FEDERAL COURT OF AUSTRALIA Lythgoe v Baycorp Advantage Ltd [2004] FCA 1198 TRADE PRACTICES –misleading or deceptive conduct – fixed term contract of employment – whether company represented that applicant would be paid nine months' remuneration in event that no permanent position could be found – whether such representation if made "in trade or commerce" – whether if not "in trade or commerce", representation amounted to collateral contract – whether applicant employed by new employer on contract of indefinite duration – breach of contract – whether applicant wrongfully dismissed – whether applicant entitled to reasonable notice or payment in lieu – identity of employer – whether applicant entitled to additional bonus payment under terms of contract Trade Practices Act 1974 (Cth) ss 51A, 52, 75B and 82 Federal Court of Australia Act 1976 (Cth) ss 21, 22 and 32 Walker v Salomon Smith Barney Securities Pty Limited [2003] FCA 1099 at [180] referred to McCormick v Riverwood International (Australia) Pty Ltd (1999) 167 ALR 689 referred to Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567 referred to Kilburn v Enzed Precision Products Pty Ltd (1988) 4 VIR 31 referred to Rankin v Marine Power International Pty Ltd (2001) 107 IR 117 referred to Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 referred to Martin v Tasmania Development and Resources (1999) 163 ALR 79 referred to Hoyt's Proprietary Ltd v Spencer (1919) 27 CLR 133 referred to Nokes v Doncaster Amalgamated Collieries Limited [1940] AC 1014 referred to Finance Sector Union of Australia v Commonwealth Bank of Australia (2001) 111 IR 241 at [64] referred to Fisher v Edith Cowan University (No 2) (1997) 72 IR 464 referred to D'Ortenzio v Telstra Corporation (No 2) (1998) 82 IR 52 referred to Dresna Pty Ltd v Misu Nominees Pty Ltd [2004] FCAFC 169 referred to Village Building Company Limited v Canberra International Airport Pty Limited [2004] FCAFC 240 referred to ANTONY LYTHGOE v BAYCORP ADVANTAGE LTD, KEITH McLAUGHLIN and BAYCORP ADVANTAGE DECISION SOLUTIONS PTY LTD V879 of 2002 WEINBERG J 15 SEPTEMBER 2004 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V879 OF 2002 BETWEEN: ANTONY LYTHGOE APPLICANT AND: BAYCORP ADVANTAGE LTD FIRST RESPONDENT KEITH McLAUGHLIN SECOND RESPONDENT BAYCORP ADVANTAGE DECISION SOLUTIONS PTY LTD THIRD RESPONDENT JUDGE: WEINBERG J DATE OF ORDER: 15 SEPTEMBER 2004 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Within fourteen days, the parties file and serve: (a) draft orders giving effect to the conclusions set out in the reasons for judgment, and (b) outlines of submissions on the issue of costs. 2. The matter be adjourned to a date to be fixed for further hearing and the making of final orders. 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 V879 OF 2002 BETWEEN: ANTONY LYTHGOE APPLICANT AND: BAYCORP ADVANTAGE LTD FIRST RESPONDENT KEITH McLAUGHLIN SECOND RESPONDENT BAYCORP ADVANTAGE DECISION SOLUTIONS PTY LTD THIRD RESPONDENT JUDGE: WEINBERG J DATE: 15 SEPTEMBER 2004 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This is an application under ss 51A, 52 and 82 of the Trade Practices Act 1974 (Cth) ("the Act") and under ss 21, 22 and 32 of the Federal Court of Australia Act 1976 (Cth). It relates to the termination of the applicant's contract of employment, either with the first respondent, Baycorp Advantage Ltd ("Baycorp Advantage"), or alternatively with the third respondent, Baycorp Advantage Decision Solutions Pty Ltd ("Baycorp Advantage Decision Solutions"). He seeks damages under the Act, as well as common law and equitable damages, in relation to what is said to be misleading or deceptive conduct, a series of contractual breaches, and breaches of duties of confidence and trust. He also seeks damages for breach of contract arising out of a failure on the part of the first respondent to pay him a portion of an end of year bonus to which he claims he was entitled. background 2 The applicant was born in England and commenced full-time employment there in 1979. Some time prior to 1995, while employed by a financial services company, he met Mr David Grafton. Mr Grafton subsequently approached the applicant to take up a position at Equifax plc, a company for which Mr Grafton then worked. Mr Grafton later moved to Australia. 3 In mid 1999, Mr Grafton contacted the applicant to ascertain whether he would be interested in working with him in Australia. The applicant responded positively. On 24 August 1999, the applicant was sent a letter offering him employment as General Manager of the Operations Division of Equigen Corporation Pty Ltd ("Equigen"), a financial services company. Equigen was part of what was known as the Data Advantage Ltd group of companies ("Data Advantage"). In broad terms, the applicant's role was to manage all aspects of software delivery and credit scoring development. 4 The applicant entered into an employment agreement with Equigen on 30 August 1999. Thereafter, the applicant, together with his wife and two young children, relocated from England to Australia. 5 On 1 November 1999, the applicant commenced employment with Equigen. On 31 March 2000, Equigen changed its name to Decision Advantage Pty Ltd ("Decision Advantage"). On 25 May 2000, the applicant was appointed to the position of CEO of Decision Advantage. 6 On 25 May 2000, the applicant and Decision Advantage entered into an Executive Service Agreement. Clause 3 of that agreement stated: "3.0 TERM 3.1 The initial term of this Agreement is for a period of two years after the commencement date. The Agreement may be extended by mutual agreement or by virtue of continuing employment beyond the initial term. 3.2 The CEO or the Board may terminate this Agreement in accordance with Clause 10 during the initial term or during any period of extended operation of this Agreement. …" (emphasis added) 7 Clause 10.2(i) relevantly stated: "Redundancy or Retrenchment The Board may terminate this Agreement at any time by payment of twenty one months' severance pay. …" 8 Clause 10.3.1 relevantly stated: "The CEO may terminate this Agreement in circumstances where: There is a change in the CEO's duties and responsibilities (as set out in Schedule 2) such as would diminish his role. The CEO must give three months written notice. The CEO is entitled to payment of twelve months' severance pay." 9 On 14 June 2001, Mr Grafton sent the applicant a letter on "Data Advantage" letterhead with attachments ("the 14 June 2001 letter"). The letter offered him the position of "Managing Director International" to commence on 1 July 2001. It said: "14 June 2001 … Dear Tony, I am writing to confirm employment details in relation to your move to the position of Managing Director International with the Data Advantage Group. The new position will commence from 1 July 2001. Your responsibilities are as outlined in the attached position description document. This document will replace the current Schedule 2 in your Executive Service Agreement dated 25 May 2000. We have also agreed some changes to notice periods for specified events in Schedule 4 and this revised document is attached as well. In all other respects, that agreement will remain the same. Please confirm your agreement by signing and returning to me the attached copy of this letter. Yours sincerely, [signed] David Grafton Chief Executive Officer SCHEDULE 2 – POSITION DESCRIPTION 2.1 Details Position Title: Managing Director International Data Advantage Limited Location: Melbourne Reports to: Chief Executive Officer, Data Advantage Limited Date: May 2000 Incumbent: Antony Bryan Hazeldon Lythgoe 2.2 Role Objectives … 2.3 Key Performance Indicators 2.3.1 Meet or exceed specified international budget objectives · Revenues AU$600,000 · Costs AU $1.2m · EBITDA (AU$600,000) loss 2.3.2 Deploy group services into specified target markets to generate revenues in 2002/2003. · DecisionPoint into UK · DecisionPoint into the USA (Trans Union) · Value Added Services, custom models, DecisionPoint and bureau scores into Hong Kong · TUA bureau services into Thailand 2.3.3 Identify and develop two additional markets for future deployment of group services 2.3.4 Meet specified Strategy Advantage budgeted EBIT 2.3.5 Promote group activities in international markets 2.3.6 Provide input and mentoring to specified group business units. Schedule 4 NOTICE PERIOD AND PAYMENTS – SUMMARY OF TERMINATION CLAUSES Reason Notice Period Payment Basis Clause Termination by the Board Redundancy or Retrenchment 3 months 21 months 10.2(i) Unsatisfactory Performance 3 months 12 months 10.2(ii) Incapacity 6 months insurance policy 10.2(iii) Indictable criminal offence Nil Nil 10.2(iv)(a) Unlawful Personal Gain Nil Nil 10.2(iv)(b) Gross or Wilful Disobedience Nil Nil 10.2(iv)(c) Misconduct Nil Nil 10.2(iv)(e) Termination at the option of the CEO Resignation 6 months 6 months 10.3.2 Change in responsibilities 3 months 21 months 10.3.1 Change in ownership 3 months 12 months` 10.3.3 Relocation 3 months 12 months 10.3.4 10.3.5 Other 3 months 12 months 10.3.1" 10 During this period, there were discussions taking place regarding a possible merger between the Data Advantage group and what was generally known as the Baycorp group, based in New Zealand. Mr Keith McLaughlin, the second respondent in this proceeding, was the Managing Director of the Baycorp group. 11 On 7 August 2001, Mr Grafton and Mr McLaughlin sent the applicant a letter about the "proposed merger between Baycorp and Data Advantage" and his continued role as Director International ("the 7 August 2001 letter"). The letter, printed on letterhead containing the name "Baycorp Advantage", stated: "7 August 2001 Dear Tony, Following the announcement of the proposed merger between Baycorp and Data Advantage, and further to our recent discussions, we are writing to set out in general terms the position we propose offering you within the new company structure. We are hopeful that you will find the nature of the proposal acceptable. We wish to retain your existing role of Director International. Your role will continue to be based in Melbourne, and will continue to report to David Grafton, Executive Director, based in Sydney. The integration process will require a full review of existing organisational structures and processes. To this end, we are establishing an integration team, which will conduct a full review of Baycorp Ltd and Data Advantage Ltd, and make recommendations in regard to future organisational structures and processes within the merged company. It is our intention to consult with you as we work through the integration process, and specifically as we review the area of the business for which you hold functional responsibility. At the conclusion of the review period, we are committed to identifying an ongoing role for you within Baycorp Advantage. For the review period, you will of course remain an employee of Data Advantage Limited, and you will retain your existing terms of employment. We will need to develop KPI's that accurately reflect the specific responsibilities and accountabilities of your role. We would expect you to focus in the short term on business development for value-add products and services. We would expect you to take increasing responsibility for the complete range of the Group's products over an agreed timetable for international markets. Tony, as noted above we trust that you find the general nature of this position to your satisfaction and that the terms and conditions are as you might have expected. Yours sincerely [signed] [signed] Keith McLaughlin David Grafton Managing Director Executive Director" (emphasis added) 12 On 12 October 2001, Mr McLaughlin and Mr Grafton sent the applicant a letter offering him the position of "Director of International in Baycorp Advantage" upon the merger of "Baycorp and Data Advantage" ("the 12 October 2001 letter"). It set out the applicant's final remuneration package as follows: "1. A base component of $255,000 per annum. 2. A bonus component of $68,500 which will be paid subject to performance criteria as agreed in your KPIs. 3. A long-term incentive component in the form of an annual grant of share options … valued at $76,500 … 4. Total remuneration (1+2+3) = $400,000." 13 It is of some significance to note that the letter did not specify a period during which the applicant would be employed. Nor did it set out any terms regarding redundancy, or diminution of role. 14 On 14 December 2001, Data Advantage and Baycorp Holdings Ltd merged to form Baycorp Advantage Ltd, which as has previously been noted, is the first respondent to this proceeding. 15 On 25 February 2002, Decision Advantage changed its name to Baycorp Advantage Decisions Solutions Pty Ltd, the third respondent to this proceeding. It will be recalled that the applicant entered into the Executive Service Agreement with Decision Advantage. 16 On 21 May 2002, Mr McLaughlin and Mr Grafton met with the applicant in Melbourne to discuss his future employment. Following the meeting, Mr McLaughlin prepared a handwritten note that referred to an employment contract of three months. The original of that note has never been located. 17 On 23 May 2002, Mr McLaughlin, Mr Grafton, and Ms Katherine Gibson, Group Legal Counsel and Company Secretary of the first respondent, met with the applicant in Sydney to discuss his employment. On that day, Mr McLaughlin's Executive Assistant, Ms Maree Weston, typed up the handwritten note prepared by Mr McLaughlin two days earlier in Melbourne. Ms Gibson subsequently amended the original typed version of that note to read: "Baycorp Advantage 23 May 2002 … Dear Tony This letter is written on behalf of Baycorp Advantage Decision Solutions Pty Ltd. As you are aware, the term of your employment agreement expires on 24 May 2002. Further to our recent discussion, we confirm our agreement that the term of your employment will continue for a fixed term period of 3 months from the expiry date of 25 May 2002. The terms of your employment will be the same as those set out in your current employment agreement, with the following amendments: Clause 10.2(i) – delete "twenty one months" and replace with "six months" Clause 10.3.1 – delete "twenty one months" and replace with "six months" This will enable us to determine the structure of the international business and determine roles and responsibilities. As you will appreciate there are matters to be agreed with our joint venture partners before we can provide clarity as to the agreed operating environment. We assure you of our commitment to resolve these issues as quickly as possible. Please acknowledge your agreement by countersigning the duplicate copy of this letter and returning to me. Yours sincerely, [signed] Keith McLaughlin Managing Director I agree to the employment terms as set out in this letter. [signed] Tony Lythgoe Date: Witness: [signed] Witness name: Katherine Gibson" (emphasis added) 18 The applicant signed the typewritten note, thereby agreeing to its terms. 19 On 16 July 2002, Mr Grafton sent Mr McLaughlin an email about possible options for the applicant, including relocation to the United Kingdom. 20 On 12 August 2002, the applicant sent Mr McLaughlin an email seeking clarification of his future employment as his contract was now due to expire on 25 August 2002. The same day, Mr McLaughlin responded to the applicant by reply email, advising him that his contract would not be extended. 21 On 15 August 2002, Mr McLaughlin and Mr Grafton met with the applicant in Melbourne at which they discussed the company's decision. 22 On 24 August 2002, the applicant's employment terminated. On 19 June 2003, he was eventually paid a bonus of $27,400.00 less tax and other deductions. the applicant's claims 23 The applicant's claims may be summarised as falling into four separate categories. His main claim is that on 23 May 2002, Mr McLaughlin told him that if after three months, a position within the company could not be found for him, he would be paid nine months' remuneration. He claims that this representation was made in trade or commerce, and that it was misleading or deceptive, in contravention of s 52 of the Act. He claims that acting in reliance upon that representation, he agreed to continue his employment. 24 In the alternative, the applicant alleges that the events of 23 May 2002 gave rise to a collateral contract, whereby he was promised that he would be employed for a period of three months, and should no alternative position become available within that time, he would receive a payment equivalent to nine months' remuneration. 25 Third, by way of further alternative, the applicant claims that he was wrongfully dismissed. That claim rests upon his assertion that, even if he originally entered into a two year fixed term contract with Decision Advantage, the merger brought that contract to an end. By taking up a position with Baycorp Advantage, he entered into a new contract of employment with a new employer. Unlike his original contract of employment, the new contract was not limited to a fixed term, but was of indefinite duration. Accordingly, there was an implied term that the applicant would be given reasonable notice before his services were terminated, or that he would be paid in lieu. The applicant claims that a period of twelve to eighteen months' notice, or payment in lieu, is reasonable in the circumstances. He alleges that the failure of the respondents to pay him that amount constitutes a breach of contract, and also amounts to a breach of the employer's duties of confidence and trust, and good faith and fidelity. 26 Fourth, as previously noted, the applicant claims that he is entitled to an end-of-year bonus payment, originally assessed at $61,650.00, less the amount of $27,400.00 that he actually received. This claim is based upon an alleged breach of contract. 27 The further amended statement of claim, which I must say is a somewhat prolix document, pleads a number of other variants of these causes of action. It is not necessary to set them out here because, for the most part, they merely constitute different ways of characterising the same alleged facts. If those facts are not proved, none of those other causes of action can be established. 28 Nonetheless, the flavour of the pleading can be discerned by noting the following matters. It runs for forty-five pages, and contains more than one hundred paragraphs. Many of these paragraphs are in turn divided into other subparagraphs. It pleads a first agreement on or about 14 June 2001, a second agreement on or about 12 October 2001, and a third agreement on or about 17 May 2002. These are all alternatives. It then pleads a first and second representation, possibly as alternatives, a fourth agreement on or about 23 May 2002, a collateral agreement on or about the same date, a termination of the fourth agreement on 12 August 2002, a duty of confidence and trust, a duty of good faith and fidelity, an alternative second agreement on or about 12 October 2001, an agency representation on or about 14 June 2001, an alternative first agreement with the third respondent on or about 14 June 2001, an alternative second agreement with the third respondent on or about 12 October 2001, an alternative third agreement with the third respondent on or about 17 May 2002, an alternative first representation by the third respondent, an alternative second representation by the third respondent, an alternative fourth agreement with the third respondent, an alternative collateral agreement with the third respondent, an alternative termination by the third respondent, alternative breaches of the duties of confidence and trust and of the duties of good faith and fidelity by the third respondent, a further alternative second agreement with the third respondent, and an alternative agency representation by the second and third respondents. All these matters are pleaded in relation to what should be a relatively straightforward case involving nothing more than a factual dispute about whether a particular representation was made, and a legal question as to who was the applicant's employer. Pleadings in this form do little to assist the efficient administration of justice. 29 It should be emphasised perhaps, in the applicant's defence, that although his claims were all originally brought only against Baycorp Advantage and Mr McLaughlin, it was largely at the prompting of the respondents that he subsequently amended his application to bring those claims, in the alternative, against the third respondent, Baycorp Advantage Decision Solutions. the evidence on behalf of the applicant 30 There were only two witnesses called on behalf of the applicant. They were the applicant himself, and Mr Grafton. 31 The applicant said that at the time he entered into the Executive Service Agreement to commence employment with the Data Advantage group of companies, in May 2000, Mr Grafton told him that "fixed-term contracts were standard for all executive appointments". He claimed that Mr Grafton said that his employment was "on a permanent basis" and that it was "intended that my employment would be renewed beyond the nominal expiry date of the Executive Service Agreement if I wished to take up residency in Australia and a longer term position here". Mr Grafton had told him that the same procedure had applied to him when he, like the applicant, had been recruited from the United Kingdom some years previously. 32 Around the time that speculation began to emerge about the merger with the Baycorp group, Mr Grafton discussed the applicant's job security with him. He said that if the applicant's responsibilities "were diminished", and the applicant left the company as a result, he would receive twenty-one months' pay, rather than twelve months, as had previously been agreed. In this regard, the applicant referred to an email from Mr Grafton to a Ms Angela Blair, copied to the applicant, on 25 June 2001, which stated: "Angela, I have spoken recently to Tony Lythgoe about making a change in his employment contract to give him greater security given his proposed new international role. I have discussed with the Chairman the replacement of the current 12 month remuneration on diminution of role with 21 months and UK relocation. Brian raised no objections and I would ask that this change be made asap – thanks. David" 33 According to the applicant, Mr Grafton had written to him on 30 July 2001 to congratulate him on an outstanding year. His annual salary was increased to $250,000.00 plus a bonus component of $80,000.00 dependent on his meeting Key Performance Indicators ("KPIs"). 34 The applicant said that he understood from the 7 August 2001 letter that when Baycorp Advantage and Data Advantage merged, his role as "Director International" would continue, and that during the review period, he would remain an employee of "Data Advantage". In truth, as previously indicated, his Executive Service Agreement was with Decision Advantage, and not Data Advantage, though nothing of any great import turns on this. The applicant also said that he understood that he would retain the existing terms of his employment. 