Breach of employment contract: Coghill v Indochine Resources Pty Ltd (No 2)  FCA 1030
A former employee who was the chairman, company secretary and chief financial officer of mining company, Indochine Resources has been awarded approximately $3.7 million following the company’s breach of his employment contract by failing to pay his salary, superannuation, annual leave, club memberships and reimbursement for business expenses and unlawfully terminating his employment.
Mr Robert Coghill commenced employment with Indochine Resources Pty Ltd on 1 May 2008, initially for a term of five years, renewable on substantially the same terms for another five years.
He was employed by Indochine Resources as chairman, company secretary and chief financial officer and was to receive $USD240,000 per annum, which was to increase each year by 20%, a car allowance, overseas living allowance, reimbursement for insurance premiums, health insurance, income protection insurance, airfares for him and his family for holidays, costs of club memberships and share options.
In October 2008, each of the senior executives, including Mr Coghill, agreed to a salary cut. It was agreed that Mr Coghill would reduce his salary to $USD120,000 and that he would catch up on the arrears at the company’s next capital raising.
On 21 June 2010 Mr Cohill was informed that his employment would be terminated immediately without notice and without payment in lieu of notice due to allegations of serious misconduct relating to dishonesty.
Mr Coghill commenced proceedings in the Federal Court of Australia against Indochine Resources claiming that it had breached his contract of employment. Mr Coghill claimed that he should receive compensation for the reduced salary that he received from October 2008, his motor vehicle allowance which he never received, overseas living allowance which was reduced from USD150 per day to USD50 per day, costs of club memberships which he never received, his reasonable business expenses and his accrued annual leave entitlements which were not paid to him on termination.
In addition, Mr Coghill claimed that Indochine Resources were liable to pay him five years’ salary, superannuation and allowances as liquidated damages pursuant to a clause in his contract of employment which stated that if Indochine Resources terminated the contract without proper cause, Mr Coghill was entitled to have five years’ salary paid to him.
Indochine Resources did not appear at the Hearing and therefore did not lead any evidence which contradicted Mr Coghill’s claims. As such, the Federal Court was required to determine the extent of Mr Coghill’s loss.
The Court found that Mr Coghill should be paid the majority of his compensation in US dollars as that was what was provided for in the contract of employment. He was awarded $USD290,986 for loss of salary and superannuation between October 2008 and his termination, together with $USD49,236 for accrued annual leave.
The Court was then required to determine whether the clause in the contract of employment allowing for Mr Coghill to be paid five years’ salary as liquidated damages amounted to being a penalty rather than compensatory for the loss that he had suffered. The Court said:
“Mr Coghill is not a young man. The parties may have reasoned or assumed or proceeded on the basis that it was likely that he would be employed for successive terms and that upon the termination of his contract, having regard to his age, he might not have been able to find other work. In those circumstance it is conceivable that his loss could have been as great as that for which the clause provided. In any event, the onus of showing that clause is a penalty is on the party seeking to avoid its enforcement… [Indochine Resources] did not please that the clause in question was a penalty, let alone discharge its onus of proof.”
The Court therefore found that the clause in question amounted to liquidated damages rather than a penalty and awarded Mr Coghill $USD2,307,890.
The total amount that Mr Coghill was awarded was $USD2,648,112 plus $AUD6,425, which amounts to approximately $3.7 million at current exchange rates.
* PCC Lawyers are a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training. They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate.