New South Wales District Court CITATION: Mayers v Next Contact Pty Ltd [2007] NSWDC 121 HEARING DATE(S): 30/04/2007 - 04/05/2007 JUDGMENT DATE: 17 May 2007 JURISDICTION: Civil JUDGMENT OF: Goldring DCJ DECISION: Verdict for the plaintiff in the sum of $110,187 CATCHWORDS: Contract - contract for services or contract of employment - repudiation - damages Bostik (Australia) Pty Ltd v Gorgevski (no 1) (1992) 36 FCR 20 at 32 Bruce v AWB Limited [No 2] [2000] IR 296 Byrne and Frew v Australian Airlines (1995) 185 CLR 410 Gunton v Richmond LBC [1981] 1 Ch 448 Walker v Citigroup Global Markets Australia Pty Limited [2006] FCAFC 101 Finucane v New South Wales Egg Corporation (1988) 80 ALR 486 at 520-523 Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64 CASES CITED: Robinson v Harman (1848) 1 Ex 850, at p 855 (154 ER 363, at p 365) Wenham v Ella (1972) 127 CLR 454 Hadley v Baxendale (1854) 9 Exch 341, 354 Murray Irrigation Limited v Balsdon [2006] NSWCA 253 New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 Alexander v Cambridge Credit Corporation Limited (1987) 9 NSWLR 310, 365 Martin v Tasmania Development and Resources [1999] FCA 593; 89 IR 98, 120-121 Czarnikow Ltd v Koufos [1969] 1 AC 350, 385 PARTIES: Stephen Mayers (Plaintiff) Next Contact Pty Limited (Defendant) FILE NUMBER(S): 5582 of 2005 COUNSEL: Mr R. Royle (Plaintiff) Mr M. Easton (Defendant) SOLICITORS: Home Wilkinson Lowry (Plaintiff) Thomson Playford (Defendant) JUDGMENT The issue 1 HIS HONOUR: The issue in this case is whether the defendant had proper grounds to terminate its contract with the plaintiff. It says that the plaintiff's performance of the contract was "unsatisfactory". If that is not the case, then it is common ground that the defendant's conduct amounted to a repudiation of the contract, which the plaintiff accepted. There may be a question as to when the plaintiff accepted the repudiation. Witnesses 2 The only witnesses in this case were the plaintiff, Mr Kukura and Mr Wilde. In a series of mentions and pre-trial hearings before the Judicial Registrar of this Court, the parties agreed that all evidence would be presented by affidavit, and these should be served within a specified timeframe. When the defendant sought to read Mr Kukura's and Mr Wilde's affidavits, the plaintiff's counsel objected to what purported to be extensive quotations from statements by officers of Westpac, particularly Mr Dennis. These passages were clearly hearsay and I admitted them for the strictly limited purpose of establishing that the persons named had made statements to the witnesses, but not as evidence of the truth of what they purported to state. Thereupon counsel for the defendant sought leave to serve a subpoena on Mr Dennis on short notice. The plaintiff opposed this application. The plaintiff said that if Mr Dennis were to be called, he would have to call other Westpac employees. This would require an adjournment and delay in the proceedings, which were otherwise ready. It was common ground that Westpac would not allow its employees to give evidence unless they had been served with a subpoena. However, Mr Dennis no longer works for Westpac. I refused the application because it was apparent to me that, if in fact the defendant had wished to rely on evidence from Mr Dennis, it would have subpoenaed him in any event. If it turned out that his evidence did not favour the defendant, the defendant would have the option of not requiring him to give evidence. However the fact that the subpoena had been issued would put the plaintiff on notice that he might be required to call other witnesses. The interests of justice, in the circumstances, would not be served by allowing an adjournment to the defendant, who had failed to follow the procedures it had agreed to. 3 For this reason, no evidence was called from any Westpac employee, and in the event, Mr Wilde was not required for cross-examination. In these circumstances, I do not think that I am entitled to infer that any evidence which Mr Dennis might have given would not have helped the defendant; I am simply faced with the position that there is no admissible evidence of what Mr Dennis, or anybody else employed by Westpac, actually said. The decision that I make on whether or not the defendant was entitled to terminate the plaintiff's contract will depend on the weight I give to the evidence of Mr Kukura and Mr Wilde, and the credit I afford to that evidence. The facts 4 Some time late in 2004, a United States company called Carreker, through its Australian subsidiary, Carreker (Australia) Pty Ltd, ("Carreker") sought to sell a program to the Westpac bank. It is not clear exactly what this program was. However, it appears that Carreker had sold similar programs to banks in other countries. The purpose of the program was to "change the culture" of the organisation, in order to develop sales of its products. The CEO of Carreker in Australia was Mr Nick Wilde. 5 Mr Gary Kukura was and is the CEO, and the principal agent, if not the only employee, of the defendant, which carries on business in Perth as a consultant. He and Mr Wilde became acquainted. Carreker appears to have ascertained that Westpac was quite interested in a program to promote organisational change, but it was not interested in employing American personnel to implement the program in Australia. Mr Wilde and Mr Kukura discussed the possibility that Mr Kukura would do this work, if Carreker were successful in selling its programs to Westpac. 6 Mr Wilde suggested to Mr Kukura that the plaintiff, Mr Stephen Mayers, might be able to provide some of the services. It is clear from the plaintiff's evidence that he was an experienced manager and consultant. He had been the CEO of a small financial institution in Australia (in which capacity he had been approached by Carreker and had some discussions with them about their activities), and had worked in the banking industry in the UK. 7 Negotiations proceeded between Westpac, Carreker, and the defendant. These negotiations took some time, as Westpac, in effect, called for tenders for supply of the program. Ultimately Carreker was successful in being offered the contract, and it, in turn, entered into a contract with the defendant for the provision of consulting services. 8 The evidence does not make it clear, as I said, exactly what the "program" was. It clearly involved encouraging the staff of Westpac to change their attitude and culture towards sale of Westpac's products at all levels. It involved the holding of meetings and seminars designed to encourage Westpac management at all levels to change their attitudes and ways of working. It also involved the production of several types of training or operations manual, or "toolkit", appropriate to each level in the organisation. The program, which Carreker was to supply to Westpac, was based on a similar program, which it had sold to a bank in South Africa, Nedbank, with adaptations to meet the needs of Westpac. 9 In the course of the negotiations, Mr Kukura made several visits to the United States, particularly to the headquarters of Carreker in Texas, and also to South Africa. These were intended to familiarise him with the program. 