Bowman v Ricegrowers Limited

Bowman v Ricegrowers Limited - [2007] NSWIRComm 204 - NSWIRComm 2007 case summary — Zoe

Appeal - Cross appeal - Leave to appeal - Unfair contract - Long serving senior manager summarily dismissed for reasons relating to, inter alia, conflict of interest in contracting out work to brother's firm - Contract found to be unfair at first instance - Contract varied to provide for reasonable notice on termination - Money orders made for 15 weeks' pay - Issue on appeal whether trial judge erred in finding the appellant lacked candour in failing to advise employer of conflict of interest - Whether trial judge erred in taking into account what he described as an error of judgment on appellant's part in failing to notify employer of conflict of interest when determining money orders - Appeal upheld - Issues in cross appeal whether claim excluded by virtue of s 109A of Industrial Relations Act 1996 and whether Full Bench lacked jurisdiction be cause of the decision in Sydney Water Corporation Ltd v Industrial Relations Commission of New South Wales (2004) 61 NSWLR 661 - Cross appeal dismissed CATCHWORDS: Unfair contract - Appeal - Cross appeal - Leave to appeal - Long serving senior manager summarily dismissed for reasons relating to, inter alia, conflict of interest in contracting out work to brother's firm - Contract found to be unfair at first instance - Contract varied to provide for reasonable notice on termination - Money orders made for 15 weeks' pay - Issue on appeal whether trial judge erred in finding the appellant lacked candour in failing to advise employer of conflict of interest - Whether trial judge erred in taking into account what he described as an error of judgment on appellant's part in failing to notify employer of conflict of interest when determining money orders - Appeal upheld - Issues in cross appeal whether claim excluded by virtue of s 109A of Industrial Relations Act 1996 and whether Full Bench lacked jurisdiction be cause of the decision in Sydney Water Corporation Ltd v Industrial Relations Commission of New South Wales (2004) 61 NSWLR 661 - Cross appeal dismissed

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Anthony Balsdon v Murray Irrigation [2003] NSWIRComm 251 Beahan v Bush Boake Allen Australia Ltd (1999) 47 NSWLR 648 Bell and Berg v Macquarie Bank Ltd and Another [2003] NSWIRComm 363 Brookton Holdings Pty Ltd No V and Others v Kara Kar Holdings Pty Ltd and Another (1994) 57 IR 288 Brown and Others v Rezitis and Others (1970) 127 CLR 157 Caulfield v Broken Hill City Council (1995) 60 IR 221 David Jones Limited v Cukeric; Cukeric v David Jones Limited (1997) 78 IR 430 Davies & Anor v. General Transport Development Pty Ltd & Ors 1967 AR(NSW) 371 English v Aradlay Insurance Brokers Pty Ltd (2005) 145 IR 129 Gala v State Bank of New South Wales Ltd t/a Colonial State Bank (No 2) (1998) 84 IR 216 House v The King (1936) 55 CLR 499 Incitec Ltd and Another v Industrial Court of New South Wales and Others (1992) 29 NSWLR 83 Keycorp Ltd v Thomes (2004) 141 IR 116 King v State Bank of New South Wales (No 2) (2002) 126 IR 407 Lavings v Barclay Mowlem Construction (NSW) Ltd (1994) 99 IR 247 CASES CITED: Logan v Otis Elevator Co Pty Ltd (1999) 94 IR 218 Michel v Ogilvy & Mather Pty Limited (1996) 71 IR 417 Murphy v Australian Guarantee Corporation Ltd (2000) 126 IR 359 Newton v Goodman Fielder Mills Ltd (1997) 81 IR 227 Nordby v Barclays Australia Investment Services Limited and Anor (1994) 53 IR 319 O'Donnell v GIO Australia Limited and Another (1996) 64 IR 297 Peter English v Aradlay Insurance Brokers Pty Limited [2004] NSWIRComm 280 Port Macquarie Golf Club Limited v Stead and Another (1996) 64 IR 53 Rod Bowman v Ricegrowers' Co-operative Limited [2007] NSWIRComm 27 Simon Richard Lane v The Commonwealth Bank of Australia [2000] NSWIRComm 274 Stead v Port Macquarie Golf Club Ltd (1995) 63 IR 416 Stevenson v Barham (1977) 136 CLR 190 Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661 TD Preece & Co. Pty Ltd v Murton [2007] NSWIRComm 130 Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121 Westfield Holdings v Adams (2001) 114 IR 241

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1 This matter concerns an appeal and cross appeal from a decision of Marks J given on 28 February 2007 in Bowman v Ricegrowers' Co-operative Limited [2007] NSWIRComm 27. The appeal and cross-appeal are brought pursuant to s 187 and s 188 of the Industrial Relations Act 1996. Both the application to appeal and cross appeal require the leave of the Full Bench: s 188. 2 The appeal is brought by Rod Bowman. The cross appeal is brought by Mr Bowman's former employer, Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited) ('Ricegrowers'). Ricegrowers had employed Mr Bowman from 1977 until his summary dismissal on 1 March 2002. At the time of his dismissal Mr Bowman was a manager earning approximately $109,000 per annum. He was responsible to his employer for providing an overall central planning and logistical role with respect to the annual rice harvest in the Murrumbidgee Irrigation Area based at Leeton, including the receipt, drying, storage and transportation of the rice harvest. He had an annual budget in 2001 of between $40 million and $50 million and was responsible for expenditure of about $12 million for the storage and handling of the rice crop. 3 Mr Bowman was dismissed for reasons related to his engagement of his brother's company, H&K Grain Handlers Pty Ltd, to assist with the 2001 rice harvest. It was contended that the engagement involved a conflict of interest on Mr Bowman's part, that the arrangement Mr Bowman made with H&K was "highly uncommercial", that Mr Bowman did not attempt to contact the main supplier ('McNaughts') to Ricegrowers to see if they could perform the work, that Mr Bowman had not been candid with management when confronted with the conflict of interest and that as a consequence of his actions management no longer had trust and confidence in Mr Bowman. 4 Mr Bowman subsequently sought relief under the unfair contract provisions of the Industrial Relations Act (Ch 2, Pt 9) claiming, inter alia, that: The contract or arrangement whereby the applicant performed work in an industry is and was unfair, harsh and unconscionable and contrary to the public interest in that:

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5 Mr Bowman claimed 18 months' pay by way of compensation for the unfairness pleaded. On appeal, Mr Bowman sought twelve months' pay plus interest. FIRST INSTANCE DECISION 6 Whilst Marks J at first instance found that there was a conflict of interest and that Mr Bowman "acted with a certain degree of lack of candour", his Honour found that the arrangement with H&K was not uncommercial and that he was unable to draw any inference contrary to the interests of the Ricegrowers in connection with the retention of H&K by Mr Bowman. The trial judge found that although Mr Bowman was guilty of an error of judgment in failing to disclose that his brother was a principal of H&K, in all of the circumstances this error of judgment did not constitute a matter that would justify summary dismissal. 7 Marks J found that the contract between Mr Bowman and Ricegrowers was unfair. His Honour stated in this regard: [76] It is clear from the evidence that the respondent determined to terminate the applicant's services because, predominantly, it formed the view that he had engaged the services of H&K on terms which were "at best, highly uncommercial." In coming to this conclusion, the respondent's representatives considered only the terms and conditions upon which McNaught had been engaged to carry out inloading work for the respondent. The applicant furnished information to the respondent concerning two other contractors, asserting that they were engaged on the same terms and conditions as H&K. The respondent's representatives chose not to investigate these matters and confined their consideration to the terms and conditions applying to the McNaught contracts. In doing so, and because they were permitted by the contract of employment to do so, the respondent, in my opinion, acted unfairly. The contract of employment in that it permitted this conduct and did not require the respondent to investigate appropriately and consider appropriately any case in reply put by the applicant to it rendered the applicant's contract of employment unfair. [77] I would propose varying the contract of employment so as to require the respondent, in the event of any concerns arising about the applicant's conduct to properly investigate those concerns, to give the applicant an opportunity to answer any allegations and to consider properly and appropriately any answers so given. Furthermore, in making any determination to terminate the services of the applicant as an employee, the respondent should be required to have regard to all the circumstances of the employment in determining what action to take. 8 Marks J also found the contract was unfair in that it only provided for one month's notice of termination of employment: [78] As I have previously indicated, the contract of employment provided for termination of employment upon one month's notice. As is clear from authority, a contract of employment of indefinite duration is to be regarded at law as containing an implied term that, absent circumstances justifying summary dismissal, termination can be brought about by the giving of reasonable notice. What is reasonable will depend upon all of the circumstances of the employment. The fixation in a contract of employment of a specific period allowing for termination of employment upon one month's notice will, in my opinion, always carry the risk of such a prescription being held to be unfair in circumstances where it does not reflect what is reasonable in all the circumstances. In the circumstances of the applicant's employment by the respondent, one month's notice is unfair and renders the contract of employment unfair. (For the general common law principle, see Brennan CJ , Dawson and Toohey JJ in the High Court of Australia in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 429). 9 In his consideration of compensation under s 106(5) of the Act, the trial judge decided that Mr Bowman should receive 15 weeks' pay. In that regard his Honour stated: [80] I have already indicated that there can be no doubt that the applicant was aware at least prior to the last occasion on which he engaged H&K that he should have disclosed his relationship with his brother and that he failed to do so. This failure constituted, in my opinion, misconduct although not such as would justify summary dismissal. The respondent was entitled, as it always was under the contract of employment, to terminate the applicant's employment, but upon giving appropriate notice or paying monies in lieu. [81] This in turn requires a consideration of what is appropriate notice in all the circumstances. The principles in this regard are well settled. It is necessary to have regard to all of the circumstances of the employment including the applicant's age, position, seniority and employment history. It is also appropriate, in my opinion, to have regard to the circumstances in which the termination of the contract of employment has come about. This includes, in my opinion, any misconduct or dereliction of duty that an employee may have embarked upon. [82] However, I emphasise that the determination of what is just compensation does not involve simpliciter the equation of a monetary amount with what an employer ought to have afforded an employee by way of reasonable notice on termination in accordance with common law principles. The requirement under s 106(5) is to award such compensation as is just in all the circumstances. Not only does the awarding of compensation benefit an employee applicant, but it imposes a burden on a respondent employer. Accordingly, it is appropriate to take into account for the purpose of assessing what monetary amount is just in the circumstances of these proceedings what is appropriate notice for the purposes of both the employer and the employee. I have found that the arrangement with H&K was not uncommercial and I have rejected any finding that the applicant failed to contact McNaught to see whether they could perform the work. I have not made any particular finding about whether or not the applicant directed a subordinate not to report the matter to management. I have further found that the respondent did not have in place any process requiring contracts with contractors and tenders for work to be reduced to writing. Nevertheless the applicant acted with a certain degree of lack of candour particularly prior to awarding the final contract to H&K. Having regard to the applicant's length of service, his seniority, his apparent good record of service but taking into account also his conduct that brought about the circumstances of his termination, I have formed a view that an appropriate amount to be paid by way of just compensation would reflect an amount equivalent to payment of his annual salary package over a period of 15 weeks. 10 Marks J made the following orders: 1. In consequence of the findings of unfairness which I have made, the applicant's contract of employment with the respondent is varied from its inception by the addition of the following terms:

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(b) such an application could have been made but for the provisions of section 83 that exclude the employee from making an application under that Part. (2) In this section: contract of employment means any contract or arrangement under which work is done by a person in the capacity of an employee, and includes a related condition or collateral arrangement with respect to such a contract. dismissal has the same meaning that it has in Part 6. First instance reasoning 18 In finding s 109A had no application, Marks J relied on decisions of Full Benches in Beahan v Bush Boake Allen Australia Ltd (1999) 47 NSWLR 648, 93 IR 1 and Bell and Berg v Macquarie Bank Ltd and Another [2003] NSWIRComm 363. In respect of the former, his Honour stated: [61] Having considered the intention of legislature in introducing s 109A into the Act, the Court concluded that "…it is central to the operation s 109A that an excluded contract of employment is one where it is alleged that it is unfair for any reason for which an unfair dismissal claim could have been made." (47 NSWLR at 692). The Court concluded that it remained permissible to argue under s 106 that the terms of a contract were unfair, unconscionable or harsh and to seek a variation accordingly as opposed to dealing with the termination of the contract and whether or not it was unfair. The Court concluded: "In short, our view is that s 109A operates to exclude a contract of employment from the operation of s 106 only where the unfair contract claim is an unfair dismissal claim in disguise and where essentially it is of the nature of an unfair dismissal. Where a claim challenges the terms or operation of a contract of employment by genuine, not superficial or coloured, reasons related to the contract itself then, in our view, it is a claim properly within ss 106 and 109A has no operation in relation to it. A review of the allegations made in the present case, we are satisfied, discloses allegations directed to the contract of employment and not to the applicant's dismissal. It is properly within s 106." (47 NSWLR at 692)

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And at [64]: [64] In my opinion, the approach contended for by the respondent does not accord with the principles developed by the Full Bench in Beahan . Those parts of the judgment which I have extracted make it clear that if the applicant's claim is directed to the provisions of the contract of employment whether express or implied as to their fairness and the impact upon those provisions of the termination, the claim may be characterised as a challenge to the terms or operation of the contract by genuine reasons and is therefore properly within s 106 and outside the operation of s 109A. Such was the factual situation in Beahan and such is the situation in all the circumstances of these proceedings having regard to the manner in which the summons is framed including, in particular, the grounds of unfairness asserted in it. 19 At [65] his Honour referred to Bell and Berg in the following context: [65] The approach of the Full Bench in Beahan was reinforced by a Full Bench of this Court in Bell and Berg v Macquarie Bank Limited and Anor [2003] NSWIRComm 363. The Court ( Walton J , Acting President, Boland J and Curtis AJ) said, "…we do not consider that the introduction of s 109A had the effect of excluding from any consideration under s 106 of the Act whether or not there was procedural fairness." (at [10]). 20 At [66]-[67] Marks J referred to the terms of the contract of employment between Mr Bowman and Ricegrowers: [66] There is only one express provision of the applicant's contract of employment that touches upon termination. It says: "Termination of this appointment will require one month's notice (unless otherwise stated) by either party, however, in the case of serious misconduct no notice is required." [67] The applicant's case was that the contract of employment by its terms was unfair in a number of ways. There was no contractual provision containing or referring to protocols in engaging or dealing with contractors and the disclosure of any potential conflict of interest. This, on the evidence, has now been attended to by the respondent in terms of its general conditions of employment. Furthermore, there was no provision in the contract containing or referring to any protocol for dealing with allegations of misconduct against an employee. Other assertions were made alleging unfairness in the contractual provisions, but it is sufficient only to refer to the two that I have previously set out. I should add for completeness that some of the submissions in the context of what should have been contained within the contract of employment by way of provisions were, in my opinion, artificial. For example, there was an allegation that the contract was unfair in that it failed to proscribe "what would constitute serious misconduct justifying summary termination." In my experience, very few, if any, contracts of employment contain such a provision, for good reason namely the difficulty in formulating an appropriate formula to reflect what is, after all, a common law principle. 21 At [68] his Honour held as follows in relation to the s 109A point: [68] In my opinion, the Full Bench authority represented by Beahan dictates that the respondent's attack on the applicant's case based on s109A must fail. Although in essence and at its heart the proceedings revolved around the termination of employment, the claim as contained within the summons was framed in a manner that challenged the terms or operation of the contract of employment in the circumstances of what occurred. I am unable to characterise the claims and basis so framed as not being genuine or as being superficial or coloured. Cross appellant's submissions 22 The error the trial judge was said to have committed was that the "genuineness" of Mr Bowman's claims was to be determined by reference to the way in which the claims were "framed". It was submitted that the decision in Beahan did not direct attention at the way in which it a claim was framed, but instead directed attention at the "essential nature" of an applicant's claim. Mr Nixon submitted that the obligation of the Court was to look beyond the outer appearance or form of the claim, and to determine the "essential nature" or the "substance" of the complaint. Further, it was submitted, s 109A required the Court not simply to consider whether the claim was framed as a claim regarding unfair dismissal, but whether the claim "could have been" framed in this way. That is, the statute expressly required the Court to consider whether the claims brought in the form of a s106 application "could have been" brought as an unfair dismissal claim. 23 Mr Nixon contended that the test of "genuineness" was as follows: "What is the essential nature of the claims of the applicant, and could those claims have been framed as a claim for unfair dismissal?" This, it was submitted, was supported by what the Full Bench stated in Beahan at 690: Importantly also, it seems to us, are the provisions of s 88 which set out the matters to be considered in determining an unfair dismissal claim. If a contract of employment is to be excluded by reason of s109A then it must be for any reason for which an application could have been made by the employee for unfair dismissal. That immediately directs attention, in our view, to the terms of s 88 as to the relevant matters to be taken into account (emphasis supplied). 24 Section 88 is in the following terms: 88 Matters to be considered in determining a claim In determining the applicant's claim, the Commission may, if appropriate, take into account: (a) whether a reason for the dismissal was given to the applicant and, if the applicant sought but was refused reinstatement or re-employment with the employer, whether a reason was given for the refusal to reinstate or re-employ, and

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(f) such other matters as the Commission considers relevant. 25 Mr Nixon submitted that the first three claims in Mr Bowman's summons for relief (see [4] above) regarding the "unfairness" of the contract were, to use the language of the Full Bench in Beahan, reasons "for which an application could have been made by the employee for unfair dismissal". Counsel said this distinguished the present case from the application that was considered in Beahan, where there was no challenge at all to the basis for the dismissal, and specifically there was no claim that the reason given for the dismissal did not have a basis in fact, or that the applicant had not been offered a reasonable opportunity to respond to the reason for the dismissal or to explain his behaviour. Instead, that case solely concerned the issue of whether the applicant was provided with sufficient remuneration upon redundancy. 26 Mr Nixon noted that in Beahan at 689, the Full Bench stressed, "there was no allegation in the summons that the dismissal per se was unfair". He submitted that although Mr Bowman's summons for relief at first instance was drafted so that the words "unfair dismissal" did not appear anywhere, all the material facts that would support such an allegation (particularly having regard to s 88(b) of the Act) were set out. In particular, in par [22] of the summons, it was pleaded that: The allegations were either without foundation and/or once properly investigated were not such as to warrant the dismissal of the applicant. 27 It was submitted for Ricegrowers that: This is a pleading in the clearest possible terms that the reasons given for the dismissal did not have a basis, that those matters were not properly investigated, and that the dismissal was not warranted. Short of using the words "unfair dismissal", it is difficult to think of a plainer pleading that would be within the terms of s 88(b). It cannot be the case that an applicant can avoid the conclusion that he has made an allegation of "unfair dismissal" simply by not using those words, even though he clearly sets out matters that constitute such an allegation. Such a result would be a clear triumph of form over substance. 28 It was further submitted in relation to legislative intent: Parliament invites the Court to look at "substance" rather than "disguise". The Full Bench says the focus should be on what is "genuine" or "true" rather than "superficial". It is submitted that to focus, as Marks J did, on the way in which the claim is "framed" is to pay insufficient attention to the fact that the frame may be "superficial" or may work to "disguise" the true nature of the claim. As Marks J recognised, this was a claim that "in essence and at its heart" … concerned the circumstances of the applicant's termination, and the fundamental premise of all of the claims brought by Mr Bowman was that the reason given for his dismissal was without basis, and that he was not afforded a reasonable opportunity to respond to the allegations or explain his behaviour. This is, in truth or in substance, a claim that the dismissal was unfair. If s109A does not apply here, it would appear that its operation has, contrary to Parliament's intention, been severely curtailed, so that the possibility of framing unfair dismissal claims as unfair contract claims is left wide open. 29 In relation to Bell and Berg, it was submitted for Ricegrowers that Marks J erred in considering that the effect of that Full Bench decision was that s 109A could not apply to any claim framed in terms of a complaint about the lack of terms in the employment contract requiring procedural fairness: the observations in Bell and Berg were merely obiter but, in any event, were to the effect that the introduction of s109A did not mean that "any consideration of procedural fairness" was excluded from the operation of s106. Mr Nixon submitted the Full Bench in Beahan did not lay down any general rule that all claims of one type or another are completely excluded from the operation of s106. In each case, as emphasised in Beahan, it was necessary to look at the substance of the claims; and, having regard to the essential nature of those claims, it was submitted that s109A did apply to Mr Bowman's application, so that s106 had no operation: see also Anthony Balsdon v Murray Irrigation [2003] NSWIRComm 251. Cross respondent's submissions 30 For Mr Bowman it was submitted that the substance of his case was that the contract under which he was employed was in its terms and operation unfair because of: its failure to provide for appropriate protective and security provisions; its failure to contain a fair period of notice of termination; its failure to articulate what exactly would be expected of Mr Bowman in his employment; and its failure to fairly define the rights and obligations of the parties. 31 Contrary to Ricegrowers' submission, it was contended that the starting point in dealing with any attack upon jurisdiction necessarily must be the way the case is framed. Once that was accepted it was necessary to examine the case (the summons, the arguments propounded, the evidence and the relief sought) in order to determine whether it really is something that it is not. The real inquiry must be whether the challenge to the contract is genuine or not. 32 Mr Reitano submitted Ricegrowers' submissions would have s 109A as precluding any claim that related to a dismissal from the Court's unfair contracts jurisdiction. He contended that neither s 109A nor Beahan were authority for the proposition that the section precluded claims "regarding an unfair dismissal" or precluded them because the claims brought in the form of a s106 application could have been brought as an unfair dismissal claim (but for the cap in s 83). Counsel submitted that because there may have been a dismissal (unfair or otherwise) and because unfair dismissal may provide evidence relevant to a s 106 claim, did not mean it could not be brought. 33 Counsel for Mr Bowman submitted: The grounds in Mr Bowman's Summons directly attack the failure of the contract to include appropriate protective and security provisions. They directly attack the contract by reason of its failure to include such provisions. Quite apart from anything to do with Mr Bowman's dismissal the contract was relevantly asserted to be unfair in material respects by reason of what it failed to contain. None of the claims selectively chosen by Ricegrowers in… its submissions depend upon any "antecedent claim" or anything in section 88(b) of the Act. They depend for their existence on the fact that the contract did not contain relevant terms and operated in the absence of those terms. The character put on those "claims" is chosen by Ricegrowers to suit its own case. The reason the contract here is claimed to be unfair is because of the way its terms (provisions) operated. Its terms failed to provide for fair procedures that would have secured its continuation that could never have formed a reason in an unfair dismissal application. True it is that a dismissal might be found to be unfair because of a failure to accord procedural fairness or to properly investigate the circumstances leading to the dismissal. Here the contract was not said to be unfair by reason of a failure to accord Mr Bowman procedural fairness or to properly investigate the circumstances of his dismissal (although there was evidence about both those things). It was said to be unfair by reason of the objectively obvious fact that it did not contain provisions that delivered procedural fairness and a proper investigation quite apart from the fact of a dismissal… The right or correct question to ask is: on what and for what reasons was it alleged that the contract of employment was unfair in this case? A genuine answer to that question is found in the case mounted by Mr Bowman and in particular in all of the grounds and reasons asserted in the Summons. 34 Mr Reitano contended it was "silly" to suggest, as Ricegrowers' submissions did, that "all these reasons for attack on the contract are reasons for which an application could have been made by the employee for unfair dismissal". He submitted that an unfairly dismissed employee could not argue, for example, that her or his dismissal was unfair because the contract of employment permitted the employer to terminate the employment without procedural fairness. That would be completely irrelevant in an unfair dismissal case - what would be relevant would be whether or not the employee was in fact afforded procedural fairness.

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(c) third, the test does not simply focus on how the claim is currently framed, but whether, given any of the reasons for which it is alleged to be unfair, it "could have been" brought as an unfair dismissal claim... 37 It was contended for Ricegrowers that an analysis of each of the submissions, the opening, the evidence and the summons below, demonstrated that the test articulated in Beahan was satisfied in the present case and that Marks J erred in deciding otherwise. As to Mr Bowman's submissions before Marks J, reference was made to the following: Absent fraud or deliberate or wilful dishonesty on Bowman's part the Respondent (who bears the onus of proof) cannot demonstrate that there was any sufficient (fair) basis for it to terminate the contract of employment. Absent such a fair basis for termination of the contract of employment the contract was unfair etc. [Emphasis added by cross appellant.] 38 Mr Nixon submitted this submission was a statement "in the clearest possible terms" that the contract was alleged to be unfair because there was not "any sufficient (fair) basis" for termination of the contract. On the way the case was here framed, it was submitted that the question as to whether there was a sufficient (fair) basis for termination is critical to the resolution of Mr Bowman's claim. If there was not a fair basis for termination, then the contract itself was unfair. It was put that Mr Bowman's submissions "put the determination of the fairness of the contract as something following on from a determination of the fairness of the basis for termination." Mr Nixon contended that: This is self-evidently, in the terms of the Beahan test, an example of a contract being alleged to be unfair for a reason for which an unfair dismissal claim could have been made, namely the lack of any sufficient (fair) basis for termination. Consequently, in terms of the decision in Beahan , s109A operates so that the contract of employment is excluded from the "Unfair Contracts" provisions of the Act.

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42 As to the summons, it was noted that it contained the following claim: The allegations [on the basis of which Mr Bowman was dismissed] were either without foundation and/or once properly investigated were not such as to warrant the dismissal of the applicant. 43 In this respect, Mr Nixon submitted: The allegation that there was not a sufficient (fair) basis for termination is clearly pleaded in the Summons… and is antecedent (both in terms of its position in the Summons and its position in the argument made by Mr Bowman) to the claim that the contract was unfair in failing to protect Mr Bowman from dismissal in such circumstances. To ignore that earlier part of the pleading is to ignore a critical step in Mr Bowman's claim that the contract was unfair, and to ignore the substance of Mr Bowman's claim, which is precisely what the Full Bench in Beahan says should be the focus of enquiry. Consideration 44 Ricegrowers, in its submissions, emphasised that it was not submitting Beahan was wrongly decided. Indeed, it relied on Beahan in attempting to show that Marks J erred in finding that s 109A did not apply. As we earlier noted, Ricegrowers contended that according to Beahan the test to be applied as to whether a claim under s 106 was genuine was, "what is the essential nature of the claims of the applicant, and could those claims have been framed as a claim for unfair dismissal?" We should make it clear that Beahan does not stand for the bare proposition that, if a claim, or any part of it, could have been framed as an unfair dismissal claim then s 109A prevents it being considered as an unfair contracts claim. So much is clear from the Full Bench's reference to (at 682), and reliance upon, the judgment of Kirby P in Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121 at 134-135: … The existence of other remedies (such as statutory claims for redundancy payments, statutory claims for reinstatement for wrongful dismissal, or a common law claim for unjust dismissal) do not control or limit the very large language of s 88 F (1). It is by no means unusual in our legal system for the one set of circumstances to give rise to a number of remedies which the person affected may pursue, sometimes in the one court, sometimes in differing courts, to the full extent of that person's entitlement. … The ingredients of the various entitlements may be different. But the existence of alternatives has never excluded a person from pursuing rights expressly conferred by statute. Unless those rights are expressly, or by necessary implication, excluded by the alternative claim, or controlled an obligation to elect or by time limits, the beneficiary of the statutory right can pursue any, or all, or no entitlements. 45 The Full Bench in Beahan held that where a claim challenges the terms or operation of a contract of employment by genuine, not superficial or coloured, reasons related to the contract itself, then it is a claim properly within s 106 and s 109A has no operation in relation to it (at 692). Importantly, however, the Full Bench also held (at 664) that s 109A is to be construed strictly so as to remove from s 106 only those contracts which unambiguously fall within the exclusion provided by its provisions.

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46 Regardless of whether Mr Bowman could have sought relief under the unfair dismissal provisions in Pt 6 of Ch 2 of the Industrial Relations Act, the fact is he chose to do so under the statute's unfair contract provisions. In doing so, he sought to challenge the fairness of the terms of his employment contract or lack of them. We do not consider the essential nature of Mr Bowman's claims, or the substance of them, related to the fact of his dismissal or the conduct of the employer in dismissing him. As the Full Bench observed in Beahan at 679, proceedings for unfair dismissal are concerned principally with the dismissal itself as to whether it was harsh, unreasonable or unjust by the employer abusing the right to dismiss an employee, but not so as to affect the contract of employment as to its terms and operation as such. 47 As counsel for Mr Bowman submitted, the essential reasons the contract was claimed to be unfair were because of the terms of the contract of employment, what it did and did not provide for, as well as the way its terms operated. Its terms failed to provide for fair procedures that would have secured its continuation that could never have formed a reason in an unfair dismissal application. The grounds in Mr Bowman's summons directly attacked the failure of the contract to include appropriate protective and security provisions. Quite apart from anything to do with Mr Bowman's dismissal, the contract was relevantly asserted to be unfair in material respects by reason of what it failed to contain. As Mr Reitano submitted: Here the contract was not said to be unfair by reason of a failure to accord Mr Bowman procedural fairness or to properly investigate the circumstances of his dismissal (although there was evidence about both those things). It was said to be unfair by reason of the objectively obvious fact that it did not contain provisions that delivered procedural fairness and a proper investigation quite apart from the fact of a dismissal. 48 It is also relevant to consider the orders sought in the summons for relief, which essentially sought to overcome the inadequacies pleaded in the contract. The orders sought included: (1) An order declaring that the contract or arrangement between the applicant and the respondent whereby the applicant performed work in an industry ("the Contract") is and was unfair, harsh or unconscionable and contrary to the public interest.

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Consideration 64 In Sydney Water, the second opponent, Mr Truelove, who had been summarily dismissed, sought to resist the jurisdictional attack on his claim brought under s 106 by claiming that the Commission (even on appeal), may make real or notional amendments to the contract in the nature of termination procedures and future lump sum payments (notwithstanding the summary dismissal) which were said not to involve an application of the principle in Reich v Client Server Professionals of Australia Pty Limited (2000) 49 NSWLR 551 (see at [17]). 65 Mason P (with whom Hodgson JA, in this respect, and McColl JA agreed) did not resolve this issue per se, leaving those issues to the Full Bench of the Commission, but concluding, nevertheless, the case before the Commission would involve some invocation of the "Reich" principle (at [19]). Mason P defined the offending principle in Reich to be one in which "unfair conduct that is in breach necessarily renders the contract unfair, thereby engaging the remedial jurisdiction" (at [31]). 66 Notwithstanding his Honour's finding regarding the error in Reich, Mason P found, in conformity with longstanding authority, that the availability of an action for breach of contract did not preclude relief under s 106 (at [31]); that remedies under s 106(3) and (5) were available even though applied after termination and/or against a party to the contract who has acted in breach or repudiation of its terms (at [28]); and that unfairness, for the purposes of s 106, may stem from what the contract failed to provide, for example as regards termination procedures (at [25]). Thus, a contract may be found to be unfair because it permits termination that is unfair and discriminatory (at [32] and see Walker v Industrial Court of NSW (1994) 53 121 at 149). In such cases, no remedies are available in the general law for breach of contract. 67 Again, in conformity with longstanding authority, in Sydney Water the Court of Appeal also held that the Commission may examine not merely the contract (or arrangement) as originally negotiated, but also the manner in which it worked out and operated between the parties to it (at [26]). The remedies granted by the Commission may include the payment of monies under a contract reformulated by the Commission (at [28]), although all remedies must stem from a finding that the contract (or arrangement) is or has become relevantly unfair (at [29]). 68 However, Mason P (with whom McColl JA agreed in this respect, but not Hodgson JA) found that he was: …unable to conceive how a contract allows or fails to prevent conduct that is in contravention or fundamental breach thereof, whether or not that contract is unfair. To be contravening or repudiatory the conduct must be in defiance of the contract exposing the party at fault to a range of adverse consequences under the general law (at [35]). 69 His Honour had less difficulty in concluding that the Commission had jurisdiction to deal with a contract that failed to make appropriate provisions for addressing the consequences of conduct that was, or was arguably, in breach (at [36]), provided the Commission was able to conclude that the remedies of the general law were "unfairly deficient" in their application to the contract. 70 Mason P found that even though s 106 was not excluded merely because a party was in breach of contract, it did not follow that "the contract of employment is unfair because or whenever it leaves the employee to remedies under the general law" (at [40]). However, his Honour concluded (at [42]): On the other hand, one can envisage arguments about the unfairness of non-statutory employment law that permits dismissal without procedural fairness or that enables the "innocent" party to be discharged from future performance entirely in certain circumstances. From this standpoint, the idea that the Commission could find a particular contract of employment unfair because it did not contain a positive regime of fair investigation pre-dismissal becomes less problematic, with the consequence that it is easier to envisage that Parliament may have committed such inquiry to the Commission by s 106.

[64]

71 Hodgson JA found (at [75]) that the occurrence of unfair conduct in breach of contract could, in some circumstances, "go towards supporting a finding that the contract was unfair, because it might help to demonstrate that the contract was itself unfair in lacking provisions that could have rendered such conduct less likely or in failing to provide adequate remedies for breach". His Honour gave the illustration that whilst the contract cannot absolutely prevent a party acting in breach of it, it was possible that, by laying down clear procedures to be followed before an employee was to be dismissed, a contract could make dismissal in breach of contract less likely. His Honour concluded that it would be a large further step from this to say that the contract was unfair because it lacked such provisions, but his Honour could not say, "this was inconceivable". These obiter comments of Hodgson JA would appear to be somewhat inconsistent with the decision in Walker and the decision of Mason P (with whom McColl JA agreed) in Sydney Water to the effect that a contract may be found to be unfair because it permits termination that is unfair and discriminatory (see [32]-[33]). 72 It follows in our view, that the decision in Sydney Water is not of assistance to the respondent in these proceedings. The mere fact that the respondent may be in breach of the contract for summarily dismissing the appellant in circumstances where the contract provided for one month's notice does not, of itself, exclude the jurisdiction of the Commission. Where the express provision of the contract providing for notice was unfair in consequence of its own terms or because of the way the contract worked out, having regard, inter alia, to Mr Bowman's length of service with Ricegrowers, his seniority, experience, level of remuneration, personal circumstances or his contribution to the employer's business, then the contract may be reformulated so as to make the provision for notice fair, even though Ricegrowers may be in breach of the provisions of the contract regarding notice. Thus, a contract may 'permit' - in the sense used by Sheller JA (with which Meagher JA agreed) in Walker - certain conduct by expressly sanctioning it (see Sydney Water at [33]) and such conduct may be found to be unfair. In the present case, the contract provided for one month's notice of termination irrespective of the circumstances of Mr Bowman's employment at termination that, as a matter of fairness, required a period of notice of longer duration. Having found unfairness the Court may then assess compensation under s 106(5). 73 From a jurisdictional perspective, the trial judge could have determined that he would vary the contract so as to provide for reasonable notice. That is merely a reformulation of the contract to provide a fair period of notice. His Honour would have been also entitled to vary the contract to specify a particular period of notice and then have regard to the varied contract when assessing compensation. 74 In concluding that Sydney Water does not assist the respondent, we have had regard to the fact that it was not part of Mr Bowman's case that his dismissal was unfair because of his employer's conduct in breaching the employment contract. Moreover, Marks J did not decide the case other than on the basis of an attack on the terms and operation of the contract.

[67]

78 It was contended that Mr Bowman was given no opportunity to make submissions or adduce evidence contrary to the conclusion reached by his Honour in respect of notice and compensation and that, therefore, Mr Bowman was denied procedural fairness. Mr Reitano submitted: It was not for Marks J to think up a case for either party that that party had elected not to bring. Ricegrowers never said anything like what Marks J decided in his 'reasons' about the monetary order he would make. Ricegrowers did not rely upon any notion of a hybrid form of misconduct. Ricegrowers did not allege anything like 'a certain degree of a lack of candour' as being a basis for termination of the contract whether with or without notice. The approach Marks J adopted in arriving at the conclusions he did at J [82] without affording the parties an opportunity to be heard and to call evidence if necessary (such as, for example, evidence that Ricegrowers would not have terminated a contract of employment on the basis suggested by Marks J) was in breach of the rules of procedural fairness (see Re Australian Railways Union and Ors; Ex parte Public Transport Corporation (1993) 117 ALR 17; see also Stead v State Government Insurance Commission (1986) 161 CLR 141 at 145). Nor was Bowman able to make submissions that if the contract of employment were to be determined on the basis suggested by Marks J it would still be unfair and warrant appropriate variation. Given that the proposition was one that was being advocated by neither party, and was something that was hitherto unheard of in any of the jurisprudence under section 106 of the Act, it was not for Marks J to invent some ground upon which he could defeat Bowman's claim. It was certainly incumbent upon him, before deciding the matter to the substantial detriment of Bowman, to afford him an opportunity to be heard in opposition to the course he was proposing to take. It was substantial denial of procedural fairness so as to warrant appellate correction. Submissions of respondent

[69]

80 Mr Nixon submitted that there was no denial of procedural fairness as regards this issue. He contended that the appellant had an opportunity to cross-examine each of Ricegrowers' decision-makers in relation to the extent to which the decision to dismiss Mr Bowman was based upon his lack of candour in deliberately concealing a known conflict of interest, and had an opportunity to make submissions in closing in response to the position advanced by Ricegrowers that this alone provided a basis for the termination of Mr Bowman's employment. 81 It was submitted for Ricegrowers that in exercising discretion under s 106(5) of the Act to make an order as to the payment of money the Court is required to consider whether the order is just in the circumstances of the case. That discretion, it was submitted, was to be exercised judicially, which did happen at first instance in the sense that Marks J applied the correct test and listed the relevant factors (in respect of which he had made findings) that were taken into account. However, Mr Nixon contended this was a broad discretion and it was misconceived to suggest that the Court was bound to exercise it only in a manner that was specifically advanced by the parties. He submitted there was no reason why the Court could not reach a view regarding what was just in the circumstances that was different from either the view advanced by the applicant or the view advanced by the respondent. Each party, he said, was always at liberty to make submissions regarding what was just in the circumstances, and the Court should have regard to those submissions, but need not be restricted by them in the application of the wide discretion under s 106(5). 82 Counsel for Ricegrowers submitted that against the background of the parties' submissions at first instance, Marks J was not compelled to choose between either an award of one month (based on Mr Bowman's conduct), or an award of 18 months (based on Mr Bowman's seniority and length of service), but appropriately exercised his discretion to conclude that having regard to all the circumstances of the case (including Mr Bowman's length of service and seniority, but also his conduct that showed a lack of candour and brought about the circumstances of his dismissal) it was just to make an order for payment of an amount equivalent to 15 weeks of his annual salary package. There was no denial of procedural fairness in this approach. 83 Finally, on this issue Mr Nixon submitted that if, the Full Bench did determine that Marks J failed properly to exercise the discretion committed to him under s 106(5), then regard should be had to the fact that Mr Bowman obtained employment shortly after the termination of his employment by Ricegrowers, and was employed for almost the entirety of the 12-month period following his dismissal up to March 2003.

