(vi) The Operation of s 106(5) - What money order is appropriate?
330In light of the findings made and the reasons given above, the Court determines that the contract (in its widest meaning) was unfair, both in its inception and the way in which it worked out. From the time it was decided by PKCT that the new scheme would be an accumulation fund, detailed consideration had to be given to the means by which the new fund could provide benefits equivalent to SASS. Mr Murphy thought it was nearly impossible to do so under a strict accumulation fund. PKCT proceeded with a scheme where there could be winners and losers, quite contrary to its representation. On the evidence, it is not possible to conclude that the representation "benefits equivalent to SASS" somehow became "there will be winners and losers." No management witness, in terms, says this occurred. The applicant's case as to unfairness is made out.
331This conclusion as to unfairness is also supported by the following matters:
(a)both Mr Coleman and Mr Dixon agreed that the comparative tables and information provided to employees was designed to show that they would not be disadvantaged in their superannuation arrangements. Despite this undisputed evidence of the PKCT purpose, witnesses were nevertheless cross-examined on the basis that the comparative tables provided to them clearly showed that there would be losers as well as winners - in other words, employees could be disadvantaged under the new scheme;
(b)Mr Dixon stated that, in August 1990, employment was offered at the coal terminal by PKCT on the basis that superannuation would be equivalent to SASS.
In this context it is also to be noted that, although the detail of the design of the scheme by Mercer was central to the issues raised, no witness was called who worked on the proposed PKCT scheme for Mercer, especially as to what elements of SASS were considered and valued and if any benefits were not included and the reasons why that approached was adopted. In addition, Mr Morris was not called, although he provided the initial instructions about the scheme.
332This is a case where variation of the contract requires consideration, especially since many employees remain engaged by the respondent. It then becomes necessary to consider the related question, namely, what, if any, money order is appropriate having regard to the circumstances found by the Court. Section 106(5) empowers the Court to make such order as to "the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case."
333During the course of proceedings, the Court reminded the parties that if relevant unfairness was found in relation to the superannuation scheme introduced at PKCT, the terms of s 106(5) did not confine the Court to awarding damages as might be appropriate in common law or equity proceedings. That comment was made in relation to the expert actuarial evidence filed by each party that attempted to establish, on actuarial principles, that either there had been a loss incurred by employees or, that there was little or no relevant loss incurred by employees transferring from SASS to the PKCT superannuation scheme. Very early in the history of the unfair contracts jurisdiction, in Re Witek v Starr (1971) AR (NSW) 1000, Perrignon J, as a matter of discretion, refused to make an order in the nature of general damages. In Brown v Rezitis (1970) 127 CLR 157, Menzies J spoke of the wide discretion available under the then s 88F in determining not only what money should be paid, but by whom it should be paid. Barwick CJ (at 164) pointed to the fact that, underlying s 88F, there was a broad concept of restitution of the parties to a situation which existed before the making of arrangements as well as, in an appropriate case, to make a remedial provision in the meantime for what had taken place or, had been done under the contract.
334By the time the Full Bench of the Commission came to decide Westfield Holdings v Adams (2001) 114 IR 241 the Commission had exercised its jurisdiction under various unfair contract provisions and had made a wide variety of money orders, taking into account many different circumstances where such orders were justified "in the circumstances of the case." In the course of deciding Westfield Holdings and applying the provisions of s 106(5), the Full Bench came to consider the principles relating to the determination of compensation and the making of a money order. So far as relevant to the present proceedings, the Court stated:
120 We do not consider the appellant was correct in contending that in determining loss or damage under the Trade Practices Act, the courts commonly turn to either the tort or contract tests as a useful benchmark. As evidenced by the earlier references to Marks, all members of the High Court in that case expressly disavowed an approach to the measure of damages under s 82 that the appropriate guide in most cases will be found by asking what would have been the measure if the common law applied. As Gaudron J said:
... the task is simply to identify the loss or damage suffered or likely to be suffered and, then, to make orders for recovery of that amount under s 82 or to compensate for or prevent or reduce that loss or damage under s 87 of the Act.
121 It was also said by McHugh, Hayne and Callinan JJ in Marks at 510-512 that the High Court in Gates, Wardley and Kizbeau did not hold that the remedies provided by ss 82 and 87 of the Trade Practices Act are to be confined by analogies, whether with tort or otherwise. At 512, their Honours added, however, that:
This is not to say that no help can be had from the common law in deciding what damages may be allowed under s 82 in cases of conduct contravening s 52. Very often, the amount of the loss or damage caused by a contravention of s 52 will coincide with what would have been allowed in an action for deceit. But that is because the inquiry in both cases is to find out what damage flowed from (in the sense of being caused by) the deceit or contravention. Leaving aside questions of remoteness of damages in assessing damages for deceit (a question that was left unresolved in Gould v Vaggelas ((1985) 157 CLR 215 at 223-224, per Gibbs CJ) the damages for deceit will be the sum representing the loss suffered by the plaintiff because the plaintiff altered its position in reliance on the defendant's misrepresentation. But the analogy cannot be pressed too far. It should not be pressed to the point of concluding that the only damages that may be allowed under s 82 are those that would be allowed in an action for deceit. The question presented by s 82 is not what would be allowed in deceit, it is what loss or damage has been caused by the conduct contravening the Act (our emphasis).
122 We think it is clear from Marks that whilst it could not be said that no help can be had from the common law in deciding what damages may be allowed under s 82 in cases of conduct contravening s 52, the primary focus of the court must be on the requirements of the statute. Under the Trade Practices Act, that focus gives rise to the question: what loss or damage has been caused by the conduct contravening the Act?
123 In Marks, McHugh, Hayne and Callinan JJ elaborated this test at 513:
If loss or damage is shown to have been suffered or to be likely to be suffered, orders of the kind prescribed by s 87 may be made. Proof of loss or damage (actual or potential) is therefore the gateway to the s 87 remedies. But the identification of loss or damage is important in the operation of s 87 not only for this reason but also because the power to make orders under s 87 is limited to making orders "if the Court considers that the order or orders concerned will compensate ... in whole or in part for the loss or damage or will prevent or reduce the loss or damage..." (s 87(1) and (1A)). That is, the Court can make orders under s 87 only in so far as those orders will compensate (or will prevent or reduce) the loss or damage that is identified.
124 The test, however, under s 106 is not "what loss and damage has been caused by the conduct contravening the Act". The test under s 106 may be expressed as follows:
(1) If the contract or arrangement was an unfair contract in terms of s 106, should the contract or arrangement be avoided or varied?
(2) If it is decided that the unfair contract should be avoided or varied, should an order be made for the payment of money in connection with the unfair contract declared void or varied?
(3) If a money order is to be made, what order is just in the circumstances of the case?
...
129 We think that Mr Shaw was correct in submitting that if one were to follow Marks in proceedings under s 106 involving misrepresentation, the appropriate question to be considered in determining loss or damage would be "what is the position that the Respondent would have been in but for the alleged misrepresentation?" However, we reiterate that the power to make money orders under s 106(5) is not limited by analogy or otherwise with either the power to award compensation for loss or damage under ss 82 and 87 of the Trade Practices Act or with common law principles relating to the assessment of damages. Consequently, we do not accept the appellant's contention that in determining what might be appropriate compensation under s 106(5) in circumstances where unfairness may have been caused by misrepresentation, it is necessary to have regard to the test applied by McHugh, Hayne and Callinan JJ in Marks or any other decision under ss 82 and 87 of the Trade Practices Act.
