FEDERAL COURT OF AUSTRALIA
Cohen v iSoft Group Pty Limited [2012] FCA 1071
IN THE FEDERAL COURT OF AUSTRALIA | |
| Applicant | |
AND: | ISOFT GROUP PTY LIMITED (ACN 063 539 702) First Respondent ISOFT HEALTH (ASIA) PTE LIMITED (A COMPANY REGISTERED IN SINGAPORE - COMPANY NO 199905436Z) Second Respondent |
DATE OF ORDER: | |
WHERE MADE: |
THE COURT ORDERS THAT:
1. The parties are to bring in Short Minutes of Orders giving effect to these reasons on or before 12 October 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
NEW SOUTH WALES DISTRICT REGISTRY | |
GENERAL DIVISION | NSD 1764 of 2011 |
BETWEEN: | BRIAN COHEN Applicant
|
AND: | ISOFT GROUP PTY LIMITED (ACN 063 539 702) First Respondent ISOFT HEALTH (ASIA) PTE LIMITED (A COMPANY REGISTERED IN SINGAPORE - COMPANY NO 199905436Z) Second Respondent
|
JUDGE: | FLICK J |
DATE: | 28 SEPTEMBER 2012 |
PLACE: | SYDNEY |
REASONS FOR JUDGMENT
1 On 13 October 2011 the Applicant, Dr Brian Cohen, filed an Originating Application and a Statement of Claim in this Court. Dr Cohen has over 30 years experience in designing and developing systems in the healthcare market. He obtained a Bachelor of Computer Science (Hons) degree from the University of New South Wales in 1973 and won the University Medal. He completed a Doctor of Philosophy in “Computer Science – Artificial Intelligence” in 1978.
2 The Respondents to the proceeding as named in the Originating Application and Statement of Claim were iSoft Australia Pty Limited (“iSoft Australia”), as First Respondent, and iSoft Health (Asia) Pte Limited (“iSoft Health”), as Second Respondent. An Amended Originating Application and an Amended Statement of Claim filed on 31 January 2012 identified the First Respondent as iSoft Group Limited. A Further Amended Statement of Claim was filed on 5 April 2012. A Second Further Amended Statement of Claim was filed on the second day of the hearing amending the First Respondent’s name to “iSoft Group Pty Limited” (“iSoft Group”) and a Third Further Amended Statement of Claim was filed on the final day of the hearing.
3 The First Respondent (iSoft Group) is part of a global group of companies having subsidiaries across the United Kingdom, Europe, the United States of America and Asia. It underwent a number of corporate restructures and names and was formerly called IBA Healthcare Limited, IBA Technologies Limited, SWi Holdings, IBA Health Limited and IBA Health Group Limited. In very summary form, it is involved in the provision of software in the healthcare industry. Rather than referring to the particular name of the corporation as at particular dates, it is convenient at times to simply make reference to the First Respondent.
4 The Second Respondent, iSoft Health, is a company registered in Singapore. It was formerly called SWi Singapore Solutions Pte Limited, IBA Technologies Asia Pte Ltd and IBA Health (Asia) Pte Ltd.
5 In the present proceeding, Dr Cohen maintains that his services as the Chief Technology Officer were terminated by the First Respondent on 30 September 2011. His principal claims for relief are as against the First Respondent founded upon alleged:
breaches of contract; and
contraventions of the Fair Work Act 2009 (Cth).
In particular, he claims:
underpayment of remuneration as between 1 July 2010 and 30 September 2011 in the sum of $75,500.42;
underpayment of annual leave paid upon termination of employment in the sum of $120,873.12;
retention payment in the sum of $100,000;
payment in lieu of notice in the sum of $725,238.75;
redundancy pay in the sum of $409,109.03; and
long service leave in the sum of $177,283.68.
6 As against the Second Respondent, iSoft Health, Dr Cohen seeks, if necessary:
rectification of an agreement when he was seconded to Bangalore in India.
7 The principal claims for relief were founded upon the entering into in February 2000 – and the continuation thereafter – subject to variation – of a contract of employment between Dr Cohen and the First Respondent. This claim was founded upon a document expressed to commence operation on 15 February 2000 by both Dr Cohen and the First Respondent (“the 2000 Agreement”). It was claimed that this document constituted an agreement which continued to regulate the “core” terms upon which Dr Cohen was employed up until the date his employment was terminated. Counsel for Dr Cohen quite properly accepted that it was central to his various claims for relief to establish that the First Respondent was the employer of Dr Cohen throughout or, at least, at the date of termination of his services. If he did not establish the status of the First Respondent as employer, it was accepted that his claims in contract and pursuant to the Fair Work Act and the Long Service Leave Act 1955 (NSW) would fail. It was also accepted that if the claim in contract was made out, it was unnecessary to resolve the claims advanced pursuant to that legislation as the claims in contract would yield a better result.
8 It is ultimately concluded that the First Respondent was not Dr Cohen’s employer as at the date of the termination of his services in September 2011.
9 In reaching this conclusion it is necessary to set forth in some detail:
the chronological sequence of a series of agreements, including those preceding the 2000 Agreement, commencing with an agreement in 1988;
the execution of the 2000 Agreement, whether or not that agreement ever came into effect and whether or not it was abrogated or abandoned;
the circumstances in which Dr Cohen entered into a “secondment agreement” to provide services in Bangalore in India in early 2006; and
the circumstances in which Dr Cohen thereafter entered into a further “secondment agreement” to provide services in Chennai in India in the latter half of 2007.
The conclusion that Dr Cohen was not employed by the First Respondent as at the date of termination of his services renders it unnecessary to resolve a number of further submissions which were advanced on his behalf. Given the attention these other submissions received, it is nevertheless appropriate to also briefly address:
the remedies which would otherwise have been available had it been concluded that the First Respondent was Dr Cohen’s employer as at September 2011, including – in particular – submissions in respect to what would otherwise have been the reasonable period of notice that should have been given in respect to the termination of his employment;
the application or non-application of the Fair Work Act; and
the application or non-application of the Long Service Leave Act.
The Sequence of Agreeements
10 It is necessary to set forth in some detail the sequence of agreements which Dr Cohen executed with a view to resolving his claims that:
it was the First Respondent who was his “employer” throughout; and
the 2000 Agreement was the agreement which governed the “core” terms of his employment up until his employment was terminated.
There was an understandable forensic desirability on the part of Dr Cohen in fixing the First Respondent as his “employer”. It is thus prudent to also identify the principles to be applied when identifying the “employer” of an “employee”.
The sequence of agreements
11 The facts giving rise to the sequence of agreements of present relevance may be traced back to 1987 when SW International Systems Pte Ltd was established. Dr Cohen was employed as that company’s Technical Director. A letter on that company’s letterhead and dated 1 November 1988 confirmed Dr Cohen’s position as Technical Director and set forth the terms and conditions of his employment as from that date. He later became the Managing Director from about September 1998. The agreement in September 1988 provided that the period of employment was to be as follows:
3. Period of employment
Unless terminated earlier under clauses 9 or 11, the Employment will be for the period of two years from the Effective Date and continuing thereafter unless and until terminated by either party giving six months notice in writing to the other party, such notice expiring on the second anniversary of this agreement or any time thereafter.
Clause 14 provided:
14. Governing Law
14.1 The validity, interpretation and performance of this agreement shall be governed by and construed in accordance with the law of the republic of Singapore.
12 Sometime in 1998 SW International Systems Pte Ltd worked on a project with iSoft Group’s predecessor, IBA Healthcare. Discussions regarding a possible merger commenced in about February 1999. Part of those discussions was the perceived need for key personnel to be employed for a three year period. That merger took place in September 1999. Dr Cohen’s brother, Mr Gary Cohen was appointed Chairman; Dr Cohen became the Chief Technology Officer.
13 The first of the agreements which assumed particular prominence in the proceeding was the 2000 Agreement. At the time this agreement commenced, Dr Cohen was living in Singapore. The 2000 Agreement was described as an “Executive Service Agreement”. The parties to the agreement were IBA Technologies Limited (which later became iSoft Group) and Dr Cohen. The recitals to the agreement provide as follows:
RECITALS
A. The Company wishes to employ the Executive on the terms and conditions of this agreement.
B. The Executive wishes to accept employment with the Company on the terms and conditions of this agreement.
14 Clause 2.1 describes Dr Cohen’s position as follows:
2.1 Position
The Company agrees to employ the Executive in the position set out in part 2 of schedule 1 and the Executive agrees to serve the Company in that capacity, on the terms of this agreement.
15 Clause 2.2 provides for the period of the agreement as follows:
Period
The Company must employ the Executive for the Term unless the Executive’s employment is terminated earlier in accordance with this agreement or by operation of law.
The expression “Term” is defined in clause 1.1 as meaning “the period set out in part 3 of schedule 1”. Part 3 of Schedule 1, in turn, identifies the period as “3 years from 15 February 2000”.
16 Clause 7 deals with leave entitlements and provides in part as follows:
7.1 Annual leave
The Executive (in addition to the usual public holidays) is entitled to 4 weeks leave in each year to be taken at a time or times agreed between the Board and the Executive.
7.2 Long service leave
The Executive’s long service leave entitlements are to be determined in accordance with law and with the policy of the Company and the Executive must take reasonable steps to ensure that long service leave is taken at a time convenient to the Company.
17 Clause 10.1 provides for “termination” as follows:
Termination of Employment
The employment of the Executive is terminated by whichever of the following events occurs first:
(a) the expiration of 6 months’ notice of termination given by either party to the other or of such shorter period of notice as may be agreed;
…
18 Clause 10.2 provides for “early termination” as follows:
Early Termination
Notwithstanding clause 10.1, where either party gives the other notice under paragraph 10.1(a) or (c), the Company may at its option, on the date the notice is given or any subsequent date during the currency of the notice, pay to the Executive the amount which the Executive would have been entitled to be paid under this agreement during or on the expiry the period of notice (in addition to all the Executive’s other entitlements payable at the time on which the notice would have expired including all leave entitlements which would have accrued during that period) and the employment of the Executive terminates on making that payment.
19 The next agreement which assumed prominence in the proceeding arose out of the secondment of Dr Cohen to Bangalore in India. In late 2005 the First Respondent, then known as IBA Health Limited, acquired a Bangalore-based IT company known as “Medicom”. At the time, the acquisition of Medicom for about $30 million was iSoft Group’s largest acquisition. Dr Cohen was asked to go to Bangalore and he agreed.
20 The agreement is said by Dr Cohen to be contained within a letter dated 23 February 2006 (“the Bangalore Secondment Agreement”). The letter is on the letterhead of IBA Health (Asia) Pte Limited, a company registered in Singapore (the Second Respondent). The letter provides in part as follows:
This letter is an addendum to your original employment contract with IBA Health (Asia) Pte Limited (“IBA”) dated 15th February 2000. The terms of your employment with IBA are amended as follows: …
The letter goes on to state that the “date of commencement in Bangalore is 1 February 2006 on a fulltime basis”. It then sets forth his “remuneration” and “other benefits” and concludes as follows (without alteration):
8. CONFIRMATION
All other terms of your Executive Service Agreement, as amended, will continue in full force and effect.
We look forward to your confirmation of the above terms and trust that your ongoing employment with us will be satisfying and rewarding experience.
The letter does not refer to an express term providing for the duration of employment.
21 Notwithstanding the date of the letter, it was common ground between the parties that it was signed by Dr Cohen on 1 August 2006 and that it took effect from 1 April 2006 and not 1 February 2006.
22 The last in the sequence of agreements which assumed prominence arose out of the later secondment of Dr Cohen to Chennai. Product development was taking place there and Dr Cohen was asked to manage the merger of product development teams. Again he agreed to do so.
23 This agreement is said by Dr Cohen to be contained within a letter dated 10 June 2008 (“the Chennai Secondment Agreement”). The letter is again on the letterhead of IBA Health (Asia) Holdings Pte Limited.
24 That letter provides in part as follows (without alteration):
Dear Brian,
EXPATRIATE ASSIGNMENT – 24 months secondment to Chennai, India
I am pleased to be able to confirm IBA’s terms and conditions for the continuation of your current Expatriate Assignment for a further period of 24 months. For the coming 24 months of this assignment, you will continue to be based in India, however, the exact location will now be Chennai. This document sets out the main particulars of your Terms and Conditions of Employment through the duration of this addition 24 month period.
1 Name of Parties
1.1 The Company: IBA Health Group
1.2 The employee: Brian Cohen
2 Employment Details
2.1 Your employment continues in the capacity of CTO based in Singapore. However, for the coming period of 24 months, you will be based in Chennai, India.
2.2 Please note that it is IBA’s intention that you will return to Singapore in 24 months time to continue in the same role.
3 Commencement of Employment
3.1 Your secondment to Chennai will commence on 1 November 2007 and is contingent on the company being able to continue to be able to obtain any appropriate visas for yourself and your family in Chennai.
3.2 Your employment with IBA Health (Asia) Pte Ltd is deemed to have commenced on the first day you joined the company, therefore, your continuous service is effective from 1 November 1988.
The letter goes on to provide details (inter alia) of his salary and benefits. It also provides in part as follows:
8 Annual Leave
8.1 Your paid annual leave entitlement will remain the same as your current terms and conditions.
8.2 In addition to your paid annual leave entitlement, you will also be entitled to all public holidays applicable to the country of your place of work, ie Chennai, during your one (2) years assignment. You will not be eligible for the Singaporean public holidays during the assignment.
9 Notice Period
9.1 Your notice period will remain the same as your current terms and conditions.
9.2 IBA reserves the right in its absolute discretion to pay salary in lieu of notice.
10 Personal Leave & Sick Leave
10.1 Your personal leave and sick leave entitlement will remain the same as your current terms and conditions.
11 Changes to your terms of employment
11.1 The Company reserves the right to make reasonable changes to any of your terms and conditions or employment and will notify you in writing of such changes at the earliest opportunity and, in any event, within one month after such changes have taken effect.
11.2 Such changes will be deemed to be accepted unless you notify the Company of any objection in writing before the expiry of one moth from the date of notification by the Company of the changes.
12 Acceptance of this Offer
12. The details in this letter, your original offer of employment in your home country and the accompanying documentation, including but not limited to the India Employee Handbook, form both the Principle Statement of the written particulars of your employment and your individual Contract of Employment.
13 Governing Law
13.1 Whilst you are seconded to IBA in Chennai, your employment will be governed by Indian employment law.
Identifying the employer - the principles to be applied
25 The correct identification of the employer of an employee where there may be two or more employers may be significant in a variety of different legal contexts, including a liability to pay workers compensation benefits; liability to pay redundancy payments; and liability under occupational health and safety legislation: Finance Sector Union of Australia v Commonwealth Bank of Australia [2001] FCA 1613 at [60], 111 IR 241 at 266 per Moore J.
26 In Re C & T Grinter Transport Services Pty Ltd; Ex parte Fitzgerald [2004] FCA 1148 Finn J summarised the principles to be applied when seeking to identify the employer of an employee as follows:
APPLICABLE PRINCIPLES
[20] The principles to be applied in the identification of the employer of an employee where there are two or more possible employers, are reasonably well settled. For present purposes I would note the following:
(1) A contract of service cannot be transferred by one employer to another or novated as between them without the employee’s consent: Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014; Re Coogi Nominees Pty Ltd (Administrators appointed); McCluskey v Karagiosis (2002) 120 IR 147. Questions of estoppel apart: Smith v Blandford Gee Cementation Co Ltd [1970] 3 All ER 154; the employee’s consent must be a real one whether express or implied and is “not to be raised by operation of law”: Denham v Midland Employers Mutual Assurance Ltd [1955] 2 QB 437 at 443.
(2) The totality of the circumstances surrounding the relationships of the various parties including conduct subsequent to the creation of an alleged employment relationship is relevant to the assessment to be made: Romero v Auty (2001) 19 AGLC 206 at [10] and [42]-[44].
(3) Documentation created by one or more of the parties describing or evidencing an apparent employment relationship will be relevant to, but not necessarily determinative of, the true character of that relationship: Pitcher v Langford (1991) 23 NSWLR 142; Marrs Fabrics Pty Ltd & Nathan Wholesale Fabrics Pty Ltd v Whipps (1991) 33 AILR 167. In determining the identity of a disputed employer, the Court is entitled to consider “the reality of purported contractual arrangements”: Dalgety Farmers Ltd t/a Grazcos v Bruce, NSWCA, 3 August 1995. The documentation may have been brought into existence for other purposes, for example, tax minimisation or the reduction of insurance premiums, without reflecting the reality of the parties relationship: ibid; Pitcher v Langford, at 149; Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 at 454.
(4) Conversations and conduct at the time of the alleged engagement of the employee is of considerable significance: Romero, at [9]. The beliefs of the employees as to the identity of their employer is admissible and is entitled to weight: Pitcher v Langford.
(5) In cases of the engagement of new employees to work in a business in which a number of separate corporate entities participate otherwise than as partners:
“… it was open to those controlling the business to select which company should be the employer provided that the selection was consistent with the financial and administrative organisation of the business and was not otherwise a sham.”
See Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd, FCA, Ryan J, 19 November 1998.
The identity of a contracting party is to be determined looking at the matter objectively: Air Tahiti Nui Pty Ltd v McKenzie [2009] NSWCA 429 at [28], 77 NSWLR 299 at 304 per Allsop P and Handley AJA (Hodgson J agreeing); City & Suburban Group Pty Ltd v Gambetta Holdings Pty Ltd [2011] WASCA 233 at [21] per Newnes JA, at [45]-[48] per Murphy JA (Hall J agreeing). See also: Mediterranean Olives Financial Pty Ltd v Gita Lederberger [2011] VSC 301 at [5]-[7] per Pagone J.
The 2000 Agreement – did it ever apply, was it abandoned and when did it come to an end?
27 The starting point for Dr Cohen’s broad proposition that the 2000 Agreement was the contract of employment that prevailed throughout was challenged at the outset by Senior Counsel on behalf of the Respondents.
28 The execution of the 2000 Agreement was preceded by discussions as to the listing of iSoft on the Australian stock exchange. As a condition of brokerage firms underwriting the Initial Public Offering Mr Gary Cohen was told that it was necessary to “lock in” the key executives for a minimum period of three years. That included the employment of Dr Cohen. The prospectus dated 15 February 2000 was lodged with ASIC on that date and stated in part:
Each of the senior management team has agreed to enter into a service agreement for a period of three years …
29 Immediately prior to the execution of the 2000 Agreement Dr Cohen was employed by SW International Systems Pte Limited, subsequently known as IBA Health (Asia) Holdings Pte Limited. After the execution of the 2000 Agreement, Dr Cohen’s duties did not change.
30 On behalf of the First Respondent, it was submitted that:
the 2000 Agreement never constituted a contract of employment as between Dr Cohen and the First Respondent, even though it was signed by both parties;
in the event that it was a contract of employment, it was a contract which was abandoned; and
even if it was a contract of employment which was not abandoned, it came to an end according to its terms – namely after the expiration of the three year term.
A contract of employment?
31 The First Respondent admits that it executed the “Executive Service Agreement” but does not admit that it operated as a contract of employment. Its case is that the document was only ever executed to fulfil representations made in the prospectus.
32 Notwithstanding this non-admission, it is concluded that the “Executive Service Agreement” constituted a written contract of employment commencing from 15 February 2000. This conclusion follows principally from the fact that the agreement was executed by the parties to it.
33 The common law attaches significance to the fact that a contractual document has been signed: Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52, 219 CLR 165. Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ there observed:
[42] Consistent with this objective approach to the determination of the rights and liabilities of contracting parties is the significance which the law attaches to the signature (or execution) of a contractual document. ….
[43] More recently, in words that are apposite to the present case, in Wilton v Farnworth [(1948) 76 CLR 646 at 649] Latham CJ said:
“In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business trans-actions.”
…
[45] It should not be overlooked that to sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, as Latham CJ put it, whatever they might be. That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.
Their Honours continued:
[47] The importance which, for a very long time, the common law has assigned to the act of signing is not limited to contractual documents. Wilton v Farnworth was not a contract case. The passage from the judgment of Latham CJ quoted above is preceded by a general statement that, where a man signs a document knowing that it is a legal document relating to an interest in property, he is in general bound by the act of signature. Legal instruments of various kinds take their efficacy from signature or execution. Such instruments are often signed by people who have not read and understood all their terms, but who are nevertheless committed to those terms by the act of signature or execution. It is that commitment which enables third parties to assume the legal efficacy of the instrument. To undermine that assumption would cause serious mischief.
The execution of a document in an approved manner has the same significance as signature by an individual: Northside Developments Proprietary Limited v Registrar-General (1990) 170 CLR 146 at 156 per Mason CJ.
34 There is no reason not to give significance to the fact that the 2000 Agreement was executed by the First Respondent and executed in the manner then set forth in s 127 of the Corporations Law.
Was it abandoned or abrogated?
35 Nor should the First Respondent’s submission be accepted that the 2000 Agreement was abrogated or abandoned.
36 A contract may be found to have been “abandoned” by reason of, for example, “an ‘inordinate’ length of time has been allowed to elapse, during which neither party has attempted to perform, or called upon the other to perform, a contract made between them”: Fitzgerald v Masters (1956) 95 CLR 420 at 432. Dixon CJ and Fullagar J there said that in such circumstances what “is really inferred in such a case is that the contract has been discharged by agreement, each party being entitled to assume from a long-continued ignoring of the contract on both sides that … ‘the matter is off altogether’”. Where a concluded contract is said to have been abandoned or abrogated, extrinsic evidence regarding the conduct of the parties is admissible in order to determine whether the parties have acted to abandon and thus abrogate the agreement: cf. Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 321 per Hope JA. See also: (1985) 2 NSWLR at 334 per Mahoney JA; at 339 per McHugh JA.
37 The basis upon which Senior Counsel for the Respondents sought to contend that the 2000 Agreement had been “abandoned” remained obscure.
38 However the argument may have been advanced, it is relatively clear that the First Respondent engaged in conduct which is not consistent with an intention to abandon the 2000 Agreement. That conduct includes conduct before and after the date of its commencement on 15 February 2000.
39 Thus, a paper of the Remuneration Committee of the First Respondent dated 8 February 2000 refers to the remuneration of three executives, including Dr Cohen. It refers to a termination notice period of six months and refers to the terms of each agreement being three years.
40 During the currency of the three year period, a minute of a meeting of the Remuneration Committee on 21 August 2000 refers to a “review of the current contracts of Senior Management”. But Dr Cohen is not mentioned.
41 Minutes of a meeting of the Appointment and Compensation Committee of the First Respondent on 1 June 2001, however, do refer to “a proposal for the establishment of new remuneration packages and contracts for senior executives”. Dr Cohen’s contract (along with the contracts of several others), it was noted, was “still to be finalized”. Whether this was to be a “new” contract was not stated. But there was in evidence a draft of a different Executive Service Agreement produced in about July 2001. There were differences between this draft and the 2000 Agreement, including the July 2001 draft:
not containing any fixed term;
proposing a commencing date of 1 July 2001; and
providing for termination on the giving of three months notice.
Dr Cohen maintains that the July 2001 draft is certainly consistent with the provision of services by Dr Cohen and the existence of an employment agreement.
42 Conduct subsequent to February 2003 (the time at which the 2000 Agreement was due to expire), included a draft amendment to the 2000 Agreement to commence in July 2004. The draft contained the following recitals:
RECITALS
A. The Company and the Executive entered into an Executive Service Agreement on [insert date] (“ESA”).
B. In the course of providing services to the Company, the Executive has or will produce certain intellectual property and other materials which will remain the property of the Company.
C. Both parties now wish to enter into this Agreement to more clearly define their respective rights and obligations with respect to that intellectual property and other materials.
Particular reliance was placed by Dr Cohen upon the acknowledgment in the first recital that an agreement had been entered into and the acknowledgment in the second recital as to the provision of services by Dr Cohen.
43 A conclusion that the 2000 Agreement was a contract which in fact recorded the terms and conditions of employment of Dr Cohen is sufficiently founded upon the fact that it was executed by both Dr Cohen and the First Respondent. The conclusion that that document in fact evidenced the agreement between the parties is only further reinforced by reference to the conduct of the parties before and after 15 February 2003, namely when the three year term came to an end. There is no basis for a conclusion that it was abandoned. The submissions to the contrary put by Senior Counsel for the Respondents on these questions are rejected.
A contract for a fixed term – expiration after 3 years?
44 The final submission advanced by Senior Counsel for the Respondents in this trilogy of submissions was that – even if the 2000 Agreement was in fact a contract of employment between the First Respondent and Dr Cohen which had not been abandoned or abrogated, it nevertheless came to an end when the period of three years expired in accordance with the terms of the agreement.
45 Any conclusion as to whether or not the provisions of a fixed term contract continue to govern the parties after it has expired is not a question of substantive law but rather a question of evidence.
46 It is a question of whether an inference can be drawn from the conduct of the parties that they intended to keep the original contract on foot: Brambles Ltd v Wail [2002] VSCA 150, (2002) 5 VR 169. Winneke P, Charles and Batt JJA there observed:
[57] It is not easy to find much discussion in the books or case law, except in North America, of the question whether the terms of a detailed written agreement for a fixed term continue, after that term has expired, to govern the parties to it where they continue dealing with each other. However, the following appears in Chitty on Contracts:
There may also be an implied contract where the parties make an express contract to last for a fixed term, and continue to act as though the contract still bound them after the term has expired. In such a case the court may infer that the parties have agreed to a newly expressed contract for another term.
Their Honours thereafter reviewed North American decisions and continued:
[59] … In the New York Telephone Co case, after the passage referred to in Steed v Busby, Lehman CJ, speaking for the Court of Appeals of New York, had stated:
Even in such a case, however, the reciprocal obligations arise from the new implied contract and, unless an intent to make such a new contract is expressed or may be fairly inferred from the conduct of the parties, the obligations of the parties are as matter of law not measured by the terms of the contract which has expired.
In another decision of the last-mentioned court, which cited the passage from an earlier edition of Corbin corresponding to that set out above and is in turn cited in the current edition, Cinefot International Corporation v Hudson Photographic Industries Desmond CJ, speaking for the majority, stated that the rule that there was available an inference or implication of fact that the parties intended to renew was not really one of substantive law, but of evidence. His Honour said that entering into a contract to run for a year, and then continuing to act as if its time had not run, was sufficient evidentiary support for a finding that the parties in fact intended to keep it alive for another year. The contract in that case was classified as an agency agreement and the principle was stated not to be limited to leases and employment contracts. …
On the facts of the case before them, their Honours concluded:
[61] Here the written agreement came to an end on 4 April 1993. The question whether an implied or tacit agreement to continue dealing on the same terms save that the agreement should be terminable on reasonable notice is to be inferred is, as Desmond CJ stated and as the other cases and the treatises make abundantly clear, an evidentiary or factual question. On the facts we have set out earlier we consider such an inference should be drawn here. The evidence, fairly sparse though it is, warrants the finding that after 3 April 1993 the parties proceeded as though still governed by the terms of the original agreement (save that, since it had already expired, either could terminate the substitute arrangement on reasonable notice), rather than a finding that they impliedly agreed merely that Andar should collect and deliver the laundry and that Brambles should pay it a reasonable sum for that or a finding that the parties made a series of individual implied agreements, six days a week, for that work to be done for a reasonable sum. In other words, after 3 April 1993 the parties operated under a standing agreement under which all the procedures and, importantly, the remuneration were exactly the same as they had been under the written agreement. The parties intended that that should be so. The contract thus made was not a mere variation of the original agreement, for it was not made until after the latter had expired. Accordingly cl 15.1, requiring signed written agreement for a variation, did not apply to it. Nor did cl 14.5, the “whole agreement” clause, since it was not apt to apply to a subsequent and separate agreement. Clauses 6.1 and 8.2, for instance, contemplate “renewal” and “extension”. Renewal and extension are closely related concepts, normally involving a continuation of the contractual relationship on essentially the same terms and conditions as contained in the original contract. Whether a renewal creates a new contract, or extends the original contract, depends primarily on the intention of the parties as evidenced by the agreement or agreements they have made. Thus, generally an option to renew a contract is the right to require the execution of a new contract, whilst an option to extend the term, exercised during the currency of the term, merely operates by way of variation to extend the term of the original agreement. Whether the implied or tacit contract made after 3 April 1993, which cannot be an extension, is called a renewal is really a matter of definition. The important point is that it was a new and separate contract.
This decision does not stand as authority for the proposition that the terms of a detailed written agreement for a fixed term continue to govern the parties where they continue dealing with each other after the fixed term has expired; it is authority for the proposition that “it is open to a court to draw the relevant inference”: Energy World Corporation Ltd v Maurice Hayes and Associates Pty Ltd [2007] FCAFC 34 at [24], 239 ALR 457 at 463 per Moore, Tamberlin and Gyles JJ. The drawing of an inference is “an evidentiary or factual question”. “What is required is conduct by the parties as if the contract remained on foot”: Viva Olives Pty Ltd v Origin Olives Australasia Pty Ltd [2012] FCA 545 at [13] per Perram J.
47 In the present proceeding it is concluded that the 2000 Agreement most probably came to an end, according to its terms, in February 2003.
48 The facts and circumstances as they existed between February 2003 and the commencement of the Bangalore Secondment Agreement in February 2006 (or April 2006) received little attention during the course of the proceeding. Other than the reference in the Bangalore Secondment Agreement to it being an “addendum to [his] original employment contract”, there is little evidentiary support for any conclusion that Dr Cohen was employed by the First Respondent according to the same “core” terms and conditions as were previously set forth in the 2000 Agreement.
