FEDERAL COURT OF AUSTRALIA

Kilcran, in the matter of Allco Finance Group Limited (Receivers and Managers Appointed) (In Liquidation) v Gothard [2012] FCA 1145

In the matter of Allco Finance Group Limited (Receivers and Managers Appointed) (In Liquidation)

THE COURT ORDERS THAT:

1.    The plaintiff’s claim be dismissed.

2.    The plaintiff pay the defendants’ costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

In the matter of Allco Finance Group Limited (Receivers and Managers Appointed) (In Liquidation)

REASONS FOR JUDGMENT

1    The principal issue in this case is whether Mr Kilcran was dismissed from the employ of the Allco Finance Group Ltd (‘AFG’) by something alleged to have been said at a meeting on 25 November 2008 by one of AFG’s receivers to Mr Kilcran’s immediate supervisor. For the reasons which follow, I have concluded that what Mr Kilcran alleges was said was not said. Consequently, the case fails.

2    On 4 November 2008, one of the secured creditors of AFG appointed Messrs Gothard and Sherman, who are members of Ferrier Hodgson, as receivers and managers to what were, in substance, the entire assets and undertakings of AFG and a number of associated entities. There were entities under the umbrella of the AFG Group to which Messrs Gothard and Sherman were not, however, appointed receivers and managers. One of these was Allco SIF Ltd (‘SIF’). SIF was not a subsidiary of AFG, although 25% of its capital does appear to have been owned indirectly by the beneficiaries of the Allco Principals Trust. The original purpose of SIF appears to have been investment in transport-related assets in Asia, North America and the Middle East. At one point, a listing on the Singapore Stock Exchange was contemplated.

3    The assets and undertakings of SIF were not subject to the security under which Messrs Sherman and Gothard had been appointed receivers and managers of AFG and the associated entities. Nevertheless, the receivership was of considerable practical importance to SIF for three reasons. The first was the fact that all of its staff were employees of AFG who had been provided to it by a wholly owned subsidiary of AFG, Allco Wholesale Investment Management Ltd which, for convenience, I will refer to as ‘the Manager’. These staff were, in effect, seconded by AFG to SIF. Under the management agreement between the Manager and SIF they were provided for free. Although the assets and undertaking of SIF itself were not subject to the control of the receivers, the employment of all of its staff technically was.

4    The second practical reason why the receivership was of significance to SIF related to the fact that SIF and AFG were co-investors in certain rail and shipping assets. By the time of the receivers’ appointment, efforts by both to sell these assets had been underway for some time and, in the case of the rail assets, were well-advanced. Both AFG and SIF understood that it was in both of their interests for these assets to be sold in the most timely fashion possible. A necessary feature, however, of the relationship of co-investment was that either could bring the process of sale to a stop by withholding consent. Such a posture would, of course, have been damaging to both parties but nevertheless was a matter of some commercial significance.

5    The third practical reason why the receivership was of significance to SIF lay in the fact that AFG, through one of its wholly owned subsidiaries, was owed S$206,000,000 (that is, Singapore dollars) under certain bonds issued by SIF. As will be seen in due course, the management of SIF ultimately parlayed its ability to withhold consent to the sale of the rail and shipping assets in return for the receivers agreeing that SIF’s liability on these bonds would be limited, after the payment of the secured creditors (and a sum for unsecured creditors), to the proceeds of the sale of its assets.

6    This case is largely concerned with the practical implications of the first matter, that is, the fact that AFG was providing SIF with its staff for free, although the commercial implications of the second and third matters are of no little significance, too, in understanding what occurred. The staff who were subject to this arrangement were: SIF’s Chief Executive Officer, Mr RenÉ Mansveld; its head of legal and compliance, Mr Stephen Kilcran (the plaintiff in these proceedings); Mr Gerard Pacheco; and Mr Chris Riddell. Consequent upon this secondment arrangement – and this was not in dispute – each of these men was not only an employee of SIF but also of AFG.

7    Had the receivers decided that the Manager would no longer provide staff to SIF and had they then terminated each of the employees’ employment without notice, there would have occurred in each case a redundancy. Each employee would have been entitled to payment in lieu of the notice not given and, depending on the terms of their contracts, a payment reflecting the fact of that redundancy. Depending on the precise terms, questions such as bonuses, not uncommon in the finance industry, may also have arisen.

8    It would have been obvious to any receiver, but particularly so in the case of experienced receivers such as Messrs Gothard and Sherman that terminating the employment of the staff of SIF would have had the potential to give rise to obligations on AFG’s part to meet any redundancy entitlements. The obviousness of this matter is borne out by the fact that all of the staff of AFG were informed by circular at the commencement of the receivership that, if their employment was terminated or if they were offered new employment by the receivers on terms they did not accept, this would constitute a redundancy.

9    On the other hand, it was no doubt unattractive from the receivers’ perspective to be providing SIF with its staff for nothing. More may this be so when SIF was engaged in vigorous negotiations with AFG using, no doubt to AFG’s chagrin, its own employees to do so.

10    At a meeting of AFG employees on or about 7 November 2008, the receivers informed them that their employment position would be made more clear to them by the end of the month. At some point around 24 November 2008, however, the receivers concluded that they would no longer provide staff for nothing to SIF. They communicated this to SIF by an email of that date which was sent from Mr Gothard to Mr Mansveld and which was in the following terms:

Dear RenÉ,

Thanks for your e-mail. I agree that we need to resolve the issues as between AFG and SIF. We might need to discuss these in greater detail, but I have summarised below our position on the matters raised:

1.    T3s – As we discussed today, let’s get John Hambly and Dominic Emmet talking as to the wording and see what they come up with.

