AVIRONE PTY LTD v PIRRIE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER, HANDLEY and COLE, JJA 5 February 1996, 5 February 1996 [1996] NSWCA 35 CONTRACT of employment — wrongful dismissal — variation of contractual terms — acceptance of offer. Meagher, Handley and Cole JJA The respondent, Kenneth Fair Pirrie, and his company, Kenneth Pirrie (Marketing) Pty Ltd sued Avirone Pty Ltd (Avirone) for wrongful dismissal of Mr Pirrie from his position as an employee of Avirone, charged with the responsibility of establishing Avirone in the Victorian market. Avirone sold clothing. We will distinguish between Mr Pirrie and his company only where it is necessary to do so. His Honour Judge Bell upheld the respondent's claim for breach of the contract of employment awarding damages of $36,086.33. Interest on that sum was $45,863.31. Avirone has contended on various bases that the judgment should be in the sum of $6,086.33, together with appropriate interest on that sum. The $30,000 challenged is a payment referred to in the contract of employment to which we will come. His Honour Judge Bell found that on 9 September 1985 there was a contract of employment agreed between Mr Pirrie and Mr Storey on behalf of Avirone. The terms of that agreement were that Avirone would: (a) Pay a salary of $25,000 per annum; (b) pay design fees of $10,000 per annum to Kenneth Pirrie (Marketing) Pty Ltd; (c) provide a car and petrol expenses; (d) pay commission of 0.5 % of sales effected in Victoria; (e) pay $30,000, as to half within two months and the other half within six months. Such payments to depend upon "performance" the details of which were not specified. On 11 September 1985 Mr Pirrie commenced employment with Avirone. The relationship between Mr Pirrie and Avirone deteriorated over the ensuing weeks. It is obvious that Mr Storey and Mrs Storey, directors of the appellant, were dissatisfied with his performance to the extent that Mrs Storey recorded his movements. They were concerned with his absence from the business, attending to business of his own. There were also concerns regarding absence of significant sales which had been generally discussed pre-employment although the agreement had not been made specific in terms of the contract of employment, or the specific basis for the payment of the $30,000 performance sum. The trial judge found: "On the other hand, despite what appears to be a genuine attempt to get Mr Pirrie to comply with Avirone's requirements, I find that from early October 1985, there was such a degree of antagonism within the works of Avirone that it was quite improbable that his employment would last". On 10 October 1985 Mr Storey telephoned Mr Pirrie. According to Mr Storey he "basically read him the riot act". Mr Storey in chief said he said to Mr Pirrie: 2 UNREPORTED JUDGMENTS "T am not happy with you. I am not happy with your work. I am tired of the lies and the deceit. You arc no better than a suburban rep. I want to terminate the agreement and arrangement". According to Mr Pirrie in chief, Mr Storey rang him on 10 October stating "He 5 wasn't happy about us having a telex machine on his premises or anything to do with the knitwear on his premises". Mr Pirrie said he accepted that, and Mr Storey then went on to say "that he wasn't - he was having second thoughts about the whole deal; he'd like to think about it and he would contact me". Mr Pirrie, when it was put to him in 10 cross-examination that Mr Storey had said he wanted to terminate the agreement in that conversation, responded: "T never saw h as a termination. I think to use John Storey's words, it was a rethink". He then said: 15 Q. "You see, it was not until 14 October that he communicated to you, that is that Mr Storey communicated to you the terms on which he was prepared to continue to employee you, was it?" A. "No, that's not correct. On the telephone he told me the new terms; he only confirmed on the 14th in writing". 20 On 10 October 1995 there was a further telephone conversation that seems to have taken place between 10 or 14 October or possibly an intermediate date - about "the new terms". Mr Pirrie said the oral discussion occurred on 10 October and was confirmed in writing on 14 October. Mr Storey said he read the contents of the document exhibit B to Mr Pirrie and then faxed it to him on 14 October. 25 According to Mr Storey he received an oral response on either 14 or 15 October from Mr Pirrie in which he said "I accept your new terms. Thank you for giving me another chance" or words to that effect. According to Mr Pirrie, after receiving the facsimile transmission, he neither responded to it in writing nor ever had any discussions with anyone from Avirone regarding it. The trial judge 30 found that "rather surprising", having regard to its terms it is remarkable. Exhibit B, the form of the telex, is as follows: "14/10/85 KP - only Avirone goods on our premises - telephone is out on to a moniter (sic) to list all STD calls. As we hv (sic) fax 35 in Mel we do not need to make interstate phone calls. Only Avirone business is to be conducted through thru our W/H - no knitwear or personal phone calls - we do not pay for knitwear hangers or anything connected with the knitwear - all expenses to be monitored thru Syd - we only pay petrol re Avirone work - not personal or knitwear 40 - contact sheets to be filed in after the day has finished not before the day starts - no interstate trips or overseas trips prior to Xmas - firm dates of overseas trips after Xmas so we can discuss/approve - only Carol will hv keys to the premises for the moment - our discussion with KP not Borris 45 - We now offer: Six weeks trial period starting today - for this period the 25,000 stays, 10,000 stays, half of one per cent stays - No car - Lease in yr name - we pay petrol re Avirone work - after six week trial we look at period to see there is any abuse ie that advantage hasn't been taken 50 — - tel will be read to list STD charges (we don't expect any but if so KP will be charged) URJ AVIRONE PTY LTD v PIRRIE (Meagher, Handley and Cole JJA) 3 - if we're in agreement that KP has tone the right thing after six weeks we then offer: cont of 25,000, 10,000 half of one per cent plus 50 per cent lease payment for car plus petrol re Avirone work and $30,000 after one yr of satisfactory performance Originally said he started on 4th then he started on 11th. On 11th he picket up family from Airport, On 30th Sept he when (sic) to Adelaide. Give us a list of all other times up to day taken off including half days were our work has not been carried out. JMC to then work out days due to KP and we make a Fresh Start as from today. This is not negotiable. JJS 12" The trial judge recognised that it was necessary to determine whether the contents of the facsimile transmission of 14 October effected a change in the existing contractual arrangements. It seems his Honour held that the only conversations between Mr Pirrie and Mr Storey occurred in 10 October, for his Honour held: "Tt could not be suggested that the plaintiffs accepted the 14th of October faxed offer on 10 October, when Mr Storey said Mr Pirrie said he accepted the offer and expressed his thanks for being given another chance. The faxed document said We now offer' so it could hardly be accepted four days earlier". That presumably constitutes a rejection of Mr Storey's evidence that there was a discussion after he sent the fax. His Honour then addressed the question of acceptance of the offer based on the assumption that there had been no oral acceptance by Mr Pirrie and concluded that Mr Pirrie's "conduct in remaining in employment is at the very least equivocal in that it was equally referable to the original agreement". We have difficulty understanding what his Honour meant. Whilst the details are at issue, both parties agree, that before 14 October the contents of the fax were read over the telephone by Mr Storey to Mr Pirrie; they are at issue whether there was an express acceptance of them, but they are not at issue about that fact. So there would be no anomaly, if on 14 October there happened to be an express acceptance. Accordingly his Honour said: "I therefore conclude that the plaintiffs' silence did not bind them to an acceptance of the unilaterally imposed 'new agreement' and that their continued employment was covered by the terms of the agreement earlier concluded". This finding is challenged on appeal. In view of his Honour's apparent findings, we shall assume Mr Storey's evidence that there was an express acceptance is to be rejected. The final step in his Honour's reasoning is found in the following paragraph: "T have no difficulty in finding that there it (sic) to be implied into the contract entered into on 9 September a term that the defendant would (not) (sic) unreasonable terminate the contract so as to prevent the plaintiffs being unable to receive the $30,000. I have already found that the defendants in fact acted unreasonably in so terminating the plaintiffs employment As the first period, namely two months, had already past, the plaintiffs were entitled (to) (sic) the first $15,000. The termination became complete - 24 January 1985 more than 2/3 of the way through the remaining six month period. I therefore find that the defendant is also liable for the second payment of $15,000 as well". 