49 It may, however, be the case that the First Respondent remained Dr Cohen’s employer for this period of time. It may well be the case that the continuation of the prior relationship can be implied from the course of conduct: Steed v Busby 268 Ark 1, 593 SW 2d 34 at 38 (1980). The Supreme Court of Arkansas there concluded:
… When an agreement expires by its own terms, if without more the parties continue to perform as before, an implication arises that they have mutually assented to a new contract containing the same provisions as the old, and the existence of a new contract is determined by an “objective” test, i.e., whether a reasonable man would think, from the actions, that they intended to make a new binding agreement. ... In such a case, when the parties continue to do business together, their conduct may permit, or even constrain, a finding that they impliedly agree that their rights and obligations should continue to be measured as provided in the old contract.
This decision was one of the North American decisions cited by the Victorian Court of Appeal in Brambles Limited v Wail [2002] VSCA 150 at [59], (2002) 5 VR 169 at 187 per Winneke P, Charles and Batt JJA. This decision, it should be noted, was reversed in part: Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28, 217 CLR 424. It was unnecessary, however, for that Court to comment upon the North American authorities. It was only Callinan J who agreed with the Court of Appeal as to the renewal of the contract.
50 It is, however, unnecessary for the purposes of the present proceeding to reach any more certain conclusion as to whether the 2000 Agreement continued in force by reason of the conduct of the parties after February 2003.
A Break in the Chain – The Bangalore Secondment?
51 Dr Cohen began working out of Bangalore in February 2006. His Research and Development Manager, Mr Srivinas SampathKumar, also moved to Bangalore at the same time.
52 Irrespective of the contractual arrangements governing Dr Cohen’s employment between February 2003 and February 2006 (or April 2006), the case sought to be advanced on behalf of Dr Cohen would confront difficulties if the Bangalore Secondment Agreement was characterised as an employment contract between Dr Cohen and a corporate entity other than the First Respondent. The principal case advanced on behalf of Dr Cohen was, of course, that he was employed throughout by the First Respondent.
53 The terms of the Bangalore Secondment Agreement presented a potential break in the chain of that employment contract. The Bangalore Secondment Agreement commenced with a reference to it being an addendum to “… [Dr Cohen’s] original employment contract with IBA Health (Asia) Pte Limited …”.
54 It was in this context that it became important for Dr Cohen to submit either that:
the reference in the letter to the “employment contract with IBA Health (Asia) Pte Limited” was properly to be construed as a reference to the 2000 Agreement with the First Respondent; or
the Bangalore Secondment Agreement needed to be rectified to record the employment as being with the First Respondent.
A fall back position adopted by Dr Cohen was that the true character of a secondment agreement was an agreement which left intact the underlying agreement. On this approach, at the conclusion of the period of secondment, the underlying contractual relationship between Dr Cohen and the First Respondent re-emerged.
55 Each of these two primary submissions should be considered separately.
A process of construction
56 A document can be construed to “avoid absurdity or inconsistency”: Fitzgerald v Masters (1956) 95 CLR 420 at 426-427. Dixon CJ and Fullagar J there observed:
There is a superficial difficulty in cl. 8, because it purports to incorporate a set of conditions so far as they are inconsistent with what has been specifically agreed upon. No real difficulty, however, is created. Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency. Here it would be indeed absurd to suppose that the parties, having expressed their agreement on a number of special and essential matters, should intend to incorporate by reference terms inconsistent with what they had specially agreed upon. What they must clearly have intended is to incorporate a set of general conditions except so far as they were inconsistent with what they had specially agreed upon, and cl. 8 must be read as if it said “consistent” or “not inconsistent”.
See also: Kimberley Securities Ltd v Esber [2008] NSWCA 301 at [33] per Gyles AJA (Allsop P and Macfarlan JA agreeing). In the context of commercial contracts, this is but an aspect of construing such contracts in a “businesslike” manner and in a manner which promotes “business commonsense”: Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 at [13] per Basten JA (McColl JA and Campbell JA agreeing) (citing Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 at [19], 76 NSWLR 603 at 618). See also: Parmalat Australia Ltd v Norco Co-operative Ltd [2006] QCA 129 at [42] per Jerrard JA. This process of construction, however, is no mandate for a Court to rewrite a contract.
57 For present purposes no submission was made to suggest that such an approach to construction should not also be employed when construing a contract of employment. And where a contract contains words which are ambiguous it is permissible for a Court to examine extrinsic evidence to determine whether the parties have in fact used the words in question in only one sense: cf. Air New Zealand Ltd v Nippon Credit Bank Ltd [1997] 1 NZLR 218 at 223 per Gault, McKay and Thomas JJ. See also: McLaughlan, Common Assumptions and Contract Interpretation (1997) 113 Law Quarterly Review 237.
58 Where a document can be construed to “avoid absurdity or inconsistency”, rectification in such case is not required: Spunwill Pty Ltd v Bab Pty Ltd (1994) 36 NSWLR 290 at 299-300. Santow J there observed (in the context of construing a restraint of trade clause) that there were a number of “settled principles for construction of a written document”, including the following:
3. In construing a written document, the object is to discover and give effect to the contractual obligations that reasonable persons in the position of the parties would objectively have intended the document's language to create. The emphasis is thus on giving effect to the apparent intention of the parties, and direct evidence of the parties' actual subjective intentions and expectations is inadmissible for purposes of construction: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales at 348 and 352; Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd [1990] VR 834 at 840.
4. The language of a term is generally assigned its natural and ordinary meaning, read in the light of the contract as a whole but where it is ambiguous surrounding circumstances may be taken into account in assigning the presumed meaning. The surrounding circumstances include the matrix of mutually known facts, and the background, object, context and commercial purpose of the transaction, in the objective sense of what reasonable persons in the position of the parties would have had in mind: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (at 347-352); Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd (at 844-850);Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Insurance Cases 60-853 at 75,343.
5. The consequences of alternative interpretations are not immaterial, and where the meaning of language in a contract is ambiguous, that interpretation will be preferred which avoids consequences which are in the circumstances capricious, unreasonable, unjust or not consonant with business efficacy: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109; Lewis Construction (Engineering) Pty Ltd v Southern Electric Authority of Queensland (1976) 50 ALJR 769; 11 ALR 305; Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd (1993) 115 ALR 295; 10 ACSR 615.
6. Every passage of a document must be read as part of the whole instrument. This may justify departing from what had seemed the plain meaning of a clause considered in isolation: The Metropolitan Gas Co v Federated Gas Employees' Industrial Union (1925) 35 CLR 449 at 455-456.
7. Where a court can discern the intent of the parties from an examination of the document as a whole, words may be supplied, omitted or corrected in the instrument, where it is clearly necessary in order to avoid absurdity or inconsistency:Fitzgerald v Masters (1956) 95 CLR 420 at 426-427. In such cases rectification of the document is not required: Re United Pacific Transport Pty Ltd [1968] Qd R 517; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (at 346).
8. “If, by any reasonable construction, the intention of the parties can clearly be arrived at from the document itself, then the court will give effect to that intention even though this involves departing from or qualifying particular words used. So the court will be prepared to restrict, transpose, modify, supply or reject words or terms in the documents, provided the intention of the parties is plain in spite of the words”: Chitty on Contracts, 26th ed (1989) vol 1 par 827; Tropwood AG of Zug v Jade Enterprises Ltd (The Tropwind”) [1982] 1 Lloyd's Rep 232.
See: McLauchlan, Objectivity in Contract (2005) 24 University of Queensland Law Journal 479.
59 Support for a construction of the Bangalore Secondment Agreement such that IBA Health (Asia) Pte Limited should be regarded as a reference to the First Respondent may be found in any of the following expressions used elsewhere in that letter, namely:
the agreement being an “addendum to [Dr Cohen’s] original employment contract” – there being no earlier contract with IBA Health (Asia) Pte Limited;
the reference to an “addendum” and the terms of employment being “amended” – it being submitted on behalf of Dr Cohen that that was an amendment or an addendum to 2000 Agreement;
the reference to the other terms of Dr Cohen’s “Executive Service Agreement”, “as amended” continuing “in full force and effect”; and
the reference to Dr Cohen’s “ongoing employment.”
Some reliance was also placed upon the letter being signed by Mr Garrington who described himself as Chief Executive Officer of “IBA Health Limited”. Each of these references, it may be noted – including the reference to the statement that the terms were to “continue” and that there was “ongoing employment” – do not dictate any conclusion as to the 2000 Agreement continuing in force after February 2003 and prior to the execution of the Bangalore Secondment Agreement.
60 But these references do lend some support for construing the reference in the Bangalore Secondment Agreement to IBA Health (Asia) Pte Limited – as opposed to the First Respondent – as erroneous.
61 That process of construction is, however, rejected. It would not be “absurd” to read the letter as evidencing an intention on the part of the Respondents to “continue” the same terms and conditions as were recorded in the 2000 Agreement subject to variation – including a variation to address Dr Cohen’s secondment to Bangalore.
62 The alternative submission for Dr Cohen was to seek rectification of the Bangalore Secondment Agreement. It was sought to rectify that agreement to delete the reference to IBA Health (Asia) Pte Ltd and to substitute it with the name of the First Respondent.
Rectification
63 Rectification is available where it can be demonstrated that the parties to an agreement were in complete agreement as to its terms and where the agreement erroneously records those terms: Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65, 69 NSWLR 603. Tobias JA there reviewed some of the authorities and summarised the principles to be applied as follows:
The relevant legal principles
[122] As is observed in Meagher Gummow & Lehane Equity, Doctrines & Remedies, 4th ed (2002), Australia, Butterworths LexisNexis, at 886 [26–010], it is of the upmost importance for a proper appreciation of the basis of the equitable doctrine of rectification to realise that the court, by its orders, merely reforms the instrument in which the parties have mistakenly expressed their agreement. The learned authors then cite the following passage from the judgment of Denning LJ in Frederick E Rose (London) Ltd v William H Pim Junior & Co Ltd [1953] 2 QB 450 at 461:
“In order to get rectification it is necessary to show that the parties were in complete agreement on the terms of their contract but by an error wrote them down wrongly …”
[123] The authors then observed that the need for rectification will thus arrive when the court can discern from the document itself and the surrounding evidence that “something must have gone wrong” which cannot be cured by the process of construction: Investors Compensation Scheme Ltd v West Bromwich Building Society ([1998] 1 WLR 896 at 913). The relevant passage in which these words occur in Lord Hoffman’s speech is set out (at 625[106] supra). Of course, the present case is not concerned with what might be regarded as a mere linguistic mistake in a formal document but, according to Ryledar, a complete misunderstanding with respect to what are otherwise the clear words of the relevant written document as embodying an intention of the parties which, so it is submitted, they plainly did not have.
[124] In Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 349, Mason J noted the “more recent desire” in the authorities to “… emphasize that the remedy [of rectification] is designed to relieve against the mistaken expression of the true agreement of the parties”. His Honour further observed (at 350):
“What is of importance is that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately. And there has been a firm insistence on the requirement that the mistake as to the writing must be common to the parties and not merely unilateral … .”
[125] This Court referred to the relevant principles in Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329. In agreeing with the leading judgment of Sheller JA, Mahoney AP relevantly observed (at 331):
“In my opinion, the principle upon which rectification is granted involves two things: that … the parties (in the case of a transaction between parties) had at all relevant times an intention which was to be given effect by the document to be rectified; and that that document does not give effect to that transaction.”
When dealing with a claim for rectification, it has been said that a court is “not entitled to determine the common intention of the parties by confining itself to the correspondence between them and any relevant conduct, and treat as irrelevant any inconsistent evidence to the effect that, subjectively speaking, no such common intention was held”: Thiess Pty Ltd v Arup Pty Ltd [2012] QSC 185 at [92] per Applegarth J.
64 The case advanced on behalf of Dr Cohen was that all previous drafts and negotiations as to the terms of the Bangalore Secondment Agreement disclosed the identity of the employer as being IBA Health Limited. There was, he submitted, agreement as to those terms. Although unnecessary to go so far as to show how the error occurred, Dr Cohen nevertheless took that further step and submitted that the final version of the letter was sent without any real attention being given on the part of the Respondents to the accuracy of the name of the employing corporate entity set forth in the letter. Senior Counsel for the Respondents also seized upon the circumstances in which the final version of the letter was forwarded to Dr Cohen. But Senior Counsel submitted that the final version evidenced a deliberate choice on the part of the Respondents as to the identity of the corporate employer. This choice, he maintained, denied the existence of any common intention that could be the subject of rectification.
65 The course of those negotiations started in about September 2005, when the intention to relocate Dr Cohen commenced, and continued right up to 1 August 2006 when Dr Cohen signed the Bangalore Secondment Agreement
66 That course of negotiations discloses:
the reference to IBA Health Limited being repeated in further drafts sent by way of e-mail on 9 January 2006, 23 February 2006 and 8 June 2006;
Ms Romano, on behalf of the Respondents, in an e-mail sent on 21 June 2006 to Dr Cohen stating that “your IBA employment contract is complete”; and
Ms Romano sending to Messrs de Figueiredo and Baker an e-mail on 30 June 2006 enclosing the agreement stating in part that “the following documents have been agreed on”.
If attention is confined to that exchange of e-mails it may be safely concluded that there had throughout been a common intention that IBA Health Limited – and not IBA Health (Asia) Pte Limited – was to be the employer. It may also be safely concluded that there had been agreement as to the terms in June 2006 and that all that remained outstanding was the execution of the agreement.
67 Notwithstanding this course of negotiations, there were inevitably factors supporting the contrary submission advanced on behalf of the Respondents. Evidence supporting a conclusion that the Bangalore Secondment Agreement was in fact an agreement between Dr Cohen and the Second Respondent included the following:
the fact that the February 2006 letter was on the letterhead of the Second Respondent;
a letter sought by Dr Cohen prior to his departure for Bangalore on 17 March 2006 for use in the event that he encountered “any hurdles from Indian customs when he lands”. The letter was dated 15 March 2006 and was signed by Ms Mary Romano, as the HR Administrator on the letterhead of “ibahealth”. The letter certified that “Brian Cohen, holder of Australian Passport No … & Singapore NRIC No … is employed with IBA Health (Asia) Holdings Pte Ltd…”. A letter in like terms had previously been given to the Product Research and Development Manager, Mr SampathKumar. Dr Cohen had seen the letter provided to Mr SampathKumar and sought a “similar letter” for himself; and
the Annual Reports for the First Respondent for the years 2005, 2006 and 2007 set forth in each year the name and position of what were identified as “specified executives”. The “employer” was also identified for each executive. Most of those executives were identified as employees of IBA Health Limited; Dr Cohen was the only person whose “employer” was identified as IBA Health (Asia) Holdings Pte Limited.
