FEDERAL COURT OF AUSTRALIA Bruce v AWB Ltd [2000] FCA 1281 EMPLOYMENT ‑ Wrongful dismissal ‑ Measure of damages ‑ Employment for period ending on fixed date ‑ Employer empowered to terminate employment on nine months notice ‑ Construction of termination provision ‑ Employment terminated without notice ‑ Whether damages limited to nine months wages or wages for balance of term. Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 applied Martin v Tasmania Development and Resources (1999) 163 ALR 79 distinguished Tasmania Development and Resources v Martin [2000] FCA 414 cited Andersen v Umbakumba Community Council (1994) 126 ALR 121 applied GARY BRUCE v AWB LIMITED VG 654 OF 1998 SUNDBERG J 11 SEPTEMBER 2000 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 654 OF 1998 BETWEEN: GARY BRUCE APPLICANT AND: AWB LIMITED RESPONDENT JUDGE: SUNDBERG J DATE OF ORDER: 11 SEPTEMBER 2000 WHERE MADE: MELBOURNE THE COURT DECLARES THAT damages are to be assessed on the basis that the respondent was entitled to terminate the applicant's employment on giving nine months notice. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 654 OF 1998 BETWEEN: GARY BRUCE APPLICANT AND: AWB LIMITED RESPONDENT JUDGE: SUNDBERG J DATE: 11 SEPTEMBER 2000 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The applicant brought an action against the respondent alleging breach of a contract of employment and in the alternative misleading and deceptive conduct in the preparation of the contract. On 10 May 2000 I declared that the applicant was entitled to damages for wrongful dismissal, and ordered that the quantum of damages be assessed by a Deputy Registrar in default of agreement. The parties have disagreed about the appropriate legal principles to be applied in determining the quantum of damages, and the Registrar has directed the parties to make written submissions to me on that question. 2 The applicant and officers of the respondent signed an "Agreement of Employment" on 1 February 1994. Clause 1 provides that the contract "shall be for a period concluding on 30 June 1998". Clause 8 deals with termination. It provides: "(a) The AWB may terminate this agreement at any time without prior notice if you as the Senior Manager Information Technology are guilty of any serious misconduct, including corrupt practice, wilful neglect or of consistent and repetitive breaks of AWB policies or instructions in the discharge of your duties. (b) If your performance does not meet the agreed Key Result Areas as per standard performance practices, your employment may be terminated by the Managing Director of the AWB after due counselling process. (c) In the event that you wish to break this contract prior to maturity the AWB is not obliged to make a severance payment and 30 days written notice is required. (d) Should the AWB seek to terminate this contract prior to maturity, the AWB is obliged to provide nine months notice or payment in lieu. (e) Prior to termination by the AWB you will be given an opportunity to defend yourself against the allegations or basis for termination unless the AWB could not reasonably be expected to give you that opportunity." 3 Counsel for the applicant submitted that clause 8 authorised the respondent to terminate the applicant's employment in two situations: without notice if he was guilty of serious misconduct, and with nine months notice and after a due counselling process if his performance was unsatisfactory. The respondent had, the applicant submitted, no other rights of termination. Sub‑clauses (d) and (e) ought be read together as procedural provisions regulating termination, and providing the applicant with an opportunity to defend himself against the allegations and the basis for termination, and if his defence was unsuccessful, entitling him to nine months notice of termination. The basis for termination could only be serious misconduct (sub‑clause 8(a)) or unsatisfactory performance (sub‑clause 8(b)). The fact that sub‑clause 8(d) did not provide an explicit basis for termination was said to show that the clause was procedural only, and did not itself confer a general right of termination. If it did, the phrasing of sub‑clause 8(d) would have emphasised that the right of termination was at large. 4 The respondent contended that the operation of sub‑clause 8(d) was not confined to any particular circumstances, and was only regulated by the procedural requirements in sub‑clause 8(e). That sub‑clause, relieving the respondent of the obligation of providing the applicant with an opportunity to defend himself in circumstances where it was unreasonable to do so, would have no work to do if it operated only when sub‑clause (a) or (b) applied. On the other hand, sub‑clause 8(e) was consistent with a wide right of termination under sub‑clause 8(d). 