10 The plaintiff, at the time of negotiations was married to another consultant, Louise Haggerty, who also had relevant experience. Together the plaintiff and Ms Haggerty had formed a company, Emagination Pty Ltd, which had developed some copyright material for use in training and consultancy. 11 Early in 2005, the plaintiff and Ms Haggerty, but particularly the plaintiff, began to work on the Carreker materials to deliver to Westpac. There were a series of negotiations between the plaintiff and Mr Kukura as to the basis of the business relationship. Several weeks after the plaintiff started to work on the project, on 4 March, Mr Kukura sent an e-mail to him, enclosing a draft contract. Ten days later the plaintiff sent back a revised form of the contract, including some suggested amendments stating expressly that the defendant would not require the plaintiff or the company, Emagination Pty Ltd, to supply intellectual property in the course of performing the contract. Both the plaintiff and Mr Kukura, in their evidence, confirmed that there had been negotiations about this. 12 It appears that on 18 March the parties agreed on the terms of the contract and Mr Kukura sent the plaintiff an e-mail attaching the final version of the contract. This was dated 21 March 2005, although it appears that it was not signed until 12 April. I shall consider the terms of the contract later. 13 The work proceeded for several months. It is not in dispute that the plaintiff did a great deal of work in the form of what were called "Discovery" projects, which involved him visiting various Westpac offices and observing what was done there. He also did considerable work developing "toolkits". In the course of the contact he had with Westpac over several months, he encountered what he perceived to be some resistance on the part of Westpac officers to organizational and attitudinal change, but he also received support from other Westpac officers. He reported this to Mr Kukura. On a number of occasions, he complained to Mr Kukura that the resources provided by Carreker were inadequate, and that he was not receiving sufficient support from a Mr Keith Von Seggern, who was apparently a senior officer of Carreker in the United States. 14 In May, there was a significant restructure of Westpac. New divisions were created to replace old divisions. Many of the personnel changed functions, although the plaintiff continued to have contact with some of the same people. He formed the view that many Westpac employees were fearful that they would lose their position. The purported termination 15 In August, the plaintiff and the defendant were preparing for a series of high-level meetings known as "GM1" and "GM2", where the general managers of the various parts of Westpac would be introduced to the program. It was apparently the plaintiff's task to develop "toolkits" for these meetings. It was important that the consultants obtain the cooperation of the various Westpac officers, and that the Westpac officers should approve the materials and plans of the consultants. Mr Kukura was generally the first point of contact between the consultants, and a Mr Peter Dennis was the contact officer for Westpac. However, during the Discovery process, the plaintiff spoke to a number of other senior officers of Westpac. He was particularly concerned with the business and financial services (BFS) section of Westpac, where his main contact was a Mr Wayne Shearing. The plaintiff reported to Mr Kukura that he regarded Mr Shearing as not being totally cooperative and as holding up, or resistant to, the process. He thought it necessary to talk to other Westpac officers in this division, and he went to Melbourne to have discussions with a Mr Jennings and a Mr Ritchie for this purpose. The plaintiff understood that the Westpac officers had "signed off" on the tool kits and reported this to Mr Kukura. According to the plaintiff, on 25 August Mr Shearing said that he had obtained everybody's sign off. 16 On 30 September there was a further meeting between Mr Kukura, the plaintiff, Ms Haggerty, Mr Dennis, and the newly appointed head of business and financial services, Mr Hanlon. At that meeting Mr Hanlon appeared to challenge the consultants' readiness to proceed. 17 On Friday 2 September there was a sales board meeting at which Mr Kukura was present. Mr Hanlon was also present. After the meeting there were telephone and e-mail exchanges between Mr Dennis and Mr Kukura, according to Mr Kukura, and as a result of this on Sunday 5 December Kukura telephoned the plaintiff and Ms Haggerty at their home. In this conversation the plaintiff again raised concerns about the resources being provided by Carreker. 18 On Monday 6 September the plaintiff and Ms Haggerty facilitated the first GM1 workshop. Among the Westpac employees at this workshop were Messrs Hanlon, Dennis and Shearing. On the next morning there was a meeting between Kukura and plaintiff to debrief on the meeting. The plaintiff continued to raise concerns about the resources being made available by Carreker, and also expressed concern at the discrepancy that he saw between what he had been told by Shearing and other officers of Westpac before the meeting and what had happened at the meeting. At this meeting, when the question of "sign off" was raised, the plaintiff said that Mr Hanlon asked who had "signed off", and none of the Westpac managers admitted to having done so. This incident caused the plaintiff a great deal of concern. On this occasion, the plaintiff was particularly concerned that he had been made to look foolish, and he asked Mr Kukura to raise the apparent change of attitude on the part of Mr Shearing with Westpac. Mr Kukura indicated that he was not prepared to do this. 19 On Tuesday 6 September there was apparently a breakfast meeting at the Westin hotels attended by Kukura and the plaintiff and by Mr Shearing and his superior, Ms Sharon Waterhouse, on behalf of Westpac. The version of events given by the plaintiff and Mr Kukura differ, and I prefer, for the reasons that I shall give later, the version given by the plaintiff. It is clear on both versions that at the end of the meeting Ms Waterhouse expressed the view that the project should proceed and that all difficulties had been overcome. It does not seem that the Westpac officers expressed any dissatisfaction with the plaintiff's performance at this meeting. 20 Subsequently there was a further discussion between Mr Kukura and the plaintiff. Whatever was said at this meeting, there is no credible evidence that Mr Kukura specifically instructed the plaintiff not to speak to Mr Shearing about what happened at the Monday meeting. In his evidence, Mr Kukura seems to imply that there was such an instruction, but the plaintiff certainly did not understand anything of this sort, and I find that it was reasonable for him to do so, because Mr Kukura was far from specific about this, even in the evidence he gave in court. 21 The next morning, the plaintiff had arranged a meeting with Mr Shearing to discuss the toolkits for the GM2 meeting. A Ms Jo Mullins, who worked for Westpac was also present. In the course of the meeting, on his evidence, which I accept, he said the following words: Mr Mayers: "Wayne I've come to discuss the toolkit with you as we agreed. Can I first ask you what happened with regard to the approval on the previous GM1 centre which gave us problems with Peter Hanlon at the Monday meeting?" Wayne Shearing: "You should not have relied on the approvals I gave you, it was never going to come." I said: "Wayne, I am astonished, that gives me very serious concerns because I spent a lot of time with you getting your approval in August so that we could hold the first set of meetings." Wayne Shearing: "You promised the reworked toolkits today." I said: "In view of what you just told me I will need to refer this back to Gary Kukura and Peter Dennis because I don't want to be placed in the same position I was put in Monday where I'm given approval and five minutes later it is withdrawn." Ms Mullins: "Well I was not part of the past, I can't comment one way or the other." 22 Subsequently the plaintiff had a conversation with Mr Kukura and possibly with Mr Dennis. They discussed the meeting with Shearing. 23 Later that day Mr Kukura said there were a series of conversations between Mr Kukura, Mr Wilde, and Mr Dennis. In the course of these conversations Mr Kukura said that he became aware that Shearing had said that he was no longer prepared to work with the plaintiff. He then telephoned the plaintiff and told him to "stand down". 24 On 9 September Kukura left a message on the plaintiff's voicemail to the effect that the bank's decision was final and that they were not prepared to work with him. 25 On 12 September there was a meeting between the plaintiff and Mr Kukura. At this stage the plaintiff informed Kukura that he had obtained legal advice and that he wanted a release and indemnity. Following that meeting, Kukura sent an e-mail to the plaintiff enclosing a letter purporting formally to terminate the contract. Subsequently he sent a signed hard copy of this letter by ordinary mail to the plaintiff, and the plaintiff admits that he received it. 26 On 16 September the plaintiff's solicitors wrote to the defendant stating that in their view, the defendant had repudiated the contract, and that the plaintiff accepted the repudiation. 27 The defendant conceded that what prompted it to act was the decision by Westpac that it would no longer work with the plaintiff. 28 I make the inference that the whole attitude of Westpac towards the plaintiff changed after Mr Hanlon took up his position in charge of the BFS division of Westpac. Without the direct evidence that Mr Dennis or any other officer of Westpac it is difficult for me to draw any specific conclusions, on the evidence before me, including that of Mr Kukura and Mr Wilde. There was no evidence that could satisfy me that anything in the work that the plaintiff had down in terms of preparation, or facilitating meetings could be described as unsatisfactory. Credit 29 In this case, a great deal depends upon the credit I attach to the evidence of the two witnesses who were cross-examined, the plaintiff, and Mr Kukura. 30 The plaintiff was cross-examined for over two days. In my view, his position did not change, at least on any substantive issue. There were times when he became frustrated at the rather repetitive questions put to him by counsel for the defendant, but I find that he did not change his answers, or give inconsistent answers on any significant matter. At times the questions put to him were not only repetitive, but frequently imprecise and confusing. From his evidence, I formed a very clear picture of an intelligent, proficient and highly professional man with a high standard of ethics and a rather high opinion of himself. He had a very clear idea of his position. Mr Wilde summed him up accurately when he said, at par 20 of his affidavit, I found Mayers likeable, but slightly "prickly", and keen to prove that he was smarter than the average guy. He clearly had some capacity and, apparently, a significant track record. 31 The more the plaintiff was subjected to cross-examination, the more his honesty and consistency became apparent to me. His maturity and experience were obvious, and it became clear that although he has a realistic way of how business works, he also has a high sense of integrity and considers that honesty in interpersonal relationships is absolutely vital. He was, in my view, a highly creditable witness. It is true that he tends to be somewhat verbose and ponderous. In his evidence he was extremely careful in his choice of words, but it would not surprise me, from the evidence , that this was his normal manner. 32 By contrast, Mr Kukura was often evasive in his answers, and pretended in my view not to understand clear and fairly simple questions put to him by counsel for the plaintiff. He appeared anxious. He appeared acutely aware that his case was that the plaintiff's performance as a consultant was unsatisfactory. He tailored his answers to support this case, regardless of other things that he had written and said about the plaintiff which were very favourable. I do not say that he was deliberately dishonest, but I do find that he was evasive and made every attempt to give evidence that was favorable to the defendant's case. He did so because of the cynical, although not unrealistic, commercial choice which he had made. 33 Mr Kukura was in a difficult position. When he was performing his contract with Westpac, he was like a person dancing with a gorilla. He could only stop dancing when the gorilla said to stop. If he did not do as Westpac wished, in the way that Westpac had indicated to Mr Wilde, and Mr Wilde had conveyed to him, his own contract was at risk. His own feelings about the plaintiff, whatever they may have been, were irrelevant. On the other hand, he had a contract with the plaintiff, and he knew or should have been aware that, if he terminated the plaintiff's services, other than in accordance with the contract, he faced payment of damages. I find that this contract was such that Westpac's attitude to the plaintiff or any other of the defendant's subcontractors was largely irrelevant. It was clearly important for Mr Kukura to be able to complete his contract with Westpac, as this was far more lucrative to him in the long run than any compensation he might have to pay to the plaintiff. The defendant was placed in a difficult position by the decision by the relevant officers of Westpac that they could no longer work with the plaintiff. They directed Mr Wilde to have the plaintiff dismissed from the project, and Mr Wilde, as he was apparently entitled to do, under his contractual arrangements with the defendant, directed the defendant to do so. Mr Kukura gave effect to these directions, leading to the message to the plaintiff on 9 September, and the letter of 12 September. It does not appear that Mr Kukura, Ms Haggerty, or any other consultant employed by the defendant on the project was placed in the same position as the plaintiff. 34 I infer from what happened, as established by the evidence, that the defendant, or rather Mr Kukura, took a commercial risk, namely that he would risk any liability to the plaintiff in damages as the price that he had to pay for continuing his contract with Westpac. That risk could be reduced if he thought that litigation over liability to the plaintiff would eliminate, or at least delay, the payment of any compensation. He chose to take that risk. His evidence, in my view, was clearly designed to reduce the defendant's exposure to damages. 