Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Bibby Financial Services Australia Pty Limited v Sharma [2014] NSWCA 37
• Hearing dates: 12 August 2013
• Decision date: 05 March 2014
• Before: Beazley P at [1]; Barrett JA at [13]; Gleeson JA at [14]

Decision

1. Appeal dismissed.

2. Appellant to pay the respondent's costs of the appeal.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: CONTRACT - Whether employment contract terminated without cause or terminated for cause for serious misconduct - Whether election was made between available grounds for termination - Whether subsequent conduct amounted to a withdrawal of termination - Whether compliance with process for termination for serious misconduct - Whether non-compliance rendered the asserted termination for cause invalid and of no effect - Whether proper grounds available on the facts for termination for serious misconduct - Whether employee had an accrued right which remained even if terminated for cause; EVIDENCE - Standard of Proof - Briginshaw Standard - clear and cogent proof of serious allegations; EVIDENCE - Standard of Proof - s140(2) Evidence Act - gravity of the matters alleged - clear and cogent proof of serious allegations; HUMAN RIGHTS - Discrimination - Sex Discrimination - Sexual Harassment - s28A Sex Discrimination Act - Whether incidents relied upon constituted sexual harassment
• Legislation Cited: Evidence Act 1995 (NSW), s140(2)(c); Sex Discrimination Act 1984 (Cth), s28A; Supreme Court Act 1970, s 75A
• Cases Cited: Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570; Association of Quality Child Care Centres of NSW v Manefield [2012] NSWCA 123; Bale v Mills [2011] NSWCA 226; 81 NSWLR 498; Birrell v Australian National Airlines Commission (1984) 5 FCR 447; Blyth Chemicals Ltd v Bushnell [1933] HCA 8; 49 CLR 66; Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336; Cavenagh v Williams Evans Ltd [2012] EWCA Civ 697; [2013] 1 WLR 238; Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394; Concut Pty Ltd v Worrell [2000] HCA 64; 176 ALR 693; Coulton v Holcombe [1986] HCA 33; 162 CLR 1; Director General of Department of Community Services; re Sophie [2008] NSWCA 250; Downer EDI Ltd v Gillies [2012] NSWCA 333; 92 ACSR 373; Hodgson v Amcor Ltd; Amcor Ltd and others v Barnes and others [2012] VSC 94; Holcombe v Coulton (Court of Appeal (NSW), 25 June 1985, unreported); Khoury v Government Insurance Office (NSW) [1984] HCA 55; 165 CLR 622; Kuru v New South Wales [2008] HCA 26; 236 CLR 1; McDonald v Denny's Lascelles Ltd [1933] HCA 25; 48 CLR 457; Metwally v University of Wollongong [1985] HCA 28; 60 ALR 68; Midya v Sagrani [1999] NSWCA 187; Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; 67 ALJR 170; O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310; Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; 136 CLR 444; Palmer v Dolman [2005] NSWCA 361; Qantas Airways Ltd v Gama [2008] FCAFC 69; 167 FCR 537; Sargent v ASL Developments Ltd [1974] HCA 40; 131 CLR 634; Sharma v Bibby Financial Services Australia Pty Ltd [2012] NSWSC 1157; Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; 45 CLR 359; Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; 166 CLR 245; Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418; University of Wollongong v Metwally (No 2) [1985] HCA 28; 60 ALR 68; Water Board v Moustakas [1988] HCA 12; 180 CLR 491; Zhu v Sydney Organising Committee for the Olympic Games & Ors [2001] NSWSC 989
• Texts Cited: Australian Human Rights Commission, Effectively preventing and responding to sexual harassment: A Code of Practice for Employers (2008 ed.); Professor John Carter, Carters Breach of Contract, (2011 LexisNexis Butterworths)
• Category: Principal judgment
• Parties: Bibby Financial Services Australia Pty Limited (Appellant); Ashley Lalit Sharma (Respondent)
• Representation: Counsel: J K Kirk SC with T O Prince (Appellant); G P McNally SC with D C P Stewart (Respondent); Solicitors: Allens (Appellant); People + Culture Strategies (Respondent)
• File Number(s): 2012/314833

Decision under appeal

• Jurisdiction: 9111
• Citation: Ashley Lalit Sharma v Bibby Financial Services Australia Pty Ltd [2012] NSWSC 1157
• Date of Decision: 2012-10-12 00:00:00
• Before: Bergin CJ in Eq
• File Number(s): 2009/291197

Judgment

1 BEAZLEY P: I have had the advantage of reading in draft the reasons of Gleeson JA. I agree with his Honour's reasons save in respect of his conclusion as to whether the appellant, Bibby Financial Services Australia Pty Ltd (Bibby), should have been permitted to raise a new issue on appeal: see reasons of Gleeson JA at [92] ff.

2 In Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418 the High Court observed, at 438, that an appellate court will not permit a new point to be taken on appeal where "evidence could have been given there which by any possibility could have prevented the point from succeeding". This remains the fundamental principle governing the circumstances in which a new point may be taken on appeal. It has been considered both by the High Court and this Court as different circumstances have arisen for its application.

3 Thus, in O'Brien v Komesaroff [1982] HCA 33; 150 CLR 310 Mason J observed that the Court may permit a new point to be raised, where, relevantly to the present matter, the facts were either admitted or beyond controversy.

4 In University of Wollongong v Metwally (No 2) [1985] HCA 28; 60 ALR 68 at 71, in a passage approved in Coulton v Holcombe [1986] HCA 33; 162 CLR 1 at 8, the High Court stated:

"It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case had been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so."

5 The Court of Appeal in Holcombe v Coulton (Court of Appeal (NSW), 25 June 1985, unreported), in a passage endorsed by the High Court, explained the importance of the principle in the public interest:

"... the finality of litigation; the difficulty of inducing an appeal court to consider new facts; the undesirability of encouraging tactical decisions not to present an issue at first instance: keeping it in reserve for appeal; and the need for vigilance to avoid injustice to a party having to meet new facts and new issues of law for the first time at the appeal court."

6 The principle is of long standing.

7 It also needs to be recognised, as Mason P pointed out Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 that:

"... a party does not have a right to insist that a new point be decided on appeal simply because all of the fact have been established beyond controversy ... This is because it remains a question of whether the appellate court 'may find it expedient and in the interests of justice to entertain the point': Water Board v Moustakas [1988] HCA 12; 180 CLR 491 at 497."

That facts have been found beyond controversy will invariably be a relevant consideration but there may be other considerations such that the Court will not allow the new issue to be raised.

8 The fact that an appeal to this Court is by way of rehearing does not answer the question whether a new point should be allowed on the appeal: Supreme Court Act 1970, s 75A; Association of Quality Child Care Centres of NSW v Manefield [2012] NSWCA 123 at [134]. It may also be a nice question in a particular case whether the facts found by the trial judge are all the relevant facts or "have been proved beyond controversy". This is because litigation is a multi-faceted process.

9 In the preparation of a case, the parties are required to muster relevant evidence. Forensic decisions need to be made. Settlement needs to be considered. The extent of cross-examination of witnesses needs to be determined as part of the forensic decision making in the case. Answers given in cross-examination may surprise the questioner and require further forensic decisions to be made. All such decisions are made in the context of the matters in issue at the trial.

10 To blandly assert that the new point is based on facts as found by the trial judge overlooks that there may have been factors at play such that all facts, including those relevant to the new issue, were not necessarily decided at first instance. It would be unfair to require the party against whom the new point is taken to demonstrate that the facts found were not beyond controversy. The onus should rather be on the party seeking to raise the new issue to demonstrate that it is expedient in the interests of justice to allow the new point to be raised. In determining that question, the factors to which I have made reference will be relevant, having regard to the particular circumstances of the particular case.

11 In the present case, I am not satisfied that Bibby should be allowed to raise the point relating to whether Bibby had withdrawn its notice of termination and reinstated Mr Sharma's employment. As Gleeson JA has explained, at [107], it appears that there was no cross-examination of Bibby's witnesses in relation to the cessation of the payment of salary to Mr Sharma and that Mr Sharma had not sought the production of documents relating to that matter. This demonstrates the point I have sought to make above, namely, that forensic decisions may be made of which the Court has no knowledge and if made, in all probability, will be made in the context of the issues at trial. To assert, as Bibby did, that Mr Sharma had not sufficiently indicated how his case would have been run differently had the issue been argued at trial, inverts the onus and invites a wrong application of principle.

12 However, as Gleeson JA has so clearly explained, the result that he reaches on the appeal makes this point moot. I respectfully agree. The appeal should be dismissed with costs.

13 BARRETT JA: I have read in draft the judgments that have been prepared by Beazley P and Gleeson JA. I agree with them that the appeal should be dismissed with costs. Their Honours have reached different conclusions on whether the appellant should be allowed to rely on a new issue on appeal. Because, as each acknowledges, the outcome does not depend on that matter, I prefer to express no opinion on it. Subject to that reservation, I agree with the reasons stated by Gleeson JA.

14 GLEESON JA: This appeal concerns the circumstances and consequences of the termination of a contract of employment between the respondent (Mr Sharma) and the appellant (Bibby), the terms of which were recorded in an Executive Service Agreement dated 2 June 2002 (the Contract).

15 The primary judge (Bergin CJ in Eq) found that Bibby had terminated Mr Sharma without cause and was liable to pay Mr Sharma a sum equivalent to six months salary in lieu of notice and a Special Bonus of $1,400,000, plus interest: Sharma v Bibby Financial Services Australia Pty Ltd [2012] NSWSC 1157. Judgment was entered for Mr Sharma against Bibby in an amount of $1,637,266 plus costs. Bibby appeals against that decision.

16 The critical provision of the Contract with which this appeal is concerned is cl 13 which provided:

"13. TERMINATION

13.1 During the first 12 months of employment from the Commencement Date, the Executive's employment may be terminated at any time by:

(a) the Executive giving to the Company 3 months notice; or

(b) the Company giving to the Executive 3 months notice or in its discretion, by the Company electing to pay the Executive an amount equal to the Executive's annual base salary in lieu of notice for that period.

13.2 After 12 months from the Commencement Date, the Executive's employment may be terminated at any time by:

(a) the Executive giving to the Company 6 months notice; or

(b) the Company giving to the Executive 6 months notice or in its discretion, by the Company electing to pay the Executive an amount equal to the Executive's annual base salary in lieu of notice for that period.

13.3 Despite the provisions of clause 13.1 and 13.2 the Executive's employment may be terminated by the Company at any time without notice or any payment in lieu if the Executive:

(a) disobeys a lawful direction of the Company;

(b) is guilty of other serious misconduct;

(c) breaches clauses 10 or 11;

(d) other than clauses 10 or 11 breaches any material provision of this agreement;

(e) is for any reason unable to perform his duties to the satisfaction of and to a standard acceptable by the Board;

(f) becomes unable to pay the Executive's debts as they become due; or

(g) is found guilty by a court of a criminal offence or guilty of any conduct which in the reasonable opinion of the Company would bring the Company or its business into disrepute.

13.4 Termination of the Executive's employment does not affect any accrued rights or remedies of the Executive or the Company.

13.5 The Company agrees not to terminate the Executive's employment without bringing to the notice of the Executive the alleged breach or misconduct and giving the Executive the Executive [sic] the opportunity to respond to such allegations prior to any final decision to terminate the Executive's employment. The Company will take submissions (if any) by the Executive into account before any final decision is made. Any final decision will be made in good faith and on the basis of the factual material before the Company including the Executive's response."

17 The essential question raised by the appeal is whether Mr Sharma's employment with Bibby was terminated on 4 February 2009 pursuant to cl 13.2 of the Contract without cause, as found by the primary judge, or whether his employment was terminated by Bibby on 24 March 2009 for cause, in particular, for serious misconduct pursuant to cl 13.3 of the Contract.

Factual background

18 From June to November 2002, Mr Sharma was employed as Sales Director by Bibby Group of Factors Ltd under the Contract. This Contract was novated to Bibby on 28 November 2002, with effect from 1 December 2002.

19 Bibby is a wholly owned subsidiary of Bibby Financial Services UK Ltd. Both companies are in the business of debt factoring.

20 Prior to June 2002, Mr Sharma worked for Orix Australia Corporation Ltd in its Factoring Division, together with Gregory Wayne Charlwood and Steven Davies. Bibby UK approached Mr Charlwood with a proposal that he, Mr Sharma, and Mr Davies take up employment with Bibby UK to establish a factoring business in Australia. This occurred and Mr Charlwood became Managing Director, Mr Davies, Operations Director, and until February 2009, Mr Sharma was the Sales Director.

21 In early 2008, Bibby approached Mr David Wright in the United Kingdom (UK) for the role of the Sales Manager for New South Wales. Mr Wright travelled to Australia in March 2008 to be interviewed for this role and accepted an offer of employment with Bibby at that time. However, following discussions with his wife, he decided not to take up the offer of employment. Mr and Mrs Wright had very young twin boys and Mrs Wright's mother, who assisted with the twins, had difficulty obtaining a visa to come to Australia.

22 After a further approach by Bibby later in 2008, Mr Wright agreed to take up the position with Bibby. He travelled to Australia with his family, including his mother-in-law, in September 2008. He commenced work with Bibby on 7 October 2008 reporting directly to Mr Sharma. At that time Mr Wright was aged 36 and Mr Sharma was aged 46 (Black 286I and Blue 2L). Mr Wright left his employment and returned to the UK without notice in mid-December 2008.

23 The primary judge observed that the manner of Mr Wright's departure from employment with Bibby and return to the UK was quite complex: at [6]. Her Honour found that the tensions in Mr Wright's personal life in December 2008 were obviously intense. He had infant twins; his wife was hospitalised with a serious illness; and his mother in law, who assisted with the care of the twins, had decided to return to the UK: at [16].

24 Prior to leaving Australia, Mr Wright had secured employment in England or was waiting final confirmation of that employment. The primary judge found that Mr Wright had made the positive choice to leave Australia and return to the UK with secure employment awaiting him: at [128].

25 However, upon his return to the UK, Mr Wright claimed that the reason for his departure was that Mr Sharma had sexually harassed him. This allegation was contained in an email which Mr Wright sent to Ms Miriam Koller (Ms Koller), the head of the Human Resources Department of Bibby UK on 8 January 2009.

26 As a consequence of Mr Wright's complaint, Ms Koller travelled to Australia in late January 2009 to investigate Mr Wright's allegations. Ms Koller conducted a number of interviews with employees of Bibby, but not with Mr Sharma.

27 The primary judge noted two significant matters arising from Ms Koller's investigations in late January 2009: at [17]. First, Ms Koller accepted in cross-examination that only one of the persons she interviewed gave "some small support" to Mr Wright but not with regard to the specific allegation of sexual harassment. Secondly, Mr Charlwood gave evidence in cross-examination that to his knowledge none of the witnesses that were interviewed corroborated any sexual harassment, but that he decided that Mr Sharma should be dismissed because of sexual harassment.

4 February 2009 meeting

28 On 4 February 2009, Mr Charlwood and Ms Koller met Mr Sharma at the Mercure Hotel. There was no challenge at the trial to Mr Sharma's affidavit evidence in relation to the conversations that occurred at that meeting. At [19] the primary judge recorded the following conversation:

"Koller: This is going to be really painful but we have decided to

terminate your contract.

Plaintiff: What for?

Koller: Your conduct is unbecoming of a director.

Plaintiff: On what basis did you come to this conclusion?

Koller: I have spoken to a couple of people at work and they think you are aggressive.

Plaintiff: Can you give me some examples.

Koller: If you do not resign we will terminate your contract. This process is not a negotiation. We do not have to tell you anything and we have lost trust and confidence in you.

Plaintiff: What about my contribution to the business? You can't just terminate me like this.

Charlwood: We will pay you 75% of your special bonus and give you six months in lieu of notice.

Koller: We are paying you on moral grounds.

Plaintiff: Please put it in writing and we shall go from there.

Charlwood: We will have your termination letter to you by Friday. Don't talk to any staff or clients."

29 Mr Charlwood agreed in cross-examination that by 4 February 2009 he had decided that what Mr Wright was saying "must have been true". He also agreed that there was nothing whatsoever that Mr Sharma could say to him that would have any effect on his decision that Mr Sharma "had to go". Mr Charlwood considered the options of terminating Mr Sharma pursuant to cl 13.2 without cause, or invoking cl 13.3 and cl 13.5 for serious misconduct. Having weighed those options and looked at both possibilities, Mr Charlwood decided to act under cl 13.2 rather than cl 13.3 for serious misconduct because he thought that would save some "unpleasantness": at [21].

30 Ms Koller had also decided by 4 February 2009 that Mr Sharma "had to go". At [23], the primary judge found that Ms Koller accepted the evidence she had gathered without giving Mr Sharma an opportunity to comment upon it and without even asking him if it was true. In this context, Ms Koller conceded in cross-examination that she decided not to follow Bibby's grievance procedure where a complaint was made against an employee, and that in doing so Mr Sharma was treated in an unfair manner: at [23].

Events subsequent to 4 February 2009

31 Following the 4 February 2009 meeting, a draft Deed of Release was prepared and provided by Bibby to Mr Sharma on around 9 February 2009. Recital C of the draft Deed recorded that: "The Executive's employment with Bibby was terminated on 4 February 2009". Clause 2.1 of the draft Deed provided:

"2.1 Within 7 days of the receipt by Bibby of this Deed and the form of Resignation of Director (attached as Annexure A) both executed by the Executive, Bibby will pay to the Executive:

(a) a sum equal to 6 months remuneration based on the Executive's Total Remuneration (less appropriate Australian taxes) and less any amounts owed by the Executive to Bibby;

(b) a sum equal to the Executive's entitlement (if any) to a bonus on a pro rata basis calculated in accordance with Schedule 2 of the Agreement (less appropriate Australian taxes) within 21 days from when the audit accounts for the year ending 30 December 2010 are published."

32 Correspondence then ensued between the parties' lawyers. Ultimately, on 24 March 2009, Bibby purported to terminate Mr Sharma's employment for cause pursuant to cl 13.3 of the Contract. Both parties rely upon the positions taken by the other in that correspondence in support of their arguments on appeal. The material parts of that correspondence are referred to below.

33 On 13 February 2009, Mr Sharma's solicitors, Harmers, wrote to Mr Charlwood referring to the draft Deed and asserted that there had been no valid termination. Harmers sought undertakings that Bibby would not take any steps or act in a way so as to effect termination of Mr Sharma's employment or to determine a Special Bonus payable to Mr Sharma, without "first complying fully with clause 13.5 of the Agreement".

34 On 16 February 2009, there was a telephone conversation between Harmers and Gillis Delaney. This led to further correspondence in which the parties' solicitors took up different positions. In a letter dated 16 February 2009, Harmers recorded that their understanding following the telephone conversation on that day was that Bibby had been purporting to rely on cl 13.2 to initiate the termination and for this reason did not consider it necessary to apply cl 13.5 of the Contract. Harmers stated that Mr Sharma wished to continue performing his duties.

35 On 17 February 2009, Gillis Delaney faxed a letter dated 16 February 2009 to Harmers asserting:

"Our client has terminated your client's employment under the Executive Service Agreement dated 3 June 2002 (the 'Agreement') pursuant to clause 13.2.

...

The Deed of Release provided to your client reflects the payment due to your client pursuant to clause 13.2 and a pro rata bonus calculated in accordance with Schedule 2 of the Agreement."

36 Gillis Delaney also asserted that cl 13.5 of the Contract only applied if Mr Sharma's employment had been terminated for cause for one or more of the reasons set out in cl 13.3, and went on to assert:

"As our client is [sic] not terminated your client pursuant to clause 13.3, our client is not obliged to comply with clause 13.5 of the Agreement. Consequently our client will not be providing the undertaking sought by you in your letter dated 13 February 2009."

37 Thus the position as at 17 February 2009 was that Bibby through its lawyers, Gillis Delaney, confirmed that Mr Sharma had been terminated without cause pursuant to cl 13.2, and that Bibby was not obliged to comply with the notice and hearing procedure under cl 13.5 because it had not terminated Mr Sharma for cause under cl 13.3.

38 There ensued further correspondence between the parties' solicitors concerning the terms of the offer contained in the draft Deed of Release. Relevantly, Harmers sought clarification from Gillis Delaney as to the basis upon which the pro-rata proportion of the Special Bonus had been calculated.

Bibby's change of position

39 On 25 February 2009, Bibby changed its position concerning the termination of Mr Sharma's employment. On that day, Gillis Delaney wrote to Harmers informing them that Bibby had formally withdrawn the offer contained in the draft Deed of Release. Further, it was stated that Bibby would provide Mr Sharma, pursuant to cl 13.5 of the Contract, with notice of the breach of the Contract and Mr Sharma would be given a reasonable time to respond to the allegations contained in the notice before any final decision was made by Bibby as to whether Mr Sharma was to be dismissed pursuant to cl 13.3 of the Contract.

40 On 26 February 2009, Harmers wrote to Gillis Delaney giving formal notice that Mr Sharma elected to become entitled to the Special Bonus referred to in Schedule 2 to the Contract.

41 The Special Bonus was payable where the financial performance of Bibby in terms of its net profit after tax exceeded certain amounts in specified years and the Executive elected to receive the Special Bonus. In the absence of an election, the entitlement to the Special Bonus was automatically triggered on 1 September 2009 if the net profit of at least $3,500,000 was achieved for two consecutive years. However, par 2.8 of Schedule 2 provided that "the Executive shall forfeit any and all rights to the Special Bonus if his employment is terminated for any reason described in clause 13.3 of the agreement".

42 On 4 March 2009, Gillis Delaney wrote to Harmers advising that Bibby had completed its investigations into Mr Sharma's performance and obligations under the Contract and stated:

"Our client now wishes to bring to the attention of your client allegations of breaches of the Agreement and serious misconduct allegations. Our client [sic] giving your client notice of the alleged breaches and serious misconduct pursuant to its obligations under Clause 13.5 of the Agreement."

43 The only "misconduct" allegation material to these proceedings was as follows:

"1. Misconduct

...

1.9 Harassment and bullying of David Wright Head of NSW Sales which caused him to leave the company specifically sighting [sic] the bullying and harassment by your client as this reason for leaving."

44 In relation to alleged breaches of the Contract, the following particulars were given:

"2. Breaches of the Agreement

2.1 Failing to follow the reasonable directions of the Managing Director in relation to:

(a) supporting the decisions of the Operations Director.

(b) supporting the decisions of the Head of Operations NSW

(c) ceasing to be aggressive towards the Operations Director.

(d) the structure of the state management bonus scheme.

(e) utilising the Company Secretary for human resources issues.

(f) ceasing to be derogatory to staff members regarding their weight.

(g) ceasing to be intoxicated and abusive to staff, clients and referrers at external functions.

2.2 Not acting in the best interest of the Company as set out in the reasons provided under the heading of Misconduct."

45 On 13 March 2009, Harmers provided a detailed response to the allegations contained in Gillis Delaney's letter of 4 March 2009. It is unnecessary to set out the detail of that response, which is recorded by the primary judge at [40], other than to note that Harmers asserted that the description of Mr Sharma's conduct as "harassment" and "bullying" was unfounded and offensive. Harmers requested detailed particulars of each of the alleged incidents.

46 On 20 March 2009, Gillis Delaney responded to Harmers and asserted that their client did not consider it was under any further obligation to provide any further details, but certain "specifics" were provided. The primary judge noted that this was the first time that Bibby provided to Mr Sharma the detail of the alleged allegations of sexual harassment that Mr Wright had communicated to Ms Koller on 8 January 2009, and that Bibby gave Mr Sharma only 24 hours to respond to these most serious allegations: at [41].

47 On 23 March 2009, Harmers sought an extension of time to the following day to respond to the new allegations. On the same day, Gillis Delaney advised Harmers that Mr Sharma was required to respond by 5.00pm on 23 March 2009.

48 On 24 March 2009, Harmers again wrote to Gillis Delaney seeking further particulars of the allegations against Mr Sharma. Their letter complained that given the seriousness of the allegations, "one would have expected your client to have specifically drawn them to our client's attention from the outset".

49 On 24 March 2009, Gillis Delaney wrote to Harmers noting that they had not received any response to their letter of 20 March 2009 and enclosing a letter from Bibby to Mr Sharma in the following terms:

"RE: YOUR EMPLOYMENT BY THE COMPANY

This letter serves to formally advise you that your Executive Service Agreement dated 3 June 2002 between you and Bibby Group of Factors Limited (the 'Agreement') will be terminated effective from close of business on 24 March 2009. Your employment has been terminated pursuant to clause 13.3 of the Agreement as:

1. you have disobeyed a lawful direction of the Company; and

2. are guilty of serious misconduct.

As a result of your employment being terminated pursuant to clause 13.3 of the Agreement:

(i) you are not entitled to any notice of your termination or any payment in lieu of notice; and

(ii) you will forfeit any and all rights to the special bonus as detailed in Schedule 2 of the Agreement."

50 Bibby's letter also advised Mr Sharma that he was not entitled to any annual bonus in accordance with cl 1 of Schedule 2 of the Contract.

The primary judge's reasons

51 The primary judge found that Mr Sharma's employment was terminated with immediate effect (on 4 February 2009), with the option to resign before Friday 6 February 2009 when a letter of termination would be delivered: at [55].

52 It is with respect to this finding that Bibby asserts that the primary judge erred in failing to conclude that the parties' subsequent conduct amounted to a "withdrawal of termination", and that "at least" from 25 February 2009 until 24 March 2009, Mr Sharma was employed on the terms of the Contract.

53 The primary judge reasoned at [56], that the provision of the option for Mr Sharma to resign did not change the termination of his employment. Rather this provided the mechanism to characterise it as a resignation by Mr Sharma, rather than as a termination by Bibby. The option of resignation provided to Mr Sharma was viewed by the primary judge as conditional on him tendering his resignation by 6 February 2009, in default of which the opportunity would be lost. In those circumstances, the primary judge noted that Bibby "would have" delivered the termination letter to Mr Sharma by 6 February 2009.

54 At [58], the primary judge found that neither Mr Sharma's conduct in not tendering his resignation to Bibby, nor Bibby's failure to deliver the letter of termination to Mr Sharma by 6 February 2009 amounted to the withdrawal of the termination of Mr Sharma's employment. The primary judge noted that recital C in the draft Deed, provided to Mr Sharma on 9 February 2009, stated that termination had occurred on 4 February 2009, and that the terms of the Gillis Delaney letter of 16 February 2009 stated categorically that Bibby had terminated Mr Sharma's employment on 4 February 2009 pursuant to cl 13.2 of the Contract.

55 At [65], the primary judge found that Bibby did not withdraw the termination of Mr Sharma's employment on 4 February 2009 by its solicitor's letter of 25 February 2009, which formally withdrew the "offer" contained in the draft Deed. The primary judge reasoned that by 4 February 2009, Bibby had fully investigated Mr Sharma's conduct and that Mr Charlwood had considered the options of terminating without cause under cl 13.2, or alternatively with cause under cll 13.3 and 13.5 and had decided to proceed under cl 13.2 to save some "unpleasantness". The primary judge found that Bibby had decided to terminate Mr Sharma in the full knowledge of the allegations of serious misconduct and had decided not to rely upon those matters, but to terminate Mr Sharma without cause under cl 13.2 of the Contract with payment of six months in lieu of notice.

56 The primary judge was not satisfied that the subsequent correspondence between the parties' solicitors, in which Bibby purported to adopt a process akin to that found in cl 13.5 of the Contract, affected the termination of Mr Sharma's employment. Her Honour reasoned that Bibby engaged in this process in an attempt to disqualify Mr Sharma from an entitlement to the Special Bonus. Her Honour noted the absence of any offer by Bibby to reinstate Mr Sharma whilst Bibby went through a process to decide whether Mr Sharma should be terminated for cause. Nor was there any acceptance of such an offer by Mr Sharma: at [67].

57 Whilst satisfied that Mr Sharma's employment was terminated pursuant to cl 13.2 of the Contract on 4 February 2009, the primary judge went on to consider the purported termination under cl 13.3 of the Contract on 24 March 2009: at [68]. This involved two aspects. First, the process engaged in by Bibby. Second, the allegations of serious misconduct levelled against Mr Sharma.

58 As to the first aspect, the primary judge concluded that there was a lack of good faith in the process adopted by Bibby, and its conduct was in breach of cl 13.5: at [76]. The primary judge found that the purported termination under cl 13.3 of the Contract was of no effect: at [80].

59 As to the second aspect, her Honour considered the allegations of sexual harassment grouped under five incidents: the Cargo Bar incident; incidents in the car; lunch with Mr Lea; inappropriate staring; and pursuit of a relationship. Her Honour did not make a finding as to whether the first, second, and fourth matters had been established, but found that if the incidents occurred they did not amount to serious misconduct that would warrant dismissal under cl 13.3 of the Contract: at [104], [109] and [121]. Her Honour was not satisfied that Bibby had proved the third incident occurred as claimed: at [117] and found that Bibby had failed to prove the allegations underlying the fifth incident: at [130].

60 At [132]-[152], her Honour considered two other matters relied upon by Bibby as justifying termination of Mr Sharma's employment, which were discovered after March 2009. It is unnecessary to refer to the detail of these matters, as there is no challenge on appeal to the primary judge's findings that these matters would not justify dismissal for serious misconduct: at [137] and [151].

Issues on appeal

61 The notice of appeal raised five grounds of appeal. By his notice of contention Mr Sharma sought to uphold the primary judge's decision on two grounds: first, that Bibby was bound by an election to terminate Mr Sharma's employment on 4 February 2009 pursuant to cl 13.2 of the Contract and could not later purport to terminate Mr Sharma's employment pursuant to cl 13.3 of the Contract. Secondly, that Mr Sharma had an accrued right to the Special Bonus as at 26 February 2009, even if his employment was terminated on 24 March 2009 under cl 13.3 of the Contract.

62 The issues on appeal, substantially in the terms identified by Bibby at the hearing, may be conveniently grouped as follows:

(1) Whether the operative act of termination of the Contract was termination without cause pursuant to cl 13.2 of the Contract on 4 February 2009, or for cause pursuant to cl 13.3 on 24 March 2009 (appeal ground 1; notice of contention, [1]-[2]).

(2) Did Bibby elect to pursue termination under cl 13.2 of the Contract on 4 February 2009 such that it was not open to later rely on cl 13.3 - or does this not matter even if the operative termination was on 4 February 2009 if Bibby is able to establish serious misconduct by Mr Sharma as a matter of fact (appeal ground 1; notice of contention, [1]-[2])?

(3) If the operative act of termination was under cl 13.3 of the Contract on 24 March 2009, did Mr Sharma nevertheless have an accrued right to the Special Bonus (appeal ground 1(b); notice of contention, [3])?

(4) If the operative act of termination was under cl 13.3 of the Contract on 24 March 2009, did non-compliance with the process set out in cl 13.5 render the termination invalid and of no effect (appeal ground 2)?

(5) If the operative act of termination was under cl 13.3 of the Contract, or if it does not matter, and if non-compliance with cl 13.5 does not preclude reliance on cl 13.3 (or it does not matter), did the primary judge err in finding that there was no serious misconduct on the facts (appeal grounds 3-5)?

Issue 1 - whether the 4 February 2009 termination "withdrawn" before 24 March 2009

63 By appeal ground 1, Bibby contended that the primary judge erred by (a) finding that Mr Sharma's employment was terminated on 4 February 2009 pursuant to cl 13.2 of the Contract and that the termination was not withdrawn and (b) failing to find that Mr Sharma's employment was terminated on 24 March 2009 for serious misconduct.

64 There are two aspects of this appeal ground. The first concerns the finding that the Contract was terminated on 4 February 2009: at [55]. The second concerns the so-called "withdrawal of termination/reinstatement of contract" issue which Bibby sought to rely upon on appeal.

65 Bibby's written submissions were directed to the second rather than the first issue. No attempt was made in those written submissions to demonstrate error in the primary judge's finding that Mr Sharma's employment was terminated on 4 February 2009 pursuant to cl 13.2 of the Contract. Indeed, Bibby's written submissions contended that "once Bibby made the election on 4 February 2009, the Contract was terminated and being duly terminated could not be 'revived except by the consent of the parties'" (Orange P-Q). So much may be accepted: Ogle v Comboyuro Investments Pty Ltd [1976] HCA 21; 136 CLR 444 at 451; Birrell v Australian National Airlines Commission (1984) 5 FCR 447 at 448.

66 In oral argument, Bibby maintained its position that the Contract was not terminated on 4 February 2009, but did not advance any argument in support of this contention.

67 In my view, no error has been shown in the primary judge's finding that the Contract was terminated on 4 February 2009.

68 The argument on appeal turned to whether the facts supported the implication that the parties continued to treat themselves after 4 February 2009 as bound by the terms of the Contract. Bibby contended that from "at least" 25 February 2009, the parties' mutual conduct was consistent only with the conclusion that their rights and obligations were governed by the terms of the Contract.

69 Bibby submitted that the primary judge erred at [67], when stating that it would have been necessary for an express statement of offer of reinstatement (by Bibby) and acceptance of that offer by Mr Sharma to have occurred. Bibby submitted that this overlooked the possibility of reinstatement of the Contract inferred from the parties' conduct. Whilst a contract may undoubtedly be inferred from the conduct of parties, in my view, the statement by the primary judge at [67] was directed to the significance of the communication contained in the Gillis Delaney letter of 25 February 2009, which withdrew Bibby's offer contained in the Deed of Release. Her Honour's statement concerning the necessity for an express statement of offer of reinstatement and acceptance of that offer is to be understood in the context of that letter. Her Honour was not addressing the argument now sought to be advanced by Bibby on appeal.

70 The primary matters relied upon by Bibby on appeal for the assertion that the termination was withdrawn and that the Contract was reinstated by mutual action and consent of parties were as follows:

(1) That the letters from Harmers to Gillis Delaney dated 13 February and 16 February 2009 demonstrated that Mr Sharma believed and intended that he was still employed pursuant to the terms of the Contract. Reliance was placed on the assertion by Harmers in the 13 February 2009 letter that there had been no valid termination by Bibby and in the 16 February 2009 letter that Mr Sharma wished to continue performing his duties.

(2) That Gillis Delaney's letter to Harmers on 20 February 2009 and their follow up letter dated 25 February 2009 formally withdrawing the offer contained in the draft Deed of Release, and stating that Bibby would provide Mr Sharma with notice of the alleged breach of the Contract and misconduct and would provide Mr Sharma with a reasonable time to respond, were consistent only with Bibby acting on the basis that its rights and obligations were governed by the terms of the Contract, in particular cl 13.5.

(3) That the later correspondence in March 2009 between Harmers and Gillis Delaney concerning the allegations of misconduct against Mr Sharma, and breaches of the Contract by him, also demonstrated that the parties were acting on the basis that Mr Sharma was employed and that the parties' rights and obligations with respect to termination were governed by cl 13 of the Contract.

(4) That, apart from a short period, Bibby paid Mr Sharma his salary throughout the period from 4 February 2009 to 24 March 2009; that Mr Sharma retained a motor vehicle and computer during this time; and also that he retained his means of access to Bibby's premises and was asked not to return back to Bibby until 24 March 2009.

71 Counsel for Mr Sharma complained that the so-called "withdrawal of termination/reinstatement" case was not relied upon at trial. It was submitted that the point cannot now be taken on appeal, because had the issue been raised below, evidence could have been given which by any possibility could have prevented the point from succeeding: Suttor v Gundowda Pty Ltd [1950] HCA 35; 81 CLR 418 at 438; Midya v Sagrani [1999] NSWCA 187 at [7].

