Luke Harper v Candle Australia Limited

The Applicant commenced proceedings in the Industrial Relations Commission on 21 December 1998.

The Respondent commenced proceedings in the Supreme Court on 1 April 1999. 5 In the main, the facts in issue cluster around three points: 1. Whether or not the applicant was made aware of the Executive Share and Option Plans of Candle Australia Limited and/or made aware of any conditions attaching to the shares and options referred to in the applicant's letter of appointment, and in particular that the right to the shares and options was forfeited if the applicant left the respondent's employment prior to certain dates;

2. Whether or not the applicant sought to give 4 weeks notice of resignation and whether or not the parties mutually agreed to a shorter period of notice and whether or not the respondent asked the applicant to leave Candle on the day he resigned; and

3. Whether the applicant had breached the "restraint" clauses of the contract of employment. 6 The following orders are agreed to be included in the Further Re-Amended Summons (that amendment having been made by consent): Share and Options

The employment agreement between the applicant and the respondent dated 8 April 1997 be varied ab initio by the inclusion of a term providing that:

(i) after 6 months based on performance, the applicant will receive 20,000 options and 30,000 shares in the Respondent;

(ii) that the said options and shares are not liable to be forfeited in the event the applicant resigns or terminates his employment after 6 months;

(iii) the said options are exercisable on or after 5 May 1999 [or in the alternative 5 November 1999] and on or before 5 May 2001 [or in the alternative 5 November 2001];

(iv) the exercise price for the options is $1.20 [or in the alternative $1.39 or in the further alternative $2.04]; and

(v) the applicant's right to sell the shares is restricted such that 30% of the shares can be sold on or after 5 May 1999 [or in the alternative 5 November 1999] and the balance on or after 5 May 2000 [or in the alternative 5 November 2000].

By way of consequential relief, the respondent procures the transfer to the applicant of 50,000 shares [or such number as may be determined].

In the alternative to order 2., the respondent procures the transfer to the applicant of 30,000 shares on condition that ___________ and 20,000 options on condition that _____________ with the options to have an exercise price of $___________.

In further alternative to orders 2. And 3., the respondent pay to the applicant the sum of $____________.

Clause 7 of the employment agreement between the applicant and the respondent dated 8 April 1997 be varied ab initio by substituting "one month" for "two weeks".

By way of consequential relief, the respondent pay the applicant the sum of $19,321.00 with interest from ______________.

In the alternative to orders 5. and 6., the respondent pay the applicant the sum of $8,917.38 with interest from ____________.

Clauses 10(a), 10(b) and 5 of the employment agreement dated 8 April 1997 be set aside ab initio.

The Non-Disclosure Agreement between the applicant and the respondent dated 14 April 1997 be set aside ab initio.

In the alternative to order 8. (in so far as it concerns Clause 10(b) ), Clause 10(b) of the employment agreement dated 8 April 1997 be varied ab initio by: (i) inserting, after the words "shall not", the words "in [location]; (ii) by adding the following: Provided that nothing in the clause or agreement shall prevent the employee undertaking work on behalf of any person whom first approaches the employee seeking assistance. (iii) by deleting the words "or been in contact"; and (iv) by substituting the words "his employment" for "this agreement".

In the alternative to order 8. (in so far as it concerns clause 5), Clause 5 of the employment agreement dated 8 April 1997 be varied ab initio by adding the words: Provided that nothing in the clause shall prevent the employee utilising candidate descriptions after his employment terminates.

In the alternative to order 8. (in so far as it concerns Clause 10(a) ) and Order 9: (i) the Non-Disclosure Agreement be set aside ab initio; (ii) clause 10(a) of the employment agreement dated 8 April 1997 be varied by: (a) deleting the words "or thereafter" and substituting [a period of time]; (b) by deleting the words "to any person whomsoever any trade secret or work process of any information concerning the business or finances of the Company or its dealings affairs or transactions including names and addresses of contact personnel"; (c) by adding after the words "divulge" the words "any material which can be reasonably be regarded as confidential to the respondent; and (d) by adding the following words at the end of the Clause: Provided that nothing in this sub-clause or agreement, other than clause 10(b) as varied, prevents the employee undertaking work on behalf of clients of the Company or placing persons as candidates who have been previously placed by the Company or who have applied to the Company for placement. 7 Particulars as to the manner in which any amount claimed is calculated are as follows: 1. One month's salary of the applicant is $8,333.33.

2. Compensation for the options - precise value of options cannot be determined but amounts to approximately $23,000 at the date of this application. [i.e. 21 December 1998]

3. Compensation for the shares - precise value of shares cannot be determined but amounts to approximately $70,500 at the date of this application.

4. The applicant has incurred and will incur substantial legal and other expenses in these proceedings which would not have been incurred had the respondent afforded to the applicant fair contractual terms and fair conduct. 8 Without any derogation from the respondent's primary argument that no relief of any kind is warranted in these proceedings, set out below are Draft Orders advanced on behalf of the respondent which deal with the issues raised by the applicant in his Draft Orders. THE COURT ORDERS that:

1 The Applicant's Further Re-amended Summons for Relief filed 16 March 2000 be dismissed.

2 The Applicant's Further Re-amended Summons for Relief filed 16 March 2000, in so far as it relates to a claim for the provision of 30,000 shares and 20,000 options, be dismissed.

3 The employment agreement between the Applicant and the Respondent dated 8 April 1997 be varied by the inclusion of a term providing that: (a) after 6 months based on performance, the Applicant will receive 20,000 options and 30,000 shares in the Respondent; (b) that the said options and shares are not liable to be forfeited in the event the Applicant resigns or terminates his employment after 6 months; (c) the said options are exercisable on or after 15 December 1999 [ or in the alternative 5 November 1999] and on or before 15 December 2001 [ or in the alternative 5 November 2001]; (d) the exercise price for the options is $2.18 being the exercise price on 15 December 1997 [ or in the alternative $2.04 being the exercise price on 5 November 1997] and (e) the Applicant's right to sell the shares is restricted such that 30% of the shares can be sold on or after 15 December 1999 [ or in the alternative 5 November 1999] and the balance on or after 15 December 2000 [ or in the alternative 5 November 2000].

4 The Applicant's Further Re-amended Summons for Relief filed 16 March 2000, in so far as it relates to a claim for one month's notice, be dismissed.

5 The Respondent pay the Applicant 2 week [sic] notice with interest from 21 December 1998.

6 The Applicant's Further Re-amended Summons for Relief filed 16 March 2000, in so far as it relates to a claim for voiding or varying of Non-Disclosure Agreement and Clauses 10(a) and 10(b) of the employment agreement dated 8 April 1997, be dismissed.

7 In the alternative to order 6 (in so far as it concerns Clause 10(b) ), Clause 10(b) of the employment agreement dated 8 April 1997 be varied by: (a) inserting after the words "shall not", the words "in the Sydney metropolitan area"; (b) by substituting the words "his employment" for "this agreement"; and (c) by inserting the words at the end of Paragraph 10(b) "'contract' includes, but is not limited to: oral or written negotiations with clients in relation to provision of job specifications, and the search for or placement of candidates; oral or written offering of candidates' resumes or candidate details to clients for the purpose of placing candidates; and oral or written agreements to place advertisements for clients for the purpose of seeking appropriate candidates."

8 In the alternative to order 8 [sic] (in so far as it concerns Clause 10(a) ) (a) Clause 10(a) of the employment agreement dated 8 April 1997 be varied by: (i) deleting the words "or thereafter" and substituting "6 months"; (ii) by adding after the words "to any person whomsoever any trade secret or work process of any information concerning the business or finances of the Company or its dealings affairs or transactions including names and addresses of contact personnel", the words "including any material which can be reasonably regarded as confidential to the Respondent by law or by virtue of this Agreement"; 9 The respondent made submissions on the orders sought so that, in the event the Court is against the respondent in respect of the submissions concerning the granting of no relief, in order to protect its position in the proceedings concerning these matters so it cannot be said it did not make submissions against what is proposed by the applicant. 10 In relation to those proposed draft orders, I intend to accede to the request of the parties that I not make final orders, but make either draft orders or findings and leave it to the parties to debate further if that course is necessary. Witnesses 11 Evidence, oral and/or affidavit, was adduced on behalf of the applicant from the following persons: Luke Harper, recruitment consultant, Managing Director, Harper IT Executive, previously Manager, Sales and Marketing of the respondent. Geoffrey Leslie Whytcross, recruitment consultant, Morgan & Banks (affidavit, not required for cross examination). Paul Marc Jaffe, sales consultant, Viewlocity, an IT company (affidavit, not required for cross examination). Malcolm Gasper, Director of Jagar Pty Ltd, a direct marketing business, previously General Manager of Ausdoc on Demand (Dashing Printing) from September 1997 until August 1999. (Affidavit admitted with leave as to objections in accordance with individual rulings. Deponent not called to give oral evidence.) Mark Lysowycz, computer hardware technician (affidavit, not required for cross examination). 12 Evidence on behalf of the respondent was given by: Geoffrey Moles, Managing Director since 1984 of the respondent in the information technology and telecommunications industry. Mark Langan, Financial Controller of the respondent since 21 April 1997. John Patrick Foster, Executive Director of the respondent; employed by the respondent for approximately 12 years. David Mark Henderson, Chartered Accountant engaged on behalf of the applicant and of Harper IT. Credibility Submissions - Respondent 13 Mr Moses of counsel on behalf of the respondent, submitted that the applicant in his evidence in these proceedings, was an evasive, unhelpful and unreliable witness. He showed many signs of tailoring his evidence to a perception of the legal principles at work as his case advanced. The applicant should not be accepted on any issue which is controversial unless his evidence is otherwise corroborated. 14 The submissions filed on behalf of the applicant attempt to ignore his evidence. Accordingly, the applicant's case, as a result, has come to depend in large measure on the suggestion that the witnesses called by the respondent are lacking in credit. There is no reason to accept this suggestion in whatever form it is advanced. The onus rests on the applicant to establish his claim for relief pursuant to s106 of the 1996 Act. In any event, it is submitted that the Commission will readily find that the respondent's witnesses (Messrs Moles, Foster and Langan) gave their evidence in an honest and co-operative manner. 15 (In relation to that last submission, Mr Beech-Jones said that the applicant had made no adverse submissions on the credit of Mr Foster.) 16 In response to the applicant's submission that the correct approach to look at issues of credit is to look only at the important issues in contention and to decide credit on the basis of those issues by corroboration, the respondent contended that the purpose of reviewing the credit of a witness is to go to the weight of the evidence being given by the witness. The more appropriate approach is to make a general assessment of credit based upon all the evidence in the case and the demeanour of the witness and use that to give weight to the evidence of the witness on any issue in contention. It is impossible to pick and choose only certain issues out of the case for the purpose of credit and to ignore others. Even if the Court were to accept the applicant's submissions as to the approach being correct, it is an approach that must be applied consistently in relation to the credit of Mr Harper. Credibility - Submissions - Applicant 17 In reply to the respondent's submissions, Mr Beech-Jones of counsel for the applicant contended that the general submission of the respondent as to lack of credibility of the applicant's evidence cannot be tested because there is no particular inconsistency or parts of the evidence advanced to sustain that submission. The contrast between the respondent's approach to credibility and that of the applicant is one of important principle. The respondent says to look at all these problems it has with Mr Harper's evidence and asks the Court not to believe him generally, but then simply says that all of its witnesses were honest and co-operative in their demeanour. Believe them generally. That is the wrong approach, because the critical task is to firstly identify what is important evidence, and secondly to ask, which the respondent has not done, is it disputed and then in respect of the disputed evidence, look at what all witnesses said and then also look at the surrounding circumstances and look at the corroborative evidence. The broad machine gun approach to credibility advanced by the respondent is not one which should be adopted. 18 That approach was adopted by the applicant in relation to disputed evidence the applicant said was critical to the determination of the application. That disputed evidence embraced a number of specific areas, for instance, there is a criticism of Mr Harper in relation to his evidence about what happened in the pre-contractual negotiations as to the applicant's expectations as to shares and options. The respondent claimed that the reference to options was an embellishment. However, in cross-examination Mr Moles did not dispute this was said. He accepted this was part of the package. He did not accept the proposition it was a "significant" part of the package. When a number of times there are criticisms made in the respondent's submissions of Mr Harper's credit, particularly on that issue, it is really a non issue because the evidence is not in dispute. 19 The next general point made by the applicant as to the respondent's submission about credibility was that on a number of occasions it criticised Mr Harper's affidavits or summons or indeed, in one case, the applicant's facts and contentions because it did not contain a reference to something that the respondent considered to be important. For example, there was criticism that the applicant, in his supporting affidavit for relief, had not referred to approximately six meetings in the pre-contractual negotiations between the parties. Those six meetings, if not the full discussions in them, had been mentioned in the applicant's first affidavit. Mr Moles had agreed that there were approximately six pre-employment interviews. What is the basis of criticism of the credit of the applicant in that he says he had six pre-employment interviews? His affidavit does not go into everything said. To attack his credit on that basis is simply quite unfair. 20 The transcript references given by the respondent to support its submissions do not demonstrate any evasiveness or unhelpfulness. What they do is to show that Mr Harper is criticised, for instance because he had a personal view or a subjective view that Mr Moles never intended to pay him for shares and options. It was not part of the applicant's case as to what Mr Moles' motivation was for not paying for shares and options. The applicant's case is the making of the statement by Mr Moles in the letter of appointment with the promise of shares and options. 21 Many of the points made against the applicant really are either unjust, incorrect or basically unfair, for instance, where Mr Harper is said to tailor his evidence in respect of the leading principles at work in this case. He was asked a question about why he sought to amend his summons and he answered the question as to his understanding of the legal principles working in his case. 22 In summation, the applicant would submit that a reading of Mr Harper's evidence revealed that he was cross-examined at length and with great skill, but he adhered to his version and, to the extent there were slips, they were slips one would expect of a person in the witness box for a considerable time, over a number of days. On the critical parts of his evidence as to the three principal issues in the case, he was corroborated by other evidence in the case, and indeed, in fact if one looks at it quite closely, there is very little of his evidence that is truly in dispute. Credibility - Conclusions 23 In relation to the different approaches advanced by counsel to determination of credibility, I simply state that, in this case, the approach offered by the applicant has the advantage of cutting to the main issues and the more general approach of the respondent also comes into play in relation to disputed evidence as to those main issues. Generally, the balancing of one approach against the other would be affected, in each case, upon the case being run by the parties. 24 I have not set out the full details of the criticisms made by Mr Moses as to the credibility of the applicant, nor of the refutation of those criticisms and criticisms of the respondent's witnesses by Mr Beech-Jones. I have gone to the references made by both Mr Beech-Jones and Mr Moses to the evidence, whether oral or documentary, and I am satisfied that the claims as to lack of credibility on the applicant's part as to many issues have not, for the most part, been made out. However, because of the difficulty discussed later that I have in accepting in total the evidence of the applicant, Mr Moles and Mr Langan as to critical issues in the case e.g. advice as to the forfeiture provisions, I have relied more on the documentary material and inferences to be drawn from all the surrounding circumstances, than on the claims made in oral evidence by the applicant or by the respondent's witnesses as to statements said to have been made. 25 I do not accept that the sending of a letter of resignation which, on the later evidence of the applicant, untruthfully stated, "because he did not want to burn any bridges", that the applicant had been happy working with the respondent, as providing the basis for a finding that the applicant might apply the same approach in respect of swearing a false affidavit or providing testimony to the Commission in order to gain favour in his case. 26 Quite properly, there was no attack made against the credibility of Mr Foster. Submissions - General - Applicant 27 As summarised by the applicant, the claims made by the applicant fall into three separate but related categories. First, he makes claims which would result in his receiving the shares and options referred to in his letter of appointment together with consequential relief; second, he makes a claim for the payment of an amount of one months', or two weeks', pay in lieu of notice; and third he seeks relief setting aside in whole, or in part, the post-employment restraints in his contract of employment and the non-disclosure agreement. Submissions - General - Respondent 28 The general position of the respondent is that there is no doubt the Commission has jurisdiction to deal with the claim brought by Mr Harper in respect of each of the matters before the Commission. However, it submitted that the applicant has failed to demonstrate to the Court that there is any unfairness in this contract and accordingly the Commission ought dismiss the application with costs. 29 The contract of employment was negotiated at arms length and on equal terms. The probationary period of employment reflected the risk associated with the respondent employing the applicant at a senior level, and on a very generous remuneration package, when the applicant had no prior experience in the development of a company division. 30 The respondent did not promise the applicant shares and options as part of his employment package regardless of whether or not he remained an employee. The shares and options scheme of the respondent was intended as a form of "golden handcuff". 31 The respondent did not terminate the employment of the applicant. It was the applicant who voluntarily terminated the employment relationship. 32 The applicant entered into a contract of employment with the respondent which also included a Non-Disclosure Agreement. It is the provisions of that Agreement concerning the non-disclosure and non-solicitation clauses which the applicant essentially seeks to attack in these proceedings. 33 The respondent commenced proceedings in the Supreme Court of New South Wales by way of a Statement of Claim against the applicant and Harper IT Executive Pty Ltd (which is not a party to the s106 proceedings) in April 1999. Those proceedings concern, inter alia, relief for breaches of post employment restraints by the applicant and Harper IT Executive Pty Ltd. 34 The Commission ought dismiss the applicant's claim concerning the restraints and leave that issue for the Supreme Court of New South Wales to determine. The applicant can still seek any relief he may wish to pursuant to s4(3) of the Restraints of Trade Act, although it is noted that he has not filed a cross claim in the Supreme Court. The effect of the orders which the applicant seeks will be to purport to prevent any action being maintained against Harper IT Executive Pty Ltd in the Supreme Court proceedings. Consideration 105 Definitions

contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument.

(c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or

(d) that is designed to, or does, avoid the provisions of an industrial instrument.

Note . The jurisdiction of the Commission under this Part is exercisable only by the Commission in Court Session.

106 Power of the Commission to declare contracts void or varied

(1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract.

(2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason.

(3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time.

(4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force.

(5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. Shares and Options - Submissions - Applicant 35 The submissions set out below are an amalgam of the applicant's written and oral submissions. 1.1 In summary the applicant submitted that:

(i) during the negotiations prior to his commencing employment with the respondent, it was contemplated by both the applicant and Mr Moles that he would receive shares and options as part of his employment package; (ii) these negotiations culminated in the making of an unequivocal representation in the letter of appointment that the applicant would receive shares and options upon the completion of his probationary period which were not subject to forfeiture should he leave the respondent's employment after that time and the applicant relied on that representation; (iii) to the extent that there was evidence from the respondent suggesting the applicant was advised prior to commencing employment that there was such a condition it is not credible; (vi) that the representation made to the applicant that he would receive the shares and options was, in contrast to the usual position with such option and share entitlements, meant to be an incentive for him to join Candle and was so acted upon by him; (v) the terms of the share and option plans do not qualify the above; (vi) to the extent that there is evidence that the applicant was advised after he commenced employment that the shares and options were subject to forfeiture should he leave the respondent's employment it is irrelevant and should not be accepted; (vii) the above matters establish the necessary "unfairness"; (viii) the applicant is entitled to relief varying his employment agreement as sought. … The offer of shares and options was part of Mr Harper's remuneration and an incentive for him to join the respondent. The applicant conceded that, while it is often the case that shares and options of the kind offered to the applicant are meant to constitute a reward for past performance and/or an inducement for existing employees to remain with the company, this particular offer was meant to form part of the applicant's remuneration package and/or was an incentive for him to join the respondent. They were unequivocally promised to the applicant in his letter of appointment which was presented to him before he commenced. … The applicant was promised he would receive them after he completed his six month probationary period. This was twice the usual period. The contrast between the promise of shares and options to the applicant and the absence of any similar promise to other employees, especially as illustrated by the treatment of Mr Langan, is testament to the fact that they were a special offer to the applicant. There was no other letter of appointment remotely similar to that provided to the applicant concerning shares and options. 36 The applicant took on the risk of a 6 month probation period during which he could be terminated without notice. He gave up a good position at Morgan & Banks and took on a position that had failed twice before. That was the risk he was taking. The benefit was that it was a relatively senior position. This was a package and after 6 months he would get the shares and options. … The statutory requirement of unfairness is clearly demonstrated in that the arrangements constituting his contract of employment were unfair: (i) in they fail to give effect to the representation made to the applicant concerning his entitlement to shares and options: Gibbs v Gold Coast Tweed Giants Rugby League Football Club Ltd & Ors (1993) 52 IR 469, 477 (per Schmidt J); and/or (ii) because of the subsequent conduct of the respondent in refusing to give effect to those representations. Even if the promise of shares and options in the letter of appointment was found to have contractual effect, the respondent's conduct in failing to honour that obligation would in itself satisfy the relevant statutory test: Reich v Client Server Professionals of Australia Limited (Administrator Appointed) [2000] NSW IR Comm 143 at para 27 ((2000) 99 IR 69 at 83. A number of cases in this Commission have dealt with employee entitlements under share and option schemes: Canizales v Microsoft Corporation & ors [2000] NSW IR Comm 118; (2000) 99 IR 426; GIO v O'Donnell (1996) 70 IR 1; Westfield Limited & Anor v Helprin (1998) 82 IR 411; Adams v Westfield Holdings Limited [2000] NSWIRComm 112; (2000) 99 IR 382). 37 This is no evidence that in a new industry that has operated for perhaps five to ten years, that there is a common industry practice that shares and options schemes operate so that if an employee leaves before the trigger date those shares and options will be forfeited. In any event, Mr Moles said he had the power to give the applicant the shares and options at the end of the probation period regardless of whether he left. 38 In relation to the respondent's claim that in the letter of appointment the words "options and share plan" have been overlooked by the applicant and that word "plan" should have put Mr Harper on alert, Mr Harper was never cross-examined about the presence of those words. Furthermore, the plain reading of that clause is absolutely clear and the obvious reference to options and share plan is "Well, this is the options and share plan for you". In any event what Mr Moles has written there is in many respects inconsistent with the options and share plan. This clause refers to the shares being transferred to Mr Harper. The share plan talks about a vesting over a period of time. In evidence Mr Moles agreed that he conveys that Mr Harper will receive them after six months and even if after that time he resigns, he will be allowed to keep them. 39 The probationary period for Mr Harper was six months, twice as long as usual. That dovetails perfectly with the clause Mr Moles drafted. The applicant could get dismissed without notice but at the end of the six months the applicant then had his absolute entitlement for shares and options. The question of remuneration came up late in the meetings. Mr Harper and Mr Moles both agree that Mr Harper said "I would like shares and options as part of my package". 40 As to relief, the applicant's employment agreement should be varied pursuant to s 106 so as to provide him with an entitlement to shares and options consistent with that set out under the heading "Letter of Appointment" and not subject to any condition that they are forfeited if he resigns at any time after the completion of his probationary period. Further, there should be consequential relief providing for the transfer to the applicant of shares and options consistent with what is set out in his letter of appointment: Brown v Rezitis (1970) 127 CLR 157, 164. 41 Order 4 for a monetary amount was included because there was some concern that the respondent might not be able to provide share options. Both parties agreed, if all other things being found in the applicant's favour, that it is preferable to be the share options, because it could attract unfairness to one side or the other to try and fix share and option prices. It is a difficult task for the Court to be able to address monetary amounts when share prices are subject to fluctuations. Submissions - Respondent 42 In respect of the relief sought concerning the shares, the respondent's primary position is that no relief should be granted by the provision of shares and options, because the applicant was told either in the course of pre-employment negotiations what his entitlement was, or at the very least during the course of employment, with reference to the shares and options plan. 43 The respondent accepted that on the evidence the Court would be able to make the finding that Mr Harper never received the plan, pre-employment, i.e. the physical document. The issue was whether he was told about the plan by Mr Moles and that the shares and options were to be exercised and governed pursuant to the plan. 44 The applicant's case on the shares and options rests on there being a positive representation that the applicant would obtain shares and options after completion of his six months probationary period subject to performance and this condition was somehow to operate outside the shares and options scheme of the respondent. 45 The issue for the Commission to determine is whether Mr Harper can rely solely on the clause set out as to the share and option plan in his Letter of Appointment as the full and complete contract. 46 It is the respondent's contention that the evidence indicates that the relevant contract of employment was not isolated to the Letter of Appointment and Employment Agreement alone, but there were verbal terms of the employment which were agreed between the applicant and respondent which must form the relevant contract of employment. 47 There is no disagreement that the applicant made it clear to Mr Moles that he would join the respondent if he received a parcel of shares. However, the applicant was an experienced executive in the recruitment industry. He knew how shares and option schemes worked. The applicant understood that the benefits were being provided on a certain basis in accordance with his experience, knowledge and common sense. It is sufficient for the respondent to alert Mr Harper, a prospective employee, to the fact that the qualifying terms and conditions existed, in the pre-employment negotiations, and by reference in the letter of appointment. Leda Holdings Pty Limited v Oraka Pty Limited (unreported judgment of the Full Court of the Federal Court of Australia, 9/12/97, NG320 of 1997) is authority for the proposition that the Commission ought take into account the applicant's background and experience when determining his evidence concerning representations and his understand of that document. 48 When one looks at the letter of offer as to Mr Harper's entitlement with the heading Share and Option Plan, one has to focus on the words, "Share and Option Plan". What do those words mean if they do not refer to the Plan by which the company operates its options and shares? 49 It is Candle's position in this case that the representation Mr Harper relies upon, being in that paragraph was qualified in the many meetings. Mr Moles consistently stated in his affidavit and in cross-examination that he advised Mr Harper in those meetings as to the existence of the shares and option plan and that shares and options would be provided under the plan. Mr Harper simply asserts that there were no qualifications on his letter of appointment. 50 In the light of Mr Harper's previous experience at Morgan & Banks Mr Harper could not reasonably have relied upon the words in the letter of appointment as giving him the entitlement that he suggests to the Commission he ought to have received upon the six months probationary period coming to an end. The applicant's assertion of reliance on this one document is a fabrication and a clear attempt to re-write history. 51 There can be no doubt in respect of the contract of employment in this case that it was negotiated at arm's length and on equal terms, bearing in mind that it was Mr Harper who sought to sell himself to Candle as being an individual who was to come across as the head of a division, a divisional manager rather than as an account manager which had been his previous role at Morgan & Banks. 52 The question arises, what was the incentive for Mr Harper to come to Candle? He told the Commission that the sole incentive was the shares and options that he would receive after six months. 53 In fact, what Mr Harper had to gain out of the relationship was a number of things, firstly, he was to receive a salary increase and a significant promotion to the head of a division of a company that had been recently publicly listed and of which he would have the opportunity as it were to get in at the ground floor in order to work his way into the senior ranks of the organisation. Secondly he would, unlike his experience at Morgan & Banks, receive access to the shares and options plan of a significant amount of shares and options after only six months. 54 The respondent did not consider in any way the applicant's employment and remuneration package as being special or unique or extraordinary enough to take the applicant outside the scope of the shares and options plan, nor did the option committee exercise its discretion to waive the requirement that the applicant remain an employee of the respondent for the requisite time period in order to take the benefit of the shares and options. 55 The onus on the applicant to show the contract was unfair in respect of the shares and options has not been discharged in this case. 56 Of course, as a matter of jurisdiction the Court may deal with the claim concerning as it were an assertion by the applicant that the non-compliance with the term of the contract is of itself unfair conduct which allows the applicant to bring forward a claim under s 106(2) of the Act (see Reich v Client Server Professionals of Australia Pty Ltd (Administrator Appointed), (2000) 99 IR 69; [2000] NSWIRComm 143). 57 There has been no breach because there was no expressed term of his contract that provided the shares and options to him no matter what after the six months. The respondent denied that it was never the intention of the respondent to provide shares and options. Mr Harper's name was entered in the register. 58 There is ample authority that the Court may take into consideration, when interpreting what was the intention of the parties when entering into a contract, as to what happened subsequent to a contract being entered into (see ABC v XIVTH Commonwealth Games Limited (1988) 18 NSWLR 540 at 547-550). Mr Harper's actions post-employment in relation to requests for the shares and options are not irrelevant as claimed by the applicant because it says its case has always been based upon the letter of appointment. If there were pre-employment negotiations, the prospect of improvements and if the discussion at these opening meetings modified the letter of appointment, then Mr Harper's actions post-employment are very relevant in order to ascertain what was the understanding of the entitlements to shares and options held by Mr Harper. That understanding, based upon this post-employment conduct, reflects the terms and conditions of the option plan. 59 If the Court decides to provide the applicant with some relief, then the most appropriate order would be for thirty thousand shares to be transferred to the applicant by the respondent. The shares and options should not be provided as a monetary sum, as this would involve, in effect, second guessing the date upon which the applicant would have sold the shares and exercised the options. The Court does not have evidence of a reliable nature concerning that issue which would involve the Commission being able to make such an order. 60 If the Court decides to grant the applicant twenty thousand options, the Court will have to make a determination as to the proper exercise price for the options. The exercise price will be dependent upon the date at which the options are to be exercised. 61 The respondent submits that options should not be provided at an exercise price of $2.04 as the letter of appointment specified that the granting of the shares and options was to be at some time after six months and was to be based upon performance. Impliedly the review should have been carried out in reasonable time. The respondent submits 15 December 1997 being one month ten days later was a reasonable time frame for that to be carried out. The 15 December date is the appropriate date as triggered by reference to Mr Harper being put into the option register on 15 December 1997. In those circumstances the most appropriate option exercise price should be the price of the shares on 15 December 1997, being $2.18. 62 It is also worth noting there is no guarantee that Mr Harper would have exercised the options on 15 December 1997. It is clear from his evidence that he was under some erroneous assumption that the exercise price was $1.20. This price cannot be sustained on any ordinary reading of the letter of appointment. Shares and Options - Consideration 63 The respondent's claim is that the applicant was advised prior to taking up his employment with the respondent that his receipt of shares and options was to be subject to the terms of the respondent's shares and options plan. That claim is denied by the applicant. 64 The applicant's contention is that he became entitled to the shares and options, without further conditions (other than a timetable as to their exercise and/or sale) as soon as his probationary period of six months as Manager (Designate) was completed to the satisfaction of the respondent. 65 It is not in dispute that during one of the pre-employment meetings Mr Moles wrote down on a piece of paper an outline of the applicant's remuneration package which included the following: After six months (based on performance)

30,000 shares. 66 The applicant's letter of appointment as Manager (Designate), Sales and Marketing, dated 8 April 1997, effective 28 April 1997, drafted by G Moles and signed by him included the following term: OPTIONS AND SHARE PLAN

After six months based on Performance you will receive 20,000 OPTIONS and 30,000 SHARES in Candle Australia Ltd. The Options are exerciseable [sic] after two (2) years and before four (4) years providing the exercise price is greater than $1.20. The shares in Candle Australia can be sold at the rate of 30 percent after two (2) years and the balance after 3 years. 67 An agreement between the applicant and the respondent, dated 8 April 1997, which appeared to complement and overlap to some extent the letter of appointment, of that same date, and included the restraint clauses, in a handwritten amendment stated that the employment would commence on 5 May 1997 or earlier by negotiation. 68 The respondent placed considerable emphasis on the concept of probation and of the existence of a probationary period for the applicant. In this case, the purpose of the probationary period was that set out in the applicant's letter of appointment as Manager (Designate), Sales and Marketing: RESPONSIBILITIES As a major supplier of technical I.T. & T resources there is a strategic opportunity to develop a significant Sales and Marketing Division within Candle Australia. Your title is Manager (Designate) on the basis that at the end of Stage 1 below your position would be confirmed. We expect this to be at the end of 6 months based on performance. We expect the development of the Sales and Marketing Division be undertaken on a staged basis as follows: … 69 That purpose had been achieved as was shown by the following letter dated 15 December 1997, on the letterhead of Candle Australia Ltd sent to the applicant by Geoff Moles, Managing Director: Dear Luke,

Your probationary period of six (6) months has expired and we are pleased to advise that your appointment to the position of Manager, Sales & Marketing is now confirmed.

In accordance with your Contract you are now entitled to 20,000 Options and 30,000 Shares in Candle Australia Ltd.

We look forward to supporting you and following you success within Candle.

Yours faithfully 70 There was no further demand made on the applicant in that letter before he thus became entitled to the 30,000 Shares and 20,000 Options in the respondent. 71 The respondent contends that none of the applicant's submissions face up to the existence of the heading "OPTIONS AND SHARE PLAN" (underlined) in the applicant's letter of appointment dated 8 April 1997. (On that issue, Mr Beech-Jones submitted that that point had not been put to the applicant.) 72 The respondent contends that the applicant, on the basis of his background and experience in the industry, knew how shares and options schemes worked and what his entitlements were pursuant to the respondent's shares and options scheme. 73 The applicant certainly knew how the Morgan & Banks scheme worked. However, it seems to me that it was because he did know how the Morgan & Banks scheme operated that the applicant set out to get a better deal for himself with Candle. While there may be some common principles as to how such schemes operate, the evidence was that the terms of the respondent's scheme and that of the Morgan & Banks scheme were not identical. 74 The applicant may have had an understanding of such schemes, but access to those schemes can be offered for different reasons. On the one hand, the offer can be an inducement to obtain the services of a person, desired to be an employee. On the other hand, it can be to ensure that a person, once employed or already employed, stays in employment with that company for a minimum period of time. It was claimed that the applicant understood the offer of shares and options was to provide "a golden handcuff" to keep him in the respondent's employ at least for the minimum period before he could access the benefits of the scheme. 75 Even if the applicant had been advised, after he took up employment, that the shares and options were liable to be forfeited if he resigned, such advice would, in my view, be irrelevant insofar as this application is concerned. The promise was made, as evidenced by the letter of appointment, prior to his taking up employment. Any purported unilateral modification of that promise, by the later addition of conditions, was irrelevant insofar as his contract of employment was concerned. I do not accept that the evidence sustained the claim by the respondent that the applicant, post employment, had some different view than advanced in these proceedings, as to his entitlements to shares and options. In any event, I do not think the applicant was told of that condition until he was leaving the respondent's employ. 76 It is common ground that a copy of the respondent's options/shares scheme document was not provided to the applicant prior to his taking up employment with the respondent. Even sighting that document would not cause him alarm. It is clear that the scheme provides for the waiving by the Board of certain requirements for its implementation i.e. for all practical purposes by Mr Moles. The applicant had reached his understanding of what was agreed as to shares and options in the pre-employment negotiations with Mr Moles, an understanding confirmed, on the face of it, in the letter of appointment. In cross examination Mr Moles said that he supposed that in total isolation, in relation to shares and options in the letter of appointment, the reader could assume that there were no other rules attaching to the options and no other rules attaching to the shares. As already mentioned, Mr Moles drafted that letter. 77 Contrary to the respondent's submissions I did not find the applicant's denial in oral evidence of receipt of the option plan unconvincing, nor that his evidence that it would have been inappropriate to discuss the matter with Mr Langan was an invention to bolster false evidence. The respondent said it was illogical for such a direction to be given, in that Mr Langan as the company's financial controller would have such knowledge in that he had responsibility for the Shares and Options Register. However, the applicant commenced work with the respondent on 5 May 1997, Mr Langan on 21 April 1997. Mr Langan did not take up responsibility for the Shares and Options Register and Scheme until some time in the first month of his employment, ie. after the applicant commenced. 78 Moreover, the applicant said Mr Moles had told him, when the latter handed him his letter of appointment, that it was confidential because it was outside the normal package, having been put together specifically for him and would create problems if discussed with anyone else. Despite the respondent's denials, I accept that was said. Examination shows that the two page letter of appointment dated 8 April 1997 given to the applicant was manifestly different from the four sentence letter dated 17 March 1997 given, for instance, to Mr Langan. 79 Mr Langan's letter had attached to it the respondent's employment agreement. Neither the letter nor the attached agreement referred to shares and options. By a later letter dated 1 December 1997 Mr Langan was offered Shares and Options in Candle. That letter also set out certain rules attached to the allocation, one of them being that if he left Candle for whatever reason he forfeited the Shares and Options. 80 A seven sentence letter of appointment, attached to which was, it was said, an employment agreement, to Mr John Bostelman on 23 December 1996, confirmed his appointment salary package and also stated that "Candle will provide you with "[number] shares in Candle", and also "you are entitled to [number] options". Restrictions as to sale of the shares and exercise of entitlement to options were set out. No mention was made of a condition that such entitlements were forfeited if Mr Bostelman left Candle. 81 By way of contrast, the applicant, in the letter dated 15 December 1997, was advised that his appointment as Manager, Sales & Marketing was confirmed and "in accordance with your Contract you are now entitled to 20,000 Options and 30,000 Shares in Candle Australia Ltd". Neither the "certain rules" set out in Mr Langan's letter nor any other conditions were referred to in the applicant's letter. 82 In his Further Re-Amended Summons for Relief the applicant claimed that he "was induced to enter into employment with the respondent on the basis of a number of representations". 83 The applicant's evidence was that he told Mr Moles, in the pre-employment discussions, that shares and options would need to form a significant part of his remuneration package. In his evidence, Mr Moles agreed only that the shares and options formed part of that package. 84 That difference in that evidence between the applicant and Mr Moles could be regarded as a striking example of the different focus each brought to the pre-employment negotiations. The applicant was hungry for shares and options. As far as Mr Moles was concerned, shares and options were simply items that went to make up the complete employment package. The offering of them was something peculiarly within his control and he could say "yea" or "nay", not only as to their inclusion, but also as to the number to be offered and conditions to be attached to their sale/exercise. 85 I find that the matter of shares and options was one first raised by the applicant, but accepted by Mr Moles as being available. 86 The Macquarie Dictionary (2nd ed., 1992), insofar as is relevant defines "inducement" as "n.1. the acting of inducing. 2. Something that induces or persuades; an incentive …". 87 The prospect of obtaining shares and options was an incentive to the applicant to join the respondent. I do not think that the applicant was actively head hunted from his then current employment with Morgan & Banks. The applicant had approached the respondent and after a number of discussions come to a position that was perceived as being mutually beneficial. 88 As already noted, the major issue between the parties was whether the applicant had been advised that if he left the respondent before certain dates he forfeited his entitlement to the shares and options. 89 The applicant first said in cross-examination, but had not recorded in any of his six affidavits, that Mr Moles had said the applicant would receive the shares and options after six months, i.e. without conditions as to forfeiture, That statement was the third answer after the following exchange: Q. Who told you that you were entitled to shares and options from Candle after a six month period? A. Yeah. Q. No, what, after? A. Nobody told me that no matter what. 90 However, Mr Moles's assertion that he in fact told Mr Harper prior to Mr Harper's employment commencing, of the relevant and critical position about shares and options, namely, that they were forfeited if he left employment, also emerged only in cross-examination. It had not been put to Mr Harper, not led in chief, nor included in either of Mr Moles' affidavits. 91 According to Mr Moles (Ex 7, par 19) he had had a general conversation with Mr Harper at some time about the vesting dates of the shares and options and in that conversation had said "providing you're still here". The reference to vesting dates can be directly related back to the letter of appointment, and that to the phasing in of the vesting to the Deed Poll in relation to Candle's shares, (not shown to the applicant) but the effect of the additional words quoted above was not set out in the letter of appointment. 92 Mr Moses submitted that the evidence of Mr Moles in Ex 7 par 19 that he had advised the applicant that it was a condition of the Deed Poll that he had to be still a member of Candle's staff at the relevant trigger dates for transfer of shares, had not been shaken during cross-examination. He referred to page 371 of the transcript to support that submission. 93 Examination of that page as to cross-examination on the point shows that Mr Moles' recollection of the claimed conversation was that he "would have said that conversation was a general conversation" at some time after the applicant started work. He "would suggest" "it was some time in the first six months" but "as far as an actual date, I couldn't give you an actual date" (but) "I would have said it was probably about the time his six month period was expiring", around November "would be about right, yes". Mr Moles said at the time he had not documented fully these discussions (but) "I have no doubt in my mind I put that to him but it's not in that document" (i.e. Mr Moles' affidavit (Ex 7) ). 94 On the point in issue, the lack of assistance to the Court of that evidence is readily apparent. 95 Mr Langan's evidence that he had told the applicant, prior to the end of the probationary period, that the applicant's entitlements to shares would lapse if the latter's employment terminated prior to the relevant trigger dates, emerged only in cross-examination. 96 Evidence of Mr Langan went to a conversation set out in his affidavit (sworn 16 April 1999) that he said he had with the applicant in late July or early August 1997 as to the operation of the shares and options plan. He did not say in that affidavit nor in evidence in chief that he had told the applicant that entitlement to shares and options would be forfeited if he left Candle. During cross-examination, having stated that he had fully and precisely set out to the best of his ability all conversations about shares and options he had had with Mr Harper, he said his recollection was that he told Mr Harper that he must be an employee of Candle to exercise his options. (Mr Beech-Jones immediately stated for the record that that matter was not put to Mr Harper. However, it should be noted on that point that the applicant had denied in cross-examination that the conversation late July/early August 1997 had occurred.) Mr Langan then said that "I believe that I said that you must be a current employee of Candle at the time that the shares were to be transferred to the employee from the vendor shareholders". 97 Mr Langan accepted the proposition put to him by Mr Beech-Jones that he understood that whether or not Mr Harper had been aware of that condition as to forfeiture was of great significance in this case. Despite that understanding, that claimed addition to the conversation had not been recorded in either of Mr Langan's affidavits, nor indeed in a letter sent by the respondent's solicitors, after consultation with both Mr Langan and Mr Moles, to the applicant's solicitors on 3 November 1998. (On 26 October 1998, the applicant's solicitor had sent a three page letter setting out the applicant's demands, including those as to shares and options. The three page reply to that demand was sent on 3 November 1998.) 98 Mr Langan was "not sure of the exact time" of the other two conversations on shares and options that he said in his affidavit had taken place, but his recollection was that they occurred before the applicant completed his probationary period. 99 Having examined Mr Langan's evidence in total, I do not accept that he did advise the applicant as to the forfeiture conditions at any time in 1997. 100 Even if the applicant had been given at any time the respondent's prospectus, as was claimed by Mr Moles in cross-examination but had not been a matter put to the applicant, that would not assist the respondent in its claim that the applicant was aware of the conditions that resulted in the forfeiture of shares and options. The prospectus did not address that matter. 101 It seems to me from the evidence that, while the applicant was focussed on obtaining access to a large parcel of shares and options, the respondent, in the person of Mr Moles, was excited by the possibilities arising from the setting up of a successful sales and marketing division, twice previously ventured unsuccessfully, and so expanding the activities of the respondent, so recently listed on the stock exchange. 102 While some aspects of the applicant's persona as a salesman were irritating in his giving of evidence, I think there is no doubt that he could generate considerable enthusiasm for a project, particularly when, in this case, the project was one in which Mr Moles already was interested. In my view, it was on that aspect of the discussions that Mr Moles was focussed. It was also not long after the company had been listed and perhaps Mr Moles did not have much experience in providing shares and options as a term of employment as he may later have acquired. 103 I think that, no matter what Mr Moles and Mr Langan in hindsight, would wished to have said, that the situation was that stated by Mr Moles at p 674 of the transcript towards the end of his re-examination: MOSES: Do you recall Mr Beech-Jones saying to you, "Why didn't you give him a letter of appointment which said that", and that is referring to the entitlement to receive shares and options. BEECH-JONES: Q. "Being subject to the rules and plan"? A. Yes. MOSES: Q. Do you recall that line of questioning? Is there a reason why it wasn't in the letter of appointment which is Annexure B to Exhibit 1? A. Look, I mean we were - we became a public company in January '97. There's a big difference between a public company and a private company in the form of documentation and I guess we were going through a learning curve. Certainly if you look at our employment agreements today they are considerably more detailed than this particular document. So it was very early days in our life as a public company and we certainly verbalised the fact that the options and the shares were subject to a share plan for the shares and an option plan for the options and I went through with Luke, Mr Harper, the actual main particular points and one of them was that you have to be employed by the organisation. Now, that's just a factor, being a new public company we just didn't have the documentation in place. 104 I do not accept that the applicant was told prior to taking up employment with the respondent by Mr Moles or anyone else on behalf of the respondent that if he left the respondent's employ prior to certain trigger dates, his entitlement to the shares and options lapsed. 105 Although both Mr Moles and Mr Langan nominated the letter of appointment as being the applicant's invitation to join the share and option plans, the terms of that letter in no way constitute an invitation but a very specific commitment: "after six months based on Performance you will receive (my emphasis) 20,000 OPTIONS and 30,000 SHARES in Candle Australia Ltd". Furthermore, the terms of that commitment had nothing in common with the standard form of "Invitation to apply for Executive Plan Options", and the accompanying procedures to implement acceptance, as instanced in the invitation to Mr Terry McShane tendered in evidence. 106 I find that, in accordance with the letter of appointment, the applicant was entitled to 20,000 options and 30,000 shares in Candle Australia as from the successful completion of the applicant's probationary period on 5 November 1997. 107 In the context of the Letter of Appointment and of the evidence as a whole I do not accept that the date of commencement of employment, that being 5 May 1997, is the proper date as contended for by the applicant for the transfer of those shares/options. 108 Similarly, 15 December 1997 the date on which he was actually advised that his probationary period had expired and his appointment confirmed is not material to that issue. 109 I decide that 5 November 1997 is the date from which time should run in relation to the shares and options and is the basis for the trigger dates for the exercise of options/sale of shares provided for in the letter of appointment. 110 I find that the applicant is entitled to the 20,000 options and 30,000 shares in Candle Australia as provided for in his letter of appointment, that entitlement having arisen consequent upon his satisfactory performance for six months. 111 I find that the conduct of the respondent in withholding those shares and options on the basis that the applicant's entitlement to those shares and options lapsed on his leaving the employ of the respondent on 14 August 1998 evidenced a contract that was unfair in terms of s 105(a) (see Reich at para 27). 112 I reject Order 2 as proposed by the applicant. It is appropriate to order on the basis of shares and options as originally set out in the letter of appointment. 113 The appropriate relief in relation to the shares and options in dispute pursuant to s 106(5) is that the Court orders the transfer of those shares and options from the respondent to the applicant. 114 There were a number of difficulties foreshadowed in the event that the Court decided such a transfer was justified: the precise trigger dates specified in the clause and an exercise price for the options need to be ascertained. 115 In relation to the further issue as to the determination of the appropriate exercise price for the options, the following alternatives were advanced by the parties, based on their positions as to the appropriate trigger dates for the operation of the Shares and Options condition of employment: 116 Applicant's alternatives: (i) $1.20 being the figure referred to in the letter of appointment; or (ii) in the alternative, $1.39 being the share price as at the date of the commencement of the applicant's employment (5 May 1997); or (iii) in the alternative, $2.04 being the share price at the conclusion of the applicant's probationary period. 117 Respondent's alternatives: (i) $2.18 being the exercise price on 15 December 1997; (ii) $2.04 being the exercise price on 5 November 1997. 118 The applicant and the respondent have one common alternative price, that being $2.04, the share price on 5 November 1997. 119 Although I have decided that 5 November 1997 is the proper date as from which the Shares and Options conditions shall operate, I refrain at this time from deciding what the appropriate trigger dates should be, leaving that matter for the parties at their request to consider once a decision in principle has been made. In the event of the parties being unable to come to agreement, I will determine that matter. 120 I take it that when the term "exercise price" is used in the letter of appointment and in the respondent's draft orders, it refers to the share price, meaning that the options are exercisable only when the share price is greater than $1.20. I note that the applicant in its proposed alternatives, has acted on a similar understanding. 121 If my understanding as to the term "exercise price" is incorrect, the parties have leave to come back to further argue that point. 122 Further relief was sought by the applicant in relation to the shares and options, that being: Third, the relief needs to take into account the dividends on the shares that the applicant was entitled to receive from November 1997 onwards (remembering that his letter of appointment represents that they will vest in the employee with restrictions only placed on their sale).

Fourth, it is submitted that the form of consequential relief should accommodate the evidence as to what the applicant would have done had he received the shares and options in the meantime (ie. when he was supposed to). (In providing such evidence the applicant took into account the comments by Marks J in Sasse v National Dairies Ltd (unreported; 98/2290; 21/10/99 at 23.) 123 In respect of two further claims by the applicant as to the shares and options, I find, in the first instance, that account is to be taken of the dividends on the shares the applicant was entitled to receive from November 1997 and account is to be taken of what the applicant would have done had he received the shares and options at the time he was supposed to do so. 124 The parties asked that the Court make a decision in principle on the issue and direct the parties to confer as to its implementation. 125 I accede to that request. 126 It was noted that on one view, the window of opportunity to exercise the options would close on 5 May 2001. The respondent indicated on the record that it would not take that date as an issue in proceedings. In the event that judgment was delivered after that date, the respondent would comply with the orders made and attempt to accommodate them in any way. Payment During Notice Period Submissions - Applicant 127 The applicant asserts that on 14 August 1998 he gave the respondent one month's notice of his intention to leave its employment but that Mr Moles instructed him that he was to leave immediately. Mr Moles denies this, asserting that it was the applicant who stated he wished to leave immediately. If the applicant's version is accepted it would ordinarily follow that he would be entitled to some form of payment in lieu of notice. Although he gave one month's notice, cl 7 of the Agreement provides that, after the conclusion of the probationary period, his employment could be terminated by either party giving two weeks' notice or the parties mutually agreeing on a shorter period. Thus, absent some order under s 106, if the applicant's version was accepted, he would ordinarily be only entitled to payment in lieu of two weeks' notice. It was the understanding of the applicant that both parties agreed that he was entitled to two week's notice if it had been Mr Moles who told him to leave immediately. 128 There was no inconsistency in Mr Harper's evidence as to when he decided to resign. What he said was he made his mind up the day of his resignation, i.e. 14 August. That is when he was asked a question, he had to put a day. He said he removed "my stuff the night before. I believe I would be walked". 129 Two weeks' notice is clearly unfair, harsh or unconscionable, given the seniority of the applicant's position, the fact that he completed a six month probationary period (being twice the usual period) during which he was liable to be terminated without notice and that he had been employed by the respondent for 14 months; see generally Ruefli v Allam Bros Australia Pty Limited [1999] NSWIRComm 471 (unreported, Glynn J, 26/10/99 at page 13.7 and cases cited thereat). 130 Clause 7 of the Agreement should be varied by substituting "one month" for "two weeks" and, by way of consequential relief, the respondent ordered to pay the applicant an amount of $19,321.00 (gross) plus interest. (Alternatively, it was submitted that the Court should order the respondent pay to the applicant an amount of $8,917.38 (i.e. two weeks salary including commission) plus interest. Those figures were taken from his tax returns as shown on his group certificate which was tendered. Submissions - Respondent 131 On the question of the notice, the respondent's primary position was that the applicant should not be provided with payment in lieu of notice on the basis it was the applicant who decided to leave the respondent and requested it be effective immediately. 132 The issue of contention in respect of this issue is what was said during the meeting with Mr Moles and Mr Harper on 14 August 1998. The applicant tendered his resignation to Mr Moles to take effect forthwith. 133 It was never the applicant's intention to work out a notice period. Certainly the letter of resignation makes no reference to a notice period. It does not corroborate the applicant's version of events. The evidence of Mr Harper on this issue is clearly false and inconsistent with the surrounding circumstances as well as his evidence in cross-examination. 134 He went to the office on 13th August 2000 to remove his personal belongings and to clean up the bits and pieces. He removed his belongings on the belief that he was going to be walked out, and he was not. There is no evidence that would support his contention. The evidence of Mr Foster, saying Mr Harper told him he was quite willing to stay for the notice period, more than happy to stay, may be true, but at the end of the day it was he who wanted to go and he made it clear to Mr Moles in the meeting on 14 August. 135 The question relating to notice ought to be resolved in favour of the respondent. The applicant resigned on that day forthwith and proceeded to conduct himself in a way in which he would be prepared for the operation of his business. 136 The other point that was quite clear in this case as it moved to the termination, was that the respondent did not terminate the employment of the applicant. The applicant's own evidence established that he resigned and that his desire was to establish his own recruitment business because of his unhappy experience, he told the Commission, at the respondent. It is fanciful for the applicant to claim that he was entitled to a notice period. 137 If the Court determines against the respondent on this issue, the respondent in the circumstances ought only be ordered to pay the applicant the sum of two weeks notice. There is an issue about the basis upon which the Commission should calculate the remuneration of the applicant for the purpose of any notice. See for example Ross v GN Comtext (Australia) Pty Limited (2000) NSWIRComm 1. Compare this to Shead v Summit Western Pty Limited t/as Blacktown Mitsubishi (1998) 81 IR 347. Payment in lieu of Notice - Consideration 138 The termination clause of the Agreement of 8 April 1997 made between the applicant and the respondent is in the following terms DETERMINATION After the probationary period this agreement may be determined by either party hereto giving to the other two weeks' notice in writing provided that after giving of such notice the parties may mutually agree to a shorter period for the determination of this agreement. During the probationary period this agreement may be terminated in writing without notice. 139 Whether or not there should be an order for two weeks pay in lieu of notice is a matter that has considerably exercised my mind. 140 It is clear on the evidence that the applicant's departure from Candle was initiated by him. 141 The applicant did offer to work out a period of notice with the respondent, as was confirmed by Mr Foster's evidence. In my view, that offer was made in the full expectation that it would be refused and that once he had announced his intention to leave the respondent he would be immediately "walked" to the front door, as had occurred upon his resignation from Morgan & Banks. In the light of his anticipatory removal of his personal belongings on the previous evening, it was probably of some surprise to him that that did not occur, but that he was asked to attend a hand over meeting with Mr Foster later in the day. 142 In relation to the applicant's last day at Candle, Mr Foster recalled that the applicant had said to him that he was happy to work out the notice period, but Mr Foster could not recall a reference by the applicant to a period of time. Mr Foster also recalled that after the applicant left, Mr Foster had had a conversation with the applicant generally along the lines deposed to by the applicant that Mr Moles had said there would be no payment, but Mr Foster said that in that later conversation there was no reference to a month's pay as was claimed by the applicant. Mr Foster also said that Mr Moles had told him that the applicant had agreed to there being no payment. The applicant disputed such an agreement. 143 The applicant's contract of employment called for two weeks notice in writing. He unilaterally and, in my view, disingenuously, proposed one month. (On that point, he said in cross examination that because he was paid monthly, he assumed the notice period was one month.) 144 It seems that the contest as to payment really comes down to two alternatives. Was the applicant deprived of two weeks salary by being refused the opportunity to work out that period, or was his departure on the day a mutually agreed shorter period of notice in accordance with his letter of appointment? 145 Each alternative is equally feasible and indeed both conversations as relayed to the Court to the extent each was supported by the evidence of Mr Foster could stand together - the applicant resigning and offering to stay and there following some discussion in which the shorter period of notice was agreed upon. The applicant was someone who, as he said to Mr Moles in a letter dated 7 October 1998, did not believe in "burning bridges" with previous employers. That approach was also instanced in his letter of resignation dated 14 August 1997, described by him as "polite" and "a polite way of resigning", because, as he said in evidence, he did not believe positive statements he had made in it as to the respondent's commitment to people or as to support given to him by the respondent were true. 146 Mr Moles, in his version of the conversation with the applicant in which the latter resigned, made no reference to any specific agreement that the applicant would not receive any payment in lieu on leaving. 147 It was said by Mr Moles that "Luke was fairly affable when he left", advising that Mr Foster could contact him on his mobile in the event that Mr Foster needed more information in managing the applicant's division on an interim basis. Mr Foster indeed did so on a number of occasions. 148 I take into account in the determination of this issue my general assessment of the evidence given by the applicant, by Mr Moles and by Mr Foster. 149 The applicant in his answers was protective of his own interests as, for example, in the applicant's evidence relied upon by Mr Moses to impugn the applicant's credibility in relation to asserted employment of contractors to enter Morgan & Banks data into the Candle data base. The applicant had indicated one belief, but denied it a few minutes later, as to the actions of Mr Moles in relation to those contractors. 150 Answers by Mr Moles prefaced by the words "I mean" or "Look, I mean", often signalled a response that in effect accepted what the cross-examiner (most often) was putting to him but was seeking to explain away that acceptance. There was a number of such answers recorded in relation to the events of the applicant's resignation. 151 I have already indicated that I accept that no attack could be made on the credibility of Mr Foster. 152 I have come to the view that the second alternative as to the applicant's termination is to be accepted. I therefore reject the claim for payment in lieu of notice. Restraint Clauses 153 Clause 5 of the Agreement provided that: The employee shall devote his/her full time to the service of the Company and shall not engage in any other employment without the consent in writing of the Directors of the Company. 154 Clause 10 provided for restraints in the following terms: 10. (a) The employee shall not either during the continuance of his/her employment hereunder or thereafter without the written consent of the Directors of the Company divulge to any person whomsoever any trade secret or work process of any information concerning the business or finances of the Company or its dealings, affairs or transactions including names and addresses of clients and contract personnel. (b) The employee hereby expressly agrees that for the period of six months from the determination of this agreement he/she shall not obtain employment with or make sales approaches to any of the Company's clients (excluding those clients who are seminar clients only) with whom he/she has worked or been in contact with in the period of six months immediately preceding the date of determination of this agreement without prior consent of the Directors of the Company in writing. 155 The Employee Non-Disclosure Agreement signed by the applicant on 14 April 1997 was in the following terms: I LUKE HARPER an employee of Candle Australia Ltd hereby recognise that documentation and information pertaining to the business of Candle Australia that may be disclosed to me from time to time is CONFIDENTIAL INFORMATION AND A TRADE SECRET. Unless duly authorised I agree not to disclose any CONFIDENTIAL INFORMATION to any external party to Candle Australia Ltd nor to copy, reprint, duplicate or recreate, in whole or in any part such CONFIDENTIAL INFORMATION. This CONFIDENTIAL INFORMATION includes any contractor/applicant and client/company details ie. resumes, computer software, diskettes and print-outs, personal information or client information gained as part of your agreed position/role with Candle Australia Ltd. I agree to be bound by this non-disclosure agreement for a period of not less than two years after termination of my employment with Candle Australia Ltd. Restraints Submissions - Applicant 156 The applicant seeks relief setting aside in whole, or in part, cl 10(a) of the Agreement and the Non-Disclosure Agreement (the "Non Disclosure Restraints"), cl 10(b) of the Agreement (the Non Solicitation Clause) and cl 5 of the Agreement. 157 Subparagraph (a) of s 105 as to an "unfair contract" is satisfied in relation to these restraints by either or both the respondent's conduct and/or the terms and operation of the restraints themselves. The restraints (other than cl 5 of the Agreement) are also unlawful restraints of trade and against the public interest such that subpara (b) of the definition in s 105 is also satisfied. 158 The restraints operate for periods of six months, two years or indefinitely after the termination of the applicant's employment. 159 The respondent's conduct in: (A) deliberately and flagrantly failing to give effect to the representation as to the applicant's entitlement to receive shares and options; (B) frustrating the applicant's attempts to develop the sales and marketing division of the respondent by refusing to direct referrals from the technical recruiting area; (C) relying on the restraints to make serious and false allegations concerning the applicant's conduct; and/or (D) failing to allow the applicant to serve his notice period or to provide payment in lieu of notice, is such that the conduct of the respondent renders the restraints and the use to which they are being put unfair with the result that they should be declared void ab initio (see Clayton v Riteway Express Pty Limited ( Clayton ) (1988) 26 IR 191). 160 It is now established that conduct alone is sufficient to establish the statutory criteria of unfairness: Reich (2000) 99 IR 69. Each aspect of the conduct identified above either occurred during the term of the applicant's employment by the respondent, or at the very least, during the term of the applicant's employment contract with the respondent. 161 As a matter of principle, the respondent should not be entitled to deliberately and contemptuously refuse to honour its obligations to the applicant yet insist on the upholding of the restraints. 162 There is no basis for saying that, because a similar subject matter can be dealt with, or is being dealt with, by the Supreme Court, s 106 should be just written out and never exercised in this context. To deny the applicant the opportunity to argue his case under s 106 because another forum is dealing with similar issues but not the same issues would not be a correct exercise of the discretion conferred by the section. The power is there to be exercised. 163 There is nothing the respondent has not had the opportunity to do to prove that there has been breach or otherwise of restraints in this case. The Restraints of Trade Act s 4(1) modifies the common law position, which was if the restraint is too wide, it is all out. Section 4 (1) says that the restraint is valid to the extent that it is not against public policy. Applying Orton v Melman (Orton) ([1981] 1 NSWLR 583 at 587), as sought by the respondent, is difficult in this case because the respondent is being coy about what the breaches are. It is hard for the Court to apply what McLelland J in Orton said to the circumstances of this case because it really was not until the last stages of the case that the applicant was able to get from Mr Moles what the breaches were. That fact is no barrier to considering either how s 106 applies to the restraints or the Restraints of Trade Act. If the Court found the restraints to be too wide, it would be as consistent with s 4(1) of the Restraints of Trade Act as with ss 105 and 106 of the 1996 Act to read the restraints down. 164 The respondent's request that the Court wash its hands of the applicant's complaints about the restraints should not be acceded to. Section 106 clearly gives the Commission jurisdiction. The Commission can act within its jurisdiction and make the findings about unfair conduct, then make findings about aspects of contracts. What consequence that leaves for the parties in other forums, the cards fall where they may in that regard. In response to the respondent's submissions, the applicant makes this clear, that it does not submit that the Court should make any findings as to whether proceedings in the Supreme Court are an abuse of process or not. 165 In effect, the respondent relied upon spurious allegations of breaches of the restraints as a counter claim to the applicant's demands for his shares, options and payment in lieu of notice. On 26 October 1998 the applicant's solicitors wrote to the respondent seeking the transfer of the shares and the options and payment of a sum in lieu of notice. On 3 November 1998 the respondent's solicitors responded. The letter denied the applicant's entitlement to shares and options and concluded by asserting that "it is clear that Mr Harper has stolen Candle's client database and candidate database". 166 There was little or no evidentiary foundation for the making of the serious allegation against the applicant that he had stolen the client database. It rested upon a comparison of two address formulations which revealed, even on a cursory glance, that there was an obvious discrepancy between the two. There were no other address formulations which were said to be similar or identical out of a database of at least 5,000 clients. No reasonable person would have accused the applicant of theft in those circumstances. 167 It was unreasonable for the respondent to maintain its allegation of theft against the applicant as Mr Moles continued to do in the witness box. This is particularly so when it was never put to the applicant in cross examination that he had stolen any of the databases. 168 As to the respondent's submission that employers are not required to have the skills of police investigators or lawyers, Candle did have lawyers. The letter of 3 November had gone through lawyers before it was sent. 169 The accusation does not necessarily have to be knowingly false but "false" meaning if made without proper evidentiary support. So a person can genuinely believe something, but if any reasonable person could not draw that conclusion, that would be a different thing. That was still unfair conduct. 170 Accordingly, it is submitted that the allegations made in the letter of 3 November 1998, and the subsequent statement of claim, were made with either no or little evidentiary support and were made with disregard as to whether they were true or not. This clearly constitutes unfair conduct within the meaning of section 106: see Geoffrey Bowker v Prophecy Technologies Pty Ltd [1999] NSWIRComm 248 (unreported, Marks J, 26 May 1999 at pp 21.10 - 22.1). It is irrelevant as to that point whether Mr Moles subjectively believed in the stealing allegation. The Individual Restraints - Submissions - Applicant 171 The applicant attacks each of the restraints (other than clause 5 of the agreement) on the basis that they are both "unfair, harsh or unconscionable" and an unlawful restraint of trade and therefore contrary to the public interest. The authorities suggest that the appropriate approach in such a case is to first consider whether the restraints constitute an unlawful restraint of trade before considering the wider test as to whether they are otherwise harsh, unfair or unconscionable (see Daley and Ors v New South Wales Rugby League Limited & Ors (1995) 78 IR 247, 280 and 287 Hungerford J; Carter v New South Wales Rugby League Limited & Ors (1997) 78 IR 368, 400 Hill J). 172 The non disclosure provisions set out in cl 10(a) and the Non-Disclosure Agreement are clearly in restraint of trade, prima facie void and incapable of being justified. No restriction is placed upon their geographical operation (i.e. it is worldwide). The time imposed by cl 10(a) is also unlimited and the time imposed by the non disclosure agreement is for a period of "not less than two years". Such provisions are clearly too wide: Wright v Gasweld (1991) 22 NSWLR 317, 327 G (per Gleeson CJ) and 332 D (per Kirby P). Moreover, the scope of the obligation imposed by the restraints extends far beyond material that could possibly be considered to be confidential for instance cl 10(a) purports to impose an obligation to not disclose "any … work process of [sic] any information concerning the … dealings, affairs or transactions" of the respondent. 173 The phrases are so wide and vague that they could be construed as applying to every piece of information the applicant received while employed by the respondent. Both these clauses appear to impinge upon the applicant's ability to undertake work or deal with persons who are or at any stage have been "clients" or "candidates" of the respondent. If as a result of those clauses the applicant cannot divulge names and addresses of clients or contract personnel, including ones that he has retained in his memory, then it would make it almost impossible for him to deal with those persons at any time subsequent to his employment. This is particularly the case where the respondent already has the benefit of a non-solicitation clause in respect of a particular class of clients only (ie. those he dealt with in the last 6 months of his employment) and which only operates for a period of six months. 174 The material the respondent tried to prevent Mr Harper disclosing is material that is publicly available and is so wide that it would shut him down. The allegedly confidential information comprises letterheads, slogans and candidate descriptions. These are all publicly disseminated. They cannot reasonably be regarded as being confidential and as such cannot be the subject of any such restraint (Wright v Gasweld supra at 333G per Kirby P and 339F per Samuels J). 175 There is an inherent unfairness in having two different agreements which address the same topic, namely non-disclosure of allegedly confidential information, but impose different obligations. Clause 10(a) of the agreement is unlimited in time whereas the non disclosure agreement only operates for a period of "up to two years". 176 There is significant potential for ambiguity with the phrase "sales approaches" in cl 10(b). It would constitute an unfair restriction upon the rights of those clients to use the recruitment consultant of their choice. (There is, of course, no exclusivity arrangement between the respondent and any of those clients.) 177 The clause also operates to prevent the applicant approaching "clients" whom he had "been in contact" within the period of six months immediately preceding the date of the termination of the agreement. This is far too wide and is otherwise unfair, harsh and unconscionable. The "contact" is not limited to contact via the respondent. It does not exclude contact in some personal or other capacity. Further, the applicant merely could have taken a message or had some brief contact with the relevant "client" and not engaged in any particular transaction with them. 178 The clause refers to clients the applicant worked with in the six months "immediately preceding the date of termination of this agreement". The clause can only operate sensibly if this is taken to be a reference to the six months preceding the termination of his employment not the agreement. 179 In relation to the respondent's submissions as to "clean hands", the applicant denied that there is undisputed evidence as to breach of post employment restraints. What Mr Harper did was, as he said in his evidence, that there were these three clients, they approached him, not he approached them, and he said he was careful with these people. Of course the restriction is on making sales approaches to the clients. 180 It is for the respondent to prove that the applicant made the sales approaches. On his evidence he did not make sales approaches. In the circumstances where clients approach Mr Harper for work there was no breach of his restraint clause, but even if there was, that would be unfair. 181 If the respondent says there was a breach of fiduciary duty it has its options. It does not have to rely on a restraint clause if it is a breach of a duty owed or implicit in the contract of employment itself. 182 Even if the Commission does not set aside the non-solicitation clause in whole, it is submitted that it should be varied: (i) by specifying the geographical area in which it operates; (ii) by clarifying that the phrase "sales approach" does not operate in the manner contended by the respondent as outlined in paragraph 3.37 above; (iii) by deleting the words "or been in contact"; and (iv) by substituting the words "his employment" for "this agreement". 183 In the Statement of Claim it is simply said because Mr Harper reused the descriptions he contravened cl 5. That is preposterous. The applicant has sought a variation to make it clear the clause does not work that way. Submissions - Respondent 184 The post-employment restraints are lawful and ought not to be read down. The restraints are essentially less prescriptive than the constraints which Mr Harper has imposed upon his current employees and would seek to enforce. 185 The applicant only sought to have the restraints varied after the Supreme Court action by the respondent was commenced and the matters relating to the restraints are established on the evidence, that is, that there are arguable grounds that exist that Mr Harper did breach restraints contained in his contract of employment. The Commission need not be troubled with making findings as to whether or not there have been breaches of those post-employment restraints. That is a matter to be dealt with by the Supreme Court of New South Wales in due course and the respondent submits that the applicant has failed to make out a case as to why the Commission should intervene. The respondent ought not be denied its right to have the legitimacy of those restraints determined and seek to enforce the restraints which were the subject of an agreement with the applicant. 186 Moreover, the jurisdiction exercised by the Commission is discretionary. The equitable concept of "clean hands" is relevant to the exercise of that discretion. The respondent submits that the conduct of the applicant at the time of and post-termination of his employment deprives the applicant of any claim to "clean hands" and any claim to the benefit of the Commission's discretion. On that question not only does it show a breach of post employment restraints to be found in Mr Harper's contract, it is also clearly a breach of fiduciary duty to his employer. 187 As to the Restraints of Trade Act at the very least there are arguable grounds that Mr Harper breached the restraints in relation to three clients of the respondent, for example, in the case of Sirius Technologies and Mr Cooper. It is clear that Sirius Technologies was a client of Candle to whom Luke Harper had made sales in the six months prior to his resignation. Sirius Technologies was caught by the relevant restraint. On 11 August 1998 Mr Harper forwarded to Sirius a resume of Ian Cooper, a candidate of Candle's on 13 August 1998, one day prior to Mr Harper's resignation. On 16 September 1998 Mr Harper involved Sirius Technologies' replacement of Mr Cooper on behalf of his own business, Harper Executive IT. Mr Harper deposited that cheque into his own business account. 188 Finally on the question of restraint, what is sought by the applicant is a complete and unfettered right to undertake any post employment activity against the respondents unencumbered by post employment restraint, and that is the effect of the orders sought by the applicant in these proceedings. If the Court is against the respondent on the question of restraints, then the Court at the very least ought apply the approach of McLelland J in Orton v Melman ([1981] 1 NSWLR 583 at 587) to read down the restraint to what is said to be a reasonable level. However, the respondent contends that there is no warrant for the restraint to be read down in any way. 189 The Commission of course has jurisdiction to deal with the matter notwithstanding the fact that there is a Supreme Court action on foot which the respondent has commenced. However, the Commission may in its discretion refuse to intervene in the matter (see Peterson J in Elkins v Full Bloom Pty Limited [2000] NSWIRComm 223). 190 The Commission (Hill J) in what is the decision in this area, Carter v NSW Rugby League Limited & Anor [(1979) 78 IR 368 in paragraph 84 at page 368], formulates the test when dealing with such a question under s 106, that being a two step process. 191 It is necessary when determining whether a restraint is valid pursuant to s 4(1) of the Restraints of Trade Act for the Court to make a finding whether a breach infringes a post employment restraint. The Commission is not in a position to do so in this case as the respondent does not seek relief pursuant to s 106 concerning the applicant's breaches. Further, the respondent could not have brought such a claim: see for example Howitt v Retec (No 2) (1995) 60 IR 93 and National Parks & Wildlife Service v Stables Perisher Pty Ltd (1990) 20 NSWLR 573. The respondent's position has always been that the right of the respondent to enforce the restraints is a matter which ought be dealt with in the Supreme Court proceedings. 192 The applicant wishes the Court to find, as to some mala fides in respect of the reliance upon the restraints, that in effect the respondent knew that there had been no breaches of restraints and all the while it sought to put some sort of pressure, at least, on the applicant including instituting proceedings in the Supreme Court. 193 The respondent has not approached this case in a way to positively prove the breaches, but rather to point out that the respondent has an arguable case concerning those breaches and that they are to be dealt with at another time and at another place. 194 In relation to restraints, the applicant's sole focus in this case on the restraint period has been to attempt to muddy the water by focussing on the investigative process undertaken by the respondent concerning these issues rather than the conduct of the applicant. 195 The course of action taken by the respondent at the very least demonstrates arguably that there was consideration by the company before the lodging of the Supreme Court proceedings and before the making of what is conceded to be a serious allegation. The path of investigation in relation to matters of principle is that an employer such as Mr Moles is not expected to be a police officer or investigator when dealing with such matters (see Mason v Electricity Commission of New South Wales trading as Pacific Power [(1995) 62 IR 436]). 196 There has been no conduct by the respondent that has been done in bad faith concerning its reliance upon the restraints. 197 The action against Mr Harper for the breach of cl 10B is consistent with Candle's treatment of other employees. There has been no testimony of action by the respondent to unfairly single out Mr Harper simply because of any issue concerning his claim for shares or options or that he has gone out in alleged competition against the respondent. 198 If one looks at the Reich decision, the making of an allegation in itself, if it be false and deliberately made and knowingly to be false, may constitute unfair conduct for the purposes of a contract. It would have to have two elements, it would have to be both false and deliberately made, knowing it to be false. 199 There are reasonable grounds that demonstrate Mr Harper understood the terms of the restraint of trade and by signing his contracts with the respondents agreed to those terms. The employment contract between Mr Harper and Candle dated 8 April 1997 and the employee's non disclosure agreement signed by him on 14 April 1997 are identical to those relied upon by Mr Harper to instruct Mr Langan to write to Candle's solicitors to have agreements enforced upon a former employee of Candle. He has more onerous restraints against his own employees in relation to post employment conduct. 200 The restraints in the Candle contracts are very similar to the restraints in the confidentiality agreement that Mr Harper was formerly employed under at Morgan & Banks. Mr Harper had been reminded of his obligations under those restraints because Morgan & Banks had been concerned about confidentiality breaches by him of them. 201 If the Court were to accept the submissions of the applicant as set out in the Further Re-amended Summons, that would have the effect of preventing the respondent proceeding in the Supreme Court of New South Wales, because if the Court were, in effect, to avoid the restraints there would be nothing in respect of the employment contract components of the statement of claim in the Supreme Court that would underpin the action. 202 The Court would simply decline to entertain these matters and find there were no grounds to intervene. Restraints - Consideration Approach to Restraints 203 Mr Moses submitted that the proper approach for the Court to adopt as to the issue of restraints was that enunciated by McLelland J in Orton v Melman ([1981] 1 NSWLR 583 at 587): In my opinion where the court is to determine, in relation to a restraint to which s 4(1) applies whether (having regard to public policy) the restraint is enforceable in respect of an alleged breach (or threatened breach), it is proper first to determine whether the alleged breach (independently of public policy considerations) does or will infringe the terms of the restraint properly construed, and if so, then to determine whether the restraint, so far as it applies to that breach, is contrary to public policy. If the restraint, so far as it applies to that breach, is not contrary to public policy then by force of s 4(1) the restraint is to that extent valid, subject always of course to any order which may be made under s 4(3). 204 Section 4(1) of the Restraints of Trade Act 1976 provides: A restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not. 205 "Public policy" is defined in s 1 of the Restraints of Trade Act to mean "public policy in respect of restraint of trade". That definition, it seems to me, is much more limited in its effect than the ability of the Commission to consider "public interest", in the terms of s 105. 206 There is a significant body of case law as to the outcome of decisions of the Supreme Court in relation to s 4 and to s 4(1) in particular. 207 In Wright v Gasweld Pty Ltd [(1991) 22 NSWLR 317 at 330], Kirby P (as he then was) noted that by the Restraints of Trade Act 1976 (Restraints Act), Parliament had made provision to permit the Supreme Court, by order, to save from avoidance on grounds of public policy the validity of certain restraints of trade. 208 Section 4(1) of the Restraints of Trade Act 1976 does not allow the Court to remake the contract or a covenant in it (Kone Elevators Pty Limited v McNay (1997) ATPR Rpt 41-564). The Court cannot make an order to have effect earlier than the date on which the order is made (s 4(3) ). 209 I do not accept that the proper approach to adopt to the issue of restraints being considered in these proceedings is that set out by Mc Lelland J in Orton. 210 As can be seen from the extremely cursory details set out above, the provision made under the Restraints Act is a very specific and limited one, quite different from the more expansive, though not at large, jurisdiction given to the Commission in Court Session pursuant to Part 9, Division 2 of Chapter 2 of the Industrial Relations Act 1996. In relation to a contract whereby a person performs work in any industry, that the Commission finds is an unfair contract in terms of s 105, (including that it is against the public interest (s 105(b) ), the Commission may make an order declaring wholly or partly void, or varying, any such contract (s 106(1) ). The Commission may find it was unfair at the time it was entered into or subsequently (s 106(2) ). The Commission may declare a contract wholly or partly void, or varied, either from the commencement of the contract or from some other time (s 106(3) ). (The remainder of s 106, including s 106(4) as to public interest, is set out elsewhere in this decision.) 211 The power of the Commission to vary a contract under s 106 arises only after the Commission has found the contract in question unfair. It is not uncommon for questions as to whether certain restraints are unfair in terms of s 105(a) or against the public interest in terms of s 105(b) to arise for consideration in applications made under s 105 and s 106 in the 1996 Act, a situation that occurred also under the predecessor sections in the Industrial Relations Act 1991 and the Industrial Arbitration Act 1940. 212 In Carter v New South Wales Rugby League Limited (Carter) (one of seven applications dealt with in those proceedings) [(1997) 78 IR 368 at 400] Hill J first found that the agreement was a prima facie restraint of trade and then stated that "the next question is whether the restraint is justified as being reasonable for the protection of the Leagues' business enterprise". 213 In Carter, the primary point at issue was whether, in proceedings seeking orders that certain "loyalty" agreements (restraints) were unfair and contrary to the public interest as being in restraint of trade, those agreements should be declared void as being unfair contracts in terms of s 105 and s 106 of the 1996 Act. 214 The findings that Hill J made in Carter were that provisions in the various contracts being examined were either fair or unfair. He said, for instance, that the unreasonableness of the options provisions arose mainly out of what he described as unconscionably long period/s of the option restraints (at 412). Unfairness in some cases could be cured by deletion, in others the agreement, having been found to be substantially unfair, was avoided. 215 Later at p 414, Hill J noted that no reference was made to the Restraints of Trade Act in the proceedings before him. His reference to s 4(1), after considering the decision by Windeyer J in ARL v Cross and Elsegood [(1997) 39 IPR 111], was in relation to the severability aspects of s 4(1). 216 In Daley v New South Wales Rugby League Limited (and applications by four other footballers) [(1995) 78 IR 247], Hungerford J, having satisfied himself that the alleged arrangements (exclusion from representative selection) were within the scope of s 275 of the Industrial Relations Act 1991 (the predecessor of the present ss 105 and 106), attended to whether the applicants had satisfied the grounds for relief contained in s 275. He first dealt with the public interest ground as to restraint of trade. His Honour adopted a number of propositions distilled from other cases as to that issue, but I refer, for the purposes of this decision, to one only (at p 281): (e) If a restraint of trade is shown it is a question of law whether the circumstances justify the restraint. 217 Having found that the exclusion imposed on the applicants by the respondents was a restraint of trade, Hungerford J then said (at 283) that the question then to be asked is whether the restraint so found is reasonable or unreasonable. His Honour found (at 287) that the ban imposed on the players was an unreasonable restraint of trade against the public interest (ie. the equivalent sub-section to s 105(b) ). Although that finding made it strictly unnecessary for him to consider the ground of unfairness as relied upon and fully argued by the applicants, he did so for completeness and concluded that the ground of unfairness had also been made out. 218 Although Hungerford J discussed the restraint of trade at common law, he did not refer to the Restraints of Trade Act 1976. 219 My consideration of Carter and of Daley is both in relation to the methodology adopted in this jurisdiction as to the consideration of restraint of trade issues in the context of applications made under s 275 (or its predecessor) and to principle. 220 In relation to other authorities relied upon, the restraints in Clayton were not upon examination avoided by Macken J because benefits under the impugned contract had been withheld from the applicant, though he held that because of that the contract was unfair, but because they were too wide both with respect to their temporal (2 years) as well as their geographic application. 221 In JRM Insurance Services Pty Ltd and John Robert Mattock v Greater West Insurance Brokers Pty Ltd & Gregory McDonald (unreported; Kavanagh J; 97/5389 and 5390; 17/11/99) Kavanagh J found that there was a manifest unfairness in the conduct by the respondents in the performance of the relevant employment contracts. That conduct included failure to pay bonus earned and the series of personal indignities suffered by each applicant in the termination of his employment contract, including unsubstantiated allegations of dishonesty. In finding the respondent's conduct in total not only unfair but also harsh or unconscionable, Kavanagh J also said that that conduct defied accepted standards of business morality as defined in Stowar v Myer Stores Limited (T/as Grace Bros) [(1993) 50 IR 9 at 37]. That is not this case. 222 The applicant claimed that the respondent frustrated the applicant's attempts to develop the respondent's sales and marketing division. How that would justify the setting aside of the restraints was not really developed. The respondent tendered evidence of the commission ($156,920) earned by the applicant in the period July 1997 to July 1998. The graphic representation of that period was one of peaks and troughs, monthly amounts ranging from $2,280 (June 1998) to $28,888 (October 1997). There was, however, no evidence as to the extent, if any, that the non-referral of leads from the technical area played in relation to any decline. 223 If it did have the consequence of his receiving a smaller amount in commissions than otherwise might have been the case, he had his remedy. He could, and did, resign from Candle. 224 I do not see that the alleged refusal to direct referrals from the technical recruiting area to the applicant's sales and marketing division falls, in this case, into the category of unfair conduct on the respondent's part. 225 It certainly was not shown that any such conduct was such as to make it unfair that the applicant should be hindered by the restraints from pursuing whatever means he wished in order to make a proper livelihood in order to balance actions of the respondent preventing him from achieving a proper income while employed by the respondent. 226 The restraint provisions being considered in these proceedings are not the central issue as to whether or not the contract of employment offends s 105 as is contended by the applicant. That central issue is focussed on the applicant's claim that, having successfully completed a six months period of probation, he is entitled, without further ado, to a number of shares and options, and that entitlement not having been honoured by the respondent, the respondent's conduct evidences an unfair contract (see Reich). 227 Deficiencies in the restraints were not originally advanced in the applicant's summons for relief as grounds for relief. The claim by the applicant that the restraints are unfair in terms of s 105 is one that was first raised in October 1999, after the respondent in April 1999 had instituted proceedings in the Supreme Court on the basis that the applicant had breached the restraint clauses and sought repayment of monies from Harper IT Executive Pty Ltd (not a party to the s 106 proceedings). 228 The applicant's attack on the restraints was put on two main bases - firstly, the restraints in themselves were unlawful and, secondly, the conduct of the respondent rendered the restraints unfair. The primary attack was directed to the conduct of the respondent. 229 It was claimed by the applicant that the respondent relied upon the restraints to make serious and false allegations concerning the applicant's conduct. Those allegations go to claimed breaches of confidentiality and to approaches to the respondent's clients/candidates by the applicant after he left the respondent. 230 The respondent quite properly accepted that those allegations were serious. 231 Evidence before the Court going to the soliciting candidate/client issue suggested that there was sufficient information available to justify the respondent's concern. If those serious allegations are found after proper investigation in the Supreme Court to be false, then undoubtedly appropriate relief will flow to the applicant. 232 I find it difficult to accept that post employment inquiries the respondent initiated to try to ascertain whether or not the applicant had breached the restraint clauses, the subsequent discussions within the company and the letter of the respondent's solicitors making specific allegations would be regarded as conduct that would result in orders by this Court to avoid the restraint clauses. 233 I do not consider that the decision of Marks J in Geoffrey Bowker v Prophecy Technologies Pty Ltd [1999] NSWIRComm 248 (unreported; 99/291; 26/5/99) assists the applicant as to its allegations that the conduct of the respondent in its investigation of alleged breaches of restraint clauses and the later solicitor's letter. The internal and external investigation in this case did not appear to go beyond proper bounds and any accusations were made between the parties, not published generally on a web site. 234 I also have difficulty in finding that the making of serious and allegedly false allegations against the applicant's conduct, such allegations being based on the restraints, would of itself constitute unfair conduct. It would be more likely to be found unfair if they were not so based. 235 I have found that the applicant resigned and agreed to a shorter period of notice. There was therefore no unfair conduct on the part of the respondent as to that issue to be considered in relation to the restraints. 236 I have found that the conduct of the respondent in relation to the shares/options was such as to evidence an unfair contract. I do not, however, see how that unfair conduct has the further effect in itself, of making the restraints unfair. On the evidence, the non-provision of the shares/options would not have had any substantial effect on the applicant's financial position for some time. In other words, that non-provision did not leave the applicant in such a parlous financial state that it would be unfair to fetter his immediate ability to earn moneys. 237 It would seem that the respondent's witnesses did not have any real understanding as to the operation of the client and candidate data bases. On the evidence before me I am not of the view that the accusations against the application were made in bad faith. The reasonableness of those beliefs may, however, be a matter to be taken into account as to whether the conduct was such as to make an otherwise fair contract unfair. Whether the matter of alleged breaches of restraint clauses after employment is terminated should be considered in relation to an application made pursuant to s 106, would depend upon the circumstances brought forward in each case. The issue as to whether those restraint clauses, in the first place, are such as to render the contract an "unfair contract" in terms of s 105 certainly needs to be considered, and, if necessary, any necessary variation made. Specific Restraints - Consideration - Clause 10 238 The statement by Lindley MR in Haynes v Doman (Haynes) ([1899] 2 Ch 13 at 25), referred to by Hill J in Carter (at 407) is an apposite today as it was more than one hundred years ago: Agreements in restraint of trade, like other agreements, must be construed with the reference to the object sought to be attained by them. 239 The "object" in Haynes was the same as that in the present proceedings: In cases such as the one before us, the object is the protection of one of the parties against rivalry in trade. 240 I do not see that either the requirement for cl 10 of the employment agreement or the employee non-disclosure agreement is unfair in principle as being necessary to safeguard the respondent's personnel recruitment business, which is peculiarly bound up with having the ability to bring together individuals - employers seeking people with specialised IT skills and employees possessing those skills. 241 To do so requires contact with possible clients (ie. seekers of personnel) and possible candidates (seekers of jobs), and the successful matching, for a fee, of one with the other. That contact with clients/candidates by the recruitment agency can be direct or indirect, the initial contact either being one made personally, at the instance of either the recruiter, the client or the candidate, or in response, for instance, to advertisements or circulars to more directly targeted contacts. The information obtained is stored and is a large part of the recruitment agency's stock in trade. Not all such information is however, exclusive to the agency. In searching for positions, candidates often provide a number of agencies with their CVs. 242 Furthermore, the evidence, to the extent presented in this case, suggests that such knowledge could have a limited shelf life, in that there seems to be a fair amount of turnover of positions in the IT industry. 243 However, upon examination I find that some of the terms of cl 10 and of the non-disclosure agreement make the contract of employment an unfair contract in terms of s 105. 244 Clause 10(a) provides that the employee shall not divulge certain information (and I assume a typographical error in the phrase "work process of [sic] any information") either during the continuance of his/her employment or thereafter, ie. without limitation as to a post-employment period. That last fact, without more, would make this contract prima facie unfair etc in terms of s 105(a) of the 1996 Act and against the public interest in terms of s 105 (b) of the 1996 Act as well as being against the public policy in terms of s 4(1) of the Restraints of Trade Act 1976, not that I think I need to consider the latter in these proceedings. 245 The Court orders that cl 10(a) of the Agreement between Candle Australia Ltd and Luke Harper dated 8 April 1997 shall be varied ab initio by the substitution of the words "for a period of six months" for the word "thereafter" in that sub-clause. 246 The limitation period of six months post employment imposed by cl 10(b) on the applicant as to employment with, or approaches to, respondent's clients (with nominated exceptions) with whom he had been in contact in the six months preceding the determination of his [employment] agreement is the same as that imposed by Harper IT Executive on its own employees and also the same as that imposed on the applicant by Morgan & Banks. There was, however, a substantial difference, to the benefit of the applicant, in the limitation to six months of client contact prior to termination. In the case of both Harper IT Executive and Morgan & Banks that period of limitation is twelve months. 247 I have considered some limitation on the restraint in cl 10(b) as to clients with whom the applicant has "been in contact with". It seems to me that this is an industry where the line between social and business contacts would become very blurred. The only variation on the limitation that I would impose would be to add the words, "other than in a purely personal capacity", after the words "been in contact with". Any dispute as to whether the contact was or was not "purely personal", would have to be resolved on the evidence in any particular case. 248 Furthermore, as a matter of clarification, the Court orders that the words "termination of employment" is substituted for the words "determination of this agreement" in cl 10(b). In their alternative submissions, both parties accepted that some such clarification was required. 249 I do not accept the applicant's submission that even if the Court does not set aside the non-solicitation clause (cl 10(b) ) in whole it should be varied by clarifying that the phrase "sales approach" does not operate in the manner contended for by the respondent ie. the sending of flyers to a potential employer or the approach by a candidate to the applicant and not vice versa. That issue is certainly not as straight forward as the applicant's submission might suggest. The matter of post employment restraints was reviewed by the New South Wales Court of Appeal in Barrett & Ors v Ecco Personnel Pty Limited (Barrett) ([1998] NSWSC 545; 24 November 1998). In Barrett (at p 3) Stein J, with whom Sheller JA and Fitzgerald AJA agreed, in relation to the construction of the term "solicit" in the agreement there being considered, acknowledged that in most instances the first approach will be made by the ex-employee to the former customer but went on to say that "common sense however demands that this not be the exclusive means by which a solicitation may occur. … Like Bryson J in Ridgeway International Ltd v McCullum (unreported, Equity Division, 9 April 1998) I cannot see that to propose to do business ceases to be soliciting business simply because the recipient invited the proposal". 250 In relation to the restraint period of "not less than two years" in the non-disclosure agreement, I find a source of unfairness in the lack of specificity of that non-disclosure period as being "for a period of not less than two years" (my emphasis). If it was intended to be for a period of two years it should say so. If not, it leaves the applicant subject to an open ended restraint, at risk of action alleging breach of it for the remainder of his life, not just his working life. That fact alone, on the evidence in this case, makes the restraint to be against the public interest in terms of s 105(b), and the contract of employment unfair in terms of s 105. 251 There is no evidence before the Court which would suggest that there should be different periods of restraints as to the various matters covered by cl 10 and by the non-disclosure agreement. The Court orders that the employee non-disclosure agreement, as a term of the applicant's contract of employment, be varied ab initio by the substitution of the words "six months" for the words "not less than two years" as presently appear there. 252 The complaint of the applicant as to the non-disclosure agreement appears to me to relate not so much to the requirement as to non-disclosure of confidential information, but to the respondent's designation as to what information, eg. logos, is confidential. For the purpose of determining this application it is sufficient that the Court has found that the contract between the applicant and the respondent is an unfair contract within the terms of s 105. It is not necessary in the circumstances of this particular case, to go beyond that finding to make further findings as to whether or not there have been post-employment breaches of restraint terms now varied. 253 Those differences can be completely considered within the Supreme Court proceedings. I note that Harper IT Executive is not a party to this application under s 105 and s 106. 254 In Elkins v Full Bloom Pty Ltd [2000] NSWIRComm 223 (unreported; Peterson J; 99/1842; 3/11/00), Peterson J declined to make any orders as to payment of a royalty in relation to designs as sought in the application. He said that: These proceedings have dealt with this issue of copyright, intellectual property, damages or account of profits or any other form of remedy only in the most cursory way. There has been virtually no attention to the relevant provisions of the Copyright Act dealing with the remedies for infringements of copyright … Section 131A provides that the jurisdiction of the Supreme Court of a State or Territory in an action under this Part shall be exercised by a single Judge of the Court. Prima facie, I would consider that the jurisdiction of this Court under s 106 would not extend to a remedy of the kind with which the Copyright Act is concerned. The claim for prohibition on use or the payment of a royalty in relation to the relevant designs in this case seems to me to fall squarely within its compass. Decision in Principle 255 Adopting the course of action proposed by the parties, the making of a decision in principle overcomes such difficulties raised by them as to any consequential relief that involved an order that involved the transfer of shares and taking account of the vagaries of the share market. 256 The conclusions the Court has reached which will, after discussions between the parties as to the specifics of their implementation, be embodied in orders, are as follows: 1. In accordance with his letter of appointment the applicant was entitled to receive 20,000 options and 30,000 shares on 5 November 1997, those options/shares to be exercisable/sold in accordance with the timetable there set out, unless modified by this decision;

2. The options are exercisable providing that the share price is greater than $1.20;

3. The conduct of the respondent in withholding those shares and options on the basis that the applicant's entitlement to those shares and options lapsed on his leaving the employ of the respondent on 14 August 1998 evidenced a contract that was unfair in terms of s 105(a) (see Reich at para 27);

4. The contract is to be varied ab initio to provide that, subject to satisfactory completion of his probationary period, his entitlements to those shares and options which arose at the end of that six months, do not lapse on his later departure from the respondent; 5. Monetary relief will take into account, firstly the dividends on the shares the applicant was entitled to receive from 5 November 1997, and, secondly, what the applicant would have done in the longer term had he received the shares and options; 6. Clause 10(a) and (b) of the Employment Agreement shall be varied in accordance with this decision; and 7. The Employee Non-Disclosure Agreement shall be varied in accordance with this decision. Interest 257 The applicant sought that, in the event that an amount of money in lieu of notice be ordered, that interest on that amount should run, at the appropriate Supreme Court rates, as from 15 August 1998 to the date of judgment. 258 Relying upon the principles set out in Abboud v State of New South Wales (No 2) [(2000) 99 IR 299 at 306-307 per Schmidt J and accepted by Wright P, President and Walton J, Vice-President at 303; [2000] NSWIRComm 110 pars 44-49 and 25] the respondent contended that the applicant is only entitled to interest from the date of the filing of the Summons for Relief. Interest - Consideration 259 That contention by the respondent refers to one only of the three possibilities considered by Schmidt J as to orders to be made as to an interest claim in an application made pursuant to s 106. It was said by her Honour: As to the interest claim, there are, in my view, three possibilities, having in mind the nature of the claim advanced and the nature of the relief granted in this case. The first, is an order that interest be calculated as from the date of termination of the contract in April 1997; the second, the date upon which the s 106 claim was brought in July 1998; and the third, that it be calculated from the date of judgment. (par 44)

It follows that the awarding of an interest component is a matter of discretion to be exercised in the particular circumstances of the case in order to discharge the statutory duty, now arising under s 106(5), to make a monetary order in connection with the contract varied, 'just in the circumstances of the case'. This will not necessarily require that interest at commercial rates and for commercial reasons be awarded in every case, even those with a commercial flavour. (par 47) 260 Insofar as the matter of interest may be relevant to the orders to be made as to the outcome of this decision, those orders for all practical monetary purposes relating to the shares and options, I order interest to run, at the appropriate Supreme Court rates as from 15 August 1998. Costs 261 The parties sought that the question of costs be deferred until judgment had been handed down. 262 I am to be advised within fourteen days if the parties wish to address further on any matters left open. 263 Otherwise, the parties are to consult in relation to what has been decided and provide to the Court within twenty one days draft orders which embody the implementation of the matters decided. ******************

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