Rick Lloyd v Commonwealth Bank of Australia Limited

Contracts Review Act 1980 LEGISLATION CITED: Industrial Arbitration Act 1940 Industrial Relations Act 1996 Truck Act 1900

B.P. Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 Custom Credit Corporation v Goldsmith & Ors [1976] AR (NSW) 98 Darrow v FreshFood Management Services Pty Ltd [2003] NSWIRComm 264 Hairman v FileNET Corporation Pty Limited [2001] NSWIRComm 318 Lumby v Yorkshire-General Life Assurance Co Ltd [1978] 1 NSWLR 626 Majik Markets Pty Limited v Brake & Service Centre Drummoyne Pty Limited (1991) 28 NSWLR 443 CASES CITED: Marshall v NM Financial Management Ltd [1995] 4 All ER 785 Morgan v Coulson [1981] 2 NSWLR 801 Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41 Port Macquarie Golf Club Ltd v Stead and Another (1996) 64 IR 53 Production Spray Painting & Panel Beating Pty Limited & Ors v Newnham & Ors (1991) 27 NSWLR 644 Prudential Assurance Co v Rodrigues [1982] 2 NZLR 54 Shead v Summit Western Pty Limited (1998) 81 IR 347 Solution 6 Holdings Limited & Ors v Industrial Relations Commission of New South Wales & Ors (2004) 60 NSWLR 558 West v AGC (Advances) Ltd (1986) 5 NSWLR 610

HEARING DATES: 19/07/05, 20/07/05, 21/11/05, 22/11/05, 23/11/05, 24/11/05

Applicant: Mr M.F. Holmes, of Queens Counsel Mr D.P. Robinson, of counsel Solicitors: Horton Rhodes Solicitors LEGAL REPRESENTATIVES:

Respondent: Mr R.M. Goot, of Senior Counsel Mr A.B. Gotting, of counsel Solicitors: Abbout Tout Lawyers

Rick Lloyd v Commonwealth Bank of Australia Limited

Application under s106 of the Industrial Relations Act 1996

1 The applicant, Rick Lloyd, has commenced proceedings against the respondent, seeking relief and orders under s 106 of the Industrial Relations Act 1996 (the Act) arising out of his employment with the respondent and the circumstances of his termination of employment with the respondent. 2 The application which has proceeded by way of amended summons for relief seeks orders in the following terms:

1. An order declaring that the contract of employment between the applicant and respondent is unfair within the meaning of s 105 of the Industrial Relations Act .

2. An order declaring that the contract of employment between the applicant and the respondent is void insofar as the contract requires the applicant to continue in the respondent's employment in order to receive remuneration earned by the applicant but not yet paid to him.

2A. An order that the respondent pay, in money within the meaning of s 117(2) of the Act, to the applicant the total of the remuneration earned by him during the period 8 July 1996 to 3 January 2002.

2B. An order declaring the provisions of the contract or contracts of employment void insofar as those provisions provide for the payment of remuneration other than by payment of money within the meaning of s 117(2) of the Act. Factual background 3 The applicant commenced his professional career in about 1977 as a foreign exchange trader. Some time in 1995, he was approached by the respondent to fill the role of manager of its Global Foreign Exchange Trading business. At that time, the applicant was working for Bank America as the manager of the Foreign Exchange Trading Division of the Bank in Los Angeles. 4 Following negotiations between the applicant and respondent, the applicant, on 29 April 1996, received a facsimile from Paul Riordan who was employed by the respondent as its Head of Financial Markets Trading. The document set out various details concerning the assessment of a bonus component of the applicant's proposed salary. According to the applicant, the calculation of a bonus figure depended upon the respondent's total global spot foreign exchange revenues in the 1996/1997 financial year. The document highlighted a $200,000 guaranteed bonus figure as applicable where the total global spot foreign exchange revenues reached $65,000,000. Revenues over and above that amount determined the applicant's total bonus component of his proposed salary for the 1996/1997 financial year. The document also set out a number of conditions upon which receipt of a bonus was contingent. These were:

(i) satisfactory performance in non-financial key result areas (KRAs);

(iii) expenses kept within budget. 5 The respondent provided the applicant with a letter of offer of employment on 21 May 1996. This letter was followed by a letter from the respondent dated 22 May 1996 in similar terms to the 21 May 1996 letter, offering the applicant the position of Global Trading Manager, Spot Foreign Exchange. 6 On 10 July 1996, the applicant signed a contract of employment with the respondent. The applicant was, under the contract, to be paid a gross remuneration package of $250,000. In addition, under clause 10 of the contract, he was also eligible to participate in a performance payment (bonus) arrangement determined by the respondent on a year-to-year basis. This arrangement had been explained in some detail in the letters dated 21 and 22 May 1996 from the respondent, sent to the applicant. The relevant passages are extracted below: You will be paid gross annual salary of AUD 250,000 per annum plus employer superannuation (pension) contribution plus a guaranteed initial bonus payment of AUD 200,000 for the first year only to be paid in two tranches of AUD 100,000; the first in February 1997 and the second in September 1997. You will be eligible for aggregate annual bonus payments of up to twice base remuneration subject to performance benchmarks as discussed and agreed. For 1996/97 any incremental performance related payment over the guaranteed component would be paid in September 1997 at the same time as the second tranche of the guaranteed component. For subsequent years, consistent with current Institutional Banking policy any bonus payments will be on a partially deferred basis with 50% payable at the time the review of performance is determined (September) and the remaining 50% 12 months later. 7 The contract of employment on its face, distinguished between the applicant's gross remuneration package and the eligibility to participate in a "performance payment (bonus) arrangement determined by the Commonwealth Bank of Australia on a year-to-year basis": clauses 7 to 10. Under the relevant terms of the contract the applicant's gross remuneration package was in accordance with the schedule to the contract and was payable on a fortnightly basis: clause 8. It was also stated to be the subject of annual review having regard to specified indicators set out in the contract, namely, "work performance, demonstrated skills and competence and market rates of remuneration": clause 8. The first review was to take place on 30 June 1997: clause 8. 8 The schedule attached to the contract provided the following details of the applicant's gross remuneration package for the period 8 July 1996 to 30 June 1997 as follows: GROSS REMUNERATION PACKAGE $250,000 LESS value of non-cash benefits A Motor Vehicle $ B Car Parking $ TOTAL OF NON-CASH BENEFITS $NIL C Balance Payable as CASH COMPONENT $250,000 For superannuation contribution and benefit purposes, 'salary' is regarded as $ 250,000.

9 The contract also contained a term dealing with conditions in the event of the applicant's retirement: clause 11. Part of that clause provided: The Employee agrees to inform the Commonwealth Bank of Australia of any intention to retire:

• at time of each remuneration review - of intention to retire within the following 12 months; or

• at any other time - if retirement is intended within the following 6 months. 10 The applicant executed the contract and the attached schedule on 8 July 1996. Neither the contract, nor the letters of 21 and 22 May 1996, indicated that payment of a deferred bonus would be contingent upon the applicant's continued employment with the respondent. 11 On 31 January 1997, the applicant was informed that the first tranche of his guaranteed bonus ($100,000 gross) would be included in his normal pay of 13 February 1997. In relation to payment of the second tranche, the applicant, in his evidence, said that contrary to the letter of 22 May 1996, the second tranche was paid in two lots, the first in September 1997 in an amount of $55,000 and the second in September 1998 in an amount of $45,000. According to the applicant, he spoke to Mr Riordan about the change to the original agreement and was told that the bank had changed its view, and, "... he had to live with it". This evidence, as to the method of payment of the second tranche of the applicant's guaranteed bonus, emerged for the first time during the applicant's cross-examination. Mr Riordan had no recollection of any such conversation occurring when he was asked about it during his evidence. It is unnecessary for me to decide this issue, as it is not relied upon by the applicant as a basis for any alleged unfairness. I mention it here, at this stage, only for completeness. 12 At the end of his first year of employment (30 June 1997), the applicant took part in a review of his performance and received a bonus of $100,000. In a letter dated 8 September 1997, the applicant was informed that the receipt of his bonus payment would be deferred and subject to his satisfactory performance and continued employment with the Bank in the following terms:

[Y]ou will receive a 1996/7 performance bonus of $100,000 gross to be paid in two tranches. The first tranche of $55,000 comprising the first $10,000 and 50% of the balance will be paid to you together with your normal pay on 11 September 1997 and details included on your pay advice. The second tranche of $45,000 is not vested but will be paid in conjunction with the 1997/8 remuneration review subject to satisfactory performance and continuing employment with the Bank until the end of September 1998. 13 Following his second year of employment, the applicant took part in a second performance review. For the year ended June 1998, he received an $875,000 bonus and an increase in his base salary to $275,000. The details of these payments were set out in a document in the applicant's name headed "Institutional Banking - Remuneration Package Summary": Fixed Remuneration Date Effective: 1 July 1998

Superannuation - Division F Nominal Employer Allocation $20,630

Component payable in 1998 $445,000 Component payable in 1999** $215,000 Component payable in 2000** $301,000

** payment subject to satisfactory performance and continued employment to date of payment.

14 In a letter dated 2 September 1998 to the applicant, Mr Riordan outlined the method by which the bonus would be paid:

Commencing this year, new bonus deferral arrangements apply in IB. The first $15,000 is payable at this review. The remainder is payable in 3 parts as follows:

(i) 50% is payable at this review; (ii) 25% is payable at the 1999 review; (iii) 35% is payable at the 2000 review. Note that the total is greater than the bonus award. Deferred amounts are not vested and payments in year 2 and year 3 are subject to satisfactory performance and continued employment with the Bank to the date of payment. 15 The total bonus payable to the applicant reflecting his second performance review, taking into account all amounts payable was in fact $961,000, that is, $86,000 in excess of the bonus figure of $875,000, actually awarded. The rationale behind the payment of an amount in excess of the actual bonus amount awarded was explained by Leslie Cupper in his evidence who was, during the period of the applicant's employment at the respondent bank, the Group Executive, Human Resources. According to Mr Cupper, in 1998, there was a change to the arrangements for the payment of deferred bonuses. This change resulted in the deferred payment of the unvested portion of a performance based bonus being made over a two-year period, as opposed to a one year period. The additional $86,000 was granted to the applicant in order to compensate him for the extended period of deferral. The change in the deferral arrangements in 1998, according to Mr Cupper, was communicated by letter to all affected staff. 16 In March 1999, organisational changes within the division of Financial Markets resulted in a change to the applicant's role within the bank when he became the manager of the respondent's global foreign exchange section incorporating trading sales and options. The new position was wholly management oriented. 17 At the end of the third year of the applicant's employment, he again took part in a performance review, and, received a $600,000 bonus. His base salary was increased to $302,912. In a letter dated 27 August 1999 from Mr Riordan, the applicant was advised that receipt of the bonus (referred to in the letter as the "Above Base Component" (ABC)), would be arranged as follows:

(i) $20,000 payable at the review; (ii) 50% payable at the review; (iii) 25% payable at the 2000 review; (iv) 35% payable at the 2001 review. 18 The letter contained the following stipulation:

Deferred amounts are not vested and payments in year 2 and year 3 are subject to satisfactory performance and continued employment with the bank to the date of payment.

19 Annexed to the letter was a document in the applicant's name which set out the details of performance-based bonuses payable as follows: Above Base Component (ABC)

ABC deferred from 1997/98 Payable in 1999** $215,000 Payable in 2000** $301,000

ABC awarded for 1998/9 $600,000 Component payable in 1999** $310,000 Component payable in 2000** $145,000 Component payable in 2001** $203,000

** Payment subject to satisfactory performance and continued employment to the date of payment.

20 A second annexure confirmed the applicant's base salary in the following terms: Fixed Remuneration Date Effective: 1 July 1999

Superannuation - Division F Employer Allocation $22,718

Total Employment Cost $325,630 Salary For Superannuation Purposes $302,912

21 A new contract of employment was also annexed to the letter which the applicant was requested to sign and return by 30 September 1999 in order to receive the remuneration increases. The applicant signed the new contract on 29 August 1999. Clause 1 of the contract stated: You will be employed by the Bank as Global Head of Spot FX in Institutional Banking. The duties and responsibilities of this position are as outlined in the position description provided to you. In the course of your employment with the Bank, you may be required to undertake other roles or duties, or to work in different locations.

Clause 3 of the contract headed "Remuneration" contained details of benefits payable to the applicant as follows: 3.1 You remuneration for the position will be in terms of a (total cost superannuation) figure [TC-S]. The TC-S is the sum of your cash salary and the cost to the Bank [including fringe benefits tax] of non salary benefits provided to you, excluding superannuation. Benefits will be costed in accordance with Institutional Banking procedures for costing remuneration packaged benefits as apply from time to time.

On commencement, your ( total cost superannuation ) figure will be $302,912 per annum and your salary for superannuation purposes will equal $302,912 in accordance with standard Bank and Institutional Banking superannuation arrangements.

Each fortnight, you will be paid an amount representing 14/365 of your cash salary into a bank account of your choice.

Your ( total cost superannuation ) figure will be reviewed annually in accordance with Institutional Banking remuneration policy applying at the time to positions at this level.

3.2 In addition, you will be considered within any performance incentive payment arrangements which the Bank may implement at its discretion.

3.3 Institutional Banking offers limited remuneration packaging. Within the rules of these packaging arrangements, you may sacrifice cash salary for motor vehicle and/or additional superannuation benefits, provided your ( total cost superannuation ) figure remains unchanged. 22 At the end of his fourth year of employment (year ended 30 June 2000), the applicant, following another performance review, was awarded a bonus of $480,000. The conditions of the payment of the bonus (referred to as "ABC payments") were subject to the same arrangement outlined in the letter dated 27 August 1999 regarding the applicant's performance review following his third year of employment. A letter dated 28 August 2000 sent to the applicant and signed by Mr Riordan set out the results of the review:

• For 2000/01, your fixed remuneration remains unchanged.

• I am pleased to advise that you have been awarded a 1999/00 Above Base Component (ABC) of $480,000.

• In addition, you have an ABC payment due from previous years. The following deferral arrangements apply to ABC awards. The first $20,000 is payable at this review. The remainder is payable in 3 parts:

Note that the total is greater than the ABC award. Deferred amounts are not vested and payments in year 2 and year 3 are subject to satisfactory performance and continued employment with the Bank to the date of payment. 23 The letter enclosed an updated summary of the applicant's remuneration arrangements for the year 2000/2001. The summary contained the following information: Fixed Remuneration Date Effective: 1 July 2000

Superannuation - Division F Employer Allocation $24,233 Total Employment Cost $327,145 Salary For Superannuation Purposes $302,912

ABC deferred from 1997/98 Payable in 2000** $301,000

ABC deferred from 1998/9 Payable in 2000** $145,000 Payable in 2001** $203,000

ABC awarded for 1999/0 $430,000 Payable in 2000** $250,000 Payable in 2001** $115,000 Payable in 2002** $161,000

24 A further restructure of the respondent's financial markets business occurred in October 2000. The applicant was given a new position entitled "Global Head Investor and Financial Solutions (sales only)". The position, according to the applicant, effectively prevented him from trading on the bank's behalf. The applicant says, in his affidavit, that he was not comfortable in his new role, but he believed that he had no "real choice" other than to accept it. 25 The applicant's account concerning his new role, is set out in his affidavit as follows:

[48.] Whilst on a business trip in Singapore, I received a phone call from Paul Riordan. He told me that I had two choices. I could either accept the new role or take a demotion.

[49.] When the restructure in October 2000 was implemented, Mr Riordan did offer me the role of foreign exchange institutional sales, across all Financial Markets' products, as he had foreshadowed in the Singapore phone call. I advised Mr Riordan that I did not want this position as my expertise and interest lay in trading and in Foreign Exchange, not sales. Mr Riordan told me that if I didn't take the institutional sales positions, I would be demoted to a lesser role within the foreign exchange trading division. I elected to take the institutional sales position because I believed I had no real choice.

[50.] In my new role under the title of Global Head of Investor and Financial Institutions it was now my task to develop and maintain relationships, at a senior level, with the Respondent's Financial Markets client base. I was now in charge of managing a global sales force of approximately 55 people in various locations, selling a diverse range of Financial Markets products to the Institutional client base. The 'selling' was done, largely, through developing close personal relationship with clients, which would include client entertainment, for which I was provided an expense account.

[51.] Although I was still theoretically permitted to trade on the bank's behalf, in fact I was unable to do so as my time was fully spent on developing and maintaining the Respondent's client relationships (both existing and potential). The new job was clearly a departure from the expertise that I had developed over a twenty-three year career in the Foreign Exchange market. This role never provided me with any job satisfaction and I told Mr Riordan this on a number of occasions - a fact that Mr Riordan was later to acknowledge upon my resignation. I have never been comfortable in any role where I have been required to market myself or any products, although I recognise that, in business, to an extent, this role is forced upon you. When I complained of my dissatisfaction with the new position, Mr Riordan said to me "You might not like it, but you're good at it.".

[52.] I filled the role of Global Head of Investor and Financial Institutions (ie, institutional sales) from October 2000 until my resignation in November 2001. I did not enjoy the role and more particularly did not like the fact that I had effectively been forced into the role. This greatly affected my sense of job satisfaction.

[53.] I would not have chosen to relocate my family and my life from the United States had I known that this was a role that I would ultimately have to fulfil. 26 Mr Riordan, in his affidavit and in his oral evidence, recalled different versions of the conversations he had with the applicant concerning the new role following the October 2000 restructure. The relevant portions of his affidavit are extracted below: [23.] I refer to paragraph 49 of Mr Lloyd's Affidavit and say that I do not recall and do not believe that Mr Lloyd expressed that he did not want to accept the position, but rather Mr Lloyd expressed the view that he was not sure that he was the right person to take the role. We spoke with words to the following effect:

Me: "You have very strong and impressive interpersonal skills and an understated and effective manner which is well suited for dealing with the clients, and fund managers in particular. More than that Rick, the fact is that you are widely respected in the business and I am confident you can pull together the diverse personalities in the investor sales area into a cohesive team."

Mr Lloyd: "Thanks for your support and belief in my ability. I know how important this is to you and the Bank. I still think it's out of my comfort zone and experience, but I can also see it's a good opportunity for me within the Bank."

[24.] I refer to paragraph 51 of Mr Lloyd's Affidavit. I do not recall and do not believe that Mr Lloyd voiced any objections or communicated any dissatisfaction with his position with the respondent prior to when he informed me of his intention to resign.

[25.] I refer to paragraph 52 of Mr Lloyd's affidavit. I deny that Mr Lloyd had been effectively "forced" into the new role although I admit that Mr Lloyd was certainly being encouraged by me to take the new position. I said:

I think it's got the potential to be a stepping stone to bigger things for you here. 27 In the same affidavit, Mr Riordan deposed to an earlier conversation he had had with the applicant about his new role. At that time, the applicant was apparently in Singapore. Mr Riordan recalled telling the applicant that if he was uncomfortable with his new role he could still continue in a trading role, but that if he chose that option he would be reporting to Peter Coad (the new head of Trading (All Products) following the restructure). At that time, Mr Coad was in a position of equal rank with the applicant. Both the applicant and Mr Coad reported directly to Mr Riordan. 28 The applicant was cross-examined at some length about his conversation with Mr Riordan in which he had attributed to Mr Riordan the words that he could either accept his new role or take a demotion. The relevant passages are extracted here:

Q. Do you see in your affidavit at paragraph 48 where you refer to a business trip to Singapore and a telephone call from Mr Riordan, and you give evidence of that telephone call in the space of about a line or maybe a bit more than a line. He told me that that I had two choices, I could either accept the new role or take a demotion? A. Yes.

Q. You were shown no doubt Mr Riordan's affidavit sworn the 29 July, and do you have that now in the witness box? A. Yes.

Q. Go to paragraph 21 on page 5, please. You see that that paragraph is introduced with the words "whilst Mr Lloyd was in Singapore" and then before the italicised print he says, half way down the paragraph, that he telephoned you in Singapore, and then he sets out in italicised print the conversation to the best of his recollection on that page, and then on page 6. Do you see that? A. Yes.

Q. And you were shown that by your lawyers I take it? A. Yes.

Q. Shortly after the date it was sworn in July 2003. And you have not put on any affidavit challenging or contradicting Mr Riordan's version of the conversation have you? A. No.

Q. And the reason you haven't done that is because you accepted that essentially that was, that words to that effect were spoken by him and you in the conversation the telephone conversation to you in Singapore, is that right? A. I certainly recall the last paragraph where he says "I would be reporting to a lower level, yes".

Q. I am asking you about the totality of the conversation which he has deposed to and which you have not responded to. The reason you have not responded to it is that that accords to your recollection of the conversation? A. I expressed my dissatisfaction of the role.

GOOT: Q. The reason you haven't responded to this affidavit with an affidavit of your own since July 2003, is because you don't dispute the accuracy of Mr Riordan's recollection of the conversation between you and he on the telephone you to in Singapore? A. I don't recall exactly how the conversation went. This may be an accurate summary. I certainly recall telling him that it was not a role that I was comfortable doing and he mentions that here, I believe.

Q. So that when you read this version of the conversation in Mr Riordan's affidavit in July 2003, you were satisfied from your recollection that it was accurate, as far as you could recollect the conversation? A. Yes

GOOT: Q. I am putting to you that Mr Riordan did not use the word demotion in the conversation with you to describe the alternative to your not accepting the new role? A. I don't think, I don't think he used the word demotion, no.

Q. And he didn't use it, he didn't use that word in October 2000 when you had a conversation with him as he deposed to in paragraph 49 of your affidavit, did he, that is, the word "demoted"? A. No, he didn't use the word "demoted". 29 During cross-examination, the applicant agreed that in about November to December 2000 he commenced discussions with ABN Amro about employment as Head of Foreign Exchange Trading in Asia. The position was based in Sydney. The applicant conceded that ABN Amro was a competitor of the respondent. The applicant also agreed that he sought from ABN Amro, as a condition of employment, a "sign on" bonus for the purpose of compensating him for the unvested portions of his bonuses that he stood to forfeit if he resigned from the respondent. According to the applicant, ABN Amro ultimately declined to pay him a "sign on" bonus. 30 In February 2001, the applicant was advised by the respondent by letter of new remuneration arrangements to be implemented during 2001. The most significant changes affecting the Institutional Banking staff, which included the applicant were set out in the letter as follows:

• The threshold for ABC deferral in IB will be TER = $100K. (TER is Total Employment Reward, which is the sum of fixed and variable remuneration).

• For TER $100K, 50% of ABC will be paid up front as cash and 50% will be applied to the purchase of restricted CBA shares. After one year, half the shares from any annual review vest and the sale restriction lifts. After two years, the other half vest and the sale restriction lifts. Sale of shares is subject to compliance with the Group's insider trading requirements.

• Employees have the option to extend the sale restriction for up to 10 years, which leads to a corresponding deferral of income tax on the shares.

• Where employees resign from the Bank prior to shares vesting, these shares are forfeited.

• Note: the "extra 10%" corresponding to the time value of money in the current ABC payment arrangements is discontinued. 31 An attachment to the letter set out the respondent's approach to the new arrangements:

Institutional Banking approach to remuneration is underpinned by the following key principles:

• variable (at risk) remuneration is preferred to fixed remuneration

• a substantial portion of performance payment (at risk remuneration) will be non vest and deferred.

The IB remuneration system and in particular the Above Base Component (ABC) are driven by the following factors:

IB business performance determines the ABC pool for Institutional Banking with reference to external market remuneration level. The total ABC pool is then allocated to individual divisions and employees based on business units and individual performance.

The Remuneration system, with its deferral component, encourages behaviour (sic) based on a long term view of the success of complex financial transactions.

The IB annual performance review system is a 360 degree feedback process where individuals are assessed by their manager and peers. The results of the performance review process is a key input to the determination of ABC awarded for the year.

ABC is not guaranteed and is totally discretionary. One key principle of the IB remuneration system is the emphasis on at risk remuneration which on average, represents one-third of the total remuneration for frontline product staff.

A large proportion of remuneration is deferred to support the need to manage long tail risk. In Institutional Banking a significant portion of complex financial transactions extend over a number of years and the profitability is dependent on future events.

ABC awarded are paid out (or vested in the case of shares) in 3 years as a retention tool to retain key staff. Due to the strong emphasis of at risk remuneration in IB, the deferred ABC represent a high portion of the total remuneration and has played a significant role in the retention of key staff. 32 The applicant took part in his fifth performance review for the year ended 30 June 2001 and was awarded a bonus of $725,000 (referred to as "Short Term Incentive" (STI)). In a document headed "Institutional Remuneration Package Summary", the applicant's unvested deferred bonuses, and the $725,000 bonus payment were to be payable as follows:

Payable in 2001 (subject to continued employment) - $203,000

Payable in 2001 (subject to continued employment) - $115,000 Payable in 2001 (subject to continued employment) - $161,000

Cash payable in 2001 - $362,500 Restricted shares (mandatory equity participation) - $362,500

3. Subject to the vesting and sale restriction rules of the CBA Group Equity Participation Plan. 33 The applicant's salary (referred to as Total Employment Review) (TER) was also increased to $330,174 following the review. 34 On 29 August 2001, the applicant sent by email an acknowledgement that half of his STIs may be applied to purchase the respondent's shares under the Equity Participation Plan (EPP) - Mandatory Equity Participation (MEP). At about the same time the applicant was provided with various documentation including the EPP Offer Document and Information Booklet and the EPP Rules. 35 The MEP required the mandatory deferral of bonuses through the acquisition of shares in the respondent bank that were subject to vesting conditions. Under the scheme, if a performance-based bonus was subject to MEP, then half was payable in cash immediately and the remainder used to acquire shares. Half of those shares were to vest one year after acquisition and the remainder after a further period of one year. Under the sub-heading "Vesting" in the EPP Offer Document and Information Booklet, the following appeared:

The vesting conditions will be satisfied if you remain an employee of the Group on each applicable vesting date. If you leave the Group before these dates other than by way of death, age retirement, ill-health retirement or retrenchment then all shares not vested will be forfeited along with any accrued dividends on these shares.

In cases of death, age retirement, ill-health retirement or retrenchment then all shares not vested will immediately vest and all accrued dividends (less any amounts deducted for tax paid by the Trustee) will be paid to you (or your legal representative). 36 The EPP Rules under section 6 headed "Cessation of Employment" contained the following conditions:

If an Eligible Employee Ceases to be Employed by a Group Company due to his or her resignation then any Unvested Shares will be forfeited unless the Bank determines otherwise.

If an Eligible Employee Ceases to be Employed by a Group Company due to his or her retirement, redundancy or a Permanent Disability the Eligible Employee will be entitled to delivery of all Unvested Shares whether or not the Vesting Conditions have been met.

If an Eligible Employee Ceases to be Employed by a Group Company due to his or her death the Eligible Employee's legal representative will be entitled to delivery of all Unvested Shares whether or not the Vesting Conditions have been met.

If an Eligible Employee Ceases to be Employed by a Group Company for any reason other than those contemplated by Rules 6.1, 6.2 and 6.3, any Unvested Shares will be forfeited unless the Bank determines otherwise." 37 The EPP Plan Rules also outlined the respondent's objectives at the beginning of the document. The first objective was expressed to provide, "a flexible financial tool for the attraction and retention of talented employees". The applicant, in cross-examination, agreed that he regarded himself as a talented employee. He sought to explain however that he had no option but to participate in the Plan. He also agreed that he had read the Plan and understood that if he resigned he would forfeit his shares unless the respondent determined otherwise.

38 In about October 2001, the applicant decided to resign from the respondent bank and take up a position with ABN Amro. Prior to resigning he informed Mr Riordan of his intentions. The applicant said in his affidavit that the reason he did this was because the applicant had been asked to implement a number of staff redundancies and he wanted the respondent to be aware of his impending resignation so that any redundancies proposed by him could be reviewed. The applicant also enquired whether the respondent would pay him his outstanding bonus amounts. On 7 November, the applicant was informed by Mr Riordan that the respondent had declined to pay him the amounts deferred. The applicant expressed his disappointment at this decision pointing out that he would have been paid if the respondent was making him redundant. According to the applicant, Mr Riordan's response to him was:

Well if you were going to live on a mountain and raise sheep, we would pay you out too. But as you're staying in the industry and working for a competitor we won't pay [the deferred bonuses] out. 39 The applicant tendered his letter of resignation on 8 November 2001. Approximately one week before that date, on 31 October 2001, the applicant was sent a letter of offer of employment by ABN Amro. The letter informed the applicant that his "total remuneration" would be $315,000 per annum paid fortnightly. This salary included superannuation. In addition, the letter advised the applicant of his eligibility to participate in the company's bonus scheme. More specifically, the letter said:

In addition, you are eligible to participate in the Company's discretionary bonus scheme. All bonus payments are subject to being in our employment and not working out a period of notice at the time payment is due.

You may be eligible to participate in the ABN AMRO Key Employee Equity Program (KEEP) at some time during the term of your employment. This program operates as a phantom equity plan and allows for a deferred component of any bonus you may receive to be invested, giving you a personal stake in the future prosperity of ABN AMRO. Eligibility criteria apply and are subject to change from year to year. If you are invited to participate, you may exercise investment choice over a portion of the deferred bonus and vesting periods will apply. Further information will be supplied to you if and when you satisfy the eligibility criteria.

40 The applicant's resignation became effective on 3 January 2002. At the time of his resignation, the applicant says he had earned, but not received, the following amounts:

$161,000 - being the bonus awarded in September 2000 $362,500 - being the bonus awarded in September 2001, but held in the MEP scheme $523,500 - total. 41 It is against this factual background that I turn to consider the impugned contract or arrangement under which the applicant performed work and the heads of unfairness alleged by the applicant. The contract or arrangement 42 The amended summons for relief refers to "The contract of employment" as unfair within the meaning of s 105 of the Industrial Relations Act. The actual contract or arrangement upon which the applicant appears to rely in this application was set out in a response to a request for particulars forwarded by the respondent. In the letter of response dated 26 August 2005, the contract of employment referred to in the amended summons was said to be, "the contracts whereby the applicant performed work for the respondent between 8 July 1996 and 3 January 2002". The letter then adds:

Relevantly to the claims made in the Amended Summons, clauses 3.1 and clause 3.2 of the contract, in force from 1 July 1999 onwards, state:

3.1 Your (total cost - superannuation) figure will be reviewed annually in accordance with Institutional Banking remuneration policy applying at that time to positions at this level.

3.2 In addition, you will be considered within any performance incentive payment arrangements which the Bank may implement at its discretion." (page 34-37 of Exhibit 1)

As the evidence referred to in Exhibit 1 demonstrates, each year there was in existence a performance incentive payment arrangement although the terms were changed from year to year. Each year the Applicant had a right to be considered against those terms in force for that year. Each year the Applicant was so considered and was awarded "remuneration" (eg see page 94 of Exhibit 1) in the form of a short term incentive payment.

Alternatively, in the event that it is found that the performance incentive payment arrangements in place from time to time are not incorporated into the contract of employment, the Applicant says that the contract is the arrangement, or related condition or collateral arrangement within the meaning of s 105 of the Act constituted by those performance incentive payment arrangements." 43 During oral submissions, I asked Mr Holmes of Queen's Counsel appearing for the applicant what contract he was relying upon. Mr Holmes proceeded to explain that the documentation current during the time of the applicant's employment with the respondent which dealt with the applicant's performance-based bonus arrangements formed part of the applicant's contract of employment. Mr Holmes also said in that context that the applicant relied upon, "...the contract of employment which required forfeiture of the bonus if you are not employed". 44 I intend to proceed upon the basis that the impugned contract comprises the applicant's contract of employment during his period of employment with the respondent between 8 July 1996 and 3 January 2002 as well as all documentation pertaining to the respondent's performance-based bonus scheme in force during that period, including the annual letters advising the applicant of the results of his performance review, the various letters and policies sent to the applicant advising him of changes and proposed changes to the scheme and the arrangements for the payment of such bonuses. It will be recalled from the factual background set out earlier in this judgment that the respondent's bonus scheme underwent a number of changes during the period of the applicant's employment. The applicant, insofar as the documentation reveals, was kept informed of those changes. The documentation revealed, for example, that sometime in 1998, new bonus deferral arrangements were put in place by the respondent in the Institutional Banking section. Deferred payments of the unvested component of the applicant's performance-based bonuses were to be made over a two-year period, as opposed to a one-year period. An additional amount, approximately 10%, was also paid to the applicant to compensate him for the extended period of deferral. Further changes to the scheme occurred in early 2001. The applicant was advised of these changes by letter in February 2001. One result of the changes was the introduction of the EPP-MEP scheme which required the applicant, and others, to apply half of their performance-based bonuses granted, towards the acquisition of the respondent's shares which, in turn, were subject to deferral arrangements. 45 In my view, the respondent's performance-based bonus scheme which required payment of a significant portion of the bonus granted to be deferred over a specified period, and which also stipulated as a condition of receipt that the applicant would be in the employment of the respondent at that time, was an integral part of the applicant's contract of employment. The bonus scheme was an important part of the respondent's policy for rewarding its employees. The performance of an employee was reviewed annually and if certain criteria were satisfied a bonus became payable upon the terms and conditions set down by the respondent. The applicant's contracts of employment referred to the applicant's eligibility to participate in such arrangements. The documentation referred to above represented the implementation of such arrangements or schemes and the amendments made to those arrangements from time to time by the respondent. 46 There can be no doubt that the applicant's contract of employment led directly to the performance of work by the applicant in the banking industry. This pre-requisite is of course necessary in order to bring the application under s 106 of the Act within jurisdiction: see, for example, Majik Markets Pty Limited v Brake & Service Centre Drummoyne Pty Limited (1991) 28 NSWLR 443 at 464-465; Production Spray Painting & Panel Beating Pty Limited & Ors v Newnham & Ors (1991) 27 NSWLR 644 at 654E; Solution 6 Holdings Limited & Ors v Industrial Relations Commission of New South Wales & Ors (2004) 60 NSWLR 558 at 572. 47 Even if the documentation evidencing the existence and operation of the performance-based bonus scheme were not an integral part of the contract of employment, they would, taken together with that contract, nevertheless be said to properly constitute an arrangement whereby work was performed in an industry. Support for this approach is found in the decision of Custom Credit Corporation v Goldsmith & Ors [1976] AR (NSW) 98 where the Full Bench of the Industrial Relations Commission in Court Session considered the meaning of an arrangement as used in s 88F of the Industrial Arbitration Act 1940 at 131, the Full Bench said:

But it must be true to say, we think, that it is significant that Parliament did not see fit to include in the Act any definition of "arrangement", which is not a term of art and is not a word which has a very precise meaning. Looking at the setting in which it is used in s 88F, we are of the opinion that in one of its meanings "arrangement" embraces transactions which do not give rise to contracts or obligations, that is to say, obligations enforceable at law; but we are also of the opinion that in another meaning it embraces a situation where there exist two or more separate contracts which, notwithstanding their separateness, are, given the facts, so sufficiently associated with each other in a practical sense as together to constitute an arrangement of which each contract is a part. 48 The respondent advanced a proposition during oral submissions that the performance-based bonus payment was discretionary and therefore non-contractual. In order therefore for the bonus payment to fall within s 105 as an arrangement, a related condition, or collateral arrangement it would have to lead to the performance of work, which it does not. Support for this proposition was sought to be found in Solution 6 Holdings' case at [67] where Spigelman CJ said:

It is also clear that the Share Sale Agreement, even if regarded as a "collateral arrangement", does not lead, for the reasons already given, to the performance of work in an industry. Mr West QC submitted that the s 106 power to void or vary a "collateral arrangement" can be exercised even though the relationship said to be an "arrangement" does not lead to the performance of work or, it appears, though it has no effect on the conditions of work or causes any other impingement on the work relationship. 49 It is necessary however to appreciate the context in which Spigelman CJ made this comment. The share sale agreement was entered into between various parties including Solution 6 Holdings for the purchase of shares (by Solution 6 Holdings as the buyer) in the Fish Tech business. The agreement was said to be conditional upon Mr Fish agreeing to be employed by Solution 6 Holdings for three years. It was alleged on behalf of the claimants in the Court of Appeal that the agreement was not one which directly led to the performance of work. Although it contemplated the performance of work by Mr Fish, that was not its purpose, which was to acquire the Fish Tech business. Nor, it was alleged, did the agreement fall into any of the alternative categories in s 105 of the Act. It was not, for example, an arrangement that was collateral to the employment agreement (between Mr Fish and Solution 6, a wholly owned subsidiary of Solution 6 Holdings). Spigelman CJ considered whether the agreement was itself a contract "whereby work is performed in an industry", and found that in neither case was the requisite relationship between the contract and the performance of work established. In relation to the characterisation of the agreement as a "collateral agreement" his Honour rejected this characterisation on the basis that (at [66]):

The s 105 definition distinguishes between a "contract" and an "arrangement". The share sale agreement is an enforceable contract. It is not an arrangement and therefore cannot be a "collateral arrangement". 50 In contrast the applicant's contract of employment in the present circumstances led directly to the performance of work. The performance based bonus scheme may be properly characterised as either an integral part of the contract or as part of a wider arrangement of which the centrepiece is the contract of employment. On either construction both characterisations would bring the application within jurisdiction: see also Custom Credit Corporation at 134, 135. 51 The applicant belatedly put in issue during the proceedings that during each year when the applicant was performing work there was an implied term conferring a contractual right to a reasonable bonus. This bonus according to the applicant was determined upon the bona fide exercise of the discretion (to award a bonus) in accordance with past practice and other information available to the respondent at the time of his performance reviews. Moreover, once the discretion was exercised the bonus payment "crystallised" and the only remaining conditions were that the applicant continue to satisfactorily perform his duties up to the vesting dates, and, remain in employment. 52 The respondent disputed the existence of an implied contractual entitlement on the part of the applicant to his bonus payment, on three bases. First, it was said that the indicia for the implication of a contractual term or entitlement were not present: Codelfa Construction Pty Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347. Secondly, the alleged contractual entitlement it was said was inconsistent with the existing contractual term as to the payment of remuneration, and, thirdly, the alleged implied entitlement ignored the express condition that the applicant had to be in employment at the time the bonus was paid. 53 The third basis is really only a variation of the first basis so that they may be dealt with together. In relation to the second basis I do not see an inconsistency between the term sought to be implied and an existing term as to the payment of remuneration (which latter term I take as being a reference to the applicant's base salary or remuneration). The point was not expanded upon by the respondent in submissions. In any event I have come to the view that the contract does not contain an implied term that the applicant had a contractual right or entitlement to a reasonable bonus. In Codelfa's case Mason J referred to the conditions necessary to ground the implication of an implied contractual term which were summarised in B.P. Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 286. These conditions are:

(2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;

(3) it must be so obvious that it goes without saying;

(5) it must not contradict any express term of the contract. 54 I find it unnecessary to deal with the first four conditions. This is because in my view the term sought to be implied, namely that the applicant had a right or entitlement to a reasonable bonus directly contradicts an express term of the contract, namely, that the applicant was only entitled to the deferred portions of his performance based bonuses if he continued in the respondent's employment. I should add that a further express condition of the contract was that the applicant continue to perform satisfactorily up to the vesting date or dates. The term sought to be implied also contradicts this express term. Was the contract unfair?

55 It remains to consider whether the impugned contract as characterised was unfair in its term as alleged by the applicant. 56 The applicant relied on a number of elements as constituting unfairness under the contract. These may be summarised as follows:

(i) the forfeiture of the deferred bonus in the event the applicant did not continue in the respondent's employ was unfair because what was forfeited represent a high proportion of the applicant's remuneration;

(ii) the forfeiture of the deferred bonus upon resignation offends the public policy of the Act which is reflected in s 117(1), namely that remuneration must be paid in money and payment must vest absolutely in the person performing such work;

(iii) the condition imposed on the applicant under the contract that he continue in employment offends public policy as it constitutes a restraint of trade. The forfeiture of any outstanding bonuses in the event of resignation constituted a fetter on the applicant's right to obtain employment and did not protect any legitimate interest. 57 For convenience the above three elements of alleged unfairness will be addressed as "general unfairness"; "unfairness under s 117" and "restraint of trade" in that order. General unfairness

58 The applicant relied in submissions on the decision of Macken J in Lumby v Yorkshire-General Life Assurance Co Ltd [1978] 1 NSWLR 626. In that decision the applicant, Mr Lumby, worked for the respondent selling assurance policies. During that period he was remunerated solely by commission which he earned from the sale of policies. The method of payment of the commission was that immediately after the first premium was paid the applicant was advanced the amount equal to two thirds of the total premium payable during a full year. When the thirteenth monthly premium was paid the balance of the commission became payable. It followed from this arrangement that some commissions would become due to Mr Lumby when he left the respondent's employ, that is, those commissions payable on policies sold during the last year of employment. Clause 22 of the arrangement between the parties under which the applicant performed work for the respondent was expressed in the following terms:

Upon termination of this Agreement for any reason whatsoever the Representative will not be entitled to be paid any commission (deferred or otherwise) bonuses or other remuneration or moneys whatsoever which at the date of such termination shall not become due and payable by the Company to the Representative and the Company shall not be under any liability whatsoever in respect thereof. 59 It was contended by Mr Lumby that this clause was unfair within s 88F of the 1940 Act. Mr Holgate, the respondent's Australian manager explained that there were two reasons for retaining the deferred balances of any commissions. These were to offset the problems encountered by established companies because of inducements offered by other companies to entice assurance salesmen to join their staff; and, to offset company losses. 60 Macken J found that clause 22 contravened s 88F because of the principle of public policy behind the Truck Act 1900 and its successor provisions in s 92 of the 1940 Act, namely, that payments for work performed should vest absolutely in the person performing the work. Such a policy denied any right to make deductions from such payments in favour of the payer or to retain moneys earned by the person performing the work. Macken J also found the method of operation of clause 22 unfair because the respondent used it is a sanction against some agents, that is as a means of dissuading those agents from leaving to work for competitors. His Honour added:

A capacity to retain all deferred commissions which become due and payable following the termination of employment must be a powerful incentive to successful agents to remain in the employ of the company, and not to seek to better themselves by accepting employment elsewhere. Thus stated, the clause amounts to a severe fetter on the private right of an agent to freely change his employment. 61 The applicant sought to draw a number of analogies between the circumstances in Lumby's case and the present circumstances. According to the applicant it is inherently unfair to perform work and be paid a performance-based bonus, a significant proportion of which is forfeited upon his resignation. Moreover, some employees of the respondent bank who resigned were in fact paid the unvested portion of their deferred bonus upon resignation. This has resulted in the applicant being a victim of selective discrimination. The evidence adduced during the proceedings effectively showed that the respondent preferred to remunerate its employees by means of variable "at risk" remuneration rather than by fixed remuneration, and then defer a substantial portion of the performance based remuneration. This had the result, not unintended, that the longer the applicant worked, the more he became "locked in": see Morgan v Coulson [1981] 2 NSWLR 801. The applicant referred to a number of exhibits tendered during the proceedings which showed, he said, the link between individual performance and the system of remuneration, that is, the bonuses (STI's) were funded by the individual's performance. Moreover, the amount representing the bonus payments had already been allocated to individual employees following performance reviews. 62 The applicant also directed the Court in submissions to stated elements of the respondent's IB Human Resources strategy which included, "actively retaining staff critical to ongoing business success". It was contended by the applicant that in pursuance of this strategy the respondent induced the applicant with a sizeable bonus to come to Australia and then imposed a condition on receipt of the bonus that he must continue in employment. The applicant also relied on evidence given by Mr Cupper concerning the respondent's rationale behind the deferred bonus scheme, one of which was, "...to restrain people going to competitors". The remaining two reasons were explained by Mr Cupper in the following way:

A. There were two other components. One was the market practice, so that we broadly had remuneration structures and arrangements that were consistent with the market, so that we were not as readily picked off by virtue of the fact that we paid everything upfront. So it was to make it broadly consistent with market practice. And secondly, and importantly, the other element was the potential that we wanted to get comfort because we were dealing often with large sums of money and the quality of the deals that had been made was something that we wanted to have some - I will use the expression "skin of the game" over an extended period before paying out the full money.

Q. What does "skin of the game" mean? What are you referring to? A. From my expression that the bank had some capacity to withhold funds over a reasonable period such that if anything came up in that period which suggested improper trading or some reason similar to that, then the bank would have some leverage. 63 Finally, the applicant sought to distinguish the decision of Hairman v FileNET Corporation Pty Limited [2001] NSWIRComm 318. The respondent relies on this decision to support its submission that the applicant's contract was not unfair within the meaning of s 106. In that decision her Honour, Justice Schmidt dismissed the application under s 106 finding no relevant unfairness in the operation of a commission scheme where the applicant lost potential payments upon resignation. 64 Eight factors were advanced by the applicant as evidencing a marked contrast with the present circumstances. I propose to attempt to reproduce these factors in a summary form as follows:

(i) in FileNET the applicant used his loss to gain a higher salary with his new employer;

(ii) following resignation the applicant in FileNET went to more lucrative employment;

(iii) the applicant in FileNET had previously benefited from the impugned commission scheme in that he had been assigned benefits from other employees who had left the employer before the deferred commission payments became due;

(iv) in FileNET the applicant's presence was required to manage any problems which might arise following the sale of the product from which the commission payments were derived. Otherwise problems may arise with regard to customers complying with payment obligations as well as the respondent's continuing relationship with those customers;

(v) in FileNET the applicant received the first tranche of his commission before payment was received by the customer. In the present case the respondent received the full financial benefit of the transaction before paying the applicant the first tranche;

(vi) the applicant in FileNET used the same claim of unfairness to support two actions, the second against another employee following termination of employment;

(vii) the commission scheme in FileNET was structured having in mind the work performed by the applicant and other salespeople as well as the respondent's business needs. In other words it was not a scheme designed only to provide additional remuneration to salespeople when they achieved sales;

(viii) in FileNET the applicant concealed his intention to resign from his employer in order to secure entitlement to the first tranche of commission. 65 The respondent joined issue with the applicant as to the alleged unfairness of the contract with the following propositions:

(i) Lumby's case does not give rise to principles and in any event is distinguishable from the present circumstances.

(ii) the applicant was not the victim of selective discrimination.

(iii) the deferred payment of bonuses and the provision of a bonus by way of shares is not unfair on the grounds alleged or at all. 66 In relation to Lumby's case the respondent emphasised that Mr Lumby was remunerated solely by commission earned from the sale of assurance policies. The decision according to the respondent turns on its facts, and, there are therefore a number of distinguishing circumstances which include:

(i) the deferred payment in Lumby's formed part of his remuneration whereas here the applicant's remuneration was his base salary which was very substantial;

(ii) in Lumby's case 100% of the remuneration was contractual and constituted "wages" under the Truck Act ;

(iii) Lumby's deferred commission was entirely earned by him whereas here the deferred bonus payments are based on the applicant's work performed having regard to a number of factors including business performance, performance of other individuals, risk and retention;

(iv) Mr Lumby's deferred payment was earned as the work occurred. The payment to the applicant here, in contrast, followed the exercise of a discretion having regard to a number of factors including some occurring over a twelve month period;

(v) unlike Mr Lumby, the deferred payment did not become due after the applicant resigned, it was not due unless the applicant was employed at the time of the payment. 67 The respondent sought to deal with the applicant's submission concerning a strategy of the respondent bank to have variable "at risk" remuneration, a substantial proportion of which was performance based and deferred. Unchallenged affidavit evidence of Peter McAuley, a specialist consultant focussing on senior executive and board remuneration, adduced during the proceedings, revealed that, during the period of the applicant's employment, within the finance industry and in particular within institutional banking the following industry practices prevailed:

(a) remuneration at senior executive level was most commonly structured with a variable at risk component in addition to a fixed component;

(b) the variable component was often 50 percent or more of aggregate remuneration;

(c) incentive plans to encourage the retention of senior executives involving deferral of the payment of cash or shares between 1 to 3 years were common;

(d) it was usual and a common practice for deferred benefits to be forfeited especially when employees moved to a competitor;

(e) in his experience he could recall no instance where an employee who resigned and moved to a competitor did not forfeit the deferred reward;

(f) the requirement for employees to be in employment at the vesting dates in order for the awards to vest was fundamental. 68 The respondent also contended that while it suited it to have variable "at risk" remuneration it also suited the applicant to have the opportunity to receive substantial bonuses in addition to his substantial base salary: see Hairman v FileNET at [130]. Nor, contended the respondent was there anything startling about "self funded" performance payouts. Sufficient revenue had to be generated in order to pay wages and bonuses however calculated. It was also not the case as had been contended by the applicant that the harder the applicant worked the more his deferred bonus was put at risk. In fact the applicant's bonus payments decreased to half during the relevant period. In relation to the applicant's contention that he suffered a reduction in earnings when he accepted employment with ABN Amro, the applicant had attempted albeit unsuccessfully to mitigate losses arising from forfeiture of his deferred bonus payments by negotiating a "sign on" bonus. 69 Finally the respondent relied on evidence given during the proceedings that the applicant appreciated from the beginning of his employment that apart from the guaranteed bonus in an amount of $200,000, any performance based bonus was discretionary and the subject of deferral arrangements. The applicant was in fact informed of these arrangements every year when bonus payments were approved. Not only was the applicant aware of and understood the arrangements but he accepted payment of his bonus on each occasion. The applicant sought to cover the non-provision of his unvested bonus payments by negotiating with ABN Amro prior to resigning from the respondent's employ. In the present case the applicant received each year generous bonus payments which were not inherently unfair. What the applicant is seeking to do here, says the respondent is make the arrangement more profitable. 70 It is appropriate at this point to refer briefly to some well known statements contained in numerous authorities as to the nature of unfairness within the context of s 106 and the approach to be taken to its assessment. One authority in this jurisdiction often relied upon is Port Macquarie Golf Club Ltd v Stead and Another (1996) 64 IR 53 at 59-60. In that decision the comments were made in the context of appellate review but they are equally pertinent to first instance applications. The Full Bench observed for example that the nature and degree of unfairness:

[R]elates to ordinary standards of fairness by directing attention to the particular circumstances of the individual contract or arrangement concerned; whether or not a contract or arrangement is unfair is a matter to be decided upon examination of the facts of each particular case.

The Full Bench also referred to the test to be applied in assessing unfairness:

The test of unfairness involves the commonsense approach characteristic of the ordinary juryman by applying standards providing a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement, bearing in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement: Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 at 374; A & M Thompson Pty Ltd v Total Australia Ltd [1980] 2 NSWLR 1 at 13; and Baker at 271-272. 71 In Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41 the appellant sought to appeal against a first instance decision involving relief sought from a loan agreement under the Contracts Review Act 1980. At first instance the trial judge had concluded that the loan agreement was unjust. Spigelman CJ during the course of his reasons made a number of observations about the meaning and methods of assessment of an unjust contract. At [63] to [65] his Honour said:

[63] In many respects this case, in its basic structure, is similar to that considered by this Court in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 where the Court held, by majority, that the contract was not "unjust". The Appellant in this case relies on a number of steps in the reasoning in West in support of its contention that the contract in the present case should not be found to be "unjust".

[64] Of course each case must depend upon its own facts. Furthermore, West is now 20 years old. When the Parliament adopts so general, and inherently variable, a standard as that of 'justness', Parliament intends for courts to apply contemporary community standards about what is just. Such standards may vary over time, particularly over a period of two decades.

[65] There have been observations in this Court that the standards may have changed from those applied in 1986 in West. (See Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413; (2003) 11 BPR 20,841 at [79].) and, again, at [73] (referring to the reasoning of McHugh JA in West v AGC (Advances) Ltd (1986) 5 NSWLR 610):

His Honour's reasoning is instructive. It was, however, directed to the issues in that case. Where the Court has to apply a standard as general as what is "unjust", it cannot be confined by such reasons as if they were rules. I do not understand McHugh JA to have put forward these observations as rules. Rather, the observations are to be understood, correctly, as identifying relevant considerations entitled to significant weight. 72 I intend to approach the issues of unfairness in this matter with these principles in mind. Lumby's case for example, in my view, falls to be decided on its own facts. The decision is some 28 years old and community standards about what is fair and unfair undoubtedly will have varied over that period of time. Like standards of justness standards as general as fairness cannot be confined to the given reasons in a particular case as if they are rules. A fundamental point of distinction between Lumby's case and the present matter is that the alleged unfairness concerned commission payments which were Mr Lumby's sole means of remuneration. The applicant here, on the other hand, during the period of his employment received a base salary of between $250,000 and $330,000 per annum at the same time as he was in receipt of performance based bonus payments, part of which were deferred. 73 The points of distinction raised by the applicant between the circumstances in Hairman v FileNET and the present matter also do not greatly assist the applicant. It would be extraordinary indeed if legal minds could not discern a great many points of distinction between any two cases involving different parties. In any event, in my view most of the so called points of distinction relied upon are in reality not points of distinction of any substance. 74 The applicant in FileNET may have used the loss of his deferred payments to successfully negotiate a higher salary with the new employer, but then so too did the applicant here attempt to negotiate a "sign on" bonus. The only difference here which is not material to the point sought to be made is that the applicant was unsuccessful. It is asserted that the applicant in FileNET resigned to go to more lucrative employment. In relation to the present matter however there is nothing in the evidence to suggest the position the applicant took up with ABN Amro required less skills, expertise and responsibility than his position at the respondent bank. Moreover, in my view, the salaries are comparable. The applicant resigned from the respondent on a fixed salary of $330,000 including superannuation and commenced working shortly after for ABN Amro on a fixed salary of $315,000 including superannuation. Like the applicant in FileNET, it appears that the present applicant may also have benefited from the pool of money assigned to other employees when he was paid a guaranteed bonus of $200,000 after he commenced employment with the respondent. In addition (in relation to points of distinction (v), (vi) and (vii)) the quantum of the applicant's deferred unvested portions of the bonuses was not based merely on the applicant's individual performance. The letter to the applicant dated 2 February 2001 advising him of the new remuneration arrangements in 2001 annexed attachment B which listed a number of factors behind the payment of performance-based deferred bonuses. These factors included the performance of the business with reference to external market remuneration levels. Once the bonuses were quantified, receipt of the deferred components was nevertheless contingent upon the applicant's continued satisfactory performance as well as his continued employment. Finally, although the applicant here was candid in revealing his negotiations with ABM Amro it will be recalled that it was in fact a term of his original contract of employment that he agree to inform the respondent of his intention to resign, although it must be said that the same or a similar term was absent in the contract of employment executed by him on 28 August 1999. 75 The applicant relies on the fact that he was not told by the respondent prior to taking up employment, of the requirement to remain in continuing employment as a condition of receipt of his deferred bonus portions. The evidence discloses that the first written communication in this regard received by the applicant was in the week of 8 September 1997 advising him of the results of his first performance based review. Nevertheless the applicant understood that prior to commencing employment with the respondent that receipt of any deferred bonus was contingent upon continuing employment. So much is made clear in the following exchange during cross-examination of the applicant:

Q. And you knew, at the time that you read and understood this letter [a reference to the 22 May 1996 letter] that if a bonus in the subsequent years were paid to you and deferred for 12 months, that you would have to be in employment with the bank at the time of the expiration of the 12 month period to collect the deferred bonus? A. No, I never worked under that system.

Q. I'm not asking you whether you worked on that system Mr Lloyd. I'm asking you whether that was your understanding when you read the letter and you read the section about the deferred bonus? A. No, it's not clear.

Q. You say it was not clear? A. Yes.

Q. At the time you read it. Did you make any enquiry of anyone to clarify it before you signed the letter on third June? A. I would have spoken to Mr Riordan.

Q. You would have, did you say, before you signed it? A. Yes.

Q. And do you have any recollection of speaking to Mr Riordan about it? A. I believe we discussed it over dinner.

Q. Where? A. In Los Angeles.

Q. When? A. In about March or April of 96.

Q. I'm asking you, Mr Lloyd, about your understanding of something that was contained in a letter that was written to you on 22 May, which you said, when you got it, was not clear to you? A. The deferred portion and how it is paid?

Q. That's correct. You said it was not clear to you? A. Right.

Q. That you had to be in employment to be able to pick up the deferred bonus, and you then said that - I asked you whether you clarified it, and you said you would have spoken to Mr Riordan about it. What I want to suggest to you is that you didn't speak to Mr Riordan about it at any time after you received the letter, either of 21 May or 22 May. Do you agree with that? A. I don't recall.