130 We have, of course, acknowledged earlier in this judgment that whilst orders made pursuant to s 106(5) should not be limited by drawing some analogy with the law of contract, tort or equitable remedies, it is proper to have regard to common law and equity principles but recognising that, in particular cases, some of the principles will be inappropriate. This means that, for example, where a contract or arrangement has been found to be unfair, and the unfairness has been caused by fraudulent misrepresentation or negligent misstatement, in making any money orders under s 106(5) it is proper for the trial judge, in appropriate cases, to have regard to the common law principles relating to the assessment of damages. It may also be helpful to have regard to approaches taken to the assessment of damages in decisions under ss 82 and 87 of the Trade Practices Act, especially where the common law principles may have been a consideration. However, given the different statutory requirements of ss 82 and 87 of the Trade Practices Act as opposed to s 106(5) of the Industrial Relations Act, particular caution needs to be exercised. Ultimately, the relevant guiding principle for the Commission in Court Session under s 106(5) is not confined to a question of what loss or damage an aggrieved party has suffered but rather a wider test, namely, what is just in the circumstances of the case. That is not to say that the discretion of a trial judge under s 106(5) is at large. The jurisprudence developed by the extensive case law on the subject enables, and requires, limits on what orders may or should be made. The statements of principle in these reasons should also assist in the clarification of any doubts that may be said to exist.
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158 Mr Kimber, on the other hand, submitted that:
Given the broad nature of the discretion under s 106(5), there could be little doubt His Honour could have considered the value of the options that he was proposing to award to be so significant that it would not be "just" to award any further sum by way of bonus or redundancy payment: see Westfield Limited v Helprin (1997) 82 IR 411 at 439.6. Indeed, it is impossible to rule out the idea that His Honour rejected the claim for twelve months notice or payment in lieu thereof on this basis. However, given the broad discretion bestowed on His Honour by s 106(5) it cannot be suggested that His Honour was required to desist from awarding bonus or redundancy payments because of the size of the award that His Honour was contemplating with respect to the options or vice versa. Nor could it be seriously contended that His Honour was somehow required to "set off" his proposed award with respect to any one or more head(s) of claim because of the award that His Honour was proposing for any other particular head of claim. In this regard see Baker v National Distribution Services Limited 50 IR 254 at 274.9-276 generally, where the issue was whether the superannuation payments made to the employee on termination served to "remove or modify" the unfairness that had been found in the redundancy arrangements allowed to the employee.
159 The approach contended for by Mr Kimber is, in our opinion, essentially correct. We would expect that in arriving at any tentative conclusions regarding money orders under s 106(5), prior to making any final determination, a trial judge would, metaphorically speaking, take a step back and consider the overall quantum of what he or she was proposing to order and whether or not it was just in the circumstances of the case. If the overall amount was considered to be excessive it would be appropriate for the trial judge to review his or her approach to each of the elements in respect of which money orders were proposed, eg, bonus, superannuation, payment in lieu of notice, redundancy, share options, etc, and to determine whether he or she may have fallen into error. This approach is consistent with the cautionary note struck by Barwick CJ in Stevenson v Barham at 192 and with the approach taken by the Full Bench (Cahill V-P, Hungerford and Schmidt JJ) in Westfield v Helprin where at 439 their Honours said:
A variation to a contract found to be harsh, unfair or unconscionable under s 275 is a discretionary matter, as is the making of any monetary order in connection with such a variation. In this case the question of whether that discretion should be exercised in relation to the question of notice arises for consideration in the context of all of the circumstances before us, which include the other orders which we have decided to make in relation to the giving of a warning before termination and the option scheme and the orders as to the payment of moneys which flow from those variations. It is also relevant that reasonably generous discretionary benefits flowed to Mr Helprin on his resignation from Westfield and withdrawal from the superannuation scheme.
The adoption of this approach is likely to lead to a limitation on some of the larger verdicts that have been awarded.
...
Principles to be applied under s 106(5)
161 In summarising our conclusions in relation to the principles proposed by the appellant in these proceedings, we consider that the correct principles to be applied in the making of money orders under s 106(5) of the Act are as follows:
1) Any order must be in connection with the making, variation or avoidance of the contract or arrangement that has been varied or avoided
2) Where appropriate, an order may be made restoring a party or parties to the situation that existed before the making of the contract or arrangement that has been varied or avoided.
3) Whether or not an order has been made providing for restitution, in appropriate cases the Commission in Court Session may make remedial provision for what has taken place or been done under the contract or arrangement that has been varied or avoided.
4) Any order shall be what the Commission considers just in the circumstances of the case. Whilst such orders should not be limited by drawing some analogy with contractual, tort or equitable remedies it is proper to have regard to the common law or equitable principles, but recognising that in particular cases those principles may be inappropriate. That is not to say that the discretion under s 106(5) is at large. As with any judicial discretion it must be exercised judicially having regard to the accepted jurisprudence which enables, and requires, limits on what orders may or should be made.
5) It follows that in making an appropriate monetary order under s 106(5) it is proper to have regard to the common law principles relating to mitigation but recognising that in particular cases it will be inappropriate to apply mitigation. Ordinarily, where an employee has been successful in avoiding his or her loss, or has failed to take reasonable steps to avoid loss in the period following dismissal, the Court, in determining what is just in the circumstances of the case, should give consideration to whether, and to what extent, any money amount in respect of notice of termination that is contemplated to be the subject of an order under s 106(5), should be reduced by monies earned, or imputedly earned, in the relevant post-termination period. We emphasise that the application of the principle of mitigation in cases brought under s 106 represents one aspect of the consideration of what orders are "just in the circumstances of the case".
6) Further, the differing purposes of a payment in lieu of notice and a payment for redundancy or severance are important matters to be taken into account when considering the application of the principle of mitigation to a sum which may otherwise be ordered under s 106(5) of the Act. The principle of mitigation is unlikely to be a central consideration when assessing the appropriateness or magnitude of any payment the Court may order for redundancy or severance. Unless these are special considerations, it will not ordinarily be appropriate to reduce any redundancy or severance payments otherwise to be made as a result of orders under s 106 of the Act because of the efforts or success of an employee in obtaining alternative employment.
7) In making orders under s 106(5) it may be helpful to disaggregate payments for notice and payments for redundancy and, in the reasons for judgment, to explain how the respective amounts were arrived at. This may assist in an appropriate case in avoiding the prospect of double counting that could arise out of the overlapping purposes of redundancy pay and payment in lieu of notice.
8) It is neither logical nor appropriate when assessing compensation under s 106(5) of the Industrial Relations Act to follow the approach adopted by other courts to the assessment of compensation under the Trade Practices Act. Nevertheless, it may be helpful to have regard to approaches taken to the assessment of damages in decisions under ss 82 and 87 of the Trade Practices Act, especially where the common law principles may have been a consideration. However, given the different statutory requirements of ss 82 and 87 of the Trade Practices Act as opposed to s 106(5) of the Industrial Relations Act, particular caution needs to be exercised. Ultimately, the relevant guiding principle for the Commission in Court Session under s 106(5) is not confined to a question of what loss or damage an aggrieved party has suffered but rather a wider test, namely, what is just in the circumstances of the case.
9) In assessing whether unfairness has occurred and in making money orders under s 106(5) it would be appropriate to have regard to the following principles regarding the relevance of general industrial standards. In doing so, however, the individual contract or arrangement concerned remains the primary consideration:
a) Whether or not a contract or arrangement is unfair within the meaning of ss 105 and 106 is a matter to be decided upon examination of the facts of each particular case; section 106 deals largely with private rights inter partes; the focus of attention is the contractual relationship between a particular employer and employee;
b) Subject to the primary focus being the particular circumstances of the individual contract or arrangement concerned, in assessing whether unfairness has occurred general standards or levels of what is considered to be fair, including general standards of redundancy pay applying to employees covered by industrial awards or legislation, will be factors to be considered;
c) Despite that a general and relevant industrial prescription governing benefits payable to employees in termination of employment situations may exist, unfairness in relation to a particular contract of employment may nevertheless arise in a situation of redundancy or termination of employment for reasons unrelated to or not relevant to the basis of award prescription of an objective and fair benefits;
d) The scale fixed in the Redundancy Awards Case was fixed on a "safety net" basis. In making money orders under s 106(5) the court may have regard to the Redundancy Awards Case scale but is not bound to apply it.
10) If the overall amount proposed to be ordered under s 106(5) was considered to be excessive, it would be consistent with an appropriately cautionary approach for the trial judge to review his or her approach to each of the elements in respect of which money orders were proposed, eg, bonus, superannuation, payment in lieu of notice, redundancy, share options, etc, and to determine whether he or she may have fallen into error. In correcting any error it would not be appropriate to "set off" a proposed money amount in respect of one head of claim against the money amount proposed to be ordered in respect of another head of claim where the heads of claim are entirely unrelated and serve different purposes.
335The decision in Westfield Holdings encapsulated the developing jurisdiction regarding the making of money orders in the variety of circumstances that come before the Commission in unfair contract cases. In King v The Industrial Relations Commission of NSW (2005) 146 IR 23, the Court of Appeal was moved to make comment about the nature of the unfair contracts jurisdiction. Young (CJ in Eq) stated:
16 That may be the situation of a court of law that was hearing an application under the Trade Practices Act or a court of equity hearing a case to set aside a contract on the ground of misrepresentation. However, it must be remembered that the present application was neither of these. It was an application to a
statutory body, the NSW Industrial Relations Commission, under a particular statute which gives the Commission limited powers. The authorities tend to show that the Industrial Relations Commission has no jurisdiction to exercise the powers under the Trade Practices Act or indeed any Commonwealth Act. It is a body that has been created for particular purposes, including to exercise the
jurisdiction under s 106.
17 I have set out the text of s 106(1) and that does appear to give the Commission a discretion as to whether it will make any order, even if it finds that there is an unfair contract - note the word "may". Indeed, consistent decisions of the Commission, which as far as I know have not been attacked, such as Finch v Copperart Pty Ltd (No 2) (1995) 62 IR 162 and Westfield Holdings v Adams (2001) 114 IR 241, show that that is a way in which the Commission has consistently carried out its jurisdiction under that particular section.
336In English v Aradlay Insurance Brokers Pty Ltd (2005) 145 IR 129, a Full Court made further observations consistent with the cases referred to above: at [30] the Full Court stated:
In dealing with these submissions, it is necessary to keep in mind the nature of the jurisdiction under s 106 exercised by the Court and to understand how her Honour approached this application. It seems abundantly clear from the terms of her Honour's judgment that she was adopting a global approach to what actually happened to the appellant in assessing whether the contract or any associated arrangement was unfair in its terms or operation. Her Honour accurately recorded the evidence called by both sides, including the evidence critical to the appellant's case where the appellant says he was advised that employment was not open to him with Elders but only a franchise. Her Honour spoke of looking at the reality of the matter and thereby disclosed an intention not to be diverted by technicalities but rather looking at all the circumstances for their general effect in assessing whether or not there was unfairness. Such an approach demonstrates no error: for nearly 40 years the Court and its predecessors have been guided by the words of Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 that the provision provides, in appropriate cases, the power to depart from the classic principles of contract law and to deal with "arrangements" between parties whether or not they have formally entered into a contractual relationship. Nor is the Court involved in a rigid exercise of awarding damages calculated on the strict application of common law principles although the approaches of the law in a variety of fields often provides guidance for the just disposition of an application and the making of a money order that is just in the circumstances of the case, once unfairness has been disclosed in the arrangements between the parties: see, for example, Westfield Holdings v Adams (2001) 114 IR 241 at 282-284.
337The scope of money orders was again considered in Caterpillar of Australia Ltd v Gough and Gilmour Holdings Ltd (2008) 170 IR 185. The Full Court, in considering what kind of monetary orders were appropriate stated:
75 The trial judge noted that the respondents sought in their Sixth Further Amended Summons compensation for a range of matters, including loss of opportunity by reason of the first respondent's alleged non-compliance with the Last Resort Policy and the Fourth Assurance; damages in respect of alleged losses flowing from post-Gough & Gilmour (No 15) events (which have not been particularised in part B of the Sixth Further Amended Summons); and an amount for compensation for losses arising out of the management distraction and disruption caused by these proceedings.
76 The trial judge addressed the appellants' contention that s 106(5) only authorised an order for the payment of money in the nature of restitution. It had been submitted that none of the above matters were restitutionary in nature and that s 106(5) did not speak in terms of damages or compensation, let alone damages in the nature of expectation loss.
77 The trial judge cited Westfield Holdings v Adams (2001) 114 IR 241 (Westfield Holdings) at [102] where the Full Bench had specifically addressed the basis upon which monetary relief might be granted under s 106(5):
102 We do not think that Brown v Rezitis mandates an approach to the assessment of compensation under s 106(5) on the basis that restitution in the sense referred to, is to be the fundamental guiding principle. Restitution so understood may be appropriate in particular cases, but the fundamental guiding principle is that which is stated in the statute itself, namely, what is just in the circumstances of the case.
78 The trial judge also noted (at [88]) that the decision in Westfield Ltd v Helprin (1998) 82 IR 411 (Westfield) had seen compensation awarded under s 106(5) for lost opportunity:
88 It is not unusual in the cases to find compensation having been awarded under s 106(5) for the loss of opportunity. In Westfield Ltd v Helprin (1998) 82 IR 411, for example, the Full Bench agreed with Marks J's conclusion at first instance that Mr Helprin's contract was unfair in that it did not require a counselling and warning process, including an opportunity for Mr Helprin to improve his performance, prior to the exercise of the right of termination. Both Marks J and the Full Bench considered it appropriate to vary the contract to incorporate a requirement that the respondent provide the applicant with a period in which to improve his performance. Thus, the variation to remedy the unfairness in Mr Helprin's case enabled the Court to make a consequential order awarding monetary compensation to reflect the respondent's failure to provide the opportunity to the applicant to improve his performance.
...
229 The second issue relates to the possible form the monetary orders may take. The primary contention of the appellants in this respect was that monetary orders needed to be restitutionary in nature. We reject this aspect of the appellants' challenge.
230 The trial judge was correct to find that the nature of monetary orders that may be made under s 106(5) are not so limited. In the first instance judgment the trial judge had (correctly in our view) relied on the decision in Westfield Holdings, where the Full Bench specifically addressed the basis upon which monetary relief might be granted under s 106(5) and in doing so had regard to Brown. After addressing at some length the decision of Barwick CJ the Full Bench stated at [98] to [102]:
98 So, the formulation by Barwick CJ as to the nature of the power to make money orders under s 88F(2) of the 1940 Act may be said to be, strictly speaking, obiter. However, the main point we wish to make about Brown v Rezitis is that in arriving at his formulation, the Chief Justice did so against the background of the facts of the case. He was required to focus on the question of restitution because of the order of Richards J that the appellants repay the $2,000 paid by the respondents for the contract, thus restoring 'the aggrieved party to a situation which existed before the making of the contractual arrangement'. Understandably then, the concept of restitution figured prominently in the Chief Justice's judgment. Given the other orders by Richards J requiring the appellants to pay the respondents for work done and expenses incurred, Barwick CJ was also required to address the question of making remedial provision for what had taken place or been done under the contract.
99 In these circumstances, given the particular facts of the case with which Barwick CJ was dealing, it could not be said that the formulation by the Chief Justice regarding the nature of the power to make money orders under s 106 is to be taken as the exclusive, or even the primary, test to be applied universally to all of the diverse circumstances that arise under s 106. Restitution has been said to be concerned with restoring or giving back something to its proper owner or making reparation for loss or injury previously inflicted. As the Full Industrial Court (Fisher CJ, Bauer and Hill JJ) observed in State of New South Wales v Health and Research Employees Association of New South Wales (unreported, 31 March 1993) (at 82): ... 'restitution' seems to involve a reversion to a position as if the contract had never been entered into."
100 In Harris v Dealing Information Systems Pty Ltd (unreported, Schmidt J, 11 December 1997) in considering the effect of Brown v Rezitis, her Honour rejected a submission that 'all monetary orders under s 106(5) are to be understood as restitutionary, rather than compensatory in nature'. Having regard to our analysis of Brown v Rezitis, we respectfully agree with her Honour.
101 Restitution may be an appropriate approach where a franchisee has paid money for a franchise and the contract has been found to be unfair. But restitution, as a basis for compensation, is rarely relevant to contracts of employment found to have operated unfairly.
102 We do not think that Brown v Rezitis mandates an approach to the assessment of compensation under s 106(5) on the basis that restitution in the sense referred to, is to be the fundamental guiding principle. Restitution so understood may be appropriate in particular cases, but the fundamental guiding principle is that which is stated in the statute itself, namely, what is just in the circumstances of the case.
231 It can be seen that the decisions in Westfield Holdings and David Jones are authorities which support the proposition that the scope for monetary orders under s 106(5) is not limited to restitutionary orders. Those decisions indicate that other types of monetary orders have been awarded by the court and are examples of where monetary orders have been in the form of compensation for lost opportunity. The trial judge sets out a consideration of this aspect of those decisions in the first instance judgment, as follows:
88 It is not unusual in the cases to find compensation having been awarded under s 106(5) for the loss of opportunity. In Westfield Ltd v Helprin (1998) 82 IR 411, for example, the Full Bench agreed with Marks J's conclusion at first instance that Mr Helprin's contract was unfair in that it did not require a counselling and warning process, including an opportunity for Mr Helprin to improve his performance, prior to the exercise of the right of termination. Both Marks J and the Full Bench considered it appropriate to vary the contract to incorporate a requirement that the respondent provide the applicant with a period in which to improve his performance. Thus, the variation to remedy the unfairness in Mr Helprin's case enabled the Court to make a consequential order awarding monetary compensation to reflect the respondent's failure to provide the opportunity to the applicant to improve his performance. Another example is David Jones Ltd v Cukeric (1997) 78 IR 430 where, notwithstanding Mr Cukeric's employment had been terminated, the Full Bench varied the contract ab initio to provide that the employment was not to be terminated as a result of any restructuring without fair consideration first being given to Mr Cukeric's future position in any new structure. The Full Bench also concluded at 462 that:
[I]t would be just in the circumstances to make a monetary order in favour of Mr Cukeric in connection with the arrangement as varied by us. The Company is to pay to Mr Cukeric an amount of money (additional to that already paid) to reflect entitlements in respect of a further period of 6 months' notice of termination.
We see no error in his Honour's approach in that respect. On the basis of Westfield Holdings and David Jones it is open for the Court to determine that the respondents' claims for monetary orders in nature of compensation in D2, D3, D4 and D5 are not inconsistent with s 106(5).
338In Stone Microsystems (Aust) Pty Ltd & Stone Group Asia Pacific Investment Ltd v Kwong & Datamax Pty Ltd (1997) 42 NSWLR 160, the Full Bench at 200 characterised the order made at first instance as compensation for loss in relation to the respondent Datamax. The Full Bench referred to the decision of the Full Court in Barclays Australia Investment Services Ltd v Nordby (1996) 99 IR 258 at 279 that:
... The task of assessing a 'just' monetary amount is one which, not infrequently, involves the exercise of a broad judgment without the assistance of defined and identifiable parameters or heads of loss or damage.
See also Masri v Santoso (2004) 134 IR 184 at [177] et seq.
339In Nordby, the Full Court was required to consider the method or formula adopted at first instance for the calculation of an amount referrable to compensation. In relation to this task, the Full Bench stated:
The amount of money which was "just" to be awarded in the circumstances was an issue which understandably must have caused considerable difficulty for her Honour, as it has for us. There was no apparent compromise position adopted by the parties before her Honour; the matter was therefore polarised with the respondent contending for a full payment of commission on the literal terms of the February 1990 memorandum, that is until the end of December 1992, with the appellants contending that the contract providing for two weeks notice was not unfair and/or that there was no entitlement to any commission.
The parties, having chosen to run their respective cases on the bases described, left her Honour with the unenviable task of determining an appropriate monetary order under s 275(3) unassisted by detailed submissions of the parties.
After May 1991 and the Mirvac purchase, there were three persons employed in the promotion of the appellants' products whereas prior thereto there had been only one, the respondent. That change involved, from the commercial point of view of the appellants, a revisiting and reappraisal of the respondent's prior commission arrangement. But, whatever the problems which that exercise may have presented to the appellants, the respondent had nevertheless been assured, by the appellants and after the Mirvac purchase was made known to him, that he would be "no worse off" under the new "pooling" arrangement than he had been under his prior one. ...
Once it was found that the respondent should in fairness have been entitled to payment in respect of commission, first for the period of notice found reasonable, and secondly for the last quarter of December 1991 and the month of January 1992, in the context that he had been assured he would be "no worse off" under the new arrangement, it then became a matter of broad judgment as to how the respondent's loss was to be measured in the context of the changed circumstances. ...
Her Honour applied a divisor of three to 50 per cent of the net ISC referable to commissions largely on the basis of the Exhibit K9 arrangement - having regard to the ''no worse off'' assurance but nevertheless taking into account the increase in the marketing team. While there may be fine issues which arise in relation to the precision of the formula adopted by her Honour to calculate the amount considered ''just in the circumstances'', it nevertheless represents a fair and reasonable basis of assessment. The task of assessing a ''just'' monetary amount is one which, not infrequently, involves the exercise of a broad judgment without the assistance of defined and identifiable parameters or heads of loss or damage. The discretion was, in our view, both properly and correctly exercised in this case.
340In this consideration of relevant authorities, it should be mentioned that in this case the Court will be guided by the statement of the Full Court in Eagle Boys Dial-a-Pizza Aust Pty Ltd v Clifford (2003) 125 IR 35 at 42, that it must be kept firmly in mind that orders made, including variations to any contract, should not travel beyond what is required to ensure a just result between the parties having regard to the circumstances of the case.
341A consideration of the authorities regarding the scope and operation of s 106 and its predecessors would not be complete without reference to two seminal judgments that continue to have relevance and resonance for the exercise of this unique jurisdiction.
In the first case brought under s 88F, Agius v Arrow Freightways Pty Ltd [1965] AR(NSW) 77, Beattie J (as he then was) emphasised that the Commission's approach to unfairness was not legalistic, but required the application of common sense. At p 89, his Honour spoke of each particular case being decided by "the application of the tribunal's common sense and sense of justice."
In Davies v General Transport Development Pty Ltd [1967] AR(NSW) 371, Sheldon J famously spoke of the fairness of a contract as being determined according to "the common sense approach characteristic of the ordinary juryman" - the enquiry was "a plain matter of morals, not law" (at 374).
This approach continues to be followed, such that Marks J in King v Cake it Away Pty Ltd [2002] NSWIRComm 140 at [84] was moved to state
In determining whether there is an unfair contract for the purpose of proceedings brought under s 106 and especially taking into account subs (2), the Court is required to exercise a value judgment reflecting contemporary community values derived from the commonsense approach characteristic of the ordinary, reasonable, hypothetical "standard" member of the community. The value judgment must obviously take into account the totality of the circumstances of the relationship between the parties and the totality of the interests of each of the parties.
342These authorities emphasise the width of the power to make a money order in connection with a contract that has been declared unfair and where the Court has varied or voided the contract or arrangement. The parties in the present proceedings have spent considerable financial resources on expert evidence that focused upon an actuarial assessment of whether or not the employees suffered a loss in their superannuation arrangements when joining PKCT. The expert reports were detailed and at many points, developed into a spirited debate of often arcane valuing and actuarial principles. Both experts were closely cross-examined as to their reports and the views they had formed. In addresses, each party made complaints about the lack of objectivity of the other side's expert, but the severest criticism emanated from the respondent. While both experts, at times, expressed a view that suggested they were advocates for the party who had engaged them, considered overall, the Court is satisfied that their strongly espoused views were genuinely held. It is somewhat surprising then to find the experts so far apart, with Mr Rawsthorne able to calculate individual losses of tens of thousands of dollars and Mr Murphy unable to find any loss whatsoever.
