FEDERAL COURT OF AUSTRALIA

Carr v Blade Repairs Australia Pty Ltd (No 2) [2010] FCA 688

THE COURT ORDERS THAT:

1.                   A penalty of $1,000 be imposed on the Respondent in respect of its contravention of s 659 of the Workplace Relations Act 1996 (Cth).

2.                  The Respondent pay the penalty of $1,000 to the Applicant.

3.                  Judgment be entered for the Applicant in respect of the Respondent’s breach of its employment agreement with the Applicant.

4.                  The Respondent pay damages to the Applicant fixed at $24,607.72.

5.                  The Applicant pay the Respondent’s costs thrown away by reason of the adjournment of the trial date fixed for 14 July 2009.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     The Applicant (“Mr Carr”) was employed by the Respondent (“Blade Repairs”) and its predecessor between March and November 2008.  On or about 26 November 2008 Blade Repairs terminated his employment.  Mr Carr contends that, in doing so, Blade Repairs contravened an anti-discrimination provision of the Workplace Relations Act 1996 (Cth) (“the Act”) and acted in breach of the contract of employment to which Blade Repairs and he were parties.

BACKGROUND FACTS

2                     Vestas Australia Wind Technology Pty Ltd (“Vestas”) manufactured and serviced blades for wind turbine machines.  It also managed wind farms.  It had a factory in Portland which it closed in December 2007.  Mr Carr worked for Vestas at the Portland factory between January 2006 and March 2007.  After the factory closed Vestas approached Mr Trevor Van Kempen who was the sole director and secretary of Total Blades Pty Ltd (“Total Blades”) and asked Mr Van Kempen to provide two teams of three men to undertake blade repair work on wind turbines in South Australia.  Work was to commence in early February 2008 and continue for three months.  The work was described as “monolithic root repair”.  Mr Van Kempen organised the teams and they were employed by Total Blades who then contracted with Vestas to provide the repair services.

3                     In February 2008 Vestas again approached Mr Van Kempen and asked if he would organise a further two teams of three men to do similar work in Western Australia for three months commencing on 1 April 2008.  Vestas advised Mr Van Kempen that the work was expected to last between three to six months, and possibly up to 12 months.  Mr Van Kempen agreed to organise these two teams.  He recruited six workers in Portland, five of whom had previously worked at the Vestas factory.  One of the five was Mr Carr.  Mr Carr and the other employees were engaged by Total Blades. 

4                     Mr Carr entered into a written agreement with Total Blades on 26 March 2008.  Mr Carr signed the agreement following a discussion with Mr Van Kempen.  There is some dispute as to what was said in the course of that conversation.  Mr Carr said that Mr Van Kempen told him that there was six to 12 months’ work to be done.  Mr Van Kempen said that he told Mr Carr that “the work would go 3-6 months with a possibility of going longer.”

5                     The agreement provided, in part, that:

“1.       INTRODUCTION

1.1       This Agreement sets out the provisions and entitlements for the employee when the employee is engaged to perform work by the Company. 

            …

2.        DURATION

This Agreement shall remain in force until the termination of the Employer’s contract of supply with Vestas Australia Wind Technology Pty. Ltd, which contract the Employee acknowledges may be determined at anytime by the provision of two (2) week’s [sic] notice at anytime from Vestas to the Employer.

3.        BASIS OF EMPLOYMENT

3.1       The employee is engaged in the classification of fibreglass technician.  It is a condition of employment that a 3 month probation period applies to all new employees from the date of commencing employment.  During the probationary period the employment may be terminated by one hour’s notice by either party or payment of one hour’s pay in lieu.

3.2       Notice of Termination

(i)         After the completion of the probationary period the following periods of notice shall be given by either party on termination of service or paid or forfeited in lieu thereof:

Period of Continuous Service   Period of Notice

Up to one year                          1 week

One year to three years             2 weeks

Three years to five years           3 weeks

More than five years                 4 weeks

The company has the right to pay you in lieu of such notice.  The Company must provide one additional weeks [sic] notice if:

•           the employee is over 45 years of age; and

•           has completed at least two years continuous service.

(ii)        Further in all other circumstances the Company may immediately dismiss an employee after the employee has received at least 1 verbal and 2 written warning’s [sic] for misconduct or dangerous, illegal behaviour.

(iii)       Notwithstanding subclause (i) or (ii) the Company retains the right to dismiss an employee without notice for inefficiency, theft, neglect of duty or misconduct.  In such circumstances, wages shall only be payable up to the time of dismissal.

3.3       Abandonment of Employment

If the employee is absent from work for 3 consecutive working days without notifying the Company it shall be assumed that the employee has abandoned their employment.  If within a further period of 5 days the employee has not satisfied the Company that there was a reasonable excuse for their absence then the employee shall be deemed to have abandoned their employment from the first day of absence. 

4.         WAGES

FOR THE DURATION OF THIS AGREEMENT you are entitled to the Rate of pay detailed in Item 3 of the Schedule.  Unless your role changes which increases or decreases your level of responsibility, or improvement during the period of your probation, this rate will remain fixed for the first year of this contract, when the rate may be reviewed without guarantee or an entitlement to an increase in the rate.  The company reserves the right to reduce an employee’s pay if deemed to have been demoted from the role for which they were initially engaged.”

(Emphasis in original.)

6                     Mr Carr worked pursuant to this contract until 31 August 2008.  He was employed initially at a wind farm just outside Geraldton where he conducted blade inspections for about two months.  He then moved to work on another wind farm at Emu Downs, also in Western Australia.  At some time before July 2008 he was transferred to a wind farm at Wattlepoint in South Australia. He earned between $1,400 and $1,600 per week, including a living away from home allowance.  He said that he enjoyed the work and believed that Mr Van Kempen was satisfied with his performance.

7                     For reasons and in circumstances which were not explained “[t]he business conducted by Total Blades was”, according to Mr Van Kempen, “transferred to [Blade Repairs] effective from 1 September 2008.”  Blade Repairs’ defence alleged that Mr Carr’s employment was “transmitted” to it on 1 September 2008.  In any event, an employment agreement between Mr Carr and Blade Repairs was executed on 7 October 2008.  So far as is relevant, the written terms of that agreement were in the same form as the earlier employment agreement between Mr Carr and Total Blades save for clause 2 which provided:

“2.        DURATION

This Agreement shall remain in force until the termination of the Employer’s contract of supply with Vestas Australia Wind Technology Pty. Ltd, which contract the Employee acknowledges may be determined at anytime by Vestas to the Employer.”

(Emphasis in original.)

8                     Mr Carr continued to provide his services as a fibreglass technician under the new agreement.  From a practical point of view, as far as he was concerned, his entering into a new contract with Blade Repairs had no impact on his day to day activities.

9                     On 25 November 2008 Mr Van Kempen had a conversation with a representative of Vestas, a Mr Wallace.  Mr Van Kempen was told that he would have to lay off a team of workers.  On the following day, or shortly thereafter, Mr Van Kempen and Mr Carr had a conversation on the telephone.  Mr Van Kempen was at the Perth airport and Mr Carr was at home on leave at the time the two men spoke.  There is a significant dispute as to the language employed by Mr Van Kempen during this conversation.  What, however, is clear is that Mr Van Kempen advised Mr Carr that he was terminating Mr Carr’s employment with almost immediate effect. 

10                  Mr Van Kempen confirmed his decision to terminate Mr Carr’s employment in an undated letter to Mr Carr which he said he signed on 3 December 2008.  That letter read, in part:

“As discussed recently we regret that we are having to cease your employment at Blade Repairs Australia P/L as at 28 November 2008, due to reduction of contract work supplied to us by Vestas Australia P/L.

All your entitlements have been paid to you (including sick days) and we thank you for your hard work over the past months.”

11                  Mr Carr then sought alternative employment.  On 5 December 2008 he commenced employment with a timber and hardware company.  He worked for that company for about six weeks during which time he earned $2,509.86.  He then obtained employment with a building company.  That employment commenced on 23 January 2009 and continued until 7 April 2009.  Prior to trial he estimated that, during this period, he earned about $9,500.  On or about 30 April 2009, Mr Carr became self employed.  He undertook construction work and, he estimated before trial, earned approximately $8,000 over the next three month period.  At trial he led evidence which established that he earned $24,974.30 in alternative employment between 5 December 2008 and the end of July 2009. 

CONTRAVENTION OF THE WORKPLACE RELATIONS ACT

12                  Mr Carr alleged that Mr Van Kempen terminated his employment because of his age.

13                  Mr Carr’s claim to have been discriminated against on the ground of age is founded on some statements he said were made by Mr Van Kempen in the course of their conversation on or about 26 November 2008.  According to Mr Carr, Mr Van Kempen told him that Vestas had advised that Blade Repairs “had to let three blokes go” and that Vestas “don’t want young blokes working on the wind farms anymore.”

14                  Mr Van Kempen denied saying anything about Vestas not wanting “young blokes” working on its wind farms.  The word “bloke” was not part of his normal vocabulary.  He said that what he told Mr Carr was that, due to a reduction in work available under its contract with Vestas, Blade Repairs had to lay off a team and that unfortunately, Mr Carr was to be one of those laid off.  Mr Van Kempen also told Mr Carr that he would be in touch with him as soon as he got back to Warrnambool and that he would pay Mr Carr all his entitlements.

15                  The Applicant claimed that, in terminating his employment, Blade Repairs had contravened s 659(2)(f) of the Act.  The section, of which this subparagraph forms part, prohibits termination of employment for one or more proscribed reasons, including an employee’s age.  Pursuant to s 659(2) of the Act, it is unnecessary that a proscribed reason be the sole reason for termination.  It is sufficient for the proscribed reason to be one of a number of reasons for termination, whether proscribed or not.  An applicant is not required to establish that his or her termination was motivated, in whole or in part, by a proscribed reason.  Pursuant to s 664 of the Act, the respondent bears the onus of proving that the termination was for a reason or reasons that do not include a proscribed reason.  

16                  Mr Van Kempen deposed that his decision to terminate Mr Carr’s employment was not made because of Mr Carr’s age, but because of “genuine operational reasons and redundancy”.  This situation arose from the advice from Vestas that it did not need a fourth team any more.  Nobody from Vestas had ever said to him that that company did not want young blokes working on its wind farms.  Mr Van Kempen made the decision to lay off a team that was “least experienced in blade repair work, based on the length of employment with [Blade Repairs], previous relevant employment and quality of work”.  Mr Van Kempen deposed that there were four other employees who were younger that Mr Carr.  Of these, two were laid off at the same time as Mr Carr.  The other two were retained in employment.  The nature of the work (which involves climbing turbines and undertaking repairs 65-75 metres above the ground) tended to favour the employment of young people.  Mr Van Kempen said that he “always prided [himself] on giving younger employees an opportunity.”  He claimed that, apart from one other employee, Mr Carr had less experience in relation to fibreglass blade inspections, and that his work was of lesser quality, than any of the other employees working on Vestas’ wind farms as blade technicians.

17                  Under cross-examination both Mr Carr and Mr Van Kempen adhered to the accounts of the conversation between them on or about 26 November 2008 which they had given in their affidavits.  Mr Carr agreed that, during the conversation, Mr Van Kempen had said that there was a downturn in work and that Mr Carr’s pay would be fixed up on the next pay day.  Mr Carr said that Mr Van Kempen had promised him a bonus and that the possibility of Mr Carr attending the firm’s Christmas party was discussed.  Mr Carr could not remember saying anything in particular himself.  He did not make a contemporaneous record of the conversation.  Mr Van Kempen had not said anything to suggest that his termination was related to his work performance.  Mr Van Kempen had said that he “had to let go a team of workers.”  Despite Mr Van Kempen having said that Mr Carr had been chosen as one of those to be terminated because Mr Van Kempen had to let “young blokes” go, Mr Carr did not think that this was the real reason.  He attributed his selection to the fact that he didn’t “knock around” with other team members and “drink and smoke dope”.

18                  When he was cross-examined Mr Van Kempen said that he did not find the standard of Mr Carr’s work to be unacceptable; it was just not as good as the work of all but one of the other blade technicians.  He had formed this view through observing the work of the various employees.  He maintained that Mr Carr had been “terminated for quality of work and nothing else.”  The decision had been made quickly.

19                  Blade Repairs submitted that Mr Carr’s evidence about being told that he had been chosen for termination because Vestas didn’t want “young blokes” working on its farms any more should be rejected.  It was contended, first, that Mr Van Kempen’s denial that he used the words “young blokes” should be accepted.  He did not use this phrase in conversation with anyone. 

20                  Secondly, it was contended that it was unlikely that Mr Van Kempen would terminate Mr Carr’s employment because of his age given the nature of the working environment experienced by blade technicians and the fact that workers who were younger than Mr Carr had been retained after Mr Carr had been dismissed.  Emphasis was also placed on Mr Van Kempen’s desire to give young employees an opportunity to work in the industry.

21                  Thirdly, Blade Repairs submitted that Mr Carr’s evidence generally had been “less than forthright” and that, in particular, he had given fundamentally inconsistent versions of the critical conversation.

22                  Mr Carr, on the other hand, urged the Court to prefer his recollection of the conversation.  He submitted that the “somewhat incongruous” nature of the comment made it likely that he would recall it.  It had been made at a time at which Mr Carr had just taken on responsibility as a provider for a young family.  He had not deviated at any point in his account of what Mr Van Kempen had said about the need to let “young blokes” go.

23                  Mr Carr also attacked Mr Van Kempen’s credibility.  He submitted that Mr Van Kempen had been “extremely unclear and contradictory” in his evidence as to what he had taken into account when deciding which employees should be terminated.  He pointed to evidence from Mr Van Kempen which was inconsistent with Blade Repairs’ pleaded position in relation to the significance of Mr Carr’s probationary status, the alleged termination of the contract of supply between Blade Repairs and Vestas on 25 November 2008 and the timing of the completion of various types of work which Blade Repairs performed for Vestas.

24                  I observed both Mr Van Kempen and Mr Carr carefully when they gave their evidence.  Both were clearly in an unfamiliar environment and exhibited signs of mild discomfort.  At times both were tentative in giving their evidence.  Nonetheless, I formed the view that they both were doing their best to tell the truth.  Both were prepared to make concessions against their interests and did so.

25                  I have experienced great difficulty in seeking to determine which of the competing accounts of the telephone conversation between Mr Carr and Mr Van Kempen accurately represented what passed between them.  It is clear enough that Vestas had advised Mr Van Kempen that it no longer required the services of one of the four teams of technicians.  It would seem improbable that, in conveying this information to Mr Van Kempen, the Vestas employee concerned would have felt the need to make a comment about the employment of “young blokes” on its farms.  Vestas had no obvious interest in the age of the workers supplied by Blade Repairs; Vestas’s interests lay in having the repair work undertaken at an acceptable standard.

26                  On the other hand, there is force in Mr Carr’s assertion that such a statement by Mr Van Kempen would have resonated with him as a young person with a young family and would have made a strong impression on him.  If the Vestas employee with whom Mr Van Kempen spoke a day or two earlier had, in fact, said words to the effect that Vestas didn’t want “young blokes” working on its wind farms anymore, this would make it less surprising that Mr Van Kempen would repeat the words attributed to him even though he did not normally use them.  His interlocutor was not called to confirm that he had not used the expression “young blokes”.

27                  Even if Mr Van Kempen used the words attributed to him, it does not follow, necessarily, that his statement truly reflected his reason for terminating Mr Carr’s employment.  It is, therefore, relevant to examine the age profile of Blade Repairs’ employees generally and those selected for termination.  It is true that two employees who were younger than Mr Carr were retained after Mr Carr was dismissed.  It is also true, however, that the three employees who were terminated were among the five youngest employed by Blade Repairs to work on the wind farms.  Only three years separated Mr Carr who was the oldest of the five from the youngest.  This tends to suggest that Mr Van Kempen, in making his quick assessment, focussed attention on the younger employees.  Even though their relative lack of experience may have been a relevant consideration, this does not exclude the possibility that their age was also a material factor in their selection for termination.  The injunction, in s 659(2)(f) of the Act, that an employer must not terminate an employee’s employment by reason of the “age” of the employee, can properly be understood to cover termination because the employee falls within a particular “age group”:  see Virgin Blue Airlines Pty Ltd v Hopper [2007] QSC 75 at [199].

28                  Although Mr Van Kempen maintained that Mr Carr had been singled out because of the relative quality of his work, Mr Van Kempen did not complain about Mr Carr’s performance during his employment and the only reason given by Mr Van Kempen for the termination in the letter, which he wrote in early December 2008, was that there had been a reduction of the contract work offered by Vestas.

29                  In the end I am unable to determine which of the two accounts of the conversation is to be accepted.  More broadly, I am not able to determine with sufficient certainty whether or not Mr Carr’s age was a material and operative factor when Mr Van Kempen decided to terminate Mr Carr’s employment.  The consequence is that Blade Repairs has failed to establish a defence that Mr Carr’s termination “was for a reason or reasons that do not include a proscribed reason” for the purposes of s 664 of the Act.  Mr Carr, therefore, succeeds on his first claim.

Breach of Contract

30                  Mr Carr made an additional claim for repudiatory breach of contract by Blade Repairs.  He contended that Blade Repairs was not entitled to terminate the employment agreement while there remained a contract between Blade Repairs and Vestas.  This was because clause 2 of the agreement provided that it was to remain in force until the termination of Blade Repairs’ contract with Vestas.  That contract was not terminated until, at least, 8 August 2009.

31                  Blade Repairs defended this claim on four grounds.  They were that:

·               Clause 2 of the agreement was void for uncertainty;

·               Mr Carr was a probationary employee who could properly be terminated on one hour’s notice pursuant to clause 3.1 of the agreement;

·               Clause 2 of the agreement should be read down by reference to the terms of the agreement generally and, in particular, clauses 1.1 and 3; and

·               In any event, the contract between Blade Repairs and Vestas was terminated on 25 November 2008, the day before Mr Carr’s employment was terminated.

32                  In final submissions counsel for Blade Repairs did not seek to press the first two of these defences.  He no doubt accepted the difficulty which would have confronted him in arguing that a contract (or part of it) which was proffered by his client should be treated as void for uncertainty.  The contention that Mr Carr was a probationary employee at the time of his termination fell away once Mr Van Kempen gave evidence that Mr Carr had ceased to be a probationary employee before 1 September 2008 when Blade Repairs succeeded Total Blades as a party to the agreement.

33                  The argument developed by Blade Repairs concentrated on the proper construction of clause 2 and its relationship with other provisions of the agreement. 

Construction of Clause 2

34                  The first issue which was debated related to the identification of the “contract of supply” between Total Blades and Vestas which is referred to in clause 2 of the agreement.  There was a measure of agreement between the parties as to what constituted this “contract of supply”.  There was, however, a dispute as to the degree of specificity which should be employed to describe it.

35                  Blade Repairs submitted that the relevant contract of supply was a verbal one constituted by telephone discussions between Mr Van Kempen on behalf of Total Blades and a Mr Wallace on behalf of Vestas in mid-2008.  It submitted that all prior agreements between Total Blades and Vestas were terminated when this new, verbal contract of supply was entered into.  Blade Repairs was “substituted” for Total Blades in this contract on 1 September 2008.  According to Blade Repairs, this contract of supply with Vestas, as at 1 September 2008, was a contract commencing in mid-2008 for what was described as “1297 monolithic root repair and 1448 web flange upgrade of Vestas wind turbines in Western Australia and South Australia by four teams of three [individuals] in Western Australia and South Australia”. 

36                  Mr Carr sought to characterise the contract of supply in different terms.  He submitted that it provided for work to be “sourced by [Blade Repairs] and performed by [its] employees from time to time at the request of [Vestas] in relation to the repair and maintenance of wind turbines or towers on wind farms managed by Vestas”.  In particular, he submitted that the “contract of supply” referred to:

·        repair work on the monolithic root repair in South Australia and Western Australia (“the 1297 work”); and

·        the web flange upgrade work in South Australia and Western Australia (“the 1448 work”).

37                  The parties were thus in agreement in identifying the “contract of supply” as being the verbal contract between Blade Repairs and Vestas which was entered into in about the middle of 2008 and which provided for Total Blades and, after 1 September 2008, Blade Repairs, to provide services to Vestas.  Those services involved the performance of the 1297 work and the 1448 work.  The material difference between them was that Blade Repairs sought to descend to greater particularity in describing the contract by including a reference to the number and composition of the teams which were to provide the services.  The significance of this difference emerges from the next stage of the submissions of each party.

38                  Blade Repairs submitted that the contract of supply was terminated on 25 November 2008.  At that point, a “new” contract of supply was agreed with Vestas for “the 1297 monolithic root repair and the 1448 web flange upgrade of Vestas wind turbines in WA and SA by three teams of three [individuals] in WA and SA”.  The agreement to terminate the contract was, it was submitted, “verbal and/or implied”.  The verbal termination was said to have occurred in the course of a conversation between Mr Wallace and Mr Van Kempen on 25 November 2008, in which Mr Wallace informed Mr Van Kempen that he would have to lay-off a team of workers.  This, it was said, constituted an implied termination of the contract of supply.

39                  Mr Carr contended that, on 25 November 2008, Blade Repairs and Vestas had agreed to vary the terms of the contract entered into by them in mid-2008.  The terms were varied to require Blade Repairs to provide three teams to perform the 1297 work and the 1448 work which had previously been performed by four teams.

40                  These competing submissions produced different legal outcomes.  Blade Repairs contended that the termination of its contract of supply with Vestas on 25 November 2008 meant that the contingency, provided for in clause 2, had become manifest thereby bringing Mr Carr’s employment agreement to an end.  Mr Carr, on the other hand, submitted that the variation did not bring the contract of supply to an end: all that was involved was a reduction in the volume of work which Vestas required Blade Repairs to perform.  This was the start of a process whereby the work was progressively scaled back.  The 1448 work finished in South Australia in April 2009.  The 1297 work continued in Western Australia until 8 August 2009.  Until then work was performed under the contract and Mr Carr’s employment agreement remained in force consistently with the provision of clause 2.

41                  These competing submissions give rise to two inter-related issues.  The first is what is meant by “the Employer’s contract of supply with Vestas …”.  The second is whether or not this contract was terminated on 25 November 2008.

The meaning of “contract of supply”

42                  “The necessary foundation for the creation of contractual rights and obligations is the agreement of the parties”:  Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 401 (per Brennan J).  An objective test is to be applied in determining the terms on which the parties have agreed.  In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 the High Court said:

“It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations.  What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe.  References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement.  The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean.  That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.”

43                  In determining the objective meaning of words employed in a contract, a Court is concerned to ascertain “the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.”  See Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912 (per Lord Hoffmann).  This test was adopted by Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at 188.

44                  The same principles which govern the construction of commercial contracts have application to contracts of employment:  see Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193 at 204-5 (per Lindgren J), and 217 (per Mansfield J).  Commercial contracts should, as Kirby J held in Pan Foods Company Importers and Distributors Pty Ltd v Australia and New Zealand Banking Group Limited (2000) 170 ALR 579 at 584, “be construed practically, so as to give effect to their presumed commercial purposes and so as not to defeat the achievement of such purposes by an excessively narrow and artificially restricted construction.”  An interpretation which accords with a broad approach will be preferred to one which does not: see Upper Hunter County District Council v Australian Chilling and Freezing Company Ltd (1968) 118 CLR 429 at 437.

45                  It is also to be borne in mind that the agreement which Mr Carr was invited to sign was given to him by Mr Van Kempen.  Mr Van Kempen had based the agreement on a precedent which had been prepared by solicitors.  In such cases, where ambiguity exists, an agreement will normally be interpreted contra proferentem, that is, against the party who formulated the document:  see Maye v Colonial Mutual Life Assurance Society Ltd (1924) 35 CLR 14 at 26-7; Wesoky v Village Cinemas International Pty Ltd [2001] FCA 32 at [47].

46                  The contract which Mr Carr signed on 8 October 2008 provided that it was to endure “until the termination” of Blade Repairs’ “contract of supply with Vestas … which contract [Mr Carr] acknowledge[d] may be determined at any time by Vestas to [Blade Repairs].”  The contract referred to was the oral contract which had been in existence since mid-2008.  Its full terms were not in evidence.  Nonetheless, Mr Van Kempen’s evidence makes it reasonable to assume that the contract, at the very least, contained terms dealing with the provision of services by Blade Repairs, prescribing the nature of those services, fixing the amount which Vestas was to pay to Blade Repairs for the provision of those services, identifying the places where the services were to be performed and prescribing the number of teams which Blade Repairs was required to supply to perform the work.  Blade Repairs chose to describe the contract which contained these terms as a “contract of supply”.  This description was not inapt:  the contract was one for the supply by Blade Repairs of services to Vestas.

47                  There was no evidence to suggest that Mr Carr was privy to the terms of this contract between his employer and Vestas.  He must be taken to have known of its existence, of the possibility that Vestas might terminate it and that, if it did, that his employment agreement with Blade Repairs would come to an end.  So much is provided for expressly in clause 2. 

48                  In accordance with the objective theory of contract expounded in Toll, a provision such as clause 2 in an agreement proffered by an employer must be construed having regard to what the hypothetical, reasonable employee, to whom the contract was presented would have understood clause 2 to mean.  In particular, what would that employee have understood the “contract of supply” to be?  In my view he would have understood it to be a reference to the contract under which Blade Repairs provided services to Vestas.  There is no reason why the description of the contract should be further refined by incorporating a reference to particular terms whether those terms be the number of employees or teams to be supplied by Blade Repairs, or any other details of the commercial arrangements between Blade Repairs and Vestas.  The reasonable employee would also have believed that his employment by Blade Repairs would continue until its contract to provide services to Vestas was terminated by Vestas.  There was nothing in clause 2 to suggest that Mr Carr might be subject to termination in the event that Vestas decided that it needed fewer Blade Repairs employees to work on its wind farms.  This contingency was simply not mentioned.

