Employee awarded $477,400 plus interest after his employer failed to uphold an oral agreement

Published 7 January 2017

Stevens v Spotless Management Services Pty Ltd [2016] VSCA 299

A chief information officer was awarded $477,400 plus interest after the Victorian Court of Appeal found there existed an oral agreement that specified his entitlements, and his employer failed to uphold this agreement.

Mr Stevens claimed he was owed $477,400 as a “termination payment” and $477,400 as a “redundancy bonus” from his former employee after he decided to leave the company during a restructure.

The payments were based on discussions Mr Stevens had in August and September 2012 with the company’s managing director and chief executive officer, Mr Dixon.

In a meeting on 23 August 2012, Mr Stevens claimed Mr Dixon told him that he would be removed from the position of chief information officer (CIO) and commence working as General Manager – Airports due to restructuring. Mr Stevens claimed he gave Mr Dixon a document for discussion, which stated, “My role as CIO … is redundant”, and Mr Dixon confirmed this.

Mr Dixon claimed Mr Stevens saw his position change as a demotion, and Mr Dixon assured him that it was not. Further, Mr Dixon claimed the position of CIO continued to exist and reported no recollection of seeing the document Mr Stevens claimed to have given him.

On 14 September 2012, Mr Stevens met with the Chief Operating Officer (Ms Pepe) to discuss his new role. Mr Stevens presented a typed memo to Ms Pepe stating he did not believe the Airports division was viable and his position as General Manager – Airports should be made redundant. Ms Pepe claimed she asked Mr Stevens if he wanted to leave the company, and Mr Stevens responded in the affirmative.

On 17 September 2012, Mr Stevens met with Ms Pepe and Mr Dixon. Mr Stevens argued Mr Dixon agreed to terminate his employment based on redundancy and pay him a retention bonus and payment in lieu of notice. He also claimed he requested a Manual Salary Calculation of his entitlements and Ms Pepe agreed to organise it.

Mr Dixon denied this. He argued he was frustrated with Mr Stevens and said “we will pay you whatever is in your contract, we will pay you what our obligations are”, but claimed making no reference to redundancy or a package.

After the meeting, Mr Stevens emailed Ms Pepe requesting the manual calculation and Ms Pepe agreed to give him the information once she received it. Later that day, Ms Pepe gave Mr Stevens the calculation document, which stated, “[t]hese are estimated only until approved for payment” and included a sum of $477,400 (less tax) listed as a “retention bonus” and a “redundancy payment” was also listed for the same amount. Mr Stevens looked over the document, in particular the total figure and, knowing that two times $477,400 would be somewhere between $550,00 and $600,000 after tax was removed, told Ms Pepe it looked fine.

On 15 October 2012, Mr Stevens was issued an amount of $477,400 (less tax) due to a processing error, and this was brought to Ms Pepe’s attention on 18 October 2012. The National Human Resources Manager and General Manager – Human Resources believed Mr Stevens was not entitled to a retention bonus. The General Manager – Human Resources informed Mr Stevens that the bonus was not payable, but said he was entitled to a termination payment of the same amount and therefore was not required to pay back the money.

On 24 October 2012, Ms Pepe met with Mr Stevens. Mr Stevens said his decision to leave was confirmed by and based on the Manual Salary Calculation, to which Ms Pepe claimed the calculation was an estimation and did not constitute an offer.

Trial judgement

The trial judge found Mr Stevens was not entitled to the additional $477,400 claimed, stating there was no discussion between Mr Stevens and Mr Dixon regarding a possible redundancy, and no agreement regarding a retention bonus.

Further, the trial judge found Mr Stevens had not been made redundant, and any references to a redundancy “were to assist [Mr Stevens] for taxation purposes”.

Mr Stevens argued leave to appeal for the following reasons:

  • The trial judge erred in finding there was not a discussion or agreement on 23 August 2012 that Mr Dixon would pay Mr Stevens a retention bonus if he were to be made redundant;
  • The trial judge erred in finding Mr Dixon did not agree on 17 September 2012 to pay Mr Stevens a sum of $477,400 as a retention bonus upon his termination;
  • The trial judge erred in finding the payment made to Mr Stevens of the retention bonus was a payment for a failed or no consideration; and
  • The trial judge erred in finding Mr Dixon paid the retention bonus under a mistake of fact and under a mistake of law.

Judgement on appeal

The Court of Appeal noted that Mr Dixon’s outline of evidence regarding the 23 August 2012 meeting had “glaring omissions and inconsistencies” and believed the notes made on the agenda document prepared by Mr Stevens for the meeting suggested discussion of possible redundancy and relevant entitlements. The Court of Appeal found Mr Stevens did tell Mr Dixon he believed he was entitled to a retention bonus in addition to payment in lieu of notice, but upheld the trial judge’s finding that no agreement was made.

The Court of Appeal recognised Mr Stevens was aware the Manual Salary Calculation was approved by the human resources team and checked that it had been approved. The finalisation of Mr Stevens departure from the company partly relied on confirmation of the calculations and “upon [Mr Stevens’s] acceptance of the Manual Salary Calculation, … he would end his employment at [the company] on terms that he would be paid the amounts specified in the document”. Thus, the Court of Appeal found Mr Dixon did agree to pay Mr Stevens a retention bonus upon termination.

The Court of Appeal found there was an exchange of promises and “whether or not that exchange [was] characterised as ‘buying peace’ or ‘leaving gracefully’, it constitute[d] sufficient consideration.” Further, on appeal, Mr Dixon did not strongly contest consideration existed.

Lastly, the Court of Appeal found the retention bonus was not paid under a mistake of fact or a mistake of law because Mr Stevens successfully established the existence of the contract that entitled him to the bonus.

Consequently, the Court of Appeal ruled Mr Stevens should be paid $477,400 plus interest.

Read the full decision here

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