Powerlan Limited & anor v Squires

CATCHWORDS: Appeal - Unfair contract - Leave to appeal - Timing and manner of employee's termination of employment - Treatment of redundancy pay and long service leave entitlements - Notice and mitigation - Amounts to be paid by way of Notice - Misconduct and breach of contract - Appeal upheld (by majority) in part - Parties to have leave to file submissions as to costs at first instance and on appeal.

LEGISLATION CITED: Industrial Relations Act 1996 s 102 s 103 s 106 s 191 Long Service Leave Act 1955

Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 Austin v NF Importers Pty Ltd & Anor (2005) 146 IR 113 Blyth Chemicals v Bushnell (1933) 49 CLR 66 Box Valley Pty Ltd v Price (2000) 97 IR 484 Caltex Petroleum Pty Ltd v Harmer (1999) 92 IR 264 Centiad (NSW) Pty Ltd v Neil Chambers (Unreported, Spender AJ, 29 March 1995) David Jones v Cukeric at (1997) 78 IR 430 De Simone Consulting Pty Ltd v Ison (2000) 97 IR 478 English v Aradlay Insurance Brokers Pty Ltd (2005) 145 IR 129 CASES CITED: Gala v State Bank of NSW Ltd (No 2) (1998) 84 IR 216 Hivac Ltd v Park Royal Scientific Instrument Ltd and ors [1946] Ch 169 Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 Murray Irrigation Ltd v Balsdon [2006] NSWCA 253 Newton v Goodman Fielder Mill Ltd (1997) 81 IR 227 Perrott v XcelleNet Australia Ltd (1998) 84 IR 255 Squires v Powerlan Ltd and Anor [2005] NSWIRComm 354 Stevenson v Barham (1977) 136 CLR 190 Strathfield Group Ltd v Hall (2002) 121 IR 158 Westfield Holdings v Adams (2001) 114 IR 241

APPELLANT: Mr M J Kimber SC and Mr I Taylor of counsel Agnew D'Arcy Legal (Mr C Agnew) LEGAL REPRESENTATIVES: RESPONDENT: Mr I Neil and Mr D Chin of counsel Phillips Fox, Solicitors (Ms J Healy)

CORAM: WRIGHT J, President WALTON J, Vice-President SCHMIDT J

Application by Powerlan Limited and another for leave to appeal and appeal against the judgment of Justice Haylen given on 5 October 2005 and orders given on or after 24 October 2005 in Matter No IRC 5580 of 2002

JUDGMENT OF THE PRESIDENT AND VICE-PRESIDENT [2006] NSWIRComm 390

1 In this appeal by Mr Steven Squires from the judgment of Haylen J of 5 October 2005 in Squires v Powerlan Ltd and Anor [2005] NSWIRComm 354, we have had the considerable advantage of considering in its initial draft form the judgment of Schmidt J. Her Honour's succinct exposition of the background to the appeal, relevant factual circumstances and the principal submissions of the parties largely obviates the need for us to set out these matters. 2 Given our agreement with her Honour on a number of aspects of the proceedings, we propose to deal only with those issues where we reach different conclusions to her Honour. These issues relate to:

1. The timing and manner of Mr Squires' termination of employment.

2. Treatment of redundancy pay and long service leave entitlements.

We otherwise agree with the conclusions reached by her Honour as regards leave to appeal and any amounts to be paid by way of notice. Given our different approach on the above issues, we propose alternative orders. Timing and manner of Mr Squires' termination of employment

3 The critical issue in these proceedings is when and how Mr Squires' employment was terminated. It is common ground in these proceedings that circumstances of redundancy prompted the appellant Powerlan to initiate the termination of Mr Squires' employment - Powerlan acknowledged that it did not have ongoing work for Mr Squires - and it is also common ground that Powerlan's letter of 2 August 2002, which terminated Mr Squires' employment, was ambiguous and confusing. The practical effect of the 2 August letter is, in our opinion, critical to deciding the points of disagreement between the parties. 4 For convenience, it is useful to set out here the terms of the letter of 2 August 2002: I refer to our meeting of Friday 2nd August 2002 and confirm with regret that your position as Manager with the NSW Business Infrastructure Division was made redundant effective Thursday 2nd August 2002 due to operational requirements.

As indicated to you at that meeting we have taken steps to look for alternative employment both within our organisation and outside, but regrettably no suitable alternative employment is at this present moment available.

In accordance with your Agreement you will be paid three (3) months salary in lieu of service. The salary will be paid on a monthly basis, as being currently paid, over the next 3 months. At the end of the notice period, any outstanding leave will be paid into your bank account.

We would prefer for you to work your notice period, however, due to impending sale of Business Infrastructure NSW business, we would ask for you not to come to office but be available on telephone, should we require you to perform any tasks.

Finally if you wish to be provided with a Certificate of Service or an Employment Separation Certificate please do no hesitate to contact me.

Again, it is with regret that it is necessary to take this operational decision. However, I wish you success in your future ventures.

Krishnan Ravi Manager, Business Infrastructure NSW 5 On the one hand, the letter asserts that:

(a) Mr Squires' position "was made redundant effective Thursday 2nd August 2002 due to operational requirements";

(b) Mr Squires will be "paid three (3) months salary in lieu of service";

(c) "We would prefer for you to work your notice period, however, due to impending sale of Business Infrastructure NSW business, we would ask for you not to come to office but be available on telephone, should we require you to perform any tasks"; and

(d) "if you wish to be provided with a Certificate of Service or an Employment Separation Certificate please do not hesitate to contact me". 6 We consider that each of these statements point to Mr Squires' employment ending on 2 August 2002. 7 On the other hand, the letter states that "The salary will be paid on a monthly basis, as being currently paid, over the next 3 months. At the end of the notice period, any outstanding leave will be paid into your bank account". We agree with the appellant that, when combined with the requirement for Mr Squires to be available on telephone, that sentence suggested that Mr Squires was to work out his notice period and that his employment did not terminate on 2 August. 8 Thus, the important consideration that then arises is whether, in the light of the admittedly ambiguous and confusing nature of the communication of 2 August 2002, the respondent was guilty of misconduct in accepting alternative employment without advising Powerlan or whether a contract or arrangement which would be so construed would be liable to be struck down for unfairness etc in terms of s 106 of the statute. We answer these alternative propositions, respectively, in the negative and in the affirmative. 9 The reasons for these conclusions and the consequences are as follows:

(a) The letter is not sufficiently clear to warrant a finding that by taking employment with Cardlink Mr Squires engaged in misconduct sufficient to justify summary dismissal as Powerlan purported to do following the meeting held on 16 September. This effectively requires obligations from the underlying employment agreement to be restated as terms of the letter, however, we consider that the letter is too ambiguous, both as a matter of construction and as a matter of fairness to justify this approach. The letter requested that Mr Squires not come to the office but be available on telephone, should Powerlan have required him to perform any tasks. As a matter of fact, Mr Squires performed all that was asked of him during the purported notice period by attending the meeting on 16 September. The appellants contended that this gave rise to general questions as to whether a full-time employee was in fundamental breach of his or her contract of employment by taking another full-time position. Given the particular, and somewhat unusual, circumstances arising in this matter, we do not consider that it is necessary to determine that general question. In the present circumstances, to the extent Mr Squires' employment was not terminated on 2 August, he performed all that was asked of him during the relevant period.

(b) Mr Squires' conduct at the 16 September meeting in asserting that he was no longer a Powerlan employee did not amount to repudiation of the contract. We doubt that either party treated the contract as repudiated on the basis of Mr Squires' assertion that he was no longer a Powerlan employee. The employer certainly did not treat the contract as repudiated by continuing to maintain that Mr Squires' had engaged in misconduct sufficient to terminate the agreement. This assertion is clear from the terms of its letter of 18 September to Mr Squires. We note further that the ambiguity of the letter suggests that Mr Squires should not, in any event, be held to his assertion that he was no longer an employee. Given the terms of the letter, it would have been equally open to Mr Squires to argue at the 16 September meeting that he had not engaged in misconduct as the letter did not restrict him from taking another job so long as he responded to any requests from Powerlan during the relevant time - which the evidence shows he did - namely by attending the 16 September meeting. 10 The appellants contended that any ambiguity could be resolved by reference to the conduct of the parties at the time that the letter was given to Mr Squires and the subsequent conduct of the parties, including the terms of Mr Squires' email of 7 August. We do not accept that this is the correct approach. The letter needed to be clear in its terms as to the matters for which Powerlan contended its stands. It is not open to Powerlan to acknowledge that the terms of the letter were ambiguous but then submit that the actions of the parties show that it was nevertheless understood in the way it considers appropriate. 11 We note in this regard that if an employer intends to impose "gardening leave" on an employee as Powerlan contended it had, it should do so in clear and unequivocal terms; not in the indirect or implicit manner in which Powerlan contended that it purported to do. 12 Accordingly, we do not conclude that Haylen J erred in the conclusions he reached as to the way in which Mr Squires was made redundant and the effect of his subsequent employment with Cardlink. There was thus no appealable error and the findings his Honour made (at [43]) were reasonably open on the evidence. Redundancy

13 As already mentioned, neither party in these proceedings sought to argue that the circumstances in which the 2 August letter was delivered to Mr Squires were something other than a redundancy. At first instance, Haylen J found that Mr Squires' contract of employment was unfair in not providing for redundancy pay and that it should be varied to make provision for such pay. His Honour's money order had regard to the test case standard and was calculated on the basis of Mr Squires' service with Powerlan and his prior employment with Centrelink. 14 There are two issues on appeal relating to redundancy:

(a) should the contract of employment be varied to make provision for redundancy pay and, if so, what redundancy payment would be just in the circumstances?

(b) what is the relevant period of service on which to calculate redundancy pay? Variation of contract 15 The principles relating to the payment of redundancy and, in particular, the relevance of mitigation are well settled. After extensively reviewing relevant authorities, the Full Bench stated the principles in Westfield Holdings v Adams (2001) 114 IR 241 at 274 - 275 in the following terms: In our opinion, these authorities persuasively demonstrate the distinct functions to be served by awarding a payment in lieu of notice and a payment in the nature of redundancy or severance. Whilst a period of notice, or payment in lieu, is directed at supplementing the income of an employee immediately following termination, the focus of a redundancy or severance payment is to compensate an employee for the loss of non-transferable benefits and for the inconvenience and hardship imposed by the termination. This is, in our view, not merely an additional purpose, but rather the dominant function of a redundancy or severance payment. The fact that an employee may apply redundancy or severance payments to supplement the employee's income during a period of unemployment, or to support the employee and their family, does not alter the purpose of those payments being made. In many instances, an employee will, of necessity, be forced to draw on any available resources during a period of unemployment. The purpose of making a redundancy or severance payment is, nonetheless, qualitatively different to providing for the employee during this time.

The differing purposes of a payment in lieu of notice and a payment for redundancy or severance are important matters to be taken into account when considering the application of the principle of mitigation to a sum which may otherwise be ordered under s 106(5) of the Act. In our view, the principle of mitigation may be a relevant consideration in relation to an order it is proposed to make for the payment of money in connection with the failure to provide reasonable notice.

However, the principle of mitigation is unlikely to be a central consideration when assessing the appropriateness or magnitude of any payment it is proposed to make in the nature of redundancy or severance payment. As we have discussed, the function of such a payment is not merely directed at supporting an employee during any period of unemployment. It is made to compensate an employee for loss and hardship that is likely to accrue whether or not the employee is successful in obtaining reasonable alternative employment. Of course, the appropriateness of making provision for such a payment, and the size of any payment to be ordered, will depend upon the circumstances of the employment. For example, a significant redundancy or severance payment may not be appropriate where the employee has built up non-transferable benefits over a long period of employment with one employer. However, unless there are special considerations, it will not ordinarily be appropriate to reduce any redundancy or severance payment otherwise to be made in consideration of the efforts or success of an employee in obtaining alternative employment. 16 We consider that it is unfair, in the circumstances, not to provide for redundancy pay and the approach adopted by Haylen J in referring to the test case standard was open in the circumstances. Consistent with the approach taken in Westfield, we do not consider there are any special circumstances which would justify the application of the principles of mitigation to the amount of redundancy pay to which Mr Squires is entitled. What is the relevant period of service on which to calculate redundancy pay?

17 Haylen J assessed the appropriate amount of redundancy on the basis of Mr Squires' service with Powerlan and his prior service with Centrelink. In these proceedings, Powerlan contended that it was not appropriate to take Mr Squires' prior service with Centrelink into account given the clear terms of the business sale agreement under which Powerlan purchased the Centrelink business. 18 Subject to considerations of fairness, this turns on the provisions of the business sale agreement under which the Centrelink business was acquired by Powerlan and the terms on which Mr Squires came to be employed by Powerlan. 19 Again for ease of reference, we set out the relevant provisions of the business sale agreement which related to employees and the commencement of employment with Powerlan:

The Seller must before or immediately following Completion

(b) ensure that all contributions due to be made by the Seller to superannuation, redundancy, statutory compensation or other funds in respect of each Employee have been duly made; and

(c) ensure that the amount of all Employee Entitlements as at the Effective Date are paid to the Transferring Employees.

(a) The Buyer must offer employment to any existing staff of the Business at Completion on terms as favourable as the terms on which they are employed by the Seller.

(b) Such offer shall be expressed as being conditional upon Completion.

The Seller indemnifies the Buyer from and against all liabilities in respect of the Employee Entitlements of the Transferring Employees as at the Effective Date or otherwise referable to any period or event occurring prior to Completion.

The Buyer indemnifies the Seller from and against all liabilities in respect of the Employee Entitlements of the Transferring Employees failing due after the Effective Date or otherwise referable to any period or event occurring after Completion.

(a) List of Employees : Schedule 5 comprises a complete list of the employees of the Seller employed in the Business as at the date of this agreement and their respective entitlements as at that date to wages, salaries, annual leave and leave loading, long service leave, sick leave and any other remuneration, compensation or benefits.

(ii) has been paid in full by the Seller all amounts due to them (note: in the case of James Phillips, January's pay was also prepaid to him in December); and

(iii) can be lawfully terminated as an employee on 1 months' notice or less without payment of any damages or compensation, including severance or redundancy payments.

(c) Compliance : The Seller has complied with its obligations under each agreement, statute, industrial award or code of conduct relating to the employees.

(d) Employee records : The Seller has kept adequate and suitable records regarding the service of each Employee. 20 "Employee Entitlements" was defined in Attachment B as: Employee Entitlements means, in respect of an Employee, all amounts owing and due to or in respect of that Employee in respect of or under that Employee's contract of employment, whether arising under contract, statute, award or otherwise, including without limitation, wages, salary, commissions, bonuses, allowances, emoluments, annual leave, holiday pay, long service leave, sick leave, redundancy entitlements, loadings and contributions to superannuation, redundancy, statutory compensation or other funds. 21 "Employees" was defined to include those employees listed in Schedule 5. Schedule 5 contained a list of five employees (including Mr Squires) and included, in respect of each employee, their date of commencement of employment with Centrelink. 22 At the outset, we observe that there is nothing in the Business Sale Agreement which excludes the payment of redundancy. Further, having regard to the above provisions, we consider that the Business Sale Agreement is inconclusive as to whether the prior service with Centrelink ought to be disregarded in calculating redundancy pay (and, for that matter, long service leave). 23 We consider that the Business Sale Agreement is ambiguous as to its terms in the following respects:

(a) while the agreement required Centrelink to ensure that the amount of all Employee Entitlements as at the Effective Date be paid to the Transferring Employees (that is, those who accepted an offer of employment with Powerlan), which was defined to include redundancy entitlements and long service leave, such entitlements were not capable of being paid out as they had not accrued at that time and, as such, there was no current liability to pay them out;

(b) while the definition of "Employee Entitlements" included reference to redundancy entitlements and long service leave, the entitlements of such amounts to which Mr Squires was then entitled were arguably outside the definition of "Employee Entitlements" as the definition only included "all amounts owing and due to or in respect of that Employee"; (c) the notion that redundancy entitlements and long service leave were paid out (or by implication, qualifying service periods extinguished) is inconsistent with the warranty in schedule 1 (cl 9(d)) about service records, which suggests that calculation of prior service was relevant to Powerlan. The inclusion of such a warranty suggests that prior service would be carried over to Powerlan - the usual approach taken in business sale arrangements with respect to "transferring employees".

(d) clause 6.2 required Powerlan to offer employment to any existing staff on terms "as favourable" as the terms on which they were employed by Centrelink. It was accepted by the parties that there was no then present liability to pay redundancy or long service leave given how long the business had been in operation. We consider that the notion that the terms were "as favourable" carried with it the implication that the employee's period of service would be carried over to Powerlan or would otherwise be paid out. In circumstances where an entitlement was not capable of being paid out, such as those relating to periods of service which may accrue at some point in the future, the terms cannot be regarded as being "as favourable" when they implicitly carry the obligation on the employee to waive any rights to such entitlement - particularly if no reference is made to such rights being extinguished.

(e) while the agreement may evince an intent that all employee entitlements are dealt with by the seller, the mutual indemnities are unclear and could suggest otherwise (as Haylen J found). Clause 6.3 refers to "all liabilities as at the Effective Date or otherwise referable to any period or event occurring prior to Completion" while clause 6.4 refers to "all liabilities falling due after the Effective Date or otherwise referable to any period or event occurring after Completion". Depending on how any redundancy payment paid by Powerlan subsequent to Completion was considered, it could fall within both indemnities - on the one hand it would have been a liability falling due after the Effective Date but could also have been referable to a period occurring prior to Completion. We do not consider that the mutual indemnities achieve the respondent's contended position that they drew a "line in the sand" in setting responsibility for employee entitlements. 24 Finally, irrespective of the terms of the business sale agreement, on principles of fairness the period of service with the seller, Centrelink, should be counted in calculating redundancy pay. As already mentioned, any entitlement to redundancy was not capable of being paid out at completion of the business sale as there was no then present liability and to subsequently disregard that period of service, when the employment with Powerlan had been on terms as favourable as the terms of employment with Centrelink, would be unfair in the circumstances of Squires' engagement with Powerlan. To do otherwise in the circumstances would effectively mean that the offer of employment made by Powerlan contained a condition that when Mr Squires accepted employment with Powerlan he agreed to extinguish his period of service with Centrelink and any rights arising from such period. We consider that if this was what was intended it should have been done so in clear and explicit terms, particularly having regard to the requirement in clause 6.2(a) for the buyer to offer employment to any existing staff "on terms as favourable as the terms on which they are employed by the Seller". 25 Accordingly, we would dismiss the appellant's appeal in so far as it seeks to set aside orders 1(a), (c) and 2(a). Long service leave

26 For the reasons given as to redundancy pay, we consider that Mr Squires' period of service for the purposes of calculation of long service leave, should include his service with Centrelink. In the circumstances of the business sale, it is unfair to disregard this period when no payment was capable of being made at Completion to pay out any entitlement to long service leave. 27 We note in this regard that it is then a separate question as to whether the mutual indemnities would apply such that Centrelink was required to indemnify Powerlan for any such employee entitlement and one that does not squarely arise here. 28 Accordingly, we would dismiss the appellant's appeal in so far as it seeks to set aside orders 1(a), (d) and 2(c). Orders 29 We would make the following orders:

(2) The appeal is allowed in part and orders 1(b) and 2(b) made by Haylen J are set aside and consequent amendments are made to the calculation of interest in order 3.

(3) The appeal is dismissed to the extent that it sought to set aside orders 1(a), (c), (d) and 2(a) and (c) as made by his Honour.

(4) The respondent shall bring in short minutes of order within seven days reflecting the above orders, including the necessary amendment to the calculation of interest. 30 We agree, as her Honour has proposed, that the parties should be given liberty to file written submissions on the question of the costs order made below. Further, in view of the outcome in this appeal, we also propose to give the parties liberty to file written submissions on the costs of the appeal. All such submissions shall be filed by Monday 29 January 2007. If the parties cannot agree as to the timetable appropriate for that to occur they should arrange through the Registrar for the matter to be listed for directions before the President in the week commencing 18 December 2006. JUDGMENT OF SCHMIDT J 31 The respondents seek leave to appeal and appeal from a judgment given by Justice Haylen on 5 October 2005 (Steven Squires v Powerlan Ltd and anor [2005] NSWIRComm 354). His Honour found that the contract of employment between the parties was unfair, in proceedings brought under s 106 of the Industrial Relations Act 1996 ('the Act'). Mr Squires had come to be employed by Powerlan Ltd ('Powerlan') after its purchase, in 2000, of two companies which he had established in 1997 with a colleague, James Phillips. The companies were Centrelink Systems Pty Ltd and Phase Shift Technology Pty Ltd, a wholly owned subsidiary of Centrelink. The employment relationship came to an end in 2002, after Mr Squires was given notice that his position was redundant. Mr Squires claimed that his employment contract was unfair, in failing to make provision for severance payments on redundancy and adequate notice on termination. 32 Haylen J ordered the variation of the contract to provide for 6 months' notice and 17.5 weeks' severance pay on redundancy, calculated on Mr Squires' total remuneration package. He also made consequential money orders in respect of those orders, as well as in relation to pro rata long service leave and interest. 33 The questions of law said to be raised by the appeal were:

What rights, if any, do employees on 'gardening leave' have to take full-time or other gainful work during normal business hours.

Does an employee employed on a full-time basis repudiate the employment contract if he or she enters into a contract to work full-time or part-time for another person during normal business hours.

Does an employee repudiate an employment contract where the employee takes another full-time or part-time engagement during normal business hours and does not disclose that fact to his or her employer.

Whether every contract of employment is necessarily unfair whenever it makes no provision for redundancy payments and the employee is dismissed for reason of redundancy. If not, what is the principle, text or approach to be adopted when deciding whether any particular contract is unfair because of the absence of a provision for redundancy payments.

Whether, in circumstances of a redundancy, standard principles of mitigation of loss, including the rule as to avoided loss, should be applied in respect of any payment in lieu of notice.

Whether a contract can be unfair in failing to provide for redundancy payments and/or should be varied to provide for redundancy payments, in circumstances whether the respondent obtained suitable alternative employment immediately and did not lose the benefit of any, or any significant, non-transferable credits.

6. Where a person sells their own business and then becomes and employee of the purchaser, whether as a matter of law or in the exercise of the discretion to award compensation in s106 proceedings, service with the person's own business should be counted when calculating entitlements on the termination of employment with the purchaser.

The proper approach to be adopted under s106 where the parties have had a full opportunity to negotiate in relation to the agreement reached between them and where the respondent's own solicitors prepared the relevant contract(s). Haylen J's decision

34 His Honour found that Mr Squires was employed as the manager of the computer software business which he and his colleague Mr Phillips had sold to Powerlan. The contract was for three years, with Powerlan having the right to terminate the contract during its term, by the giving of three months' notice. Mr Squires' package was worth $150,500. In 2001, a downturn in the IT industry affected Powerlan's business and its ability to make work available to Mr Squires. In April 2001, it contracted with Cardlink Services Ltd, for Mr Squires to provide his services as a temporary manager. At the end of 2001, Mr Squires' employment was transferred to Powerlan Resources, although Mr Squires knew nothing of the transfer. This development was not one which affected what subsequently occurred and was not a matter raised on appeal. 35 Powerlan restructured its business in 2002 and Mr Squires was transferred to the Business Infrastructure New South Wales Division, reporting to Mr Ravi. In July 2002, Cardlink advised Powerlan that it no longer required Mr Squires' services. Discussions about the termination of his employment ensued between Mr Ravi and Mr Squires, but nothing was finalised. On 26 July, Mr Squires' work at Centrelink ceased and he returned to Powerlan, where there was little or no work for him to perform. 36 On 2 August, Mr Squires was informed of his redundancy, in circumstances where the Business Infrastructure New South Wales Division was being sold. He was given a letter, the terms of which were ambiguous, but which the parties acted upon, as if Mr Squires had been given three months' notice of termination. He was not required to attend work, but had to make himself available to Powerlan to provide his assistance. 37 On 2 August, Mr Squires sought a position with Cardlink. He commenced work with Cardlink as a consultant on 5 August. On 7 August, Powerlan sold its Business Infrastructure division. Powerlan later became aware that Mr Squires was working for Cardlink. On 16 September, it advised Mr Squires that it took the view that he was in breach of his contract, which was then summarily terminated. Mr Squires' view at that time was that his employment had already been terminated by Powerlan and could not be terminated again. On 1 October, he was employed in a permanent position by Cardlink, on a salary package worth some $30,000 less than his Powerlan package. 38 Haylen J noted that there were various issues which he was called upon to decide, including what the terms of the contract were; the identity of the employer; what notice was given on termination; what payments were made; and what occurred when the contract was terminated for breach. 39 At [32] Haylen J observed that:

There was no issue between the parties that the applicant had been made redundant on 2 August 2002 and that the employment contract was silent in relation to the manner with which redundancy would be dealt. The applicant ultimately received one month's pay as notice. 40 His Honour noted that Mr Squires relied on the provisions of s 102 of the Act, to argue that his prior employment in the Centrelink and Phase Shift businesses which Powerlan had purchased, was required to be taken into account in calculating his long service leave entitlements on termination of his employment by Powerlan. That provision was also relied upon for the purposes of the notice and redundancy claims which Mr Squires advanced. 41 His Honour noted at [35] that the appellants' case was not much directed to the fairness of the contract in failing to make provision for redundancy pay, but rather focussed attention on 'disqualifying factors that would result in no finding of unfairness being available and no further payments being required to be made to the applicant.' His Honour concluded at [36]:

Those matters will be addressed in due course but it is appropriate to commence with a consideration of the fairness of the contract in not providing redundancy pay. Having regard to the position held by the applicant in the Centrelink business, the transfer of his employment to the Powerlan business, the requirement for him to remain in employment with Powerlan for three years, the near autonomous operation of the Centrelink business within the Powerlan group by Mr Squires and Mr Phillips, the status of the position held by Mr Squires at termination and the payment arrangements (being substantially by share allotment) which tied the value of the sale of the business to the continued profitability and share market price of the respondents and the continued input of Mr Squires to achieve profitable results, and Mr Squires' age and the fact that there was still seven months of the three year period to run when he was terminated, I consider that the claim for six months' notice on being made redundant is not unreasonable. Such a period is in reality, a fairly modest claim which is justified by consideration of concepts of fairness and reasonableness and by reference to the expectations of the ordinary person: the contract was unfair in its terms by not providing six months' notice in circumstances of redundancy. This is an entirely orthodox approach supported in numerous cases decided under this provision, but see, for example, the Full Bench judgment in Gala v State Bank of NSW Ltd(No 2) (1998) 84 IR 216. 42 His Honour next turned to consider the 'applicant's submission that, in the calculation of entitlements arising from his redundancy, credit should be given for the period of employment with the Centrelink businesses' [37]. 43 Under the purchase agreement, employees' accumulated entitlements had to be paid out on the sale by the vendors. There were no entitlements to redundancy or long service leave then due to be paid to employees. Mr Squires took up employment with Powerlan, being bound to that employment for three years. His Honour concluded at [37] that:

Ultimately, I think the key to this issue is the fact that the business purchase agreement clearly contemplated the transfer of employees to the first respondent and only the payout of accumulated and then due amounts for redundancy and long service leave by Centrelink and Mr Squires. At this point, there was no redundancy payable, nor was there long service leave payable. In those circumstances, I think it is appropriate that, in calculating what is fair in the arrangements for providing payments on redundancy, prior service should be credited to the applicant. Some support for this approach appears from the terms of clause 6.4 of the business purchase agreement. That clause indemnified the seller (Centrelink) against all liabilities in respect of employee entitlements of transferring employees falling due after the effective date or otherwise referrable to any period or event occurring after completion. In relation to Mr Squires, the was no liability for Centrelink to pay long service leave or redundancy - those liabilities only arose after the transfer of employment to the first respondent. These were liabilities falling due after the effective date and related to an event occurring after completion, namely the redundancy of Mr Squires. In this way it might be said that clause 6.4 operated on the basis (or was open to operate on the basis) of giving transferred employees credit for service with Centrelink but only in relation to liabilities that crystallised after the date of completion. It should be stated that even if this approach is not an accurate description of the operation of clause 6.4, fairness requires that the contract be varied to recognise prior service for the purposes of calculating long service leave and redundancy, given the factors previously referred to and in particular the transferred nature of the employment. 44 Haylen J then turned to the disentitling matters raised by the respondents. He took the view at [38] that: …there was nothing in the contract of employment with the first respondent that required the applicant to work solely and exclusively for the first respondent, nor did it require him to obtain the first respondent's consent before taking up some other, unrelated, employment. The contract of employment required the applicant to devote "substantially" the whole of his time and attention during the ordinary hours in the discharge of his duties. There was clearly room for him to undertake other tasks so long as he was "substantially" so employed. At the time of his redundancy, and for a considerable time before that, the first respondent, and probably the second respondent so far as it is relevant, had no work within their businesses for the applicant according to his statement of duties and the only work available was performing unrelated tasks for Cardlink. It was this very fact that caused the respondents to terminate the applicant for redundancy. 45 As to the letter of 2 August, his Honour observed at [39] that it was ambiguous, but that:

The second respondent purported to pay out the three months' salary in lieu of notice on a monthly basis rather than in a lump sum and then to pay outstanding leave at the end of the three month period. While this suggests that the applicant might be working out the notice, the letter then went on to say that the second respondent would prefer the applicant to work the notice period, however, due to the impending sale of the business infrastructure division, he was not to come in to the office but to be available on the telephone should he be required to perform any tasks. The structure of this sentence is also ambiguous, but seems to operate from the premise that the second respondent had a preference for the applicant to work out his period of notice but, because the division was to be sold, he was not to come to the office but might be called on the telephone to perform unspecified tasks in relation to a division that was in fact sold five days later. At best, this seems to be a short term requirement or it might simply be the second respondent attempting to space the period over which the payments had to be made and holding the applicant to perform incidental tasks in the unlikely event that they occurred but, nevertheless, giving him three months' salary "in lieu of notice". The finality of the arrangement appears to be concluded by the second respondent's offer to provide the applicant with a certificate of service or an employment separation certificate, documents that were not to be provided at the end of three months but, it appears, immediately if they were desired by the applicant. 46 Haylen J concluded at [40] that 'the preferable construction ultimately is that Mr Squires was being given salary in lieu of notice because of the sale of the division and was not to attend the office. There was, in fact, no work for him to perform.' 47 His Honour further concluded at [41] that even if the letter could be construed as giving actual notice, taking up employment with Cardlink did not evidence repudiation of his employment contract with Powerlan, or a breach of a direction to remain available to perform work. His Honour found there was no evidence of any refusal to perform work or failure to respond to any request made. Mr Squires responded to the only request made of him, which suggested that 'he was able to make time to attend to other matters such as any discussion that the respondents might wish to have with him.' 48 His Honour noted that prior to the dismissal for misconduct, the parties had discussed Mr Squires resigning and taking up employment with Cardlink or any other of the respondents' clients. His Honour described the dismissal as 'ham fisted' and posed the question at [42]:

Bearing in mind that earlier conversation, how could it be, just a few weeks later, that Mr Squires had misconducted himself by taking that very course? He had been told by Mr Ravi that it was a course open to him and that work with those clients did not pose any conflict with the interests of the respondents: yet that was the very reason, according to Mr Baker's oral evidence, that he was dismissed for misconduct. 49 Having this evidence in mind, Haylen J concluded at [43] that Mr Squires' conduct had not disentitled him to 'being paid a proper sum for being made redundant by the respondents'. 50 His Honour also dealt with the difficulty posed by the purported unilateral transfer of Mr Squires from the employment of Powerlan to Powerlan Resources, which the parties accepted was not effective. In those circumstances, termination of the contract by Powerlan Resources raised obvious difficulties - the decision to make him redundant in August and to terminate his contract for misconduct, was not made by the legal entity which employed Mr Squires. At [44] Haylen J concluded that 'Ultimately, I do not find it necessary to resolve these issues but they form part of the unsatisfactory background to the dealings between the applicant and the respondents.' These matters were not raised on appeal. 51 Haylen J dealt with the quantification of the long service leave claim and various other claims not necessary here to deal with and then turned to the question of mitigation. His Honour concluded at [50] that as to severance pay, 'the standard to be found in Sch 1 of the Employment Protection Regulation 2001' should apply, this amounting to a payment of 17.5 weeks. 52 As to mitigation, after referring to English v Aradlay Insurance Brokers Pty Ltd (2005) 145 IR 129 and Westfield Holdings v Adams [2001] 114 IR 241, Haylen J took the view at [50] that:

In relation to the period of notice, I have already held that the contract of employment should be varied to specify a period of 6 months' notice in the case the applicant being made redundant. Having regard to the principles of mitigation, I believe that this is a case where, notwithstanding the difference in employment, the different status of the employment and the lower rate of pay, there should be some reduction in this period of notice to take account of the amounts earned by Mr Squires in his new employment with Cardlink. In my view, the justice of this case would be met by a period of four months' notice for which credit would need to be given for the one month already paid by the respondents.

53 It was the appellants' case on the question of leave to appeal, that the decision demonstrated serious errors of law, with wider implications for the jurisprudence of the Court, which warranted leave being granted, as a matter of public interest. These included the failure to apply principles of mitigation as provided by the Full Bench in Aradlay; whether an employee who has been given notice of termination and who takes up other full-time employment during the notice period is in fundamental breach of contract; whether a person who has sold a business for a substantial sum is thereafter entitled to rely on service in that business, for the calculation of long service leave and redundancy pay when employed by the purchaser; whether the provisions of the sale agreement which provided for an indemnity in favour of the purchaser for such claims, could leave open the claim by the vendor against the purchaser as a former employee in the business; and whether it was appropriate to increase a notice period on account of redundancy, when redundancy pay was also ordered. 54 It was argued that Mr Squires' employment did not terminate on 2 August. He was given notice of termination that day. It was in those circumstances that taking up full-time employment with Cardlink on 5 August and not informing the appellants of that fact amounted to a fundamental breach of his employment contract, which negated any entitlement to notice, redundancy pay or long service leave. It was submitted that Haylen J had erred in the 'primary view' that he had come to, that the employment had ceased on 2 August. In particular, his Honour erred in not coming to a final conclusion as to the date on which the employment ceased, which led him into other error. 55 Even if the letter of 2 August was ambiguous, it was submitted that Mr Squires' contemporaneous record of what had occurred, in an email written on 7 August, confirmed that he too understood that he had been given notice and that his employment was not to come to an end for a further three months. Haylen J had failed to pay regard to this evidence. Other documents in evidence also confirmed that understanding, which was also supported by evidence given in the proceedings, including answers given by Mr Squires in cross examination. 56 Given the fundamental error into which his Honour fell, proper consideration was not given to the consequences of Mr Squires' conduct in taking up employment with Cardlink on 5 August. Mr Squires' services had been provided to Cardlink at a rate of $750 per day. Cardlink terminated the arrangement, preferring to employ someone directly in the position. The appellants sought to retain the contract, by offering to reduce the fee to $575 per day, but that was refused by Cardlink and their contract came to an end on 29 July. While there was some evidence of the possibility of his employment by Cardlink being discussed between it and Mr Squires in July, when on 2 August Mr Squires was advised of the redundancy, he immediately contacted Cardlink and was offered a position, which he accepted and he commenced work for Cardlink on 5 August. 57 The evidence showed that Cardlink required an immediate start. Mr Squires initially provided his services as a contractor. On 7 August, Mr Squires sought, unsuccessfully, to have Powerlan agree to end his employment immediately. He did not inform Powerlan of the position he had taken with Cardlink, or seek a release. 58 Powerlan became aware of the position later in August. Mr Squires was then being paid both by it and Cardlink. Powerlan sought an explanation and having received no satisfactory explanation, acted to terminate the contract for breach. 59 In concluding that taking up this position involved no breach, Haylen J took into account an irrelevant consideration - namely, that earlier in July Powerlan had indicated that it would not object to Mr Squires taking up employment with Cardlink, or one of its other clients, after his employment came to an end. That discussion occurred in a context where Mr Squires' employment was to end with only one month's actual notice, that involving him agreeing to a lesser notice period than that to which he was contractually entitled. The result of Mr Squires' conduct was to deprive Powerlan of revenue from his services during the notice period. 60 It was further argued that his Honour had erred in varying the contract to provide for a 6 month notice period. The contract provided for a 3 month notice period in circumstances where Powerlan had acquired the business for $1.25 million, which included over $1 million for goodwill. Mr Squires had been advised by Gilbert and Tobin solicitors, on the terms of the sale and the employment contract. The contractual terms agreed struck a fair balance between the parties, given the totality of their agreement. 61 It was also argued that given the approach adopted by his Honour in fixing a 6 month notice period on account of redundancy, as well as providing for redundancy pay, double counting had resulted. 62 It was also argued that his Honour had erred in having regard to Mr Squires' prior employment in the business sold, in calculating the various entitlements dealt with. Mr Squires had already been rewarded by the sale price negotiated, for the work he had put into developing the business. The purchase agreement did not contemplate such service being taken into account in his future employment with Powerlan. It indemnified Powerlan against such claims. 63 As to mitigation, it was submitted that despite citing the authorities which bound him, his Honour failed to apply them to the circumstances of this case. Mr Squires mitigated any loss he may have suffered in relation to notice, by the employment he took up with Cardlink. During the 6 month notice period ordered, Mr Squires earned more than he would have earned in his employment with Powerlan, if given such a period of notice by it. It followed that no money orders should have been made in his favour on that account. 64 Mr Squires' case was that Haylen J had not concluded that the employment had terminated on 2 August and that his conduct had not repudiated the contract. The 'primary view' expressed by his Honour, that the employment had been terminated on 2 August, was submitted to be available, on the ambiguous terms of the letter itself. The appellants' reliance on the subjective views of the parties, did not demonstrate that his Honour's view was erroneous. The incoherent nature of the letter understandably resulted in some confusion on Mr Squires' part. There was no appealable error in the conclusions reached. 65 An appeal under s 191 of the Act was an appeal stricto senso. The Court was confined to correcting error and in the case of inferences to be drawn from established facts, was constrained to circumstances where the findings at first instance were erroneous, through 'incontrovertible facts or uncontested testimony' or where the decision was 'glaringly improbable' or 'contrary to compelling inferences.' 66 It was submitted that the finding that there had been no misconduct or repudiation of the contract when Mr Squires accepted employment with Cardlink, was a finding open on all of the evidence, including the express terms of the contract itself and the letter of 2 August. Mr Squires had obeyed all of the appellants' directions. There was no implied term known to law which prohibited an employee from undertaking alternate employment otherwise compatible with the discharge of their obligations to the first employer. "[T]he touchstone for ascertaining whether an employee has breached his or her implied duty of fidelity and good faith to an employer so as to amount to a repudiation of the employment contract is the question whether the conduct of the employee itself involves an incompatibility with the fulfilment of his or her duty to the employer, or a conflict between his or her interest and his or her duty to the employer, or an impediment to the faithful performance of his or her obligations, or is destructive of the necessary confidence between employer and employee (Blyth Chemicals Ltd v Bushnell (1933) 49 CLR 66 at 81-82; Hivac Limited v Park Royal Scientific Instruments Limited [1946] 1 Ch 169, [1946] 1 ALL ER 350 at 354; Cementaid (NSW) Pty Ltd v Chambers (NSWSC, unreported, Spender J, 29 March 1995). " 67 The appellants referred to Mr Squires as being on 'gardening leave'. It was argued that the fact that he earned supplementary income by taking up alternative work during such leave, did not result in any conflict with his obligations to the appellant. It was open to his Honour in that regard, to pay attention to the earlier discussions in July, in which the appellants had indicated it had no objection to Mr Squires working for Cardlink or any other customer. 68 The allegation that Mr Squires diverted to his own account work which otherwise would have been done in the name of the appellants, was not argued below and thus could not now be raised on appeal. The allegation was made by Mr Baker in cross examination, but not pursued in submissions. 69 In any event, the appellants sold the division in which Mr Squires worked on 7 August, so in taking up work with Cardlink, Mr Squires was not taking on work within the sphere of the appellants' business operations. 70 As to the challenge to the exercise of the discretion to award six months' notice, it was argued that Haylen J properly took into account the business arrangement under which Mr Squires came to work for the appellants and the fact that he had received legal advice. There was no double counting in the conclusions reached, even if there were common factors contributing to or manifesting the unfairness of the contract, in relation to both redundancy pay and notice. It is well settled that termination of employment on the ground of redundancy attracts special consideration and separate and additional benefits to that of fair notice - see Westfield Holdings at 275; Newton v Goodman Fielder Mill Ltd (1997) 81 IR 227 at 238. There was no serious challenge to the conclusion that prior service in the business ought to be taken into account and that conclusion was supported by s 102 of the Act. 71 As to mitigation, it was submitted that Haylen J exercised a permissible discretion to reduce the amount of notice otherwise deemed fair. Notice was reduced by 2 months, a conclusion open and consistent with the approach in Westfield Holdings. 72 In reply, it was submitted that the respondent had not refuted the submission that he had fully mitigated any loss flowing from the failure to be given six months' notice of termination. No mathematical basis to support the money order of four months' pay was advanced. It was not open to argue that his Honour was entitled simply to ignore that the loss was fully mitigated, given the work taken up with Cardlink. It followed that the exception discussed in Westfield Holdings at [146] did not apply - as that was confined to circumstances where alternative employment was found, but not taken, because it was not reasonable. His Honour did not properly take mitigation into account as s 106(6) required and as the Full bench in Aradlay discussed at [36] to [38]. Had he done so, he would have dealt with the fact that there was no actual loss, during the 6 month period. 73 The respondent's submissions also failed to deal with the other evidence which confirmed that employment did not cease on 2 August. The suggestion that Mr Squires was confused, was contrary to the evidence, in which he expressed his very clear understanding that his employment remained on foot. 74 As to the constraints on an appeal bench dealing with findings of fact, the position here was that Haylen J made no findings on crucial questions. Rather he proceeded on a 'primary view', which was erroneous and contrary to compelling evidence. 75 It was submitted to be well settled that taking on a second full-time job amounted to a fundamental breach of contract, because the employee was no longer ready, willing and able to perform full-time work for the employer; failed to act in accordance with their duty of fidelity and good faith and acted in a situation of conflict of interest, by taking salary secretly from someone else, destructive of the necessary confidence required between an employer and an employee. In this case, it was inconsistent with an express term of the contract, which was not affected by the letter of 2 August, because that letter required the respondent to remain available to perform his duties. The negotiations in July did not assist the respondent, showing that it did not wish Mr Squires to work for Cardlink while still employed by it. 76 Submissions as to repudiation were advanced in broad terms at first instance, contrary to the respondent's submissions. The respondent also did not answer the submission that there had been double counting for redundancy, in the money orders made. The exercise of the discretion miscarried and was not assisted by the provisions of s 102 of the Act. 77 The parties filed further written submissions as to the money sums actually paid to Mr Squires by Powerlan and Cardlink after 2 August and how the making of money orders ought to have been approached, in the light of that evidence. Further submissions were also filed in relation to the question of a managerial employees' obligations to disclose misconduct.

Consideration 78 It is well settled that leave to appeal will never be lightly granted and not when the issues in the appeal have already been the subject of authoritative pronouncement, or when the issues raised on appeal were not argued at first instance. An appeal bench is ultimately concerned with correction of error. (See Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 at 381; Perrott v XcelleNet Australia Ltd (1998) 84 IR 255 at 265; De Simone Consulting Pty Ltd v Ison (2000) 97 IR 478 at 482; Caltex Petroleum Pty Ltd v Harmer (1999) 92 IR 264; Ace Business Brokers Pty Ltd v Phillips-Treby (2000) 100 IR 420 and Strathfield Group Ltd v Hall (2002) 121 IR 158 at [45].) 79 It is also well settled that 'some issue of real significance in the interests of justice will need to be identified for such an application to succeed.' (See Austin v NF Importers Pty Ltd & Anor (2005) 146 IR 113 at [4].) If an appeal seeks, by and large, merely to challenge findings of fact or the exercise of a discretion, it will face a significant hurdle in obtaining leave. (See Box Valley Pty Ltd v Price (2000) 97 IR 484 [4].) 80 I am satisfied that given the issues here arising, that this is a case where leave to appeal should be granted as a matter of justice, for reasons which I explain below.

The date of termination of the employment 81 A fundamental question between the parties, which his Honour did not ultimately resolve in his judgment, was the date upon which Mr Squires employment came to an end. This was an important question, for a number of reasons, including in relation to the calculation of the money orders to be made. Haylen J indicated that his 'primary view' was that Mr Squires' employment was terminated on 2 August, the claim which Mr Squires advanced in the proceedings. His Honour also considered the position which the appellants pressed, namely that it gave Mr Squires three months' notice of termination in August, leaving it free to terminate the contract summarily in September, when his employment with Cardlink came to light. 82 The appellants argued that Haylen J erred in not coming to a final view on this issue, because it had an impact on his Honour's approach to the determination of the fairness of the contract and ultimately led his Honour into error in the conclusions reached and the orders made. On the evidence, I take the view that the appellants' submission must be accepted. 83 The evidence showed that it was Mr Squires who first approached the appellants about being paid 'to go', as early as May 2002. The employment contract was for a fixed term of 3 years; it permitted the appellants to terminate earlier on the giving of three months' notice and it bound Mr Squires to a restraint, after termination. He had no right to resign from the employment during its term. Mr Squires advanced no complaint that the contract was unfair, in not giving him that right, understandably in the context of the sale of the business which accompanied his employment. Accordingly, in May 2002, the contract had until February 2003 to run. 84 At that point, the appellants' business, acquired under the purchase agreement had been affected by the downturn in the IT industry. Rather than exercising its right of termination under the contract, the appellants had found work for Mr Squires with Cardlink. Understandably he made no complaint about that in the proceedings. It was obviously an approach which had been to his advantage. 85 While terms upon which Mr Squires would be let go were later discussed, no agreement for early termination was, in fact, reached by the parties. Mr Squires was advancing claims as to leave entitlements calculated by reference to his employment in his former business, which Powerlan did not accept it had responsibility for, given the terms of the sale agreement. Ultimately, Mr Squires advised Powerlan that he was not prepared to resign his employment, as Powerlan was suggesting he do, on his legal advice. 86 On 29 July 2002, the contract between Cardlink and Powerlan came to an end, as did Mr Squires' engagement with Cardlink. Cardlink wished to employ someone direct. Powerlan had offered to reduce what it was charging for Mr Squires services, but Cardlink did not agree and so their contract came to an end. On 1 August, Mr Squires sent Mr Ravi an email at Powerlan, which provided:

It appears that there is no useful work here for me at the moment and I think that my time in the office is futile so it(sic) you have no objections then I will not attend the office on a regular basis until you find me some work to do. When you have please call me and I will return immediately.

Steve 87 On 2 August, Mr Ravi met with Mr Squires to inform him of his redundancy and gave him the letter which gave rise to the debate in the proceedings, as to whether or not his employment with Powerlan came to an end that day. It provided:

I refer to our meeting of Friday 2nd August 2002 and confirm with regret that your position as Manager with the NSW Business Infrastructure Division was made redundant effective Thursday 2nd August 2002 due to operational requirements.

As indicated to you at that meeting we have taken steps to look for alternative employment both within our organisation and outside, but regrettably no suitable alternative employment is at this present moment available.

In accordance with your Agreement you will be paid three (3) months salary in lieu of service. The salary will be paid on a monthly basis, as being currently paid, over the next 3 months. At the end of the notice period, any outstanding leave will be paid into your bank account.

We would prefer for you to work your notice period, however, due to impending sale of Business Infrastructure NSW business, we would ask for you not to come to office but be available on telephone, should we require you to perform any tasks.

Finally if you wish to be provided with a Certificate of Service or an Employment Separation Certificate please do no hesitate to contact me.

Again, it is with regret that it is necessary to take this operational decision. However, I wish you success in your future ventures.

Krishnan Ravi Manager, Business Infrastructure NSW 88 On Mr Squires' first affidavit, he and Mr Ravi had the following conversation on 2 August when he was given the letter:

During the meeting, after I read the letter referred to at paragraph 70, there was conversation between Mr Ravi and me to the following effect:

Squires: 'I don't think you can put me on call and pay me out in stages like that. If you make me redundant then you have to pay me now.'

Ravi: 'I have checked this out with the company's solicitor. I'm told that it's within our rights to ask you to fulfil your contract obligations.'

Squires: 'I will check this out myself and get back to you. 89 Mr Squires never revisited this issue with Mr Ravi. Mr Squires explained that on 2 August he immediately approached Cardlink about taking up employment with it, because:

I was concerned about my future employability. There had been a major downturn in the IT industry since the 'Year 2000' problem and the 'Dot Com crash'. I knew of many people who had been in the IT industry for 20 years or more and who were out of work and looking for work for over 6 months.

I decided that my only opportunity for further work would be to apply for the position which I had previously held at Cardlink, but this time employed directly at Cardlink. 90 In cross examination, Mr Squires revealed that he advised Cardlink on 2 August that Powerlan had terminated his employment. He also confirmed, however, that his understanding of the contents of the letter he was given that day was that he had been given three months' notice of termination and was required to be on-call during that period and to remain an employee of Powerlan. He also explained that despite this, he no longer regarded himself to be a Powerlan employee. 91 While the 2 August letter is somewhat ambiguous, that what was intended was to give Mr Squires his contractual three months' notice and that he understood that this was what was being done, became apparent from the way in which both Mr Ravi and Mr Squires conducted themselves. At the outset, Mr Squires told Mr Ravi that he doubted that he could be given such notice and would take legal advice. Mr Ravi said that Powerlan's advice was that it could give such notice, understandably given the terms of the contract, which did not permit it to make a payment in lieu of notice to Mr Squires. 92 Mr Ravi sent an email on 2 August to Ms Leon at Powerlan HR, advising that Mr Squires would be 'working through his notice of 3 months'. Mr Squires' sent an email on 7 August, to Mr Giannopolous, the Company Secretary and Ms Leon, asking that the way in which his redundancy was being handled be reconsidered. In the email, he said, amongst other things:

I was made redundant on Friday 2nd August and was asked to work out my 3 months notice period but not to attend the office but be on call in case I was needed. This means that Powerlan will pay my salary for the next 3 months and that I will accumulate 1 week more holiday. Powerlan will pay 9% super plus payroll tax and more for log service leave. All of this will be taxed at normal rates.

If I was made redundant and not required to work out the 3 months it would save Powerlan the holiday pay, super, payroll tax and extra long service leave.

If it was payed out as an ETP then I would be better off tax wise as described below. 93 This email put beyond doubt that Mr Squires' understanding of what Powerlan had done, was the same as that of Mr Ravi. He was not challenging its right to give him notice, understandably, given that Powerlan had no right under the employment agreement to make a payment in lieu of notice to him. The parties were free to agree to that course, if they wished and that was what Mr Squires was raising. 94 Mr Squires had taken legal advice about his position previously. The email confirms that he plainly understood that he was being required to work out his notice, as his contract required, remaining on-call to provide any advice required of him, but otherwise not being required to perform work. This the parties termed 'gardening leave'. Mr Squires was asking Powerlan to take a different course - to pay him out instead and was arguing that would be to their mutual benefit. What Mr Squires did not reveal when making this suggestion was that on 2 August he had told Cardlink that his employment had been terminated, nor that he no longer regarded himself to be a Powerlan employee. That this was his attitude was not revealed to Powerlan until some time later. 95 Mr Squires later pursued Ms Leon, to enquire whether Powerlan had considered his request, but by then it had become aware that he was working for Cardlink. Mr Squires had not revealed to Powerlan that he had already taken on a full-time position with Cardlink. Powerlan had never agreed to his suggestion that he be paid in lieu of notice. It follows that the notice he had been given on 2 August continued to run. He thus was to remain an employee of Powerlan, until the notice period expired in November. Despite this, on his evidence Mr Squires regarded himself no longer to be a Powerlan employee and acted accordingly. 96 Contrary to the view expressed by Haylen J as his 'primary view', I am satisfied that the evidence left no doubt that in accordance with the parties' written contract, on 2 August Powerlan gave Mr Squires the three months' notice it was obliged to give him and that was what Mr Squires understood had occurred. Although, when first given the notice, he disputed that Powerlan was entitled to give him such notice, his email of 7 August showed that he understood that this was what Powerlan had done. While the 2 August letter was somewhat ambiguous, the construction that notice was being given was plainly open on the face of the letter. In any event, the evidence showed that was what the parties each understood the letter to mean. It follows that there was, in fact, no confusion about that matter, when Mr Squires received the letter on 2 August. It was however, a position which, on the one hand he tried to have Powerlan alter, with its agreement and on the other, he did not accept, even though Powerlan did not agree to his suggestion of 7 August. 97 When Powerlan directed him to attend its offices in September, after learning that he had taken a position with Cardlink, Mr Squires complied. That was consistent with his contractual obligations, which expressly required him to comply with Powerlan's directions. He asked Ms Leon if the meeting was to discuss his leave claims, but he was told that it was to discuss his gross misconduct. When he was advised at the meeting on 16 September that Powerlan viewed his taking up the Cardlink position to amount to misconduct, he asserted that his employment had been terminated on 2 August and could not be terminated again. That was inconsistent with what Mr Squires had written in his 7 August email, but it was the claim later pressed in these proceedings. 98 I am satisfied that such a claim was not properly open, given the evidence of what in fact had occurred on 2 August, as Mr Squires' affidavit and oral evidence and his email of 7 August confirmed. Three months' notice of termination was given that day by Powerlan, with the contract due to come to an end in November. The contract was brought to an end earlier, on 16 September, when Mr Squires was dismissed summarily, upon Powerlan becoming aware of what it viewed to have been Mr Squires' repudiation of his contract, by taking up a position with Cardlink on 5 August.

Notice and mitigation 99 Haylen J varied the contract to require Powerlan to give Mr Squires six months' notice, taking the view that the three months' notice of termination which the parties had agreed when Powerlan purchased Centrelink and Phase Shift and employed Mr Squires, was unfair when the employment later came to an end in circumstances of redundancy. Mr Squires had agreed to work for Powerlan for three years, unless it earlier exercised the right to terminate his contract by giving him three months notice, or the contract being terminated summarily for misconduct or breach, amongst other matters. His Honour concluded that the contract was unfair in so providing, even though on Friday 2 August, when he was given that notice, Mr Squires the same day approached Cardlink and obtained a full-time position with it, as a contractor, on the same rate he was being paid by Powerlan. He commenced that work the following Monday. The result was that until the employment came to an end in September, Mr Squires doubled his income. 100 His Honour's conclusion that fair notice was six months in the circumstances of this contract, rested on a number of considerations:

36 Having regard to the position held by the applicant in the Centrelink business, the transfer of his employment to the Powerlan business, the requirement for him to remain in employment with Powerlan for three years, the near autonomous operation of the Centrelink business within the Powerlan group by Mr Squires and Mr Phillips, the status of the position held by Mr Squires at termination and the payment arrangements (being substantially by share allotment) which tied the value of the sale of the business to the continued profitability and share market price of the respondents and the continued input of Mr Squires to achieve profitable results, and Mr Squires' age and the fact that there was still seven months of the three year period to run when he was terminated, I consider that the claim for six months' notice on being made redundant is not unreasonable. Such a period is in reality, a fairly modest claim which is justified by consideration of concepts of fairness and reasonableness and by reference to the expectations of the ordinary person: the contract was unfair in its terms by not providing six months' notice in circumstances of redundancy. 101 The respondent complained that in so concluding, his Honour failed to have proper regard to the terms of the acquisition which the parties had agreed; particularly given that Mr Squires was legally advised about the agreements which he then entered, including the terms of the employment contract; that proper account had not been taken of the employment obtained with Cardlink even before the Powerlan employment had come to an end and that his Honour's consideration of redundancy as a factor relevant to fixing fair notice, had the result that there was a double counting, because his Honour also varied the contract to require the respondents to pay Mr Squires redundancy pay on termination. 102 In my view there is some force in these submissions. As the High Court observed in Stevenson v Barham (1977) 136 CLR 190 at 192:

The legislature has apparently left it to the good sense of the Industrial Commission not to use its extensive discretion to interfere with bargains freely made by a person who was under no constraint or inequality, or whose labour was not being oppressively exploited. 103 The discretion vested in the Court by s 106 may only be exercised in circumstances where a contract is found to be unfair. It may not be exercised to make an agreement more generous to one party, in the absence of a proper basis for the finding of unfairness. 104 His Honour took account of the circumstances in which this employment came into existence. In 2000, Mr Squires and Mr Phillips were approached by Powerlan. They agreed to sell the two companies which they had established in 1997, to the respondents for a purchase price of $1.25 million, of which $1 million reflected goodwill. Mr Squires and Mr Phillips shared equally in the purchase price and each agreed to take up employment with Powerlan. They took their payment partly in cash and partly in Powerlan shares. Powerlan is a listed company and the value of the shares was fixed on the basis of the price at which they were trading at the time. The value of the shares was later affected by the downturn in the IT industry, but no complaint was advanced in the proceedings, about the way in which the purchase price was struck. 105 The Centrelink company's business involved the installation and maintenance of operating systems for IBM mainframe computers and the Phase Shift company owned a software product which resolved problems associated with the year 2000 problem in IBM mainframe environments. 106 The sale agreement required Mr Squires and Mr Phillips to take up employment with Powerlan for three years, with only Powerlan having the right to terminate earlier, on the giving of three months' notice, or no notice in the case of misconduct or breach. The contract also provided for a restraint period. Initially the businesses continued to operate under Ms Squires' management as an autonomous business. When the businesses were affected by the downturn in the IT industry, Powerlan found other work for Mr Squires at Cardlink, to which he was seconded. In July 2002, that work was no longer available to be provided, when Cardlink decided to terminate its contract with Powerlan and to engage someone direct. 107 When Powerlan came to exercise the contractual notice provision in August 2002, Mr Squires was understandably concerned about his situation, given the downturn in the IT industry. Mr Squires had already earlier unsuccessfully sought to negotiate a shorter period of notice with Powerlan and after the notice was given, he sought to do so again, advancing various arguments as to why that would be in Powerlan's interests. 108 Despite what the evidence clearly showed, the case advanced for Mr Squires at first instance, was that he was not obliged to work out the notice which had been agreed in the contract, given the terms of the letter of 2 August, because the contract was brought to an end that day. As I have already found, that view of what had occurred on 2 August was not open on the evidence, given the terms of the letter itself and Mr Squires' conduct, which revealed that he had an understanding that he had been given notice, which he was obliged to work out, even though he was not being required to attend work, as he himself had proposed to Mr Ravi. Mr Squires was trying to persuade Powerlan to a different course, when it became aware that he had already taken up the Cardlink position, while his employment with Powerlan continued. 109 That the arrangement that he not come into the Powerlan office during the notice period, was of benefit to Mr Squires, was apparent on the evidence. It was not suggested that Powerlan was not entitled to give him that direction. After all, it was a course which Mr Squires had himself proposed and which Powerlan had accepted. Not only did this arrangement give Mr Squires time to pursue other employment while continuing to be paid by Powerlan, it also enabled him to take up another full-time position with Cardlink. The end result, from his point of view, was that his income doubled, clearly a very significant benefit. 110 When Mr Squires sought to convince Powerlan, after 2 August, to agree that he was not required to work out his notice, he did not reveal that he had already taken up a position with Cardlink. Whether he had a contractual or other legal obligation to do so was the subject of debate on appeal. Nevertheless, given the requirement in s 106(2), that the Court have regard to the parties' respective conduct, in coming to a conclusion on the fairness of the parties' contract, this conduct was relevant to the determination of whether or not the contract was unfair. 111 On any view of the evidence, Mr Squires did not, in fact, require longer notice than he received. Mr Squires was given notice on Friday, 2 August and commenced work at Cardlink on Monday, 5 August. His employment was due to come to an end in November and he was being paid by Powerlan during the notice period, but was not required to attend work. He had for some time been seeking early termination of his contract by Powerlan, not himself having the right to resign during the three-year term of the contract. Powerlan was willing to entertain an early termination, but did not wish to pay out the contractual notice in those circumstances and so it invited him to resign. Mr Squires declined to do so. On the same day that he was finally given three months' notice by Powerlan, he took up another full-time position at Cardlink and persisted with his efforts to have his Powerlan employment brought to an end early. Even then, Mr Squires did not offer to resign. Clearly what he was seeking to ensure by not being frank with Powerlan was that he would be both paid out the notice and that he would earn income from his Cardlink position. 112 On the evidence, I take the view that this was not a case where it could seriously be thought that the contract was unfair in providing for the giving of three months' notice by Powerlan when it was made. It was Powerlan who approached Mr Squires and Mr Phillips about the acquisition of their businesses. They plainly benefited from the terms which they negotiated. The employment agreement was part and parcel of the arrangement which the parties came to. Mr Squires agreed to work for Powerlan for 3 years, unless Powerlan earlier gave him three months' notice of termination. Mr Phillips' evidence was that a shorter period had been sought in the negotiations, but Powerlan wanted to protect its investment by the three year term. It had acquired the two companies at a substantial cost - $1.25 million, including $1 million in respect of goodwill. That it was to have the right to protect that investment by having Mr Squires work for it for the next three years, was expressly agreed between the parties. A restraint was also agreed. The parties were all legally represented and plainly reached an agreement with which they were each satisfied when it was made. Indeed, on the evidence, the notice provision was more generous to Mr Squires than the terms of the notice provision in the employment contract he had with the companies he sold to Powerlan and those which he later agreed with Cardlink. In both of those cases, he agreed to only one month's notice of termination. 113 In determining whether the contract later became unfair, when the notice provision came to be exercised, Haylen J had regard to the negotiations which the parties were having about termination, up to that point. Those negotiations had arisen after Mr Squires had approached Powerlan about being 'let go', before the 3 year term was up. Powerlan was prepared to entertain a one month notice provision, but sought Mr Squires' resignation, which, on legal advice, he was not prepared to give. Undoubtedly, there was good reason for him taking that approach. Amongst other things, it would have put him in a position where he had no right to the long service leave claim he was pressing. 114 It was in that context, that he was given three months' notice, on 2 August, after Powerlan's contract with Cardlink came to an end. In the absence of that notice, the employment contract was to come to an end, in accordance with its terms, on 28 February, at the expiry of its three year term. 115 What had altered, which had the result that the parties' agreement had become unfair? His Honour took the view that:

'the claim for six months' notice on being made redundant is not unreasonable. Such a period is in reality, a fairly modest claim which is justified by consideration of concepts of fairness and reasonableness and by reference to the expectations of the ordinary person: the contract was unfair in its terms by not providing six months' notice in circumstances of redundancy. 116 That conclusion rested on the eight matters his Honour had earlier identified, namely:

'the position held by the applicant in the Centrelink business, the transfer of his employment to the Powerlan business, the requirement for him to remain in employment with Powerlan for three years, the near autonomous operation of the Centrelink business within the Powerlan group by Mr Squires and Mr Phillips, the status of the position held by Mr Squires at termination and the payment arrangements (being substantially by share allotment) which tied the value of the sale of the business to the continued profitability and share market price of the respondents and the continued input of Mr Squires to achieve profitable results, and Mr Squires' age and the fact that there was still seven months of the three year period to run when he was terminated.' 117 Of these matters, they all concerned factors relevant to the agreement which the parties had reached at the outset, in the context of their business sale agreement. In reality, the factor which had altered during the term of the employment, was that the three month notice period came to be exercised in circumstances of redundancy, some seven months before the contract was due to come to an end. The possibility that the right to give notice might be exercised before the employment came to an end, was plainly one which the parties had contemplated and had provided for. They had not dealt otherwise with the question of redundancy. 118 It follows that the exercise of the right to give notice in circumstances of redundancy, was undoubtedly, a relevant factor to consider in determining whether the contract was a fair one. His Honour assessed a fair period of notice, as he observed, in considering 'the fairness of the contract in not providing redundancy pay'. Despite having increased the notice from three to six months on that account, his Honour then also varied the contract to introduce a separate contractual requirement to pay redundancy pay. In my view, in so approaching the issues before him, his Honour fell into error. 119 His Honour relied on the approach of the Full Bench in Gala v State Bank of NSW Ltd (No 2) (1998) 84 IR 216, to support the view reached. In that case, the Full Bench concluded that the contract was unfair and varied it to provide for nine months' salary, referable to 'a lack of notice (or pay in lieu) and to the failure by the respondent to extend benefits which would normally be expected upon a termination on account of redundancy.' (at 227) That conclusion was reached in a case where the applicant had been employed for over 11 years and had been promoted to the position of the Bank's Treasury Audit Manager. The Bank decided to abolish the position, following a merger. The Bank required the applicant to take up a new position, in circumstances which the Appeal Bench found unfair, the applicant having been given the option of taking the new position, or resigning, without any notice being given to her of the abolition of her position, the Bank's requirement being that she take up a position outside her specialist auditing field. The Full Bench did not have before it the Bank's redundancy policy, which had not been received in evidence and so had regard to a range of other redundancy provisions on which the parties relied, both as to notice and redundancy pay. The principle of mitigation was considered, but not applied in the particular circumstances. 120 The circumstances of this case, were quite different, of course. It was a three-year fixed term contract so far as Mr Squires was concerned, entered in the context of a business sale, terminated before the end of the three year period. There was a three month notice period on the employer's side, both expressly provided for and given. On his Honour's approach, a total redundancy and notice period of over 10 months resulted - 6 months' notice and 17.5 weeks redundancy pay - when Powerlan exercised its right to early termination on three months' notice, some seven months before the contract was to come to an end. This resulted, in part, from regard being paid to Mr Squires' service with the companies which he had sold, despite the indemnity he had given Powerlan in respect of such claims. 121 The contract was not varied to require one payment for both notice and redundancy pay, as the Appeal Bench in Gala ordered. Rather, his Honour both increased the notice period having regard to the redundancy and in addition, varied the contract to introduce redundancy pay. That approach was required, given the need to consider the mitigation principle, as s 106(6) and binding authorities such as Westfield and Aradlay now require. Mitigation is relevant to notice, but not redundancy pay. Nevertheless, in my view, that necessity did not properly leave open the double counting which was here complained about - namely both increasing notice on account of redundancy in the circumstances in which this contract was brought to an end and also introducing redundancy pay. 122 In increasing the notice period, Haylen J noted that the contract still had 7 months to run, but took no account of the fact that this was a contract which obliged the respondents to give Mr Squires notice of termination. It did not provide for payment in lieu of notice. That was an important feature of the contract which the parties had agreed, given that Mr Squires was bound to Powerlan's service for three years and could not himself terminate earlier by resignation and indeed, refused to resign himself when seeking early termination. 123 As has oft been observed, for some employees, particularly in times of economic downturn, the giving of the notice which a contract requires, can be extremely important - it has been demonstrated that in some cases it is easier to obtain new employment, while the employee still remains in employment, rather than when unemployed. (See David Jones v Cukeric at (1997) 78 IR 430 at 456.) In this case, on his own evidence, Mr Squires was concerned about his ability to obtain other employment, given the downturn in the IT industry, which was why he immediately approached Cardlink on 2 August, when given notice by Powerlan. 124 Despite the contractual terms as to notice, Mr Squires, who was not prepared to resign as Powerlan invited, nevertheless resisted working out the notice he had to be given under the contract, even though he was not required to come into work. In addition, he took up other work immediately when the notice was given. Once this became known to Powerlan, Mr Squires wrongly claimed that he had not been given notice of termination at all, having regarded himself no longer to be an employee of Powerlan, since he was given notice on 2 August. That claim was directly contrary to what Mr Squires himself wrote in his 7 August email. 125 It is difficult, in those circumstances, to see that fairness required that the contractual notice which Powerlan had to give Mr Squires, be increased. The counterpart to an employer giving notice, is, after all that the employee works it. Here, the circumstances were unusual, because Mr Squires had himself proposed that he not attend work, a proposal which Powerlan accepted when giving him notice - he took 'gardening leave' as the parties called it. This is a matter to which I will return in the context of the early termination of the contract in September, but irrespective of whether or not accepting a position with Cardlink amounted to misconduct, taking up that position and later asserting that no notice had in fact been given on 2 August and that Mr Squires from that day regarded himself no longer to be a Powerlan employee, cannot be overlooked when the fairness of the contractual notice period is considered. 126 Even if the conclusion that longer notice was in fairness required in the circumstances of this case, the principle of mitigation then had to be applied. Haylen J approached that consideration, by having regard to the Cardlink position, thereby reducing the six months' notice period to four months and also taking account of the month's payment already made by Powerlan, so that the money order made required the payment of a further three months at the package rate. 127 As was conceded on appeal, this was an unusual approach. As Haylen J observed at [49]:

As pointed out by the Full Bench in English v Aradlay Insurance Brokers Pty Ltd [2005] NSWIRComm 253, the assessment of appropriate compensation under s 106(5) and also under s 106(6) involves an act of judgment where the general law principles as to mitigation of damages are relevant but not decisive as to what order is to be made. Further, the authorities as to mitigation of damages make clear that, while the duty to act reasonably to mitigate damages does not generally require an employee to take employment of a different or inferior kind, that part of the rules of mitigation known as the rule as to avoided loss, or mitigation in fact, means that, where an applicant actually avoids loss by obtaining other employment (or earnings), the earnings will reduce the damages or compensation even though the non-acceptance of the other employment would not have constituted a failure to mitigate (see par [35]). 128 The approach which his Honour adopted did not have regard to what, in fact, was earned during the notice period. Up until Powerlan dismissed Mr Squires for misconduct, he was being paid both by Powerlan and Cardlink. The position which he took up with Cardlink was a consultancy, under which he was paid the same rate as he was paid by Powerlan. It was only in October, after Powerlan terminated the contract in September, that Mr Squires became an employee of Cardlink, on a package worth about 30% less than he earned in his employment with Powerlan. This was not a case where Mr Squires was reluctant to take up that position, he was eager to do so, understandably, given the state of the industry in which he had made his career. 129 By taking up the consultancy with Cardlink on 5 August, Mr Squires would have completely mitigated any loss he would have suffered, had he not been given the three months' notice he was entitled to receive from Powerlan under the contract. He was, however, given that notice by Powerlan and in addition to what he was paid by Powerlan, he also had earnings from Cardlink. After his termination in September, he only had his Cardlink pay and that reduced by 30% in October, when he became an employee. Had the termination in September amounted to a breach of contract by Powerlan, Mr Squires' earnings from Cardlink, plainly would have mitigated any resulting loss. It follows, as a matter of justice, that if the contractual notice period were varied to increase the notice period from three to six months, as Haylen J concluded should result, that Mr Squires' earnings from Cardlink also had to be taken into account in determining what money orders were just in the circumstances of this case. In not having regard to the differing amounts earned by Mr Squires at Cardlink at different times, but rather dealing with the question of mitigation on the basis of months of notice, I am satisfied that his Honour fell into error, given the circumstances of this case. 130 Contrary to the views expressed by his Honour, in my view no different approach to mitigation properly arises from the fact that notice of termination of employment was here given in circumstances of redundancy, rather than for some other reason. 131 Consistently with s 106(5) of the Act, as well as with what the Full Bench held in Westfield and Aradlay, in this situation I take the view that there can be no doubt that his Honour erred in concluding that the proper application of the mitigation principal was to require Powerlan to pay Mr Squires a further three months' pay. It was plainly not just to require it to pay Mr Squires any further amount on account of notice, when the evidence in the case showed that three months' notice was not unfair, Mr Squires having obtained an alternate position, even before the Powerlan contract came to an end and that in any event, in the six months from 2 August, Mr Squires had, in reality, lost nothing by way of remuneration, given what he was paid by both Cardlink and Powerlan during that time. 132 On the various calculations advanced, at most, Mr Squires was some $10,000 worse off than he would have been, had he, in fact, been given six months' notice by Powerlan on 2 August. On his own evidence, Mr Squires was not prepared to work out any notice of course, even on the 'gardening leave' basis Powerlan directed. From 2 August, he no longer regarded himself to be a Powerlan employee. If regard was paid to both what he earned in the six months from both Powerlan and Cardlink, Mr Squires earned more in total than he would have earned, if he had been given such notice by Powerlan. Section 106(5) permits money orders to be made which are 'just in the circumstances of the case'. On this evidence, I am well satisfied that no money order would have been just in the circumstances of this case, in respect of notice.

Misconduct and breach of contract 133 The next issue which requires resolution is whether Mr Squires taking on a full-time position with Cardlink, while he was being paid as a full-time employee of Powerlan, was misconduct or breach of a kind which permitted Powerlan to exercise its right to summarily terminate the contract. Powerlan had purported to exercise that right, by its letter of 16 September. That letter must be understood in the context of Mr Squires' view that from 2 August he was no longer an employee of Powerlan, of which he advised it on 16 September, when Powerlan asked him about his employment with Cardlink, of which it had been advised by an employee of Cardlink, who understood Powerlan was still providing Mr Squires services. Powerlan's September letter alleged misconduct on Mr Squires' part and said that:

Your response to these serious allegations was that you did not consider yourself to be an employee of Powerlan and was (sic) therefore free to work for our client, even though your redundancy letter dated 2nd August 2002, and subsequent emails from yourself and from Powerlan, clearly indicated that you agreed to work out your three month notice period.

Accordingly we found your explanation to be unacceptable and had no alternative but to terminate your employment without notice in accordance with the provisions of clause 9.1(a) and (b) of your Employment Agreement. 134 On appeal, the appellants argued that taking up the position with Cardlink amounted to 'moonlighting' on Powerlan's time, of the kind which Spender AJ discussed in Centiad (NSW) Pty Ltd v Neil Chambers (Unreported, 29 March 1995), as being a breach of the duty of fidelity and amounting to conduct incompatible with his duty and the confidential relation between Mr Squires and Powerlan. Mr Squires' case was that given the directions he had been given by Powerlan on 2 August, there was no misconduct, nor had he repudiated his contract. 135 Ordinarily, taking on a second full-time position, requiring work to be performed at the same time as work is required in another full-time position, is likely to amount to a breach of the duty of fidelity. (See Hivac Ltd v Park Royal Scientific Instrument Ltd and ors [1946] Ch 169 and Blyth Chemicals v Bushnell (1933) 49 CLR 66.) Much will depend, of course, on the nature of the work required to be performed under the contract in question in a particular case and the time at which such work is required to be undertaken. As observed in Blyth at 74, 81 and 82, incompatibility, or conflict, or the destruction of confidence, must be demonstrated. 136 Here, the circumstances were rather unusual. The contract expressly required Mr Squires to 'carry out such lawful directions as are given from time to time'. He also had to 'devote substantially the whole of his time and attention during ordinary business hours of the Company to the discharge of his duties and shall conform to such hours of work as may from time to time reasonably be required of him.' On 2 August, Powerlan directed that he not come into the office during the notice period, as he had proposed, but 'be available on the telephone; should we require you to perform any tasks'. 137 On the evidence, Powerlan never called upon Mr Squires. The only requirement it made of him, that he attend a meeting at its offices on 16 September, Mr Squires complied with. While initially asserting that Mr Squires was in breach of his restraint in taking up employment with Cardlink, Powerlan did not persist with that view. Its attitude remained however, that taking up employment with Cardlink was a fundamental breach of his contract. 138 On Mr Ravi's evidence, Mr Squires had first approached Powerlan about the early termination of his employment in May. During the ensuing discussions, a four week notice period was proposed and he advised Mr Squires that Powerlan would have no objection to him then working for Cardlink, or other Powerlan customers. 139 The discussions about an agreed early termination of the contract foundered over Mr Squires' claim that Powerlan had obligations to pay him annual and long service leave, in respect of his period of employment with the companies he had sold to Powerlan, which Powerlan denied. In addition, Mr Squires advised that he was not prepared to resign, as Powerlan had proposed. During this period Powerlan was also negotiating with Cardlink, over the possibility of the secondment arrangement continuing, with Powerlan reducing Mr Squires' charge out rate. No agreement about that proposal was reached with Cardlink and that contract came to an end at the end of July. This then led to the termination of Mr Squires' employment. Powerlan had no other work for him, the sale of the Division he was employed in being imminent. Before Powerlan terminated his contract, Mr Squires proposed that he not be required to come in for work. Powerlan accepted that suggestion when it gave him the notice it was obliged to give under the contract. 140 Powerlan nevertheless, later took the view that taking up a full-time position with Cardlink while still employed by it, even though not required to attend the office, amounted to a breach of Mr Squires' contract. The new employment had come to its attention, only because a disgruntled Cardlink employee had made a complaint about Mr Squires to Powerlan. Powerlan objected to paying Mr Squires during the notice period, when he had taken full time work elsewhere. 141 On 12 September, Mr Squires was directed to attend the office, to discuss an allegation of gross misconduct. He brought his lawyer with him to the meeting. Mr Squires account of the meeting was:

Leon: 'On 2 August Powerlan gave you a letter advising your position had been made redundant on 3 month's(sic) salary in accordance with the contract. By agreement you were to remain at home but to come in as Powerlan required'.

Agnew: 'Mr Squires is in breach of the restraint of the contract'.

Squires: 'Cardlink is not a competitor of Powerlan'.

Agnew: 'This meeting has been called to put these matters to Mr Squires to obtain his response. Your contract is terminated without notice as at last Friday'.

Squires: 'I was made redundant on 2nd August. How can you terminate my contract when it has already been terminated?' 142 Ms Leon's account of the meeting was:

Me: Steve, Ravi gave you a letter on 2nd of August advising your position was redundant and that you were to work out your notice period but you did not need to come into the office.

Agnew: His contract only provides for our client to give notice and not pay monies in lieu.

Me: Steve we are here to give you an opportunity to respond to the allegation that you have been working for Cardlink without Powerlan's consent.

Agnew: The conduct is a breach of your employment agreement.

Agnew: Steve you are still an employee of Powerlan you can't work for any of its clients.

Simpson: My client's contract only restricts him from working businesses that involve the application and development of shrink wrapped products and software tools and mainframe services.

Agnew: It also restrains him from consulting and he is still in breach of his obligations as and employee to act in good faith. Your client has not presented our client with an acceptable explanation as to his conduct our client has no alternative but to terminate your contract without notice for serious misconduct.

Squires: I was made redundant on 2 August, how can I be terminated when I have already been terminated.

Agnew: Steve you will be paid all outstanding entitlements up until the 13th and you will receive a letter from my client confirming our discussions today.

The meeting then ended. 143 Mr Squires did not dispute this fuller account of the conversation. 144 Consistently with the case later advanced by Mr Squires below, on 16 September, despite his email of 7 August, when he sought Powerlan's agreement to early termination and despite attending the meeting as he had been directed, Mr Squires claimed that his employment had come to an end on 2 August. On the evidence, that is not what had occurred, nor had Mr Squires conducted himself on the basis of such an understanding. As the Court of Appeal recently observed in Murray Irrigation Ltd v Balsdon [2006] NSWCA 253, when asked about his Cardlink employment, Mr Squires had an obligation to explain to Powerlan what he had done, given 'the nature of his employment and the wide range of matters to which he was obliged to attend in a management position and in the interest of his employer; assisted by the implied obligation relating to good faith.' (at [19]) 145 Whether Mr Squires had an obligation to advise Powerlan on 2 August that despite the notice he had been given, that he no longer regarded himself to be a Powerlan employee is a question which arises, but does not need to be resolved. It was arguable that Mr Squires repudiated his contract that day, even though he did not communicate that repudiation to Powerlan until 16 September. 146 The position which Mr Squires adopted at the meeting on 16 September and which he never resiled from subsequently, was that he was not, in fact then an employee of Powerlan and had not been since 2 August. Given that stance, it is strictly unnecessary to determine whether or not taking up employment with Cardlink on 5 August had amounted to misconduct, because what he communicated to Powerlan, on 16 September unequivocally amounted to a repudiation. Mr Squires plainly communicated that repudiation of his employment contract to Powerlan and it accepted that repudiation, thereby bringing the contract to an end without further notice. If what Mr Squires had done to that point had not amounted to misconduct or a breach of the contract, what he did on that day, certainly did. He claimed that he had not been an employee of Powerlan since 2 August and that he had acted accordingly. That conduct evidenced a position on his part, that he would no longer be bound by his contract, which Powerlan was free to accept and it did. 147 On 18 September, Powerlan wrote to Mr Squires, referring to his position, that he did not consider himself to be an employee of Powerlan and confirming that his employment had ceased, as it was asserted on 13 September. The basis for that view was unclear, but nothing turns on it. The contract was plainly brought to an end on 16 September. Powerlan noted that Mr Squires did not consider himself to be an employee of Powerlan. That repudiation was one which Powerlan was entitled to accept and it plainly did so. 148 It follows that the contract accordingly came to an end in September, about six months before it was otherwise due to end in February 2003. Had Mr Squires worked out the notice period he was given on 2 August, the contract would have ended in November, some three months before it was due to end.

Redundancy 149 There was no issue between the parties that the circumstances in which Mr Squires was given notice of the termination of his employment on 2 August amounted to a redundancy. His Honour concluded that the contract was unfair in not providing for redundancy pay and that it should be varied to introduce such a payment. The money order made had regard to the test case standard and was calculated on the basis of both Mr Squires' service with Powerlan and previously in the business he had sold to Powerlan. 150 That was argued to be an error in approach, having regard to the fixed term nature of this contract; that it had been made in the circumstances of the sale of the business, where the parties had taken care to ensure that the employment of all employees, including Mr Squires, was brought to an end by the vendors on completion of the sale; with all employee entitlements being paid out on termination and Mr Squires and Mr Phillips providing warranties as to the making of those payments and providing indemnities against future claims. It was submitted that in so far as his Honour concluded that there was a transfer of the employment to Powerlan, his Honour erred. 151 As to these matters, his Honour concluded:

The next matter to be considered is the applicant's submission that, in the calculation of entitlements arising from his redundancy, credit should be given for the period of employment with the Centrelink businesses. The respondents point to the terms of the business purchase agreement that required the accumulated entitlements of employees of Centrelink to be paid out before being transferred to the first respondent. The applicant points out that there was certainly no redundancy due nor was there any long service leave due to him at that point and that is all that was addressed by the business agreement. There seems to be some support for that approach in the schedule to the business purchase agreement that noted only annual leave and superannuation in amounts calculated as being the entitlements of the Centrelink employees including the applicant. What is clear is that the business sale agreement contemplated the transfer of the applicant's employment to the first respondent and bound him to give three years' service to the first respondent as an employee to operate the business he had formerly owned with Mr Phillips. Although the picture is a little confusing, the business purchase agreement certainly made no clear provision for prior service not to be credited to transferring employees: on the other hand, there is no provision, in terms, giving credit for prior service. Ultimately, I think the key to this issue is the fact that the business purchase agreement clearly contemplated the transfer of employees to the first respondent and only the payout of accumulated and then due amounts for redundancy and long service leave by Centrelink and Mr Squires. At this point, there was no redundancy payable, nor was there long service leave payable. In those circumstances, I think it is appropriate that, in calculating what is fair in the arrangements for providing payments on redundancy, prior service should be credited to the applicant. Some support for this approach appears from the terms of clause 6.4 of the business purchase agreement. That clause indemnified the seller (Centrelink) against all liabilities in respect of employee entitlements of transferring employees falling due after the effective date or otherwise referrable to any period or event occurring after completion. In relation to Mr Squires, the was no liability for Centrelink to pay long service leave or redundancy - those liabilities only arose after the transfer of employment to the first respondent. These were liabilities falling due after the effective date and related to an event occurring after completion, namely the redundancy of Mr Squires. In this way it might be said that clause 6.4 operated on the basis (or was open to operate on the basis) of giving transferred employees credit for service with Centrelink but only in relation to liabilities that crystallised after the date of completion. It should be stated that even if this approach is not an accurate description of the operation of clause 6.4, fairness requires that the contract be varied to recognise prior service for the purposes of calculating long service leave and redundancy, given the factors previously referred to and in particular the transferred nature of the employment. 152 The sale agreement was clear in its terms. Clause 6.1 expressly required the seller to 'terminate the employment of all employees'; to ensure that all contributions to superannuation, redundancy and other funds had been made and to ensure that all specified entitlements had been paid. The sale agreement included a defined term 'transferring employee', which was defined to mean an employee who accepted the buyer's offer of employment. The sale agreement specified what 'employee entitlements' had to be paid out by the seller on termination. The term was defined as:

Employee Entitlements means 'in respect of an Employee, all amounts owing and due to or in repect(sic) of that Employee in respect of or under that Employee's contract of employment, whether arising under contract, statute, award or otherwise, including without limitation, wages, salary, commissions, bonuses, allowances, emoluments, annual leave, holiday pay, long service leave, sick leave, redundancy entitlements, loadings and contributions to superannuation, redundancy, statutory compensation or other funds. 153 The sale agreement included a number of relevant warranties, including in relation to employees:

(a) List of Employees : Schedule 5 comprises a complete list of employees of the Seller employed in the Business as at the date of this agreement and their respective entitlements as at that date to wages, salaries, annual leave and leave loading, long service leave, sick leave and any other remuneration, compensation or benefits.

(ii) has been paid in full by the Seller all amounts due to them (note: in the case of James Phillips, January's pay was also prepaid to him in December); and

(iii) can be lawfully terminated as an employee on 1 months' notice or less without payment of any damages or compensation, including severance or redundancy payments.

(c) Compliance : The Seller has complied with its obligations under each agreement, statute, industrial award or code of conduct relating to the Employees.

(d) Employee records : The Seller has kept adequate and suitable records regarding the service of each Employee. 154 The schedule specifying employee entitlements of the 5 employees, including Mr Squires, showed that he had a package worth $120,000 per year; was owed 57 days' leave and was entitled to specified superannuation contributions. I accept the submission that the proper inference from the sale agreement was that Mr Squires had no entitlement to redundancy pay in this employment. Plainly he had no entitlement to long service leave either, because the business had been in existence for only three years. Long service leave entitlements under the Long Service Leave Act 1955 do not arise until after five years' service, whether termination of employment results from action taken by the employer or the employee. As a result of the sale agreement, Mr Squires' employment was terminated; he was to have been paid his annual leave and superannuation entitlements on termination and he accepted new employment with Powerlan, that contract providing for a package worth some $150,000. 155 The sale agreement also contained indemnities, in these terms: 6.3 Indemnity by Seller

The Seller indemnifies the Buyer from and against all liabilities in respect of the Employee Entitlements of the Transferring Employees as at the Effective Date or otherwise referable to any period or event occurring prior to Completion.

The Buyer indemnifies the Seller from and against all liabilities in respect of the Employee Entitlements of the Transferring Employees falling due after the Effective Date or otherwise referable to any period or event occurring after Completion. 156 It was in those circumstances that the claim for redundancy pay arose to be considered. As the appellants argued, the sale agreement showed that the parties had gone to considerable trouble to ensure that the former employment of all staff, including Mr Squires, was brought to an end and their entitlements were paid out by the sellers, before they accepted employment with Powerlan. The agreement could have been framed in a different way, but it was not. The indemnity agreed was designed with that approach in mind - as the appellants submitted, the parties drew a 'line in the sand'. In those circumstances, the claim advanced in these proceedings, that Powerlan ought in fairness to have paid Mr Squires redundancy pay calculated by reference to his prior period of employment in his own business, as well as with Powerlan, is difficult to understand. 157 While undoubtedly, Mr Squires' prior employment came to an end when he sold his shares to Powerlan, neither he nor the other employees received a redundancy payment from his former employer. Having taken on a more lucrative position with Powerlan for a fixed term period of three years in 2000, he sought redundancy pay from Powerlan, inconsistently with the terms of the sale agreement, when it exercised its right to bring the employment to an end in 2002, by claiming such pay in respect of the period of his prior employment in the business he sold to Powerlan. 158 Given the terms of the indemnity provided in the sale agreement, there can, in my view, be no basis upon which it can properly be concluded that fairness would permit such a claim to be granted. The conclusion that fairness required that this fixed term contract be varied to provide for redundancy pay, calculated by reference to the period of Mr Squires' employment with the business he had sold to Powerlan, on the test case standard, was not properly open, in my view. Even if redundancy pay were warranted, it could only have been calculated as a matter of fairness, on the basis of his Powerlan employment, given the terms of the sale agreement which the parties had negotiated. 159 Given the circumstances in which the contract in fact came to an end, as the result of Mr Squires' actions on 16 September, in my view justice did not, in any event, permit a money order to be made in respect of redundancy, even if fairness required the variation of the contract to introduce such a term. Consideration needed to be given to the fact that the contract did not, finally, come to an end on account of redundancy, at the end of the notice period given by Powerlan. That was to be a date in November, the date upon which, in the ordinary course, Mr Squires' period of service would have been determined, for the calculation of any redundancy pay he was owed. In fact, the employment came to an end earlier, when Powerlan accepted Mr Squires' repudiation of the contract. In those circumstances, I am satisfied that no money order could flow as a matter of justice between these parties, from any variation of the contract on account of redundancy.

46 In relation to the applicant's claim for long service leave, I have already held that it was fair in the circumstances of this contract that credit should be given for past service when Mr Squires was transferred to the employ of the first respondent. I accept the thrust of the applicant's submission in relation to the operation of s 102 of the Industrial Relations Act but in the absence of full debate, a finding on this basis is unnecessary: in any event, on the application of principles of fairness, it seems to me that it would be appropriate that Mr Squires be paid pro rata long service leave having been terminated for reasons of redundancy. An order should therefore be made in favour of the applicant in recognition of 5.5 years of service paid out as long service leave on the applicant's accepted package of $158,000. 161 As I have noted, I take the view that his Honour erred in concluding that Mr Squires' employment had been transferred to Powerlan, given the express terms of the sale agreement which required the vendor company to terminate the employment of all employees, including Mr Squires, before Powerlan offered them employment. While reference was made to s 102 of the Act, his Honour found it unnecessary to consider the claim, so advanced. Had he done so, the provisions of s 103, which provides for an indemnity by a former employer, would also have arisen for consideration. Those provisions confirm the view I have otherwise reached. 162 In any event, his Honour's approach entirely overlooked the parties' agreement, in so far as it provided for an indemnity by the sellers in respect of 'liability in respect of Employee Entitlements ... referable to any period or event occurring prior to completion'. These entitlements included long service leave. That aspect of the sale agreement was not attacked in these proceedings and ought, I am satisfied, to have precluded the relief granted, because it expressly required Mr Squires to indemnify Powerlan for such a claim. Costs

163 The costs order made below had regard to an offer which the respondent had made and the appellants had rejected. Given the conclusions which I have reached, the parties should have liberty to file written submissions as to the proper order as to costs at first instance. Orders 164 For the reasons given, I have concluded that leave to appeal must be granted and the appeal upheld. I would order accordingly and would set aside the judgment of Haylen J. I would order the respondent to pay the appellant's costs of the appeal, as agreed or assessed. 165 I would give the parties liberty to file written submissions on the question of the costs order made below. 166 PRESIDENT: The Court therefore makes orders in terms of those proposed earlier in the joint judgment at paras [29] and [30]. _______________

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