2.    Funding and arrangements for your team – Steve and I have considered the position in relation to the funding of SIF and have concluded that it does not make sense for us to fund SIF’s expenses going forward. We would suggest that at the first instance, SIF meets its expenses from its own cashflow and, if this is insufficient, that the secured lenders and the T1, T2 and T3 bondholders contribute on a pro-rata basis with any such additional funding gaining priority of repayment over all other debts of SIF. This policy would impact on the arrangements for your team going forward. Ideally, SIF would SIF would [sic] take the team on directly (either as employees or consultants) on terms which are acceptable to you. The other alternative is for SIF to reimburse AFG for the cost of the staffing although we may be somewhat limited in that we would prefer to treat all AFG employees in the same way – currently on existing salary payment only. Clearly we need to discuss this further with you to determine the best course of action.

3.    Citi engagement letter – Citi are currently working through the indemnity issue. They have apparently switched the engagement so that it is run out of Sydney. I expect another engagement letter this evening or tomorrow morning.

4.    Shipping sales protocols – I am reviewing your proposal and will revert with comments shortly.

5.    Travel to London – as discussed this afternoon, it may be that this can be deferred. In any case I would refer to the comments in relation to funding raised above.

6.    Meeting with the SIF Board – as discussed I will see you at 11:30am tomorrow in your offices.

Please let me know if you wish to discuss any of the above.

Best regards,

Peter

11    This email is expressed in a somewhat condensed fashion and its various skeins require some explanation. The reference in paragraph 1 to ‘T3’ and the reference in paragraph 2 to ‘T1, T2 and T3 bondholders’ are references to the bonds which SIF had issued. These were divided into three tranches and it was the third, most subordinated, of these tranches which AFG held and which was signified by the abbreviation ‘T3’. The issue to which paragraph 1 was principally directed was SIF and Mr Mansveld’s attempts to get AFG to agree to limit SIF’s liability to the proceeds of the asset sales.

12    It is paragraph 2 which lies at the heart of this case. What was being suggested was that those who stood to benefit from SIF’s activities in selling the assets – the secured creditors and the bondholders – should now bear the burden of footing the bill for SIF’s expenses, including staff. Two possible ways of achieving this result were suggested: first, SIF could meet its own expenses (which would include a transfer of AFG’s employees to SIF); secondly, AFG could retain those employees with SIF reimbursing it for the cost of so doing.

13    This email did not occur in isolation and I accept that the context in which it occurred is a matter which must be examined. For present purposes, however, I should record my view that paragraph 2 of this email does not say that AFG would dismiss those of its employees who were seconded to SIF. What it says is that it would no longer fund, inter alia, SIF’s wages bill. These are not the same concept.

14    The crux of this case lies in the proposition that to indicate to Mr Mansveld (and through him, his team) that AFG would no longer be funding the expense of maintaining SIF’s staff was to indicate that it, AFG, would no longer be paying them as employees at all. The receivers, on the other hand, contest this. They say that to make such a statement was to say nothing of the sort.

15    I have said above that the email of 24 November 2008 lies at the heart of the case. In terms, however, Mr Kilcran placed the pivotal events on the following day when there was a meeting between Mr Gothard, as receiver of AFG, Mr Mansveld, as SIF’s CEO, and the board of SIF. Mr Kilcran was not at this meeting. Mr Mansveld, however, gives an account of it and says that during it Mr Gothard said these words (or words to this effect):

Having discussed this internally, Steve and I are of the view that we will not pay the salaries of the SIF staff, or other SIF expenses, beyond the end of November 2008. Ideally, SIF would take the team on directly. We are willing to consider some transitional arrangements relating to office space etc. in order to assist SIF.

16    Mr Mansveld says that in none of his previous discussions or correspondence had Mr Gothard indicated that the SIF staff might continue to be employed by AFG beyond the end of November 2008. Literally, I accept this although I do not accept that Mr Gothard ever indicated that the SIF staff would cease to be employed after the end of November 2008. I return to the reasons for that conclusion below.

17    Mr Gothard, on the other hand, denies that he said the words attributed to him by Mr Mansveld. His account of the conversation is as follows:

18    Mr Mansveld was very confident in his evidence under cross-examination that he had been told by Mr Gothard that the SIF term would not be employed by AFG after the end of November 2008. His evidence is that immediately after the meeting he passed this important information on to his team including Mr Kilcran. Mr Kilcran says that, as his immediate superior, Mr Mansveld had the authority of AFG to pass the information on to him and that that communication by AFG, through Mr Mansveld, was a termination of his employment or, at least, an indication that AFG would not employ him beyond the end of the month (and, therefore, a species of constructive dismissal).

19    It followed, on this view of things, that AFG had terminated his employment. I accept that if AFG did terminate Mr Kilcran’s employment then the consequence is that it will be obliged to pay him substantial benefits as a result of the way in which his particular contract of employment is drafted.

20    I also accept another crucial plank in Mr Kilcran’s case; namely, that whatever it was that Mr Gothard had said to Mr Mansveld at the meeting, Mr Mansveld had the authority thereafter to pass that communication on to the members of his team. So much flows from his position as their superior.

21    An important limitation on this authority was, however, this: Mr Mansveld was not authorised to communicate to his team things which were not said by Mr Gothard. This is commonsense.

22    Mr Kilcran also pursued an argument that Mr Mansveld had the ostensible authority of AFG to communicate whatever Mr Gothard had said or that it was estopped from denying such authority. But significantly, these species of authority were said – perhaps curiously – to extend only to authorise Mr Mansveld to pass on what had been said by Mr Gothard at the meeting. It was not suggested that Mr Mansveld had ostensible authority (or that AFG was estopped from denying his authority) to pass on information which had not been imparted to Mr Mansveld by Mr Gothard. That being so, this issue is only of relevance if it be concluded that Mr Mansveld’s account of the discussion is correct. Of course if that be so then the argument is otiose, as Mr Kilcran will have succeeded under the actual authority argument. In the way it was pursued, the ostensible authority argument could have no impact on the outcome of the case.

23    It will follow then that the critical issue is what Mr Gothard said at the meeting. In a sense, the case presents a classic ‘I said’/‘he said’ debate. As will be seen, there are materials which cut in both directions but, despite that, I have come to the conclusion that it is Mr Gothard’s recollection which is sound and Mr Mansveld’s which is faulty.

