Unfair Employment Contract Leads to Monetary Orders

The Industrial Relations Commission found an employment contract to be unfair and unconscionable, resulting in monetary orders in favour of the claimant. The contract lacked a proper process for investigating allegations against the employee before termination.

OUTCOME: Allowed

Industrial Relations Commission of New South Wales in Court Session

CITATION : [NAME_1] v [COMPANY_2] [2000] [NAME_5] 253 APPLICANT: [redacted] RESPONDENT: [redacted] CORAM: Kavanagh J CATCHWORDS : Application pursuant to s106 of the Industrial Relations Act 1996 - whether applicant terminated for just cause - terms of Compensation Memorandum incorporated as terms of contract, issue as to appropriate notice payment (BCR) and payment of Directors' Profit Share (DPS) - the effect of a vesting clause on DPS already allocated - meaning of a term that calls the applicant a "residual owner" of [COMPANY_9] - termination found to be without just cause - contract found to be unfair in its terms and in its performance on termination of applicant - monetary orders made LEGISLATION CITED : Industrial Relations Act 1996 General Medical Council v Spackman [1943] AC 627 CASES CITED : [COMPANY_2] v [NAME_10] & Anor 64 IR 53 Westfield Ltd & Anor v Helprin (1998) 82 IR 411 [NAME_11] v The State of New South Wales (Department of School Education)(No 2) [2000] [NAME_5] 110 (published 30 June 2000) HEARING DATES: 05/01/2000; 05/02/2000; 05/03/2000; 05/04/2000; 05/05/2000; 05/08/2000; 05/09/2000; 05/15/2000; 05/16/2000; 05/17/2000; 05/18/2000; 08/07/2000; 08/08/2000; 08/09/2000 DATE OF

JUDGMENT: 12/15/2000

APPLICANT: [redacted] SOLICITORS: [redacted] LEGAL REPRESENTATIVES: RESPONDENT: [redacted] SOLICITORS: [redacted]

JUDGMENT: - 88 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: KAVANAGH J

Date: Fri 15 December 2000 IRC4188 of 1998 [NAME_6] v [COMPANY_2] Application under s106 of the Industrial Relations Act 1996

JUDGMENT 1 This is an application under the provisions of s106 of the Industrial Relations Act 1996 ("the Act") for declarations that the contract or arrangement pursuant to which [NAME_6] ("the applicant") worked for [COMPANY_2] ("[COMPANY_9]") was unfair, harsh or unconscionable and that the said contract be declared void or varied such as to attract orders requiring the payment of compensation that is just in the circumstances. 2 The applicant was represented by Mr [NAME_25] [NAME_13] QC and [NAME_26] of counsel. The respondent was represented by [NAME_28] and Mr [NAME_30] of counsel. The matter proceeded over 14 days of hearing including submissions. The applicant gave evidence and relied upon documentation and the report of a financial expert in support of his claim. The respondent called six witnesses and relied upon two further affidavits and documentation. Written submissions were received up to 13 September 2000.

The Claim 3 The applicant alleges the contract or arrangement became unfair by reason of one or more of the following matters: (a) It failed to provide for a proper process by which the allegations which led to his dismissal and his concerns that he was being unfairly targeted by [NAME_32], could have been openly and frankly investigated, the true facts established and a proper and fair solution adopted as an alternative to summary dismissal; (b) It failed to provide that he should have a reasonable period of tenure in his employment as an Executive Director, subject to him continuing to meet the respondent's contribution criteria; (c) It failed to provide what, if any, entitlement he should have to compensation and what financial arrangements should apply in circumstances where the respondent dismissed him otherwise than for just cause. 4 The applicant seeks the following orders:

1. An order declaring that the contract or arrangement pursuant to which the applicant worked as an Executive Director for the respondent was, or by reason of the conduct of the respondent became, unfair, harsh and/or unconscionable.

2. An order that the contract or arrangement pursuant to which the applicant worked as an Executive Director for the respondent be varied ab initio to provide that the applicant should have a reasonable period of tenure as an Executive Director of the respondent, being such period as the Commission may determine, commencing from 1 July 1990, subject to the applicant continuing to meet the respondent's contribution criteria during that time.

3. Alternatively, an order that the contract or arrangement pursuant to which the applicant worked as an Executive Director for the respondent be varied, on and from 7 November 1991, to provide that his employment should not be terminated by the respondent without first: (a) giving proper notice to the applicant of the details of any allegations made by any person in relation to the applicant's management style and of the identities of the person or persons who had resigned or threatened to resign allegedly because of the applicant's management style; (b) giving him a proper opportunity to answer the allegations; and (c) if it should be determined by the respondent that there was any substance in the allegations, providing him with counselling in relation to any perceived deficiency in his management style and giving him a reasonable opportunity to correct any such perceived deficiency.

4. Alternatively to orders 2 and 3, an order that the contract or arrangement pursuant to which the applicant worked as an Executive director for the respondent be varied ab initio to provide that: (a) the respondent could terminate the applicant's employment, otherwise than for just cause, by not less than 12 months notice in writing expiring on 30 June next; (b) the applicant's compensation during any such period of notice should be determined by the respondent in the ordinary course, on the basis of the applicant's existing points allocation as at the date on which notice is given and having due regard to the applicant's statutory entitlements payable upon termination; (c) the unpaid balance of the applicant's DPS allocations should vest and become payable 6 months after the date on which the applicant should cease his employment with the respondent.

5. Such order as to the payment of money by the respondent to the applicant as the Commission considers just in the circumstances of the case.

6. An order that the respondent pay the applicant's costs of these proceedings.

7. Such further or other order as the Commission may consider to be appropriate.

The Defence 5 The Respondent raises the following defences to the claim: The applicant was terminated by the Executive Board of the [COMPANY_3] on 11 November 1991 for just cause.

Alternatively, The applicant by his own behaviour, denunciated the employment contract.

As to the orders sought the respondent submits: The respondent paid the applicant "just terms" on termination.

Alternatively,

There be no order of any discretionary payment because of the applicant's unreasonable failure to accept the reasonable termination monies and arrangements offered by [COMPANY_9] after termination.

Alternatively,

There be no order as to any discretionary payments to the applicant due to the inordinate "delay" by the applicant in bringing the case. 6 As to any findings of fact by the court, the respondent relies on an attack as to the applicant's credit in any consideration as to those findings.

History 7 The applicant was born on [DATE] in Scotland. His family migrated to Australia in 1950 and he was educated partly at [COMPANY_34] and completed studies at [COMPANY_35]. The applicant has had 20 years experience in the structured finance industry. The structured finance industry incorporates corporate leasing with asset-based finance. It involved developing innovative products and selling them by way of "cold calling" on clients, namely, sizeable corporation's finance directors. The applicant had also promoted other types of innovative corporate lending facilities such as executive loan facilities, interest re-payment deals and various leverage leasing options. The applicant conceptualised and sold a number of innovative lease-financing schemes for the purchase of motor vehicles. This area of finance was perceived by all witnesses as a "niche" market within the merchant banking industry. 8 The applicant joined [COMPANY_36] ("[NAME_37]") in 1983. He joined [NAME_37] as an Associate Director for the purpose of establishing for it a Structured Finance Division. At the time of the [NAME_37]/[COMPANY_2] amalgamation in 1985 there was a Government decision to de-regulate the finance industry and the Banking business became significantly competitive. 9 [NAME_37] became [COMPANY_2] ("[COMPANY_9]") in 1985. The applicant was promoted to Divisional Director at [COMPANY_9] in 1987. The applicant was then promoted to Executive Director at [COMPANY_9] in 1990. 10 The division the applicant headed at [COMPANY_9] was called the [NAME_39] ("[NAME_40]"). At all material times it was a division of the [NAME_42] Group ("the CBG"). As at November 1991 in [NAME_40] there were 31 staff members comprising 4 Associate Directors, twelve Managers with the balance being non-executives and support staff. The CBG was headed by [NAME_32]. After the amalgamation with [COMPANY_9] and prior to becoming head of the CBG, he had been head of the Melbourne operation of [COMPANY_9] for 12 months. [NAME_32] was promoted to head of the CBG and moved from Melbourne to Sydney in 1988. He has been Deputy Managing Director of [COMPANY_9] since 1996.

11 The CGB was one of 5 Groups within [COMPANY_9] as at 1991: ORGANISATION STRUCTURE Board of Directors Chairman: [NAME_43] ---- [NAME_46] Director [NAME_47] Management [NAME_50] [NAME_53] Investment Operations Banking Services Market Services Group Group Group Group Group - [NAME_124] Financing & - Financial Leasing Services Packaging - Property Services Group

12 The initial terms of the applicant's employment with [NAME_37] were recorded in a letter dated 20 May 1983. The terms of his remuneration under that contract (as defined in the letter of appointment) included, under a Basic Cost Responsibility Plan ("BCR"), all costs of the applicant's employment to be aggregated and paid by the employee. His commencing BCR was $69,000 per annum effective to 30 June 1984. BCR levels were to be determined in June of each year for the forthcoming year commencing 1 July. As an executive staff member the applicant also participated in a profit sharing scheme, the benefits of which depended upon the continuing success of [NAME_37] and his own performance. 13 The letter of appointment did not specify what period of notice would be given if [NAME_37] decided to terminate the applicant's employment. Both parties accept, in accordance with the common law principle, there was an implied term in the applicant's contract of employment that termination at any time would be upon reasonable notice. 14 The applicant was remunerated after the amalgamation in accordance with [COMPANY_9] designed remuneration package. This must be taken to be a variation of his original employment contract which then incorporated [COMPANY_9]'s package for remuneration. This package also involved a profit share arrangement. [COMPANY_9], in order to determine the profit share applied a measure of performance. In 1987, as an Associate Director the applicant was given a performance rating of 8.28 stars and 0.7 super stars. A profit share star rating of between seven and ten stars meant an executive was regarded as having put in an outstanding performance. The applicant in 1987 received a 33.33% increase in BCR earning $160,000 per annum and also a profit share allocation of $200,000. 15 The applicant's good work performance continued after 1987. He received high star ratings reflected in an increase in his BCR and a significant "total profit share" allocation. This rating process did not continue once the applicant became an Executive Director of [COMPANY_9], that is, after 1 July 1990. Executive Directors were renumerated in a separate package. This package represented another variation to his employment contract. 16 As to his promotion to Executive Director, evidence revealed on two separate occasions, in 1987-88 and 1989-90, the applicant's name had been put forward to the Executive Board of [COMPANY_9] for promotion to Executive Director but had been rejected. [NAME_32], as head of the Group under which the applicant's division operated, supported the applicant's third promotion to Executive Director in 1990-1991. As to the applicant's performance, [NAME_32] wrote of the applicant's achievements in May 1990 in the following terms: During his period with [COMPANY_9] he has - . Built the equipment leasing business of [COMPANY_9] now known as the Corporate Finance and Leasing Division ([NAME_41]) from a zero base;

. Been given extended responsibility encompassing the corporate lending business of [COMPANY_9] and also the property leasing business previously carried out in the structured finance division with [NAME_41] now responsible for more than $500 million in assets;

. [NAME_40] to a point where it earned $4.1 million during 1989-90 with a substantial level of future earnings essentially locked in.

. Achieved a zero bad debt record over the seven years of operations (with the single exception of the NSC fraud), which probably constitutes a unique record in corporate lending related activities of banks;

. Achieved steady development of executive staff within [NAME_41], substantially by internal development (albeit with acknowledged related brokers in Melbourne).

The Division now consists of fifteen executives, most of whom have joined in the last three to four years.

There has been virtually no executive resignations from the Division.

[NAME_41] is now highly respected in the corporate market for its range of products competing primarily with Westpac, Project and Advisory Services, Alco, [NAME_55].

[NAME_7] has more than twenty years of experience in banking finance and insurance. He has built a successful division of [COMPANY_9] which has considerable growth potential in front of it.

(Emphasis added) 17 In May 1990 the applicant wrote a memorandum after he was notified of his promotion. In it he referred to a 1989-90 discussion with [NAME_57], the Managing Director of [COMPANY_3] and [NAME_32] which discussion revealed the reasons why he had not achieved prior promotions. The applicant identified in the memorandum those issues to which his attention had been drawn such as the need for "a significant increase in fee income, a significant increase in total income, and an overall significant growth in the business." The memorandum also drew attention to two business transactions within his group which had caused some difficulties and outlined a strategy to resolve those difficulties. The applicant explained his view as to why there had been difficulties in relation to those transactions. The applicant then wrote in the memorandum how important it had been for him to obtain the promotion saying: I am proud of my achievement in developing a successful business and I have built a dedicated team of young and professional merchant bankers who should help [NAME_59] to reach its goals in the foreseeable future. In fact, the issue of my promotion is a matter of considerable concern within the senior executives of the Division. The basic problem being their clear prospects are in question as the lack of promotion indicates the lack of acknowledgment of [NAME_41] as an important and successful business within [NAME_59]. This is an important factor and one that I would prefer not to raise but it is becoming an issue that would definitely get worse during 1990-91 and could, in fact, undermine the future development of the business if key executives decide either other [NAME_59] businesses or other merchant banks offer better opportunities than [NAME_41].

In effect the applicant was saying if there was no recognition of his division, key executives would leave. This was a concern of the applicant in May 1990.

