Riverwood International Australia Pty Ltd v Mccormick

[2000] FCA 889

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(Decision by: Lindgren J)

Riverwood International Australia Pty Ltd
vMcCormick

Court:

Judges:
Lindgren JNorth J
Mansfield J

Legislative References:
Federal Court of Australia Act 1976 - s 27
Trade Practices Act 1974 - s 52

Case References:
Ryan v Textile Clothing and Footwear Union of Australia - [1996] 2 VR 235
Shirlaw v Southern Foundries - [1939] 2 KB 206
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales - (1982) 149 CLR 337
Scally v Southern Health & Social Services Board - [1992] 1 AC 294
Esso Australia Resources Ltd v Plowman - (1995) 183 CLR 10
Byrne v Australian Airlines Ltd - (1995) 185 CLR 410
Shirlaw v Southern Foundries - [1939] 2 KB 206
Hospital Products Ltd v United States Surgical Corporation - (1984) 156 CLR 41
Byrne v Australian Airlines Ltd - (1995) 185 CLR 410
BP Refinery (Westernport) Pty Ltd v Shire of Hastings - (1977) 180 CLR 266
Hawkins v Clayton - (1988) 164 CLR 539
Codelfa Construction Pty Ltd v State Rail Authority (NSW) - (1982) 149 CLR 337
Schenker & Co (Aust) Pty Ltd v Maplas Equipment and Services Pty Ltd - [1990] VR 834
Antaios Compania Naviera SA v Salen Rederierna AB - [1985] AC 191
Hawkins v Clayton - (1988) 164 CLR 539
Breen v Williams - (1996) 186 CLR 71
McCormick v Riverwood International (Australia) Pty Ltd - (1999) 167 ALR 689
Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd - (1979) 144 CLR 596
Life Insurance Co of Australia v Phillips - (1925) 36 CLR 60
Smith v South Wales Switchgear Ltd - [1978] 1 WLR 165
News Limited v Australian Rugby Football League Ltd - (1996) 139 ALR 193
Minister for Immigration, Local Government and Ethnic Affairs v Hamsher - (1992) 35 FCR 359
Warren v Coombes - (1979) 143 CLR 531
Duralla Pty Ltd v Plant - (1984) 2 FCR 342
Edwards v Noble - (1971) 125 CLR 296
State Rail Authority of NSW v Earthline Constructions Pty Ltd - (1999) 160 ALR 588
Hospital Products Ltd v United States Surgical Corporation - (1984) 156 CLR 41
Ansett Transport Industries v Commonwealth - (1977) 139 CLR 54
Renard Constructions (ME) Pty Ltd v Minister for Public Works - (1992) 28 NSWLR 234
Byrne v Australian Airlines Ltd - (1995) 185 CLR 410
National Coal Board v Galley - [1958] 1 All ER 91
Spunwill Pty Ltd v Bab Pty Ltd - (1994) 36 NSWLR 290

Hearing date:
Judgment date: 4 July 2000

Sydney

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Decision by:
Lindgren J

Introduction

[1] The respondent ("Mr McCormick") ceased being employed by the appellant ("Riverwood") on 8 May 1998. He had been employed in the same business for thirty six years and eleven months, although by a succession of employers.

[2] Upon termination of his employment, he received an after tax payment of $17,135.05 for "salary/wages", annual leave and long service leave. Nearly six months later he received a "without admissions" payment of a further $5,810.51, representing five weeks' payment in lieu of award or statutory entitlement to a period of notice, and eight weeks' payment for any award redundancy entitlement (the relevant award was the Graphic Arts General (Interim) Award).

[3] Mr McCormick contended that he had a contractual entitlement to a much greater sum as a redundancy payment pursuant to the terms of his contract of employment. The amount he claimed on this account in his statement of claim was three weeks' ordinary pay for each completed year of service and a pro rata payment for each completed calendar month. He particularised this claim on the basis of 110.75 weeks' pay at $652.50 per week before tax, giving an amount of $72,264.38 before tax, from which would have to be deducted the whole or part of the sum of $5,810.51. In fact, Mr McCormick's claim also included other amounts which he contended had been payable to him on severance, making a total of $87,514.27, from which he deducted the sum of $5,810.51 mentioned earlier, giving an amount claimed of $81,703.76. The amount referred to in the primary judge's judgment as the amount of the claim is $76,435.74. I need not be concerned further to understand the arithmetic.

[4] The learned primary judge upheld Mr McCormick's claim on two alternative bases: first, that the express terms of the contract of employment imported by reference the terms of a redundancy agreement negotiated between Riverwood and the Printing and Kindred Industries Union ("the PKIU") (of which Mr McCormick was not a member); secondly, that it was an implied term of the contract of employment that Mr McCormick had an entitlement to a redundancy payment in accordance with that redundancy agreement.

Background facts

[5] The history of Mr McCormick's employment in the business is somewhat complex.

[6] On 9 May 1961, Mr McCormick commenced employment in the "packaging systems" division of a cardboard packaging business. In addition to the packaging systems division there was a "cartons" division. In the late 1980's the business was owned by companies associated with Mr Richard Pratt (they included Visy Board Pty Ltd and Visypack Pty Ltd) to which I will refer as the "Pratt companies".

[7] The first of three written redundancy agreements to be mentioned was entered into on 28 October 1988 and was between the Pratt companies and the PKIU. It contained certain provisions that purported to burden and to benefit employees of the Pratt companies. It has not been suggested that this or either of the two later redundancy agreements gave Mr McCormick contractual rights directly, that is, by reason of its own terms and of his status as an employee; cf Ryan v Textile Clothing and Footwear Union of Australia [1996] 2 VR 235.

[8] On a date not revealed by the evidence but prior to the sale referred to in the next paragraph, a second redundancy agreement was entered into. The parties to this undated second redundancy agreement were the Pratt companies and "the AMWU, CEPU, Printing & Kindred Industries Union".

[9] In 1990 or 1991 the Pratt companies sold the business to Multiboard Packaging Pty Ltd ("MPP"), a then recently incorporated company not associated with Mr Pratt.

[10] On 20 November 1992, those controlling MPP caused "Riverwood Packaging Systems Pty Ltd" ("Packaging") to be incorporated.

[11] In 1993 several events occurred. On 14 May 1993, the business of the packaging systems division, in which Mr McCormick was employed, began to be conducted by Packaging. This left the remainder of the business, the cartons division, being conducted by MPP, at least for the time being.

[12] There was a high degree of interaction between the activities of the packaging systems division and the cartons division. John Bradbury, although formally employed by MPP as its Human Resources Manager, also had responsibility for Packaging's human resources issues. Mr Bradbury agreed before his Honour that he had understood that from 1990 to 1993, the terms of the second (undated) redundancy agreement, although made with the Pratt companies, applied to MPP employees, including those who, like Mr McCormick, worked in the packaging systems division. Moreover, he agreed that his view was that if there had been redundancies in the packaging systems division, before or after its transfer from MPP to Packaging, the employees would have been treated as covered by the second redundancy agreement as he understood those in the cartons division were.

[13] On 6 October 1993 Packaging wrote to Mr McCormick offering him employment with it. This was some five months after the packaging systems division, in which Mr McCormick had always been employed, had been transferred by MPP to Packaging. On 12 October 1993 Mr McCormick signed and returned an "acceptance" of the offer at the foot of the last page of the letter of offer, reading:

" I hereby agree and accept employment with Riverwood Packaging Systems Pty Ltd under the terms and conditions outlined above ."

The letter was not the result of negotiation and Mr McCormick understood that its purpose was simply to formalise the new arrangement. There was no change in his day to day activities. He could recall no discussion about the terms of the letter with anyone representing Packaging. The terms of the letter are of central importance and I will discuss them below.

[14] In November 1993, a third redundancy agreement was entered into. This was between MPP and the PKIU. The party to the agreement, other than the PKIU, was called "the Company" and was defined as meaning "Multiboard Packaging, Smithfield, Reservoir, Dandenong and Woodville". Mr McCormick was employed by Packaging at Smithfield, and Packaging's letter to him of 6 October 1993 had borne its Smithfield address.

[15] On 18 May 1994, this third redundancy agreement was inserted in a document of MPP called "Human Resources Policies and Procedures Manual" ("the Manual"). The Manual was a loose-leaf spiral bound document. As part of the up-dating of the Manual from time to time, replaced pages were discarded. There was not in evidence a copy of the Manual as it existed at 18 May 1994, when the third redundancy agreement was filed in it.

[16] On 1 December 1994, MPP changed its name to Riverwood Cartons Pty Ltd ("Cartons"). The title of the version of the Manual in evidence before his Honour was "Riverwood Cartons Pty Ltd Human Resources Policies & Procedures Manual". (Mr Bradbury testified before his Honour that he thought that the change of name occurred "about 93" and "some time in 93" and his Honour, counsel and Mr Bradbury appear to have assumed, at least at times, that this was correct.)

[17] Both Packaging and Cartons were owned by an American corporation, Riverwood International Corporation.