35 For those reasons, where there is a conflict between the evidence given by the plaintiff, Mr Mayers and Mr Kukura, in general I prefer the evidence of the plaintiff. This is particularly true in relation to accounts of various conversations which both these witnesses had with other persons and where they report different versions of a similar conversation. 36 It was suggested to the plaintiff that he had may have manipulated the version of the contract provided to his solicitors for the purpose of this case. It is true that in evidence there were two versions of the contract, which differed in relation to the addressee of the letter (the contract being in the form of a letter from the defendant to the plaintiff) and the inclusion of one provision, paragraph 8(a)(iii), in the version tendered by the defendant, which was not present in the version tendered by the plaintiff. As the defendant did not rely upon this provision, nothing turns on it. However, given that the original documents appear to be on the letterhead of the defendant and produced on the same typewriter, I would, if necessary, make the inference that any alterations to the contract made after the event were made by the defendant or someone on its behalf, rather than by the plaintiff. It is significant, in my view, that no alterations were made on the signature page and the signature appears to be the plaintiff's original signature. The business culture of the work 37 On 6 September, the plaintiff had a conversation with Mr Shearing. Some days previously, he had had a conversation with Mr Hanlon. In both of these conversations, the plaintiff pointed out that in conversations with other senior Westpac officers, notably Mr Jennings and Mr Ritchie, he understood, and had been led to understand, that he had been given approval for the "toolkits" that he had developed specifically for the GM1 and GM2 training sessions. He accepted these assurances and, as Mr Kukura agrees, reported them to Mr Kukura. When he first met Mr Hanlon, who had recently been appointed to the most senior position in Westpac in charge of all business and financial services, the plaintiff says Mr Hanlon had told him that his acceptance of the assurances was "naive". He reported this to Mr Kukura, saying that he was concerned and annoyed at the suggestion. Subsequently Mr Shearing told the plaintiff that he should not have accepted the assurances given to him by other Westpac officers. 38 Mr Kukura gave a great deal of evidence about the need, in the consulting business, to develop and maintain relationships with clients. This is undoubtedly true, and the plaintiff would be the first to accept it. That was clear from his evidence. However, it does seem essential that if any professional person is to maintain and develop relationships with his or her clients, there must be a high degree of mutual trust. This means that each party must accept and understand that the other party is telling the truth, and that when they say something, they mean what they say. It is very clear that both Mr Hanlon and Mr Shearing seemed to assume that Westpac, as the dominant party in the relationship with Carreker and the defendant, had some licence to tell lies, resile from assurances, or depart from the truth when it suited Westpac. It appears from Mr Kukura's evidence that he at least, was prepared to be sufficiently obsequious so as not to question what his client said. He would not do so even if the client resiled from previous positions that had been clearly articulated. That may be one view of what it is to deliver professional consulting services of a high level. 39 It was, however, clearly not the view taken by the plaintiff. The plaintiff, on a number of occasions, took it upon himself to go to various officers of Westpac, the client, and either to admit that he was wrong (as he did with Mr Welsh, discussed below), or to question why what he had previously been told by persons in authority was not followed through or was denied on subsequent occasions. He took the view that the way ahead in the consulting relationship was to raise these matters with the person who he regarded, in at least one case, as having acted "dishonourably" so that the way ahead could be cleared. It is quite obvious, with hindsight, that Mr Shearing did not like being confronted with the fact that he had told lies. I infer that this was the reason that Westpac was informed of Mr Shearing's displeasure, and this was a significant factor that caused the plaintiff's contract to be terminated. However, the fact that some officers of Westpac did not wish to work any further with the plaintiff does not mean that his services were in any way unsatisfactory. Relevant provisions of the contract 40 As indicated elsewhere, the contract is in the form of a letter from the defendant to the plaintiff dated 21 March 2005. The clauses particularly relevant are clauses 2, 3, 4, 8 and 13. Those clauses read: 2. SERVICES (a) The services to be provided by the Consultant [defined as Stephen Mayers] includes any item of work required to fill the obligations to the Client [defined to mean Westpac] as arranged through the Prime Contractor [defined as Carreker] including advice, guidance, strategy development, claims, process development, training, coaching and skills transfer together with such other services as may be required by Next Contact from time to time, including the development of products, processes, services, methodologies and training that may be offered to clients. Any other services required that might include the development of new Intellectual Property are to be negotiated separately with Next Contact. (b) The Consultant must perform the Services with the high degree of professional skill, care and diligence which may reasonably be expected of a skilled, professional person suitably qualified and experienced in the performance of the services similar to the Services. (c) The Consultant must keep records of all of the Services performed by it in a form satisfactory to Next Contact. The Consultant must make these records available for inspection by Next Contact on its request. 3 . PERIOD OF ENGAGEMENT The Consultant is initially engaged for 170 billable days over 12 months. Further engagement or extensions to this agreement may be agreed in writing from time to time. Clause 4 provides for a fee of $900 per day, and provides for the consultant to submit timesheets. 8. TERMINATION OF AGREEMENT (a) Next Contact may terminate this agreement at any time by giving four weeks written notice in advance to the Consultant except where termination of this agreement will be effective on delivery of the notice in the following circumstances: (i) a breach of this agreement; (ii) unsatisfactory performance; Subparagraphs (b) (c) and (d) are not material to my determination. 41 Paragraph 11 of the contract provides that the written document is to express the whole contract. There was some evidence of discussions between the plaintiff and Mr Kukura before the document was formally entered into. These conversations cannot be regarded as being part of the contract, unless such evidence were necessary to resolve any ambiguity. In my view there is no such ambiguity in this contract. Even if this were not the case, the document purports to be a formal written contract, and I would not be prepared to accept evidence of any discussions of negotiations between the parties before the contract as affecting any significant changes in it. The parties to the contract 42 The defendant suggested in cross-examination that it had intended to enter into a contract with both the plaintiff and the company, Emagination Pty Ltd. The plaintiff says that the company was mentioned, on page 6 of the contract, because he wished it to be his agent for the purpose of receiving payments and submitting timesheets. At one point the Consultant (Mr Mayers) is referred to as "it". However, in all other respects, it is apparent that the contract is between the plaintiff and the defendant. The plaintiff says that he wished the contract to be with the company, but that Mr Kukura insisted that it be with him individually. Mr Kukura did attempt to resile from this position, but as I read the contract it is unambiguously (in all versions) addressed to the individual, though in the defendant's version apparently in care of the company. The execution clause for the defendant is in a form appropriate to a corporation, that for the plaintiff is in a form inappropriate for a corporation, but appropriate for an individual. I do not accept the defendant's submission on this point. I find, for reasons given elsewhere in this judgment, that the contract in its final form is the document tendered by the plaintiff, and that the parties to it are the defendant and the plaintiff. Emagination Pty Ltd is not a party to the contract. 43 Also in evidence is a contract entered into by the defendant with Ms Haggerty on the same date. Apart from the name of the addressee of letter -- the contract being in the form of a letter -- the contents of the documents are identical, even to the point that the contract between the defendant and Ms Haggerty says that the services to be provided under that contract are those of the plaintiff, not those of Ms Haggerty. "Unsatisfactory performance" 44 The defendant maintains, and has always maintained, that the only reason it purported to terminate the contract with the plaintiff was the plaintiff's unsatisfactory performance. The defendant says that "unsatisfactory performance", where it occurs in clause 8(a)(ii), must mean something less than failure to perform the services, as defined in paragraph 2 of the contract, to the standards required in that paragraph. 45 The defendant submits that some aspects of the plaintiff's conduct were "unsatisfactory" within the meaning of the contract. Until the trial, it was not clear in what respect this was alleged to be so, and even after Mr Kukura's evidence, I found it difficult to ascertain exactly what the defendant alleged. It is clear that in a case such as this, the onus of proof of unsatisfactory conduct lies on the party asserting it. This is an application of the contra preferentem rule. 46 It appears, if somewhat murkily, from Mr Kukura's evidence, that he regarded the plaintiff's behaviour both in raising issues with officers of Westpac, and the way in which he did so, as unsatisfactory performance. He relies primarily on 2 instances. One of those is the situation which was the immediate cause of Westpac indicating that it was no longer prepared to work with the plaintiff, namely the discussion between the plaintiff and Mr Shearing on 8 September. According to Mr Kukura, this was not the first situation of this type. At paragraphs 40–44 of his affidavit, he sets out some cases where he says he has drawn the plaintiff's attention to what he perceives to be shortcomings. These relate primarily, it seems to me, to the language used by the plaintiff. 47 Both Mr Kukura and Mr Wilde recount instances where they speak of Westpac officers reporting some dissatisfaction with the plaintiff's handling of some aspects of the work. This evidence is hearsay and was admitted for a limited purpose only. There is no evidence from officials of Westpac at that time at all, simply evidence that they had discussions with Mr Kukura or Mr Wilde about the plaintiff. The main content of these reported conversations seems to be that the plaintiff's manner in communicating caused some concern at times. On one occasion, Mr Kukura passed this on to the plaintiff, and the plaintiff thanked him for the feedback. There does not seem to be any indication of opinions on the part of either Mr Wilde or Mr Kukura that the substance of the plaintiff's work was unsatisfactory in a significant way. 48 As late as 6 September, at 6.48 p.m. an e-mail from Mr Kukura to the plaintiff and Ms Haggerty (annexure UU to plaintiff's affidavit) says "I have renegotiated our daily rate for these days. I realize [sic] it isn't much of an increase and still well below what you're worth . . . " Given the date of this e-mail, such an expression is hardly consistent with the defendant regarding the plaintiff's performance as unsatisfactory. 49 However, in his evidence, both in his affidavit and in cross-examination, Mr Kukura refers to a situation where a Mr Alistair Welsh, apparently a senior general manager with Westpac, had expressed dissatisfaction with a report on the Discovery process prepared by the plaintiff. Mr Kukura says that this, in his opinion, did not comply with the format or terminology required by Westpac. Accordingly, he (Kukura) re-formatted and edited the document, before returning it to the plaintiff to be sent to Westpac. The plaintiff sent this to Westpac, but he also sent to Mr Welsh an e-mail in which he presented an apology. It appears that he did so because Mr Welsh had passed onto him, Mr Kukura, comments suggesting that the document was not up to standard and was "unprofessional" and Kukura had passed these on to the plaintiff, who was upset by them. 50 Mr Welsh subsequently responded to this apology and thanked the plaintiff for it. The plaintiff said that he took this to be an indication that he had resolved any differences with Mr Welsh. He said that he had done so in order to ensure that his future relationship with Mr Welsh would be more satisfactory. 51 The plaintiff says, and I accept, that in doing this he was acting in accordance with what he considered to be high professional standards. Mr Kukura took the view that the plaintiff's conduct in these situations had inflamed the situation by reminding the Westpac offices of a difference with which he, Kukura, had resolved. 52 Even if Mr Kukura was justified in regaining what the plaintiff did as being something other than what he would have done himself, there is no evidence that what the plaintiff did or failed to do, on any objective test, amounted to something that was "unsatisfactory". The test is, as Mr Easton, for the defendant, conceded, objective. In order to justify the defendant taking the action it did in purporting to terminate the plaintiff's contract because his performance was unsatisfactory, it must show that a reasonable person in the position of the defendant would have regarded something the plaintiff did or omitted to do, as "unsatisfactory". There is no evidence that the plaintiff did any such thing. 53 What is more, in respect of the two incidents upon which Mr Kukura relies, there is no evidence that Mr Kukura indicated to the plaintiff in any clear way that he regarded anything the plaintiff did as being unsatisfactory performance of his obligations under the contract. In the absence of any such indication, where the behaviour of the plaintiff upon which the defendant relies is not clearly legally or morally wrong, or professionally incompetent, such an indication is implicitly required by the contract, because the contract could not be read as meaning that the defendant was entitled to terminate it on the basis of some conduct on the part of the plaintiff which the plaintiff did not know, and could not reasonably be expected to have known, was regarded by the defendant as being unsatisfactory. 54 The fact that Westpac had indicated that it would not work with the plaintiff may be some evidence that there may have been unsatisfactory elements of the plaintiff's performance. There is no direct evidence before me of what Westpac communicated so it is impossible for me to assess its truth or accuracy. However, any mere assertion by Westpac is, in any case, not evidence that meets the standard required for proof of unsatisfactory performance. In fact, whether or not Westpac had particular views is of marginal, if any, relevance to an assessment of the plaintiff's conduct for the purposes of determining whether or not it was "unsatisfactory" within the meaning of the contract. Was the defendant justified in terminating the contract? 55 In the circumstances I find that what the plaintiff did could not be regarded as unsatisfactory performance of his obligation under the contract. It follows that the defendant was not entitled to terminate the contract on the basis of unsatisfactory performance. This is a repudiation of the contract. 56 It is conceded that what prompted the defendant to act was Westpac's indication to Wilde and Kukura that it would no longer work with the plaintiff. This is not, in itself, an indication that the plaintiff's performance was unsatisfactory. Unsatisfactory performance must be determined on an objective standard, and in the absence of some express provision in the contract which would entitle the defendant to terminate the contract in the event that either Westpac or Carreker was dissatisfied with the performance of the contractor, an expression of dissatisfaction on the part of either of those parties could not amount to "unsatisfactory performance". Was the contract repudiated? 57 By his messages and e-mail communications with the plaintiff, Mr Kukura indicated that he was not prepared to provide work to the plaintiff under the contract, even though the plaintiff gave evidence, which I accept, that he was ready and willing to perform his obligations under the contract. This amounted to a breach of a term essential to the contract, and therefore to a repudiation of the contract. When the plaintiff indicated to Mr Kukura that he wanted a release and indemnity from the defendant, I find that he accepted the repudiation, but, when his solicitors stated expressly that they accepted the repudiation, the matter was put beyond any doubt. Was the notice formally effective to terminate the contract? 58 Clause 8(a) of the contract requires a party to give 4 weeks written notice of termination of the contract, unless the grounds for termination are those specified in that clause. If the plaintiff's conduct was not unsatisfactory, as I have found, notice was required and was not given 4 weeks in advance. If notice was given, in the light of the wording of the contract, it would not have been necessary for the defendant to have provided paid work for the plaintiff during that period if it had chosen not to do so. 59 The defendant concedes that the notice of termination, in the form of a letter from the defendant to the plaintiff dated 12 September 2006, was not sent to the plaintiff in any of the forms contemplated in clause 9 of the contract. It was sent by e-mail and by ordinary mail; it was not delivered personally to the plaintiff's address, sent to that address by registered mail, or transmitted to that address by facsimile. There has not been formal compliance with the terms of the contract. The defendant argued that, as the plaintiff acknowledged that he had received the notice, he had waived his rights to compliance with the formalities of the contract. I am inclined to reject this submission, but it is unnecessary for me to decide this. Once the defendant's repudiation of the contract was accepted, the provisions of the contract no longer applied to either party. Fees and payment; extension of the contract 60 Clause 3 of the contract provides: "The Consultant is initially engaged for 170 billable days over 12 months. Further engagements or extensions to this agreement may be agreed in writing from time to time." 61 Clause 4(a)(i) of the contract provides: "The fee for the Services will be $900 per day plus GST. Any further Services will be provided at rates to be separately agreed in writing." 62 In fact, by e-mail dated 15 August, Mr Kukura advised the plaintiff and Ms Haggerty as follows: "Further to our meeting today the consultant days remaining, as at the end of July, is as follows: Louise: 118 days Stephen: 120 days The above represents an additional 10 days that I have added to SM's allotment and 38 days to LH. These extra days have predominantly been drawn from the KVS consulting days budget. I had basically allocated around 20 days per month for each of you from August to end November (except for Sept Stephen in which I have allowed for your week off), falling to around 10 to 15 days per month from Jan to March next year." 63 I omit the remainder of the e-mail. I take this as being an agreement in writing by the defendant to engage the plaintiff and for an additional period, pursuant to the contractual provision. 64 As indicated elsewhere in my reasons, on 6 September 2005, the day before the purported suspension of the plaintiff, Mr Kukura sent an e-mail to the plaintiff and Ms Haggerty which included the following: "Also with regard to our GM1 and GM2 workshops I have wrestled the associated "training" days back from ASK. That is, the days we will be spending on these sessions will be drawn from the ASK "budget", not ours. Also, given that ASK charge a little more than us I have renegotiated our daily rate for these days. I realize that isn't much of an increase and still well below what you're worth, but you can invoice me $1150 p/d for the GM1 and GM2 sessions (ie. one session equals one day). This is regardless of whether you are standing at the front of the class or providing support for the Coaches delivering, but still on the assumption that you will play some part in delivery." 65 I take this as being an agreement in writing by the defendant to pay an additional $250 per day to the plaintiff for each day spent on the GM1 and GM2 sessions. The plaintiff estimated that these sessions would occupy 25% of his time for the remainder of the contract period, he was not cross-examined upon this, so that I accept that, as from 6 September, he would be paid at the rate of $900 per billable day for 75% of the time and at $1150 per day for 25% of the time. Damages 66 The defendant submits that the plaintiff is not entitled to any damages for the breach of contract, because there was no obligation on the defendant to provide any work for the plaintiff. This submission is based on the assumption that the defendant was entitled to terminate the contract without notice, but even if notice had been required, it says that because the contract is expressed in terms of a number of billable days' work per year, there was no obligation on the defendant to provide work during the notice period. The legal authority to support these propositions flows from a number of cases dealing with the termination of contract of employment. The defendant relied particularly on Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 at 32, Bruce v AWB Limited [No 2] [2000] IR 296, the High Court decision of Byrne and Frew v Australian Airlines (1995) 185 CLR 410, and also on the English case of Gunton v Richmond LBC [1981] 1 Ch 448, which were all cases dealing with contracts of employment. 67 These authorities show that where the contract of employment is terminated, the employee is entitled to recover his or her entitlements under the contract for the remainder of the period in which notice is required, but not more than those entitlements. The entitlements must be calculated in the way most favorable to the employer. 68 As the plaintiff points out, this is not a contract of employment. It is a commercial contract between two businesses, under which one business will provide certain services to the other. It is not relevant that one of the businesses is an individual, rather than a business corporation. Counsel for the plaintiff referred me to a decision of the Full Court of the Federal Court, Walker v Citigroup Global Markets Australia Pty Limited [2006] FCAFC 101. The facts of that case were remarkably similar to the facts in this case. The Court held that the wrongful termination of the contract amounted to a repudiation, which was accepted. In that case the contract was, as in the case before me, for a fixed term. At paragraph [85] the Court (Gyles, Edmonds and Greenwood JJ) said: "The authorities concerning wrongful dismissal referred to by the primary judge, exemplified by Bostik (Australia) Pty Ltd v Gorgevski (No 1 ) (1992) 36 FCR 20, are not of assistance here as they relate to the actual dismissal of an employee, not damages for breach of contract by repudiation. The approach by Lockhart J in Finucane v New South Wales Egg Corporation (1988) 80 ALR 486 at 520-523, although in a different context, is a better guide in this case." 69 I respectfully agree with that reasoning and apply it in this case, because I find that the authorities to which I was referred by the defendant are quite irrelevant. This was not a contract of employment. 70 At paragraph [86], the Court in Walker had found that it was a proper approach to the assessment of damages to assume that the contractor would have remained in place, but that his remuneration should be discounted for the possibility of termination and before the expiry of the contract on proper grounds. That was said to be consistent with the approach of both the Full Court of the Federal Court and the High Court in Commonwealth v Amann Aviation Pty Limited (1991) 174 CLR 64, upon which the plaintiff relies in this case. In that case, the High Court affirmed the doctrine as developed in the English cases. The general rule at common law, as stated by Parke B in Robinson v Harman (1848) 1 Ex 850, at p 855 (154 ER 363, at p 365), is: "that where a party sustains a loss by reas o n of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed". It follows that the plaintiff must not be placed in a better position than he would have been in had the contract been performed, merely that he should not be in a worse position. This principle may explain the employment contract cases on which the defendant relied. Mason CJ and Dawson J went on to say, at [23]: This statement of principle has been accepted and applied in Australia: see Wenham v Ella (1972) 127 CLR 454 , per Gibbs J. at p 471. 24. The award of damages for breach of contract protects a plaintiff's expectation of receiving the defendant's performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as "expectation damages". The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation. 25. In the ordinary course of commercial dealings, a party supplying goods or rendering services will enter into a contract with a view to securing a profit, that is to say, that party will expect a certain margin of gain to be achieved in addition to the recouping of any expenses reasonably incurred by it in the discharge of its contractual obligations. It is for this reason that expectation damages are often described as damages for loss of profits. Damages recoverable as lost profits are constituted by the combination of expenses justifiably incurred by a plaintiff in the discharge of contractual obligations and any amount by which gross receipts would have exceeded those expenses. This second amount is the net profit. 26. The expression "damages for loss of profits" should not be understood as carrying with it the implication that no damages are recoverable either in the case of a contract in which no net profit would have been generated or in the case of a contract in which the amount of profit cannot be demonstrated. It would be an invitation to the repudiation of contractual obligations if the law were to deny to an innocent plaintiff the right to recoupment by an award of damages of expenditure justifiably incurred for the purpose of discharging contractual obligations simply on the ground that the contract breached would not have been or could not be shown to have been profitable. If the performance of a contract would have resulted in a plaintiff, while not making a profit, nevertheless recovering costs incurred in the course of performing contractual obligations, then that plaintiff is entitled to recover damages in an amount equal to those costs in accordance with Robinson v. Harman , as those costs would have been recovered had the contract been fully performed. Similarly, where it is not possible for a plaintiff to demonstrate whether or to what extent the performance of a contract would have resulted in a profit for the plaintiff, it will be open to a plaintiff to seek to recoup expenses incurred, damages in such a case being described as reliance damages or damages for wasted expenditure. 71 Damages are therefore to be assessed on the basis laid down in Hadley v Baxendale (1854) 9 Exch 341, 354. The damages are to be "such as may fairly and reasonably be considered either [as] arising naturally, that he is, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it." 72 This area of law has been revisited by the Court of Appeal in Murray Irrigation Limited v Balsdon [2006] NSWCA 253, where Bryson JA (with whom Handley and Ipp JJA agreed). His Honour considered the application of the Amann case in the context of the termination of a contract of employment. At [49], his Honour said: "In my opinion the entitlement is not to be tested by intention, expectation or the likely future course, but by the existence of a contractual entitlement to employment; damages can only be awarded for failure to conform with what has been contractually promised." 