The [COMPANY_3]: Employment Conditions 18 [COMPANY_9] expected its staff to strive for excellence. In support of its goals and values it published a document headed "[COMPANY_3], What We Stand For." Promotion depended solely on merit. The promotion criteria focused on the qualities of the individual as to functional expertise, experience and leadership perspective. 19 The applicant relied on this document as setting the required standard against which his work performance could be measured. He relied upon it as the philosophical document setting out the standards [COMPANY_9] demanded of its employees. He asserts his performance for [COMPANY_9] met all of those standards. He submits generally, therefore, the termination of his employment was unfair. The document outlines the overall goals of [COMPANY_9], who and how clients must be served, the personal qualities required in staff and [COMPANY_9]'s obligations to staff in return. Relevantly it reads: Our objectives [COMPANY_3] aspires to be respected as a specialised, pre-eminent Australian financial institution over the long haul. Our pre-eminence comes from offering selected innovative financial services and products of the highest quality in terms of service, knowledge, skill, and market assessment. And: To achieve these goals, we will be unrelenting in our quest to attract, develop, and retain the best team of people in the financial services industry. We will recruit vigorously, reward performance generously, and continuously ensure the working environment is challenging, fun and fair. And: A staff member will be asked to leave if, after appropriate review, senior [COMPANY_4] management judge the individual's contribution to be inadequate. In carrying out this policy we will be firm but fair. And: In carrying out both their managerial and senior collegial roles, Executive Directors by their example set the standards of professionalism by which [COMPANY_9] lives. Thus it is important that Executive Directors operate on a basis of trust and: . Consider issues from a [COMPANY_4]-wide rather than from a specific business or personal perspective. . Raise issues constructively and openly. . Treat each other's proposals and comments with a high degree of respect. In so doing, we seek to debate issues and not speak of any colleague in a negative way. . Maintain strict confidentiality of discussions except where otherwise decided. 20 If not an integral term of the employment contract this document was at the very least collateral to the employment contract. One further [COMPANY_4] document is relied upon by the applicant in support of his claim and that document outlines the financial package for employees who are appointed by the Central Executive as Executive Directors. On receipt of the promotion to Executive Director, each employee received the document which is entitled "[COMPANY_60] Directors' Compensation" ("the Compensation Memorandum"). The court finds the document in its terms is integral to the contract of employment of the applicant. It outlines the financial remuneration made available to Executive Directors. Persons contracted to work at other levels of [COMPANY_9] enjoyed different packages. 21 There are a number of relevant sections of the Compensation Memorandum under the heading: "Components of compensation". The Compensation Memorandum states: [COMPANY_3]'s policy is to offer Executive Directors of [COMPANY_9] the opportunity to receive, over time, an overall level of compensation that is at or above that offered by [COMPANY_9]'s peer competitors. For all Executive Directors, the compensation system has three principal components:

(A) Basic Cost Responsibility, (B) Directors' Profit Share, (C) Ownership Participation

Relevantly, the explanation of the (A) component the "Basic Cost Responsibility" ("the BCR") states: Basic Cost Responsibility ("BCR") includes direct benefits to the individual (such as salary, superannuation, etc.) as well as the cost to [COMPANY_9] of some purely cost items (such as FBT, payroll tax, and workers compensation insurance). . . .

The explanation of the (B) component, "the Directors Profit Share" ("the DPS") states: Executive Directors of [COMPANY_9] participate in the Directors' profit Share scheme (DPS. . . . DPS (and staff profit sharing) are designed to provide significant incentives for staff to generate, over time, superior returns that benefit all major [COMPANY_4] stakeholders: shareholders, executives and Executive Directors alike. The DPS system is designed to encourage [COMPANY_9]'s Executive Directors, over the long haul, to maximise the return on shareholders' funds, and to this end effectively treats the Executive Directors group as residual owners of [COMPANY_9].

The compensation document also says: Points distributed to specific Directors are grouped by "level". Normally, there are a total of six levels. Currently, the relationship between the highest and lowest levels is 6:1. In contrast, the same relationship in organisations such as [NAME_61] appears at about 10:1.

It further states: In general, the compensation system is designed to recognise individual Directors' cumulative overall contributions to [COMPANY_9]. To the extent that individuals' contributions over time are superior to their peer group, they will receive a larger point allocation. An individual with variable performance can expect the cumulative point allocation to vary accordingly. A consistently poor performer will be penalised relative to other Directors by downwards points adjustment and, consistent with [COMPANY_9]'s commitment to recruiting and retaining the best staff, may be asked to leave.

The outline of the terms of the DPS vesting is as follows: To encourage a longer term perspective on the part of [COMPANY_4]'s Executive Directors, [COMPANY_9] operates a system whereby DPS vests progressively over a ten year period of service as an Executive Director of [COMPANY_9], (including service as a Director of [NAME_38]). After ten years' service as a Director, DPS vests 100% unless the Executive Director resigns to join a competitor.

Vesting applies according to the following table:

Years as a Director Percent of DPS vesting 1 33 2 50 3 60 4 70 5 75 6 80 7 85 8 90 9 95 10 100 For a Director, (regardless of length of service), who leaves to go to a competitor, the full vesting provision will not apply. That director will forfeit an amount equivalent to two thirds of the latest DPS allocation made plus one third of the allocation made in the year before that. In the unlikely case that a Director, (regardless of length of service), leaves [COMPANY_9] under circumstances of dishonesty or that otherwise cause significant damage to [COMPANY_9], the [NAME_46] has the authority to decide the level of DPS payout. . . . Examples of actions that cause significant damage to [COMPANY_9] might include misappropriation of funds; deliberate concealment of a transaction; or taking a team of [COMPANY_3] staff to go to a competitor. The mere act of resignation will not be construed as causing severe damage in and of itself, nor will the resignation of a group of Directors following a change in control of [COMPANY_9].

Further: For the purpose of calculating entitlements on leaving, any Director giving notice to [COMPANY_9] prior to 1st April in any year, of the intention to resign from [COMPANY_9], will be deemed to have left [COMPANY_9] before that date, regardless of the actual leaving date, and will accordingly forfeit DPS entitlements for that year just ended unless the [NAME_46] resolves otherwise (which it may do if it believes the Director's exit has been managed in a way that is beneficial for [COMPANY_9]).

As to the DPS retention scheme, the document suggests: Regardless of the bonus scales which are in place, it is reiterated that Directors may forfeit all entitlements if they engage in activities which cause significant damage to [COMPANY_9], and/or in cases of dishonesty.

The (C) component, "Ownership Participation", relates to the allocation of partly paid shares. Under the heading of "Termination of Employment," it states: On leaving [COMPANY_9] any unpaid amounts on partly paid shares become payable. Should a Director leave [COMPANY_9] within two years of the issue of any partly paid shares, any charged bonus shares which have been received on those partly paids together with any related charged reinvestment shares will be sold at the ruling market price and the resulting after-tax proceeds applied to pay up the underlying partly paid shares. . . . The Director will however be able to pay up any partly paid shares issued more than two years prior to termination.

The Compensation paid to Executive Directors therefore has three components: (i) A "BCR" (Basic Costs Responsibility) - what payment of monies as basic salary is a measure of what each Executive Director costs the respondent, such cost comprising the total of the direct benefits payable to the Executive Director (such as salary and superannuation) and the deduction of other costs payable by the respondent in respect of the Executive Director such as fringe benefit tax, payroll tax and workers compensation insurance.

(ii) A "DPS" (Directors Profit Share) - This payment reflects each Executive Director's share (allocated annually according to the individual performance of each Executive Director, using a DPS points system) of a profit share pool calculated between April and June of each year by reference to the respondent's earnings on average capital employed for the financial year ended 31 March of that year. The Executive Director's pool was a different profit pool to the one which the applicant participated during his years as an Associate Director and Division Director.

(iii) A "PPS" (Partly Paid Shares) - at any point of time, up to but not exceeding 20% of the insured capital of the respondent, allocated to Executive Directors annually and from time to time, in similar proportion to the DPS points referred to in sub-par (ii) above. 22 The applicant's evidence was as follows: [NAME_59]'s accounting year extended from 1 April of one year to 31 March of the next year. Shortly prior to the end of each financial year (i.e. ending on 30 June) executive directors would receive a memorandum setting out the following information: (a) BCR (basic cost responsibility which is the way [NAME_59] describes salary) for the next financial year; (b) Directors' profit share ("DPS") allocated by the compensation [NAME_46] to the executive director, which was 'earned' in the previous year and paid in the approaching financial year; (c) The allocation of partly paid share ("PPS") which was to be issued in the following financial year.

23 At the time the applicant left his employment no issue as to PPS arises. 24 The way the compensation package was calculated for Executive Directors was, between April and June of each year the [NAME_46] of [COMPANY_9] determined the annual entitlements (in respect of the next 12 month period ending 30 June of the following year) of individual Executive Directors to BCR, DPS and PPS having regard to the overall relative contribution of the director in the preceding 12 month period. 25 The DPS allocations with their progressive vesting component over 10 years increased from 70% in the first four years to 100% in the 10th year. It operated effectively as a retention against the possibility of an Executive Director's resignation. The scheme therefore operated as a structural disincentive to early retirement or resignation. Only if an Executive Director died, while employed by [COMPANY_9], would DPS vest 100% and be paid to the Executive Director's estate regardless of his or her period of service. A forfeiture of DPS entitlements applied to any director giving notice to the respondent prior to 1 April in any year. However, there was a discretion in the [NAME_46] to resolve otherwise. 26 The Compensation Memorandum contained no provision governing the right to compensation of any Executive Director whose employment was terminated other than for just cause. 27 It is clear from the evidence there was no negotiation with each individual Executive Director as to this compensation package. Prior to being appointed to the position the applicant had neither seen nor been given the document outlining his compensation package or the associated conditions. 28 By the time the applicant was promoted to Executive Director level in July 1990 he had responsibility to provide management, leadership and motivation for his staff. He bore responsibility for group budgets, audit preparation and business planning. As part of his duties related to staffing and his determination that his division function as a most effective business unit, the applicant introduced a review of each employee's performance conducted each quarter. This review was separate to the review of performance made by [COMPANY_9] each year. The latter review, a performance review, was used by [COMPANY_9] to determine what payment of bonus each employee would receive in the new financial year. 29 The applicant was not privy to which Executive Directors were in each DPS band or the amount of each director's DPS allocation or PPS allocation. However, the total [NAME_62] was made known to all Executive Directors in the monthly board meeting reports. From these reports the [NAME_62] for the year ended 30 March 1990 was $23,587,000 and for the year ended 30 March 1991 was $20,720,000. 30 At all the relevant times approximately 20 to 25 Executive Directors shared in the [NAME_62]. For the year ended 30 March 1991 (March being the end of [COMPANY_9] financial year) the applicant's DPS allocation from the Executive Directors' pool, his first, was $266,047. This is identified as 1.3% of the total pool. This bonus payment is distinguishable from his agreed salary payment (his BCR) which was steady at $225,000 for the last few years of his employment and also distinguishable from any allocation of partly paid shares (his PPS). 31 The applicant opines that the effect of his DPS payment was as follows: After reviewing the above figures I expected if I remained as an executive director of [NAME_59] over ten years and continued to perform well, not only would I receive, by progressive vesting, further amounts of DPS that had been allocated to me in previous years but if I was able to progress through the bands of the DPS allocations then my share in the profits of [NAME_59] over those years would be significantly increased as a proportion of the [NAME_62].

I expected that if the division under my control and direction, continued to remain in profit then my DPS allocations, both in amount and in proportion to DPS allocations of other executive directors, would increase over the following years. 32 The applicant relies on the Compensation Memorandum which refers to "the performance" of Executive Directors as having an impact on their DPS allocation.

[COMPANY_9] in the 90s 33 It is agreed between the parties that the environment within the Banking industry in 1990, 1991 and 1992 was very difficult due to an economic recession. All banks and merchant banks were suffering major financial problems and were retrenching large numbers of staff. Profits were down, losses were huge and there was very little corporate business available. Property values had slumped. This situation followed upon the banking turmoil of the 1980s when Banks and their operations were deregulated. 34 In this economic environment the CBG was the only group in [COMPANY_9] which made property loans, so the level of problem loans became critical to the group's performance. The group contained two other divisions as well as [NAME_40], namely, a division called Banking Services and a division called Property Services. Both these divisions of the CBG were badly affected due to the economic climate of the early 1990s. [NAME_40] division was however able to maintain a profit. 35 In the two years to the end of 1990 the CBG had incurred losses approaching $25 million. By 1991 the CBG was the worst performing group in [COMPANY_9]. [NAME_32] agreed [COMPANY_9] was operating by the end of 1990 in one of the most difficult business periods in decades because of the recession. He was troubled by the number of problem loans which emerged throughout 1991, the Property Services Division of his Group which suffered write-offs of such loans. 36 Of the three divisions within the CBG - the Banking Services Division at the end of [COMPANY_9]'s financial year in 1991, wrote off $13.475 million; the [COMPANY_63] wrote off $1.385 million and the Property Services Division wrote off $1.749 million. However, while [NAME_40] division earned a profit of $4.387 million after write-offs, the CBG finished the year with an overall loss of $7.682 million. Part of [NAME_40] profit related to the management of a transaction with the Queensland Electricity Commission. [NAME_40] division re-negotiated a property lease for a further two years otherwise its own profit margin would have been only approximately $1 million. 37 The applicant states: I set out below a table showing the results for the Division and the Group during the period I was an Executive Director, being the accounting year ended 31 March 1991 and the six months to 30 September 1991. I have also shown the combined 18 month period to 30 September 1991.