49                  From a practical perspective there was no need for Mr Carr to have been aware of the various terms of the contract between Blade Repairs and Vestas.  His employment hinged on the continued existence of the contract, not the continued existence of any particular term.

50                  For these reasons I reject Blade Repairs’ contention that the “contract of supply” is to be described by reference to some of its terms.  Clause 2 should be understood as referring to the verbal contract between Blade Repairs and Vestas which was entered into in the middle of 2008 and which provided for Blade Repairs to provide the 1297 work and the 1448 work to Vestas.

Was the “contract of supply” terminated on 25 November 2008?

51                  The evidence relating to what passed between Mr Van Kempen and Mr Wallace of Vestas, during their conversation on 25 November 2008, is sparse.  It is clear enough that Vestas had determined that it did not, any longer, require the services of four teams to undertake the repair work.  Implicit in this advice was an indication by Vestas that it was, thereafter, only prepared to pay for the services of three teams.  This meant that one team of three men who were each employed by Blade Repairs could no longer gainfully be employed on Vestas work.  Mr Van Kempen agreed to reduce the number of employees supplied by Blade Repairs to Vestas by three.  Mr Van Kempen said that no mention was made during the conversation of the contract being terminated.

52                  The central question is whether the oral agreement between Blade Repairs and Vestas on 25 November 2008 terminated the then existing agreement between them and substituted a new agreement or merely varied the existing agreement to the extent of reducing by one the number of teams which Vestas required to be supplied by Blade Repairs.

53                  In such cases “the determining factor must always be the intention of the parties as disclosed by the later agreement”:  see Tallerman & Company Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 at 144 (per Taylor J).  In Federal Commissioner of Taxation v Sara Lee Household and Bodycare (Australia) Pty Ltd (2000) 201 CLR  520 at 533 Gleeson CJ, Gaudron, McHugh and Hayne JJ said that:

“When the parties to an existing contract enter into a further contract by which they vary the original contract, then, by hypothesis, they have made two contracts.  For one reason or another, it may be material to determine whether the effect of the second contract is to bring an end to the first contract and replace it with the second, or whether the effect is to leave the first contract standing, subject to the alteration.  For example, something may turn upon the place, or the time, or the form, of the contract, and it may therefore be necessary to decide whether the original contract subsists.”

54                  Mr Carr’s entitlements under his employment agreement with Blade Repairs turn, in part, on the resolution of this issue.  It is, therefore, necessary, in resolving the dispute between the parties in the present case, to determine whether the contract, entered into between Blade Repairs and Vestas in mid-2008, subsisted after 25 November 2008.  I have concluded that it did.

55                  As already noted, the evidence, although sparse, established that the original contract included terms which, at the least, covered the provision of services by Blade Repairs, the nature of those services (presumably on a per person or per team basis), the amount which Vestas was to pay Blade Repairs for the provision of those services, the places where the services were to be performed and the number of teams which Blade Repairs was required to supply to perform the work.  According to Mr Van Kempen the only term of the contract which was discussed on 25 November 2008 was the number of teams which Vestas wished Blade Repairs to supply after that date.  No attempt was made to alter any of the other terms which, plainly, were intended to continue operating.  It is noteworthy, in this context, that Mr Van Kempen advised Mr Carr that Mr Carr’s services were being terminated, not because the contract between Blade Repairs and Vestas had been terminated by Vestas, but because of “reduction of work supplied to us by Vestas …”. 

56                  In Sara Lee the variations to the rights and obligations of the parties which were affected by the amending agreement were described as “not insubstantial” (see at 533).  Those amendments included a significant increase in the price to be paid for a business and a reduction in the number of employees who the purchaser was required to retain following the sale.  Despite this, the High Court held that the original contract, as varied, subsisted.  The modification of a single term in the present case is modest by comparison.  Although each case must be judged on the evidence tendered in relation to the (objectively judged) intention of the parties, the change in the present case, while not insignificant, was in no way inconsistent with the original contract such as to destroy its substance: cf Koh v Pateman [2005] WASC 172 at [79].  What occurred was a variation of one term of the contract to meet a contingency which was encountered as the original contract “steer[ed] its course through the various potholes of business life”:  cf Berry v Wong [2000] NSWSC 1002 at [33] (per Young J).

57                  Clause 2 cannot be construed in isolation from the rest of the contract.  It is necessary that it be considered having regard to the contract as a whole:  see Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

58                  Mr Carr argued, correctly in my view, that the contract was a “contingency contract”, pursuant to which his employment was to last for an indefinite period, contingent on the occurrence (or non-occurrence) of a stipulated event:  cf Bunge (Australia) Pty Ltd v Mallard (1982) 41 ALR 223 at 224; Bryant v Defence Housing Authority [2002] ACTSC 43 at [29]‑[31].  That stipulated event was the termination of the contract of supply between Vestas and Blade Repairs.  Once that occurred Blade Repairs was required to give him the notice set out in clause 3.2(i) “on termination of service.” 

59                  The wording of clause 4 and, in particular, to the stipulation that “this rate will remain fixed for the first year of this contract” (emphasis in original) tends to support the construction contended for by Mr Carr.  It suggests that it was the intention of the parties that the agreement would remain on foot for at least one year, unless Vestas terminated the contract of supply under clause 2.

COMPENSATION

60                  Section 665(1)(c) of the Act provides that, where an employer has contravened s 659, the Court may make an order requiring the employer to pay to the employee compensation of such amount as the Court thinks appropriate.  That power is qualified by subsections 665(3) and (4) which prescribe a maximum sum which may be awarded by way of compensation.  Relevantly that amount of compensation is the total amount of remuneration received by the employee during the six months immediately before the termination or $32,000, whichever is the lower amount.

61                  In the six months prior to his termination Mr Carr earned $1,625.64 per week.  In total he received $42,266.64.  The maximum amount to which he is entitled by way of compensation is, then, $32,000.  He accepts that this amount must be discounted having regard to what he earned in alternative employment after his termination and a further reduction to take account of the possibility that his employment may have been terminated by Blade Repairs or his own actions in the period immediately following the termination.

62                  Mr Carr earned $24,974.30 in the period between 5 December 2008 and the end of July 2009.

DAMAGES

63                  Mr Carr may also be entitled to damages for breach of contract.

64                  He is “so far as money can do it” to be placed in the same position as he would have been had he remained employed by Blade Repairs until Vestas terminated its contract:  Robinson v Harman (1848) 1 Ex 850 at 855.  Under Clause 4 Mr Carr was entitled to the prescribed rate of pay during the currency of the agreement.  It remained current at least until 8 August 2009 when the 1297 work was completed in Western Australia.  He was entitled to payment at least until then.  Blade Repairs did not make the prescribed payments after November 2008 and its failure or refusal to do so constituted a repudiation of the agreement which Mr Carr had accepted.

65                  In determining the quantum of damages there must be reductions made to take account of Mr Carr’s earnings in alternative employment prior to 8 August 2009 and vicissitudes such as the possibility that Mr Carr may lawfully have chosen to terminate his agreement with Blade Repairs before that date:  see Gregory v Philip Morris Ltd (1988) 80 ALR 455 at 484 (per Wilcox and Ryan JJ).  A payment of one week’s pay in lieu of notice which was made to Mr Carr when his employment was terminated must also be brought into account.

66                  Had Mr Carr’s employment continued until 9 August 2009 he would have earned $56,897.40 ($1,625.64 x 35 weeks).  From this sum must be deducted the $24,974.30 he earned in alternative employment.  Payment in lieu of notice of $1,625.64 should also be deducted.

67                  Mr Carr was committed to his employment with Blade Repairs because it provided him with an income sufficient to support his family.  He had skills which enabled him to perform (as he did) work other than that of a blade technician.  The alternative work was not, however, as remunerative.  On the other hand, it was local employment around Portland which enabled him to be with his family whereas the work he performed for Total Blades and Blade Repairs was undertaken in isolated areas in outback Western Australia and South Australia.  He may well have felt an attraction to pursue employment that enabled him to return to his family home each evening.  It is also possible that the disagreements which he had with other Blade Repairs employees may have made working with them sufficiently unpleasant for him to have resigned.  I consider that the prospect of Mr Carr’s employment being terminated by Blade Repairs or by him prior to 9 August 2009 was relatively remote.  I would allow only a 10 percent reduction in contractual damages to take account of the vicissitudes of employment life.

68                  The result is that Mr Carr is entitled to $24,607.72 by way of contractual damages calculated as follows:  $56,897.40 – ($24,974.30 + $1,625.64 + $5,689.74).  This figure exceeds the amount of compensation to which he is entitled under the Act.  No order for compensation should, therefore, be made.

PENALTY

69                  Section 665(1)(a) of the Act provides that, where an employer has contravened s 659, the Court can impose a penalty of not more than $10,000.  Mr Carr seeks the imposition of a penalty on Blade Repairs for its contravention of s 659 of the Act.

70                  In Kelly v Fitzpatrick (2007) 166 IR 14 at 18-19 I identified a non-exhaustive list of considerations which were of potential relevance in determining an appropriate penalty to be imposed for breaches of an award.  Most of those considerations are also relevant in determining an appropriate penalty under s 665 of the Act:  see Claveria v Pilkington Australia Ltd [2007] FCA 1917 at [3]-[5] (per Kenny J).

71                  There was only one breach of the Act.  The circumstances in which it took place are explained earlier in these reasons.  It caused Mr Carr to lose his employment and to suffer financially as a result.  Blade Repairs was a small business.  Its principal, Mr Van Kempen, was responsible for the contravention.  He has denied any breach of the Act and has not demonstrated any contrition.

72                  Discrimination against an employee on the ground of that employee’s age constitutes a significant interference with the employee’s rights.  I doubt that specific deterrence looms as a significant consideration when determining penalty:  it is highly unlikely that Mr Van Kempen will repeat his mistake.  General deterrence, on the other hand, must assume some importance.  Employers must understand that they cannot act to the prejudice of an employee for one or more of the reasons proscribed by s 659 and that, if they do, they will be subject to penalties.

73                  No previous misconduct of this or any other kind is alleged against Blade Repairs. 

74                  In all the circumstances of the case, and having regard to the matters to which I have referred, I consider an appropriate penalty to be $1,000.  The penalty should be paid to Mr Carr:  see s 841 of the Act.

COSTS

75                  Section 666 of the Act provides:

“(1)      Subject to this section, a party to a proceeding under section 663 must not be ordered to pay costs incurred by any other party to the proceeding unless the court hearing the matter is satisfied that the first-mentioned party:

(a)        instituted the proceeding vexatiously or without reasonable cause; or

(b)        caused the costs to be incurred by that other party because of an unreasonable act or omission of the first-mentioned party in connection with the conduct of the proceeding.

(2)        Subsection (1) does not empower the court to award costs in circumstances specified in that subsection if the court does not have the power to do so.

(3)        In this section:

“costs” includes all legal and professional costs and disbursements and expenses of witnesses.”

76                  It has been held that this provision governs the award of costs in proceedings such as the present in which both compensation under the Act and common law damages are sought:  see Goldman Sachs JBWere Services Pty Ltd v Nikolich  (2007) 163 FCR 62 at 65 (per Black CJ), 70 (per Jessup J).

77                  The Respondent, however, seeks its costs thrown away as the result of the adjournment of a previous trial date.  Those costs were reserved pursuant to orders made by Gordon J on 14 July 2009.  Blade Repairs relies on the exception provided for in s 666(1)(b) of the Act.

78                  Mr Carr submitted that he did not act unreasonably in making the application to amend his claim which prompted the vacation of the original trial date.

79                  In order to assess the competing submissions it is necessary to have regard to the history of the proceeding.  Most of that history is set out in the judgment of Gordon J in Carr v Blade Repairs Australia Pty Ltd [2009] FCA 764.  A summary follows.

80                  Mr Carr issued proceedings in the Australian Industrial Relations Commission (“the Commission”) with respect to the termination of his employment on or about 18 December 2008.  Conciliation proved to be unsuccessful.  The Commission issued a certificate pursuant to s 650 of the Act on or about 19 January 2009.  This meant that Mr Carr was able to commence a proceeding in the Court under s 663:  see s 663(5)(a).  On or about 13 February 2009 he filed and served a notice of election pursuant to s 651 of the Act.  On 19 February 2009, he filed a statement of claim and an application in this Court seeking relief in respect to his termination.  He alleged that Blade Repairs had contravened s 659(2)(f) of the Act.  The relief sought was “compensation in respect of the remuneration lost, likely to be lost, by reason of the termination”.  Pursuant to Order 72 of the Federal Court Rules, the proceeding was referred by Gordon J to mediation on 11 March 2009.  Mediation was unsuccessful.  On 31 March 2009 Registrar Moore ordered that the matter be set down for hearing.  It was fixed for hearing on 14 July 2009.  On 10 July 2009 Mr Carr gave notice of an application for leave to amend his statement of claim to raise, for the first time, his contractual claim.  The late application to amend was made following the briefing of new counsel who advised that a cause of action in contract should be pleaded.

81                  The application to amend came on before Gordon J on 14 July 2009.  It was strongly resisted by Blade Repairs.  Following argument her Honour made orders granting leave to Mr Carr to amend his statement of claim and requiring Blade Repairs to file and serve an amended defence.  She also made provision for the filing and serving of further evidence on affidavit by both sides.  The trial date was adjourned to 31 August 2009.

82                  In her reasons (at [7]) her Honour noted a submission, which had been made by Mr Carr, that “there was no prejudice to [Blade Repairs] other than to the question of costs.”

83                  Blade Repairs was prepared to proceed with the trial on 14 July 2009.  A few days earlier it was given notice by Mr Carr that he wished to amend his statement of claim to plead an additional cause of action alleging breach of contract.  Gordon J considered this application on the day fixed for trial.  Once her Honour acceded to the application it was inevitable that the trial would have to be adjourned.  This was because an amended defence had to be prepared and it was likely that both parties would wish to put on additional evidence to deal with the contract claim.  Mr Carr acknowledged that his late application and the acceptance of it by the Court might have cost implications for Blade Repairs.  Her Honour recognised this possibility by reserving costs. 

84                  The question that now falls to be decided is whether any costs incurred by Blade Repairs as a result of the late application and the vacation of the trial date can be said to have been so incurred “because of an unreasonable act or omission” on the part of Mr Carr.

85                  The proceeding was commenced on 19 February 2009.  The principal relief sought by Mr Carr was compensation under the Act.  An attempt to resolve the dispute by mediation in March 2009 failed.  A trial date was fixed.  The trial was to commence about three and a half months later.  Blade Repairs prepared for trial on the basis that it would be required to deal with the compensation claim arising from its alleged contravention of s 659 of the Act.  The trial was to commence on a Tuesday.  It was only on the previous Friday that Mr Carr raised, for the first time, his desire to invoke the Court’s accrued jurisdiction and pursue a common law claim.  The only explanation for this late application was that newly briefed counsel had advised that such a claim was viable and should be prosecuted.

86                  In the circumstances and, in particular, having regard to the length of time the proceeding had been before the Court and the period during which the trial date had been known to the parties, I consider it to be unreasonable for Mr Carr to have left it almost to the eve of the trial to seek to rely on an additional cause of action when, to do so, would inevitably lead to the trial having to be postponed.  Had a timely application been made (say, in April or May 2009) and been successful the necessary procedural steps could have been taken without prejudicing the trial date.

87                  I am, therefore, satisfied that the exception, provided for in s 666(1)(b) of the Act applies.  It is, therefore, open to the Court to make a costs order against Mr Carr.  Such an order should be made in the circumstances to compensate Blade Repairs for any costs incurred by it and thrown away as a result of Mr Carr’s belated application.

Associate:

Dated:         2 July 2010