4 UNREPORTED JUDGMENTS On 17 January 1986 Mr Pirrie was given one week's notice of termination. The trial judge found he was entitled to four weeks' notice. Regarding termination, his Honour Judge Bell thought that: "Tt is the task of the Court to determine which party acted the more reasonably. The employer was entitled to expect Mr Pirrie to measure up to its standards and to the level of achievement to which he himself had advanced. Mr Pirrie failed to do so. On the other hand, despite what appears to be a genuine attempt to get Mr Pirrie to comply to the Avirone requirements, I find that from early October 1985 there was such a degree of antagonism within the ranks of Avirone that it was quite improbably that his employment would last. Notwithstanding this near certain result, I am satisfied that Mr Pirrie was striving to comply with the Avirone requirements. He did bring in orders, and his termination in January 1986 prevented him from exploiting the opportunity to obtain the type of sales recorded for Ms Pearson in exhibit F." In our opinion, the trial judge fell into error in the following respects: Even if one were to accept the surprising evidence of Mr Pirrie that after receipt of the telex exhibit B he made no response, as the trial judge apparently found that he did, in our opinion the continuation of employment after receipt of that document against the background of dissatisfaction with Mr Pirrie's performance by his employer constituted acceptance of the varied terms of employment as set out in exhibit B. The document concluded: "We make a fresh start as from today. This is not negotiable". The obvious unstated alternative to acceptance of those terms was dismissal for unsatisfactory performance. Learned counsel for the respondent has properly accepted that if it may be inferred from the respondent's silence that he accepted the offer, that is a matter which would conclude the case in favour of the appellant. The test is the test which was laid down by his Honour Justice McHugh in Empirnall Holdings Pty Ltd v Machon Paull and Partners Pty Ltd! where his Honour said: "The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree including his silence as signalling to the offeror that his offer has been accepted". Those words were anticipated by Mr Justice Isaacs in International Paper Company." Applying those tests to the facts of the present case, we are of the opinion that the silence of the respondent must entail the consequences that the offer was accepted and if that is so, absent some different conversations in late November, the entitlement to payment of $30,000 could only arise if there had been one year of satisfactory performance. That condition precedent to that payment, namely one year of satisfactory performance, did not occur. Accordingly in our view the respondent had no entitlement to receive that sum or any part of it. That really disposes of the case. There are number of other matters which arose in the course of argument, but we do not think it is necessary for us to deal with them. In particular, we do not see why it is necessary to deal with the contention that his Honour's finding that the contract has varied contained a condition subsequent, although it is clear that the contract as varied and properly interpreted did not contain a condition subsequent which required any subsequent agreement of the parties. 1. (1988) 14 NSWLR 523, particularly at 535 2. 4 CLR 739 at 761 URJ AVIRONE PTY LTD v PIRRIE (Meagher, Handley and Cole JJA) 5 In those circumstances the following orders should be made: The appeal should be upheld. The verdict below should be set aside. In lieu thereof we enter judgment in the sum of $6,086.33 for the plaintiff, including interest. DISCUSSION ABOUT INTEREST The order will be for the sum of $6,086.33 together with interest to be agreed between the parties. The respondent to pay the appellant's costs of the appeal and is to have a qualified certified under the Suitors' Fund Act. Leave was granted to the appellant to file the amended notice of appeal. Leave was given to the respondents to file a notice of contention. Are there any further orders that you wish? THOMSON: That would leave the costs below in favour of the respondent and we accept that. Counsel for the Appellant: JE Thomson/M Anastasi Solicitors for the Appellant: Makinson and d' Apice Counsel for the Respondent: FC Corsaro Solicitors for the Respondent: Davis Harris Hyde Page