343What is to be made of these divergent expert views in these proceedings? It should, firstly, be noted that the initial reports for each expert broadly set out their approach, although in subsequent reports there was some movement and even agreement, on issues where each expert recognised that the approach of the other fell into an acceptable actuarial range. Mr Murphy's approach, however, appeared to be relatively inflexible, especially in applying actuarial principles while, nevertheless, accepting a number of approaches put forward by Mr Rawsthorne as falling within an acceptable range. In this respect, Mr Murphy set himself against any approach that might compromise a strict accumulation fund - any suggestion of including provisions to protect employees against losses compared with SASS was rejected as turning the PKCT fund into a defined benefits fund.
344At one point in his analysis, Mr Murphy spoke of such moves as defeating the purpose of converting the fund to an accumulation scheme. There is no evidence, however, that the consortium had as a primary objective, the conversion of the employees' superannuation scheme to an accumulation fund with the benefits that flow to employers from such a conversion. Indeed, the evidence was that PKCT were content to stay in SASS with its defined benefit obligations borne by the employer. The only reason a new fund became necessary was the Government's refusal to allow PKCT employees to remain in SASS. While it is true that PKCT alone chose an accumulation scheme as the appropriate superannuation vehicle, neither Mr Coleman nor any other hands-on managers made that decision. Why it was unilaterally determined and the reasons for selecting an accumulation scheme were not disclosed in the evidence. Mr Beale offered an explanation based on things he had been told by Mr Coleman and Mr Dixon, but their evidence was that they were not informed of the basis of the consortium's choice of an accumulation fund. There was no explanation of how PKCT's representation that the new scheme would provide equivalent benefits to SASS and that no one would be worse off, could be met by operating an accumulation scheme. Clearly, such representations could have been met by creating a new defined benefit fund or, by including a safety net within the accumulation scheme to ensure that equivalence of benefits were maintained. It can be accepted that both these options would introduce a level of complexity in the operation of the new fund, but that difficulty arose because of the important representation of ensuring equivalence of SASS benefits made by PKCT to its employees.
345Mr Murphy did acknowledge that the easiest way to match SASS and provide equivalence of benefits in the new PKCT fund was to increase the employer's rate of contribution. Mercer did not explicitly embrace that approach, in a global sense, in its design, nor did Mercer consider such an approach in setting the rate of employer contributions. There is no practical way that this can now be achieved as the PKCT fund has been closed.
346Mr Murphy was critical of Mr Rawsthorne's approach in concentrating upon two areas of asserted loss, namely, the loss of the pension option and valuing the passing of the investment risk from the employer to the employee. This criticism was enthusiastically taken up in cross-examination of Mr Rawsthorne and ultimately, the submission was made that Mr Rawsthorne's calculations could not be accepted and the basis of his calculations was not properly exposed in his reports. This evidence has been dealt with earlier in this judgment.
347It is convenient at this point to also state, in broad terms, the Court's assessment of the competing expert evidence. As already mentioned and having regard to the nature of the jurisdiction being exercised, there were aspects of both approaches that the Court found inappropriate. Overall, the Court would prefer the evidence of Mr Rawsthorne as his assessment was framed in the context, not of a strict actuarial approach, but against the necessary background that the PKCT scheme had to provide equivalent benefits to those available under SASS. In addition, although both experts were experienced in superannuation matters, Mr Rawsthorne had a closer involvement over a significant period of time with public sector superannuation schemes. Mr Murphy's approach, as mentioned earlier, proceeded upon the application of actuarial principles he held to be appropriate, although there was some disagreement about actuarial approaches as well as agreement that some of the differences between the experts fell within the range of acceptable actuarial differences of approach. The most significant aspect of Mr Murphy's assessment, rendering it significantly less useful in the exercise of this unfair contracts jurisdiction, was his interpretation of the consortium's guiding objective that the new scheme would provide equivalent benefits to those available under SASS. Initially, Mr Murphy regarded that objective as being impossible to achieve because of the fundamental difference between the two schemes, with SASS being a defined benefit scheme and the PKCT fund being an accumulation scheme. He later modified that view to the extent that equivalence might be achieved by a very high rate of employer contribution that resulted in a number of employees being much better off than under SASS. Mr Murphy therefore approached his task, for the great majority of the exchanges between himself and Mr Rawsthorne, by analysing the schemes against a broader objective of ensuring that, in general, the group would get much the same benefit as under SASS but inevitably, there would be winners and losers. In the Court's view that approach was not justified, having regard to the findings it has made in relation to the nature of the representation and the particular circumstances in which that representation was made.
348Having regard to the considerable detail in the reports of each of the experts and their vigorous debate as to the inadequate or inappropriate approach of the other, the Court is left in the situation of having little confidence in adopting the entire propositions or final conclusions put forward by either of the experts. While the experts' reports have focused on numerous elements in the SASS scheme and how they have or have not been reflected in the PKCT scheme, ultimately, the Court is unable to meet the requirements of s 106(5) by primarily applying one of the actuarial scenarios presented by the experts in making a money order that is just in the circumstances of the case. While their debate and the issues they have raised will be helpful in assisting the Court in its task under s 106(5), ultimately, the Court must make its own determination on the issues of fairness and then make its own assessment on how to compensate for that unfairness.
349The Court is not satisfied that a strict actuarial approach would satisfy the statutory requirements in this particular case. From the case law canvassed in the paragraphs above, it can be seen that over a number of decades in exercising the unfair contracts jurisdiction, the Court has repeatedly avoided urgings that, in exercising its power to make a money order, it should follow common law principles in assessing damages or that it should be limited to a pure restitution approach. The present case is another example of where it would be inappropriate to adopt those approaches or a strict actuarial approach. This is a case where broader considerations lead to a compensation approach. It is worthy of note that, during the debate with Mr Murphy, Mr Rawsthorne came to the view that the best remedy to meet deficiencies in the PKCT fund was to provide a once and for all amount of compensation rather than attempting to top- up benefits that were lower than SASS. This top-up option was appropriately described as being "prohibitatively difficult and expensive to apply in practice."
350There are, nevertheless, aspects of Mr Rawsthorne's approach that the Court would accept as appropriate in assessing the money order that should be made. In the Court's view, although criticised by Mr Murphy, Mr Rawsthorne was correct to approach the task by having regard to the representation made by PKCT that the new scheme would be of equivalent value to benefits available to employees under SASS. Although both experts, at different times, accepted that the complexity of the task was such that an overall or averaging approach was appropriate, Mr Rawsthorne was correct in not ignoring relatively small losses associated with certain benefits that had not been replicated in the PKCT fund. In applying the wider concepts of fairness, it was unfair that no explicit or any other consideration was given to the loss of the pension option or, to the passing of the investment risk from the employer to the employee. The importance of these two issues is that the evidence supports Mr Rawsthorne's conclusion that these matters were not taken into account by Mercer in designing the new fund. It is also significant that Mr Murphy accepted that these two matters were not explicitly taken into account on any consideration of the working papers made available by Mercer. The evidence supports Mr Rawsthorne's opinion that no consideration was given to these two elements in setting the design of the new superannuation scheme.
351The loss of the pension option could not be set aside, in fairness, by the simple consideration of its take-up rate early in the operation of the SASS scheme. The availability and the take-up rate of the pension option was unlikely to be of immediate concern to young employees, but was a benefit that came under closer examination as employees grew older and closer to retirement. It could not be ignored in the design of the new scheme, regardless of the difficulty of valuing it. Of course, one simple means of addressing the issue, nominated by Mr Murphy, was to make the best estimate of its value and increase the employer's contribution rate to cover this aspect so as to ensure that there was an equivalence of benefit. Indeed, in 1990, the PKCT scheme could not provide the equivalent value of benefits under SASS unless the issue of the pension option was addressed. It could not, in fairness, be ignored.