35 However, according to the applicant, when he received the 12 October 2001 letter, he understood that he had been offered the position of Director of International in Baycorp Advantage, subject to the merger being approved by shareholders. He was offered a revised remuneration package totalling $400,000.00, consisting of a base component of $255,000.00 per annum, a bonus component of $68,500.00, paid subject to performance criteria, and a "long-term incentive component" in the form of an annual grant of share options, valued at $76,500.00. He was told that he would commence his employment with Baycorp Advantage on 14 December 2001 when it was believed the merger would be unconditional. 36 The applicant claimed that in late 2001 and early 2002 he made enquiries about seeking permanent residency in Australia. He sent an email to Mr Grafton on 19 September 2001 asking whether Data Advantage would consider making his role more permanent by sponsoring his migration. In that email, he wrote: "…It would require a minor modification to my contract of employment as the stipulation is that the employment contact must be for a minimum of three years, mine I believe is two years rolling. There would be a cost involved which I estimate to be in the region of $2,500 inclusive of expenses…" 37 In an email dated 21 September 2001, Mr Grafton replied: "Go ahead – happy to support. David" 38 Following this exchange of emails, the applicant commenced the application process for permanent residency for himself and his family under the Employer Nominated Scheme. That scheme required applicants to have permanent or long-term employment contracts in Australia. In light of that requirement, the applicant again spoke with Mr Grafton in about May 2002 about his concerns, and requested that his "short term contract" be renewed with "something which would meet the criteria required for residency." Mr Grafton replied that he would take the matter up with Mr McLaughlin, who by now had assumed the role of Managing Director. 39 The following is the applicant's account of the events of May 2002. 40 On 17 May 2002, the applicant had a conversation with Mr McLaughlin and Mr Grafton in which he was advised that his Executive Service Agreement was reaching its "nominal expiry date" of 25 May 2002. Mr McLaughlin and Mr Grafton discussed rolling the existing agreement over whilst resolving strategy issues with Trans Union, international joint venture partners in the United States. They agreed to roll over the applicant's existing Executive Service Agreement for three months. 41 The applicant said that on 21 May 2002, he again met with Mr McLaughlin and Mr Grafton in Melbourne to discuss the continuation of his employment. Mr McLaughlin confirmed that "the company intended for me to remain in employment, but that my exact position depended upon negotiations with the joint venture partner". Mr McLaughlin presented the applicant with a handwritten letter purporting to continue his employment for three months on the same terms and conditions as those which he then had. 42 Under cross-examination by Mr Rinaldi, counsel for the respondents, the applicant described the events of 21 May 2002 as little more than a "brief encounter" in the corridor. Mr McLaughlin and Mr Grafton had been visiting Melbourne on business rather than specifically having come down to meet with the applicant. Mr Rinaldi asked: "Did you sit down together and have a discussion?" The applicant responded: "There was no discussion. Mr McLaughlin merely handed over the handwritten note that he had prepared and said words to the effect that, 'I've written this. We'll get it typed up.'" 43 The applicant said that on 23 May 2002, he met with Mr Grafton and Ms Weston in Sydney. According to the applicant, Ms Weston "was handed the handwritten note of 21 May 2002 to formally type". Later that afternoon, he was called into a meeting with Mr McLaughlin, Mr Grafton and Ms Gibson. Mr McLaughlin told the applicant that upon legal advice, he was not prepared to extend the terms "as originally proposed as the provisions regarding redundancy were unacceptable". Ms Gibson also told the applicant that if he "did not agree to changes to the Agreement then [his] contract would effectively cease on 25 May 2002 and [he] would have no rights to compensation." 44 The applicant said that he was then handed the letter that had been typed up by Ms Weston and amended by Ms Gibson (see above at [17]). As previously noted, the letter was expressed to be written on behalf of "Baycorp Advantage Decision Solutions Pty Ltd", the third respondent. The applicant said that he felt "considerable pressure to sign" but told the parties present that he would not agree to anything less than six months' severance pay on the basis that that was what he was presently entitled to, if he resigned. The applicant said that Mr McLaughlin and Ms Gibson agreed to this, and amended the proposed letter to read that he was entitled to three months' notice, and three months' pay. He said that he took the letter back to Mr McLaughlin and had it changed to six months' severance pay so that he could continue to receive the three months' notice to which he believed he was entitled. 45 The applicant claimed that he then verified with Mr McLaughlin that should no alternative position become available within the next three months, he would receive nine months' entitlement under the Executive Service Agreement, being the six month redundancy benefit together with three months' notice. In evidence in chief, the applicant was asked: "What did you – what was the outcome of the meeting, eventually?" 46 He responded: "The outcome was that there was an agreement that in the new revision it would state that I would be entitled to three months' notice and six months' payments or severance in the event that no position could be found for me within the organisation." 47 According to the applicant, at the end of the meeting, he, Mr McLaughlin and Mr Grafton moved to Mr McLaughlin's office. There, the applicant said words to the effect of "[s]o this means that if we can't find a position within the next three months I walk away with nine months' pay". He said that he and Mr McLaughlin "shook hands on that". Ms Gibson was not present during this discussion, as she was making changes to the letter at a workstation outside Mr McLaughlin's office. He said that he signed the "three-month fixed-term contract" in reliance upon Mr McLaughlin's assurances to him. 48 In cross-examination, Mr Rinaldi questioned the applicant regarding his understanding of the terms of his contract as they stood at 23 May 2002. He referred to the 14 June 2001 letter, and asked the applicant whether he accepted that the terms contained therein governed his employment from 1 July 2001. The applicant said that he proceeded on that basis. However, he added: "It's only from talking with my counsel that I have come to the conclusion that there may be an alternative interpretation. But as far as I was concerned, from the meeting on 23 May it was made clear to me that those terms and conditions were the contract that I was working under and I negotiated on that basis." 49 Later, I questioned the applicant further regarding his understanding of the contractual position that existed as at 23 May 2002. The transcript of the exchange reads as follows: "HIS HONOUR: Just to understand briefly, the contract that was signed in May of 2000, that provided for six months salary if you resign prior to the end of the contract for whatever reason?---Correct. So in your mind, you could have resigned the day before the two years and got six months no matter what?---Correct. You didn't need a reason for resigning, you just resign, and you get six months salary?---Correct, that was my interpretation and still is my interpretation of the contract. So just extrapolating from that, one sense of grievance that you have is that you are in a sense worse off than if you'd resigned the day before?---Exactly. I could have resigned at any time and taken at least ‑ ‑ ‑ With the further three months work for which you were paid but then you ended up with nothing, whereas if you'd resigned the day before the contract ended you would have got six months salary. That's one sense of grievance?---Correct, and the reason I didn't resign is because I had this agreement that nine months will be paid. If it had been made clear that that was not the case before the end of the contract and that they weren't going to pay me then I would have resigned and taken the six months. Of course the counter argument to that is that if this was an important part of the reason that you stayed on and did the extra three months - that's the nine months comfort - you would have insisted on that being recorded in the document that you did sign, albeit under circumstances of distress and pressure?---In hindsight, your Honour, then yes, I should and I should have insisted that the wording reflect exactly what my interpretation was. Not so much your interpretation but what you say the agreement was?---What I say the agreement was, yes. In hindsight I should have done that. But this was not a comfortable situation to be in and, yes, I wouldn't have - knowing what's happened since I wouldn't have signed it." 50 In summary, it is clear from the applicant's evidence that he believed that he was entitled to six months' salary, upon resignation, at any time prior to the end of his contract. According to the applicant, he did not resign and take up that entitlement because he believed that he had agreed with Mr McLaughlin that he would be paid nine months' salary in the event that no position could be found for him within the company at the end of the three-month term. 51 The applicant said that Mr Grafton wrote to him on 12 August 2002, advising him that the Executive Service Agreement would not be extended, and that his employment would terminate twelve days later. He said that at a meeting on or about 15 August 2002, Mr McLaughlin and Mr Grafton told him that there were no suitable alternative positions available. His employment was terminated on 24 August 2002. He did not receive any payment in lieu of notice, or any severance pay. 52 The applicant said that in the week following his termination, the position of Managing Director International was advertised internally "within Baycorp" as a Trans Union role. 53 The applicant next gave evidence about the other aspect of his claim, namely the refusal of his former employer to pay him the performance bonus calculated by Mr Grafton based upon his having met the KPIs. He said that in about August 2002, Mr Grafton had told him that he had recommended to Mr McLaughlin that the bulk of the bonus payment be paid. The 12 October 2001 letter set the bonus at $68,500.00, and Mr Grafton recommended that he receive ninety per cent of that figure. The applicant said that the KPIs were never amended to reflect the changes in his role following the merger between Data Advantage and Baycorp Advantage. He claimed that he was never told of any weighting that would be attached to the individual KPIs. As previously indicated, Mr McLaughlin ultimately cut that figure back to $27,400.00. That amount, less tax and deductions, was paid in June 2003. 54 On 1 December 2002, the applicant commenced employment with Insfin Insurance and Financial Services as a Director. His basic salary is $110,000.00, not including bonuses. 55 As previously indicated, the only other witness called on behalf of the applicant was Mr Grafton. He gave evidence under subpoena, having elected not to swear an affidavit. 56 In examination in chief, Mr Grafton said that he had had a long working relationship with Mr Lythgoe. He had known him when they were both working in the United Kingdom. He had recruited the applicant to work for a credit reporting company at which he himself was then working. Mr Grafton then approached the applicant about joining him in developing business opportunities in the field of credit reporting in Australia. According to Mr Grafton, he was concerned that any position the applicant would accept in Australia should be "extended into the long term". 