24    It is inherent in Mr Mansveld’s account of the meeting that he must have come away from it having the clear view that both he and his team were out of their jobs at the end of the month. Indeed, in his oral and written evidence he made it quite plain that this was the case. Under cross-examination by Mr Darams for the receivers, the following evidence was elicited from Mr Mansveld:

Well, it’s the case is it not, that – you say in your evidence that you were absolutely certain or under no misunderstanding as of the 25th that your employment would be terminated. Is that correct? --- That’s correct. At the end of the week.

Yes. And I want to suggest to you that in fact, you were still in doubt as to whether or not your employment had been terminated, as late as 2 December. What do you say about that? --- No doubt in my mind.

No doubt at all. There was no doubt whatsoever in your mind that you …? --- That my employment would come to an end at the end of November?

Yes? --- No.

25    The difficulty with this evidence is an email sent by Mr Mansveld on 2 December 2008. The second paragraph of this email read as follows:

2.    Staff and Office – I haven’t seen anything formal but assume that it is your intention to terminate myself and the team? As discussed, we are working on internalisation. It is unclear yet whether the SIF senior lenders will accept the proposal. We also need to discuss the terms of which we remain in the office (if that is what is intended).

26    If Mr Mansveld had absolutely no doubt in his mind after the meeting of 25 November 2008 that his employment was to be terminated (which was his oral evidence) it is very difficult to understand why, one week later on 2 December, he might be asking Mr Gothard whether it was his intention to terminate his employment.

27    Perhaps unsurprisingly, Mr Mansveld was further pressed about this under cross-examination. His evidence continued:

Now, you say in paragraph 2:

Staff and office: I haven’t [seen] anything formal but assume it’s your intention to terminate myself and the team?

Now, I want to suggest to you the reason you said that is because you were, at that date, not of the view that your employment had been terminated? --- That’s incorrect. I was looking for a formal letter of termination there. I had no doubt that our employment had come to an end. I am familiar with this email; I know the subject of it. In effect, it’s pretty clear – in the last sentence there, where I talk about whether we even remain in the office if that’s even what’s intended. It was a reference to the possible transitional arrangements that we had in place.

That’s the explanation you’re giving to the Court now. That’s correct, isn’t it? --- That’s what – that was what that was intended. That was what I intended when I sent that to Peter.

Well, why – why, if you were under absolutely no doubt that your employment had been terminated, were you – it seems to suggest you were still in some doubt at this stage? --- I wasn’t. The reason I sent that was that we were talking to an employment lawyer about the go-forward documents and the like, and that he had suggested to me that, “You should probably get a formal letter of termination at some point.” I accept that it may be better worded, but that is what happened, and that’s why I sent that email to Peter.

Well, isn’t it the case that you sent that email to Mr Gothard is because in fact, you knew well that there had been no decision to terminate your employment, or terminate the employment of your colleagues ---? --- Absolutely not.

No. You don’t accept that you being – you don’t accept that this is inconsistent – you writing this letter on 2 December is inconsistent with you holding a view as at 25 November 2008 that your employment had absolutely been terminated? You don’t accept that? --- No, I don’t.

No? --- We were told we would not be paid beyond the end of November; I was looking for a formal letter of termination here. We hadn’t been – it’s in evidence: we hadn’t been given a formal letter of termination, but having been told that we would not be paid beyond the end of November, it’s absolutely clear our employment came to an end then.

28    I do not disregard the fact that this email was sent at 2:32 am or Mr Mansveld’s evidence that he was working 18 hours a day. Some latitude in expression is plainly called for. The problem, however, with this explanation – confidently asserted as it was – is that the letter is an inquiry about Mr Gothard’s intentions as to termination and is not a request for a letter. Mr Mansveld would have it that he knew he had been terminated and was merely asking for a formal letter of termination to give to the team’s employment lawyers. But if that is so, why not merely ask for a formal letter of termination? Why the need for an inquiry about Mr Gothard’s intentions in relation to termination? Furthermore, I do not see that Mr Gothard could have understood that he was being asked, by this email, for such a letter. If it was meant to be such a request it singularly failed to ask, in any way, for the letter. I do not accept that saying ‘I haven’t seen anything formal’ amounts to a request for a formal letter. I should say that there is no evidence that the receivers ever supplied a formal letter of termination; no evidence that that failure was ever followed up by Mr Mansveld; and no evidence about his unidentified employment lawyers or what they needed a termination letter for (a matter opaque to me).

29    There is another difficulty. It relates to Mr Mansveld’s unwillingness to accept that his email expressed uncertainty as to whether termination had occurred. Although he was willing to concede that it might have been ‘better worded’, he would not accept that there was any inconsistency between the email he had written and his evidence that his employment had been terminated before the email was sent. To my mind this unwillingness to accept the unavoidably obvious suggested that Mr Mansveld was rather one-eyed about this question.

30    There is another difficulty for Mr Mansveld’s account which is not dissimilar to those arising from Mr Mansveld’s email of 2 December 2012. On Monday 8 December 2008, Mr Gothard and Mr Mansveld had further email exchanges in which both gentlemen plainly assumed that AFG was going to pay the SIF team past the end of November. This arose in the context of Mr Gothard’s need to have order and certainty in the administration of AFG’s payroll.

31    Mr Gothard’s email of 8 December 2008 to Mr Mansveld was as follows:

RenÉ,

Could you please let me know whether the SIF internalisation of staff has been agreed?

As to mechanics – will the staff be immediately taken across to SIF or will they need to be paid through the AFG payroll for December with SIF reimbursing AFG for the cost? Happy to do this if it assists in the transition process but we need to know by tomorrow so that we can process the payroll.