Although the significance of the letterhead cannot be discounted, the fact that the Bangalore Secondment Agreement was on the letterhead of IBA Health Asia Pte Ltd assumes only marginal relevance.
68 Senior Counsel for the Respondents also sought to place significance upon events in late July and early August 2006. In mid-July 2006 Dr Cohen had made an inquiry as to when he could get a signed copy of “the Expatriate Contract addendum to [his] employment contract as agreed …”. Ms Romano replied on the same day, 19 July 2006, stating that she was “still waiting on [Dr Cohen’s] actual contract [to be] returned to [her] duly signed”. Dr Cohen wanted another “version” of the contract deleting certain payments so as to not “confuse the local tax authorities …”. Further attention was given to “tax implications” later that month. Dr Cohen had also sought to minimise his tax liabilities by entering into a consultancy agreement. On 28 July 2006 an internal e-mail from Ms Chua to Ms Romano stated (without alteration):
I just realised that Brian’s offshore invoices were addressed to Sydney office. May I know the contract is prepared in the name of IBA Health Asia Pte Ltd or IBA Health Ltd (Sydney office)? Btw, the auditors is asking for Brian and Srinivas’s overseas posting contract. Can you email the signed contract?
A subsequent e-mail sent on 1 August 2006 to Mr Tony Connell, the Chief Financial Controller, stated (without alteration):
Hi Tony,
As per Mary’s email below, Brian’s consultancy agreement is issued by IBA Health Ltd (Sydney). Should this payment be made in Sydney as his invoices were addressed to Sydney office (see attached)? I do not know what is the agreed arrangement. If the consultant fee has to be paid out of Singapore, the agreement must be made by either IBA Health Asia Pte Ltd or IBA Health Asia Holdings Pte Ltd. I do not know whether there is any tax implication on this.
Would appreciate it if you could help to check on this so that we are on the right track of payment to avoid any audit or tax issue.
Dr Cohen sent an e-mail on 1 August 2006 to Ms Chua and others stating (without alteration):
Hang on.. there may be Australia tax implications here…!
A “revised IBA contract that requires your signature” was sent by Ms Romano to Dr Cohen later on 1 August 2006. It was that version which was signed and which contained the reference to “your original employment contract with IBA Health (Asia) Pte Limited …”.
69 Although it may be accepted that the last exchange of e-mails was focussed upon the consultancy agreement, it was also apparent that attention was being given to the “tax implications” of their arrangement by both Dr Cohen and those financial officers within the First Respondent.
70 An available inference was that by late July/early August 2006 both Dr Cohen and officers of the Respondents had directed their attention to the “tax implications” and had decided that the “employer” for Dr Cohen should change from the First Respondent to IBA Health (Asia) Pte Limited.
71 But no such inference, it is concluded, should be drawn. On balance it is concluded that Dr Cohen has discharged the onus of establishing a common intention that the First Respondent was to be the “employer”. The Bangalore Secondment Agreement should accordingly be rectified so as to reflect the common intention of the parties that the employer was to be the First Respondent.
A Break in the Chain? – The Chennai Secondment & Thereafter
72 Discussions which ultimately led to Dr Cohen agreeing to a further secondment in India commenced in about October 2007. He was asked to go to Chennai and he agreed. He moved to Chennai in November 2007. Dr Cohen further says that as from the end of August 2010 he no longer worked in Chennai on a full-time basis. Instead, he thereafter spent about half of his time in Singapore and about half of his time in Chennai.
73 It is at least at that point of time when the Chennai secondment commences that the contractual case advanced on behalf of Dr Cohen breaks down.
74 Even though it is concluded that the reference to the Second Respondent in the Bangalore Secondment Agreement should be rectified such that it should refer to an employment contract with the First Respondent, and even if it were to be further concluded that after 15 February 2003 (the date the 2000 Agreement concluded) and the commencement of the Bangalore Secondment Agreement there was to be an implied contract of employment on very much the same terms and conditions as set forth in the 2000 Agreement, any contract of employment between Dr Cohen and the First Respondent came to an end at that point of time when:
the Bangalore Secondment Agreement concluded;
or when
the Chennai Secondment Agreement commenced.
Given the prospect that Dr Cohen’s employment with the First Respondent may have continued after February 2003 by reason of the conduct of the parties, it may also have been the case that the First Respondent remained his employer after the Bangalore Second Agreement concluded. But the conclusion that the First Respondent was not the employer of Dr Cohen as at the date his employment was terminated renders it unnecessary to determine the precise date that he ceased employment with the First Respondent.
75 The nature of secondment agreements, of itself, does not assist any contrary conclusion. And, although caution must be exercised when reviewing individual documents, there is evidence which supports the conclusion that the First Respondent was not the employer of Dr Cohen in late 2010. Although it may initially appear curious that Dr Cohen served one period of secondment with one employer and the second period of secondment with a different employer, so much it is concluded necessarily follows from the form of the Chennai Secondment Agreement. It is further concluded that no question arises of the First Respondent purporting to transfer the services of an employee from one employer to another without his knowledge or consent.
The Chennai Secondment Agreement – employment by IBA Health (Asia) Pte Ltd
76 It is concluded that the letter dated 10 June 2008 (‘the Chennai Secondment Agreement’) is a letter evidencing the employment of Dr Cohen by IBA Health (Asia) Pte Ltd.
77 There is considered to be no ambiguity or uncertainty in cl 3.2 which expressly refers to Dr Cohen’s “employment with IBA Health (Asia) Pte Ltd”. Marginal further support for that conclusion may also be derived from the fact that the letter was on the letterhead of IBA Health (Asia) Holdings Pte Limited.
78 Such other terms or phrases within that letter as were relied upon by Dr Cohen in support of a submission that his employment was with the First Respondent do not lead to any contrary conclusion. Those phrases or terms included:
the “Names of the Parties”, including a reference to “IBA Health Group”, in cl 1;
the “continuation of your current Expatriate Assignment”, in the introductory words to the letter;
“your current terms and conditions” in cl 7.1, cl. 9.1 and cl 10.1; and
“your original offer of employment in your home country” and “the written particulars of your employment” in cl 12.1.
Although it may readily be accepted that the 10 June 2008 letter certainly contemplates a continuity of service on the part of Dr Cohen, the reference in cl 3.2 remains unambiguous. The identification of the “Names of the Parties”, it is considered, does no more than refer to the group of companies in the “IBA Health Group” and is not a reference to any particular corporate entity. Nor can cl 3.2 be construed, as submitted by Dr Cohen, as merely creating a “fiction” for the purposes of calculating payments. Those provisions which refer to Dr Cohen’s “current terms and conditions” do no more than identify the terms and conditions to govern his employment on secondment in Chennai by reference to his terms on the Bangalore secondment. They do not identify, or assist in identifying, the employer.
79 Unlike the situation in respect to the Bangalore Secondment Agreement, there were no circumstances surrounding the Chennai Secondment Agreement that could be relied upon by Dr Cohen in support of any application to rectify the 10 June 2008 letter of agreement. His case stood or fell upon how that agreement was construed.
Clause 11
80 One particular aspect of the Chennai Secondment Agreement assumed particular significance relevant to Dr Cohen’s primary submission that the 2000 Agreement continued throughout and that the First Respondent remained his employer at all times.
81 This aspect focussed attention on cl 11, namely the clause headed “Changes to your terms of employment”.
82 In construing the agreement as signed, Counsel on behalf of Dr Cohen correctly submitted that consideration could be given to the content of drafts of the clause and, in particular, to what was deleted from the final version.
83 Reliance was placed upon the following observations of Mason J in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352-353:
There may perhaps be one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention. If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal. After all, the court is interpreting the contract which the parties have made and in that exercise the court takes into account what reasonable men in that situation would have intended to convey by the words chosen. But is it right to carry that exercise to the point of placing on the words of the contract a meaning which the parties have united in rejecting? It is possible that evidence of mutual intention, if amounting to concurrence, is receivable so as to negative an inference sought to be drawn from surrounding circumstances: see Heimann, (38 SR(NSW) at 695).
The importance of this evolution of the law as it affects the construction of contracts is that it centres upon the presumed, rather than the actual, intention of the parties. Once it is accepted that in the construction of the contract account is taken of the presumed intention of the parties it naturally follows that account should also be taken of their presumed intention when the court is called upon to decide whether a term is to be implied. The existence of the remedy of rectification and the purpose which it serves make it obvious that the actual intention of the parties cannot constitute the basis of an implied term.
84 An earlier draft of the Chennai Secondment Agreement as forwarded to Dr Cohen on 11 April 2008 contained the following proposed clause:
11 Change to your terms of employment
11.1 The Company reserves the right to make reasonable changes to any of your terms and conditions of employment and will notify you in writing of such changes at the earliest opportunity and, in any event, within one month after such changes have taken effect.
11.2 Such changes will be deemed to be accepted unless you notify the Company of any objection in writing before the expiry of one month from the date of notification by the Company of the changes.
11.3 This Agreement is in substitution for any previous agreements, arrangements, contracts of employment or for services between the Company or any of its Group Companies (whether written oral or implied), which should be deemed to have terminated by mutual consent.
A subsequent draft was forwarded on 15 May 2008. The draft as forwarded was in a “marked up” version recording that the proposed cl 11.3 was deleted. Clauses 11.1 and 11.2 remained. The final version of the agreement, being the version signed by both Ms Walkington (as the “Group HR Director”) and Dr Cohen, only contained clauses 11.1 and 11.2.
85 The deletion of cl 11.3, it was submitted, removed any suggestion that the Chennai Secondment Agreement contained the entirety of the agreement as between the parties. Counsel for Dr Cohen contended that the deletion of that clause left open the conclusion that the entirety of the agreement was not confined to the Chennai Secondment Agreement and was to also include the 2000 Agreement – albeit as negotiated and varied as between April and June 2008 over time.
86 The deletion of cl 11.3 lends some support to Dr Cohen’s submissions. But the deletion of that clause cannot transform the true identity of Dr Cohen’s employing entity in the face of the unequivocal identification of IBA Health (Asia) Pte Ltd as the employer.
The date of expiration of the Chennai Secondment Agreement
87 Even if a contrary conclusion had been reached in respect to the effect of cl 3.2 of the Chennai Secondment Agreement, and even if it had been concluded that that agreement constituted a further contract of employment between Dr Cohen and the First Respondent, it would have been further concluded either that:
any contract of employment between Dr Cohen and the First Respondent came to an end (at the very latest) when the Chennai Secondment Agreement itself came to an end; or that
Dr Cohen had failed to establish that the First Respondent was his employer when the Chennai Secondment Agreement came to an end.
88 There is, however, some uncertainty arising from the terms of the agreement as to when the Chennai Secondment Agreement came to an end.
89 There is no uncertainty that the agreement was for the secondment of Dr Cohen for a “further period of 24 months”. But whether that period commenced on 10 June 2008 (the date of the letter) or on 1 November 2007 (in accordance with cl 3.1) was unresolved. On any view, however, it came to an end in either November 2009 or June 2010. The preferable view is that it came to an end in November 2009.
90 Dr Cohen’s evidence was that the agreement commenced in November 2007. He was first given notice that his employment was to be terminated in a conversation with the Executive Vice-President, WW Solutions of iSoft, Mr Jackman. This was later confirmed in e-mail sent to Dr Cohen on 18 June 2011.
91 There is no persuasive basis upon which any conclusion could be reached that the employment relationship between the First Respondent and Dr Cohen resumed at the cessation of the Chennai Secondment Agreement in either November 2009 or June 2010.
The nature of secondment agreements
92 In searching for such a persuasive basis, reliance was placed by Dr Cohen on the nature of secondment agreements. Such agreements, it was submitted, gave effect to the secondment of an employee for a limited period of time; thereafter the employee reverted to the original terms of his employment with his original employer. A secondment, Counsel on behalf of Dr Cohen contended, did not sever the original contract of employment.
93 The nature of a secondment agreement was relied upon by Counsel for Dr Cohen both in respect to the Bangalore and Chennai Secondment Agreements. The rectification of the Bangalore Secondment Agreement renders it unnecessary to then look closer at secondment agreements and whether or not anything in the nature of such agreements supported a conclusion that any underlying agreement was revived upon the conclusion of a secondment.
94 The authorities relied upon by Counsel for Dr Cohen were usefully collated by Edmonds J in Gothard, in the matter of AFG Pty Limited (Receivers and Managers appointed) (in liq) v Davey [2010] FCA 1163, 80 ACSR 56. His Honour there said:
[207] The terms of his secondment agreement did not expressly terminate any existing employment agreement although such a termination might be implied from those very same terms or from the conduct of the parties.
[208] In an article entitled “The seconded or transferred employee” by Graham Rossiter of Massey University published in the New Zealand Law Journal, August 2007 at 265, reference is made to two New Zealand cases: Clifford v Rentokil Ltd [1995] 1 ERNZ 407 and Royds v FAI (NZ) General Insurance Co Ltd [1991] 1 ERNZ 820. The learned author writes:
In Clifford v Rentokil Ltd, the applicant was employed by Rentokil as an area manager. In 1991, he agreed to go to Fiji and take on the task of re-structuring a Fiji company. Rentokil and the second respondent were both subsidiaries of the same parent company. The applicant claimed he was constructively dismissed in early 1993 and brought proceeding against Rentokil. Rentokil applied to have the action struck out on the ground that the applicant had been employed by the Fiji company while in Fiji and that his employment was governed by Fiji law. The Employment Court held that this was a situation of the secondment of the applicant by the Rentokil to the Fiji company. The expression “second” in this context was said by Judge Palmer to mean “to transfer an employee to other employment or to another position”. A secondment does not, however, mean a severing of employment or contractual links with the general or primary employer. In this case, notwithstanding that Clifford was providing services for the Fiji company and was being paid by that company, his employment relationship with Rentokil continued. Accordingly, his personal grievance had been correctly commenced under New Zealand law. Somewhat similar circumstances and issues arose in Royds v FAI. Royds was employed by FAI and, in February 1998, was asked to work in Papua New Guinea in an equivalent role for an associated company for a three year term. In September 1998, the applicant was given six months notice of termination. The Employment Court had to determine whether the applicant was entitled to bring a personal grievance in New Zealand or rather had to pursue remedies under PNG law on the basis he had been employed by the defendant’s associated company. Judge Travis held that what had taken place had the “characteristics of a secondment arrangement” (p 832). It therefore followed that the defendant remained throughout the plaintiff’s true employer and New Zealand law was applicable. A key factor in the court’s reasoning appeared to be that the centre or, as it might be put, ultimate control of this business remained with the New Zealand company. Again, as in the Clifford matter, the arrangements at the time of the applicant’s appointment to PNG contemplated repatriation to and future employment in New Zealand by the defendant.’
