New South Wales Supreme Court CITATION : Campbell v Encyclopaedia Britannica Australia Ltd [2008] NSWSC 1178 HEARING DATE(S) : 3, 4 & 5 November 2008 JUDGMENT DATE : 11 November 2008 JURISDICTION : Equity Division JUDGMENT OF : Bergin J DECISION : Plaintiff entited to recover the balance of redundancy package; plaintiff entitled to nine months notice. CATCHWORDS : [CONTRACT] - contract of employment - termination of employment - whether contract included a provision fixing period of notice for termination without cause - whether termination was "a redundancy" CATEGORY : Principal judgment Byrne v Australian Airlines Ltd (1995) 185 CLR 410 Caulfield v Broken Hill City Council (1995) 60 IR 221 Dyer v Peverill (1979) 2 NTR 1 Hem v Cant (2007) 159 IR 113 CASES CITED : Jones v Department of Energy and Minerals (1995) 60 IR 304 Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567 R v Industrial Commission (SA); Ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6 Rankin v Marine Power International Pty Ltd (2001) 107 IR 117 Savage v British India Steam Navigation Co (1930) 46 TLR 294 PARTIES : David Campbell (Plaintiff) Encyclopaedia Britannica Australia Ltd (Defendant) FILE NUMBER(S) : SC 5617 of 2006 COUNSEL : Mr AJ McInerney (Plaintiff) Ms PM Sibtain (Defendant) SOLICITORS : Carneys Lawyers (Plaintiff) TressCox Lawyers (Defendant) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BERGIN J 11 NOVEMBER 2008 5617/06 DAVID CAMPBELL v ENCYCLOPAEDIA BRITANNICA AUSTRALIA LTD & ANOR JUDGMENT 1 The plaintiff, David Campbell, sues the defendant, Encyclopaedia Britannica Australia Limited, his former employer, for damages for breach of contract. The plaintiff claims that the defendant breached its contract with him by failing to pay him the appropriate amount when his employment was terminated in August 2006. He claims that the termination was an event of redundancy or alternatively that the defendant failed to give him reasonable notice of his termination. The defendant denies that the termination was a redundancy and denies that it failed to provide the plaintiff with proper notice. The parties 2 The defendant was established in 1963. In about 1999 it was restructured and split into two entities: Britannica.com.au Limited and Encyclopaedia Britannica Australia Pty Limited. In 2002 these two companies ceased operation and thereafter a single company operated the business in Australia returning to its original name, Encyclopaedia Britannica Australia Limited. The defendant is a company incorporated in Delaware USA and is registered as a foreign corporation in Australia. It is a wholly owned subsidiary of a USA corporation, Encyclopaedia Britannica Inc., that has its head office in Chicago. The defendant has been referred to in evidence as EBA and the holding company has been referred to as EBUSA. Another company within the group, Britannica Asia Pacific Pty Limited, an Australian company, operated the business in the Asia/Pacific region. At the relevant time the defendant had a broad product range including more than 100 different products in paper, electronic, video and online form. 3 The plaintiff was born in 1958 in New Zealand. He holds a Bachelor of Commerce and Administration from Victoria University in Wellington. After graduating from that University he established radio stations in various New Zealand markets in respect of which he sold his interest in 1994 and moved to Australia. Between 1994 and 1999 he worked with Australian Radio Network as regional network manager in a sales and marketing role. In that role he came into contact with Scott Neilson who was then a sales consultant with the defendant. In April 1999 Mr Neilson advised the plaintiff that the defendant was looking for a Business Development Manager and he decided to apply for employment with the defendant. Business Development Manager – 6 April 1999 4 The plaintiff commenced casual employment with the defendant on 6 April 1999 and was appointed to the permanent position as Business Development Manager (Offline Sales) by letter dated 5 June 1999 effective from 6 April 1999. The letter of 5 June 1999 was in the following terms: The team at Britannica are creating a new and exciting future for the organisation in an Internet environment. We are keen for you to join the team and have pleasure in offering you the position of Business Development Manager (Offline Sales) Encyclopaedia Britannica (Australia) Inc. In this position you will report to Mr Scott Neilson Director Sales & Advertising. As you are aware from our discussions and your long association with Britannica, we are committed to a flat, 'networked' organisational structure which encourages creativity, open communication and innovation. In this structure you will be encouraged to contribute your ideas and views to your colleagues and about aspects of the business which are broader than your immediate position might indicate. Similarly, we expect you will welcome the ideas and views of other Britannica team members. As a result of your excellent performance in the initial casual employment period, your employment and the terms of this contract with Britannica will be retrospectively effective to 6 April 1999 and is subject to the following terms and conditions: DUTIES Your responsibilities will be in accordance with the attached job description. In this role you will need to draw upon your creativity and business acumen. Britannica is committed to becoming a high performance, total quality organisation and it is expected that you, as part of the team, will produce quality output. This is an exciting and pivotal role in Britannica and we are very pleased to welcome you to the position. REMUNERATION Your basic salary will be $90,000.00 per annum (including car allowance) which will be paid monthly into a bank account nominated by you. Britannica is committed to encouraging and rewarding performance. You will be invited to join our executive performance related, variable compensation scheme. Details of this scheme are appended. In 1999 this will allow you to earn an annual equivalent bonus of up to $30,000, subject to achieving mutually agreed specific performance objectives. This will be based on our fiscal 1999 year which runs from October to September and will be calculated on a pro rata basis. You will also be entitled to receive 3.5% of gross profits above target revenues. Targets must, at all times, be above budgets or forecasts. Gross profits are calculated after all direct variable costs have been accounted for. This will be calculated and paid six-monthly, ending in September and March. Your annual remuneration package is capped at $160,000. (Base $90K, Super $12K, Bonus $30K, Medical $5K (gross of FBT) above target remuneration $23K) A mobile telephone will be provided for Company business use. You will be eligible to join the Company's superannuation scheme immediately upon joining the company. The company provides contributions of 10% on your cash salary and bonus payments. Life Insurance, currently at 4 times the annual salary, Salary Continuance Insurance and Private Medical Insurance will commence immediately upon joining the company ($2,500 for single employees and $5,000 for married employees). Your remuneration package will be reviewed annually in October. HOURS OF WORK Our official business hours are 8.45 am to 5.00pm, however, the salary offered for the position described is made on the basis that the hours worked will be those necessary to effectively carry out the responsibilities of the position. HOLIDAY You will be entitled to 20 days holiday per year SICK LEAVE Five (5) days in the first year of service and eight (8) days during the second and subsequent years of service as governed by the relevant industrial award conditions. LONG SERVICE LEAVE You will be entitled to long service leave as determined by the relevant Long Service Leave Act as modified from time to time. CONFIDENTIAL INFORMATION You must not divulge or use, either for your own benefit or the benefit of others, any confidential information about the Company or its affairs acquired during your employment. Confidential information refers to any information (written or verbal) of a commercial, technical or financial type which is not publicly available. This obligation extends beyond your employment with us. It is also a condition of employment that you do not, either during your employment (other than as part of it) or when it ceases, retain, take or make copies of material (original or not) such as correspondence, computer printouts, proposals, presentations or other material compiled or made by you, or to which you have access as part of your employment. This also applies to confidential information of our customers and strategic partners. All information in relation to our customers and strategic partners, including rates charged to them, is proprietary. TERMINATION 1 Encyclopaedia Britannica may terminate your employment without notice in the event of misconduct by yourself in a serious or wilful manner in relation to the performance of your duties pursuant to your employment or if you conduct yourself in a manner which is inconsistent with the interests of Encyclopaedia Britannica. Encyclopaedia Britannica reserves the right to terminate your employment for any reason at common law. 2 Encyclopaedia Britannica may terminate your contract of employment at any time by giving you one (1) month's notice. Encyclopaedia Britannica may pay you the equivalent amount of remuneration in lieu of notice. 3 You may terminate your contract at any time on one (1) month's notice. Britannica may vary your duties for the duration of your notice period. Your first 3 months will be regarded as probationary, during which time your employment can be terminated at two (2) weeks notice by either party. VARIATIONS TO CONDITIONS TO EMPLOYMENT Britannica reserves the right to alter the terms and conditions of employment as deemed necessary by the Managing Director. Any variation will be advised, in writing, one month prior to the change becoming effective. This offer is subject to the Company receiving satisfactory references. GENERAL We welcome you to Britannica and are confident that you will make an excellent contribution. We trust that you will have an exciting and rewarding time with us and that it will be possible for you to develop and enhance your capabilities within the Company. Director–Sales Asia Pacific – 13 March 2000 5 On 13 March 2000 the plaintiff was appointed Director, Sales – Asia Pacific. His letter of appointment was in the following terms: Following on from our recent discussions, it gives me great pleasure to confirm your new appointment as Director, Sales – Asia Pacific effective from Monday 13th March 2000. In recognition of you taking on this new role, your salary package has been revised as follows:- Base Salary $120,000 Hold-back Commission (up to a maximum) $40,000 Superannuation (10%) $16,000 Note: 1. You will continue to be entitled to your car parking benefit. 2. A letter outlining your option entitlements under the employee share incentive plan will be given to you shortly. 3. You will continue to be entitled to your medical insurance benefits until the employee share incentive plan takes effect. 4. A separate document will be issued to you in the next few days setting out details of the hold-back commission structure. Your monthly salary for April onwards will reflect your new package. We will also process an adjustment back to 13th March 2000 with the April payrun.. Please note that this letter forms an addendum to your original letter of employment. I would like to take this opportunity to offer my congratulations on your new appointment and look forward to an exciting and challenging year ahead. 6 On 13 March 2000 Mr Neilson provided a copy of the following file note to the plaintiff: FILE NOTE Dated: 13th March 2000 In accordance with your new position, the termination notice period is now extended from one (1) month to three (3) months notice on termination. Redundancies – May 2000 7 In May 2000 a number of changes were made to the staffing and organisation of the defendant. At this time approximately 35 members of staff were made redundant. Mr Neilson who by this time was the Managing Director of Britannica.com.au Limited tendered his resignation. In a conversation with the plaintiff Mr Neilson said: David you are the best person to head up EBA. You have a great understanding of EBA's business and where it's tracking. This is a great opportunity to have a long-term career with a solid company known around the world and which has a distinguished history. 8 The plaintiff expressed concerns to Mr Neilson about his position should he accept the role of Managing Director, particularly if the defendant intended to abolish further positions. General Manager/Managing Director – 16 May 2000 9 On 16 May 2000 Mr Neilson wrote to the plaintiff in the following terms: As you are aware the recently announced world-wide restructure will have major implications for the Sydney office. I have tendered my resignation and will formally leave the position of Managing Director of Britannica.com.au on Friday 19th May. I am writing to confirm the verbal advice given at our meeting on Monday with Cooma Chelliah that you have been appointed to the position of General Manager, Britannica.com.au. This is effective from Monday 22nd May. In this position you will be answerable to Mitchell Davis, Senior Vice President – Marketing & International, who is based in Chicago. As mentioned at our earlier meeting, you will be responsible for the operation and restructure of the Sydney office. It will be necessary to recut the budgets to reflect the revised operation and get these signed off by Mitch. Mitch should also forward a job description and KPI's in due course. Discussions regarding remuneration should also be directed to Mitch. You have asked me to clarify the terms of your employment, specifically redundancy provisions. I am in a position to confirm that in the event of a redundancy you will be entitled to the following: 1. Three (3) months period of notice 2. Three (3) months redundancy payment 3. An additional payment equal to three (3) months salary paid as superannuation directly into your superannuation fund I wish you all the best in your new role. 10 Although this letter suggested that Mr Davis would provide a job description and key performance indicators (KPIs) to the plaintiff "in due course", this did not happen. Although the letter referred to the plaintiff's appointment as General Manager it appears to be common ground that he was referred to as Managing Director or MD during the course of his employment. The plaintiff was also appointed director and secretary of the defendant and Britannica Asia Pacific Pty Ltd and was granted a general Power of Attorney on 19 May 2000 by Britannica.com.au Limited. The Power of Attorney set out specific powers, without prejudice to the general powers as follows: 1. To enter into, make, sign and do all such contracts, agreements, receipts, payments, assignments, transfers, conveyances, mortgages, assurances, instruments and things as may in the opinion of the said Attorney be necessary or convenient for carrying on the business of the Corporation in the Commonwealth of Australia; 2. To purchase or otherwise acquire or sell any personal property in the Commonwealth of Australia for the purpose of the Corporation; 3. To work, manage and develop the property of the Corporation for the time being in the Commonwealth of Australia in such manner as he may think fit; 4. To let on lease, mortgage, charge, exchange, improve, or otherwise deal with the property of the Corporation for the time being in the Commonwealth of Australia; 5. To appoint any managers, inspectors, workmen and agents on such terms as may seem expedient, and to remove or dismiss any person so appointed; 6. To collect rents, royalties and other moneys due to the Corporation and to distrain for rents or royalties in arrears; 7. To commence and prosecute, and to defend, compound and abandon all actions, suits, claims, demands, and proceedings in regard to the property of the Corporation for the time being in the Commonwealth of Australia, or otherwise in relation to the affairs of the Corporation; 8. To adjust, settle, compromise, and submit to arbitration all accounts, debts, claims, demands, disputes and matters which may subsist or arise between the Corporation and any person or persons in the Commonwealth of Australia; 9. To make and give receipts, releases, and other discharges for moneys payable to the Corporation, and for any claims and demands of the Corporation; 10. To carry into effect any agreements under the seal of, or otherwise binding on, the Corporation; 11. To subdelegate to any person or persons any of the powers hereby conferred upon such terms and conditions as may seem expedient, and to at any time revoke such subdelegation. 11 Between May 2000 and August 2006 the plaintiff performed what has been described as the "dual" role of General Manager/Managing Director of the defendant and Director–Sales Asia Pacific. The plaintiff was responsible for: the Asian/Australian business which took in the sale of English language products in twenty countries in the Asia Pacific region; the management of thirteen staff in the defendant's North Sydney office; and the management of four staff in Taipei. 12 The plaintiff appointed James Buckle as the General Manager of Sales and Marketing of the defendant and he reported directly to the plaintiff. The plaintiff's management duties included personnel, human resources, overseeing of staff, liaising with the head office in Chicago, representing the defendant at industry functions, trade shows and book fairs and liaising with professional advisers. The plaintiff's duties also involved managing sales representatives and distributors in the Asian region, business development, sales planning, researching industry trends and business opportunities, establishing business contacts and responding to direct enquiries from prospective customers. By 2006 the plaintiff had established more than fifty relationships with distributors in the Asian region which he managed and liaised with on a regular basis in relation to the sale of the defendant's products. In 2002 the financial and sales responsibilities of the Taiwan office were transferred from head office in Chicago to the defendant. 13 At the end of each financial year the plaintiff attended a meeting in Chicago at which he would have discussions with his immediate supervisor in head office who from 2002 was Leah Mansoor. It would appear that the relationship between the plaintiff and Ms Mansoor during the period of mid 2002 and mid 2006 was professional and candid. Indeed in 2004 when Ms Mansoor indicated to the plaintiff that she was intending to resign because of family commitments, the plaintiff made representations to the President of EBUSA in Chicago to retain Ms Mansoor's services with a flexible arrangement so that she would be able to work from her new home in Denver, Colorado. This was rather ironic having regard to the events of 2006 referred to below. Meeting in Chicago – November 2005 14 In November 2005 at the usual meeting in Chicago the plaintiff and Mr Buckle met with Ms Mansoor and Richard Anderson, the Vice President and Chief Financial Officer of EBUSA. Mr Anderson had a conversation with the plaintiff in relation to the allocation of sales in the 2005 year which he required the plaintiff to book in the 2006 year. Although the plaintiff and Mr Anderson had different views about this matter it appears to have been an amicable discussion with the plaintiff agreeing to adjust the books accordingly. 15 In the meeting between the plaintiff and Ms Mansoor the budgets for the Australian company were discussed. It is clear that the Australian operation was always profitable whilst the plaintiff was performing his duties as Managing Director, however in the 2005 year the budget target of approximately 20% return against revenue was not achieved. The plaintiff suggested in evidence that this was partially due to the collapse of the CD-Rom market. Ms Mansoor's evidence was that the discussion at this meeting included her advising the plaintiff and Mr Buckle that management were unhappy with the ongoing failure of the EBA to meet the budget numbers and that improvement must be achieved. Ms Mansoor also claimed that she said: "both of your positions in the Company are at risk unless this improves". Mr Buckle gave affidavit evidence that Ms Mansoor said that their jobs would be "in jeopardy". Mr Buckle was not cross-examined on this evidence. 16 The plaintiff claimed in his affidavit in reply that Ms Mansoor did not warn him that his job was at risk and claimed that she said: "its really important that you reach your budget this year. Please don't let me down". The plaintiff was cross-examined about the conversation at this meeting and gave the following evidence (tr 51-52): Q. She informed you, did she not, that Encyclopaedia Britannica was unhappy with the ongoing inability of the Australian office to meet its budget? A. Yes, she certainly said in light of the American office and the UK office experiencing growth that it was important that we address that issue, correct. Q. And she indicated to you that the head office wasn't happy with the position in the Australian office, didn't she? A. Yeah, yes, she did. Q. She also indicated to you that those figures must improve, didn't she? A. Yes, she basically told us both that it was important that we achieve a better result for the end of the 2006 financial year, correct. Q. And she also indicated to both you and Mr Buckle that unless they improve, both your position and his position in the company was at risk? A. Well, she indicated that it was serious. I did not – I did not leave that meeting feeling that my job would be terminated if I didn't reach it. It was – there was discussion about that amongst other things and she certainly did indicate that it was important that we improve our financial position but I didn't think for a minute that Mr Buckle or myself would be terminated if we didn't reach those financial figures. … Q. So when she informed you the matter was serious and that the position must improve, did it not occur to you that that might mean your position was at risk? A. I didn't think – ever think it was at risk. We talked about a wide range of things over many days and certainly she indicated to me and Mr Buckle that the Australian operation needed to lift its game and if – to hit targets but a wide range of things were discussed and, as I said, I never felt that my position was at risk. Decision to terminate – June 2006 17 Ms Mansoor gave the following affidavit evidence: 15. I had reached the conclusion that David was not the right managing director for EBA although he was a very good sales person. However, I decided not to terminate David for cause for what was clearly a direct violation of EBUSA's policy in a position of trust because I did not wish to shame him and affect his resume. I decided to take the termination road and not cause him personal embarrassment as gratitude to his overall service to EBA. I made arrangements to travel to EBA's Sydney office to terminate David's employment. 18 The reference in that evidence to a "direct violation of policy" was to the fact that the plaintiff had maintained or caused to be issued a corporate American Express card for use by employees of the Australian office for business related expenses such as travel. In 2001 Mr Anderson wrote to the plaintiff advising that the company policy was changing to avoid all company-owned credit cards and that the staff were to "travel at their own expense, submit an expense report and receive prompt reimbursement". Mr Anderson requested the plaintiff to "cancel the four or five cards you have within the next week and confirm back that you have done so". There is no suggestion that any expenses incurred and paid for on the American Express card were other than appropriate business expenses. The financial officer of the Australian office, Kingsley Gunaratnam, was provided with the details of the expenses incurred on the American Express card. 19 It was in June 2006 that Ms Mansoor became aware that the plaintiff had retained or had reissued an American Express card. Mr Gunaratnam was in the habit of writing directly to the head office in Chicago in rather florid terms about the plaintiff's performance. He made complaints about the plaintiff and neither he nor head office brought these complaints to the plaintiff's attention, although towards the end of his employment the plaintiff became aware that Mr Gunaratnam was making complaints about him directly to head office in Chicago. 20 On 27 June 2006 Ms Mansoor wrote to EBUSA'a General Counsel, Bill Bowe, and to Mr Anderson in the following terms: I have decided in the past few days that we probably need to let David Campbell go. He is not a bad guy, but we discovered some inaccurate reporting that covered up slow sales and also recently discovered that 8-10 months after we cancelled all credit cards (5 years ago) a new cards (sic) was re-issued in AU and soon after a card to James buckle was issued. The financial guy got a verbal instruction and was told that I approved it (which I never did). Putting all the small issues aside – I just do not think that his performance in the past few years was good enough and he is not the managing director we should have in AU. I asked for a copy of his agreement and I am concerned to discover the amazing compensation package (can it be 9 months?) in case of redundancy. I can understand a 3 months notice but the rest looks a bit excessive. Do you have a copy of his file as well as it was done before my time. I do not wish to turn it into firing for cause although if needed, we can find something. I want it to be done peacefully but paying 9 months salary is a bit outrages ( sic ). What do you think? … In the meantime, I need to focus on David Campbell issues and the possible scenarios. Please note that his current salary is higher (it was approved by us) and the superannuation he gets is 12.5% not 10% (once again, an earlier agreements he got and sent me in the past emails proof). I would like to focus on the termination issues. I intend to fly there in July and make the notice at the same day (obviously giving him few months but not 9 if I can avoid it). 21 On 28 June 2006 Mr Gunaratnam wrote by email to Ms Mansoor and Mr Anderson claiming that the plaintiff had advised him that the Amex card had been approved. He made a series of claims about the plaintiff in most derogatory terms including a suggestion that the plaintiff was "a waste of space". This, as I said, was not brought to the plaintiff's attention. There were far more florid claims which do not bear repeating. Mr Gunaratnam was not called to give evidence. 22 Towards the end of July 2006 Ms Mansoor telephoned the plaintiff and advised him that she was coming to Australia and that she had "some urgent business" to discuss with him and Mr Buckle. On 29 July 2006 the plaintiff wrote to Ms Mansoor in terms that included the following: I have been round long enough to be concerned about the repercussions of your visit next week – especially in the light of your comments on the phone this morning. There is obviously something major in process involving either the restructuring of the AU office or the termination of my employment with EB – or both. Given our close working relationship, I would like to think that you would have advised me if my performance was in question – but I have received no comments or warning in this regard. Nevertheless, I am getting the feeling that my position may be in jeopardy. I hope that I am wrong about this feeling. Since being appointed to the position of MD, the Sydney office has produced good bottom line profits and cashflow for EB. In this year alone we have remitted over US$1 million to Chicago. Last year a similar amount was sent to the US. In the six years that I have been running the Sydney office there have been very few, if any, major issues or problems that have taken significant time or resources of US based management. The office runs quite smoothly despite the fact that our internal resources are very limited. The only significant exception to this was the run-in that I had with Kingsley last year. I outlined details of this in a memo to you and Dick in November (copy attached). The issues raised in this memo have never been addressed by Chicago and still stand today. When I met with Dick in November he said that he would come to Sydney in January to look into this matter. He has changed dates for his visit 4 times before finally arriving in Sydney yesterday. I am aware that Kingsley has been working behind my back to undermine me, but I felt that my performance over the years, and my position at EBA, would stand for something. I hope that Kingsley's underhand comments are not being accepted at face value. In addition to my management role, I have generated millions of dollars for EB in the 7+ years that I have been with the company. I have built a good sales network in Asia and will generate significant revenue in the future. Unless there is a rock solid reason, you don't generally get rid of your top revenue earners. Not only will many current projects not be finalised, resulting in a short-term fall in revenue, but the cost to EBA to terminate my employment will be significant. And then you have to find someone else to do this work. It doesn't make financial sense. There are better ways to cut costs at EBA – if that is your aim. I hope that I am wrong with my concerns and we will look back on this email in the future years and smile. But I have been a loyal employee to EB, and to you personally, and I think that I deserve some explanation as to what is going on. We know each other well enough to speak frankly. I look forward to hearing back from you before your arrival on Wednesday. 23 On 29 June 2006 Mr Anderson wrote to Ms Mansoor and Mr Bowe in terms that included the following: For your information, this contract was organized during the B.com days when there was little concern for contractual commitments. If my memory is correct, we had a similar situation in the UK…the General Manager worked 3 months and received a year's severance based on a contract given to him without much concern for the business. At one time, I counted 36 people in the Chicago office that were allowed to sign contracts. Having a terminated manager (Scott Neilson) hand out contractual commitments is not likely to happen today. We will honor the contract as noted, and the contract supersedes any statutory rules. I assume you would not want him to participate in the next 3 months of business, although if there is a hand off in the office for files, customer contacts and matters in process, we can certainly expect him to do so over the 10 days following your visit. We do not pay pension contributions on payment in lieu of notice (first 3 months). No pension contribution during the second 3 months are applicable to the final 3 months deposit. James can comment on what we pay for medical & life insurance. Without mention in the contract, it seems we do not have to pay for these. So David and his family are not at risk, we could continue these for a short time by ( sic ) have David pay for it via a payroll deduction. I do not know the details. There may or may not be a discount on months 1-6 if they go tax-free into the pension fund…if we do it as a favor to David, we should share in the benefit in some way. James can likely clear the details. Bill can advise if it is worthwhile having Mark do a short settlement agreement or not. 24 The reference to "Mark" in this email was to Mr Mark Bamford at TressCox in Sydney, solicitors for the defendant. 25 On 30 July 2006 Ms Mansoor wrote to Mr Bowe and Mr Anderson in the following terms: I told David I am coming to AU. Right or wrong he now knows that something bad is about to happen. While it gives him some time to prepare mentally, I would like you to review his message and specifically the part where he refers to his dismissal costs. Obviously, he means the extra six months in his contract unless he has a contract we are unaware of. Please work with Mark in AU and make sure we are prepared for denying the extra costs. I know the basic answer regarding the redundancy clause but I have reason to believe that David will ask for the extra comp. I need to make sure we are covered legally and that we are translating is ( sic ) contract correctly. … I know it add (sic) extra stress to the process (which is already taking a toll at (sic) both me and James) but it must be done. A (sic) least we know now that he has great expectations and it will not be smooth. I asked both Dick and James to back off David's enquiries and I do not plan to answer him. I prefer to do all the talking face-to-face. Termination – 2 August 2006 26 On 2 August 2006 the plaintiff met with Ms Mansoor at her hotel in Sydney. The plaintiff gave the following affidavit evidence: I met Ms Mansoor in the foyer area and immediately she said words to the effect, "EB has recently restructured some of its international operations and we've made some changes in the senior management in the UK, Korea and India. The company has taken the decision to change the management of the Sydney office. Accordingly I am here to terminate your position as MD Asia Pacific and I am also terminating your employment forthwith". I said, "this is obviously a shock would you like to tell me why". She said, "EB has decided it needs a new vision for the Australian operation". 27 Ms Mansoor then handed a letter to the plaintiff which was in the following terms: Aug. 2nd 2006 Draft only Your contract calls for 3 months notice period. To ensure your orderly departure, EBA requires that from today and for the first 2 weeks of your notice period, you undertake the following matter: § Hand over all customer details and contacts; § Report on current activities, including sales, business developments, marketing and administration; and § Answer all questions and attend to transition as directed by EBA. Following the initial two weeks of the remainder of your notice, your service will only be required on call, to answer questions by telephone, or if requested, at EBA's premises. Provided that you continue to comply with your obligations as an employee of EBA. Including as set out above, you will be paid your full entitlements during your notice period. On expiry of your notice period you must maintain in confidence and not use for any purposes, all information on confidential nature of which you became aware during your employment, including EBA's customer lists, EBA's business and trade secrets. For the avoidance of doubt, your position is not being made redundant. At the end of your notice period, you will be entitled to the statutory long term service and vacation pay. 28 The plaintiff's affidavit evidence of the conversation at this meeting also included the following: Ms Mansoor then said, "James Buckle is aware that I'm taking this action. He will be taking on the role of acting MD". I said, "Leah, obviously I am quite shocked by this. All the feedback I've had is that I am doing a really good job not just here but in my sales role in the Asian markets. As you know we are on track to meet all our targets. No one has ever said to me that EB is looking for a new vision. I take it that the termination is not based on any suggestion of misconduct or poor performance". She said "no, we have sought advice from our lawyers as to your entitlements and that advice is that you will get three (3) months notice". I said, "I intend to seek my own advice about that". I went on to say, "Leah, I don't believe it is fair or ethical to summarily terminate a long-term employee because of a so called change of vision. There must be some reason for this. Can you at least tell me off the record what that reason is". She replied "As I've said, there is no ulterior motive and I want you to know, this is not a cost cutting measure and you are not being made redundant". I went on to say "That isn't really much comfort to me. There is no one at EB that knows the Asian markets as well as I do. Asia is extremely important to EB. I hope you bear that in mind and perhaps if you want a new vision for the Australian office part of that should be promoting sales in Asia". She said, "I would be interested in that. Would you like to put that proposal in writing." 29 Ms Mansoor accepted that most of what the plaintiff said in his affidavit about this meeting was correct although she claimed it was not her "exact wording". She claimed that she advised the plaintiff that head office did not believe he was performing as well as expected. Staff Meeting – 3 August 2006 30 On 3 August 2001 the plaintiff provided a proposal in writing to Ms Mansoor suggesting that he take up a role as Director of Sales in Asia. Ms Mansoor advised the plaintiff that his emails and files would be frozen and also advised him that she had called a staff meeting to make a formal announcement about the change in his position. Ms Mansoor's evidence in relation to that meeting was that she said to the staff: You are probably wondering why I am here. I am in Sydney to undertake a restructuring of the office. Chicago has taken a decision to put more resources into developing our Asian business. I have had discussions with David Campbell and it has been agreed with him that he will step down as Managing Director. EB and David agree that it is not practical for one person to hold both Managing Director and Asia business development position, therefore, James Buckle will assume the role as Acting Managing Director and EB and David are discussing his future possible role focusing on Asia. 31 The plaintiff's version of what was said by Ms Mansoor at the staff meeting was slightly different and included that Ms Mansoor said that "these changes are consistent with other changes which have been made in EB offices worldwide". 32 After the staff meeting Ms Mansoor advised the plaintiff that she had formed a view that any further discussions about his future role should be left to their respective lawyers. Although the plaintiff tried to engage Ms Mansoor in further discussion about a prospective role for him with the defendant she suggested that it would be better if he left the office and went home. He was then escorted off the premises. The plaintiff subsequently provided some assistance to Mr Buckle by meeting with him and answering questions about the business. Proceedings commenced 33 The plaintiff commenced these proceedings on 3 November 2006. The matter was heard on 3, 4 and 5 November 2008 at which time Mr AJ McInerney, of counsel, appeared for the plaintiff and Ms PM Sibtain, of counsel, appeared for the defendant. Construction of the contract 34 The contract of employment in relation to the plaintiff's role as Business Development Manager made provision for two methods of termination. The first was termination without notice in the event of misconduct by the plaintiff. The second was a mutual right of termination by giving one month's notice. When the plaintiff was appointed as Director of Sales – Asia Pacific those same provisions formed part of his contract of employment in that role. The letter of 13 March 2000 appointing him referred specifically to that letter being "an addendum to your original letter of employment". A further term agreed orally and recorded in the file note was that the provision in relation to the second method of termination was amended to increase the period of notice from one month to three months. 35 The letter appointing the plaintiff to the position of General Manager/Managing Director, effective from 22 May 2000, made no reference to the previous letters or to his job description or KPIs nor did it fix the remuneration to be paid to the plaintiff for that role. Rather the letter stated that discussions were to occur regarding the plaintiff's remuneration with Mr Davis the then Senior Vice President Marketing & International based in Chicago, Ms Mansoor's predecessor. The letter also made no reference to the plaintiff's appointments as a director and secretary of the defendant and Britannica Asia Pacific Pty Limited. 36 The defendant submitted that the notice provisions in the letters in relation to the plaintiff's employment as Director Sales–Asia Pacific applied to the plaintiff's appointment as General Manager/Managing Director. At the time the plaintiff was appointed as General Manager/Managing Director, the parties did not set out in detail the terms and conditions of the plaintiff's role as General Manager/Managing Director. 37 The question for determination is whether the contract of employment in relation to the plaintiff's appointment as General Manager/Managing Director included a term that either party could terminate the contract without cause on three month's notice. When the plaintiff was appointed as Director–Sales Asia Pacific, the parties' intentions in relation to termination of the contract were made clear. They agreed that the terms of that employment would be additional (by way of "addendum") to the terms set out in the letter of 5 June 1999 appointing the plaintiff as Business Development Manager. However no such provision was included in the letter in relation to the plaintiff's employment as General Manager/Managing Director. Ms Sibtain relied upon the very "broad" provisions of the original contract in relation to variation to submit that the letter appointing the plaintiff as General Manager/Managing Director, was a variation to the original letter. Those provisions were: Britannica reserves the right to alter the terms and conditions of employment as deemed necessary by the Managing Director. Any variation will be advised, in writing, one month prior to the change becoming effective. 38 This was not a variation to the contract of employment as Director-Sales Asia Pacific. Had the parties intended to make the plaintiff's employment as General Manager/Managing Director subject to the same termination provisions as his employment as Director-Sales Asia Pacific, all that was needed was the provision that had been included in the letter just two months earlier making it an addendum to the earlier letter. They did not do so and it seems to me that was because they intended that the plaintiff would have a more generous arrangement under his contract as General Manager/Managing Director particularly in respect of any termination of his employment. The contract was silent as to termination other than termination by way of redundancy. In the absence of an express term it is appropriate to imply a term into the contract that the defendant would give reasonable notice of termination except in circumstances justifying summary dismissal: Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 429. 39 The next step is to determine what was reasonable notice in the circumstances of this case. The plaintiff relied upon a number of cases in support of the submission that a reasonable period of notice in the circumstances of this case would be in the range of 6 to 12 months: Savage v British India Steam Navigation Co (1930) 46 TLR 294; Quinn v Jack Chia (Australia) Ltd [1992] 1 VR 567; Rankin v Marine Power International Pty Ltd (2001) 107 IR 117; Dyer v Peverill (1979) 2 NTR 1; Caulfield v Broken Hill City Council (1995) 60 IR 221; and Hem v Cant (2007) 159 IR 113. Although some of these cases have some similarities to the facts of this case, the question of what is reasonable notice will depend upon the facts of the particular case. 40 Ms Sibtain submitted that if I were to imply a term as to reasonable notice, then a period of three months is appropriate. In support of this submission Ms Sibtain relied upon the provision in the contract requiring three month's notice in relation to redundancy. It is true that the provisions in relation to redundancy refer to three month's notice, however the package provides for the equivalent of nine months salary. 41 The plaintiff stepped into the breach when Mr Neilson left the defendant in 2000. The plaintiff's role as General Manager/Managing Director had the added burden of having to perform the role of Director-Sales Asia Pacific at the same time. The plaintiff's role was extremely important. His obligations and duties outlined earlier were pivotal to the successful operation of the defendant in Australia and the Asia/Pacific region. The provisions of the contract provide some guidance as to what may be reasonable because the parties considered that a package equivalent to nine months salary was reasonable for termination on a redundancy basis. Taking all these matter into account I am satisfied that reasonable notice in the circumstances of this case is nine months. 42 I have reached the conclusion below that the defendant made the plaintiff's position redundant and in those circumstances the plaintiff is entitled to the additional 6 months of the package contained in his contract dated 16 May 2000. However if that is wrong the plaintiff is entitled to succeed on this aspect of his case. The defendant failed to provide nine months notice and only paid the plaintiff the equivalent of three month's notice. The plaintiff is entitled to damages in the amount of the difference between what he was paid and what he would have been paid if the defendant had complied with the terms of its contract with the plaintiff. Redundancy 43 Mr McInerney did not cross-examine Ms Mansoor and Ms Sibtain submitted that in those circumstances the plaintiff is unable to challenge her claim that the plaintiff was terminated for under-performance. Mr McInerney's submissions do not challenge Ms Mansoor's evidence that she was of the view that the plaintiff was under-performing and thus it was not essential that he cross-examine her on this matter. Rather Mr McInerney submitted that whatever may have been Ms Mansoor's views about the plaintiff's performance, or lack thereof, the fact is that the plaintiff's role was made redundant. It was submitted that the dual position that the plaintiff held was made redundant in that the obligations and duties were redistributed so that the position that he held no longer existed. Mr Buckle became the Acting General Manager/Managing Director as an employee of the defendant. However the plaintiff's role as Director–Sales Asia Pacific was changed so that the responsibilities for China and Taiwan were removed. Mr Frank Feng, an employee of EBUSA, took on this new role. 44 The plaintiff submitted that the true position was as stated by Ms Mansoor to the plaintiff on 2 August 2006, that is, that there had been a decision made to restructure the Australian office and proceed with a "new vision". 45 The plaintiff relied upon the following passage from R v Industrial Commission (SA); Ex parte Adelaide Milk Supply Co-operative Ltd (1977) 16 SASR 6 at 8 in support of his submission that his termination was a redundancy: …a job becomes redundant when the employer no longer desires to have it performed by anyone. A dismissal for redundancy seems to be a dismissal, not on account of any personal act or default of the employee dismissed or any consideration peculiar to him, but because the employer no longer wishes the job the employee has been doing to be done by anyone. 46 The plaintiff also relied upon the following passage of Ryan J's judgment in Jones v Department of Energy and Minerals (1995) 60 IR 304 at 308: However, it is within the employer's prerogative to rearrange the organisation structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly–created positions. It is inappropriate now to attempt an exhaustive description of the methods by which a reorganisation of that kind may be achieved. One illustration of it occurs where the duties of a single, full-time, employee are redistributed to several part-time employees. What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organisation, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Milk Co-Operative case. 47 Ms Sibtain submitted that it is important to determine whether the restructure came first causing the termination in which case, she submitted, there would be a redundancy, or whether the dismissal or removal of the plaintiff came first causing the reallocation of the plaintiff's duties in which case, she submitted, there would be no redundancy. Ms Sibtain submitted that what motivated the restructure was the termination of the plaintiff for under performance. It was submitted that the evidence establishes that as from 27 June 2006 the head office in Chicago formed the view that the plaintiff was not performing his obligations in a way that satisfied head office and in those circumstances it was decided to let him go, as Ms Mansoor put it. On balance I am satisfied that although the plaintiff was obviously motivated to remove the plaintiff from his position what it did was to make the position that he held redundant. 48 Ms Mansoor advised the staff on 3 August 2006 that it had been decided that it was "not practical for one person to hold both" positions that the plaintiff held. That meant that the plaintiff's "dual" role was no longer to be performed by anyone and thus, it seems to me, that particular position was made redundant. The plaintiff's obligations were broken up and two positions were created, the Managing Director position and the Director-Sales position, with the latter position being broken up even further. The plaintiff is entitled to the balance of the redundancy package. 49 The plaintiff made an alternative claim of constructive dismissal that in the circumstances, is unnecessary to decide. The parties are to bring in short minutes of order together with an agreed costs order. The matter is listed at 9.15 on 14 November 2008 for the filing of those short minutes and any costs argument if the parties are unable to otherwise agree. *********************** 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.