Thanks,

Peter

32    This is inconsistent with the proposition that the SIF team would not be paid after the end of November. Mr Mansveld’s response of 8 December 2008 shows, I think, the same thing:

Peter,

I have agreed the terms of the internalisation with the Board, however, as discussed, this is all contingent on resolving the standstill agreements and the T3 point. I had set a deadline of the end of last week on this but unfortunately it has drifted into this week. I expect to have the terms sheet etc signed this afternoon and I will be asking the senior lenders to agree to release the funds today.

If these things are not agreed the Board will not be in a position to reimburse AFG. It will all be moot in any case as if these things are not finalised in the next few day [sic] as the team will leave.

Regards

RenÉ

33    The first sentence of the second paragraph is premised on continued payment by AFG. The anxiety is not over that fact but over whether AFG is to be reimbursed. If termination was believed to have occurred at the end of November then it is difficult to understand why the receivers would be concerned about this issue in the second week of December.

34    It will be appreciated that Mr Mansveld’s response of 8 December 2008 had not really addressed the somewhat practical question which Mr Gothard had posed which related to the functional need to know whether the SIF team should be removed from the AFG payroll.

35    It is, however, a fact that the SIF team was not removed from the AFG payroll. Mr Mansveld’s evidence was that they were paid in December 2008 by AFG as was Mr Gothard’s. To my mind this fact is not consistent with a case that Mr Gothard had announced at the 25 November meeting that the SIF team would not be paid after the end of November.

36    In an effort to make this fact consistent with Mr Kilcran’s case, it was suggested that the payment in December 2008 had been made in error. This was the tenor of Mr Mansveld’s evidence. There were two aspects to it. First, he gave evidence of a conversation he had with a member of his own team on 16 December 2008 where, in response to being informed by the team member that he had received his December payment from AFG, Mr Mansveld says that he said:

That’s clearly an error. Gothard said he would not be paying us after November. I expect it will need to be repaid.

37    Mr Kilcran swore that a similar conversation occurred between himself and Mr Mansveld on or about 15 December 2008. I am unable to reconcile this, however, with the email exchange of 8 December 2008 which showed that, as at that date, payment by AFG of the SIF team would occur unless ‘internalisation’ had occurred. ‘Internalisation’ was the process by which SIF would take over the employment of Mr Mansveld and his team from AFG. As will be seen, this did not take place until 19 December.

38    The second aspect of Mr Mansveld’s evidence directed to explaining the erroneous payment concerned a conversation he had with Mr Gothard on 17 December 2008 which he says was in these terms:

Peter Gothard:    You will have seen that you and your team have been paid through the Allco payroll for December. This payment was made in error and I expect these amounts to be reimbursed by SIF.

RenÉ Mansveld:    We have already set up the documents for the internalisation to provide for payment of December wages from SIF to the team. We would need to amend all of the documents if SIF is to reimburse these amounts. Rather than do that how about each of us refunding the amount paid to us when we receive payment from SIF in due course.

Peter Gothard:        Ok.

39    This is consistent with Mr Mansveld’s theory that the payment had been made in error. I do not accept, however, that this discussion took place in the terms alleged by Mr Mansveld. The reasons for this are essentially chronological. The email exchange of 8 December 2012 shows that the two options Mr Gothard was considering were:

(a)    an internalisation of the SIF team by SIF with AFG paying their salaries for the month of December and thereafter receiving reimbursement from SIF; or

(b)    an internalisation of the SIF team by SIF with SIF immediately paying the SIF team’s salaries.

40    Until internalisation had occurred there could be no ‘erroneous’ payment and Mr Gothard could not sensibly have said that there had been. As Mr Mansveld’s email of 8 December 2008 shows, internalisation had not occurred by that day. And, indeed, because it could not occur until AFG had agreed (a) to a limitation on its claims on SIF qua bondholder and a degree of subordination to the unsecured creditors and (b) to a standstill agreement that, inter alia, consented to the change in SIF’s management structure, internalisation could not occur before that consent was forthcoming. Preliminary step (a) occurred on 16 December 2008 and (b) was agreed to on 19 December 2008. The actual mechanics of the internalisation also happened on 19 December 2008 when a management agreement between SIF and the Manager was terminated and a fresh management agreement with a new company, Awaruku Pty Ltd, was executed. All that being so, Mr Gothard could simply not have described the payment to the SIF staff on 15 or 16 December as erroneous. Far from being erroneous it was intended and correct. The only question which arose at that time was one of reimbursement. There could be no error until the internalisation had occurred and it had not occurred at the time of the discussion between Mr Mansveld and Mr Gothard on 17 December 2008.

41    Mr Gothard, it is true, gave evidence that a discussion about erroneous payments occurred but only in late December (when of course the internalisation had occurred). This discussion only occurred because Mr Gothard had then been told that Mr Kilcran had ceased to be an AFG employee on 1 December 2008. For those reasons, I do not accept Mr Mansveld’s account of the 17 December 2008 conversation.

42    How does this relate to the meeting of 25 November 2008? Mr Gothard’s account of that meeting has a number of advantages over Mr Mansveld’s which commend it. First, it is entirely consistent with the email sent the day before on 24 November 2008. Having enunciated his position in the email it is difficult to see why he would adopt a different position at the meeting. Secondly, there was no rational reason for Mr Gothard to tell Mr Mansveld that he and his team would no longer be paid by AFG after the end of the month. Doing so would only trigger redundancy obligations on AFG’s part. In the face of repeated requests by Mr Mansveld to clarify the receivers’ position in relation to his team, Mr Gothard was careful – indeed, astute – never to say that their employment had been terminated.