Q. So you have no recollection of seeking clarification from Mr Riordan about the deferred basis of any bonus payment after getting the letter of 21 May. Is that correct? A. That's right.

Q. But you nevertheless understood and appreciated that if a bonus, after the first year, was awarded to you, you would have to wait 12 months after it had been awarded to you in order to get half of it? A. Yes.

Q. You say, do you, that you didn't know that that would mean that you had to remain in employment to be able to get it? A. I'm just saying that I don't recall discussing it, and I don't - I had never worked under that system.

Q. I know you hadn't worked under such a system. But I'm asking you about your understanding, prior to signing this letter on 3 June 1996 and accepting its terms, and I'm suggesting to you that the understanding that you had at that time, even though you hadn't worked under such a system before, was that you had to be in employment in order to - at the time of obtaining the deferred bonus, and you had that understanding, didn't you? A. Yes. 76 Another aspect of alleged unfairness upon which the applicant relies is that the deferred portions of his bonuses were a consistently high portion of his overall bonus. Maybe so, but the applicant consistently took immediate receipt of an even higher portion of his bonus and in addition received his base salary. Moreover, at least until the change in remuneration arrangements announced in 2001 the applicant received an additional 10% on top of the quantum awarded as compensation for deferring payment over two tranches representing two years in total. 77 The applicant also alleged unfairness on the basis that in his words he was forced to take on a new role following the October 2000 restructure. So dissatisfied was he with the new role that he stated in his affidavit that he would not have moved to Australia and relocated his family had he known he would be required to fulfil his role. The fact remains however that it was an express term of the contract of employment signed by the applicant on 28 August 1999 that he may be required in the course of his employment, "...to undertake other roles or duties, or to work in different locations" (Clause 1). 78 The applicant operated in a workplace where the receipt of deferred performance based bonuses contingent upon continuing employment were commonplace. It was also commonplace that banking and finance institutions dealing with large amounts of money such as the respondent would take some steps to retain the services of valued employees. The respondent's actions therefore in deferring a sizeable component of the performance-based bonuses was in accordance with the rationale and in accordance with industry practice. Another rationale common to the banking and financial sector was the withholding of funds by the respondent as a means of protecting itself in the event a particular trade did not yield expected results because of, for example, improper trading (Mr Cupper's "skin of the game"). The applicant was aware of and understood all of these workplace practices as part of the work environment or the employment culture within which he operated. The applicant chose to continue to work for some years under a regime where forfeiture of the unvested portion of his performance based bonuses was the consequence if he resigned. While these industry practices alone may not be sufficient to negate findings of unfairness there are a number of other factors outlined above which taken together would militate against such a finding. 79 The applicant also alleged that he had been selectively discriminated against by the respondent on the ground that four other employees had also resigned from the respondent bank but had nevertheless received the deferred unvested portions of their bonuses. The respondent's policy on the payment of unvested performance-based bonuses in the event of termination of employment however was consistently clear throughout the applicant's period of employment. The applicant was also kept consistently informed of all developments of that policy. The policy, stated simply, was that the respondent would not pay out an employee's unvested performance bonus if that employee resigned. Moreover the policy had national application, not international application. If for example an employee was made redundant, retired or suffered a permanent disability that employee was entitled to delivery of all of his or her unvested shares whether or not the vesting conditions had been met (EPP Plan Rules, section 6). In relation to resignation the EPP Plan Rules dictated that any unvested shares were forfeited, "unless the bank determines otherwise". The vesting conditions in the MEP were also based on the forfeiture of unvested shares in the event of resignation only, but not death, age retirement, ill health-retirement or retrenchment. 80 The applicant compares his circumstances of resignation entailing the consequential forfeiture of his unvested bonus with four other employees of the respondent who resigned but nevertheless received their unvested bonuses. In my view however the circumstances of all four employees are distinguishable and do not support the applicant's contention of differential or selective discriminatory treatment. The first employee John Martin worked in the respondent's New York office and suffered from Crohn's disease. He resigned to relocate to Ireland with his family. Phillip Heath the second employee also worked in the respondent's New York office and resigned to work for Wells Fargo in San Francisco, a relationship bank of the respondent. Michael Bertelle also worked in the respondent's New York office and resigned to work for a non-competitor bank in New York. The fourth employee, Zoran Mavrinac also worked for the respondent in its New York office and resigned to work on an internet start-up trading company with the expectation that it would be a mutually rewarding relationship, with the respondent. 81 Neither Mr Cupper nor Mr Riordan in their evidence could recall any circumstances in Australia where an employee who resigned had been paid his or her deferred bonuses. Mr McAuley in his affidavit said he could not recall an instance when an individual who left an institution of his or her own accord and moved to a competitor had not forfeited any deferred bonuses. 82 I have endeavoured to give careful consideration to all matters raised by the parties in relation to this first head of alleged unfairness and I find, on balance, that the circumstances were such that the impugned contract was not unfair in its terms as alleged by the applicant. Unfairness under s 117

83 The applicant also contends that the contract, as characterised, offends against s 117 of the Act on two bases. First, because the effect of the bonus scheme was to defer bonuses (and ultimately forfeit them upon resignation), and, secondly, because it was a requirement imposed by the respondent that half of the deferred component of a bonus had to be used to acquire shares. Both deferred components of the bonus, one in cash and the other in shares, it was said, constituted "remuneration" within the definition of s 117. As Macken J held in Lumby's case, the arrangement under clause 22 of Mr Lumby's contract, whereby deferred commission stood to be forfeited in the event of termination, was held to contravene s 88F of the 1940 Act (a predecessor section to s 106). This was because the clause offended the principle of public policy behind the Truck Act 1900 provisions reproduced in s 92 of the 1940 Act (a predecessor section to s 117) namely that payment for work performed should vest absolutely in the person performing the work. According to Macken J such a policy denied any right to make deductions from such payments in favour of the payer or to retain moneys earned by the person performing the work. 84 The applicant relied on a decision of the Full Bench of the Commission in Shead v Summit Western Pty Limited (1998) 81 IR 347 to support his contention that his deferred bonus payable in cash and shares constituted unlawful "remuneration" in contravention of s 117. 85 The respondent submitted that s 117 was only intended to apply to wages not the provision of bonuses, and, that the reference to remuneration in s 117 is a modernisation of the language contained in the Truck Act and therefore does not expand the operation of the section. The applicant's remuneration it was said was his base salary which did not include a bonus. 86 According to the applicant, this Court is bound by Shead's case. I disagree. The decision is in fact a decision of the Full Bench of the Commission, not the Court. Nevertheless, it contains some observations which support the respondent's contention that the definition of "remuneration" used in s 117 is confined by reference to the Truck Act 1900 that is, a more narrow construction than has been contended by the applicant. 87 It may be useful at this point to reproduce the relevant parts of the Act which deal with the payment of remuneration in connection with the provisions of s 117. These are ss 117, 118 and 119. s 117(1) Remuneration payable to an employee must be paid in money and, if demanded, at least once each fortnight. s 117(2) Payment is made in money only if it is made: (a) in cash, or (b) with appropriate authority, by cheque payable to the employee, or (c) with appropriate authority, into an account in the name of the employee (whether or not jointly with another person) at a financial institution by electronic transfer of funds or other means. Appropriate authority is authority conferred in writing by the employee or authority conferred by an industrial instrument. s 117(3)Payment of remuneration is to be made in advance if the employee is entitled to payments in advance by agreement, custom or otherwise. s 117(4) An employer must not pay remuneration to an employee contrary to this section. Maximum penalty: 100 penalty units.

s 118(1) Payment of remuneration to an employee is to be made in full without any deduction for goods, board or lodging or any other services supplied by the employer in payment (or part payment) of remuneration. s 118(2) However, an employer can deduct and pay on behalf of an employee from any remuneration payable to the employee: (a) any payments principally for the benefit of the employee that are authorised in writing by the employee to be deducted and paid, or (b) any payments that are authorised by an industrial instrument to be deducted and paid. s 118(3) An employer must not pay remuneration to an employee contrary to this section. Maximum penalty: 100 penalty units

s 119 An employer must not, directly or indirectly, impose as a condition of the employment of an employee any terms as to the place where or the manner in which or the person with whom any remuneration paid to the employee is to be spent. Maximum penalty: 100 penalty units. 88 In essence these sections require:

(i) remuneration to be paid in cash (or cheque, with the appropriate authority) (s 117);

(ii) remuneration to be paid in full without deductions, subject to certain exceptions (s 118);

(iii) an employer must not impose any terms as to where or how an employee may spend his or her remuneration (s 119). 89 In Shead's case the Full Bench considered whether an applicant in an unfair dismissal application under s 84 of the Act was prevented from seeking review of his application because his remuneration exceeded the remuneration cap of $62,200 which was the jurisdictional limit imposed by s 83(1) of the Act. The Full Bench examined in detail the meaning of "remuneration" as used in the Act including the definition relevant to s 117. In this latter regard the Full Bench traced the history of the provision (and its related provisions) from it origins in the Truck Act 1900 and all relevant successor provisions to that Act up to and including s 117. The Full Bench found ultimately that the meaning of "remuneration" as used in s 117 was limited to the cash components of an employee's salary or wages package which are payable (at 360):

Section 117 of the 1996 Act, recited earlier in these reasons, enacted provisions for the payment of remuneration and its recovery as the successor to s 172 of the 1991 Act.

This comparison suggests strongly, it seems to us, that the language of the Truck Act was "updated" when the 1991 Act was enacted and that the "modern" form of language was continued in the 1996 Act.

Support for the conclusion that the adoption of the word "remuneration" in the 1991 Act was to adopt a modern term in lieu of the earlier term "wages", can be found in the work which the provisions in the 1991 Act were given and the conjunction of the word "remuneration" and the word "payable" in s 172 of the 1991 Act (and later in s 117 of the 1996 Act). If the word "remuneration" was understood in its ordinary broad sense in s 172 of the 1991 Act, potentially absurd circumstances could arise. How could benefits of a package, such as a motor vehicle or a mobile phone, be "paid in money"? On the other hand, if the word was intended to have the narrow meaning proposed by the appellant, the drafting of the provision would be odd in the extreme. It follows, in our view, as a matter of commonsense that the word "payable" in s 117 must be read as a word of limitation with particular work to do, namely by limiting the ordinary meaning of the word "remuneration" in the context of the provisions of s 117 to the cash components of any package - they being "payable".

Likewise, the phrases used elsewhere in this part, such as "payment of remuneration" in s 118 and "remuneration paid" in s 119, compel the conclusion that in the context of Pt 10 of Ch 2 of the 1996 Act the word "remuneration" is limited by context to the cash or monetary elements of any employee's package. 90 I have formed the view that the deferred bonuses payable as part of the respondent's bonus scheme, either by way of cash or shares did not constitute part of the applicant's remuneration under his contracts of employment. Rather, the decision to pay the portions of the applicant's performance based bonuses was a discretionary one based on the applicant's continued satisfactory performance and his continued employment. Moreover, unlike the circumstances in Lumby's case where Mr Lumby's sole means of remuneration was his commission, the applicant here had a fixed salary which comprised wages and superannuation and which was paid fortnightly. The applicant's contract of employment clearly distinguished between the applicant's fixed salary (his "gross remuneration") and his entitlement to participate in a bonus scheme. 91 To revisit the evidence briefly in this regard, in the contract of employment signed by the applicant on 10 July 1996 specific mention was made of the applicant's "gross annual salary and other employment benefits constituting the gross remuneration package to which the Employee is entitled under the Agreement...". The applicant's gross remuneration package details were set out in an annexure to the contract and comprised his salary of $250,000. The contract in clause 10 stated the following:

In addition to the gross remuneration package, the Employee is eligible to participate in a performance payment (bonus) arrangement determined by the CBA on a year to year basis. 92 The contract of employment signed by the applicant on 28 August 1999 provided that the applicant's remuneration (expressed as "total cost-superannuation") comprised his cash salary less superannuation, being a total of $302, 912 which was to be paid fortnightly. An attachment to the contract stated that the applicant's "fixed remuneration" was $302,912 plus $22,718 being superannuation, a total of $325,630. Clause 3.2 of the contract stated that "in addition" to that fixed remuneration the applicant would be, "considered within any performance incentive payment arrangements which the Bank may implement at its discretion". 93 Having considered the relevant evidence and legal principles covering the application of s 117 (as well as ss 118 and 119) of the Act to the circumstances of this case, I find, on balance, that the applicant has not shown that the public policy of the Act reflected in those provisions has been offended. This aspect of the applicant's case therefore has also not been made out. Restraint of trade

94 The applicant also contended that his contract was unfair within the meaning of s 106 on public interest grounds because it was a contract in restraint of trade. Support for this was sought to be found in J.D. Heydon's "The Restraint of Trade Doctrine", 2nd Edition, where it was said that a contract will be in restraint of trade if its effect is to "bind or coerce", or otherwise fetter the rights of an employee to obtain employment and does not protect any legislative interest. The alleged restraint of trade in issue here was the respondent's retention policy which was one of the stated rationales for the deferral of bonuses (and forfeiture of any unvested component upon resignation) by the respondent. Nor says the applicant did the respondent have any legitimate interest in deferring the payment of bonuses in order to retain key staff. This is because the deferral mechanism and consequent threat of forfeiture prevented those employees, including the applicant, from freely using their skills and experience to leave the respondent's employ and work for a competitor. 95 The respondent challenged the contention that the contract was a contract in restraint of trade in the terms characterised and therefore unfair on public interest grounds within s 106. First, the respondent contended that the deferred bonus did not have the effect of precluding the applicant from seeking other employment. He in fact sought and obtained employment with ABN Amro. Secondly, even if a restraint of trade were found to exist it was reasonable in the interests of parties and in the interest of the public. The deferred bonus while providing an incentive to remain in employment was not unreasonable because the respondent has a legitimate interest in doing so, namely, to retain key staff. 96 The question to be addressed in relation to this head of alleged unfairness is whether the respondent's retention policy, which was sought to be implemented through the deferral of bonuses and consequential forfeiture in the event of resignation, constituted a restraint of trade, and, if so, whether it was an unreasonable one: see, for example Darrow v FreshFood Management Services Pty Ltd [2003] NSWIRComm 264 at [38]; Marshall v NM Financial Management Ltd [1995] 4 All ER 785 at 791. 97 A not dissimilar situation to the present circumstances arose in Prudential Assurance Co v Rodrigues [1982] 2 NZLR 54. The facts in that case, briefly, were that the respondent was employed by the appellant as a life insurance agent or representative. During the period of his engagement the respondent was subject to a system of prepayments of commission. When the respondent terminated the agreement with the appellant he had been prepaid a total of $11,603.21. The appellant sought the recovery of the prepayments on the basis of clause 12 of the agreement which stated:

[T]he Representative will not be entitled to any commission (deferred or otherwise) or other remuneration which at the date of termination shall not have become due and payable by Prudential to the Representative. 98 Cooke J found that the clause constituted a restraint of trade but was reasonable. His Honour said (at 57):

I also agree that the respondent's restraint of trade argument fails. This argument attacks cl 12. It cannot be said to be unreasonable to agree that an agent shall not be entitled to commission on new business unless and until premiums are actually paid. The provision to the effect that they must be paid while he is still working for the company could certainly create a strong incentive for an agent not to terminate his employment. But incentives to stay are not obnoxious in themselves. This is quite a common type of provision in commission contracts, and I do not think that we could possibly say that it must always be an unreasonable restraint of trade. 99 The finding of course proceeded upon the basis that the clause was a restraint of trade. Similar clauses or terms and conditions in agreements which have sought to prevent an employee or person otherwise engaged to work for a party from leaving that party's employment have been found to be in restraint of trade: see for example J.D. Heydon's "The Restraint of Trade Doctrine", pp 43 to 46. 100 On the other hand a similar complaint was made and rejected in Hairman v FileNET. The decision it will be recalled also involved a commission scheme whereby 55% of the commission was earned on the booking of an order in advance of receipt of payment from a customer, and 45% was earned after payment by the customer. The appellant had resigned his employment before receiving payment of the further 45% commission due on certain orders. This result was in accordance with the commission scheme. At [128] and [129] her Honour said:

While it was complained that the result was that the scheme acted as a restraint on employees leaving the respondent's employ, the fact is that restraints are commonplace in employment and other kinds of relationships. Remuneration itself is often structured so as to include attraction and retention payments, as well as payment for the actual work performed. Other conditions also often contain such elements. The decision of the Full Court in Westfield Limited & Anor v Helprin (unreported; Cahill VP, Hungerford and Schmidt JJ; 23 March 1997) was an example of such an approach, in that case adopted in connection with an option scheme. Another common and even more direct approach to achieving similar ends, is those agreements which provide for a fixed term contract of employment.

Designing a remuneration package with retention of employees as one aim is not inherently unfair, indeed it is commonplace and to the advantage of many employees, who thereby gain access to advantageous conditions, otherwise not available to them. An inducement provided by an employment contract to remain in employment for a time, does not preclude an employee resigning, if he or she wishes. As in this case, the loss of such an inducement can even enable an employee headhunted by another employer, to negotiate more favourable terms in the new employment. 101 In the present circumstances the actual clause the subject of the allegation of restraint concerns the conditions of the bonus scheme imported into the contracts of employment or arrangement dealing with the payment of deferred performance-based bonuses, namely continued satisfactory performance and continued employment. Whether that clause constituted a restraint falls to be decided by reference to the particular circumstances applicable to both parties. 102 These circumstances reveal that the applicant was not precluded from seeking employment with ABN Amro. There was no evidence led during the course of proceedings which might suggest that the position at ABN Amro did not entail skills and responsibility commensurate with the applicant's position at the respondent bank. The new position also paid a comparable salary. The applicant was aware at all times of the likely consequences of resignation. It was commonplace for an employee to forfeit unvested components of a bonus in the event of resignation as attested to by Mr McAuley in his affidavit. The respondent's retention policy was, and is, also commonplace within the banking and finance industry and known and understood as such by the applicant. Notwithstanding that a significant proportion of the applicant's performance-based bonuses stood to be forfeited in the event of resignation the applicant was remunerated by means of his fixed salary. In addition the applicant consistently received in excess of half of his performance based bonuses immediately upon completion of his yearly performance reviews. This factor alone substantially mitigates the impact of any binding or coercive effect that the conditions attaching to the payment of the deferred bonuses may have otherwise had on the applicant. 103 Based on the circumstances applicable to the applicant's situation I have some doubt that the offending clause as characterised constituted a restraint of trade. It is difficult to see how, in all the circumstances the clause had a coercive effect on the applicant or acted as a fetter on his ability to seek and obtain other employment within the same industry. Even if it were to be construed as a restraint of trade I would nevertheless find, based on the same circumstances as outlined above, that the clause was reasonable: see Prudential Assurance Co v Rodrigues at 57. 104 This head of alleged unfairness therefore I find, on balance, has also not been made out by the applicant. Orders

(2) The applicant is to pay the respondent's costs as agreed or in the absence of agreement as assessed. ___________________

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