72 Alternatively, it was submitted by Mr Sharma that, on the facts, there was no withdrawal of the termination/reinstatement of the Contract, and accordingly no basis for the purported termination under cl 13.5 on 24 March 2009.

Consideration

73 It is convenient to first deal with the withdrawal issue as a matter of substance by reference to the matters relied upon by Bibby in support of the implication that the parties continued to treat themselves as bound by the terms of the Contract.

Correspondence between solicitors

74 In my view, the reliance which Bibby placed on the correspondence between the parties' solicitors is misplaced. First, it is apparent from the time receipt stamped on the facsimile of the Gillis Delaney letter of 16 February 2009 (see [35] above), that this letter was faxed at 9.07am the following day, which was after receipt of Harmers' letter of 16 February 2009. It is clear from the sequence of those letters that Bibby did not offer to reinstate Mr Sharma, nor did it withdraw the termination which occurred on 4 February 2009.

75 The subject matter of the Gillis Delaney letter of 16 February 2009 was what flowed from the termination which had already occurred. Gillis Delaney made it clear that Bibby was not prepared to negotiate on the offer contained in the draft Deed. In no way could this letter be construed as an offer to reinstate Mr Sharma.

76 It is also apparent that up until receipt on 17 February 2009 of the Gillis Delaney letter of 16 February 2009, Mr Sharma was labouring under the misapprehension, arising from the terms of the 4 February 2009 meeting, that he had been purportedly terminated for cause, in particular for conduct unbecoming of a director, without proper process. It is unsurprising that he did not accept up to that point that he had been lawfully terminated for cause. That misapprehension was corrected by the Gillis Delaney letter of 16 February 2009, which made clear Bibby's position that Mr Sharma had been terminated under cl 13.2 without cause and not cl 13.3 for cause.

77 Secondly, as the primary judge observed at [58], Bibby, through its lawyers Gillis Delaney, stated categorically in writing on 16 February 2009 that the termination of Mr Sharma's employment was pursuant to cl 13.2 on 4 February 2009. Bibby could not unilaterally withdraw the termination, it could only reinstate Mr Sharma by agreement, whether express or inferred from conduct. No express agreement was alleged. Bibby's contention on appeal that an agreement was to be inferred from the parties' conduct is considered below.

78 Thirdly, the next letter from Gillis Delaney to Harmers dated 20 February 2009, simply left Bibby's offer in the draft Deed open until 5.00pm on 23 February 2009. What was foreshadowed if the offer was not accepted was that Bibby would withdraw the offer and proceed under cl 13.5. However, as the primary judge correctly found at [67], the threat in that letter to withdraw the "offer" did not include a condition or a suggestion that Mr Sharma would be reinstated whilst Bibby went through a good faith process under cl 13.5 of the reinstated Contract to decide whether he should be terminated for cause. It may also be observed that Bibby did not purport to withdraw its termination under cl 13.2, only its "offer" in the draft Deed. Nor was there any mention by Bibby of what was to occur in respect of Mr Sharma's existing entitlement to six months pay in lieu of notice under cl 13.2(b).

79 Fourthly, there is no error in the primary judge's finding at [67], that these communications focusing on what amounts Bibby would pay Mr Sharma, were premised upon the fact that his employment had already been terminated and that what Bibby engaged in was an attempt to disqualify Mr Sharma from an entitlement to the Special Bonus, by the purported adoption of a process akin to that found in cl 13.5 of the Contract. That process was ineffective because Mr Sharma's employment had already been terminated.

Bilateral agreement?

80 A notice of termination can be withdrawn by the consent of both parties to the contract: Birrell v Australian National Airlines Commission at 457 (Gray J).

81 In oral argument, counsel for Bibby contended that there was a bilateral agreement between Mr Sharma and Bibby manifested by Mr Sharma's conduct in responding in detail to the allegations of serious misconduct of which notice had been given by Bibby on 4 March 2009, purportedly under cl 13.5 of the Contract. The terms of this bilateral agreement were said to be that any termination pursuant to cl 13.2 was set aside, and that the Contract remained on foot with the parties engaging in the notice and hearing process under cl 13.5 with a view to possible termination under cl 13.3. It was further contended that a term of the bilateral agreement included that Mr Sharma's entitlement to six months pay in lieu of notice was also set aside. Counsel for Bibby submitted that the latter term was a necessary implication of the correspondence from Mr Sharma's solicitors to Bibby's solicitors. In my view, these submissions should be rejected.

82 As already noted, the primary judge found, correctly in my view, that the communications between the parties' solicitors were focused on what amounts Bibby would pay Mr Sharma premised upon the fact that his employment had already been terminated: at [67]. The fact that Mr Sharma sought to address Bibby's allegations of serious misconduct was not inconsistent with him having been already terminated on 4 February 2009. As the primary judge found, Bibby was attempting to disqualify Mr Sharma from an entitlement to the Special Bonus (at [67]). By responding to Bibby's allegations of serious misconduct, Mr Sharma may be taken to have been attempting to clear his name of the allegations of serious misconduct and also keep the Special Bonus. This did not turn upon the parties having agreed to reinstate the Contract.

83 Moreover, it cannot be inferred from Mr Sharma's conduct in responding to Bibby's allegations of serious misconduct that he agreed to set aside or forego his entitlement to six months pay in lieu of notice which arose on the termination of his employment on 4 February 2009. The contention by Bibby that there was a bilateral agreement between Mr Sharma and Bibby manifested by the parties' conduct which reinstated the Contract should not be accepted.

Indicia of re-employment

84 Fifthly, there is no error in the primary judge's finding at [61] that the matters relied upon by Bibby as indicia of re-employment - the recommencement of payment of salary sometime after 13 February 2009 and the retention of the car, laptop computer and keys to the premises - did not outweigh the other matters identified by Mr Sharma that supported the finding that the Contract was terminated on 4 February 2009 - that Mr Sharma was directed not to return to the office, not to speak to any staff or clients, and that his salary was stopped, albeit Bibby reinstated payment of his salary sometime after 13 February 2009: at [59].

85 As to recommencement of the salary, this was a unilateral act by Bibby. Mr Sharma gave unchallenged evidence that he was not entitled to a salary, but that Bibby kept paying him after it had stopped payment for a period of time (Black 15P).

86 As to retaining the means of access to Bibby's premises, the primary judge noted at [60] that there was no suggestion that Mr Sharma visited the offices after he was directed not to do so on 4 February 2009; thus there is no significance in his retaining the means of access to those premises.

87 As to the significance of Mr Sharma's retention of the car and laptop computer, the primary judge found at [61] that there was no request or direction by Bibby on 4 February 2009 to return these items, or the keys to the premises, and that this was understandable having regard to the fact that Mr Sharma was offered the option of tendering his resignation. Moreover, cl 8 of the draft Deed of Release prepared by Bibby's solicitors, provided for the return of these items immediately upon execution of the Deed. The fact that Mr Sharma retained these items for a period of time is explicable, and was not an indicia of re-employment by Bibby.

Suspension pending investigation

88 Bibby also submitted that its actions in stopping payment of the salary (for a period of time) and in directing Mr Sharma on 4 February 2009 not to return to the office, not to speak to staff and not to speak to clients, were perfectly consistent with a reinstatement of the Contract, but on the basis that Mr Sharma was under "suspension" pending an investigation. This submission must be rejected in light of the findings by the primary judge that by 4 February 2009, Bibby had fully investigated the allegations against Mr Sharma: at [65], and that both Ms Koller and Mr Charlwood had already decided that Mr Sharma "had to go" and that nothing whatsoever that Mr Sharma could say to Mr Charlwood would have any effect on his decision: at [21] and [23]. There is no challenge to these findings.

89 Moreover, it should not be inferred, as was submitted by Bibby, that a contract came into existence after 4 February 2009 upon terms where, from its commencement, Mr Sharma was not permitted to work, but was suspended pending a cl 13.5 process being undertaken. No such contention was ever pleaded, let alone put to Mr Sharma in cross-examination. Such a contract would be inconsistent with Mr Sharma's expressed wish, conveyed in his solicitors' letter of 16 February 2009, to continue performing his duties.

90 There is no error, in my view, in the primary judge's finding at [67] that what occurred after 4 February 2009 is that Bibby became impatient with Mr Sharma's failure to accept the offer contained in the draft Deed of Release, which provided for substantial payments to be made by Bibby to Mr Sharma, and then engaged in a purported cl 13.5 process in an attempt to disqualify Mr Sharma from any entitlement to the Special Bonus or payment in lieu of notice.

91 Ground 1 of the notice of appeal is rejected.

New case on appeal

92 In view of the above conclusion, the objection by Mr Sharma to Bibby being permitted to rely upon a new point on appeal is academic. However, it is appropriate that I deal with it should others be of a different view in relation to the disposition of appeal ground 1.

93 There are two matters to be considered in respect of this issue. The first concerns Mr Sharma's complaint that the withdrawal/ reinstatement issue was not relied upon at trial. This appears to be correct for the following reasons.

94 Firstly, there was no pleading by Bibby that if the employment of Mr Sharma was terminated on 4 February 2009, that termination was subsequently withdrawn and the Contract reinstated.

95 Secondly, the withdrawal/reinstatement issue was not raised in Bibby's written outline of opening submissions, or during oral submissions by Bibby. To the contrary, counsel for Bibby acknowledged that Bibby's defence failed altogether if the Court found that cl 13.2 was the provision by which termination of the Contract was effected (Black 423E-J). This was a reference to Mr Sharma's case that the Contract was terminated on 4 February 2009.

96 Thirdly, the defence by Bibby below was limited to the contention that either there was no termination on 4 February 2009 (and the termination occurred on 24 March 2009) or alternatively, Bibby's conduct on 4 February 2009 amounted to a repudiation of the Contract, being a refusal to pay the whole of the Special Bonus to Mr Sharma, but that repudiation was never accepted by Mr Sharma and hence the Contract remained on foot until it was terminated on 24 March 2009 (Black 427G-O). The primary judge did not find it necessary to deal with this alternative case, having found that the Contract was terminated on 4 February 2009.

97 Fourthly, the withdrawal/reinstatement issue was not identified by the primary judge as one of the "issues" for determination: at [49]-[51]. Counsel for Mr Sharma correctly noted that the reference by the trial judge at [58], to "withdrawal of the termination of the plaintiff's employment" relates only to whether the failure of Mr Sharma to resign, or Bibby to deliver a letter of termination by 6 February 2009, amounted to a withdrawal of the termination on 4 February 2009. Her Honour was not referring to the change of position by Bibby on 25 February 2009, when it withdrew the draft Deed of Release.

98 Fifthly, Bibby's senior counsel at trial did not address any submissions on the withdrawal/reinstatement issue. Rather, submissions were made to the effect that the parties' conduct on and after 4 February and until 24 March 2009 did not constitute a termination of the Contract (Black 423W-Y). Bibby's submission was that the position of both parties was that the Contract remained on foot on, and after, 4 February and until 24 March 2009 (Black 425P-R).

99 Against these matters, it must be acknowledged that the issue of reinstatement was adverted to by senior counsel for Mr Sharma in his closing written submissions (Black 520 S-521J). However, this was in the context of a submission that Bibby did not ever withdraw its termination under cl 13.2, only its "offer" in the draft Deed of Release and that no offer of reinstatement was made. The primary judge dealt with this submission at [65] and found that Bibby's withdrawal of the "offer" in the draft Deed of Release on 25 February 2009 was not a withdrawal of the termination on 4 February 2009. Her Honour did not address the withdrawal issue in any wider context, such as that sought to be raised on appeal.

100 The primary judge also dealt with the question of whether the parties' conduct in engaging in correspondence in a process akin to that found in cl 13.5 of the Contract supported a finding that there was no termination of Mr Sharma's employment on 4 February 2009. However, again, this was not in the context of the new point sought to be raised on appeal.

101 In my view, the withdrawal/instatement case is a new point which was not relied upon at trial. Bibby relied upon the conduct of the parties on and after 4 February 2009 for a different point, namely, that the Contract was not terminated on 4 February 2009 but remained on foot, not for the point which is now sought to be raised on appeal, namely that if the Contract was terminated on 4 February 2009 it was subsequently reinstated by a bilateral agreement between the parties manifested by their conduct after 4 February 2009.

102 Bibby submitted that in any event, Mr Sharma has not sufficiently indicated how his case would have been run differently had the withdrawal/ reinstatement point been argued at trial.

103 A party does not have an entitlement to raise a new issue on appeal otherwise than in accordance with the principles discussed in Coulton v Holcombe [1986] HCA 33; 162 CLR 1; Suttor v Gundowda Pty Ltd at 438. In this regard it is relevant that the withdrawal/reinstatement case does not rely upon any additional facts relating to the parties' conduct after 4 February 2009 than those as found by the primary judge. The matters relied upon by Bibby were those addressed in her Honour's judgment at [60] and [67], being the reinstatement of Mr Sharma's salary after it was stopped for a period, Mr Sharma's retention of the motor vehicle, laptop computer and means of access to Bibby's premises, and Mr Sharma's conduct in responding to Bibby's allegations of serious misconduct.

104 On the question of prejudice, senior counsel for Mr Sharma identified three areas of potential inquiries had the point been raised below. The first was investigations as to whether there were any further discussions between the parties' solicitors relevant to this issue. However, as Bibby submitted, the events between 4 February and 24 March 2009 were exhaustively examined at the trial and counsel for Mr Sharma was unable to indicate any other relevant conversation between the parties' solicitors in respect of which evidence could have been given at the trial. I accept this submission.

105 The second matter concerned seeking bank records of Bibby which might have shown the nature of the payments that were made to Mr Sharma sometime after 13 February 2009. Bibby contended that such records were not relevant because they amounted to nothing more than an uncommunicated subjective manifestation of intention. Whilst uncommunicated, such records may have been relevant as either an objective manifestation of intention, or as an admission against interest. It is convenient to deal with the prejudice argument concerning such documents together with the third matter.

106 The third matter involved possible cross-examination of Bibby's witnesses in relation to whether or not the reinstatement of the payment of salary sometime after 13 February 2009 was an indicia of re-employment, or whether it was paid on an ex gratia basis in order to forestall an application for an injunction, or whether it was paid not in good faith.

107 Bibby submitted that the payment of salary, after it had been stopped for a period of time, was a matter in issue at the trial, that Mr Sharma was cross-examined on this issue on the first day of the trial, and the absence of cross-examination of Bibby's witnesses, or to seek documents on these matters, should be taken to reflect a deliberate forensic choice made by Mr Sharma at the trial. These submissions should be accepted. The fact of reinstatement of payment of the salary sometime after 13 February 2009 and its significance to whether the Contract remained on foot was clearly a matter in issue at the trial. It was addressed in each party's submissions and dealt with by the primary judge. The suggested cross-examination of Bibby's witnesses in relation to whether or not payment of salary was on an ex gratia basis or whether it was not paid in good faith, and documents related to payment of salary, would have been just as relevant in answer to Bibby's case that the Contract always remained on foot as to the new point sought to be raised on appeal, that the termination was withdrawn and the Contract reinstated.

108 In all the circumstances, I do not consider that Bibby is precluded on appeal from raising the withdrawal/reinstatement case. However, for the reasons already given, this argument is rejected.

Issue 2 - election

109 By pars 1 and 2 of the notice of contention, Mr Sharma contended that Bibby elected to terminate Mr Sharma's employment without notice on 4 February 2009 pursuant to cl 13.2 of the Contract, rather than pursuant to cll 13.3 and 13.5 of the Contract for cause, and that election bound Bibby and prevented it from later purporting to terminate Mr Sharma's employment under cl 13.3.

110 The reference to Bibby "later" purporting to terminate Mr Sharma's employment under cl 13.3 has two aspects. The first, which was the subject of the parties' written submissions, is the purported termination of Mr Sharma's employment under cl 13.3 on 24 March 2009. The second, which was first raised by Bibby during oral argument on the appeal, concerns whether even if the termination occurred on 4 February 2009, as found by the primary judge, it is open to Bibby to later rely on cl 13.3 to justify the termination on that date for serious misconduct as a matter of historical fact. No objection was taken by Mr Sharma to this new argument being raised on appeal.

111 It is convenient to first deal with the parties' written submissions which addressed the issue of election as between the two operative dates for termination contended for at the trial - 4 February 2009 and 24 March 2009.

Whether election precluded termination on 24 March 2009

112 Mr Sharma's argument in his written submissions, was based on the following propositions:

(1) That Bibby had two inconsistent contractual rights in respect of the allegations of serious misconduct against Mr Sharma - termination under cl 13.2 without needing to prove any misconduct, or to proceed to a "hearing" under cl 13.5 to establish serious misconduct and then proceed to summary dismissal under cl 13.3.

(2) That all facts relating to the decision to terminate Mr Sharma were known to Bibby as at 4 February 2009.

(3) That Bibby elected between two inconsistent rights and having chosen to proceed under cl 13.2, that election prevented Bibby from later proceeding under cl 13.3 for cause: Sargent v ASL Development Ltd [1974] HCA 40; 131 CLR 634 at 655-666; Hodgson v Amcor Ltd; Amcor Ltd and others v Barnes and others [2012] VSC 94 at [386]-[475]; Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57; 238 CLR 570.

(4) The election on 4 February 2009, precluded Bibby from purporting to terminate Mr Sharma's employment on 24 March 2009 pursuant to cl 13.3.

(5) Having acknowledged Mr Sharma's entitlement to six months pay in lieu of notice of termination, with full knowledge of the allegations of misconduct (and accepting them to have been proven), it was not open to Bibby to later rely upon the same acts of Mr Sharma to deny him six months notice and the right to elect to receive the Special Bonus.

(6) Alternatively, Bibby waived any entitlement it may have had to summarily dismiss Mr Sharma by reason of his misconduct.

113 The primary judge referred to these arguments at [69]-[71] but found it unnecessary to deal with them because of the findings her Honour had made concerning the termination on 4 February 2009.

114 Bibby submitted in its written submissions that no issue of election arises as between 4 February 2009 and 24 March 2009. First, if as Bibby contended there was no effective and operative termination until 24 March 2009 then no election issue arises. Alternatively, if the termination was effective and operative on 4 February 2009, as found by the primary judge, then again no election issue arises.

Consideration

115 An election occurs where a person has two truly alternative rights or sets of rights and with knowledge of the facts giving rise to the inconsistent rights acts in a manner consistent only with the exercise of one of those rights and inconsistent with the exercise of the other: Sargent v ASL Developments Ltd at 641, 645-6 (Stephen J) and 655-6 and 658 (Mason J); Commonwealth v Verwayen [1990] HCA 39; 170 CLR 394 at 407-8 (Mason CJ) and 421 (Brennan J); Khoury v Government Insurance Office (NSW) [1984] HCA 55; 165 CLR 622 at 633-4 (Mason, Brennan, Deane and Dawson JJ).

116 Bibby's submission that no issue of election arises, at least in relation to the withdrawal/reinstatement case as argued on appeal, should be accepted. This is because the premise of appeal ground 1 is that the Contract was terminated on 4 February 2009 but subsequently reinstated by a bilateral agreement between the parties. In those assumed circumstances (which I have rejected) no question of choosing between inconsistent rights on 4 February 2009 and 24 March 2009 would have arisen. Rather, the termination which had occurred pursuant to cl 13.2 on 4 February 2009 would have been set aside by virtue of the alleged bilateral agreement to that effect, the Contract would have been reinstated, and Bibby would have had available to it, amongst other things, the right of termination for cause under cl 13.3, subject to satisfaction of the process required by cl 13.5.

Can Bibby rely on cl 13.3 to justify the 4 February 2009 termination?

117 Bibby next submitted that even if the operative termination was on 4 February 2009, it could later seek to justify the termination on that date relying on cl 13.3 for termination for cause, if it is able to establish serious misconduct by Mr Sharma as a matter of historical fact.

118 Bibby relied upon the decision of this Court in Downer EDI Ltd v Gillies [2012] NSWCA 333; 92 ACSR 373 which applied the principle in Shepherd v Felt and Textiles of Australia Ltd [1931] HCA 21; 45 CLR 359 at 377-8 (Shepherd), that a contracting party who gives a reason for a contractual position being taken (such as termination) does not by giving of that reason (which may be wrong) deprive itself of a justification which existed, whether known of or not at the time: Downer EDI Ltd v Gillies at [131] (Allsop P).

119 It is to be observed that Bibby's reliance upon the Shepherd principle on appeal was put in a different manner to its reliance upon this principle at trial. At the trial, Bibby sought to justify the termination on 24 March 2009 relying upon two grounds of alleged misconduct by Mr Sharma of which it claimed it was unaware of as at that date. As already noted, the primary judge found that the two matters relied upon by Bibby would not justify dismissal for serious misconduct: at [137] and [151]. There is no challenge on appeal to those findings.

120 Rather, Bibby contended on appeal that it could justify the 4 February 2009 termination under cl 13.3 relying upon the alleged sexual harassment constituting serious misconduct, being matters of which it was aware of as at that earlier date, even though it purported to terminate Mr Sharma's employment on that date pursuant to cl 13.2 without notice.

121 Counsel for Mr Sharma did not seek to challenge the decision of this Court in Downer EDI Ltd v Gillies, nor dispute that the Shepherd principle applies to matters relied upon to justify a termination, whether known or not at the time of the termination. Counsel for Mr Sharma submitted that the present case is distinguishable from Downer EDI Ltd v Gillies because in this case an election was made by Bibby not to seek to rely upon matters known to it at the time of the termination which would have required it to observe the cl 13.5 process before termination for cause under cl 13.3 of the Contract would have been available to it. It was argued that as Bibby had not complied with the cl 13.5 process, it could not later seek to justify the termination on 4 February 2009 relying on cl 13.3 for termination for cause.

Consideration

122 The so-called Shepherd principle is encapsulated in the following statement of Dixon J at 377:

"But the rule is of general application in the discharge of contract by breach, and enables a party to any simple contract who fails or refuses further to observe its stipulations to rely upon a breach of conditions, committed before he so failed or so refused, by the opposite party to the contract as operating to absolve him from the contract as from the time of such breach of condition whether he was aware of it or not when he himself failed or refused to perform the stipulations of the contract. 'It is a long established rule of law that a contracting party, who, after he has become entitled to refuse performance of his contractual obligations, gives a wrong reason for his refusal, does not thereby deprive himself of a justification which in fact existed, whether he was aware of it or not'." [Citations omitted and emphasis added.]

123 In Sunbird Plaza Pty Ltd v Maloney [1988] HCA 11; 166 CLR 245 at 262 Mason CJ (Deane, Dawson, Toohey JJ agreeing) stated that:

"Shepherd v. Felt & Textiles of Australia Ltd stands as authority for the general proposition that a termination of a contract may be justified by reference to any ground that was valid at the time of termination, even though it was not relied on at the time and even though the ground actually relied on is found to be without substance."

124 In Downer EDI Ltd v Gillies, Allsop P at [36] (Macfarlan JA agreeing at [150]) rejected the submission by Mr Gillies that the principle in Shepherd was restricted to circumstances where the act purportedly taken under the contract required other justification to be valid. His Honour stated:

"In principle, it should equally extend to adding a further basis for justification of the act if that further basis has separate relevance. So to approach the matter accords with the approach to the availability of damages for loss of bargain even if the contract be terminated in the exercise of a contractual power: Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; 157 CLR 17 at 31; and Sunbird Plaza at 260-262. Of course, whether or not the two contractual bases can operate concurrently or severally will be affected by the terms of the contract."

125 The concluding sentence from the above passage is important because it directs attention to the need to consider the terms of the contract in issue. As Allsop P observed at [139], how a contract operates, both by reference to its own terms and to the general law of contract, will depend upon the content and meaning of the contract.