57 Mr Grafton acknowledged that the Executive Service Agreement of 25 May 2000 between the applicant and Decision Advantage was a fixed term agreement, for a term of two years. He said: "The chairman of the company Data Advantage was keen that all senior executive appointments should be on a two-year contractual basis. I don't think that's unusual for senior appointments, and I explained to Tony that the two-year contract would be what would be required to be signed, but I was very anxious to explain to Tony that the view that I had and the vision that I had for the growth of the company and his role within it certainly extended well beyond two years, and I did say those things to Tony." 58 Mr Grafton said that before he made such statements to the applicant, he had consulted Mr Brian Gatfield who was at that time the Chairman of Data Advantage. He said that at the time of the merger, when the applicant was offered his new position, his two-year contract had not been renewed. Mr Grafton and I then had the following exchange: HIS HONOUR: What was your understanding of the term of the contract that you were offering Mr Lythgoe on 12 October 2001? MR GRAFTON: One of the things, your Honour, that I have gone over in my own mind many times - and I regret to say I had simply forgotten that Tony was working under a two-year fixed contract. I don't think that's very clever of me, but the truth of the matter is that there was so much that was going on at that point in time that it simply didn't occur to me about the length of time of Tony's contract. So rather embarrassingly, I have to say to you that it just didn't enter my mind as to what the term should be. It should have entered my mind and it didn't. HIS HONOUR: That's why, even though you've got the remuneration package on the next page, there's nothing said about the term of the contract? MR GRAFTON: It was an omission for which I take responsibility, but all I can say is that it was an exceptionally busy time, with all of the merger discussions. I should have addressed that, and I didn't. HIS HONOUR: Did you discuss the question of term of the new contract with Mr Lythgoe? MR GRAFTON: No, your Honour, I didn't. I focused my discussions with Tony on remuneration and getting together a set of key performance indicators that were consistent with the bonus element of that package." 59 According to Mr Grafton, it was not until about May 2002, when the applicant aired his concerns about the pending expiry of his contract that Mr Grafton became aware that the contract in fact had a fixed term, with only a short time left to go. Mr Grafton told the applicant that he would take the matter up with Mr McLaughlin. He also said that at about that time, he was in Seoul in business when he received a telephone call from Mr McLaughlin. He was told that he was not to discuss the matter with the applicant until Mr McLaughlin had had a chance to speak to him about any future role that the applicant might play within the company. 60 Mr Grafton's recollection of the 23 May 2002 meeting largely accorded with that of the applicant. There was only one significant point of difference. According to the applicant, at the conclusion of the meeting, when Ms Weston was typing up the handwritten letter, both he and Mr Grafton moved into Mr McLaughlin's office. Mr Grafton's recollection, however, was that Mr McLaughlin, Ms Gibson and the applicant went into Mr McLaughlin's office, but he did not. He said that he could see what was happening through the glass of his own office where he was at the time. Though he recalled a handshake between the applicant and Mr McLaughlin, he could not recall whether he had seen it during the meeting proper, or as the applicant claimed, in Mr McLaughlin's office afterwards. 61 According to Mr Grafton, the letter that was typed on 23 May 2002 did not accurately reflect all that had been agreed at the meeting earlier that day. He said Mr McLaughlin had agreed that in the event that no position was found for the applicant at the end of three months, he would receive a nine-month payout. However, that agreement had not been reflected in the typed letter. 62 Under cross examination, Mr Rinaldi tested Mr Grafton's recollection of this matter: "MR RINALDI: Can I suggest to you that there was no agreement made in the Thredbo meeting room to pay a nine-month payout if there was no position found within the three months? MR GRAFTON: My response to that is that would be an incorrect statement. MR RINALDI: May I suggest also that you've been through this many times in your mind over recent months and that your current memory is unclear and mistaken? MR GRAFTON: Memories are peculiar things and, whilst I have reflected over many months, there are things that I can remember extremely clearly and I suppose, being human, there are things that perhaps I ought to remember that I don't remember clearly. However, in the category of things that I remember clearly, and in part because of its importance, I do remember that agreement being reached." 63 Mr Grafton acknowledged that, on the day in question, he had not said anything about the fact that the letter omitted any mention of the nine-month payout. He was asked why he had not raised the matter with Ms Gibson when he went through the letter with her. He replied: "---Because it was clear to me at that time that - and again this is perhaps in the realms of supposition, but it was in my opinion the case that the company had no intention of paying a nine-month payout and that the company would seek to exit Tony as quickly and as cheaply as it possibly could." 64 The cross examination continued: "But according to your version the company had just committed to paying him a nine-month payout at the end of the three months if a job wasn't found for him. Why didn't you raise that as soon as you saw this letter?---The reason why I didn't was that I felt that if Keith was not going to fulfil on that agreement, then he'd actually put me in a very, very difficult position personally and professionally. So you resolved, in effect, to be party to a complete denial of an agreement that had been reached some short while before?---No, I had a different strategy. I wanted to talk to Keith about a way that he could avoid where we are today and do what I thought was right in the circumstances. I wanted to talk to Keith about that rather than discuss it with somebody more junior." 65 With regard to the meeting on 15 August 2002, Mr Grafton said that on the flight from Sydney to Melbourne, he had been anxious about two matters: "One was that [the company] treated Tony [the applicant] in what I thought would be in a fair and proper and reasonable way, and the second thing is that the company avoided what was likely to be litigation should the company not get to a point where Tony was satisfied with an outcome. I was really very anxious about that, so I did talk to Keith [McLaughlin] on the plane and I said to him, "The way out of this, you know, is on that nine months." I said, "That's what needs to be done." Keith neither agreed nor disagreed and I was left, I have to say, rather hopeful that at the very last minute the right thing was going to be done and that in the meeting - it didn't happen, but I was hopeful that in the meeting the agreement that we had reached was - there was going to be fulfilment on that agreement. When you say "the agreement we reached", what are you referring to?---The nine-month payout at the end of the three-month extension." 66 At the meeting itself, Mr Grafton recalled that the applicant raised the issue of the nine-month payout at the conclusion of the three-month extension. He said that Mr McLaughlin responded with words to the effect that "he had no authority to agree to that, could not provide it, did not think it was reasonable." Mr Grafton's understanding of Mr McLaughlin's stance was that the Board would "not have not been best pleased had they become aware that those terms had been entered into in terms of [the applicant's] termination". 67 Mr Grafton recalled that at the conclusion of the meeting, he said to Mr McLaughlin, "Keith, the way out of this is to pay the nine months". Mr Grafton then told the Court: "I recall very clearly that the response from Mr McLaughlin was, 'Well, I'm not going to do that' and – I remember these words – 'We had better be prepared for incoming.'" the evidence on behalf of the respondents 68 Four witnesses gave evidence on behalf of the respondents. They were Mr McLaughlin, Ms Gibson, Ms Weston, and Ms Fiona MacDonald, an employee solicitor with the respondents' solicitors, Lander & Rogers. 69 Mr McLaughlin said that he was appointed Managing Director of Baycorp Advantage when Data Advantage and Baycorp Holdings Limited merged on 14 December 2001. Mr Grafton was appointed Executive Director. He said that Mr Grafton had direct responsibility for the "Decision Solutions / Marketing Solutions and International business units". He exercised a "high level of autonomy", though he still reported to Mr McLaughlin. Mr Grafton was required to obtain Mr McLaughlin's agreement to any major business decisions, including the appointment of senior executives. 70 During the due diligence leading up to the merger, Mr Grafton had briefed Mr McLaughlin on the executive structure within Data Advantage. He had explained that the applicant was based in Melbourne, and held the title "Managing Director of International". 71 From his discussions with Mr Grafton, Mr McLaughlin became aware that Mr Grafton and the applicant had worked together in the United Kingdom, and that Mr Grafton had recruited the applicant to oversee a restructure of the Decision Solutions business unit of Data Advantage in Melbourne. At the time of the merger, the applicant had completed that restructure, and was then working for "International". The applicant's role at that time was to create international business opportunities. 72 Mr McLaughlin acknowledged that he signed the 7 August 2001 letter. Similar letters were sent to all senior management staff of both the Data Advantage group and the Baycorp group. Mr McLaughlin also acknowledged that he signed the 12 October 2001 letter. He said that both letters were written before the merger had been completed. He was not aware, at that stage, that the applicant was employed under a fixed term contract. 73 Mr McLaughlin said that throughout the first half of 2002, he and Ms Gibson conducted a review of all senior management contracts in Baycorp Advantage. As part of that review, he learnt about the applicant's Executive Service Agreement. He said that he became aware of the applicant's "Living Away from Home Allowance", which he understood under Australian tax law was only available to employees on fixed term contracts who intended returning to their country of origin at the end of those contracts. 74 Mr McLaughlin further said that from his discussions with Mr Grafton, he understood that the applicant had been given the role of Managing Director of International only because he had completed the restructure for which he was originally employed, but the Executive Service Agreement still had time to run. In early May 2002, he and Mr Grafton discussed the pending expiry of the applicant's contract, and agreed that the applicant could not continue in his current role. Mr McLaughlin asked Mr Grafton to tell the applicant of that decision. 