[18] There were redundancies within Cartons, and possibly also within Packaging, in 1995 and 1997. On both occasions, employees made redundant were paid in accordance with the third redundancy agreement. Mr McCormick became aware of this, apparently at the time.

[19] On 30 March 1998, Cartons sold its business to Carter Holt Harvey Ltd ("CHH") a New Zealand based company. Packaging reduced the size of its operation and sold certain of its assets to CHH as well. CHH was obliged to offer employment to all employees of Cartons. So far as concerned those employees of Packaging whom Packaging did not wish to retain, CHH was entitled, but not obliged, to offer them employment also. Mr McCormick was one of these employees.

[20] On 26 April 1998, after the sale to CHH, Packaging changed its name to its present name, "Riverwood International (Australia) Pty Ltd". That is, the appellant was once Packaging and is now Riverwood.

[21] As noted earlier, on 8 May 1998 Mr McCormick's employment terminated.

Reasoning of primary judge

[22] His Honour had to consider several issues that were not before the Court on the appeal and which I need not discuss.

[23] At the centre of the case is the letter dated 6 October 1993 from Packaging to Mr McCormick which commenced:

" We are pleased to write to you to offer you the position of Senior Technician with our company at our Melbourne Plant ".

[24] The letter was on the letterhead of Packaging. Mr McCormick said he had never previously had a written contract of employment. The letter dealt, under headings, with the subjects of remuneration, superannuation, annual leave, "Company Policy and Practices", length of period of notice of termination and payment or forfeiture of payment in lieu of notice, commencement date, and medical examination. The letter did not refer to redundancy, but under the heading "Company Policy and Practices", it stated:

" You agree to abide by all Company Policies and Practices currently in place, any alterations made to them, and any new ones introduced ."

[25] His Honour described the reference to "Company Policies and Practices" as "somewhat obscure". He referred to the three redundancy agreements. Of the third, the one made in November 1993, he noted that its preamble stated that it was to come into effect from 7 September 1993, that is, a date prior to its own date and also prior to Packaging's letter to Mr McCormick of 6 October 1993. His Honour noted that the letter was signed by John Bradbury for and on behalf of MPP (Jubilee Division), a Brisbane-based division of MPP, and by the PKIU delegates of MPP (Jubilee Division) on their own behalf and on behalf of all PKIU members employed by MPP from time to time. It will be recalled that Mr McCormick was not a member of the PKIU. However, the term "employee" was defined in the agreement to mean, in substance, any employee of MPP from time to time.

[26] The third redundancy agreement, like the two earlier ones, contained an undertaking, expressed to be by the PKIU and employees, "not to impose any bans, limitations or restrictions on [MPP] as a result of redundancies, retrenchments or relocations." It also provided that if "the parties" were not able to agree on issues of interpretation of the agreement, they would request the service of the Conciliation and Arbitration Commission and that normal work would continue while discussions and Arbitration Commission hearings were in progress.

[27] His Honour held that, conformably with the Victorian Court of Appeal decision in Ryan v Textile Clothing and Footwear Union of Australia [1996] 2 VR 235, the third redundancy agreement did not, of itself, create legally enforceable rights in favour of Mr McCormick.

[28] In dealing with the question of "incorporation by reference" his Honour considered that:

•

for several reasons, it was immaterial that the third redundancy agreement was filed in a Manual of MPP (following the later change of name, Cartons) rather than of Packaging, Mr McCormick's employer;

•

"virtually every document contained in Cartons' Manual provide[d] a benefit of some sort to that company's employees" and "[n]o burden of any kind is imposed, except upon the employer" (his Honour described this consideration as one "of considerable significance" in the construction of the obligation purportedly imposed by the letter on Mr McCormick to "abide by all Company Policies and Practices");

•

it would be wrong to deal with Mr McCormick's claim as a claim that his employer was estopped from denying that the obligation to make a payment in accordance with the terms of the third redundancy agreement formed part of his contract of employment, since he had not pleaded a cause of action in estoppel of that kind;

•

the competing considerations in the present case were "finely balanced".

[29] His Honour's reasons for accepting Mr McCormick's "incorporation by reference" submission proceeded along the following lines. His Honour thought it appropriate to approach the construction of the letter by regarding it as a loosely drafted commercial document, the author of which had not realised that its terms might conflict with those of the Manual which it incorporated by express reference, so that the Court's task was "to make sense, if possible" of the letter. His Honour thought that the words "abide by" in the letter imposed obligations that were "directly linked to the Manual and, accordingly, to the third Redundancy Agreement as well". But the Manual was "concerned principally, if not exclusively, with laying down employees' entitlements". Accordingly, Mr McCormick's agreement to "abide by" Packaging's "Policies and Practices" should be construed, his Honour thought, "in the context of a contract made in good faith, as imposing a like obligation on the company".