73 His Honour went on to consider a number of cases commencing with New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68, and concluding with Walker v Citigroup Global Markets Australia Pty Limited [2006] FCAFC 101. Bryson JA at [58] expressed the view that if that decision was in conflict with Sarfaty, he would follow Sarfaty. Sarfaty concerned an employment contract and damages for loss of a chance of re-appointment, which is quite different from the facts before me. As I consider that there is no such conflict, so the principles developed in Sarfaty apply here. 74 As I understand it, in this case the plaintiff does not seek damages for loss of prospects of renewal of this particular contract. In my view, given the wording of the contract, such an argument would not be maintainable. He does, however, seek damages for the loss of the opportunity to seek other work as a contractor in the same type of work. It was clear from the evidence that both parties contemplated that the plaintiff would, over the 12 months contract period, have the opportunity to spend up to 30% of his time on work other than that the services to be provided under the contract. It is also implicit in the contract that the plaintiff would be free to seek other work of a similar nature, though not necessarily with the defendant, before the expiry of the contract, provided that the performance of such work would not interfere with his contractual obligations. He says that he has lost the chance to do this work. In this respect, the facts of this case differ from those considered in Murray Irrigation Limited v Balsdon especially at [51]. 75 It is not necessary that the parties understand the precise extent of the loss or damage, simply that they contemplate the type of loss or damage, including damage that arises in the ordinary course of events; Alexander v Cambridge Credit Corporation Limited (1987) 9 NSWLR 310, 365. It is fair to say that this was a contract for a fixed term and had the "contract not been wrongfully terminated, [the plaintiff] would have enjoyed the benefits of the contract for the remainder of the term"; Martin v Tasmania Development and Resources [1999] FCA 593; 89 IR 98,120-121. 76 As the plaintiff submits, it is important that the defendant should reasonably have foreseen the loss. It is to be established that the information available to a reasonable man in the party's position should have made him realise that the loss "flowed naturally from the breach or that loss of that kind should have been within his contemplation." Czarnikow Ltd v Koufos [1969] 1 AC 350, 385. 77 I should say that, in this case, I consider it extremely unlikely that there would have been grounds for termination of the plaintiff's services under the contract between the defendant and the plaintiff before its expiry. On the evidence before me, the plaintiff's work had been entirely satisfactory, and there was unlikely to be any grounds for the defendant to terminate his contract early. I therefore propose to award damages on the basis submitted by the plaintiff. 78 The contract provides that the defendant would provide the plaintiff with at least 170 days work – and if the contract had been extended by agreement in writing, for the extended period as well - during the 12 month period of the contract. What is left at large is not the obligation to provide work, but rather the times at which the plaintiff was to provide the services, which was at the defendant's discretion. By repudiating the contract, the defendant made it impossible for it to provide work, and becomes obliged to compensate the plaintiff for the payments lost for the days on which the defendant has not provided work for the plaintiff. 79 The damages that a reasonable person in the position of the defendant would have contemplated, should the contract be broken, are that the plaintiff would have been denied his right to the remaining agreed days of work, less those already worked, including the increased fee on 25% of those days. The plaintiff thus claims 120 days, but gives credit for 26.3 days worked but not paid for in August and early September. I find this claim is sustained. 80 The plaintiff gave evidence that he had tried to seek further consultancy work through a headhunter, but understood that such work was unlikely to be available unless he could explain the circumstances in which he left the work had been doing for Westpac. He understood that, in order to gain such contracts, he would require some explanation from Westpac. Absence of such an explanation would result in both loss of the chance of him finding new consultancy work, and also loss of opportunity to engage in further work as permitted under the contract, during the remainder of the contract period. Loss of these rights must be compensated for by damages to which the plaintiff is entitled under the general common law principles. It is compensation for what the parties contemplated the plaintiff would be likely to earn, but which, because of the defendant's wrongful repudiation of the contract, he has not been able to earn. Those damages are limited to the contract period only. They do not extend to any renewal, and although the plaintiff claimed some damages for loss of the opportunity to obtain future contracts, such a claim cannot, in the face of the authorities, be maintained. The award of such damages is not contrary to anything contained in the Amann case or any subsequent case; it is, in fact totally consistent with those cases. 81 The defendant argues that the plaintiff has not mitigated his damage. The plaintiff's evidence, as I have indicated, was that he established a consultancy business called "Best Behaviours". This business did earn $15 000 before the contract with the defendant would have expired in March 2006. He sought further consultancy work through a headhunter. He also devoted himself, for more days than he would have expected, to some charitable work he was doing in Wollongong. This charitable work did not have any financial benefits for him. 82 The plaintiff is therefore entitled to damages calculated as follows: a. Payment for 93.7 days, being 120 days less the days worked (26.3 days (at the rate provided in the contract, as amended); 25% @ $1150 ($26 939) and 75% @ $900 ($63 248). This totals $90 187, exclusive of GST. b. A sum of $20 000 as compensation for loss of the terms or opportunity to engage in additional contracting, being a sum of $35000 being damages to compensate the plaintiff for the loss of the chance to obtain consulting work during the 30% of the time he was not providing services under the contract, less a sum of $15 000, being a sum equal to the remuneration for the additional work performed by the plaintiff's company during the contract period. 83 There will accordingly be a verdict for the plaintiff in the sum of $110, 187. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.