352In relation to the transfer of the investment risk from the employer to the employees, both Mr Murphy and the respondent engaged in semantics in suggesting that there was no such transfer of risk because this was not a case where PKCT was closing down a defined benefit fund and was converting it to an accumulation style fund. That actuarial approach fits uneasily in a contest about unfairness in circumstances where the respondent had represented that the new fund would provide benefits of equivalent value to those available to employees under SASS.
353Again, the valuing of this detriment unilaterally imposed upon the employees raised complex issues, but the complexity of those issues could not, properly, result in this aspect being ignored in designing the new fund. PKCT had a choice: it could have adopted the most efficient scheme it could devise to provide defined benefits or, adopt an accumulation scheme but either way the benefits had to be equivalent to those under SASS. Once it chose an accumulation style fund, there were obvious benefits to the respondent as employer (as detailed in both expert reports) and there was clearly a possibility of losses to employees. Indeed, many of the employee witnesses were cross-examined on the basis that the material provided to them by the Joint Working Party concerning the new fund clearly showed that there could be winners and losers and depending on the state of the markets when a person retired, they may be better off, much better off, worse off or much worse off. Those possibilities, so strongly relied upon by the respondent in cross-examination, was a two-edged sword: it demonstrated that no attempt had been effectively made to replicate the certainty of the benefit under SASS , or factor in necessary elements of a new scheme that would at least adequately address that risk.
354In this context, it is pertinent that Mr Murphy identified increased employer contributions as the easiest way of addressing these concerns. In answer to questions raised by the Court, Mr Murphy rejected the idea that there should have been some provision in the new scheme allowing a calculation to be made of any losses compared to SASS and compensating for those losses, if they eventuated at retirement. That approach was rejected, not because it was said to be incapable of implementation but because Mr Murphy supported a strict delineation between accumulation funds and defined benefit funds and was of the view that any safety net proposition would simply turn the accumulation fund back into a defined benefit fund.
355It is to be remembered, however, that what was of primary importance to the consortium was the creation of a superannuation fund, acceptable to employees that would ensure benefits equivalent to SASS so that it could take up the operation of the terminal with experienced employees and free from continual industrial unrest. The evidence before the Court demonstrates that the consortium and the PKCT management appeared to have an open mind as to the terms of the new superannuation scheme and were not wedded to traditional approaches or opposed to novel provisions, so long as the scheme provided equivalent benefits and was relatively easy to administer. Once the position was reached where the new scheme did not address the possibility of the risk of loss by the employees, then it was fundamentally flawed as a scheme that could meet the description of ensuring benefits equivalent to those available under SASS.
356There was also considerable debate concerning the effect of Mr Rawsthorne's calculations that, under the provisions of an industrial agreement, an annualised rate was introduced at the terminal. It is not necessary to plumb the depths of this debate in light of the course that the Court has determined to follow, but it is not entirely clear that Mr Rawsthorne or those who gave him instructions on this matter were incorrect. This issue focused upon allowances, especially for shift workers, being recognised under SASS and how SASS might treat the annualised rate introduced by PKCT. One aspect of the debate centered upon whether, under SASS, the annual rate would be recognised in its totality and not disaggregated as occurred under the PKCT fund.
357Essentially, this was described as an argument about statutory construction. No evidence was called from public sector superannuation administrators as to how similar provisions operated in relation to annualised salaries which took into account incidents of employment, for example: overtime, shift allowance and tool allowance. While it is unnecessary to determine this matter, it should be noted that there appears to be a respectable argument that under SASS, an annualised rate that did not specify within it what was paid by way of a tool allowance, overtime or shift work, would be the rate by reference to which superannuation would be calculated. Such an "all incidents of employment" type provision has a long industrial history and often represents an amount of compensation for being available to perform all work without requiring the employer to engage in costly timekeeping arrangements and to value each element as and if it arose. Those arrangements were often entered into, regardless of the likelihood of all employees performing regular shift work, overtime or, for example, having recourse to a tool allowance. The all incident rate frequently represented an industrial compromise that suited both parties, with the employer given some flexibility in work arrangements and avoiding expensive timekeeping arrangements. The employees received an increase in wages to cover the eventuality that such work could be, at any time, called upon to be performed without further pay. Having regard to these matters, the Court prefers the approach adopted by Mr Rawsthorne but that element will be treated with caution in determining a "just" amount of compensation.
358It has previously been noted that both experts adopted, for the most part, a generalised or averaging approach in order to determine whether or not there had been losses suffered by employees after enrolling in the PKCT superannuation scheme. In his last report, Mr Murphy made a calculation for individuals but did so based on a number of assumptions and therefore, did not purport to show the actual position for employees. It seems that a calculation of an actual loss by each employee by reference to what they may have obtained under SASS and what they did obtain under the PCKT scheme was so complex and/or time consuming, neither side undertook that task. It may well have been not only onerous, but one that involved costs that could not otherwise be justified. There was also the difficulty of many employees not yet retired with their final benefits unknown. For the most part, the experts adopted a generalised approach that, at best, represented a professional estimate. It would be wrong, therefore, to proceed on the basis that, accepting one of the approaches proffered by the experts would lead the Court to a comfortable satisfaction that its order represents a just result, or a sum that was just in all the circumstances.
359Another issue that divided the experts concerned the treatment of "improvements" in the PKCT fund after 1990. As earlier mentioned, Mr Rawsthorne did not take into account these improvements because he was unaware of their origin and left unexplained, they may well have arisen by way of wage offsets. Mr Murphy was of the view that, essentially, these improvements had the effect of improving the benefits available under the fund and needed to be fully taken into account.
360Submissions for the applicant emphasised the importance of the scheme introduced in 1990 as providing equivalence of benefits available under SASS. In this context, it was noted that the representation in 1990 did not make any mention of employees being responsible for financing or sharing the costs of making the PKCT scheme equivalent to SASS. In particular, they were not told that to achieve equivalence of benefits, in the future, they would be required to either give up wages or forego wage increases that might otherwise be granted.
361The applicant's submissions focused on what appeared to be the three main areas claimed as necessary offsets by the respondent, resulting from improvements in the PKCT scheme. The submissions noted that after a year or two, complaints surfaced about benefit equivalence not being obtained under the scheme and in particular, the evidence of Mr Giddings in that regard. This perceived problem led to the first change whereby the respondent brought forward the capacity of employees to make a 2 per cent additional contribution for 6 years after age 52 and that became generally available. Where employees took up this benefit, their 2 per cent contribution was matched by an additional 3.5 per cent contribution by the employer. The applicant's submissions noted that employees were always able to make additional contributions but here, the attractiveness of the proposal was the additional 3.5 per cent contribution by the employer. It was pointed out to employees that it was not mandatory to flex-up in this way but if they did, they had to pay an additional 2 per cent themselves. This was described as a change of "marginal significance." Employees who did not flex-up in this way for six years did not obtain any benefit. It was then submitted that at no stage were employees ever informed that paying an additional 2 per cent for 6 years into the superannuation fund was required in order to obtain equivalent benefits with SASS.
362It was next pointed out that in 1998 and 2000, wage increases were foregone at the level of 1.75 per cent and were taken as enhanced superannuation contributions. Mr Giddings' evidence in this regard was relied upon. The point was made again in submissions that employees were not told in 1990 that they would have to forego wage increases in order to obtain equivalence of SASS benefits. The two increases, on the evidence, occurred in the course of enterprise agreement and wage negotiations., It was submitted that the context of the negotiations supported Mr Giddings' evidence.
363The third matter was the introduction of salary sacrificing. The applicant submitted that this was a factor that should not be open to the respondent as an offset: the amounts of salary sacrifice were, at all times, the employees' money and there was no matching of any amount by additional employer contributions. The argument was repeated that, in 1990, employees were not informed that if they were to achieve equivalences of benefits, they would have to finance their own investments by way of salary sacrifice.
