Marshall v Proteus Solutions Limited [2007] NSWIRComm 112 | Case summary

Marshall v Proteus Solutions Limited [2007] NSWIRComm 112 | Case summary | Zoe

1 In April 2002, Mr Bruce Alan Marshall commenced proceedings under s 106 of the Industrial Relations Act 1996 ('the Act'), claiming that his contract of employment with the first respondent, Proteus Solutions Limited ('Proteus'), was unfair in various respects. That contract had been entered as a part of a deal which involved Mr Marshall selling his outplacement business to Proteus as a going concern, as well as he taking up employment with Proteus. The sale price comprised cash and shares in Proteus. Mr Marshall seeks orders of avoidance and variation of the employment contract in relation to notice of termination and the shareholding which he acquired in Proteus, under the separate sale of business contract. No orders were sought in relation to the business sale contract whereby he acquired those shares. Mr Marshall also seeks consequential money orders in excess of $2 million in total, against Ms Patricia Sneddon, Proteus' former CEO and a former director and shareholder of Proteus. No money orders were sought against Proteus. 2 The claim for money orders was advanced in circumstances where Mr Marshall had reached an agreement with the liquidator of Proteus, that it would not defend the claims brought and that he would not seek to enforce any orders made against that company. Indeed, when the case was opened, it was announced that 'in terms of any monetary payment, we do not seek any payment of any kind against the first respondent. We seek the order for payment of money against the second respondent'. 3 When the hearing commenced on 28 August 2006, there was no appearance for Proteus. In a statement of issues filed the previous week, the second respondent, Ms Sneddon, had raised the question of whether the applicant had obtained leave of the Supreme Court to continue the proceedings, as required by s 500 of the Corporations Act 2001. 4 While at first asserting that such leave had not been sought, because it was not required, after a short adjournment, Mr Marshall sought and was granted an adjournment of the hearing, so that he could approach the Supreme Court for leave to pursue the proceedings. It was complained that the issue of the necessity for such leave to be obtained had been raised by way of ambush, which Ms Sneddon denied. Costs of the adjournment were reserved, each party indicating that they would seek a costs order in their favour. 5 On 29 August 2006, Palmer J granted Mr Marshall leave to proceed. The orders made were:

[3]

Further, and/or in addition, an order varying the contract (as defined) under which the Applicant performed work in an industry for the First Respondent so as to insert from its commencement or at some other time prior to its termination the following terms: (a) should the Respondents act in such a way as to bring about the termination of the contract prior to the conclusion of the agreed term of the employment of 29 June 2001 to 29 June 2004 ("the Agreed Term"), and/or create a finding of unfairness in terms of s.106 of the Industrial Relations Act 1996, the Respondents will forthwith pay to the Applicant on the date of the termination of the contract or the date it is found to be unfair, a sum equivalent to 27 months Total Remuneration, being the balance of the Agreed Term. "Total Remuneration" shall include all components of the remuneration payable by the First Respondent to the Applicant, including base salary, superannuation, incentive or bonus payments, statutory leave and any other payment which the First Respondent would have been obliged or reasonably required to pay to the Applicant had the Applicant remained in the First Respondent's employment during the 27 months period from the date of termination. Should the Respondents fail forthwith to pay the said sum, then interest upon it shall run at the rate of 10% per annum on the amount unpaid from the date of termination until payment in full is made; (b) In the alternative to Order 3(a) it is agreed between the parties that should the contract for whatever reason be terminated by conduct of the Respondents prior to the expiry of the first three year period in the following regards that pre-assessed damages as follows are paid: i. if the contract is terminated within the first six months, then the Respondents shall pay to the Applicant pre-assessed damages of two years of total remuneration and paid forthwith on the date of termination of the contract; ii. if the contract is terminated within the first twelve months, then the Respondents shall pay to the Applicant pre-assessed damages of eighteen months of total remuneration and paid forthwith on the date of termination of the contract; iii. if the contract is terminated within the first eighteen months, then the Respondents shall pay to the Applicant pre-assessed damages of twelve months total remuneration and paid forthwith on the date of termination of the contract; iv. if the contract is terminated within the first twenty four months, then the Respondents shall pay to the Applicant pre-assessed damages of six months total remuneration and paid forthwith on the date of termination of the contract; v. if the contract is terminated within the first thirty months, then the Respondents shall pay to the Applicant pre-assessed damages of three months total remuneration and paid forthwith on the date of termination of the contract; vi. if the contract is terminated within the first thirty three months, then the Respondents shall pay to the Applicant pre-assessed damages of 1.5 months total remuneration and paid forthwith on the date of termination of the contract; Should the Respondent fail to pay the said sum, interest on it shall run at 10% per annum on the amount unpaid from the date of termination until payment is fully made. "Total remuneration" shall include all components of the remuneration payable by the First Respondent to the Applicant, including base salary, superannuation, incentive or bonus payments, statutory leave and any other payment which the First Respondent would have been obliged or even required to pay to the Applicant had the Applicant remained in the First Respondent's employment for the expiry of the agreed term. (c) Should the contract between the First Respondent and the Applicant not be renewed after the expiry of the agreed term (three years) then the parties agree that as a redundancy payment or payment for loss of opportunity for renewal, that compensation equivalent to six months total remuneration shall be paid to the Applicant. This sum shall be paid if the contract is not renewed after three years, or if it is brought to an end prior to the expiry of the agreed term of the first contract. Total remuneration shall include all components of the remuneration payable by the First Respondent to the Applicant, including base salary, superannuation, incentive or bonus payments, statutory leave and any other payment which the First Respondent would have been obliged or even required to pay to the Applicant had the Applicant remained in the Respondent's employment for the six month period. (d) If during the course of the contract between the Applicant and the Respondents, the Respondents act in such a way as to damage or which could have the potential to damage the Applicant's professional reputation and/or cause him distress and/or injure his health, then the Respondents shall pay a sum of money reasonably assessed by an independent arbitrator in order to compensate the Applicant for such loss and damage; (e) If the Respondents bring about the termination of the contract between it and the Applicant prior to the conclusion of the Agreed Term, and/or engage in unfair conduct in terms of s.106 of the Industrial Relations Act, the First and/or Second Respondents shall purchase the Applicant's one million shares in the First Respondent, or shall pay to the Applicant the full value of the shares as represented to the Applicant by the Respondents.

(iii) restraint. The parties' cases For the applicant 13 The applicant's case was that both his treatment under the contract and the contract itself were unfair. The unfairness complained of went to aspects of the contract before it was entered, when it was entered, during the contract and at its conclusion, in relation to the financial performance of Proteus, as well as the work he was to perform. It was also claimed that he was subjected to behaviour during his contract which had the effect of demoralising him and bringing about the termination of the contract. 14 It was submitted that perceived difficulties in the performance of his Unit led to an audit being commissioned by Ms Sneddon, of which Mr Marshall was not aware, until after it had commenced. The evidence showed that he was misled about the audit and its purpose. Ms Sneddon's evidence as to when the audit commenced was contradicted by Ms Marsden, who had conducted the audit. Mr Marshall never had any fair opportunity to comment on it during its preparation, as even Ms Marsden's evidence demonstrated. Mr Marshall was not afforded an opportunity to deal with the report in any fair way, or to defend himself against the findings reached. The final report of 18 February 2002 was not provided to him until after his return from sick leave on 18 March. By that stage, the report had already been referred to the Board, but Mr Marshall was not given any opportunity to address the Board on the report. Nor was the report based on any fair processes. 15 It was submitted that presenting the findings of the report to staff before Mr Marshall had even received a copy, was but another part of the process of demoralisation, which the respondents had embarked upon, long before. This was part of an attack on Mr Marshall's status and ability to run his Unit. 16 The evidence showed that the audit report formed an important foundation for Ms Sneddon's subsequent poor performance review of Mr Marshall. That review was a further concerted undermining of his employment contract. 17 As to the evidence as to how the contract in question was negotiated, it was Ms Sneddon's evidence that the negotiations concerning financial matters were handled by Mr Stoneman, himself a 20.1% shareholder of Proteus. It was submitted that because Mr Stoneman had not been called, Mr Marshall's evidence on those negotiations had to be accepted. There was nothing put against him. Mr Marshall relied upon information he was provided. He accepted a $2 valuation for Proteus' shares; a million shares and $500,000 cash. He was not told of Proteus' precarious financial position, which was clearly later revealed by the administrator's second report to creditors in November 2003. All that Mr Marshall was given were documents prepared by UBS Warburg and discussions with Mr Stoneman, which gave quite a different picture. It was submitted that what was required was:

An analysis between the documentary material he was given, it also requires analysis in relation to the words he says Mr Stoneman spoke to him in relation to the company and also then by way of comparison to other material which was gathered by Knights concerning this matter. 18 That analysis showed that the administrator's independent viewing of Proteus' financial records revealed that the picture going back to 1999 was quite a different one than that presented to Mr Marshall in 2001. Mr Marshall had discussed projected earnings of the two merged businesses with Mr Stoneman, with differing budgets advanced in February, March and April, assuming synergies from a merger. The evidence showed increased results after the merger. 19 The evidence also showed that after the termination of Mr Marshall's employment, the career transition business was sold at the end of 2002. Beforehand, the earnings generated by the merged business subsidised Proteus' other operations, to the benefit of Ms Sneddon, the main shareholder holding 34% of Proteus' shares and a director and its CEO. Ms Sneddon also secured a two-day a week contract with the purchaser. It followed that she had a sufficient connection with the unfairness demonstrated, for the orders sought to be made against her, she being at the very heart of the matters which would activate the exercise of the Court's discretion. (See Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420.) It was submitted to be irrelevant that the applicant had not proceeded against others who were also culpably associated with the unfairness complained of. 20 In any event, it was submitted that Mr Stoneman's role was much less than that of Ms Sneddon. Mr Marshall's treatment on termination all related to Ms Sneddon's conduct. Her role was so intimately connected with the unfairness complained of, that the Court would not hesitate to make the orders sought. 21 The evidence showed that Proteus' software development activities were soaking up Proteus' earnings. The applicant's business was acquired in order to generate more revenue, while the software was developed. 22 Mr Marshall was induced to enter the contract by representations that Proteus was financially viable. The valuation of $2.5 million for the sale was linked with the fixed term employment contract of $230,000 per annum. Documents were provided to him which painted a rosy picture. As it transpired, all that Mr Marshall, in fact, received of the $2.5 million sale price was $400,000, because $100,000 came out of funds from Workshift itself. The shares finally proved to be worthless and the contract only lasted for nine months. 23 The respondents, on the other hand, got significant value, because they obtained a valuable business which was revealed by the gross revenue in the 2001 financial year of around $900,000 and by 30 June 2002, revenue of over $2 million. The business was later sold in 2002 to another company, Altona, for around $3 million. 24 There was no evidence that after his termination, Mr Marshall made any money out of the business which he established in 2002. The evidence only went to earnings in the 2003/04 tax year, when, in any event, Mr Marshall was not bound by any 'no compete' clause, because Proteus had sold the outplacement division. 25 In written submissions, complaint was made that Mr Marshall was not provided with a written position, or job description for his role. After the acquisition in July 2001, the evidence showed that the respondents' attitude towards him changed, Mr Marshall giving numerous examples of his 'cruel, petty and unfair treatment' from then until the termination of his employment. He complained of inappropriate micromanagement of his work and the requirement to perform demeaning work, such as invoicing and administrative work. This work was inconsistent with his role as National Director of the Career Transition Unit and his work and authority was undermined in various ways by other Proteus' executives. This evidence was submitted to have been corroborated by Ms Durham. 26 Problems arose with his final cash payment in October 2001, which led Mr Marshall to make a statutory demand on Proteus, after an unsatisfactory discussion with Mr Stoneman. As early as October 2001, Proteus' solicitors proposed the termination of the parties' ongoing relationship, a proposal submitted to have been designed to unsettle Mr Marshall and to force his resignation. It was in November that Mr Stoneman first threatened Mr Marshall with a performance review. 27 This led to the first of an ongoing exchange of correspondence, with Mr Marshall complaining about an unnecessary and threatening encounter in which it was unfair to link his demand for payment, with his performance. Threats and hostility increased when the payment issue was not resolved and led to a difficult and demeaning course of conduct towards him and further correspondence between he and Ms Sneddon. For her part, Ms Sneddon confirmed that Proteus had concerns about his performance. Mr Marshall complained about the linkage between his demands for payment and his performance. Despite this correspondence and discussions, these difficulties did not abate, but continued, culminating in the audit, about which complaint was made and eventually, termination, about which detailed submissions were advanced, all of which it is unnecessary to repeat. 28 The subsequent sale of the business was also analysed, realising it was submitted, some $3 million for Proteus. Reliance was also placed on the administrator's later report to creditors, which suggested that Proteus had been 'trading unprofitably since June 2000 and it may be reasonable to suspect insolvency since that time'. While Ms Sneddon denied that Proteus was in financial difficulty in the year ending 1999 and didn't recall that being the case in 2001, she agreed that at the end of 2002, a decision was made to sell the outplacement division. The administrator's report suggested that the directors were aware of difficulties in May 2002, when they were able to raise further capital through short term loans or a sale of part of the business. 29 In oral submissions it was pointed out that the Telstra contract, which Proteus was working on at the time of the negotiations with Mr Marshall, was referred to in the UBS Warburg document, given to Mr Marshall in 2001, to induce him to enter into the contract. It was submitted that the inference from Ms Sneddon's evidence was however, that in December 2000, or the beginning of 2001, it was known that the Telstra contract 'was gone', but this wasn't revealed to Mr Marshall. To the contrary, he was still given a very rosy picture of the value of the business. 30 It was argued that the applicant had strong motives to make this employment a success, given the terms on which he had sold his business. That was not true to the respondents. In Ms Sneddon's case, it was submitted that she had given silly and misleading evidence about a number of matters which would cause her evidence to be approached with some care. After the statutory demand was made, it became apparent that she was wishing that Mr Marshall was gone and then worked towards that goal, consistently with Proteus then having massive revenue problems. Ms Sneddon's evidence was that in 2001, Proteus was paying people when they 'screamed loud enough'. Mr Marshall's demand was a very loud scream. 31 It was submitted that a comparison of the UBS Warburg document and the administrator's report showed that while the earnings before income tax figures were similar, the forecasts were significantly different. It was apparent that if the UBS Warburg document was provided to Mr Marshall in the early part of 2001, it was then pretty clear that the forecast was unobtainable. It was reckless for the respondents to have provided him with that document. The Telstra contract was offered as an inducement to enter the contract, but it was nothing more than a 'pie in the sky'. Even when advice was given that the contract had been awarded, within 48 hours Telstra indicated that it was not going to be bound. It was submitted that this advice was given in December 2000, making false the representation that Telstra was about to negotiate a contract. 32 UBS Warburg could not be criticised for its report, because it depended on information provided to it by Proteus. 33 The increase in gross revenue after the acquisition of the Workshift business was shown in the administrator's document to have been only an increase of some $500,000, although it was pointed out that while in employment, Mr Marshall had claimed that Workshift clients had brought in over 80% of those earnings. That claim had not been disputed. 34 As to the statutory demand made by Mr Marshall in 2001, it was submitted not to have been a winding up application, but that it could have had that result, if the demand was not complied with. It was accepted that Proteus was contesting the demand on the basis of Mr Marshall's alleged misrepresentations and that ultimately an agreement was reached and payment was made to him. 35 The evidence showed that in February and March 2002, Mr Marshall was dealt with in a way designed to humiliate and demoralise him, with a view of getting him out of the company. He had long been unhappy with his treatment and finally his contract was repudiated, when he was unilaterally advised that his job was no longer available and he would have a different position. At all times prior to cross examination, Ms Sneddon asserted that Mr Marshall had resigned. In cross examination, she accepted that she had directed him to accept a different position.

For Ms Sneddon 36 The case advanced for Ms Sneddon was that she was the head of an executive team which included Mr Stoneman, another shareholder, director and Proteus' deputy CEO and chief financial officer. The evidence showed that Ms Sneddon first approached Mr Marshall and the financial performance of the two entities was discussed between them, but the ongoing negotiations which ensued were almost exclusively conducted between Mr Marshall and Mr Stoneman, with Mr Marshall being assisted by his accountant, Mr Stephen Champion, whom Mr Stoneman also dealt with. 37 Mr Marshall was a sophisticated, well educated, experienced and very successful businessman. He had his accountant conduct a due diligence of Proteus. There was no evidence that in reaching an agreement with Proteus, that Mr Marshall ever relied on anything other than his accountant's advice. There was no evidence by way of positive assertion, or otherwise, that he relied on any representation made to him by anyone connected with Proteus. While there was reference in the summons to various representations, there was no claim advanced that Mr Marshall placed any reliance on those representations. Recovery of damages was dependent on factual reliance on the conduct said to be a misrepresentation. (See Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1998) 39 FCR 546.) That there was a misrepresentation relied upon, which caused a loss, was argued to be an intrinsic element of causation in a claim such as this and was fundamentally missing from the case advanced. 38 Ms Sneddon should not be made Mr Marshall's guarantor. He made an agreement which involved the sale of his business for $2.5 million, accepting a mix of cash and shares. In accepting market value of the shares, he took the risk that the value could go up or down. He assumed that risk and could not now look to Ms Sneddon to guarantee that the market value would only go up. It was also relevant that there was no claim advanced that the sale agreement was unfair and should be avoided, either in this Court or any other Court. 39 There was, in any event, no misrepresentation. The evidence showed that the UBS Warburg report had been provided to Mr Marshall by Mr Stoneman. It was prepared by an international investment bank in December 2000. There was no suggestion that it had been fraudulently or negligently prepared. At its highest, the applicant drew comparisons between the report and an opinion based report prepared by an administrator, with the benefit of hindsight, a number of years later. 40 The UBS Warburg report referred to a potential contract with Telstra. It led to a positive forecast for the company. The evidence as to that contract was not capable of leading to the conclusion, that the Telstra deal was not still on the table during the negotiations with Mr Marshall. 41 The report also addressed investor concerns, which were identified as management's ability to deliver on forecasts. It prudently identified this as a significant issue for investors, as was the state of the Australian market, with high growth rates being identified as difficult to achieve. Comparisons were drawn with comparable companies and positive conclusions were drawn. The IPO valuation was calculated as falling within the $90 million to $125 million range, after numerous limitations were identified. 42 Mr Marshall was also provided with Proteus' financial material, including actual profit and loss history of Proteus' operations, including for 1999 and 2000. The business was developing software which would enable outplacement services to be provided, largely online. It was this software which was to provide the anticipated increases in revenue dealt with in the UBS Warburg document. The projections provided by Mr Stoneman for the year ending June 2001, were based on a combination of actual unaudited results and projected result for different time frames. The figures later produced in the administrator's reports, showed some differences from actual results, but only slight ones. They could not support a conclusion that there had been any misrepresentation as to Proteus' financial position in early 2001. No evidence had been led to challenge the veracity of any of Proteus' audited accounts, which in any event, did not differ markedly from the later report to creditors. 43 It followed that any representations made about Proteus' financial position must be accepted as having been accurate at the time and could not found any misrepresentation. Those figures could not have misled Mr Marshall into making a decision to sell his business and to take up employment with Proteus. There could be no penalty for making a representation which was true. Even if it was not true, which was not conceded, but had not been relied upon, it could not found any relief. 44 As to the Telstra contract, the evidence showed it was discussed early on, but on Ms Sneddon's evidence, she had never suggested that the contract had been finalised, consistently with Mr Marshall's own evidence. The negotiations were ongoing. At some later point, Proteus was informed that it had the contract, but 48 hours later that was rescinded, news which was a distinct shock. Negotiations continued, albeit they were finally unsuccessful. Ms Sneddon's affidavit evidence was that this occurred in November 2001. In cross examination, she could not recollect precisely when this had occurred. Her recollection then was that it was in December, she could not recollect the year. It was submitted that it could not have been December 2000, given the evidence of the ongoing discussions in 2001 and other evidence. There was no evidence that the loss of the contract occurred before Mr Marshall joined Proteus. 45 When Ms Sneddon told Mr Marshall about the Telstra contract, namely that it was being negotiated and would have a big impact on the business, what she said was true. It was never a misrepresentation. That the negotiations later failed, could not make it so. 46 It followed that the information provided to Mr Marshall and his accountant, Mr Champion was accurate. Mr Champion was not called to give evidence. It must be inferred that nothing he had to say would be of assistance to Mr Marshall. Nor was any expert evidence led analysing any of the financial representations said to have been made. There was simply no cogent evidence to the effect that any false representations had been made. 47 As to Mr Marshall's complaints about not knowing what his duties were, having sold his business as a going concern to Proteus and accepting employment as the National Director of the merged business, it was submitted that they were laughable and ought to be rejected. The employment contract had been prepared by his lawyer. He never sought a statement of duties and on his evidence he was happy to sign the contract. It was ludicrous to suggest any difference in the bargaining position of these parties. His solicitors were also the author of the sale agreement. In cross examination, he agreed that he understood the effect of the agreements. 48 As to the events of February and March 2002, the evidence showed that Mr Marshall was offered retention of his salary and title and duties which dealt with the same subject matter, career transition. The Unit was to be divided in half, in a way which better suited him, relating to that aspect of his duties which he was better at. 49 This followed a stream of complaints from Mr Marshall about his administrative duties and filling in forms and adhering to Proteus' policies and procedures. The attempt to amend his duties to remove some of his management responsibilities, only met with further complaint. However, his contract required him to perform duties allocated to him by the CEO or the Board. The evidence showed that Proteus had taken steps contemplated by clause 11 of the contract, as being required, before it could be terminated, but had not terminated the contract, when repudiation was alleged. 50 It was also relevant that having not accepted the position proposed by Ms Sneddon, within six months, Mr Marshall established another business of the same kind, because, he explained of legal advice that he was no longer bound by his restraint. It would be noted that when that advice was called for, it had not been produced. By 2004, he was earning more from this business than he was earning at Proteus. 51 It followed from the evidence that it would not be concluded that the contract was unfair when it was entered in 2001. The complaints about unfairness during the term of the contract did not arise until after there was a physical merger of the two businesses, with a move in premises in September 2001, although there was some complaint that Ms Sneddon had invited clients to a cocktail function, without his knowledge. That complaint was submitted to be ludicrous, as Proteus having acquired the Workshift business at considerable cost, its CEO was certainly entitled to contact clients who were Proteus' clients, after the acquisition. 52 The evidence showed how quickly the relationship became strained thereafter, with complaints being made by Mr Marshall in these proceedings of his cruel, petty and unfair treatment. It was relevant however, that in cross examination, Mr Marshall was unable to explain many of these complaints - for example, what amounted to 'inappropriate micromanagement'. He took the view, for example, that a request by the chief financial officer to provide details of his AMEX expenses amounted to inappropriate micromanagement. How that was inappropriate was submitted to be inexplicable. 53 Similar complaints were made about the need to justify mobile phone expenses. Ms Greggery's evidence was that she had attempted to obtain such information from Mr Marshall and in cross examination, Mr Marshall agreed that it was inappropriate that Proteus had been asked to pay his wife's expenses, when she was not a Proteus employee. Other complaints were not submitted to have been established, including that made in relation to the design of the office fit out, as Mr Marshall conceded in cross examination. 54 Ms Greggery gave evidence about her concerns as to the operation of the career transition unit under Mr Marshall's direction, particularly in relation to billings and budgets, expenses and revenue. Her evidence was that reporting requirements were consistent with the structure in place before Mr Marshall's arrival and that other heads made similar reports. Mr Marshall complained that Ms Greggery described the Unit's December figures as 'disgusting', but agreed in cross examination, that they were pretty poor. Ms Sneddon described the results as the worst ever recorded. How this could be described as petty or cruel, was not apparent. The evidence did not suggest that it was being said at the time that these results were Mr Marshall's fault, but he plainly took the view that the criticism was being unfairly directed to him. 55 It was accepted that at this time, the industry had been affected by the events of September 11 and that the relationship between the parties was being affected by the failure of the Unit to meet projected budgets and by the statutory demand which Mr Marshall had made on Proteus. The evidence demonstrated it was submitted, that the financial performance of the Unit was poor and that its performance was being discussed. 56 While it was suggested in Mr Marshall's evidence that he was being excluded from meetings at this point, the evidence of Ms Greggery was that up until about 25 November, regular weekly meetings were held, some of which Mr Marshall attended and some of which he advised he could not attend. In cross examination, he agreed there were other meetings which concerned his Unit which he did attend. While he complained about being excluded from involvement in major projects, there was no evidence to support the complaint. On Ms Greggery's evidence, for example, he was involved in the major projects underway for AMP and Sunway Metcorp. 57 To the extent that complaints were made about budgets, the complaint could not properly be assessed, because the budgets had not been led in evidence. Ms Greggery gave evidence about discussions about the budgets with Mr Stoneman and Mr Marshall, when Mr Marshall was unable to provide advice as to the amount and timing of cash expected to flow into the divisions. She was not cross examined about this evidence. 58 While Mr Marshall complained about the setting of participant fee scales, Ms Greggery's evidence was that this was Mr Marshall's responsibility and that the schedules he produced were incomplete and never finalised by him. Again, she was not cross examined on this evidence. Similar complaints were made about brochures not being produced for his Unit. Ms Greggery's evidence was that Mr Marshall had the responsibility to produce them, which he never did. 59 As to administrative assistance, the evidence showed that he had such assistance for a considerable period, despite Proteus' policies that executives including Ms Sneddon attended to such tasks themselves. The evidence suggested an inability on Mr Marshall's part to adapt to his new environment. In reality, he only had to do so in the last month of his employment, given the level of administrative support he was provided till then. His evidence demonstrated his keen awareness of his position in the Proteus hierarchy and that he struggled to adapt to the flatter management structure under which Proteus operated. 60 It was submitted that problems, undoubtedly, had arisen had to be dealt with. This was done through the audit Ms Sneddon commissioned. It was submitted to be relevant that Mr Marshall had not dealt with this audit at all in his first affidavit, sworn in September 2002, in order to support his complaints of unfairness. The summons initiating these proceedings was filed some four working days after the termination of his employment. No complaint was there made about any unfairness in the audit, it was only dealt with in response to Ms Marsden's affidavit. In cross examination, Mr Marshall conceded that the audit report wasn't critical of his performance, but dealt with the performance of the Unit. It was submitted that the cross examination of Ms Marsden could only lead to the conclusion that the audit was conducted in a transparent and fair way and that its only agenda was to document how the Unit was running. It was undertaken in February 2002, after Mr Marshall had been running the Unit since the preceding July. It was critical of aspects of adherence to operating systems; failure to maintain files and records; absence of regular reports, failure to apply accounting procedures; problems with billing; failure to keep accurate information about participation numbers; participant progress; and incomplete participant records, booking and attendance records. Various programmes were not being applied and outcomes not being recorded. 61 The cross examination of Ms Marsden had failed to establish anything other than that the audit had been transparently conducted and reported. While it revealed performance sadly lacking on Mr Marshall's part in running the Unit, it did not demonstrate that he was a victim. He was a senior executive, well paid to run this Unit. He had a number of opportunities to discuss the report, which he did. He could have sought more such opportunities, but did not do so. 62 It was submitted that Ms Sneddon's evidence that in their discussion of the report Mr Marshall told her that he found his position overwhelming, would be accepted. In cross examination, Mr Marshall conceded he used that word, but on his evidence, used it to describe the need to deal with record keeping and marketing. To suggest, in the light of that evidence, that no avenues were open to Proteus to remedy the situation with which it was faced, but to continue the status quo, was submitted to be ridiculous. 63 Ms Sneddon's letter of 27 February suggested that an agreement had been reached with Mr Marshall about a new role. It was accepted that Mr Marshall immediately made clear that he had not agreed to such a change. It was submitted that what would be concluded from all of the evidence was that Mr Marshall 'did not communicate his real feelings or his feelings at all or his views and resorted to paper later'. It should be concluded, on that basis, it was argued, that what Mr Marshall was in truth complaining of in these proceedings, was that there had been a constructive dismissal and that his dismissal was unfair, a claim precluded by s 109A of the Act. 64 The evidence showed the difficult position in which Proteus was placed when Mr Marshall was demonstrably not performing in his role. While Mr Marshall claimed that the letter proposing the change in his role made him ill, so that he needed to take sick leave, in cross examination he conceded that by 8 March, he was well enough to go to work, but did not return until 18 March. Any complaints about the unfairness of sending correspondence to him before his return had no foundation in those circumstances, as did his pursuit of other correspondence, about his other financial interests at the time. 65 Complaint was made about how Mr Marshall was dealt with while away on sick leave. This leave was taken when Ms Sneddon crystallised her concerns with Mr Marshall in writing. In his evidence, Mr Marshall claimed that when he received the letter he became unwell, but in cross examination, he agreed that for some part of the time he was absent, he was not sick or unwell. He had already exhausted his sick leave entitlement, did not seek any discretionary leave, but accepted payment which he was not entitled to, for time away from work, for periods when he was not unwell and was engaging in correspondence with Proteus about his financial interests. It was submitted that complaint could not be made about the correspondence sent to him during this period, given the correspondence he was then himself pursuing, with his solicitor's assistance. 66 The warning letter sent about his performance on 15 March showed that he was being given a further opportunity to attend to his performance, as his service agreement contemplated. In cross examination, Mr Marshall agreed that he did nothing to attend to the matters raised with him. While he also accepted that it was perfectly legitimate to appraise his performance and that he was well when he returned to work on 18 March, he could give no explanation for his failure to participate in the review process Ms Sneddon then wished to pursue with him. 67 Mr Marshall insisted on his solicitors attending the review meeting. No unfairness was demonstrated by the course Proteus was pursuing. Mr Marshall's evidence demonstrated however, that his claim was in truth an unfair dismissal claim (see Sydney Water Corporation Ltd & Anor v Industrial Relations Commission of NSW & Anor (2004) 61 NSWLR 661). He had not adhered to his obligations, responsibilities or duties and had breached his duty of fidelity to Proteus, by refusing to adhere to its policies. On the evidence, it would be concluded that he had resigned. 68 In any event, it was submitted that Mr Marshall's service agreement was not unfair, the necessary focus of the proceedings (see Truelove v Sydney Water Corporation Limited (2005) 146 IR 253). Mr Marshall was happy to sign the agreement on the basis that it was fixed for three years. It contained provisions for termination prior to the expiry of the term in specified circumstances. There was a restraint and a no further claims clause, which was not sought to be varied by the relief sought in the summons. The agreement was not unfair when it was executed and did not become unfair as the result of any conduct by Ms Sneddon. Mr Marshall's list of petty complaints did not render the contract unfair. The evidence demonstrated that the complaints had no real foundation. The no further claims clause should be given effect. 69 The audit process was shown by Ms Marsden's cogent and persuasive evidence to not have been unfair to Mr Marshall. The audit report did not even mention him by name. Ms Marsden's evidence showed that Mr Marshall's complaints had no foundation. 70 It followed that no orders should be made in favour of Mr Marshall. Even if the contract was found unfair, no orders should follow under s 106(5). Orders were to be made which were 'just in the circumstances of the case'. The power is not at large (see Zahos & Anor v Industrial Relations Commission of NSW & Ors (2005) 148 IR 208). 71 The money orders sought made it clear that what was sought by way of relief was payment out of the contract for the balance of its term. Lesser amounts were sought in the alternative. It was argued that if the necessary unfairness was found, contrary to Ms Sneddon's case, the proper money order to be made was 12 weeks' notice. 72 As to that money order it was noted, however, that the applicant had led no evidence in relation to steps taken to mitigate his loss. It followed that he could not satisfy the Court that he had lost anything. The only evidence led related to earnings in the 2004 tax year, when he earned more than he would have earned in his employment with Proteus. It followed that it should be assumed that there had been no loss. 73 As to orders sought against Ms Sneddon, it was submitted that it was relevant to have regard to the agreement made between Mr Marshall and the liquidator of Proteus. If orders were made on a joint and several basis, the applicant had indicated his intention to pursue the orders only against Ms Sneddon. While Ms Sneddon could look to Proteus, in the circumstances that would require leave of the Supreme Court. It followed that justice would not result in orders of the kind proposed by Mr Marshall, especially when he had also made a deliberate decision not to proceed against another obvious respondent, Mr Stoneman. It would not be just to make Ms Sneddon solely liable for the money orders sought. 74 It was also submitted that the Court would be slow to make any order against Ms Sneddon in these circumstances and if any order was to be made, it would be carefully framed so as to ensure that her exposure was properly limited to her involvement in the unfairness established. This was particularly so, given that many of the complaints made were not advanced against her personally, indeed, even in correspondence, often her assistance was being sought by Mr Marshall. As CEO she was acting as Proteus. 75 It would also not be overlooked that no orders were sought varying the share sale agreement. The evidence established no misrepresentation as to the value of the shares. The $2 value Ms Sneddon spoke of was based on an earlier transaction and was accurate. Even if misrepresentation had been established, reliance had not. 76 In any event, the applicant's complaint was that the shares he received were worth less than $2. Even if that had been established, which it had not, the applicant would have had to show that he would have acted differently. There was no such evidence, because the matter of reliance had not been addressed. This was a critical failure in the applicant's case. 77 The applicant had agreed to take shares over cash in the bargain which he made. The risk in diminution of the value of the shares was of the applicant's design and choosing. That the shares were now, presumably worthless, could not lead to the orders sought by way of variation to the service agreement.

Reply 78 It was submitted that the summons did claim that Mr Marshall had relied upon the respondents' misrepresentations. The applicant was given a whole range of financial documents to satisfy himself that Proteus was a sound financial business, which included the UBS Warburg material. It was submitted that material had been provided recklessly, given the earnings forecasts made, of earnings of $10 million by 30 June 2001. By that time, it must have been quite apparent that such earnings were not achievable, in fact only around $2 million was earned, a massive shortfall. 79 Those earnings forecast were all based on the Telstra contract and the later report to creditors suggested that as at June 2000, Proteus was probably trading insolvently. None of this was revealed to Mr Marshall. He was given quite a different picture. 80 The evidence as to when the loss of the Telstra contract became known was further analysed, it being submitted that the date was, in fact, earlier than November 2001, having regard particularly to what had been pleaded in the reply to the summons. 81 The evidence, it was submitted, demonstrated the unfair conduct to which Mr Marshall had been subjected over the course of his employment, which involved other misrepresentations. The evidence demonstrated the repudiation of Mr Marshall's contract. A unilateral variation was sought to be made to the contract, which he did not accept. 82 As to the restraint clause, the evidence showed that the new business was not established until October 2002, after the restraint ended. It followed that there had been no breach. In any event, if Proteus had repudiated the contract, it could not rely on the restraint. Mr Marshall was, in fact, free to commence that business even before October. 83 As to just compensation, the touchstone was the Full Bench's judgment in Westfield Holdings v Adams (2001) 114 IR 241. This was a mixed case, concerning an employment contract and the sale of a business. This affected the assessment of damages, because the principle of restitution involved putting Mr Marshall back to the position where the parties had agreed that the contract was worth $2.5 million and he would be employed for 3 years. He received only $400,000 and 9 months' employment. He was entitled to the balance of the $2.5 million and the rest of the term of the employment contract. 84 As to mitigation, that was a defence and not a matter requiring the applicant to lead evidence. The only evidence related to the 2004 tax year. There was no evidence of any personal earnings before that year and cross examination was confined to that year. There was no inference available that the evidence as to earnings in other years would not have assisted the applicant's case. He had no onus to lead that evidence. Mitigation would, in any event, not be relevant to the restitution part of the claim going to the sale of the business. Mitigation only related to the work performance part of the claim. It would not be possible to mitigate the business claim, the business was gone, Proteus had it and later sold it. 85 Furthermore, that no orders were sought in relation to the sale agreement would not preclude the relief being sought by way of variation to the employment contract. Mr Marshall would retain his shares, albeit they were worthless. The money order, nevertheless, had the necessary connection with the employment contract, given the broad discretion granted by s 106(5) to make money orders which did justice between the parties. 86 The Court would not refrain from making the orders sought. Ms Sneddon had been demonstrated to have been intimately involved in the unfairness complained of. It was submitted that 'one does not need to make this apportionment of blame in relation to how much of the contract sought to be impounded should you have to bear and we would submit the appropriate order is that the second respondent in effect picks up all the compensation which your Honour would deem to be just in the circumstances.' Consideration 87 In order to resolve the real issues lying between the parties, as they became apparent during the hearing, it is necessary to deal with conflicting evidence as to a range of matters. This task was more difficult than it might have been, given that Proteus did not participate in the proceedings and that relevant documents belonging to Proteus, such as various financial records and budgets, were not tendered or analysed. Nor was evidence called by either party from Ms Sneddon's former son-in-law Mr Stoneman, Proteus' former company secretary and deputy CEO, also a director and major shareholder. It was with Mr Stoneman that Mr Marshall negotiated the employment contract attacked in these proceedings, as well as the business sale agreement. Mr Champion, who advised Mr Marshall on the sale, and was involved in the negotiations with Mr Stoneman, was also not called. 88 Notwithstanding such difficulties, in the usual way, the onus falls on the applicant to make out the case advanced, which must be decided on the evidence led. As I recently observed in Leckie v Crockett and Ors (No 2) [2007] NSWIRComm 42:

140 The difficulty in establishing a case which depends on a recollection of conversations and their consequences, was recently discussed by the Court of Appeal in McMurtrie v Commonwealth of Australia [2006] NSWCA 148 : 5 The difficulties in proving the precise terms or effect of a conversation that occurred a long time ago are well expressed by McLelland CJ in Eq. in Watson v. Foxman (1995) 49 NSWLR 315 at 318-9 as follows: Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act ), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not … attained or established independently of the nature and consequence of the fact or facts to be proved" including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding": Helton v Allen (1940) 63 CLR 691 at 712. Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s52 of the Trade Practices Act 1974 (Cth) (or s42 of the Fair Trading Act ), in the absence of some reliable contemporaneous record or other satisfactory corroboration. That is the position in the present case.

Who brought the contract to an end? 89 It is convenient to deal with this issue at the outset. 90 Mr Marshall's case was that almost immediately upon taking up his new employment as the National Director of Proteus' Career Transition Unit in July 2001, Proteus began a process of denigrating and undermining him in his position, finally to the point where his health was affected. His employment came to an end in March 2002, when Proteus repudiated his contract of employment. He accepted that repudiation in a letter of 26 March, thereby bringing the contract to an end. Ms Sneddon's case was that there had been no such repudiation; Mr Marshall had not performed to expectation in his role; the Unit which he headed did not meet its budgets; he did not assist in the steps introduced by Proteus to meet these difficulties and in March 2002, it was Mr Marshall who brought the employment to an end. 91 Mr Marshall complained about many aspects of his treatment by Proteus and its senior executives, including that he had never been provided with a position description by Proteus, or a list of his specific duties. On Ms Sneddon's evidence there was no foundation for these complaints. Proteus had employed Mr Marshall under an employment contract prepared by his own legal advisers. That employment occurred in conjunction with Proteus' acquisition of Mr Marshall's business as a going concern. Ms Sneddon had herself been running Proteus' Career Transition Unit, but no longer had time to do so. That was a similar business to Mr Marshall's. The acquisition of his business was intended to result in a merger of the two businesses. This provided Proteus with three things - Mr Marshall's services to run the merged Career Transition Unit; further business, the income of which would support Proteus' ongoing software development activities; and the freeing up of Ms Sneddon's time, so that she could concentrate on the sale of that software, which Proteus had been developing for some years. 92 On Ms Sneddon's evidence, had the opportunity with Mr Marshall not arisen, Proteus would have raised capital and employed someone else to run its Career Transition Unit. Given Mr Marshall's position in establishing and making a success of his own career transition business, which was to be merged with the Proteus business, there was no need for him to be given a position description, or specific directions in his duties at Proteus. Ms Sneddon was confident that he was well capable of heading the Unit, without any close direction or supervision. 93 On his evidence there can be no doubt that Mr Marshall had similar views of his abilities. Mr Marshall had established and grown his own business to the point where it became an attractive acquisition for Proteus. They were involved in the same industry and shared various clients. Mr Marshall negotiated the sale price of his Workshift business with Proteus' company secretary and deputy CEO Mr Stoneman, on the basis both of its past performance and his projections of what the merged businesses could achieve. The sale price was agreed in a negotiation process, which involved Mr Marshall and his accountant conducting a due diligence of Proteus, and Mr Stoneman doing likewise in relation to Mr Marshall's business. The deal was approved by the Proteus board, after negotiation of the sale price between Mr Marshall and Mr Stoneman. The price agreed involved both cash and Proteus shares. It was also agreed that Mr Marshall would be employed under a three-year fixed term contract of employment. There were also restraints agreed in both the employment contract and the sale agreement. 94 Once the agreements were implemented in July 2001, Mr Marshall began working for Proteus, although there was not a physical relocation until September. Budgets for the newly merged Career Transition Unit were settled between Mr Marshall and Mr Stoneman, having regard to Mr Marshall's earlier projections. Whether or not those budgets were realistic at the time they were set, the undisputed fact was that they were never achieved. The circumstances in which, and the reasons why that came to be, was the subject of heated disagreement between the parties. 95 Ms Sneddon's evidence was that the merged Career Transition Unit did not prosper under Mr Marshall's leadership. Its budgets were not met. Its systems were not adhered to. Ms Greggery, Proteus' former chief operating officer gave corroborating evidence. Much of her evidence contradicted that of Mr Marshall, but she was not cross examined on various areas of conflict. Indeed, some of her evidence was consistent with answers given by Mr Marshall in cross examination. I am satisfied that there is not reason to reject Ms Greggery's evidence. After growing concerns about the Unit's performance and financial failures, Ms Sneddon took the decision to review its operations. In January 2002, she commissioned an internal audit which was conducted by a consultant, Ms Marsden. Her report showed an alarming shortfall from the projections. Mr Marshall's view of the audit was that it was a sham. This was denied by Ms Marsden and Ms Sneddon. On Ms Marsden's evidence, her audit was conducted by reference to the relevant financial and other records of Proteus, as well as discussions with various personnel, including Mr Marshall himself. Those financial records were not in evidence. Even though it was common ground that the Unit's budgets had not been achieved, Mr Marshall denied any responsibility for the findings of the audit, persisting with the view that it had not been properly conducted. 96 It is difficult to resolve this and many of the other controversies relating to the performance of the Unit. The relevant financial and other records of Proteus were not in evidence; Proteus did not participate in the proceedings and Mr Stoneman, who might also have shed light on this and other matters in issue, was not called to give evidence and was not made a party to the proceedings. What the audit investigated and was based on, cannot be assessed, but the existence of the difficulties which the report deals with was later supported by a report to creditors made by Proteus' administrators. On the evidence of Ms Sneddon, corroborated as it was in various ways by Ms Marsden and Ms Greggery, it must be concluded that Mr Marshall did not make out this aspect of his case. 97 It was common ground that on 20 February, Ms Sneddon discussed with Mr Marshall the audit report and what had to be done in order to address the problems revealed. They disagreed completely as to the tenor of their discussion and what, if anything, they had agreed. Ms Sneddon also discussed the report with Mr Marshall and his staff on 26 February. 98 On 27 February, Ms Sneddon wrote to Mr Marshall about the changes she had decided to introduce, in light of the audit findings. The letter referred to the audit and their discussions. Ms Sneddon advised that she had decided to create two separate units, Career Transition and Executive Outplacement. She advised that she would review the structure around the two new units and would take an overall leadership role for both new units, meeting with Mr Marshall on a daily basis, where possible. As for Mr Marshall's position, she said:

99 In cross examination, Ms Sneddon agreed that she proposed to take the leadership role of the business from Mr Marshall. She explained that she had previously headed up that Unit and needed to take back control 'to bring that back into profitability post the audit'. Ms Sneddon also agreed that she issued Mr Marshall with a 'direction' about this change although she explained that was not her intent at the time, she was frustrated about the pursuit of an agreement with him. 100 Mr Marshall's evidence was that the letter of 27 February made him ill. He agreed that it contained no specific criticism of him, or his performance. It thanked him for his 'willingness to assist in the corrective measures needed to address these critical issues at this time'. His view was, however, that it did not reflect his discussion with Ms Sneddon. He did not accept what was proposed. 101 Mr Marshall took sick leave, not returning to work until 18 March. He had apparently exhausted his sick leave entitlements, but was still being paid. There was an issue between the parties as to the real length of his illness, given that while he was away he was pursuing correspondence with Proteus on other matters then in issue between them. There was also an issue as to whether or not correspondence sent to him by Ms Sneddon before he returned to work, breached Proteus' policies and was an unfair way in which to treat him. It is also unnecessary to resolve questions of this kind, although it must be observed that in cross examination, Mr Marshall agreed that he had recovered his health by 8 March, although he did not return to work until 18 March and that in this time he was pursuing other matters with Proteus, and seeking the assistance of his solicitor. 102 On 15 March, Ms Sneddon wrote to Mr Marshall, prompted, Ms Sneddon said, by preparation for his performance review. Proteus conducted such reviews for all senior staff. Participation in this process was expressly dealt with in Mr Marshall's employment contract, even though he regarded it as an inappropriate procedure in his position. Mr Marshall's review had been due since November 2001 and had been pursued with him, but had been constantly postponed, finally as the result of his ill health. In her letter, Ms Sneddon advised that Proteus took the view that Mr Marshall was in breach of certain of his obligations under his contract and gave him 7 days in which to rectify those breaches. Ms Sneddon said that Proteus had the view that Mr Marshall's 'performance has been so poor that it warrants Proteus invoking the regime for termination of your employment'. Mr Marshall was warned that his employment was in jeopardy, if he failed to act as required in the letter. 103 What was then required of him, was compliance with various corrective measures implemented by Ms Sneddon after the audit report, while he was absent on sick leave. The letter noted that these measures had not been complied with before Mr Marshall left on sick leave and expressed disappointment as to Mr Marshall having offered no 'assistance or initiative in attempting to put any corrective measures into place. Other Executives and staff have driven all efforts related to change and improvement'. He was also advised that he was to be placed 'under strict and immediate counselling and daily supervision.' 104 The specific matters of concern raised included an accumulated shortfall in budget revenue of 40%; various lost billings and invoice write offs; various administrative difficulties, including failure to complete expense reimbursement for accounts presented. 105 While Mr Marshall had expressly agreed to participate in performance reviews in his service agreement, on his evidence he took the view that a review ought not to have been required in his case. As events unfolded, his review was never completed. The review involved a written document, completed by both the supervisor and employee, which was then to be discussed between them. The document produced by Ms Sneddon reflected that she took an extremely poor view of Mr Marshall's performance, in almost every respect. He was highly offended. Mr Marshall never completed his part of the review document. 106 Mr Marshall did provide a detailed response to the 27 February letter, on 17 March. Amongst other things, he told Ms Sneddon that he was 'extremely shocked and genuinely upset that you have chosen to act in such an imprudent and unilateral fashion'. It advised that:

The Executive must: (a) undertake the duties and exercise the powers which the Board assigns to or vests in the Executive and comply with all lawful orders and instructions given by the Board in this regard; 110 In cross examination, Mr Marshall agreed that the change in duties which Ms Sneddon had sought to introduce in her 27 February letter, involved him in future, concentrating on only part of the duties he had performed to that point. His title and remuneration were not to alter. He agreed that Proteus was contractually entitled to alter his duties and that Proteus was free to allocate him the duties it wished him to perform. He had no right to refuse duties he was given. He was, however, very dissatisfied with the decision to restructure the Unit and to alter his duties and disagreed with it, believing that it was such a fundamental change to what he had been employed to do, that it effectively brought his employment to an end. Mr Marshall himself had no right to terminate his contract, other than in circumstances where he fell ill - he had agreed to stay in Proteus' employ for a period of three years. Nevertheless, he disputed that the altered duties were ones which Proteus was entitled to require of him, without his agreement. In his view, they involved a breach of his contract. 111 This was disputed by Proteus at the time. However, for her part, in cross examination, Ms Sneddon conceded that her 'directive' amounted to her removing Mr Marshall from the position he had been originally employed to perform, her taking over that leadership role and offering him a new position, with duties restricted to one part of those of his former position. 112 In Mr Marshall's letter of 26 March 2002, correctly it appears from Ms Sneddon's concession, it was alleged that Proteus had repudiated his contract. On his evidence, he had drafted the letter and had received advice as to its contents from his lawyers. The letter accepted the repudiation and thereby brought the employment to an end, with these proceedings being commenced shortly afterwards. 113 It follows that it must be concluded on the evidence that the contract came to an end on 26 March, as the result of Proteus' repudiation of the contract and Mr Marshall's acceptance of that breach. While, at that point, Proteus had foreshadowed terminating his employment in accordance with the contractual termination provisions, it had not done so. The contract came to an end with Proteus' insistence on Mr Marshall's removal from the position he had been employed to perform, as Head of the Career Transition Unit, the splitting of the Unit into two, under Ms Sneddon's leadership, with Mr Marshall only to head one part of the Unit in future. While Mr Marshall could have agreed to take up the new position which Ms Sneddon was intent on creating, Proteus did not have the right to require him to do so. Its insistence amounted to a repudiation which Mr Marshall was entitled to accept and he did.

[20] Although conduct of a party which renders a contract or arrangement unfair or otherwise actionable under s 106 of the Industrial Relations Act may well provide jurisdiction for relief under that provision, the primary focus of the exercise of the Court's jurisdiction should be, where relevant and available, the contract or arrangement and its respective terms or omitted terms as to the effect thereon of the impugned conduct. This approach will usually lead to orders (where orders are made) more certainly well-founded jurisdictionally and will be less likely to result in appeals which, whilst superficially thought to be available, upon examination on appeal are soon shown to lack substance. 120 I am satisfied that on the evidence, it must be concluded that many of Mr Marshall's complaints about his unfair treatment were not made out. While Mr Marshall regarded the audit undertaken by Ms Marsden to have been a sham, there was no doubt on the evidence that his Unit had not performed as was expected; that it was significantly under budget and that there was a real need to deal with the problem which had emerged. So much was confirmed by the administrator's later report to creditors. As I have already noted, Mr Marshall did not make out this aspect of his case, for the reasons earlier discussed. There was greater force in his complaints about how the results of the audit came to be provided to him, but given the circumstances in which the employment in fact came to an end, by repudiation, a breach of the contract which he accepted, it is not necessary to analyse this in detail. Suffice it to say that by that point, the relationship between Proteus and Mr Marshall had well and truly broken down, given what was being said in correspondence by Mr Marshall and Ms Sneddon. While Proteus had engaged the termination provision of the contract in order to deal with its view that Mr Marshall's performance had been inadequate, Mr Marshall's case was that the contract had, in fact, been repudiated, the termination process not having been concluded. I have accepted that the case, so advanced, was made out. 121 Mr Marshall was very critical of the way in which Proteus was managed, by Ms Sneddon, taking the view that he was required to spend too much time attending to administrative work, which he found demeaning and which kept him from attending to more important matters, such as marketing and providing outplacement services. The evidence showed that Proteus operated in various ways which were quite different to the way in which Mr Marshall had previously operated his Workshift business. For example, he was used to administrative assistants dealing with matters such as invoices, data entry and filing. Mr Marshall found such work demeaning and resented not being provided with sufficient administrative assistance to ensure that he did not have to perform such tasks. Mr Marshall agreed in cross examination however, that at Proteus, even executives senior to him, such as Ms Sneddon and Mr Stoneman, did not have the level of support he believed he should have received and that they performed administrative work of the kind he objected to. Mr Marshall accepted that he was required to adhere to Proteus' processes. The evidence suggested that many of these processes were computerised, in ways with which Mr Marshall was really not familiar, or comfortable with. 122 Proteus also required Mr Marshall to justify that his AMEX card had been used for business expenses and that he only used his mobile phone for business calls. In cross examination, Mr Marshall persisted in a view that it was inappropriate that he had been required to justify his mobile phone expenses, even though it transpired that his mobile phone accounts had included the use of the mobile phone by his wife, which he agreed Proteus should not have been asked to meet. 123 In cross examination, Mr Marshall also accepted that Proteus' requirements about these matters was in accordance with the terms of his service agreement. I do not propose to engage in a detailed analysis of the many other ways in which Mr Marshall complained he was inappropriately treated by Proteus. These are, after all, not unfair dismissal proceedings. An unfair dismissal complaint is precluded by s 109A of the Act. 124 That these various difficulties were of such a kind as to explain why it was that the Unit performed under expectation, was not established on the evidence. As a consequence of the audit into the performance of the Unit which Mr Marshall headed, created after the acquisition of his Workshift business and the merger of that business with Proteus' career transition business, Proteus came to the view that Mr Marshall was in breach of certain of his contractual obligations under the service agreement. It gave him notice of that view and required him to rectify the deficiencies identified, in accordance with the termination provisions of the contract. It is unnecessary to decide whether there was a proper foundation for that view, given the conclusions I have reached as to Mr Marshall accepting Proteus' repudiation of the contract, when it sought to remove him from his position. 125 As I have found, the evidence given by Ms Sneddon in cross examination, permitted no conclusion other than that there was a constructive dismissal and that it was Proteus which was the real and effective initiator of the termination. 126 Proteus was concerned about the poor performance of the Unit; it had undertaken an audit and discussed the result with Mr Marshall and his team; as a result, Ms Sneddon sought to allocate Mr Marshall new duties, which he did not accept he ought to be required to perform. Proteus insisted on its right to allocate duties to him and pursued the question of his performance with him, through the performance appraisal system. All this it was entitled to do. What it was not entitled to do was to remove him from the position he had agreed to fulfil under his service agreement and to appoint him to an entirely different one, despite his protests. That resulted in a repudiation, which eventually brought the employment to an end. 127 It is against this background that I turn to the various claims made.

