[1] This is an application for leave to appeal and, if leave is granted, an appeal by the Northern Territory Department of Justice ("Department") from a decision of Commissioner Whelan [1] dismissing a jurisdictional objection to an application for relief against termination of employment pursuant to s.170CE of the Workplace Relations Act 1996 ("the WR Act"), as it then was, filed by the respondent ("Ms Lunn"). The jurisdictional objection raised by the Department was that there had been no termination of employment "at the initiative of the employer", as required by s.170CE of the WR Act.

[2] The termination of Ms Lunn's employment occurred before the commencement of the Workplace Relations Amendment (WorkChoices) Act 2005. The appeal proceeded on the basis that, notwithstanding the amendments to Part VIA of the WR Act effected by that Act, the transitional provisions operate in such a way that none of those amendments took effect in relation to the provisions of Part VIA with which this appeal is concerned. Accordingly, apart from the appeal provisions, we shall refer to relevant provisions of the WR Act by the pre-reform numbering used by the Commissioner, and by the parties during argument.

[3] This is an appeal alleging jurisdictional error on the part of the Commissioner. The question is not whether the relevant finding of jurisdictional fact was open but whether it was correct and the Full Bench is not constrained by the principles relating to appeals against discretionary decisions. [2]

[4] The Commissioner set out the background of the matter, as to which there is no dispute:

"[3] The applicant commenced employment with the Attorney-General's Department (now the Department of Justice) on 28 May 1998 on a one-year temporary contract as an Articled Clerk. The offer of employment indicated that an offer of further employment might be made. On 28 May 1999 an offer of employment on a two-year contract at increment 1 of the Professional 2 level was made and a contract was entered into with a start date of 28 May 1999 and ending on 27 May 2001.

[4] On 3 May 2001 the applicant was offered a contract of temporary employment from 21 May 2001 to 27 May 2003 as a Professional 2. This contract was not accepted by the applicant. She nonetheless continued to work in the Department. During August and September 2001 there were discussions between the applicant and various officers of the Department including the Chief Executive Officer which resulted in the applicant's agreement to terms of employment contained in a letter from the Chief Executive Officer dated 12�September 2001. It was not until 12�November 2001 however that a final contract was given to the applicant. On her evidence this document was never signed by her.

[5] In August 2002 a number of generic positions at levels Professional 3, Professional 4 and Executive Contract Officer Level 1 were advertised both internally and externally by the Department. The applicant applied and was advised on 24�December 2002 that she had been "selected for the advertised temporary vacancy of Law Officer, Professional 4". As the selection was a "temporary promotion" it was subject to an appeal process. Following correspondence and representations from her supervisor, Mr Shields, the applicant finally received a contract on 12 March 2003 which specified her appointment as a "Professional 4" and specified a period commencing on 24 December 2002 and ending on 15 January 2005.

[6] Towards the middle of 2004, Ms Lunn's relationship with her supervisor Mr�Shields deteriorated, culminating in allegations being made on both sides about the other's behaviour. In order to attempt to resolve these difficulties it was suggested in November 2004 that mediation conducted by the Employment Assistance Service should occur.

[7] In December 2004 the applicant was told by Mr Shields that at the expiry of the contract she had entered into in March 2003 she would be offered a contract for three months only. Eventually on 18 January 2005 a contract was signed by the applicant specifying a period commencing on 16 January 2005 and ending on 15 April 2005 unless terminated sooner.

[8] In a meeting on 24 March 2005 the applicant was informed that she would not be offered a new contract. She was told that she would be paid all of her entitlements to 15�April�2005 but that she was not required (or obliged) to attend for work. She was told that it would be preferable for her to pack up her personal belongings and take them but was later told that if she had anything she wished to finish off an office would be found for her away from her usual workplace.

[9] It was common ground that employees in the Department were almost without exception engaged on temporary contracts but that subject to the availability of work and funding and in the absence of any performance issues such contracts were renewed. There was an expectation on the part of solicitors that their contracts would be renewed and the evidence in the case of Ms Lunn was that in the absence of the conduct issues alleged against her, she would have been offered a new contract.

[5] The central issue before the Commission, and on this appeal, is whether the conversation on 24 March 2005 involved a termination of employment at the initiative of the employer within the meaning of s.170CE.

[6] The Commissioner made the following findings:

"[23] The applicant was employed by the relevant Department for a period of almost seven years. During that time she was continuously employed, although the terms and conditions under which she was engaged were subject to some five different contracts. For a period of some four months she worked without any written contract of employment. There was clearly no intention on the part of the Department to terminate her employment in May 2001 and her rejection of the terms being offered to her did not bring the employment relationship to an end. During the seven years she only once applied for any position, which was referred to by the Department in the letter of offer as a "temporary promotion".

[24] It is apparent from the evidence that it was the policy of the Department to place all employees (or at least employee solicitors) on temporary contracts. It is also clear that it was not in fact, the practice of the Department to employ staff for periods of one or two years only. Indeed it would beggar belief to suggest that the Department of Justice had no need for ongoing work of a legal nature to be performed by suitably qualified persons.

[25] While from time to time solicitors might be needed for a limited period to undertake specific projects, it is apparent that there was a need for ongoing legal work to be performed and money in the budget to employ staff to do it. Further employees had an expectation that provided their performance was satisfactory, and they were not engaged on a short-term project, their contracts would be "rolled-over" at the expiry of the period specified.

[26] In my view it is insufficient to look at the terms of Ms Lunn's various contracts in isolation from the practices employed by the Department in relation to its staff. Looked at in isolation it could be said that Ms Lunn was engaged on a contract for a fixed term from 28�May 1998 to 28 May 1999 and a further contract for a fixed term from May 1999 until May 2001. Following her failure to agree to the terms of a further contract and her continued employment after that date she then became an ongoing employee [See Coll and ASU v Shire of Yarra Ridges_, IRCA 39/97, per Marshall J, February 1997;_ HSUA v Department of Human Services [Print P1209], per Ross VP, Watson DP and Gay C, May 1997]. On her acceptance of the contract as "Professional 4" for a period commencing 24 December 2002 and ending on 15�January 2005 she once again became a fixed-term employee and the last contract from 18�January 2005 to 15 April 2005 was also an "outer limit" contract.

[27] The nature of a person's engagement may change during the course of their employment, from casual to ongoing, from fixed term to permanent and vice versa. The true nature of the engagement may be derived from a written contract, from oral communication or from the actions of the parties.

[28] While there has been some confusion from time to time, about the difference between "a contract for a specified period of time" _as defined by the statute and a contract for a fixed term as defined by its own terms [_Endersbee v Eastern Health ( [Victoria v Commonwealth [1996] 187 CLR 416 pp519-520; Roos v Monash University [Print Q2529] per Watson SDP; Hughes v Monash University [Print R4303] per Whelan C].

[7] The Commissioner ultimately found that the contract of employment between the parties at the time of the alleged termination at the initiative of the Department on 24 March 2005 was the three month 'outer limit' contract entered into by Ms Lunn on or about 16�January 2005 ("the Final Contract"), being a contract that "both parties understood to give rise to no obligation that it would continue beyond 15�April 2005". [3]

[8] The essential reasoning of the Commissioner in reaching the conclusion that she did was as follows:

"[34] The parties in these proceedings chose not to pursue evidence in detail concerning the content of the conversations which occurred on 24 March 2005. It is clear however that the applicant was not expected to, and did not, perform any work for the Department following that date. In my view, the fact that the Department continued to pay her until the end date of the contract does not entitle it to claim that the contract therefore remained on foot.

[35] It is well established that where a contract requires an employee to be given notice of termination or be paid in lieu thereof that the effective date of the termination is the date that the employee is relieved of the obligation to perform work and not at the expiry of the period for which payment is made [Siagian v Sanel Pty Ltd, IRCA, 123/94, per Wilcox CJ, 27 May 1994].

[36] On 24 March 2005, Ms Lunn was relieved of her obligations under the contract when she was told that she was not required (or obliged) to attend for work. In such circumstances she considered the contract to have come to an end. It is no longer accepted that the mere payment of wages is sufficient to sustain an employment relationship [See Blackadder v Ramsay Butchering Services (2005) HCA 22].

[37] I am therefore satisfied that the employment of Ms Lunn was terminated on 24�March�2005 and did not terminate due to the expiry of her contract at a later date on 15�April 2005.

[38] For these reasons the motion to dismiss is rejected. As the applicant has already elected to proceed to arbitration should the motion fail, the matter will be listed for hearing in due course.

Whether the Final Contract was terminated at the initiative of the employer

[9] The WR Act has, for some time, excluded the jurisdiction of the Commission under s.170CE where the employee was "engaged under a contract of a employment for a specified period of time": see s.170CBA(1)(a). It has been held that a contract with a nominated end date does not meet that description if it provides for a broad or unconditional right of termination during its term. [4] In such circumstances, the description of such a contract as an 'outer limit' contract usefully distinguishes it from a contract for a "specified period of time" to which s.170CBA(1)(a) applies. There is no dispute that the Final Contract, executed on or about 16 January 2005, was an 'outer limit' contract thus described.

[10] When a contract for a specified period or an 'outer limit' contract reaches the nominated end date, the contract terminates through the effluxion of time and there is no termination of employment at the initiative of the employer. [5] Thus, the critical issue is whether what occurred on 24 March 2005 involved a termination at the initiative of the employer.

[11] The first sentence of paragraph [34] of the Commissioner's reasons is difficult to reconcile with the evidence. Ms Lunn gave a verbatim account of the conversation on 24 March 2005 extending for almost two and half pages of her statement. [6] Nevertheless, paragraph [8] of the Commissioner's reasons, set out above, summarises the substance of the conversation deposed to by Ms Lunn.

[12] Apart from one sentence attributed to a departmental officer by Ms Lunn, the version of events on 24 March 2005 given by the witnesses for the Department was consistent with the account given by Ms Lunn. In relation to that one sentence, there was an agreement between counsel during the hearing before the Commissioner that it was unnecessary for her to decide whether the words in question were said because they could not affect the outcome of the matter. [7]

[13] With respect to the Commissioner, the decision of the Wilcox CJ in Siagian v Sanel Pty Ltd [8] is not authority for the proposition for which it is cited in paragraph [35] of her reasons. In that case an employed radiographer was handed a piece of paper entitled "Statement of Earnings on Termination" on 29 March 1994, together with a cheque. The piece of paper contained calculations which included pay for the period from 1 April 1994 to 15 April 1994 and the value of the radiographer's accrued annual and long service leave. The cheque was for the calculated amount. There was no dispute that the employment of the radiographer had been terminated. One of the issues before the Court was the date on which that termination had occurred (29 March 1994 or 15 April 1994), because this determined whether particular statutory remedies were available.

"The effect of the payment on the date of termination

Counsel's second argument is that, because of the payment in lieu of notice, the termination did not occur on 29 March but at the date of expiration of the period for which payment was made, 15 April. If this argument is correct, s.170EE orders are available.

This argument also raises a complex problem. The problem arises because of the ambiguity inherent in the words "payment in lieu of notice". The ambiguity was pointed out by Waite J, in Leech v Preston Borough Council [1985] ICR 192 at 196:

"... it is clear from the authorities cited to us, ... all of which are confirmed by the experience of our lay members, that the expression 'payment in lieu of notice' is regularly used throughout industry in one or other of two quite different senses. The first, which is the grammatically correct one, is when it is used to describe the payment to an employee whom it is proposed to dismiss summarily of a lump sum representing compensation for the wages or salary which he would have received if he had been given the notice to which he is entitled by law. The second, which is the colloquial and grammatically inaccurate one, is when the term is used as a convenient shorthand way of telling an employee that he is being given the full period of notice to which he is entitled by law but is at the same time excused any duty (and refused any right) that he would otherwise have under his employment contract to attend at the workplace during the notice period."

Although Waite J did not spell out the result that flowed from each meaning, it is clear from other decisions that, in the first case, the employee's employment terminates upon the date of payment of the lump sum. In the second case, the employment extends until the expiration of the period for which the payment was made.

The question whether a payment in lieu of notice immediately terminates the employment is always one of fact. In Leech at 196-197 Waite J said that the proper inference as to the sense in which the expression is used may turn upon "very subtle indications or nuances of wording which will have to be weighed carefully according to their context". The difficulty, of course, is that the parties will normally not have made the position clear. They will probably not have averted to the distinction made by Waite J. The Court will be left to put its own interpretation on their actions.

Is there a prima facie position where parties use the words "payment in lieu of notice", or something similar? I think there is. As Waite J pointed out, the grammatically correct meaning of the term is that there is to be no notice, the employment is to terminate immediately, but the payment is made instead. ...

[15] Wilcox CJ then considered a number of authorities and concluded: [10]

"In his work The Contract of Employment (1975) M R Freedland at 188 says:

"It would seem that a lawful termination by payment in lieu of notice normally results in an immediate termination of the contract of employment. The termination will not be projected to the end of the notional period of notice. The payment should be regarded as a lump-sum payment, equal to the amount of wages during the period of notice, rather than as payment of actual wages for a period of notice during which the services of the employee are not required. ... It would seem also that termination with payment in lieu of notice will, in practice, be regarded as resulting in an immediate termination of employment for the purposes of liabilities of employer and employee to social security contributions. It would in general seem correct to hold that such payments in lieu of notice result in an immediate termination of the contract of employment because the payment is related to wages only in that these quantify the payment."

I think these statements are justified by the authorities. It seems to me that, in the absence of evidence of a contrary intention, it should usually be inferred that the employer intended the termination to take effect immediately. This conclusion not only reflects the more accurate meaning of the phrase "payment in lieu of notice"; it accords with common sense. An employer who wishes to terminate an employee's services, and is prepared to pay out a period of notice without requiring the employee to work, will surely usually wish to end the relationship immediately. If the employee is not to work, there is no advantage to the employer in keeping the relationship alive during the period for which payment is made; and there is the disadvantage that the employer will be burdened with employment related costs, such as workers' compensation insurance, payroll tax, liability for leave payments etc. The employer also incurs the risk that some new burden will be imposed in respect of the employment during the period."

[16] It is clear that Wilcox CJ approached the matter on the basis that a "payment in lieu of notice" can, depending upon the circumstances, give rise to a termination of employment either at the time the notice is given or at expiration of the period of notice, albeit that the use of the words "payment in lieu of notice" is prima facie evidence of an intention to terminate at the time such payment is advised. His Honour concluded that, on the facts, that prima facie position was not displaced: [11]

"I see nothing in the present case to suggest that Sanel intended that its employment relationship with Mr Siagian should continue until 15 April. The statement of account given by Mr Bryant to Mr Siagian was headed "Statement of Earnings on Termination". His key was taken from him. Mr Bryant had no thought that Mr Siagian might be called back to work before the expiration of the period of notice. Mr Bryant supplied a separation certificate on 31 March, an action that would have been premature if the employment had not then terminated.

I conclude that the payment made to Mr Siagian in lieu of notice did not have the effect of extending his employment until 15 April."

[17] In our view the reasoning in Siagian is irrelevant to the present case. Here, neither the expression "payment in lieu of notice", nor any equivalent expression, was used. Even on her own version of the conversation on 24 March 2005, Ms Lunn was simply informed that her contract would not be renewed upon its expiry and that she was not required to perform work between that day and the day on which her contract expired, 15 April 2005. She was not given any "payment in lieu of notice" or advised that any payment characterised in that way would be made. Indeed, it is not disputed that the Department continued to pay Ms Lunn her wages in the ordinary course during the period between 24 March 2005 and 15 April 2005. Similarly, it was not disputed that if Ms Lunn had so wished, she could have continued performing work finalising her files and that the Department would have made an office available for her for that purpose. [12] The notice given by the Department was no more and no less than notice that Ms Lunn would not be offered a new contract when the Final Contract came to an end through the effluxion of time. The conversation of 24 March 2005 did not involve the Department in breaching a fundamental term of the Final Contract such as to amount to a repudiation of the Final Contract. It follows that the conversation on 24 March 2005 did not amount to a termination of the Final Contract at the initiative of the employer.

[18] In paragraph [36] of her reasons, the Commissioner placed reliance on the decision of the High Court in Blackadder v Ramsay Butchering Services [13], as a basis for concluding that Ms Lunn was entitled to consider her contract "to have come to an end" upon being told that she "was not required (or obliged) to attend for work". Blackadder is cited as authority for the proposition that "it is no longer accepted that the mere payment of wages is sufficient to sustain an employment relationship". The decision in Blackadder was concerned with the nature of the Commission's power to reinstate an employee pursuant to s.170CH of the WR Act and whether or not an order made pursuant to s.170CH(3)(a) required the employer to provide the employee with work upon his or her reinstatement. The High Court held that an order for reinstatement pursuant to s.170CH(3)(a) inter alia requires the employer to provide work of the sort that was being performed prior to the termination of employment.[14] Callinan and Heydon JJ noted:[15]

"The Full Court upheld the appeal in part on 21 February 2003 (Tamberlin and Goldberg JJ, Moore J dissenting). In doing so the majority reviewed the position at common law by which they were obviously influenced, and found that there is no obligation upon an employer to provide work to an employee unless the contract of employment specifically requires that it be provided, or where it was necessary for an employee, an actor for example, to continue to be employed in order to maintain a profile, or where the employee's career and future prospects depended upon the employee working in a particular way, or where the employee's remuneration depended upon the amount of actual work performed by the employee."

[19] There is no suggestion in the judgments of the High Court of any disagreement with the view of the common law adopted by Tamberlin and Goldberg JJ [16] summarised in this passage. It was irrelevant that, subject to exceptions not applicable in that case, an employer has no obligation under the common law to provide work to an employee because s.170CH(3)(a) empowers the Commission to make an order for reinstatement that obliges the employer to provide work to the employee upon reinstatement.

[20] In short, the decision of the High Court in Blackadder is not authority for the proposition for which it is cited ("It is no longer accepted that the mere payment of wages is sufficient to sustain an employment relationship." [17]). The proposition that the mere payment of wages is not sufficient to sustain the employment relationship is correct only for those categories of exception to the general common law rule that an employer has no obligation to provide work to an employee. Of course, where there is a common law obligation to provide work, a refusal to provide work may amount to a repudiation of the contract of employment.[18] We can see no basis in the evidence for concluding that Ms Lunn's employment fell within one of the categories of exception to the general common law rule that an employer has no obligation to provide work to an employee such that the conversation of 24 March 2005 involved a repudiation of the Final Contract, accepted by Ms Lunn, with the result that the Final Contract was terminated at the initiative of the employer rather than coming to an end through the effluxion of time.

[21] On the appeal counsel for Ms Lunn advanced a repudiation argument on a different basis. The Commissioner found that the series of contracts that preceded the Final Contract was "a 'sham' arrangement" [19] but nevertheless proceeded on the basis that the Final Contract was operative as between Ms Lunn and the Department.[20] Counsel for Ms Lunn argued that the Commissioner erred in proceeding in that way and that, having regard to the circumstances and representations alleged by Ms Lunn in connection with the Final Contract, the Commissioner should have found that the Final Contract was also part of the same "sham" arrangement such that the true contract between Ms Lunn and the Department as at 24 March 2005 was an ongoing contract of employment and not the 'outer limit' Final Contract. Counsel for Ms Lunn argued that the conversation of 24 March 2005 involved a repudiation of that alleged ongoing contract of employment, which repudiation was accepted by Ms Lunn with the result that the alleged ongoing contract of employment had been terminated at the initiative of the Department.

[22] The Commissioner had directed the filing and service of an outline of written submissions prior to the jurisdictional hearing. The repudiation argument we have just summarised was not adverted to in the outline of written submissions filed on behalf of Ms�Lunn in accordance with that direction. We accept the assurance of counsel for the Department, plausibly explained, that the circumstances and representations alleged by�Ms�Lunn in connection with the signing of the Final Contract were contested by the Department and it would have led significant additional evidence and undertaken further cross-examination of Ms Lunn if it had appreciated that such an argument was being advanced. Neither party sought to lead fresh evidence on the appeal. In all the circumstances, Ms Lunn ought not be permitted to rely on the repudiation argument because this would involve a denial of procedural fairness to the Department.

Whether practice of engaging staff on serial temporary contracts was a "sham" arrangement

[23] However, even if we had permitted Ms Lunn to rely on this repudiation argument, we would nonetheless have rejected it. The Commissioner's reasons for finding that the Department's practice of engaging staff on serial temporary contracts was a "sham" arrangement were as follows:

_"[29] There are, however, circumstances where despite the existence of written evidence to the contrary "_strong countervailing factors" _indicate that a continuing employment relationship exists [_D'Lima v Princess Margaret Hospital (1995) 64 IR 19].

[30] In this case I am satisfied that until 15 January 2005 those "strong countervailing factors" did exist. Both the applicant and witnesses for the Department gave evidence of the practice of "almost without exception" all staff being engaged on temporary contracts. Further they gave evidence of the strong expectation that contracts would be renewed and indeed that was the applicant's experience in 1999 and again in May 2001 when she was offered contracts without any need for her to apply for a position.

[31] I am satisfied that the practice of engaging staff on serial temporary contracts was a "sham" arrangement in much the same way as the practices of the Princess Margaret Hospital, dictated by some unknown policy considerations and not the operational needs of the Department." (emphasis added)

[24] In D'Lima v Princess Margaret Hospital [21] the applicant had been employed as a hospital cleaner. The main issue related to the operation of reg. 30B(1)(a) of the then Industrial Relations Regulations. A further issue was whether the employment relationship had been terminated at the initiative of the employer. The employer relied upon a series of written fixed term contracts for "temporary" employment and argued that the employment relationship had terminated by virtue of the last in that series of written contracts coming to an end through the effluxion of time, the employer having chosen not to enter into a further contract. A judicial registrar rejected the employer's argument and upheld the applicant's claim. On review, Marshall J also rejected the employer's contention that there was no termination at the initiative of the employer. His Honour dealt with the issue in the following way:[22]

I likewise reject the submission of Mr Hooker that the dismissal of Ms D'Lima was not a termination of employment at the initiative of the employer. The fact of the matter was that Ms D'Lima was continuously employed from 18 June 1993 to 11 December 1994 on which latter date her employment was terminated by the hospital. The practice of signing of further contracts for alleged periods of temporary employment appears to have been one of mere administrative convenience and cannot compel the Court to ignore the weight of strong countervailing factors indicating a continuous employment relationship. Mr Hooker described the relationship as "relatively" continuous. I find no basis for the use of the adjective "relatively" in that context. As Ms D'Lima said in unchallenged evidence on the review:

"... I had continuous employment ... except for my father's death [on] which I approached Ms Dyson and asked her to grant me leave.""

[25] The expressions "employment relationship" and "employment contract" are sometimes used interchangeably, as if they are exactly synonymous. They are not exactly synonymous. [23]

[26] The common law of employment in the modern era rests upon contract. In Byrne v Australian Airlines [24] McHugh and Gummow JJ observed:

"The evolution in the common law as to the relationship of employment has been seen as a classic illustration of the shift from status (that of master and servant) to that of contract (between employer and employee)." [25]

[27] Whatever may have been the position in the past, under the modern law, there can be no employment relationship without there also being a contract of employment in existence between the parties to the employment relationship. However, as the Full Court of the Federal Court in Brackenridge v Toyota Motor Corporation Australia Ltd [26] made clear, the termination of a contract of employment does not necessarily result in the termination of the employment relationship between the parties to that contract of employment: if the parties enter, or are taken to have entered, a new contract of employment of employment, the employment relationship continues notwithstanding the termination of the prior contract of employment. Thus, a "continuous employment relationship" is not inconsistent with a series of back-to-back fixed term or 'outer limit' contracts, each of which takes effect according to its terms. On the other hand, as noted by Dixon J in Automatic Fire Sprinklers Pty Ltd v Watson[27], it is possible for a contract of employment, and thus an entitlement to wages, to survive a termination of the employment relationship.

[28] Prior to 1996, s.170CB of the WR Act required the expression "termination of employment at the initiative of the employer" in s.170CE to be interpreted by reference to the meaning of the expression "termination of employment" in the Termination of Employment Convention. [28] In that Convention the expression "termination of employment" refers to termination of the employment relationship rather than termination of an employment contract.[29] In 1996 s.170CB was amended and, since that time, the expression "termination of employment at the initiative of the employer" in s.170CE has its ordinary meaning and refers to termination of a contract of employment.[30] Thus, in this case we are concerned with whether there was a termination of Ms Lunn's contract of employment at the initiative of the employer and not with whether there was a termination of the employment relationship.

[29] A particular consequence of the fact that the law of employment in the modern era rests on contract is that, with some qualifications [31] and subject to any statutory provisions to the contrary, ordinary contractual principles apply in relation to employment contracts. A fundamental feature of the general law of contract, applicable in relation to the contracts of employment, is that the intention of the parties is determined objectively and, indeed, evidence of the subjective intention of the parties is not admissible in construing a contract.[32] Subjective intention is relevant in determining whether the parties to a written document intended to create binding legal rights and obligations but it is not determinative and the objective test will prevail where, to all outward appearances, there was an intention to create legal relations.[33]

[30] The High Court has repeatedly emphasised the importance of what is sometimes referred to as the objective theory of contract and, in particular, maintaining the rules of the common law upholding obligations undertaken in written contracts. The appellant correctly points to the decision in Equuscorp Pty Ltd v HFT Investments Pty Ltd [34] as a recent and apposite example. Gleeson CJ, McHugh, Kirby, Hayne and Callinan JJ referred to the debate as to whether the loan agreements in that case "were wholly oral, as the respondents alleged, or wholly written, as Equuscorp and Rural Finance contended" and continued:[35]

"It is, and always has been, common ground that each of the respondents executed a written loan agreement on 30 June 1989. The respondents alleged that the "operative agreement" was not contained in that writing. It was said that the relevant agreement was reached earlier and was wholly oral. Yet it was not said that the written agreement should be rectified. It was not said that a defence of non est factum was available. It was not said that the written agreement was executed by mistake, or that its execution was procured by misrepresentation as to its contents or effect. (The misrepresentation alleged was as to what had been said in the conversations, not what the document was or provided.)

The respondents each having executed a loan agreement, each is bound by it. Having executed the document, and not having been induced to do so by fraud, mistake, or misrepresentation, the respondents cannot now be heard to say that they are not bound by the agreement recorded in it. The parol evidence rule, the limited operation of the defence of non est factum and the development of the equitable remedy of rectification, all proceed from the premise that a party executing a written agreement is bound by it. Yet fundamental to the respondents' case that the operative agreements between the parties were wholly oral, and reached earlier than the execution of the written agreements, was the proposition that the written agreements subsequently executed not only may be ignored, they must be. That is not so. Having executed the agreement, each respondent is bound by it unless able to rely on a defence of non est factum_, or able to have it rectified. The respondents attempted neither__._

There are reasons why the law adopts this position. First, it accords with the "general test of objectivity [that] is of pervasive influence in the law of contract". The legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions.

Secondly, in the nature of things, oral agreements will sometimes be disputable. Resolving such disputation is commonly difficult, time-consuming, expensive and problematic. Where parties enter into a written agreement, the Court will generally hold them to the obligations which they have assumed by that agreement. At least, it will do so unless relief is afforded by the operation of statute or some other legal or equitable principle applicable to the case. Different questions may arise where the execution of the written agreement is contested; but that is not the case here. In a time of growing international trade with parties in legal systems having the same or even stronger deference to the obligations of written agreements (and frequently communicating in different languages and from the standpoint of different cultures) this is not a time to ignore the rules of the common law upholding obligations undertaken in written agreements. It is a time to maintain those rules. They are not unbending. They allow for exceptions. But the exceptions must be proved according to established categories. The obligations of written agreements between parties cannot simply be ignored or brushed aside.

The conclusion that the respondents are bound by the written loan agreements may leave open the possibility that an earlier consensus reached by the parties was in each case a collateral agreement (made in consideration of the parties later executing the written agreement), but that has never been the respondents' case. In another case it may leave open the possibility that the contract is partly oral and partly in writing. But that cannot be so here. The oral limited recourse terms alleged by the respondents contradict the terms of the written loan agreement. If there was an earlier, oral, consensus, it was discharged and the parties' agreement recorded in the writing they executed. It is the written loan agreement which governed the relationship between Rural Finance and each respondent." (emphasis added, footnotes omitted)

[31] Thus, under the general law, in contexts where binding contracts are the norm (and employment, like commerce generally, is such a context), executed written contracts are taken to be binding according to their terms unless one of the well established categories of exception is established (and we note that these were not listed exhaustively in the passage from Equuscorp we have just set out). The established categories of exception do not include an amorphous assessment that there exist "strong countervailing factors" indicating that the agreement between the parties is something other than what appears in an executed written contract.

[32] There is support for this approach in the decision of the Full Bench in Marsh v Macquarie University, [36] a case with similarities to the present case. There, a university employee had been employed on a series of fixed term contracts. The university notified the employee that her employment would end when her then current contract expired. At first instance, the Commission found the employee had been engaged under a contract of employment for a specified period of time. The member at first instance also rejected the employee's evidence that when she commenced with the university she was told that if she performed satisfactorily she could consider herself a continuing member of staff. On appeal, the employee argued that in the circumstances she was a continuing employee whose employment was terminated by the university by reason of the fact that she was not offered a further contract of employment. The Full Bench rejected this argument:

"[17] Turning to the second substantive appeal ground, that the applicant's employment was ongoing and terminated by Macquarie, the ground is inconsistent with the Commissioner's finding that Macquarie's offer of appointment of March 2004 was accepted by the applicant and that a contract of employment for a specified period of time came into effect. No basis was advanced for concluding that the Commissioner's finding was erroneous. We do not think it was. In the circumstances she was entitled, if not obliged, to find that the written offer of appointment and the written acceptance evidenced the formation of a contract. Past arrangements, including the series of contract renewals, do not provide a legitimate basis for going behind the written agreement." (emphasis added)

[33] Of course, it is open to a party to show that a written contract that gives the appearance of creating binding legal rights and obligations was a "sham" and did not in truth have that effect. The law in this regard was considered at length by the Full Court of the Federal Court in Sharrment Pty Ltd v Official Trustee in Bankruptcy. [37] Lockhart J, with whom Foster J relevantly agreed, referred[38] with approval to the description of the term given by Diplock LJ in Snook v London & West Riding Investments Limited[39] in these terms:

"I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the 'sham' which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. But one thing, I think, is clear in legal principle, morality and the authorities ... that for acts or documents to be a 'sham', with whatever legal consequences follow from this, all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating." (emphasis added)

[34] Lockhart J concluded: [40]

"A "sham" is therefore, for the purposes of Australian law, something that is intended to be mistaken for something else or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front. It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not. It is something which is false or deceptive."

[35] Referring to Sharrment, the High Court in Equuscorp noted: [41]

"'Sham' is an expression which has a well-understood legal meaning. It refers to steps which take the form of a legally effective transaction but which the parties intend should not have the apparent, or any, legal consequences."

[36] The judgments in Sharrment demonstrate that it is often a difficult matter to establish that a document that gives the appearance of creating binding legal relations is a sham.

[37] Further, as suggested by the passage in Equuscorp, it may be open to an employee to demonstrate that the true contract with the employer was partly oral and partly written - and that although the written part of the contract specified an end date, the parties had orally agreed that the contract would be renewed - or that there was a collateral agreement to the same effect. In such circumstances there may well be a "termination of employment at the initiative of the employer" if the employer insisted that the employment had come to an end through the expiry of the written contract (or the written part) because this would involve the employer breaching the oral term or the collateral agreement as the case may be.

[38] The Department correctly noted in its written submissions that in D'Lima Marshall J did not purport to apply some special rule to contracts of employment whereby written agreements not amounting to a sham or a pretence not intended to create legal relations (and not coming within one of the other established categories of exception) can be ignored. The decision in D'Lima might be explained on the basis that it was one of those rare cases where the written "contracts" were a sham or pretence in accordance with conventional principles, however his Honour did not use the term "sham" or "pretence" and did not conduct an analysis of the sort required by Sharrment. Given the subsequent decision of the High Court in Equuscorp the decision in D'Lima must now treated with caution. Certainly, the expression "strong countervailing factors" in the judgment of Marshall J in D'Lima should not be elevated to an independent test or treated as some form of jurisdictional talisman that obviates the need to consider whether, in the particular circumstances, a signed contract was objectively intended to create binding legal rights and obligations according to its terms consistent with the well established principles of contract law.

[39] The present case illustrates the problem of treating "strong countervailing factors" as some sort of independent test pursuant to which a written contract can be disregarded or a series of written contracts treated as a "sham". The "strong countervailing factors" relied upon by the Commissioner was the Department's practice of engaging all or almost all staff on a series of temporary contracts (see paragraph [30] of the Commissioner's reasons set out above).

[40] The mere fact that all or almost all of the Department's staff were engaged on temporary contracts and that there was a strong expectation that contracts would be renewed upon their expiry simply does not permit a conclusion that, determined objectively, there was a common intention (that is, the objective intention of both the Department and the relevant employee) that the contracts were not to create the legal rights and obligations which they give the appearance of creating. We have reservations as to whether the evidence before the Commissioner permitted a finding that the practice of engaging staff on serial temporary contracts "was dictated by some unknown policy considerations and not the operational needs of the Department." [42] However, even assuming this to be so, the existence of such a policy, if anything, supports a conclusion that, viewed objectively, the Department entered 'outer limit' contracts with its staff as a deliberate implementation of the policy and thus, at very least, the Department intended the contracts to have legal effect according to their terms. Without more, a "common intention that the... documents [were] not to create the legal rights and obligations which they [gave] the appearance of creating" could not be established.

[41] The position is even clearer when one considers the particular circumstances of Ms�Lunn's contracts. The September 2001 contract was preceded by months of negotiation following the expiry of the previous contract in May 2001 [43] (during which period it was not disputed that Ms Lunn was an ongoing employee). Those negotiations culminated in an exchange of letters in which Ms Lunn expressly accepted the Department's offer of an 'outer limit' contract and acknowledged the creation of a binding contract in accordance with the terms of that offer.[44] Ms Lunn's penultimate contract, executed in March 2003 but expressed to be operative from December 2002, was for a position advertised as a "temporary vacancy", involved a promotion for Ms Lunn and followed an appeal process.[45] It simply cannot be inferred that, determined objectively, there was a common intention that these contracts would not create the legal rights and obligations which they gave the appearance of creating.

[42] The Department's practice of engaging almost all staff on successive 'outer limit' contracts may be viewed by some as industrially contentious. However, subject to legislative constraints, employers are entitled to structure their affairs, including the contracts they offer to employees, in the way that they think best suits their interests. There is nothing in the WR Act that prevents an employer from offering a series of 'outer limit' contracts to an employee. Moreover, even if it were shown that the purpose of the policy was to avoid the Commission's unfair dismissal jurisdiction (and we hasten to add that there was no evidence to that effect and the proposition was denied by counsel for the Department who advanced a plausible explanation for the practice) this would still not render such contracts a "sham" in the sense that, viewed objectively, the parties to those contracts had a common intention that they would not create binding legal rights and obligations according to their terms.

[43] In summary, we reject the Commissioner's finding that the series of contracts prior to the Final Contract in this case was a "sham" arrangement.

[44] For the reasons we have given, we are satisfied that, on the material before the Commissioner, Ms Lunn's employment was not terminated at the initiative of the employer within the meaning of s.170CE and that, accordingly, the Commission has no jurisdiction in relation to her application for relief against termination of employment. We grant leave to appeal. The appeal must be allowed, the decision of the Commissioner quashed and Ms�Lunn's application for relief dismissed. Orders to this effect have been issued in conjunction with these reasons for decision.

[45] We note that we have been concerned with a jurisdictional issue and not with the merits of the circumstances that led to Department's decision to not offer Ms Lunn a further contract after the Final Contract came to an end. She may or may not have been treated unfairly. However, the Commission can only act within its statutory constraints and does not have a general power to address unfairness in connection with employment.

[2] Sammartino v Foggo [1999] FCA 1231; (1999) 93 IR 52 at paras [7]-[10], Pawel v AIRC [1999] FCA 1660; (1999) 94 FCR 231 at para [14], Staff Aid Services v Bianchi [2003] WAIRComm 10388; (2004) 133 IR 29 at [16]

[4] See the summary of authorities adopted by the Full Bench in Ledington v University of Sunshine Coast (PR937250, Munro J, Drake SDP and Redmond C, 3 September 2003) at para [34]

[5] Victoria v The Commonwealth (1996) 187 CLR 416 at pp 519-520

[8] [1994] IRCA 2; (1994) 122 ALR 333

[12] Exhibit A1, para [94] see also Appeal Transcript at PN323

[13] [2005] HCA 22; (2005) 221 CLR 539

[14] [2005] HCA 22; (2005) 221 CLR 539 at paras [14] and [16] per McHugh H, para [33] per Kirby J, para [44] per Hayne J and para [73]ff esp at para [77] per Callinan and Heydon JJ

[15] [2005] HCA 22; (2005) 221 CLR 539 at para [68]

[16] [2003] FCAFC 20; (2003) 127 FCR 381 at para [65] ff

[18] White v Australian and New Zealand Theatres Ltd [1943] HCA 6; (1943) 67 CLR 266

[21] (1995) 64 IR 19

[22] (1995) 64 IR 19 at pp 25-6

[23] Siagian v Sanel ((1994) [1994] IRCA 2; 122 ALR 333 at 345 per Wilcox CJ; Brackenridge v Toyota Motor Corporation Australia Ltd [1996] IRCA 628; (1996) 142 ALR 99 at p 101 per Wilcox CJ, von Doussa and Marshall JJ; CFMEU v Newcastle Wallsend Coal Company Pty Ltd (Print R0234, Ross VP, MacBean SDP and Deegan C, 21 December 1998) at para [49]

[24] (1995) 185 CLR 410 at p 436

[25] See also Attorney-General (NSW) v Perpetual Trustee Co. Ltd [1955] HCA 9; (1955) 92 CLR 113 at pp 122-123

[26] [1996] IRCA 628; (1996) 142 ALR 99

[27] [1946] HCA 25; (1946) 72 CLR 435 at 649

[28] Brackenridge v Toyota Motor Corporation Australia Ltd [1996] IRCA 628; (1996) 142 ALR 99

[30] See discussion in Charlton v Eastern Australian Airlines (PR972773 , Lawler VP, Blain DP and Gay C, 7 July 2006)

[31] For example, a Court will not order specific performance of a contract of employment.

[32] Codelfa Construction Pty Limited v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337 at 352 per Mason J (with whom Stephen J and Wilson J agreed)

[33] Air Great Lakes Pty Ltd v K S Easter Holdings) Pty Ltd [1985] 2 NSWLR 309 at pp 330-4 per Mahoney JA, see also McHugh JA at pp 337-8.

[34] [2004] HCA 55; (2004) 218 CLR 471

[35] [2004] HCA 55; (2004) 218 CLR 471 at paras [32]-[36]

[36] PR963299, Giudice J, Duncan SDP and Deegan C, 30 September 2005

[37] [1988] FCA 179; (1988) 18 FCR 449

[38] [1988] FCA 179; (1988) 18 FCR 449 at pp 453-4

[39] (1967) 2 QB 786 at p 802

[40] [1988] FCA 179; (1988) 18 FCR 449 at p 454

[41] [2004] HCA 55; (2004) 218 CLR 471 at para [46]

[44] Exhibit R7, Transcript PN522. See also Transcript PN561ff

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