Hughes v Loy Yang Power Management Pty Ltd [2010] FMCA 81 (26 February 2010)

Last Updated: 1 March 2010

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HUGHES v LOY YANG POWER MANAGEMENT PTY LTD

[2010] FMCA 81

INDUSTRIAL LAW – Application for unlawful termination of employment – Australian Human Rights Commission complaint – both matters allegedly resolved by settlement – arguments about tax of settlement sum – abuse of process alleged.

Workplace Relations Act 1996, s.824 Federal Magistrates Act 1999, s.14 Income Tax Assessment Act 1997, s.82-130 (1)

Sea Culture International Pty Ltd v Scoles [1991] FCA 523; (1991) 32 FCR 275 Dibb v Commissioner of Taxation [2004] FCAFC 126; (2004) 136 FCR 388 Le Grand v Commissioner of Taxation [2002] FCA 1258; (2004) 124 FCR 53 McLaurin v Federal Commissioner of Taxation [1961] HCA 9; (1961) 104 CLR 381 Advanced Prosthetics Centre Pty Ltd v Appliance & Limb Centre (International) Pty Ltd [2002] NSWSC 515; (2002) 53 ATR 331 Fosters Group Ltd v Wing [2005] VSCA 322; (2005) 148 IR 224 Pioneer Plastic Containers Ltd v Commissioners of Customs & Excise [1967] Ch 597

Applicant:

GARRY HUGHES

Respondent:

LOY YANG POWER MANAGEMENT PTY LTD

File Number:

MLG 918 of 2008

Judgment of:

Burchardt FM

Hearing date:

22 January 2010

Date of Last Submission:

1 February 2010

Delivered at:

Melbourne

Delivered on:

26 February 2010

REPRESENTATION

Counsel for the Applicant:

Mr M. Champion

Solicitors for the Applicant:

Holding Redlich

Counsel for the Respondent:

Mr M. Follett

Solicitors for the Respondent:

Freehills

ORDERS

(1) The Respondent pay the Applicant $16,292.00.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE

MLG 918 of 2008

GARRY HUGHES

Applicant

And

LOY YANG POWER MANAGEMENT PTY LTD

Respondent

REASONS FOR JUDGMENT

Introductory

1. The issue before the Court, looked at superficially, is whether the respondent was correct to deduct $44,305 from the $200,000 it agreed to pay the applicant, Mr Hughes, by way of settlement of various claims Mr Hughes brought against the respondent.
2. The respondent says it was correct to make these deductions and was indeed obliged to do so by the relevant tax legislation. The applicant says this was not the case, and that no tax should have been deducted or alternatively, a reduced sum because he was redundant.
3. For the reasons that follow, I think that tax should have been deducted, but not in the sum that the respondent actually did so. Tax should have been deducted on the basis that Mr Hughes was redundant.

The Background Facts

4. Mr Hughes was a very long standing employee of Loy Yang Power Management Pty Ltd (“Loy Yang”) and its predecessor entities. By 2007, he had been the production scheduler within the mine planning group of Loy Yang for over three years, according to his statement annexed to a complaint made to the Australian Human Rights Commission (“AHRC”).
5. In a letter sent to Mr Hughes by Loy Yang dated 15 April 2008, it was asserted that Mr Hughes had been off work since 30 July 2007, and had been sending medical certificates all the way through to April 2008 indicating that he was unable to attend work. A number of other assertions were made which are relevant to the redundancy issue to which I have already referred. I will return to them later. It should be noted that there is no disagreement, as I understand it, that Mr Hughes did not work after about July 2007 in the sense of actually attending and performing any duties.
6. On 28 April 2008, the respondent wrote to the applicant dismissing him forthwith. The letter, nonetheless, notified Mr Hughes that he would be provided with six months’ payment in lieu of notice, and that that pay would be treated as a redundancy payment.
7. Thereafter, on 28 July 2008, Mr Hughes lodged a claim of unlawful termination of employment, together with an application under the Workplace Relations Act 1996 (“WR Act”), in this Court.
8. Those applications were followed by a notice of appearance filed by Messrs Freehills on behalf of the respondent. Freehills have continued to represent the respondent, just as Holding Redlich have continued to represent the applicant throughout.
9. On 7 November 2008, the Court made a number of interim orders including an order for mediation, and on 4 February 2009 the matter was fixed for trial for ten days in September 2009.
10. For reasons to which I now turn, that ten day hearing did not proceed because, by then, the parties thought they had negotiated a settlement.