The notice claim 128 In cross examination, Mr Marshall accepted that the contract was fair when he entered into it, unsurprisingly given that it was drafted by his lawyers. It provided for a fixed term three year appointment, subject to early termination in certain circumstances, including poor performance under a regime agreed between the parties to be followed in order that there be an opportunity given to Mr Marshall to rectify such a problem, if it arose. 129 That process had commenced, but had not been completed, when the employment came to an end. The evidence demonstrated that there were significant problems at that point. Proteus and Mr Marshall did not agree however, about their magnitude, or who was responsible for them. Earlier, Mr Marshall had not been paid instalments of the sale price which had been agreed when they fell due. He had made a statutory demand, which had been resisted by Proteus on the basis of his alleged misrepresentations. (Proteus later initiated proceedings about these matters under s106 of the Act, by way of cross claim to these proceedings.) Proteus was having cash flow difficulties at that time. The earnings which the merged businesses were expected to generate were not being achieved in circumstances where, as Mr Marshall was aware, Proteus depended on that income in order to pay the instalments due to him. Mr Marshall and Proteus were eventually able to resolve their differences about the payment, with a late payment schedule being agreed. Had that not been achieved, failure to meet the demand would have led to Proteus being wound up. 130 These difficulties arose in circumstances when the evidence suggested that Mr Marshall's Workshift business had been generating income in excess of $1 million a year before the sale. After its acquisition by Proteus, Proteus' earnings increased by only some $500,000. While Mr Marshall claimed that his former business had been responsible for generating over 80% of what was earned, the evidence led did not seek to establish that. Given that on the evidence, Proteus and Workshift had shared a number of clients before the acquisition, such a claim might have been difficult to make out, but it was not attempted. Given the earnings achieved by Proteus after the acquisition, either the former Workshift business did not replicate its past performance or Proteus' outplacement business did not. The merged businesses comprised the Unit which Mr Marshall headed, which did not achieve its budgets. The evidence did not seek to show that Proteus' views about Mr Marshall's inadequate performance had no foundation, no doubt because his case finally rested on the claim that the employment came to an end by repudiation, not as the result of the contractual processes established to deal with inadequate performance. 131 Mr Marshall believed that he was inappropriately treated by Proteus, almost from the outset of his employment. While not a matter raised by way of complaint in the summons, nor in Mr Marshall's original affidavit, the audit Proteus commissioned into why the business was not performing, conducted by Ms Marsden, also formed part of the case which Mr Marshall pressed at trial. On Ms Marsden's evidence, she had difficulty securing Mr Marshall's co-operation in conducting the audit. There is no reason to doubt Ms Marsden's evidence. The results of the audit obviously confirmed concerns which Proteus held about Mr Marshall's performance. Proteus had taken the view for some time that it had been misled by Mr Marshall as to the business he was bringing and that he was failing to perform adequately in his role as head of the merged business. It acted to deal with that situation. Mr Marshall had been resisting a performance review, which Proteus was insisting on, as it was entitled to do under the service agreement. Before he went on sick leave, Mr Marshall and Ms Sneddon discussed these difficulties. While they both agreed that Mr Marshall had described himself at that meeting, as being 'overwhelmed', they did not agree as to the detail of what was said, or agreed. 132 Ms Sneddon understood Mr Marshall to have said that he had been overwhelmed by his job. She proposed to split his duties, to herself take on leadership of the overall Unit from him, leaving him to concentrate on work he preferred, while he retained his title and salary. She understood he had agreed. It soon became apparent that he had not agreed to that course. In cross examination, Mr Marshall insisted that he had said only that he had been overwhelmed by administrative work, which he found demeaning and unnecessary to be performed by him. He refused to agree to Ms Sneddon's proposal. Ms Sneddon insisted on the restructure she proposed, issuing a 'directive', to Mr Marshall about his new role. Proteus, later took the view that Mr Marshall had resigned when he refused to take on that role. Mr Marshall claimed that there was a breach of his contract, which he accepted and so the employment came to an end by repudiation. 133 So far as the contract was concerned, the parties had clearly agreed on a mechanism to deal with a situation of inadequate performance if it emerged. That process had been engaged. The fairness of that process was not challenged in these proceedings, although the reasons for Proteus engaging the process was. Had the process continued, either the problems would have been addressed and the employment would have continued, or the employment would have come to an end, in accordance with the agreed process. That process did not conclude, however, before the contract was repudiated. 134 The complaint advanced in these proceedings about the fairness of the termination provision of the contract, was that it did not deal with the question of what payment ought to have been made to Mr Marshall, in the event that the contract came to an end as the result of Proteus' breach, rather than pursuant to the agreed termination mechanism. 135 I have great difficulty in coming to the view that this employment contract, which does not deal with such an eventuality, is unfair. In reality, Mr Marshall complains in these proceedings about the fairness of a contract his own legal advisers drafted. The evidence showed that Mr Marshall was placed under no constraint or inequality in negotiating the terms of this contract. That the contract did not deal with the consequences of repudiation in the way now sought, is not surprising, indeed it is commonplace. 136 The consequences of a repudiation of an employment contract such as this are available to be dealt with at common law, under well settled principles, as discussed by the Court of Appeal in Sydney Water Corporation Ltd. 137 Unlike the pleadings later dealt with by the Full Bench in Truelove, in these proceedings Mr Marshall seeks a variation of the contract in circumstances where 'the Respondents act in such a way as to bring about the termination of the contract prior to the conclusion of the agreed term of the employment of 29 June 2001 to 29 June 2004 ('the Agreed Term'), and/or create a finding of unfairness in terms of s.106 of the Industrial Relations Act 1996' (clause 3(a) of the summons).' The variation sought requires payment of all remuneration, including superannuation, incentive and bonuses, for the balance of the 27 months which the contract had left to run when it was repudiated. 138 In the alternative, it was claimed that if the contract was terminated for any reason, that the contract specify 'pre-assessed damages', of 18 months total remuneration, if the contract was terminated in the first 12 months 'for whatever reason'. Other sums were specified, in the event of termination at other times. 139 The reasons advanced for the orders sought all concerned the complaints made by Mr Marshall about his unfair treatment during his employment, culminating with the repudiation of the contract. As I have found, those complaints were no means all established. Complaints were also made about damage to Mr Marshall's reputation and the damage to the business sold to Proteus, although the evidence did not deal with these claims, understandably, given that Mr Marshall established another outplacement business, six months after the termination of his employment. So understood, it is clear that these proceedings were not finally concerned with whether or not the termination of Mr Marshall's employment was justified, as discussed in Truelove at 265, given the case pressed in relation to repudiation. 140 The complaint advanced in the summons about the contract by way of a claim for variation, was that it failed to require payment in the event that it was brought to an end by Proteus' repudiation, supported by complaints of unfair treatment during the time of the contract and on termination. As the Full Bench again warned in Truelove at 265:

The share claim 143 On the evidence, Mr Marshall has had a highly successful career. He is highly educated, had been a partner in KPMG Management Consulting, before leaving that firm in 1996 to establish his outplacement and career transition business, Workshift. In the years ending June 2000 and June 2001, the business had generated revenue of around $1 million per annum. 144 Before Mr Marshall sold his company to Proteus in 2001, it was his intention to continue in the workforce for another three years, and then to sell Workshift. Ms Sneddon approached Mr Marshall with a proposal that Proteus acquire Workshift. From the outset, Mr Marshall told Ms Sneddon and Mr Stoneman that Workshift's books did not reflect what he believed the business was worth and that profitability had been 'disappointing because of distractions and overheads'. He had spent about a year investigating the possibility of franchising the business. On Mr Marshall's evidence Ms Sneddon was also frank, telling him that 'Proteus is not cash rich, so a significant part of any compensation would need to be shares.' 145 Mr Marshall executed a deed of confidentiality in February 2001 and he was provided with a copy of a UBS Warburg letter of December 2000, containing an indicative IPO valuation of Proteus of between $90 million and $125 million, as well as financial information. Mr Marshall and his accountant Mr Champion dealt with Mr Stoneman in the ensuing negotiations, providing financial information about Workshift and its business and performance to him, and receiving and considering financial information about Proteus, its performance and plans. 146 On Mr Marshall's evidence Ms Sneddon was involved in the early discussions, telling him about the imminent Telstra contract and its effect on the value of the business. While Ms Sneddon disagreed as to the detail of what she said and when it was first raised, she agreed the Telstra contract and its impact on Proteus was discussed. In cross examination, Mr Marshall agreed that the detailed discussions about the agreements finally reached, were held with Mr Stoneman. If Mr Marshall's evidence that Ms Sneddon initially told him that she expected the Telstra contract to be signed in one or two weeks is accepted, the evidence as to the course which the negotiations took, left no room for doubt that Mr Marshall was aware that the Telstra contract had not been achieved, before the agreements between Mr Marshall and Proteus were concluded. 147 Ms Sneddon's evidence was that what she had told Mr Marshall about the anticipated Telstra contract was true. On her evidence, Proteus did, in fact, later secure an agreement with Telstra, and that Telstra informed Proteus by email and letter that it had the contract. This was then announced to staff at a function. Several days later, Proteus was advised that Telstra's decision had been rescinded and further negotiations were invited, which were conducted over the course of many months, before they failed. This occurred after Mr Marshall was employed. 148 Ms Durham corroborated Ms Sneddon's affidavit evidence that the announcement was made to staff in November 2001, that the Telstra contract had been won. While several years later, when sitting in the witness box, Ms Sneddon was unable to recollect the date, at that point no longer being Proteus' CEO and not having access to its records, I am unable to conclude, on all of the evidence, as was urged for Mr Marshall, that it was in November 2000 that it became known that the Telstra contract had been lost. The evidence demonstrates that this event occurred after the parties' transactions were entered in June 2001, not beforehand. Mr Marshall led evidence from Ms Durham. That evidence was not challenged by Ms Sneddon. It supported her case. There is no reason for Ms Durham's evidence not to be accepted. Mr Marshall's case, in fact, corroborated Ms Sneddon's, in this respect. 149 It was Mr Marshall's case that during the negotiations, Ms Sneddon had informed him that the value of the Proteus' shares, then standing at $2, was expected to double, because Proteus expected shortly to sign a contract with Telstra. The $2 valuation was relied on by Mr Marshall. The figure came from a recent independent transaction. Mr Marshall's employment contract was claimed to be unfair, in part, because these representations were not made good, because Proteus later failed. It was claimed what was said about the Telstra contract and the share price were known then to be misrepresentations, or to have been recklessly made. 150 Mr Stoneman provided Mr Marshall with a copy of the December 2000 letter from UBS Warburg, which contained an indicative IPO valuation of Proteus at between $90 million and $125 million, as well as other documents showing Proteus' current capital structure and its unaudited profit and loss history to 1999. This document showed that Ms Sneddon had a 34.6% shareholding in Proteus and Mr Stoneman a 20.1% interest. Mr Marshall conducted a due diligence on Proteus with the assistance of his accountant, prior to entering the agreement. Proteus' relevant financial records were not in evidence. No evidence was called from Mr Champion, Mr Marshall's accountant. Nor was any expert evidence led to demonstrate that the financial information provided to Mr Marshall prior to the parties' agreement was inaccurate. 151 In cross examination, Ms Sneddon agreed that the UBS Warburg letter painted a rosy picture of Proteus' financial position. Plainly enough, Proteus at that point had high hopes that the completion of the software development to which it had devoted significant resources, would result in a very lucrative contract with Telstra. This was reflected in the UBS Warburg letter, albeit the letter warned potential investors of the consequences of such plans not being achieved. Given that Proteus' shares had traded in an independent transaction at $2; Ms Sneddon's undisputed evidence that Proteus had rejected a bid valued at some $16 million around this time and the fact of the agreement Mr Marshall himself entered after his investigations, there must have been some foundation for the view that Proteus had prospects of future success. Mr Marshall's Workshift business was acquired to create the cash flow necessary for Proteus to continue trading, while the software development work was concluded and the agreement with Telstra finalised. 152 In March 2001, discussions between Mr Marshall and Mr Stoneman proceeded to price. Mr Marshall wanted 'cash of five hundred to seven hundred thousand dollars, shares to the value of 2 or 3 million and a 2 to 3 year employment contract at $250,000 per annum'. Mr Stoneman asked Mr Marshall to provide a 2002 budget that included work 'that we don't know about and revenue which has a good probability of coming in', so that consideration could be given to whether the numbers justified the price Mr Marshall was asking. 153 Mr Marshall explained that the financial information which he provided to Proteus in March 2001, was based on work which Workshift had already won and work which Mr Marshall believed it had a 'good probability' of winning, assessed on the history of referrals from Workshift's existing clients, recommendations from potential clients and 'on the basis of the Workshift Business forming part of Proteus.' That information was not in evidence. 154 Revenue projections were prepared by Mr Marshall with Mr Champion's assistance, which included 'probable' work and 'possible' work. Mr Marshall believed the revenue projections he provided were achievable. A price was proposed by Mr Stoneman which Mr Marshall was not happy with. Further projections were prepared and provided by Mr Marshall in April. These documents were also not in evidence, but the correspondence demonstrated that by this stage, Mr Marshall was keen to pursue this agreement. 155 A revised offer was then made by Mr Stoneman, involving Mr Marshall being paid some $500,000; the grant of 1 million Proteus shares, valued at $2 per share and his employment by Proteus, with a remuneration package worth some $230,000 per annum. Details of a budget for the merged business was also provided. On 18 April, Mr Marshall and Mr Stoneman executed heads of agreement, which included a statement:

158 On 1 June 2001, the share sale agreement was executed. It was completed on 2 July. The first and second instalment payments of $150,000 were made on 29 June and 2 July. On 29 June, the parties executed the employment agreement. Both agreements contained restraint provisions, effectively precluding Mr Marshall from competing with Proteus for a period of three years after completion, or six months after ceasing to be employed by Proteus, whichever was the greater, except as permitted by the service agreement which the parties then also entered. Proteus was also obliged to cause Mr Marshall to be issued with 1 million fully paid shares 'at $2.00 per share'. 159 It was Mr Marshall's evidence that his legal advice after the termination of his employment contract, was that he was no longer bound by his restraint. How the restraint in the share sale agreement had been affected by the repudiation of Mr Marshall's employment contract in March 2002, was not explained. In October 2002, Mr Marshall successfully established another outplacement business, of which he remains the principal and shareholder. In the 2003/04 tax year, he earned more from that business than he did as an employee of Proteus. 160 It was Ms Sneddon's case that the projections provided by Mr Marshall, which formed the basis upon which the parties agreed to the sale price of Workshift, were never achieved. Her view was that Mr Marshall had misrepresented the financial position of Workshift in the negotiations which preceded Proteus' purchase of the Workshift shares from Mr Marshall. The result was that the Unit which Mr Marshall headed, failed to achieve the budgets set, with resulting cash flow problems for Proteus. These difficulties affected Proteus' ability to make payments to Mr Marshall when they fell due. 161 The final instalment of $200,000 was due to be paid on 1 October. Mr Marshall reminded Mr Stoneman of this on 23 September. On 4 October, Mr Stoneman advised that Proteus was not in a position to make the payment. A meeting was arranged with Ms Sneddon, Mr Stoneman, Ms Greggery and a Ms Eckholm on 5 October, when Mr Marshall was informed of complaints being made about him by members of his team. Later that day, a proposal was made by Mr Stoneman that the payment be made 'when the venture capitalists pay the next phase funding' at the end of November. This was confirmed in writing on 9 October, but not accepted by Mr Marshall, who instructed his solicitors to serve a statutory demand. 162 The evidence clearly demonstrated that what the parties had set out to achieve was a merger of their two businesses, with the expectation that under Mr Marshall's leadership, the Workshift business would continue and would grow, given the support which Proteus could provide with its systems and employees, as well as its own ongoing business. Proteus had also made clear in the negotiations, that it was relying on the cash flow which would result from the merger of the two businesses, in order to be able to pay Mr Marshall the cash it had agreed to pay him, by later instalments. 163 The evidence also demonstrated that both parties adopted a 'rosy' approach to the financial positions of the two businesses. The figures which Mr Marshall provided were not solely based on what his Workshift business had been able to achieve in the past, but also on projections of what he believed it would be able to achieve in the future, including as the result of synergies flowing from the merger. Mr Marshall was supplied with the 'rosy' UBS Warburg document, but also conducted his own due diligence of Proteus' financial position, with his accountant's assistance. There was nothing from which it could be inferred that these records showed anything other than an accurate picture at the time, other than a view expressed in November 2003, by Proteus' administrator, to which I will return. 164 In coming to the view that he should sell his business to Proteus and take up employment with it, Mr Marshall undoubtedly had regard to the UBS Warburg advice, which was based, in part, on Proteus' expectation at the time of that advice, that it would shortly be entering a contract with Telstra. He also had access to Proteus' financial records at the time and received his accountant's advice about its position. He led no evidence in his case as to what that advice was, or what Proteus' financial records revealed to him. He called no evidence to support his claim that he was misled, from Mr Champion, who advised him at that time. 165 On the evidence, neither parties' expectations as to what the future would bring, later materialised. 166 Mr Marshall found his position at Proteus and the required conformity to its systems and administrative arrangements, demanding and demeaning. In his view, they took him away from business pursuit, to the performance of menial tasks, which he thought administrative assistants ought to perform, as they had previously at Workshift. Mr Marshall described his treatment as 'cruel, petty and unfair', with initially polite requests and suggestions soon replaced with commands. 167 For her part, Ms Sneddon was disappointed with Mr Marshall's approach to the merged business and did not believe that he was delivering what he had promised. She denied his claims of mistreatment. The budgets which had been set for the Career Transition Unit following the merger were not achieved. It is unnecessary to determine who was at fault for what transpired. The result was clear. The expected cash flow did not emerge; Proteus' ability to pay Mr Marshall the instalments which were due under their agreement was affected and it failed to make the final payment of $200,000 to him when it fell due on 5 October. 168 By the time this emerged, the parties' relationship had already soured considerably. Mr Marshall had engaged a lawyer and issued a statutory demand against Proteus. It was Ms Sneddon's evidence that this had a negative effect on Proteus' business and the relationship between Mr Marshall and other Proteus staff, including herself, although any difficulties in Mr Marshall's relationship with Ms Durham, was denied by her. 169 Ms Durham had been employed by Proteus since 1999 as an outplacement consultant and worked under Mr Marshall when he joined Proteus. She had sent Ms Sneddon an email in November 2001, in which she made various negative comments about Mr Marshall. Her evidence was that the comments she made were a distortion of the truth and that the real cause of a lack of leadership in the Career Transition group was Ms Sneddon and Ms Greggery repeatedly and actively undermining Mr Marshall's leadership and authority. It is unnecessary to resolve this controversy. 170 Mr Marshall seeking to wind Proteus up would appear to have been inconsistent with his own interests. Mr Marshall, after all, was not only owed $200,000 cash by Proteus, he also owned 1 million shares, with a value, he believed of $2 per share. Winding Proteus up if the demand was not met, in those circumstances, seems a curious course to have taken. It became unnecessary. On 25 October, Proteus' solicitors wrote to Mr Marshall:

171 On 1 November, in discussions with Mr Stoneman, Mr Marshall refused to consider deferring the outstanding cash payment and Mr Stoneman responded 'all right then, we'll have a performance discussion'. Even by this point, it appears Mr Marshall's Unit was not meeting its budgets, but Mr Marshall told Mr Stoneman, 'they were conservative estimates based on what I genuinely believed to be achievable with the benefit of the Proteus systems and Workshift's clients'. 172 Mr Marshall regarded Mr Stoneman's suggestion of a performance discussion to have been unnecessary and threatening, unprofessional and unwarranted and he wrote to Ms Sneddon on 2 November, to tell her so. Mr Marshall maintained that view, notwithstanding that he had agreed he would participate in such review, in his service agreement. Given the terms of the correspondence, the relationship between Proteus and its staff and Mr Marshall had plainly deteriorated. Ms Sneddon responded that without providing details of Mr Marshall's concerns, it was not possible for her to deal with them, but she added 'the somewhat obvious statement that some personnel, including me, are bound to be affected by their interpretations of your performance, particularly in the light of the situation summarised above and in my affidavit and also by the fact that you commenced Supreme Court proceedings seeking an order that Proteus Solutions be wound up, relying upon Proteus refusal to pay disputed debt'. 173 By this time Proteus was defending Mr Marshall's winding up application on the basis of his alleged misrepresentations as to Workshift's financial position. 174 On 19 November, Mr Marshall again wrote to raise his concerns about his treatment; the suggested performance review and being 'constantly bombarded by somewhat trivial requests with unrealistic timeframes.' Mr Stoneman responded by referring to the connection between a consideration of Mr Marshall's performance and Proteus' refusal to make the $200,000 payment. 175 The variation claimed to the employment contract to deal with these alleged misrepresentations was:

176 Consequential money orders of $2 million were claimed, being the 'value of shares in the First Respondent calculated at $2 per share'. No orders of avoidance or variation were sought in relation to the sale of business agreement. 177 I am satisfied that such orders should not be made. 178 While, as was submitted, the two agreements entered by Mr Marshall and Proteus were closely related, I am satisfied that without any finding that the sale agreement was unfair, an order of this kind could not properly be forthcoming, given the structure of s 106 and the evidence. Seemingly, such an approach would leave Mr Marshall with the money sum reflecting the agreed value of the shares as at the date of the acquisition of the shares and the shares as well. 179 Section 106 of the Act provides that: 106 Power of 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. (2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as: (a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and (b) the performance of work is a significant purpose of the contractual arrangements made by the person. (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. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 180 In my view, in the circumstances here before the Court, unless orders of avoidance or variation of the sale agreement are sought, as s 106(2A) contemplates, such relief may not flow by way of a variation and consequential money orders in relation to the employment contract. It was the parties who determined to enter two separate agreements, one dealing with the sale of the business and the other with ongoing employment. Indeed, it was Mr Marshall's solicitors who drafted the two agreements. That cannot be overlooked, given the statutory scheme and the authorities which have considered that Court's jurisdiction thereunder. 181 In any event, I can find nothing unfair in the employment contract, which would lead to the making of the variation sought, from which such money orders would flow. That contract was not concerned at all with the sale of the Workshift business, or Mr Marshall's acquisition of shares in Proteus, on that sale, but rather with his ongoing employment with Proteus. Nor can I see how the sale agreement could have been found unfair, had it been sought to be dealt with in these proceedings, so as to lead to the making of a variation and consequential money orders of this kind. 182 To the contrary, the evidence clearly showed that Mr Marshall was one of those applicants seeking 'to make use of the wide discretions provided by s 88F as a means of rescue where a calculated business risk is taken which, contrary to expectations, turns out not to be as profitable as anticipated and results in a loss to all concerned' (see Autobake Pty Limited v Budd (1986) 19 IR 18 at 18). (Section 88F of the Industrial Arbitration Act 1940 was a predecessor to s 106). 183 The evidence made it clear that while the 'rosy' projections in the UBS Warburg letter had been shared with Mr Marshall, he had also been provided with Proteus' actual financial information and had conducted a due diligence on what he was provided, with the assistance of his accountant. While his case was that in his earliest meeting he was told by Ms Sneddon that the Telstra contract was to be signed within two weeks, which Ms Sneddon denied, he was plainly aware that this had not occurred before he entered the sale agreement. It cannot be doubted that until it was finally agreed, that there was a known risk that the Telstra contract would not materialise. On the evidence, that was not what Proteus or Ms Sneddon expected would occur, but the UBS Warburg letter, which also assumed that the Telstra contract would be finalised, itself warned about the risk that management would not achieve what was expected. 184 Furthermore, that the information Mr Marshall was provided prior to entering the sale agreement and taking up employment with Proteus was not accurate, was not established. For example, a comparison of the Proteus Information Memorandum provided to Mr Marshall by Mr Stoneman in 2001, with the administrator's Report to Creditors in November 2003, advanced for Mr Marshall in final submissions, showed that: 1999 2000 2001 2002 2003 $000 $000 $000 $000 $000 IM Rev 4,844 3,072 10,218(forecast) 46,729 forecast) NA EBIT 678 (2002) 958 21,404 NA CR Rev 5,033 3,091 2,417 2,919 1,381 EBIT 25 (1,959) (3,376) (5,256) (2,849)

185 It is apparent that the figures for 1999 and 2000 are similar. Mr Marshall cannot have been misled as to those, by the information he was given by Proteus in 2001. The figures depart from each other in 2000. Proteus' forecasts for 2001 and 2002 were certainly not met, with the result that instead of forecast revenue of $10,218,000 in 2001 for example, only $2,417,000 was achieved. The reasons for the results actually achieved were not fully explored in the case advanced, but undoubtedly the projections in the Information Memorandum reflected what was anticipated to be achieved under the Telstra contract. That contract was not achieved, in the circumstances I have already dealt with. I am unable to conclude that Mr Marshall was misled about those matters. 186 What must also be considered, however is that the administrator's figures also showed that Proteus' revenues in 2002, after the aquisition of Workshift, only increased to $2,919,000, from Proteus' 2001 revenue of $2,417,000. What this confirmed was that Workshift's acquisition did not lead to the increase in revenue which Proteus and Mr Marshall had expected, consistently with what the audit conducted in 2002 had earlier revealed. 187 Mr Marshall relied on the administrator's second report to creditors, in so far as the view was expressed that Proteus may have been trading insolvently since 2000, 'based on our preliminary review of the Company's historical trading position' and that there might be claims available to be made against its directors, as a result. There was no evidence that such claims have ever been made. Indeed, the agreement which Mr Marshall reached with Proteus' liquidator would suggest that the liquidator did not reach such a view. It is inconceivable that the liquidator would have made such an agreement, which might result in Ms Sneddon having to meet very substantial money orders, if it was thought that Proteus itself had a cause of action against her. In any event, there was no evidence led from which it could be concluded that the administrator's opinion was soundly based, or that the information on which it was based, was hidden from Mr Marshall in 2001. 188 It is also relevant to note that in the report the administrator accepted the directors' opinion that one of the 'four primary causes of the failure of the company' was:

The Company in an attempt to expand its outplacement business, acquired the business of a competitor, Workshift Pty Ltd. Consideration paid for the business amounted to $500,000 cash paid and 1,000,000 shares in the Company issued at $2 per share. The investment was subsequently written off, after performance objectives were not met, nor any benefit derived. The former proprietor subsequently commenced legal proceedings against the Company for breach of contractual obligations. The matter is still subject to litigation and the cost borne by the Company has been extensive. 189 The administrator also considered that the development pursued in relation to new technology, which underpinned Proteus' expectation of entering into a contract with Telstra and the failure to derive revenues from that technology 'in a sufficiently timely fashion,' was unable to be supported by Proteus. It was, of course, the pursuit of this technology, which would have been to the considerable advantage of shareholders, including Mr Marshall, had it succeeded. This was the business risk which Mr Marshall determined to take when he sold Workshift to Proteus. 190 On the evidence, Mr Marshall, an experienced and senior businessman who had known Ms Sneddon for a long time and who was successfully operating his own outplacement business in the same field as Proteus, plainly saw a good opportunity to take a profit from the sale of his business; to take up employment with Proteus, in the period before his intended retirement; as well as obtaining a substantial shareholding in Proteus, when he was approached by Ms Sneddon in 2001. After his investigations, he was prepared to take the risk which that opportunity entailed, when he agreed to take a substantial part of the sale price in Proteus' shares. No doubt, he was conscious of the large rewards which would have flowed to him as a Proteus' shareholder, if Proteus succeeded with its software development and the Telstra contract. He was informed from the outset that Proteus was cash poor; that the sale price would have to include shares and that Proteus depended on the cash flow his business would bring, in order to pay him the agreed purchase price. Neither that cash flow or the Telstra contract eventuated. 191 Mr Marshall himself painted a rosy picture of Workshift's past and future performance in his negotiations with Proteus. His projections did not eventuate and the cash flow expected to flow from the acquisition of the Workshift business also did not eventuate, as Proteus was led to expect. True it is that the pursuit of the software development and the failure to achieve the Telstra contract finally led Proteus to fail, even though it sold its outplacement business beforehand. How, in all of those circumstances, it could now be concluded, as a matter of justice, that by way of variation of Mr Marshall's employment contract, Ms Sneddon should be made a guarantor, as it were, that Proteus' business would be successful, so that the value of its shares was maintained, after Proteus' business failed to achieve its aims, and Mr Marshall failed to deliver the earnings the parties expected the outplacement business he was employed to head to achieve, is not evident to me. 192 That the employment contract was unfair, as claimed, was simply not demonstrated. It follows that this aspect of the claim must also be dismissed. To grant the relief sought, would, I am satisfied, be inconsistent with the Full Bench's observations in Eagle Boys Dial-A-Pizza Australia Pty Ltd v Clifford (2003) 125 IR 35 at [43]:

Money orders against Ms Sneddon 196 From the outset of the case, it was made clear that no orders were sought against Proteus. Mr Marshall had an agreement with the liquidator that Proteus would not defend his claims and he would seek no orders against Proteus. He was only interested in pursuing Ms Sneddon. 197 The evidence was that Ms Sneddon was the CEO and a 34% shareholder of Proteus. Mr Marshall has elected not to pursue his claims against any of the other employees, directors or shareholders of Proteus, not even Mr Stoneman, a 21% shareholder of Proteus, and the director who conducted the negotiations which were attacked in these proceedings, as having involved serious misrepresentations. 198 In these circumstances, the question of whether or not the Court's discretion should be exercised in the manner sought, which unsurprisingly was vigorously opposed by Ms Sneddon, is one which would require careful consideration, if I had found that the contract was unfair, so that a discretion came to be exercised in Mr Marshall's favour, with the making of orders of variation of the employment contract. 199 It is strictly unnecessary to deal with this issue, given the views I have reached. In deference to the parties' arguments, however, I make some comment on the matter. It is well settled that the Court has a discretion to make money orders against an individual such as Ms Sneddon, who was not a party to the contract in question, so long as the necessary culpable association with the contract be demonstrated. Whether the discretion should be exercised in the unusual circumstances presented in this case, is a different matter. 200 It seems to me that the Court would hesitate to make orders on the basis sought against an individual, not a party to the contract at issue, when an applicant elects not only to ask the Court to make no money order at all against the employer in question, but where the applicant has elected, for reasons which are not explained to the Court, not to proceed against other individuals who, on the evidence, appear to be culpable for complaints of unfairness which are advanced and who arguably benefited from them, if the complaints made were established. It seems to me that the questions raised by such an approach are not answered merely on the basis that the individual respondent, a director and shareholder of the corporate employer, could have herself taken steps to join other directors and shareholders as respondents. The onus falls on the applicant to demonstrate that justice will be served by the making of the orders which are sought. Making one individual solely liable for conduct which is not solely the responsibility of that individual, is a matter which requires some care and also requires a consideration of the public interest, as s 145 of the Act requires. 201 It also raises jurisdictional questions. As was discussed by Barwick CJ in Brown v Rezitis (1970) 127 CLR 157 at 168, the making of joint and several orders for the payment of money against persons not party to the contract in question, has to be approached with caution. An order against an individual respondent not party to the contract, for the total money amount ordered by the Court in a particular case, may be in excess of jurisdiction, if the order is 'not limited to an amount to represent their association with the making or executions of the contract', because that 'would not be an order for the payment of money in connection with the contract'. Similar views were expressed by Menzies J at 172. His Honour took the view that a 'blanket order that the whole sum should be paid by each of the appellants' - among others - was 'in excess of power.' 202 What Brown v Rezitis stands for was dealt with extensively by the Full Bench in Westfield, on which reliance was placed by Mr Marshall. There, it was observed: 93 We consider that the formulation by Barwick CJ in Brown v Rezitis as to the nature of the power under s 106(5) to make money orders has not been seriously questioned. There has been no real attempt to depart from that formulation as it was summarised in Port Macquarie Golf Club v Stead . The question, however, that has been squarely raised on this appeal, is what in precise terms does Brown v Rezitis stand for?

95 The formulation by Barwick CJ in Brown v Rezitis , however, has to be seen in the context of the facts of the case. Shortly stated, these were that Imisons Metal Sand Filling Supplies Pty Ltd, one of the appellants, in consideration of the sum of $2,000 paid to it by the respondents, promised to engage the respondents (Mr and Mrs Rezitis) "for the cartage of goods with payments for work performed in accordance with a schedule of rates". Imisons agreed to provide the respondents with sufficient cartage work to enable them to earn a minimum average amount of $200 per week gross, the respondents for their part agreeing to provide a suitable vehicle that they would keep in good order and comprehensively insured. As Barwick CJ observed in his judgment at 162: The respondents were given some cartage work by the company (Imisons) and were paid certain sums of money. However, the representations which had been made both by the company and by the agents and the contractual promises by the company as to the amount of available work and the amount of money to be earned by the respondents were not made good. 96 The respondents sought relief under s 88F of the Industrial Arbitration Act 1940. Richards J ordered the appellants to pay jointly and severally to the respondents an amount that included the $2,000 paid by the respondents for the contract, loss on the truck purchased by the respondents, plus registration, insurance, road taxes, repairs and service as well as wages. The appellants appealed to the Court of Appeal, where the appeal was dismissed, and subsequently appealed to the High Court. 97 The High Court upheld the appeal on the basis that there had been an excess of jurisdiction because some parts of the moneys ordered to be paid could not be regarded as being "in connection with the contract or arrangement" as against those respondents who received no benefit from the contract or arrangement, or because the order extended beyond their association with the making or execution of the contract.

98 So, the formulation by Barwick CJ as to the nature of the power to make money orders under s 88F(2) of the 1940 Act may be said to be, strictly speaking, obiter . However, the main point we wish to make about Brown v Rezitis is that in arriving at his formulation, the Chief Justice did so against the background of the facts of the case. He was required to focus on the question of restitution because of the order of Richards J that the appellants repay the $2,000 paid by the respondents for the contract, thus restoring "the aggrieved party to a situation which existed before the making of the contractual arrangement". Understandably then, the concept of restitution figured prominently in the Chief Justice's judgment. Given the other orders by Richards J requiring the appellants to pay the respondents for work done and expenses incurred, Barwick CJ was also required to address the question of making remedial provision for what had taken place or been done under the contract. 99 In these circumstances, given the particular facts of the case with which Barwick CJ was dealing, it could not be said that the formulation by the Chief Justice regarding the nature of the power to make money orders under s 106 is to be taken as the exclusive, or even the primary, test to be applied universally to all of the diverse circumstances that arise under s 106. Restitution has been said to be concerned with restoring or giving back something to its proper owner or making reparation for loss or injury previously inflicted. As the Full Industrial Court ( Fisher CJ, Bauer and Hill JJ) observed in State of New South Wales v Health and Research Employees Association of New South Wales (unreported, 31 March 1993) (at 82): "… 'restitution' seems to involve a reversion to a position as if the contract had never been entered into." 100 In Harris v Dealing Information Systems Pty Ltd (unreported, Schmidt J, 11 December 1997) in considering the effect of Brown v Rezitis , her Honour rejected a submission that "all monetary orders under s 106(5) are to be understood as restitutionary, rather than compensatory in nature". Having regard to our analysis of Brown v Rezitis , we respectfully agree with her Honour.

thus providing confirmation, if any were necessary, of the importance of adhering to the actual words of the statute. As for the proposition propounded by the appellant that it is only "actual loss" that is to be compensated under s 106(5), we fail to see how that can be derived from Brown v Rezitis . There were two elements in the formulation laid down by the Chief Justice in Brown v Rezitis . The first was restitution and the second was to "make remedial provision for what has taken place or been done under the contract in the meantime." It seems to us that this is a broader test than one that requires compensation for actual loss. We note the phrase used by Menzies J in Brown v Rezitis at 170 where he referred to the requirement to "…recompense the worker for what he has lost." There is nothing, however, in the judgment of Menzies J to indicate that he regarded the power to make money orders under s 88F(2) as limited to compensation for actual loss. 203 The matter was also considered by the Court of Appeal in Zahos at [54] - [70]. There too, difficulties with money orders which cannot be seen to flow directly from the contract attacked in the proceedings, were discussed. 204 It seems to me that consistently with this approach, and in doing justice in the circumstances here before the Court, in formulating any money orders the Court could no more ignore the agreement made by the applicant with the direct party to the contract, Proteus the employer, that no money orders, would be sought against that party, than it could overlook a deliberate decision not to seek relief against someone like Mr Stoneman, another non-party to the contract, who, on the evidence, also had culpability for the matters complained about. Furthermore, the Court would be confined to the making of money orders against Ms Sneddon, which had a 'real connection with the making, variation or avoidance of' the employment contract, the subject of the proceedings, a fundamental difficulty with the share claim advanced. Orders

Marshall v Proteus Solutions Limited

At a glance

Court

Decision date

Before

Source

Judgment (207 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (17)