WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

CITATION : 2014 WAIRC 00020

DELIVERED : MONDAY, 20 JANUARY 2014

FILE NO. : B 66 OF 2013

Applicant

AND

TNT Australia Pty Ltd (41 000 495 269)

Respondent

Catchwords : Industrial law – Contractual benefits claim – Commission and Bonus Scheme – Claim for commission payments – Letter of offer and checklist of attachments – Express incorporation and the words “abide by” – Entire agreement clause – Exclusion clause – Implied terms – Mutual trust and confidence – Duty of cooperation – Variation to the contract – Notice – Consideration – Managerial discretion – Principles applied – Circumstances, context and intention – Construction of the Scheme – Scheme did not have contractual effect – Application dismissed

Legislation : Industrial Relations Act 1979 (WA) ss 7, 29(1)(b)(ii)

Result : Application dismissed

Representation:

Counsel:

Applicant : Mr S Ferguson of counsel

Respondent : Mr N Furland of counsel

Case(s) referred to in reasons:

Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99

Balfour v Travelstrength Limited (1980) 60 WAIG 1015

Barker v Commonwealth Bank of Australia (2012) 296 ALR 706

BP Refinery (Westernport) Pty Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266

Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337

Commonwealth Bank of Australia v Barker (2013) 214 FCR 450

Con-Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226

F.A. Tamplin Steamship Company, Limited v Anglo‑Mexican Petroleum Products Company, Limited [1916] 2 AC 397

GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1

Goldman Sachs JBWere Services Pty Limited v Nikolich [2007] FCAFC 120

Hotcopper Australia Ltd v Saab (2001) 81 WAIG 2704

MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451

Perth Finishing College Pty Ltd v Watts (1989) 69 WAIG 2307 

Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193

Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165

Wigan v Edwards (1973) 47 ALJR 586

Yousif v Commonwealth Bank of Australia (2010) 193 IR 212

Case(s) also cited:

Ahern v The Australian Federation of Totally and Permanently Incapacitated Ex-Service Men and Women (Western Australian Branch) Inc [2000] WASCA 80

Ajax Cooke Pty Ltd v Nugent (1993) 5 VIR 551

Akmeemana v Murray (2009) 190 IR 66

Al-Safin v Circuit City Stores Inc. (2005) 394 F 3d 1254

Anderson v Douglas & Lomason Company (1995) 540 NW 2d 277

Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147

Barry Bainbridge v Circuit Foil UK Ltd [1997] EWCA Civ 1016

Bauman v Hulton Press Ltd [1952] 2 All ER 1121

Bekker NO v Total South Africa (Pty) Ltd [1990] 3 SA 159

Belo Fisheries v Froggett (1983) 63 WAIG 2394

Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20

Buckland v Bournemouth University Higher Education Corporation [2011] QB 323

Byrne v Australian Airlines Ltd (1995) 185 CLR 410

Cadoux v Central Regional Council [1986] IRLR 131

Clark v Nomura International Plc [2000] IRLR 766

Cohen v Clean Image Cleaning Services WA [2012] WAIRC 00713

Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520

Concut Pty Ltd v Worrell (2000) 176 ALR 693

Construction, Forestry, Mining and Energy Union v HWE Mining Pty Ltd [2011] FWA 8288

Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd [2005] NSWSC 1005

Criniti v Scott Turner - Vip Publishers and Adconnect Local Marketing [2011] WAIRC 937

