that Gary was capable of carrying out the position and that he also referenced the fact that there would be some in-house training required to fulfil the clerical and administrative side.  He did not see that as a problem and that the main purpose of the thing was to talk to Gary and offer him that position on that day.

Did Mr Marris say what the terms and conditions would be? – He indicated to Gary that there would be no change in his terms and conditions and he would swap over from Riverwood to – from Riverwood Packaging to Carter Holt Harvey Cartons under the terms and conditions of employment.

You mentioned there was a letter of appointment, was it contained in anything? – It was in an envelope, standard envelope, yes.

Did you see the envelope during the discussion? – Yes, I did.

Did Mr Marris at any stage pick up the envelope? – Yes, he put it down in front of him when he was discussing the position with Gary – he had it in front of him.”

138               Mr Bradbury continued:

“At the time he did that, did he say anything to Mr McCormick? – I just indicated to Gary that that was the standard letter or letter of appointment for him.”

139               Mr Bradbury further continued:

“What did Mr McCormick say as to the offer of working with CHH? – Gary indicated that he was a bit annoyed about the way some of his fellow Packaging Systems people had been treated and indicated that he wasn’t really certain that he wanted to work with Carter Holt Harvey.

What was his attitude that he displayed towards CHH when expressing those views? – Gary was feeling fairly angry, I thought.

What did Mr Marris say in response to McCormick’s complaints? – He indicated to Gary that what he really wanted was team players and that he required people to have a commitment to the team to join it.  As such, that he wasn’t really prepared to have him sign the letter or put the letter across to him for signature unless Gary got his head around the prospect of actually working for Carter Holt Harvey.

Did Mr Marris say what Mr McCormick had to do? – Well, it was a Friday.  The meeting was on a Friday.  So he indicated to Gary that he felt it was best that if he wasn’t sure, that he should go away, he should think about it over the weekend and then come back to either Chris Baudinette or myself on the Monday and indicate to either of us his preparedness to start work with Carter Holt Harvey or not. 

Did Mr Marris indicate what would occur if he indicated his preparedness to work for CHH? – Just indicated that he could sign the letter, that he would be employed.

Now, did Mr Marris ever take the letter out of the package? – Not to my knowledge.”

140               Mr Bradbury also recalled that the applicant had asked about his redundancy.  The applicant had been told by Mr Marris that he had no authority to talk about redundancy in terms of Packaging. 

141               Mr Bradbury was adamant that Mr Marris had in fact offered the applicant a job at the meeting.  Mr Marris had not, however, given the applicant the letter of offer which had been prepared.  His recollection was that Mr Marris had handed him the envelope which he, Mr Bradbury, had put into his bag. 

142               Some days later Mr Baudinette had told him that the applicant had spoken to Mr Baudinette on the Monday, and indicated that he did not wish to take up the position with Carter Holt Harvey.

143               There is one important difference between the applicant’s position, and that of the other persons present at the meeting.  The applicant made notes of what he says occurred at the meeting.  I accept the applicant’s evidence that these notes were made within hours, or days, of that meeting having taken place, at a time when the events were fresh in his mind.  A typed version of those notes, prepared by the applicant, was tendered by the respondent during the course of cross-examination of the applicant (transcript 96).  Notwithstanding some inconsistencies between the applicant’s testimony and what is set out in the notes, they seem to me generally to support the applicant’s version of what occurred at the meeting.

144               The notes are received as evidence of the truth of their contents.  Where evidence of a prior inconsistent statement is tendered to impugn the credibility of a witness, the statement is now also evidence of what is asserted in it – Evidence Act 1995 (Cth) ss 43 and 60.

145               It is these notes which tip the balance in favour of my accepting the accuracy of the applicant’s recollection, rather than that of Messrs Marris and Bradbury.  Those gentlemen were not asked to recollect in detail the events of 27 March 1998 until some time in 1999.  Though Mr Marris impressed me as a witness with a better than average memory, I am sceptical as to his capacity to recall with precision what had occurred approximately a year earlier at a meeting which would not have been of any particular significance to him. 

146               To the extent that the recollections of the applicant and Mr Baudinette conflict with those of Messrs Marris and Bradbury, I prefer the account given by both the applicant and Mr Baudinette.  Mr McCormick impressed me as a witness of truth throughout.  Although I have some reservations about the reliability of Mr Baudinette’s evidence on some matters, I found his evidence concerning the meeting of 27 March 1998 to be truthful and credible.

147               I should say that I think that it is likely that prior to the commencement of the meeting Mr Marris intended to offer the applicant a position with CHH.  However, faced with the applicant’s uncooperative and aggressive demeanour, it is probable that Mr Marris changed his mind, and elected not to make him that offer, at least on that day. 

148               I am unable to accept Mr Marris’ explanation for not having handed the applicant the letter of offer prepared beforehand.  It seems improbable to me that Mr Marris adopted that course in order to instil in the applicant a need to take a positive initiative, and to demonstrate his resolve in desiring to join CHH.  It is more likely that Mr Marris simply decided to withhold the letter of offer until the applicant had an opportunity to consider the situation, and to make up his mind whether he wished to work for CHH.  In making this finding I do not suggest that Mr Marris was not a witness of truth; rather that his recollection of the meeting may have been the product of an inaccurate reconstruction in his mind some months after the events in question.

149               It follows from these findings of fact that it is unnecessary to consider the nature and scope of any possible qualification to the applicant’s redundancy entitlement arising from his having refused an offer of employment with CCH.  If no such offer was made, the applicant could not have lost any such entitlement by declining to seek a position with CHH.  It is unnecessary, therefore, to determine whether such an entitlement would be lost merely by reason of an offer having been made, as the respondent submitted, or whether the applicant would still, in those circumstances, have been entitled to a redundancy payment, as the applicant submitted.

150               It is also unnecessary to consider either the applicant’s contention that the silence of Mr Bradbury at the meeting of 27 March 1998 operated as an estoppel against the respondent, or his alternative contention that Mr Bradbury’s silence was misleading or deceptive conduct which would afford the applicant relief under s 52 of the Trade Practices Act.

151               The applicant is entitled to succeed in this application.  He is entitled to have judgment in the amount of $76,435.74.  The respondent must pay the applicant’s costs.

Associate:

Dated:              26 November 1999