[71]

85 We have already referred to his Honour's findings at [31] that "at least by November 2001, the applicant knew, from his discussion with Mr Troy who reported to him, that he had a potential conflict of interest which should have been disclosed"; that Mr Bowman was aware, at least prior to the last occasion on which he engaged H&K, that he should have disclosed his relationship with his brother and that he failed to do so (at [81]); and that Mr Bowman "acted with a certain degree of lack of candour particularly prior to awarding the final contract to H&K" (at [82]). 86 The reference by the trial judge to "prior to awarding the final contract to H&K" indicates that in making his finding about 'lack of candour' his Honour had in his mind the conversation between Mr Troy and Mr Bowman where Mr Troy asserted that he advised Mr Bowman "there's a bloody big conflict of interest here, you could find yourself in deep water" and to which Mr Bowman allegedly replied, "They won't say anything". Further, in the same conversation, that Mr Bowman asked Mr Troy not to tell "Wayne" about Mr Bowman's association with H&K, Wayne being Mr Wayne Preston, Ricegrowers' Supply Chain Manager. 87 Marks J stated at [82] of his judgment that he had "not made any particular finding about whether or not the applicant directed a subordinate not to report the matter to management." We take this to mean that because of the conflict in the evidence regarding the conversation between Mr Bowman and Mr Troy, his Honour was unable to make a finding about whether or not Mr Bowman asked Mr Troy not to advise management about his association with H&K. His Honour did, however, appear to accept that Mr Troy advised Mr Bowman he had a conflict of interest and that given his Honour's finding about 'lack of candour' it, therefore, seems to have followed in his Honour's view that Mr Bowman accepted he had a conflict of interest and knew, at that time, that he should have advised his employer, but did not do so.

[72]

88 Mr Reitano submitted that nowhere in the evidence could it be shown that Mr Bowman knew that he had a conflict of interest and knew that he had to disclose the conflict but did not disclose it. It is necessary to examine the evidence to determine whether this submission is sustainable. 89 In the record of interview at the meeting when Mr Bowman was summarily dismissed it states that: Graham [Harvey] asked if it was correct that Rod [Bowman] had asked Brian Troy not to pass onto Wayne [Preston] that there had been a relationship between him [Mr Bowman] and Harry [Hunter - Mr Bowman's brother]. Rod said that this was correct and that it had been an error of judgement. Harry was going to 'finish up' and that was it. Graham questioned that Harry had not finished up. Rod agreed and added that this also had been an error of judgement and he should have disclosed the relationship. Rod also restated that he had deliberately concealed that H&K Grain Trading were a related party. 90 The record of interview was signed by Ms Del Gigante, General Manager, Human Resources; Mr Harvey, General Manager, Operations; and Mr Dirk Teale, Paddy Operations Manager. These three individuals were present at the interview with Mr Bowman and each of them gave evidence in the proceedings before Marks J. They each confirmed in their evidence the record of interview was a true and correct record of what had occurred at the meeting. 91 Next, there is Mr Troy's evidence about his conversation with Mr Bowman. Mr Troy claimed that he said to Mr Bowman, "there's a bloody big conflict of interest here", and that Mr Bowman replied, "They won't say anything" (which Mr Troy took to mean employees at two sites where H&K loaded rice but which Mr Bowman said he was referring to Ricegrowers' management). Mr Troy also claimed that he said to Mr Bowman that Mr Bowman would have no objection to him, Mr Troy, advising Wayne Preston of the association between Mr Bowman and H&K, and that Mr Bowman allegedly asked him not to do so because it was not going to happen again, as his brother was going back to Darwin. 92 In an affidavit in reply to Mr Troy's affidavit, Mr Bowman referred to the conversation and denied that he said it was H&K's last job and that Harry Bowman would be returning to Darwin. Mr Bowman said nothing about the remainder of the conversation. 93 Then there is the cross-examination of Mr Bowman regarding what had occurred at the meeting when he was dismissed. The following exchange took place: Q. Well, we had a look at the conversation between yourself and Mr Troy set out in the paragraphs of his affidavit, and you said there was only one aspect in particular you had the disagreement with? A. Yes. Q. And in that conversation he has you asking him not to tell Mr Preston? A. Yes. Q. And I'd suggest that when you [were] then asked if that had happened at the meeting you indicated that that in fact occurred and it was an error of judgment? A. Yes. Q. And you knew it was an error of judgment because you knew you were in a period of conflict of interest and you should disclose that? A. Yes. It was an error of judgment, yes. … Q. Now you recall that after there's been these discussions Mr Harvey, Mr Teale and Ms Del Gigante left the room for some time. A. Yes. Q. And when they came back there Harvey said they'd come to a number of conclusions? A. Mmm. Q. And first he said to you that you had not been up front about your relationship with your brother? A. Yes. Q. And had deliberately suppressed reporting that to management? A. Yes. Q. You agreed that you never told Mr Teale or Mr Preston? A. Yes. Q. And you agreed when Mr Troy said he was going to report it to Mr Preston you asked him not to do so? A. That was my understanding of the question. Q. And you said you erred in your judgment because you recognised there was a conflict of interest that should have been disclosed. Second, Mr Harvey said the arrangements with H&K were not commercial and you hadn't contacted McNaughts to see if they could do the work. A. I deny that. 94 With regard to the last exchange, the difficulty with understanding the answer is the double-barrel nature of the question. Clearly, Mr Bowman had consistently denied the arrangement with H&K was not commercial and had consistently denied he had not contacted McNaughts. But on our view of the evidence Mr Bowman had earlier conceded that he had recognised there was a conflict of interest that he should have disclosed and his denial did not encompass the "conflict of interest that should have been disclosed". 95 Further, in earlier cross-examination of Mr Bowman, the following exchange took place: Q. It might short circuit things if I can show you paragraphs of Mr Troy's affidavit referred to in your reply affidavit, which sets out some conversations at length. Now, Mr Bowman, in your affidavit in reply, at paragraph 6 of that - you might want to have a look at that. In that you are referring to the conversation set out in these three paragraphs [paragraphs 38-40 of Mr Troy's affidavit]? A. Yes. Q. And you only dispute one aspect of that conversation which is that you'd said to Mr Troy that your brother was going to finish up? A. Yes, that's right. Q. And other than that, you broadly agreed with what Mr Troy set out as being the substance of the conversations? A. Broadly. Q. I'm not asking you to give the exact words. But you don't deny any particular part of it except that one part? A. That was certainly the one part I (sic) - yes. Q. If you look at the end of the paragraph 39 -- A. Yes. Q. -- in Mr Troy's affidavit - sorry, you'll se that Mr Troy has himself saying, "Rod, there's a bloody big conflict of interest here. You could find yourself in deep water" and you find yourself saying (read)? A. I can't recall that. Q. You can't recall that but it is the case, as you recognised this morning, that giving around $160,000 of business to a company owned by your brother created a potential conflict of interest situation? A. I don't - I don't know what "they" are. Who are "they"? Q. I'm not asking about that part at the moment. Purely the conflict of interest; do you recognise there's a conflict of interest? A. Yes. First time, yes. 96 Mr Nixon also drew our attention to an exchange between Marks J and counsel for Mr Bowman where counsel stated: Mr Bowman conceded at the end of the transaction that his brother had an interest in H&K and that he asked Mr Troy not to say anything about it. 97 The evidence against the contention that Mr Bowman knew that he had a conflict of interest and knew that he had to disclose the conflict but did not disclose it was that, firstly, there was no policy or protocol promulgated by Ricegrowers that would have informed Mr Bowman that contracting work out to his brother's firm would involve a conflict of interest. Secondly, there was the statement in Mr Bowman's first affidavit, which may be construed as him saying that following the conversation with Mr Troy he saw no conflict of interest nor understood there to be any reason why he should advise his employer of the association with his brother. The statement was in the following terms: I did have a conversation with Mr Troy concerning H&K. He had asked me whether I had a relationship with H&K. I told him there was a relationship but that H&K's rates were competitive to other work going on. Mr Troy agreed with me and further agreed that there was no reason to raise the matter any further. 98 This statement appears to be the plank upon which Mr Bowman based his submission that at the time of his conversation with Mr Bowman (November 2001) he did not consider there was a conflict of interest because the agreement he reached with H&K was on purely commercial terms under which Ricegrowers suffered no disadvantage and neither he nor his brother gained any wrongful benefit or advantage. Therefore, it was not necessary to advise management. 99 There was also the following exchange in Mr Bowman's cross-examination: A… when I'd had the discussion with Brian Troy about this, we discussed - it was a purely hands-off arrangement. It was on a commercial basis and we walked out of the room. I didn't think anything else was going to be said about it. Q. And one of the reasons you didn't think anything else was going to be said about it was because Mr Troy agreed not to tell Mr Preston on the basis that this was your brother's last job for Sunrice? A. Well, that's where we disagree, don't we? That's what I deny. 100It is unclear what Mr Bowman was denying. Certainly he had consistently denied saying to Mr Troy this was his brother's last job, but in light of concessions by Mr Bowman referred to earlier, that he had asked Mr Troy not to say anything to management about his brother, the question arises as to whether, in his answer above, he was now denying that was the case. 101In our opinion, the weight of the evidence favours a conclusion that Mr Bowman knew there was a conflict of interest in contracting work to his brother's firm and that he knew he should have advised his employer of that conflict. In particular, we note the evidence regarding the record of interview at the meeting when Mr Bowman was dismissed, the sworn testimony of three managers that the record of interview was true and correct, Mr Troy's evidence and Mr Bowman's concessions under cross-examination that we cited earlier in this judgment. Moreover, we are inclined to the view that the evidence was capable of supporting a conclusion that Mr Bowman asked Mr Troy not to advise management about his brother. His Honour took the view that he was not able to make a finding about whether Mr Bowman directed Mr Troy not to report the matter to management. However, we understand his Honour to have, in fact, made a finding in favour of Mr Bowman in this respect. Applying the ordinary principles for resolving conflicts in evidence, his Honour was required to find whether the party asserting a particular fact had satisfied the evidentiary burden in that respect: Bigg v NSW Police Service (1998) 80 IR 434 at 455. Thus, despite the language used by his Honour, the effect of his judgment, in this respect, was to conclude that Ricegrowers had not discharged that evidentiary burden. When so assessed, there appears to be no proper basis for disturbing his Honour's finding, as he had the advantage of hearing the witnesses and assessing their demeanour.