364While there is force in these submissions, it appears that at least some credit needs to be given for the 3.5 per cent additional contribution made by the employer at an earlier time than previously available, even though the employees were required to increase their own contributions by 2 per cent to obtain this further benefit. It also needs to be understood that not all employees took up this option. Because it was an existing benefit brought forward for people at a younger age and bearing in mind that employees had to undertaken to contribute 2 per cent for six years, it is difficult to treat the entire 3.5 per cent as an appropriate offset: indeed, Mr Rawsthorne did partially account for this element. Bearing in mind the approach the Court ultimately takes to calculating the extent of any shortcomings in equivalence in the PKCT scheme, it is not necessary to precisely quantify the level of discount of the 3.5 per cent that would be appropriate, but it is sufficient to say that it should, nevertheless, be taken into account. Importantly, the Court's approach to these matters has a real impact on the approach adopted by Mr Murphy and the results he achieved.
365Further mention needs to be made of wages said to be foregone by employees to improve their superannuation. Although Mr Beale was of the view that wage increases taken as superannuation benefits were only motivated by taxation considerations, the evidence of Mr Geddings in this respect is preferred. In particular, Mr Beale was not involved in negotiations for two increases granted in 1998 and 1999, nor was he involved in the salary sacrifice negotiations. Mr Giddings was firm in his evidence that at least two wage increases were foregone so that improvements could be made in the PKCT superannuation fund. Although there were tax benefits, the wages were foregone because of the need to address inadequacies in the superannuation scheme. In the light of this evidence, the full force of Mr Murphy's contention that all improvements in the fund had to be taken into account in valuing the PKCT scheme against SASS, loses a good deal of its impact.
366In calculating whether or not employees had incurred a loss as at 2006 and 2012, Mr Murphy relied on a number of assumptions and in essence, made two calculations, including as a benefit under PKCT, the lump sum payments made out of the SASS fund and then a separate calculation that did not include that redundancy payout. Part of the rationale for this approach appeared to be that the lump sum benefit only became available because of the sale of the coal terminal and the respondent should be able to rely on this payment in assessing the equivalence of the two schemes..
367There is considerable force in the submissions for the applicant that those lump sum retrenchment payments have nothing to do with ensuring the equivalence of the PKCT scheme with SASS benefits. Mr Rawsthorne was correct to identify the usual industrial principle that retrenchment payments are made to address a number of issues, including the loss of security of employment (here, importantly, public sector employment) and the uncertainty of new employment. As a matter of fairness, the inclusion of those lump sum payments in the employers' calculations as PKCT benefits is also unjustified, having regard to the scope of the representation made by the respondent that employees would have equivalent benefits to those available under SASS and they would be no worse off under the PKCT scheme. It was never indicated to the employees at any time that the representation depended upon including the lump sum benefit paid out under SASS, especially in circumstances were it was never a requirement of the PKCT fund that those lump sum payments made by another entity had to be rolled over into the PKCT fund or, that such a rollover was required to ensure equivalence of benefits. The Court, as a matter of fairness when comparing the two schemes, is unable to offset in favour of the respondent, the lump sum payments made under SASS by way of retrenchment payments.
368In dealing with Mr Rawsthorne's approach to redundancy, it is necessary to briefly consider some long standing authorities. In the first Termination, Change and Redundancy Case (1984) 8 IR 34 at p 71, the then Australian Conciliation and Arbitration Commission acknowledged that material examined by the Commission indicated many different heads of loss or damage had been considered as relevant in matters involving the assessment of redundancy. Some of those matters included: the degree of hardship likely to be suffered by way of loss of accumulated benefits of service, lost opportunity of other and more secure employment and the cost of movement, financial hardship, fear of such hardship caused by interruption to employment, disruption to a worker's routine, society and social contact and the fact that legitimate expectations came to an abrupt end through no fault of their own. At p 73, the Commission stated its preference for the view that severance pay was justifiable as compensation for non-transferable credits and the inconvenience and hardship imposed on employees. That assessment would be made by reference to standards adopted over the years by the Commission.
369At p 57 of the TCR case, the ACTU submitted that there were common hardships that employees suffer when they were terminated on the grounds of redundancy, including the loss of security of regular and continuous employment, the possible loss of earnings and accumulated benefits associated with employment such as seniority, promotion prospects and other benefits, especially the loss for long serving employees. Job security was also mentioned. At p 70, the cases surveyed by the Full Bench referred to a number of losses suffered and where the compensation addressed the loss suffered as a result of dismissal not due to the fault of the worker, the need to recognise past services, income, maintenance during any period of unemployment following the loss of a job or compensation for employees for leave entitlements which would have accrued if not for the dismissal. In this regard, the Full Bench noted that retrenchment benefits should be paid whether or not the termination was followed by a period of unemployment. It is also to be noted that the TCR case made a provision excluding employees who were transferred under a transmission of business arrangement. There has never been any suggestion here that there was such a transmission of business from the MSB to PKCT. Moreover, the Full Bench discussion is supportive of Mr Rawsthorne's treatment of the redundancy payments made under SASS provisions.
370Mr Murphy accepted that under SASS, the ability to catch-up points and thereby regulate contributions was "of some value." However, in his assessment, it was of a relatively low value and in an exercise of this nature, he would not have expected Mercer to take it into account: it would be appropriate to look at "valuable benefits" and to value them in the comparative exercise but here, there were very many little or small benefits found in various places and special deals that would not be attempted to be valued. This was consistent with Mr Murphy's approach that the comparisons for working out equivalence had to be made on a broad basis with the aim of generally achieving equivalence for the group over time, but was not an exercise whereby every element of the SASS package would be valued and reflected in some way in the PKCT scheme, nor was it appropriate to attempt to establish that individuals would, over the years, not be worse off or have equivalent benefits for those available under SASS.
371Mr Rawsthorne's view was that the benefits that could be identified should be valued because of the instructions he had received that the PKCT scheme was to provide equivalent benefits to those available under SASS and that the employees would be no worse off. This was a very significant difference between the experts and the way they approached their calculations. In this important difference between the experts, the approach of Mr Rawsthorne is to be preferred, particularly in relation to the nature of the exercise to calculate the equivalent benefits consistently with the representations made to the employees by PKCT. It might be that in another context an available actuarial approach may be unexceptional, but in the context of a finding of unfairness in relation to the representations made by the PKCT consortium, the potential for under-valuing the consequence for employees is of such significance that Mr Murphy's approach should not be adopted. It is to be noted that in cross-examination, Mr Murphy accepted that in the nature of the exercise being undertaken by Mercer, they should have priced all the benefits in the SASS fund - although he disagreed that investment risk was a benefit under SASS.
372In relation to transfer of investment loss, it is necessary to consider what needed to be added to the PKCT fund from its date of operation to ensure equivalence of benefits.
This approach flows directly from the respondent's representation that the new fund would provide benefits of equivalent value to SASS and that employees would be no worse off. As earlier pointed out, this was not a global representation, meaning that, nevertheless, there could be winners and losers. An element, therefore, had to be included at the outset of the new scheme to ensure that there would be no losers, but that task was not attempted.
373This approach was criticised by Mr Murphy, in part, because it could lead to windfall gains in the future whereby some employees might obtain even higher benefits because of high interest rates in the market simply to ensure that other members did not lose when they retired in a period of slow economic returns. In considering fairness in the context of s 106, this approach cannot be accepted. The representation was not that there would be equal benefits, but that there would be equivalent benefits and an employee would not be worse off. This meant that, regardless of the complexity of the task, the respondent and Mercer had to address methods that would avoid creating losers in the operation of the new fund. Again, the complexity of the task does not permit the Court to calculate a precise figure to address this element of unfairness, but it does result in this element being included in the overall assessment of compensation that is just in the circumstances of the case.
374Mr Rawsthorne, from the outset, had identified a significant benefit under the PKCT fund for employees who commenced in their 20s and who stayed employed until retirement. They would be entitled to uncapped pension benefits and would not be restricted to points contributed for until age 60 in SASS.
