Mark Cotton v Harpoon Investments

LEGAL REPRESENTATIVES: RESPONDENT: Mr A Britt of counsel Solicitor: Mr P Hayward Hayward Solicitors

JUDGMENT: - 35 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: BOLAND J 12 September, 2001 Matter No IRC 6224 of 1999 MARK SIMON COTTON v HARPOON INVESTMENTS PTY LIMITED Application under s 106 of the Industrial Relations Act 1996

1 In February 1996 Mark Simon Cotton, the applicant in these proceedings, commenced employment with Harpoon Investments Pty Ltd, formerly Circa Telecommunications Pty Ltd. In about August 1998 the applicant's employment with the respondent came to an end. The applicant claimed that his contract of employment with the respondent was unfair, harsh or unconscionable. On 11 November 1999 the applicant filed a summons for relief under s 106 of the Industrial Relations Act 1996. The summons named Harpoon Investments as the first respondent and two directors of the respondent, namely Stephen Francis Dale and Thomas Peter Curtain, as the second and third respondents respectively. The orders sought in the summons were as follows: 1. A declaration under section 154 of the Industrial Relations Act 1996 ("the Act") that the arrangement ("the Arrangement") whereby the Applicant performed work in the telecommunications industry as an employee of the First Respondent, HARPOON INVESTMENTS PTY LIMITED, formerly called Circa Telecommunications Pty Limited, consisted of the following elements: a) By a written agreement made on or about 31 January 1996 ("the Contract"), the First Respondent agreed that:

(i) the First Respondent would employ the Applicant, and the Applicant would serve the Respondent, as the Respondent's Chief Technical Officer, or Technical Officer,

(ii) the First Respondent would pay to the Applicant a base annual salary of $60,000.00, in periodic instalments, together with superannuation contributions at the rate of $3,000.00 a year (together, these amounts are called "Remuneration"); and

(iii) the First Respondent would reimburse expenses that the Applicant incurred in the course of his employment.

b) In or about January 1996, and in the First Contract, the First Respondent, the Second Respondent, STEPHEN FRANCIS DALE, and/or the Third Respondent, THOMAS PETER CURTAIN, represented to the Applicant that, in addition to his remuneration, the Applicant would be, or become, entitled to a bonus to be paid by the First Respondent ("the January 1996 Representation").

c) From time to time between 31 January 1996 until about 17 April 1996, (i) the First Respondent failed to pay all or part of the Applicant's remuneration, or to reimburse expenses incurred by the Applicant, either as they fell due or at all, (ii) the First, Second and/or Third Respondents represented to the Applicant that the First Respondent would pay " backpay " to him when it became " financially possible to do so", and (iii) the Applicant was induced by this representation to acquiesce in, or condone, the First Respondent's failure, and to continue to serve the First Respondent.

d) Late in about April 1996, (i) the First and Third Respondents represented to the Applicant that, if he agreed to accept payment of a lesser amount on account of his remuneration, then, when the Respondent " recovered ", he would be paid the balance of his remuneration, and

(ii) the Applicant was induced by this representation to agree to make this agreement. e) In or about December 1996, the First Respondent transferred the Applicant to Sydney, in New South Wales, where he thereafter performed work for the First Respondent until about September 1998.

f) By a letter dated 12 July 1997, the First, Second and Third Respondents represented to the Applicant that: (i) he would be appointed as a director of the Respondent, and given the title of "Director of Technical Services", and

(ii) subject to the approval of the Respondent's shareholders, he would be, or become entitled, to certain shares.

("the July 1997 Representation"). 3. A declaration that the Arrangement was unfair, harsh and unconscionable, or against the public interest, and so was unfair contract within the meaning of sub-section 106(1) of the Act. 4. In order under sub-section 106(1) of the Act varying the Arrangement from such time as the Commission considers just to require the Respondents to pay to the Applicant:

(a) the sum of $60,374.18, together with interest thereon calculated at the rate prescribed for the purposes of sub-section 95(1) of the Supreme Court Act , being the amount of the Applicant's remuneration and the expenses incurred by him in the course of his employment with the First Respondent that, as at the date of this summons remains unpaid under the First Contract; and

(b) a sum considered by the Commission to be just to compensate the Applicant for the Respondent's failure to honour the January 1996 and/or July 1997 Representations. 5. An order under sub-section 106(5) of the Act that the Respondents pay the amounts referred to in Order 4 to the Applicant, and that they be jointly and severally liable to make the payment.

6. An order under sub-section 181(1) of the Act awarding costs of and incidental to these proceedings to the Applicant. Section 106 2 The power exercisable by the Court in relation to this matter is contained in s 106 of the Industrial Relations Act 1996. The section provides: 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. 3 A "contract" is relevantly defined in s 105 of the statute as meaning "any contract or arrangement, or any related condition or collateral arrangement …"; and an "unfair contract" is defined as one "that is unfair, harsh or unconscionable". Relevant background to summons 4 The applicant was a telecommunications engineer with degrees from US universities in computer science and business administration. On 31 January 1996 the applicant received a letter of offer of employment as a Technical Officer with the respondent. The applicant commenced employment with the first respondent on 26 February 1996 in the State of Victoria on an initial probationary period of two months. After two months the applicant's annual salary was to increase from $45,000 to $60,000. The contract of employment also provided for the reimbursement of expenses incurred by the applicant, a payment in respect of superannuation of $3,000 per annum and a bonus on performance with the amount to be advised. No bonus was paid to the applicant during the period of his employment. The applicant said in his evidence that the bonus was "a significant inducement to enter into the contract" although the applicant was not aware of the size of any bonus or in fact whether he would even receive a bonus.

5 The position of technical officer reported to Mr Curtain as director of operations and Mr Dale as director of product services. As the applicant described his position, the first respondent was brokering pre-paid discount calling phone cards and the applicant's brief was to manage "the company's telephone service provider relationship". The applicant said that his responsibilities "steadily increased to include design, programming, testing, installing and maintaining the company's phone card system." Mr Curtain's evidence regarding the applicant's role was that the first respondent purchased the licence for "Voice Operating System" (VOS) and that In or about the end of April 1996 our first VOS Software Licence arrived together with an associated piece of computer hardware from a company Dialogic Corporation Inc being the equipment in which VOS software relies to run. Cotton installed the software and the hardware and commenced to write the software which was needed before the equipment could be utilised as a telephone answering system. By the end of May 1996 Cotton had finished the development phase of the small system on which he was working and the Company made a decision to run it in tandem with the system which was already operating for us and located at Hawthorn in Victoria. That system was functioning perfectly. Our intention, however, was to gain greater control over the operation and development of such a system and it was for this purpose that Cotton had been employed. 6 On 17 April 1996 Mr Curtain met with all employees, including the applicant, and asked them to accept a lower rate of pay from time to time in order to allow the first respondent to continue operating. The applicant agreed to this and accepted a lower salary of $35,000 per annum. The applicant said, however, he agreed to the lower salary on the basis he was told by Mr Curtain that the problem affecting the first respondent was only for a limited term and that "we will pay you back-pay when it becomes financially possible to do so." Mr Curtain said that he informed the applicant of the nature of the problems confronting the first respondent and told him he could resign or keep working at a reduced rate of pay. Mr Curtain said he "talked about reviews when the Company became financially viable in the future", but "there was no mention of back pay in the context deposed by Cotton."