43    In truth, I am inclined to infer that a complex negotiation was in play in which both Mr Gothard and Mr Mansveld were fully aware of what was happening. Mr Gothard needed Mr Mansveld to consent to the sale of the rail and shipping assets. Without that, AFG would directly lose money both through the assets themselves but also through its losses as a bondholder (and indirectly as an equity holder) in SIF. Mr Mansveld needed Mr Gothard to limit AFG’s claims as a bondholder on SIF to the proceeds of the asset sales. Without that, SIF had solvency issues. Mr Gothard needed Mr Mansveld to ensure that SIF paid the staff bill rather than AFG. Mr Mansveld needed Mr Gothard (along with other bondholders) to subordinate their claims to permit unsecured creditors – which I infer included the newly internalised staff – to get paid. Lastly, Mr Gothard needed Mr Mansveld and his team to resign rather than be terminated to avoid redundancy payments. Mr Mansveld and his team, on the other hand, most assuredly did not need this.

44    Mr Mansveld and Mr Gothard were able to negotiate all of these issues away bar the last one. In it, Mr Gothard held the upper hand because he could achieve the result he sought by doing nothing. Sooner or later Mr Mansveld would need to jump. That is, in effect, what happened. How clearly Mr Mansveld’s team appreciated this is a matter I need not determine.

45    It is principally for those reasons that I accept Mr Gothard’s evidence about what occurred at the meeting on 25 November 2008 and reject Mr Mansveld’s. Something should also be said about demeanour. Mr Gothard impressed me as a very careful witness who was alive to all of the issues and chose his words with precision. Mr Mansveld, on the other hand, impressed me with his confidence and certainty. But his confidence about the events of 25 November 2008 simply cannot be fully reconciled with the other material which is available. It is not consistent with the email of the preceding day and it is not consistent with his own behaviour in December. It may well be that Mr Mansveld told Mr Kilcran after his meeting with Mr Gothard that Mr Gothard told him that the team was out of a job at the end of November (although I do not need to, and do not, make a finding about this). If he did say such a thing, however, he was wrong. Mr Gothard had said no such thing.

46    There is other material, however, which may be seen as working against this conclusion.

47    Above at paragraph [41], I have accepted Mr Gothard’s evidence that the discussion about an erroneous payment occurred in late December rather than on 17 December 2008, as Mr Mansveld would have it. One reason Mr Gothard gave for this was that it was impossible for him to have had such a discussion on 17 December because he was attending the birth of his daughter.

48    Cross-examination of Mr Gothard by Mr Friedgut for Mr Kilcran (with the assistance of telephone records) revealed that, on that day, he had indeed had a telephone discussion with Mr Mansveld from his mobile phone in the same area as the hospital he had been attending.

49    That would provide a basis for rejecting Mr Gothard’s evidence about that issue. However, I do not think this would be appropriate for three reasons. First, in the days leading up to 17 December 2008, Mr Mansveld and Mr Gothard were negotiating about several issues: the sale of the rail and shipping assets, the agreement by which the creditors would limit their claims to SIF’s assets and, of course, an arrangement with the bondholders whereby the SIF management would be internalised. It is quite possible that the discussion which occurred was about any one or more of those topics. Put another way, whilst it is clear that Mr Gothard’s account of 17 December must be incorrect in relation to whether a call took place, it does not follow that his evidence that the discussion about the erroneous payment of the SIF staff did not occur until the end of December should be rejected.

50    Secondly, this observation receives some support from Mr Kilcran’s evidence that Mr Mansveld told him of the ‘mistake’ on 15 December, that is, two days before Mr Mansveld said he spoke with Mr Gothard. I give this little weight, however. Such errors of chronology are not surprising at this distance from the events in question.

51    Thirdly, the first time that Mr Mansveld appears to have informed AFG that the internalisation process had occurred was on 30 December 2008 when he informed the man in charge of the AFG payroll, Mr Jim Sarantinos, of its occurrence. That email was as follows:

Jim,

The SIF Board has agreed to internalise the management of SIF (following confirmation from Peter in November that they did not wish to support the team going forward). This is effective from 1 December. When you are back in the office could we please speak about two things:

1.    The arrangements in relation to myself and the team staying in the office etc; and

2.    The December payroll. There was some confusion here about the arrangements which resulted in us being paid through the usual payroll for December. I have agreed with the team that the funds they received will need to be refunded to you – please let me know where you would like this to be paid and I will arrange for this to be done. You will need to adjust the PAYG accordingly.

I am back in the office on Monday, although will be travelling from Monday afternoon.

52    This email was copied by Mr Mansveld to Mr Gothard. This is consistent with Mr Gothard’s evidence that he was not aware that internalisation had occurred until late December. For those reasons I accept Mr Gothard’s version of events; that is, I think the discussion between Mr Mansveld and him about the refunding of AFG’s payments only happened on or around 30 December when Mr Gothard had become aware of the internalisation.

53    I am aware of the evidence given by Mr Mansveld that he had said words to the following effect to the SIF team at around 17 December 2008:

I have spoken to Gothard and as I thought, he has said that he expects SIF to reimburse the amounts paid to us by Allco for December. Rather than amend all of the documents now I have agreed with Gothard that we will each refund the amount paid to us when we receive the payment form SIF.

I am also aware that Mr Kilcran gave evidence of a similar statement on or about 15 December.

54    I accept that it is possible that Mr Mansveld said something like this to the SIF team but I do not accept that he had spoken to Mr Gothard about reimbursement at around this time (i.e. 15 or 17 December 2012). If such an agreement had been reached it would have been mentioned in the email to Mr Sarantinos which it was not. It is also highly likely that, had any discussion between Mr Mansveld and Mr Gothard taken place in the terms reported by Mr Mansveld to his team, it would have immediately brought into sharp relief Mr Gothard’s understanding that AFG had not dispensed with the services of the SIF team but only instead indicated that it was not going to continue to provide them for free to SIF.

55    Of course, another way to unpick this material would be to reject Mr Gothard’s version of the November meeting. But were I to do that, it would immediately render much of Mr Mansveld’s correspondence (set out above) problematic. In saying that, I accept that the resolution of the payroll issue is not entirely tidy or completely coherent from any perspective. Nevertheless this is the view to which I have come.

56    There is another matter which provides support for Mr Kilcran’s version of events. It concerns the rather puzzling action which Ferrier Hodgson took after receiving Mr Kilcran’s proof of debt in February 2009. Two matters were then in play. One was Mr Kilcran’s efforts to get the receivers to pay his redundancy entitlement; the other was the receivers’ efforts to get Mr Kilcran to repay the money paid to him on 15 December 2008.

57    Mr Kilcran’s campaign started well enough. In order to obtain his payment under the contract he needed a proof of debt form. On 19 February 2009 he sought such a form from a Mr Burrows who on the same day provided it to him. Ultimately there were a number of elements to Mr Kilcran’s claim but he inquired of Mr Burrows in respect of only two. The second of these was conveyed by an email dated 20 February 2009. Relevantly it said:

Under my employment contract, if I was terminated prior to 31 December 2008 I was entitled to receive a payment equal to my fixed remuneration for the period commencing on the date of termination and ending on 31 December 2008. Should this be included in the [proof of debt]?

58    Mr Burrows helpfully responded:

Regarding point 2 you are absolutely correct and apologies for this oversight… You should indeed add 1 months’ pay (i.e. the period between [termination] and 1/1/09) to the form and attach the letter to support it

59    To the extent that this shows that Mr Burrows thought there had been a termination on 1 December 2008, I give it little weight. The question of whether there had been such a termination turns on what had passed between Mr Gothard and Mr Mansveld. Mr Burrows’ views have no impact. For the reasons I give at [62]-[63], the receivers’ documents showed, erroneously, that Mr Kilcran had been terminated. Mr Burrows was merely acting in accordance with them.

60    Shortly afterwards, on 23 February 2009, Mr Kilcran lodged a proof of debt with AFG in the sum of $273,260.03 for ‘Employee Entitlements’. This included a redundancy claim. On 25 November 2010 an email was sent by ‘allcoemployees@fh.com.au’ informing Mr Kilcran that under his contractual documentation there needed to be an executed deed. On 29 November 2010, Mr Kilcran provided such a deed. On 7 December 2010, under his own hand, Mr Gothard wrote to Mr Kilcran in terms which are, with respect, absurd. He rejected the deed of release because it had not been signed by AFG. It complained that Mr Kilcran had not repaid his December salary even though he had been terminated on 30 November 2008.

61    The former matter made no sense. AFG could hardly rely on its own act of not signing to defeat Mr Kilcran’s claims. The latter is, of course, the very point that Mr Kilcran now makes. Mr Gothard’s explanation for this embarrassing assertion was that Mr Kilcran had never sent a resignation letter to the receivers and that his resignation was communicated only after it had occurred. Consequently it was entered into the system as a termination. I am not quite sure what to make of this. It is true that Mr Kilcran never sent a letter of resignation. But I do not think he ever communicated his ‘resignation’ at a later date either. His initial communications were with the receivers’ staff on the topic of the proof of debt. In that email exchange, which occurred in February 2009, it was Mr Kilcran who implied that he had been terminated. The payroll staff provided him, thereafter, with figures based on that proposition. I accept that this is what Mr Gothard’s evidence was, in substance, saying.

62    Mr Gothard’s further evidence was that, thereafter, the internal Ferrier Hodgson inquiries (of which his letter of 7 December 2010 was but one manifestation) had proceeded on the assumption that what had occurred was a termination. Mr Gothard described this as oversight and that it surely was. Mr Gothard says that it was only later that he reviewed the position of Mr Kilcran and realised that he had not been terminated but had resigned.

63    Although the argument based on the deed is an embarrassment, I accept this evidence. That acceptance necessarily involves the proposition that Mr Gothard did not read the letter of 7 December 2010 carefully (or possibly at all) before he signed it but this was inherent in his evidence that he conducted the review only later. Although there is no doubt this was unfortunate, it does not cause me to alter my assessment of the events of 25 November 2008.

64    A second unfortunate occurrence concerns the failure of the receivers to send a letter at the end of November confirming that the SIF staff were still employed. It will be recalled that the receivers had told the staff in November 2008 that their positions would be made clear to them by the end of that month.

65    The receivers say, in fact, that such letters were prepared for all the SIF staff. Mr Gothard says that he signed these letters on 26 November 2008. A copy of the letter to Mr Kilcran of 26 November 2008 was put in evidence. It recorded that the receivers wanted him to continue in his role until the asset sales had been completed and that the receivers were committing to employing Mr Kilcran until at least the end of January 2009. Each of Mr Mansveld and Mr Kilcran denied, however, ever receiving this letter.

66    There are many things which can be said about it. It is certainly compellingly consistent with Mr Gothard’s account of the meeting of 25 November and inconsistent with Mr Mansveld’s and Mr Kilcran’s. It is also consistent with the non-existence of any letter terminating Mr Mansveld’s employment (which might be expected to exist on Mr Kilcran’s case given the receivers’ indication that the staff would be informed of their fate by the end of November). If this letter is not that letter where is the one that was? Mr Gothard said it was his practice to provide such letters to the Human Resources Manager of AFG for distribution to division leaders who were then required to distribute the letters to employees. Mr Gothard felt that because the AFG Human Resources Department had been involved he could not confirm that the SIF staff had, in fact, received the letters.

67    On the other hand, is not the existence of the letter of 26 November 2008 (suggesting that the employment by AFG of the SIF term was to continue) inconsistent with Mr Gothard’s silence upon receiving Mr Mansveld’s email of 2 December 2008 (saying ‘I haven’t seen anything formal but assume it’s your intention to terminate myself and the team’)? Would it not have been reasonably expected of Mr Gothard that if he had signed a letter confirming the continued employment of Mr Mansveld (and his team) on 26 November that he might have replied to Mr Mansveld’s email of 2 December by pointing that out?

68    Mr Gothard was cross-examined about this but that cross-examination did not elicit form him any reason why he did not disabuse Mr Mansveld of the assumption he was making that termination was possible. Indeed, Mr Gothard’s evidence was that he could have disabused him if he had wished to do so.