This benefit was taken into account by Mr Rawsthorne, although he did not regard it as a significant benefit in the overall scheme having regard to the need to commence work at a very young age and continue until age 60 or over. The evidence shows that there was a wide range of ages in the workforce when comparison documents were being prepared. There was no precise analysis as to whether or not there was a significant component of the workforce who had commenced in their 20s. The applicant in its written submissions drew attention to the fact that the benefit would require employees to work more years than they would in SASS. In any event, Mr Rawsthorne took this benefit into account, yet still found two important areas where no equivalent benefit was provided in SASS. In the exercise being conducted by the Court, all these factors will be taken into account.
375There are other matters that need to be considered in assessing any loss in achieving equivalent SASS benefits.
Firstly, the employees had lost the certainty and security of a defined benefit fund. Secondly, under the PKCT fund, the administrative costs of operating the fund were to be paid out of the fund, thereby reducing returns: in SASS, the employees paid the administrative costs. Thirdly, the 2 per cent gap chosen by Mercer and regarded as "reasonable" by Mr Murphy (see [218] herein) could not be regarded as reasonable if it excluded consideration of ensuring employees would be no worse off, regardless of the fact that might result in the scheme becoming a hybrid accumulation fund with a safety net benefit. Fourthly, the PKCT assumptions treated everyone as new starters, when under SASS they would have had continuity of membership. While these matters are not easily quantified, they should be placed in the balance when assessing deficiencies in the PKCT fund.
376The evidence of the experts amply demonstrated the complexity of the task involved in trying to ascertain the relative gains and losses under the two superannuation schemes. The calculations performed by both the experts, of necessity, proceeded on a number of assumptions. This became necessary, particularly in view of employees who had not yet retired and for whom no calculations could be readily made about actual gains or losses, especially through investment of the superannuation funds. The difficulty was clearly identified by Mr Murphy who had acknowledged that, once the decision was made to create the PKCT fund as an accumulation scheme, it was "absolutely impossible" for participants to be no worse off "in any situation environment." Whether there were potential gains or losses depended upon the performance of investment markets and in particular, the state of the market when retirement occurred.
377Against this background there were a number of issues (as discussed above) that arose concerning the approach of both experts, not only in relation to an actuarial assessment, but also in relation to what might be regarded as appropriate and fair when those questions arose in proceedings brought under s 106 of the Act. Those aspects of the experts' reports leaves the Court in the invidious position of being unable to wholly accept Mr Murphy's opinion that there are no losses, or to wholly accept Mr Rawsthorne's conclusion that there were losses for the group running in total into millions of dollars. It is, however, implicit in Mr Murphy's approach that the PKCT fund did not, at its inception, provide for equivalent benefits to SASS, or benefits of equivalent value. From the preceding analysis, the Court confirms its conclusion that the PKCT scheme, at both its inception and in its operation, did not provide benefits equivalent in value to SASS benefits. The defects identified in the PKCT scheme leads to the further conclusion that it is just in the circumstances of this case to make a money order to compensate for these defects. In performing this task, the nature of the numerous considerations, (together with the Court's view that in the calculation of each expert there were matters that should either be eliminated or significantly modified), unfortunately, does not allow the Court to simply conduct its own exercise based on the actuarial evidence, including some factors and excluding others relied upon by the experts. Fundamentally, the Court in this case is not engaged in an actuarial exercise but must mould a money order that is just in the circumstances of the case.
378There appear to be two important considerations that impinge upon the exercise of the discretion in s 106(5). The first is the seeming inability to now create an accumulation scheme that accurately reflects the defined benefit scheme available under SASS. The second important consideration is that the Court is constrained from making orders that would operate beyond 2006, thus, removing from consideration actual results (if available) demonstrating losses or gains after 2006. In the peculiar circumstances of this case, there is merit at looking at the position at 1990 when the PKCT accumulation scheme was introduced and making some provision at that point which would address the deficiencies in the PKCT scheme. Mr Murphy accepted that one way the possibility of loss could be addressed would be by increasing the employer contributions to the scheme, perhaps significantly. It may well be that a calculation could be made as to what increase in contributions might yield a result that was "just in all the circumstances", but there appears to be nothing in the evidence that would allow that figure to be determined by the Court and at the same time ensure that the figure did justice to both parties. In any event, the PKCT scheme has now been closed and there are jurisdictional issues concerning any order operating beyond 2006. Further, it is not possible to simply re-create the SASS fund.
379There is one area of the evidence, however, that recommends itself for closer attention. Both Mr Strudwick and Mr Giddings gave evidence that in the context of wage negotiations in 2004, representatives of the parties attempted to resolve, once and for all, the perceived inadequacy of the superannuation arrangements under the PKCT scheme. The evidence of Mr Giddings (Lodge President) and Mr Strudwick (Lodge Vice President) was that those discussions resulted in an agreement that the issue could be totally resolved by a payment to employees of two weeks' salary for every year of service. The union and PKCT was represented at a senior level with the finance manager (Mr Tonnini) and the human resources manager (Ms Hogan) participating in the discussion and agreeing to the proposal. The proposal was then put to the general manager of the coal terminal (Mr Brannon). The arrangement was explained to him and he agreed to sleep on the issue, but the next day he rejected the proposition which included paying the money out of a jointly operated fund specifically set up to meet emergent issues such as employee entitlements if the consortium venture failed.
380The circumstances of the 2004 negotiations were dealt with in the evidence of Mr Giddings and Mr Strudwick. It was responded to in the evidence of Mr Brannon. Both parties referred to this evidence in their submissions and the Court referred to it during the course of submissions. The attitude of the parties to this 2004 event is, therefore, fully disclosed to the Court. The importance of the proposal framed by senior representatives of the unions and management, however, is that it represented their solution to a most difficult problem. The unions embraced that approach as a common sense way of addressing continuing concerns about the inadequacy of the PKCT scheme. That is a significant factor to be considered in this case when fashioning an appropriate money order. The fact that senior management representatives agreed with that proposal does not carry with it any notion that management was somehow bound by the proposal , but the proposal does represent perhaps a somewhat novel solution that senior managers could accept as concluding the ongoing issue about the adequacy of the PKCT superannuation scheme.
381Although Mr Brannon thought that the unions had not made out a case, the proposal had also come from senior managers who were selected to negotiate with the unions over wages and conditions. In cross-examination, Mr Brannon said he was aware that the unions were dissatisfied with the PKCT superannuation arrangements but he did not recall the substance of that dissatisfaction, nor could he recall whether it was explained to him. He could not recall a period when the union's dissatisfactions were raised with him. There was nothing in that evidence to suggest that Mr Brannon had identified any fundamental flaws with the proposal, and he may well have had reservations about paying for such a proposal out of the jointly managed entitlements fund.
382The Court has accepted that there were at least two significant defects in the PKCT scheme by that new scheme failing to factor in, on an equivalent basis, the availability of a pension for a large number of employees and the transfer of investment risks from the employer to the employees. Other, but less significant, defects have also been identified. In the broad exercise of its jurisdiction to make a money order that is "just in all the circumstances of the case" it appears to the Court that the 2004 proposal is a relevant starting point. It appears prudent to the Court, in light of the very different and extensive evidence before it, that the 2004 proposal should be trimmed to ensure that the resultant money order does not inadvertently impose an inappropriately larger burden upon the respondent.
383It must be borne in mind, however, that the difficulties addressed in this case primarily arose because of representations made to the employees that were difficult to meet in an accumulation fund. Having considered all those matters, the Court is of the view that the employees identified in this case should have their contracts varied to provide for the payment of a lump sum calculated by reference to their service between August 1990 and February 2004 at the rate of 1.25 weeks' salary for every completed year of service. That sum should be calculated at the salary payable to each individual as at February 2004 or, their salary at the last day of employment if they left work prior to that date. As discussed in [ 390], it is appropriate in this case that interest on that sum should be paid in accordance with the provisions of the Uniform Civil Procedure Act 2005 and the Rules made thereunder.