Davis v Blaxland Pty Ltd (2002) 82 WAIG 475

Derksen v Wasa Insurance Co (1994) 4 BCLR 3d 73

Dietrich v Dare (1980) 30 ALR 407

Eley v Potato Marketing Corporation of Western Australia (2013) 93 WAIG 213

Eshuys v St Barbara Ltd [2011] VSC 125

EzishopNet Ltd (in liq) v Veremu Pty Ltd [2003] NSWSC 156

French v Barclays Bank Plc [1998] IRLR 646

Hall v Busst (1960) 104 CLR 206

Hanson v Royden (1867) LR 3 CP 47

Hart v Macdonald (1910) 10 CLR 417

Hartley v Cummings (1847) 5 Comb 247

Hartley v Ponsonby (1857) 119 ER 1471

Hawkins v Clayton (1988) 164 CLR 535

Hilton v Shiner Builders Merchants [2001] IRLR 727

Horkulak v Cantor Fitzgerald International [2005] ICR 402

Horwood v Millar's Timber & Trading Co Ltd [1917] 1 KB 305

Jackson v Iustini Holdings Trading As Doors Plus (2001) 81 WAIG 1215

Johnson v Unisys Ltd [2003] 1 AC 518

Knight v Alinta Gas Ltd (2002) 82 WAIG 2392

Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 5

La Rosa v Nudrill Pty Ltd [2013] WASCA 18

Larkin v Boral Construction Materials Group Ltd (2003) 83 WAIG 929

Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60

Lloyd's Bank Ltd v Cooke [1907] 1 KB 794

Maier v E & B Exploration Ltd [1986] 4 WWR 275

Malik v Bank of Credit and Commerce International SA [1998] AC 20

Manufacturers' Mutual Insurance Ltd v Withers (1988) 5 ANZ Ins Cas 60

Matthews v Cool Or Cosy Pty Ltd (2004) 84 WAIG 2125

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457

McDonald v Parnell Laboratories (Aust) Pty Ltd [2007] FCA 1903

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377

Miles v Brendon Penn Nominees Pty Ltd [2006] WAIRC 05752

Moschi v Lep Air Services Ltd [1973] AC 331

Mouritz v Hegedus [1999] WASCA 1061

Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197

Onuoha v PEP Community Services Inc [2011] WAIRC 00402

Pemberton v Civil Service Insurance (2009) 89 WAIG 538

Ramsey v Annesley College [2013] SASC 72

Rankin v Scott Fell & Co (1904) 2 CLR 164

Re London Celluloid Co (1888) 39 Ch D 190

Reynolds v Southcorp Wines Pty Ltd (2002) 122 FCR 301

Rose v TJ & LK Cattle (2012) 92 WAIG 1797

Salomon v Brownfield (1896) 12 TLR 239

Scally v Southern Health & Social Services Board [1992] 1 AC 294

Silverbrook Research Pty Ltd v Lindley [2010] NSWCA 357

Sterling Commerce (Australia) Pty Ltd v Iliff [2008] FCA 702

Stilk v Myrick (1809) 2 Camp 317

Stylianou v Country Realty Pty Ltd As Trustee for the Marcelli Family Trust (2010) 91 WAIG 2028

Sullivan v Janvay Pty Ltd trading as Harvey World Travel, Fremantle (1998) 78 WAIG 3583

Sydney City Council v West (1965) 114 CLR 481

Taylor v Laird (1856) 1 H & N 266

The Australian Rail Tram and Bus Industry Union of Employees West Australian Branch v Public Transport Authority (2005) 85 WAIG 1604

Trimboli v Cusma Corporation Pty Ltd t/as Cusma Property Consultants [2003] WAIRC 8020

Vodafone Pacific Ltd v Mobile Innovations Ltd [2004] NSWCA 15

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Wandsworth London Borough Council v D'Silva [1998] IRLR 193

Waroona Contracting v Usher (1984) 64 WAIG 1500

Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45

Whitwood Chemical Co v Hardman [1891] 2 Ch 416

Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522

Williams v Roffey Brothers & Nicholls (Contractors) Ltd [1991] 1 QB 1

World Best Holdings Ltd v Sarker [2010] NSWCA 24

Young v Canadian Northern Railway Company [1931] AC 83

Reasons for Decision

1         Ms Ferguson was employed by TNT Australia Pty Ltd in May 2010 as a Field Sales Executive.  TNT is a national company engaged in the business of freight and transport services.  Ms Ferguson was based in the Perth office of TNT. In her position, she was responsible for the sales of TNT services to existing and new clients.  Ms Ferguson was employed under a written contract of employment.  In addition to her base remuneration, Ms Ferguson participated in a Commission and Bonus Scheme.  It is this Scheme which is controversial in these proceedings. 

2         Ms Ferguson resigned from her employment on 1 March 2013, by the giving of four weeks’ notice in accordance with her contract of employment.  Ms Ferguson sought clarification of her entitlements under the Scheme, for commission payments for January, February and March 2013, following the tendering of her resignation. Ms Ferguson was informed by TNT management that she had no entitlement under the Scheme to payments of commission, because her employment was terminating at the end of March 2013.  Ms Ferguson disputed this. She claims under the Scheme she is owed some $5,000, despite her resignation. TNT disagrees.  It says it does not owe Ms Ferguson any commission payments under the Scheme, because its terms provide that no commission is payable when a person ceases employment with the company. 

3         Ms Ferguson has now brought the present claim, alleging that TNT has denied her, as a contractual benefit, payments under the Scheme. Two principal issues need to be determined in this matter.  They are: 

(a) Did the Scheme have contractual effect, either on the basis of express incorporation of its terms or were its terms implied into Ms Ferguson’s contract?

(b) If the Scheme did have contractual effect, on a proper construction of its terms, did the Scheme give rise to an entitlement on the facts? 

4         There were a number of subsidiary arguments put by Ms Ferguson and TNT. These issues will be separately identified and dealt with.

Factual setting

5         Affidavits were filed by Ms Ferguson and Mr Godbier, TNT’s General Manager Sales.  Ms Ferguson testified that her offer of employment was contained in a letter from TNT dated 13 May 2010. The offer letter was detailed and ran to some seven pages. It had annexed to it a document entitled “Check list of Attachments”, setting out various policies and procedures of the company.  A second attachment to the letter of offer was a job description for Ms Ferguson’s position. 

6         Formal parts omitted, relevant parts of the letter were as follows. At the commencement, the first two paragraphs provided: 

I am pleased to formally offer you the position of Field Sales Executive with TNT Australia Pty Limited (Company), commencing on 17 May 2010. 

Should you accept this offer, the terms and conditions of your employment will be as follows: 

7         Under the heading “Duties”, the final paragraph was in the following terms:

The terms set out in this letter will continue to govern your employment with the Company despite any changes from time to time to your position, duties and responsibilities, remuneration, working hours or employment location unless otherwise agreed in writing. 

8         For present purposes, the most controversial part of the letter appears under a heading “Policies and Procedures”.  The two paragraphs under this heading read as follows: 

You agree to abide by all policies and procedures of the Company as replaced, amended or varied from time to time, including but not limited to the policies and procedures attached to this letter.  However, the policies and procedures of the Company referred to in this clause and elsewhere in this letter are not incorporated into this letter. 

