Canavan v Shred-X Pty Ltd[2023] QDC 37

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   The defendants apply, pursuant to r 171(1)(a) of the UCPR, to strike out paragraphs 17 to 21 inclusive, and the associated paragraph of the prayer for relief, in the Statement of Claim (“SOC”) filed on 17 August 2021. The application is opposed.

Background

2. [2]
   In essence, the proceedings arise out of the termination of the plaintiff’s employment by the first defendant. The second defendant is the general manager of the first defendant. The extent of his control of the first defendant is in dispute.
3. [3]
   The plaintiff’s claim seeks various declarations for contraventions of the Fair Work Act 2009 (Cth) (“FW Act”), orders for pecuniary penalties under the FW Act, orders for compensation under the FW Act and, relevantly, damages for breach of contract.
4. [4]
   The plaintiff was employed by the first defendant in 2019 or 2020 in a particular capacity, but entered into a written contract of employment with the first defendant for an upgraded position on 12 February 2021. His employment was terminated by written notice on 5 July 2022. The plaintiff was entitled to a minimum period of three weeks’ notice pursuant to s 117 of the FW Act, or payment of the equivalent wages for that period. As the termination was expressed to be effective immediately, he received a payment as a consequence of the termination, the details of which are of no moment for the purposes of this application.
5. [5]
   As an issue in the application is said to be the construction of part of the contract of employment, reference should be made to some of its provisions.
6. [6]
   Clauses 16.1 and 16.2 of the contract provided:

3. “16.1
   … the Employment may be terminated by either Party on the giving of the minimum notice period determined on the period of continuous service according to Fair Work.

3. 16.2
   The Employer may elect to provide the Employee with payment of the equivalent salary, in part or totally in lieu of notice.”

7. [7]
   There are other sub-clauses of clause 16 but they need not be reproduced.
8. [8]
   Clause 36.1(1) of the Contract specifically defined “Act” to mean “the Fair Work Act 2009 (Cth) and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth), and their regulations, and includes any amendment to, or replacement of, them.”
9. [9]
   The term “Fair Work” is not defined for the purposes of the contract.
10. [10]
    Clause 29 provides for the severability of any provision of the contract that is unenforceable, illegal or void and allows the other clauses to remain in force.
11. [11]
    Clause 33 is an “entire understanding clause” that purports to state that the whole of the agreement and understanding between the parties is contained in the Contract, and that each party has entered into the Contract without relying on any representation by any other party or person purporting to represent that party.
12. [12]
    At paragraphs 5 and 6 of the SOC, the plaintiff pleaded reliance on the entire written Contract, but specifically repeated clauses 16.1 and 16.2. In their defence, the defendants referred to clause 33 of the Contract and asserted that clause 16.1 of the Contract allowed the first defendant to terminate the plaintiff’s employment by giving the minimum period of notice as calculated under s 117 of the FW Act. It is uncontentious that the plaintiff was paid the equivalent of the minimum notice period under s 117 of the FW Act.
13. [13]
    Paragraphs 17 to 20 of the SOC, the subject of the present application, assert that a term of reasonable notice of termination of employment should be implied as a term of the Contract. It is asserted that the reasonable period of notice was 12 months, and that the first defendant breached that implied term. The defendants deny the availability of such an implied term because it is inconsistent with the express term of the Contract dealing with termination. Alternatively, they pleaded that the three-week period applied by them was reasonable in all of the circumstances.
14. [14]
    Paragraph 21, also the subject of the application, merely asserts that the plaintiff suffered loss and damage as a result of the asserted breach.

The parties’ submissions

15. [15]
    The defendants’ submissions can be distilled into the following propositions:

1. The resolution of the present application turns on the construction of clause 16.1 of the Contract;
2. Consistent with established principles, the only proper construction is to read the words “Fair Work” as meaning “the Fair Work Act”;
3. Once that is accepted, there is an express term in the Contract which expressly and, by virtue of clause 33, comprehensively deals with the rights of the parties concerning termination of the employment;
4. The ability of the Court to imply a term concerning reasonable notice of termination is governed by the observations of the High Court in Byrne v Australian Airlines Ltd^[1] accordingly, an implied term requiring reasonable notice of termination cannot be implied because it would contradict an express term of the Contract;
5. Accepting that section117 of the FW Act does not, of itself, make an implied term of reasonable notice to terminate unnecessary, in terms of Byrne v Australian Airlines Ltd criteria, that does not negate the force of the defendants’ express provision to the contrary argument;
6. In so far as the authorities relied on by the plaintiff are relevant to the express provision argument, none are binding on this Court, and all are distinguishable on the facts; and
7. Notwithstanding the high degree of satisfaction required to succeed on a strike out application, this is an appropriate case for such an order.

16. [16]
    The plaintiff’s submissions can be distilled to the following propositions:

1. It is a question of construction as to whether the parties intended the express provision of the Contract relating to termination to be comprehensive;^[2]
2. According to some earlier decisions, a term of reasonable notice can be implied when there is an express term allowing for notice based on minimum periods of notice;
3. Also, it has been held that reference to the minimum notice period in the FW Act does not necessarily exclude a term of reasonable notice;
4. The express terms of clause 16.1 of the Contract are so vague, uncertain and ambiguous as to the meaning of “Fair Work” that it can be understood to mean things other than “the Fair Work Act”. In undertaking that exercise, the clause should be construed contra proferentem against the first defendant, who prepared, or who was responsible for preparing, it;
5. Alternatively, those same features many result in the clause being deemed void and unenforceable; and
6. The plaintiff’s claim concerning an implied term of reasonable notice is not so devoid of merit as to warrant summary dismissal.

17. [17]
    Oral argument was heard ten days after the filing of the Defence, and hence before the last day allowed under the UCPR for a Reply to be filed. That is, the argument was heard before the pleadings had closed.^[3]
18. [18]
    The reply was filed on the last day allowed under the Rules.^[4] Of relevance for present purposes, the Reply asserts that there were certain conversations between the plaintiff and the second defendant during which the plaintiff was assured of many more years of employment than in fact eventuated. It is asserted that the plaintiff expressed reluctance to take up employment with the first defendant unless, in effect, he was assured of that extended period of employment. It asserts that, as a result of these conversations, “a common understanding” was reached between the plaintiff and the second defendant prior to the execution of the subject Contract as to the employment being for a long term period, that absent misconduct on the plaintiff’s part he would be employed until he chose to terminate the employment and that he would be given reasonable notice of termination by the first defendant.
19. [19]
    Further written submissions were accepted after the Reply was filed. In the course of oral submissions during the hearing, and given that the plaintiff was in effect submitting that matters relevant to the availability of an implied term of reasonable notice would be contained in the Reply, I enquired if I should adjourn the hearing to after the last day for its filing. While the plaintiff did not oppose such a course, the defendants did. I decided not to do so. After the Reply was filed, the defendants’ solicitors wrote to my associate, on behalf of both parties, indicating that the parties were prepared to make submissions as to whether the Reply should be considered in the application and, if so, the effect it had on the outcome.
20. [20]
    The defendant contends that the Reply should not be taken into account on the application. It was not read at the time of the hearing, the plaintiff did not apply to adjourn the hearing to allow it to be considered, the plaintiff did not file affidavit material to raise the matters that were raised in the Reply which was filed only days later, and the plaintiff has not applied to re-open its case in order to rely on the Reply. Even if considered, it does not save the plaintiff for the purposes of the application. The application was an attack on the adequacy of the SOC, which it can now be even more clearly seen does not include the plaintiff’s factual matrix which is necessary to appreciate its case in terms of the proper construction of clause 16.1 and the enforceability of it. These are matters that should have been pleaded in the SOC.
21. [21]
    The plaintiff submits that the purpose of pleadings is to define the issues, and as such the reply needs to be considered alongside the SOC and the defence to understand the issues to be tried. As such the reply should be considered and, when that is done, the factual matrix demonstrates that the allegations at paragraphs 17 – 21 should not be struck out. It is emphasised that the function of the Reply is, when necessary, to answer the facts pleaded in the defence. As such it is submitted that the plaintiff has acted in accordance with the UCPR and the application should be dismissed.

Consideration

22. [22]
    At face value, the meaning of clause 16.1 of the Contract is unclear; the words “Fair Work” create the ambiguity. Both parties’ arguments as to the approach to that issue have some merit, but it is an issue that does not need to be decided.
23. [23]
    The fact there is ambiguity means that evidence of the surrounding circumstances of the making of the Contract is admissible to assist in the interpretation of it.^[5] It is now clear that there are evidential matters available to the plaintiff which may bear on the interpretation of clause 16.1, and which, once pleaded, must necessarily frustrate a strike out application based on r. 171(1)(a), regardless of whether they are accepted or not.
24. [24]
    The defendants contend that these matters should have been pleaded in the SOC as they are material facts. It was argued in anticipation of a reply being filed, and prior to the later submissions from both parties, that even if something were raised in the Reply, the subject paragraphs should be struck out with leave to replead. The plaintiff denied the need to have pleaded the “common understanding” in the SOC and says that it would be appropriately pleaded in the Reply, so the defendants were not taken by surprise. Both parties later submissions have been summarised above.
25. [25]
    I accept that at least some of the matters raised in the Reply, should have been pleaded in the SOC, although some of the things pleaded in the Reply are likely evidence and hence should not be pleaded in a SOC. The assertion that there is to be implied a term concerning reasonable notice of termination, in the face of an apparently express term covering the period of notice to be given, is the asserted consequence of the matters raised in the Reply. They, or at least some of them, therefore amount to material facts^[6] and were required to have been pleaded in the SOC.^[7] Put another way, the reason why it is said that a term of reasonable notice should be implied into the contract in the face of clause 16.1 is not apparent without the material facts contained in the Reply being pleaded in the SOC.
26. [26]
    While there have been instances where the Reply has been considered as part of the scope of the matters in contest, each of the examples put before me by the plaintiff has been in a different context. In Orchid Avenue Pty Ltd v Parniczky & Anor^[8] Burns J was considering the availability of granting judgment in default of the defendant’s appearance at trial pursuant to r. 476 of the UCPR. Whereas in Morrison v Australian Postal Corporation,^[9] McGill DCJ, sitting on appeal from the Magistrates Court, was considering a complaint about the sufficiency of the pleadings to sustain the judgment under appeal in circumstances where there had not been any application below to strike out the pleading in the SOC. His Honour found that the pleading of matters in the Reply that should have been in the SOC was an irregularity rather than rendering the proceeding invalid. He did not endorse the practice and specifically referred to the availability of a power to strike out the offending pleading.
27. [27]
    It can therefore be seen that the observations relied on by the plaintiff have been made in materially different circumstances to the present.
28. [28]
    The plaintiff has identified that the defendants have brought their application under r. 171(1)(a). That is true, but I am not limited in my powers to being strictly bound by that approach.^[10] In the course of the argument, including the supplementary submissions, the focus of the application shifted to some degree from the construction of the contract to include the propriety of the pleadings in the SOC. I consider it appropriate to strike out the subject paragraphs of the SOC under r. 171(1)(b), with leave to re-plead, in order to allow the filing of an amended defence so as to ensure that the issues in the trial are fully engaged in the pleadings. As it currently stands there is no requirement for the defendants to respond to the Reply, which is undesirable, both in terms of any other interlocutory applications that may arise and in the final determination of the matter.

Costs

29. [29]
    The power to award costs in this matter is regulated by s. 570 of the FW Act. There is nothing in the proceedings that obviously brings the matter within the exceptions stated in s. 570(2). Further, although the applicant succeeded on the application, it was on a different basis to that applied for. Accordingly, I will make no order as to costs.
30. [30]
    However, as I indicated at the oral hearing that I would invite submissions on the topic, the parties will have liberty to apply on two days’ written notice.

Orders

31. [31]
    My orders are:

1. Paragraphs 17 to 21 of the statement of claim filed 17 August 2022 be struck out.
2. The plaintiff has leave to replead within 28 days of the date of this Order.
3. No order as to costs.
4. Liberty to apply on two days’ written notice.