69    The choices then are:

(a)    the letter was written by Mr Gothard on 26 November but lost in the administrative processes of delivery (consistent both with Mr Gothard’s evidence and that of Mr Mansveld and Mr Kilcran); or

(b)    the letter was written by Mr Gothard on 26 November and was in fact delivered to Mr Mansveld and/or Mr Kilcran (consistent with Mr Gothard’s evidence but inconsistent with Mr Mansveld and Mr Kilcran’s evidence); or

(c)    the letter was not written by Mr Gothard on 26 November but at some later date (consistent with Mr Mansveld and Mr Kilcran’s evidence but inconsistent with Mr Gothard’s).

70    It is true that Mr Gothard’s silence in the face of the email of 2 December provides some support for theory (c). On balance, however, I do not think it at all likely that Mr Gothard would have manufactured the letter given its trivial nature in the scheme of the whole receivership, the lack of any personal motive to do so and the very serious misconduct that would have been thereby involved. His silence is perhaps puzzling but he was not, when all is said and done, bound to speak up. I do not think I could embrace theory (b) which is also unlikely given the serious criminal and professional consequences which would be entailed. On the other hand, theory (a) is consistent with both sides’ evidence and does not involve any species of misconduct.

71    On this evidence I make the following findings. First, Mr Gothard did write the letter in question at the time he suggests. Secondly, I conclude that Mr Gothard took administrative steps to have the letter delivered to Mr Kilcran and his colleagues. Thirdly, I find that that delivery process failed to deliver the letter to Mr Kilcran.

72    At this point it is necessary to pause. The obligation of a trial judge is to consider the totality of the evidence. To this point I have considered the implications of Mr Gothard’s silence in the face of the email of 2 December largely in isolation from any consideration of Mr Gothard’s evidence about the meeting of 25 November (above at [17]-[63]). It is necessary, however, that they be considered in an integrated way. The curiosity of Mr Gothard’s silence is rationally capable of bearing on whether his account of 25 November is to be accepted. Taking such a global view does, I think, advance Mr Kilcran’s case. Mr Gothard’s account is then vexed by his silence on 2 December (when he could have said he had confirmed the team’s employment), by the fact that he did speak with Mr Mansveld on 17 December (when his evidence initially was that he did not), by Mr Kilcran’s evidence that Mr Mansveld had mentioned a discussion at that time with Mr Gothard and by the foolish correspondence in the following year in which Mr Gothard asserted, contrary to his current position, that Mr Kilcran had been terminated. Viewed alone this evidence would provide some basis for rejecting Mr Gothard’s account of the meeting. But it is not the only evidence. There is the fact of the existence of the letter of 26 November. To accept Mr Kilcran’s case it seems to me that I would need to find that this letter was manufactured after the event. And that, so it seems to me, is quite unlikely for reasons I have already given. I would also need to conclude that Mr Mansveld was not discussing whether the team’s employment should be terminated in his 2 December email which, despite his testimony to the contrary, I am not prepared to do. In addition I would need to find that Mr Gothard’s position at the meeting changed from what was enunciated in his email of the previous day for no apparent reason. Implicit also would be an acceptance of the proposition that Mr Gothard said something which could only trigger redundancy obligations when it seems to me that an experienced receiver such as Mr Gothard would be most unlikely to make such an amateurish error.

73    Taken all together, whilst there are certainly difficulties in Mr Gothard’s position, there are more serious difficulties with Mr Kilcran’s. I conclude, therefore, that Mr Gothard’s account of the meeting of 25 November is, indeed, the correct one, although not without some hesitation.

Conclusions on principal case

74    Mr Gothard did not tell Mr Mansveld that the SIF staff would be out of a job at the end of November at the meeting held on 25 November 2008. Whether Mr Mansveld said something to that effect to Mr Kilcran or not, his authority (both actual and, as the case was put, ostensible) to communicate information to the SIF employees about the position of the receivers was limited to an accurate reporting of that position. Likewise, whilst I would be prepared to conclude that AFG is estopped from denying the authority of Mr Mansveld to pass on what had been said by Mr Gothard, that estoppel was not suggested to extend to cover things which had not been said by Mr Gothard. If Mr Mansveld did tell the SIF staff the receivers had terminated their employment after the end of November, it was not what the receivers had told him at all. I do not have to determine whether Mr Mansveld was mistaken in what he perceived Mr Gothard to have said or whether his account of the meeting was false. I refrain from doing so.

75    This conclusion means that the various arguments by which Mr Kilcran sought to repackage the primary case must also fail. These included that Mr Gothard engaged in repudiatory conduct or constructively dismissed Mr Kilcran.

76    Once those findings are accepted, Mr Kilcran’s primary case fails. I turn then to his alternative cases.

The alternative cases

77    Mr Kilcran made two additional points. The first was that, regardless of whether a termination had in fact occurred as a result of what Mr Gothard was alleged to have said on 25 November 2008, the reality was that AFG had no more work for him to do. The nature of his work was that he was to be seconded to SIF. Whilst he had previously worked at AFG it had been made plain to him in writing that it had no other work for him beyond his seconded duties at SIF. Once it became clear that the receivers were not going to require his services at SIF (because of their intention to terminate the management agreement under which those services were provided) the reality was that AFG no longer had any work for him to do. He was, in the true sense of the word, redundant.

78    This argument cannot, however, be reconciled with the way in which Mr Kilcran’s case was put. That case – made express at paragraph 37(e) of his first affidavit – was that he regarded himself as having been discharged from AFG’s employment with effect from 30 November 2008. He regarded himself as being in that state because of what had been said to him by Mr Mansveld. It was for that reason that his evidence was that ‘consequently I did not provide the services to SIF as an employee of AFG’. No doubt it is the case that Mr Kilcran’s understanding that he was not providing services to AFG from 30 November 2008 was caused by Mr Mansveld’s inaccurate reporting of what Mr Gothard had said. Nevertheless, it remains plainly the case that Mr Kilcran’s argument is that his employment ended on 30 November 2008.