You must familiarise yourself with these policies and procedures, including the policies and procedures attached and verify acknowledgement by signing the attached checklist confirming you have read and understood the policies and procedures. 

9         At the end of the letter was a heading “Previous understandings and agreements” and the paragraph under it said as follows: 

This letter, which includes the attached position description:

(a) constitutes the whole of the terms and conditions of your contract of employment with the Company; and

(b) supersedes all previous agreements, arrangements, understandings or representations in relation to your employment with the Company. 

10      In the acceptance section of the letter, appeared the words:

I have read and accept employment with TNT Australia Pty Limited on the terms and conditions set out in this letter. 

11      There follows the name and signature of Ms Ferguson (by her maiden name) which is dated 17 May 2010. 

12      It was common ground that the Scheme was not one of the policies and procedures listed on the checklist of attachments attached to Ms Ferguson’s letter of appointment. Ms Ferguson sought to make something of this in her submissions, and I will return to this issue later in these reasons.  Ms Ferguson testified that she was given a copy of the documents referred to in the list with the letter of offer and she said she read them.  She also acknowledged this by her signature accepting the offer of employment. 

13      Once employed, Ms Ferguson testified that she earned commissions, payable monthly, under the Scheme.  There was a three month time lag between a claim being made under the Scheme for a commission payment, and a payment being made. The Scheme was reviewed and updated regularly. Attached to Ms Ferguson’s affidavit, were versions of the Scheme in place in 2010, 2011 and the most recent version as at the time she resigned from her employment, for 2013.  Ms Ferguson testified that the commission payments she received under the Scheme, for both new business and existing customer sales, formed a substantial portion of her total income. 

14      At the beginning of each year, Ms Ferguson said she received a letter from Mr Godbier, setting out her sales targets for that year. A letter of 1 February 2011 also referred to the updated version of the Scheme, which was available on the TNT intranet.  Mr Godbier testified that a full copy of the Scheme was available for all employees to view on the TNT intranet, and which was easily accessed by staff.  He also referred to the requirement for all employees to remain familiar with the Scheme and its various updates. 

15      As noted, on 1 March 2013, Ms Ferguson resigned from the company. She testified that she was not clear as to her entitlements under the Scheme on her resignation. Relevantly, cl 8 of the Scheme, under the heading “General Rules for Participants”, in the 2013 version provided as follows:

8.0  GENERAL RULES FOR PARTICIPANTS

To be eligible for payment of commission/bonus, a member of the scheme must:

8.0.1 Be fully employed by one of the following companies (each referred to as a 'Member Company'):

TNT Australia Pty Limited

Riteway Transport Pty Limited

TNT Express Worldwide (NZ) Pty Limited

TNT Express Worldwide Pty Limited

for the duration of the period of the claim.

8.0.2 Have been in full time employment with a 'Member Company' referred to in clause 8.0.1 for four weeks prior to the first date of any claim and be assigned to a territory.

8.0.3 No consideration will be given to any request for consequential claims by members of the scheme.  The liability of each 'Member Company' referred to in clause 8.0.1 to its respective members is restricted to the period during which a member of the scheme was fully employed by such 'Member Company', with no consideration as to future value after the final date of employment.  For the avoidance of doubt and notwithstanding any other provision in this document, no payments of any type under this Scheme will be paid to a member of the scheme after the termination of the member's employment. (My emphasis)

8.0.4 Have met the criteria for payment as defined in the rules of New Business Bonus and Commission scheme.

8.0.5 New business eligibility is conditional upon the first trade as specified in Section 3. This means that if a sales person leaves/is redeployed and an account has been signed but not traded, then there is no eligibility for commission for that customer. 

8.0.6 If a sales person is redeployed within the Sales Department in a selling role, then entitlement to New Business Commission will run its course until the expiration of the 12 month eligibility period.  This includes moving to Time Critical and Failsafe in a selling role.

8.0.7 If a Manager receiving commission based on their Team's performance moves to a selling role, any New Business Ongoing Commission is forfeited. 

8.0.8 If a sales person is redeployed within TNT, but to a different department or country, New Business commission ceases to be an entitlement. 

8.0.9 New Business Commission will be paid up until the last week of employment for eligible Sales personnel who have resigned from TNT. Such payments will be paid with normal monthly payroll subject to clause 8.0.3 above and not as a lump sum on the last day of employment with TNT. 

8.0.10 In the case of Maternity and Paternity Leave, New Business Commission is payable up until the last day at work. If the person on Maternity/Paternity Leave starts work again within the 12 month New Business commission payment period, then commission is payable from the date that the person recommences work (not retrospectively) up until the 12 month commission eligibility period expires.

8.0.11 All monetary amounts in this document are in the local currency (ie AU$,NZ$ or FJ$) relevant to the country in which scheme participant receiving the payment resides.

16      Ms Ferguson said she spoke to her manager about the matter, and in turn, the TNT head office.  On 17 March 2013, the TNT Director Sales and Marketing, confirmed that under cls 3.6.7, 8.0.3 and 8.0.9 of the Scheme, no payments were made to employees following the termination of their employment.  Mr Godbier in his testimony confirmed that this had been the longstanding practice of the company.  He said that an employee must be actually employed to receive a “New Business Commission” under the Scheme.  Mr Godbier said that claims by employees for payment of commission after their employment had ended, are not paid.  This includes claims based on revenue received by TNT, at a time when the person was still employed. 

17      In relation to cl 8 of the Scheme, Mr Godbier testified that following a claim by an employee for commission payments after their employment had ended cl 8.0.3 was changed to reflect the current provision.  He said that this was done so it would be completely clear to employees, that no payment under the Scheme of any type, are payable after termination of employment. 

18      Further, Ms Ferguson suggested that neither she nor those in the Perth office of the company were aware of the changes to cl 8 made in 2011, and Ms Ferguson submitted, this was deliberate. This was denied by TNT.  Mr Godbier said amendments to the Scheme were noted in the “Amendment Detail” table at the back of the Scheme document.  This contained a summary note of the change, which was often expressed in a generic format. 

19      Ms Ferguson maintained that at all times she considered that she should be paid for commission payments for January, February and March 2013, based on the work she had performed.  She said that she was never told these amounts would be effectively forfeited, on her resignation. 

Relevant legal principles

Contractual benefits claim

20      On a claim made by an employee or a former employee under s 29(1)(b)(ii) of the Act, the onus is on the applicant to establish that the benefit claimed, was one arising under their contract of employment.  To establish such a claim, the claim must relate to an “industrial matter”, as set out in s 7 of the Act; the claim must be made by an “employee” as defined in s 7 of the Act; the benefit claimed must be a contractual benefit, as an entitlement under the contract of service; the subject contract must be a contract of service; the benefit must not arise under an award or order of the Commission; and the benefit must also have been denied:  Hotcopper Australia Ltd v Saab (2001) 81 WAIG 2704.  To be “entitled”, to such a benefit, the employee or former employee must establish that the relevant benefit claimed arises under, by virtue of or pursuant to their contract of employment:  Perth Finishing College Pty Ltd v Watts (1989) 69 WAIG 2307. Furthermore, the meaning of “benefit” has been defined broadly, to include any “advantage, entitlement, right, superiority, favour, good or perquisite by the action of the employer in contravention of a provision of the contract of service”: Balfour v Travelstrength Limited (1980) 60 WAIG 1015. 

Interpretation of contracts

21      The contemporary approach to contractual interpretation is to have regard to the meaning of a contractual provision that a reasonable person in the position of the parties at the time the contract was made, would have, in the context of the surrounding circumstances and the purpose and object of the transaction: Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165. This involves an objective assessment. The subjective intention of the parties is not relevant: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451. 

22      The focus is on the text of the contract, which is to be given its ordinary and natural meaning. There is no reason to depart from the ordinary and natural meaning unless the terms in question are unclear or ambiguous, or would lead to an absurdity or inconsistency: Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99.  Furthermore, it is not generally permissible to look to extrinsic material, unless there is some ambiguity in the terms of the relevant contract: Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 per Mason J. 

23      In cases where a contract contains an “entire agreement” clause, this generally prevents the conclusion that the contract may contain further express provisions or the existence of a collateral contract:  MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152 per Davies JA at 156. However, this does not preclude the implication of a term for example, of good faith and fair dealing: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 128 FCR 1.

Was the Scheme a contractual entitlement?

Express incorporation

24      In very detailed written submissions, Ms Ferguson contended that the Scheme was incorporated into her contract of employment by reason of the language used in the letter of appointment. In particular, Ms Ferguson focussed on the words “abide by” in the letter of appointment, in the policies and procedures clause.  It was contended, that when regard is had to other cases, such as Riverwood International Australia Pty Ltd v McCormick (2000) 177 ALR 193, the use of such a phrase reflects an intention by the parties to offer and accept mutual obligations in accordance with the terms of the Scheme (per North J at par 107).  Further, Ms Ferguson submitted that by reason of the level of detail in the Scheme and the fact that it creates substantial rights, this reinforces the view that objectively, the parties intended the secondary document to have contractual effect. 

25      Ms Ferguson also pointed to the bureaucratic process she said she had to use to participate in the Scheme. Forms had to be completed. She had to “register” under the Scheme, before she could participate in it.  In support of the contractual nature of the Scheme, Ms Ferguson also made reference to letters she received each year from TNT, suggesting she would be rewarded under the Scheme. 

26      Taking all of these matters into account, Ms Ferguson contended that a reasonable person in the position of the parties would assume that the terms of the Scheme conferred, as a matter of contract, the benefit of participation in it and the rewards that flowed from its terms. This was so, on Ms Ferguson’s submissions, despite the second sentence in the policy clause, to the effect that policies and procedures of the company were “not incorporated into this letter”.  Whilst Ms Ferguson accepted that this part of the clause was a “hurdle”, it was not insurmountable, given the other factors to which I have referred. 

27      It was also contended that in this case, there appears no exclusion clause in the Scheme itself.  This is in contrast to cases such as Yousif v Commonwealth Bank of Australia (2010) 193 IR 212 and Barker v Commonwealth Bank of Australia (2012) 296 ALR 706. Ms Ferguson emphasised the importance of context, despite the existence of the exclusion clause in the policies in these cases. A further contention put by Ms Ferguson, was to the effect that as the Scheme was not on the “check list” attached to the letter of offer, it was removed from any operation of the exclusion clause in any event. 