[30] In the alternative, his Honour thought that Mr McCormick's contract of employment contained an implied term that if Mr McCormick was made redundant, he would "receive redundancy benefits calculated in accordance with the formula set out in detail in the various Redundancy Agreements, and in particular, that of November 1993". His Honour's reasons in this respect proceeded along the following lines:

" Consistently with the approach adopted by MacKinnon LJ in Shirlaw v Southern Foundries (1926) Ltd [[1939] 2 KB 206 at 227] and by Mason J in Codelfa [Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 345-346] the implication in this case is both ' obvious' and ' necessary to give the transaction such business efficacy as the parties must have intended' . The implication is ' a necessary incident of a definable category of contractual relationship' - Scally v Southern Health & Social Services Board [[1992] 1 AC 294 at 307]. I can see no reason why both Cartons and Packaging would have made redundancy payments to all employees who were made redundant throughout the entire history of their ownership of the cardboard packaging business, other than that this was what they understood they had agreed to . Fear of industrial action does not, in my view, provide the explanation ."

[31] His Honour said that the implied term he formulated did not, in his view, conflict with the express terms of the letter, which was not drafted so carefully and comprehensively that it should be viewed as containing an exhaustive statement of the detailed terms agreed between the parties. Again, his Honour said that he regarded the letter as "a loose and somewhat carelessly drafted commercial document which should, if possible, be construed in a manner which enables it to make sense."

[32] The learned primary judge said he was influenced in arriving at both conclusions (that there was an incorporation by reference and an implied term) by (a) "the elaborate detail contained in the third Redundancy Agreement", and (b) the fact that "the terms of [the] third Redundancy Agreement appear[ed] to have been implemented in relation to every other employee, apart from [Mr McCormick], made redundant by Cartons and Packaging, in 1995, 1997 and 1998."

[33] Finally, his Honour thought it "not unimportant to note" that the senior management personnel of Packaging appeared to have assumed throughout that if Mr McCormick was not offered a position with CHH at a certain meeting on 27 March 1998, he would be entitled to a redundancy payment. In order to understand this statement of his Honour's, it is necessary to know that there was another issue at trial which has not featured in the appeal: was Mr McCormick offered a position with CHH? At trial, Riverwood's case was that Mr McCormick was, and Mr McCormick's case was that he was not, made an offer of employment by CHH at a certain meeting on 27 March 1998. If he was made such an offer but declined it, he may have lost any entitlement to a redundancy payment, even in conformity with the terms of the third redundancy agreement. There was conflicting evidence as to what transpired at the meeting and his Honour found, favourably to Mr McCormick, that no such offer was made to him by CHH. His Honour said:

" The possibility that [Mr McCormick] may not have had ... an entitlement appears to have been considered for the first time only after the applicant brought these proceedings . That does not mean that the contention that there is no such entitlement so forcefully advanced before me lacks legal merit - only that it runs directly counter to the actual beliefs of those most centrally involved . Those beliefs should, in my opinion, be given appropriate weight ."

My conclusions on the appeal

[34] With great respect to the learned primary judge, I do not think that either ground on which he found that the term in question formed part of Mr McCormick's contract of employment can be supported.

[35] It is important, I think, to bear in mind that before us there is no question of the term's having become part of Mr McCormick's contract of employment except by incorporation through the Manual by reference or, on the other hand, by implication. There is no question of rectification of the contract; and there is no question of estoppel.

[36] Mr McCormick had pleaded a different estoppel. This was that Riverwood was estopped, as a result of representations made by it to him in March 1998, from denying that he was entitled to a severance payment, whether or not he chose to apply for a position with CHH or to accept an offer of employment by CHH. In this respect, Mr McCormick relied on the silence of Mr Bradbury at the meeting on 27 March 1998. Mr McCormick had also pleaded that Mr Bradbury's silence constituted misleading or deceptive conduct within s 52 of the Trade Practices Act 1974 (Cth). His Honour found it unnecessary to consider either of these claims because of his conclusion that Mr McCormick succeeded on his contractual claim.

Incorporation by reference

[37] I start with the proposition that the word "you" in the letter should not be construed to mean "you and the Company". Neither party seems to have suggested that it should be construed in that way. The author used the expression "the Company" in the letter and so was mindful of the possibility of using it, yet did not do so in the critical paragraph.

[38] The letter was presented to Mr McCormick by Packaging as a fait accompli . A purpose of the paragraph which suggests itself was, as a matter of more abundant precaution, to remind Mr McCormick that he must accept, and had no right to object to, Packaging's "Policies and Practices", present and future.