75 Shortly after, Mr Grafton told Mr McLaughlin that he had informed the applicant of their decision. Mr Grafton said that the applicant had requested a meeting with Mr McLaughlin to discuss the possibility of entering into a new contract. At around the same time, Mr Grafton told Mr McLaughlin that the applicant had asked the company to pay the costs of his visa application. Mr McLaughlin considered that given that the company had not made a final decision about whether to continue to employ the applicant, it was inappropriate for the company to pay those costs. He asked Mr Grafton to tell the applicant that the company would not do so. 76 On 21 May 2002, Mr McLaughlin met the applicant in Melbourne in response to his request. Mr McLaughlin said that during the course of that meeting, he explained to the applicant briefly the reasons why the company was unable to offer him a permanent position. He said that he told the applicant that he was prepared to keep him on for another three months, in which time he would consider whether there were any other suitable positions for him within the company. The applicant asked whether those terms could be reduced to writing. According to Mr McLaughlin, he told the applicant that he would give him a "short note in the interim" until they met to formalise those arrangements. Mr McLaughlin gave the applicant a handwritten note as promised. He did not make a copy of that note. 77 Mr McLaughlin said that it was his intention at the time to offer the applicant continued employment if a suitable position could be found. However, he denied having given him any assurance that a position would be found, as the applicant claimed. 78 Mr McLaughlin agreed that on 23 May 2002, he, Mr Grafton and Ms Gibson met with the applicant in Sydney to discuss the extension of his employment for a period of three months. He said that both he and Ms Gibson explained to the applicant that the company was unable to continue to make available to him the 21-month entitlement in his Executive Service Agreement arising out of a redundancy, or diminution of role, if either such event occurred within the extended period. They suggested that if either of those events occurred, a three-month payment would be appropriate, consistent with the length of the proposed extension. According to Mr McLaughlin, the applicant asked that the payment in those circumstances be nine months. After some discussion, the parties agreed to six months. This term was included in the draft letter prepared by Ms Gibson. 79 Mr McLaughlin recalled that in response to the initial draft letter, the applicant requested the deletion of a sentence that excluded the requirement of three months' notice under clause 10.3.1 of the Executive Service Agreement. Ms Gibson explained to Mr McLaughlin, in the presence of the applicant, that if the company agreed to that deletion, the effect would be that if the applicant terminated the contract within the three month period, on the grounds of a reduction of responsibilities, he would receive three months' notice as well as six months' severance pay. Mr McLaughlin agreed to the deletion of this clause as there was no intention whatever for the applicant's duties to be diminished within the extended period of three months. Nor was it envisaged that his employment would otherwise be terminated during that period. 80 Mr McLaughlin said that there was no discussion to the effect that the applicant would be entitled to receive a six-month payment, or indeed any payment whatsoever, on the expiration of the three-month extension. At no time during the course of the meeting did the applicant suggest that he believed that if the three-month contract were not extended, he would be entitled to a twenty-one month payment, or any other payment. Mr McLaughlin said that he would have remembered such a claim because he would have had to seek legal advice regarding such an issue, and because it would have fundamentally affected the negotiations. 81 According to Mr McLaughlin, once the parties had reached agreement as to the terms of the three-month extension, the applicant stood behind Ms Gibson as she typed the amendments to the letter. The letter was then signed and Mr McLaughlin shook hands with the applicant. Mr McLaughlin recalled saying words to the effect of, "Well, we've got another three months to see if we can find you something." The applicant said words to the effect of, "Thanks Keith, thanks for extending the contract." 82 Mr McLaughlin noted that, at the 23 May 2002 meeting, he had no authority to agree to an employment condition that would have provided the applicant with a nine-month payment, or any payment, at the end of the three-month contract. He claimed that at no stage did he say to the applicant, or imply, that he would be entitled to such a payment. The Board of Baycorp Advantage had previously directed that any such terms could not be agreed without its authority. It was implicit in Mr McLaughlin's evidence that he would never have disregarded that direction. 83 Over the ensuing months, Mr McLaughlin and Mr Grafton had several conversations about the options for the applicant. One of these included his possible relocation to the United Kingdom. Mr McLaughlin believed that the applicant first suggested this possibility. To this end, Mr Grafton asked the applicant to prepare a paper on business development opportunities in the United Kingdom, and the applicant did so. However, having considered the applicant's proposal, Mr McLaughlin rejected it. He considered it unlikely that the applicant could generate the revenue that was predicted in the proposal. According to Mr McLaughlin, Mr Grafton agreed with him that the proposal was not viable. 84 Mr McLaughlin said that he suggested an alternative arrangement whereby the applicant might work in the United Kingdom as a consultant, and assume a significantly higher level of risk. He asked Mr Grafton to convey this to the applicant. Mr Grafton did so, but nothing came of this alternative. Apparently, the applicant sought greater security than was being offered. 85 On 12 August 2002, the applicant sent an email to Mr McLaughlin reminding him that his three-month extension was about to expire, and seeking confirmation that his employment would be extended for the long term. Mr McLaughlin telephoned the applicant to tell him that it had become clear that no position was available, and that his contract would not be extended. Mr McLaughlin made diary notes during the conversation. Mr Grafton was also present. Later that day, Mr McLaughlin sent the applicant an email, attaching a letter from Mr Grafton, putting in writing what had been discussed on the telephone. 86 It is worth noting that annexed to Mr McLaughlin's affidavit was the cover email from him to the applicant, and the letter from Mr Grafton that was attached to the email. During the trial, Mr Staindl, counsel for the applicant, tendered an earlier draft of Mr Grafton's letter. There were some differences between the draft and the final letter, but in the end, they were of little consequence. Under cross-examination, Mr McLaughlin said that he had seen the draft of Mr Grafton's letter before he sent out the final version, under cover of his own email. 87 On 15 August 2002, Mr McLaughlin and Mr Grafton flew to Melbourne to meet with the applicant. Mr McLaughlin said that Mr Grafton did not raise any matter concerning the applicant during the flight. At the meeting, Mr McLaughlin confirmed that no position had been found within the company for the applicant. The applicant wanted to know what payout he would receive. Mr McLaughlin told the applicant that as his contract had now come to an end, he had no entitlement to a payout. 88 Under cross-examination, Mr McLaughlin acknowledged that at this meeting the applicant had raised the nine-month payment. The following ensued: "Did you say, 'You're not entitled to the nine-month payment'?---I said, 'I never agreed to a nine-month payment.' So Mr Lythgoe's position at that meeting was that there had been an agreement to a nine-month payment?---He said, 'Keith, when I came into your office and I shook your hand, you agreed to pay me nine months,' and I said, 'Tony, I never agreed to pay you nine months then or any other time.' Mr Grafton was present during that discussion?---He was, yes." 89 In May 2003, Baycorp Advantage group's legal counsel advised Mr McLaughlin that the applicant had now amended his pleading to include, for the first time, a claim for a bonus payment. It was agreed that he was indeed entitled to a bonus. Mr McLaughlin said that he then calculated the bonus based upon his own assessment of the applicant's performance in the relevant areas. He concluded that the applicant was entitled to a bonus payment of $27,400.00 for the 2001-2002 financial year. This amount, less tax and other deductions, was paid to the applicant in June 2003. 90 Under cross-examination, Mr McLaughlin agreed that there was a significant difference between his assessment of the applicant's performance under the KPIs and that of Mr Grafton. He said that normally, where there were significant differences in assessing KPIs, he would consult with the person who made the initial assessment. He acknowledged that at the time he reviewed the KPIs, in May 2003, Mr Grafton could have been contacted for such a discussion, notwithstanding that the latter was on "garden leave", but that he had not done so. He conceded that he had very little contact with the applicant, whereas the applicant reported almost daily to Mr Grafton. He said that when he came to make his assessment of the KPIs in May 2003, he had definitely seen Mr Grafton's assessment of the KPIs made in August 2002. 91 The next witness called on behalf of the respondents was Ms MacDonald. As previously mentioned, she is an employee solicitor with the respondents' solicitors. She gave evidence about a meeting that she attended on 26 March 2003 at the respondents' offices in North Sydney. Also in attendance at that meeting were Mr Grafton, Ms Gibson and Mr Scott Jamieson, Legal Counsel for the first and third respondents. Mr Michael Landvogt, a partner of Lander & Rogers, took part in the meeting by telephone link-up from Melbourne. 92 Ms MacDonald made ten pages of handwritten notes at the meeting. The following day, on 27 March 2003, she dictated the notes of the meeting in some greater detail. Her secretary then typed up the dictated notes. 93 Ms MacDonald said that at no time during the meeting of 26 March 2003 did Mr Grafton mention that an agreement or a representation had been made to the effect that the applicant was entitled to nine months' pay at the end of the three month contract if a continuing role were not found for him. Ms MacDonald said that had Mr Grafton mentioned any such entitlement, she would have regarded it as important, and included it in her notes. She would certainly have reported it to her client, the insurer. 94 The following is an important passage from the cross-examination of Ms MacDonald: "So you say that the substance of the - or the allegation or the pivotal allegation in the statement of claim was put to Mr Grafton quite squarely?---Yes. You've got no doubt about that?---I have no doubt about that. You have no ‑ ‑ ‑?---And if he had have said to me, remembering at this time that my client is the insurer, that Mr McLaughlin promised Mr Lythgoe nine months, it would have been underlined with exclamation marks. I have no doubt in my mind that he denied that Mr Lythgoe was entitled to anything, and that's on the last page of my notes where he said he was never promised anything else and Mr Grafton told us that it was his view that Mr Lythgoe was looking for protection with a payout, not that he was looking for protection with the nine months that was promised. I was so clear at the end of that meeting that Mr Grafton supported what Baycorp's view and what Mr McLaughlin's view and what Ms Gibson's view of what took place was. You have in that - on page 4 of your typewritten notes, 'David said there was a' - this is the middle of the - the third paragraph, the middle of the - that paragraph. 