7 In the latter part of 1996 the applicant said he spent one month in Sydney installing equipment at "World Exchange". Mr Curtain said in his evidence that the applicant spent approximately one week in Sydney. In November 1996 the applicant said that he had a discussion with Mr Dale and Mr Curtain regarding his "proposed Sydney trip" and put up a proposal that he be made a director and shareholder of the first respondent because "I am working extremely hard and my responsibility had increased greatly." The applicant said that Mr Curtain's response was that he would talk to the Board and consider the matter. Mr Curtain's recollection of the discussion, corroborated by Mr Dale, was that the reference to the "Sydney trip" was a proposal by the applicant that he move to Sydney to live. Mr Curtain said that as the first respondent had no Sydney offices and no money earmarked for expansion, the applicant's proposal was categorically rejected. As to the applicant's proposal regarding a directorship and shares, Mr Curtain agreed that he told the applicant that the Board would consider the request and "At that time, I was personally in favour of such a proposition, as I was then of the view that Cotton had talents in computer programming which I believed made him a valuable member of the team." 8 In respect of the move to Sydney, the applicant said that because of the installation of a new system in Sydney it was necessary for him to be located in that city. He said it would have been too difficult to operate the system remotely from Melbourne. The applicant said that he was transferred to Sydney for an extended period of time with the knowledge and consent of Mr Curtain and Mr Dale. That the transfer was with their consent was evidenced, the applicant said, by the fact that his expenses in relation to the Sydney location were reimbursed by the first respondent. Mr Curtain said in his evidence that despite it being unnecessary for the applicant to do so and notwithstanding the first respondent's objections, the applicant did move to Sydney in December 1996. The applicant was reimbursed expenses but only to the extent that such expenses would have been incurred if the applicant had remained in Melbourne. Whilst in Sydney the applicant performed much of his work from his residence in Coogee. That is, for much of the time he was able to operate the system remotely. The system was located at Rosebery, some ten minutes, the applicant claimed, from his residence and thus he was able to reach the site quickly to remedy any faults or problems that arose with the system. The applicant said "I had to be available around the clock to monitor and modify the system which began to carry millions of connected call minutes."

9 It would appear that it was the applicant's idea to move to Sydney and that while there was no express agreement to this move on the part of the respondents, they took no action to oppose it.

10 The applicant's request to be made a director of the first respondent and for shares to be issued to him was put to other shareholders of the first respondent but a decision regarding the request was deferred on the basis that "Cotton would need some time to prove himself." The applicant continued to make inquiries about his request but said that he was told by Mr Curtain that he was still waiting on final approval from the Board of the respondent and from "our Cairns investor." Mr Curtain said that in or about June or July 1997 at a meeting in Sydney, the applicant said to him: If I don't get what I want (meaning a directorship and shareholding) don't be surprised if the system stops working one day.

11 Mr Curtain said that he understood that the applicant was threatening the first respondent. Mr Curtain said: I had been very apprehensive about Cotton for some time at that stage but now became really concerned as Cotton had made it plain that no-one would work on or have access to the system but himself. He refused to share with me any of his project details despite me being the only other person in the Company at that time who had any understanding of the basis architecture of the system. Before I returned to Melbourne on that trip, I asked Cotton for his latest systems backup which he had been providing as part of the requisite systems housekeeping. For the first time, Cotton refused to provide it to me saying it was his responsibility.

12 The applicant denied that he had in any way threatened to stop the system, although it was clear from the evidence that the applicant was well aware of his capability of doing so. The applicant agreed that he did not provide the systems backup to Mr Curtain on request but said that there was no point in doing so because the system varied on a minute-by-minute basis and any backup data would be out of date within a few hours.

13 On 12 July 1997 a meeting took place in Melbourne between the applicant and the second and third respondents. At that meeting it was agreed that the applicant would be made a director and that he would receive shares in the respondent. The agreement was expressed in a letter of offer to the applicant of the same date. The letter stated as follows: The Board of Circa Telecommunications Pty Limited is pleased to offer the position of Director of Technical Services as per article 68 of the Memorandum and Articles of Association. The position reports to the Board of Directors and Shareholders of Circa. 14 The letter also set out the duties and responsibilities of the applicant as director of technical services. In relation to the issue of shares, this was said to be conditional on existing shareholders' approval and conditional on a merger between the first respondent and another company. That merger never took place. The last paragraph of the letter stated: The purchase price for the above shareholding may be waived in its entirety or by existing shareholder consent that a portion of the outstanding monies owed by Circa to Simon Cotton to be attributed to the purchase of the said shares.

15 The second and third respondents and the applicant signed the letter. However, Mr Curtain gave evidence to the effect that the applicant's directorship was "in name only" and he was not a "duly appointed company director" because the applicant did not want the "grave responsibilities and liabilities attaching to directors". The applicant denied that he told Mr Curtain he wanted to be a director in name only and that after the meeting on 12 July 1997 considered himself to be a director of the respondent as was Mr Curtain and Mr Dale. That he was a director was confirmed in the applicant's mind when it was announced later in July at a weekly company meeting. The applicant was also issued a business card bearing the title "Director, Technical Services".

16 Nevertheless, Mr Curtain maintained that any company directorship to be bestowed on the applicant was to be subject to the approval of shareholders, although no such qualification was contained in the letter of 12 July and the applicant was not made aware of the qualification. It seems, however, that the fact of the matter was that there was never any intention, on the respondents' part, of agreeing to the applicant's request to be a director of the first respondent and Mr Curtain admitted that this was the case. It appears that the charade perpetrated on 12 July, in agreeing to make the applicant a director of the first respondent and allowing the applicant to believe he was a company director, was motivated by an alleged fear that, unless they did so, the applicant would either sabotage the system or, through his technical knowledge and control of the system, hold the respondents to ransom.

17 In June 1998 the applicant travelled to Melbourne for an eight-day trip that the applicant said was to include a company retreat and board meeting. The applicant said that at this stage the Sydney system had become "stable enough to run unattended." The applicant said that at the board meeting he put forward a proposal that he be appointed as the Chief Executive Officer of the first respondent. His proposal was set out in a one-page statement. The applicant said in his evidence that Mr Curtain said of the proposal "Your plan sounds great, as soon as you wrap up in Sydney we can get started." Mr Curtain denied making this statement and described the applicant's plan as "grandiose". He said his response to the applicant's proposal was "thank you, but no thank you."