12 months 6 months 18 months to 31/3/91 to 30/9/91 to 30/9/91 ($M) ($M) ($M) Division Gross income 11.5 5.6 17.1 Division Net income after expenses 7.1 3.1 10.2 CBG Net Income 13.65 4.82 18.47 CBG Net Income after Write-offs (none from the Division) 4.173 (0.66) 3.51 The Division's proportion of CBG Net Income before Write- offs >50% >75% >55%

Over the 18 month period to 30 September 1991 the Division generated 55% of the Banking Group net Income before write-offs. When write-offs are taken into account over the same 18 month period the Division produced a total Net Income of $10.2 million which was nearly three times the total Net Income recorded by the Group (of $3.51 million). In summary the operating performance of the Division was very good whereas the Group's overall performance was poor because of the losses and write-offs in the other two Divisions. . . . 38 [NAME_32] described this situation as "A negligible or negative result" in his affidavit. I do not accept this review of that performance given the economic circumstances at the time. 39 In the circumstances, from the evidence, the court is persuaded [NAME_32] put considerable pressure on the applicant not only to ensure that his division did not suffer any write-offs in the coming financial year but also to ensure his division generated as much profit from new business as possible to underwrite the continuing losses in other divisions in the group. Evidence revealed [NAME_32] and the applicant had a number of discussions on the subject of ensuring the division did not suffer any write-offs and there was much general discussion about the specific loans to determine whether there would be any write-off problems. [NAME_32]'s evidence as to the pressure placed by him on the applicant was: Q. Now to those expected increases in new business there would need to be a very significant marketing effort by executives in [NAME_64]'s division and by [NAME_64]? A. Well, collectively, yes. Q. And [NAME_64] was expected to put pressure on his staff to increase their marketing efforts wasn't he? A. Well, that was their job. I mean I don't think it is quite undue pressure but if you want to characterise it that way, yes. Q. Well, if a significant marketing effort was required and it was their job to do the marketing, [NAME_64] would be required to put pressure, necessary pressure, to make sure those results were achieved? A. Well, he would certainly be required to encourage their efforts, correct. Q. Is there any difference between encouraging and pressure? A. Different words. Q. But meaning the same? You nodded, do you mean yes? A. Yes, I am happy to agree with you.

The applicant was asked: Q . . . Do I understand you were under great pressure to ensure that [COMPANY_9] didn't lose any money? Would it be right that you, in turn, put enormous pressure on your staff - or the key people on your staff? That's true is it not? A. Yes. 40 As a result of these circumstances and in the application of [COMPANY_9]'s formula, in [COMPANY_9] budget process for 1991-92, the staff of the applicant's division, [NAME_40], did not receive any wage increases (that is no increase in their BCR) and any bonus paid to each through their DPS allocation was very limited. 41 It is not surprising given the economic climate, [COMPANY_9]'s trading situation and the decisions [COMPANY_9] took as to the remuneration of staff that there was low morale in the applicant's [NAME_41] division in the first half of 1991. It was the applicant's view that while there were uncertainties caused by the recession, the difficult business environment and the pressure exerted on staff to ensure budget targets, other factors had a more immediate and tangible effect on morale: A. Well, there's a list of areas of contributions and the difficulties we had at the time. There's the overall problems of the market, the problems within the division, with losing a huge amount of money from the group, the problems of the very low, or basically no increases in wages at the time, the perception that this group was not the group - losses that were going to keep going meant it was fairly likely that people were not going to get any increases in the next year. So it made a lot of sense to move out of the division into another division because the wages were so low and were not likely to increase. Q. They were moved out of a division that was not making? A. I'm saying that despite the fact my division was making money we were not able to have any increases in wages in 1990-91-92 because of the overall performance of the whole banking group and that the situation would have continued in the following year as well. Q. Do I understand your evidence to be the wages of your staff or at least some of them, were not reflected by the market, were low by merchant banking standards? A. Yes. HER HONOUR: Q. I don't understand why they would have wanted to move out of your division? A. Because if they had moved to go into one of the other divisions where those divisions were making bonuses because other groups were successful, it is far better for them to be there. The problem is, it is sort of in the [NAME_42] group there were three divisions. Mine was one of them which was performing reasonably - Q. And the other two were not? A. The other two were not. Q. So they were not going to get bonuses - A. Yes. 42 [NAME_32] agreed that the CBG was the worst performing group in [COMPANY_9]. A note in [NAME_32]'s notebook under an agenda item for a meeting of CBG (undated) but somewhere near 28 May 1991 headed "BCR reviews" records: In most getting zero. Some reductions where this is dictated by marketing or rel (which [NAME_32] agreed meant "relationship") with colleagues. Market policy. Bonus - pool down. Good results but profits grew slower than capital. 43 The salary reviews of each employee were conducted in the following manner: Group heads discussed with [NAME_65] the principles to be applied to executive profit share distribution between groups. Agreement would be reached on the value of one star as a percentage of admissible BCR. Each star was worth a certain amount of bonus calculated as a percentage of a particular individual's BCR. There was also scope for additional specific bonus allocations recognised by half stars. After the briefing by [NAME_65], [NAME_32] would brief division heads giving them a print out showing the necessary information and the appropriate details of the executives in their division. The division heads, that is persons of the applicant's stature within [COMPANY_9], were then required to make recommendations as to the separate ratings of their employees. These were then discussed with [NAME_32]. [NAME_32] revealed the consultative procedure thus: . . . generally it went to the division heads, to the group head, consultation with other relevant group heads, possibly some consultation with the group head to the managing director, and then when the whole of the process was completed by a final set of recommendations which were typical, and might not always carry an endorsement of the group head and that division head. That complete set of recommendations for the entire [COMPANY_4] would go to the executive [NAME_46] and would be ratified and then just to complete the process, the executive [NAME_46]'s recommendations I think went to a sub-[NAME_46] of our full board for ratification. The process went on for a period of several weeks. 44 The documents revealed, and the evidence supports a finding, that the process was a most rigorous review process and the court accepts it was designed to ensure the end result was a fair and proper one for each employee. Given that the year ending 30 March 1991 had been a bad year for the CBG, it was allocated only $1.09 million of the total sharing pool of $15.53 million. In comparison, for example, the Financial Markets Group was allocated more than $9 million out of the pool, it being the most profitable group in [COMPANY_9] that year. 45 Another important difference between 1990 and 1991 which had a dramatic impact on the size of the bonuses earned by executive staff of [NAME_40] was the value of one star, as a percentage of admissible BCR, dropped from 12% in 1990 to 8% in 1991. Even if there had been no change in the worker's star rating each staff member would still suffer a significant drop in the value of his or her bonus. From the evidence, the court finds neither [COMPANY_9] nor the applicant discriminated against or acted in any way unfairly in relation to any staff remuneration review conducted under this procedure. 46 However, as the evidence unfolded some staff members thought otherwise. Some complained the applicant, [NAME_64], must have discriminated against them in the process. The court finds they were misled. 47 In the second half of 1991 inside [NAME_40] there was clearly a growing discontent. This discontent has been focused upon in the presentation of the respondent's case before the court. Such discontent related to a number of areas: the applicant alleges the discontent related to performance warnings given to staff as to poor individual results and to a discontent related to their level of remuneration including the lack of BCR (salary) increments and their low DPS allocations. The respondent submits this discontent related to the applicant's personal management style and the applicant's responsibility for associated and disassociated resignations from within his [NAME_41] division. 48 The respondent challenges generally the applicant's management style and submits an analysis of his style forms one of the basic reasons for his termination for just cause. It also directly attacks the credit of the applicant submitting he: manufactured evidence, refused to produce contemporaneous notes while giving evidence; gave speculative evidence, gave creative evidence, gave untenable evidence and made up evidence while answering questions in cross examination. The respondent further submits from the applicant's demeanour the court would conclude he obfuscated and the court would find generally his evidence was unsatisfactory. 49 It is common ground seven members of the applicant's division were put on notice by the applicant by mid-1991 that, if their performance did not improve, they could be asked to leave [COMPANY_9] within six months. The court finds such notice had a detrimental effect on the morale of the whole [NAME_41] division. A dispute arises as to whether the applicant was acting under the direction of [NAME_32] or on his own initiative in giving such notice as to performance. 50 The applicant asserts the issue of staffing and performance was raised by [NAME_32] with him when they were setting the budget for the 1991-92 financial year. After the rating review six executives in [NAME_40] division were rated with only one star or less. These people were spoken to by the applicant about early May and given a performance warning. [NAME_32] denies he knew anything about the warnings, save in relation to [NAME_66] and [NAME_68]. 51 [NAME_32] agreed he was concerned about some identified staff members' performances but asserts he did not know those employees were all placed on a warning. A number of staff members were called and questioned about these warnings. [NAME_70] said in his evidence: There was a discernible fall in the morale of the division following the applicant's identification of a significant number of executives who were facing termination. 52 Another staff member, [NAME_72], denied he knew that there were a number of people in the division who had been told that if they did not improve their performance they may be asked to leave. However, his expressed view is in conflict with that attributed to him in a conversation with [NAME_74] where it is said he commented: "I am particularly concerned about [NAME_7]'s plan to get rid of [NAME_76]. I think it is important we all work together to counter [NAME_7]'s approach of marginalising people so they can be more readily picked off." 53 [NAME_32] kept a working notebook, on an informal basis, to keep track of his days. His note from 28 May 1991 indicates an agenda for a discussion with the applicant, who is referred to in the notes as "[NAME_79]", on a range of matters, one of which was a worker called [NAME_80] and also under the heading "Performance reviews" - the initials of IL ([NAME_83]), NW ([NAME_76]), GdeM ([NAME_85]), JB ([NAME_88]) and [NAME_91] ([NAME_92]) appear. In explanation as to this notation, it is the respondent's assertion that [NAME_32] recommended to the applicant that due to those identified staff member's low productivity it would be beneficial to [COMPANY_9] for the applicant to "counsel" them as to how they could improve their performance. However, the applicant says of this discussion that it reflects a conversation he had first with [NAME_32] in about January 1991 where he alleges [NAME_32] said: You will have to start making plans to reduce staff members of your division. Make a short list of executives who are not performing and put them on notice that if they don't improve in the next six months they'll be asked to leave.

Having prepared the list of staff members, the applicant then reveals he said to these executives: [NAME_56] has asked me to inform you because of the economic conditions and the performance of the group we will be reducing staff level and your performance will be closely monitored. If it does not improve you may be asked to leave within six months. 54 It is the applicant's recollection two other names were on the list, that of [NAME_95] and [NAME_97]. At the time there were 20 executives in the division so seven had been selected for reviews on their performance. The applicant agrees, given 30% of executive staff in the division at that time were under threat unless their performance improved, this threat affected the morale of the division. This must be seen in the context that the division in the first six months of [COMPANY_9]'s accounting year from March to 30 September 1991 showed a profit well above budget and it was obvious the result and performance for the full year for [NAME_41] was going to be excellent. 55 It was in this context the staff were allocated and paid in part their annual bonuses (their DPS) in the first weeks of July 1991. They were already some four months into what was looking to be a profitable future year yet their DPS allocations for the year before, when they viewed [NAME_40] had done well, were significantly down on the DPS of the previous years notwithstanding the profit margins for their division were up and much better than other divisions in their Group. 56 [NAME_70], a staff member, says of the announcement of the BCR reviews and DPS bonuses of July 1991: There was a general and deep seated level of disappointment, resentment and anger about the salary increases and the bonus levels that were announced at that time. Again, I have direct knowledge of this matter from a discussion with staff members within the group at that time. [NAME_100], [NAME_76], [NAME_102] and [NAME_105] were all unhappy at this time. The feeling was consistent that everybody felt they were being paid below the market and that the bonuses were below what was expected.

From my discussions with them at that time I knew that [NAME_108], [NAME_102] and [NAME_105] all resolved to look for other job opportunities outside of the group as a consequence of what they regarded as unfair treatment by the applicant with respect to their remuneration levels, and certainly from my own point of view the outcome of that executive review in June 1991 only serves to confirm my own determination to leave the applicant's group.

57 I reject the respondent's submissions the applicant should be assessed as a bad manager arising out of the staff warnings. [NAME_32] in his evidence did not concede the morale problems in the division could have been at all affected by the reaction of staff members to their salary and bonus reviews. [NAME_32], the court finds from the evidence, was himself aware of and involved in the warnings delivered to staff. Accepting there was low staff morale, from the evidence in the notebook and [NAME_32]'s concession as to the need for staff "counselling" the court cannot accept [NAME_32] bears no responsibility for same. 58 The combined effect of warnings as to performance and the lack of personal reward for endeavour created a classic environment for individual and group discontent. The warnings on performance delivered to 30% of the staff within the division in 1991 combined with the effect on the staff of their low BCR and DPS allocation in May 1991, the court finds were contributing factors leading to an environment of discontent in [NAME_40]. I find the applicant cannot be held solely responsible for the discontent these corporate decisions generated. I find the effect of these corporate decisions cannot be perceived solely as a reflection of [NAME_64]'s management style. The BCR and DPS allocations were that of the corporate body and the warnings were within the knowledge of [NAME_32] and therefore a corporate responsibility. 59 Other evidence was relied upon by the respondent to attack the management style of the applicant. [NAME_32] asserts he warned the applicant after his appointment as Executive Director in 1990 as follows: Congratulations on your promotion to executive director. However, I have been asked by the executive [NAME_46] to inform you that the [NAME_46] believes that you still need to work on your team work and relationship skills. This is very important as an executive director of [COMPANY_9]. One thing that I have been asked to suggest to you is that you make a real effort to attend the fortnightly lunches for executive and division directors. 60 [NAME_32] gave evidence he began to have growing concerns about the applicant's abilities and performance as a consequence of the complaints he received from staff and clients and from his general observations of the applicant's management style and the impact this had on staff in the applicant's division. This concern he says he began to feel in the first half of 1991. As to his expression of this concern to the applicant there is dispute. The applicant denies he was aware of any concern as to his management style until one mention in July 1991 and then not until over the three day working period in early November 1991 which led to the termination of his employment. 61 Some time around 28 May 1991, [NAME_33]'s notes indicate the items covered at the meeting with [NAME_64] were [NAME_80] (a staff member) and "style of management" including quarterly reports required from the conference to address strategy, marketing meeting, secretaries, secretary structure and responsibility. [NAME_32] recalls he said to the applicant at this meeting: I believe your staff are unhappy with your style of management, your process of requiring quarterly written performance reports, even from secretaries, is de-motivating.

You should be giving your senior executives more responsibility.

We should discuss the possibility of having a group conference so there can be a group discussion of strategy going forward. 62 Another meeting took place sometime after 10 July 1991 where [NAME_32]'s notes indicate. [NAME_41]: [NAME_110]'s - morale on division, management issues.

Possibilities: Meeting schedule and content. Strategic plans. Secretary. Management by memo. [NAME_111] involvement.

([NAME_111] refers to the writer, [NAME_32]) 63 These are the only two notations that mention [NAME_32]'s concern or that this issue was to be raised with the applicant before events throughout three working days in November 1991. 64 The respondent also relies on the applicant's reaction to the rejection of his 1989 application to promotion as Executive Director. It is alleged the applicant was "extremely bitter" and made inappropriate comments to the staff about [NAME_32], his superior. The 1990 letter of [NAME_64] written after his promotion, it was submitted, was written as a self promotion exercise. This submission the court rejects. The applicant had just received the promotion to Executive Director and had no need to self promote. Further the memorandum addresses a number of criticisms raised with him after his earlier failed application and it is noted it does not address any issue as to his "management style". 65 A further area of the applicant's management that was given a particularly detailed examination in the evidence was the "Performance Reviews" he conducted with his staff. The effect of these performance reviews as required by the applicant, the respondent submits, supports the proposition the applicant did not satisfy [COMPANY_9]'s standard as to management skills. The applicant required from his staff quarterly assessments of their performance. Taking a view of the evidence overall the court finds the tone of these performance reviews were not accepted by his staff as encouraging. They are to be distinguished from [COMPANY_9]'s performance review held each March to determine each employee's DPS and BCR. 66 The court was given a very comprehensive analysis of the performance reviews conducted by the applicant with staff. The applicant's feedback, it was generally held, was not constructive. [NAME_74] expressed some personal complaints about not being promoted and a refusal by the applicant to accept his business plan in the early part of 1991. He also expressed concern at the total personal control, even over division correspondence, demanded by the applicant. Evidence revealed [NAME_74] had shown to [NAME_64] personal and professional loyalty within the Division. 67 [NAME_70] in his evidence by implication blamed the applicant for the poor allocation of [NAME_112] to staff in 1991. The performance reviews of [NAME_70] were closely examined. The examination revealed the applicant praised and encouraged [NAME_70]'s efforts particularly in relation to an AWA transaction. [NAME_70]'s view was with his two star rating in 1991 which in itself meant "performance good, substantially exceeds expectation," should have led to him being paid more money through his [NAME_112] and the gain of a further promotion which he thought was "justly deserved". [NAME_70] saw in the departures of [NAME_74], [NAME_113] and [NAME_114] the executive pool profit from which he drew his DPS would increase. As to this bonus pool he said when asked: Q. What about if people left? A. There was more for the people that were left. So with [NAME_108] going and [NAME_76] going and [NAME_102] going the following year - - Q. It would have been good for you? A. Yes Q. That is what you meant when you said you were not going to talk about leaving for a while "Until I see how events unfold". A. Yes. 68 [NAME_70] reconsidered his decision to look for employment elsewhere and decided to stay to enjoy this financial benefit. Such a reaction was certainly not within the written ideal or intention of the scheme. I expect management would not approve of such motivation. 69 [NAME_70] was also very ungenerous in his begrudging acknowledgment of the contribution the applicant made to his career. As to the in depth analysis given to the quarterly reviews of [NAME_70], although [NAME_70] perceived them to be not constructive, they were in the court's view, in [NAME_70]'s case, quite constructive and [NAME_70]'s ongoing success is reflective of this. 70 One gets the overall impression that all of the applicant's young staff have met ongoing success in their careers which they began under the applicant's very stern guiding hand. While I do not accept that the quarterly reviews were necessary, nor that the applicant demonstrated to the court, by either the tone of his oral evidence or examination of his written reports, any sensitivity to the staff's feelings, the success of these employees, all now known as "executives", indicates the training and review process adopted by the applicant, while vigorous and severe, had positive and constructive outcomes. 71 Another issue relied upon by the respondent to support the attack on the applicant's management skills was the general level of executive and staff resignations in [NAME_40]. An executive, [NAME_115], transferred out of the division. [NAME_80] in October 1991 went on maternity leave but prior to that she was moved out of her position by the applicant. The applicant admits he moved [NAME_117] sideway and says he assessed her as lazy and abusing her maternity leave provisions. His treatment of her certainly, prior to maternity leave, seems offensive. A secretary on staff, [NAME_118], is also mentioned. [NAME_120] then left [COMPANY_9] to join a competitor in September 1991 for a very good salary increase and remuneration package. The applicant believed the new position to be a fine opportunity for [NAME_74]. He did not discourage [NAME_74] from moving. Then [NAME_121] announced her transfer to another group inside [COMPANY_9] on 6 November 1991. The applicant's understanding was [NAME_113] chose to transfer out of the division though her reasons for so doing are unclear from the evidence. The applicant concedes she was a very fine worker doing very well in finance and he was disappointed to lose her skills. It is acknowledged she returned to the division after the applicant left [COMPANY_9]. [NAME_114] then announced his resignation on 7 November 1991. [NAME_114]'s move was not of concern to the applicant because he was on the short list of poor performers. 72 [NAME_74] and [NAME_114] were the first two senior executives to leave the division since its creation more than eight years previously. In the memorandum in support of the applicant's promotion, [NAME_32] had noted there had been stability in the senior ranks saying "there has been virtually no executive resignations from the Division". However, [NAME_32] says when he heard of these executive moves in late 1991 he was gravely concerned. 73 [NAME_74] left [COMPANY_9] in September 1991, he and the applicant had a conversation in which [NAME_74] warned the applicant of some manoeuvring by [NAME_72] related to the applicant's position in [COMPANY_9]. It is the applicant's recollection that [NAME_74] included [NAME_32]'s name in the identification of those persons moving against the applicant's interest. However, [NAME_74], in evidence indicated he did not have any idea of [NAME_32]'s involvement at that stage. [NAME_74] agreed he did warn the applicant of [NAME_72] complaining about the applicant and of [NAME_72] attempting to obtain support from other members of the division as to laying a complaint about the applicant with [NAME_32] as Group Head. He said to the applicant prior to leaving: [NAME_100] has approached me about his concerns with respect to your management style. He told me he is proposing to take the matter up with [NAME_124]. 74 [NAME_32] gave evidence he had received a number of complaints from staff and clients which originally gave rise to his growing concerns about the applicant's management skills. There was no witness called to give direct evidence of the making of such a complaint or the reason for it. The only evidence of direct complaint was from [NAME_72] who agreed he raised with [NAME_32] one issue: that was the applicant did not consult with the staff. It is, I find, significant that as the "just cause" termination was grounded on the applicant's "management style", the evidence of persons allegedly affected by the applicant's management, such as [NAME_113], [NAME_125] and [NAME_126], were not called. All are now Executive Directors with the respondent. [NAME_32] alleges he received a complaint from [NAME_128] yet she was also was not called to give evidence. She had been viewed positively in her performance review by the applicant. [NAME_70] revealed she was one of the persons he was aware was unhappy with the results of her remuneration review. He does not say she was unhappy because of the applicant's management. The applicant alleges she was simply poached by another group with [COMPANY_9] because she was good. I have already held the effect of the remuneration reviews are a corporate responsibility and those reviews were inherently fair. 75 The respondent also relies upon a complaint by a secretary, [NAME_129]. A memorandum from [NAME_131] was exhibited. The memorandum gives notice of [NAME_131]'s intention to transfer to the Qualitative Applications Development Division. She gave her reasons as follows: . To broaden her horizons. . Obtain more job satisfaction in a job a great deal harder. . To develop her career path and, . To gain further responsibility.

There was some inference cast that [NAME_117] complained to [NAME_32]. She was one of the staff who it was determined was not to be promoted. The details of the complaint have not been put before the court although the note of 28 May 1991 indicates [NAME_64] and [NAME_32] discussed the situation. [NAME_32]'s notes reveal he knew of and discussed her "non-promotion". Both parties seem to agree [NAME_117] was "a very difficult customer."

Events leading to termination 76 Much affidavit evidence was contradictory about what conversations occurred over the period of time from 5 November to 11 November 1991. However, the court finds once again the significant evidence is in the form of contemporaneous notes as contained in the working notebook of [NAME_32]. These handwritten notes provide a chronology and certainly the content of, or intended content of conversations by [NAME_32] during this relevant three day working period. There are also a further lot of loose leaf hand written notes of [NAME_32] from 8 November 1991 to 11 November 1991 re meetings conducted by [NAME_32]. These add to the contemporaneous record. Some of the notes are clearly written from recollection after the meetings. However, they all reflect [NAME_32]'s musings or view of events and his intentions. They assist in providing this court with one view on the record of what was intended or what may have occurred at the meetings. Further both parties have chosen to rely on various notes to make submissions. 77 The court finds very relevant in its consideration a note which appears in [NAME_32]'s notebook of 5 November 1991. It reads: [NAME_132] and [NAME_41] - [NAME_111] takeover [NAME_41] for time being - F/X marketing with [NAME_132] - [NAME_79] position? Anywhere else in [COMPANY_4]?

Arguments to merge - Client base - [NAME_41] moving towards mid-market.

[NAME_41] - [NAME_133] - [NAME_108] - [NAME_85] - [NAME_103] - 1 other [NAME_79] business - Some good people development - Good credit management - Good systems But - profits - [NAME_134] NL/MP etc Rel with clients - doubtful. Mainly with law firms

[NAME_79] - [NAME_77] not performing - Paid considerably more - Departures due to Corp Banking problems 78 I read this note of [NAME_32]'s as a working note where he considers all the arguments as to a proposition developed by him by 5 November 1991 to merge a division called the [COMPANY_135] ("[NAME_132]") with [NAME_40], the applicant's division. The [NAME_132] division is not in [NAME_32]'s CBG but in another Group called the [COMPANY_136]. The note indicates [NAME_32] also considered whether he himself should "take over" [NAME_40] division "for the time being". From the list of names in the notes, [NAME_32] clearly considered the "staffing issue" in the division. Further, the note assesses [NAME_64]'s "pluses" as "built business . . . some good people development . . . good credit management . . . good systems". These notes do not seem to challenge the applicant's management skills. Importantly, on 5 November 1991 the view is expressed "Departures due to [NAME_42] problems". That is, problems related to the Group not the division. This latter note may be an expression of [NAME_32]'s recording of [NAME_64]'s view after the meeting. What is clear is resignations may have been perceived as a problem but they were staff not executive resignations. Further the thought was to move [NAME_64] out, "[NAME_79] position? Anywhere else in [COMPANY_4]?" 79 [NAME_32] then appears to have had a conversation on the same day with a [NAME_137] who headed the [NAME_132]. [NAME_139] expressed the view he would love to run [NAME_40] domestic leasing section heading by the applicant. [NAME_32]'s note reads as follows: JRC 5/11/91 - Leveraged lease market. Would love to run with domestic leasing business. - Operating leases. - People issues - Opportunities - Self assessment, infrastructure, financing. 80 [NAME_32] clearly had a conversation with [NAME_139], a person from another group, about taking over some of the applicant's responsibilities. The applicant had, at this stage, not been told of this thinking. 81 From these memoranda it becomes clear, before even talking to the applicant, [NAME_32] examined the proposition of amalgamating the applicant's [NAME_41] division and passing over control internally of at least some parts of it to [NAME_137]. This memorandum pre-dates any discussions by [NAME_32] with the applicant. On 5 November 1991 [NAME_32] was looking at a merger between the [NAME_132] and [NAME_40]. [NAME_139] was the head of the [NAME_132]. By that time [NAME_32] chose to speak to the applicant he had already noted and acted upon a possible part amalgamation of the applicant's division and the moving of the applicant. He had spoken to [NAME_139]. He had also raised the question as to what could be the applicant's future role in [COMPANY_9] if a reallocation of responsibility occurred through merger or his taking over some of the Division's responsibilities. 82 Given those circumstances I find it unacceptable to submit, as did the respondent, that the tone of the meeting between [NAME_32] and the applicant was conciliatory in terms of advising the applicant about his morale problems and ways to resolve them. 83 In the chronology after events of the 5 November 1991, there are two notes of [NAME_32] one dated 6 November 1991 and the other dated 6/7 November 1991. They both relate to one conversation with the applicant. The date of the conversation was challenged. [NAME_32] and the applicant agree there was only one conversation. It is obvious there are two records of this conversation by [NAME_32] and his second note on a reading of it indicates a more conciliatory tone than that of the first note.

The first note: [NAME_79] discussion 9.00 6/11/91 [NAME_111] 6 months ago of morale problems & management issues & need for changes - Division in crisis. Won't be anyone left. - Departures/problems [NAME_140] [NAME_119] [NAME_141] [NAME_194] - [NAME_143] situations discussed. Big disappointment to [NAME_79] thread. All of above have raised concerns with [NAME_111] about [NAME_79] management style [NAME_111] believes concerns shared by those remaining [NAME_79] defence - Departures due to probs in Corp Banking, better offers, etc - [NAME_79] firm but fair. Has changed following [NAME_111] observations - Advertising Friday. Difficult market. [NAME_111] concerned. [NAME_41] staff have voted with feet. Changes required. Discuss further.

. . .

And the second note: Discussion with [NAME_79] 6/11/91/Thurs 7/11 - Joint memo from [NAME_111] and [NAME_79] meetings to review work in hand and other issues - - Reformat WIH sheets to make more effective communications - NAT - Continuing transactions - Dormant - Prospects - Meeting/lunch to discuss bonus policy - Reviews in [COMPANY_4] format - Structure of divisions - New appointments

- [NAME_111] to be invited to attend meetings. 84 It would appear from the applicant's recollection and a cross referencing of the recollections of various other witnesses of the events over these few days in November the first conversation between the applicant and [NAME_32] about concerns as to the applicant's management style occurred not on 6 November 1991 but on Thursday 7 November 1991. [NAME_32]'s note of 6 November 1991 refers to the "Departure problems" and names "[NAME_103]" ([NAME_144]) and "[NAME_77]" (Mr [NAME_76]). However, [NAME_114] did not announce his resignation until 7 November 1991. [NAME_32]'s note arising from individual conversations with staff members about "morale" reveals the first conversation was with [NAME_146] and it was held on 7 November 1991. It follows the other persons to whom [NAME_32] spoke were spoken to on or after 7 November 1991. I find there was a conversation with the applicant first on 7 November 1991. 85 The applicant's evidence was after the conversation with [NAME_32] on 7 November 1991 he felt very threatened. He recalled [NAME_32] in the conversation with him mentioned the word "resignation". He denies there was any conciliatory tone to the conversation from [NAME_32]. He determined to approach [NAME_65] about what he immediately perceived to be a serious problem. 86 It is submitted the applicant's evidence should be preferred to [NAME_32]'s who denied using those words. [NAME_32]'s recollection of the exchange with the applicant was [NAME_32] said: Other people are prepared to leave the Division if you do not resign. 87 The court finds such words were intended as an ultimatum to the applicant. This is the only way that it could have been understood by him although [NAME_32] alleges such a statement gave the applicant options. [NAME_32]'s agrees he said "Other people are prepared to leave the Divisions if you do not resign". He says these words could not be taken as a request for the applicant's resignation. As to this view, he was cross examined: Q. By making that suggestion to [NAME_64] you were indicating to him he had no alternative but to resign, weren't you? A. No. Q. What other inference could he draw from such an exchange? A. That we had to make some changes. Q. And if others were going to resign, the changes most likely were him? A. Certainly, at that stage I had not concluded his resignation as the only option. I believed there could have been other things we could discuss in which we in fact did discuss which could possibly have been a solution. Q. You were conveying to him in that exchange unequivocally it was either him or the (other) people remaining or the other people in the Division who were going to leave? A. I think it was getting pretty close to that at that point, but I don't think we were quite at that point then. Q. To anybody receiving such a statement, it was inevitable they would have to conclude you were giving them an ultimatum. A. I don't agree with that. 88 [NAME_32]'s answer that "it was getting pretty close to that at that point" must be viewed in light of the fact that [NAME_32] had not, at that time, spoken to any of the applicant's staff. While the sudden departure of two members of staff according to [NAME_32]'s evidence led him to conduct an inquiry into staff morale, nothing that had happened up to that point could have justified [NAME_32] to begin to contemplate removing the applicant from his position as Head of the Division. 89 I am satisfied that the proper inference can be drawn that [NAME_32] had made up his mind by 7 November 1991 that the applicant had to go. In coming to this conclusion and accepting [NAME_64]'s assertion that [NAME_32] asked him to resign on 7 November 1991, the court has considered all the evidence before it. In the notes of 5 November 1991 there is no specific notation as to management issues being a problem although there is a suggestion as to concerns with the staff departures. Words such as "good credit management" and "good systems" are used as well as "some good people development." 90 The court finds by 5 November 1991 [NAME_32] was contemplating removing the applicant from his position as Head of [NAME_41]. He had such a move in mind before knowing of the transfer of executive staff [NAME_113] and the departure of [NAME_114] or from discussion generally with staff. From all the evidence I accept when [NAME_32] heard of these executive departures he felt further pressure on him about the decision to move the applicant. It is unclear why [NAME_32] was questioning by 5 November 1991 whether to move the applicant. The notes only reveal business reasons, namely, "CFL moving towards mid market". When the applicant met with [NAME_32] on 7 November 1991 the applicant thought it was to discuss [NAME_114]'s resignation. The applicant alleges [NAME_32] said: I think you have to resign, people are leaving in droves, this is all because of your poor management style. 91 As [NAME_32] had not spoken to other staff members on 7 November 1991 he could not have had any basis to submit, as he did to [NAME_65], that other persons were prepared to leave the division if the applicant's position was not addressed. 92 I find it is more probable than not that [NAME_32] did mention to the applicant on 7 November 1991 the word "resign". Even if the word itself was not used there is no doubt the tenor of the conversation was such the applicant sought the intervention of [NAME_65]. [NAME_32] spoke to [NAME_65] before the applicant spoke to him. He agrees he said to [NAME_65] he had been "thinking about whether [NAME_7] should stay in charge." [NAME_32]'s evidence is silent about whether he revealed to [NAME_65] that he had been discussing with [NAME_147] two days earlier [NAME_147]'s role in absorbing part of the applicant's division. 93 The applicant, when he met [NAME_65], explained the departure of [NAME_74], [NAME_114] and the transfer of [NAME_113] and asserted to [NAME_65] that [NAME_32] should not have been discussing matters with his staff and that whatever were the issues they should be put openly on the table and that the conduct of secret conversations with his staff without reference to him was not acceptable. The applicant submits he had gone to [NAME_65] in the hope of finding a solution to the conflict. 94 [NAME_32] says he discussed with the applicant the possibility of finding a solution in order to work together after the applicant met [NAME_65]. [NAME_32] claims the tone of that meeting was "conciliatory". Yet his reaction and words to the applicant were extraordinary. The applicant says [NAME_32] said: "I will talk to the people that have approached me, over the weekend, to see what their reaction is to you working in a different role in the division. Maybe you could be in charge of all credit approvals and the innovative structuring so we use your best skills." 95 This conversation did not set [NAME_64]'s mind at rest. Nor could it as it continues to refer to [NAME_64]'s removal as Head of the Division. [NAME_32] agrees (although the dates are in dispute) he said to the applicant: [redacted] 96 The chronology reveals [NAME_32] at 8am on 8 November 1991 met with [NAME_72]. I find [NAME_72] had a prior agreement with [NAME_32] to make contact with a number of staff members within the division to ascertain the general level of discontent. A note of [NAME_32]'s conversation with [NAME_72] indicates this conversation was initiated by [NAME_72]: Discussion with [NAME_149]/[NAME_111] 8 am Friday 8 November 1991 Meeting initiation by [NAME_149]. Had given further thought to our previous discussion. Had obviously spoken to others in the Division, to whom [NAME_79] had also been talking. Now very concerned about situation. Hadn't realised how unhappy people had become. "Something has to be done". Whole Division will go down the drain. Thinks more departures inevitable. Intends to talk to [NAME_150] over weekend. [NAME_111] discussed various options - undertook something would be done but I wasn't sure what yet. [NAME_101] I had put [NAME_79] on notice that fundamental changes required. 97 The content of [NAME_32]'s discussion with [NAME_72] from [NAME_72]'s recollection was [NAME_32] initiated the conversation in relation to the future management of the division. [NAME_32] attributed to [NAME_72] the introduction of this topic into the conversation. From all the evidence I reject [NAME_32]'s proposition which was [NAME_72] was not acting on his behalf. [NAME_72] and [NAME_32] agree they met on Friday 8 November. [NAME_72] opines this meeting occurred because he was reporting back to [NAME_32] after he had spoken to other staff. I accept that [NAME_72] was making inquiries of staff at [NAME_32]'s request. By the morning of 8 November 1991, [NAME_72] was reporting back to [NAME_32] and indicated he, [NAME_72], intended making further inquiries over the coming weekend. [NAME_32]'s memorandum refers to "previous discussions". I have no doubt [NAME_72] was, if not influencing decisions being made by [NAME_32], at this stage actively canvassing opinions against the applicant's interests, behind the applicant's back. The note also reveals [NAME_64] is by then discussing matters with staff members. 98 After talking to [NAME_72], [NAME_32] then decided he would talk to other staff members. His notes indicate he perceived the "key people" were [NAME_72] ([NAME_101]), [NAME_70] ([NAME_151]) and [NAME_66] ([NAME_87]). [NAME_32] recorded in note form the conversations he had with the applicant's staff members. 99 [NAME_32] spoke to [NAME_152], [NAME_122], [NAME_100] and [NAME_76]. They were the senior members of the applicant's [NAME_41] division. [NAME_32]'s ostensible reason for speaking to members of the applicant's staff was to "evaluate the seriousness of the morale problems." [NAME_32]'s notes of the conversation with [NAME_146], the first person to whom he spoke, addressed [NAME_70]'s suitability to lead the division and reveal "RJL (meaning [NAME_70]) a "loner" - not manager". I cannot accept that such a suggestion would automatically have come from [NAME_146]. [NAME_146]'s further view is recorded by [NAME_32] as "No one would leave if [NAME_79] left" and "No one respected enough to manage, [NAME_111] respected", that is, [NAME_32]. [NAME_32]'s notes of his discussions with [NAME_113] also confirms there was a discussion about the suitability of [NAME_70] and/or [NAME_72] to lead the division "[NAME_151] not a manager" ([NAME_70]), [NAME_149] "not enough respect" ([NAME_154]). [NAME_70] was away at the time but both [NAME_72] and [NAME_32] spoke to him before the Monday morning. 100 Some criticisms were also recorded by [NAME_32] with these staff members about the applicant such as: division unhappy, . . . everyone unhappy . . . adverse reaction to [NAME_79] ([NAME_64]) had threatened everyone at one stage or another [NAME_79] rude . . . no consistency of approach - one minute happy - next minute terror . . . surprised things have fallen apart so quickly. 101 The conversation revealed the only other person contemplating leaving the applicant's Division was [NAME_70]. The court does not accept [NAME_32] on 8 November 1991 still had an open mind as to the applicant remaining head of the Division. The court takes from [NAME_32]'s own notes the view he was canvassing by 8 November the reaction of [NAME_41] staff to the removal of the applicant and whether other staff could be an acceptable replacement as leader of [NAME_40] - himself included. 102 The notes reveal there was no consideration given by [NAME_32] as to the effect of the lack of increase in BCR or poor DPS allocation on staff morale. [NAME_65] did not mention management issues to the applicant and [NAME_32] notes reveal no consideration of these factors. 103 No matter who said what to whom on the weekend of 9/10 November 1991, it is clear the applicant sat at home troubled by the threat, as I have found, that [NAME_32] required his resignation. Early on Monday morning 11 November 1991, the applicant arranged to meet [NAME_65]. Before meeting with [NAME_65] the applicant went to [NAME_32], informing [NAME_32] he was going to make allegations as to [NAME_32]'s behaviour during the course of the previous few days. [NAME_32] agrees he reacted saying "[NAME_7], do you realise this is now between you and me. Only one of us can stay in [COMPANY_9]." In fact, [NAME_32] agrees he had already decided the applicant had to resign before this conversation occurred having spoken to others over the weekend. 104 The applicant informed [NAME_65], "[NAME_56] has been purposely trying to undermine my position in the division by encouraging certain senior members of my staff to form an allegiance with him." [NAME_65]'s reaction was most revealing "A Putsch!" that is, an uprising, a revolt (see [COMPANY_2]). 105 This was a very serious allegation made by the applicant. The respondent submits it is so serious as to be perceived by the court as a renunciation by the applicant of his employment contract. 106 While the applicant invited [NAME_65] to speak to [NAME_155] and [NAME_74] in support of his allegations against [NAME_32], the evidence reveals [NAME_65] had a brief telephone conversation only with [NAME_74]. [NAME_65]'s note is as follows: [NAME_108] conversation 11/11/91 Discussion with [NAME_111] re: BFG - negative style - no congratulations - put pressure on people eg quarterly reports - written - one on one - no group discussion + positive things re BFG leaving not because of BFG not major or only leave people longer/more discontent people happy up to 1986

[NAME_74] in his affidavit evidence gives this account of an exchange with [NAME_65]: [NAME_65] said:

Do you think that [NAME_124] is seeking to get rid of [NAME_157]?

I said:

I have no basis for believing this to be so but I am aware that [NAME_100] had complained to [NAME_124] about aspects of [NAME_7]'s management style. 107 [NAME_155]' gave affidavit evidence. [NAME_65] did not speak to him but [NAME_155] confirmed the applicant had approached him during 1991 and raised concerns about [NAME_32] and their respective difficulties including [NAME_32]'s practice of talking independently to their staff. [NAME_155], as head of the Property Services Division, agrees he and the applicant spoke "without enthusiasm" of [NAME_32]'s habit of developing relationships with staff working under them without their knowledge. 108 [NAME_65]'s conversation with the applicant there was as usual on Monday an [NAME_46] meeting. [NAME_32] prepared notes for the meeting: [NAME_41] -- Issues to be raised with Exec Comm 11/11/91 1. Departures 2. background to [NAME_111] discussions with [NAME_79]. - 6 months ago - after which I told a no of [NAME_110]'s my views - Last wed when I talked about crisis - Thursday when I told [NAME_79] job on line and discussed alternatives - [NAME_79] met with [NAME_111] and [NAME_158] separately - This morning 3. Attitude of other staff members, eg, [NAME_149], RJL, NL, MP, [NAME_159], [NAME_160]

4. Issues raised by [NAME_79] 109 From these it can be concluded, as the applicant has given evidence, that [NAME_32] had only discussed morale with the applicant six months before; [NAME_32] had been taking the other staff, the Associate Directors ([NAME_110]'s) into his confidence after July and before his inquiries on 8 November 1991; [NAME_32] did tell [NAME_64] his job was "on the line" and discussed possible alternatives; on the Wednesday, [NAME_32] had referred to a crisis, that is, before the resignation of [NAME_114] and the departure of [NAME_113]. 110 There was no further inquiry made by [COMPANY_9] as to the applicant's allegation or as to the bona fides of [NAME_32]'s report. Evidence revealed there was clearly a difference of opinion between the applicant and [NAME_32] as to the reasons for poor morale in the division. [NAME_32] was aware of this. His note acknowledged [NAME_64] had views. [NAME_64] was not asked for his view. In the context of whether he should be terminated, further inquiry should have been made. No direct consultation was entertained with the applicant. Even if [NAME_64] was a senior executive he was entitled to a fair hearing. 111 The [NAME_46] formed a view, based on [NAME_32]'s view, that if the applicant stayed as head of the Division further executive staff would leave and they determined there was an irreconcilable breakdown in the relationship between [NAME_32] and the applicant. I accept the applicant's submission that what the respondent did may have been commercially expedient. However, commercial expediency does not equate to fairness. As Lord Atkin said in General Medical Council v Spackman [1943] AC 627 at 638: Convenience and justice are often not on speaking terms. 112 [NAME_65] says of the decision to terminate: I supported the view that there was no option but for the applicant to leave the respondent not only because of what I assessed to be an irreconcilable breakdown in the relationship between himself and [NAME_124] but also because I was satisfied that if he remained as the head of [NAME_40] that there was a real risk that we would lose yet further valuable executives then working there. 113 The reasons for the termination were at the time, therefore, an irreconcilable breakdown between the applicant and [NAME_32] and the possible further loss of valuable staff. As to the irreconcilable breakdown this only occurred after [NAME_32] had threatened [NAME_64] in his position and rallied his staff. 114 It is common ground that following the meeting of the [NAME_46], [NAME_65] gave the applicant an ultimatum which involved his resignation from [COMPANY_9]. [NAME_65] gave the applicant time to consider his position overnight. 115 A period of negotiation followed which failed to achieve resolution of the terms upon which the applicant would agree to resign. The applicant left the worksite after the Executive Meeting. The respondent formally dismissed the applicant by a letter sent to him on Christmas Eve with effect from 31 December 1991.

Consideration 116 As to the unfairness in the contract or in the performance of the contract, the court is guided by the principles enunciated in Port Macquarie Golf Club Limited v Stead & Anor (64 IR 53). The Full Bench examined s275 of the Industrial Relations Act 1991 which is a similar provision to s106 of the Industrial Relations Act 1996. The court, it says, must make an examination of the particular facts of the case (at 59): Unfairness may arise either from the terms of the contract or arrangement itself, the surrounding circumstances and/or from the manner of performance or operation of the contract or arrangement: Barry v Incitec Limited (1991) 45 IR 143 at 146; Incitec Limited v Industrial Court of New South Wales (1992) 45 IR 155 at 157-158; and Baker v National Distribution Services Ltd (1993) 50 IR 254 at 270-271. 117 In applying the test for unfairness the Full Bench guides the court to take (at 59-60): . . . the common sense approach characteristic of the ordinary juryman by applying standards providing a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement, bearing in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement: Davies v General Transport Development Pty Ltd (1967) AR (NSW) 371 at 374: A & M Thompson Pty Ltd v. Total Australia Limited [1980] 2 NSWLR 1 at 13; and Baker at 271-272.

And at 59: (5) The nature and degree of the unfairness within the purview of s.275, as a matter of law, relates to ordinary standards of fairness by directing attention to the particular circumstances of the individual contract or arrangement concerned; whether or not a contract or arrangement is unfair is a matter to be decided upon examination of the facts of each particular case: Incitec Limited v. Barry (1992) 45 IR 148; and Baker (1993) 50 IR 270. 118 The respondent submits as to events in November, that over the weekend of 9 and 10 November 1991, the applicant formulated a conspiracy theory linking disparate pieces of information and convinced himself that [NAME_32] was to blame for criticisms being levelled at him. In adopting the stance that he had no alternative but to defend himself by attacking [NAME_32], the respondent submits the applicant "launched an unsubstantiated and scurrilous attack on [NAME_32]". The respondent submits the applicant realised the seriousness of what he was doing by telling [NAME_65] that his career was at stake and at risk. [COMPANY_9] argues the applicant's behaviour on the morning of 11 November 1991 ensured there was an irreconcilable breakdown in his relationship with [NAME_32] such that they could never again work together. The respondent submits [NAME_74] did not confirm the applicant's conspiracy theory when [NAME_65] spoke to him, and therefore the [NAME_46] of [COMPANY_9] quite properly resolved the dispute by ruling the applicant should be invited to resign and if he refused he should be summarily dismissed. 119 The respondent submits that the contract of employment contained an implied term the applicant would act with fidelity and good faith and not entertain conduct likely to damage or destroy the relationship of trust and confidence between the parties as employer and employee. The applicant's behaviour on 11 November 1991 was a fundamental breach of the employment contract such as amounts to a repudiation of the contract since it necessarily goes to the root of the contract. The respondent in support of this proposition relies on [NAME_161] (1997) 77 IR 332, where a dismissed employee was found to have attitudinal problems, a tendency to lose control, an inability to accept change and a personal intransigence. The court held (at 335.4): "These factors made her dismissal inevitable". The respondent also relies on the authority of [NAME_162] v [COMPANY_166] (unreported, IRC96/6024, 15 April 1998) where Peterson J held, in examining the behaviour of a manager who made unsubstantiated allegations against his employer's behaviour to the Taxation Office: In this matter, a manager lost employment as the direct result of his own conduct which was without any apparent foundation in law or in common sense. 120 As to "fault" the respondent submits the applicant's own conduct/behaviour was either the cause or at least a substantial contributory cause of the termination. He relied on [NAME_167] v Industrial Court of NSW (1994) 53 IR 121 at 135 where it was held an employee's misconduct was a matter which had to be taken into account in determining whether a contract was unfair. 121 The respondent invites the court to make a finding, from an examination of the applicant's conduct as a whole, judged reasonably and sensibly that the respondent could not be expected to accept such behaviour. Such a finding would lead the court to a further finding that the applicant breached an implied term of his contract to act with fidelity and good faith and therein, by his conduct repudiated the contract. The respondent submits the applicant's attack on [NAME_32] was "entirely scurrilous", his conspiracy theory ill founded and there was an irreconcilable breakdown due to the applicant's conduct. 122 The respondent further submits the delay that occurred in the applicant presenting his case is such that the respondent suffered prejudice and the court would not be satisfied on the evidence. 123 The applicant submits the inquiry process leading to his termination was flawed. A proper inquiry should have explored fully the circumstances that gave rise to the respective concerns of both [NAME_32] and the applicant - in the case of [NAME_32], that the applicant's management style was responsible for the poor morale of the Division and could lead to a number of staff leaving [COMPANY_9]; on the applicant's part, that [NAME_32] was working to undermine him and have him removed from his position as head of the Division. 124 The applicant further submitted it is significant that the Compensation Memorandum which contained the material terms of his employment as an Executive Director were not known to him before his promotion and were in a real sense not negotiable at that time or any other time. The court rejects this submission. The applicant urged upon [COMPANY_9] his promotion knowing the basic formulae upon which he would be remunerated and in fact claims the benefit of that type of remuneration if he succeeds through this litigation relief. The court cannot accept the applicant was not in an equal bargaining position when he accepted the contract as to his remuneration as Executive Director. Further, the applicant accepted his conditions of employment as varied with each promotion. 125 The applicant's destiny was decided by [NAME_32] and the [NAME_46] relied almost exclusively on [NAME_32]'s flawed report. There are some serious differences between the evidence of [NAME_32], when one examines the chronology of events, and the attitude of [NAME_32] as revealed in his notes and that of the applicant. The court has preferred to make findings when there is support from contemporaneous records. On some occasions it has preferred [NAME_64]'s version of events but generally it has been persuaded when there has been supporting evidence in documentation. The respondent makes a strong submission the applicant's credit was impugned in the hearing. It submits the court should infer because [NAME_64] did not produce some notes he took of events and was at times "obfuscative" in his answers he should be dismissed as not a witness of truth. While I do not accept all the applicant's recollection of events, I accept generally his evidence especially when an examination of the contemporaneous documents support much of his version of events. 126 The court rejects the claim the respondent suffers prejudice in the presentation of the case due to the delay by the applicant in litigating his claim. The court is satisfied the relevant documentation and evidence was still available. 127 There is no evidence that persuades the court simply because [NAME_32] declared "its you or me" such should have been the outcome. The conclusions [NAME_32] reached from his inquiries as to staff discontent were unfair as they did not attempt to consider the effect [COMPANY_9]'s financial decisions related to staff had on the division's morale. The interviews with other staff by [NAME_32] were clearly directed towards working for the removal of the applicant and were conducted after the applicant revealed he was approaching [NAME_65]. [NAME_65] only made an inquiry of [NAME_74] and did not approach [NAME_155]. [NAME_74], as [NAME_65]'s notes reveal, confirmed some of the applicant's case. 128 While the matter went to the [NAME_46] there was a failure by [COMPANY_9] to perceive, in its consideration, the effect of circumstances other than those acknowledged by [NAME_32]. [NAME_65] made a single telephone call to assess the applicant's view of events and some of the context of this call expressed the applicant's explanation. The [NAME_46] had no consultation with the applicant. 129 The court finds there was an unfairness in the performance of the employment contract arising from the respondent's conduct leading to the applicant's dismissal. The court finds persuasive the following circumstances: [NAME_32] failed to connect the perceived morale problems in the applicant's division to the reaction of staff members to the 1991 remuneration review; [NAME_32] failed to acknowledge during his inquiry that in putting staff on notice as to their performance the applicant was acting within the knowledge of [NAME_32] and such warnings had an adverse effect on the morale of the staff in the division; [NAME_32], as to any complaints from the applicant's staff as to the applicant's management style (not necessarily proven in evidence) failed to fully and frankly discuss such complaints with the applicant; [NAME_32] failed to make clear to the applicant the terms of his inquiry and his perceived gravity of the applicant's situation; [NAME_32] failed to give any warning or consultation after July 1991 as to concerns related to the applicant's management style; [NAME_32] failed to enter into any consultation with the applicant as to any criticism of his management style. 130 Further, the process of inquiry conducted by [NAME_32] the court finds was not only not comprehensive, it was inappropriate. Before reaching a conclusion from that inquiry there was no consultation by [NAME_32] with the applicant about perceived problems with the applicant's management style such as would lead to his termination. There was further no consideration by [NAME_32], [NAME_65] or the [NAME_46] that factors unrelated to the applicant's management style were impacting within the division. [NAME_65] and the [NAME_46] acted principally on the evidence arising from [NAME_32]'s inquiry and [NAME_65]'s single inquiry. The [NAME_46]'s decision, as far as there is evidence of its consideration, was based on [NAME_32]'s assessment. [NAME_65] supported the view there was no option but for the applicant to leave for the two reasons [NAME_32] had enunciated. 131 [NAME_64] may well have adopted a heavy handed and focussed management approach. [NAME_32] seems to have been equally heavy handed in the conduct of his inquiry arising from his concerns. While "staff resignations" was [NAME_32]'s explanation for the inquiry the evidence in the notes reveals the underlying reason was [NAME_32]'s decision to split up [NAME_40]. The reason for this decision is unclear. The background to this decision was, however, the difficult economic conditions being experienced by [NAME_32]'s own Group. 132 The court finds in all the circumstances the applicant was not terminated for just cause and there was, in the performance of the contract at termination, an unfairness. The court is further satisfied the termination without just cause manifested a relevant unfairness in the terms of the contract. The termination, without just cause was beyond the applicant's control. In the making of the employment contract, the applicant had every reasonable expectation of a long and secure employment at a senior executive level with a dynamic and developing corporate environment (see Adams v Westfield Holdings Ltd [2000] [NAME_5] 112 at para 70). 133 I find the applicant's performance, measured in terms of [COMPANY_9]'s agreed objectives, had been met. His demise related to a workplace discontent. There should have been a considered managerial approach to determine the reasons for this discontent and a measured address of the problems. Reactions like "its you or me" and allegations of "conspiracy" cannot be recognised as focused, management practice to address what was a genuine staffing problem. [NAME_32] and [NAME_64] may have had valid views as to the cause of concern in [NAME_40], the situation was handled badly, the inquiry flawed, the decision making process of the [NAME_46] reflected the flawed inquiry and therefore the contract in its performance on termination for other than just cause was unfair.

Compensation 134 Having found an unfairness in the conduct of this employment contract as was held in Port Macquarie Golf Club Limited v Stead & Anor (1995-96) 64 IR 53 the court must apply its discretion to determine whether to vary the contract and give orders just in the circumstances. As to the Court's discretion, the Court said (at 60):

(8) If a contract or arrangement be found to relevantly offend one or more of the grounds, such as it being unfair, contained in s.275(1) then the next question involves the exercise of a discretion, to be performed judicially, as to whether the contract or arrangement should be avoided or varied: Hodges [1985] 11 IR 60 at 62-63; Autobake [1986] 19 I.R. 18 at 20; and Baker at 267. (9) If it be decided to avoid or vary the contract or arrangement under s.275(1) then a further discretion arises as to whether an order should be made under s.275(3) for the payment of money in connection with the contract or arrangement declared void or varied: Hodges at 63; Autobake at 20; and Baker at 267. . . . (11) The discretions allowed by s.275 to the Court are extensive and the Court should not interfere with bargains freely made by a person who was under no restraint or inequality, or whose labour was not being oppressively exploited: Stevenson v Barham (1977) 136 CLR 190 at 192; and Baker at 276. 135 The applicant's claim for just compensation is as follows:

1. An order for the unpaid balance of the DPS allocated in respect of the 1990-91 financial year.

2. An order for 2.5 years, alternatively 1.5 years loss of salary (BCR), of full payment of profit share (DPS) and other entitlements - superannuation and long service leave.

3. An order for interest from termination at Supreme Court Act 1970 rates 31 December 1991.

4. An order for losses suffered due to the early forced sale of shares whose real value maximised at a later date.

5. $650,966 plus interest. 136 It appears to be common ground that the Compensation Memorandum failed to deal with what should happen in relation to an Executive Director's remuneration, nor his/her termination entitlements, in circumstances where employment may be terminated by the respondent otherwise than for just cause. The Compensation Memorandum was silent in relation to an Executive Director's rights on termination otherwise than for just cause. In practice the question was left to the discretion of an [NAME_46]. 137 On 11 November 1991, [NAME_65] and [NAME_32] gave the applicant an assurance [COMPANY_9] would treat him generously and support him in finding suitable employment. It offered the applicant a resignation and a [NAME_168] position until the end of March 1992 so he could seek another position with [COMPANY_9] providing the assistance of an outplacement service to the value of $40,000. During that four months [COMPANY_9] offered to pay the applicant his BCR and agreed his personal financial arrangements with [COMPANY_9] would stay in place such as mortgage, motor vehicle leases, share payments. The applicant rejected this offer. He never returned to work after his termination on 11 November 1991. Payments of his BCR were however made to his [COMPANY_4] account until June 1992, that is, the date the applicant confirmed to [COMPANY_9] he was establishing a business with [COMPANY_169]. There was a period then of negotiation as to appropriate termination payments. 138 Evidence revealed from January 1992 the applicant sought suitable employment. Applications required the applicant obtain references from his last position. Some inference was cast [COMPANY_9] did not assist the applicant in his search for employment. Whatever was the situation, the applicant in June 1992 succeeded in establishing a business relationship with [NAME_170]. The applicant's financial agreement with [NAME_170] involved him entering an arrangement whereby [NAME_170] advanced him a monthly payment of $10,000 which was to be treated as a loan to be repaid from future distribution of profits. 139 While this dispute was ongoing, the applicant filed in the Supreme Court. The respondent has always been on notice about a dispute in relation to the termination payments and a claim by the applicant for entitlement to his DPS. 140 The applicant received the following payments for his termination. Such payments were not finalised until December 1994.

For the 1992 Calendar Year (ie year following notional termination date of 31 December 1991) the applicant was allocated (and either paid, or later setoff against loans to [COMPANY_9]) before tax: BCR $225,000 Less deduction for [NAME_170] earnings during 1992 ($59,230) $165,770

Profit Share Retained profit share for 1990 $50,000 Plus interest on that sum $8,808 $58,808

DPS 50% vesting of 91/92 allocation $43,219 (1) Further release of 90/01 DPS (to take from 33% to 50%) $44,342 (2) Interest on DPS balance 1.4.91-31.12.92 $9,155 $96,716 T otal(before including long service leave) $321,294 Long service leave $57,781 Total $379,075

Footnote (1) . . .This is the amount that he would have received for the 1991/92 year under the scheme if still employed as at June 1992 (2) . . .This is the further amount that he would have received for DPS allocated for the 1990/91 year under the scheme if had been still employed as at June 1992 141 The applicant received various payments at different times throughout 1992. The applicant complains about the way payments were "dribbled" to him to retain pressure on him to settle his claim. The respondent as to what it finally did pay the applicant, without his agreement, seems to have calculated all the applicant's payments and rights within the one year's notice period. Only the DPS payments were calculated up to June 1992, the date when the applicant obtained employment.

Claim for BCR 142 The applicant claims his BCR for 1½ - 2½ years. This payment the court finds should be perceived as the "salary" component of his financial package. He was paid his BCR for 1 year less the monies he earned from [NAME_170]. From this, [COMPANY_9] took deductions for the loans of his held by them. The applicant claims he should be credited with the deduction of the monies he earned at [NAME_170]. He submits it has taken four years to entertain a profit from his new venture with [NAME_170] and the monies he was advanced by [NAME_170] are monies now being deducted from his profit share of [NAME_170]. Further, he submits, he retained a very specialist skill and the termination caused him to be thrown into a bad economic climate, onto an open labour market that held limited opportunity for his re-employment and he obtained employment at the earliest opportunity. 143 The applicant concedes the remuneration package he accepted from [COMPANY_9] was structured to discourage early retirement or resignation. He concedes [COMPANY_9]'s goals and values statement said "[COMPANY_9] does not have a system of tenure". However, he submits: . . . promotion depended solely on merit and on an individual's "ability, experience, performance and overall contribution to [COMPANY_9]'s success and that "a staff member will be asked to leave if, after appropriate review, senior [COMPANY_4] management judge individual's contribution to be inadequate". Seen in its proper context, the statement that [COMPANY_9] did not have a system of tenure meant that no individual, at whatever level of the organisation he or she may be employed, would be protected from the consequences of his or her inadequate contribution to [COMPANY_9]'s ongoing success.

It does not follow, however, that this statement of policy was intended to preclude a person who had achieved promotion to the position of Executive Director from enjoying a reasonable period of tenure in that position, provided that person's contribution continued to meet [COMPANY_9]'s criteria. 144 I do not find the applicant had "tenure" under any term of the contract of employment. The contract had terms and conditions. This issue is not one for which the court would allow a variation to the terms of the contract. 145 However the court finds the Compensation Memorandum was integral to the employment contract and was unfair in that it denied, other than for death or permanent disability, to any executive a right to retain any DPS on termination other than in the absolute discretion of the Executive Director's [NAME_46]. Such a provision in the situation of a termination without just cause I find is inherently unfair and should be remedied (see Adams v Westfield Holdings Ltd [2000] [NAME_5] 112 at para 76). 146 What can be said is the evidence revealed the applicant attempted to mitigate his loss. His skills were clearly in a very refined area of employment. Evidence revealed there would be only 10-20 positions on the open labour market available to meet his expertise. Given the circumstances of the applicant's dismissal and the fact that he was thrown into a very difficult labour market, that he was an employee of 8 years stature, that he presented with a very specialised qualifications and that he determined, after fruitlessly trying to obtain employment over a six month period, to himself invest in his own future the court finds was a proper resolution of his employment situation. 147 The court finds it just in the circumstances the applicant be given the benefit of 12 month's salary payment, that is, 1 year's BCR from 31 December 1991 without deduction for the payments he received from [NAME_170]. From the respondent's calculations the applicant is therefore owed by [COMPANY_9] $59,230 which amount was deducted by [COMPANY_9] as his [NAME_170] earnings. 148 Any payment to the applicant of his BCR should reflect his full salary package including holiday pay, etc. 149 Some payments were made for long service leave. Such a payment was a right held by the applicant and in all the circumstances, I find, while it was a generous payment to the applicant, it should not be used as a "set off" against his appropriate notice payment of one full year BCR payment.

The DPS Claim 150 The respondent in its discretion paid the applicant $155,524 referrable to DPS. The [NAME_46] calculated, in the use of its discretion, the following payments as to his DPS: (i) the balance of his 1989/90 profit share; (ii) a further 17% taking to 50% his DPS vesting of his 90/91 allocation; (iii) 50% vesting of his 91/92 allocation up to June 1992. 151 The applicant claims a payment for 1½ or alternatively, 2½ years of DPS. It is not suggested by the applicant that there was anything unfair about the deferred vesting arrangement. He concedes it was an integral part of the respondent's scheme to ensure that Executive Directors did not resign or retire before completing a lengthy period of service with the respondent. However, the applicant submits this arrangement enabled the respondent, at its discretion, to bring the employment relationship to an end prematurely and thereby cause an employee to forfeit profit allocations made in respect of an Executive Director's contribution in earlier years. Arrangements of that kind are inherently unfair the applicant submits (see Lumby v Yorkshire-General Life Assurance Co Ltd [1978] 1 NSWLR 626 at 629. 152 [COMPANY_9] enjoyed the benefits of long term profits reflecting the endeavours of [NAME_40]. But one of the examples given in evidence was the Government Car Lease Arrangement that the applicant designed and sold to [NAME_171]. It is agreed this arrangement reflects in [COMPANY_9]'s profits for 10 years. 153 From the Compensation Memorandum it can be determined the amount of DPS profit share was struck each year for each Executive Director and was allocated in consideration as to past performance of the employee (see Westfield v Helprin (1998) 82 IR 411). The scheme made no provision for the payment of the allocated DPS for termination without cause. The scheme's vesting provision requires there be a long term vesting of monies, already allocated to executive staff for their endeavours, for the purpose of retaining the long term services of the employee. The allocation was made on a performance estimate. The payments vested over a 10 year period of time. In my view this is a long period of time to vest monies already allocated. For the vesting of shares, Peterson J in Canizales v Microsoft Corporation & Ors [2000][NAME_5] 118 (1 September 2000) referred to a 7½ years vesting period as "lengthy". Ten years was certainly a long period of time in which to allow access to a cash payment already earned and allocated. The vesting provision had as its purpose the retention of service. [COMPANY_9] determined not to retain the service of this employee. His termination has been found to be not for just cause. 154 The respondent submits, as to the level of DPS payments that were made on the termination, it exercised its discretion at [NAME_46] level bona fide and not capriciously or otherwise unfairly (see Westfield Ltd & Anor v Helprin (1998) 82 IR 411 at 439 generally) and therefore the [NAME_46]'s decision for the DPS payments of termination to the applicant should be found just in the circumstances. 155 The respondent submits, in the event the Court is satisfied this was not a "just cause" termination and a reasonable notice period in the circumstances was 12 months, then the court will not as a matter of discretion make a monetary order in favour of the applicant with respect to any "profit share" that he would have been entitled to had he remained in employment beyond that notice period: it relied on Addis v Gramophone Co (1909) AC 488; Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64 at 92; and NSW Cancer Council v Sarfarty (1992) 28 NSWLR 68 at 80-81. [ADDRESS] in consideration of claims under s106 of the Act has examined various share option schemes. In submissions, the respondent conceded "there is no appreciable difference between the design and purposes of such share option schemes and the respondent's "Executive Director profit share scheme". 157 [COMPANY_172] v [NAME_174], the Commission in Court Session examined a share option scheme and held (at 437.3): . . . the option arrangement was unfair in not making provision for [NAME_175] to receive some benefit under the option scheme upon the termination of his employment.

On termination, [NAME_175] had been employed for almost three-quarters of the qualifying period. We propose to vary the arrangement to require that, on termination, other than for cause, [NAME_175] should be entitled to exercise 73 per cent of the 40,000 options granted to him under the option scheme, proportionately reflecting his period of employment during the operation of the scheme. That approach is consistent with the approach urged for [NAME_175] at first instance and on appeal. The monetary order we propose to make in this regard will reflect that entitlement, and the opportunity to sell the shares on the same day, allowing only for notional stamp duty on acquisition and brokerage on sale. 158 The respondent submits if this court applied the principles as enunciated in [NAME_174]: The application of a strict proportionality approach in the applicant's situation, would have resulted in him receiving less than he did as the vesting period was 10 years and he had only been an executive director of 18 months. 159 However this submission does not take into account the fact in [COMPANY_9]'s profit share scheme and in its DPS allocation, the applicant had already been allocated an amount of money from a pool which amount allocated reflected his past performance. The fact that it was to vest over 10 years, according to the Compensation Memorandum, was for the purpose of retaining his services in the long term. 160 In O'Donnell v GIO Australia Ltd (1996) 64 IR 297, affirmed on appeal (1996) 70 IR 1, it was held an executive should not be denied the benefit of future entitlements arising from a share option scheme as a consequence of termination other than for just cause. This view has been supported in the judgment of Peterson J in Canizales v Microsoft Corporation & Ors [2000][NAME_5] 118 (1 September 2000). The applicant in that matter earned a salary of $150,000 but with options had earned $10 million over 10 years. The respondent's conduct, held to be unfair, was the retrenchment of the applicant, without notice, while work was still available and with no search made for alternative employment for the applicant, giving rise to an inference the dismissal occurred on a date calculated to prevent the applicant gaining share options. 161 The respondent submits the [NAME_176] is supportive of the proposition a future financial benefits claim that is by way of options or profit share is confined to those benefits which would otherwise have accrued during a reasonable notice period. However this court does not accept the [NAME_176] being authority for such a proposition. The applicant in that case was terminated in May 1998. The contract required only 1 month's notice. His Honour ordered only 4 months' notice but that share options granted in 1994 and 1995 which were to vest between May and July 1999 inclusive vest forthwith. His Honour found some of the grants of options were essentially "to retain and reward senior staff over a lengthy future period of 7.5 years". He held "the principal motivation was retention, not reward for past service". He distinguished Westfield Ltd v Helprin (1997) 82 IR 411 where there was only a proportional allocation of the options. His Honour opened a three month window for the purchase of the shares. 162 In Adams v Westfield Holdings Ltd [2000] [NAME_5] 112) (30 June 2000) under the terms of an employment contract [NAME_177] was allocated 30,000 share options. The applicant was unaware that the share options were "hand-cuffed" for five years and lapsed on redundancy. He was made redundant. Hungerford J in examining the exercise of the directors' discretion to allow the applicant to exercise 40% that is 45,000 of his 150,000 options held: . . . termination . . . beyond the employees power or control calls, in my view, for more favourable treatment than an approach merely equating the entitlement to options in the same proportion as the completed service of the option qualifying period.