[73]

102That then leaves us in the position of accepting his Honour's findings that Mr Bowman knew, from his discussion with Mr Troy who reported to him, that he had a potential conflict of interest that should have been disclosed. His Honour characterised the appellant's conduct as acting with "a certain degree of lack of candour." We consider such a finding was open to his Honour. 103We note, however, that his Honour found that the lack of candour was not sufficient to justify summary dismissal. Nevertheless, his Honour proceeded to construct a form of relief that had regard to his finding regarding 'lack of candour'. That is to say, his Honour varied the contract to provide, inter alia, for reasonable notice to be given or the payment of "moneys equivalent thereto based on the employee's annual remuneration package." His Honour decided that the money equivalent to reasonable notice in this case was 15 weeks' pay. In arriving at that amount his Honour took into account the appellant's length of service, his seniority, his apparent good record of service and also his lack of candour. 104The appellant's complaint was that neither he nor the respondent advocated such an approach to relief and that his Honour did not advise the parties of his thinking in that regard, thereby depriving them of any opportunity to make submissions about it. It was submitted this amounted to a denial of natural justice. The respondent, on the other hand contended that it had always been part of its case that it had terminated Mr Bowman for reasons that included his failure to report a known conflict of interest and that given his Honour's findings, including the appellant's lack of candour, it was open to his Honour, given the wide discretion accorded to him under s 106(5), to frame the relief in the way he did and that he was not bound to simply grant, or refuse to grant, a form of relief proposed by the parties. 105There can be no doubt, in our view, that there was a denial of procedural fairness as contended for by Mr Bowman. Whether his Honour reached a conclusion as to compensation as a consequence of the variation of the contract to provide for reasonable notice or by some other process of reasoning as part of his assessment of compensation under s 106(5), his Honour was required to raise with the parties, before deciding, that he was contemplating there may be some discount associated with "the lack of candour" of Mr Bowman. His failure to do so constitutes an error of law (if not jurisdiction) and represents a proper basis to uphold the appeal. However, there are additional matters that, in our view, require consideration and ultimately that the appeal be upheld. We propose, therefore, to address those matters before turning to the appropriate orders to be made on the appeal.

[79]

112Mr Reitano noted that the approach adopted by Marks J did not identify at all why 15 weeks' notice was considered appropriate; his Honour did not give any reasons that would allow the Full Bench on appeal or Mr Bowman to ascertain the extent to which Mr Bowman was being 'punished' (over and above losing his long term secure employment). 113The submission was put that the approach taken by Marks J considered the discretion under section 106(5) to be at large. It failed to apply, or even have regard to, the accepted jurisprudence of this Court and its predecessors in dealing with money orders arising out of contracts of employment that have been subject to avoidance or variation under section 106 of the Act. Respondent's submissions 114Mr S Nixon of counsel for Ricegrowers, submitted that there was no error on the part of Marks J; that his Honour simply applied the "fundamental guiding principle" in determining monetary orders, namely, what is just in all the circumstances of the case: Westfield Holdings v Adams (2001) 114 IR 241; Keycorp Ltd v Thomes (2004) 141 IR 116. Counsel submitted that the appeal had to be approached having regard to the undoubted width of the discretion conferred upon Marks J under s 106(5): see Davies & Anor v. General Transport Development Pty Ltd & Ors 1967 AR(NSW) 371 at 374 per Sheldon J; Stevenson v Barham (1977) 136 CLR 190 at 192 per Barwick CJ. 115Counsel for the respondent submitted that a court of appeal should not, and would not, intervene in a trial judge's application of a remedial statute expressed in broad terms (such as s 106(5)) simply on the ground that it would have exercised a discretion differently (Westfield Holdings v Adams at [73]). In order to succeed, Mr Bowman must show that Marks J failed to properly exercise the discretion committed to him under s 106(5): Port Macquarie Golf Club Limited v Stead and Another (1996) 64 IR 53 at 60 (confirmed as applicable to the exercise of discretion under s 106(5) in Westfield Holdings v Adams at [69]). Mr Bowman had failed to do so. Consideration 116Mr Bowman's contract of employment was of indefinite duration but terminable on the giving of one month's notice. Marks J found that the notice period in the contract was unfair and in that respect varied the contract to provide for "reasonable notice of termination" or the payment of moneys equivalent thereto based on Mr Bowman's annual remuneration package. 117We agree with his Honour that one month's notice was unfair. Marks J, however, did not state, in express terms, what he considered to be reasonable notice. Instead, his Honour came to the view that having regard to Mr Bowman's length of service, his seniority, his apparent good record of service "but taking into account also his conduct that brought about the circumstances of his termination", the appropriate amount to be paid to Mr Bowman "by way of just compensation would reflect an amount equivalent to payment of his annual salary package over a period of 15 weeks".