126 Where a promisee enjoys more than one right of termination at the time of its election to terminate the performance of a contract, it is necessary to identify whether those rights are "independent" (that is, several) or "concurrent". As explained by Professor Carter, the learned author of Carter's Breach of Contract (LexisNexis Butterworths, 2011) at [10-08], independent rights of termination generally arise at different times, whereas concurrent rights of termination arise if two or more rights of termination arise from the same event. Thus, in the case of independent rights of termination, a promisee who purports to terminate on one contractual basis, cannot rely upon a contractual right to terminate which would have come into existence at a later date.

127 In the present case, Bibby had two contractual bases to terminate Mr Sharma's employment. The first was termination under cl 13.2 by either giving six months notice of termination of the Contract, or electing to terminate immediately by paying six months pay in lieu of notice. The second was termination for cause under cl 13.3, but this contractual power was subject to compliance with the cl 13.5 process (which the primary judge found, correctly in my view, was a condition precedent to the right to terminate under cl 13.3: see Issue 4 below).

128 The rights of termination under cll 13.2 and 13.3 of the Contract did not operate concurrently. They conferred rights of termination that arose in respect of different events or circumstances and at different times. The right to terminate relying on cl 13.2 was available at any time by either giving six months notice of termination, or electing to terminate immediately and paying six months pay in lieu of notice. By contrast, the right of termination for cause under cl 13.3 was subject to the condition precedent in cl 13.5.

129 Bibby could not seek to justify Mr Sharma's termination on 4 February 2009 relying on cl 13.3 for termination for cause, unless it had complied with the cl 13.5 process. Where Bibby had not complied with the cl 13.5 process, but elected to terminate the Contract immediately by paying six months pay in lieu of notice, the right to terminate relying on cl 13.3, necessarily arose at a later date than the termination under cl 13.2. Thus, no question of election between alternative rights under the Contract arose in the present case. For this reason, it is unnecessary to consider on this appeal whether there remains room for operation of the doctrine of election between alternative rights arising at the same time (in circumstances where the employer has knowledge of the facts giving rise to inconsistent rights or remedies) as held by the Court of Appeal in England in Cavenagh v Williams Evans Ltd [2012] EWCA Civ 697; [2013] 1 WLR 238 at [42]-[43] (Mummery LJ) and [55] (Tomlinson LJ), in the light of the decision of this Court in Downer EDI Ltd v Gillies: see at [141]-[142] (Allsop P).

130 In the circumstances, the terms of the Contract (which in my view are clear) have the effect that Bibby cannot rely upon cl 13.3 to justify termination of the Contract on 4 February 2009 because no valid right of termination under this provision existed as at that date.

131 Bibby's argument relying upon the Shepherd principle is rejected.

Issue 3 - accrued right to Special Bonus

132 By par 3 of the notice of contention, Mr Sharma contended that even if he was validly terminated under cl 13.3 on 24 March 2009, he was entitled to a Special Bonus on the basis that it was an accrued right which was unaffected by any subsequent termination of his employment. The primary judge did not deal with this issue, having found that the termination had occurred on 4 February 2009.

133 In view of my conclusions above, this issue is academic. However it can be dealt with briefly, as in my view, the contention is flawed.

134 The context of this contention is cl 5 of the Contract and the provisions of Schedule 2, the material terms of which are set out in full at the end of this judgment. Clause 5 of the Contract provided:

"BONUS

The Executive will be entitled to a bonus in accordance with the Company's bonus scheme set out in Schedule 2."

135 Paragraph 2.9(c) of Schedule 2 provided:

"In the event the Executive's employment with the Company terminates:

...

(c) on or after 1 September 2006, the Executive shall be entitled to elect to receive the Special Bonus in accordance with paragraph 2.3 above."

136 An election in accordance with par 2.3 of Schedule 2 could be made by the Executive once only between 1 September 2006 and 1 September 2009, which clause also provided that:

"Once the election is made payment will be made by the Company and received by the Executive at a time in Year 3 in accordance with paragraph 2.6. (emphasis added)"

137 The time for payment of the Special Bonus was identified in par 2.6 of Schedule 2. This provided for payment within 30 days of Bibby delivering to the Executive signed audited financial statements of Bibby for Year 2. The term "Year 2" was defined in par 2.1 to mean the financial year in which the election to become entitled to the Special Bonus, relevantly under par 2.3, is made.

138 It was submitted by Mr Sharma that it was not necessary that he remain employed by Bibby, after his election to receive the Special Bonus made on 26 February 2009. This was not disputed by Bibby and may be accepted.

139 There was no dispute that Mr Sharma made an election to receive the Special Bonus on 26 February 2009 in accordance with par 2.3 of Schedule 2. It was contended by Mr Sharma that once that election was made, the effect of par 2.3 of Schedule 2 was that Mr Sharma became entitled, as of right, to receive the Special Bonus, provided the required net profit threshold exceeding $500,000 was achieved by Bibby in the relevant financial years. There was no issue that the net profit threshold had been met in the financial years 31 December 2008 and 2009 respectively. The primary judge noted at [49] that the parties agreed that the amount of the Special Bonus, if payable, was $1.4 million.

140 Clause 13.4 of the Contract provided:

"Termination of the Executive's employment does not affect any accrued rights or remedies of the Executive of the Company."

141 However, par 2.8 of Schedule 2 provided:

"Notwithstanding any of the provisions under this clause 2 relating to the Special Bonus, the Executive shall forfeit any rights to the Special Bonus if his employment is terminated for any reason described in clause 13.3 of the agreement." (emphasis added)

142 It was contended by Mr Sharma that the interaction of cl 13.4 of the Contract and the forfeiture provision in par 2.8 of Schedule 2 was that the accrued right to the Special Bonus as at 26 February 2009 was protected by cl 13.4 and that the forfeiture provision in par 2.8 of Schedule 2 did not "trump" cl 13.4. That is, par 2.8 of Schedule 2 did not qualify the operation of cl 13.4 of the Contract.

143 Bibby submitted that the effect of par 2.8 of Schedule 2 is that the Executive's entitlement to a Special Bonus is conditional, at least, on the Executive not being terminated for any reason described in cl 13.3 of the Contract, which includes serious misconduct. It was argued that the effect of that condition subsequent, where it takes effect, is that the right to the Special Bonus is forfeited. It was submitted that there was no tension or inconsistency between cl 13.4 of the Contract and par 2.8 of Schedule 2, because cl 13.4 only preserves unconditionally acquired rights. Bibby submitted that the word "accrued" in cl 13.4 is to be given the same meaning as at common law, being a reference to a right which has been "unconditionally acquired": McDonald v Denny's Lascelles Ltd [1933] HCA 25; 48 CLR 457.

144 A further argument advanced by Bibby was that on ordinary principles of construction, a provision such as par 2.8 of Schedule 2, dealing specifically with the forfeiture of the Special Bonus in circumstances of serious misconduct, must prevail over a general provision such as cl 13.4 of the Contract.

Consideration

145 In my view, Bibby's construction of the interaction between cl 13.4 of the Contract and par 2.8 of Schedule 2 should be accepted. First, the Executive's entitlement to the Special Bonus, relevantly under par 2.3 of Schedule 2, is expressly qualified by the condition of forfeiture in par 2.8 of Schedule 2, if the Executive's employment is terminated for any reason described in cl 13.3 of the Contract. The introductory words of par 2.8 "Notwithstanding any of the provisions under this clause 2 relating to the Special Bonus", expressly qualify the entitlement conferred by par 2.3 of Schedule 2, including the entitlement to payment of the Special Bonus at the time identified in par 2.6 of Schedule 2. If the reason for termination of the Executive fits the description in cl 13.3, such as serious misconduct, then the Executive forfeits his or her rights to the Special Bonus.

146 On the scenario presently under consideration, it is to be assumed that Mr Sharma was terminated for cause for serious misconduct on 24 March 2009. On that assumption, the sequence of events would be that whilst Mr Sharma had made a valid election to become entitled to payment of the Special Bonus by his notice given on 26 February 2009, he was not entitled to receive payment of the Special Bonus until 30 days after receiving the signed audited accounts for Bibby for Year 2 (relevantly 31 December 2009), but prior to that payment date, the effect of par 2.8 of Schedule 2, in the assumed circumstances, would be to forfeit his rights to receive payment of the Special Bonus.

147 Secondly, there is no inconsistency between par 2.8 of Schedule 2 and cl 13.4 of the Contract. The reference in cl 13.4 to termination not affecting "accrued rights" should be given the same meaning as at law as referring to unconditionally acquired rights: McDonald v Denny's Lascelles Ltd (supra). It cannot be said that Mr Sharma had unconditionally acquired a right to the Special Bonus at any time immediately prior to his assumed termination on 24 March 2009, because that entitlement was always liable to forfeiture by reason of par 2.8 of Schedule 2, if the reason for his assumed termination met the description in cl 13.3 of the Contract, which included serious misconduct.

148 Thirdly, even if the expression "accrued rights" in cl 13.4 of the Contract is not to be given the same meaning as at law, the forfeiture provision in par 2.8 of Schedule 2 qualifies the Executive's entitlement to a Special Bonus which right is given pursuant to cl 5 of the Contract, such that there is no room for the operation of cl 13.4 of the Contract. The specific provision in cl 5 of the Contract, as qualified by par 2.8 of Schedule 2, would prevail over the general provision in cl 13.4 of the Contract.

Issue 4 - whether compliance with cl 13.5 was a condition precedent to right to terminate under cl 13.3

149 Bibby contended that the primary judge erred in finding that non-compliance by Bibby with cl 13.5 of the Contract meant that the purported termination of Mr Sharma's employment on 24 March 2009 pursuant to cl 13.3 of the Contract was of no effect. This issue arises on the appeal if, contrary to my conclusion above on Issue 1, appeal ground 1 is upheld. This issue also arises in relation to Bibby's reliance on the Shepherd principle to justify the termination on 4 February 2009 (Issue 2).

150 It will be recalled that the primary judge concluded at [76] that Bibby's conduct was in breach of cl 13.5 by reason of lack of good faith in the process that it adopted. At [77], her Honour observed that cl 13.5 required Bibby to take submissions (if any) from Mr Sharma into account before any final decision was made (based on the misconduct allegations) and to make a final decision in good faith. However, what occurred in this case was that Ms Koller had already made up her mind that there was nothing that Mr Sharma could say that would change her mind as at 4 February 2009. Mr Charlwood was of like mind.

151 Bibby did not challenge the primary judge's finding that it failed to comply with cl 13.5 of the Contract.

152 Bibby sought to overcome this finding by contending that her Honour erred in treating cl 13.5 as a condition precedent to termination for cause under cl 13.3, for serious misconduct. Bibby's argument relied upon the following propositions:

(1) That cl 13.5 is a warranty, breach of which will sound (only) in damages, rather than a condition precedent.

(2) The existence of express conditions precedent in cl 13.3 make it inappropriate to imply or infer additional preconditions arising from cl 13.5.

(3) That the construction preferred by her Honour defeats the evident commercial purpose of cl 13, and gives rise to unreasonable consequences because unless Bibby complied strictly with the preconditions in cl 13.5, an Executive would still be entitled to the additional money - payment in lieu of notice and the Special Bonus - notwithstanding that he or she was guilty of serious misconduct.

153 Mr Sharma submitted that compliance with cl 13.5 of the Contract was a condition precedent to a termination for cause under cl 13.3 for serious misconduct. It was argued that the clause is expressed in such terms. It was also submitted that the clause, which was negotiated with Bibby at the inception of the Australian operation, was a critical protection to ensuring that the founding Executives (including Mr Sharma) could not be placed in the invidious position of having worked to establish the business but then be immediately removed for alleged cause without recourse, when a Special Bonus was imminent, and lose any entitlement to the Special Bonus.

Consideration

154 In my view, the primary judge did not err in concluding at [80] that the failure of Bibby to comply with cl 13.5 of the Contract had the consequence that the purported termination under cl 13.3 of the Contract was of no effect. My reasons are as follows.

155 First, the language of cl 13.5 is emphatic. Bibby agreed "not to terminate" the Executive's employment without bringing to the notice of the Executive the alleged breach or misconduct and giving the Executive the opportunity to respond to such allegations prior to any final decision to terminate the Executive's employment being made. This undoubtedly operated as a constraint on Bibby's right to rely upon cl 13.3 for termination for cause for serious misconduct.

156 Secondly, the terms of cl 13.5 are also emphatic in requiring that both the notice and hearing process occur before any final decision is made by Bibby to terminate the Executive. Bibby agreed to take into account any submissions by the Executive before making any final decision. It also agreed that any final decision would be made in good faith and on the basis of the factual material before it, including the Executive's response.

157 Thirdly, cll 13.3 and 13.5 are to be read together. It cannot be supposed that, viewed objectively, the parties intended that Bibby could exercise the contractual power of termination under cl 13.3 for serious misconduct, without having first complied with the process provided in cl 13.5.

158 Fourthly, Bibby's contention that the construction accepted by the primary judge is unreasonable and commercially nonsensical is no more than an assertion. It suffers from the problem that it assumes the conclusion to which it seeks to argue, namely, that the Executive is in fact guilty of serious misconduct. The premise of Bibby's argument that breaches of cl 13.5 should only sound in damages, is an assumption that the Executive is guilty of serious misconduct. But cl 13.5 required that before Bibby made any final decision to terminate the Executive's employment for serious misconduct, it would follow the notice and hearing process there provided. Compliance with this condition of the right to terminate for serious misconduct is neither unreasonable nor uncommercial.

159 Clause 13.5 may be seen as operating as a brake on Bibby's entitlement to terminate for cause. The Executive was to be given a form of procedural fairness before any final decision was made by Bibby to terminate for cause under cl 13.3 relying upon allegations of serious misconduct. Moreover, Bibby was obliged to make its final decision in good faith taking into account the factual material before it, including the Executive's response. Compliance by Bibby with the cl 13.5 process was a significant protection for the Executive, in circumstances where allegations of serious misconduct had been made against the Executive. That protection was conferred on persons occupying senior positions with Bibby, and who potentially would forego significant monetary benefits (such as six months pay in lieu of notice and a Special Bonus) if terminated under cl 13.3 for serious misconduct as opposed to terminated without notice under cl 13.2. The clause should not be construed as a mere warranty, breach of which sounds only in damages, as submitted by Bibby.

160 Ground 2 of the notice of appeal is rejected.

Issue 5 - whether Mr Sharma's conduct in respect of Mr Wright constituted serious misconduct

161 In light of the view which I have expressed concerning no termination under cl 13.3, appeal grounds 3, 4 and 5 are academic. However, it is appropriate that I deal with them having regard to the comments of the High Court in Kuru v New South Wales [2008] HCA 26; 236 CLR 1 at [12].

162 These grounds involve a challenge to the primary judge's fact-finding approach in respect of the allegations of serious misconduct against Mr Sharma.

Serious misconduct

163 Both parties accepted that the meaning of the expression "serious misconduct" in cl 13.3(b) of the Contract may be taken to involve conduct which strikes at the root of the contract, or justifies a loss of trust and confidence in the relationship: Zhu v Sydney Organising Committee for the Olympic Games & Ors [2001] NSWSC 989 at [222]-[229].

164 Bibby also referred to the statement by the High Court in Concut Pty Ltd v Worrell [2000] HCA 64; 176 ALR 693 at [25], where the plurality referred to the statement of Dixon and McTiernan JJ in Blyth Chemicals Ltd v Bushnell [1933] HCA 8; 49 CLR 66 at 81:

"Conduct which in respect of important matters is incompatible with the fulfilment of an employee's duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal."

165 The first part of this statement cited in Concut emphasises the incompatibility of the conduct in important matters with the fulfilment of an employee's duty. It was common ground at the trial that serious misconduct involving allegations of sexual harassment was to be approached by reference to a definition from a guide from the Australian Human Rights Commission entitled "Effectively preventing and responding to sexual harassment: A Code of Practice for Employers" (2008 ed), which reflected in turn the "legal test" in s 28A of the Sex Discrimination Act 1984 (Cth). At [81], the primary judge recorded that this involved three essential elements:

(1) the behaviour must be unwelcome;

(2) it must be of sexual nature; and

(3) it must be such that a reasonable person would anticipate in the circumstances that the person who was harassed would be offended, humiliated and/or intimidated.

166 The parties did not depart from this approach on appeal. It provides the reference point for this Court's consideration of the matter.

Incorrect characterisation of significance of certain incidents

167 By appeal ground 3, Bibby submitted that the primary judge:

(1) Incorrectly characterised the significance of the incidents found to have occurred; and

(2) Failed to consider the cumulative effect of the incidents found to have occurred.

The premise of these submissions is flawed. As noted at [59] above, the primary judge did not find that any of the alleged incidents occurred - her Honour found that two of the incidents had not been proved, and found that if the other three incidents occurred, they did not amount to serious misconduct that would warrant dismissal under cl 13.3 of the Contract. Appeal ground 3 is to be approached on this basis.

168 Bibby's contention that the primary judge erred in assessing the significance of the incidents relied upon as constituting sexual harassment and/or serious misconduct was directed to two incidents - the incident in the "Cargo Bar", and the allegation by Mr Wright that Mr Sharma would stare at his crotch making him feel uncomfortable.

Cargo Bar incident

169 As to the Cargo Bar incident, the allegation was that during an afternoon drinks session lasting from about 3.30 or 4.00pm to 6.00pm, Mr Sharma hugged Mr Wright on two or three occasions, continually kept touching Mr Wright's legs, later grabbed Mr Wright's cheek and kissed him, and said that Mr Wright was his soul mate and that he thought they would be good together. The primary judge noted that Mr Sharma denied these allegations: at [99].

170 There was some dispute in the evidence as to when the drinks session at the Cargo Bar occurred. Bibby accepted on appeal that the primary judge found that it occurred in March 2008, during part of the interview process between Mr Sharma and Mr Wright: at [99].

171 The primary judge observed at [103] that the description given to this incident by Mr Wright in his examination in chief, in which he described it "like a football player celebrating giving his mate a kiss" was most extraordinary, in the light of the history of this complaint when first made by Mr Wright to Ms Koller in January 2009, which suggested that it was of a sexual and unwanted nature. Significantly, Mr Wright's evidence in chief did not include any allegation that Mr Sharma continually kept touching his legs at the Cargo Bar.

172 The primary judge did not make a finding as to whether the alleged conduct occurred. Her Honour proceeded upon the assumption that the incident occurred in the way in which Mr Wright had described in his evidence in chief, and was not satisfied that it amounted to misconduct, let alone serious misconduct: at [104].

173 Bibby complained that her Honour took the description of the kiss by Mr Wright out of context, and ignored the alleged touching of the legs and the alleged comments concerning a soul mate and that they would be good together.

174 This submission should be rejected. The alleged touching of the legs was not established by Mr Wright's evidence. Further, it is not to be assumed that the primary judge overlooked the context of this alleged incident, as suggested by Bibby. Her Honour recorded the various allegations and evidence given by Mr Wright at [99]-[102]. The primary judge had the significant advantage of viewing Mr Wright give his evidence. This included that Mr Wright dismissed the alleged incident at the time as a "drunken antic" (Black 333M). It was open to her Honour, on the evidence, not to accept Bibby's characterisation of this incident, assuming it occurred in the way described by Mr Wright, as sexualised behaviour.

Inappropriate staring

175 As to the inappropriate staring, again the primary judge did not make a finding as to whether or not this occurred as alleged by Mr Wright: at [120]. Her Honour observed at [120], that there was a significant divergence between Mr Wright's evidence in chief - that Mr Sharma "continually stared at my crotch" - and his evidence in cross-examination, that he "occasionally stared" at his crotch.

176 In assessing whether such conduct, if it occurred, was of a sexualised nature, her Honour had regard to the fact that there was no suggestion that Mr Sharma said anything inappropriate to Mr Wright, or that he was leering or smiling at Mr Wright. Her Honour also took into account the absence of any complaint by Mr Wright to Mr Sharma that he did not like the way he was staring at him or his crotch, whereas Mr Wright was able to complain to Mr Sharma that he was being rude to him in their dealings in a work setting. Her Honour considered, correctly in my view, that this was relevant to whether a reasonable person would anticipate in the circumstances that Mr Wright was offended, humiliated, or intimidated by the alleged conduct: at [120].

177 Contrary to the submissions of Bibby, the evidence did not establish that this alleged conduct occurred "repeatedly". The primary judge dealt with the matter on the assumption that if the conduct occurred, it was only on the occasional basis as described in Mr Wright's cross-examination: at [120]. It was open to her Honour to reject Bibby's characterisation of this assumed conduct as plainly sexual and unwelcome.

178 No error has been established in the trial judge's findings at [104] or [121], that the assumed conduct did not amount to serious misconduct justifying dismissal under cl 13.3.

Failure to consider conduct as a whole

179 Bibby next contended that the primary judge did not address whether Mr Sharma's conduct towards Mr Wright, considered as a whole, constituted serious misconduct. Mr Sharma submitted that her Honour did consider the possible cumulative effect of the alleged incidents, pointing to the penultimate paragraph in her Honour's consideration of the sexual harassment complaints where her Honour stated:

"[130] In considering all these matters I have had in mind the possible cumulative effect of the alleged incidents. I am not satisfied that a reasonable person would anticipate in the circumstances that the plaintiff would be offended, humiliated or intimidated. In any event I am far from comfortably satisfied that these allegations regarding the pursuit of a "relationship" are made out. The defendant has failed to prove these allegations."

180 Mr Sharma submitted that her Honour's reference to the allegations regarding the pursuit of a "relationship" was to be taken as a reference to all of the alleged incidents. Whilst this is a possible interpretation of her Honour's statement, the better view in my opinion, is that her Honour was only referring to the allegations dealt with under the heading "Pursuit for a relationship" commencing at [122] of the judgment. Nonetheless, in my view, the complaint by Bibby is unsustainable.

181 Firstly, in relation to the incidents cumulatively described as "pursuit for a relationship", her Honour at [130] considered the possible cumulative effect of those alleged incidents and was not satisfied that a reasonable person would be offended, humiliated or intimidated by the matters complained of. In any event, her Honour was not satisfied that Bibby had established these allegations.

182 Secondly, as to the lunch with Mr Lea, her Honour was again not satisfied that Bibby had proved this incident occurred as claimed: at [117].

183 Thus, no occasion arose for the primary judge to consider the possible cumulative effect of these two alleged incidents and the remaining three incidents.

184 Thirdly, as to the alleged failure to consider the possible cumulative effect of the other three incidents, it is to be recalled that her Honour rejected each of these distinct incidents as amounting to sexual harassment. Other than contending that the primary judge's factual findings were in error, Bibby did not identify how these alleged incidents, if viewed together, amounted to sexual harassment notwithstanding her Honour's individual factual findings that each of the incidents did not amount to sexual harassment. I do not consider that a finding of sexual harassment is warranted if these three incidents, assuming they occurred in the manner assumed by her Honour, are viewed cumulatively.

185 As to the alleged incidents in the car (involving touching of legs whilst driving), her Honour found that Mr Wright's evidence elevating this complaint from Mr Sharma trying to touch Mr Wright's legs to "brushing" his legs was most unimpressive: at [109]. Counsel for Bibby submitted that there was an ambiguity in her Honour's finding at [108] that the journey during which these alleged events occurred was no longer than 5 minutes and the best that Mr Wright could do to assess how many occasions it occurred was "at least three". Bibby submitted that the better reading of her Honour's finding was that there were three occasions on the one trip, whereas Mr Wright's evidence was that there were three trips on which Mr Sharma brushed his legs whilst driving.

186 It may be accepted that there is some ambiguity in her Honour's finding at [108]. However, I doubt that her Honour was mistaken as suggested by Bibby. The finding at [108] was preceded by a description of the incidents in the car and reference to Mr Wright's evidence in chief at [105] and extracts of the cross-examination of Mr Wright on this issue at [106] and [107]. At [105] her Honour refers to trial transcript at 241. Although not extracted in the judgment, at that page of the trial transcript it is apparent that Mr Wright was referring to three separate car trips (Black 241R-V). Likewise, in relation to the transcript extract set out at [107], on the same page of the transcript as referred to by her Honour, it is clear that Mr Wright was referring to more than one incident in the car (Black 294C). It should not be supposed that her Honour overlooked this evidence, when expressing her finding at [108].

187 Even if her Honour was mistaken at [108] as suggested by Bibby, accepting that there were three trips in which some contact between Mr Sharma's hand and Mr Wright's leg (a brushing of the outside leg) occurred as assumed by her Honour, no error has been demonstrated in her Honour's finding at [109] that she was not satisfied that a reasonable person would anticipate in the circumstances that Mr Wright would be offended: at [109].

188 Taken at its highest, Mr Wright's evidence was that Mr Sharma's driving position was such that his left hand was completely across the centre console and brushed against the side of his leg once on three out of the six occasions whilst Mr Sharma was driving (Black 240X-241D and 241P-V). I do not consider that any error has been demonstrated in her Honour's finding rejecting this conduct as amounting to serious misconduct.

189 As to the Cargo Bar incident and the inappropriate staring, her Honour did not find that either conduct, assuming it occurred, was of a sexualised or unwelcome nature. Viewing the conduct cumulatively does not change its nature.

190 The temporal difference between these three alleged incidents is also significant. On her Honour's findings, the only occasion on which Mr Sharma and Mr Wright attended the Cargo Bar was during part of the interview process, in March 2008: at [99]. The two other incidents - inappropriate staring and incidents in the car - were alleged to have occurred during the short period of Mr Wright's employment with Bibby towards the end of 2008. Whilst the better view is that the primary judge did not address the cumulative issue in relation to these three incidents, in my view, Bibby has not demonstrated error in her Honour's finding that the allegations of sexual harassment had not been established.

191 Ground 3 of the notice of appeal is rejected.

Incidents not addressed by the primary judge

192 By appeal ground 4(a), Bibby contended that the primary judge erred in failing to address the alleged touching by Mr Sharma of Mr Wright's leg in the Cargo Bar. Although such an allegation was contained in Mr Wright's email to Ms Koller on 8 January 2009, the terms of which were recorded by the primary judge at [85], it was not the subject of any evidence in chief given by Mr Wright at the trial (Black 245F-249N). No written submissions were made by Bibby on appeal in support of this appeal ground. It may therefore be put aside.

193 By appeal grounds 4 (b) and (c), Bibby contended that the primary judge erred in failing to address two other incidents. The first concerned alleged frequent invitations by Mr Sharma to Mr Wright for lunch, coupled with disappointment and irritation if those invitations were refused. The second concerned an allegation that there were occasions when Mr Sharma told Mr Wright he had missed him upon Mr Wright's return when he had been away on business.

194 Although there was some limited evidence on these topics, they did not significantly feature in the parties' submissions at trial. The complaint in relation to frequent invitations to lunch received a passing reference in three lines of closing submissions by counsel for Bibby (Black 450, lines 20-23). Significantly, this complaint was not included in the letter from Gillis Delaney of 20 March 2009 to Mr Sharma's solicitors specifying the allegations of misconduct, the material parts of which are set out by the primary judge at [97].

195 In cross-examination, Mr Wright conceded that he did not tell Ms Koller, when he met with her on 13 January 2009, that Mr Sharma was always asking him to go out to lunch (Black 336H). After initially denying telling Ms Koller that Mr Sharma treated him like a son (Black 337K-O), the following exchange occurred in cross-examination of Mr Wright:

"Q: You see, you did say to Ms Koller that Mr Sharma treated you like a son, didn't you?

A: Yes.

Q: And you say, do you, that what you meant by that was just that he was over familiar?

A: I don't know what I meant when I made those comments.

Q: Well then why don't you know what you meant when you said you were treated like a son?

A: Because it was four years ago and I'm doing my best to recollect the events.

Q: And these were events that almost ruined your like [sic] you say?

A: Yes.

Q: And you just can't remember what you meant?

A: No, I can't no."

196 Mr Sharma agreed that he asked Mr Wright to lunch on some occasions as he did other employees, but denied getting angry if Mr Wright declined the invitation. The limited evidence on this topic, to which the primary judge did not refer, would not in my view amount to sexual harassment, nor serious misconduct.

197 As to the second incident not addressed by her Honour, the alleged comments by Mr Sharma about "missing" Mr Wright were not the subject of cross-examination of Mr Sharma, and no submissions were made in the Court below by counsel for Bibby on this topic. In the circumstances, there was no occasion for the primary judge to address this alleged incident.

198 Ground 4 of the notice of appeal is rejected.

Application of the Briginshaw standard and s 140(2)(c) Evidence Act

199 By appeal ground 5, Bibby contended that in finding that two of the alleged incidents had not been proved - the incident at a lunch with Mr Lea (at [117]), and the pursuit of a relationship (at [130]) - the primary judge inappropriately had regard to the Briginshaw standard and s 140(2)(c) of the Evidence Act 1995.

200 The context of this complaint is as follows. First, at [83], the primary judge observed that in considering the evidence of Mr Wright and Mr Sharma in respect of the allegations of sexual harassment it was appropriate to keep in mind the following passage of Dixon J's judgment in Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336 at 362 as follows:

"The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences."

201 Secondly, at [84] her Honour referred to s 140(2)(c) of the Evidence Act which required the Court to take into account the "gravity of the matters alleged".

202 Bibby contended this was not a case where either the principles in Briginshaw v Briginshaw or s 140(2)(c) of the Evidence Act, required any special or heightened approach to the findings of fact by the primary judge. Bibby argued that these principles were limited to findings on the balance of probabilities concerning fraudulent or criminal conduct, and had no application to an allegation of sexual harassment.

203 There are a number of difficulties with this contention. The first is that the senior counsel who appeared for Bibby at the trial, but not on the appeal, acknowledged in his closing submissions that the Briginshaw standard was appropriate in the present case (Black 459G-H). No exceptional circumstances have been shown as to why Bibby should be allowed, after the case has been decided against it, to raise a new argument which, whether deliberately or by inadvertence, it failed to put during the hearing when it had an opportunity to do so: Metwally v University of Wollongong [1985] HCA 28; 60 ALR 68 at [71].

204 Secondly, in my view, the primary judge did not err in taking into account "the gravity of the matters alleged" as required by s 140(2)(c) of the Evidence Act. This is one of a non-exhaustive list of "matters" to be taken into account in applying the standard of proof on the balance of probabilities in civil proceedings and its application is not limited to allegations of fraudulent or criminal conduct.

205 Thirdly, s 140(2) provides for no new principle: Palmer v Dolman [2005] NSWCA 361 at [40] per Ipp JA (Tobias and Basten JJA agreeing); Bale & Anor v Mills [2011] NSWCA 226; 81 NSWLR 498 at [71]-[72]. It reflects the principles stated in Briginshaw v Briginshaw, that the requirement that there should be clear and cogent proof of serious allegations, does not change the standard of proof, but merely reflects the perception that members of the community do not ordinarily engage in serious misconduct: Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; 67 ALJR 170 at 171; Director General of Department of Community Services; re Sophie [2008] NSWCA 250 at [50] per Sackville AJA (Giles JA and Handley AJA agreeing).

206 Fourthly, the distinction sought to be made by Bibby between the nature of the behaviour itself (unwelcome sexual advances) and what Bibby contended rendered it serious misconduct (because it occurred in the context of the supervisorial employment relationship) does not detract, in my view, from the requirement of s 140(2)(c) of the Evidence Act that the Court take into account "the gravity of the matters alleged".

207 The allegations made against Mr Sharma of sexual harassment in the workplace were undoubtedly of a serious nature. It was asserted that Mr Sharma's behaviour was unwelcome and that a reasonable person would anticipate that Mr Wright would be offended, humiliated and/or intimidated: at [81]. The additional fact that Mr Sharma was Mr Wright's immediate supervisor clearly added to what were already serious allegations of misconduct in the workplace. However, such allegations, whether or not involving a subordinate in the workplace would, if proved, have had significant detrimental consequences for Mr Sharma financially under the Contract and potentially prospectively in respect of his future employment prospects.

208 Bibby also contended that where otherwise applicable, the correct approach is to apply s 140(2)(c) of the Evidence Act, rather than cite the observation of Dixon J in Briginshaw v Briginshaw: see Qantas Airways Ltd v Gama [2008] FCAFC 69; 167 FCR 537 at 139 per Branson J (French and Jacobson JJ agreeing at 110). I do not consider that the primary judge's citation of Briginshaw v Briginshaw was inappropriate, or an indication of error, in circumstances where her Honour immediately referred to s 140(2)(c) of the Evidence Act. No submission was made in the present case that the observations of Dixon J in Briginshaw v Briginshaw did not elucidate the effect of s 140(2)(c) of the Evidence Act, nor was any submission made that the decision of this Court in Palmer v Dolman at [40] was wrong.

209 Ground 5 of the notice of appeal is rejected.

Conclusion

210 In my view, the appeal fails on all grounds. I propose the following orders:

(1) Appeal dismissed.

(2) Appellant to pay the respondent's costs of the appeal.

211 As referred to at [134] above, the material provisions of Schedule 2 to the Contract are set out below.

2. Special Bonus

Definitions

2.1 In this paragraph:

'Cap' means A$1,400,000.

'Net Profit' means Net profit after tax.

'Year 1' means the financial year immediately preceding any election to become entitled to the Special Bonus under paragraphs 2.3 to 2.5.

'Year 2' means the financial year in which the election to become entitled to the Special Bonus under paragraphs 2.3 to 2.5 is made.

'Year 3' means the financial year following Year 2 in which the payment of the Special Bonus is made under paragraphs 2.6.

Election of right to Special Bonus

2.2 The Executive will, subject to the following provisions, be eligible to receive a Special Bonus calculated by reference to the net profit of the Company. The Executive shall only be entitled to payment of this Special Bonus once from the Company. In order for the Executive to elect to and become entitled to and subsequently be paid the Special Bonus pursuant to this paragraph the Company's Net Profit for the relevant Year 1 and Year 2 must be A$500k or greater in both Year 1 and Year 2. Subject to the cap, the Special Bonus payable to the Executive shall be based upon the following schedule:

Net profit of the Company	Amount of Special Bonus
Less than A$500,000	0%
A$500,000 to A$1,499,999	10%
A$1,500,000 to A$1,999,999	20%
A$2,000,000 to A$2,499,999	30%
A$2,500,000 to A$2,999,999	35%
A$3,000,000 to A$3,499,999	37.5%
Over A$3,500,000	40% (not to exceed the Cap)

2.3 The Executive may make a once only election to become entitled to payment of the special bonus ('Special Bonus'). This election must be made by the Executive between 1 September 2006 and 1 September 2009. Election by the Executive shall be made within 30 days of the Company delivering to the Executive signed audited financial statements relating to the Company for Year 1 which establish that the Special Bonus threshold has been reached for Year 1. Once the election is made, payment will be made by the Company and received by the Executive at a time in Year 3 in accordance with paragraph 2.6. The amount of the Special Bonus paid in Year 3 by the Company to the Executive will be calculated in accordance with paragraph 2.7.

...

2.6 In the event of the Executive making an election to receive the Special Bonus, payment of the Special Bonus shall be made in Year 3 within 30 days of the Company delivering to the Executive signed audited financial statements of the Company for Year 2.

2.7 The amount of the Special Bonus payable to the Executive shall be determined by the Company based upon the formula set out in paragraph 2.2 above provided that if payment of the Special Bonus is made pursuant to paragraph 2.3, on Executive election, the net profit used in the calculation under paragraph 2.2 shall be the net profit for Year 2.

2.8 Notwithstanding any of the provisions under this clause 2 relating to the Special Bonus, the Executive shall forfeit any and all rights to the Special Bonus if his employment is terminated for any reason described in clause 13.3 of the agreement.

2.9 In the event the Executive's employment with the Company terminates:

...

(c) on or after 1 September 2006 the Executive shall be entitled to elect to receive the Special Bonus in accordance with paragraph 2.3 above."

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Decision last updated: 05 March 2014