His Honour allowed the applicant to exercise the full remaining 105,000 options. His Honour in the use of his discretion therefore rejected the "proportionality" argument as unfair and on the facts before him allowed the applicant 100% of the options. 163 [COMPANY_9] acknowledged the [NAME_179] was a reward for past service. This court finds the [NAME_179] was in truth a performance scheme and is so titled. However, while the allocation to the applicant was made directly on past performance, it was the payment of the monies that represented the retention part of the scheme. The monies had already been allocated on the applicant's performance. 164 In that spirit the court finds it unfair the DPS allocation already allocated for past performance be retained by [COMPANY_9] and finds is just in the circumstances for the applicant to be paid his complete allocation of DPS for 1990/91 reflecting his past allocation for service (he served the company until December 1991) and ¾ of the DPS allocation for 1991/92 taking him up to the December 1991 termination. 165 The applicant claims a DPS payment which he would have been allocated past his termination date. 166 In accordance with [COMPANY_9]'s principles the applicant is also referred to as "a residual owner" of [COMPANY_9]. Its own document explaining the DPS reads: Directors' Profit Share DPS (and staff profit sharing) are designed to provide significant incentives for staff to generate, over time, superior returns that benefit all major [COMPANY_4] stakeholders; shareholders, executives, and Executive Directors alike. The DPS system is designed to encourage [COMPANY_9]'s Executive Directors, over the long haul, to maximise the return on shareholders' funds, and to this end effectively treats the Executive Director group as residual owners of [COMPANY_9].

DPS Calculation The philosophy behind DPS is as follows: . Shareholders should earn a minimum rate of return on their investment, but above that minimum level, profits should be shares with staff.

. Once profits exceed this minimum level, an increasing proportion of profits should be allocated to the profit sharing pool for non- Director executives.

. After the above are accounted for, the residual interest in [COMPANY_9]'s profits should accrue to the Executive Directors as a group.

(emphasis added)

These were the terms of the applicant's employment before [COMPANY_9] became a public company on 29 July 1996. 167 The applicant was viewed as "a residual owner" of [COMPANY_9]. The applicant's contribution to the banking business allowed much of the profit enjoyed from his and his Division's endeavours to be accrued over a number of years. [COMPANY_9] has declared his interests as that of a "residual owner". The [COMPANY_2] (2nd Edition, 1996) defines "residual" as "remaining"; "left over"; and residue as "that which remains after a part is taken". The applicant was to be perceived as the owner of what other profits [COMPANY_9] retained. The applicant had a legitimate expectation he would enjoy the benefits of the profits reflecting his and its endeavours over the years. The successes he achieved through his Division had and continued to effect the long term profit of [COMPANY_9] at least through 1992/1993 and for a considerable number of years thereafter. 168 In the spirit of this principle of "residual ownership" of [COMPANY_9] and taking into account the applicant's contribution to the profit of [COMPANY_9] accrued over a number of years into the future, the court determines it just in the circumstances the applicant be paid not just ¾ but the full DPS allocation for 1991/92 and the half DPS allocation of 1992/93 up to December 1993 (as would have been allocated to an Executive Director at his equivalent level for the 1992/93 financial year).

The shares claim 169 Due to financial need the applicant, in accordance with the terms of the memorandum, gave instructions to [COMPANY_9] for his fully paid shares to be sold on 2 January 1992. The shares were sold on or about that date. The respondent however did not pay the applicant for those shares until September 1992. The sum involved was $150,000. No interest was paid for the holding of these monies by [COMPANY_9]. [COMPANY_9] paid the applicant these monies some 7 to 8 months after the sale had been finalised. 170 The applicant argues he used the money to pay off some of his mortgage from necessity given he held a loan through [COMPANY_9] and [COMPANY_9] required the loan to be discharged after termination. The applicant claims it is just in the circumstances that he be compensated for the full value of these shares as he was unable to retain the shares because of the above financial difficulties arising from his termination. The applicant claims compensation for the early sale of the shares. The value he claims is the value of the shares at the time [COMPANY_9] was floated on the [NAME_180]. The applicant claims he had intended to keep the shares until that date. The float date, he submits, attracted a maximum value for the shares that would be just in the circumstances. 171 I dismiss this claim. The applicant made a number of personal financial decisions related to termination. The fact he chose to sell the shares was a personal decision not one related to the unfairness in the performance of the contract.

The Taxation Payment Claim 172 [COMPANY_9] after termination paid the applicant his BCR on a monthly basis until June 1992. It then made other payments that were set off against loans. For tax purposes the respondent continued to treat the applicant as an employee and therefore took from his BCR payments tax at the PAYE rate of 48.25% even though he had been terminated. Fringe Benefit Tax and Payroll tax continued to be deducted from his BCR. The applicant challenged the taxation rate deducted from his BCR and received a ruling from the [NAME_181] in his favour in 1992 that the appropriate tax payment was at the significantly lower rate that an Eligible Termination payment attracts. 173 This amount as deducted by [COMPANY_9] has still not been reimbursed to the applicant by [COMPANY_9]. The respondent wrote to the [NAME_181] in January 1994: Once agreement on the quantum of the termination payment was reached in (in January 1993) [COMPANY_9] paid out the balance of the ETP (Eligible Termination Payment) in one lump sum.

This statement to the [NAME_181] was untrue. There had been no agreement as to the termination pay-out to the applicant although in December 1994 [COMPANY_9] had made a termination payment to the applicant with which, it was noted, the applicant was not in agreement. The evidence revealed the applicant is still owed $28,886.66 deducted for tax. This payment was not particularised in the summons although there was claimed generally for "such order as to the payment of money as the Commission considers just in the circumstances of the case". 174 Both parties were given an opportunity to submit as to appropriate orders if the court determined such an order should be made. The respondent submits the applicant would not sign a Statement of Termination Payment form as required by the [NAME_181] so the payment has not been made. Further, [COMPANY_9] claims the decision of the [NAME_181] was not finalised until August 1994 and the respondent was then willing to pay the applicant even though he did not accept the payments. However, correspondence tendered reveals the [NAME_181] ruled in 1992 the appropriate taxation level on the relevant payments was that required on an Eligible Termination Payment. It would appear from evidence [COMPANY_9] wrote to the applicant on 22 October 1992 making this concession. The applicant in 1994 refused to accept [COMPANY_9]'s first offer of pay, on legal advice, because the form submitted to him raised concern that he may prejudice his right to other further payments. The respondent submits the applicant signed other such forms, when receiving payment. They submit [COMPANY_9] offered the amount to him in 1994 and is willing to pay the amount therefore there should be no order for payment of the sum and/or no order as to interest as to the amount. 175 The court accepts the applicant's submission that it was appropriate he be concerned at signing of the form which enunciated "Total amount due". The applicant was concerned the respondent might seek to rely on such an admission given the respondent, at the time the form was submitted, had been notified of the applicant's resolve to litigate. The court rejects the submissions of the respondent. The applicant has been entitled to his BCR amount since his termination and, if there was any dispute, certainly since the ruling and concession was made in October 1992. The court does not find this is a situation where a significant amendment is sought to be made to a claim at a late stage such as that examined in the circumstances of [NAME_182] v [NAME_183] Service (unreported, Schmidt J, IRC2422 of 1998, 25 August 1999). 176 I order the payment of the taxation deductions be reimbursed to the applicant in accordance with the 1992 ruling of the [NAME_181].

The Superannuation Claim 177 The applicant claims pro rata superannuation payments. The documents indicate there has been no consideration of such rights by the respondent in his termination payment or in any payment of monies made to the applicant. The report of [NAME_184] of [NAME_187] dated 16 September 1999 reveals his rights to superannuation payments on a pro rata basis beginning 1 January 1992 as follows: 1 January 1992 to 30 June 1992 $2625 1 July 1992 to December 1992 (at $437.50 per month) $2500 178 I determine it is just these monies be paid for the duration allowed over the notice period granted of one year.

The Interest Payment Claim 179 The applicant makes a claim for interest on any amounts the subject of court order in accordance with the rates as adjusted under s 94 of the Supreme Court Act 1970 from the date of termination. 180 The litigation history in this matter becomes relevant. The applicant filed in the [NAME_188] for breach of contract on 10 November 1994, he having failed to come to an agreement after much negotiation between the parties through their legal representatives as to agreed termination payments. The applicant then filed in the Industrial Relations Commission of NSW on 31 July 1998. 181 The issue before the court is whether interest on any payment ordered should lie from the date of the applicant's termination or the date of the filing of the applicant's claim in the Supreme Court in 1994 or the date of filing under s106 of the Act before this Court in 1998. 182 Schmidt J in [NAME_11] v The State of New South Wales (Department of School Education)(No 2) [2000] [NAME_5] 110 (published 30 June 2000) held in a consideration as to interest as follows (at para 45): The role of an interest component in monetary orders made under s88F of the Industrial Arbitration Act 1940, a predecessor to s106, was discussed by two members of the Industrial Commission in Court Session in Thomas Nationwide Transport Ltd v Thomas & Anor (1990) 34 IR 378. That approach has since been followed by the Court and its predecessors. (See Westfield v Helprin (1998) 82 IR 411 at 443-4).

Her Honour in [NAME_11] then considered the various reasoning, as to what was an appropriate order for interest by Bauer and Hungerford JJ in Thomas Nationwide Transport Ltd v Thomas & Anor (1990) 34 IR 378. She also in consideration as to money ordered under s88F examined the reasons of Barwick CJ in Brown v Rezitis (1971) CLR 157 (at 164). Barwick CJ adopted the principle that orders should reflect as "to effect wholly or particularly, the restitution of the parties to their former position upon the variation or avoidance of the contract or arrangement". Her Honour in [NAME_11] then held (at par 49): While there undoubtedly have and will be cases brought under s106 where the issue is notice and where a proper basis for making an order in relation to interest calculated from a date earlier than the date of application will be established, there was nothing advanced in evidence or submissions in this case, which would provide a proper basis for going beyond that date. 183 The applicant relies on the comment of her Honour and submits this is a case where there is a proper basis for making an order in relation to interest calculated from a date earlier than the date of application filed in this jurisdiction. The applicant urges upon the Court the principles enunciated in Brown v Rezitis (1971) CLR 157 (at 164) where the High Court held that a party has the right to interest from when the loss occurred. In [NAME_189] v [NAME_190] 196 CLR 329 the High Court held a contract brought to an end by termination "then and there" did not waive a right to notice or infer agreement with a course of conduct by an employer after the termination. The applicant submits his rights "crystallised" "then and there" that is on his termination. 184 The respondent submits as there is no express power to award interest on amounts under s106 it is a question whether such an amount should be awarded in the exercise of the overall discretion to award such moneys "as the Commission considers just in the circumstances of the case." (See s106(5) and Thompson v Nationwide Transport Pty Limited (1990) 34 IR 378 at 383 and 393). They further submit in this case there was a significant delay by the applicant in commencing the claim in this jurisdiction, which delay gives ground for the submission that there be no order as to interest even from the date litigation was commenced in this jurisdiction ([NAME_191] v Nationwide Transport and Hurley v Art Printing Company Pty Limited (1994) 54 IR 254 at 258-259, 286). 185 The court has considered all submissions as to interest and finds the facts reveal special circumstances such as to make it just in the circumstances to order interest on monies to be paid from the date of termination that is 31 December 1991. The respondent was on notice as to a dispute in relation to termination payments from the day the applicant left his employment. The respondent finally made a lump sum payment in December 1994 which was not agreed to by the applicant. The respondent delayed paying the applicant the monies from the sale of his shares for some months, it chose to make only BCR payments for 6 months then made "dribble order" payments to the applicant. The respondent deducted monies from payments to the applicant without agreement. The respondent also retained monies owed to the applicant arising from a [NAME_181] ruling in 1992 endorsed to the respondent in August 1994 and still retains those monies. The respondent then chose to make a lump sum payment accepting in principle that some of the DPS allocation was owed to the applicant. 186 In all the circumstances, the court believes the principal payments to the applicant to which the court gives orders accrued on his termination. From that date the applicant had an entitlement to the monies for BCR with only an eligible termination taxation deduction; further DPS payments and a pro rata superannuation payment. The court finds interest should accrue from the date of termination on all payments ordered except as to the 6 months DPS allocation payment from July 1992 to December 1993 which order should attract interest from the vesting date of 1 July 1992. 187 The rates for the payment of interest should be calculated on the basis of rates prescribed in Schedule "J" to the Supreme Court Act 1970 as amended.

Orders 188 The court finds this was a contract of employment whereby work was performed in an industry and in the conduct of the employment contract, in the termination of the applicant by the respondent, there was a manifest unfairness. The court finds the Compensation Memorandum in its terms incorporated into the employment contract the financial arrangements for the employment of the applicant. The court finds this arrangement as a term of the contract was unfair as it did not acknowledge an executive's rights on termination other than for just cause. The court finds the contract of employment should be varied and that it is just in the circumstances to order the following payments:

1. The unpaid balance of the applicant's BCR to 31 December 1992 including the re-imbursement of monies deducted for taxation purposes by the respondent from the termination payment in accordance with the ruling of the [NAME_181] in 1992.

2. The unpaid balance of the applicant's DPS allocation 1990/91.

3. The unpaid balance of the applicant's DPS allocation 1991/92.

4. A DPS payment of monies, equivalent to that allocated to the Executive Directors at an equivalent level to the applicant for the six months June 1992 to December 1992 under the 1992/93 DPS allocation.

5. The claim for Loss of Share Value and the associated Interest Claim is dismissed.

6. Interest on all payments from date of termination to the date of judgment except that of the DPS payment for 1992/93. Interest for that payment from June 1992 to the date of judgment.

7. Costs are awarded to the applicant as agreed or assessed.

8. The parties are to file and serve Orders reflecting this judgment within 28 days with liberty to apply.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.