[209] At the end of the day, the answer to the issue is to be found from an overall view of the entire factual matrix but like the evidentiary deficiencies that faced the court (Finn J) in C&T Grinter, I suspect that I may not have all relevant material and information before me.
Edmonds J was obviously not there purporting to do anything other than set forth the authorities to which he had been referred and to express the conclusion that “the answer to the issue is to be found from an overall view of the entire factual matrix”.
95 Counsel for Dr Cohen also relied upon Clifford v Rentokil Ltd (1995) 1 ERNZ 407 at 425. Palmer J, sitting as the Employment Court in Christchurch, set forth the natural meaning of the term “second” as follows:
Upon a plain words/plain meaning approach, that is to say the “golden rule of construction” that words usually mean what they say, “second” means “transfer (a[n] … official or worker) temporarily to other employment or to another position. Secondment n.” (The Concise Oxford Dictionary – The New Edition for the 1990s, p 1092).
96 The authorities relied upon by Counsel for Dr Cohen do not establish any general legal proposition; they are decisions confined to the facts and circumstances of the facts there prevailing.
97 The nature of a secondment agreement, it is concluded, is properly to be discerned from the terms of the agreement itself. Whether or not it is called or termed a “secondment”, whether or not it severs any pre-existing contractual relationship between the parties and whether the rights and entitlements of the parties revert to being determined by any pre-existing contractual relationship, obviously depends (inter alia) upon the terms of any pre-existing contract and the terms of the secondment agreement in issue. Much may also depend upon the conduct of the parties prior to and, perhaps more importantly, after a secondment comes to an end.
98 Whether or not the pre-existing rights and entitlements of parties to a contract of employment continue to govern their relationship at the expiration of a secondment agreement is not to be resolved simply by characterising an intervening agreement as a “secondment agreement”. Counsel for Dr Cohen did not submit to the contrary.
99 The characterisation of the Bangalore Secondment Agreement and the Chennai Secondment Agreement as “secondment agreements”, it is thus concluded, says nothing as to whether the 2000 Agreement continued at the expiration of either or both of those agreements. It certainly does not necessitate any conclusion that the First Respondent again became the employer after the Chennai secondment came to an end.
Employment by the Second Respondent – the evidence and the need for caution
100 After the Chennai Secondment Agreement came to an end there was some evidence as to the identity of Dr Cohen’s employer at that time. But that evidence did not unequivocally or necessarily point in favour of the employer being the First Respondent.
101 Prior to the Bangalore Secondment Agreement Dr Cohen had not identified the First Respondent as his “employer” for income tax purposes. Dr Cohen in his income tax returns for the period from 1994 through to 2006 had recorded his “employer” as IBA Health (Asia) Holdings Pte Ltd, SW International Systems Pte Ltd or IBA Technologies Asia Holdings Pte Ltd. It would appear from the oral evidence that Dr Cohen considered that there was a difference between his “contractual employer” as opposed to his “employer” for taxation purposes. The following exchange thus occurred between Dr Cohen and his cross-examiner:
MR FERNON: … The companies that were named in the various tax documents that you have reviewed for the purposes of preparing for these proceedings, and told us about in the last few questions, were the companies that you identified as your employer at the relevant times. That’s correct, isn’t it? --- No, I – the companies were represented as where I was based to pay tax. It wasn’t considered by me as my contractual employer. It was a – when I was based in Singapore, I considered that my residence there – tax residence was Singaporean, and India was India.
But in each of the records that you’ve seen, there was a provision for the name of the employer? --- Yes.
And the name of the employer was identified as the Asia Holdings company, or its earlier version, the International System company in Singapore? --- Yes.
Or the Indian companies that you’ve ---?--- Yes.
--- just identified? --- Yes.
Correct? --- Yes.
And in each case, you were identifying that entity that you regarded as your employer, weren’t you? --- Not as my employer in terms of contractual terms.
Well, if the taxation authority requires the employer to be named, it would be necessary, wouldn’t it, to do just that – name the employer? --- Yes.
And that’s what you were doing, naming the employer that you considered you were employed by at that time? --- For the tax purposes, yes.
Well what – if it was for tax purposes or any other purpose, why would a tax purpose be different from the true position? --- Because I considered the iSOFT, or the IBA company before it, to be the overall company that I worked for, and that wherever I was currently based, that was the one that I had to pay my tax and the other conditions demanded by the government. And that was the place that the company decided to put up for tax purposes and other reasons locally, but my overall employer was always the group.
… Is this your evidence Dr Cohen, that you would name as the employer, the company that you thought was most convenient to yourself at the particular time? --- No.
Well, if you considered that your true employer was a company different to the employer named in the tax document, for taxation purposes, you would be doing just that, wouldn’t you? --- No. I mean, I was told when I was asked to second to India that during that stage, that I would have to file tax returns which were done for me and that I was not an employee of India. And I assumed that that was the ways things were done.
The true position is that you never named the first respondent as your employer, correct? --- Not in those documents, no.
And you never regarded the first respondent as your employer? --- That’s not true. I always regarded it as my employer.
The explanation provided is, with respect, less than satisfactory. Why the entity that Dr Cohen “regarded” as his employer was not also the entity identified in the tax returns to which he was taken by his cross-examiner as his employer is not satisfactorily explained by saying that his tax returns were “done for [him]”. There is also a disturbing lack of consistency between Dr Cohen acknowledging that “[his] overall employer was always the group” and his insistence that he “always regarded [the First Respondent] as [his] employer”.
102 Of more immediate concern, however, are those documents concerning the period after the Chennai Secondment Agreement had come to an end.
103 This included a Deloitte Singapore Personal Income Tax Questionnaire for the 2010 assessment year sent by Dr Cohen on 11 October 2010 to the Comptroller of Income Tax in Singapore identifying IBA Health (Asia) Holdings Pte Limited as his “employer”. A further letter sent by Deloitte to Dr Cohen on 23 December 2010 also identified IBA Health (Asia) Holdings Pte Ltd as the “employer”. An internal e-mail sent from Dr Cohen on 11 March 2011 contained another Deloitte Singapore Personal Income Tax Questionnaire for the 2011 assessment year which again identified his “employer” as IBA Health (Asia) Holdings Pte Ltd. An earlier “Memorandum” dated 17 September 2010 from Deloitte to Dr Cohen providing “guidance in respect of [his] Singapore and Indian income tax position” identified Dr Cohen as being an “employee of iSoft Singapore”.
104 In considering the inferences to be drawn from such evidence, the caution expressed by Finn J in C & T Grinter (supra) is to be heeded – namely, documents brought into existence for a particular purpose may not reflect the “reality of the party’s relationship”. The content of taxation records, for example, is not conclusive: Australian Insurance Employees Union v WP Insurance Services Pty Ltd (1982) 42 ALR 598 at 606. Evatt J there concluded:
I am satisfied that WPA was not Mrs Roberts’ employer at any time. The fact that her salary was paid by WPA and that tax group certificates issued to her showed that company as her employer is not conclusive evidence of the fact that it was the employer. I am satisfied that that arrangement was one of financial convenience to the Watkins Group and, in my view, those facts are what may be termed neutral indicia in determining the issue which company was her employer in the legal sense during the relevant period: cf RES Logging Co Pty Ltd v Bridge [1969] AR (NSW) 604, cited Australian Timber Worker Union v Monaro Sawmills Pty Ltd (1980) 29 ALR 322 at 329.
105 Dr Cohen’s explanation for the taxation records also forms part of the factual background against which an inference is to be drawn. Dr Cohen explained that the tax returns merely recorded what he thought were the requirements imposed when he was performing work overseas and as not impacting upon his underlying employment by the First Respondent. But that explanation does not extend to the presumed need for care in correctly identifying the “employer” in September 2010 when Deloitte was providing “guidance”.
106 Although caution must thus be exercised so as to not place too much weight upon such evidence, it remains evidence to be taken into account.
107 On balance, it is considered that such evidence supports a finding that the First Respondent ceased to be the employer of Dr Cohen as from June 2008 when his employer became IBA Health (Asia) Pte Ltd. Even if it were to be concluded that the First Respondent remained Dr Cohen’s employer during the period of his secondment to Chennai, a conclusion which it is respectfully considered should not prevail, that period of employment came to an end in November 2009. Thereafter, Dr Cohen failed to establish on the balance of probabilities that the First Respondent either again became his employer or remained his employer.
A different employer?
108 A conclusion that Dr Cohen at one point of time was employed by the First Respondent and thereafter became employed by a different employer, it was submitted, offended the principle that a new employer cannot be forced upon an employee without his consent.
109 It is clear that an employee cannot be transferred from the employment of one employer to another without his knowledge and consent: McCluskey v Karagiozis [2002] FCA 1137, 120 IR 147. In reliance upon earlier authority, Merkel J there summarised the position as follows:
[11] The law is clear. As was stated by Lord Atkin in Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 … at 1026 there is no power in an employer
“...to transfer a man without his knowledge and possibly against his will from the service of one person to the service of another. I had fancied that ingrained in the personal status of a citizen under our laws was the right to choose for himself whom he would serve: and that right of choice constituted the main difference between a servant and a serf.”
[12] Viscount Simon LC stated at 1020 that it was a fundamental principle of the common law that: “...a free citizen, in the exercise of his freedom, is entitled to choose the employer whom he promises to serve, so that the right to his services cannot be transferred from one employer to another without his assent.”
The “employee’s consent must be the real consent of the employee and not a constructive consent by operation of law”: Gothard, in the matter of AFG Pty Limited (Receivers and Managers appointed) (in liq) v Davey (supra) at 93 per Edmonds J. It matters not that another employer may be “another admirable employer”. Thus, in the decision relied upon by Merkel J, Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 at 1030, Lord Atkin was considering the transfer of rights between companies and amalgamations and continued:
… There has thus been provided a much more rapid mode of carrying out a reconstruction or amalgamation which avoids a winding up, an improved procedure akin to the various modern conveyancing provisions made in other statutes. But why this beneficent procedure should be tainted with the oppression and confiscation which in some cases would certainly be caused, or why in the interests of companies big or small for the mere purposes of an amalgamation it should violate all the rules as to transferability depending on some occasions on principles of our law and on other occasions on contract I cannot imagine. It is said that one company does not differ from another : and why should not a benevolent judge of the Chancery Division transfer the services of a workman to another admirable employer just as good and perhaps better. The answer is two-fold. The first is that however excellent the new master may be it is hitherto the servant who has the choosing of him, and not a judge. The second is that it is a complete mistake in my experience to suppose that people, whether they are servants or landlords or authors do not attach importance to the identity of the particular company with which they deal. It would possibly hurt the feelings of financial gentlemen with large organizing powers and ambitions to know how strongly some people feel about big combinations, and especially amalgamations of small trading concerns. But, it is said how unreasonable this is : for the big company can buy the majority of the shares in the old company : replace the directors and managers : change the policy and produce the same result. Be it so : but the result is not the same : the identity of the company is preserved : and in any case the individual concerned, while he must be prepared to run the one risk, is entitled to say that he is not obliged to run the other.
The mere fact that another corporate employer may be another corporate entity within the same corporate group leads to no different conclusion. It forever remains a matter for the employee to consider; a corporate group cannot change the employer without the concurrence of the employee. See: Chin, Servant or Serf? Severance Pay on Transmission of Business and the Right to Choose an Employer (2003) 16 Australian Journal of Labour Law 1.
110 But no such question arises in the present proceeding of a new employer being substituted for a former employer without the consent of Dr Cohen. Dr Cohen agreed to the secondment in Chennai and agreed with the terms and conditions set forth in the June 2008 letter. It may be accepted that he paid little attention to the terms of the letter. During the course of his cross-examination, the following exchange thus took place in respect to this letter and (in particular) cl 3.2:
And you signed that document on 12 June 2008, did you not? --- Yes.
And clause 3.2 of that document appears on page 459, the first page of the tab? --- Yes.
And in clause 3.2, you agreed, didn’t you, that your employment with IBA Health (Asia) Pte Limited was deemed to have commenced on the first day you joined that company. Therefore, continuous service was effective from 1 November 1988? --- No, I don’t agree. I signed the document, I agree, but I did not pay the detailed attention to this – the fact that it was IBA Health (Asia) mentioned, in November 1988, because it didn’t exist and I knew it. I was never working for that company in November ’88. I mean, when I loot at these documents, just to look – work out the details – I tend to concentrate on the dates …. The terms and so on. To be honest, I don’t pay too detailed attention to the name of the company, because it’s a version of IBA Health or IBA Group, or whatever. The person that signs it is, normally, the senior executive of the group, which is where I put my signature.
But you would agree with me, wouldn’t you, that it’s quite clear that it’s indicating employment with IBA Health (Asia) Pte Limited? --- In this document, yes, I agree with you.
And you would agree with me, wouldn’t you, that the names of parties are referred to in clause 1 of the document? --- Yes.
And the company name of IBA Health Group indicates that he company party is a member of the IBA Health Group? --- Yes, but I read that as – IBA Health Group is the main party that I sign my contract with.
Well, you would agree with me, wouldn’t you, that IBA Health (Asia) Pte Limited is in the IBA Health Group? --- Correct.
As, indeed, is IBA Health (Asia) Holdings Pte Limited? --- Correct.
This is not a case of Dr Cohen being treated as a “serf” rather than an employee – his position was simply that it mattered not to him who his employer was within the “IBA Health or IBA Group”. He did not pay “too detailed attention to the name of the company” because his attention was focussed on “the terms and so on”. The terms were acceptable and so he went to Chennai; the precise identification of his employer was not matter which required in Dr Cohen’s view “detailed attention”.
111 Just as consequences flowed to the First Respondent in part by reason of its signature of the 2000 Agreement, like consequences similarly flow to Dr Cohen due in part to the fact of his signature of the Chennai Secondment Agreement.
Breach of Contract – Termination & Non-Payment
112 Given the conclusions that:
the 2000 Agreement did not continue as an underlying agreement recording the core terms and conditions of the employment of Dr Cohen by the First Respondent;
and more importantly that:
the First Respondent was not Dr Cohen’s “employer” as at the date of termination of his services
it is unnecessary to resolve a number of further submissions advanced on behalf of Dr Cohen. In particular, it is unnecessary to resolve whether any agreement that may otherwise have been implied from the conduct of the parties would have been a continuation of the 2000 Agreement, a “variation” of that agreement or a completely new contract of employment.
113 Nevertheless, the further issues which were raised in both oral and written submissions should be briefly addressed.
Termination - a reasonable period of notice
114 Dr Cohen was first notified of the fact that his employment was to be terminated in a telephone conversation with Mr Jackman, the Vice President he reported to. This intention was then confirmed in an email sent on 18 June 2011. Dr Cohen responded to this email on 20 June 2011 stating that he was “very surprised and extremely disappointed”. He nevertheless concluded by stating he awaited “[the company’s] terms of redundancy” and that he reserved his rights. He concluded his employment on 30 September 2011.
