MAILMAN and ORS v ELLISON and ORS SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL BRYSON J KIRBY P, MAHONEY, SHELLER JJA 21 September 1993, 25 November 1993 [1993] NSWCA 169 PRACTICE and PROCEDURE — motion for judgment at end of plaintiffs case — judgment entered — "jury basis" CONTRACT — bonus payments — construction of agreements — quantum metuit PRACTICE and PROCEDURE — motion for judgment under Pt34 R8 SCR — claim by manager for bonus payments allegedly owing under agreements with former employer or for quantum meruit — at end of manager's case employer moves successfully for judgment — on appeal to the Court of Appeal CONTRACT — employment contract — promise to pay bonuses in respect of development and investment properties found for employer — initial agreement evidenced by letter — subsequent agreement made in contemplation of manager's termination — construction of agreement(s) — trial judge (Bryson J) at conclusion of plaintiff s case enters judgment upon employer's application in employer's favour — on appeal Held: There was evidence, taking the plaintiffs' case at its highest, upon which a tribunal of fact could find for plaintiffs - proceedings returned for conclusion of trial. Held: (per Mahoney JA; Kirby P and Sheller JA concurring): (1) Assuming (as was done at the trial) that the decision of the judge was to be made upon "the jury basis", ie taking the evidence of the manager at its highest, there was evidence upon which the judge could find in favour of the manager, at least upon the first agreement and the claim for a quantum meruit; (2) Accordingly, judgment for the employer set aside and proceedings returned for completion of the trial. Held: Judgment for plaintiffs' open. Held: (Mahoney JA; Kirby P and Sheller JA concurring): Upon a true construction of the agreements it was open to the trial judge to find a promise to pay outstanding bonus payments after date of termination - it was also open to find for the manager on a quantum meruit - judgment for employer set aside and proceedings returned for completion of trial. Pavey and Matthews Proprietary Ltd v Paul (1987) 162 CLR 221 considered. Supreme Court Rules, Pt34, R8. Kirby P I agree with Mahoney JA. Mahoney JA The plaintiff was employed as general manager and otherwise for thedefendant. His work involved, inter alia, the finding and development of properties for the defendant. The plaintiff claims that, in 1981, an agreement was made between him and the defendant in relation to his remuneration and that, in 1984, when he was contemplating leaving the defendant's employment, that agreement was varied to provide, inter alia, for the way in which bonus payments should be calculated and made in respect of developments which had not been completed at the time he left the defendant's employment. 2 UNREPORTED JUDGMENTS The defendant refused to pay the plaintiff what the plaintiff claimed to be due to him. In 1985, the plaintiff sued the defendant. His claim was placed on three bases: the 1981 agreement; the 1984 agreement; and a claim, described as quantum meruit, for "fair and reasonable remuneration". On 7 August 1991, Bryson J dismissed the plaintiffs claim. An appeal has been brought to this Court against his Honour's judgment. Before dealing with the substance of the matters argued on the appeal, it is proper to refer to two procedural matters. First, the plaintiffs in the proceeding included Mr Gregory Robert Mailman and two companies associated with him; the defendants included Mr Rodney Ellison and a number of companies associated with him. Before this Court and, it would appear, before the trial judge, the matter was dealt with upon the basis that it was a dispute between Mr Mailman and Mr Ellison. Nothing has been urged to turn upon the position of the various companies. I shall adopt the approach adopted by counsel and treat the matter accordingly. Second, it is necessary to make clear the procedural basis upon which the trial, and the appeal to this Court, have proceeded. The proceeding at trial level was dealt with upon the basis that two written statements by Mr Mailman were prepared and accepted in evidence. The first statement dealt mainly with matters going to liability: it detailed how the suggested agreements had been made. The second statement dealt mainly with the calculation of the amount to which Mr Mailman claimed he was entitled. Annexed to the statement were detailed accounts, in respect of various properties, of the way in which the bonus payments in dispute were quantified by him. The statement set forth the basis upon which the amounts appearing in the attachments had been calculated. Mr Mailman gave oral evidence and was cross-examined at length. Evidence was given by a supporting witness Craig Lawrence Stuckey. At the end of this evidence, the plaintiff sought an adjournment in order (I put the matter generally) to prepare further evidence going mainly to the calculation of the amount claimed. The adjournment sought was refused. At the end of the plaintiff's case, the defendant did not then call evidence. Mr Grieve QC, for the defendant, submitted that there was no basis in the plaintiff's evidence upon which he could succeed. Mr Grieve, as it was noted, advanced "submissions under Pt34 R8". It was on that basis that the matter was dealt with by Bryson J, the trial judge. Pt34 R8 provides: "8(1) This rule applies to a trial. (2) An opposite party may, after the conclusion of the evidence in the beginning party's case in chief or after the conclusion of the evidence given for all parties, move the Court for judgment for that opposite party in the proceedings generally or on any claim for relief in the proceedings on the ground that, on the evidence given, judgment for the beginning party could not be supported. (3) Where the ground of an opposite party's motion under subrule (2) is established, the Court shall give judgment for the opposite party accordingly. (4) Where an opposite party moves the Court under subrule (2), he may not adduce evidence or further evidence in the proceedings generally or on the claim for relief in question, as the case may be. (5) Where fewer than all opposite parties move the Court under subrule (2), the Court shall not entertain the motion before the conclusion of the evidence given for all parties." URJ MAILMAN and ORS v ELLISON and ORS (Mahoney JA) 3 Before the judge and before this Court upon, as it has been described, "the jury basis" it was assumed that the judge was to consider the defendant's application upon the basis that the plaintiff's case was to be dismissed if the evidence adduced by him was such that a verdict in his favour by a jury would, if challenged, necessarily be set aside. The issue posed by Pt34 R8 is posed in terms by the words "judgment for the beginning party could not be supported". However, the matter has proceeded upon the basis that the meaning of those words is such that Mr Grieve's application is properly to be dealt with upon the jury basis. It is proper that this be recorded. I do not mean by this that, on its proper construction, Pt34 R8 poses an issue which is different from the jury basis. The matter was not considered by the learned judge in his judgment and has not been argued before this Court. If the issue posed by Pt34 R8 be different - if, for example, issues of reasonableness or the like are involved - a different approach would be required and it would be necessary for the trial judge applying the provision to consider different questions and, it may be, issues of credibility or the like. It is sufficient to record that the matter has not been dealt with in that way and that it has been accepted that, in this Court, it is the jury test which is to determine the appeal. 1. THE BASES OF THE PLAINTIFF'S CLAIM: In order to understand the bases of the plaintiff's claim, it is necessary to refer to the matters essentially in dispute. Mr Mailman was, as I have said, involved in the finding and developing of property for the defendant Mr Ellison. His remuneration was to include, inter alia, what was described as a bonus. As will appear, the original arrangement made in respect of his remuneration provided for the payment of a bonus of ten per cent of the "profits" from various developments. As the evidence disclosed, the time apt to elapse between the finding of a property and the development of it was substantial. In order to enable the bonus to be quantified from time to time, it was necessary to determine how and when the profit upon the development was to accrue. In 1981, the parties divided the developments into two classes: trading and "investment". In respect of trading developments, the net profit was to be "the actual profit less relevant costs which will include the cost of running the company operation and other relevant expenses". It was therefore envisaged, in general terms, that the profit in respect of a trading development would accrue only when, on sale or other realisation, the profit accrued. In respect of investment developments the position was more complicated because it was envisaged that these developments would not be sold or the profit realised in a short time. The provision made was that, if the property was not "traded" within a two year period, "a value will be attributed to the property for bonus calculation purposes". The problem which gave rise to the present dispute arose because it was contemplated that Mr Mailman would leave the full-time service of the defendant Mr Ellison. At the time when he left there would be some properties which had not yet been developed to the stage of sale or other realisation; and there might be properties which had been developed but which had not been, as trading developments, sold or otherwise realised, and which, as investment developments, had not been held for a two year period. It was in respect of properties of these kinds that the present dispute arose. 