Haddadi v Solectron Australia Pty Limited

APPLICANT: Mr P Coleman of counsel SOLICITORS: Carroll & Associates LEGAL REPRESENTATIVES: RESPONDENT: Mr S Prince of counsel SOLICITORS: Minter Ellison

JUDGMENT: - 54 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J

MOHAMED HADDADI v SOLECTRON AUSTRALIA PTY LIMITED Application under section 106 of the Industrial Relations Act 1996

1 This application was brought under s106 of the Industrial Relations Act 1996 ('the Act') in March 2001, in relation to the applicant's former employment with the respondent, which came to an end in August 2000, when the applicant was paid three months' pay in lieu of notice.

2 The applicant's case was that the contract was unfair in various respects and also, as a result of the respondent's conduct, in failing to honour certain aspects of the agreement and as the result of the way in which the contract was brought to an end.

3 The relief claimed was: 1. An order declaring the contract of employment (the contract as defined in section 105) between the applicant and the respondents (sic), unfair, harsh and unconscionable, and against the public interest.

An order declaring the said contract void from its commencement or some later time, safe for money paid to the applicant pursuant to the contract.

In the alternative and (sic) order to vary the contract of employment so as to add the following terms: (a) If employment is terminated by the respondent for any reason other than misconduct the employer will pay out to the applicant his remuneration for the balance of the contract term together with annual leave accruing over the period.

(b) The value of 25,000 stock options is to be paid to the applicant with interest from the date of commencement of employment.

(c) Upon termination of employment the performance bonus promised in the letter of offer of employment be assessed and paid forthwith, for time worked and over the balance of the fixed term of the contract.

(d) To prevent the respondent from treating the applicant so as to induce stress, humiliation, illness, pain and suffering.

(e) To require the respondent to comply with and observe the contract, to prevent and restrain the respondent from breaching the contract and prevent the respondent from relying upon work performance as the reason for termination.

(f) In the alternative if termination by the respondent within the fixed term by reason of poor performance is justified, then the respondent will give to the applicant 18 months notice of termination or payment of 18 months remuneration (including salary and bonus) in lieu of notice.

(g) To require the respondent to deliver on all promises and representations contained in the offer of employment.

An order that the respondent pay to the applicant a sum, as particularised in Part D Below, representing remuneration for the balance of the contract term, annual leave over the balance of the contract term, the value of stock options, promised on commencement, an amount in respect of performance bonus promised on commencement and an amount to compensate for stress, humiliation, illness, pain and suffering caused to the applicant.

An order that the respondent pay to the applicant an amount for interest as set out in Part D below.

An order that the respondent pay to the applicant his costs of the proceedings.

Such further or other orders that the Commission in Court Sessions (sic) may consider just.

4 The money orders sought were: 1. In respect of 25,000 stock options, US$111.848 (Approximately A$211,000)

In respect of remuneration (at $370,000 pa) over the balance of the contract term - 25 months remuneration at $30,833.33 per month = $770,833 less $91,377 paid on termination) Balance Due = $679,456.

Annual leave over the balance of the contract term - $64,236.

In respect of additional remuneration based on performance objectives - 25% of salary for three years - $310,000 x 3 x 25% = $232,500.00

For stress, humiliation, illness, pain and suffering - $100,000 Total of items 1 to 5 = $1,332,192

Plus interest on item 1 above at Supreme Court scale from date of commencement and on other sums from the date of termination of employment, plus costs.

5 The issues identified by the parties as requiring resolution were: 1) Principal issues for resolution

(a) Was the operation of the 'termination of employment' clause of the contract dated 15 February 2000 and accepted 21 February 2000 ("the contract") unfair (to the Applicant) by reason of the Respondent's conduct in purporting to terminate the employment for reasons relating to the Applicant's performance?

(b) Is the answer to 1(a) is (sic) yes, should an order be made under section 106(5) for payment to the Applicant of money equal to the balance of the contract term?

(i) Is the 'termination of employment' clause of the contract unfair?

(ii) Is the conduct of the Respondent in providing payment in lieu of 3 months notice to the Applicant unfair? (d) Did the Respondent represent to the Applicant (as set out in the email exchanges during March 2000 between the Applicant and Sean Rosthey which appear as annexures MH22 and MH23 to the Affidavit of the Applicant sworn 8 May 2002) that it would provide him with 25,000 share options in the Respondent at a strike price of $1.00? (e) Was the conduct of the Respondent in not providing to the Applicant the value ascribed to what is referred to as 'Singapore options' in annexure MH29 of the Affidavit of the Applicant sworn 8 May 2002 unfair?

(f) If the answer to 1(e) is yes, is it appropriate for the Commission to order an amount of money equal to the value ascribed to what is referred to as Singapore options' in annexure MH29 of the Affidavit of the Applicant sworn 8 May 2002? (g) Was the conduct of the Respondent, in not making any bonus payments to the Applicant in relation to the three (3) year term of the contract unfair?

6 Evidence was called from the applicant and Mr Joe Tang, Senior Vice-President Asia Operations; Mr Paul Zuber, Chief Executive Officer; Mr Michael Edwards, Inventory & Purchasing Manager; Mr Neil Graham, inventory list at Parker Hannford; Mr William Kinnane, Consultant; Ms Kaye Knowles, self employed; Mr Leslie Takeo Nishimura, retired Special Projects Vice President; Mr Johnny Ong Seng Huck, Senior Business Unit Director; and Mr Paul Weiss, General Manager.

7 The evidence was that the applicant had approached Mr Zuber, then the respondent's CEO, in January 2000. It was around this time that the respondent's former operations manager had left. The respondent operated manufacturing plants in Liverpool and Wangaratta. The Liverpool plant manufactured components for the telecommunications sector. The respondent had been established in 1998, by a group of venture capitalists, who had acquired the plants from IBM and Alcatel STC Australia Pty Limited. Various of the respondent's employees also held significant shares and options in the respondent, directly or through other entities. The applicant was very experienced in this industry, both in Australia and overseas. The parties' negotiations resulted in an agreement, with the applicant commencing employment in February 2000.

8 At the time of the negotiations, the applicant was made aware that negotiations were ongoing with Solectron Australia Pty Ltd ('Solectron'), in relation to a potential acquisition. This was of concern to the applicant. He also wanted to ensure that his remuneration package was consistent with that of his former employment; that some account would be taken of share options and bonuses which he would forgo in leaving that employment to join the applicant and that he did not become a casualty of the acquisition.

9 The written contract of employment was drafted by Ms Knowles, although the termination clause reflected the applicant's proposal. It was agreed as the result of quick and amicable negotiations between the applicant and Mr Zuber. It relevantly provided: Remuneration

Your fixed remuneration package will be A$370,000 per annum. This includes company contribution to superannuation. Your salary will be paid monthly by Bluegum Telecommunications Pty Limited on the 15th of each month by electronic funds transfer to your nominated bank account. In addition, you will be eligible to receive variable remuneration of 25% (threshold 1 - satisfactory performance) or 35% (threshold 2 - superior performance) of your fixed remuneration package) against the achievement of performance objectives to be mutually agreed.

Should you wish to resign, a minimum of three calendar months notice will be required.

On acceptance of our offer of employment you will be provided with an Executive Service Agreement which will remain in force for a period of three years from the date of commencement of your employment with Bluegum. Should your employment be terminated during this period, unless for poor performance or summary dismissal, you will be compensated the greater of: (a) the amount of your package payable on the termination date as if you had continued to be employed from termination date until three years from date of commencement of employment, or

(b) the amount of your package payable on the termination date as if you had continued to be employed for a one year period from the termination date.

After three years from date of commencement of employment Bluegum may terminate your employment by giving three months notice.

Initially you will receive 10,000 share options in the company. These options will have a strike price to be determined by the Board. You may be granted further options in the future at the discretion of the Board.

In addition, to increase your equity in the company you will be encouraged to purchase employee shares as they become available. In this connection we are actively pursuing an initial parcel of 15,000 shares.

10 The respondent's name at this time was Bluegum Telecommunications Pty Limited ('Bluegum').

11 The promised share options in Bluegum were not forthcoming, despite what had been agreed. There were further negotiations and in March 2000, it was agreed that the applicant would be allocated 25,000 options in another entity, located in Singapore, with a $1 strike price.

12 Mr Kinnane explained that it had been intended to relocate the respondent's head office to Singapore and to have executives with Bluegum options swap them for the options in the new Singapore entity. In August 1998, it had been therefore decided by the Board not to issue further Bluegum options. His evidence as to what Mr Haddadi had been promised in that context, was inconsistent with the contract of employment, quoted above. Mr Kinnane was not involved in the negotiation of that contract, but remembered that shares were not available to be bought by the applicant at the time and so the grant of a larger number of options, was advantageous to him. The applicant's evidence was that the Singapore entity had never been mentioned in the negotiations. It was first referred to when the promised Bluegum options were not granted.

13 Mr Kinnane was a member of the Board, as was Mr Zuber. Mr Haddadi was referred to in the Board papers dealing with the proposed Singapore options. Problems with the proposal developed, in the context of the Solectron acquisition, given the relevant regulatory scheme in the United States. This led to the development of an undertaking that Solectron would 'make whole', the position of executives, including Mr Haddadi, in relation to Singapore options. Other employees held Bluegum shares, but this was never Mr Haddadi's position. Mr Kinnane held various options and exercised them after the acquisition, when he left the respondent, taking up shares in Solectron, having decided to become a long-term holder of the shares. He explained in cross examination that he had also received a cash payment in respect of the difference between the theoretical cash value of the Singapore options and the Solectron options which Solectron was prepared to grant.

14 While there were concerns about what Solectron proposed and delays in implementation, Mr Kinnane accepted what he was offered as being reasonable. In cross examination, he agreed that he regarded the sale to have been a success for the shareholders. That had been the venture capitalist's aim.

15 Mr Haddadi's evidence was that the Singapore options were also not forthcoming. After the acquisition was completed in July, a further proposal was put to him. It involved the applicant being granted certain options, under the 'Solectron Incentive Stock Option Plan', but with gradual vesting over an extended period, in order 'to make whole' what might have flowed to the applicant under the earlier arrangement. The respondent assessed the value of these options as $US111,848. The applicant never accepted this proposal, which was clearly not negotiable. By that time he was involved in difficulties at work, which he believed were designed to wrongly lead to the termination of his employment, on a basis which would ensure that he did not receive his contractual entitlements. In these proceedings, the applicant however relied upon the respondent's valuation of the Solectron options. The respondent resisted the idea that it had any relevance to the claim.

16 The Solectron options were to be subject to a four year vesting period, in circumstances where the applicant had a three year contract, one year of which had also almost passed by that time. Ms Knowles' evidence was that there was general discontent amongst the executives about this vesting period, which was the subject of unsuccessful negotiation with Solectron.

17 Ms Knowles gave evidence about the course of the negotiations between the respondent's executives and Solectron, in relation to their shares and options. There was general concern about the fairness of what was proposed. The position of Mr Haddadi was different to that of other executives, because he had never been granted the promised Bluegum options. The offer of Solectron options depended upon seniority and the value of the Singapore options which an employee held. If the Solectron options were valued by Solectron as less than the notional value of the Singapore options, a cash payment was made to the employee.

18 In re-examination Ms Knowles explained that in her own case, she had Bluegum options. Their value was assessed and the difference between their value and that of the Solectron options she was allocated was calculated and she received a cash payment of the difference, with the last payment being made on the termination of her employment in 2002. Other executives holding such options received a similar payment, having regard to their own holdings and what was proposed for them by way of Solectron options.

19 Mr Zuber confirmed in cross examination that one possibility which he raised with the applicant was that Solectron would have to make a cash payment to him, given the promise to "make good". This did not occur. He also explained however, that the offer of the Bluegum options was itself subject to a vesting period, which was set by regard to "annual plans and targets for teams and plants and those were performance targets for the basis for compensation. That was true for all our senior people". There was, however, no reference to such a process in the applicant's letter of appointment, no document describing such a process was tendered and no evidence from any other employee, that such a process applied to their circumstances. To the contrary, there was evidence of universal concern about Solectron's proposal, including in relation to the vesting period, as being unfair.

20 On the applicant's case, there had never been any question as to his performance, prior to the takeover. Mr Zuber had always spoken glowingly of his performance. After the acquisition, it became apparent that the results which had been represented to Solectron were not, in fact, achievable by the respondent and Mr Zuber went about making the applicant the scapegoat for these shortcomings. It had been in Mr Zuber's interests to maximise the share sale price, because he had a substantial shareholding in the respondent, through a corporate vehicle. The respondent had been established by he and a number of other investors, with the intention of achieving an on-sale.

21 The applicant's case was also that Mr Zuber sought to make the applicant responsible for matters for which he had never been given responsibility and over which Mr Zuber himself continued to exercise close control. The contract of employment referred to agreement on performance objectives being reached. They never were. The applicant was faced with a crisis at Liverpool, which distracted him from pursuing his own outstanding contractual arrangements. Mr Zuber was distracted with the sale negotiations and so the applicant set his own targets. Ms Knowles' evidence in cross examination was that other executives had performance objectives set by Mr Zuber, in discussion with the executive, which were then confirmed, usually by email. Mr Zuber explained in cross examination that this did not occur with the applicant, because of the sale and because there were to be changes in structure and responsibilities, as the result of moving to Solectron.

22 The targets which the applicant set himself, were contained in a document entitled 'Liverpool Lean Production Plan', which was also presented to the Board in April 2000. It dealt with short-term recovery and long term objectives in areas such as quality, delivery cycle time, cost and people. It did not deal with profitability, inventory turns and asset utilisation, which Mr Zuber later asserted were also the applicant's responsibility.

23 The applicant's evidence was that the respondent's profit and loss depended upon sales being achieved, a responsibility assigned to the Sales director, Mr De Cata, who reported to Mr Zuber. Inventory was a product of the respondent's order system, which operated on the basis of customers' forecasts of intended purchases. Weekly decisions were made by a senior management group, of which the applicant was but one member and which was headed by Mr Zuber. It was on the basis of these decisions that orders of inventory were made. They were reflected in the 'Master Production Schedule' ('MPS').

24 At that time, materials required by the respondent to manufacture orders took between 16 and 52 weeks to acquire. Thus, acquisition of inventory could not await receipt of firm customer orders. The result was that divergence between customer orders actually placed and the MPS, based on earlier customer forecasts resulted in excess inventory. Throughout the applicant's employment MPS assessments proved to be consistently overoptimistic, resulting in an ever-growing inventory. This was a difficulty others in the industry also encountered at the time, including Solectron. The industry was badly affected by a serious general downturn.

25 As to asset utilisation, the applicant's evidence was that assets included cash/liquid assets controlled by the CFO; accounts receivable controlled by the sales director and CFO and production, machinery and equipment. Only the latter came under the applicant's direction. On the applicant's case, equipment utilisation at Liverpool was around 25%, due to lack of shippable orders, the responsibility of the sales director. This was despite a decision made Mr Haddadi to reduce the number of lines operating at the plant by three.

26 Mr Zuber's evidence in cross examination, however, was that: 'A plant manager role within Liverpool particularly in Solectron is that the plant manager is responsible for the profitability of their facility. They have to work with account managers and many others who don't have direct control over but ultimately the plant manager has to figure out the best ways to make that plant work and be more profitable.'

27 Mr Zuber agreed that the respondent could not make profits unless costs were lower than revenue and that the respondent had fixed costs, including the servicing of debt; lease of premises and administrative costs. In 1999, sales were disappointing, with a significant reduction in volume, reflecting a worldwide difficulty at that time, which continued in 2000. There were also worldwide difficulties in sourcing parts, some of which had to be acquired at considerable cost and delay. He also agreed that of those reporting to him, only Mr Haddadi had a background in contract manufacturing. Mr Kinnane's background was in food purchasing, Ms Knowles in services and construction and Mr De Cata in software sales.

28 Mr Zuber's evidence was that prior to the sale he was not present at many MPS meetings. Decisions were made by consensus and they were critical to the business. A big problem developed because the inventory was purchased for forecasts which did not result in sales. This impacted heavily on the respondent's profitability. He agreed that after the acquisition, protocols were implemented regulating the acquisition of inventory. He had authority to authorise purchases of individual orders of up to $800,000. Mr Zuber denied, however, that he was ever informed that Solectron was disappointed by the performance of the business. He asserted its awareness of the respondent's performance, given the due diligence exercise undertaken before the acquisition.

29 In July, Mr Haddadi made a presentation to the senior management team, as to steps which he believed needed to be taken to address the respondent's problems. It was not well received and on the applicant's evidence, Mr Zuber warned him that Mr Kinnane had "his knife out for you". He found other executives unco-operative. Ms Knowles, despite Mr Haddadi's protests, appointed a personnel manager to the Liverpool plant who had no experience in manufacturing plants. Mr Haddadi had to work closely with him at the plant, even though he reported to Ms Knowles at head office. Mr Haddadi did not find him of assistance in dealing with personnel issues at the plant, but a burden. In cross examination, Ms Knowles explained that she made the appointment after consultation with Mr Zuber and that the manager was made redundant in December 2000.

30 In early August, without any prior warning and unbeknownst to Mr Haddadi, Mr Zuber took steps to have his employment brought to an end. Mr Zuber agreed that one of the key reasons for a problem with the Liverpool plant operation which he communicated to Mr Nishimura at the time, when he proposed the applicant's dismissal, was the Alcatel CMUX product. He agreed that he did not explain this to Mr Nishimura. He explained that he had mentioned the incident with Mr Rigoni in May, because Mr Nishimura had asked to be supplied with examples of problems. He was unaware however, that Mr Haddadi had apologised about that matter at the time. His evidence as to his own involvement in the matter was that he had attended a meeting at which he said nothing.

31 Mr Zuber explained the reason for having taken this step was because he and his team had reached a point where they were not confident that relationships with Mr Haddadi could be repaired. They were becoming increasingly worried that necessary improvements at the plant were not occurring. Urgent action needed to be taken, including potential changes in roles, if Solectron standards were to be met. He had decided that he wanted Mr Haddadi removed. He had made this decision after returning to the plant after the sale. He then had discussions with Alcatel. There were complaints about delays and many cancelled orders. He agreed that he had never raised this with Mr Haddadi and did not do so until the following December. He denied however, that at that point, he needed someone to blame for the business which Solectron could now see was not coming to fruition.

32 Mr Zuber was not given the go ahead, for a dismissal. While the respondent's case denied this, Mr Zuber agreed in cross examination that he had decided at this point, before the applicant's unsatisfactory performance review, that the applicant's employment should be terminated. This view was not accepted and instead, a performance review was implemented.

33 Later in August 2000, the applicant had an unsatisfactory performance review, which he initially disputed. The applicant disagreed with many aspects of the review, but after reflection and discussion with Mr Nishimura, accepted that his performance would be measured on the basis of future results, rather than past performance. His attitude soon altered. He quickly came to the view that he was being made responsible for matters outside of his control, which were the responsibility of others who reported to Mr Zuber and of Mr Zuber himself. This view was entrenched by Mr Zuber's establishment of a taskforce in November. Mr Nishimura's evidence was that he did not regard himself as having a role in the performance review process. That was Mr Zuber's responsibility. He was available to provide Mr Haddadi with support, within his capacity as site manager.

34 Mr Zuber explained that it was highly unusual within Solectron for a poor performance review to be discussed with more senior officers. Mr Haddadi had discussions with both Mr Nishimura and Mr Tang. He agreed that Mr Haddadi received nothing more in writing from him until December, when he was informed his employment was under threat. Mr Zuber agreed that he was personally responsible for profit and loss of the respondent in Australia, but pressed the view that Mr Haddadi had that responsibility for the plant, even though he had no responsibility for matters such as sales or finance. Mr Zuber explained that even though the MPS was not set by the plant manager, Mr Haddadi had authority to accept the forecast or not, to make the material commitments and if the orders did not materialise, to reduce material liability, by sending inventory back to the supplier; delivering it to the customer, or giving it to a broker. This authority extended to the decisions made in relation to the Clyrcom customer, a significant problem at the time. The position so far as Mr Zuber was concerned, was that Mr Haddadi either had to accept the judgment of others, or explain why he would not, because he "ultimately has to bear the Profit and Loss responsibility for inventory".

35 There were a series of issues between the parties as to the accuracy of this review and what resulted from it. On the applicant's case, a decision had been made in August, to bring his employment to an end and that is what Mr Zuber worked towards. It was the applicant's belief that Mr Zuber was seeking to deflect Solectron's concerns about his own performance, by seeking to make the applicant a scapegoat and in order to avoid paying him under his contract, once his termination had been engineered.

36 Issues as to personnel matters were raised in Mr Zuber's unsuccessful attempt to remove Mr Haddadi and in the performance review. A report made by Ms Knowles by email, following from a discussion which she had privately with a consultant, was a factor to which he had regard. Ms Knowles' cross examination showed that this report was not one made known to Mr Haddadi.

37 Mr Zuber's evidence was that he began having concerns about the applicant as early as March or April 2000, when he began receiving complaints about him from other senior managers. He found the applicant's behaviour in weekly executive meetings to be abrupt. In June, Ms Knowles raised a concern with him as the result of a weekend programme which had been conducted with the applicant's staff. He came to the view that the applicant did not have "a professional and productive relationship with his peers and many of his immediate subordinates" and that this was essential, if the profitability of the plant was to be turned around. The applicant's evidence was that such concerns were never raised with him by Mr Zuber. It was in late June that Mr Zuber first proposed replacing Mr Haddadi to Mr Nishimura. He wanted to appoint Mr Weiss to the position. By July Mr Nishimura also had concerns about the applicant's performance.

38 Mr Zuber's evidence was that as early as April and May he also had concerns about complaints from Alcatel and Clyrcom and that there were performance issues at the plant in relation to quality control; unresponsiveness to customer needs; high costs of production; increasing labour costs; inability to meet production schedules and relationship issues. He thought it was too early, however, to form concluded views.

39 This evidence was inconsistent both with the applicant's evidence and also with documents written at the time by Mr Zuber. For example, he wrote to Mr Haddadi in May that he was pleased that he 'would be leading the pack' and slept better at night as a result. In June, Mr Zuber wrote to tell him that he had told Solectron that he was doing a very good job and "your leadership has been a key ingredient in making inroads at Liverpool." In July, he wrote to Mr Haddadi telling him that he looked forward to working with him to raise standards to the Solectron levels.

40 Mr Nishimura's evidence was that he worked closely with the applicant and Mr Zuber for two weeks at a time between May 2000 and February 2001. He left Solectron's employ in March 2001. The profit and loss projections provided during the acquisition process were never achieved by the respondent. There was deterioration after the acquisition. When he questioned Mr Haddadi about the Liverpool plant performance, he complained about an inability to obtain figures from the finance department. Mr Nishimura informed the applicant that profit and loss was his responsibility and that he had to develop an understanding of the position.

41 The applicant's evidence was that the finance department had continuing problems in providing credible financial information as to the operation of the plant. This was not improved when Solectron required changes to be made to the way in which records were kept. There were ongoing problems with resources in the finance department. Mr Kinnane confirmed that the respondent had problems meeting Solectron's requirements to produce weekly profit and loss reports. He understood Solectron itself had problems and that the process was new to it too,

42 Mr Nishimura's conclusions were that inventory turns at the plant were unacceptably low; inventory levels exceeded the annual operating plan ('AOP') and the profit did not meet AOP projections. In his position, Mr Nishimura expected Mr Haddadi to also have responsibility for these matters. That was the general understanding of the role of such a position within Solectron. Mr Haddadi repeatedly told Mr Nishimura that those issues were not totally within his control and Mr Nishimura disagreed. By August and September, he was telling Mr Haddadi that he had to take control of sales placing too many orders in the MPS forecast, so that inventory targets were not being met.

43 There was no evidence that Mr Nishimura was giving the same direction to Mr Zuber, who plainly retained control of the MPS process at that time, or that this was put to the taskforce, when it was implemented in November. Mr Zuber reported to Mr Tang, not Mr Nishimura.

44 Mr Nishimura's evidence was that inventory levels did not improve and were running below those achieved by other Solectron sites elsewhere. Customer Satisfaction Indexes ('CSI') were also poor. By November, Mr Nishimura was of the view that profit and loss, inventory management and CSI were areas where performance was deficient and not meeting the AOP. He believed it essential that Mr Haddadi be able to manage relationships with other managers to ensure that these targets were met. In his view, when the taskforce was established, it involved Mr Haddadi dealing with other managers at peer level, but this did not absolve him of his responsibilities.

45 In cross examination, Mr Nishimura confirmed that Solectron was concerned that the respondent was not meeting the AOP. He spent a lot of time analysing the problems present and agreed that a major problem was lack of sales, which were running at about half of forecast. There were also problems flowing from inventory connected with the Clyrcom and Alcatel CMUX products.

46 The applicant's evidence was that he understood that Mr Nishimura expected him to take on various accountabilities, but he could not do so, when not given authority over the areas in question. Mr Nishimura was well aware of the matters over which he was not given authority, as they had frequently discussed them. In November, Mr Nishimura assisted the applicant prepare a presentation to Mr Zuber and other senior staff about the changes in accountability which were required, if these responsibilities were to become his, as the Plant Manager. Those changes were not accepted until Mr Ong was appointed. Mr Kinnane explained, in cross examination, that Mr Haddadi's suggestions were then "vigorously put down" by Mr Zuber.

47 In cross examination, Mr Nishimura explained that he did not regard this presentation as proposing changes, but rather reinforcing what existing responsibilities were. He did not, in any event, accept that at other Solectron sites, the sales function always reported to the site manager. Rather, they reported to a site sales person who reported to the site manager.

48 In cross examination, Mr Nishimura also explained that he expected the applicant to exercise the "authority of influence", so that he could get his job done, even if he had no direct authority for areas such as sales and finance. He understood from Mr Zuber and the applicant that he had this responsibility. He accepted that Mr Zuber had overall responsibility for profit and loss of the respondent's two plants. Nevertheless, he expected Mr Haddadi to elicit cross functional support from these other areas. In re-examination he explained that he found Mr Haddadi to be quiet in the taskforce meetings when it was established in November, not taking a leadership position or the initiative which he expected of him. He also found that Mr Haddadi always had external explanations for his own performance shortfalls.

49 The taskforce Mr Zuber established on the applicant's case, removed from him various of his responsibilities. This, too, was the subject of dispute in the proceedings. Mr Zuber's explanation of this development was that it was designed to assist Mr Haddadi to offload pressure from him and to help him turn the operation around. Mr Zuber also denied that he played an active role in the taskforce, or that it removed responsibilities from Mr Haddadi, or that he had changed reporting lines away from Mr Haddadi. He also denied that he had made these changes at the same time as imposing new performance objectives upon Mr Haddadi.

50 The Chairman of the taskforce, Mr Kinnane and other witnesses, however confirmed aspects of the applicant's evidence about this development. For example, Mr Zuber denied that Mr Kinnane was to run the taskforce, he was only to "manage the various roles within the taskforce". Mr Haddadi had a critical role in the taskforce, his responsibilities had not been diminished and Mr Weiss and Mr Stahlhut continued to report to him. Mr Zuber's aim was to improve relationships among the senior managers, which Mr Haddadi had failed to make harmonious.

51 Mr Kinnane's evidence was that the applicant always received reports on the Liverpool plants profit and loss status, even when the taskforce operated. He found the applicant difficult to work with and took the view that customer's perishing demand reflected poor delivery and quality performance of the plant. The applicant's tendency was to blame customers and others for these problems and not accept responsibility himself.

52 Mr Kinnane, however, described the aim of the taskforce in quite a different way to Mr Zuber, who on his evidence, was an active member of the taskforce. On Mr Kinnane's understanding, it was designed to solve the problems at the Liverpool plant over two to three months, by providing attention by other executives to problems which were there not being addressed by Mr Haddadi. Mr Kinnane then spent about 90% of his time at the plant, but denied that Mr Haddadi reported to him.

53 Mr Kinnane described his role as one of co-ordination, with line managers' maintaining functional responsibility and with only Mr Stahlhut's reporting role changing. He disagreed that Mr Haddadi's role or responsibilities had changed with the establishment of the taskforce. He described pricing of products to have been calculated by a team responsible to Mr Haddadi, utilising a "well developed full absorptions costing system", but with profit margins being set by the senior management team, including Mr Haddadi.

54 The applicant's evidence was that Mr Kinnane pursued his role as head of the taskforce forcefully and aggressively. The result was that he became a lame duck at the plant. Mr Kinnane did not have a work background in this industry. The applicant believed that he was remiss in the MPS meetings, in not pushing the obvious point that an overoptimistic MPS was draining the respondent's cash resources. The resulting high inventories obviously placed a very high strain on those resources.

55 In cross examination, Mr Kinnane disagreed that the respondent's major problem was lack of orders. In his view it was inability to fulfil orders, which led to perishing demand. The respondent's records showed, however, that production went up and down, around a relatively stable monthly figure throughout this period. Sales, however, declined overall and so production was less than the previous year.

56 The finance and sales functions at the plant were never accountable to the applicant. The applicant's evidence was that low sales, the responsibility of Mr De Cata, led to plant utilisation levels as low as 25%, compared to worldwide Solectron figures of 100%. Mr Haddadi was not aware of "perishing demand" at the plant as the result of supply reliability. The period of his employment coincided with a worldwide problem in procurement of electronic components. Shortages were common and "grey markets" developed, with prices for some components increasing by 20 times the normal price. After the acquisition, the applicant discovered that some 70% of components were acquired by the respondent at lower cost than by Solectron. In his view, the performance of the purchasing group was excellent under the prevailing circumstances. The calculation of final price to a customer, and the resulting profit margin, however, remained that of Mr Kinnane and Mr Zuber.

57 In cross examination, Mr Nishimura explained that the taskforce meetings he attended were much concerned with problems of material management. There was a major problem with the Alcatel CMUX product. Mr Weiss had responsibility for materials and Mr Stahlhut for production planning and scheduling. He did not, however, regard their appointment as absolving Mr Haddadi of his responsibilities, rather, he had to then deal with them at their new level. The operation was then cross-functional, but Mr Haddadi still had to meet plant profit and loss expectations, even though these functions then reported direct to Mr Zuber.

58 Mr Nishimura also explained that he heard about the possible termination of the applicant's employment in December. He then spoke to the applicant, but not Mr Zuber.

59 Mr Weiss' evidence was that he was acting site manager at Liverpool immediately before Mr Haddadi's appointment. After his appointment he was appointed supply chain director for the group, with only a 'dotted line' of report to Mr Haddadi. He understood that Mr Haddadi was then responsible for profit and loss of the Liverpool plant. In cross examination, he explained he had this understanding from Mr Nishimura. He was critical of Mr Haddadi's approach to many aspects of his work, including the new Customer Focus Teams Structure and believed that he did not mentor the newly appointed team leaders, a criticism rejected by Mr Haddadi. He also observed Mr Haddadi to have poor relationships with other senior managers and described his relationships with Mr De Cata and the sales team as abysmal.

60 In Mr Weiss' view, the customer forecasts loaded into the MPS were far in excess of plant capacity. He regarded it as Mr Haddadi's responsibility to ensure that this did not happen and believed that he was not monitoring the inputs. In cross examination, he confirmed however, that he was one of the managers involved in the weekly meetings at which the MPS was fixed.

61 In October, Mr Weiss was appointed to the position of Materials and ITSS Director for Solectron, but still with a dotted line report to Mr Haddadi. He then spent three to four days per week in Sydney. He worked closely with Mr Kinanne in improving the Liverpool plant performance, especially on time delivery and his title then changed to IT and Materials Director of the Liverpool plant. He reported directly to Mr Zuber and set about cutting the number of orders placed into the MPS. On his evidence the figure was halved in November. Mr Haddadi denied that Mr Weiss had reduced the MPS figures as claimed. The respondent's own records demonstrated that he had not done so. In cross examination, Mr Weiss explained that three monthly figures were important to consider, as were shipments.

62 Mr Weiss' description of the operation of the taskforce and the roles assigned by Mr Zuber, as he supervising materials, Mr Stahlhut as supervising purchasing and himself as being given responsibility for planning and scheduling, also confirmed Mr Haddadi's evidence that responsibilities were removed from him. Mr Weiss' evidence also directly contradicted that of Mr Zuber and Mr Kinnane, as to how reporting relationships and responsibilities altered. His evidence was that "The task force allowed me to go and focus on the problems being experienced with materials without any hindrance from Mr Haddadi." In cross examination, he explained that what he meant by this was that if the team agreed with him, he was no longer constrained by Mr Haddadi's views.

63 Mr Weiss recounted his views as to other problems with Mr Haddadi's approach to management. While he agreed with Mr Haddadi that the major reason for shifts in schedule was declining customer demand, he was also of the view that this had resulted from a failure to clear backlog and a failure to clear historical unsatisfied demand from the MPS. In cross examination, he also expressed the view that there were good results achieved at the Liverpool plant in the early days of Mr Haddadi's appointment, but that they reflected his own achievements in the plant manager role prior to Mr Haddadi's appointment and not the work of Mr Haddadi.

64 In cross examination, Mr Weiss also explained that he had never had any intention of taking up Mr Haddadi's position. He had both shares and options in Bluegum for which he eventually received consideration from Solectron. He intended to leave after the acquisition and become involved in another start up. That was what he later did.

65 Mr Haddadi's evidence was that he found Mr Weiss resentful of his role. He was relatively young and inexperienced, but considered himself as one of the respondent's founders, with intense loyalty to Mr Zuber. He disagreed that Mr Weiss only initially had a 'dotted line' reporting relationship to him, it was direct. Mr Weiss, as his subordinate, had no basis upon which to understand Mr Haddadi's role and responsibilities. Mr Weiss resented interference with any of the decisions which he made. After he was appointed Materials Director, Mr Weiss no longer reported to him, he reported to Mr Zuber and another materials manager in Malaysia.

66 Mr Haddadi disagreed with the detail of much of Mr Weiss' evidence. He particularly disagreed with the description of his personal relationships with other senior managers. His issues were related to business and were not personal. The ongoing conflict with the Sales Department related to the weekly process of agreeing to the MPS, which the Sales Department wanted high, so that potential sales were not lost and which Operations wanted lower, so that excess inventory was not built up. It was otherwise necessary for Operations and Sales to work closely together and they did. Most of the team was Melbourne-based, but there were daily discussions.

67 The evidence showed that the parties' relationship deteriorated markedly over this time. Mr Haddadi held Mr Zuber accountable for the disastrous Clyrcom account. Mr Zuber denied responsibility. His view was that he had been careful to ensure he had no conflict in relation to what had arisen. Credit decisions were made by Mr Kinnane and Mr Haddadi was responsible for operational aspects of the account. He had later to become involved, because of the huge inventory stockpiled in relation to the account. Mr Haddadi had not raised concerns about the account with him. If he had them, they should have been raised with the sales director, Mr De Cata.

68 Mr Kinnane's evidence, in cross examination, was that pricing was under plant control, although margins were adjusted by Mr Zuber and his reports with decisions made in formal meetings. Contracts were negotiated by Sales and Finance departments. In the case of large contracts they were signed off by Mr Zuber. As to Clyrcom, there were three problems, there was never sufficient plant capacity to fill an order of that size; the product was not manufacturable and the client never completed the design. Clyrcom went into liquidation and efforts were being made in February 2001, to find a use in Australia for the components, so the inventory had not been disposed of.

69 Legal advice was obtained by the applicant after he was threatened in early December with three months' notice of the termination of his employment, if his performance did not improve. Mr Zuber and the applicant disagreed about the genuineness of the opportunity afforded the applicant to improve his performance. There was a flurry of correspondence and recriminations. The end result was a dismissal in January 2001.

70 The evidence showed that the respondent's performance was, in fact, so poor, that both the Wangaratta and Liverpool plants were later closed. This was despite the work of the taskforce and Solectron's appointment of Mr Ong to the applicant's former position. Mr Stahlhut acted in the position for a short period after the applicant's dismissal, during which time the taskforce continued to operate. While Mr Ong's affidavit evidence was that when he was appointed, he was given the same responsibilities as those which the applicant formerly had, that was not made out on the evidence.

71 Mr Ong and the applicant never met. In cross examination, Mr Ong explained that he had his understanding of the applicant's responsibilities from what he had been told by other people. In cross examination, Mr Tang confirmed that the organisation structure implemented with Mr Ong's arrival, was designed to address the particular problems existing in the respondent's operations. His charter to Mr Ong was "to cut across the different functions".

72 The evidence clearly showed that Mr Ong's responsibility and control over areas such as sales, financial management and profit and loss, were not given to the applicant, even though Mr Tang's evidence in cross examination was that he understood that Mr Haddadi had control over some of those areas, particularly profit and loss. Mr Tang explained that as Mr Zuber's number two at the plant, he had to accept that responsibility and to ensure accountability across functions. While he accepted that low sales were not the applicant's responsibility, he believed that it was possible to run a profitable operation with lower sales. Plant utilisation could also be affected by inefficient machines, slow changeover time and poor maintenance.

73 When appointed, Mr Ong was also given control over the MPS process, which was never given to the applicant. The respondent's organisation chart was altered to reflect these changes. Mr Nishimura explained in cross examination that when Mr Ong was appointed it was on the basis of "two in a box" with Mr Zuber. He did not understand what that meant. Mr Ong explained that it meant that he and Mr Zuber shared responsibilities.

74 In cross examination, Mr Ong also confirmed that after he replaced Mr Haddadi, it was his decision as to what went into the MPS. He agreed that his experience was that there was tension between sales and operations as to what should be loaded into the MPS, with sales seeking more and operations less. In re-examination, he explained that in the case of such disagreements he made a decision. When he was appointed, he revised the MPS downwards, because of the inventory position. This flowed from a consideration of each customer's orders against their forecasts.

75 Despite these changes, the respondent's figures provided by Mr Graham showed that the MPS figure was $139 million in September; $132 million in October, November and December; $116 million in January 2001; $114 million in February and $134 million in March. The applicant's evidence was that it appeared that the work of the taskforce from November to February and Mr Ong's appointment did not, in fact, lead to a reduction in the MPS.

76 In cross examination, Mr Ong agreed that the respondent's documents showed that the MPS figures, in fact, increased after his appointment. He was unable to say what Mr Haddadi should have done differently with the MPS. He was also unable to say where the respondent's documents reflecting the performance beyond March 2001 were to be found. He also conceded that he had no first hand knowledge of the applicant at all. In re-examination, he explained that there was a rapid and drastic downturn in the industry between January and November 2001.

77 Mr Haddadi described the work undertaken by he and his staff was to manage excess inventory flowing from the overloaded MPS. Despite these efforts between February and November 2000, inventory grew by $19 million or 65%, $12 million of which reflected the Clyrcom account. $8 million reflected the Alcatel CMUX product. In the same period Solectron inventory worldwide increased by 200%.

78 The Liverpool plant was closed in November 2001. The reasons given by Mr Tang were the economy and significantly lower customer demand in the IT industry. Mr Tang explained that there were many reasons for the eventual plant closure and the announcements then made, only revealed part of the picture. He did not wish to demoralise remaining staff. The reasons included were not viable performance, inefficiency, revenue flow, shrinking customers and the world economy.

79 Mr Graham produced various charts from the respondent's records, assessing various aspects of its performance over the time that the applicant was employed. There were few comparisons drawn with performance before, or after, his employment. However, in relation to the MPS, Mr Graham observed that in November 1999, only something in the order of half of the forecasts upon which inventory had been acquired, reflected firm orders. In his experience this was "not sustainable in a manufacturing environment which is based on closely matching materials purchase with output." Other graphs showed that the level of inventory almost doubled from January 2000 to 2001. This was despite Mr Weiss' actions in October, November and December. Other documents showed that while forecasts remained high, they did not turn into firm orders.

80 Mr Graham's analysis of backlog figures suggested a problem with the operations of the plant, as the result of three probable factors. They were material supply deficiencies, manufacturing deficiencies and engineering design issues. His evidence was that Mr Haddadi had responsibility for these matters and apart from three products, AAL, Clyrcom and CMUX, the demand from the majority of customers was relatively constant and straightforward. This evidence, I observe, was not consistent with that of the applicant or that of the evidence of other witnesses called by the respondent, in cross examination.

81 The evidence of the applicant, for example, was that the respondent's approach overlooked the concept of 'shippable backlog' or 'part supported backlog', which meant that if an order was placed, but components were unavailable, the order remained unshipped and overdue until the last component arrived. After July 2000, a problem developed with Alcatel, which insisted on placing orders for an ADSL product called CMUX, one of the components of which was manufactured in its own plant in Spain. That plant had severe problems, resulting in shortages as high as 38%. In the same period other backlogs were almost zero.

82 Nevertheless, Mr Graham's evidence was that the problem with the Clyrcom product did not explain the entire backlog and that there was a reduction in backlog between December 2000 and January 2001, by the working of overtime.

83 In re-examination, Mr Zuber explained that he could not agree that backlog had been filled, as Mr Haddadi claimed, because orders perished, as the result of a failure to supply. He also explained that while Mr Haddadi had the full authority to deal with excess inventory, he did not do so. This, I note, was inconsistent with Mr Kinnane's evidence as to the decision made to retain Clyrcom inventory. Mr Zuber's evidence was that plant managers had to utilise excess inventory for other customers or dispose of it. Mr Haddadi failed to take steps to address problems other plants were facing and dealing with. His explanation was always that these problems were not under his control. There was no active improvement in the areas Mr Haddadi was responsible for.

84 Mr Graham was involved in the management of the respondent's inventory. His evidence was that the extent of inventory was so dire by October 2000, that weekly meetings were being held. He did not recollect Mr Haddadi taking a leadership role at such of those meetings which he attended. This appeared to coincide with the introduction of the taskforce and the re-arrangement of responsibilities.

85 Mr Edwards had been recruited by Mr Haddadi with a brief to fix the problems being caused by the shortage of parts necessary to complete orders and to reduce inventory. His evidence was that these somewhat conflicting tasks were not easy, involving engineering, planning, scheduling, assembly, testing, warehouse, stores and shipping, which all reported to the applicant. Mr Edwards found real initial resistance, but over time the position was reached where week after week the plant was shortage free, everything was manufactured on schedule, but shortfalls in revenue flowed from a lack of orders being placed, compared to forecasts.

86 Mr Edwards found that with the establishment of customer satisfaction teams, productivity and customer satisfaction began to rise. Problems however arose after the Solectron acquisition, when new requirements were imposed by Mr Nishimura, which suited massive production runs of relatively low cost identical units, but not the respondent's small runs of expensive high-tech telecommunication products. While Mr Haddadi implemented various cost cutting measures, including retrenchments, the underlying problems of lack of orders and high salary paid to staff, negotiated by the respondent prior to Mr Haddadi's employment, meant that overheads remained too high.

87 Mr Haddadi implemented removal of some $40 million from the MPS, largely as the result of inflated Alcatel forecasts. The Clyrcom problems however exacerbated the problems and added some $12 million worth of inventory. Only one order ever finally materialised. The respondent's profit margins were low and the continuing lack of orders led to losses, month by month.

88 After a few months Solectron directed the Australian operation to divest itself of customers which did not have the potential of placing $10 million worth of orders per year. The divestment occurred, but no high volume customers were acquired to replace them. Mr Nishimura confirmed his views of the pitfalls which flowed from having too many small customers which did not grow into large ones and the subsequent impact this could have on profitability and effectiveness. This was being addressed, but in his view did not present an insurmountable challenge to the business. Mr Zuber's evidence was that some of the customers, while small, were profitable, but were disposed of because there were no prospects that they would grow in future.

89 Mr Edwards' evidence was that in mid-2000, the Clyrcom account was presented as a new customer and Mr Zuber directed the acquisition of huge quantities of electronic components, which were entered into the MPS. No orders were placed and when Mr Haddadi was approached, to confirm that acquisition should continue, he confirmed Mr Zuber's instructions remained. Mr Edwards later himself confirmed this direct with Mr Zuber.

90 While Mr Zuber recollected discussing Mr Edwards' concerns as to the Clyrcom account, after he had discussed the matter with the site director and the finance people, he denied that he was responsible for putting these orders in the MPS. He agreed, however, that he authorised the inventory purchases, because they were over Mr Edwards limit. He also recollected that there were problems with manufacturing, but could not recollect if there was a design problem. He denied that his evidence about the Clyrcom account was a fabrication. He could not recollect making a presentation to Mr Tang about the matter with Mr Kinnane. Mr Tang's evidence, however, was that he held Mr Zuber very accountable for the problems with Clyrcom.

91 Mr Edwards found the MPS to have been highly inflated, with inherent problems for the respondent's bottom line. He found Mr Haddadi's approach to be quiet, but forceful in making an accurate appraisal of the problem. In Mr Edwards' opinion, resulted in him being made a scapegoat for the respondent's poor performance, the responsibility of its senior management team.

92 Mr Edwards saw what he regarded as the inevitable, then happen. Manufacturing was the easiest target to blame and Mr Haddadi eventually departed. The taskforce had earlier involved Mr Haddadi being pushed to one side and being noticeably isolated. The end result was that local control was lost, Solectron appointed overseas executives; remaining staff were alienated and productivity suffered. In May 2001, Mr Edwards accepted an offer of employment elsewhere, despite having been assured that he was not on a list of those to be retrenched.

93 Mr Zuber's evidence was that in reaching his views as to the Liverpool plant performance, which led to Mr Haddadi's dismissal, he had regard to plant yields, on time delivery; overtime; inventory turns and asset management; plant profitability; quality and material price variation figures. He discussed the matter with Mr Tang in Janury and together they reviewed the targets which had been set for Mr Haddadi; his performance in those areas and the trends. They agreed that he had "not been taking responsibility for performance at the Liverpool plant and was not giving adequate direction or listening to middle managers. This was causing heavy damage to the organisation". There was no consideration of the role of the taskforce.

94 The view taken was that the applicant had not performed or turned the operation around in nine months and so his employment should be terminated. Mr Tang's evidence was that he found the applicant's performance inferior as the result of the hard data which suggested his performance was at a less than acceptable level and because he was not comfortable with his style of leadership. Mr Tang had discussed Mr Haddadi's dismissal on number of occasions with Mr Zuber. The recommendation finally came to him from Mr Zuber and Ms Knowles. Mr Tang had wanted to make sure that the applicant was given a fair assessment and that the process was legally correct. When he agreed to the dismissal he directed Mr Zuber to "make sure that the performance reviews and the processes that are going to be applied in his termination are totally above board and fair".

95 In cross examination, Mr Tang said that he had looked at hard data as to the plant's performance in November and December, but he had not revisited that material prior to giving his evidence. He explained that while data as to factory quality control showed quality of 100% or close to it, he was concerned about customer feedback, which was different. He understood that this information came from surveys and direct from customers. That information was provided to him by others employed by the respondent. Mr Tang agreed that this information was never discussed with Mr Haddadi, to understand from his point of view, if there were any explanations. He also agreed that Clyrcom featured in the CSIs. Mr Tang did not hold Mr Haddadi accountable for the problems with that customer. He also agreed that the plant's biggest customer, Alcatel, did not appear in these documents. He was aware that there had been a problem with one of its products, but not the details.

96 Mr Tang could not, however, recollect the information provided to him by Mr Haddadi when he made a presentation to him in November. He recollected their discussion, when he accused Mr Haddadi of "double talking" in relation to accepting responsibility for profit and loss. He took the view that Mr Zuber had ultimate control for this, but that he was entitled to appoint lieutenants like Mr Haddadi to help him achieve his initiatives. In their second meeting, he believed that Mr Haddadi accepted accountability for profit and loss. This, Mr Haddadi denied.

97 Mr Tang was concerned with quality and customer service indexes. Mr Zuber, however, was responsible for managing the applicant's work. Mr Tang explained in cross examination that he became responsible for the Australian operation after the acquisition, but it was only in November, that Mr Zuber commenced reporting to him. He confirmed that there was then a concern that the business was not as good as expected. Low levels of orders and low machine utilisation figures were of concern.

98 Mr Tang had two meetings with Mr Haddadi in November, when Mr Tang was new to the plant, but was already aware that Mr Haddadi's performance was not strong. He told Mr Haddadi that "he was expected to take responsibility for turning around the profit and loss situation of the Liverpool plant". He received negative comments about Mr Haddadi from senior employees in Australia, who was regarded as perceiving himself as a victim of circumstances. In his own discussions with him, Mr Tang found Mr Haddadi to be inconsistent, but finally accepting of the need to be responsible for doing a better job. He had concerns about his style of leadership, because Solectron expected people who had a willingness to accept responsibility.

99 The taskforce had been established before Mr Tang's meetings with Mr Haddadi. He found later that Mr Haddadi would only accept responsibility for his performance when it was convenient. If there were complaints, he blamed others and would only accept responsibility if he wanted more control. While he never attended a whole meeting of the taskforce, Mr Tang understood the taskforce to be a think tank, so that common solutions and improvements could be found. Mr Haddadi was silent while he was present at the one part of the meeting he attended. He believed that "Mr Haddadi's area of responsibility was operations and the management of profit and loss".

100 The applicant's evidence was that Mr Tang's expectations of him reflected how Solectron structured the responsibilities of positions such as his, elsewhere. The person who came closest to having those responsibilities in Australia was Mr Zuber. Mr Tang had met him briefly only twice and had no direct experience of his style of leadership. He regarded it as unreasonable for Mr Tang's views to have been formed, without paying regard to the consequences of the establishment of the taskforce.

101 The applicant had sought a contractual provision to protect himself from becoming a casualty of the acquisition. His view was that the respondent had set about trying to engineer a situation so that those guarantees could be avoided. His only private meeting with Mr Tang commenced with a virulent attack upon his entry to the room, where he found Mr Tang leafing through his unsatisfactory August performance review. Mr Tang refused to accept his explanation that he only had responsibility for manufacturing at the plant and not its profit and loss. He regarded the blame he received for the plant's poor financial results to be nothing more than a device to avoid paying his contractual entitlements.

102 Mr Tang's other concerns, for example, about CSI indexes were unreasonable, given that they were only published for September to December and of the five categories only two were his direct responsibility and a third was shared. Customers were new to the process and in cases where there were low ratings, reflected particular problems with the customer concerned. For example, there was a design problem with one customer's product, on which a lot of work was done by the plant to help the customer rectify the issue. This resulted in delayed delivery and despite the assistance provided, resulted in a low rating from the customer for delivery.

103 Mr Nishimura confirmed that the CSI process was new and that it was difficult to have customers respond. It was the responsibility of the sales department to gather the information, by sitting down with the customer and agreeing on gradings. In relation to Clyrcom, Mr Nishimura was aware of the problems and the negative report from the customer, after millions of dollars inventory had been acquired, but no orders placed. He regarded negative reports as the beginning of a process designed to identify and resolve problems. He also agreed that many of the reports were within the worldwide average achieved by Solectron.

104 The applicant's evidence was that various of the respondent's own documents showed that quality control for various products was consistently above contractual quality levels, with consistent improvement after his appointment, in some cases to 100%. On his arrival at the plant customer's major concerns were delays in delivery. Deliveries improved to June, with backlog figures declining, the time when Mr Zuber's concern apparently arose. Overtime hours peaked in February 2000, when backlog was targeted and then fell to below the level operating when he was appointed.

105 In the applicant's opinion, the review implemented in August involved no genuine attempt to either identify or agree on targets which needed to be addressed or to fix any reasonable time in which such goals could be achieved. The goal was to humiliate him into resigning or otherwise forcing him out. Mr Zuber and Mr Kinnane relocated to the Liverpool plant and stripped him of most of his responsibilities, with the establishment of the taskforce. Mr Zuber even removed his authority to approve travel for members of his staff and reduced his spending authority to nil.

106 While Mr Zuber attempted to give him responsibility for plant profit and loss, he refused to accept it, given that the relevant management functions were not under his control. Mr Zuber could never produce any documents which showed that such a responsibility had been assigned to him on his employment, because that was not the fact.

107 While plant capacity was running at 25%, the problem was fuelled by declining orders. Problems with CSI indexes for customers like Clyrcom reflected the errors of others. While Mr Zuber asserted that he had responsibility for the problem with this customer, the fact was that Mr Kinnane's report to Mr Tang about the problems was given confidentially and did not involve him. Mr Kinnane and Mr Zuber made all the relevant decisions about this account.

108 Mr Zuber was retained as CEO only until May 2001. Mr Kinnane also left in February. Mr Ong returned to Penang in June, after a period as General Manager. It was the applicant's case that after the acquisition, it was in Mr Zuber's interests to bring about the termination of his employment, on the basis of poor performance. The contract permitted his termination without any notice in such circumstances. This term had resulted from a suggestion which the applicant had himself made to the respondent, in the context of seeking to ensure that he did not become a casualty of the takeover. It was the respondent's alleged conduct in manufacturing a case of poor performance against the applicant, about which complaint was made. Had the respondent given the applicant notice, a substantial payment for the balance of the contractual 3-year term was required. Instead, he was paid three months' notice.

109 Mr Zuber accepted that he had not performed well in his own role, from the point of view of profit and loss. Business declined throughout 2000. He also accepted, however, that there could be situations where a person performs well in their position, but the business itself was not successful.

110 The case advanced for the applicant by Mr Coleman of counsel was that the parties' negotiations revolved around the applicant's desire to have his existing remuneration matched, to receive a sign on bonus, shares and protection from termination, given the imminent takeover. The negotiations were quick and straightforward. Remuneration, termination and share options were agreed, but a cash payment was rejected.

111 The agreement in relation to shares was clarified later in discussions, but it was never honoured. The agreement was not conditional upon performance, or any other criteria and there was no vesting period. Ms Knowles had prepared the contract, in accordance with Mr Zuber's instructions. It was not credible that if the share options had been the subject of any conditions, that they would not have been specified. It followed that Mr Zuber's evidence as to that matter should be rejected.

112 The documents also established that Mr Haddadi was later regarded by the respondent as having vested Singapore options. There was an arrangement in place that Solectron would make whole the position of such employees. That was not done in Mr Haddadi's case. Submissions were also advanced as to the conditions attached to the Solectron shares which were offered, which also made the contract relevantly unfair, in any event. The contract provided for Mr Haddadi to be given options in the respondent, originally known as Bluegum. This was not done and relief had to follow. That would be granted on the basis of the respondent's valuation at the relevant time. Comparisons were also drawn with the position of other employees, who were treated differently.

113 As to the respondent's conduct, it was submitted to be relevant that the evidence showed a decision by Mr Zuber in early August to dismiss Mr Haddadi. This was not implemented, but a process of criticism of his work performance was implemented. Despite this, in November he was effectively stripped of his responsibilities, around the time that the offer of Solectron options was made. Given the conditions attached to the offer, the unfairness of the respondent's approach was undoubted. This was persisted with. On termination he was paid nothing to reflect the promises made in his contract, as to shares in Bluegum.

114 As to the money orders sought, it was argued that regard would be paid to the cash payments other employees received, including upon termination of employment prior to vesting of their options. Submissions as to the US dollar exchange rate and interest, were also advanced.

115 As to the work performance issues, it was relevant that the applicant, at 56 years of age and with a distinguished career in this industry was employed by the respondent to improve its manufacturing operations, initially at Liverpool. Mr Zuber acknowledged and met the applicant's concerns about the consequences which the takeover might have for him. A three-year term contract was agreed, with termination only for poor performance or summary dismissal, without payout of the balance of the term.

116 The evidence showed that the respondent's conduct in asserting poor performance in order to terminate the contract was unfair. The business was failing. Mr Zuber accepted that lack of orders was what finally led to its failure. He also acknowledged that it was possible for an employee to have performed well, but yet for a business to fail. The respondent's documents demonstrated the applicant's responsibility for operations. His initial focus was to be the Liverpool plant. When the plant closure was announced after the applicant's dismissal, the evidence demonstrated that its orders had fallen far short of the respondent's forecasts.

117 Despite the respondent's contractual promises, the applicant's objectives and performance criteria were never agreed. This was something Mr Zuber never attended to. Proactively, Mr Haddadi set his own. They were all operational and were presented to Mr Zuber, other senior managers and the Board. He had no responsibility for the profit and loss of the plant. Given his duties and the respondent's organisation, such responsibility was not practically possible.

118 The evidence showed that prior to December 2000, there was no expectation that he had such responsibility. This reflected that the applicant had no control of aspects of the respondent's operations such as sales, account management, finance, marketing or human resources. After Solectron acquired the business in July 2000, the applicant was prepared to accept such responsibility, provided he was given the necessary authority in relation to these matters at Liverpool. That was not forthcoming.

119 Despite this, in December Mr Zuber asserted that the applicant had such responsibility, as well as having responsibility for ensuring that the respondent achieved the annual operating plan. The evidence showed that such responsibilities were consistent with how Solectron operated other of its plants. It also reflected how the respondent structured the responsibilities Mr Ong was given, when he replaced the applicant in February 2001. Mr Ong was particularly given authority to make the final decision as to forecasts which would go into the respondent's MPS. Mr Haddadi never had such roles, as the contemporaneous documents demonstrated.

120 The evidence showed that the applicant had made many improvements in the areas for which he was responsible, such as on time delivery and backlog. He worked long hours, but was not given responsibility for the MPS and so could not be held to account for the joint decisions made by all those involved in that process. He was only one of those with input into that decision making process. The evidence showed that this was crucial to the respondent's operations and a process over which Mr Zuber kept close control and had direct responsibility for. It was he who finally resolved the tensions which arose between sales and operations in that process. The evidence showed that the forecasts had been inflated at the time that the sale was being pursued. The result was that the forecasts were overoptimistic and the respondent was never able to achieve the levels of sales that Solectron expected.

121 While the respondent had asserted that other evidence showed the applicant's failures, this was not borne out by the evidence. It clearly showed perishing demand, but not as the result of any inability to manufacture. The records showed that quality yield remained high. The problems with inventory largely resulted from overoptimistic forecasts. When the problems created by the Clyrcom and CMUX products were removed from consideration, neither problem for which the applicant had any responsibility, inventory had actually decreased over the period.

122 The worldwide problems in the industry at the time were reflected in the evidence, which demonstrated a worldwide component shortage, even reflected in the Solectron financial records which showed a tripling of its inventory in the period. The respondent's performance under the applicant's control of operations was better than that picture.

123 The evidence had also shown that during the first six months of the employment, there had been nothing but praise for the applicant's performance. Within a matter of weeks of the acquisition, Mr Zuber turned on the applicant. Mr Zuber suggested his dismissal, at a time when Mr Nishimura was given responsibility for integrating the respondent into the international Solectron business. The evidence showed that Mr Zuber had not revealed to Solectron the extent of the CMUX problems and that he tried to portray these problems as Mr Haddadi's responsibility. This was less than honest.

124 Mr Nishimura was also given a distorted picture of other aspects of the applicant's performance. Mr Zuber explained in cross examination that the examples he had referred to in his emails to Mr Nishimura were all that he could think of at the time. The single incident of problems with people management referred to was over three months old and had occurred before other documents produced by Mr Zuber which were very complimentary of the applicant's performance, to which no reference was made in the report Mr Nishimura was given.

125 It was argued that while reliance was placed by the respondent upon reports from a team building exercise which Mr Haddadi had initiated, no evidence had been called from the person who had conducted it. The evidence as to problems in the areas referred to was submitted to be very feeble. The evidence rather demonstrated the dysfunctional nature of the respondent's senior management team. The respondent asserted that Mr Haddadi's position was such that he was expected to exert a heavy influence over a group of senior executives over whom he was given no authority and who each had responsibility for their own areas, reporting directly to Mr Zuber. Reference was made to the human resources area, where the evidence was that Ms Knowles was in charge and appointed to the Liverpool plant a human resources manager who had no experience in manufacturing, whose appointment Mr Haddadi directly opposed, but who he then had to closely work with, despite not being up to the job. The evidence of the efforts made by the applicant to garner the support of those executives for the initiatives he wanted to pursue at the plant showed their failure to co-operate with those endeavours, which they but perceived as an attack on their own areas of responsibility.

126 While there was evidence that Mr Zuber had sought to make the applicant the scapegoat for problems not of his making, the real reason notwithstanding this conduct, was irrelevant. The evidence had clearly demonstrated that there was no basis in the applicant's performance for his dismissal. The applicant did not assert that there was no basis at all upon which his performance could be criticised, but argued that the evidence amply demonstrated that it was satisfactory.

127 It was also relevant that while the applicant initially agreed to co-operate with Mr Zuber after the August review, given Mr Nishimura's assurances that he wanted to look forward, the establishment of the taskforce and what followed, showed the way in which the applicant's ability to do what was required of him had been removed. Mr Weiss, who formerly reported to him said in his evidence that this had removed the applicant as a hindrance. In fact he was marginalised. What was required of the applicant was not achieved by the taskforce. That reflected the lack of demand for the respondent's products and its continued over-forecasting of orders. Problems in the customer satisfaction indexes included matters for which the applicant never had responsibility. It also reflects other problems, such as that existing with Clyrcom account, where the customer was seeking to shift blame for its own problems, to the respondent.

128 Detailed submissions were advanced as to other areas of responsibility assigned to the applicant in the correspondence, which I will not outline. The requirements imposed were submitted to have been ridiculous, both in the circumstances which by then prevailed at the respondent and the timeframes imposed. It was also submitted that the process which Mr Zuber implemented and which led to the applicant's dismissal had been demonstrated on the evidence to have not been genuine. Mr Ong was appointed to replace the applicant before the timeframe fixed had expired.

129 The final decision maker was Mr Tang. He gave a clear explanation of his reasons for the dismissal. They related to unsatisfactory performance in relation to profit and loss, customer satisfaction and quality. This had not been sustained on the evidence. The further reasons given was that Mr Tang did not like the applicant's style of leadership. This was precisely the type of arbitrary decision against which the applicant had sought to protect himself in his employment contract.

130 If the applicant's style did not suit Solectron that was a basis upon which his contractual term came into play. Mr Zuber's concerns were said to be poor performance, but there had been a failure to properly consider what the applicant was in fact responsible for; to demonstrate what his failing in those areas was and to consider whether it was what the applicant had done or failed to do, which had led to the failings in those areas.

131 The evidence did not show that after the applicant was replaced, there were improvements in the areas for which the applicant was said to have had responsibility. The evidence showed that Mr Ong was appointed to a position with different authorities, but still the evidence did not demonstrate any improvement, to the contrary, the plant was closed. The respondent's case was remarkably silent about these matters. A Jones v Dunkel inference was argued to flow against the respondent in relation to this aspect of the case.

132 Submissions were also directed to the calculation of the money orders, which I do not outline. As to mitigation, the evidence showed that despite his endeavours the applicant obtained no alternate employment and when no opportunities presented themselves, he took the initiative to set up his own business. The business however made a loss. The evidence suggested that his difficulties had resulted from the respondent's unfair conduct, which impacted on his endeavours to find other employment, exacerbated by his age and the limited opportunities at this level in Australia, particularly given the declining state of the industry at the time. 133 The case advanced for the respondent by Mr Prince of counsel was that the bona fides of the respondent in terminating the employment, given the provisions of the termination clause of the contract, arose for consideration, as did the fairness of the share option provision.

134 There was no contest as to the fairness of the contractual provision. The case raised purely conduct matters and an alleged breach of the termination clause. The agreed clause equated poor performance with misconduct. It was submitted that given the three months paid by the respondent on termination, any unfairness or ambiguity in the contract had been addressed.

135 It was argued that the case advanced by the applicant required a consideration of what the contractual clause was designed to address. The applicant sought to protect himself from the possibility of a change in management structure, after an acquisition as a result of which he became a casualty in the reshuffle. The liquidated damages provided by the clause were directed to that possibility, as a pre-estimate of damages.

136 It was submitted that the clause would not permit the employer to capriciously exercise the right to dismiss for poor performance and there could be an implied obligation to exercise the power in good faith. It followed, however, that the case advanced in reality concerned an alleged breach of contract. The applicant, in those circumstances had to demonstrate "some sort of conspiracy by the defendant in order to denude him of the benefit that's conferred on him by the contract". It was submitted that it would not be a breach of the contractual term, if the employer was mistaken in the belief that there was poor performance, or even if the Court took a different view on the evidence.

137 It was also argued that the Court would pay regard to the negotiations conducted between the parties and the senior level at which the applicant was operating. He was a very senior man, used to negotiating large scale complex contracts. He was not pushed into the contract or the termination clause, indeed the latter was his suggestion. Only one term which he had suggested, a sign on bonus, was rejected by the respondent. It followed that whether or not there was a genuine belief on the respondent's part as to the question of poor performance was critical. The applicant's case all turned on Mr Zuber's views as to his poor performance being baseless and that he only acted to remove him.

138 It was submitted that the applicant failed to accept the level of responsibility he had acquired from the outset. He had represented his expertise and international experience to the respondent, in areas such as profit and loss management, as his resume made clear. The evidence showed no inferior bargaining position on his part and he was employed in a turnaround situation, initially at Liverpool. His role was to make the plant run properly and as profitably as possible. He was being asked to solve the problems outlined to him by Mr Zuber, from the outset, although he resiled from this in his evidence.

139 As to the options, they had not been promised to him in the first year of his employment in their entirety. His remuneration was, nevertheless, significantly high. This was because of the role he was given. The evidence showed the seniority of the position that resulted, by comparison with others. It was irrelevant, in that context, whether others may have performed poorly. The issue was whether the applicant had and whether this enlivened the respondent's right to terminate the employment without the full contractual benefits.

140 The operational issues drawn to the applicant's attention at the outset, closely resembled the failures for which he was dismissed, because he had not resolved them. While there was no clear job description or duty statement, his role and responsibilities had been clear from the outset.

141 The problems in his performance were drawn to his attention in August. He accepted some matters, but not others. The problems with his staff were evident from Ms Knowles' evidence. She had no reason to lie and showed his difficulties predated the August review. There were problems with interaction with his peers and subordinates, a matter of legitimate concern, give the applicant's seniority. The evidence showed that the applicant had no real concern to improve his performance. His evidence that he had not had a negative review before, was inconsistent with the evidence of other reviews in other employment, which showed he was not an effective learner.

142 In any event, the evidence showed that by August his goals had been clearly set. He was required to restore productivity and CSI targets. The evidence showed that matters in respect of which the applicant undoubtedly had responsibility for and control over, such as ultilisation rates and yields, inventory returns and costs, were not addressed. Throughout this time the taskforce of which the applicant was a member operated. He should have taken the initiative to inject his energies and experience into that taskforce to advance the interests of the parties. He was held responsible for the ability of the Liverpool plant to turn a profit.

143 The letter of termination indicated the areas where the applicant had been found to have failed to perform. They were all clearly within the applicant's domain. Even though some of the factors referred to, declined under the influence of the taskforce, Mr Haddadi was still responsible for them and his day-to-day role as Director of Operations had not been removed from him.

144 It was argued that there was a legitimate basis for concern about many of these areas which permitted his termination for poor performance. Even if that were not established, it was argued that there would be no basis upon which the exercise of the jurisdiction could be attracted, albeit the binding authority of the judgment in Reich v Client Server Professionals of Australia Pty Ltd (Administrator Appointed) (2000) 49 NSWLR 551; (2000) 99 IR 69 was acknowledged. The only basis upon which unfair conduct could be found, was if the whole exercise was found to be but a ruse, where that view was not genuinely held. This was inconsistent with the applicant's own response to the performance review, where he accepted some of the criticisms.

145 It was also argued that there were internal inconsistencies in the applicant's case, because it was said that sales were falling but direct costs were increasing. This required even more accurate management by the applicant. His role was to be an advocate for restricting what went into the MPS. He was not effective, which came back to questions of leadership. Mr Zuber was not much involved prior to the acquisition. He was entitled to rely on the applicant in his absence. Mr Tang and Mr Nishimura were clear as to the applicant's responsibilities and that operational problems were impacting on profit and loss. While Mr Zuber had overall responsibility, there was no shifting blame from he to the applicant. Their evidence made that clear.

146 Evidence as to the quality yield rate did not assist the applicant, because it showed quality only on leaving the plant. Even if Mr Haddadi was not responsible for the creation of the inventory, he was obliged to deal with it and failed. Direct labour costs also increased and were not managed.

147 As to the termination clause, it was submitted that the clause provided a very generous benefit, in the event that he was terminated following the takeover. That did not occur and so the applicant should not now receive the benefit of the clause. He was paid three months' notice, reflective of the notice he was obliged to give under the contract. No relief was warranted in those circumstances. As to the options, it was relevant that they were an incentive for him to remain for the long term. There was never an intention of immediate vesting, consistent with the applicant's experience in other employment. There was no evidence that he would ever have exercised the options. The applicant was confused as to this aspect of the claim. A cash grant was not available to the applicant for any options and there was nothing unfair about that.

148 As to vesting, even if it had not been a feature of the Solectron offer, there was a three month restriction on the exercise of the options. Having regard to the relevant share prices, there would have been little reward for the applicant. Others were treated in the same way. Those who received cash, received that by instalments, where what was offered was of lesser value than what they received by way of Solectron options. What was offered to Mr Haddadi was more valuable and so no money orders should flow.

149 In reply, it was argued by Mr Coleman that the evidence showed that it had been agreed by the parties that the applicant would receive Bluegum options. This had not been honoured and the applicant had suffered losses as a result, for which he should be compensated. Calculations were available which would result in him receiving a greater sum than that claimed. Such amounts were not pressed, but showed that the respondent was wrong in submitting that any orders would result in a windfall for the applicant. That the respondent had promised to make good his position, but had failed to do so, confirmed these conclusions. The offer eventually made contained a four year vesting term and involved options with a significantly higher strike price and a lower share price. It had no value for the applicant as a result. The share price had since declined. That other employees might have accepted such an unfair offer was irrelevant. The applicant was, in any event, treated differently to other employees.

150 The orders proposed by the respondent in their submissions were submitted to be of questionable validity and could not redress the unfairness demonstrated. The orders sought by the applicant had a sound basis in the evidence.

151 As to any suggestion that the applicant was seeking relief not arising from the summons, it was submitted that the summons made clear that the applicant pressed claims in the alternative and that if the respondent had required further particulars of the calculation of any aspect of the claim, they should have been sought.

152 The suggested test, that all that the applicant had to show was that it had a "genuine belief" that the applicant's performance had been poor, was submitted to be wrong and that in any event, the evidence showed that the respondent's witnesses could not reasonably have had such a belief. The correct test was whether the respondent's conduct in asserting poor work performance as the reason for its decision, had made the contract unfair.

153 It was submitted that the applicant did not need to establish any conspiracy against the applicant, although the respondent had a powerful motive to manufacture "poor performance". The reasonable inference from the evidence was that it was so motivated. This flowed from the evidence that Mr Zuber sought to blame the applicant for the Clyrcom debacle, a matter for which he was clearly responsible and the evidence of Mr Zuber's attempt to remove him for poor performance as early as August, when there had been nothing but high praise for him up to July. The taskforce established then made the applicant a lame duck, but Mr Zuber still attempted to make him responsible for the respondent's failures. The evidence was so absurd and wrong that mala fides could properly be inferred.

154 In the alternative, if the genuine belief test was accepted, it was argued that the clause had, in any event, been established to have been unfair from the outset.

155 It was further argued that a proper distinction had to be drawn between the applicant's performance and that of the respondent. That business was failing prior to the applicant's employment and the position continued after his termination. His responsibility for turning around the Liverpool plant was confined to what efficient management of the plant could achieve. He had no broader control or responsibility, nor was it suggested that he had, prior to December 2001. The applicant then resisted being given responsibility for matters never assigned to him, but to others.

156 The evidence showed that the respondent's problems were beyond the control of the applicant, but impacted upon him. The evidence demonstrated that over-optimistic forecasting of orders resulted in excess inventory and increased costs. It defied logic to suggest, as Mr Tang did, that this did not also affect machine utilisation. The problems with the CMUX and Clyrcom products exacerbated these difficulties. They were not of the applicant's making or responsibility.

157 There was an absence of comparative data for the periods preceding and following the applicant's employment. The evidence did not demonstrate how the applicant could, or should, have performed differently. One exception was the evidence that the applicant should have been more forceful in planning meetings. These decisions were made by consensus and were the responsibility of Mr Zuber. Prior to July they were made in the context of the sale of the business, where there was a vested interest in those making the decisions showing the business in a favourable light. It was absurd to suggest that the applicant was responsible for Mr Zuber not being persuaded that forecasts should be more conservative, especially when the sales director and others involved in the process, reported directly to Mr Zuber, not to the applicant.

158 The other aspect was that the applicant should have been more active in disposing of excess inventory. The evidence showed that a great deal of attention was given to this, but that much of the problem arose from the Clyrcom inventory. Mr Kinnane's evidence was that it was decided to retain this inventory for long after the applicant's dismissal, was also relevant.

Consideration The applicant's share options

159 There can be no doubt that the applicant made out this aspect of the claim. The promise made in the contract of employment was that Mr Haddadi would be granted a specified number of Bluegum share options, on employment. There were no conditions attached to that promise. It was not honoured, as Mr Zuber confirmed in his evidence. An alternative arrangement was put in place in relation to shares in a Singapore entity and that, also, was not honoured. The evidence showed that had Mr Haddadi been granted the promised Bluegum options, his treatment on the takeover would have been different. He would have been entitled to a cash payment like other members of the executive team received.

160 Instead, after the takeover, another proposal was put to him, which was not as valuable as the earlier promised options, having regard to the vesting periods which accompanied them and the price. The applicant was not prepared to accept these options on that basis. This was a subject of ongoing discussion and no agreement prior to the termination of the applicant's employment. The aim of 'making good' the applicant's entitlements was thus never achieved, nor were the terms of either the original, or amended agreement honoured.

161 The end result was undoubtedly that the contract was relevantly unfair and that relief must follow.

Did the respondent have a basis for terminating the applicant's conduct for poor performance?

162 The evidence showed that Mr Haddadi accepted the fairness of the termination provision of the contract, but not the bona fides of the respondent's conduct towards him, given what had been agreed and what transpired. In this respect, it is relevant to note that on commencement it was envisaged that the applicant would be provided with an executive service agreement and that his objectives would be agreed. Mr Zuber confirmed that neither happened. The respondent's case that his responsibilities were clear from a document given to the applicant by Mr Zuber at the outset of his employment, outlining problems confronting the respondent, was simply untenable, in the face of the other evidence.

163 The evidence showed that Mr Haddadi was recruited in circumstances where the business required 'turnaround'. In 1999 there were significant operational problems at Liverpool, which he was employed to address in the first instance, with the prospect that once this had been done, he would be given wider responsibilities. That did not occur. This employment came about in circumstances where the two people who had been operating the Liverpool plant before Mr Haddadi, had been replaced in very quick succession. The device of the taskforce had also earlier been implemented, but with the appointment of Mr Haddadi, it was abandoned.

164 The respondent's problems had arisen in circumstances where there had been a worldwide decline in business in this industry. Throughout 1999, the respondent had received contracting orders at the same time as the number of its customers overall increased. This led to significant problems at the plant. This downward trend in orders continued in 2000 and in 2001, the Wangaratta plant was closed and the closure of the Liverpool plant was also announced. At the same time, there were worldwide component shortages. Some components took 16 to 52 weeks to acquire. There were various consequences, including increased price, as the result of competition for scarce components; the need to stockpile some components, inconsistent with the 'just in time' production methods operating at the respondent's plants, resulting in increased inventory and delays in production, if components could not be sourced when required.

165 The challenges facing the applicant and the respondent in these circumstances when Mr Haddadi's employment commenced were obvious and difficult. Indeed, the evidence suggested that they proved to be much greater than either expected at the outset of the employment. The evidence also showed that they were exacerbated by the approach adopted by the respondent, to establishing what orders might be placed by its customers and securing materials so that orders could be met, when placed.

166 The respondent had customers who advised it of the orders they might place, up to 90 days and in some cases longer, in advance of any order being actually placed. This information was considered by the respondent through the committee headed by Mr Zuber and the results loaded into its MPS. Computer programmes were used in order to identify components to manufacture such orders. The components were then secured, in the expectation that the underpinning orders would materialise. There were problems with this system in 1999, which did not diminish in 2000.

167 Decisions about the MPS were made in weekly meetings of senior staff, chaired by Mr Zuber. Mr Haddadi was one of those involved. Others included Mr Kinnane and Mr De Cata, amongst others. The decisions were made by consensus by a group of senior employees, most of whom reported to Mr Zuber and many of whom had no background in this industry.

168 The evidence showed that the results of these decisions were not healthy, from the point of view of the respondent's profitability, either before, during or after the applicant's employment. Orders which customers anticipated placing did not materialise, but components were purchased in order to meet them. The result was that inventory grew rapidly. Two customers particularly contributed to this problem in 2000. The first was Clyrcom, a company which had a product in respect of which design problems and other difficulties materialised. The evidence showed that the respondent did not adhere to its credit and design testing policies when dealing with this customer. The end result was something in the order of $12 million worth of components were held in inventory. The customer never met its debts to the respondent, resulting in very substantial losses. Mr Tang's evidence was that he held Mr Zuber responsible for this. It was very clear, despite Mr Zuber's evidence to the contrary, that these problems had not developed because of the applicant's failures.

169 A second major problem arose in relation to an Alcatel product called 'CMUX'. Alcatel was the Liverpool plant's major customer. It supplied the baseboard for this product, which it manufactured in Spain. There were significant delays in the supply of these boards to the respondent, resulting in increased inventory, worth about $8 million and an inability to meet orders placed. Alcatel refused to agree to the backboards being sourced elsewhere. While the respondent asserted that Mr Haddadi had responsibility for this, the evidence did not make this out. Mr Kinnane's evidence was that another employee, responsible to Mr Zuber after the establishment of the taskforce, not Mr Haddadi, was trying to convince the customer not to source these boards in Spain. He was unsuccessful.

170 I am unable to accept Mr Zuber's evidence that Mr Haddadi had the authority to determine, as plant manager, whether to accept the MPS. That was plainly not how the respondent operated while the applicant was employed. The evidence as to the way in which the Clyrcom product was dealt with, put this beyond doubt. Mr Zuber plainly kept close control of various aspects of the respondent's operations, including this one. This explains the applicant's insistence that he was employed to do a operational job and could not be regarded as having responsibility for the consequences of the way in which the MPS process was operated by Mr Zuber. Indeed, Mr Tang's evidence showed that with the applicant's removal and Mr Ong's appointment, the respondent made significant changes to this aspect of the operation. Mr Ong was given and exercised control over the MPS process. Mr Haddadi did not.

171 I found various aspects of Mr Zuber's evidence problematic. His evidence as to the MPS system, bordered on the fanciful. To suggest that a decision made in a weekly meeting of senior executives, of which the applicant was but one participant and which was usually chaired by Mr Zuber, could thereafter simply be rejected by the applicant as plant manager, was simply unbelievable. Mr Kinnane's evidence was that the suggestions made by Mr Haddadi in November, as to changes which would have given him greater control of such matters, were vigorously rejected by Mr Zuber. This evidence put this matter entirely beyond argument.

172 There were other problems. On the applicant's case he was successful in turning around a significant backlog in orders, after his appointment. The respondent's case was different. On the one hand it was said that there had not been a reduction in backlog and on the other, that the reduction represented lost or cancelled orders ('perishing demand'), rather than orders which had been caught up.

173 It was the applicant's case that from July 2000 there was a significant decline in orders. This was clearly established on the evidence. The applicant's case was that this resulted in low utilisation of plant, less than 25% of capacity. On the respondent's case this resulted from equipment breakdown and maintenance problems and perishing demand. It was difficult to establish exactly where the truth in relation to all these matters lay. It was, however, common ground that the downturn in orders had a significant impact upon plant utilisation. Having considered this evidence, I am of the view that the picture sought to be painted by the respondent of its data was, on the whole, an overstatement of the problems and Mr Haddadi's responsibility for them and an understatement of what had been done to address the problems existing when the applicant was employed. Mr Tang and Mr Nishimura's evidence as to the CSI, put this beyond doubt. Mr Tang also acknowledged that concerns about such data were not raised with Mr Haddadi, so that any explanation could be considered.

174 It was Mr Zuber's evidence that up to the time of the acquisition, he had been relatively content with the applicant's performance, although there had been some problems of which head become aware and which were of growing concern. He soon came to a different view. By 10 August, he had decided that the applicant's employment should be terminated and Mr Weiss appointed in his place. He suggested this to senior Solectron managers, but it was not accepted. This evidence, I reiterate, was entirely inconsistent with the views he was earlier expressing about Mr Haddadi in various written documents.

175 Instead, a six monthly performance review was conducted, in which, unsurprisingly, Mr Zuber gave Mr Haddadi an unsatisfactory rating. He did not, however, warn him that his employment was in jeopardy, as it undoubtedly then was.

176 Mr Haddadi was shocked, given the support he felt he had been receiving to that point. He had never had such a rating before, after many years of success in this industry. He disagreed with the review, and provided written comments on the assessment and also spoke to Mr Nishimura about the review. As a result, he accepted that he should co-operate with Mr Zuber and he accepted that he should work to redress some of the negative results he had received. His position soon altered. He came to the belief he was being made a scapegoat for problems not of his making and over which he had no control.

177 Mr Zuber established a taskforce, chaired by Mr Kinnane, in November. While this was denied on the respondent's case, the evidence given by its own witnesses demonstrated that the result was the establishment of new responsibilities and the diminishment of the applicant's role and authorities. Mr Kinnane's evidence was that he and Mr Zuber then relocated to the Liverpool plant, where they became closely involved in the work at the plant.

178 The results for Mr Haddadi were plainly dramatic. His authority in relation to matters formerly under his control was reduced and in some cases removed. There was no change in his title or remuneration, however his duties were altered significantly. Mr Weiss' evidence, candidly put, entirely corroborated that of Mr Haddadi about the result of this innovation.

179 Despite these changes, there were seemingly no improvements in the respondent's performance, or that of the Liverpool plant. The problems with Clyrcom and CMUX, continued to grow. The evidence did not permit the conclusion that those problems resulted from what the applicant had done. Nor were they, in reality, within the applicant's control, particularly given the changes which were made in November.

180 In December, Mr Haddadi was given a written warning that unless his performance improved by the end of December, he would be dismissed. Several areas of responsibility were identified. Mr Haddadi did not accept what was being put to him. On his understanding, he no longer had control over many of these matters, since the establishment of the task force and more particularly because, as manager of the Liverpool plant, he had never been given control over all of the aspects of the operation, which would have enabled him to control the plant's profitability. In particular, he had no control over the sales force and no control over the MPS, which he had long argued was being skewed to the interests of the sales force, in maximising order expectations, rather than those of the plant, which had an interest in minimising excess inventory.

181 Mr Zuber disagreed. At the time, discussions about the respondent's failure to allocate the outstanding share options were also continuing. The applicant sought legal advice; relationships deteriorated further, with the applicant protesting at his treatment and asserting that his dismissal was obviously a foregone conclusion. His lawyers alleged that his contract had been repudiated and legal proceedings were threatened. An endeavour to settle the parties differences in a meeting failed. The end result was that Mr Zuber terminated the applicant's employment for poor performance. While under his contract he had no right to notice, or a payment in lieu in the circumstances, he was paid the equivalent of three months' notice.

182 I am satisfied that the evidence does not properly permit the conclusion that the applicant's performance was unsatisfactory or poor. Undoubtedly, Solectron was not satisfied with the asset it had acquired. The MPS figures were over inflated; resulting inventory was too high and the business was impacted by a worldwide downturn, as well as a worldwide shortage of components. It soon came to the view that the projections it had been provided with were not achievable. It also accepted that the concerns Mr Zuber was raising about Mr Haddadi, were sufficiently serious to permit an improvement programme to be implemented by him, although it did not accept that his employment should be terminated, as Mr Zuber proposed.

183 The evidence also, however, demonstrated that as a result, Mr Haddadi was then on the one hand required to achieve improvements, but on the other was not given the authority which would have made the imposition of those requirements reasonable. The evidence plainly demonstrated that increased inventory was the result of poor decision making by the senior management team, undoubtedly then led by Mr Zuber, who was no longer distracted by the acquisition. The approach of some of the respondent's witnesses, especially Mr Nishimura, evidenced an expectation that despite Mr Haddadi being but a member of this team, because of his position as plant manager, he should have been able to influence the team, to reduce the orders in respect of which inventory was acquired. I am well satisfied that this was neither a sensible or reasonable approach. I am also well satisfied that Mr Tang's expectation of what Mr Haddadi could achieve as Mr Zuber's lieutenant, was not reasonable, given the approach Mr Zuber himself adopted to the MPS system and customers such as Clyrcom.

184 This approach of achievement of profit and loss by the exercise of "influence" in the absence of any authority and while the relevant areas remained under Mr Zuber's direct control, was certainly not one adhered to by the respondent after Mr Haddadi was dismissed. His replacement, Mr Ong, was given the authority the applicant was complaining he needed, in order to meet the respondent's requirements and he was appointed "two in a box" with Mr Zuber. Despite this change in approach, it was evident that the respondent was still unable to address the problems the plant was facing in 2000 and it was subsequently closed. The problems this industry was facing on a worldwide basis undoubtedly played a significant part in this development, as was Mr Tang's evidence.

185 All of these matters, however, preclude a conclusion that Mr Haddadi's performance in the role for which he was recruited and the authorities and responsibilities he was in fact given, was unsatisfactory.

186 The evidence as to the problems with the MPS system and the CMUX and Clyrcom products, all lead to this conclusion. These had significant impacts upon the plant's profitability and performance. Mistakes were clearly made by the respondent as to these orders and how they were handled. On the evidence, holding Mr Haddadi to account for those errors was not reasonable. They were not of his making and he had neither responsibility nor authority to rectify them. Given the evidence of the establishment of the taskforce, which still failed to address the problems which had developed, I am well satisfied that Mr Haddadi could not properly have been held accountable for these problems.

187 Mr Haddadi's complaints about what he was being required to achieve after his August performance review plainly had a basis. There were also issues as to whether or not that review was a fair or accurate reflection of his performance beforehand. Again, I am satisfied that much of Mr Haddadi's complaints were made out. The way in which the review arose, raised some obvious questions as to the bona fides of the process established and whether what the applicant was required to do to address the matters for which Mr Zuber sought to make him accountable, while not relinquishing necessary aspects of his own control over them, was reasonable in the circumstances.

188 I have been left with the most uncomfortable impression that many of those involved in the decision making process which led to over-estimates of orders, inaccurate forecasts in the MPS and a hugely overstocked inventory, had a vested interest in achieving that position prior to the sale. Apart from Mr Haddadi, it appeared that the members of the committee all held shares and options in the respondent, either directly or indirectly. It was in their interests to maximise the sale price. This was not in the applicant's interests. His promised options never materialised. It was his views which did not prevail in the committee's determinations. It was plainly unreasonable for the applicant to have been later held accountable for the consequences of those decisions.

189 The introduction of the taskforce can properly have led to no different conclusion. The applicant's authority was thereby clearly confined.

190 One of the areas said by the respondent to have evidenced the applicant's poor performance was in his interaction with other staff. On the evidence this was an area where Mr Haddadi encountered some difficulties. This was perhaps not surprising, given the problems he was employed to address, the ongoing difficulties faced by this industry worldwide and the consequences of the respondent's poor decision making in relation to the MPS. That the respondent's failure to achieve a turnaround, put pressure on Mr Haddadi and others, seems entirely understandable in those circumstances. The efforts being made to effect a sale of the respondent to Solectron, can have only exacerbated these pressures. The evidence showed that Mr Zuber and other executives, including Mr Haddadi, were involved in those efforts, as well as trying to address the ongoing problems of the business.

191 That Mr Haddadi himself recognised he had a difficulty in staff relationships, was evident. It was he who initially sought the feedback organised by Ms Knowles, which led to a day long weekend meeting with his staff. Mr Haddadi saw this as a positive, rather than a negative development, because his staff were prepared to give up their weekend to participate. The private and seemingly critical report later made about the applicant by the consultant to Ms Knowles, was not shared with him, but was then utilised by Mr Zuber, as a part of his unsuccessful attempt to terminate Mr Haddadi's employment. No evidence was called from the consultant himself. The respondent relied upon Ms Knowles' report of a private conversation with him.

192 Mr Zuber was not successful in his attempt to dismiss the applicant, but that report was still not shared with him, so that he could take it on board and respond to it. Mr Haddadi had found his own discussion with the consultant not to have been especially helpful. The evidence as to what the consultant told Mr Haddadi and what he suggested to Ms Knowles, showed a very marked difference. I am satisfied that fairness required that this be broached with him in a direct way, so that he could deal with it. The end result of the approach adopted was that this information was kept for these proceedings, where it was used to demonstrate Mr Haddadi's alleged failings, together with one other example of a problem which had arisen some months earlier prior to the sale, when it had been addressed.

193 This concerned the conduct of a member of the sales force who reported to Mr De Cata and how he had conducted himself when he took a customer, unannounced to the factory. Mr Haddadi plainly lost his temper on this occasion, but soon afterwards apologised. The matter had been resolved by the apology and an agreement as to how such factory visits should be arranged and conducted by the salesman in question in future.

194 I was left with the distinct impression that this material had been brought forward in the attempt to dismiss Mr Haddadi and then in these proceedings, in order to bolster the case that Mr Haddadi's performance had been inadequate, with the benefit of hindsight and in a way not consistent with either a fair approach to the issues themselves, or one properly reflective of the respondent's approach at the time in question.

195 There was also undoubtedly evidence of tension amongst the senior executives. Mr Haddadi was making suggestions to them about altered approaches to the respondent's operations, which he perceived to be necessary, but which impinged on their own authority and Mr Zuber's level of direct control of various operational matters. They were not receptively received. To the contrary, they were perceived as Mr Haddadi not accepting responsibility for problems manifesting themselves at the plant. The reality was, however, that those problems reflected errors in the decision making processes in which these other executives were involved and whom Mr Haddadi had no authority to control. The end result was that obviously necessary changes in approach did not materialise. To the contrary, the taskforce was established. In reality it did not result in operational improvements.

196 Mr Ong was unable to say what Mr Haddadi should have done differently. As far as the evidence showed, Mr Ong effected no reduction in the MPS, even with the control he was given. In these proceedings the respondent criticised the applicant for the result he achieved. On its approach, he should have been more persuasive in the MPS process. That he was not, was undoubtedly because he had no authority to direct any of these other executives, who took a different view to him. Yet even when Mr Ong was given that authority, improvements did not materialise in reality.

197 The evidence also showed that necessary changes did not materialise with the innovation of the taskforce. Mr Kinnane was a forceful chairman of the taskforce and various responsibilities which Mr Haddadi had to that point were removed from him and given to others. Mr Zuber, who had authority to take control and make decisions which would have reduced the orders being put into the MPS by the respondent, on Mr Weiss' evidence gave that role to him. Mr Weiss' evidence as to his effect on the MPS figures was not made out. By March, the figures were at similar levels to those existing prior to the taskforce. The figures were at reduced levels in January and February. If Mr Weiss' evidence that it took three months to see the result of the work he commenced as part of the taskforce in November was correct, those results would have been evident in February, March and April. The March figures were back to their previous levels and April figures were not in evidence. Mr Haddadi undoubtedly had reduced, not greater, input in this period. Mr Zuber retained his ultimate control over those decisions. I am well satisfied that the evidence did not show unsatisfactory performance by Mr Haddadi.

198 While it is undoubtedly correct that Mr Zuber was entitled to Mr Haddadi's assistance with achieving the respondent's profit aims, particularly at the Liverpool plant, as Mr Tang expected, the respondent was not, however, entitled to impose artificial and unachievable requirements upon Mr Haddadi, given the way in which Mr Zuber elected to retain control over those matters which necessarily impacted on the achievement of those aims. The approach adopted was plainly unreasonable and suggested that some closer attention should have been paid by the respondent to what Mr Zuber was, in fact, doing on the one hand and expecting on the other. What occurred can only be regarded as having been engineered to achieve what Mr Zuber had decided upon in August, but was then not permitted to implement - the applicant's dismissal.

199 Mr Ong's cross examination put beyond doubt that the authorities which Mr Haddadi was seeking, were given to him by the respondent. What Mr Zuber was requiring Mr Haddadi to address in the absence of these authorities was not only unreasonable, but put beyond question that the reasons for the dismissal, unsatisfactory performance for having failed to achieve what was required of him, could not be sustained.

200 In coming to that conclusion, I note that I was by no means of the view, on the evidence, that there was absolutely no basis upon which any criticism could have been directed to Mr Haddadi. He had, after all, been recruited at significant cost in order to help turn this business around. He performed that work with a number of other executives, who together failed to achieve what they had set out to do. The business environment plainly had a part to play in this failure. The evidence also showed that business decisions made by the respondent exacerbated the problems which the respondent was facing, rather than addressing them.

201 The applicant's case was, however, never that his performance was perfect, or could not have been improved. Rather, it was that the respondent had no proper basis for the conclusion that his performance had been poor, as required by the contractual term. I reject the submission of the respondent that it was necessary for him to establish more. I am satisfied that the applicant met the onus falling upon him to make out this aspect of his case. Were the contractual provisions unfair?

202 The evidence as to the respondent's conduct towards the applicant well demonstrated the unfairness of the contract which permitted that treatment. I am satisfied that the circumstances revealed on the evidence are such that relief must follow.

203 The contractual term equated poor performance and misconduct. While it was argued for the respondent that there was some ambiguity in the clause, given that the parties would have understood that at common law the two circumstances are not equated, I am satisfied that the term was not ambiguous. Further, Mr Haddadi regarded the term to be a fair one.

204 The unfairness he complained about flowed from the way in which the clause enabled the respondent's obviously superior position to be improperly exploited. The inference was that having decided to bring the employment to an end as the result of the process adopted by Mr Zuber, the respondent appreciated that a problem of fairness confronted it and so provided a payment of three months in lieu of notice. This either reflected a breach of the contractual term if there had not been poor performance, or an ex gratia payment, if there had.

205 Given my conclusions in relation to the applicant's performance, it follows that relief must flow.

206 I am satisfied that the proper approach to the circumstances of this case, is to declare the parties' contract void, other than in relation to the payments which flowed hereunder.

207 The applicant is entitled to money orders in the circumstances.

208 The evidence showed that the applicant made endeavours to mitigate his losses. He did not find alternate employment and when that failed, went into business for himself. His earnings were less than his outgoings in the period.

209 Considerations of fairness in this case require that the applicant should have the benefit of the basis upon which the parties contracted with each other, which was designed to protect the applicant from becoming a casualty of the acquisition. The process which led to his termination and his replacement by Mr Ong, make this conclusion unavoidable. It follows that the balance of the contractual term should be paid out, as agreed, at a rate calculated having regard to the value of the applicant's package, with account taken of the payment made to him on termination.

210 I am also satisfied that given the evidence of the respondent's performance and its eventual fate, not long after the termination of the applicant's employment, that no account should be taken of any potential increases in remuneration over the balance of the term under the contract. I am satisfied that this reflects an appropriate adjustment between the parties' respective positions, as a matter of justice. I also take the view that no account should be taken of any entitlements to annual leave which would have arisen from further service. This approach also accords with that discussed by the Full Court in Westfield Holdings v Adams (2001) 114 IR 241 at pp283 and 284.

211 As to the share options, I am satisfied that justice requires that the applicant receive a money order. The promises made in relation to options were never honoured. The applicant was to be given Bluegum options from the outset. He did not receive them, or the Singapore options, or Solectron options. What he was finally offered could not make good his contractual entitlements. Other staff received both cash and options and received early benefits, when their employment came to an end. The vesting period proposed at a time when the termination of the applicant's employment was being engineered, ensured that the applicant received nothing. That vesting period was universally regarded as unfair by other staff, for obvious reasons.

212 The respondent's compensation committee determined in March 2000, that 25,000 Bluegum options would be allocated to the applicant "over the course of the next few days". The applicant showed on one approach to the calculation, that the value of those options was $US162,177. This calculation had regard to the exercise rate of $1 per share; the evidence of the conversion rate of Bluegum shares for Solectron shares; the evidence of how other employees were treated and the sale price of the Solectron shares in October 2000, after the three month period during which the respondent's employees were precluded from selling their Solectron shares.

213 This amount was not pursued by the applicant, but the evidence was argued to show that the sum claimed could not result in any windfall for the applicant. The alternatives pressed for the respondent were submitted to not be capable of redressing the respondent's fundamental failure to provide these Bluegum options and later, to make good the applicant's contractual entitlements thereto. In this context, it was relevant that the Solectron shares had always been of lower value than the offered strike price for Solectron options.

214 I am well satisfied on the evidence that the applicant's approach to these matters had a proper foundation in the evidence. The claim pressed by the applicant had regard to an assessment made by the respondent itself, at the relevant time, of 'employee expected value' of Singapore options, in the applicant's case, of $US111,848. I am satisfied that an order of that amount, as at the date of termination of employment is appropriate, especially given evidence of how others were treated, including when their employment came to an end. An order for interest must also follow.

215 For all of these reasons, I make the following orders: 1. I declare that the contract was unfair.

2. I declare the contract void, save for the money paid to the applicant thereunder.

3. I order the respondent to pay the applicant a sum calculated by regard to the balance of the contractual term, at the value of the package of $370,000, less the sum paid on termination in lieu of notice; plus $US111,848 in respect of the options; plus interest thereon, calculated from the date of termination to the date of judgment, at Supreme Court rates.

216 The usual order as to costs would be that the respondent bear the applicant's costs, as agreed or assessed. The parties have liberty to approach in relation to costs, if there is no agreement as to the appropriate costs order. That liberty should be exercised within 28 days. ------------------------

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