18 On or about the last day of his eight-day trip to Melbourne the applicant was informed by a Mr Ramzi Halabi, the manager of the first respondent's main client (X-Com) at the time, that the applicant's name was not on "the company register". The applicant said that he subsequently checked the ASIC web site and verified what Mr Halabi had told him. The applicant said he did not discuss the matter "with anyone from Circa at this point of time."

19 At some time during July or August 1998 the applicant became aware from an "Optus engineer" that the first respondent, without the applicant's knowledge, was developing a system in Melbourne paralleling the Sydney system. On 6 August 1998 the applicant confronted Messrs Curtain and Dale in Sydney about the fact that he had not been made a director of the first respondent or shareholder. The applicant said that Mr Curtain's response was that.

· The applicant was never made a director but was told that he was a director because the respondents wanted him to continue working for the first respondent. · The applicant should move back to Melbourne so he could work with the junior engineer and create a hybrid system. · The applicant would be granted intellectual property rights for the programming he had done and retained under contract to work for the first respondent on current and future projects. · The applicant would be engaged as an independent contractor in a consultancy role.

20 The applicant said that he agreed to Mr Curtain's proposal but in doing so did not resign and his employment with the first respondent was not terminated. 21 Mr Curtain's version of the discussion on 6 August 1998, supported by Mr Dale, was that:

· The applicant was told that the respondents would not give him any managerial responsibilities and that they had only made promises in the past because of his threats that the system would "crash." · The applicant was not told he would be granted intellectual property rights for the programming he had done. On the contrary he was reminded that the first respondent owned such rights and that the applicant had acknowledged this in writing on 12 July 1997. · Because an alternate system was running that did not require the applicant's expertise to maintain the respondents did not consider the applicant as an "absolute threat". The applicant was, therefore, offered a role back in Melbourne where he could be "rehabilitated within the Company." 22 Having had no confirmation of Mr Curtain's proposal the applicant made inquiries on 19 August 1998 and was told by Mr Curtain (who was apparently about to board a flight to Thailand for two weeks) that he was not needed in Melbourne for another three weeks because the junior engineer was opposed to him coming straight away. Following this conversation the applicant said he felt under a great deal of stress. He placed two industrial type computers, which were the first respondent's property, with a friend for safekeeping and "went on a holiday in the country." The applicant did not inform the respondents of his intended absence. The applicant said that he left the Sydney system running and he was able to access it from the country in order to make sure that it was working properly and to assist clients who needed help. The applicant said that "After a few weeks access to the system, both over the phone and via the modem, was terminated."

23 Mr Curtain said that in the absence of the applicant the Sydney system deteriorated. On a visit to Sydney to restore some capacity to the system, Mr Curtain said he went to the applicant's apartment in Coogee and spoke with the applicant's flatmate. Inside the apartment Mr Curtain said that he found it was stripped of all of the respondents' equipment, including the many modems needed to access the system remotely from the apartment. The matter was reported to the police. Apparently after having a discussion with the applicant about the missing equipment, most of which was returned to the respondents, the police did not pursue the matter any further. The respondents, however, continued to attempt to retrieve passwords and the remaining equipment from the applicant.

24 It would appear that after the applicant left for the country an attempt was made by the respondents to strike an agreement with him that involved the provision by the applicant of services to the first respondent. In a letter to the applicant dated 25 August 1998 it was proposed that the applicant would be deemed to have commenced to provide these services as an independent contractor from 15 August 1998 and that the applicant's resignation as an employee of the first respondent would take effect on that date. No agreement was made and it would appear that the contract of employment came to an end some time in August 1998. How the contract of employment was brought to an end is not clear but there appears to be implicit mutual agreement that after the applicant was no longer able to remotely access the Sydney system because the respondents had changed the relevant passwords, the contract of employment had come to an end. There was no express resignation by the applicant or notice of termination or summary dismissal by the first respondent.

25 There was some evidence that in the latter part of 1998 the applicant set up his own company and began providing services to X-Com, which had been the first respondent's major customer. Submissions of the parties

26 The applicant in these proceedings represented himself. The essence of the applicant's complaint was that he worked hard and put in long hours for the respondents' business, making a significant contribution to its success. He was promised a certain level of salary, superannuation, expenses and a bonus that were not paid to him. He was transferred to Sydney where he continued to make a major contribution to the success of the business and was led to believe he had been made a director of the first respondent when in fact he had not. He had been promised a shareholding in the first respondent that would be paid for by the outstanding back pay owed to the applicant but this was not delivered. He wanted to be made the chief executive officer of the first respondent but his proposal in this respect was brushed aside or ignored. On confronting the respondents about the directorship and the setting up in secret of a system in Melbourne that paralleled the Sydney system, the applicant was told to forget the past and return to Melbourne under a new, more lucrative arrangement. But again, after some weeks he was told that a junior engineer was opposed to the applicant returning to Melbourne in the short term. This was the last straw for the applicant; he removed certain computer equipment for safekeeping and left for country New South Wales on holiday without informing the respondents. A further attempt was made by the respondents to make a new agreement with the applicant but by this stage he was completely disillusioned. The employment contract with the first respondent was terminated and he set up his own company and began providing services to the first respondent's major client.

27 Mr A Britt of counsel represented the respondents. Mr Britt's submissions may be summarised as follows: 1) The applicant seeks a declaration that one of the elements of the arrangement whereby the applicant performed work as an employee of the first respondent was that the applicant would be entitled to a bonus. The evidence showed that the first respondent had not put a bonus system in place and no employee of the first respondent received a bonus; there is no basis upon which a bonus could be ordered. 2) The applicant seeks a declaration that one of the elements of the arrangement whereby the applicant performed work as an employee of the first respondent was that the applicant would be entitled to reimbursement of expenses. There was no evidence as to what expenses the applicant incurred, when they were spent and how much they amounted to. 3) The first respondent did not transfer the applicant from Melbourne to Sydney in December 1996. 4) The applicant seeks a declaration that one of the elements of the arrangement whereby the applicant performed work as an employee of the first respondent was that in April 1996 the first and third respondents represented to the applicant that if he agreed to accept payment of a lesser amount of remuneration than that contracted for, that when the first respondent's business recovered the first respondent would pay the agreed amount of remuneration and any back pay. Without conceding the point that such an arrangement might be regarded as a collateral arrangement for the purposes of s 106 of the Act, the arrangement was made in the State of Victoria and is not subject to the law of New South Wales: Chrysler Jeep Automotive Distributors Australia Pty Limited v Canberra Star Motors Pty Limited (1997) 79 IR 452 and Perrott v XcelleNet Australia Limited (1998) 84 IR 255.

5. Mr Dubedat (a handwriting expert), Mr Curtain and Mr Dale were witnesses of credit, whose evidenced should be preferred over that of the applicant. The applicant's evidence involved inconsistencies and inaccuracies. 6) The applicant was paid superannuation. 7) The applicant agreed in April 1996 to take a reduced salary on the basis that once the first respondent sufficiently recovered the applicant would be paid the salary originally agreed, namely, $60,000. There was no request by the applicant for any back pay during the period of his employment other than towards the very end of it.

8. The applicant was only promised that he would be made director of technical services and not a director of the first respondent. The applicant was made director of technical services because of threats that he may interfere with the operation of the respondent's telephone system.

9. The offer to the applicant of a shareholding in the first respondent was contingent upon a merger with another company that did not take place.

10. There was no unfairness in relation to the contract between the applicant and the first respondent. In the event the Court was to find unfairness, in considering whether to make any orders the Court should take into account the conduct of the applicant; he did not come to the proceedings with clean hands.

11. If the Court were to make money orders such orders should only be made against the first respondent and not the second and third respondents. Evidence of applicant and respondents

28 The applicant, I consider, was essentially a conscientious, yet somewhat naïve, person looking to make a significant contribution to the first respondent and to achieve something for himself in the process. His sometimes erratic behaviour during the course of his employment can, to some extent, be attributed to the frustration he felt in being denied what he considered to be a proper level of remuneration for his work, proper recognition by way of a directorship and senior management role and a shareholding in the business. His sudden departure in August 1998 was a culmination of the frustration and embarrassment he felt at being denied much of what he sought to achieve and also, I suspect, it was meant as a demonstration to the respondents that despite the fact they had secretly set up a parallel system, they still needed his knowledge and expertise. In the short term this was borne out by the apparent failure of the parallel system to take over from the Sydney system once the latter had begun to deteriorate in the applicant's absence.

29 The applicant represented himself in the proceedings and in doing so lacked the knowledge and ability to put the best case on his own behalf. There were also inconsistencies in his evidence that detracted from his overall credit as a witness. In particular, I refer to a letter from the applicant to members of the board of the first respondent on 18 April 1996. The letter concerned a proposal about remuneration and how it would be "safer" for the first respondent not to pay him until his visa had been approved. The applicant initially denied he had written the letter and later could not recall writing it, but on the evidence of Steven Dubedat, a handwriting expert, I am satisfied that the applicant did in fact write the letter.

30 In weighing up the inconsistencies in the applicant's case I do not consider them to be of such a character as to lead me to the conclusion that the applicant was an inherently untruthful person, although I was left with the impression that the whole truth was not always forthcoming.

31 I would make the same comment in relation to Mr Curtain, although the applicant's lack of skill in the cross-examination of Mr Curtain did not, in my view, adequately test the truth of his evidence. As for Mr Dale, he did make out an affidavit deposing that "Where in Curtain's Affidavit Curtain deposes to events where I am stated to be present, those matters are accurately and truthfully deposed to the best of my knowledge and recollection." The applicant, however, chose not to cross-examine Mr Dale on his affidavit. I do not afford Mr Dale's evidence the same weight as if he had been subject to proper cross-examination. Unfairness of the contract or arrangement

32 Considering the whole of the evidence, it does seem to me that the applicant was dealt with unfairly. I say this notwithstanding the applicant's conduct in August and September 1998 and his unilateral decision to move to Sydney in December 1996, a move however, which had not been seriously opposed by the respondents.

33 The applicant did, indeed, make a significant contribution to the business of the first respondent and eventually found himself in a position of some power by virtue of his unique knowledge and control of the telephone services system, which was central to the respondents' business. Aware of this power and in order to gain some recognition of his contribution to the respondents' business, the applicant proposed that he be made a director of the first respondent and that he become a shareholder. Mr Curtain said that, at least initially, he supported the idea of the applicant being made a director because of his talents in computer programming but that the other shareholders felt that the applicant had to prove himself. After what Mr Curtain said he took to be a threat by the applicant that if he was not made a director the system might stop, an agreement was reached that the applicant would be made a director and be granted shares in the first respondent, albeit conditionally.

34 On the face of the letter of 12 July 1997 representing the agreement, the applicant was entitled to think that he had been made a director of the first respondent. However, as he was to subsequently discover, this was not the case. There was never any intention, in my opinion, on the part of the second and third respondents to make the applicant a director of the first respondent. The applicant was allowed to believe he was a director in more than name only because of what the respondents said was a concern on their part that he might sabotage the system or hold them to ransom.

35 Mr Curtain contended in his evidence that at the time he signed the letter of 12 July 1997 relating to the directorship and shareholding he had no intention of honouring the commitments in the letter. However, he sought to qualify this by saying that he would have honoured the letter if there had been shareholder approval. I simply do not accept that there was any prospect of shareholder approval. The entire motivation of Mr Curtain and the other shareholders was, in Mr Curtain's words, "to buy time". Mr Curtain also contended that the applicant was aware that the directorship referred to in the letter of 12 July 1997 was a directorship in name only and he accepted the directorship on that understanding. I do not accept Mr Curtain's evidence in this respect. The letter very clearly conveys that the applicant was being offered a directorship of the first respondent as he requested and that is what the applicant understood that he had accepted.

36 Now, it is difficult to discern from the evidence whether in fact the applicant did actually transmit a threat to the second and third respondents that if he did not get a directorship and shareholding they should not be surprised "if the system stops working one day." I tend to think that the truth of the matter was that even in the absence of any express or implied threat by the applicant to stop the system, both the applicant and the respondents were well aware of the degree of control that the applicant had over the system and that it was simply not open to the respondents to ignore any proposals by the applicant to increase his status within the business. This was because if the applicant had chosen to leave the first respondent's employ in mid-1997 there was no other person who had sufficient knowledge of the telephone services system to keep it operating. Mr Curtain only had an understanding of the "basis architecture" of the system. Moreover, up until 12 July 1997 there was no agreement between the first respondent and the applicant about who owned the intellectual property relating to the system.

37 It would appear that in dealing with the applicant's demands for a directorship and shareholding, and in order to avoid any interruption to the telephone services system, the strategy adopted by the respondents was to lead the applicant into believing that he had been made a director of the first respondent and that, if certain conditions were satisfied, he would receive a shareholding in the first respondent. The strategy also involved having the applicant assign to the first respondent any rights to inventions made during the course of employment and, at some point, arranging for a telephone services system to be constructed in Melbourne paralleling the Sydney system, without informing the applicant.

38 The question is whether the respondents, in the context of s 106 of the Act, can justify this deception perpetrated on the applicant. They say they can, in effect, because the applicant threatened to stop the system, which would have been an attack on the very core of their business, and because his demands on the respondents were becoming unreasonable. For example, the applicant proposed that he become chief executive, which Mr Curtain described as "grandiose".

39 In considering this justification it is necessary to have regard to the whole of the relationship between the applicant and the respondents. In the first place, the proposals by the applicant to improve his status and interest in the first respondent, something that the respondents obviously did not regard favourably, were made in an environment where the applicant had made a significant contribution to the increasing success of the business. This contribution was not really acknowledged in any tangible way by the respondents. Moreover, it appears the applicant was left largely unsupervised and I have the impression that consultation with him by the respondents was an intermittent affair. Even taking into account what might have been an inflated view on the applicant's part of his contribution to the respondents' business, it should not have come as any great surprise to the respondents that the applicant may have wanted more for his effort than the relatively low salary he received for most of the period of his employment. The respondents' response to the applicant's proposals for a greater reward for his efforts was one of delay and deception. If there had been closer consultation, more appropriate supervision and greater support for the applicant, most probably the cause of the respondents' concern would not have arisen. It might be said to the contrary that the difficulty in managing the applicant arose from his unilateral decision to move to Sydney. I acknowledge that this has some force but I also note that instead of taking any action to prevent the move, the respondents effectively condoned it by continuing to employ the applicant, by failing to take any form of disciplinary action and by taking the benefit of the applicant's work whilst he resided in Sydney.

40 The other significant issue in the relationship between the applicant and the respondents was the question of remuneration. The applicant stated that Mr Curtain told him at the time of proposing a pay cut from $60,000 to $35,000 per annum that the pay cut would be paid back. Mr Curtain denied this. The applicant said he asked about the back pay issue on a number of occasions and from time to time adjustments were made to his salary but he was not paid at the rate of $60,000 per annum until a few months prior to his departure and he was not paid back pay.

41 In the letter of agreement relating to his appointment as a director and arrangements regarding a shareholding in the first respondent, it stated that a portion of the outstanding monies owed by Circa to the applicant would be attributed to the purchase of shares. It was said by the respondents that the reference in the letter to outstanding monies related to expenses owing to the applicant and not back pay that the applicant alleged had been promised. There was no evidence, however, about the nature of these expenses and the amount involved - information that I would have thought might have been available to be produced from the first respondent's records.

42 I also note that in the applicant's proposal of 21 June 1998 relating to appointment as chief executive he said "By now I had expected to be paid in full." This could be interpreted as referring to the fact that the applicant was still not being paid a salary of $60,000 or alternatively, the back pay he considered he was owed or both. The documentary material received into evidence was that the applicant's annual salary as at 30 March 1998 was $60,000. I also note the oral evidence to the effect that the applicant's salary increased to $60,000 a "few months" before his departure in August 1998. All this would suggest that at the time the applicant wrote his letter of 21 June 1998 seeking to be appointed as the chief executive, what he was referring to in his letter was a claim for back pay.

43 My view of the evidence is that, on the balance of probabilities, it was represented to the applicant that when the first respondent sufficiently recovered from its financial problems, the applicant's salary would be restored to $60,000. Further, that the difference between what he received by way of salary from the time he agreed to a lower salary, to the time his salary was restored to $60,000 per annum, would be paid by way of back pay. This representation, in my opinion, induced the applicant to remain in the employ of the first respondent on a salary less than what he otherwise would have been payable. I find that the promise to pay back pay to the applicant and the subsequent failure to do so, was unfair.

44 The letter of 12 July 1997 also made an offer to the applicant of a shareholding in the first respondent, subject to existing shareholder approval and subject further to a merger with another entity. The applicant accepted this offer. There was no shareholder approval and the merger did not occur. There was no evidence of any unfairness in relation to the shareholding issue.

45 The contract of employment also provided for the payment of superannuation contributions. This was to be at the rate of $3,000 per annum. The evidence suggested that for the period of his employment from February 1996 to August 1998 - approximately two and a half years - the applicant had an amount of $4,594.84 standing to his credit in the relevant superannuation account. There was no evidence before the Court as to how this latter amount was calculated.

46 The contract of employment also provided for the payment of a bonus although the details of such a bonus were "to be advised." No bonus was paid to the applicant, perhaps understandably so, given the financial difficulties faced by the first respondent in 1996 and 1997. Nevertheless, the failure of the first respondent to address the issue of a bonus in any way whatsoever - even to obtain the applicant's agreement to change the terms of the contract to remove the bonus - highlights the disregard on the part of the first respondent for the applicant and added to the overall unfairness of the contract. Jurisdictional issue

47 Mr Britt for the respondents submitted that any contract or arrangement or any related condition or collateral arrangement made prior to the applicant's move from Victoria to New South Wales in December 1996 did not fall within the Court's jurisdiction under ss 105 and 106 of the Act because it did not have the necessary connection with the State of New South Wales. The practical implications of this submission, if it were accepted, would be that the Court would be precluded from making any of the declarations sought in Part A (1)(a) to (d) inclusive of the applicant's summons and that it would seem to follow that the Court would not have jurisdiction to make money orders, at least in relation to the period of the applicant's employment spent in Victoria, that is, February to December 1996.

48 Mr Britt relied on Chrysler Jeep Automotive Distributors Australia Pty Limited v Canberra Star Motors Pty Limited. (1997) 79 IR 452 and Perrott v XcelleNet Australia Limited (1998) 84 IR 255. In Chrysler Jeep the Full Bench (Hill, Hungerford and Schmidt JJ) found that the contract in question had "a real and substantial connection with NSW". At 459 the Full Bench observed: Parties' choice of law is not of itself a matter sufficient to give the Court jurisdiction to deal with a contract otherwise outside the purview of the section; such an agreement can neither confer nor remove jurisdiction. Nevertheless, an agreement as to the proper law of the contract is a factor proper to take into account in determining whether in a particular case the necessary connection with NSW exists.

49 The Full Bench's conclusion in Chrysler Jeep was expressed at 461 as follows: The fact that sales to NSW residents may have been formally finalised and later servicing carried out in the ACT cannot, in our view, derogate from the significant obligation imposed by the contract to perform work which necessarily had to be carried out by the respondents and their employees in NSW. Nor can it properly lead to the conclusion that work actually performed under the obligation (to market, promote and make sales to and service the vehicles of NSW residents in a large area of NSW) was not work performed in the NSW motor vehicle industry, so as to give the parties' contract a real and substantial connection with NSW. These matters, particularly when considered in the context of the parties' agreement as to the proper law of the contract, leads us to the conclusion that his Honour was correct in deciding that the contract had a sufficient connection with NSW so as to ground jurisdiction to deal with the application.

50 In Perrott v XcelleNet the Full Bench (Hungerford, Peterson and Schmidt JJ) said at 266-267: The proper approach to the determination of whether a particular contract is amenable to relief under s.106 of the Act is that outlined by the Full Bench of the Court in Chrysler Jeep. Insofar as Mr. Rothman urged a departure from that approach, by the submission that both the contract and the industry in question must be found to be "in and of" N.S.W., his submission is not accepted. But there is some support for that submission in the observations of Kerr C.J. in Hildred (at 429), the relevant part of which we have earlier quoted and, for convenience, which we repeat: "It follows that for s.88F(1) to apply the contract must be a New South Wales contract in the sense in which I have used that phrase. Is that enough, or must it be a New South Wales contract whereby work is performed in a New South Wales industry? The answer to this question would appear to be "yes"." As we have observed, that approach was not adopted by Asprey and Manning JJ.A. in that case. The question, it seems to us, should be approached in the way discussed by Jacobs J. in O'Connor v. Healey to which reference has been made. That is consistent with the approach adopted by the Full Bench in Chrysler Jeep. It is an approach now of long-standing, well settled and in accordance with the provisions of the Interpretation Act . It should not now be departed from.

What must be determined, it seems plain to us, is whether, on the evidence, it has been demonstrated that the contract in question has the necessary connection with the State of New South Wales. That involves, in our view, a consideration of whether the contract, "any contract " (emphasis added) to use the words in s.106(1) of the Act, was one whereby a person performs work in any industry "in and of New South Wales". Such an approach accords with that of both Asprey J.A. and Manning J.A. in Hildred - Asprey J.A. there spoke (at 434) of "a contract or arrangement whereby a person performs work in the theatrical industry in or of New South Wales" as conferring a right to obtain relief under the section; and Manning J.A. posed (at 437) the "vital question for determination" to attract jurisdiction as being "because there was an industry in New South Wales, and because the persons who performed work in the industry did so wholly or substantially in New South Wales," although, as Asprey J.A. added (at 434), "the theatrical industry in or of New South Wales is not limited to the performance of entertainment in New South Wales by the artists engaged in that industry."

While in a particular case a question may arise as to what the proper law of the contract is (such as the circumstances in which that question arose in Australian Entre Busines s Centres ), that issue alone will not determine whether the contract has the necessary connection with N.S.W. As it was put in Chrysler Jeep (at 459): "Parties' choice of law is not of itself a matter sufficient to give the Court jurisdiction to deal with a contract otherwise outside the purview of the section; such an agreement can neither confer nor remove jurisdiction. Nevertheless, an agreement as to the proper law of the contract is a factor proper to take into account in determining whether in a particular case the necessary connection with N.S.W. exists." It follows necessarily that the judgment under appeal is erroneous to the extent that it treats the proper law of the subject contract as being the same as or interchangeable with the question whether the contract had the necessary connection with New South Wales. That error should be corrected on appeal.

The proper law of a contract and when the contract has a sufficient connection with New South Wales to ground jurisdiction under s.106 are separate and distinct matters. As discussed in Chrysler Jeep, however, one may impact upon the other. The determination of what the proper law is will not, however, of itself determine whether the contract is amenable to relief under s.106. Circumstances may well arise where the proper law under which work is performed is not the law of N.S.W. but the contract will still be amenable to relief under s.106 because it is one whereby work is performed in an industry "in and of" N.S.W. That is consistent with the approach of Kitto J. in Kay's Leasing to which we have earlier referred. Legislation such as s.106, which embodies a specific policy directed against practices which the legislature regards as oppressive or unjust, may not be avoided by the parties to a contract because of the choice which they make as to the proper law thereof.

51 The proper law of the contract between the applicant and the first respondent was that of the State of Victoria. But as the Full Bench observed in Perrott v XcelleNet, the determination of what the proper law is will not, of itself, determine whether the contract is amenable to relief under s 106. Circumstances may well arise where the proper law under which work is performed is not the law of NSW but the contract will still be amenable to relief under s 106 because it is one whereby work is performed in an industry "in and of" NSW.

52 In the present case, the applicant moved from Victoria to NSW in December 1996. Despite the fact that the move was not at the initiative of any of the respondents, no action of any significance was taken by the respondents to either discourage the move or to prevent it. As I noted earlier, the respondents were content to take the benefit of the applicant's work in Sydney. In my opinion, the respondents acquiesced in the applicant's move to Sydney. The applicant remained in Sydney, except for brief periods when he visited Melbourne on business trips, from December 1996 to August 1998. This period constituted the bulk of his period of employment. The Sydney site for which the applicant was responsible was central to the respondents' business; it was the main revenue producing activity. The first respondent continued to pay the applicant a salary and provide other employment benefits during the whole of his period in NSW. In my opinion, the contract between the applicant and the first respondent had a real and substantial connection with NSW. Accordingly, I find that the contract or arrangement between the applicant and the first respondent or any related condition or collateral arrangement was amenable to the making of orders under s 106 of the Industrial Relations Act 1996. Culpability of second and third respondents

53 Mr Britt submitted that if the Court decided to make orders under s 106, any such orders should be directed against the first respondent and not the second and third respondents. It was put that neither Mr Curtain nor Mr Dale derived benefit from the making of the contract or arrangement with the applicant and neither persons were involved in any subterfuge as that expression was used by Barwick CJ in Brown v Rezitis (1970) 127 CLR 157.

54 The particular passage in Brown v Rezitis referred to by Mr Britt at 163-164 was as follows: In my opinion, even if the proceedings for the variation or avoidance of the contract or arrangement must be initiated by one of the parties to the contract or arrangement, the parties to the proceedings are not necessarily limited to those parties. It must be borne in mind that one of the purposes of the section is to deal with subterfuges, subterfuges which will take the worker out of the relationship of master and servant and therefore out of the operation of an industrial award designed, amongst other things, for the protection of workers in industry. There may be persons involved in the subterfuge who are not parties to the contract or arrangement but who are in reality the actors deriving benefit from the making or the execution of the contract or arrangement.

55 At 165 Barwick CJ also said: In my opinion, the power to make an order for the payment of money is at best no more than a power to make such an order as can reasonably be thought to have a real connexion with the making, variation or avoidance of the contract or arrangement which has been varied or avoided. It may in truth be limited to a power to make an order for payment of money which has in fact a real connexion with the making, variation or avoidance of the contract or arrangement. However, in either case it will, of course, include power to make an order for payment of money which has been paid or which was payable under the contract arrangements themselves. But, in my opinion, the power will not be limited to the making of such orders. It will extend to ordering the payment of money where the order on the larger view of the jurisdiction given by the sub-section could be considered to be appropriate to effect wholly or partially the restitution of the parties to their former position upon the variation or avoidance of the contract or arrangement. In my opinion, the limitation of the power to order the payment of money to such orders either as are or as may be considered in the circumstances to be connected with the making, performance, variation or avoidance of the contract or arrangement sufficiently limits the power and leaves room for supervision of the Commission by a Court having power to issue prerogative writs so as to confine the Commission within the granted power. Consequently I am unable to accept the submission made by the appellants that an order made by the Commission for the payment of money by any person other than a party to the contract or arrangement varied or avoided is necessarily beyond the power of the Commission. Whether or not it is so depends upon all the circumstances and the terms of the order itself.