115 In very summary form, it was submitted on behalf of Dr Cohen that:
the e-mail sent on 18 June 2011 was not an effective notice of termination as it did not comply with cl 11 of the 2000 Agreement, namely the clause directed to the manner in which “notices” were to be given; and
a reasonable period of notice of termination was not 6 months, as provided for in cl 10.1(a) of the 2000 Agreement but a period in the range of 12 to 18 months.
116 Given the conclusion that the 2000 Agreement did not continue to apply as at September 2011, it matters not that such notice as was given to Dr Cohen did not comply with a contractual provision no longer in effect. Had cl 11 continued to apply, the e-mail would not have satisfied the requirements there set forth.
117 Some reservation, however, is expressed as to whether a reasonable period of notice was a period of some 12 to 18 months.
118 The period of notice required by cl 10.1(a) of the 2000 Agreement, it may be accepted, only provided for the period of notice to be given during the “term” of that agreement and in the event that that agreement was terminated pursuant to the “early termination” clause set forth in cl 10.2. On the case advanced by Dr Cohen, the 2000 Agreement continued to apply – but subject to variations which were to be implied to accommodate such matters as:
pay increases;
the periods of secondment; and
the period of reasonable notice to be given in the event the agreement was terminated.
Whether any agreement as varied was adequately pleaded may be left to one side.
119 Of present concern is the period of notice to be given had the 2000 Agreement continued, albeit as varied. In the absence of cl 10.1(a) applying it was submitted that a “reasonable period” of notice was to be implied.
120 The object of requiring the giving of reasonable notice is to enable the parties to have a reasonable opportunity to bring a relationship to an end in an orderly manner: Crawford Fitting Co v Sydney Valve and Fittings Pty Ltd (1988) 14 NSWLR 438 at 448. McHugh JA there set forth the principle as follows:
The chief purpose of a notice for a reasonable period, therefore, is to enable the parties to bring to an end in an orderly way a relationship which, ex hypothesi, has existed for a reasonable period so that they will have a reasonable opportunity to enter into alternative arrangements and to wind up matters which arise out of their relationship …
121 “The reasonableness of the period of notice depends upon the circumstances existing” at the time “when the notice is given”: IOOF Building Society Pty Ltd v Foxeden Pty Ltd [2009] VSCA 138 at [72], 23 VR 536 at 552. What period of time is reasonable depends upon a variety of considerations: Elliott v Kodak Australasia Pty Ltd [2001] FCA 807, 108 IR 23. Marshall J there observed:
[98] In determining what is reasonable notice in a particular case consideration should be given to a number of factors including, amongst others, the length of employment, the seniority of employment and the importance of the position. …
With reference to the facts of the case before him, His Honour went on to conclude:
[98] … The fact that Mr Elliott was employed by Kodak for over 17 years lends itself to an argument that any implied term regarding reasonable notice should be longer than the standard one month. However, having regard to the lack of seniority of Mr Elliott's position in Kodak's workforce, I consider 12 months notice would be inappropriate. If the terms of the award did not exclude an implied term regarding reasonable notice, I would have considered that reasonable notice of termination in the circumstances would have been three months. As Kodak paid Mr Elliott three months wages in lieu of notice, any obligation to pay reasonable notice has been discharged.
122 In Macken’s Law of Employment (7th ed, 2011 at 289-291) the authors there helpfully summarise the “job-related factors” relevant to an assessment as to the reasonableness of notice required as being:
(a) the ‘high grade’ of the appointment;
(b) the importance of the position;
(c) the size of the salary;
(d) the nature of the employment.
The authors then proceed to identify those factors which “pertain to the employee and which are relevant in assessing the reasonableness of notice” as including:
(a) the length of service of employee;
(b) the professional standing of the employee;
(c) the employee’s age;
(d) the employee’s qualifications and experience;
(e) her or his degree of job mobility;
(f) the expected period of time it would take the employee to obtain alternative employment;
(g) the period it was likely, apart from the dismissal, that the employee would have continued in the employment;
(h) what the employee gave up to come to the present employer (for example, a secure long-standing job);
(i) the employee’s prospective pension of other rights.
The authors then note:
The courts will be reluctant to impose on the parties a requirement in excess of what either of the parties would have considered reasonable when they turned their minds to that topic. A list of factors such as those above is no more helpful than the conventional aphorism that each case in this area will depend on its own facts. But obviously, if one has an ‘important’ and ‘high grade’ appointment carrying a large salary and occupied by a long-serving employee with but a few years to serve until retirement, a generous period of notice will be required, perhaps nine or 12 months.
Counsel on behalf of Dr Cohen expressly relies in his written submissions upon the reference to a “generous period of notice”. The considerations identified in this text, albeit a useful summary or collation of considerations to be taken into account, nevertheless remain just that; they are not to be equated with a statutory list of considerations, each of which must be addressed in turn. The facts of each individual case must necessarily remain the focus of determining a reasonable period.
123 But one instance of a court concluding that a lengthier rather than a shorter period of notice was appropriate is provided by Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567. The plaintiff had there been employed as an assistant to the construction manager of a building project and his contract provided for the giving of not less than one month’s notice of termination. He thereafter assumed the quite different role of construction manager and, later still, the role of general manager. The Supreme Court of Victoria concluded that it was a question of fact whether a change of duties had given rise to a new contract supplanting the old and that it was a question of fact as to what terms were to be implied. A period of 12 months notice, it was further concluded, was to be applied. In so concluding, Ashley J referred to earlier authorities and went on to say:
… the passage highlights what seems to me to be a valid point - that where employer and employee agree to an alteration in the employee's duties and responsibilities which is profound, a court should be more ready to hold (unless the original contract of employment provided for the contingency) that a new contract has replaced the old; or at least that the old contract, as varied, contained terms objectively appropriate to the new relationship created: [1992] 1 VR at 576-577
A little later his Honour concluded:
… that the original contract between plaintiff and defendant was replaced rather than varied not simply by taking the position that any change in position and salary not contemplated by the original agreement necessarily requires the conclusion that a new contract has been set up, but rather by focussing on the circumstance that a change of great magnitude in the relationship between the parties was effected as at August 1985. In my opinion, a new and very different employment relationship then arose; and it is inapposite to describe it as involving no more than a variation of the earlier agreement between the parties. No reason in law was suggested why the parties could not by a parol agreement discharge the original contract (which was partly written and partly oral) and replace it with another.
On the footing that a new contract came into existence between plaintiff and defendant in August 1985, the next question is – what were its terms – specifically as to termination?: [1992] 1 VR at 578
His Honour then cited as follows the summary provided by Macken and concluded with respect to the period of termination (at 580-581):
Macken et al, Law of Employment, pp. 157-8, lists certain pertinent considerations. Thus, for example: the duration of the hiring; industry practice; the seniority of the position held; the importance of the position held; the size of the salary; the worker's age; the worker's length of service; what the worker gave up to come to the present employer; the worker's prospective pension or other rights.
In the present case I regard as principally important the worker's age when he entered the August 1985 contract, the seniority and importance of, and salary commanded by that position, the fact that the parties would have envisaged – in August 1985 as they did in January 1985 – that the job would be a long-term one, the fact that the plaintiff had given up security to enter the defendant's employment in January 1985 (albeit that this was under a different contract) and the fact that the plaintiff's reasonable expectation of getting superannuation protection was destroyed by the termination which was effected.
I have come to the view that, in all the circumstances, the reasonable period of notice of termination of the plaintiff's employment was 12 months. In arriving at this conclusion I have not ignored the evidence that, in the case of a man technically senior to the plaintiff who was employed by the Chia Group there was an agreed period of notice of three months. This evidence was, understandably, relied upon by Mr. Houghton. But, whilst, no doubt, it casts light on the notice period thought by the Chia Group to be appropriate, it does not resolve the question what period of notice should be accounted reasonable in all the circumstances of Mr. Quinn's engagement. I do not regard it as establishing an industry norm.
Senior Counsel for the Respondents submitted, correctly, that this was a decision influenced (at least in part) by the “profound” changes to the responsibilities discharged by the plaintiff. The present proceeding, he submitted, was not such a case.
124 In the present proceeding it would have been concluded that a period of no more than nine months would have been “reasonable”, given all the circumstances of the case, including:
the period of notice fixed in cl 10(1)(a) of the 2000 Agreement – namely the period which the parties had agreed, at least in 2000, was reasonable;
the fact that it was contemplated in a draft variation to the 2000 Agreement (the draft July 2001 variation) that a period of three months was reasonable;
together with such further factors as:
the fact that Dr Cohen was 60 years old at the time his employment was terminated;
Dr Cohen’s extensive qualifications including a University Medal and a PhD;
his long tenure discharging high-level responsibilities as the Chief Technology Officer;
the 23 years that he had been employed by one or other of the companies within the iSoft group; and
his level of remuneration (approximately $456,125).
Whether or not a period of 9 months would be characterised as “generous” is not to the point; it is considered to be “reasonable” as that term has been dealt with in the authorities. Even six months – being a period which had previously been agreed between the parties – may also have been considered “reasonable”.
125 In indicating that a period of nine months probably would have been “reasonable”, particular consideration has been given to the seniority of Dr Cohen. In Rankin v Marine Power International Pty Ltd [2001] VSC 150, 107 IR 117 Gillard J relevantly observed:
[220] In determining what is a reasonable period in respect to an employee, it must be steadily borne in mind what the primary purpose of giving a period of notice is. It is to enable the employee to obtain new employment of a similar nature. Some types of employment are readily available, whilst others are not. Those who are at the top or near the top of their chosen fields, invariably have very few opportunities to obtain similar employment and hence, the period of notice is usually many months to in excess of a year.
126 That period of nine months would have operated as from 18 June 2011.
Redundancy
127 Dr Cohen further seeks an amount of $409,109.03 in respect of “redundancy pay”.
128 The purpose of a redundancy payment is “to provide compensation to the worker for loss of job, irrespective of whether it leads to any unemployment. The losses which the individual may suffer as a consequence of redundancy, such as loss of security, possible reduction in earnings and fringe benefits and the uncertainty and anxiety of changing jobs, may all be present in the redundancy situation even if he has managed to find another job immediately”: Black v Brimbank City Council (1998) 152 ALR 491 at 504 per Moore J (citing Termination, Change and Redundancy Case (1984) 8 IR 34 at 72 per Moore P, Madder J and Brown C).
129 Dr Cohen’s written submissions state that “[t]he principal basis for Dr Cohen’s claim is that there is an implied term in the contract of employment that where the first respondent terminated his employment on the ground of redundancy, he would be entitled to receive a redundancy payment calculated on the basis of 2 weeks per year of service”.
130 Such a contractual term, it was further submitted, may be implied where there is evidence that the custom “is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract”: Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226 at 236-237. Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ there summarised the principles to be applied as follows:
The circumstances in which trade custom or usage may form the basis for the implication of terms into a contract have been considered in many cases. The cases have established the following propositions:
(1) The existence of a custom or usage that will justify the implication of a term into a contract is a question of fact …
(2) There must be evidence that the custom relied on is so well known and acquiesced in that everyone making a contract in that situation can reasonably be presumed to have imported that term into the contract … However, it is not necessary that the custom be universally accepted, for such a requirement would always be defeated by the denial by one litigant of the very matter that the other party seeks to prove in the proceedings.
(3) A term will not be implied into a contract on the basis of custom where it is contrary to the express terms of the agreement … In matters of this kind, that phrase means no more than that the general notoriety of the custom makes it reasonable to assume that the parties contracted on the basis of the custom, and that it is therefore reasonable to import such a term into the contract.
(4) A person may be bound by a custom notwithstanding the fact that he had no knowledge of it …
131 Had it been necessary to determine whether the Respondents had a policy of making redundancy payments and whether that practice or policy was “well known”, that question would have been resolved in favour of Dr Cohen. It would have been assumed that “the parties contracted on the basis of that custom”. The submission of Senior Counsel for the Respondents to the contrary would have been rejected.
132 Evidence sufficient to make such findings of fact may be found in the evidence of Dr Cohen and his brother, Mr Gary Cohen. The fact that redundancy payments were made – albeit not the manner of calculation – is also supported by various documents and e-mails.
133 Dr Cohen thus gave evidence as to payments made to employees who were made redundant “arising out of the Medicom acquisition”. In his evidence in chief, the following exchange took place:
How many employees altogether, Dr Cohen, were made redundant arising out that acquisition?---I believe between 12 to 13.
And Dr Cohen, from your involvement in those redundancies, do you recall the basis for the payment of those redundancies?---It was based on the formula of two weeks per year for every year served, which I think was more than – if you had served more than three years.
Now, Dr Cohen, were you involved in any other redundancies besides those in 2005 and 2006?---I was involved with a number of others prior to the 2000 contract.
Can you explain – can you tell the court when those redundancies occurred?---I believe around the mid 90s when we had some financial issues and we had to let a lot of staff go, and at that stage we were a joint venture with ICL, and this was their practice.
Dr Cohen also then went on to give evidence that in respect to the employees that were made redundant prior to 2000, the same “formula” had been applied – namely, “two weeks a year for every year served more than three years”.
134 If reference is made to other redundancies that have occurred, there is limited further recognition of redundancy payments being made. For example, there was an e-mail from the “Head of HR, Global Functions” sent on 12 February 2010 that referred to a “draft redundancy calculation” for a named employee, but no reference was made to any “formula” being applied to determine that calculation.
135 The fact that Mr Gary Cohen gave a slightly different account as to the practice and the fact that the Medicom acquisition took place some years previously in 2005 does not dictate any contrary conclusion. Mr Gary Cohen in his Affidavit thus referred to his involvement in “… many terminations of the employment of executives and senior staff” and that the “general practice adopted by iSOFT in such cases was to make payments to executives in accordance with a scale of 2 weeks per year of service, in addition to any notice period”.
136 An alternative ground for the entitlement to redundancy pay was put on the basis of s 119 of the Fair Work Act. But that Act, it is concluded, does not apply.
The promised pay rise
137 The claim for what is characterised by Dr Cohen as an “[u]nderpayment of remuneration between 1 July 2010 and 30 September 2011” is in the sum of $74,500.42. This was a claim made against the First Respondent as the “employer” of Dr Cohen as at the date of the termination of his services.
138 Attention had been given to the question whether Dr Cohen’s salary should be increased from at least September 2007. In October 2007 a meeting of the Appointments and Compensation Committee of IBA Health Limited considered that “further salary data was required” before a decision could be made.
139 The present claim, however, is in respect to an alleged failure to give effect to a pay rise which was agreed in July 2009. The claim has its origins in the following letter sent by Mr Gary Cohen in his capacity as the Executive Chairman and CEO of iSoft to Dr Cohen on 6 July 2009:
Dear Brian
I am pleased to be able to inform you that as a result of a recent review of executive pay, your Annual Base Salary has been increased to AUD$396,440, representing an increase of 6%. Your new Annual Base Salary will be paid with effect from 1 July 2009.
