Industrial Court of New South Wales CITATION: Irving v Jones Lang LaSalle Australia Limited and another (No. 2) [2007] NSWIRComm 87 Applicant: Oliver Desmond Irving PARTIES: First respondent: Jones Lang LaSalle Australia Limited Second respondent: Jones Lang LaSalle (NSW) Pty Limited FILE NUMBER(S): IRC 7758 of 2001 CORAM: Backman J CATCHWORDS: Unfair contract - s 106 of the Industrial Relations Act 1996 - determination of issue of quantification of amounts ordered to be paid by the respondents - whether orders finally made at date judgment delivered. LEGISLATION CITED: Industrial Relations Act 1996 Irving v Jones Lang LaSalle Australia Limited and another [2006] NSWIRComm 305 CASES CITED: LEP International Pty Ltd v Caine (2000) 97 IR 35 Ove Arup Pty Ltd v WorkCover Authority (NSW) (Inspector Mansell) (2005) 141 IR 78 Wentworth v Wentworth [1999] NSWSC 638 HEARING DATES: 13/12/2006 DATE OF JUDGMENT: 12 April 2007 Applicant: Mr P M Kite, SC Solicitors: Henry Davis York LEGAL REPRESENTATIVES: Respondents: Mr A R Moses of counsel Solicitors: Hunt & Hunt JUDGMENT: - 7 - INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Backman J Thursday, 12 April 2007 Matter No IRC 7758 of 2001 IRVING v JONES LANG LASALLE AUSTRALIA LIMITED AND ANOTHER (NO. 2) Application under s 106 of the Industrial Relations Act 1996 JUDGMENT [2007] NSWIRComm 87 1 These proceedings were brought by way of summons for relief under s 106 of the Industrial Relations Act 1996. I delivered judgment in the matter on 21 September 2006: Irving v Jones Lang LaSalle Australia Limited and another [2006] NSWIRComm 305. The parties now apply to the Court for it to determine issues of quantification of various amounts which the respondents have been ordered to pay. The application is made pursuant to Order 7 of the Judgment Orders. 2 The Orders are extracted below: [142] I make the following orders consequent upon the findings of unfairness which I have made: 1. The contract of employment between the applicant and the second respondent is varied from its inception to include a term that the respondents will make a payment in lieu to the applicant equivalent to all amounts which the applicant would have earned had he worked out his six months notice period including: (i) base fixed remuneration (including any salary sacrifice benefits provided to the applicant); (ii) likely bonus (including guaranteed bonus) for the period 17 October 2001 until 31 December 2001; and, (iii) employer superannuation contributions at 9% of the applicant's base salary immediately prior to his termination of employment. 2. The contract of employment between the applicant and the second respondent is further varied from its inception to include a term that, on termination, for any reason other than serious misconduct, the respondents will pay the applicant for any pro rata bonus for the year 2001 up to the date of termination, calculated by reference to the likely bonus which the applicant would have earned for the calendar year 2001. 3. The contract of employment between the applicant and the second respondent is further varied to include a term that on termination, for reason of redundancy, the respondents will pay the applicant the current market value of 2,622 shares granted in lieu of partial bonus for the calendar years 1999 and 2000. 4. The respondents are to pay the applicant the sum equivalent to: (i) likely bonus (including guaranteed bonus) for the period 17 October 2001 until 31 December 2001; (ii) employment superannuation contributions for six months commencing from 17 October 2001 until 16 April 2002 at 9% of the applicant's base salary immediately prior to his termination; (iii) likely pro rata bonus from 1 January 2001 until 16 October 2001 calculated by reference to the likely bonus the applicant would have earned for the calendar year 2001; (iv) the current market value of 2,622 shares granted in lieu of partial bonus for the calendar years 1999 and 2000. 5. The respondents are to pay interest on the amounts specified in Order 4 above in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. The interest shall be payable from the date of the filing of the summons for relief on 26 November 2001 until the date of this judgment. 6. The respondents shall pay the applicant's costs of the proceedings in an amount as agreed or assessed. 7. In the absence of any agreement as to the amounts ordered to be paid in accordance with 4, 5 and 6 above, the parties have liberty to approach. That liberty should be exercised within 28 days. 3 The applicant has identified four discrete areas for further consideration. These are: (a) the "likely" bonus which the Applicant would have received for the period from 1 January 2001 to 31 December 2001; (b) the payment of superannuation contributions on the six months payment in lieu of notice made at the time of termination; (c) the value of the PBS shares (sic) granted to the Applicant; and (d) costs. 4 I propose to consider each issue in turn. Likely bonus 5 Under Orders 4(i) and 4(iii) the respondents were ordered to pay the applicant an amount for bonus. The amount was referable to two components. The first component, for the period 17 October 2001 to 31 December 2001, represented an amount of bonus which the applicant could have earned had he worked out his six months notice period. The second component represented any pro rata bonus for the period 1 January 2001 until 16 October 2001 payable, calculated by reference to the likely bonus earned in that calendar year. 6 One of the issues during the substantive hearing was whether a six months payment in lieu of notice made to the applicant following his termination of employment on the ground of redundancy, was adequate. I found that the payment awarded was not unfair but that the respondents' calculation of that payment, that is by reference to the applicant's base salary alone, should have included an amount representing any "likely bonus payment or component of any likely bonus payment for 2001" (see Judgment at [86], [87]). In relation to a pro rata bonus I found that the respondents' failure to provide for a payment upon the applicant's termination reflecting an amount for bonus was also unfair: (see Judgment at [98], [99]). 7 The evidence in relation to these aspects was that the applicant had been awarded a target bonus of $125,000 gross for the calendar year 2001 but his employment had been terminated before any actual bonus for that period became payable. The applicant at the time of his termination of employment was an international director of the respondent. According to the evidence, other international directors of the respondent had been paid actual bonuses for that calendar year. 8 The parties made submissions as to the appropriate method of calculation of the amount. Their respective methods revealed only one difference of any significance. The applicant's calculations included a figure representing the average bonus paid to other international directors of the Australasian region which comprises Australia and New Zealand. The respondents' calculations were based on the average bonus amounts paid to other international directors in the Asia-Pacific region. The applicant presented a final figure of $45,487.50 in relation to both components of bonus. The respondent's final figure was $45,125.00. 9 The difference between the two figures is not marked but in any event the applicant's final figure should be preferred. A memorandum from the respondent to the applicant dated 12 April 2001 advised the applicant that his target bonus for the 2001 calendar year was $125,000 gross. The memorandum also set out how the applicant's actual bonus was to be calculated, namely by reference to his target bonus, his individual performance rating and the Australasian performance rating. The parties have not directed my attention to any other documentation which addresses the issue. I intend therefore to adopt the applicant's calculations based on the memorandum of 12 April 2001. This document is both sufficiently contemporaneous with the applicant's termination date as well as purporting to deal with circumstances particular to the applicant. 10 The appropriate amount referable to a bonus payment which therefore should be paid to the applicant under Orders 4(i) and 4(iii) of the Judgment is A$45,487.50. Superannuation 11 The applicant also contends that the payment made to him upon termination in lieu of notice should have included superannuation contributions in addition to his base salary. The respondents contend that the applicant is not entitled to any superannuation payments as this entitlement has been paid. 12 In a memorandum to the applicant dated 28 February 2001 the respondent confirmed that the applicant's executive salary package for 2001, "will be $300,000 gross". The memorandum also stated that the package "may be" split into various components including base salary and superannuation. The applicant's termination payment set out in a document entitled "Redundancy Payment Reconciliation" shows a tax free redundancy payment in an amount of $63,551 and the balance of redundancy payment (ETP) in an amount of $86,449. The two amounts equate to $150,000 which is exactly half of the applicant's executive salary package for 2001 as set out in the memorandum. 13 On one view of this documentation the amount of $150,000 may be construed as representing half the applicant's gross salary for 2001 of which superannuation contributions are a component. It may follow from this that the applicant's payment in lieu of notice was inclusive of superannuation. Other documentation however is suggestive of a contrary view. 14 Under clause A of the applicant's Senior Executive Service Agreement (SESA) the applicant during his employment was to be paid a "base salary" of A$130,000 for the first twelve months of the SESA and thereafter at A$430,000 per annum. According to the evidence given during the substantive hearing, this amount underwent various modifications following annual salary reviews. Clause 3B of the SESA states that the applicant's "base salary" shall be paid in accordance with any arrangements specified in Schedule A of the SESA. Schedule A contains a section headed, "Superannuation", which states: The Company will also pay to a complying superannuation fund for the benefit of the Executive an amount each year that will satisfy the Company's minimum obligation as an employer under the Superannuation Guarantee (Administration) Act 1992 in respect of the Executive. 15 The applicant contends that the effect of these clauses is that at least at the time the SESA was executed the second respondent had contracted to pay employer superannuation contributions in addition to the applicant's fixed base remuneration. 16 The respondents' contention that the applicant's superannuation entitlements have already been paid is made here for the first time. At no stage during the substantive hearing did the respondents assert otherwise. Indeed, in oral submissions on the issue of whether the contract was unfair by failing to provide for employer superannuation contributions as part of the applicant's termination payment in lieu of notice, the respondents appeared to implicitly accept that such payments had not been made. Counsel for the respondents submitted to the Court: Superannuation is the next one, which is paragraphs 70 through to 74, and the first submission we make is he did not ask for a variation to his contract in relation to superannuation. That is in paragraph 70, and then it is said, "well, we just want to take it into account" and we make a number of submissions about that. He does not say, in 71 he does not say his service agreement was unfair because it lacked that term. In 73 we say although the service agreement provided for compliance with the Commonwealth legislation, they were not payable to him, they were payable to a superannuation fund. Now, I will put this as a positive submission, his contract cannot be unfair if it provides for payment - I am sorry, that is wrong. The submission is that he wants superannuation for a deemed period of notice but superannuation has to be paid to a superannuation fund, not to him. After termination, this is paragraph 73, he took over his own superannuation fund, he was close to an age where he could have the benefit of it. He was able to then use that superannuation fund for his own purposes, subject to the trust laws of course, after he left employment and he had a fund to obtain alternative employment. He ran his own business. It is not appropriate in those circumstances to provide for such a payment. 17 The respondents' submissions on the issue have been summarised in the Judgment at [127] to [130]. Neither party has specifically directed my attention to any other documentation which might have provided some clarification. Given the uncertain state of the documentation and the fact that the respondents did not prior to the Judgment rely on a submission that the applicant's superannuation entitlements had already been paid, I intend to resolve the matter in the applicant's favour. The amount that the respondents are ordered to pay the applicant in accordance with Order 4(ii) of the Judgment which reflects the applicant's employer superannuation contributions for six months commencing from 17 October 2001 until 16 April 2002 will be $4,951.80. Part bonus in shares 18 The applicant also seeks a monetary amount representing the value of the 2,622 shares which he forfeited when he was made redundant by the second respondent. I found that the failure of the contract to provide for the vesting of the shares in the event of termination of employment on the ground of redundancy was unfair (see Judgment at [111] - [126]). Order 4(iv) of the Judgment requires the respondents to pay the "current market value" of the 2,622 shares. The applicant contends that the reference to "current market value" is the value of the shares as at the date of judgment. The respondents contend that the Order refers to the market value of the shares as at the date of the applicant's termination of employment on 16 October 2001. 19 The issue is resolved by resort to Order 3 of the judgment orders. Order 3 declares that the impugned contract is further varied to include a term that on termination (my emphasis) the respondents will pay the applicant the current market value of the 2,622 shares. It follows that the reference to "current market value" in Order 4(iv) of the judgment orders refers to the value of those shares as at the date of the applicant's termination of employment. This construction of Order 4(iv) is also consistent with [2(a)] of the applicant's summons and consistent with the case presented by the applicant on the issue. Accordingly Order 4(iv) will be amended to include at the end, the words, "as at the date of termination on 16 October 2001". 20 The respondents contend that the proposed amendment may be made under the slip rule. If it be necessary to invoke the rule I agree that it may be invoked in the present circumstances, since this will give effect to the intention of the Court which requires the respondents to pay the applicant the market value of the shares as at the date of termination. Order 4(iv), as amended, properly reflects Order 3 of the judgment orders. I should add for completeness that Order 7 of the Judgment leaves open the power of the Court to correct or alter Orders 4 to 6 in any event. This is because in my opinion it follows from the terms of Order 7 that Orders 4 to 6 have not been perfected: Wentworth v Wentworth [1999] NSWSC 638 at [6]; and see generally Ove Arup Pty Ltd v WorkCover Authority (NSW) (Inspector Mansell) (2005) 141 IR 78. 21 In relation to this latter point the applicant submitted that Order 4(iv) was entered and perfected when judgment was delivered on 21 September 2006. In developing the submission the applicant relied upon the judgment of the President, Wright J in LEP International Pty Ltd v Caine (2000) 97 IR 35. The applicant sought to distinguish an exception to orders which finally dispose of a matter, identified by Wright J in LEP International as being where a judgment or decision requires the parties to provide short minutes of order, (giving effect to the judgment). In such circumstances his Honour found that final orders do not take effect until the short minutes of order are made (at [36]). 22 LEP International was an application to extend time in which to appeal from a decision of Glynn J. An issue before Wright J was whether Glynn J had made final orders at the date judgment was delivered or at a later date after Glynn J had signed the Short Minutes of Order. In finding that the latter occurrence was the relevant date on which final orders were made, Wright J relied on two processes of reasoning. The first, already referred to, was where a judgment or decision requires the parties to provide the Short Minutes of Order, in which case the final orders do not take effect until they are made. The second involved an analysis of Glynn J's judgment to see if it evidenced an intention by its terms to provide a final determination. Upon delivery of judgment Glynn J had made certain orders consequential upon findings of unfairness under s 106 of the Act. Her Honour relevantly made a further Order as follows: The applicant in consultation with the respondent is within 14 days to prepare file and serve formal minutes of orders giving effect to my decision. 23 In considering this Order, Wright J concluded (at [39]): [I]t is clear that her Honour did not in the judgment of 21 October finally determine the matter before her but rather was indicating to the parties the matters that should be taken into account and acted upon in the final orders, yet to be made... In no objective sense could it be said that the judgment represented or embodied the specific final orders that would be made by the Court in the proceedings. Accordingly, the intention to be gathered from the judgment in an objective sense was that the final decision in the proceedings was one yet to be made, albeit after the parties had had an opportunity of considering the detailed judgment delivered by her Honour, the reasons given, and possible agreement on the precise orders that should be made to effectuate the Court's determination of the proceedings. 24 In my view Glynn J's order is sufficiently close to Order 7 of this Court's judgment of 21 September 2006 to warrant the same conclusion. Order 4 therefore is not a final order in the proceedings. Final orders have yet to be made. Other matters 25 This leaves the issues of interest and costs. In relation to costs, the parties agreed to address the issue in written submissions following publication of this judgment, and following the appropriate quantification of the sums referable to bonus, superannuation contribution and part bonus in shares payments. The amount of interest payable in accordance with Order 5 should also be quantified. In addition the respondents have raised an issue of overpayment to the applicant in the amount of $10,862.64 which they say should be deducted from the final amounts. I do not intend to make any order in relation to this issue. The parties may resolve the matter between themselves. Orders 26 I make the following orders: (1) The parties are directed to file short minutes of order reflecting the quantification of the amounts payable in accordance with Orders 4 and 5 of the Judgment Orders within 7 days. (2) The parties are directed to file and serve any evidence and submissions on the issue of costs within 14 days, after which the question of costs shall be dealt with on the papers, unless the parties contend otherwise. (3) Order 4 of the Judgment Orders is amended as follows: (4) The respondents are to pay to the applicant the sums equivalent to: (i) likely bonus (including guaranteed bonus) for the period 17 October 2001 until 31 December 2001 and likely pro rata bonus from 1 January 2001 until 16 October 2001 in the amount of $45,487.50. (ii) employer superannuation contributions for six months commencing from 17 October 2001 until 16 April 2002 at 9% of the applicant's base salary immediately prior to his termination, in the amount of $4,951.80. (iii) The current market value of 2,622 shares granted in lieu of partial bonus for the calendar years 1999 and 2000 as at the date of termination on 16 October 2001. ________________ 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.