The Negotiations for a Settlement

11. As long ago as 15 April 2009, the parties thought that they had settled the proceeding. Exhibit AW2 to Mr Wood’s first affidavit shows that Freehills, at least, thought that matters had been resolved. The letter from Mr Wood to Ms Knowles of Holding Redlich relevantly read,
    “In addition, we enclose a cheque for the payment of $200,000.00 (less appropriate taxation deductions as required by law) in accordance with the agreement reached between the parties.”
12. It should be noted that the sum so deducted was, in fact, tax on a progressive basis reflecting marginal rates from zero to $200,000. It has subsequently been conceded that that was erroneous.
13. Thus, it was apparent from the inception of the settlement documentation that tax was an issue.
14. By 1 May 2009, Messrs Holding Redlich replied (exhibit AW4). That letter took issue with the deduction of tax, and asserted that “the whole of the $200,000 should not be subject to tax.”
15. The Holding Redlich letter also took issue with the terms of the very comprehensive draft deed of release prepared by Freehills, and that led to a shortened version later on. Holding Redlich referred their own proposed deed with their 1 May 2009 letter.
16. It should be noted that the draft version of the deed of release sent by Messrs Holding Redlich on 1 May 2009 provided, nonetheless, at paragraph 1.1(a) that the respondent would “Pay to the Employee, $200,000, less appropriate deductions required by law.”
17. By 7 May 2009, Freehills wrote back (exhibit AW-5) and asserted, relevantly, that “the Settlement Sum should be taxed as an eligible termination payment rather than characterised as damages in relation to loss of opportunity and for disappointment and distress.”
18. By early June 2009, Freehills was seeking that Mr Hughes execute the deed of settlement, and Ms Knowles was asserting that a cheque for $200,000 should still be sent (exhibits AW-7 and 8). Ms Knowles raised an issue about the payment being made over a year after the dismissal, which has since proved irrelevant.
19. Further discussion about the accuracy of each party’s taxation advice continued, but to no ultimate avail. On 31 July 2009, Holding Redlich wrote to Mr Wood again stating, relevantly, that “We are instructed to confirm that our client accepts the amended deed as attached to your letter of 7 May 2009,” but went on, nonetheless, to reiterate the dispute about the deduction of tax and threatening court proceedings to enforce the settlement (AW-12).
20. By letter dated 6 August 2009, Mr Wood wrote to Ms Knowles indicating that a cheque would be sent to Mr Hughes for “the Settlement Sum, less appropriate taxation deductions as required by law, following receipt of an executed copy of the deed”. The letter went on to say that Freehills still considered that their client was legally obliged to treat the sum as an eligible termination payment and would withhold the tax accordingly. The letter went on to point out that Mr Hughes was free to make whatever representations he so chose to the Australian Taxation Office (“ATO”) to determine the true taxation position (AW-13).
21. Mr Hughes banked the cheque and on 30 September 2009 Holding Redlich wrote to Mr Wood confirming that Mr Hughes accepted the cheque in part settlement of his claim and demanded the balance.
22. It appears that the AHRC claim was closed without any active opposition of the parties on 24 November 2009.
23. No formal action has been taken by Mr Hughes, however, to cease his claim either in the AHRC or in this Court.

The Applications Presently Before the Court

24. An application and supporting affidavit were filed by Holding Redlich just before Christmas 2009, but both were overtaken by documents filed on 15 January 2010. By his amended application filed on
    15 January 2010, Mr Hughes seeks that Loy Yang pay him the balance of the $200,000 or alternatively, a lesser sum calculated as if the payment of $200,000 were to be treated as a redundancy payment, together with ancillary orders. Ms Knowles’ affidavit, filed the same date, supports the application.
25. The respondent filed an application in a case on 8 December 2009 seeking, in effect, that the applicant cease his proceeding in this Court. The two affidavits of Mr Wood support that application.

The Position as Articulated in Argument

26. Both sides agree that the essential issue before the Court is the extent to which Loy Yang correctly complied with the deed in withholding tax as it did. It is true that there is a further issue as to whether or not
    Mr Hughes has complied with his obligations under the deed by failing to dispose completely of his application in this Court and, possibly arguably, before the AHRC. That issue, however, is wholly ancillary to the primary dispute and in substance, both parties agree that it would follow the event.

Jurisdiction

27. Both parties have submitted that the Court has power to entertain the competing applications before it, notwithstanding that both parties say that there is in place a deed which would, on its face, appear to prevent any further litigation. I have had careful regard to the authorities referred to in both the written submissions and oral submissions of the parties. I think that the parties are correct to submit that the Court has jurisdiction to entertain this controversy. Putting the matter at its lowest, the fact is that the claim for unlawful termination of employment and application filed by Mr Hughes has never been determined by judicial order. The claim is, in that sense, extant before the Court. The Court has power under s.14 of the Federal Magistrates Act 1999 to do what is necessary to give final judgment between the parties, and I note the persuasive authorities quoted by the parties in their written submissions to the effect that the Court has power to determine the controversy about the settlement that the parties purported to enter into.
28. The parties, therefore, agree that the Court should deal with the matter, but their proposals as to how the Court should do so are radically different.

The Respondent’s Proposal

29. The respondent’s primary submission is that the continuation of the proceeding settled by way of the deed was an abuse of process. It was submitted that the questions associated with the settlement sum should be determined elsewhere as between the applicant and the ATO.
30. It was also submitted that a separate question arose as to the exercise of the Court’s power to enforce the deed, notwithstanding that it was conceded that, subject to the abuse of process issue, it had jurisdiction to do so. It was submitted:
    • “In any case such as the present, the Court must be satisfied that it is appropriate to determine the Applications for judgment on the Deed, as opposed to having those matters heard and determined in separate proceedings. This is a question of discretion.”

(Respondent’s written submissions, paragraph 20).

31. The respondent submitted that the simplest and quickest way for the Court to proceed was to dismiss the matter as an abuse of process and leave enforcement proceedings for another day.
32. The written submissions acknowledged, however, that the alternative way for the Court to proceed was to examine and then determine the question of correct taxation treatment of the settlement sum.
33. Submissions advanced in support of the first alternative are set out at paragraph 22 of the respondent’s written submissions. In particular, emphasis was laid upon the fact that the Court will need to determine factual and legal issues in a summary manner as opposed to on a full hearing with evidence and argument.
34. Nonetheless, it was not submitted that the Court had no power to proceed in this way, rather that the matter was one of discretion.
35. In the event that the Court was to be against the respondent on that argument, the respondent’s written submissions went on to deal in detail with the taxation position attaching to the settlement sum.

The Applicant’s Proposals

36. The applicant’s written submissions put two alternatives (see paragraph 7 of the applicant’s written submissions). The primary position put was that the settlement sum reduced various claims to an inseverable lump sum and that as a matter of fact the Court could not be satisfied that that sum was made in consequence of the termination, and accordingly tax should not have been withheld.
37. In the alternative, it was submitted that excessive tax was withheld because the payment should have been made on the basis of a genuine redundancy.
38. The applicant’s position was clearly one that the matter should proceed to determination by the Court on all relevant issues at the hearing listed. The applicant declined an invitation from the Court to adjourn the matter to enable a private taxation ruling to be sought.

Abuse of Process

39. In my opinion, to approach the issue of abuse of process in the way that the respondent does is inappropriate. Both parties agree that the Court has jurisdiction to entertain the competing applications before it. The amounts of money involved are not enormous, and indeed it is regrettable that both parties have almost certainly expended already far more money than they are presently arguing about. To put the matter off for further argument in another forum on another day, whatever the force or otherwise of the suggestion that it is easy for Mr Hughes to obtain a private taxation ruling, seems to me to be an inappropriate exercise of the Court’s discretion. The Court has a statutory obligation to deal with matters expeditiously and with as little formality as possible. I think I should proceed to deal with the matter.
40. The suggestion that Mr Hughes’ applications constitute an abuse of process, in circumstances where the parties have been arguing about the proper interpretation of the deed of settlement for a long time, including both before and after it was actually executed and on any view, in part complied with, seems to me misconceived.
41. Abuse of process, putting the matter broadly, is not by definition a closed area. As is asserted in the wonderful headnote to Sea Culture International Pty Ltd v Scoles [1991] FCA 523; (1991) 32 FCR 275:
    • “The possible varieties of abuse of process are only limited by human ingenuity and the categories are not closed.”

(Per French J, as his Honour then was).

42. To quote again from the headnote:
    • “Underlying the power the courts have assumed to stay or dismiss proceedings for abuse of process is a policy preventing waste of judicial resources and their use for purposes unrelated to the determination of genuine disputes. There is another relevant to be considered and that is the necessity to maintain confidence in and respect for the authority of the courts.”
43. Here, there is controversy still before the Courts, namely the proper interpretation of the deed, which both parties agree the Court has jurisdiction to determine. To suggest that this should give rise to other proceedings, possibly not even between the same parties, and that that is in some way preferable, seems to me as I have said to be misconceived. It certainly does not constitute an abuse of process and I think that Mr Hughes is perfectly entitled to have his issue determined.

The Exercise of the Court’s Discretion

44. Bearing in mind that the determination of the substantive issue of the interpretation of the deed is not in my view an abuse of process, the question next arises as to whether the Court should indeed embark upon the process of seeking to examine the proper meaning and application of the terms of the deed.
45. It should be noted that while the respondent submitted that it was inappropriate to proceed to deal in a summary way with the evidentiary conflict to which the case gives rise, it was not submitted that this should not on any view occur. The respondent made no application to adjourn the proceeding to enable evidence to be called. Both parties made their submissions on the express understanding that the Court should deal with this matter on the basis of the evidence before it. Most of the relevant evidence is at least arguably hearsay (leaving aside the extent to which some of the documentation might be said to constitute business records or be otherwise admissible). I confirmed with both counsel that there were no objections to the evidence being received as if those persons to whom reference was made by way of hearsay in the affidavits had indeed been called and given the evidence attributed to them.
46. I accept that dealing with evidentiary issues in this fashion is not generally desirable, but given the amounts of money involved the implicit concessions of the parties that this would be a preferable way to proceed are in my view to be applauded.
47. The parties have already wasted inordinate sums on this proceeding. To have a further trial going no doubt for some days (bearing in mind the original ten day estimate and the fact that much of the evidence in that case would seem as a matter of impression to have some potential purchase on this tax issue), is utterly undesirable.
48. Furthermore, to force Mr Hughes to either sue on the compromise, a set of yet further proceedings, or alternatively to sue the ATO, one of the best funded litigators in Australia, is surely not an appropriate way to determine a claim of this size.

The Terms of the Deed

49. This brings us inexorably to consideration of the terms of the deed itself. Only two matters need be noted for present purposes. Having set out under the heading “Background” the history of a truncated version of Mr Hughes’ employment and his various claims at law, at paragraph 6 it was recorded that:
    • “Loy Yang denies it unlawfully terminated or discriminated against Mr Hughes and that it has any liability to Mr Hughes.”

And at paragraph 7 it was noted that:

“The parties have agreed to settle the proceedings and finalise all matters between them arising out of the employment of
Mr Hughes and the termination of Mr Hughes’ employment with Loy Yang on the terms of this deed.”

50. In the operative part of the agreement, under the heading 1.1 “Settlement Sum”, it was provided that:
    • “Loy Yang will pay Mr Hughes $200,000, being the Settlement Sum, less appropriate taxation deductions as required by law, within 14 days of Loy Yang or its solicitors receiving a copy of this deed.”
51. The first thing to be said about this term of the deed is that it plainly contemplated that tax would be withheld and forwarded to the ATO. Nonetheless, that preliminary impression is qualified by the incontrovertible evidence that Holding Redlich were at all material times, both before, during and after the execution of the deed, asserting that no tax should be deducted.
52. Both counsel referred me to extensive authority upon the primary position for which they contended, namely that no tax should be deducted at all (Mr Hughes’ position) and that tax should be deducted as an eligible termination payment (Loy Yang’s position).
53. In my opinion, because there is no material dispute as to the applicability of the relevant case law, I do not propose to set out that case law in detail. From the authorities referred to, including the taxation legislation, the following propositions seem to me to be pertinent:
    1. Eligible termination payments are defined relevantly by
       s.82-130(1) of the Income Tax Assessment Act 1997 as being payments being received by any employee “in consequence of the termination of (their) employment.”
    2. The fact that the settlement sum was paid more than 12 months after the termination of the employment is not pertinent
       (see paragraph 28 respondent’s submissions).
    100. Un-dissected global sums paid to settle legal proceedings which involve claims relating to, or interwoven with, or following on from termination of employment are to be taken to be paid in consequence of the termination of the employment for these purposes (Dibb v Commissioner of Taxation [2004] FCAFC 126; (2004) 136 FCR 388, and Le Grand v Commissioner of Taxation [2002] FCA 1258; (2004) 124 FCR 53).
    4. Portioning payments among several heads according to their income tax consequences becomes even more difficult where none of the claims are liquidated or are readily otherwise ascertainable by calculation (McLaurin v Federal Commissioner of Taxation [1961] HCA 9; (1961) 104 CLR 381 at [391]).
54. Here it should be noted that the parties agree that the settlement sum was a single un-dissected global sum. I note a reference early in the correspondence from Freehills to Holding Redlich that the settlement sum was paid to avoid legal costs and with a denial of liability (exhibit AW-1). Nonetheless, one must also say that even the prospect of a ten day hearing in this Court, to which might be added any additional time spent on the AHRC matter which was not at that stage joined when the ten day estimate was set, might not justify payment of $200,000. After all, costs in the Human Rights matter would have followed the event.
55. I think it is proper for me to say that I am unable to speculate as to the component aspects of the claims made by Mr Hughes. Given his salary of in excess of $135,000 a year, it is not possible to say with any kind of certainty, or in my view even to guess wildly, as to how much of the $200,000 reflected damages for loss of earnings, how much of it might have been referable to damages for hurt and distress (which would be untaxable), and how much would be attributable to costs. I note that Mr Hughes did not seek that a sum be apportioned to costs, as is sometimes the case.
56. Thus, leaving aside the further issue as to whether the payment should have been treated as a redundancy payment, to which I shall return, I am left with a single un-dissected sum.
57. I accept the submission advanced by Mr Hughes that “the issue for decision is whether, as a matter of fact, in a causal sense the payment of the Settlement Sum followed as an effect or result of the termination” (applicant’s written submissions – paragraph 38).
58. In this case, Mr Hughes’ complaints to this Court and to the AHRC followed, according to his account to the AHRC, his removal from the duties he formerly performed. That removal seems to me, more probably than otherwise, to have been directly related to his ill-health and to be directly interwoven with his termination of employment. Following that termination, he issued the two proceedings which the deed purported to compromise, and it should be noted that the deed expressly released the respondent from all claims arising out of the termination of employment including, but not limited to, the two proceedings (deed-clause 2.2). I would respectfully adopt the remarks of Goldberg J in Le Grande at [33] to this effect:
    • “I do not consider that the issue can simply be determined by seeking to identify the “occasion” for the payment. The thrust of the judgments in Reseck and McIntosh is rather to the effect that a payment is made “in consequence” of a particular circumstance when the payment follows on from, and is an effect or result, in a causal sense, of that circumstance.”
59. The judgments to which I have referred earlier (i.e. Dibbs, Le Grand and McLaurin) make this clear. They also make it clear that there need not be identified only one circumstance which gives rise to a payment before it can be said that the payment is made “in consequence” of that circumstance. The authorities to which I have referred make it clear that it can be said that a payment may be made in consequence of a number of circumstances, and that for present purposes it is not necessary that the termination of the employment be the dominant cause of the payment, so long as the payment follows, in the causal sense referred to in those judgments, as an effect or result of the termination.
60. The determination of what I have described as a question of fact
    (a reference taken from the judgment of Bryson J in Advanced Prosthetics Centre Pty Ltd v Appliance & Limb Centre (International) Pty Ltd [2002] NSWSC 515; (2002) 53 ATR 331) must necessarily involve a discrete judgment in each case. In Advanced Prosthetic, Bryson J thought that the terminations of employment, while elements in the chain of facts and events, and necessary elements for the whole series, were “highly attenuated by the causal operation of many intervening events and circumstances. ... their part in the outcome is so distant and attenuated that I do not regard it as a correct conclusion of fact, applying the terms of the definition to the facts, that the payment was made in consequence of the terminations” (Advanced Prosthetic at [63]).
61. Here, I think that the payment of the settlement sum in the deed was made, as a matter of fact, as a consequence of the termination of employment. It should be noted that the facts asserted by Mr Hughes in his AHRC complaint have not been, and never will be, the subject of judicial determination. It is proper to infer, given the denials of liability made at every step by Loy Yang through their lawyers, that Mr Hughes’ assertions are in issue. What is not in issue is that Mr Hughes was dismissed and thereafter brought the two proceedings which were compromised. The payment made to Mr Hughes was designed to compromise those proceedings and any other matters arising out of the termination of employment. The terms of the deed, in my view, suggest, more probably than otherwise, that the payment was indeed made as a consequence of the termination of employment within the meaning expounded in the authorities.
62. Here, following termination, Mr Hughes commenced his legal proceedings promptly and it is clear that the settlement negotiations, likewise, commenced relatively promptly. There is no series of intervening events of the sort identified by Bryson J in Advanced Prosthetics.
63. For these reasons, it follows that the settlement sum was, in my view, required to be the subject of tax deductions according to law. This brings us to the second limb of the argument; whether it should have been taxed as a redundancy payment.

The Redundancy Payment Issue

64. It should be noted, and I repeat, that the primary position adopted by the respondent was that this issue should not, as a matter of discretion, be dealt with for the reasons I have earlier described. But I repeat, it was not the subject of any application by the respondent that the Court hear oral evidence and have that advantage in determining the facts if I were against Loy Yang as to that primary argument. Since I am against Loy Yang as to the primary argument, and have decided as a matter of discretion to embark upon this investigation, it follows that I have to do the best I can with the evidence as it stands.
65. Here, the first evidence to which the parties take me is the correspondence of the parties before and at the time of the termination of employment. Various doctors’ reports have been exhibited at AW-27 to AW-29. They show that Mr Hughes was referred to various doctors, but that their reports proved, in a sense, incomplete for the reasons that the correspondence discloses. Following that correspondence, Loy Yang wrote to Mr Hughes on 15 April 2008 (AW-30). That letter asserts relevantly, by way of background, that “In August/September 2007, Loy Yang offered you three alternative roles at the same level as a Planning Engineer which you did not accept.” And “You were therefore directed to perform the role of Civil Engineer by our letter dated 6 September 2007.”
66. Having complained of what was described as Mr Hughes’ failure to
    co-operate properly with the medical investigative process, the letter went on to say, relevantly, “In light of this, Loy Yang is of the reasonable view that you are unable to perform the inherent requirements of your position.” The letter went on to state that:
    • “As stated above, on the basis of available medical evidence it is clear that you are incapable of performing the Civil role. Further, we have made reasonable investigations and there is no other suitable role available for you.
      • In these circumstances, Loy Yang will confer upon you a termination payment equivalent to that you would receive upon being made redundant. In other words, instead of a 3 month termination payment under clause 20 of your Executive Employment Agreement, Loy Yang will provide termination benefits to you pursuant to the redundancy benefits in your Executive Employment Agreement.”
67. Loy Yang did indeed pay Mr Hughes a payment of six months’ salary taxed as a redundancy payment. Both parties agree that, were the applicant to be successful in persuading the Court that his settlement sum should have been taxed as a redundancy payment, a further $16,292 should be paid to him.
68. I have already referred to the statement of Mr Hughes, untested as it is, to the effect that he was removed from his former position in July 2007 and replaced by a younger man. That statement also confirms that on
    6 September 2007, Mr Hughes was required to perform the role of civil engineer (see paragraph 27 of Mr Hughes’ complaint). He rejected that proposal because, according to him, it was unsuitable. He also took issue (see paragraph 29) with the proposition that the general manager of human resources at Loy Yang had discussed a number of alternative roles with him.
69. In Mr Wood’s second affidavit, filed on 22 January 2010, it is asserted (on the hearsay basis to which I have referred and to which no objection is taken) that:
    • “Paragraph 11. I am informed by Mr Ryan that on the basis of the information in Dr Wallin’s Report, Mr Ryan on behalf of the Respondent determined that the Applicant could not perform the inherent requirements of his position.
      • Paragraph 14. On the basis of the Applicant’s significant medical absence, Dr Wallin’s Report regarding the Applicant’s ability to perform the inherent requirements of his role and his unwillingness to be further medically assessed, Mr Ryan decided to terminate the Applicant’s employment.
      • Paragraph 16. I am informed by Mr Ryan that the termination payment given to the Applicant was not paid to him because he was being made redundant, but rather paid to him as if he were being made redundant. The amount beyond the 3 month payment required under clause 20 of the Applicant’s contract of employment ... was paid as a gesture of goodwill, in recognition of the Applicant’s significant period of service.”
70. The respondent now adopts the position that the moneys paid ex gratia to Mr Hughes on the basis that they were paid as if they were a redundancy payment should not have been so paid, and the respondent according to it is in the process of seeking to regularise that matter with the ATO. As I observed in passing, that is a matter for Loy Yang, but I do not see that it imposes any obligations on Mr Hughes.
71. The evidence, such as it is, is scarcely compelling. After all, all
    Mr Ryan has told Mr Wood is that “the termination payment given to the Applicant was not paid to him because he was being made redundant, but rather paid to him as if he were being made redundant.” It may be an overparticular criticism on my part, but that statement does not go so far as to express any view as to whether Mr Hughes was or not, in fact, redundant and indeed, the employer’s state of mind would not be binding in any event.
72. Further, it must be said that the materials put in by the applicant himself in his AHRC complaint, and the materials in the correspondence generally, do not tend to suggest prima facie that
    Mr Hughes was redundant. Rather, they suggest that he might have been removed from one job and offered another job, or jobs, which he either was not prepared to do, or for which he was deemed not to be suitable.
73. There is, however, one further piece of evidence which, amidst this miasma of uncertainty, seems to me to be conclusive. A copy was provided to the Court as part of the applicant’s materials without objection. On or about 23 May 2008, Freehills filed a form 28 notice of employer’s appearance in the Australian Industrial Relations Commission. The appearance is dated that date. It was confirmed, under paragraph 9, that somebody was representing the employer, and the details of Messrs Freehills and the relevant lawyers followed in succeeding paragraphs.
74. Item 13 in this document states as follows:
    • “In summary form specify the facts on which the respondent relies and admit or dispute, either with or without qualification, each part of the claim made by the applicant.”
75. I would interpolate here, before coming to the materials set out in response, that Freehills is (and I am entitled to take judicial notice of this) a large national firm with an outstanding expertise in industrial and employment matters. It is also a reputable firm which would not act without instructions.
76. The response put in by Freehills was as follows:
    • “The Respondent terminated Mr Hughes on 28 April 2008 on the basis of medical evidence that was available to it at that time. The Respondent had reasonably formed the opinion that
      Mr Hughes was unable to perform the inherent requirements of his position with it (and further that there were no suitable alternative roles available to him).
      • Further, as the Respondent no longer required Mr Hughes’ role to be performed by any employee of the respondent, Mr Hughes’ role was made redundant.” (Emphasis added).
77. I accept, of course, that what an employer says is not binding upon the Court, and I also accept that there may be cases where, for one reason or another, what the employer said need not be accepted. An example is Fosters Group Ltd v Wing [2005] VSCA 322; (2005) 148 IR 224, where the employer deliberately misrepresented to the employee the reasons why he was being dismissed.
78. In this case, there was no intention in filing the notice of appearance to mislead Mr Hughes. The parties were already locked in litigation and there was no benefit to dissimulation, unlike the position found by the Victorian Court of Appeal in Wing.
79. While the Australian Industrial Relations Commission does not operate on the basis of pleadings in any strict sense, the notice of appearance document filed by Freehills in the unlawful termination case in the Industrial Commission was plainly a document that served a function akin to a pleading. In relation to pleadings, it has been held that “An admission of a fact alleged in the pleading of the opposite party operates to remove the fact from the area of controversy.” (Pioneer Plastic Containers Ltd v Commissioners of Customs & Excise [1967] Ch 597).
80. I have not been provided with the application to the Industrial Relations Commission, and obviously in technical terms the notice of appearance was not a pleading. Nonetheless, in circumstances where the evidence is otherwise far from decisive, a formal assertion made by lawyers acting on behalf of the respondent is obviously extremely persuasive.
81. This is even more so where the terms of the appearance that are relevant, namely:
    • “Further, as the respondent no longer required Mr Hughes’ role to be employed by any employee of the respondent, Mr Hughes’ role was made redundant.”

are so clearly aligned with the definition of redundancy for which the employer contends.

82. At paragraph 37 of the respondent’s written submissions it was stated:
    • “Redundancy” takes on its common law meaning, where the position/job the employee was filling/performing no longer exists or becomes superfluous to the needs of the employer.”
83. I do not know, and the parties do not propose to seek to tell me, precisely why Freehills filed the notice of appearance that they did. The passage to which I have drawn particular attention is an addition which does not find any obvious ground in the other materials put forward either by Mr Hughes or Loy Yang. It was, however, plainly not a frolic of Freehills’ own.
84. In the circumstances, I see no reason not to accept the factual assertion set out in the notice of appearance as being truthful, and it follows that Mr Hughes was redundant and should have the relief that he seeks to the tune of $16,292.

Were the Parties ad idem and Did They Conclude a Contract?

85. I raised with the parties during the currency of the hearing the rather dreadful prospect that the parties in fact were never ad idem and therefore did not conclude a contract, so that the claims were still at large. It is not an attractive outcome in the context of the case as a whole given the overall size of the controversy and the small amount of money presently in dispute.
86. It is trite law that a contract must be sufficiently certain, at least in the essentials, to be enforceable. If not sufficiently certain, it is said to be void unless the uncertain part can be severed, leaving the rest of the agreement intact (Cheshire and Fifoot’s Law of Contract, eighth Australian edition at paragraph 6.1).
87. The learned authors go on to say at 6.2, that “At least the parties to the contract, the principal undertakings, the subject matter and the price must be certain”. Here, the parties were certain. Almost all the terms of the agreement were certain. The price, however, was not certain. In one sense, it is still not certain.
88. The findings I have made do not bind the ATO. They may still levy tax on Mr Hughes and/or Loy Yang, thus distorting the outcomes of the case as I impose them.
89. In a deal where one party gets money for giving up causes of action, which is what happened here, the parties might well be thought to have had two essential components to the contract. One was the money paid, and the other was the release.
90. The parties entered into this agreement knowing full well that they did not agree about the price to be paid. It is a very moot point as to whether they entered into a binding agreement.
91. I think that the better view is that parties who sign off on a deed, and even where they act in accordance, at least in part, with the deed, in circumstances where they know they are not agreed about an absolutely fundamental issue, are not in fact entering into a binding contract.
92. Nonetheless, both parties have filed written submissions in which they strongly contend that a binding contract was achieved. This being so, the issue is not in dispute before me and it is not necessary for me to determine it. Not without hesitation because of the matters I have set out above, I will proceed on the footing adopted by both parties, namely that there was and is a binding contract.

Costs

93. Both sides have indicated, expressly or implicitly, a desire to be heard on the question of costs. I will certainly hear the parties on the question of costs should they so wish, but I would invite all parties to bear in mind the concessions apparently made thus far as to the applicability of s.824 of the WR Act before they embark on spending yet more money in a proceeding which has already cost more than it is worth.

Conclusion

94. In these circumstances, I think I should simply order the respondent to pay the applicant $16,292.
95. I will hear from the parties as to whether any other orders should be made.

I certify that the preceding ninety-five (95) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate: Ms B. Evans

Date: 26 February 2010