In addition to this increase, your Annual Base Salary will be increased a further 6% to AUD$420,227 effective 1 July 2010.
All other terms and conditions of your employment remain unchanged.
I would like to take this opportunity to thank you for all your consideration efforts and achievements over the past year and to wish you every success for the future.
It was common ground that the first increment in salary was paid but that the second increment was not paid.
140 Attention was thus being given to the appropriateness of a pay increase immediately before Dr Cohen commenced his secondment in Chennai and during that secondment. Indeed, the July 2009 letter was relied upon by Counsel for Dr Cohen to support his submission that Dr Cohen’s employer at this point of time was the First Respondent and not IBA Health (Asia) Pte Ltd. The letterhead, it was submitted, was not on IBA Health (Asia) letterhead – but that of iSoft. The submission in respect to the identity of the employer has been rejected. But the claim in respect to the failure to give effect to Dr Cohen’s pay rise can be briefly addressed.
141 As at July 2009 the First Respondent, it has been concluded, was not the “employer” of Dr Cohen. The claim as against it for “underpayment of remuneration” should thus be rejected on that basis alone. Senior Counsel on behalf of the Respondents separately submitted that there was in any event no consideration provided by Dr Cohen in exchange for a contractual variation to accommodate the promised increase. Had it been necessary to resolve that further submission, it would most probably have been also accepted.
142 On behalf of Dr Cohen it was submitted that the terms in which the July 2009 letter were expressed were not such as to amount to an offer which had to be accepted by Dr Cohen but rather as a variation of a prior agreement: cf. O’Sullivan Partners (Advisory) Pty Ltd v Foggo [2012] NSWCA 40 at [60] per Campbell JA (Macfarlan and Young JJA at [101] and [120] agreeing). Consideration for the pay increase, it was submitted, was provided by Dr Cohen continuing to provide services and in not seeking to terminate his contract of employment. He continued to provide his services, such was the submission, in the belief that he would receive a pay increase which had long been under deliberation.
143 Consideration, it has been held, may be found by an employee continuing in employment. Thus, for example, in Ajax Cooke Pty Ltd t/as Ajax Sparway Fastners v Nugent (unreported, Supreme Court of Victoria, Phillips J, 29 November 1993). Phillips J there concluded that an employee was entitled to be paid certain sums for “redundancy”. His Honour relevantly observed:
In my opinion, the notice containing the terms and conditions of the redundancy package was an offer to the plaintiff (among others) on condition: if the plaintiff continued in his employ until retrenchment then, if retrenchment occurred during the currency of the agreement, the benefits spelled out in the redundancy package would be paid by the employer. …
To this, the defendant responded that, by continuing in employment, the plaintiff was doing no more than he was already bound to do by his contract of employment, in the absence of any notice from him to terminate that employment. It was said that the plaintiff was bound to continue working unless and until he gave notice to quit and that therefore his mere continuing in employment could not constitute consideration for the employer's offer of the redundancy package. But I think this should be rejected. The plaintiff was not bound to continue in his employment: even if the employee was bound by his existing contract not to quit his employment without giving due notice, he was not bound to continue in employment until retrenchment. By doing so in the belief that the package applied to him, he both accepted the offer made of further benefits upon retrenchment, and he gave consideration at the same time.
His Honour, it should also be noted, there found that there was a “benefit” to both the employer and the employee. His Honour thus stated that:
… it was at least open to the magistrate to have found mutual advantage to both plaintiff and defendant in the redundancy package. The benefit to the plaintiff is obvious. As for the defendant, was it not open to infer that, in posting notice of the redundancy package, and thereby announcing the benefits to be paid during the relevant period, the defendant acted to secure some benefit or advantage to itself, whether by inducing its employees to refrain from further industrial disputation or by encouraging them to continue in their present employment? …
144 The most useful examination of whether the continued performance of an existing contractual obligation may provide consideration for a promised future benefit is that undertaken by Santow J in Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723. His Honour there examined whether a “practical benefit” would suffice to permit enforcement of such a promise. After reviewing the authorities and the commentary provided by text writers, his Honour concluded:
“The present state of the law on this subject can be expressed in the following proposition:
(i) If A has entered into a contract with B to do work for, or to supply goods or services to, B in return for the payment by B, and
(ii) At some stage before A has completely performed his obligations under the contract B has reason to doubt whether A will, or be able to, complete his side of the bargain, and
(iii) B thereupon promises A an additional payment or other concession (such as reducing A's original obligation) in return for A's promise to perform this contractual obligation at the time, and
(iv) (a) As a result of giving his promise B obtains in practice a benefit, or obviates a disbenefit provided that A's performance, having regard to what has been so obtained, is capable of being viewed by B as worth more to B than any likely remedy against A (allowing for any defences or cross-claims), taking into account the cost to B of any such payment or concession to obtain greater assurance of A's performance, or
(b) as a result of giving his promise, A suffers a detriment (or obviates a benefit) provided that A is thereby foregoing the opportunity of not performing the original contract, in circumstances where such non-performance, taking into account B's likely remedy against A (and allowing for any defences or cross-claims) is capable of being viewed by A as worth more to A than performing that contract, in the absence of B's promised payment or concession to A.
(v) B's promise is not given as a result of economic duress or fraud or undue influence or unconscionable conduct on the part of A nor is it induced as a result of unfair pressure on the part of A, having regard to the circumstances, then,
(vi) The benefit to B or the detriment to A is capable of being consideration for B's promise, so that the promise will be legally binding.”
Dr Cohen, it is concluded, cannot bring himself within this statement of principle. On the case advanced on behalf of Dr Cohen, consideration for the promised pay rise was to be found simply in the continued performance of an existing contractual obligation. The law, however, has not as yet embraced such a proposition; indeed, it has long rejected it: Stilk v Myrick (1809) 2 Camp 317, 170 ER 1168.
145 The present case is a long way removed from the remaining sailors in Stilk v Myrick who sailed a ship home after other sailors had deserted. The remaining sailors were promised, but did not receive, the wages otherwise payable to the deserters. The principle established by that decision may well be in need of reform: Meyer-Rochow, The Requirement of Consideration (1997) 71 Australian Law Journal 532. The need for change has long been mooted. Thus, after conducting a case-law study of French law, Mason wrote in 1941:
III. Shall We Change The Law Of Consideration ?
Our law of consideration, in its relationship with the law of formality, is inharmonious and unbalanced. It fails to provide a useable guide to direct the formalities of contract making. It has improperly intruded itself into the doman of tort. It fails to make suitable provision for gratuitous promises of service. Above all, it fails to respect the reasonable requirements of business and does not aid to equitable decision in commercial cases: The Utility Of Consideration – A Comparative View (1941) 41 Columbia Law Review 825 at 847.
146 In the present proceeding, however, there was no suggestion that Dr Cohen would resign in the event that his remuneration was not increased. There was no case sought to be advanced, for example, that Dr Cohen continued his employment against a background of threatened industrial action or contractual uncertainty. Nor was any suggestion put that the promised increase in remuneration was made to improve the chances of securing Dr Cohen’s services. It was never contended that Dr Cohen was even giving any thought to seeking employment elsewhere. Indeed, there was no evidence of anything other than consideration being given to increasing his salary.
147 Given the fact that this claim made by Dr Cohen must nevertheless fail, it is perhaps prudent to not attempt any further analysis of the First Respondent’s submission that the pay rise was not supported by consideration.
148 Dr Cohen’s claim in contract as against the First Respondent for “underpayment of remuneration” is thus rejected. As at the date of the promised pay rise, the First Respondent was not Dr Cohen’s “employer” and, in any event, there was most probably a lack of consideration provided by Dr Cohen in return for the increase.
149 It should, perhaps, also be mentioned that the facts relevant to the separate claim for a “retention payment” also assume some relevance to the conclusion that there was an absence of consideration provided by Dr Cohen in return for the promised pay rise. Rather than some “practical benefit” being held out to Dr Cohen if he continued to provide those services, the facts relevant to the claim for a “retention payment” seem to suggested the very opposite. Rather than some “practical benefit” – perhaps in the form of a “retention payment” – being offered to Dr Cohen in return for his continued services, Dr Cohen’s claim is that all other senior executives other than himself were being offered the “retention payment”.
The failure to pay a retention payment & unauthorised deductions
150 The claim that the First Respondent has wrongfully failed to pay what was characterised as a “retention payment” should also be refused.
151 The facts relevant to the claimed “retention payment” should, however, be briefly mentioned.
152 In about June, or perhaps later in about July or August 2010, the First Respondent had decided to make a payment of $100,000 to all senior executives other than Dr Cohen. The reason Dr Cohen did not receive this payment was explained to Mr Gary Cohen by Mr Robert Moran in a conversation that took place in about June. Mr Moran was the Managing Director of iSoft’s largest shareholder, Oceania Capital Partners. Mr Gary Cohen set forth that conversation in his Affidavit as follows (without alteration):
Mr Moran: “It’s a very troubled time. We’re looking at offering retention payments to some key executives of about $100,000”.
Me: “I agree. Who will get them?”
Mr Moran: Andrea [Fiumicelli, COO], Steve [Garrington, Director of Business Strategy], Martin [Deda], and the MDs of each region”.
Me: “What about Brian [Cohen]?
Mr Moran: “He’s got a large enough interest. He’s a major shareholder. He’s already incentivised. I don’t think that would be appropriate in the circumstances”.
Me: “That’s a family interest. He shares it with me. His position as CTO is separate to that.”
Mr Moran: “I’m not interested”.
A Remuneration Committee Paper of IBA Health Group Limited prepared on 21 July 2010 confirms the decision to exclude Dr Cohen from those to whom the payment would be made. That paper stated in part as in part as follows:
The retention proposal will apply to the following Senior Executives
Extension of Notice Period | Retention payment /date | |
Andrea Fiumicelli | 12 months | $100,000 30.09.11 |
Mike Jackman | $100,000 30.09.11 | |
Brian Cohen | 6 months | |
Steve Garrington | $100,000 30.09.11 | |
Martin Deda | $50,000 31.12.10 | |
Guillermo Ramas | 6 months | $100,000 30.09.11 |
Adrian Stevens | $100,000 30.09.11 | |
Peter Herrmann | $100,000 30.09.11 | |
Michael Dahlweid | $100,000 30.09.11 |
Thereafter there was a further discussion between Mr Gary Cohen and Mr Fiumicelli, who had been appointed the interim Chief Executive Officer of iSoft. Mr Fiumicelli told Mr Gary Cohen that “[s]ome members of the Board want me to stop talking to” Dr Cohen because “they don’t trust him not to tell you everything”. Whatever the reason for the decision, the decision to not make a “retention payment” to Dr Cohen was clearly deliberate.
153 On behalf of Dr Cohen it is said that there is an implied term in employment contracts that an employer should not, without proper cause, conduct itself in a manner calculated to damage or destroy the relationship of mutual trust and confidence: Russell v Trustees of the Roman Catholic Church for the Archdiocese of Sydney [2007] NSWSC 104, 69 NSWLR 198 per Rothman J. In declining the make the “retention payment” to Dr Cohen, it is then said that “the first respondent’s conduct breached the implied term of mutual trust and confidence”. A “reasonable inference”, it is submitted, “can be drawn that no adequate explanation exists other than the discriminatory reason asserted”.
154 In seeking to give content to an employer’s duty pursuant to such an implied term and to the purpose to be served by such a term, Doyle CJ, White and Kelly JJ in State of South Australia v McDonald [2009] SASC 219, 104 SASR 344 observed:
[232] It is plain that the duties which may be required of an employer under the implied term of mutual trust and confidence, or perhaps the conduct from which an employer should refrain, are still being developed. This seems inevitable given the open ended nature of the way in which the duty is expressed. In England, the implied term of mutual trust and confidence has evolved into a duty by employers to treat their employees fairly. Basten JA appeared to approve of this evolution in Russell. But other authorities have resisted the notion that the implied term connotes an obligation which is closely related to that of fairness, namely, an obligation by employers to treat employees reasonably.
[233] It may be that the better view is that the implied term operates in a variety of circumstances within an employment relationship to restrain abuses of an employer’s power. This purpose of the term is suggested by the authors of Macken’s Law of Employment:
Whilst the duty may add little to the obligations of the employee, its importance lies in the extent of obligations it imposes on the employer. It provides a means by which “a balance [is] struck between an employer’s interest in managing his business as he sees fit and the employee’s interest in not being unfairly and improperly exploited”. In a climate of reduced collective bargaining, it protects the vulnerable employee by imposing limits on the managerial prerogative.
It should, however, be noted that the Full Court there went on to conclude:
[234] The determination of the State’s submission concerning the necessity for the implication of the term as to mutual trust and confidence in contracts of employment generally would require a closer analysis of the basis of the term, the nature, scope and effect of the term, and of the interrelationship of the term with other established terms and conditions of employment relationships than we have attempted so far.
[235] As noted at the outset of these reasons Mr McDonald’s submissions, made as a self represented litigant, did not address adequately many of the issues of legal principle to which the appeal gave rise. In particular, his submissions did not address adequately the issues of principle which arose from the State’s submission that his contract of employment did not contain the implied term of mutual trust and confidence. We do not say this by way of criticism of Mr McDonald: only to indicate that the Court has not had the benefit of detailed submissions about these issues.
[236] In these circumstances, we consider it inappropriate to determine the State’s submission that the implied term of mutual trust and confidence does not form part of Australian employment contracts generally. We think it sufficient to address only the State’s alternative submission that the implied term did not form part of Mr McDonald’s contract of employment.
Their Honours thus set aside an award of damages that had been made at first instance for breach of the implied term.
155 Irrespective of how these concerns may ultimately be resolved, there are a number of difficulties in accepting the claim now made by Dr Cohen for the “retention payment”.
156 First, it has been concluded that the First Respondent was not the employer of Dr Cohen as at mid-2010. And that conclusion is adhered to notwithstanding the fact that the Remuneration Committee was apparently a committee of the First Respondent. The form of the Remuneration Committee Paper is but another instance of there being a lack of consistency or precision in identifying with any degree of certainty the true employer of Dr Cohen.
157 Second, if it had been necessary to decide the point, it would have been concluded that the term should not be implied into Dr Cohen’s contract of employment as at mid-2010. The basis upon which any such term should be implied was not fully explored either during the course of oral submissions or in the written submissions filed on his behalf. The New South Wales Court of Appeal has recently concluded that a pleading founded upon an implied term of trust and confidence “should be regarded as disclosing an issue that is triable in the sense …. indicated by reference to the General Steel test”: Shaw v State of New South Wales [2012] NSWCA 102 at [44] per Barrett J (Beazley, McColl, Macfarlan JJA and McClellan CJ at CL agreeing). An even more recent decision of this Court has concluded that such a term should be implied into the contract of employment there in issue: Barker v Commonwealth Bank of Australia [2012] FCA 942 at [330] per Besanko J. There is much to be said, however, for the reservations expressed by Buchanan J in Dye v Commonwealth Securities Ltd [2012] FCA 242 at [601] as to “the general existence of an implied term of mutual trust and confidence”. But these questions received scant attention in the present proceeding and the circumstances of this case do not give rise to a need to express any concluded view.
158 Third, even if a term of the kind alleged is to be implied, the content of any such term was not specified. In the absence of knowing with some degree of precision the precise term sought to be implied, it is difficult to reach any conclusion as to whether that particular term has been breached. Whatever may be the content of the term sought to be implied, it is concluded that the evidence most probably falls short of demonstrating any breach. Mr Fiumicelli was obviously not comfortable with the Board not wanting him to talk to Dr Cohen. But no inference should be drawn as to why Dr Cohen did not receive the payment other than that explained to Mr Gary Cohen by Mr Moran.
159 The claim made by Dr Cohen for unauthorised deductions from his salary must also fail. Dr Cohen alleges that for the period between 1 September and 30 September 2011 he has remained unpaid. Any claim for any amount outstanding is to be made against his employer and not the First Respondent.
The Fair Work Act
160 The conclusion that the First Respondent was not the employer of Dr Cohen as at the date his services were terminated also renders it unnecessary to determine whether the Fair Work Act applies to Dr Cohen’s employment.
161 But, again, both oral and written submissions were advanced in respect to this question. Those submissions should thus be briefly addressed. A question inevitably arose as to whether the Act applied to services being performed by Dr Cohen whilst he was employed outside Australia. He was employed to provide services in both Singapore and in India whilst on secondment.
162 Given the fact, however, that it is unnecessary to resolve the argument as to the application of the Fair Work Act and the potential significance that any observations in respect to the operation of the Act beyond Australia may assume, it is prudent to express no more than very tentative views.
163 Part 1-3, Division 3 of the Fair Work Act provides for the “geographical application of this Act”. Within that Division, s 34 extends as follows the Act “beyond the exclusive economic zone and the continental shelf”:
Extension of this Act beyond the exclusive economic zone and the continental shelf
Extension to Australian ships etc.
(1) Without limiting subsection (3), this Act extends to or in relation to:
(a) any Australian ship outside the outer limits of the exclusive economic zone and the continental shelf; and
(b) any ship, outside the outer limits of the exclusive economic zone and the continental shelf, that:
(i) is operated or chartered by an Australian employer; and
(ii) uses Australia as a base.
(2) For the purposes of extending this Act in accordance with paragraph (1)(b):
(a) any reference in a provision of this Act to an employer is taken to include a reference to an Australian employer; and
(b) any reference in a provision of this Act to an employee is taken to include a reference to an employee of an Australian employer.
Extensions prescribed by regulations
(3) Without limiting subsection (1), if the regulations prescribe further extensions of this Act, or specified provisions of this Act, in relation to all or part of the area outside the outer limits of the exclusive economic zone and the continental shelf, then this Act, or the specified provisions, extend accordingly to:
(a) any Australian employer; and
(b) any Australian-based employee.
(3A) For the purposes of extending this Act in accordance with subsection (3):
(a) any reference in a provision of this Act to an employer is taken to include a reference to:
(i) an Australian employer; and
(ii) an employer of an Australian-based employee; and
(b) any reference in a provision of this Act to an employee is taken to include a reference to:
(i) an employee of an Australian employer; and
(ii) an Australian-based employee.
Modified application in the area outside the outer limits of the exclusive economic zone and the continental shelf
(4) Despite subsections (1) and (3), if the regulations prescribe modifications of this Act, or specified provisions of this Act, for their operation under subsection (1) or (3) in relation to all or part of the area outside the outer limits of the exclusive economic zone and the continental shelf, then this Act, or the specified provisions, have effect as so modified in relation to the area or part.
(5) For the purposes of subsection (4), the regulations may prescribe different modifications in relation to different parts of the area outside the outer limits of the exclusive economic zone and the continental shelf.
Section 35 defines what is meant by an “Australian employer” and an “Australian-based employee” as follows:
Meanings of Australian employer and Australian-based employee
(1) An Australian employer is an employer that:
(a) is a trading corporation formed within the limits of the Commonwealth (within the meaning of paragraph 51(xx) of the Constitution); or
(b) is a financial corporation formed within the limits of the Commonwealth (within the meaning of paragraph 51(xx) of the Constitution); or
(c) is the Commonwealth; or
(d) is a Commonwealth authority; or
(e) is a body corporate incorporated in a Territory; or
(f) carries on in Australia, in the exclusive economic zone or in the waters above the continental shelf an activity (whether of a commercial, governmental or other nature), and whose central management and control is in Australia; or
(g) is prescribed by the regulations.
(2) An Australian-based employee is an employee:
(a) whose primary place of work is in Australia; or
(b) who is employed by an Australian employer (whether the employee is located in Australia or elsewhere); or
(c) who is prescribed by the regulations.
(3) However, paragraph (2)(b) does not apply to an employee who is engaged outside Australia and the external Territories to perform duties outside Australia and the external Territories.
164 Section 34, it is considered, is not confined to applying the Fair Work Act to “Australian ships”; s 34(3) clearly is expressed in terms of being not limited by s 34(1). Provision is made in s 34(3) for the making of regulations to “prescribe further extension of this Act”. For the purposes of the present proceeding, it is accepted that there is no relevant regulation.
165 The First Respondent, it may be accepted, falls within s 35(1)(a). But Dr Cohen cannot bring himself within s 35(2)(b) by reason of s 35(3). Even if the 2000 Agreement had been a continuing source of contractual obligations and he were found to be engaged by the First Respondent, he was “engaged outside Australia … to perform duties outside Australia”. When taken at the outset of his oral evidence, Counsel appearing for Dr Cohen asked whether there were any corrections he wished to make to his Affidavit and the following exchange occurred:
Which parts of your affidavit would you like to change?---Paragraph 45, in relation to my recollections of signing the 2000 contract.
What is the correction you wish to make, Dr Cohen?---In my original affidavit, I stated that I couldn’t recollect exactly which place that I had signed the document. But when I went back to look over the document, I realised that it was witnessed by my then personal assistant, Zena Vacbutter who was with me in Singapore at that state and had not come to Australia, so by deduction, I assumed that I had signed it in Singapore.
That’s the only change you wish to make, Dr Cohen?---Yes.
If “engaged” is a reference to the physical location where Dr Cohen executed the 2000 Agreement, as was the contention of Senior Counsel for the Respondents, the place of “engagement” was Singapore. Dr Cohen was thus a person who was “engaged outside Australia and the external Territories to perform duties outside Australia and the external Territories” within the meaning of and for the purposes of s 35(3).
The Long Service Leave Act
166 In the present proceeding it was also claimed on behalf of Dr Cohen as against the First Respondent that he has an unpaid entitlement to long service leave in the sum of $177,283.68. That is a sum claimed for leave accruing during the period from 1 November 1988 through to 30 September 2011.
167 That sum is calculated on the basis that:
there was a contract of employment between the First Respondent and Dr Cohen;
the period of entitlement was from 1 November 1988 to 30 September 2011; and
Dr Cohen performed “services” for the First Respondent within the meaning of and for the purposes of the Long Service Leave Act.
The claim in contract is dependent upon the provisions of the State Long Service Leave Act.
168 Irrespective of whether the 2000 Agreement applied until the termination of Dr Cohen’s employment in September 2011, the claim for long service leave fails for quite separate reasons.
169 Any entitlement to long service leave is contingent upon laws, awards or agreements beyond the contract of employment. Clause 7.2 of the 2000 Agreement simply provided as follows:
Long service leave
The Executive’s long service leave entitlements are to be determined in accordance with law and with the policy of the Company and the Executive must take reasonable steps to ensure that long service leave is taken at a time convenient to the Company.
The only written “policy” in evidence was one with an “effective date” of 1 January 2010. Assuming that that “policy” – or a different earlier version – was in like terms, Clause 2.4 provided as follows:
Long Service Leave is a leave entitlement granted to employees for “long service” to an employer. Entitlements are contained in either state legislation or in federal awards or agreements.
Employees can contact Human Resources to determine eligibility for entitlements.
Any “entitlements” are thus to be found, if at all, in the State Long Service Leave Act.
170 Section 2 of the Long Service Leave Act provides as follows:
Construction
This Act shall be read and construed subject to the Commonwealth of Australia Constitution Act, and so as not to exceed the legislative power of the State to the intent that where any provision of this Act, or the application thereof to any person or circumstances is held invalid, the remainder of this Act, and the application of such provision to other persons or circumstances shall not be affected.
Section 3 of the State Act defines an “employer” as “any person employing any worker or workers and includes the Crown”. Section 4(1) further provides as follows:
Except as otherwise provided in this Act, every worker shall be entitled to long service leave on ordinary pay in respect of the service of the worker with an employer. Service with the employer before the commencement of this Act as well as service with the employer after such commencement shall be taken into account for the purposes of this section.
171 Notwithstanding the manner in which s 4 is drafted, it was obviously common ground that the Long Service Leave Act does not apply to all contracts of employment entered into anywhere in the world. There is a territorial limitation: Mynott v Barnard (1939) 62 CLR 68 at 73. Latham CJ there observed in respect to an argument as to the application of the Workers Compensation Act 1928 (Vic) in respect to a worker injured in New South Wales:
… It would be unreasonable to read the section as applying to all employers, all workers, and all accidents everywhere. Some territorial limitation must be introduced in the construction of the section. The court has been offered an embarrassing choice of possible limitations …
172 The territorial limitation which it has been accepted applies in respect to the Long Service Leave Act is that it is necessary to find some nexus between the Act and the State of New South Wales: Australian Timken Pty Ltd v Stone (No 2) [1971] AR (NSW) 246 at 253. The test which was there applied was whether the there was a “substantial connection” with New South Wales. McKeon, Sheldon and Sheppard JJ there concluded:
… We are, therefore, in agreement with the appellant’s approach to the problem to the extent that it contends that the service involved must be connected with New South Wales. We think, however, that its submission go too far when they involve the proposition that the service (subject to temporary absences) which is to be rewarded must be performed entirely in New South Wales. We think that the benefits provided for in the Act accrue if at the time the relevant event occurs (that is, completion, termination or cessation) the service which was being performed up to that time has a substantial connection with this State. This interpretation seems to us to accord with the purpose and policy of the Act without being in any way inconsistent with its language. It is to be assumed that the legislature intended the statute to bear a meaning which would have regard to the practical situation in industry and would leave as few anomalies as possible. We believe that the interpretation we favour achieves this result. This view does not make it necessary, as in the case of workers’ compensation legislation, that the relevant event must occur within the State but it is essential that, at the time of its occurrence, the service, looked at as a whole, may fairly be said to be to a substantial extent New South Wales service. Whether it is or not must be a question of fact and degree in each case. If, however, the service is actually being performed here at the time when the relevant event occurs, this is strong although not conclusive evidence that the service has a substantial connection with New South Wales. While we realize, on this pragmatic test, that there will be some cases close to the border, we see no difficulty in the present case. …
This decision was subsequently applied in International Computers (Australia) Pty Ltd v Weaving [1981] 2 NSWLR 64 at 74 per Watson, Dey and Maclean JJ.
173 In the present proceedings, it is submitted on behalf of Dr Cohen that the “substantial connection” with New South Wales is to be found in:
the fact that the First Respondent is incorporated in New South Wales and has its principal place of business in New South Wales;
the fact that Dr Cohen was born in, and grew up in New South Wales;
the fact that the 2000 Agreement is, by reason of cl 13.1, “governed by the law in force in New South Wales”; and
the fact that the entitlement to “long service leave” referred to in cl 7.2 of the 2000 Agreement is “quintessentially” an entitlement conferred and recognised by Australian law.
174 The Respondents maintained at all times that Dr Cohen’s service did not have a substantial connection with NSW and that the factors relied upon by Dr Cohen only served “to demonstrate the disparity between the Applicant’s service and New South Wales”. The “connection” with New South Wales is only further removed if:
the 2000 Agreement did not operate continuously throughout his employment as a contract of employment;
And, irrespective of whether there was such a continuity of agreement, any connection is also further removed if reference is made to:
clause 13.1 of the Chennai Secondment Agreement which provided that the employment of Dr Cohen whilst on secondment in Chennai was to be “governed by Indian employment law”.
175 In resolving these competing submissions, it has not been considered appropriate to determine whether there are more considerations pointing to a connection with New South Wales as opposed to those which indicate the lack of any such connection. It has thus not been considered appropriate to approach any determination as to whether there is a “substantial connection” with New South Wales by reference to which jurisdiction has the greater connection to that State. A contract may have a “substantial connection” with New South Wales even though it may also have “substantial connection” with (for example) India.
176 Approached in such a manner, it is concluded that there is no substantial connection between Dr Cohen and New South Wales for the purposes of the Long Service Leave Act.
177 It is unnecessary to address the submission advanced on behalf of the Respondents that this Court lacked jurisdiction to make an order for the recovery of long service leave accruing by virtue of a State Act. Section 12 of the Long Service Leave Act, it may be noted, confers jurisdiction to make such an order upon a Local Court of New South Wales or the Industrial Relations Commission of New South Wales in Court Session. Whether those Courts possess jurisdiction exclusive of this Court is equally unnecessary to resolve.
178 The claim for payment of long service leave therefore fails.
Conclusions
179 The case advanced on behalf of Dr Cohen dependent upon the continuation of the 2000 Agreement throughout (or a contract replacing it in substantially identical terms) and dependent upon the First Respondent being the employer as at the date of termination thus fails.
180 The fact is that insufficient attention was given by Dr Cohen to the form in which letters in respect to his employment were expressed. He paid little attention to the entity identified in that correspondence as his employer. It may have mattered little to him to definitively identify his employer – at least until that point of time when his services were terminated. But it is concluded that the First Respondent was not his employer when Dr Cohen departed for Chennai on his second secondment. And thereafter there is an insufficient factual basis upon which any conclusion can be reached that the First Respondent again became his employer when he returned from Chennai to Singapore.
181 Except with respect to the claim for long service leave, no question was raised as to the jurisdiction of this Court to resolve all of the claims for relief as were relied upon by Dr Cohen.
182 The parties are to bring in Short Minutes of Orders within fourteen days to give effect to these reasons. Consideration should also be given by the parties to the question as to whether the present proceeding falls within s 570 of the Fair Work Act. Short submissions directed to that question may also be filed.
I certify that the preceding one hundred and eighty-two (182) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. |
Associate:
