Johnson Joseph v Westpath Services Pty Ltd and Ors

LEGISLATION CITED: Industrial Relations Act 1996 s106 Civil Procedures Act 2005 s100

A & M Thompson Pty Ltd v Total Aust Ltd (1980) 2 NSWLR 1 Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 Adams v Aspecta Financial Group Pty Ltd and Ors [2004] NSWIRComm 28 Baker v National Distribution Services (1993) 50 IR 254 Brown v Rezitis (1970) 127 CLR 157 CASES CITED: Davies v General Transport Development PtyLtd (1967)AR NSW 37 Joseph v Westpath Services Pty Ltd (IRC 1517 of 2000, 5 April 2002, Cambridge C) Oraka Pty Limited v Wendy's Supa Sundaes, Pilgrim and Ors (2004) NSWIRComm 39 Port Macquarie Golf Club v Stead (1996) 64 IR 53 Saliba v John Hearder Pty Ltd (1986) 15 IR 36 Westfield Holdings v Adams (2001) 114 IR 241

HEARING DATES: 16/10/06, 17/10/06, 30/10/06

Applicant: Mr A.T. Britt of counsel Solicitors: Mr V. Prasad LEGAL REPRESENTATIVES: Harish Prasad & Associates

Respondent: Solicitors: Mr C. Levingston Christopher Levingston & Associates

Application under s106 of the Industrial Relations Act 1996

[2006] NSWIRComm 393 1 Johnson Joseph (the applicant) claims under s106 of the Industrial Relations Act 1996 (the Act) that his contract of employment was unfair, harsh or unconscionable in its terms and in its operation. The applicant seeks a variation to the contract and monetary orders "just in the circumstances." 2 The applicant prior to this application brought a claim under s84 of the Act asserting his unfair dismissal by Westpath Services Pty Ltd, the first respondent in these proceedings. On 5 April 2002, Commissioner Cambridge published a Decision in the s84 application Joseph v Westpath Services Pty Ltd (Matter No. IRC 1517 of 2000, 5 April 2002). In delivering his Decision the learned Commissioner commented it could be subtitled 'a rogues gallery'. The second and third respondents along with the applicant were Directors of the first respondent and each gave evidence before the Commissioner. The Commissioner found not one of them, nor six other witnesses, provided completely truthful evidence. The Commissioner found the termination was under s84 of the Act "harsh, unjust and unreasonable."

The Application 3 The applicant asserts in his application under s106 of the Act, the employment arrangement was through two contracts, the first with the first respondent, and the second between the applicant and the second and third respondents who were he asserts the operating minds of the first respondent. 4 The applicant pleads in his Amended Summons for Relief: 58. The first contract between the applicant and the first respondent under which the applicant performed work in an industry was and is unfair, harsh and unconscionable and contrary to the public interest in that: (a) It permitted the first respondent to terminate the contract of employment without sufficient notice or payment in lieu of notice. (b) It discriminated against the applicant having regard to the applicant's length of service, position and responsibilities. (c) It invested the first respondent with significant discretionary powers that may and have been used to the substantial disadvantage of the applicant, particularly in the circumstances relating to termination of the contract and/or failure to continue the applicant's employment. (d) The applicant was at all material times in a position of unequal and inferior bargaining power in respect of his dealings with the first respondent and was specifically in such a position at the time of termination. (e) It permitted the first respondent to deprive the applicant of the significant benefits of long-term secure career employment and/or employment at all. (f) It failed to provide for any reasonable payment to the applicant by the first respondent upon termination of employment for any reason. (g) It permitted the first, second and/or third to prevent the applicant from working and thus deprive the applicant of income for the period 29 December 1999 (sic) until 21 January 2000. (h) It failed to provide the applicant with adequate notice of his termination and allow him to take steps to find comparable employment whilst in employment with the first respondent. (i) It failed to contain provisions and protection consistent with Australia's international obligations under the International Labour Organisation's Termination of Employment at the initiative of the Employer Convention to which Australia is a party. (j) It permitted the first, second and/or third respondent to terminate the applicant's employment without taking steps to minimise or reduce the stress, hurt and suffering of the applicant at the time of the termination and into the future, in circumstances where such stress, hurt and suffering was foreseeable. (k) It permitted the first, second and/or third respondent to terminate the applicant in a manner that caused him stress, hurt and suffering, impaired his future employment prospects and reduced his quality of life. (l) It permitted the first respondent not to pay the applicant's statutory entitlements. (m) It permitted the first respondent not to pay the applicant the remuneration package agreed by the second and third respondents. (n) It permitted the first respondent to treat the applicant differently to the second and third respondent in circumstances which were not materially different. (o) It failed to contain the terms in A3.

59. The second contract between the applicant and the second and third respondents under which the applicant performed work in an industry was and is unfair, harsh and unconscionable and contrary to the public interest in that: (a) It permitted the respondents to terminate the contract of employment without sufficient notice or payment in lieu of notice. (b) It invested the second and third respondents with significant discretionary powers that may and have been used to the substantial disadvantage of the applicant, particularly in the circumstances relating to termination of the contract and/or failure to continue the applicant's employment. (c) The applicant was at all material times in a position of unequal and inferior bargaining power in respect of his dealings with the second and third respondents and was specifically in such a position at the time of termination of his employment. (d) It permitted the second and third respondents to deprive the applicant of the significant benefits and investment in the first respondent. (e) It failed to provide for any reasonable payment to the applicant by the second and third respondents for the loss of the applicant's investment and likely benefit in the first respondent. (f) It permitted the second and/or third respondent to terminate the second contract without taking steps to minimise or reduce the stress, hurt and suffering of the applicant at the time of the termination and into the future, in circumstances where such stress, hurt and suffering was foreseeable. (g) It permitted the second and/or third respondent to terminate the second contract in a manner that caused the applicant stress, hurt and suffering and reduced his quality of life. (h) It permitted the second and third respondent to breach the Corporations Law. (i) It permitted the first respondent to provide loans to the second or third respondents without the approval of the applicant. (j) It permitted the first respondent to transfer its assets to the fourth respondent without the knowledge of the applicant. (k) It permitted the first respondent to transfer its assets to the fourth respondent without the approval of the applicant. (l) It failed to contain the terms in A10. 5 Arising from the alleged unfairness in the contract of employment, the applicant claims compensation as follows: D. Particulars of the manner in which any amount claim is calculated: (i) Payment in lieu of Notice 1 years salary = $49,948.00 (ii) Annual leave = $6,771.00 (iii) Unpaid Remuneration = $39,147.00 (iv) Payment of Bonus, Overtime = $100,573.00 (v) Amount compensating The applicant for stress Hurt and suffering, Impairment of employment Prospects and loss of Enjoyment of life on the First contract $10,000.00 (vi) ¼ share in business $375,000 (vii) Amount compensating The applicant for stress, Hurt and suffering, And loss of enjoyment of life On the second contract $10,000.00 ( viii) Interest (ix) Costs 6 In reply, the respondents assert the applicant's conduct disentitles him to a money amount sought in Part D of the Amended Summons for Relief. The respondents assert: (i) The applicant's 'contract' was a bargain entered into on even terms. (ii) The applicant's evidence that the employment contract required the parties to engage in criminal conduct or to aid and abet the commission of criminal offences is to require the Court to enforce a contact (sic) tainted by illegality. (iii) The applicant's fraud in retaining monies due to his partners and applying such monies to his personal use. (iv) The applicant's cumulative conduct traverses the expectation that he comes to the jurisdiction "with clean hands". (1) The applicant's willing participation in criminal conduct, his fraud and the giving of false evidence in proceedings IRC1517/00 materially taints his application in the current proceedings. 7 Mr A.T. Britt of Counsel appeared for the applicant. The applicant tendered the following evidence - Original Summons, Reply, Response, Amended Summons, Affidavit of Johnson Joseph sworn 13 July 2004, Affidavit of Johnson Joseph sworn 21 October 2004, Decision of Cambridge C dated 5 April 2002, Transcripts before Cambridge C, Agreed Issues document (as amended), Schedule of Cheques, Company Search - Westpath, Company Search - Austax Med Lab, Five Income Records and Summaries for years 1.7.98 to 30.6.99, 1.7.99 to 30.6.00, 1.7.00 to 30.6.01, 1.7.01 to 30.6.02 and 1.7.02 to 30.6.03 and a List of Payments made to Directors. 8 In this application, the respondents presented no evidence other than an Amended Reply (although some of those pleadings were abandoned at the hearing) and a bundle of financial documents from the records of KSPC Pty Ltd, the fourth respondent but trading as Westpath Services. 9 The respondents have conceded for the purpose of the s106 application: · The Court has the jurisdiction to grant the relief sought in relation to the First Contract. · The first respondent is a corporation and is able to sue and be sued in its corporate name and style. · The fourth respondent is a corporation and is able to sue and be sued in its corporate name and style. · The applicant was one of the founding Directors of the first respondent. 10 The respondents also conceded they accept the finding of facts as established before the Commissioner and all adverse findings made by the learned Commissioner as to the credit of the relevant parties who appeared before him.

History 11 In early 1998, the applicant and three other men including Carl Zhang, the second respondent, Nadeem Khaliq, the third respondent and a Dr Raghubir Singh decided to establish the private pathology company, Westpath Services. The first respondent was registered on 14 July 1998 as a Proprietary Company limited by shares and certified as such by the Australian Securities and Investments Commission (ASIC). 12 The applicant paid $41,000 for his shares. The third respondent paid $50,000 for his shares. There is no record of a payment by the second respondent for the purchase of his shares. The applicant asserts this payment gave him a ¼ interest in the first respondent company. It is admitted the applicant was a founding Director of the first respondent. 13 The applicant started work, full time, in April 1998. His first duty was to establish the pathology business of the first respondent. Given the company was registered in July 1998, his first day of employment with the first respondent was 3 August 1998. The applicant was paid a salary, provided with a company motor vehicle and telephone expenses and was largely responsible for recruiting work for the first respondent from various medical practitioners. The applicant's title was Marketing Manager/Scientific Officer. 14 The first respondent started to process specimens for pathological analysis in about October 1998. The second and third respondents performed roles related to the laboratory operations and support services that were required to undertake the pathology analysis work. They also received a salary from the first respondent. The first respondent's business developed slowly but steadily during the period from about October 1998 up until May-June 1999. 15 From about May-June 1999, tensions developed between the applicant and the second and third respondents. The difficulties, which arose between the applicant and the other Directors, were reflected in the minutes of Directors' meetings held during the last half of 1999. These minutes include some record of Directors' meetings in the absence of the applicant, despite the fact the applicant was nominated as a Director and as Company Secretary of the first respondent. One issue of contention was the existence within the operation of the company of a cash payment, kick-back scheme from the first respondent company to the doctors in return for directing the pathology sampling and testing work which is paid to the pathology company by way of rebate from Medicare. 16 It was described thus from the applicant's evidence to the Commission and recited by the Commissioner in his Decision at [29]-[31]. The applicant asserted: 29. . . . "12. In the middle of 1999 a number of persons wanted to pay Doctors for the samples they provided to the company. This issue was discussed at the Directors meeting on 1 September 1999. During the meeting I said words to the following effect: "This is malpractice and prohibited by the Health Insurance Commission."

Despite this the Company agreed to pay Doctors for the samples."

30 During cross examination the applicant provided the following further evidence about his participation in the "Doctors' kickbacks" schemes: "Q. Do you say you were involved in the kickback scheme? A. Yes, I am.

Q. So, for example, you handed cash payments, did you, to Dr Sood, as a kickback? A. Yes. When it was my turn to give it, Carl gave it, I gave it to her.

Q. So you were just simply the courier, were you? A. No, we were all taking turns, as it is illegal to do that, so we were careful not to be caught.

Q. So you say that you were involved in this illegal activity? A. Yes, I admit that." 31. One particular inconsistency in the applicant's evidence regarding the "Doctors' kickbacks" schemes should be mentioned. The applicant's initial evidence suggested that in about the "middle of 1999" there was apparently some discussion amongst the respondent's Directors to implement the "Doctors' kickbacks" schemes. The inference that would be logically drawn from paragraph 12 of Exhibit 2, is that the Directors' meeting of 1 September 1999, endorsed the proposition regarding the "Doctors' kickbacks". 17 The kick back scheme was raised in a meeting of the first respondent's Directors in September 1999 as recorded in minutes thus it was raised before the Decision to terminate the applicant. 18 Then in November 1999, the applicant deposited a cheque from Ultrasound Services made out to Cash into his own bank account. An emergency Directors' Meeting was called for 1pm on Sunday 28 November 1999. Directors opposed to and in conflict with the applicant called the meeting. The meeting was heated. After about 35 minutes the applicant walked out of the meeting. An examination of the minutes suggest discontentment with the applicant and his performance but there is no mention of the cashing out of the cheque. The meeting continued in the applicant's absence and the remaining Directors voted to remove the applicant as a Director of the first respondent and as Company Secretary. While there is mention of the return of the car, there is no mention of a decision to terminate the applicant. 19 There were no further wage payments made to the applicant. He took some sick leave then, after trying to present for work and being asked to leave, he ceased. He asserts there was a constructive dismissal by the first, second and third respondents of his employment contract. The respondents assert (as before Cambridge C) that the applicant was terminated for misconduct.

20 The first respondent, on termination, made no calculation of, or payment to, the applicant for any of his accrued entitlements. He received none of his holiday pay or any bonus. 21 The applicant was formally removed as a Director and Company Secretary of the first respondent on 11 March 2000.

Section 84 Application 22 The respondents have accepted the findings of Cambridge C. It is however necessary to traverse the learned Commissioner's Decision in this consideration of the s106 claim. The respondents, while not disputing facts established before the Commissioner submitted as to how such facts should be perceived by the court and the proper application of those facts to the claim for unfairness and the associated claims for compensation. 23 In the s84 application, Cambridge C examined the conduct of the pathology business before the events that led to the termination of the applicant. He held as to the conduct of the business: 4. Johnson Joseph (the applicant), not only alleged that various Directors of Westpath Services Pty Ltd (the respondent), participated in the secret commissions schemes, referred to as "Doctors' kickbacks", but he also admitted to participating in the "Doctors' kickbacks" schemes himself.

5. Although there was considerable evidence in addition to the applicant's confessions, which strongly suggested that the "Doctors' kickbacks" schemes were conducted by various individuals associated with the respondent, these proceedings did not represent the proper forum for conclusive findings to be made regarding the "Doctors' kickbacks" schemes. 24 As to the credit of witnesses before him, including the applicant and the second and third respondents, Cambridge C held: 19. As mentioned at the commencement of this Decision, the most striking feature of the evidence in this case involved the unreliability of all witnesses. It was disturbing and disconcerting to observe that not one of the nine witnesses called in this case could be described as a witness of truth in all respects.

20. There was a remarkably consistent level of poor performance displayed by all of the witnesses. It was unusual to find that not one of the witnesses was prepared to answer questions in cross-examination in an open, concise and deliberate manner. A number of witnesses refused to answer questions and all of the witnesses left the witness box with serious doubt regarding credibility as the most notable feature of their testimony.

21. All of the witnesses presented as individuals who seemed to have something to hide. In many instances a simple question was greeted with a convoluted, loquacious and sometimes irrelevant response. In other instances questions were met with limited and guarded responses which often sought to deflect from the obvious issue that was the subject matter of the question. 25 The learned Commissioner as to events on 28 November 1999 commented: 68. When the evidence about an issue like the reason for the argument on the evening of 28 November is considered in totality, it became obvious that the various Directors of the respondent deliberately attempted to conceal or avoid the actual reason for the tumultuous events of 28 November 1999. Of course it does not necessarily follow that such concealment establishes that the uproar of that occasion arose from the discoveries regarding the "Doctors' kickbacks" schemes and, in particular, the applicant's conduct which represented what might be described as "cheating on the cheats". Consequently the evidence remained inconclusive but the only plausible explanation for the dramatic events of 28 November was the discoveries made in connection with the "Doctors' kickbacks" schemes.

69. The evidence about the termination of the applicant's employment was to some extent overshadowed by the allegations concerning the operation of the "Doctors' kickbacks" schemes. The evidence regarding the termination of the applicant's employment is well summarised by the evidence provided by Mr Zhang during cross examination, and the following extract from transcript is relevant:

Q. Now, Sir, when do you say his employment came to an end? A. I think it's middle of January. Q. Middle of January, did it, sir? A. Somewhere because he didn't turn up and we now notice no one. Q. Sir, did you provide him a cheque for his outstanding annual leave? A. Pardon me. Q. Did you provide him a cheque for his outstanding annual leave on the termination of his employment? A. Because at that - - - Q. No, sir, answer my question. Did you provide a cheque for his outstanding annual leave? A. Not yet. Q. Not yet. What you're going to pay it one day, are you, sir? A. No, because he done his job - because he failed the job badly. People can't leave the job with no noticed."

70. I have been reasonably expansive and detailed in the examination of the evidence in this matter so as to provide for proper foundation for the adverse findings made as to the credit of witnesses. Although these findings may not have been a necessary prerequisite for the determination of this claim, the matter has involved allegations and admissions of what may be serious unlawful and possibly, criminal activity. Consequently there is significant potential that these proceedings may lead to further litigation, and therefore it has been necessary to carefully examine the evidence provided by all witnesses, and to properly support the adverse findings of credit that are made against those individuals. 26 As to the termination of the applicant's employment, the Commissioner held [107]-[109]: 107. The conduct of the employer in the period following the events of 28 November 1999 amounted to the dismissal of the applicant. The employer acted in a manner which sought to bring the employment to an end. These actions were consistent with the decisions taken on 28 November when the respondent purported to remove the applicant as a Director and Company Secretary.

108. The dismissal of the applicant was formalised in the correspondence from the respondent's solicitors dated 5 April 2000, which asserted that the applicant had abandoned his employment. There can be no finding made that the applicant abandoned his employment. Instead the applicant was dismissed and that dismissal was harsh, unjust and unreasonable.

109. The Relief that I am prepared to provide to the applicant has been limited because of the evidence that the applicant advanced in that he knowingly participated in conduct which he understood to be illegal and possibly criminal activity. Although the applicant did ultimately confess to this conduct, his approach to disclosure of the alleged conduct has been guarded and he has attempted to misrepresent his role in the alleged activity. Consequently I am prepared to provide for only limited compensation as appropriate Relief for the applicant's unfair dismissal. 27 Cambridge C then awarded the applicant $7,800 in compensation from the first respondent ordering: In this matter, for the reasons outlined herein, I have determined that the dismissal of the applicant was harsh, unreasonable and unjust and I hereby make the following Orders: 1. The Commission Orders that the respondent pay to the applicant an amount of compensation of $7,800.00. This amount has been calculated on the basis of approximately thirteen weeks of the applicant's pre-dismissal remuneration. The amount is a gross figure and appropriate taxation treatment is a matter for the Parties.

The s106 Application 28 A clear distinction can be drawn between the s84 proceedings in the Commission and these proceedings under s106 of the Act. The s84 proceedings provided a statutory remedy in respect of a claim brought by the applicant for his unfair dismissal. The Commission found that the Westpath Services' conduct was "harsh, unreasonable and unjust" in the termination of the applicant under s84. 29 To attract the jurisdiction of the Court under s106 of the Act there must be an established unfairness in the terms and/or conduct of the employment contract. Therefore in determining whether "unfairness" has been established, regard may be had by the Court not merely to the terms of the contract, any arrangement or collateral arrangement but also to the manner in which the contract or arrangement was conducted between the parties so as to make the contract unfair. The relevant unfairness "may arise either from the terms of the contract or arrangement itself, the surrounding circumstances and/or from the manner of performance or operation of the contract or arrangement" (see Port Macquarie Golf Club v Stead (1996) 64 IR 53 and Oraka Pty Limited v Wendy's Supa Sundaes, Pilgrim and Ors (2004) NSWIRComm 39). 30 In Davies v General Transport Development Pty Limited (1967) AR NSW 37, Sheldon J commented the unfairness of a contract or arrangement was to be determined according to: The common sense approach characteristic of the ordinary juryman ... It is a plain matter of morals not law. 31 The nature of the unfairness was considered by the then Industrial Commission in Court Session in A & M Thompson Pty Limited v Total Australia Limited (1980) 2 NSWLR 1 as follows (at 13): It has been said that fairness is determined by the commonsense approach of a juryman and that it is a moral and not a legal issue ( Davies v General Transport Development Pty Limited (1967) AR NSW 37). Whether this be so or not, it does seem that in distinguishing between what is fair and what is not fair the Judge must apply standards which appear to him to provide a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement. In doing so he would always have to bear in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement.

Findings of Fact 32 The application brought under s106 pleads unfairness against the first respondent and separately against the second and third respondents. The employment contract and the associated arrangements were unfair it is asserted in: · The way the contract was conducted during the time of the employment relationship; · Upon termination of the employment relationship; · In the unfair distribution of monies to other employees through the first respondent company established to conduct the business; · In the transfer of, and in the continued use of, the applicant's monies in the formation of a new company operating the same business or a similar business, namely, the fourth respondent. 33 While acknowledging the findings of the Commissioner and conceding as to the expressed doubts as to the credit of the second and third respondents, the respondents also challenged a number of the asserted further facts relied upon by the applicant and placed before the court in affidavit form. It is necessary to establish such facts for the Court's consideration of the particular claims brought by the applicant under s106 of the Act. They are asserted facts; neither raised nor argued before the Commissioner. They can be identified as follows: · The shareholding held by the applicant in the first respondent. · The applicant's salary/remuneration package as agreed during the employment relationship. · The full financial dealings of the first respondent. · The Shareholding of the First Respondent Company. 34 The respondents concede the applicant was a founding Director of the first respondent but challenged his assertion he was a shareholder of the company. 35 The applicant's interest in the first respondent appears on the share register and through a share certificate which certificate bears the seal of the first respondent and incorporates a "receipt" which acknowledges that the applicant has "received" 50,000 ordinary shares "on which the sum of $1.00 per share has been paid …" The date on the certificate is 12 October 1998. 36 The respondents challenge the validity of this certificate given it was issued by the applicant in his capacity as Company Secretary. The respondents assert the court would not be satisfied as to the applicant's shareholding as the certificate was prepared many months after the company was established. 37 On its face, the certificate recites, incorrectly, the monies paid for the shares (not $50,000 but only $41,000). The respondents assert the applicant, as a Director and Company Secretary of the first respondent, was placed in a position of advantage and consequential trust over his fellow Directors and business partners and the share certificate issued should not have been issued. The respondents therefore challenge the applicant's proposition that he held 50,000 shares in the first respondent and that this shareholding made him as equal shareholder to the second and third respondents. The respondents only concede the applicant was a founding Director of the first respondent. 38 The respondents in the alternative assert the applicant had an unpaid portion of shares and he failed to meet a "call" made for the monetary balance of his unpaid shares and therefore he forfeited the shares. The power to declare a forfeiture of shares, however, must be a power recited in the company constitution and notice must be given to the members. While that power is invariably given and is normally exercisable by resolution of the Directors, after notice to the member, in exercising the power the Directors must act in good faith for the benefit of the company as a whole. 39 The respondents asserted the first respondent made a call on the applicant to pay the $9000 owed and, when the monies were not paid, the first respondent was entitled to remove the applicant from the company register. I reject this submission. I am not confident there was a proper "call" made on the applicant for the outstanding monies. 40 Given the state of the company records and the challenge to the credit of all parties it is difficult to assess this part of the claim. However, I am satisfied by cross referencing the records that the applicant contributed $41,000 of $50,000 for 50,000 $1 shares in the first respondent. The third respondent paid $50,000 for his allocation of 50,000 shares. The second respondent does not appear to have paid his monies however, he was recognised as the holder of a third 50,000 shares. The evidence is silent as to other shareholders. 41 The company records are of concern. For example, they reveal relevantly the third respondent's shares were converted from 50,000 Y class shares to ordinary shares on 14 October 2002. There were then some unusual share ownership patterns related to the second respondent as at 11 February 2000. 42 However, a certificate held by a member specifying shares is prima facie evidence of the title held by the member to the shares (s1087 Corporations Law). 43 Sometime but after the applicant's dismissal, the first respondent company's shareholding was changed. The Statement of Agreed Facts outlines the following occurred: 41. In October 2002 the First Respondent sought to introduce a share buy back scheme without informing the Applicant. 42. The Third Respondent borrowed $25,000 from the First Respondent. 43. The Second Respondent borrowed $25,000 from the First Respondent. 44. In November 2002, the First Respondent agreed to a proposal from the Applicant to have an independent valuation of its business. 45. In November 2002 the Second and Third Respondents registered the Fourth Respondent. 46. In December 2002, the Applicant's Solicitor and the Respondents' Solicitor discussed the issue of appointment of an independent valuer. . . . 50. On the 13 May 2003, the Respondents advised that the First Respondent had ceased trading and a new company had been in the formed in the name of Westpath Pty Ltd. 51. On 5 August 2003, the Respondents' Solicitor advised that the name of the new company was KSPC Pty Ltd and not Westpath Pty Ltd. 52. The Fourth Respondent trades as "Westpath Services" and operates out of the premises formerly occupied by the First Respondent. 44 The applicant was formally removed as a Director of the first respondent on 11 March 2000. The minutes of the company which record the removal of the applicant as a Director and Company Secretary acknowledged him as being a former shareholder of 50,000 ordinary shares and record he ceased being a shareholder on 30 January 2001. From 1998 and until November 1999, however, the applicant and the second and third respondents seem to have conducted themselves as though they were equal shareholders. 45 I accept the applicant held an interest in the first respondent as a result of his financial contribution and he held an allocation of shares in the first respondent of 50,000 shares. I am satisfied this was an associated arrangement to the employment contract. The first respondent received the monies as an establishment contribution. The applicant asserts this contribution gave him a ¼ share in the business of the first respondent. The fact of the shareholding was in dispute between the parties but the respondents did not challenge that if the applicant was found to be a shareholder he held a ¼ share in the business at the time of the formation of the first respondent. · Salary 46 The applicant asserts a term of the employment contract he made through and with the second and third respondents, on behalf of the first respondent, was the first respondent would pay him a salary of $700.00 a week. The maximum he was paid during the employment was $460.00 a week. The applicant also received a car as part of his package and the cost of mobile calls. He retained the use of that car until April 2000. The applicant asserts he agreed to receive $460.00 a week until the company reached a profit after which his agreed salary would be $700.00 a week plus a car and mobile telephone use. 47 The applicant submits as no other evidence has been placed before the court, the court should accept his assertion that he was promised a base salary of $700.00 per week. 48 The respondents assert the salary agreed to was the salary the applicant received, namely, $460.00. I reject this submission. While I accept the evidence before me from the applicant is unchallenged, I also have before me Cambridge C's finding casting doubt as to the credit of all the parties. The credit issue has been conceded at least by the respondents. In such a circumstance, where credit is a key issue and where the parties are in conflict, I have attempted to go to other sources including bank records to determine the issue although the first respondent's record keeping appears unreliable. 49 To determine an approximate salary under the contract, I have examined the description of the employment duties (as stated in the Amended Summons for Relief) which were not challenged as follows: 12. The applicant's primary responsibilities in establishing the first respondent and its business and then in conducting that business included: (a) Registering the first respondent; (b) Attending to all legal matters pertaining to the first respondent; (c) Seeking approval of local council for the running of the Pathology Laboratory; (d) Seeking clearance from relevant Environmental Protection Authorities; (e) Obtaining a licence from Health Insurance Commission to operate Pathology service; (f) Making various calls on a daily basis to medical centres, doctor's surgeries located in Sydney and metropolitan areas including Wollongong, Gosford, Newcastle, Blaxland and the Blue Mountains; (g) Registering pathology as Approved Pathology Laboratory (APL) for Quality Assurance Programme; (h) Meeting representatives of various companies and obtaining costs of reagents and cost of leasing machines; (i) Engagement of pathologists for the laboratory and negotiating their salary, terms and conditions of that engagement; (j) Business promotions and meeting business people at the applicant's residential premises, which was the registered office of the first respondent; and (k) Negotiation of lease agreement for the first respondent's business premises with the owners of the building.

13 The applicant's first day of employment with the first respondent was 3 August 1998. 50 Taking into account the applicant's duties, I find a fair rate of pay for his labour was $600.00 per week. I note the Commissioner, in the use of his discretion determined at [109] he was "prepared to provide for only limited compensation as appropriate Relief for the applicant's unfair dismissal" and he gave his Order for compensation "calculated on . . . the applicant's pre-dismissal remuneration". He allowed the applicant $600.00 per week, it appears, in ordering a payment of $7,800 for 13 weeks. 51 Whether the above reasoning of the Commissioner was to "limit" the period of payment or the salary rate earned is not clear. However, given the evidence before me, I accept the monitory amount accepted by the Commissioner of $600 a week as the pre-dismissal remuneration was fair in the circumstance. I do not accept, given the description of the duties performed by the applicant that $460.00 a week was a fair payment for his labour. · Financial Records of First Respondent 52 For the court to address the particulars relied upon to establish the claim the contract was unfair, there must be an analysis of the financial records of the first respondent. The records exhibited reveal the Directors of the first respondent including the second and third respondents received, in addition to their salary, other payments from the bank account of the first respondent. They received them each financial year until the first respondent ceased trading on 5 May 2003. No such payments were made to the applicant after he was terminated. 53 In the first financial year in which the first respondent provided a pathology service, 1998/1999, there was only a distribution to Dr Singh, another Director, of $1,216 and one to Mr Zhang, the second respondent, of $1,110. 54 In the financial year 1999/2000, the year the applicant was dismissed, up until 30 June 2000, the monies paid to each Director, or to a company in which each Director declared an interest, were as follows: (a) Ram Singh $28,865.00 (b) Ishwari Prasad $29,480.00 (c) Carl Zhang $41,206.00 (d) Nadeem Khaliq $46,610.00

On an analysis of these payments, Mr Zhang and Mr Khaliq, the second and third respondents received larger payments than those made to Dr Singh and Dr Prasad. There was therefore a distribution of monies accumulated by the first respondent, be it a profit distribution or bonus payment. While the applicant laboured for the first respondent for six months of the financial year 1999/2000, he was a shareholder until removed from the register yet he received no distribution of monies. 55 Evidence reveals each of the four Directors took out of the account of the first respondent, after salary, on average in the financial years: · 2000/2001 - $68,477 · 2001/2002 - $88,291 · 2002/2003 (for the 9 months until the company trading in March 2003) on average $19,908.00. 56 Further, the financial records reveal an amount of $35,055.71 was transferred from the first respondent's bank account to the fourth respondent's account on 2 June 2005. A further amount of $140,532.88 was transferred from the first respondent's account to the fourth respondent's account on 2 June 2005. In all, $175,588.00 (approximately) was transferred to the fourth respondent's bank account from the first respondent's trading account in 2005. The fourth respondent in financial year ending 30 June 2006 had an income of $4,554,385.00. 57 The fourth respondent was a company established by the second and third respondents in 2003. It received some $175,588.00 transferred from the bank account of the first respondent. 58 Further, the fourth respondent conducted a similar business to that of the first respondent. It employed the second and third respondents to provide the same service as they had provided to the first respondent, notably pathology services. The fourth respondent continued (originally) to trade under the name of Westpath Services as the trading name of the first respondent and to operate out of the same building. It seems now to operate through KSPC Pty Ltd. The agreed facts state its trading name is still Westpath Services.

59 Therefore, for the purpose of the Court's considerations as to the asserted unfairness in the employment contract, I find: 1. The applicant held 500,000 shares in the first respondent and held an initial ¼ share in the first respondent.

2. The applicant's salary was $600.00 per week and his salary package included the use of a car and the cost of work related mobile phone calls.

3. The other Directors received payments, other than salary, from the first respondent until it ceased trading in March 2003. The company is still on the company register.

4. Monies were transferred from the bank account of the first respondent to the account of the fourth respondent in 2005.

Unfairness 60 As to the unfairness in the employment contract and/or associated arrangement in making this determination, I take into account the facts which were established by the learned Commissioner and as established before this court (see above). The respondents, although they filed a number of affidavits did not tender any material going to the facts except as to financial records of the fourth respondent. 61 In any consideration as to whether the contract of employment between the applicant and the first respondent was unfair, I take into account the following matters which include facts established before the Commissioner and/or before the court and from the agreed statement of facts: · The second and third respondents established, with the applicant, the first respondent company for the purpose of conducting a pathology service. · The applicant was employed on a full time basis to establish the business of the first respondent from April 1998. · A fair salary package was to be paid to the applicant of which the applicant was only paid $460.00 per week. · The applicant and the second and third respondents were to work and enjoy the benefit of having an equal share in the business of the first respondent. · Whilst employed by the respondent the applicant received a total payment of $27,696 for 18 months work. · The applicant was never reimbursed the $41,000 he invested as start-up capital for the first respondent. · The applicant held 50,000 shares in the first respondent. · The applicant was removed from the share registry of the first respondent. · The applicant was removed as a Director and Company Secretary of the first respondent following his termination. · Following the termination of the his employment and his removal as a Director and Company Secretary the applicant was frozen out of any interest he held in the first respondent. · The fourth respondent took over the business of the first respondent. Monies held by the first respondent and derived from providing pathology services were transferred to the fourth respondent in 2005. · The first respondents share register was altered against the applicant's will including the transformation of the third respondent's shares to ordinary shares and some unexplained dealings were related to the second respondent's shares. · The second and third respondents continued to enjoy financial reward from the conduct of the pathology business Westpath Service conducted through the first respondent until March 2003. · The transfer of the pathology business to the fourth respondent occurred in May 2003. · Funds, after salary earned, were allocated to each Director in 2000, 2001, 2002, 2003 years from the first respondent. Funds continued to be transferred by the fourth respondent to its Directors when the business changed to KSPC Pty Ltd. · The applicant's financial interest in the first respondent was not considered after his termination in these allocations. · Monies held by the first respondent earned from pathology services in which the applicant, as a shareholder, would have held an interest were transferred to the fourth respondent in 2005. 62 While the pleadings assert the applicant held a contract of employment with the first respondent and separately with the second and third respondents, I find there was an employment contract with the first respondent but that the second and third respondents had a direct connection with the making and avoidance of that contract. They were, on the evidence, the controlling minds of the first respondent. 63 I find, given the above circumstances, the applicant held a financial interest in the first respondent. He established the pathology business in his role as Marketing Director/Scientific Officer. In the circumstances, the minutes do not reveal that at the company meeting on 29 November, 1998 there was agreement the applicant be dismissed. Much of the meeting was about the doctor's kick-back scheme. I accept in the financial dealings of the first respondent there was unacceptable corporate behaviour. The applicant and the second and third respondents were party to that unacceptable conduct. While the terms of employment contract were originally fair and the contract was entered into on even terms, by the conduct of the first respondent employer and through the conduct of its Directors, the second and third respondents, the contract, in its performance, became unfair. It was unfair in the way its financial dealings were conducted to the detriment of the applicant's financial interest both as to distribution of profits/bonus and in the financial dealings within the associated arrangement, in the applicant's termination and in the operation of the first respondent's share register which removed the applicant as a shareholder as part of the unfair employment termination.

Compensation "Just in the Circumstances" 64 The question that arises from this finding of unfairness is whether the unfair conduct of the first, second and third respondents should enliven a variation to the employment contract and associated order of compensation "just in the circumstances". The applicant asserts the finding of unfairness in the employment contract in the particular circumstance should be such as to attract an order for the payment of monies, as pleaded, which payments, the applicant asserts, would be "just in the circumstances" under s106 of the Act. 65 The jurisdiction of the Court in this application is established through the operation of s105 and s106 of the Act. Upon a threshold finding of unfairness, s106(5) of the Act permits the Court to make orders varying the terms of the contract and fashioning orders as to the payment of monies that the Court considers "just in the circumstances" of the particular contract or arrangement concerned (Baker v National Distribution Services (1993) 50 IR 254). 66 The proceedings under s106 invoke the Court's discretionary powers. These broad powers carry the descriptor of "massive powers" (Baker) and must be applied by the Court with the caveat of "proper restraint". 67 The principles for making an order under s106(5) were recited in Westfield Holdings v Adams (2001) 114 IR 241 at [161] and primarily at (1) to (4): 1) Any order must be in connection with the making, variation or avoidance of the contract or arrangement that has been varied or avoided 2) Where appropriate, an order may be made restoring a party or parties to the situation that existed before the making of the contract or arrangement that has been varied or avoided. 3) Whether or not an order has been made providing for restitution, in appropriate cases the Commission in Court Session may make remedial provision for what has taken place or been done under the contract or arrangement that has been varied or avoided. 4) Any order shall be what the Commission considers just in the circumstances of the case. Whilst such orders should not be limited by drawing some analogy with contractual, tort or equitable remedies it is proper to have regard to the common law or equitable principles, but recognising that in particular cases those principles may be inappropriate. That is not to say that the discretion under s 106(5) is at large. As with any judicial discretion it must be exercised judicially having regard to the accepted jurisprudence which enables, and requires, limits on what orders may or should be made.

Any monetary order needs to be connected with the variation of the contract and can, where appropriate, restore a party to the circumstance that existed before the making of the contract. The monetary order may make remedial provision for what has taken place under the contract and must be "just in the circumstances".

Clean hands/Compensation 68 The respondents submit the applicant does not come before the Court with 'clean hands' and should not therefore have the benefit of an order from the court for compensation. As a general principle, applicants under s106 should "come with clean hands" (Saliba v John Hearder Pty Ltd (1986) 15 IR 36 Macken J) and: Where a Respondent to an unfair contract claim can show that an applicant is in some way culpable for the unfairness in the arrangement that has been impugned, it is possible that the Commission will refuse to grant relief." ( Butterworths Service Industrial Law(NSW) (1996) at [IRA 106.5.25]). 69 As was acknowledged by the learned Commissioner and from the evidence before me I find all parties to this contract impugned its integrity. Those parties whose credit was found to be impugned were the first respondent (the employer), the applicant and the second and the third respondents, all of whom in the conduct of the employment relationship could be described, on any analysis of their business dealings, as unethical. The applicant, together with the second and third respondents behaved inappropriately if not fraudulently in the conduct of the pathology business. There was an unacceptable corporate culture and behaviour in the operation of the first respondent's pathology services. 70 It is the submission of the respondent the Court should not give any relief to an applicant who was a thief, "who was culpable and recalcitrant" and therefore the respondents submitted no order which would "punish" the respondents should be given. 71 The respondents' further submit the applicant should be disentitled to compensation under s106 as: · The contract was a bargain entered into on even terms; and · The applicant's employment contract required the parties to engage in criminal conduct or to aid and abet the commission of criminal offences and the Court is being asked to enforce a contract tainted with illegality; and · The applicant lacks clean hands because of fraud, because not withstanding he took an oath to tell the truth he gave false evidence in proceedings IRC1517/2000 and because he participated in criminal proceedings. 72 The applicant, in failing to act honestly in the bona fide interests of the company in the theft of the cheque ($300.00), was described by the Cambridge C at [68] as "cheating on the cheats". At [41] Cambridge C said: When the totality of the evidence provided in this matter is carefully analysed, the applicant's testimony is the more believable, but by no means could it be described as reliable. It must be remembered that although the applicant endeavored to portray himself as a "whistle-blower", on his evidence, he first attempted to expose the "Doctors' kickbacks" schemes only after he had been caught by his fellow Directors siphoning off some of the proceeds from the "Doctors' kickbacks" schemes for himself. 73 I am persuaded there was collective misconduct in the operation of the first respondent. Further there was unethical behaviour in the conduct of the first respondent's business contributed to by the unprofessional conduct of the applicant along with the unethical behaviour of the second and third respondents. 74 The respondents assert the applicant comes to the court without clean hands and it would therefore be contrary to public policy for the court to order the distribution of the "proceeds of crime". 75 That submission ignores the fact the second and third respondents each continued to receive payments, apart from their salary, from the first respondent's funds. Company records reveal both respondents receive a distribution of the "profits", or perhaps each year received a "bonus", from the first respondent. The applicant held at least a 1/4 share (originally) in the first respondent. He received no extra payment in the year he was terminated. The applicant was removed from the company share register. He did not have his $41,000 establishment monies reimbursed. He received no disbursement of funds from the first respondent in the financial year 1999/2000 nor thereafter. 76 I am persuaded in such a circumstance, it is proper, given an unfairness in the conduct of this contract has been established, to vary the contract of employment. 77 I am further persuaded given the challenge to the credit of all the Directors of the first respondent that the only proper way to determine if there should be associated orders for compensation "just in the circumstance" in the context of the operation of this company is to seek guidance from following the "money trail."

The Claims of as to Notice 78 The applicant claims one year or alternatively, six months payment for Notice for his unfair termination. He relies upon the following facts: representations made to him by the second and third respondents that he would be in a long term employment contract; that he played a specialist role through his labour as marketing manager/scientific officer to establish the first respondent company; that he was successful in marketing the company; that he also served the company in his role as a Director/Company Secretary of the company. He submits all are grounds to found his claim for one year's notice or alternatively, six months notice for his 2½ years of service on the termination of his employment contract. 79 Commissioner Cambridge, in the use of his discretion, ordered the applicant receive 13 weeks salary for his unfair dismissal. I find that same 13 weeks is a fair period of Notice for the 2½ years of service of the applicant in the circumstances of the termination of this employment contract which was harsh and unconscionable and, I find, unfair under s106 of the Act. 80 The applicant has received a payment for his unfair dismissal of 13 weeks at $600.00 per week under his s84 application. The applicant claimed his promised salary was to be $700.00 a week. I adopt the limited 13 week period as a fair Notice period in the circumstance. I have found a fair weekly salary for the applicant, in consideration of the duties he performed, to be $600 per week. The applicant was provided with a motor vehicle. However, evidence revealed he kept the motor vehicle until April 2000, some four to five months after he was terminated. Therefore he had the use of the car within the 13 week period he has received payment and which I believe was a fair notice period. Given the Commissioner's Order for compensation, the applicant does not succeed with his claim for Notice under s106.

Unpaid Remuneration 81 I have accepted the applicant's fair rate of pay on termination was $600.00. I also accept the applicant agreed to be paid at the lower rate of $460.00. I accept it was agreed the applicant was to be reimbursed further for his labour when the company made a profit. I find the payment for the applicant's labour at $460.00 a week was an agreed figure until the company became profitable. However, at the time of the termination of the applicant, the first respondent was making a profit and continued to do so. I accept it is just in the circumstances to order the applicant be reimbursed in accordance with the promise for a fair payment of salary and I find that payment should be $600.00 per week.

82 The only reimbursement to the applicant of his salary package which is just in the circumstance is an order for the back-payment of the salary component of the applicant's remuneration to be reimbursed. That is, the applicant should receive the payment of $600.00 a week, for salary from 1 April 1998 to 28 November 1999 with credit for payments already made.

Accrued Benefits 83 The applicant asserts he has not been paid his accrued annual leave. The respondents concede if the applicant was not fairly terminated for theft, he should have received his accrued benefits. Given the finding, the employment contract was unfair in its conduct, I find it just in the circumstances to order the applicant be paid the benefit of his accrued leave entitlements for the 20 months he laboured for the first respondent calculated at his base rate of $600.00 a week. The applicant was employed under a contract for service so I reject the claim for 17½% annual leave loading.

Claim for Loss of Contribution 84 The applicant contributed $41,000 as establishment monies to the first respondent. The applicant then received 50,000 shares in the first respondent. The company records reveal the third respondent also contributed $50,000. The second respondent received 50,000 shares but there is no evidence that he purchased those shares. The applicant held an original 25% of the shareholding. 85 I accept the applicant provided $41,000 as part of the start-up capital of the first respondent. The applicant's 50,000 shares in the first respondent have mysteriously ceased to exist and the $41,000 contributed in 1998 has never been repaid. 86 The respondents have had the benefit of the applicant's capital in order to both establish and build the business of the first respondent. There was considerable growth in the revenue of the first respondent during the period of the applicant's employment as follows: · Financial year ending 30 June 1999 $367,820.40 · Financial year ending 30 June 2000 $1,172,573.79 · Financial year ending 30 June 2001 $1,550,006.37. 87 However, the applicant ceased work on 28 November 2000. I accept the applicant's labour contribution for 20 months to the turnover of the first respondent as recorded in the financial years in 1998/1999 and 1999/2000. I further accept the applicant's $41,000 investment contributed to the capital base of the first respondent. The applicant's labour and as well his activities as a Director and Company Secretary also contributed to the success of the first respondent. I am persuaded the applicant has a legitimate claim for a return on his capital investment which investment was an arrangement closely associated with the employment contract. The question is once the applicant was terminated, how long should that arrangement give him a financial return especially in a circumstance when his capital investment was still retained but his labour was rejected. 88 The applicant submits he should be compensated for his initial investment of $41,000 plus interest dating back to 1998. 89 Alternatively, the applicant submits he should be compensated on the value of the businesses of both the first and fourth respondents. The applicant submits: 91. . . . if the Applicant had not been terminated and removed as a Director there is no reason that he would not be paid the other payments made to the Directors or too there (sic) entities and a failure to make such payments would have been unfair. In these circumstances the Applicant would have earned (compared with average payment to other Directors (only up until 30 June 2003) an average payment of $213,797.25. However, since the Applicant did not work for that entire period, the Applicant seeks only $100,000 that represents les (sic) than 50% of average payment to other Directors.

92. The Applicant submits that he should be paid the $100,000 as claimed and in the alternative, there is no basis for awarding the Applicant less than $37,121. 90 Apart from salary, the financial records reveal each of the second and third respondents in the financial year 1999/2000, took out an extra $40,000 (approx). The payments to the other Directors added to those paid to the second and third Directors when averaged out come to $37,121.00 91 Given the applicant's contribution to the company in the financial year 1999/2000, I find it just the applicant share in the distribution of monies, be they profit/bonus or as asserted in the claim, overtime payments. He contributed capital, his labour for six months in the financial year 1999/2000, his work overall for 20 months through 1 April 1998 to 29 November 1999 and each of these endeavours are reflected in the 1999/2000 income of the first respondent. Each of the second and third respondents took approximately $40,000 from the first respondent in 1999/2000. They held similar shareholdings to that of the applicant. The applicant was removed as a shareholder but I have found not fairly in the circumstances of his capital contribution to the first respondent which was made in support of his employment contract. I have found that capital contribution to the first respondent was an associated arrangement to the employment contract. Given the applicant's contribution to the first respondent's financial success and in the circumstance where he laboured for the company for five months of the financial year 1999/2000, I find it just the applicant share similarly with the second and third respondents in monies paid to them. I have reduced relevant sum from $40,000 (or the averaged $37,000) to $35,000 in recognition the applicant only laboured for the first respondent for 6 months of that financial year.

92 I order the applicant be paid the sum of $35,000 given his contribution to the first respondent company in the year 1999/2000.

Claim for loss of business 93 The first respondent continued to operate for the financial year 2001/2002 and until March 2003 revealing a significant turnover. From June 2001 to March 2003, when the first respondent ceased trading, the first respondent and the individuals, the second and third respondents, had the benefit of the applicant's monies in the conduct of the pathology business. I take into account, however, that the applicant did not contribute his labour to the business from December 1998. 94 The applicant asserts the first respondent continued to hold his capital investment and the company continued to grow in revenue from $1,172,577 in 1999/2000 to 2000/2001 $1,550,006; to 2001/2002 $1,687,447 to 2002/2003 (limited to March) $1,336,770. The applicant mounts his further claim for loss of his business interest by asserting: 100. At the very least the Applicant should receive his initial investment plus compounded interest going back until 1998.

101. However, the Applicant should be compensated on the value of the business of the Fourth Respondent. The evidence reveals that its income is $4,554,385. for the year ending 30 June 2006. It would be open to the Court to very conservatively value this Fourth Respondent with a multiplier of at least 1 x income which would amount to $4,554,385. This would equate to be $1,324,324 after a multiplier of 41/141 (to reflect the Applicant's capital contribution). Even if a similar calculation was undertaken in relation to the First Respondent for the year ending 30 June 2000 the amount would $340,960.

102. The Applicant concedes that his contribution to the business after December 1999 has been less but in such circumstances the amount sought by the Applicant in the Amended Summons of $375,000 reflects an appropriate discount.

103. The Applicant submits that the Respondents should be ordered to pay the Applicant an amount of $375,000.00. 95 In addition, the year after the applicant was terminated, the other Directors were paid - above salary $68,477, $88,291 and to March 2003 $19,908. 96 The only direct interest the applicant held in the earnings in this period of time, that is, from July 2000 to March 2003 was his capital investment in the first respondent and an asserted shareholding and what could be termed his contribution to the success of the company. The applicant submits his financial interest should be recognised with an order for a ¼ interest in the distribution of profits from the first respondent for the years 2000/2001, 2001/2002/2003 to May 2003. 97 The applicant also claims a one-off payment of $375,000 from the earnings of the fourth respondent. He asserts this sum reflects an appropriate discount given the considerable income of the fourth respondent which in 2005 was over $4 million. The applicant in support of the claim asserts the fourth respondent, in addition to receiving the monetary contribution from the first respondent's bank account of $175,000 (approximately), conducted the same or a similar business as the first respondent which the applicant had assisted in establishing. 98 The respondents submitted the 'entitlement' to a repayment of the capital investment is not a matter appropriate for orders in terms of s106(5) of the Act. 99 This is the most difficult of the claims mounted by the applicant. 100 However, the principle behind the s106 provision is parties to a contract should not be "culpable" in their dealings within the employment contract. I have found, given the financial dealings between all the respondents, there is culpability when one takes into account the whole of the employment circumstance of the applicant and how the second, third and fourth respondents, given their culpability, have continued to enjoy a benefit from the initial employment contract and the associated financial arrangement. 101 However, the applicant has been reimbursed up until the end of June 2000 by way of the above order for the payment of $35,000 that sum so ordered also reflects a return on his $41,000 investment in the year 1999/2000. 102 In a circumstance where the first respondent, then the fourth respondent, continued to deliver pathology services using the applicant's capital monies, I find it just the applicant be reimbursed the sum of $41,000. However, I find compounded interest calculated annually should be paid on this sum of $41,000.00 from 1 July 2000 (given the $35,000 order reflects both his labour and investment up until 30 June 2000) to the date of judgment. This compounded interest is an order I consider just given the continued use of the applicant's monies in the successful pathology business. 103 I therefore reject the claim of the applicant that he should receive a payment reflecting the earnings of the first respondent after his termination and a payment reflecting the continued success of the fourth respondent who inherited the business and some beneficial resources from the first respondent company. The applicant did not continue his labour in either company's interest. He did not continue to serve as marketing manager/scientific officer nor as a Director or company secretary. I cannot accept the submission that given the continued financial success of the first respondent, the applicant should continue to share equally in the profit/bonus paid to the second and third respondent as the first respondent continued to trade through 2000, 2001, 2002 and to March 2003. I therefore reject the claims for a one off payment of $100,000 and a lump sum payment of $375,000 for a share in the profits made by the fourth respondent. I do not believe it would be just in the circumstances to so order. 104 I therefore order the applicant be paid the sum of $41,000, but he also be paid compounded interest calculated on an annual basis on that sum from 1 July 2000 to the date of judgment. Stress 105 The applicant claims monies for the psychological injury he suffered during the employment in the form of stress. Given the behaviour of the applicant throughout the duration of the employment contract, his cavalier attitude to the company finance as demonstrated by the banking company cheques to his own bank and taking into account the full circumstance of his termination, I reject the application. 106 No medical evidence has been presented in support of the claim. 107 I have accepted the applicant has behaved inappropriately, if not unethically and probably illegally in the performance of his employment contract. 108 I cannot accept in the circumstance the applicant should be entitled to any monetary order to compensate for any stress he may have suffered in such a circumstance. I reject the claim.

Orders 109 The applicant, as well as seeking orders against the first respondent as the employer, seeks orders against the second and third respondents as Directors of the first respondent and as the operating mind of the first respondent. He also seeks orders against the fourth respondent which company benefited from monies passed over to it by the first respondent as well as receiving the benefits of an established pathology business. 110 The applicant pleaded there was an employment contract with the second and third respondents which was unfair. He further asserted the fourth respondent was a third party receiving money from one of the parties to the employment contract which monies were derived from the performance of the employment contract. 111 In Brown v Rezitis (1970) 127 CLR 157, the High Court considered the ability of the Court to make orders against persons who were not parties to the employment contract in this case the respondents. Barwick CJ said at (163-165): In my opinion, even if the proceedings for the variation or avoidance of the contract or arrangement must be initiated by one of the parties to the contract or arrangement, the parties to the proceedings are not necessarily limited to those parties. It must be borne in mind that one of the purposes of the section is to deal with subterfuges, . . . . . There may be persons involved in the subterfuge who are not parties to the contract or arrangement but who are in reality the actors deriving benefit from the making or the execution of the contract or arrangement. ... The five grounds on which the Commission may vary or avoid contractual arrangements are not homogeneous. Only two of them refer to the avoidance of the award for the underpayment of a worker in industry. Consequently the nature of the orders which may be made under sub-s (2) will of necessity cover a wide field. But underlying sub-s (2) is I think a broad concept of a restitution of the parties to a situation which existed before the making of the contractual arrangement as well as in an appropriate case to make remedial provision for what has taken place or been done under the contract in the meantime. This, it seems to me, cannot of necessity and in all cases and with relation to an arrangement varied or avoided on each of the grounds in sub-s (1) be confined to an order for payment of money by one of the parties. In some cases, as I have said, there will be persons who are not the parties to the contract but who have in fact participated in its making and there may be persons who have received money indirectly from one of the parties to the contract or who may be holding money derived there from for one of the parties. Consequently, I am of opinion that the power to order the payment of money is not limited to the making of an order for the payment of money by one of the parties to the contract or arrangement varied or avoided. ….

and (at 167): . . . Assuming that the Commission was entitled to go behind the incorporation of the company and to include its managers and shareholders in the orders for payment of money made in the case - and, as at present advised, I see no reason why under a section such as s 88F the Commission should not do so - it seems to me that persons who were not beneficial shareholders could not be included in an order for the payment of money made in connexion with the varied or avoided contract or arrangement merely because they held shares in the company on trust for some known person, even if that person had been connected with the making or operation of the contract or arrangement.

The only other basis for an order for payment of money against these appellants in this case could be that they had received the proceeds of the contract or arrangement or were in some way culpably associated with its making or operation. 112 These principles have been adopted by the Court in Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420. The Full Bench when considering the judgment of Barwick CJ in Brown v Rezitis and the construction and operation of the statutory provision enabling the making of a monetary order by reference to what was said in Brown v Rezitis, also made reference to the views expressed by Asprey JA in Ex parte Ashfield Brokers and Consultants Pty Ltd; Re Witek (unreported, Sugerman P, Asprey and Holmes JJA, 72/118, 29 June 1972). The Full Bench at [40] in Ace Business adopted the principles as formulated by Asprey JA at (pp 5-6) including: 40. (1) The parties to the proceedings, respondents to an application made to the Commission pursuant to section 88F , are not necessarily limited to the parties to the contract or arrangement sought to be declared void and there may be other persons who are in reality the actors deriving benefit from the making or the execution of the contract or arrangement . An order made against a person who is not a party to the contract or arrangement declared to be void is not necessarily beyond the jurisdiction of the Commission.

(2) The power contained in the section to make an order for the payment of money is not unlimited and is at best no more than a power to make such an order as can reasonably be thought to have a real connection with the making, variation or avoidance of the contract or arrangement which has been varied or avoided; it will include power to make an order for payment of money which has been paid or which was payable under the contract or arrangement and will extend to ordering the payment of money which can be considered to be appropriate to effect, wholly or partially, the restitution of the parties to their former position upon the variation or avoidance of the contract or arrangement .

(3) An order for the payment of money against a person, whether a party or not to the contract or arrangement, which is not limited in amount to represent his association with the making or execution of the contract or arrangement cannot be thought to be an order for the payment of money in connection with the contract or arrangement except, perhaps, in some exceptional circumstances.

(4) In the appropriate circumstances an order may be made against persons which imposes upon them a joint and several liability for the payment of money. (emphasis added) And: [41] As to the upper limit of any order which may be made for the payment of money by an agent referable to the amount received by way of commission, Asprey JA added (at pp 6-7) : But, if there is more than one person culpably responsible for the acts which have induced an innocent party to enter into and carry into execution a contract which justifiably attracts the jurisdiction of the Commission to declare it void, I do not think that the amount payable as restitution by a participant in the acts leading to the making of the contract and its execution is necessarily to be measured by the sum of money which, as the result of some agreement between himself and his fellow transgressors, he personally receives from the total amount of the ill-gotten gains. With respect, I do not think that the learned Chief Justice in Brown v Rezitis (supra) laid down any such rule of thumb as that for the implementation of section 88F. [42] His Honour then (at p7) dealt with the true measure of the extent of the restitution which an agent may be called upon to make as being : … the nature and the degree or depth of his association with the acts which brought the innocent party into the transaction subsequently invalidated . Each case will depend upon its own particular facts but one act may justly require the payment of a larger sum than a series of acts which were of less consequence in the affair which led to the making of the contract and its execution. In the present case, from the findings of fact made by the learned Judge, it is not possible in this respect to make any distinction between the acts of Starr and those of the Agent. (emphasis added) 113 The ability to make a monetary order against non-parties to the contract, the basis would be "that they had received the proceeds of the contract or arrangement or were in some way culpably associated with its making or operation". The Full Bench then held in Ace Business at [47]-[48]: [47] Our review of the authorities results in the conclusion, as to which we are in no doubt, that the proper approach and applicable principles are as laid down, particularly by Barwick CJ and Menzies J, in Brown v Rezitis . Those aspects were extensively considered by the Court of Appeal in Ashfield Brokers and Consultants; Re Witek and were summarised therein by Asprey JA with Sugerman P (with whom Holmes JA agreed) to a similar effect. We respectfully agree with the relevant principles as formulated in the four propositions stated by Asprey JA (at pp 5-6); those propositions have been cited earlier by us with emphasis and there is nothing we can usefully add to them. Suffice it to say that each case will depend on its own facts as illustrated by the extracts we have quoted from TNT Management v White, Grace v Baker and Monahan v Gibbons . However, and in a very real sense, it seems to us that the Industrial Commission in Court Session in TNT Management v White encapsulated the relevant test (at 335) as being whether the monetary order could "reasonably be thought to have a real connection with the making, variation or avoidance of the contract or arrangement which has been varied or avoided". [48] In the present case, the appellants' senior counsel made much of the fact that her Honour's finding of "recklessness" against the appellants was insufficient for the order made and that it was only open to do so if their conduct amounted to "reckless indifference". This argument seemed to flow from the reference in Brown v Rezitis by Barwick CJ (at 168) and in Ashfield Brokers and Consultants ; Re Witek by Sugerman P (at 3) for the person concerned to be in some way "culpably associated" with the making or operation of the contract or arrangement. We would not so describe or limit the necessary association of a person with an impugned transaction which has more the connotation of the criminal law or as at the level of fraud; in context, we think that comment by Barwick CJ and by Sugerman P was but an exemplar of what relevant conduct could be to justify an order. In any event, to be "culpable" means to be " blameworthy". If an agent in dealings with a principal's customer was blameworthy in some respect, such as here by making unsupported representations the truth of which was not ascertained thereby inducing that person to make a contract found to be unfair, then, we would have thought, the necessary connection or association with the contract had been established. Indeed, in dealing with the true measure of the extent of the restitution which an agent may be required to make, Asprey JA in Ashfield Brokers and Consultants; Re Witek (at 7) expressed it in terms as being "the nature and the degree or depth of his association with the acts which brought the innocent party into the transaction subsequently invalidated". We respectfully agree.

and in Adams v Aspecta Financial Group Pty Ltd and Ors [2004] NSWIRComm 28, Curtis AJ held at [21]: That conduct necessary to found an order for the payment of moneys by a non party to a contract voided pursuant to s106 is no more than conduct "in connection with" the making or performance of a contract which reasonably excites a sense of corrective justice discharged by a money order in favour of the aggrieved applicant. 114 In such a circumstance, I am persuaded on the above authorities, that the second and third respondents had a direct relationship to the employment contract such as to excite a sense of corrective justice. 115 I am persuaded also that each respondent had a connection with the making of the contract and the unfairness identified in its terms and conduct. The second and third respondents were parties to the making of the employment contract. They were, as circumstances evolved, the controlling minds of the first respondent. They agreed to the formation of the first respondent, were equal shareholders with the applicant and agreed for the first respondent to employ the applicant. They were the parties who played a role in the unfair termination of the contract. Each continued to take from the first respondent payments for profit/bonus at the end of each financial year. They benefited from the applicant's labour for the company including his financial investment. They were parties to taking away from the applicant his shareholding in the company. They were parties to transferring accumulated funds from the first respondent to the fourth respondent's funds in which the applicant held a financial interest. The funds of the first respondent company were divided without the applicant's approval and without a consideration of the applicant's entitlement. I have found the applicant held an ongoing financial interest in operation of the first respondent up until June 2000 through his labour, his investment of time and money and after June, through a continuing investment in the company. I find, therefore, there is a sufficient connection with the making and execution of the contract and associated arrangement to give orders against the second and third respondents.

The fourth respondent 116 There was a challenge mounted by all respondents asserting there was no employment relationship between the applicant and the fourth respondent. In November 2002, the second and third respondents registered the fourth respondent. In March 2003, the first respondent ceased trading. The fourth respondent then traded and continues to trade as "Westpath Services" although there has been a further change of company name to KSPC Pty Ltd. The pathology service continues to operate out of the premises formerly occupied by the first respondent. The fourth respondent provides a similar pathology service to that provided by the first respondent. The second and third respondent now work for the fourth respondent. In March 2003, when the first respondent ceased trading its bank account held accumulated funds. Some of those funds were divested to the other Directors and some funds were transferred to the fourth respondent in 2005. The amount transferred was $175,000.00 in the two separate transfers (referred to above). 117 I find the fourth respondent, while not a party to the employment contract, derived a benefit from the making of the employment contract. The fourth respondent inherited not only the full benefits of the operation of the first respondent (a company in which the applicant held an ongoing financial interest) but it also received a transfer of funds from the first respondent and therefore derived a financial benefit from the employment contract. The parties, other than the applicant, who played a significant part of these transactions were the same as those connected to the making of the employment contract namely the second and third respondents. They transferred the business dealings of the first respondent to the fourth respondent, were employed by the fourth respondent, continued to provide a similar pathology service for the fourth respondent and serve as Directors of the fourth respondent. In such a circumstance, I am persuaded the fourth respondent holds the business and monies derived from the employment contract and therefore has the necessary association to the employment contract such as to attract orders.

118 Accordingly, I make the following declarations and orders:

The contract of the employment whereby the applicant performed work in an industry providing pathology services was unfair, harsh and unconscionable pursuant to s106 of the Industrial Relations Act , 1996. The contract of employment is varied to reflect the following Orders: 1. The applicant is to be paid $600.00 a week for the period of his employment from 1 April 1998 to 28 November 1999. There is to be credit given for payments made.

2. Interest is to be paid on the above amount in accordance with s100 of the Civil Procedures Act 2005 from 1 April 1998 to the date of judgment.

3. The applicant is to be paid the sum of $35,000 as a distribution of the bonus/profit made by the first respondent in the financial year 1999/2000. Interest is to be paid in accordance with s100 of the Civil Procedures Act 2005 from 1 July 2002 to the date of judgment.

4. The applicant is to be repaid the sum of $41,000.00 he invested in the first respondent. The applicant is to be paid compound interest calculated annually on this re-payment under s100 of the Civil Procedures Act 2005 from 1 April 1998 to the date of judgment.

6. The respondents are to pay the applicant's costs as agreed or assessed.

7. The first, second, third and fourth respondents shall be jointly and severally liable for each amount as ordered.

8. Minutes to be prepared from the above Orders to be filed within 14 days.

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