56 At 167-168 Barwick CJ went on to say as follows: 23. Assuming that the Commission was entitled to go behind the incorporation of the company and to include its managers and shareholders in the orders for payment of money made in the case - and, as at present advised, I see no reason why under a section such as s 88F the Commission should not do so - it seems to me that persons who were not beneficial shareholders could not be included in an order for the payment of money made in connexion with the varied or avoided contract or arrangement merely because they held shares in the company on trust for some known person, even if that person had been connected with the making or operation of the contract or arrangement. 24. The only other basis for an order for payment of money against these appellants in this case could be that they had received the proceeds of the contract or arrangement or were in some way culpably associated with its making or operation. But, though one of them received money from the company apparently without giving any consideration therefor, I can see no evidence of any connexion between that payment and the formation or execution of the contract. Further, in any case, in my opinion, an order for the payment by these appellants of a sum of money which was not limited in amount to represent their association with the making or execution of the contract could not be thought in the circumstances of the case to be an order for the payment of money in connexion with the contract or arrangement. This reasoning if applied to the case of the salesman Joyce necessarily leads to the conclusion that an order for the payment by him of the total sum of $7,579.19 could not possibly be regarded as an order within the jurisdiction of the Commission. 25. For these various reasons, any one of which would suffice to support the conclusion, I am of opinion that an order for payment of $7,579.19 jointly and severally by the appellants and Mr. Joyce was beyond the jurisdiction of the Commission. Orders for some amount could have been made in the circumstances of this case against the appellants severally with the possible exception of the appellants Logan, and probably some sum could be ordered to be paid jointly and severally by some of the appellants. But the joint and several nature of the obligation to pay the total sum ordered to be paid provides sufficient reason that the order of the Commission is in excess of the jurisdiction conferred on it by s 88F.

57 In the same case Menzies J, at 171-172 held as follows: 6. In my opinion the order as made was outside the power conferred by s. 88F. I would not be prepared to say that any one of the items set out could not have been the subject of some limited order but to order that each and all the appellants pay the whole sum of $7,579.19 does seem to me to be in excess of power. 7. Thus, what is the justification for an order against Keith W. Logan, for instance, to pay the respondents $7,579.19 when, so far as appears, he had no connexion with the making of the avoided contract, or with any sum paid or lost by the respondents, or in work done by the respondents as provided by the contract, and the only basis for the order against him could be that he was a bare trustee of one of the shares in Imisons Metal Sand Filling Suppliers Pty. Ltd., the company which made the contract with the respondents that has been avoided. 8. Moreover, the section does not, so it seems to me, authorize adding together a number of different payments to be made, and the making of an order for the total against persons who may have had some connexion with one of the payments included in the addition, but not with the whole amount ordered to be paid. Thus, although I would not exclude the sums of $293.10, $628.20 and $271.17 ordered to be paid as so-called wages from a payment that could be ordered under the section - whether or not payment of these sums could be ordered under s. 92 of the Act - I do not read the section as authorizing an order that payment of these sums as compensation for work done should be made by, for instance, a mere shareholder in John Royce and Associates Pty. Ltd., the business agents who negotiated the arrangement between Imisons Metal Sand Filling Suppliers Pty. Ltd. and the respondents. Of course, upon my reading of the section, the business agent itself could be ordered to repay any moneys paid to it by the respondents for the contract, but to treat a person as liable for the whole $7,579.19, including wages at award rates, because he held a share in the business agent who negotiated the offending contract, seems to me to transgress the limits of the section. 9. While, therefore, being satisfied that any of the items forming part of the sum of $7,579.19 ordered to be paid to the respondents could, in the circumstances, be the subject of an appropriate order under s 88F, I am also satisfied that a blanket order that the whole sum should be paid by each of the appellants - among others - was in excess of power.

58 Insofar as it is relevant to the present case, I consider that Brown v Rezitis is authority for the following propositions: 1) The power of the Commission in Court Session to make an order under s 106(5) is not limited to the making of an order for the payment of money by one of the parties to the contract, arrangement, related condition or collateral arrangement that has been varied or declared void under s 106(1) but extends to such orders as can reasonably be thought to have a real connection with the making, variation or avoidance of the contract, arrangement, related condition or collateral arrangement. 2) A sum by way of compensation for wages unpaid can properly be included in an order under s 106(5) for the payment of money. 3) Where a manager or shareholder is culpably associated with the "making or operation" of a contract etc., there is no reason why such a person could not be the subject of an order under s 106(5). 4) An order for the payment of a sum of money by a manager or person culpably associated with the "making or execution" of the contract etc. should be limited to an amount that represents their association with the making or operation of the contract etc.

59 It was evident that the third respondent, Mr Curtain, was a director and shareholder of the first respondent. He was instrumental in recruiting the applicant; he made the offer of employment on behalf of the first respondent's Board as set out in the letter of appointment dated 31 January 1996. It was Mr Curtain who advised the applicant of the need to reduce salaries and who put to the applicant the proposition that he take a cut in pay until the business sufficiently recovered to enable it to return the applicant to a salary of $60,000. Given my earlier finding regarding the representation relating to back pay, Mr Curtain was the person who represented to the applicant that back pay would be paid thereby inducing the applicant to remain in the first respondent's employment to his disadvantage. Mr Curtain negotiated the arrangement relating to the applicant's appointment as a director and his entitlement to a shareholding in the first respondent knowing that there was no intention on the part of the first respondent to honour any agreement to appoint the applicant as a director of the first respondent. Mr Curtain, together with a junior engineer, Mr Manicolo, secretly developed a new generation interactive voice response system that the first respondent would be able to operate without the applicant's involvement.

60 In my opinion, Mr Curtain was culpably associated with the making and operation of the contract of employment with the applicant. In relying on Brown v Rezitis Mr Britt appeared to contend that not only did a person who was not a party to a contract or arrangement need to have been culpably associated with it for an order to be made against that person under s 106, but also that person needed to have derived a benefit from the contract or arrangement. I am not certain that Brown v Rezitis stands for such a proposition. Given that the Court's power under s 106(5) extends to such orders as can reasonably be thought to have a real connection with the making, variation or avoidance of the contract or arrangement, I do not think that in order to satisfy this requirement it has to be shown that in order to make such orders there has to be a culpable association with the contract etc. by the person or persons against whom the orders might be directed and, as well, that such person or persons necessarily derived a benefit from the contract etc. In this case, however, Mr Curtain as a director and shareholder in the first respondent, did in fact gain a benefit from the contract between the first respondent and the applicant by virtue of the applicant's contribution to the business in developing, operating and maintaining the primary revenue source for the business. As Mr Curtain acknowledged in his evidence, the first respondent grew from a turnover of $400,000 in its first year to $1,000,000 per month in its third year. Clearly, not all of that extraordinary increase can be attributed to the applicant but I consider that it is undeniable that the applicant made a significant contribution to the growth of the first respondent. I note that the business was later sold and that money from the proceeds of the sale was owing to Mr Curtain.