28      Taking this last proposition first, I do not accept that it can be concluded that because the Scheme is not mentioned in the list on the attachment to the letter of offer, it means no reference can be made to the Scheme when considering the exclusion clause. The first sentence of the policies clause clearly refers to “all policies and procedures of the Company”. Further, in the same sentence, the words “including but not limited to the policies and procedures attached to this letter”, appear.  The combined effect of these words in the clause is to make it plain that the policies and procedures list attached to the letter of offer is not in any sense exhaustive. There is no doubt in my view, that the Scheme was a policy and procedure for the purposes of the clause at the material time. 

29      Whether an employer is to be taken to commit itself contractually to a particular policy in the workplace, is to be concluded from all of the circumstances and the context of each case.  I reject the proposition that an employer can only require an employee to observe a particular policy, as an obligation on the employee, with the consequence of disciplinary action if not complied with, only if, as a corollary, the employer must bind itself contractually to such a policy. To so conclude, would be to completely disregard, and render almost nugatory, an employer’s right, as an incident of an employment contract, to require an employee to comply with lawful and reasonable directions, given by an employer, from time to time. 

30      In this case, the obligation on Ms Ferguson to familiarise herself with and “abide by” the policies and procedures of TNT, was an obligation the company was able to lawfully and reasonably impose on an employee.  If Ms Ferguson failed to do so, she may have been subject to disciplinary action.  Absent other indications in the letter of offer, or the Scheme document itself, it may also, consistent with cases such as Goldman Sachs JBWere Services Pty Limited v Nikolich [2007] FCAFC 120, and depending on the entire context, be open to conclude that the policies and procedures concerned created enforceable contractual obligations. 

31      However, in this case, unlike in Nikolich, and as in Yousif and Barker, there were clear indications in the contract documents that such policies and procedures did not have contractual effect.  The statement in the policies and procedures clause of the letter of offer, referred to above, is clear and unambiguous. In my view, a reasonable person in the position of the parties could be in no doubt as to the meaning and intention to be gleaned from the policies and procedures clause in the letter of appointment. Ms Ferguson’s evidence was she carefully read and understood the letter of offer and policies and procedures as outlined in the checklist of attachments. This policies and procedures clause in the offer of employment is a fundamental barrier to Ms Ferguson’s claim for the recovery of a denied contractual benefit. 

32      However and furthermore, the policies and procedures clause in Ms Ferguson’s letter of appointment should not be read in isolation. When considered in the context of other provisions of the letter of offer, the issue is put beyond doubt in my view. The entire agreement clause, set out above at par 9, is of significance.  It is clear from its terms, that it is only the letter of offer and the attached position description that constituted the contract of employment between Ms Ferguson and TNT.  In my opinion, there is no reason, despite Ms Ferguson’s submissions to the contrary, to not give plain effect to this entire agreement clause. It reinforces the express terms of the policies and procedures clause, to the effect that while Ms Ferguson was required to comply with the company’s policies and procedures, they were not incorporated into the contract of employment. 

33      Additionally, the terms of the letter of appointment specifying that it will continue to govern Ms Ferguson’s employment with TNT, regardless of identified changes, “unless otherwise agreed in writing”, is a further indicator of the contract of employment being limited to the express terms of the letter of appointment, including Ms Ferguson’s job description. 

34      When regard is had to these provisions of Ms Ferguson’s letter of appointment, expressed as they are in clear and unambiguous language, from the four corners of the letter of appointment, the conclusion is compelling that a reasonable person in the position of the parties at the time the contract was entered into, could only conclude that the terms and conditions of Ms Ferguson’s contract of employment, were limited to those set out in the letter of offer.  To conclude otherwise, would be to disregard the plain language of the written contract of employment itself.

35      As to the issue of the Scheme as an implied term, I turn to those contentions now. 

Implied term

36      A number of arguments were advanced by Ms Ferguson in support of the proposition that the Scheme formed an implied term of the contract of employment between her and TNT. The first basis contended by Ms Ferguson was applying the “business efficacy” principle. This principle was espoused by the Privy Council in BP Refinery (Westernport) Pty Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266.  In this case, Lord Simon of Glaisdale observed at 283: 

In their [Lordships] view, for a term to be implied, the following conditions (which may overlap) must be satisfied:  (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that it “goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract. 

37      The principle in BP Refinery has been considered and adopted by the High Court.  In Codelfa, Mason J said at 346: 

The implication of a term is to be compared, and at the same time contrasted, with rectification of the contract.  In each case the problem is caused by a deficiency in the expression of the consensual agreement.  A term which should have been included has been omitted.  The difference is that with rectification the term which has been omitted and should have been included was actually agreed upon; with implication the term is one which it is presumed that the parties would have agreed upon had they turned their minds to it – it is not a term that they have actually agreed upon.  Thus, in the case of the implied term the deficiency in the expression of the consensual agreement is caused by the failure of the parties to direct their minds to a particular eventuality and to make explicit provision for it.  Rectification ensures that the contract gives effect to the parties’ actual intention; the implication of a term is designed to give effect to the parties’ presumed intention. 

38      Thus, Mason J was commenting on the failure by the parties to the contract to direct their minds to the subject matter of the terms sought to be implied. 