5 The proper construction of clause 8 is important, because the damages available to the applicant are the minimum amount the respondent would have to pay in normal circumstances in order to terminate the contract. If the respondent is correct, and sub‑clause (d) is an independent ground of termination, this would be an amount equivalent to nine months salary. In Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at 32 Sheppard and Heerey JJ said: "Where an employee is wrongfully dismissed, he is entitled, subject to mitigation, to damages equivalent to the wages he would have earned under the contract from the date of the dismissal to the end of the contract. The date when the contract would have come to an end, however, must be ascertained on the assumption that the employer would have exercised any power he may have had to bring the contract to an end in the way most beneficial to himself: that is to say, that he would have determined the contract at the earliest date at which he could properly do so …." 6 On the other hand, if the applicant is correct, and the only grounds of termination are those in sub‑clauses (a) and (b), the respondent would have no general right of termination, and damages would be assessed differently. In Martin v Tasmania Development and Resources (1999) 163 ALR 79 at 100-101 Heerey J said: "It is true that if … the employment is for an indefinite period terminable on a given period of notice then the employee cannot recover as damages more than the salary he or she would gave got for that period of notice. In other words, the employee cannot be in any better position than he or she would have been had the contract been lawfully terminated by the giving of the notice. However, the present case is different. The contract was for a fixed term. Had the contract not been wrongfully terminated, Mr Martin would have enjoyed the benefits of the contract for the remainder of the term: Patterson v Middle Harbour Yacht Club (1996) 64 FCR 405. No fault was found with these observations on appeal: Tasmania Development and Resources v Martin [2000] FCA 414. 7 Although clause 1 states an explicit end point, the existence of a general right of termination may characterise the contract as one of a maximum duration rather than of a fixed term. In Andersen v Umbakumba Community Council (1994) 126 ALR 121 at 126–127 von Doussa J explained the matter as follows: "It is significant that the rights to terminate the contract of employment arising under cl 21(c) [right of both parties to terminate on two weeks notice] and 21(d) [right of the employer to terminate without notice but with two weeks pay in lieu] are not conditioned on a breach of any term of the contract. The rights are unqualified. Different considerations may apply where a contract of employment for a period of time fixed by clearly stated dates of commencement and cessation contains a term which permits either side to terminate the contract on breach by the other side. In such a case, it is possible that the contract would be characterised as a contract of employment for a specified period of time notwithstanding the possibility that on breach of its term by one side or the other it may sooner come to an end. In this case, however, the unqualified rights to terminate without reason under cl 21(c) and cl 21(d) make it clear, in my opinion, that the contract cannot be so characterised." 8 In my view clause 8 provides for termination of employment in three situations: · by the Board, without notice, in the case of serious misconduct · by the Managing Director on failure to meet Key Result Areas, after due counselling process · by the Board on nine months notice or payment in lieu, the applicant having the qualified right to defend himself against the allegations or basis for termination. If sub‑clauses (d) and (e) did nothing more than regulate the termination procedure, the latter would be redundant, because sub‑clauses (a) and (b) have already provided when notice of and opportunities to answer allegations are or are not required. Sub‑clause (e) cannot apply to termination under sub‑clause (a), because the former requires an opportunity to be heard "prior to termination", whereas sub‑clause (a) deals with termination without prior notice. Sub‑clause (e) cannot apply to termination under sub‑clause (b) for two reasons. The first is that the latter contains its own measure of natural justice, a due counselling process, making inappropriate the importation of a different measure under sub‑clause (e). The second is that sub‑clause (b) deals with termination by the Managing Director and sub‑clause (e) with termination by the Board. The location of sub‑clauses (d) and (e) supports the conclusion that they travel together. However, if sub‑clause (d) confers a general right of termination, sub‑clause (e) would operate upon that clause, and thus have a field of operation. I therefore hold that the respondent had a general right of termination under the contract, and that subject to any question of failure to mitigate, the applicant is entitled to damages equivalent to nine months salary. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg. Associate: Dated: 11 September 2000 Counsel for the Applicant: A Donald Solicitors for the Applicant: Graeme Steinfort & Company Counsel for the Respondent: M P McDonald Solicitors for the Respondent: Blake Dawson Waldron Date of Hearing: 4 September 2000 Date of Judgment: 11 September 2000