[39] On its face, the expression "Company Policies and Practices" refers to things that from time to time answer the description of a "policy" or "practice" of Packaging, whether contained in a document or not. The opposing view seems to be that Mr McCormick (and, for such significance as it might have, Packaging as well) was undertaking to abide by any stipulation of any kind that Packaging might choose to insert in a document called "Policies and Practices". This seems to be an extreme view that should not be embraced unless necessary.

[40] The use of the words "all", "them" and "any new ones" in the paragraph is clearly against the view that the paragraph is referring to a document and in favour of the view that it is referring to individual policies and practices.

[41] The relevant part of the definition of "policy" in the Macquarie Dictionary is:

" 1 . a definite course of action adopted as expedient or from other considerations : a business policy 2 . ... 3 . action or procedure confirming to, or considered with reference to, prudence or expediency : it was good policy to consent. 4 . prudence, practical wisdom, or expediency . ..."

The same dictionary defines "practice", relevantly, as follows:

" 1 . habitual or customary performance : normal business practice. 2 . a habit or custom . ..."

[42] Although not conclusive, these definitions lend some support to my understanding of the meaning of the paragraph: Packaging must retain the right to lay down and alter, from time to time, such stipulations as it finds expedient in its interests, even if they have some impact on Mr McCormick, who is being required to accept this state of affairs. Of course, the paragraph must be construed in the context of the letter as a whole and Packaging would not be entitled to require Mr McCormick to submit to a policy or practice that would detract from the rights given to him expressly in the letter.

[43] In my respectful opinion, the construction that I have outlined above is not an alarming one and reflects the plain meaning of the language used, which, in my view, is not ambiguous.

[44] What is the case for construing "Policies and Practices" as referring to the Manual? It seems to me that there is only one consideration favouring this view: the capitalisation of initial letters can sometimes suggest the title of a document. But this is an insecure foundation for the view propounded. On any reckoning the expression "Policies and Practices" was an inept way of referring to a "Human Resources Policies and Procedures Manual" and, in any event, in my view the capitalisation is clearly outweighed by the other matters that I have mentioned and will mention.

[45] The evidence of the background against which the letter of 6 October 1993 was written is unclear. Mr Bradbury testified that the Manual was kept in his office in Dandenong but that there were other copies. He stated that when MPP changed its name to Cartons the name of the company on the Manual was changed correspondingly.

[46] We know that the third redundancy agreement was filed in the Manual by 18 May 1994. A page of the Manual bearing that "issue date" stated under the heading "SICK LEAVE":

" Accumulated Sick Leave shall not be paid out on termination for either Hourly or Monthly paid employees, except in the case of the redundancy of hourly paid employees and then only in accordance with the Company's Redundancy Document (See Redundancy )."

[47] It may be possible to infer that the Manual existed on 6 October 1993, some seven and a half months prior to 18 May 1994, but it is impossible to know what its content would have been at that time, except that it would probably have been headed "Multiboard Packaging Pty Limited, Human Resources Policies & Procedures Manual"; that it could not have contained the third redundancy agreement (which was not entered into until November 1993); and that it may or may not have contained the second (undated) redundancy agreement.

[48] I am not persuaded by what I regard as the uncertain state of the relevant evidence, to think that the author of the letter dated 6 October 1993 intended to refer in the paragraph to the Manual.

[49] There was no evidence that employees were consulted before the content of the Manual was altered or even that copies of the Manual were made available to them to read. No doubt, even according to the construction of the letter that I reject, some restrictions would be implied before Packaging could treat Mr McCormick as being in breach, such as a requirement of a sufficient period of notice to Mr McCormick of a change in the content of the Manual and of cooperative action on the part of Packaging where this was necessary in order for Mr McCormick himself to be able to abide by the Manual. Nonetheless, the construction that the letter imported the terms of any redundancy agreement because it happened to have been inserted in the Manual by Packaging is, it seems to me, an unreasonable one from Mr McCormick's viewpoint.

[50] According to my own construction of the letter, Mr McCormick was undertaking to abide by requirements of Packaging that answered the description "policies" or "practices", wherever they might be found. No doubt, these words could also give rise to difficulty of construction and application in particular circumstances. Moreover, they would not give Mr McCormick the protection of a substantial constraint on the unilateral imposition of terms by Packaging. But their purpose was, in my view, in general terms to "acknowledge the right of management to manage", and, accordingly, there might be some unilateral impositions by Packaging so substantial that they would be held to fall outside the notions of "policies" and "practices". The competing construction, that Mr McCormick (Packaging as well) was agreeing to abide by any obligations which Packaging might cause to be included from time to time in its own document, clearly offered him no protection at all.

[51] With respect there are other considerations that tell against the conclusion that the terms of the Manual, including the third redundancy agreement, were incorporated by reference into Mr McCormick's contract of employment. But it is important in considering these that one not be distracted from the main point: that the letter has a plain, unambiguous and sensible meaning on its face and that it is not necessary to refer to the Manual at all.

[52] His Honour thought that the Manual's provisions were so predominantly of a nature that imposed obligations on Packaging and in favour of employees, that the parties must have meant that Packaging as well as Mr McCormick be bound. But, firstly, this approach assumes what is to be established: that the expression "Company Policies and Practices" was a reference to the Manual at all. Secondly, there was not in evidence a Manual that existed on 6 October 1993 and that therefore could have constituted part of the background against which the letter was written and read. Thirdly, the content of the Manual in evidence, the one that existed at the time of termination of Mr McCormick's employment on 8 May 1998, is a mixture of diverse provisions. Some are exhortatory; some are directed to administrative staff rather than the general workforce; some are expressed in terms not susceptible of enforcement (eg "the Company requires that at all times employees of the Company transact business in accordance with the highest standard of corporate conduct"), while others are more precisely expressed (eg the employer's obligation to pay promptly monies due upon the death of an employee, and the obligation on an employee, upon termination of employment, to return keys, corporate American Express cards, mobile phones and Shell petrol cards). Assuming, contrary to my view, that the paragraph in the letter referred to the Manual, I do not think that the Manual is so much directed to the protection of employees that the paragraph can operate sensibly only if the letter is construed as obliging Packaging as well as Mr McCormick to abide by the Manual.

[53] The construction which I reject may be thought to be supported by the consideration that the parties, acting reasonably and fairly, must have intended that Mr McCormick have a contractual right to recover the amount of the redundancy benefits provided for in the third redundancy agreement. But an alternative view is that the third redundancy agreement was not intended to affect legal, as distinct from industrial, relations or, that it was intended to create, relevantly, legal rights enforceable only at the instance of the PKIU or of the PKIU and its members. I do not think that considerations of fairness or reasonableness require a departure from what I perceive to be a plain and sensible construction of the paragraph in the letter.

[54] The third redundancy agreement inserted in the Manual is a self contained agreement, the parties to which are the PKIU and "the Company". The expression, "the Company" is defined to mean "those operating entities listed in Schedule A of [the] Agreement". Apparently a copy of Schedule A was not included in the Manual but it does not seem to have been in dispute that MPP was identified in it. Nor is the execution page included in the Manual but another copy of the Redundancy Agreement in the Appeal Book shows the form of execution which I described earlier.

[55] In the version of the Manual as at 8 May 1997, and apparently from that date to 8 May 1998 when Mr McCormick's employment ended, the provision in the Manual that immediately preceded the third redundancy agreement was as follows:

" EMPLOYMENT

REDUNDANCIES

Where terminations of employment are as a result of redundancy the terms and conditions of the company redundancy policy shall apply . Such situations must be discussed with the General Manager, Human Resources before any action is taken .

For calculation see copy of Redundancy Agreement attached ."

[56] The PKIU had an important role under the third redundancy agreement. For example, the agreement contained the following provisions:

" 4 . CRITERIA FOR THE SELECTION OF REDUNDANT EMPLOYEES

.............................................................................................

It is acknowledged that in compiling the list of employees to be made redundant, that the Company may not be in possession of all relevant factors and therefore the Company is prepared to discuss with the Union any specific case which becomes known after the time of the announcement .

5. NOTICE

Prior to redundancies taking effect, the Company will give the Union and the affected employee four (4) weeks notice . Where this is not appropriate, the employee will receive four (4) weeks pay in lieu of notice ."

" 10 . RELOCATION

Where an employee is required to relocate his / her place of employment as a result of a plant relocation, he or she shall be given four (4) weeks' notice of the requirement to transfer . During this period of notice, discussions on the relocation will be convened and finalised between the Company and Union . These discussions will include negotiations of a disability payment where the relocated employees are disadvantaged through extra distance travelled or extra time spent travelling .

These discussions will be by form of a hardship committee of four (two employer representatives and two Union representatives ). The committee will consider any genuine issues of hardship which may preclude an employee from relocating ."

" 14 . UNDERTAKINGS BY UNIONS AND EMPLOYEES

i. In the light of undertakings made by the Company in this Agreement, the Union and employees will undertake not to impose any bans, limitations or restrictions on the Company as a result of redundancies, retrenchments or relocations .

ii. In the event of the parties not being able to reach Agreement on issues of interpretations of any clause of this Agreement, the parties agree to request the service of the Conciliation and Arbitration Commission . Normal work will continue while discussions and Arbitration Commission hearings are in progress ."