39      The immediate problem confronting Ms Ferguson in relation to this issue is, for the reasons I have set out in some detail above, the parties in this case have turned their minds to the issue of the status of the company’s policies and procedures and other documents, standing outside of the detailed letter of offer.  As I have found, it was an express term of the contract that TNT policies and procedures are not to be taken to be incorporated into the contract of employment. This conclusion is not just based on the policies and procedures clause itself, but also, as I have set out earlier in these reasons, from a reading of the letter of offer as a whole, in its ordinary and natural grammatical sense.  If, as Ms Ferguson contended, the Scheme is to be implied as a term of the contract, it would deprive the policies and procedures clause, and the others to which I have referred, of any real meaning. 

40      This issue was explained in F.A. Tamplin Steamship Company, Limited v Anglo‑Mexican Petroleum Products Company, Limited [1916] 2 AC 397 where Lord Parker of Waddington said at 422‑423: 

It is, of course, impossible to imply in a contract any term or condition inconsistent with its express provisions, or with the intention of the parties as gathered from those provisions.  The first thing, therefore, in every case is to compare the term or condition which it is sought to imply with the express provisions of the contract, and with the intention of the parties as gathered from those provisions, and ascertain whether there is any such inconsistency. 

41      I am therefore not persuaded by Ms Ferguson’s submission that the Scheme can be said to satisfy the tests in BP Refinery to stand as an implied term of the contract. 

42      A further proposition advanced by Ms Ferguson was to the effect that the Scheme is to be implied into her contract based on custom and usage.  It is the case that a term may be implied into a contract based on an established custom and usage.  The principle was explained in the decision of the High Court, Con‑Stan Industries of Australia Proprietary Limited v Norwich Winterthur Insurance (Australia) Limited (1986) 160 CLR 226. In this case, the Court (Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ) held at 236‑238 that (1) the existence of an implied term based on custom and usage is a question of fact; (2) the term relied on must be so well known as to be notorious to all those in the trade or industry concerned; (3) it must not contradict an express term of the contract; and (4) knowledge of the term is not necessary before it will be implied. 

43      As with the implication of the Scheme as a term based on the business efficacy test, the custom and usage principle founders as, in this case, to imply it, would fly in the face of the express terms of the contract in relation to the status of the policies and procedures of TNT. Furthermore, and equally problematic for Ms Ferguson, is the fact that there is no evidence before the Commission of the Scheme’s existence as a “notorious fact” such that anyone entering into a contract of employment with TNT would know of the Scheme’s existence and operation and that it would be an assumed part of any contract of employment entered into. As to the proposition of a prior course of dealing between the parties, consistent with the submissions of TNT on this issue, the evidence before the Commission, through Mr Godbier, was to the effect that it has been the past practice that commissions under the Scheme are not paid after termination of employment. This evidence was at odds with the case advanced by Ms Ferguson on this issue. 

44      The next basis contended by Ms Ferguson for the implication of the Scheme as a term of the contract, was in reliance on the proposition of mutual trust and confidence, said to be implied into the contract. This term is said to be implied, following the decision of the Full Court of the Federal Court in Commonwealth Bank of Australia v Barker (2013) 214 FCR 450. The existence of such a term in Australia is controversial and the decision of the Full Court in Barker is presently on appeal before the High Court.  However, even if such an implied term exists, a breach of it would give Ms Ferguson a right to claim damages at common law. That right, as a cause of action, is not of itself in my view, a contractual benefit capable of being the subject of an order of the Commission in proceedings of this kind. It must be borne in mind that Ms Ferguson has sought the recovery of a specific contractual benefit, in the form of commission and bonus payments, not any other form of benefit.

45      Equally problematic for Ms Ferguson, even if such a term could be implied and a breach led to an order for a denied contractual benefit, any such breach would need to be sufficiently serious to give rise to a remedy.  In this case, the evidence points to no other conclusion than that TNT has consistently applied the Scheme based upon its view of its operation and effect. For a breach of an alleged implied term of trust and confidence to be established, it would need to be found that the company has conducted itself without reasonable or proper cause, inconsistently with its policies and procedures, and such conduct was likely to destroy or seriously damage the relationship of trust and confidence between the parties. There is no evidence to support such a proposition. 

46      The same conclusions may be reached in relation to Ms Ferguson’s submissions that the implied duty of cooperation, if breached, supports a finding of a denied contractual benefit. I am therefore not persuaded that Ms Ferguson had a contractual benefit to the terms of the Scheme, based on the implication of such a term into her contract of employment.

Variation to contract 

47      There were further submissions made by Ms Ferguson to the effect that despite the entire agreement clause in the letter of offer, the Scheme could be regarded as going beyond the terms of the original offer of employment, amounting to a subsequent variation to her contract of employment. In response to TNT’s answer that Ms Ferguson provided no fresh consideration for this variation, Ms Ferguson submitted that her requirement to “over achieve”; to “exceed targets” and to “exceed certain criteria” all pointed to her performing other than an existing legal obligation.  For the following reasons, I do not consider this to be so. 

48      It is trite that the existence of consideration, in the form a benefit moving from the promisee to the promisor, being the agreed price for the promissor’s promise, is essential in the formation of a contract (see generally Lindgren KE, ‘Consideration’ in Lindgren KE et al Contract Law in Australia (1986) 75-130).  Consideration needs to have some value in the eyes of the law, but its adequacy is not relevant. In the case of employment contracts, the consideration for the employer’s promise to pay an employee’s salary is the employee’s performance of work, encapsulated in the “wages for work” bargain (see generally Sappideen C, O’Grady P and Warburton G, Macken’s Law of Employment (6th ed, 2008) 118). 