61 Mr Dale was the second respondent. He was also a director and shareholder of the first respondent. It seems to me that there is not sufficient evidence to support a conclusion that Mr Dale was culpably associated with the making and operation of the contract with the applicant. As I understand the evidence Mr Dale initially was not in favour of employing the applicant. I do note that Mr Dale was in attendance at various meetings with Mr Curtain and the applicant, including the meeting that led to the 12 July 1997 letter. But there was no evidence upon which I could rely that indicates there was a real connection between the conduct of Mr Dale and the making or operation of the contract or arrangement with the applicant of the nature referred to in Brown v Rezitis or Reich v Client Server Professionals of Australia Pty Limited (Administrator Appointed) (2000) 99 IR 69 at 82 -83 that might make him liable in respect of any orders I make under s 106(5) of the Act. The conduct of the respondent

62 Mr Britt contended that the applicant had not come to the proceedings with clean hands in that in August 1998 he removed equipment belonging to the first respondent and withheld passwords thereby making it difficult to maintain and operate the system. It was submitted that the respondents found it necessary to contact the police to have the equipment returned. It was also submitted that the applicant had for his own gain negotiated arrangements with customers whilst employed by the first respondent. 63 As to the latter allegation, there is simply not sufficient evidence to enable the Court to understand what these arrangements were and whether it could be said, for example, that the applicant breached his duties towards the first respondent. As to the former allegation regarding the removal and keeping of property belonging to the first respondent, I cannot avoid drawing the inference that in making himself absent without any initial communication to the respondents as to his whereabouts, the withholding of passwords and hiding of equipment, that the applicant intended either to demonstrate to the respondents that in some way he was indispensable to them, or to use this as a bargaining chip in some way, or both. However it is to be interpreted, it was a foolish and irresponsible act causing considerable disruption to the first respondent's business and is to be taken into account in weighing up the question of unfairness. Conclusions

64 I find that the contract of employment in the present case was a contract whereby work was performed in an industry; the representations relating to the payment of back pay and the letter of 12 July 1997 relating to the applicant's directorship and shareholdings were related conditions of or collateral arrangements to the contract of employment. In the alternative, the contract of employment, representations relating to back pay and the letter of 12 July 1997 constituted an overall arrangement whereby work was performed in an industry. I find that these transactions had a real and substantial connection with NSW. The said transactions were, therefore, "contracts" answering the relevant description within the meaning of s 106 of the Industrial Relations Act. Specifically as to the aspects of the transactions which I find to be unfair under the section, I identify them as follows:

1. The contract of employment provided for the payment of a salary of $60,000, superannuation contributions to be made by the employer at the rate of $3,000 per annum and a bonus. The applicant did not receive a bonus during the period of employment and he did not receive superannuation in accordance with the contract of employment. 2) The applicant agreed to reduce his salary from $60,000 to $35,000 on the proviso that his salary would return to $60,000 when the business of the first respondent recovered sufficiently to enable it to pay such a salary. The applicant's agreement to accept a reduced salary was also subject to an undertaking by the respondents that for the period during which the applicant received a salary of less than $60,000 he would be entitled to back pay to be made up on the basis of the difference between what the applicant received by way of reduced salary and $60,000. No back pay was paid to the applicant. The applicant was induced to remain in the employ of the first respondent to his disadvantage by the promise of back pay. 3) It was falsely represented to the applicant that he had been made a director of the first respondent thereby inducing him to remain in the employ of the first respondent to his disadvantage.

65 In light of the findings I have made, I propose to make appropriate orders under s 106(1) of the Industrial Relations Act varying the contract of employment to remedy the unfairness therein.

66 Insofar as money orders under s 106(5) are concerned, it seems to me that I am essentially limited to the question of salary and superannuation. Whilst no bonus was paid to the applicant, I have no information that would allow me, even in the most general way, to determine what might be an appropriate amount in respect of unpaid bonus. Moreover, I note that the applicant was not aware of the size of any bonus that might have been paid. In relation to salary, I consider that the applicant was fairly entitled to back pay. This is to be calculated on the basis of the difference between the reduced salary received by the applicant and $60,000, for the period between the time when the applicant agreed to a reduced salary and the time when his salary returned to $60,000. In relation to superannuation, the applicant is fairly entitled to superannuation contributions at the rate of $3,000 per annum for the period of his employment with the first respondent. To these amounts should be added interest from the date of filing of the summons in this matter (i.e., 11 November 1999) up to judgment on the basis of the rates prescribed in Sch J to the Supreme Court Rules 1970 pursuant to s 94 of the Supreme Court Act 1970. The first respondent and third respondents shall be liable to pay any money ordered to be paid to the applicant under s 106(5) on the basis that the first respondent pays two-thirds and the third respondent pays one-third.

67 I have considered whether the applicant should have been entitled to notice of termination or payment in lieu of notice and/or redundancy pay. In light of his conduct in removing equipment and withholding passwords and the disruption caused to the respondents' business, I make no orders in this respect.

68 The respondents should pay the applicant's costs of the proceedings. Orders

69 I propose to make orders to give effect to the following:

1. The contract of employment made on 31 January 1996 between the applicant and the first respondent as evidenced by the letter of appointment dated 31 January 1996 from the first respondent to the applicant is to be varied from its commencement by inserting the following provisions: a. Provided that in the event Mr Cotton agrees to accept an annual salary of less than $60,000 per annum during his period of employment for reasons relating to the financial position of the company, he shall be paid in respect of the period between the time when he agreed to the reduced salary and the time when his salary returned to $60,000, a lump sum that equals the difference between the reduced salary and what he would have been paid if his salary had remained at $60,000 per annum. 2) The first and third respondents are to pay the applicant a sum to be calculated in accordance with the proposed variation to the applicant's employment contract in proposed order 1 hereof. 3) The first and third respondents are to pay the applicant a sum in respect of superannuation that represents the difference between what the applicant received for superannuation and what he would have received if he had been paid superannuation contributions at the rate of $3,000 per annum for the period of his employment, which shall be deemed to be 26 February 1996 to 26 August 1998. 4) To the amounts referred to in proposed orders 2 and 3 should be added interest from the date of filing of the summons in this matter (i.e., 11 November 1999) up to judgment on the basis of the rates prescribed in Sch J to the Supreme Court Rules 1970 pursuant to s 94 of the Supreme Court Act 1970. 5) The total of the money amounts in proposed orders 3,4 and 5 hereof shall be paid to the applicant within 28 days from the signing of the orders and on the basis that the first respondent pays two-thirds and the third respondent one-third. 70 The respondents shall pay the applicant's costs of the proceedings in an amount as agreed or, failing agreement, as assessed.

71 The applicant is to file and serve short minutes of order reflecting this judgment on or before Tuesday 25 September 2001.

72 This matter will be listed to make final orders at Wednesday 3 October, 2001 at 9.30am.

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