Graham v Macquarie Bank Limited

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

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

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

You should be giving your senior executives more responsibility.

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

Possibilities: Meeting schedule and content. Strategic plans. Secretary. Management by memo. WRS involvement.

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

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

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

Arguments to merge - Client base - CFLS moving towards mid-market.

CFLS - Maturia - Nick Lattimore - Geoff de Mesquita - Kerry - 1 other BJG Pluses - Built business - Some good people development - Good credit management - Good systems But - profits - Paxus NL/MP etc Rel with clients - doubtful. Mainly with law firms

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

The first note: BJG discussion 9.00 6/11/91 WRS - Warned 6 months ago of morale problems & management issues & need for changes - Division in crisis. Won't be anyone left. - Departures/problems Martina Kerry Pippin Theresa Nigel Cheri Nick - Geoff de M situations discussed. Big disappointment to BJG - Common thread. All of above have raised concerns with WRS about BJG management style WRS believes concerns shared by those remaining BJG defence - Departures due to probs in Corp Banking, better offers, etc - BJG firm but fair. Has changed following WRS observations - Advertising Friday. Difficult market. WRS - Very concerned. CFLS staff have voted with feet. Changes required. Discuss further.

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

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

Mr Lattimore in his affidavit evidence gives this account of an exchange with Mr Berg: Mr Berg said:

Do you think that Richard Sheppard is seeking to get rid of Brian Graham?

I have no basis for believing this to be so but I am aware that Charles Wheeler had complained to Richard Sheppard about aspects of Brian's management style. 107 Mr Moss' gave affidavit evidence. Mr Berg did not speak to him but Mr Moss confirmed the applicant had approached him during 1991 and raised concerns about Mr Sheppard and their respective difficulties including Mr Sheppard's practice of talking independently to their staff. Mr Moss, as head of the Property Services Division, agrees he and the applicant spoke "without enthusiasm" of Mr Sheppard's habit of developing relationships with staff working under them without their knowledge. 108 Following Mr Berg's conversation with the applicant there was as usual on Monday an Executive Committee meeting. Mr Sheppard prepared notes for the meeting: CFLS -- Issues to be raised with Exec Comm 11/11/91 1. Departures 2. background to WRS discussions with BJG. - 6 months ago - after which I told a no of AD's my views - Last wed when I talked about crisis - Thursday when I told BJG job on line and discussed alternatives - Friday BJG met with WRS and ARB separately - This morning 3. Attitude of other staff members, eg, CW, RJL, NL, MP, KM, FH 4. Issues raised by BJG 109 From these it can be concluded, as the applicant has given evidence, that Mr Sheppard had only discussed morale with the applicant six months before; Mr Sheppard had been taking the other staff, the Associate Directors (AD's) into his confidence after July and before his inquiries on 8 November 1991; Mr Sheppard did tell Mr Graham his job was "on the line" and discussed possible alternatives; on the Wednesday, Mr Sheppard had referred to a crisis, that is, before the resignation of Mr Windsor and the departure of Ms Mather. 110 There was no further inquiry made by the Bank as to the applicant's allegation or as to the bona fides of Mr Sheppard's report. Evidence revealed there was clearly a difference of opinion between the applicant and Mr Sheppard as to the reasons for poor morale in the division. Mr Sheppard was aware of this. His note acknowledged Mr Graham had views. Mr Graham was not asked for his view. In the context of whether he should be terminated, further inquiry should have been made. No direct consultation was entertained with the applicant. Even if Mr Graham was a senior executive he was entitled to a fair hearing. 111 The Committee formed a view, based on Mr Sheppard's view, that if the applicant stayed as head of the Division further executive staff would leave and they determined there was an irreconcilable breakdown in the relationship between Mr Sheppard and the applicant. I accept the applicant's submission that what the respondent did may have been commercially expedient. However, commercial expediency does not equate to fairness. As Lord Atkin said in General Medical Council v Spackman [1943] AC 627 at 638: Convenience and justice are often not on speaking terms. 112 Mr Berg says of the decision to terminate: I supported the view that there was no option but for the applicant to leave the respondent not only because of what I assessed to be an irreconcilable breakdown in the relationship between himself and Richard Sheppard but also because I was satisfied that if he remained as the head of the CFLS Division that there was a real risk that we would lose yet further valuable executives then working there. 113 The reasons for the termination were at the time, therefore, an irreconcilable breakdown between the applicant and Mr Sheppard and the possible further loss of valuable staff. As to the irreconcilable breakdown this only occurred after Mr Sheppard had threatened Mr Graham in his position and rallied his staff. 114 It is common ground that following the meeting of the Executive Committee, Mr Berg gave the applicant an ultimatum which involved his resignation from the Bank. Mr Berg gave the applicant time to consider his position overnight. 115 A period of negotiation followed which failed to achieve resolution of the terms upon which the applicant would agree to resign. The applicant left the worksite after the Executive Meeting. The respondent formally dismissed the applicant by a letter sent to him on Christmas Eve with effect from 31 December 1991.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The DPS Claim 150 The respondent in its discretion paid the applicant $155,524 referrable to DPS. The Executive Committee calculated, in the use of its discretion, the following payments as to his DPS: (i) the balance of his 1989/90 profit share; (ii) a further 17% taking to 50% his DPS vesting of his 90/91 allocation; (iii) 50% vesting of his 91/92 allocation up to June 1992. 151 The applicant claims a payment for 1½ or alternatively, 2½ years of DPS. It is not suggested by the applicant that there was anything unfair about the deferred vesting arrangement. He concedes it was an integral part of the respondent's scheme to ensure that Executive Directors did not resign or retire before completing a lengthy period of service with the respondent. However, the applicant submits this arrangement enabled the respondent, at its discretion, to bring the employment relationship to an end prematurely and thereby cause an employee to forfeit profit allocations made in respect of an Executive Director's contribution in earlier years. Arrangements of that kind are inherently unfair the applicant submits (see Lumby v Yorkshire-General Life Assurance Co Ltd [1978] 1 NSWLR 626 at 629. 152 The Bank enjoyed the benefits of long term profits reflecting the endeavours of the CFLS Division. But one of the examples given in evidence was the Government Car Lease Arrangement that the applicant designed and sold to State Treasury. It is agreed this arrangement reflects in the Bank's profits for 10 years. 153 From the Compensation Memorandum it can be determined the amount of DPS profit share was struck each year for each Executive Director and was allocated in consideration as to past performance of the employee (see Westfield v Helprin (1998) 82 IR 411). The scheme made no provision for the payment of the allocated DPS for termination without cause. The scheme's vesting provision requires there be a long term vesting of monies, already allocated to executive staff for their endeavours, for the purpose of retaining the long term services of the employee. The allocation was made on a performance estimate. The payments vested over a 10 year period of time. In my view this is a long period of time to vest monies already allocated. For the vesting of shares, Peterson J in Canizales v Microsoft Corporation & Ors [2000]NSWIRComm 118 (1 September 2000) referred to a 7½ years vesting period as "lengthy". Ten years was certainly a long period of time in which to allow access to a cash payment already earned and allocated. The vesting provision had as its purpose the retention of service. The Bank determined not to retain the service of this employee. His termination has been found to be not for just cause. 154 The respondent submits, as to the level of DPS payments that were made on the termination, it exercised its discretion at Executive Committee level bona fide and not capriciously or otherwise unfairly (see Westfield Ltd & Anor v Helprin (1998) 82 IR 411 at 439 generally) and therefore the Executive Committee's decision for the DPS payments of termination to the applicant should be found just in the circumstances. 155 The respondent submits, in the event the Court is satisfied this was not a "just cause" termination and a reasonable notice period in the circumstances was 12 months, then the court will not as a matter of discretion make a monetary order in favour of the applicant with respect to any "profit share" that he would have been entitled to had he remained in employment beyond that notice period: it relied on Addis v Gramophone Co (1909) AC 488; Commonwealth v Amman Aviation Pty Ltd (1991) 174 CLR 64 at 92; and NSW Cancer Council v Sarfarty (1992) 28 NSWLR 68 at 80-81. 156 This Court in consideration of claims under s106 of the Act has examined various share option schemes. In submissions, the respondent conceded "there is no appreciable difference between the design and purposes of such share option schemes and the respondent's "Executive Director profit share scheme". 157 In Westfield Ltd v Helprin, the Commission in Court Session examined a share option scheme and held (at 437.3): . . . the option arrangement was unfair in not making provision for Mr Helprin to receive some benefit under the option scheme upon the termination of his employment.

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

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

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

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

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

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

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

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

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

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

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

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

Orders 188 The court finds this was a contract of employment whereby work was performed in an industry and in the conduct of the employment contract, in the termination of the applicant by the respondent, there was a manifest unfairness. The court finds the Compensation Memorandum in its terms incorporated into the employment contract the financial arrangements for the employment of the applicant. The court finds this arrangement as a term of the contract was unfair as it did not acknowledge an executive's rights on termination other than for just cause. The court finds the contract of employment should be varied and that it is just in the circumstances to order the following payments: 1. The unpaid balance of the applicant's BCR to 31 December 1992 including the re-imbursement of monies deducted for taxation purposes by the respondent from the termination payment in accordance with the ruling of the Australian Taxation Office in 1992. 2. The unpaid balance of the applicant's DPS allocation 1990/91. 3. The unpaid balance of the applicant's DPS allocation 1991/92. 4. A DPS payment of monies, equivalent to that allocated to the Executive Directors at an equivalent level to the applicant for the six months June 1992 to December 1992 under the 1992/93 DPS allocation. 5. The claim for Loss of Share Value and the associated Interest Claim is dismissed. 6. Interest on all payments from date of termination to the date of judgment except that of the DPS payment for 1992/93. Interest for that payment from June 1992 to the date of judgment. 7. Costs are awarded to the applicant as agreed or assessed. 8. The parties are to file and serve Orders reflecting this judgment within 28 days with liberty to apply.

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