Munro v Chubb Security Holdings Australia Ltd & Ors

APPLICANT Mr J J E Fernon of Counsel SOLICITORS Michael Harmer & Associates

LEGAL REPRESENTATIVES: RESPONDENT Mr W R Haylen QC of Counsel SOLICITORS Clayton Utz

JUDGMENT:

• 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

PETER JAMES MUNRO v CHUBB SECURITY HOLDINGS AUSTRALIA LTD & ORS

Application under s 106 of the Industrial Relations Act 1996

1 In these proceedings the applicant Peter James Munro seeks certain relief under s 106 of the Industrial Relations Act 1996 ("the Act") against the first respondent Chubb Security Holdings Australia Ltd, the second respondent Chubb D & SM Plan Pty Ltd and the third respondent Chubb Superannuation Pty Ltd. The first respondent was the applicant's employer. The second and third respondents were successive trustees of a superannuation fund of which the applicant was a member and which was established by the first respondent. 2 Sections 105 and 106 of the Act are in the following terms: 105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. Note. The jurisdiction of the Commission under this Part is exercisable only by the Commission in Court Session.

106 Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case.

3 Before dealing with the nature of the relief sought by the applicant against each of the respondents it is appropriate to refer to the factual background against which the proceedings were conducted.

FACTUAL BACKGROUND 4 Prior to 1985 the applicant had experience in employment in senior operational, marketing and finance positions with a number of organisations. 5 On 12 March 1985 he commenced employment as Commercial Manager Asia in the Security and Fire Division of Wormald International Ltd, and was later promoted to a more senior position. The business of that organisation was acquired by the first respondent in October 1988. The first respondent was a member of the world-wide group of companies owned by Chubb plc. In April 1997 Chubb plc was acquired on a world-wide basis by Williams plc. The first respondent became a wholly owned subsidiary company of Williams plc from that time. 6 In early 1996 the applicant had been appointed Finance Director of the first respondent and together with the Managing Director played a part in a number of corporate acquisitions including the business of James Hardie Security and MSS Security. In addition to his role as Finance Director the applicant became Acting Managing Director in July 1996 and was confirmed in that position in August 1997. The applicant's employment with the first respondent was terminated effective 1 February 1998, in circumstances to which I shall refer shortly. 7 On 18 November 1996 the then Chairman of the Board of Directors of the first respondent forwarded a letter to the applicant dealing with the circumstances in which the termination of employment of senior executives would be effected. In terms of notice the letter, for present purposes, said that there would be an entitlement of one month's notice for every year of service up to a maximum of 12 years service or the payment of salary in lieu. There was also a reference to cases of "genuine redundancy", a non-solicitation clause and a non-compete clause. These terms were accepted by the applicant. 8 The applicant was offered the position of Managing Director after the acquisition of the Chubb business by Williams plc. He dealt initially with Mr Roger Carr, Chief Executive Officer of Williams plc and Mr Davies who was chief of world-wide operations. 9 On appointment as Managing Director the applicant's salary was increased. He was paid a salary of $300,000 per annum, became entitled to superannuation contributions made by the first respondent at the rate of 27.5% of his salary, and also received additional remuneration in the form of medical insurance, home telephone expenses, a club subscription and use of a company car. In addition the applicant was offered a bonus the terms of which became contentious for the purpose of these proceedings. 10 The applicant said in his evidence that he was offered a bonus by Mr Davies in the course of a conversation which took the form of a payment of $30,000 in recognition of the applicant's efforts during the period immediately after the Williams acquisition and that he would receive a further $60,000 if he continued to work hard to achieve the transition of the business to Williams plc. Mr Guy Wannop was present during the course of that conversation. At that stage he was employed by Williams plc and was given overall responsibility by that company with respect to the integration of the first respondent's business activities within the Williams plc group. 11 Mr Wannop disputed the applicant's evidence about what was said. It was Mr Wannop's evidence that Mr Davies had said that the $30,000 bonus was payable to recognise the applicant's work both pre and post acquisition and that there would be an additional bonus of up to $60,000 depending upon the performance of the first respondent's business over the remainder of the 1997 year. It was Mr Wannop's evidence that Mr Davies had told the applicant that the arrangements would be put in writing by Mr Wannop. 12 In fact, Mr Wannop wrote to the applicant the same day in the following terms: I would like to confirm the conversation we had this morning regarding your appointment as Managing Director of Chubb Security Holdings Australia Ltd. With effect from 1 August, 1997, your salary will be increased to A$25,000 per month. Your salary will then be reviewed on 1 January 1998 in line with the Williams plc review of Senior Management salaries. In addition, we will pay you a bonus on 1 August, 1997, of A$30,000 in recognition of the part that you have played in transitioning the business from Chubb to Williams ownership. You will be eligible for a discretionary bonus of up to 20% of your salary to be paid in early 1998 at the same time as other Executive Williams bonuses are paid. The basis for this bonus will be the business performance over the 8 months of 1997 ownership of the business by Williams. Details to be agreed between yourself and myself. All your other conditions of employment remain the same. I will work with I. Hawthorn to draw up a formal letter to you in the near future. Once again, I would like to offer you my congratulations on your appointment and I look forward to a successful working relationship with you. 13 The applicant did not raise any questions concerning this letter with Mr Wannop, or with anyone else within the first respondent or the Williams plc organisation claiming that the letter was inaccurate in the manner in which it described the eligibility to a further bonus. Despite this, the applicant maintained during the course of these proceedings an entitlement to a specific sum of $60,000 which was not contingent upon the performance of the business. 14 No formal letter as contemplated by Mr Wannop in his letter was ever drawn up. Subsequently to his appointment as Managing Director, the applicant reported in effect to Mr Wannop as the Special Operations representative of Williams plc. The applicant also had involvement with Mr Tim Gallagher, a Finance Director employed by Williams plc who came to Australia in August 1997. His role initially was to prepare financial information and to introduce Williams' financial and reporting methods to the first respondent. 15 The applicant said that Mr Wannop and Mr Gallagher increasingly became involved in the management and operation of the first respondent's business and that although he was Managing Director, he was, in effect, sidelined. Both Messrs Wannop and Gallagher denied this in evidence stating that each of the heads of the divisions which made up the first respondent's business continued to report to the applicant and it was the applicant's responsibility to ensure that the overall business interests of the first respondent prospered. The applicant complained that he was excluded from the provision of financial and management information by Messrs Wannop and Gallagher. Mr Gallagher asserted that he shared this information with the applicant on a frequent and informal basis because their respective offices were near each other, each having an office on either side of that occupied by Mr Wannop. 16 The applicant said that whilst he remained Managing Director he introduced a number of measures and the businesses of the various divisions of the first respondent's operations were conducted in a regular and appropriate manner. 17 In their evidence Messrs Wannop and Gallagher stated that the businesses were not preforming to budgets which had been established by the first respondent prior to the acquisition by Williams plc and that furthermore the businesses did not perform according to revised budgets which were set in September 1997 after the Williams plc acquisition. 18 It was the evidence of the applicant that at no stage did Mr Wannop or any other person from the Williams plc organisation raise with him any concerns about his performance as Managing Director. However Mr Wannop said that he had told the applicant on a number of occasions that if the performance of the business did not improve there would need to be management changes. He said that he thought that as Managing Director the applicant would understand that management changes encompassed the position of Managing Director. 19 Mr Wannop said that he asked the applicant on a number of occasions what steps he was taking to improve the performance of the business. The applicant is alleged to have responded that there was little he could do because factors which affected the business were beyond his control such as the banks closing branches. 20 The decision to terminate the applicant's employment was made by Mr Wannop in consultation with Mr Davies at the end of 1997 or early in January 1998. Mr Wannop then obtained advice from Mr Ian Hawthorn the Group Personnel Manager of the first respondent. 21 The employment of the applicant was terminated in a conversation between the applicant and Mr Wannop which occurred on 12 January 1998. Whilst the evidence of both the applicant and Mr Wannop differed as to what was said, I am satisfied that the applicant was told that it was considered by Williams plc that he was not the right person to be managing the business. 22 During the course of the discussion the applicant was advised that he could continue to use his company motor vehicle for six months and that he would be offered a consultancy for a period of two years for which he would receive payment of $100,000 per annum. The applicant said that he was offered the sum of $450,000 based on one and a half times his salary of $300,000. Mr Wannop denied that there was a reference to the one and half times multiplier. 23 There was also a conversation during which the applicant asked Mr Wannop for payment of the $60,000 bonus which he alleged had been promised to him. He said that Mr Wannop agreed immediately to pay that amount. Mr Wannop said that he agreed to pay the amount on the basis of an assertion made by the applicant that Mr Davies had agreed to that payment in a conversation with the applicant, although this did not agree with his own recollection of the discussions which had occurred between the applicant and Mr Davies in July 1997 at which he was present. 24 Mr Wannop forwarded a letter to the applicant dated 13 January 1998 confirming termination of employment effective 1 February 1998 and agreeing to pay the sum of $450,000 subject to a number of matters. These were the acceptance of the offer in full and final settlement of all claims, resignation as a director of all companies in the Williams group of which the applicant was a director, the waiving and releasing of all and any claims that the applicant might have against the Williams plc group, and the execution of the consultancy agreement in the form which was enclosed with the letter. The letter confirmed six month's use of the company vehicle and offered the provision of executive outplacement services to a cost of $45,000. 25 The consultancy agreement offered an initial period of consultancy of two years. The applicant would be required to provide certain service for up to 50 days per annum for which he would receive payment of $100,000 per annum together with reimbursement of expenses. There was a non-compete clause in usual form and a clause concerning confidentiality. There was also a non-compete restriction after termination of the consultancy agreement for a further period of one year. 26 A letter of 16 January 1998 from Mr Wannop said in part: "In light of your discussions and agreement with Chris Davies in July that your 1997 bonus would be discretionary and based upon the continued effort that you applied to transition the business from Chubb to Williams, I confirm that we will pay a bonus of A$60,000. This bonus would normally have been paid with other Executive Williams bonuses by the end of March. As a result of the termination of your employment, I will arrange for payment to be made at the same time as the amount paid in terms of your termination." 27 A memorandum entitled "Management Change" was issued by Mr Wannop on 12 January 1998 to senior personnel within the first respondent's operations. It stated that effective 12 January 1998 the applicant would no longer be Managing Director of the first respondent and that with immediate effect the several businesses would report directly to Mr Wannop who was described as the Managing Director. The memorandum concluded: "Peter Munro will continue to be associated with the business in an ongoing role as a consultant." 28 Subsequently the applicant retained solicitors and there were discussions between his solicitors and Mr Wannop concerning the applicant's termination package. In a letter of 9 February 1998 forwarded to those solicitors Mr Wannop said that the package offered was based on 18 month's salary, that the offer was generous because the company was "prepared to recognise a bonus of $60,000 notwithstanding that it was not due", that there was the consequent effect of increasing superannuation entitlement by including the bonus as income and that the consultancy agreement "was not simply intended to operate as a three year non-compete arrangement, but was intended as a genuine consultancy which would have provided Mr Munro with continued and guaranteed income whilst availing him the opportunity to earn an additional income from other employment or consultancy." 29 The letter also stated that if the package set out in Mr Wannop's earlier letter of 13 January 1998 was not accepted the offer to pay the bonus would be withdrawn. 30 The letter also contains reference to superannuation benefits, which I shall deal with separately. 31 The total offer was not accepted by the applicant. He was afforded the outplacement services, was given use of the company car and was paid the sum of $450,000. The applicant declined to sign the consultancy agreement and accordingly no consultancy fees were paid to him. 32 The applicant has also received annual leave and long service leave entitlements which were based on his annual salary of $300,000 and other ingredients of his remuneration package excluding the $30,000 bonus paid and the $60,000 bonus which the applicant had claimed but which remained unpaid. 33 Mr Wannop declined to pay the $60,000 bonus because the total package had not been accepted by the applicant and because also he said that the representation made by the applicant as to his entitlement to payment was not correct.

THE APPLICANT'S CLAIM 34 The applicant alleged that his contract of employment with the first respondent was unfair for the purposes of s 106 of the Act in that it permitted the applicant to be treated unfairly in terms of entitlements payable to him in connection with the termination of his employment. He also alleged that the conduct of the first respondent in and about the termination of his employment was unfair with respect to benefits accorded to him on termination and with respect to benefits which were offered to him on termination. 35 Although, as I understood his submissions, Mr Fernon of Counsel who appeared for the applicant did not specifically rely on the recent majority decision of a Full Bench of this Court in Reich v Client Server Professionals of Australia Pty Ltd [2000] NSWIRComm 143, I am bound by the judgment of the majority members of the Full Bench. The majority of the Bench (Wright J President, Walton J Vice President and Hungerford J) in a joint judgment held: In other words, it seems to us, in finding a contract (contract or arrangement, or any related condition or collateral arrangement) to be unfair, that may be supported because it became an unfair contract due to the conduct of a party at the time of the termination of the contract which enabled a finding that a contract which could or did so operate was relevantly unfair. It would then be open to declare the contract void or to make an order varying its terms in an appropriate way, with as to either form of relief a consequential order for the payment of money considered to be just in the circumstances. We have to say we find nothing surprising in that reasoning in terms of the operation of s 106 and, indeed, if it were otherwise then the whole jurisprudence developed in relation to the unfair contracts provisions in the industrial legislation over more than three decades would be effectively negated. Indeed, as to the conduct of parties, s 106(2) not only recognises such development in the cases but emphasises it by express statutory provision. (para 24) 36 This reasoning was repeated in the course of the joint judgment. For example at para 27 their Honours said in part: "….to us it seems an utterly arid exercise in semantics to find conduct as part of the operation of a contract to be unfair but not thereby to find also the contract to be unfair because such unfair conduct was not permitted by the otherwise fair contract - we think it should be stated as plainly as it may be, and as we think the authorities and s 106(2) do, that a contract may be found to be unfair because of any conduct of the parties." At para 28 their Honours said: A contract whereby a person performs work in an industry (including as here a contract of employment as a species thereof) has as an inherent feature the behaviour or conduct of the parties for the contract to be able to operate. It is difficult, we think, in conceptual terms to separate the contract itself from the conduct of the parties in performing it. As Priestley JA, with whom Kirby P and Meagher JA agreed, observed in Rothmans Distribution Services Ltd v Full Court of the Industrial Court of New South Wales [1994] 53 IR 157 at 160, "how the terms of the contract operated in practice … necessarily means looking at … conduct … and to conclude that a contract which could so operate was unfair". What a contract of employment does is set the terms and conditions to govern the employment relationship; the contractual relationship is another term which may be readily used to describe it. If a party in the course of operation of the employment relationship were to act in contravention of the contract of employment, particularly by committing a fundamental breach thereof, then that may only mean that the contract otherwise was unfair in so allowing or not preventing such unfair conduct or, indeed, in failing to make appropriate provision in the event occurring. In any of those situations, we think it clear that s 106 could be called in aid by the aggrieved party to obtain relief. We repeat, the section should not be construed to the contrary and as would protect the wrongdoer. (para 28)

37 In conformity with the expression of opinion of the majority in Reich it is only necessary that I find in the circumstances of these proceedings that there was unfair conduct on the part of the respondent and it is not necessary that I relate that conduct in any way to any terms of the underlying contract of employment or to any of the provisions of any arrangement or related condition or collateral arrangement. 38 The relief sought by the applicant in these proceedings was summarised as follows:

1. Payment of two years' remuneration (based upon all components of the applicant's remuneration package as at the date of termination of his employment) in lieu of notice of termination of employment, less an amount of $450,000 already paid by the first defendant.
2. Severance payment equal to four weeks' remuneration (based upon all components of the applicants' remuneration package as at the date of termination of his employment) for each year of service (being 12.88 years).
3. Payment of a bonus of $60,000.
4. Compensation accounting for the difference in the applicant's superannuation entitlement under the Chubb's Directors and Senior Managers Retirement and Insurance Plan as at the effective date of termination compared with that entitlement had the applicant been given two years notice of termination, based upon a "salary" for superannuation purposes of: (i) base salary of $300,000; (ii) salary sacrifice of $18,000 (6% of base salary); (iii) bonus payment of $30,000; and (iv) bonus payment of $60,000.
5. Payment of accrued annual leave and long service leave entitlements calculated having regard to all components of the applicant's remuneration package as at the date of termination.
6. Compensation of three months' remuneration (based upon all components of the applicant's remuneration package as at the date of termination of his employment) in respect of the restraint contained in the applicant's contract of employment preventing him from being employed in a business concern which competes with the first respondent for a period of three months after termination of employment.
7. Compensation for distress, humiliation and loss of reputation.

39 The relief sought by the applicant as outlined above represents what the applicant alleges should have been paid to him on termination of employment by way of that which was fair. Of course, the applicant is not entitled to any relief under s 106(5) of the Act unless and until the applicant satisfies the Court that he is entitled to a finding in his favour that the relevant contract was an unfair contract as that expression is defined in s 105. 40 There was some contention between the parties as to whether there was, in effect, a fundamental entitlement as of right to some of the claims made by the applicant, as opposed to claims based on qualitative grounds. For example there was no contention that the applicant was entitled to payment of moneys in lieu of notice on termination of employment. However claims for severance payment, a bonus of $60,000, enhanced superannuation benefits and compensation for distress, humiliation and loss of reputation were hotly contested. To some extent, therefore, it is difficult to assess whether there was the requisite unfairness without considering each of these matters. Accordingly, I propose to consider each of the heads of relief sought by the applicant for the dual purpose of considering some of them in connection with determining whether there was an unfair contract and all of them in connection with whether any relief ought to be granted under s 106(5).

PAYMENT IN LIEU OF NOTICE 41 Although there was a specific provision in the applicant's employment contract to the extent that it was reduced to writing requiring 12 months' notice, these proceedings were conducted on the basis that the applicant was entitled to reasonable notice. What is reasonable notice will depend upon a number of factors which are discussed in general terms in the 4th Edition of the Law of Employment by Macken, O'Grady and Sappideem published by LBC Information Services 1997. There are many instances where these relevant factors have been discussed in decided cases of this Court and its predecessors. 42 For the purpose of these proceedings I take into account in particular the following matters:

1. The applicant was the Managing Director of the first respondent.
2. The first respondent was a substantial company. Evidence was tendered as to the extent of its turnover.
3. As Managing Director the applicant assumed ultimate responsibility for the performance of the first respondent's business, which consisted of a number of divisions, and extended throughout Australia and New Zealand.
4. Although the applicant had acted as Managing Director for some little time, he had been appointed Managing Director by the first respondent under its current ownership some five months only before his employment was terminated.
5. The applicant's age. (55 as at 23 April 1998).
6. The applicant had been employed by the first respondent since October 1988, but had worked in an acquired business since March 1985.
7. The applicant's employment was terminated because of a perception on the part of Mr Wannop in particular that the applicant was not the right person for the job and that his strategic planning skills were not adequate. There was also concern that the first respondent's financial performance was not consistent with either an initial budget established prior to acquisition by Williams plc or a revised budget established in about September 1997. 43 Whilst none of the authorities and none of the text seem to indicate that the reason for termination is necessarily a factor in determining what is reasonable notice, I take into account for the purpose of determining this issue in the context of these proceedings that the applicant was selected for the position by persons who determined shortly after that they had made a mistake. I take this factor into account in favour of determining a longer rather than a shorter period of notice in terms of what is reasonable, although I hasten to add that this is but one factor of the several which I have identified as being of particular relevance. 44 It is a trite observation, as referred to in many decided cases that there are no scientific means of ascertaining what is "reasonable" in terms of length of notice. Reference is made to the commonsense approach characteristic of the ordinary, reasonable, hypothetical, objective bystander carefully taking into account the competing interests of employer and employee in the context of the relevant factual matrix. As with all assessments of this nature, that which is reasonable cannot be represented by drawing a single line in the sand. That which is reasonable must lie within two lines. This renders the task of identifying the parameters of reasonableness a little easier. 45 In fixing what I perceive to be reasonable for the purposes of notice which should have been afforded to the applicant by the first respondent I take into account the matters to which I have earlier referred and I have regard also to a well established line of cases in this Court and its predecessors, cases particularly such as Cukeric v David Jones Ltd (1997) 78 IR430. 46 In my opinion what is reasonable in terms of notice in all the circumstances of these proceedings is a period between 18 months and 24 months.

ENTITLEMENT TO SEVERANCE PAYMENTS 47 The applicant submitted that his position was made redundant in that Mr Wannop assumed the position of Managing Director subsequent to his dismissal and later direct responsibility for the New Zealand operation was given to another senior executive. It was said that Mr Wannop was not an employee of the first respondent but was at all times an employee of Williams plc. Accordingly, in effect, the position which the applicant occupied at the time of the termination of employment was not filled and that position therefore became redundant. 48 I do not accept that on any factual basis the position of the applicant became redundant consequent upon his dismissal. Mr Wannop performed the role of Managing Director with the General Managers of each of the business units reporting to him as was the theoretical position during the time of the applicant's employment as Managing Director. 49 There is, however, in my opinion a more fundamental objection to this aspect of the claim as formulated by the applicant. His dismissal was not occasioned by the fact that the first respondent no longer desired the position of Managing Director to be performed by anyone or by a desire by the first respondent to restructure, rearrange or rationalise the organisation of its business. The real and effective cause of the termination of the applicant's contract of employment was the perception by Mr Wannop as to the applicant's shortcomings and as to his concerns with respect to the performance of the business. 50 In these circumstances no question arises as to payment of any moneys by way of severance payment consequent upon redundancy, even allowing for the fact that this would be an appropriate matter to be taken into account in fixing what should be paid to a Managing Director upon termination of his employment.

BONUS OF $60,000 51 The factual background to this claim is set out earlier in paragraphs 10 to 14 of these reasons for judgment. 52 The applicant relied on his version of his conversation with Mr Davies. Mr Wannop disputed that version of the conversation. No affidavit sworn by Mr Davies was filed by the respondent in the proceedings, nor did Mr Davies give evidence. 53 As I have earlier indicated the question of the $60,000 bonus was not raised again between the parties until after the applicant's employment had been terminated. (see para 23 above). I have also set out the history of the negotiations between the parties post-termination of employment including the offer made by the first respondent to pay the $60,000 and the circumstances in which it was withdrawn. 54 The applicant explained his failure to raise with Mr Wannop the discrepancy in Mr Wannop's letter of 30 July 1997 concerning the circumstances in which the further bonus would be paid for three reasons. Firstly, he said that he took the words of Mr Davies at face value, secondly he thought that Mr Wannop would be discussing the bonus further with him as foreshadowed in his letter of 30 July 1997 and thirdly, he "had a significant workload at the time which overtook any close review of the precise wording used by Mr Wannop as to the basis of the bonus." 55 In cross examination Mr Munro said that the payment of the $60,000 bonus was an important matter to him and he conceded he was an experienced businessman. In further cross examination the applicant conceded the bonus was discretionary as to whether or not it would be given but insisted that if it were to be given it would be for a fixed amount of $60,000. 56 The following evidence was given by the applicant with respect to this matter: Q. In your view the agreement was you would get 60,000; nothing more and nothing less so long as Chubb was satisfied you worked hard for the transition? A. Yes. Q. And that was to be paid in early 1998? A. Yes. Q. And you accepted, did you, that that would be for working hard between the end of July 1997 and the beginning of 1998 - July 1997 to the beginning of 1998? A. Yes. Q. And that you would be paid at the same time as other executive Williams bonuses were paid? A. Yes. Q. Now, were you aware when you received this letter of what other Williams bonuses were paid? A. No. Q. Had you made any inquiries about the types of bonuses available? A. No. Q. You were then - when you received this letter you were the acting managing director, you had been offered and accepted appointment as managing director; did you not acquaint yourself with the bonuses you would have to administer for them in relation to your staff? A. Not at that point in time, no. 57 Furthermore in cross examination the applicant said that he made no note of the conversation with Mr Davies at which Mr Wannop was present, nevertheless he had a clear recollection of the conversation. 58 In cross examination Mr Wannop reiterated his view that his letter of 30 July 1997 represented the substance of what was said by Mr Davies during the course of his conversation with the applicant. 59 The burden of establishing that there was a firm agreement made by the first respondent to pay the applicant a fixed bonus of $60,000 lies on the applicant. I am not satisfied on the basis of the evidence that the applicant has discharged this burden. Given the fact that both the applicant and Mr Wannop have differing recollections as to what was said during the course of the conversation with Mr Davies, given that Mr Wannop said that he committed his understanding of what was said to writing the following day and that the applicant did not at any stage dispute what was contained in that letter I am not persuaded that the applicant has discharged the burden of proof in this regard. I do not take into account the fact that Mr Davies did not give evidence. His position as chief of the world-wide operations of Williams plc must be taken into account in determining the extent to which one might expect that he would become unnecessarily involved in the proceedings as a witness. There was evidence given in the course of the proceedings that Mr Davies resides in the UK and is based in that country. 60 In any event, the applicant conceded that the payment of the bonus was discretionary and depended upon performance of the business. There was no evidence given in the proceedings concerning the payment of bonuses generally for the 1997 year. It was the evidence of Mr Gallagher that the first respondent's performance did not meet budget for that calendar year. On this basis such evidence as has been presented in the proceedings would not allow me to find with the requisite degree of certainty that any bonus based on the first respondent's performance would have become payable in any event. 61 Accordingly, I am unable to find that the applicant had any eligibility to payment of a bonus of $60,000 as claimed by reference to any contractual provision or, indeed, any arrangement with the first respondent.

SUPERANNUATION ENTITLEMENTS 62 As set out in the documentation prepared by the applicant there are a number of components to this claim. 63 The first is that the applicant's superannuation pay out should have been calculated in accordance with a further notional two years' employment based on a claim of reasonable notice of two years. As a matter of basic principle I would only be persuaded to consider such a claim in a general sense if all of the circumstances of the employment including the termination of that employment indicated that the applicant should have remained in employment for the two years rather than having his employment terminated upon payment of an amount which equated with a period of reasonable notice. There will be cases where such an approach may be taken. Such a case was the decision of the Full Bench of this Court in Cukeric. In that case the Full Bench concluded that a reorganisation undertaken by the employer was unfair in that no proper consideration was given to the employee's future position in any new structure. Accordingly, the approach to relief which was granted by the Full Bench was conditioned on the basis that he had been deprived of an opportunity to continue in his employment with the company. The Full Bench varied the contract of employment ab initio "to provide that the employment is not to be terminated as a result of any restructuring without fair consideration first being given to Mr Cukeric's future position in any new structure." (at 462). It was on this basis that the Full Bench proposed the making of a monetary order to "reflect all elements of Mr Cukeric's package on termination, including salary, all non-salary components of the package such as motor vehicle and other benefits, superannuation contributions, statutory entitlements in respect to the further six months period, and a sum to reflect what his early retirement payment from the superannuation fund would have been had his employment so continued for a period of 18 months from 18 October 1994. Although the material available to us does not permit an actuarial calculation to be made, it enables the fixation of an amount which we consider just in the circumstances and which will give effect to our decision." (at 462). 64 The circumstances in these proceedings are, in my opinion, sufficiently different to require a different approach. A notice of termination of employment brings about an end to the employment relationship. It is the time so fixed by which a number of entitlements are then determined including annual leave and long service leave entitlement, superannuation entitlement and the like. 65 In these circumstances I see no basis for acceding to the applicant's submission that his superannuation pay out should have been calculated as if he had notionally remained in employment for a further period of two year, thus resulting in a larger pay out.

WHETHER SUPERANNUATION CONTRIBUTION A COMPONENT OF SALARY. 66 The second part of the applicant's claim under this heading attacked the amount of salary upon which superannuation entitlements was based and which should have been utilised for the purpose of calculation of the amount payable in connection with the quantification of payment in lieu of reasonable notice. 67 The applicant argued that his salary for the purpose of calculation of termination benefits was not, in effect, $300,000 per annum but should be increased inter alia by reference to certain superannuation contributions made by the first respondent to the superannuation fund which he said were in the nature of salary sacrifice. The relevant trust deeds were in evidence. The fund is a contributory one, and the principal benefits are provided by a defined benefit arrangement. The applicant as Managing Director was classified as a category A member. There was provision in the trust deed for the employer to contribute the member's compulsory contribution of 6%. The first respondent contributed in addition to the amount necessary to be contributed by it from time to time to the fund an amount of 6% of the applicant's salary of $300,000. There was tendered into evidence certain documentation concerning the applicant's salary and overall remuneration both as Managing Director and previously whilst he occupied the position of Finance Director. 68 This documentation took the form of an "Employment Cost Advice", a form devised by Mr Hawthorn to enable executives to understand the cost of their remuneration to the first respondent. Such a form dated 1 July 1993 prepared with respect to the applicant showed the following current amounts:

Salary $112,500 Company car (deemed value) $15,670 Superannuation company contribution $25,538 Home telephone (business use) provided TOTAL: $153,708 Similar advice forms were tendered into evidence with respect to the applicant for the years commencing 1 July 1994 and 1995. 69 The applicant relied on documentation which had been issued to him in connection with his salary package from 1 July 1989. That documentation indicated that for that financial year his salary package would total $77,000 made up in part of a taxable salary and the sum of $3,850 described as "superannuation sacrifice". The document prepared with respect to the year commencing 1 July1990 showed that the applicant was paid a remuneration package of $105,400 of which $74,900 was to be taxed as a salary, $26,000 was to be provided as a fringe benefit for "home improvements" and $4,500 was to be regarded as salary sacrifice payable to the superannuation fund. 70 However, this documentation and these arrangements pre-dated the applicant's appointment as Finance Director to the first respondent in early 1996 and his subsequent appointment as Managing Director. All of the documentation with respect to the appointment as Managing Director indicates that the applicant was to receive a base salary of $300,000 per annum and there is no indication of any kind that this was to be net of any other moneys receivable by the applicant and paid by way of salary sacrifice to the superannuation fund. To the contrary, the evidence indicates that the first respondent made the compulsory member contributions otherwise payable under the superannuation plan because the applicant was Managing Director. 71 This conclusion is reinforced by the manner in which the earlier salary sacrifice payments made by the applicant to the superannuation fund were treated for the purposes of that fund. There is provision in the trust deed for the payment by members of an additional percentage of salary which is credited to a "Voluntary Contribution Accumulation". Such contributions are accumulated to the account of the member and are not utilised for the purpose of funding the defined benefit payments. This is to be contrasted with the compulsory members' contributions of 6% for category A members which are used for the purpose of funding the defined benefits. As I previously indicated, those amounts were paid by the first respondent on behalf of the applicant whilst he was Finance Director and whilst he was Managing Director. 72 Mr Fernon also relied as an aid to construction of the provisions of the trust deed on clause 6 of the first schedule. This refers to benefits payable upon a member leaving employment before the "Normal Retirement Date" in circumstances where no other benefit is payable. This clause provides in part that all of the contributions made or deemed to be made by the member are to be paid out together with interest at an interest rate specified from time to time. Mr Fernon submitted that because contributions deemed to be made by the member but in fact made by the employer are to be vested in the member, this was indicative that such contributions should be regarded as salary sacrifice. I disagree with this approach for two reasons. Firstly, as I previously indicated, it is more appropriate to consider this matter by reference to the basis and nature of remuneration pursuant to the contract of employment than by reason of the treatment of remuneration for the purpose of the superannuation plan. The superannuation plan is responsive to the provisions of the contract of employment and operates upon those provisions. Secondly, my reading of the superannuation deed does not indicate that contributions deemed to be made by the member, but funded by the employer do vest immediately in the member. It is my understanding that such deemed contributions are paid into the general funds of the superannuation plan in order to fund the defined benefits payable on death or retirement after normal retirement age. It is only where a member leaves the employment service before normal retirement date that deemed contributions are paid out with interest. This is, in my experience, the usual manner in which superannuation plans of this kind operate. For these reasons I reject these submissions of Mr Fernon. 73 The applicant in his position as Managing Director was at one stage a member of the Board of Directors of the Trustee of the superannuation fund. Prima facie, therefore, he must be deemed to have been aware of the manner in which the fund operated, especially in conjunction with his accounting background and the executive positions he held with the first respondent. At no stage during the course of his employment as Finance Director and Managing Director did the applicant make any complaint about the manner in which his salary was described in terms of a basic salary package of $300,000 per annum with no specific mention of salary sacrifice by way of superannuation contributions. 74 The applicant did, however, initiate inquiries as to whether his salary for the purpose of the superannuation fund should be 106% of his approved salary together with bonuses. This was the subject of correspondence between the company secretary of the first respondent and consulting actuaries retained by the Trustee of the superannuation fund. The actuary said that "on the surface it would appear 'base wage or salary' would not include superannuation contributions but the employer can include 'other regular or recurring components' if it is approved by the Trustee". The actuary commented that he used whatever salary was advised to him by the employer at each annual review date. 75 In my opinion the principal and substantial inquiry to resolve this issue should be directed to the remuneration package received by the applicant from the first respondent. It is only by examining this package and in particular the salary component that one can then apply the results of that examination to the manner in which the superannuation fund operates. The totality of the evidence is, in my opinion, overwhelmingly to the effect that the applicant's remuneration package which he received from the first respondent whilst employed as Finance Director and, indeed, Managing Director, did not include any superannuation salary sacrifice component. Accordingly there is no justification in the applicant's claim that his remuneration for the purpose of ascertaining benefits payable on termination of employment should be increased by reference to a further 6% by way of salary sacrifice superannuation contributions.

BONUS AS PART OF REMUNERATION 76 The third component of this claim related to the bonus payment of $30,000. As I understand the evidence, the bonus payment of $30,000 was taken into account in determining the applicant's salary for the purpose of calculating superannuation entitlements but was not taken into account for the purpose of calculating annual leave and long service leave. It was not taken into account in the offer which was made by the first respondent to the applicant during the course of negotiations after the termination of employment, to which I have earlier referred. 77 This raises the question as to whether the bonus payment of $30,000, or indeed any bonus payment should be taken into account in calculating the applicant's remuneration for the purpose of assessing the quantification of payment in lieu of reasonable notice. 78 There is no doubt on the evidence that the payment of bonus was discretionary. There is some evidence of a bonus earned by another senior executive, the head of a business division of the first respondent in the 1998 year. However there is insufficient evidence to enable me to conclude that the payment of a bonus to the applicant was a regular recurring feature of his employment and that it was an integral part of the employment milieu which operated for senor executives within the first respondent. Such evidence as there is is to the effect that the bonus scheme bears none of the hallmarks which applied in Vincent v Merrill Lynch Australia Pty Ltd (2000) NSWIRComm 160. 79 In any event, a remuneration amount to be used as the basis for calculation of the payment of moneys in lieu of notice should reflect fairly the employee's actual remuneration package. I have already indicated why in my opinion payment of a bonus does not form an integral part of remuneration for the purpose of these proceedings, and in addition there is no evidence which would justify assessing any amount by reference to a bonus component which would or even probably have been earned by the applicant during a putative period of additional employment. In making this observation I am mindful that bonuses were more likely than not paid by the first respondent to senior personnel for the 1998 calendar year but such payment would not have been made until March 1999. There is simply no evidence which would enable me to assess any amount of money by reference to the 1998 bonus, even if I were inclined to do so. 80 For these reasons I decline to include any bonus component within the remuneration for the purpose of calculating payment in lieu of notice. This extends not only to the bonus payment of $30,000 which, as I have said, represented a one-off payment for achieving a particular purpose in connection with the integration of the business but applies also to the bonus payment of $60,000 claimed. I have already given reasons why in my opinion the applicant has no entitlement to this $60,000 payment.

BASIS OF CALCULATION OF ANNUAL LEAVE AND LONG SERVICE LEAVE ENTITLEMENTS. 81 The applicant claimed that three additional components should be included for the purpose of calculating these entitlements. They were firstly the $30,000 bonus, secondly the 6% deemed salary by way of superannuation sacrifice and thirdly a bonus component of $60,000. I have previously given reasons as to why the applicant's claim for 6% superannuation salary sacrifice fails and as to why the applicant is not entitled to a bonus of $60,000. This leaves only the $30,000 bonus. 82 The applicant based his claim on the provisions of the Annual Holidays Act 1944 and the Long Service Leave Act 1955. 83 Payment under the Annual Holidays Act for a period of a holiday or holidays not taken on termination of employment is based on an employee's "ordinary pay". By s 2(2)(a2) of that Act the ordinary pay is, in effect, increased by the weekly equivalent of "any amount under any bonus, incentive or other similar scheme" which the employee has received "under the terms of his employment". 84 Under the Long Service Leave Act 1955 the calculation of entitlement to long service leave is based on an employee's "ordinary pay". By (c) of s 3 of that Act, ordinary pay is defined to include the average weekly amount of bonuses received "by the worker as a worker employed by the person who is the worker's employer ….". By s 3(2)(c), " 'bonus', in relation to a worker, means any amount received by that worker under the terms of that worker's employment under any bonus, incentive or other similar scheme ….". 85 Put simply, the applicant's claim was that the bonus of $30,000 which he received was a bonus which should be taken into account in the calculation of ordinary pay as defined in both the Annual Holidays Act and the Long Service Leave Act. 86 The respondent resisted this claim on a number of bases. First, it was submitted that the applicant had not made any such claim in the course of these proceedings and the applicant was not entitled to any such relief. In order to consider this argument it is necessary to have regard to the relief sought in the further amended summons. 87 There were eight numbered paragraphs setting out the claims made by the applicant against the respondents. The first claim sought a declaration that the contract of employment and any related conditions or collateral arrangements were unfair. The second claim sought an order of variation in terms of a schedule to the summons. The schedule included within para B(c) says the following: "The company will take all steps reasonably necessary to ensure that Mr Munro receives prompt payment of all sums to which he is entitled under any applicable legislation or superannuation plans." 88 The third claim sought an order for the payment of compensation in an amount as deemed just in the circumstances. The fourth, fifth and sixth claims sought orders relating to the applicant's superannuation entitlement. The seventh claim sought an order under s 107 of the Act and the eighth claim sought an order for the payment of costs. 89 Arguably, the second claim seeking a variation in the contract of employment in the manner set out is sufficiently wide in its terms to encompass the Annual Holidays Act and Long Service Leave Act, although it arguably lacks a degree of specificity in this regard. 90 The grounds set out in the summons upon which the claims were based complained in part that the contract of employment between the applicant and the first respondent was unfair either in its terms or was rendered unfair because of the conduct of the first respondent. One of the particulars given was that "the first respondent has failed to pay to the applicant all of his accrued entitlements in accordance with the Annual Holidays Act 1944 (NSW) and the Long Service Leave Act 1955 (NSW)." 91 The summons also contained particulars of the manner in which any amount claimed was calculated and this included the fact that the applicant's base salary of $300,000 per annum, together with "6% salary sacrifice and bonus payments of $90,000 should be incorporated for the purposes of calculating accrued annual leave and long service leave entitlements ….". 92 Whilst this is not a court of strict pleading, it is obvious that respondents to actions brought under s 106 of the Act must at all times be aware of the nature and extent of the claims made against them. In my opinion the further amended summons sufficiently raises as one of the claims the basis for calculation of entitlement to annual holidays and long service leave benefits under the relevant legislation by reference to the amount of bonus which was paid. Accordingly, this submission must fail. 93 The next basis raised by the first respondent relied on the provisions of the Industrial Relations Leave Legislation Amendment (Bonuses) Act 2000. That Act was assented to on 5 July 2000 and by reasons of regulations published commenced operation on 28 June 2000. This Act amends inter alia the Annual Holidays Act and the Long Service Leave Act by providing, in effect, that from the published commencement date, namely 28 June 2000 "the ordinary pay of a worker is not to include or be increased by the amounts paid under any bonus, incentive or other similar scheme if the annual amount of the worker's ordinary pay (excluding any amount so paid) exceeds the amount prescribed by the regulation namely $120,000. Accordingly, any employee whose ordinary pay as defined exclusive of any bonus exceeds $120,000 per annum will not be entitled to have annual leave or long service leave calculated by reference to any such bonus, incentive or other similar scheme. 94 There is a proviso in s 4 of the Amendment Act so that it does not affect either any payment made before 28 June 2000 or "any entitlement to payment arising before (28 June 2000) that was the subject of proceedings instituted in a court before the commencement of this Act under the industrial relations legislation (within the meaning of the Industrial Relations Act 1996). 95 Mr Haylen submitted that any entitlement to payment for annual holidays or long service leave based on the bonus was not the subject of a proceeding as referred to in s 4(4). 96 The dictionary to the Industrial Relations Act defines "industrial relations legislation" to mean any of a number of Acts and regulations made under those Acts including the Industrial Relations Act itself, the Annual Holidays Act and the Long Service Leave Act. Mr Haylen submitted that the only means of claiming entitlement to payment under the Annual Holidays Act or Long Service Leave Act by way of proceedings instituted in a court were those means created by each Act. Accordingly, the reference to s 4(4) of the Amendment (Bonuses) Act should be confined in this way. Even if this were incorrect, in the absence of any specific order sought under either Act within these s 106 proceedings the requirements of s 4 (4) have not been complied with and accordingly no entitlement arose. 97 I should add that Mr Haylen did not concede that any claim for annual holidays or long serve leave entitlement could be brought under s 106 of the Act. However, it is clear that such a claim may be brought as part of s 106 proceedings, as confirmed by a decision of the Full Bench of this Court in Dun & Bradstreet (Australia) Pty Ltd v Robbie (1999) 91 IR 150. 98 In my opinion, once it is established that a claim for annual holidays or long service leave benefit may be brought before this Court in conjunction with s 106 proceedings, the description set out in s 4(4) of the Amendment (Bonuses) Act is satisfied namely that an entitlement to such payment has arisen before the relevant date which was the subject of proceedings instituted in a court before the commencement of the Amendment Act under the industrial relations legislation as defined in the Industrial Relations act 1996. 99 Accordingly, this submission also fails. 100 The next ground advanced by Mr Haylen referred to the annual holidays and long service leave payments which were in fact made by the first respondent to the applicant. It was the evidence of Mr Hawthorn that these entitlements were based on a remuneration package of $457,250. The sum of $457,250 was arrived at by reference to the following components: Annual salary $300,000 Value of non contributory superannuation paid at the rate of 27.5% or salary $90,750 Medical insurance $2,500 Home telephone expenses $12,000 Club subscription $2,000 Company car $40,000 TOTAL $457,250

101 It should immediately be observed that the amount of $12,000 shown for home telephone expenses was, in fact, incorrect and should have been $2,000. Accordingly the basis for the calculation of these entitlements was inflated to the applicant's advantage by the sum of $10,000. However there is also included the value of the non contributory superannuation payment of $90,750. For reasons which I have earlier advanced, non contributory superannuation payments do not, in my opinion, represent part of an employee's salary package in connection with a defined benefits fund, although they are obviously to be taken into consideration in calculating the overall cost to an employer of an employee's employment package. 102 Although no submissions were directed to this issue by either party, I am not aware of any authority which would require such superannuation contributions to be taken into account as ordinary pay for the purpose of either the Annual Holidays Act or the Long Service Leave Act. Accordingly, on this basis the applicant has been paid annual holidays and long service leave entitlement calculated on a remuneration package which exceeds his statutory entitlement by $100,750 taking into account $90,750 for superannuation and $10,000 overpayment for home telephone expenses. These figures do not take into account the value of a company car of $40,000 which was made available to the applicant for his use, and as to whether such an amount should also be taken into account for the purpose of the calculation of these entitlements. 103 Mr Haylen submitted that in all the circumstances orders should not be made for the payment of any further amount on account of annual leave or long service leave as a matter of discretion. 104 I agree with this submission. If the applicant had commenced proceedings claiming underpayment of annual holidays and long service leave entitlement because the bonus of $30,000 should have been taken into account, the first respondent would have been entitled to plead by way of defence that the applicant had received more than his statutory entitlement in any event. Any proceedings brought under either Act would have necessarily been confined to the statutory entitlement. Accordingly, to retain payment of the amount which was paid to the applicant and which exceeded his statutory entitlement, it would be necessary for the applicant to rely on some other ground such as waiver or estoppel or the like. There has been no debate in these proceedings about any such entitlement, and I do not make this observation by way of criticism because such submissions as were made by the applicant were confined to entitlement under the relevant legislation, in the manner which I have earlier described. Accordingly, in order to determine whether the applicant's claim should be acceded to in all the circumstances it is necessary to determine whether there has been any relevant unfairness in what occurred by reference to the payment of annual leave and long service leave entitlements. In that the applicant has been paid these entitlements calculated by reference to a salary package which far exceeds the amount to which he would be entitled at law even allowing for the inclusion of the $30,000 bonus, I am not persuaded that any relevant unfairness exists. Accordingly on this basis I would uphold the first respondent's submission and disallow the claim brought by the applicant. 105 Strictly, therefore, it becomes unnecessary to consider the final submission made by Mr Haylen, but in deference to the submission I shall refer to it briefly. 106 The starting point for this submission is the characterisation of the $30,000 which was paid. It was acknowledged by the applicant that this payment was a "one-off" payment which was made in recognition of the work which he had undertaken in connection with the transition period following the acquisition of the Chubb business by Williams plc. Accordingly, it was submitted that the payment of this bonus was not part of any ongoing bonus scheme which was in turn part of the applicant's contract of employment with the first respondent. Such a scheme was that described in Mr Wannop's letter which I have set out earlier in para 12 of these reasons for judgment. Mr Haylen submitted that in addition the $30,000 bonus was not part of the contractual terms of employment between the applicant and the first respondent. It was accordingly not paid "under the terms of the (applicant's) employment" and was in fact an ex gratia payment to which the applicant had no contractual entitlement. 107 It was Mr Haylen's submission that "ordinary pay" as referred to in the Annual Holidays Act and Long Service Leave Act was intended to capture the usual and regular earnings of an employee. He relied on decisions including Brain and Robinson v Goodyear Tyre & Rubber Co (Australia) Ltd (1959) AR 643, Kezich v Leighton Contractors Pty Ltd (1974) 131 CLR 362, Kucks v CSR Limited (1996) 66 IR 182 and John A Gilbert Pty Ltd v Irving (1962) AR 307 in support of this proposition. 108 I agree with this submission. Firstly the relevant provisions of the Annual Holidays Act and the Long Service Leave Act to which I have referred require that the bonus be paid "under the terms of that worker's employment". This requires a nexus between the receipt of the bonus and "the terms" of the employment. I readily concede that the reference to "employment" is not necessarily confined to contractual terms found within the contract of employment. There may be some other incident of the employment situation giving rise to the receipt of a bonus, such as an industrial instrument. However there must be some "terms" because of the use of that word. It is not sufficient in my opinion, that the receipt of the bonus be by an employee and from an employer per se. There must be some provision of some kind by reference to which the receipt of the bonus is made. This approach to construction is strengthened by the reference to "any bonus, incentive or other similar scheme." The use of the word "scheme" signifies some form of arrangement sufficiently defined for its provisions to be made known. This word is relevantly defined in the 2nd Ed of the Macquarie Dictionary as "a policy or plan officially adopted by a company, business, etc. as for pensions, loans, etc.". In my opinion the payment of a bonus on a one-off, ex gratia basis per se made to acknowledge past as opposed to future performance in the circumstances of these proceedings does not fall within the description of a scheme as used in the legislation. For this reason also I reject this claim made by the applicant.

COMPENSATION FOR RESTRAINT OF TRADE 109 The applicant's contract of employment, to the extent that it was reduced to writing, contained a provision that the applicant would not be employed in a business concern which competed with the first respondent for a period of three months after termination of employment. He claimed compensation of three months remuneration based on his total remuneration package which it was submitted should be awarded by way of fairness. I assume that the applicant's submission was that the failure to pay any such compensation on the part of the first respondent amounted to unfairness. 110 No detailed submissions were made concerning this issue on behalf of the applicant. The applicant was the Managing Director of the first respondent's business for a short period and prior to that had been Acting Managing Director and Finance Director. In my opinion a non-compete period of three months after termination of employment is reasonable in all the circumstances. I do not regard there to be any unfairness attaching to this matter.

COMPENSATION FOR DISTRESS, HUMILIATION AND LOSS OF REPUTATION 111 There can be no doubt that the applicant was distressed by the peremptory manner in which his termination of employment came about. There is no doubt in my mind that he was not specifically counselled about any shortcoming nor given any specific opportunity to improve his performance in any particular area. However I accept the evidence of Mr Wannop that he did question the applicant from time to time about the performance of the first respondent's business activities and the poor performance when compared with both the original and the amended budgets. I accept that Mr Wannop was dissatisfied with the applicant's response. It appears also from the evidence that the applicant genuinely endeavoured to carry out his duties as Managing Director to the best of his ability. The applicant submitted that the circumstances of the business did not justify his dismissal and that he was neither counselled nor given any opportunity to explain his position. He said that he had an expectation that he would continue in employment and that his termination created stress and shock, social dislocation for himself and his wife and obviously impacted upon his future employment prospects. 112 There must be a great deal of sympathy for any person in the applicant's position whose employment is summarily terminated. One can readily imagine the hurt, shock, distress and adverse impact on self esteem created by these circumstances. As against this it is necessary to balance the needs of the employer as perceived by Mr Wannop, and that unlike employees at a lesser level of management whose performance is subject to direct supervision, a managing director does not work under close supervision. Accordingly, a managing director's position may be seen on one view of it to be more vulnerable than that of employees at a lower level and it is essential for a managing director to enjoy the full confidence of the board of directors or other persons to whom he or she reports. This vulnerability is obviously exacerbated where new proprietors enter the scene. 113 Mr Wannop gave evidence that he had many discussions with the applicant and indicated that if the performance of the first respondent did not improve there would be repercussions at management level. Mr Wannop assumed that the applicant, as Managing Director, would understand that such a message was directed to him without the necessity of any more specific reference being made to the applicant's personal position. 114 Included within this general area were complaints made by the applicant concerning his inability to obtain meaningful and full time employment after his dismissal by the first respondent. Obviously his reputation would not have been enhanced by the fact that he was dismissed from employment. I accept the applicant's evidence that the fact of his dismissal may have impacted upon his future employment prospects. 115 Of course, if the applicant had accepted the consultancy which had been offered to him by the first respondent he would have been in a position of continuing association which may have countered, to some extent, any adverse assessment of the applicant by other potential employers. 116 The applicant said that he had been diagnosed with a condition called "tinnitus" in April 1994 which deteriorated particularly during 1996, 1997 and 1998. He said this condition produced a constant loud ringing/buzzing in his head and ears. He said the condition was caused by stress which he sustained at work during this period and was further aggravated by that stress. He made a claim for worker's compensation benefits which were paid. I am not sure as to the extent to which and the basis for which the applicant asserts that the causation and aggravation of his tinnitus condition should be taken into account for the purpose of these proceedings. The proceedings revolve around the termination of the applicant's employment. Whilst the applicant might be said to be alleging that his already existing tinnitus condition was further aggravated by the stress of the termination of his employment the only evidence about this is that which is provided by the applicant himself. It is usual within the litigation process in every jurisdiction, to my knowledge, for expert medical evidence to be adduced concerning matters which are outside the knowledge and comprehension of lay persons, including judicial officers. Such evidence as was given by the applicant concerning any worsening of his tinnitus condition by reason of termination is insufficiently precise for me to gauge in any meaningful way the extent to which any worsening occurred. In the absence of any supporting evidence from a medical practitioner I am not prepared to accept that the applicant's underlying tinnitus condition was aggravated by the stress associated with the termination of employment. I am unsure as to the aetiology of the condition of tinnitus and as to any part played by stress in association with that condition. 117 Mr Fernon submitted that I was entitled to rely on the applicant's evidence. For this proposition he relied on a decision of the High Court of Australia in Walker v Walker & Anor (1937) 57 CLR 630, in particular the judgment of Dixon J at 636. Those proceedings concerned the probative value of a document which was tendered into evidence. However I do not understand the judgment of Dixon J to assist in the resolution of this matter. I accept that the applicant has given evidence about his tinnitus condition. I accept the fact that he has said it, but my concern is as to whether I am entitled to take any account of what he said given that its acceptance obviously involves matters of expertise which are outside any qualifications possessed by the applicant which have been made known to me. 118 In submitting that I should disregard the applicant's evidence concerning his tinnitus condition and its aggravation Mr Haylen relied on authorities such as Reg v Whitby (1957) 74 WN(NSW) 441 and Reg v Duncan (1969) 90 WN(NSW) 150 at 156. These authorities support the approach which I have determined to take in these proceedings. 119 In any event, the matter appears to be settled by the provisions of Pt 3.3 of the Evidence Act 1995. By s 76 the evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. That is, the applicant's opinion cannot prove any causal or other relationship between his tinnitus condition and his employment, including the termination of that employment. It appears to me that none of the exceptions provided for in ss 77, 78 and 79 of the Act apply. That is, in terms of s 77 the opinion is not relevant for any other purpose; in terms of s 78 the opinion is not based on what the applicant saw, heard or perceived and, in any event it is not necessary in terms of the applicant's perception; and there is no evidence that the applicant had specialised knowledge of a kind contemplated by s 79. Accordingly, s 76 of the Evidence Act precludes anything said by the applicant from proving any necessary nexus between his tinnitus condition and his employment by the respondent including the termination of that employment. 120 There is, in my opinion, jurisdiction under s 106(5) to award compensation under this head. I refer to the recent judgment of Hungerford J in Stonham v The Speaker of the Legislative Assembly of New South Wales [2000] 97 IR 325. His Honour accepted that there was jurisdiction under s 106(5) to deal with the applicant's claim for compensation for stress and suffering and for the impairment of employment prospects and reduction in quality of life. Indeed, the present state of the authorities on this aspect would seem to favour a view that power exists to entertain this head of the applicant's claim. (par 33)

121 However I am not persuaded that in the circumstances of these proceedings that any unfairness instituted by the respondent would justify the awarding of any compensation under this head. There must be no easy way in which the circumstances of termination of the employment of a managing director can be conveyed or received. There was no evidence that the applicant sought medical advice. Such distress as suffered by the applicant dissipated over some little time and I see no specific reasons which would require the awarding of compensation under this head, assuming an ultimate finding of unfairness.

WAS THERE ANY RELEVANT UNFAIRNESS? 122 The applicant submitted that the contract of employment was unfair in the manner in which I have already stated. As I have already indicated, a finding of unfair conduct is all that is necessary based on the majority Full Bench decision in Reich. 123 On whatever approach one takes, the focus of attention in terms of unfairness must be the conduct of the first respondent at the time of the termination of the applicant's employment with particular reference to what was offered. 124 Mr Fernon submitted that the applicant was given no opportunity to answer, explain or rectify any concerns that Mr Wannop had concerning his performance as Managing Director and concerning the business activities of the first respondent. These considerations overlook, however, the fact that the applicant's contract of employment with the first respondent was one of indefinite duration terminable upon reasonable notice. In these circumstances the element of "cause" and the lack of opportunity afforded the applicant by way of counselling, and opportunity to respond do not impact upon the first respondent's entitlement to bring about a termination of the applicant's employment upon giving reasonable notice. As I have previously indicated, these are matters which may be taken into account amongst others in determining what was reasonable by way of notice in all the circumstances. 125 I have earlier set out the factual circumstances surrounding what occurred on termination and subsequently in this regard. 126 In essence, the applicant was offered the following:

1. The payment of $450,000 which equated with eighteen months of his annual salary package of $300,000.
2. Use of the applicant's company motor vehicle for six months.
3. The payment of the $60,000 bonus claimed.
4. A consultancy for a period of two years with a remuneration of $100,000 per annum.
5. Payment of annual leave, long service leave and superannuation benefits in accordance with respective statutory and trust deed provisions.
6. The provision of executive outplacement services at a cost of up to $45,000, which the applicant utilised.

127 I should add that the letter from Mr Wannop of 9 February 1998 indicated that the $60,000 offered by way of bonus would be treated as income for the purpose of the applicant's retirement benefit under the superannuation plan which would have increased the benefit payable to him. 128 In order to determine whether the relevant unfairness existed in terms of what was offered it is necessary to give consideration to the provisions of the consultancy agreement. Whilst the letter accompanying that agreement described it as a draft, the form of agreement attached to the letter had already been signed by Mr Wannop. There is no indication in any of the correspondence that the form of the consultancy agreement was open to negotiation. 129 The consultancy agreement provided for appointment as a consultant from 1 February 1998 until 1 February 2000 with provision for discussion of a renewal in the last two months of the term. The consultant was to be an independent contractor and not an employee. The duties set out in the agreement were to provide advice to the first respondent, its subsidiaries, affiliates and associated companies and to report to the managing director. The consultant was required during the term to use his best endeavours to promote the interests and welfare of the company and may be required to provide services "for up to 50 days per annum and he shall advise at times and for as long as the Board may from time to time reasonably require him. Any days in excess of 50 and the fee payable for such excess days must specifically be agreed in advance with the Managing Director." There was also provision for a non-compete clause during the period of the consultancy. A consulting fee was to be paid at the rate of $100,000 per annum payable monthly in arrears. 130 There was provision in the agreement for termination by the first respondent without notice for cause but no other provision for termination either by the consultant or by the first respondent. 131 A number of restrictions were imposed after termination of the consultancy including a non-compete clause for a period on one year. 132 The omission of any termination clause in the consultancy agreement would have resulted in the applicant being bound to the first respondent for up to 50 days in each year during a two year period. This would have curtailed his ability to obtain alternative full time employment. In my opinion this represents a substantial detriment to the applicant, albeit he was unable during the period of two years after termination of employment to obtain full time employment in any event. However, of course, his failure to do so could not possibly have been known to him as at February 1998. 133 On first impressions, the total offer made to the applicant by the first respondent on termination of his employment was an attractive one. However, as I understand the offer particularly as formulated in Mr Wannop's letter of 13 January 1998 the execution of the consultancy agreement was an integral part of the offer. Notwithstanding the fact that the offer included in addition to the use of a company car for six months and outplacement services payment of a total of $510,000 (including the $60,000 bonus offer) the fact that the applicant was required to enter into a consultancy agreement which would have precluded him from seeking and undertaking full time employment is sufficient, in my opinion, to render the total package unfair, as opposed to a package which was not unfair. This is despite the fact that the applicant could have derived income of $100,000 per annum for two years during the consultancy period. 134 Arguably, the applicant was precluded from seeking full time employment at a comparable rate of pay of, say, $300,000 per annum during that two year period and would have been disadvantaged to the extent of $400,000 over that period on this basis after allowing for the consultancy fees offered by the first respondent. 135 On one basis, if the package offered to the applicant by the first respondent on termination had not included the consultancy agreement at all, it might not be said to have been unfair, and the applicant would not have succeeded in obtaining any finding of unfairness as against the respondent and would have failed in the totality of the proceedings. 136 For the reasons stated, I find that the conduct of the respondent in terms of the package offered to the applicant on termination, which included as an essential ingredient the two year consultancy was unfair. In that the applicant's contract of employment with the first respondent permitted this to occur, it was unfair.

CONSEQUENTIAL RELIEF 137 It now remains necessary to determine what consequential relief should be afforded to the applicant pursuant to the finding of unfairness. 138 I would propose that the applicant be entitled in fairness to a payment in lieu of notice which equated with 21 months remuneration. This is in the middle of the "fair" period which I have selected and takes into account the relatively short time during which the applicant was Managing Director and the relatively short period of his total employment with the first respondent. 139 I do not propose to include within the remuneration the bonus of $30,000 which I regard as a "one off" payment for reasons earlier stated. I have rejected the applicant's claim for a bonus of $60,000 and for a notional increase in his remuneration to accommodate the 6% superannuation contribution made by the first respondent to the superannuation plan as a deemed member contribution. 140 The parties agreed that the other elements of the applicant's remuneration package were: Medical insurance $2,500 Home telephone expenses $2000 Club subscription $2000 Company car

The applicant claimed the value of the company car was $47,000 per annum. Mr Hawthorn in his evidence valued the company car at $40,000 per annum. This competing evidence was given as bald assertions without supporting documentation. Such supporting documentation as was tendered included reference to the cost of the acquisition of the applicant's new replacement vehicle in July 1997. The acquisition cost was $146,482 less a trade-in value of his existing car of $43,582 leaving a balance of $102,900. The applicant's vehicle appears to have been provided on a fully maintained basis. In the absence of more detailed evidence concerning the cost of the provision of the vehicle and its worth as part of the applicant's remuneration package I would prefer to rely on the evidence of Mr Hawthorn in this regard whose duties presumably included the costing of motor vehicles as part of the remuneration package of employees of the first respondent. Accordingly I allow the sum of $40,000 for this component of the applicant's remuneration package. 141 Mr Fernon submitted that the payment to which the applicant should have been entitled on termination should in fairness have been based upon his remuneration package and not his base salary. For this proposition Mr Fernon relied on the decision of the Full Bench of this Court in Cukeric, to which I have earlier referred and relied also on the approach taken by other members of this Court as typified by cases such as Pullen v R & C Products Pty Ltd (1994) 60 IR183 and Caine v LEP International Pty Ltd (unrep.21/10/99) IRC2441 of 1998. I accept these submissions and utilise this approach for the purpose of these proceedings. 142 Accordingly, the applicant's annual remuneration package for the purpose of calculating 21 months payment in lieu of notice should be made up of the following: Salary $300,000 Medical insurance $2,500 Home telephone expenses $2000 Club subscription $2000 Company car $40,000 TOTAL: $346,500

Accordingly, 21 months equates with an amount of $606,375. 143 As against this the first respondent should be given credit for the sum of $450,000 paid on termination together with the sum of $20,000 representing six month's value of the use of the company car. 144 In view of the findings which I have earlier made and my conclusions as to the several parts of the applicant's claim, no other compensation becomes payable.

ORDERS 145 Consequent upon the finding of unfairness which I have made I make the following orders:

1. The contract of employment between the applicant and the first respondent is varied from its beginning to provide that upon termination of employment other than for cause the first respondent shall pay the applicant an amount equal to 21 months pay based on the applicant's annual remuneration package exclusive of bonus.
2. The first respondent is to pay the applicant the sum of $136,375.
3. The first respondent is to pay the applicant interest on the amount referred to in order 2 in accordance with the Supreme Court Act from 12 January 1998 until this date.
4. The applicant's claim against the second and third respondent is dismissed.
5. In accordance with the consent position of the parties, costs are reserved.
6. Liberty to apply in respect of costs.

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