'David said there was a discussion of payment when extending the contract for three months.' Firstly, is that when he mentions the nine months? ---I can't remember if it was specifically there but we had a general discussion which Ms Gibson was - all of us were trying to discuss where nine months might come from. You started to say Ms Gibson, 'which Ms Gibson' - what? Did she have input on this discussion?---No, Ms Gibson was saying about - she gave some of her views and Mr Grafton gave some of his views and so did I about where nine months might come from in the documents. What did Ms Gibson say?---That's where she says - she says that she heard ‑ the only time that she remembers nine months is when she spoke to Mr McLaughlin with Mr Grafton about - with Mr Lythgoe, sorry, about three plus six equals nine." 95 The third witness called on behalf of the respondents was Ms Gibson. She has been Group Legal Counsel of Baycorp Advantage since 27 January 2002. Prior to that, she was Legal Counsel of the New Zealand holding company. She said that she first met the applicant in December 2001 during "merger integration workshop sessions". Later, she had some contact with him over legal matters relating to the international business. 96 Ms Gibson recalled that in March 2002, the Board asked her to undertake a review of employment contracts for senior management with a view to standardising them. As part of that process, she reviewed the applicant's Executive Service Agreement. 97 Ms Gibson also recalled that prior to the meeting on 23 May 2002, she met with Mr McLaughlin and Mr Grafton to discuss the terms of the applicant's employment contract. They discussed matters including the fixed term nature of the contract, that it was due to expire on 25 May 2002, and the severance payments in terms of redundancy, diminution of role and the like contained within it. Ms Gibson said: "This employment contract was by far the most generous in terms of severance pay that I had reviewed. It was my advice that in the event the Contract was not extended by mutual agreement, or a new employment contract not entered into, the Contract would be at an end on 25 May 2002 with no obligation for any payment by the Third Respondent." 98 Ms Gibson said that during the course of the meeting in Sydney on 23 May 2002, she explained to the applicant that the Executive Service Agreement could only be extended by consent. She told him that if agreement could not be reached in relation to a further three-month period of employment, then the contract would terminate on 25 May 2002. Ms Gibson said that the main discussion concerned changes to the severance pay in the event of redundancy and diminution of role. After some discussion, the applicant and Mr McLaughlin agreed to amend the payout in the event of termination in these circumstances to six months' severance pay. Nothing was said about any payout in the event that no position could be found for the applicant within the company at the end of the three-month period. 99 Ms Gibson typed a letter setting out the terms on which the extension of the applicant's employment for three months had been agreed. She typed this letter at Ms Weston's desk. That was because her office was across the other side of the building and the applicant was in a hurry to catch a plane back to Melbourne. 100 Ms Gibson said that the draft letter that she presented to the applicant was in the same terms as the final letter that he signed, except that she had also included a provision in relation to clause 10.3.1 along the lines of "delete 'The CEO must give three months written notice'". The applicant queried why this had been deleted. A discussion then took place in Mr McLaughlin's office in which she explained to Mr McLaughlin, in the applicant's presence, that if the company retained that clause, and the circumstances relating to the clause occurred during the three month period, then the applicant would either work out the three months' notice (which was inconsistent with the three month extension which was being agreed), or receive a payment of three months in lieu of notice. If that occurred, it would bring the total payment to nine months. Mr McLaughlin instructed Ms Gibson to include the three months' notice provision in the three-month contract. She amended the letter accordingly. 101 Ms Gibson said that she handed the letter to the applicant to read. He agreed with its terms, and she then gave it to Mr McLaughlin. The applicant and Mr McLaughlin both signed the letter, and she witnessed their signatures. The two men then shook hands. 102 It must be emphasised that, according to Ms Gibson, the applicant at no stage raised any issue regarding the terms of the letter. As previously indicated, she denied that Mr McLaughlin told the applicant that he would receive any payment at the end of the three-month term. Equally, she did not become aware of any such agreement having been reached at any stage after the meeting on 23 May 2002. 103 Ms Gibson agreed with Mr Grafton that he was not present in Mr McLaughlin's office after the initial meeting, though she did not know where he was at that time. 104 Finally, an affidavit of Ms Weston was read. There was nothing contentious in the affidavit, and I need say nothing more about it. the applicant's submissions 105 Mr Staindl commenced his submissions by arguing that, assuming that Mr McLaughlin made the representations pleaded during the course of the 23 May 2002 meeting, they were made "in trade or commerce". He submitted that representations made during the course of negotiations involving terms of employment are relevantly made "in trade or commerce". He relied upon the following comment by Kenny J in Walker v Salomon Smith Barney Securities Pty Limited [2003] FCA 1099 ("Walker") at [180]: "The authorities support the proposition that a statement made in the course of employment negotiations, which proves to be misleading or deceptive, can fall within s 52 of the TPA: see O'Neill v Medical Benefits Fund of Australia (2002) 122 FCR 455 per Carr, Moore and Marshall JJ; Stoelwinder v Southern Health Care Network (2000) 177 ALR 501 ("Stoelwinder"), at 503 per Finkelstein J; and Patrick v Steel Mains Pty Ltd (1987) 77 ALR 133 ("Patrick"), at 136 per Wilcox J." 106 He also relied upon McCormick v Riverwood International (Australia) Pty Ltd (1999) 167 ALR 689 in support of the contention. 107 Mr Staindl next addressed the question of the identity of the employer. That was an important issue, given that one of the bases upon which the applicant claimed damages was that he was wrongfully dismissed. That contention depended, in turn, upon whether once the merger was effected, the applicant was employed under a new contract, and not under the Executive Service Agreement. 108 Mr Staindl accepted that when the applicant was appointed to the position of Managing Director International, in response to the 14 June 2001 letter, his employer was, in general terms, Data Advantage. He acknowledged that the 7 August 2001 letter spoke of the applicant remaining "an employee of Data Advantage Limited" and confirmed that he would "retain [his] existing terms of employment". However, he submitted that the respondents' argument that the applicant remained employed throughout by his previous employer was simply untenable. 109 Mr Staindl relied heavily upon the 12 October 2001 letter, which offered the applicant "the position of Director International in Baycorp Advantage". The letter set out in detail the basis upon which the applicant would be remunerated, referred to the prospects for the "new company", and gave his commencement date. Importantly, it did not refer to the applicant's existing terms and conditions under the Executive Service Agreement. Mr Staindl submitted that this letter could only be construed as an offer of a new contract of employment, not incorporating the terms of any earlier contract of employment, and not being for a fixed term. He said that this interpretation was supported by Mr Grafton's stated intention that the applicant be employed far beyond his initial two year fixed term. 110 Mr Staindl then turned to the applicant's primary claim. He acknowledged that this claim was based entirely upon the applicant's account of what Mr McLaughlin allegedly said during the 23 May 2002 meeting being accepted in preference to Mr McLaughlin's version of events. He submitted that both the applicant and Mr Grafton had given their evidence in an impressive manner. He submitted that the same could not be said of the evidence of Mr McLaughlin and Ms Gibson. In particular, he pointed to what he claimed to have been a series of inconsistencies in the evidence of Mr McLaughlin. He described Ms Gibson as "more cautious in her evidence", but submitted that there were significant differences between her account of events, and that of Mr McLaughlin. 111 Mr Staindl submitted that Mr Grafton's evidence that he had raised the issue of the nine-month payment on a number of occasions with Mr McLaughlin should be accepted. In particular, his evidence concerning the discussion that he had with Mr McLaughlin on the flight to Melbourne on 15 August 2002 rang true. In relation to the 26 March 2003 meeting, he submitted there was nothing in the evidence of Ms MacDonald that contradicted Mr Grafton's account. Mr Grafton said that he had raised the issue of the nine-month payment during that meeting, but had been cut off by Ms Gibson. It was entirely possible that Ms MacDonald had failed to appreciate what Mr Grafton was endeavouring to say. 112 Mr Staindl then turned to his alternative submission. He argued that if there was a new contract of employment between the applicant and Baycorp Advantage, as from 14 December 2001, the date of the merger, that contract was not for a fixed term. Indeed, it was silent on the question of notice. In those circumstances, the normal rules of contract would apply. The applicant would be entitled to reasonable notice from his employer if his employment were to be terminated, or payment in lieu. Having regard to the applicant's position, reasonable notice would be something in the order of twelve to eighteen months. He relied upon Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567, Kilburn v Enzed Precision Products Pty Ltd (1988) 4 VIR 31, and Rankin v Marine Power International Pty Ltd (2001) 107 IR 117 for that proposition. He submitted that the applicant should be paid one year's salary ($255,000.00) by way of damages, less any amount subsequently earned as from 1 December 2002 ($110,000.00 per annum). 113 Mr Staindl next dealt with the applicant's claim arising out of Ms Gibson's statement to him on 23 May 2002 that his Executive Service Agreement was due to expire in two days' time, as were his entitlements under that contract. Mr Staindl submitted that this statement was wrong on two counts. First, the applicant was entitled to reasonable notice. Second, if the Court found that the Executive Service Agreement constituted part of the applicant's contract of employment, it was not in any event a fixed term contract. It provided for redundancy benefits totalling twenty-four months in circumstances where the contract itself was for a period of twenty-four months. 114 In relation to the bonus payment for the KPIs, Mr Staindl noted that the amount had been set at $68,500.00. Mr Grafton had assessed the applicant's performance at ninety per cent. He was therefore entitled to $61,650.00 as Mr Grafton had calculated. Mr Staindl submitted that this figure should be accepted, as it was Mr Grafton who had almost daily contact with the applicant and was therefore in the best position to assess his performance. According to Mr Staindl, Mr McLaughlin conceded under cross-examination that he had little day-to-day contact with the applicant, and was therefore not in as good a position as Mr Grafton to evaluate the KPIs. the respondents' Submissions 115 Mr Rinaldi submitted that contrary to the applicant's contention, he had never been employed by Baycorp Advantage, the first respondent. Rather, he had been employed, at all material times, by Baycorp Advantage Decision Solutions, the third respondent, under whatever name that company had had in the past. He noted that the applicant's initial employer was Equigen. That company became Decision Advantage, which in turn became Baycorp Advantage Decision Solutions. The Executive Service Agreement was never altered to reflect another employer. The terms of that agreement remained the same, except as expressly altered, until the end of the applicant's employment on 24 August 2002. Importantly, Baycorp Advantage Decision Solutions paid his salary. 116 Mr Rinaldi noted that the applicant's claim for nine months' remuneration rested entirely upon the alleged representation made by Mr McLaughlin at the 23 May 2002 meeting. He submitted that it was unclear whether the applicant contended that this representation was made in the meeting room, or later in Mr McLaughlin's office. He pointed to the difference between the evidence of the applicant who said that Mr Grafton had been in Mr McLaughlin's office, and that of Mr Grafton, Mr McLaughlin and Ms Gibson, all of whom disagreed. 117 Mr Rinaldi submitted that the evidence failed to establish that the alleged representation was ever made. The discussion at the 23 May 2002 meeting concerned the reduction of the payment provisions in the Executive Service Agreement relating to retrenchment or major diminution of role. Under cross-examination, Mr Grafton at first agreed that this was the end product of the meeting though, upon being shown the resulting letter, claimed that the promise of a nine month payment had been omitted. 118 Mr Rinaldi further submitted that had Mr McLaughlin made the representation, it would have been recorded in writing. Indeed, the applicant would have refused to sign the letter drafted by Mr McLaughlin had it omitted an important matter such as this. At the very least, someone like Mr Grafton or Ms Gibson would have brought the fact that such a representation had been made to the attention of the Board, its risk committee, its chairman, the insurer, or the insurer's solicitors. 119 Mr Rinaldi then identified a series of occasions on which the supposed representation or agreement could have been raised, and reduced to writing, but had not. These included the 23 May 2002 letter, the 6 August 2002 email, the 12 August 2002 telephone call and letter, the 12 August 2002 email, and the 26 March 2003 meeting. He submitted that the applicant's memory, and that of Mr Grafton, had become clouded over time by their preoccupation with what they perceived as being the unjust way in which the applicant had been treated. Their recollections must have been affected by what they considered to be the company's harsh approach to the applicant's situation, notwithstanding the fact that he had no legal entitlement, at the expiration of his contract, to any payout. He submitted that their evidence should not be accepted. 120 As to whether the alleged representation was made "in trade or commerce", Mr Rinaldi relied upon the leading decision on this point, Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 ("Concrete Constructions"). He also referred to Martin v Tasmania Development and Resources (1999) 163 ALR 79 in which Concrete Constructions was considered by Heerey J. His Honour noted at [72] that the majority had preferred the view that "in trade or commerce" was restricted to: "conduct 'which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character'… and not to 'the immense field of activities; in which corporations may engage in the course of, or for the purpose of, carrying on some overall trading or commercial business." 121 Mr Rinaldi accepted that a number of cases had held that it was at least arguable that negotiations by a corporate employer offering new employment terms to staff could be regarded as having been made "in trade or commerce". He submitted, however, that those decisions turned upon whether the negotiations disclosed some other commercial element. 122 In relation to the claim that the alleged representation gave rise to a collateral contract, Mr Rinaldi submitted that it offended the parol evidence rule, and that Hoyt's Proprietary Ltd v Spencer (1919) 27 CLR 133 ("Hoyt's v Spencer ") presented an insuperable obstacle. He submitted that the employment contract was at all times intended to be, and was, wholly in writing. 123 Turning next to the further alternative claim for damages in lieu of reasonable notice, Mr Rinaldi argued that there was no scope for the implication of any term requiring reasonable notice. The terms of the applicant's employment continued from 14 December 2001 until 24 August 2002, except as expressly altered. These terms included the fixed term introduced by the Executive Service Agreement. If the continuing employer was Baycorp Advantage Decision Solutions, as the respondents contended, there was no new employer and could be no new contract. If the employer had changed, it was clearly with the consent of the applicant and on the same continuing terms, except as expressly varied. See Nokes v Doncaster Amalgamated Collieries Limited [1940] AC 1014, and Finance Sector Union of Australia v Commonwealth Bank of Australia (2001) 111 IR 241 at [64]. Likewise, the change of position from CEO to Director International from 1 July 2001 did not give rise to an implied term of reasonable notice. 124 Mr Rinaldi acknowledged that the 12 October 2001 letter did not repeat the words of the 7 August 2001 letter to the effect that the terms of employment remained the same. He contended, however, that this did not alter the position. The later letter related to the same position as the earlier letter, and had to be read in conjunction with it. The later letter simply confirmed that the merger was proceeding and provided more detail on the topic of remuneration. 125 Mr Rinaldi submitted that the applicant's employment was not terminated in breach of his contract. His employment ended by the effluxion of time and by the operation of his contract. This could not constitute termination by the employer: Fisher v Edith Cowan University (No 2) (1997) 72 IR 464, and D'Ortenzio v Telstra Corporation (No 2) (1998) 82 IR 52. Mr Rinaldi emphasised that the applicant was not dismissed for reasons of redundancy or diminution of role, and remained employed right up until the end of his contract. 126 In relation to the claim for the bonus as originally assessed by Mr Grafton, Mr Rinaldi submitted that the discretion as to bonus had been exercised in good faith. The Court should not review such an exercise of discretion, nor should it alter its outcome. He argued that Mr McLaughlin had given consideration to each of the KPIs applicable to the applicant's employment, and had acted rationally in arriving at the conclusions that he did. Mr Rinaldi submitted that Mr Grafton's "draft assessment" had no means of quantification in that he did not use weightings or scores. He had simply assessed the applicant's performance in a qualitative manner as being equivalent to ninety per cent. Mr McLaughlin, on the other hand, supported his assessment with rational weightings and scores. conclusion 127 The applicant's claim is essentially in three parts. These are: · a claim for nine months' remuneration, based on an alleged representation said to have been made "in trade or commerce", and also said to have been misleading or deceptive in breach of s 52 of the Act. The same claim was based, in the alternative, on an alleged collateral contract; · a claim for damages for breach of contract, namely wrongful dismissal in lieu of reasonable notice, which the applicant submitted was twelve to eighteen months; and · a claim for a further bonus of $34,250.00, that being the difference between the $27,400.00 actually paid, and the $61,650.00 calculated by Mr Grafton. 128 I propose to deal with these claims in the order set out above. 129 The question whether the alleged representation was made is entirely one of fact. It requires me to determine whether the evidence of the applicant, and that of Mr Grafton, should be preferred to the evidence of Mr McLaughlin, and that of Ms Gibson. 130 The applicant has the onus of proof on this issue. He must satisfy the Court, on the balance of probabilities, that Mr McLaughlin told him that he would be paid nine months' salary in the event that no employment could be found for him at the end of the three month extension. In my view, the applicant has not discharged that onus. 131 I accept Mr Staindl's submission that the applicant gave his evidence in an honest and forthright manner. To a considerable though lesser extent, the same can be said of Mr Grafton. However, the same can also be said of Mr McLaughlin and Ms Gibson. They testified that the entire discussion on 23 May 2002 concerned the reduction of the provisions in the Executive Service Agreement applicable to retrenchment, or significant diminution of responsibility, from an entitlement of twenty-one months' pay to six months' pay (together with, in the latter case, the requirement of three months' notice to be given by the employee). The matters discussed involved sufficient complexity to allow for the possibility of misunderstanding on the part of the applicant, and Mr Grafton. In other words, it is perfectly possible that all parties to the conversation have given a truthful account of what they believe took place. 132 There is one factor that seems to me to tell strongly against the applicant's version. Mr McLaughlin was an experienced Managing Director. He struck me as a cautious man, who would be unlikely to go out on a limb on behalf of an employee who was not, in any event, a friend or even close associate. He was well aware of the limits of his authority. They did not extend to offering the applicant a payment of nine months' salary in circumstances where no further employment could be found for him. Mr McLaughlin knew that the applicant had no legal entitlement to any such payment. Given that the Board had just arranged for he and Ms Gibson to carry out a review of executive agreements, some of which seemed unduly generous, and given that the applicant's contract was about to expire within two days of the meeting of 23 May 2002, it is unlikely that he would have flouted the Board's plain intentions, and offered the applicant such a generous payment, based solely upon considerations of fairness. In my opinion, he would not have done so without express authorisation from the Board. Had any such offer been made, he would certainly have ensured that it was properly documented. It would not have been done on a handshake basis. 133 I accept Mr Rinaldi's submission that had such a representation been made, it would have been referred to in terms in subsequent correspondence between the parties. References to a "negotiated exit" are inconsistent with the prior agreement alleged. Had there been an agreement of the type claimed, there would have been no question of any "negotiation". Had Mr Grafton understood Mr McLaughlin to have entered such an agreement, and then reneged upon it, he would in all likelihood have taken the matter up with him, or with the company's Board or Risk Committee. He would also have been conscious of the need to inform its insurer and its solicitors. 134 It seems to me to be likely that both the applicant and Mr Grafton have misconstrued some of the terms of a conversation, the details of which they do not recall with precision. The inherent probabilities favour the account given by Mr McLaughlin, a cautious manager, who could not have had any sensible reason to offer the applicant a nine-month payout in circumstances where he knew that such an offer would directly contravene company policy, and get him into serious trouble. 135 I consider that there may have been an element of reconstruction in the evidence of Mr Grafton. The evidence of Ms MacDonald is particularly significant. Her notes, taken during the course of a lengthy meeting with Mr Grafton on 26 March 2003, omit any reference to a representation on the part of Mr McLaughlin regarding a nine-month payout. Had Mr Grafton even hinted that such a representation had in fact been made, I have no doubt that Ms MacDonald would have noted that fact, and recorded it in her ten-page handwritten document. 136 In effect, Mr Rinaldi's submission was that Mr Grafton's evidence on this point, supporting that of the applicant, should be rejected, having come as "a bolt from the blue". He submitted that Mr Grafton was either lying or, more likely, mistaken about the events of 23 May 2002. Mr Grafton was, after all, responsible for the applicant's decision to come to Australia, and no doubt felt that the company had treated him somewhat shabbily. 137 I have some difficulty with one aspect, in particular, of Mr Grafton's evidence. His explanation for not having raised with Mr McLaughlin the failure to include any reference to the nine month remuneration payment in the note that was signed, namely that he thought Mr McLaughlin would resile from what he had only just agreed upon, struck me as contrived and disingenuous. 138 It is unnecessary for me to make any final determination regarding Mr Grafton's credibility, or indeed that of the applicant. There is simply no basis upon which I can be satisfied that their version of the events of that day should be preferred to that of Mr McLaughlin, supported as it was by Ms Gibson. Whatever inconsistencies there may have been in Mr McLaughlin's evidence, they were not of such a character as to cause me to doubt his truthfulness. The same may be said of Ms Gibson. The scenario that was implied, namely that Mr McLaughlin made the offer in question and then, regretting having done so, lied about it, is one that I reject. Accordingly, the claim based upon misleading or deceptive conduct must fail. 139 Having concluded that the applicant has failed to establish that Mr McLaughlin made the representation regarding a nine-month remuneration payment, it is unnecessary to consider whether that representation, if made, was made "in trade or commerce". I note, however, that this expression, in s 52, has been the subject of recent consideration in Dresna Pty Ltd v Misu Nominees Pty Ltd [2004] FCAFC 169, and Village Building Company Limited v Canberra International Airport Pty Limited [2004] FCAFC 240. 140 It is also unnecessary to determine whether that representation, had it been made, would have constituted a collateral contract. I note, however, that there would be difficulties with that claim, in any event, having regard to the parol evidence rule: Hoyt's v Spencer. The applicant's contract of employment was at all times, and was at all times intended to be, in writing. 141 The applicant's claim for damages for wrongful dismissal is based upon the premise that he entered into a new contract, separate and distinct from the Executive Service Agreement, from the time of the merger, if not earlier. As previously noted, it was common ground that the applicant was initially employed by Equigen. On 25 May 2000, he was appointed Chief Executive Officer of that company, which by then was called Decision Advantage. His Executive Service Agreement was said to derive from that appointment. On 14 June 2001, he was appointed "Managing Director International" with "Data Advantage Ltd". On one version of his case, this was a new position with a new employer, encompassing new responsibilities. Alternatively, the new position was that taken up shortly thereafter with Baycorp Advantage. 142 Mr Staindl submitted that the most telling evidence in support of this contention was the 12 October 2001 letter which offered the applicant "the position of Director International in Baycorp Advantage", setting out his remuneration, referring to the prospects for the "new company", and giving a commencement date. That letter did not refer to his existing terms and conditions of employment. It did not refer to the Executive Service Agreement. In particular, it did not refer to the expiry date of that agreement, namely 25 May 2002. 143 On the other hand, Mr Rinaldi submitted that the applicant's employer was, at all times, Baycorp Advantage Decision Solutions, the third respondent, and its predecessors. He submitted that the applicant's employer never changed. The Executive Service Agreement always governed the terms of his employment, except as expressly altered, until 24 August 2002. He noted that the applicant was, at all times, paid his salary, by Baycorp Advantage Decision Solutions, and its predecessors, and not by Baycorp Advantage. 144 According to Mr Rinaldi, the applicant's employment ended by simple effluxion of time: see [125]. Irrespective of whether his contract was for a "fixed term", in the sense in which that term is understood by industrial lawyers, it came to an end once the period of employment specified had passed. That did not constitute a termination by the respondents. The fact that the original contract contained notice terms, redundancy terms, and other provisions of that kind, was of no consequence. There was no redundancy or diminution of role during the term of the contract, or indeed during the three-month extension. The applicant was not dismissed, and remained employed until the end of the contract. 145 Mr Rinaldi correctly submitted that if the applicant remained in continuous employment with Baycorp Advantage Decision Solutions, and its predecessors, there could be no new employer, and therefore no new contract. As previously indicated, he further submitted that if the employer changed at any time, this was with the applicant's consent, and on the same continuing terms, except as expressly varied. 146 With regard to the 12 October 2001 letter, Mr Rinaldi submitted that it did not have the effect for which the applicant contended. The fact that it did not repeat the words of the 7 August 2001 letter, to the effect that the terms of employment remained the same, did not alter the position. The October letter plainly related to the same position as the August letter, and had to be read together with it. The later letter simply confirmed that the merger was proceeding, and provided some additional detail in relation to remuneration. It did not derogate from the earlier letter. 147 In my view, the evidence supports Mr Rinaldi's contentions on this issue. There is nothing to suggest that the parties ever intended to create an entirely new employer-employee relationship once the applicant completed his earlier role, and assumed his new responsibilities. If he were to move from a fixed term contract to permanent employment, it would be expected that that fact would be reflected in the written documentation. The applicant himself believed throughout, as he acknowledged in his evidence, that he was on a contract that expired on 25 May 2002, and that is a matter of some significance. I gained the sense that the "new contract" theory was the product of his legal advisers' ruminations, perhaps as a reconstruction of events, and not a contemporaneous belief on his part. It follows that the applicant has not persuaded me that he entered into a new contract of employment with a new employer on new terms. Accordingly, his claim for damages for wrongful dismissal must fail. 148 That takes me to the last of the applicant's claims. It will be recalled that Mr Grafton set his bonus payment at ninety per cent of $68,500.00. Mr Grafton had almost daily contact with the applicant, and was in a far better position to assess his performance than was Mr McLaughlin. 149 Mr Rinaldi relied heavily upon what the respondents described as a "grandfathering policy". When asked to produce a written version of that policy, all that could be done was to produce a "Human Resources Charter", attached to certain Minutes of the Board. There is a real question as to whether this Charter was applicable to the applicant, and it is clear that he had no knowledge of it. Indeed, he was not even cross-examined about it. 150 Mr Rinaldi submitted that Mr McLaughlin had exercised his discretion in relation to the applicant's bonus "in good faith", and that this Court should not conclude otherwise. The KPIs that had been applied were those that were appropriate to the position, and Mr McLaughlin gave proper consideration to each of them in accordance with the corporate respondents' grandfathering policy. Mr Rinaldi submitted that unlike Mr Grafton, whose draft assessment was purely qualitative, Mr McLaughlin's quantification was supported by careful reasoning, and by rational weightings, and scores. He submitted that the applicant had no entitlement to either the maximum bonus, or ninety per cent thereof. Baycorp Advantage Decision Solutions was merely required to consider whether a bonus was warranted, and exercise its discretion in an honest and fair manner. This, it had done, and its judgment should not be "second-guessed". 151 Mr Rinaldi's submissions on this point cannot be accepted. In this proceeding, the Court is not engaged in the task of judicial review. There is no "deference" owed to any honest belief on the part of Mr McLaughlin. The only question is whether the applicant has established, on the balance of probabilities, that he was entitled to the bonus assessed by Mr Grafton. 152 On this issue, I much prefer the evidence of Mr Grafton. He carried out his role in assessing the KPIs properly, and in a responsible manner. Unlike Mr McLaughlin, he took into account the changes in the applicant's responsibilities that required some adjustment to be made in those KPIs. I had the distinct sense that Mr McLaughlin had become somewhat peeved with the applicant by the time he came to review the KPIs. That was long after Mr Grafton had undertaken the task. It is significant that Mr McLaughlin did not consult Mr Grafton when conducting his review. I consider that the applicant earned his bonus as assessed by Mr Grafton, and that it was unfair and unjust to reduce the figure from $61,650.00 to $27,400.00. The applicant has established his claim for breach of contract with regard to the unpaid portion of the bonus, and is entitled to damages together with interest in relation to that sum. 153 I propose to invite the parties to file and serve draft orders that reflect the findings set out above. Both the applicant and the respondents have had a measure of success in this proceeding. I will consider the question of costs after hearing further submissions on the matter. I certify that the preceding one hundred and fifty-three (153) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. Associate: Dated: 15 September 2004 Counsel for the Applicant: Mr D J Staindl Solicitor for the Applicant: Ryan Carlisle Thomas Lawyers Counsel for the Respondents: Mr M G Rinaldi Solicitor for the Respondents: Lander & Rogers Lawyers Date of Hearing: 17-22 March 2004 Date of Judgment: 15 September 2004