79    Mr Kilcran’s case did not include any contingency for a finding that Mr Mansveld’s account of his conversation with Mr Gothard might be wrong. Consequently, there was no exploration during the trial about what the status of Mr Kilcran’s understanding of his employment situation was in the event that Mr Mansveld had misreported what Mr Gothard had said. In particular, and perhaps importantly, there was no alternative case advanced that if Mr Mansveld was the source of the statement that the team’s employment by AFG was to end on 30 November 2008 (and not Mr Gothard) that, in law, Mr Kilcran remained employed by AFG despite his mistaken understanding to the contrary induced by Mr Manveld’s erroneous statement. Mr Kilcran’s evidence was that he ceased employment on 30 November 2008. This matters because the management agreement between SIF and the Manager was not terminated until 19 December 2008. Until that time the Manager continued to be obliged to provide management services to SIF. As such, there continued to be a role for Mr Kilcran to perform at AFG, viz, the same job he had been performing until 30 November 2008. Once that is appreciated it is difficult to see how he could be redundant-in-fact on 30 November 2008.

80    It is true that Mr Kilcran advanced an alternative case that he became redundant when the management agreement was terminated on 19 December 2008. The difficulties with this case, however, were many. It left unexplained, for example, why Mr Kilcran’s own evidence that he ceased employment at the end of November was to be rejected. Any such explanation would have required an attempt to reconcile Mr Kilcran’s understanding that he had ceased his employment at the end of November with the emails of Mr Mansveld of 2 and 8 December which suggested that he at least understood his team still to be employed by AFG. Without such an attempt there is presented for this Court’s consideration no theory of what happened at the end of November. Is Mr Kilcran’s evidence as to his belief that his employment by AFG had ended at that time to be rejected because it was induced by accidental misstatements by Mr Mansveld? Or is it suggested that Mr Kilcran’s own understanding of the situation was legally irrelevant? Or is it the case that Mr Mansveld never told Mr Kilcran that Mr Gothard had said that the SIF team was being let go at the end of November and that Mr Kilcran’s evidence about his understanding to that effect is to be rejected as false? Or is it the case that Mr Mansveld deliberately misled Mr Kilcran as to the true state of affairs?

81    Without knowing how it is that Mr Kilcran contends that he might have been employed by AFG after 30 November there is no way I can rationally reject his own evidence that that relationship ended on that day. Of course, if an argument to that effect had been developed it might well have been met by the receivers. One question that they might have raised is the question of what one is to make of Mr Kilcran’s evidence that he had been told he had been paid in December by mistake. I raise these various questions not to give them any particular answers but merely to observe that I can see no ready way through to rejecting Mr Kilcran’s evidence that the relationship was over by the end of November.

82    Consequently, I reject this argument

83    The second argument accepts that the relationship between Mr Kilcran and AFG came to an end consensually without termination or redundancy. It is said, on that view of things, that on the proper construction of Mr Kilcran’s written employment contract he is still entitled to the payment.

84    The relevant agreement is contained in a letter dated 27 June 2008. It is necessary to understand a little of the background to that letter. Shortly after Mr Kilcran had been seconded to SIF he had, in fact, been made redundant by AFG. This had happened on 27 March 2008 when AFG had informed him of this fact by letter. The letter told him that his employment would come to an end on 27 June 2008 (which was, at that time, some months off). It promised him a number of payments: $19,166.67 in lieu of notice; $34,413.19 for statutory entitlements; a bonus of $150,000; and six weeks’ salary by way of redundancy being $26,538.47. In all, this totalled $230,118.33.

85    There was then a section in the letter which read as follows:

Conditions in relation to Redundancy Entitlements

You will only be entitled to the payments and benefits set out in this letter if the following are satisfied:

•    you continue to work until the Termination Date or such other date as advised to you by Allco. If you resign from your employment without Allco’s agreement or are dismissed for cause before this date you will not receive a redundancy entitlement, nor will you receive the benefit of the Outplacement and Employee Assistance Programs;

•    until the Termination Date you are expected to fulfil the responsibilities of your position including among other things, to assist Allco to complete outstanding work as directed by your manager.

(Emphasis added.)

86    It was submitted on Mr Kilcran’s behalf that the emphasised portion showed that the pre-condition would be satisfied if he resigned from AFG with its permission. This was referred to as a consensual resignation. I think it would be fair to say that this does describe what occurred. If the letter of 27 March 2008 governed the matter I would find for Mr Kilcran.

87    But it does not. On 27 June 2008 – the date on which Mr Kilcran’s employment was to come to an end – it was superseded by another agreement. It too set out Mr Kilcran’s entitlements on redundancy (which were largely the same). However its conditions precedent were different. It now provided:

Conditions in relation to Redundancy Entitlements

You will only be entitled to the payments and benefits set out in this letter if the following are satisfied:

•    you continue to work until the Termination Date;

•    until the Termination Date, you continue to fulfil the responsibilities of your position including among other things, assisting Allco to complete out standing work as directed by your manager.

If you are dismissed for cause prior to your Termination Date you will not receive a redundancy entitlement, nor will you receive the benefit of the Outplacement and Employee Assistance Programs

88    Mr Kilcran did not satisfy this requirement, at least if it was read in its usual meaning: he did not work until the Termination Date but ceased employment, on his case, on 30 November 2008. It was submitted on his behalf that the agreement of 27 June 2008 needed to be understood in light of the agreement of 27 March 2008 and, no doubt, one provides valuable context for the other. But there is nothing ambiguous about the critical part of the 27 June 2008 letter. Its meaning is plain.

89    Consequently, I am unable to accede to Mr Kilcran’s second alternative argument.

Conclusion

90    The present proceedings take the form of an appeal form the liquidator’s refusal to accept Mr Kilcran’s proof of debt. For the reasons I have given that appeal must be dismissed with costs.

Associate:

Dated:    22 October 2012