49      In this case, Ms Ferguson was obliged by her contract of employment to work to the best of her capacity as an employee of TNT.  Participation in the Scheme did not require employees to do what they had otherwise promised to do, that being to perform their duties, to the best of their ability, in accordance with their contracts of employment. In Ms Ferguson’s case, that involved selling TNT’s products and achieving her sales targets given to her each year. This was an existing legal obligation under her then contract of employment and could not constitute fresh consideration: Wigan v Edwards (1973) 47 ALJR 586. 

50      However, if I am incorrect in relation to contentions advanced by Ms Ferguson in her submissions, and the terms of the Scheme were a benefit under her contract of employment, I will now turn to consider the terms of the Scheme itself.

Terms of the Scheme – did Ms Ferguson meet them?

51      Ms Ferguson gave evidence as to the operation of the Scheme. She described payments under it as being made monthly, with a three month time lag.  She was paid the commissions along with her usual salary.  The criteria for the payment of commissions were referred to by Ms Ferguson. These criteria are all set out in the copy of the 2013 version of the Scheme, on which Ms Ferguson’s present claim is based. Ms Ferguson referred to the Scheme being regularly reviewed and her receiving a letter at the start of each year, setting out the company’s direction for that coming year.  Attached to her affidavit, at ALF 7, ALF 8 and ALF 9 were copies of letters from Mr Godbier, to this effect.

52      In particular, the letter of 1 February 2011 from Mr Godbier, referred to by Ms Ferguson, included a copy of the updated Scheme’s terms and conditions for that year. It was this update, which included the revised terms of cl 8.0.3.  Ms Ferguson also acknowledged that sales staff had been referred to the TNT intranet, where the latest versions of the Scheme could be accessed by staff.  I interpose to observe, that by her contract of employment, Ms Ferguson, along with other sales employees, was required to maintain a current knowledge of the company’s policies and procedures, all of which were available on the company’s intranet. 

53      From the terms of the Scheme, it provides an incentive and reward for sales staff to achieve and exceed their sales objectives: cl 1.0.  There are two broad types of commission payments available under the Scheme:  New Business and Cross Sell commissions: cl 3.0. From its terms, there appears to be quite strict rules regarding the application of the Scheme.  For example, all sales staff have to be registered to participate: cl 2.0. Eligibility for commissions and bonuses is dependent on sales transactions taking place within a 13 week “Eligible Period”.  All claims for commissions must be submitted within 14 days of a second “trade”: cl 3.4.1 ‑ 3.4.2. Subject to what is described as a “genuine special circumstance”, any claims submitted outside of this 14 day period are considered “late claims” and are not processed: cl 3.6.5 ‑ 3.6.6. 

54      As noted earlier in these reasons, all approved claims are paid within a 3 month time lag from the date of approval: cl 3.6.7.  This is subject to the proviso in the general rules for Scheme participants, in cl 8.0.3, set out above.  There are also other exclusions and exceptions in the Scheme.  For example, managers of TNT who participate in a team performance bonus and who move into a sales position, forfeit their commissions: cl 8.0.7. Similarly, if a salesperson moves to a non‑selling position, they cease to be entitled to commissions:  cl 8.0.8.  Those on maternity and paternity leave, cease to have any entitlements to commissions under the Scheme, beyond the last day prior to proceeding on leave:  cl 8.0.10. 

55      When these provisions of the Scheme are read with the terms of cl 8.01 ‑ 8.03 of the general rules, it seems that the Scheme is intended to reward staff whilst they are employed by TNT and related companies, are at work and are performing their duties in a sales position. 

56      Turning then to the controversial provision in cl 8.0.3. Ms Ferguson in her submissions sought to draw a distinction between “past value” commission payments and “future value” commission payments. The former were said to be those earned prior to the termination of Ms Ferguson’s employment on 29 March 2013. The latter payments were said to be those for value generated after the termination of her employment. However, the scheme itself draws no such clear distinction. No doubt Ms Ferguson sought to draw this distinction from the terms of cl 8.0.3, which refer to “consequential claims” and “future value”.  These phrases are less than clear. However, as with all cases of interpretation, the meaning of particular words in a contract, or in this case, a policy, is to be gleaned from the context in which the words appear. From the first two sentences of cl 8.0.1, it seems the reference to “consequential” claims by members, is referring to the rule in the second sentence, that no entitlements will survive the termination of a member’s employment. 

57      The third sentence of cl 8.0.3 puts the issue beyond doubt in my view.  It was the case that this sentence was included in cl 8.0.3 from February 2011, on Mr Godbier’s testimony.  Regardless of the correctness of the view that there is no distinction under the terms of the Scheme between “past value” commissions and “future value” commissions, it is difficult to imagine a clearer statement of entitlement, under the Scheme, than the third sentence of cl 8.0.3.  The sentence refers to payments of “any type” under the Scheme. When read with the remainder of cl 8.0, in the context of the operative parts of the Scheme as a whole, it is clear in my view, that for Ms Ferguson to be entitled to commission payments for January, February and March 2013, she would need to be employed by TNT in April, May and June 2013 respectively. She was not so employed.  Ms Ferguson has not established an entitlement under the Scheme, even if the Scheme was to be considered a contractual benefit.

58      There were two further submissions made by Ms Ferguson. These related to whether, if TNT’s interpretation of cl 8.0.3 of the Scheme was correct, Ms Ferguson had sufficient notice of the change to it in February 2011. The second argument put was whether, in the circumstances, any discretion that TNT may have had under the Scheme to pay a commission or bonus, was lawfully exercised.  I will deal with each of these contentions in turn.

Notice of the variation to the Scheme

59      The nub of Ms Ferguson’s submission on this issue was that the change to cl 8.0.3 in February 2011 was substantial and should have been brought to her attention specifically.  In reliance on cases such as Riverwood, it was submitted that courts are reluctant to uphold an employer’s power to vary a contract unilaterally, the absence of clear words to the contrary.  It was also submitted that whether the variation is to the benefit of the employer or employee is also relevant. If it is the former, then adequate notice becomes more important. The contention was also put that cl 8.0.3 operated as an exclusion clause, and, accordingly, should be construed consistent with the principles applicable to them in contracts.  In particular in relation to putting a party to the contract clearly on notice as to its terms.  

60      The first point to note in relation to these submissions is that, as I have found above, the terms of the Scheme in this case did not have contractual effect and were not incorporated into Ms Ferguson’s contract of employment. Thus any changes to the Scheme, or other policies and procedures for that matter, would not, from the perspective of a reasonable bystander, be seen to contractually bind the parties. The cases referred to and relied on by Ms Ferguson, dealt with situations where changes to external documents, such as manuals, had contractual effect. In those circumstances, one can perhaps appreciate the need for some specific notification, in particular, in cases where the changes made may disadvantage an employee. Similar observations can be made about exclusion clauses. I have doubts however, as to whether the exclusion clause analogy applies in this case. Such clauses usually seek to limit liability for breach of a contract. No issue of breach of contract, in this sense, arises in this case.

61      Secondly, it is relevant to note, as submitted by TNT, that Ms Ferguson was on notice of the updated version of the Scheme from Mr Godbier’s letter of 1 February 2011.  A copy of the 2011 Scheme, annexed as ALF 5 to Ms Ferguson’s affidavit, was provided to her at the time. The general rules for Scheme participants were then cl 9 and not cl 8.  Ms Ferguson had been employed since May 2010 and had been a Scheme participant for some time by then. It is reasonable to assume that she would have been broadly familiar with its operation by that time.  She certainly was quite familiar with the operation of the Scheme in her testimony.

62      In any event, Ms Ferguson gave evidence that the Scheme was regularly updated and was aware of her obligation to remain familiar with its terms. The terms of the general rules section of the Scheme are not overly complicated and a cursory reading of the then cl 9.0.3, would have put Ms Ferguson on notice that no payments under the Scheme would be made to an employee after termination of their employment. Whilst with the benefit of hindsight, it may have been better for TNT to have noted the specific change then made, it is not open to conclude in my view, that Ms Ferguson did not have adequate notice of the change at the time.  Nor in my view, based on the evidence in this matter, is it open to draw an inference that there was any deliberate attempt to conceal the change made.  Whilst on Mr Godbier’s evidence the change made in February 2011 was described in the “Document Amendment Record” in generic terms that was also the case with many other changes to the Scheme referred to in the list. No adverse inference can be drawn from this in my view.  I also note Mr Godbier’s evidence that from time to time queries are raised with him by sales staff about the Scheme’s operation.  He testified that he has never discouraged staff from doing so and has answered such queries to the best of his ability.

63      It is also relevant to observe, as pointed out in TNT’s submissions, that Ms Ferguson had been working under the Scheme as amended for over two years and taken the benefits of it, before she resigned and commenced these proceedings.

 Unlawful exercise of discretion

64      The final submission made by Ms Ferguson was that the company has exercised its discretion under the Scheme in an unlawful manner. It was contended that the operation of the three month time lag meant that Ms Ferguson had no entitlement under the Scheme for the last three months of commissions and this was inherently unfair. The submission was that TNT did have discretion under the Scheme to make a payment to Ms Ferguson and the company should have exercised it in this case.

65      It is not clear how, under the Scheme, such discretion could have been exercised in this case. Whilst Ms Ferguson referred to cl 1.0, by partial reference to “payment rulings outside of the stated rules”, a full reading of this clause makes it clear the intention of the Scheme rules is to avoid the need for any such rulings.

66      There is no doubt that where discretion is conferred on a person, in this case, an employer, such discretion should not be exercised capriciously or in an arbitrary manner. A remedy may be available if this obligation is breached.  However, in this case, based on the construction of the Scheme’s terms that I prefer, Ms Ferguson has not established an entitlement to a commission and no issue of discretion arises in this case. The terms of cl 8.0.3 are very clear and as mentioned earlier in these reasons, other provisions of the Scheme point to quite stringent requirements being imposed for eligibility and other matters. These requirements are spelt out in the Scheme in plain terms and a participant could be under no reasonable misapprehension about them in my view.          

Conclusion

67      Accordingly, despite the valiant attempt by Ms Ferguson to persuade the Commission to the contrary, the application must be dismissed.