[57] These passages illustrate difficulties that can arise from construing the paragraph in the letter in the manner suggested by Mr McCormick: as a result of the mere filing by Packaging of a document in the Manual, the PKIU came to have a role to play in the contractual relationship between Packaging and Mr McCormick. No doubt, in this instance, Mr McCormick does not find this objectionable: the PKIU won the redundancy benefits in question and Mr McCormick, not a member of the PKIU, would be getting something for nothing in any event. But the fact that Mr McCormick's employer was able unilaterally and without his knowledge to give the PKIU a role in relation to his contract of employment illustrates the difficulty in accepting that the parties, in particular Mr McCormick, were agreeing to abide by the content of any page or pages, whatever the nature of their contents, that Packaging might insert in the Manual from time to time. Consistently with the same construction, Packaging could unilaterally vary the content of Mr McCormick's contract of employment by removing from the Manual the pages on which the third redundancy agreement appeared. Indeed, according to that view, it is only the employer's misfortune in having omitted to do so just before Mr McCormick was made redundant that has left it liable to him. But a general, though narrower, construction of the terms "policy" and "practices" of the kind suggested by me earlier, is more reasonable in providing at least some basis on which a court might limit the employer's contractual power over its employee.

[58] On the appeal, counsel for both parties put arguments with which I do not find it necessary to deal, but in respect of which I make the following observations.

[59] There is no substance in Mr McCormick's submission that for each undertaking in a contract there must be a particular "reciprocal" undertaking or an identifiable separate consideration. Accordingly, it is not necessary that Packaging have undertaken to abide by "Company Policies and Practices" in order that Mr McCormick be bound to abide by them.

[60] There is no substance either in Riverwood's submission that there is inconsistency between the letter's provision for termination by four weeks' notice or the forfeiture or payment of four weeks' pay on the one hand, and the third redundancy agreement's provision for payment of certain amounts to longer term employees in the case of redundancy, on the other hand. I do not think the paragraph in the letter providing for termination by no less than four weeks' notice on either side, or the forfeiture or payment of four weeks' pay, purports to be an exhaustive statement of the parties' rights in respect of termination.

[61] There is no substance in Mr McCormick's submission that certain parts of the Manual, notably the detailed provisions dealing with the supply of motor vehicles to certain employees, appear to give contractual rights and that this makes the construction of the paragraph in the letter for which Mr McCormick contends to be more likely to be correct. For all that is known, the letters of appointment of employees entitled to be supplied with a motor vehicle (Mr McCormick was not one of them) may have incorporated the provisions by reference or the provisions may have become terms of the contracts of employment of those employees in other ways, such as pursuant to an oral agreement or an agreement implied from a course of conduct.

[62] Submissions were made based on other cases in which courts have concluded that the terms of the particular industrial agreements in question did or did not become part of an individual contract of employment. With respect, I have not found those cases particularly helpful. It is not in question that Mr McCormick and Packaging could have agreed that the terms of an industrial agreement be incorporated into Mr McCormick's contract of employment: the question is whether they did so .

Implication of terms

[63] There is no warrant for saying that there is implied by law in all contracts of employment a provision for the making of a special payment by the employer to the employee where the employer terminates the employment because the employee's services have become redundant to the employer's needs (cf Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 30; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 448).

[64] Was the relevant term implied in fact?

[65] The term which the learned primary judge concluded was implied was formulated by his Honour as follows:

" he shall receive redundancy benefits in accordance with the formula set out in detail in the various Redundancy Agreements, and in particular, that of November 1993 ."

[66] With respect, it is important, I think, to formulate an implied term by reference to the circumstances that existed at the time when the contract was made, that is, in this case, in October 1993. Presumably, the term implied becomes:

" You will be entitled to redundancy benefits in accordance with the current redundancy agreement between [the Pratt companies] and [the PKIU] and any subsequent redundancy agreement replacing it entered into between your employer at any time and from time to time and any union for the benefit of employees, including yourself ."

[67] The grounds on which a term is to be implied in a contract have been variously stated and, with respect, I do not think that any of them support the implication of such a term. I do not think, for example, that if asked in October 1993 whether the term in question formed part of their contract, both parties would unhesitatingly have said "Of course" or "It goes without saying" or "Obviously" (cf Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206 at 227 per Mackinnon LJ; Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 121; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 442). Nor do I think it was necessary to give business efficacy to the contract to imply the term in question; the contract operates reasonably and effectively without it (cf BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 (PC) at 282-3; Hawkins v Clayton (1988) 164 CLR 539 at 573). A court must not find a term to be implied merely in order to make the contract "reasonable or fair or prudent" and it is important to recall that "[t]he necessary foundation for the creation of contractual rights and obligations is the agreement of the parties" ( Codelfa Construction Pty Ltd v State Rail Authority (NSW ) (1982) 149 CLR 337 at 401 per Brennan J).

[68] A sensible effect can be given to Mr McCormick's employment contract without the implication of a term of the kind proposed. The letter of 6 October 1993 does not refer to redundancy and provides for Mr McCormick to be given four weeks' notice of termination of employment or four weeks' pay in lieu of notice. While I do not think it inconsistent with that provision to find that the parties agreed that additional benefits were to be paid to long term employees where the termination of their employment occurred as a result of redundancy, it is an altogether different thing to say that it goes without saying that the parties must have intended a provision of that kind to be part of their contract.

[69] The term implied by his Honour was not:

" That Packaging will abide by the Manual ."

Mr McCormick did not submit on the appeal that that term, rather than the one proposed by his Honour, should have been implied. Nor do I think that it was obvious or necessary for business efficacy that Packaging was undertaking contractually to abide by the Manual. Only if the expression "all Company Policies and Practices" is construed as referring to the Manual could it be said that the Manual was referred to in the letter at all. As mentioned earlier, I do not think that that construction is warranted. But even if it were, the fact that there was a unilateral right to vary the content of the Manual from time to time, tells against the suggestion that Packaging was impliedly undertaking to Mr McCormick to abide by its contents as they might exist at any moment.

Effect of the making of redundancy payments

[70] In my view, the fact that redundancy payments were made in conformity with the redundancy agreement to other employees does not aid Mr McCormick on the question of the construction of the paragraph in the letter or the implication of a term.

[71] The payments were made in 1995, 1997 and 1998, well after the making of the contract of employment in October 1993, and so do not form any part of the factual matrix against the background of which the contract was entered into.

[72] There are several reasons why the making of the payments after the making of the agreement are not probative in relation to the question whether the third redundancy agreement's provision for the making of a redundancy payment formed part of Mr McCormick's contract of employment. First, the payments may have been evidence of the employer's wish in the interests of industrial peace to conform to the terms of an industrial agreement with the PKIU, rather than evidence of its view that the redundancy agreement was a term of individual contracts of employment in question. Secondly, for all that is known the redundancy payments may have been made only to members of the PKIU. Thirdly, even if the making of the payments was evidence that officers of the employer understood that there was an obligation on the employer enforceable at the instance of the employees in question to make the payments, those officers may have been mistaken. They may, for example, have erroneously thought that the redundancy agreement itself gave the employees a right to compel the employer to make the payment. Fourthly, they may have thought that there was a contractual obligation on the employer to make the payments, but one enforceable by the PKIU and not by the individual employees.

[73] I do not find it necessary to discuss the interesting question of the admissibility of post-contract conduct as relevant to the issue whether an admitted contract contains a particular term.

Conclusion

[74] There is a further way in which Mr McCormick's case might have been put which does not depend on either incorporation of the terms of the third redundancy agreement through the Manual by reference or the implication of a term. The argument is as follows:

1.

By the letter, Packaging was offering to vary the existing contract of employment by, relevantly, agreeing to abide by (honour) its policies and practices as they existed from time to time upon Mr McCormick's agreeing also to abide by (honour) them;

2.

By signing and returning the "agreement and acceptance" at the foot of the last page of the letter, Mr McCormick agreed to abide by (honour) those policies and practices, and in doing so, both accepted Packaging's offer and provided the consideration for its own undertaking to abide by (honour) the policies and practices;

3.

It was one of Packaging's policies and practices to pay redundancy benefits calculated in accordance with the third redundancy agreement.

This approach to the present problem is analogous to that which might arguably be taken when invitations to tender or to join an association are issued, stipulating "you agree to be bound by" stated terms and conditions of tender or the terms of the association's constitution. In such cases it is arguable that the invitation is one for the invitee to become bound on the understanding and basis that the invitor will also become bound.

[75] I do not mean to imply that the argument just outlined would necessarily have succeeded. If my brethren had not been of the view that the appeal should be dismissed, I would have favoured inviting the parties to make submissions on the point. If the argument had not prevailed, I would have proposed that the matter be remitted to the learned primary Judge for the purpose of his determining the non-contractual issues of estoppel and misleading or deceptive conduct as pleaded which he did not find it necessary to decide.