Desmond Henry Randall v Aristocrat Leisure Limited (ACN 002 818 368) [2004] NSWSC 411

New South Wales Supreme Court

CITATION : Desmond Henry Randall v Aristocrat Leisure Limited (ACN 002 818 368) [2004] NSWSC 411 HEARING DATE(S) : 03/05/04, 04/05/04, 05/05/04, 06/05/04, 07/05/04, 11/05/04, 12/05/04, 13/05/04 JUDGMENT DATE : 8 June 2004

JURISDICTION: Equity Division Commercial List JUDGMENT OF : Einstein J DECISION : Summary dismissal justified. Plaintiff entitled to bonus in respect of 2002 year [approximately $900,000] and to certain relocation out of pocket expenses.

CATCHWORDS : Contract - Master and servant - Summary dismissal - Appointment of plaintiff by written contract of employment as chief executive officer and director of defendant - Defendant listed company operates in Australia and worldwide through subsidiaries - Contract stipulates that chief executive officer to perform all normal duties associated with the position held by a chief executive officer of a public company, to faithfully serve defendant and to competently exercise all skills as would be normally expected of persons holding the position of chief executive officer and director of a public company - Clause giving defendant entitlement to terminate the contract and the services of plaintiff without prior notice in the event that he commits any act of dishonesty, fraud, wilful disobedience, misbehaviour or breach of duty which might detrimentally affect defendant or wilfully, persistently and materially breaches any of the provisions of the contract and if the breaches are remediable, does not remedy them within 14 days after receiving notice in writing - Summary dismissal of plaintiff pursuant to clause - Plaintiff asserts that termination of his employment constitutes a repudiation of the contract and purports to accept repudiation - Proceedings concern events before and aftermath of 7 February 2003 profit downgrade announcement resulting in a decrease in the defendant's share price from $4.22 being the last price immediately before announcement released to low of $2.25 after the release and closing price of $2.40 on the day - Clarification announcements issued on days following initial announcement - Defendant claims that post 7 February events involved plaintiff making [or causing to be made] a series of public statements - Effect of public statements said to be to assert that he had had no warning of the possibility of a profit downgrade before 4 or 5 February 2003 - that he had been confident of a strong US profit result at the end of 2002 - that it was not clear to him before 4 and 5 February 2003 that Aristocrat had a problem with its profit margins in its North American business - Claimed conduct said to justify summary dismissal under contract - Defendant contends that these statements were false and false to the knowledge of plaintiff - Defendant contends that plaintiff failed to make full disclosure of his knowledge to the board - Defendant relies upon ASX continuous disclosure requirements and statutory obligations including obligations to use reasonable care and diligence and to act in good faith and in the best interests of the company - Plaintiff contends that he and defendant had only become aware of particular material information in early February 2003 and that this information had then been promptly released to the market - Plaintiff contends that there was no failure of disclosure of his own knowledge to the board - Line of defences include defences raising technical issues, as for example whether contract provisions unenforceable by reason of particular sections of the Corporations Act requiring shareholder approval - Examination of performance/standard of performance of the duties of a director and chief executive officer - Duties of disclosure of chief executive officer to board - Principles concerning fraudulent representations, wilful disobedience, misbehaviour/misconduct justifying summary dismissal at common law - Content of statutory duties to use reasonable care and diligence (section 180), to act in good faith and in best interests of company (section 181) and not to use position improperly to gain an advantage to himself (section 182) Corporations Act 2001 (Cth) LEGISLATION CITED : Corporations Act 1989 (Cth) Corporations Legal and Economic Reform Plan Act 1999 (Cth). Abeles v PA (Holdings) Pty Ltd (2000) 18 ACLC 867 Adami v Maison de Luxe Ltd (1924) 35 CLR 143 Ashton Mining Ltd v Commissioner of Taxation [2000] FCA 590 Atlantic Shipping and Trading Co. v Louis Dreyfus & Co [1922] 2 AC 250 Australian Colliery Staff Association v Queensland Mines Rescue Service [1999] FCA 395 Bettini v Gye (1876) 1 QBD 183 Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 Boston Deep Sea Fishing & Ice Co v Ansell (1888) 39 Ch D 339 Brackenridge v Toyota Motor Corporation Australia Ltd (1996) 142 ALR 99 Bruce v AWB Ltd (2000) 100 IR 129 Clouston & Co Limited v Corry [1906] AC 122 Commissioner of Stamp Duties (NSW) v Bone and Others (1976) 135 CLR 223 Commonwealth v Verwayen (1990) 170 CLR 394 Courtaulds Northern Spinning Ltd v Sibson [1988] ICR 451 Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd (1975) 133 CLR 72 Daniels t/as Deloitte Haskins and Sells v Anderson (AWA case) (1995) 37 NSWLR 438 Derry v Peek (1889) 14 App Cas 337 Dovey & Metropolitan Bank (of England & Wales) Ltd v Cory [1901] AC 477 Elcom v Electrical Trades Union of Australia, New South Wales Branch (1983) 5 IR 267 Farley v Lums (1917) 19 WALR 117 Federal Commissioner of Taxation v Orica Limited (1998) 194 CLR 500 Fox v GIO Australia Limited [2002] NSWIRComm 318 Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd & Anor [1964] 2 QB 480 Galipienzo v Solution 6 Holdings Limited (1998) 28 ACSR 139 Gooley v Westpac Banking Corp (1995) 129 ALR 628 Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 CASES CITED : Harmer v Cornelius (1858) 5 CBNS 236 Harold Holdsworth & Co (Wakefield) Ltd v Caddies [1955] 1 WLR 352 Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298 John McGrath Motors (Canberra) Pty Ltd v Applebee (1964) 110 CLR 656 Jones v Associated Tunnelling Co Limited [1981] IRLR 477 Jupiter General Insurance Co Ltd v Shroff [1937] 3 All ER 67 Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 Larratt v Bankers & Traders Insurance Co Ltd (1941) 41 SR (NSW) Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 2 All ER 285 Legione v Hateley (1983) 152 CLR 406 Lewis v Cook (2000) 18 ACLC 490 Marchesi v Barnes [1970] VR 434 Meyrick v Stirling Bros Ltd (1899) 1 WALR 51 Mulcahy v Hoyne (1925) 36 CLR 41 Newbon v City Mutual Life Assurance Society Ltd (1935) 52 CLR 723 North v Television Corporation Ltd (1976) 11 ALR 599 O'Brien v Associate Fire Alarms Limited [1969] 1 All ER 93 Orr v University of Tasmania (1957) 100 CLR 526 Quinn v Jack Chia (Australia) Limited [1992] 1 VR 567 Rowbotham v Arthur Lee & Sons Ltd (1974) IRLR 377 Sheldrick v WT Partnership (Aust) Pty Ltd (1998) 89 IR 206 Shirlaw v Southern Foundries (1926) Ltd & Anor [1939] 2 All ER 113 Tallerman & Co Pty Ltd v Nathan's Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 Thompson v Palmer (1933) 49 CLR 507 Turner v Mason (1845) 14 M & W 112 Vardy v Cuthbert (1872) 3 AJR 25 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 PARTIES : Desmond Henry Randall (Plaintiff) Aristocrat Leisure Limited (ACN 002 818 368) (Defendant) FILE NUMBER(S) : SC 50066/03 COUNSEL : Mr B Coles QC, Mr A Fernon (Plaintiff) Mr G Lindsay SC, Mr A McGrath (Defendant) SOLICITORS : Toomey Pegg Drevikovsky (Plaintiff) Phillips Fox (Defendant)