4 UNREPORTED JUDGMENTS Discussions took place between Mr Mailman and Mr Ellison with a view to arriving at an agreement as to how, inter alia, this aspect of Mr Mailman's departure from the defendant's service should be dealt with. Mr Mailman claimed and Mr Ellison denied that, in 1984, a contract was made which would govern this matter. When Mr Mailman left, Mr Ellison did not pay to him what Mr Mailman claimed was due to him and, in 1985, Mr Mailman commenced the present proceeding with a view to recovering what, on his contention, was his entitlement in this regard. The statement of claim sought recovery on one or more of three bases: an agreement claimed to be made in 1981; an agreement claimed to be made in 1984, alone or as a variation of the 1981 agreement; and, as it was described, a quantum meruit basis. Mr Bennett QC for the plaintiff put his case before this Court in various ways. Mr Bennett was not counsel at the trial and it is not clear to what extent what is put before this Court was, in the terms, put before the trial judge. But, I think, to a sufficient extent the contentions made at the trial comprehend what Mr Bennett has now put. Mr Bennett's contentions have been put broadly in the following way. Mr Mailman left the defendant's employment in or about February 1985. At that time there were a number of developments in one or other of the stages to which I have referred. Mr Bennett contended, first, that Mr Mailman was entitled to bonus payments in respect of these developments by virtue alone of the 1981 agreement. The contention was that this agreement had been made some time prior to 9 May 1981 and terms relating to it had been "confirmed" by a letter of 9 May 1981 from Mr Ellison to Mr Mailman. Mr Bennett relied upon the agreement, to the extent that it was embodied in that letter, as entitling Mr Mailman to bonuses upon this basis. The letter does not in terms refer to entitlement in the circumstances here in question, viz, when Mr Mailman ceased employment. However, Mr Bennett contended, inter alia, that it was to be implied from the terms of the agreement evidenced in the letter that an entitlement to a bonus existed in respect of some or all of these developments. Upon this basis, it was irrelevant that there were discussions in 1984: the assumption was that those discussions did not result in an agreement which varied the 1981 agreement. Second, Mr Bennett contended that towards the end of 1984, and in anticipation of Mr Mailman leaving the defendant's service, discussions took place between him and Mr Ellison. The suggestion was, inter alia, that, for the purpose of calculating the bonus as contemplated by the 1981 agreement, the parties should accept that the value or the amount of the profit of each development should be assessed at the time of Mr Mailman's departure. Various discussions took place as to how this should be done and as to variations of the general principle. However, Mr Mailman contended, a firm agreement was made in or about November 1984 or thereafter. If this basis were accepted as binding the parties, then, it was contended, the bonus in each case could be calculated and the appropriate percentage arrived at. Third, Mr Bennett contended that if neither of the foregoing bases was available, whether because the agreements involved were not made or were not sufficiently certain, then a claim could be made upon a quantum meruit or similar basis. His contention was that it was clear that Mr Mailman was to be paid for his work and that, in the absence of a binding agreement as to the quantum of the payment, an appropriate basis would be adopted by the court. URJ MAILMAN and ORS v ELLISON and ORS (Mahoney JA) 5 Each of these bases was, in one form or another, considered by the trial judge. His Honour concluded that (as I shall put the matter generally) a verdict in favour of the plaintiff on any of them could not be sustained. Accordingly, he dismissed the proceeding. I shall examine more closely the basis on which his Honour proceeded. His Honour rightly proceeded on the basis that the issue was not "about what findings I should now make": he accepted that he should "take the plaintiff's evidence at his highest" and upon that basis see whether, as I have described it, a judgment for the plaintiff would satisfy the jury test. His Honour accepted, I think, that the 1981 agreement, as set forth in the letter of 9 May 1981, might be held sufficiently certain to be enforced. His Honour referred to the circumstances in which a bonus became payable and said: "Tn my mind the meaning of these arrangements is and must be that if for some reason the consultancy came to an end before any such event had happened then no bonus would be payable". He pointed to "some of the events which Mr Mailman would have to participate in to bring about profitability and payability of the bonus" and said that if some of these had not occurred, when, on 20 February 1985, his employment was terminated, "there could be no entitlement to the bonus unless the 1984 agreement was made as alleged and was enforceable and on its true terms made a bonus entitlement payable on that date". His Honour said, "In none of those cases was there a realised profit nor had two years holding of the property expired". His Honour's conclusion in this regard depends of course upon the facts in relation to each of the developments in respect of which a bonus was claimed. I do not think his Honour erred in holding that, if at the date of his retirement, the plaintiff had not done all of the things that the 1981 agreement obliged him to do, a bonus, as such, was not payable. Thus, eg, if the plaintiff had merely identified a property by that time but none of the other steps in the development had taken place, I do not think that it is to be implied from the 1981 agreement that a bonus was payable ultimately when the property was dealt with and realised. But on the other hand if the plaintiff had done all that he was required to do, the fact that the development had not been disposed of or otherwise dealt with so that the profit was "realised" by the time of his retirement would not, I think, prevent the bonus right accruing. Thus, as at present advised, I incline to the view that if the development of an investment proposition had been completed but the proposition had, at the date of retirement, been held only for eighteen months, that would not prevent the entitlement to a bonus accruing at the end of the two year period notwithstanding that the plaintiff had left the employment. The proper construction of the agreement in this regard would be affected by what, as a matter of fact, was held to be the terms of the conversation or conversations which took place prior to the letter of 9 May 1981 and whether there was to be implied from the sum of those conversations a contract having this or some other effect. The letter of 9 May 1981 evidences but does not constitute the agreement. If the agreement be and be only in the terms of that letter, then in my opinion it could be found to be the effect of the agreement that a right to bonus could accrue after retirement in circumstances such as those I have referred to. It does not appear from the terms of the judge's judgment whether he examined each case so as to determine what in fact were the things to be done by the plaintiff (if anything) so as, at the date of retirement, to bring into operation the accrual of the right of bonus. I am inclined to think that there were 6 UNREPORTED JUDGMENTS some properties in respect of which, in accordance with what I have said, a right of entitlement to bonus might have accrued. However, this matter has not been examined in detail and I shall put it aside. I come now to consider the second basis of claim, that arising from the 1984 agreement. The plaintiffs claim was that, as the result of a series of conversations towards the end of 1984, agreement was arrived at in general terms as to how his retirement should affect his right to a bonus under the 1981 agreement and that, in addition, particular or special agreements were made in respect of some of the properties in question. His Honour considered the evidence. The agreement was alleged to be derived from oral conversations and therefore it was necessary for his Honour to consider what it would have been open to a jury or other fact-finding tribunal to find in that regard. He was, in my respectful opinion, careful to make clear that his conclusions were not based upon a finding by him as to what in fact was the position. His Honour said: "My conclusion on the evidence tendered then is that there is no evidence on which a finding could be based that the parties came to an agreement as alleged in 1984, or went beyond negotiating. All I see is evidence of actual and long continued negotiations without any conclusion or accord." Mr Bennett submitted that in this regard his Honour erred. He submitted that it was essentially a jury question whether and when a contractual agreement had been reached. He pointed to, eg, oral evidence given by Mr Mailman from which, he submitted, a jury could find an agreement had been reached. Mr Mailman there said that, in November 1984, he and Mr Ellison had discussed "the best way to estimate how much Mr Ellison owed me". They talked, he said, about the matters here in question, discussed ways of arriving at the "value" of properties for the purpose of estimating profit and he said that Mr Ellison "agreed" to the proposal Mr Mailman made, that the properties should be valued at the date of his retirement. He said that Mr Ellison "agreed to this". Mr Mailman "then suggested that perhaps the easiest way was to estimate the value or the amount of profit in each remaining deal at the time of my departure" and that Mr Ellison responded, "Sure, that sounds fine - would you please make a list of those and put it down for me". It would, in my opinion, be open to a fact-finding body to conclude that a firm agreement was made at that time. As Mr Grieve QC has emphasised, and as his Honour indicated, there were subsequently discussions of matters of detail and differences accrued. But, in my opinion, a jury or other fact-finding tribunal could conclude that, if Mr Mailman's evidence was accepted at its highest, a firm agreement was made and that what happened subsequently was the working out of that agreement or, in certain respects, the attempt by Mr Ellison to renegotiate it. It is, as his Honour emphasised, important to maintain the distinction between the conclusion of fact which he might draw and the conclusion which, without error, a jury or fact-finding tribunal could make upon the evidence without the finding being set aside on appeal. I accept Mr Bennett's submission to the effect that a finding of this kind would have been open to the jury. His Honour then considered whether there was evidence on which a conclusion could be reached as to the bonus in respect of some or all of the properties in question. He concluded, "There is really no showing on the evidence of the quantum either of the damages alleged or of the moneys alleged to be payable as bonuses". URJ MAILMAN and ORS v ELLISON and ORS (Mahoney JA) 7 Mr Bennett QC submitted that in Statement B and its attachments Mr Mailman had provided detailed evidence as to the manner of calculating the bonus in each of the cases and that what was said in Statement B and otherwise provided factual support for the items in the calculation there set forth. The Statement was admitted into evidence. In the factual portion of the Statement, Mr Mailman indicated the sources from which or the basis upon which he had assessed the amounts taken into account in arriving at the estimate of bonus in respect of each of the properties referred to in the various attachments. With respect, I am of opinion that it would be open to a jury or other fact-finding body to base the quantification of bonus, under the 1981 or the 1984 agreement, upon this material. For these reasons there was, in my opinion, a basis or bases in the evidence for a finding in favour of the plaintiff in respect of the first and/or second agreements. I come now to the third basis of claim, quantum meruit. His Honour saw the circumstances in which the work was done as not providing any basis for a claim of this or analogous kinds. And in addition he found there was "no evidence valuing the services alleged at all". He referred to leading cases upon this branch of the law: Pavey and Matthews Pty Ltd v Paul 162 CLR 221; Way v Latilla (1937) 3 All ER 759; but distinguished them upon the basis, inter alia, that the agreements here alleged fixed remuneration "but the conditions of payability of other parts" of the remuneration "did not occur'. There is, with respect, much force in his Honour's observations in relation to the claim based upon the 1984 agreement. If that matter consisted of no more than evidence seeking an agreement in respect of work previously done, it is arguable that there is no basis for such a claim as the present. But that, of course, does not apply to a case based upon the 1981 agreement. It is, I think, clear that the parties intended that what was done by Mr Mailman should be remunerated not merely in other ways but by a form of bonus. If that agreement failed for, eg, uncertainty or the like, there was, I think, a basis for concluding that an appropriate sum should be paid for the services which, at that time, had not been performed but which subsequently were. As far as concerns the quantification of the payment, there was, in my opinion, in the Statement B and the evidence relating to it material from which the court could quantify an appropriate sum. At least, a tribunal of fact might assess the material in such a way that there was such a basis. 2. CONCLUSIONS AND ORDERS: For the reasons I have given, it was in my opinion open to a tribunal of fact to find for the plaintiff upon one or more of the bases advanced for him. In so concluding, I do not of course express any opinion as to whether the tribunal of fact, on that evidence, would reach a conclusion or conclusions favourable to the plaintiff. My conclusion is merely that some such finding would be open. It follows that the appeal should be upheld. The proceeding should be returned to the Equity Division. The judgment for the defendant should be set aside. The trial judge should, upon the basis that a conclusion for the plaintiff was open, proceed with the hearing. The course to be followed is, of course, to be determined by the trial judge, in conformity with the Act, the Rules and this Court's decision. If it be open to the defendant to call evidence, his Honour may see fit to allow the defendant to elect whether to do so: cf Pt34 R8(4). If the defendant elects to call evidence, then the hearing should proceed to a conclusion 8 UNREPORTED JUDGMENTS in the ordinary way. If the defendant elects not to call evidence, then it is prima facie for the trial judge to make such findings and orders as, upon the evidence before him, are appropriate. The appeal should be allowed. The judgment should be set aside. The proceeding should be returned to the Equity Division to be dealt with in accordance with this judgment. The respondents should pay the appellants' costs of the appeal and should, if entitled, have a certificate under the Suitors' Fund Act. Sheller JA I have had the benefit of reading the judgment of Mahoney JA and agree with it and the orders therein proposed. ORDERS 1. Appeal allowed; 2. Judgment of Bryson J set aside; 3. Order that the proceedings be returned to the Equity Division to be dealt with in accordance with the judgment of the Court of Appeal; and 4. The respondents to pay the appellant's' costs of the appeal but to have, if so entitled, in respect of such costs, a certificate under the Suitors' Fund Act 1951. Representation: Counsel for the Appellants: D M J Bennett QC/D F Libling Counsel for the Respondents: D E Grieve QC/J C Kelly Solicitors for the Appellants: Gadens Ridgeway Solicitors for the Respondents: Abadee, Dresdner and Freeman