[80]

118The "conduct that brought about the circumstances of [Mr Bowman's] termination" included the arrangement with H&K being uncommercial, the failure to contact McNaughts to see whether they could perform the work, the direction to a subordinate not to report the matter to management and Mr Bowman's lack of candour at the meeting with management to discuss his conduct. None of these matters were made out and, what is more, the respondent suffered no commercial disadvantage. Consequently, for the purpose of his Honour assessing just compensation, the matters could not have constituted, in his Honour's mind, any part of Mr Bowman's conduct that brought about his termination. 119The only matter his Honour could have considered adversely to Mr Bowman in assessing what was just compensation, was the lack of candour on Mr Bowman's part in failing to disclose the relationship with his brother, which his Honour described as an "error of judgment". 120In our opinion, there is such a manifest disjunction between the variation of the contract in this case to provide for reasonable notice and money orders to the value of 15 weeks' pay, as to indicate a result so unjust as to require correction on appeal. 121What is reasonable notice in each case will depend on its own facts and it is a matter to be considered in the light of the circumstances applying at the date of notice, not the date of the original contract: Logan v Otis Elevator Co Pty Ltd (1999) 94 IR 218 at 229. But reasonable notice in this context does not mean reasonable both to the employer and employee. As Young J observed in Brookton Holdings Pty Ltd No V and Others v Kara Kar Holdings Pty Ltd and Another (1994) 57 IR 288 at 290: What is reasonable is what a reasonable observer would consider the employee would need to find a new position in the labour market, if the contract should come to an end. It is not a situation that the employer can either by accident or design have a company with too few liquid funds and say, accordingly, that it is reasonable for all the employees to leave without notice or with very little notice. 122In Westfield Holdings v Adams at [138] it was held that: Notice provisions focus on the future of an employee and are intended to compensate, to the extent possible, for the disruption, cost and hardship caused by periods of unemployment that commonly follow termination.

[83]

125The factors referred to in the foregoing paragraph constitute well-known considerations by courts and tribunals in determining what is reasonable notice: see Macken, O'Grady, Sappideen, Warburton, Law of Employment, 5th ed., Lawbook Co, 2002 at 168-173 and the cases referred to therein; Creighton and Stewart, Labour Law, 4th ed., The Federation Press, 2005 at 418-421 and the cases referred to therein. Some of the cases determined in this Court that have considered the relevant factors for determining reasonable notice include: Lavings v Barclay Mowlem Construction (NSW) Ltd (1994) 99 IR 247; Nordby v Barclays Australia Investment Services Limited and Anor (1994) 53 IR 319; Caulfield v Broken Hill City Council (1995) 60 IR 221; O'Donnell v GIO Australia Limited and Another (1996) 64 IR 297; Stead v Port Macquarie Golf Club Ltd (1995) 63 IR 416; Michel v Ogilvy & Mather Pty Limited (1996) 71 IR 417; David Jones Limited v Cukeric; Cukeric v David Jones Limited (1997) 78 IR 430; Newton v Goodman Fielder Mills Ltd (1997) 81 IR 227; Gala v State Bank of New South Wales Ltd t/a Colonial State Bank (No 2) (1998) 84 IR 216; Murphy v Australian Guarantee Corporation Ltd (2000) 126 IR 359; King v State Bank of New South Wales (No 2) (2002) 126 IR 407; Peter English v Aradlay Insurance Brokers Pty Limited [2004] NSWIRComm 280. 126Applying the factors referred to in [124] above, we are of the view that a reasonable period of notice would have been in the order of 12 months. 127Notwithstanding the variation of the contract to provide for reasonable notice, his Honour decided on the basis of an "error of judgment", which resulted in no disadvantage to the respondent and no ill-gotten gain to the appellant or his brother, to discount what should have been something in the order of 12 months' notice or the money equivalent thereof, so that Mr Bowman received only the money equivalent of 15 weeks' notice. We consider his Honour erred. As it was held in House v The King (1936) 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ: If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. 128Marks J did not explain what he considered to be reasonable notice in this case. Nor did he explain how he arrived at 15 weeks. But the result is plainly unjust and we find that his Honour failed properly to exercise his discretion. 129We would add this by way of observation: his Honour was entitled to determine an amount of compensation that was just in the circumstances of the case. However, in determining the compensation, s 106(5) requires that it be in connection with the contract declared wholly or partly void, or varied. In Brown and Others v Rezitis and Others (1970) 127 CLR 157, Barwick CJ held at 166: It seems to me that the expression "in connection with" the contract or arrangement varied or avoided provides the necessary limitation as to the nature of the orders for payment of money which can be made and as to the person against whom they may be made. The draftsmanship of the section is inadequate: but I think the expressed intention as to this limitation can be derived from the sub-section read as a whole. Whilst it can be said that the expression "in connection with" is of wide import, it does emphasize the need for a close connexion between the order made and the contract or arrangement varied or avoided. In my opinion, the power to make an order for the payment of money is at best no more than a power to make such an order as can reasonably be thought to have a real connexion with the making, variation or avoidance of the contract or arrangement which has been varied or avoided. 130The variations his Honour made to the contract included that: b) In determining to terminate the employment of the employee for any reason other than circumstances justifying summary dismissal, the employer will give the employee reasonable notice of termination or pay moneys equivalent thereto based on the employee's annual remuneration package. 131In light of this variation and the "real" or "close connexion" that an order for the payment of money must have with the variation, the money order in this case was required to reflect a period of reasonable notice. Whilst Marks J had a wide discretion to make orders under s 106(5) that were just in the circumstances of the case, the discretion was not unlimited. Having determined to vary the contract to provide for reasonable notice of termination we do not believe it was open to his Honour to ignore that variation and exercise his discretion at large. What was just in the circumstances of the case had to be determined according to what might be regarded as reasonable notice.

[84]

132We earlier expressed the view that an order for compensation in this case should reflect a period of reasonable notice and in this case such notice would be of the order of 12 months. Given our findings in this matter, it will be necessary to set aside the orders made by Marks J regarding reasonable notice and 15 weeks' pay and assess for ourselves the matters of notice and compensation. Whilst we consider 12 months is appropriate, the Court must take into account whether or not the applicant took any action to mitigate loss: s 106(6). 133Ricegrowers submitted that regard should be had to the fact that Mr Bowman obtained employment shortly after the termination of his employment and was employed for almost the entirety of the 12 months' period following his dismissal up to March 2003. It was submitted that applying the principles in Westfield Holdings v Adams at [145] and English v Aradlay Insurance Brokers Pty Ltd (2005) 145 IR 129 at [35], having regard to the employment of Mr Bowman throughout the 12 months' period following the termination of his employment by Ricegrowers, and also having regard to the way in which Mr Bowman's conduct in failing to disclose a known conflict of interest contributed to the circumstances of his dismissal, a period of notice of no more than three months was just in all the circumstances of the case. 134Mr Reitano submitted that the issue of mitigation was not raised in the application to appeal. Further, that this Court has not accepted that the mere obligation to consider the question of mitigation gives rise to some automatic deduction. In any event, it was submitted, the failure by Ricegrowers to prove the extent (if any) of Mr Bowman's claimed mitigation was a complete answer to the submission. 135The evidence regarding the extent to which Mr Bowman mitigated his loss is quite unsatisfactory. Nevertheless, it is apparent he did work during the 12 months following his dismissal and earned income in that period. We propose to reduce what would otherwise have been a money order equivalent to 12 months' notice, to 10 months (that is, 43 weeks) to take account of mitigation.

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