Sinadinos v EDI Rail Pty Limited

Industrial Relations Commission (NSW)|2007-11-14|Before: Marks J, Mr P, Ms P

Industrial Relations Commission of New South Wales in Court Session

CITATION: Sinadinos v EDI Rail Pty Limited [2007] NSWIRComm 294

APPLICANT Tas Sinadinos PARTIES: RESPONDENT EDI Rail Pty Limited

LEGISLATION CITED: Industrial Relations Act 1996 s106 Uniform Civil Procedure Rules 2005

Abboud v NSW Department of School Education (2000) 99 IR 299 CASES CITED: Byrne and Frew v Australian Airlines Limited (1995) 185 CLR 410 Schwartz v Central Sydney Area Health Service & Anor [2002] NSWIRComm 79 Sydney Water Corporation v Industrial Relations Commission of New South Wales (2004) 61 NSWLR 661

HEARING DATES: 12, 13 and 14 November 2007

APPLICANT Mr P Coleman of counsel Solicitors: Carroll & Associates Ms P Barry LEGAL REPRESENTATIVES: RESPONDENT Mr A Moses of counsel Solicitors: Colin Biggers & Paisley Mr P Harkin

Application under s 106 of the Industrial Relations Act 1996

1 By amended summons for relief, the applicant Tas Sinadinos seeks orders against the respondent EDI Rail Pty Limited under s 106 of the Industrial Relations Act 1996 ("the Act"). The applicant seeks to have declared unfair a contract of employment with the respondent and to have it varied accordingly. The applicant seeks the payment of monetary compensation together with interest and costs. 2 The amended summons alleges that the applicant commenced employment with the respondent on about 8 December 2004 as Executive Manager, Logistics. There is an allegation that he was recruited into the position by being invited to make application for employment. The precise circumstances that pertain to the applicant's application for employment were denied by the respondent, but nothing turns on this. After extensive negotiations, the applicant signed a letter of offer of employment dated 13 October 2004. It provided for payment of a base salary of $152,000 per annum together with superannuation, a fully maintained company vehicle and salary sacrifice residential rental payments, because the applicant was relocating from his then permanent home in Melbourne to Sydney for the purposes of taking up the position. 3 Included in the signed letter of employment was the following: "Senior Management Incentive Scheme You will be included in the Senior Management Incentive Scheme. This scheme is based on a balanced scorecard format and will contain agreed objectives/KPI's, initially set at the commencement of your employment and reviewed in July of each year. This Scheme will pay up to a maximum of 15% of base salary per annum ($152,000). You will be consulted on your balanced scorecard and advised in writing as soon as possible." 4 At the time of commencing employment, the applicant was given a bundle of documents comprised in an Induction Manual. This included a document entitled "Code of Employee Conduct." There was controversy in the proceedings as to whether the Induction Manual received by the applicant included a one-page "Employee Code of Standards" as the applicant alleges or a more extensive document, which the respondent's witnesses said, always accompanied the Induction Manual. 5 I prefer the evidence of the applicant in this regard because he has annexed to his primary affidavit the actual documents which he says were received by him including the one-page Employee Code of Standards. In any event, as will be seen, nothing significant turns on this aspect. 6 On 4 January 2005, the applicant was issued by the respondent with an American Express ("Amex") corporate card. The letter accompanying that card said, "Please use your Corporate Card for charging business related expenses only . All of the purchases you make with the Corporate Card will be itemised on your monthly Corporate Card statement. Your itemised statement will then have to be authorised for payment by the appropriate signatory." 7 By letter dated 24 February 2005, the Chief Executive Officer of the respondent, Mr Guy Wannop, wrote to the applicant about the Senior Management Incentive Scorecard for the 2004/2005 year. The letter referred to "the Incentive Scorecard" that was issued to the applicant prior to Christmas and indicated that the bonuses applicable would be payable in the second quarter of the 2005/2006 year following the announcement of the company's full year result. The letter went on to say, "To achieve a bonus payment on this Scorecard, employees in the scheme must remain employed by the company at 1 July 2005." 8 Evidence in the proceedings by Mr Moore, the respondent's Human Resource Manager, was to the effect that after employment commenced, the applicant's manager should have discussed with him the KPI's, which were fixed for him, and that Mr Moore should have discussed with him the general effect of the scheme. Neither of these discussions occurred. There is in evidence an email from the applicant to Mr Moore and to the applicant's immediate manager, Mr Martin Camp dated 10 July 2005 in which the applicant seeks to have his KPI's finalised. The evidence is that this did not occur. 9 On 8 August 2005, a memorandum from Mr Wannop to the applicant indicated that his salary had been reviewed from 1 July 2005 and the base salary increased to $155,800 and that superannuation contributions would be $14,022. 10 The applicant's employment was summarily terminated by the respondent on 31 August 2005 as a result of discovery of certain expenses incurred by the applicant on the Amex corporate card. There is a great deal of controversy concerning the circumstances in which that card was used by the applicant and concerning the discussions between the parties about its use. 11 The applicant alleges that on a date in late December 2004, at a respondent's Christmas function, he had a discussion with his manager, Mr Camp, concerning the use of the Amex corporate card, which he understood would be issued to him, for certain personal expenditure. The applicant alleges that he told Mr Camp that, because his family was continuing to live in Melbourne and he was working in Sydney, he might be able to make tax claims for travel, accommodation or related expenses in performing his work in Sydney. He said that Mr Camp agreed that the applicant could use the Amex corporate card to keep track of his living away from home expenses so as to provide any proof that the taxation authority may require. The applicant said that Mr Camp agreed that he could separate his personal costs from direct business related costs and the applicant agreed to "track, mark and separately take care of" those costs himself and to pay for them directly. 12 The applicant said that he then went to Mr Moore's office and informed him that Mr Camp "has now agreed that I can use my corporate Amex card to track other living away from home expenses for tax claim purposes. I will mark these separately to company related expenses on the statement and pay for these directly myself. That way I have a single record for possible tax claims. This will help to claw back some of the salary drop I took…." 13 The applicant said that Mr Moore agreed to this process on the basis that Mr Camp would sign off on his expenses. 14 Both Mr Camp and Mr Moore deny that any such conversations took place. 15 The respondent received a number of complaints about the applicant's interaction with a number of persons who reported to the applicant. These were predominantly directed to the manner in which the applicant treated these persons and in particular the way he spoke to them. These were unresolved as at the date of the termination of the applicant's employment. 16 Mr Camp said that in August 2005, he raised with the applicant the fact that he had not seen his Amex statements and that he was required to approve them. About a week later, the applicant gave Mr Camp an Amex statement dated 4 July 2005. There were some expenses shown on that account, particularly for charges to a company known as Delfare Annandale, that Mr Camp was unable to identify. After having a discussion with Mr Moore to ensure that they did not represent part of the applicant's rental salary sacrifice arrangements, Mr Camp said that he then went to see the applicant about these charges. He said the applicant told him that some of the expenses on the account were of a personal nature, they were identified on the Amex form with the handwritten notation "paid direct" and initialled by the applicant. Mr Camp said that the applicant then informed him that those amounts had not been paid and Mr Camp handwrote the words "To be" in front of the words "paid direct". 17 Mr Camp said that he then asked the applicant about the Delfare expenses which were for $385 and $770. He says that the applicant told him that they were for suits for his brother. Mr Camp then spoke to Mr Moore asking him to make further enquiries about those expenses. 18 Mr Moore, in his evidence, corroborated these conversations that Mr Camp said that he had had with him concerning the applicant's Amex card expenses. 19 The applicant denies having had any such conversation with Mr Camp enquiring about his expenditure on the Amex corporate card. 20 However, in his affidavit Mr Moore says that shortly after he had had the original discussion with Mr Camp, he attended a meeting with Mr Camp and the applicant in his office concerning the use of the Amex corporate card for personal expenses in which he told the applicant that he should thenceforth cease using the card for those expenses. There does not appear to be any corroboration of such a meeting in the evidence of Mr Camp. Certainly, as I have said, the applicant denies that any such meeting took place. 21 The matter was referred by Mr Moore to Mr Nicholas Stephen O'Brien-Pounde, the Financial Controller of the respondent, who made enquiries concerning the applicant's personal expenses charged to his corporate card, including expenses to Delfare Annandale. After enquiries, he ascertained that Delfare provided escort services. This information was conveyed to Mr Moore who in turn contacted Mr Camp. Initially, Messrs Moore and Camp were advised that about $19,000 of personal expenses had been charged to the corporate card by the applicant. This amount was subsequently reduced and, on a compromise basis, is said to be of the order of $14,000 (inclusive of costs owing by the applicant in Local Court proceedings taken by the respondent for their recovery.) 22 The applicant says that the first occasion on which he understood that there was a problem with respect to his Amex corporate card was on 31 August 2005 when he was asked to attend Mr Moore's office. He was invited to obtain a witness to the meeting at which one other person was present. At that meeting, the applicant was told that he was being accused of "gross misconduct for misuse of the Downer EDI corporate Amex card." He was told that Mr Wannop and Mr Camp, both of whom were travelling in China, had been briefed about that matter and that they had determined that his employment was to be terminated. The applicant said that he was shown a policy document, which he had denied ever having previously seen. He was then told by Mr Moore that he had abused company assets. Mr Moore said "You have exposed and brought the company's name into disrepute and the company has decided to terminate your employment on the ground of gross misconduct." 23 There was then a discussion about the personal expenses claimed by the applicant, after which his employment was terminated on a summary basis and he was required to leave the respondent's premises. 24 The applicant's Amex corporate card expense claims are in evidence. 25 The first Amex statement appears to be dated 3 March 2005, although there must be an earlier statement because it shows a prior balance of $3,319.18. 26 There are a number of charges on that account that are said to be of a personal nature including a restaurant, supermarket and air travel between Melbourne and Sydney for passengers other than the applicant. 27 There does not appear to have been completed any summary form with respect to this month's charges or, at least, there is no such form in evidence. 28 The next statement was issued on 4 April 2005 for the previous month. That account was submitted to the respondent by the applicant who completed a summary form in which he certified that the expenses claimed were "in accordance with company policy." That form has printed on it a list of different types of charge including domestic airline, international airline, accommodation, restaurants, vehicle, taxis, retail and "other". As against "other" there is a notation "paid directly". Included within this account are a number of items that are clearly business related because they cover international travel. However, there are also expenses for a number of domestic restaurants that were incurred on a weekend. 29 The form completed by the applicant contains a "manager authorisation". Mr Camp signed that form and in doing so authorised payment of the claim "in accordance with company policy." 30 The applicant seized upon this authorisation as confirming his arrangement with Mr Camp of his ability to pay personal expenses of the kind negotiated with him prior to the issue of the card. 31 In other months, the applicant claimed expenses for purchases of furniture and the like as well as continuing to claim supermarket, restaurant and motor vehicle expenses. However, in later months there are a number of charges incurred for Delfare Annandale NSW. For example, on 14 and 15 June 2005, there are successive charges, each in the sum of $385. On 28 June, there is a further amount for Delfare Annandale in the same sum. 32 The Amex card statement issued for July 2005 for the period 3 June to 4 July shows expenses incurred with Delfare Annandale NSW of $385 on 30 May, $385 on 6 June, $770 on 10 June, $385 on 14 June, $385 on 15 June, $770 on 24 June, and $385 on 28 June. 33 A reconciliation of the applicant's Amex corporate card account conducted by Mr O'Brien-Pounde with respect to statements issued between 3 February 2005 and 4 October 2005 shows total expenses incurred by the applicant of $67,941.48. Of those, Mr O'Brien-Pounde concluded that $45,371.44 were legitimate business expenses and that $22,570.04 were personal expenses. Of those amounts, it appears that the applicant paid monies direct to Amex of $810 shown on account of 3 May 2005 and $2,319.18 shown on account of 3 February 2005, making a total of $3,129.18. 34 As I have previously observed, there has been controversy between the parties concerning the exact amount owing by the applicant to the respondent. Whether it be $19,000 or $14,000 inclusive of costs of Local Court proceedings, it is clear that the applicant expended a significant amount of money on the Amex corporate card, which had been given to him by the respondent. The applicant had protested that he had not adjusted the account in a timely fashion because, following an extensive overseas business trip ending in late March 2005, he was required to undertake a great deal of work in connection with a significant tender. He said that he was working about 80 hours per week and this precluded him from finalising his Amex accounts. 35 However, evidence produced in the proceedings showed that as at 31 August 2005, the applicant had a credit balance in a bank account of less than $1,700. The applicant gave no evidence of any other source of funds available to him to make payment of the personal expenses incurred by him on the Amex credit card. 36 There was evidence given in the proceedings concerning a number of conversations between Mr Camp, Mr Moore and Mr Wannop immediately prior to a decision being taken to terminate the applicant's employment. These conversations demonstrate that the final decision to terminate the applicant's employment was taken by Mr Camp. However, the tenor of the conversations is that Mr Moore was adamant that the applicant's employment should be terminated. Mr Moore's main concern appears to have been the fact that the personal expenditure was for escort services per se and he was concerned about any damage to the reputation of the respondent if there was public disclosure of the use of the respondent's Amex corporate card for this purpose. Mr Camp's concern was more centred around the personal use of the corporate card per se. There was also discussion at that time between Mr Camp and Mr Moore concerning the complaints that had been made by a number of employees concerning the applicant's conduct towards them. It will be remembered that these complaints were suggestive of harassment of these employees by the applicant. Whilst I conclude, on the basis of the evidence, that this was a matter about which Mr Camp was conscious at the time that he ultimately made the decision to terminate the applicant's employment, I am persuaded on the basis of his evidence that the real and effective reason for his ultimate decision to terminate the applicant's employment was the personal use of the corporate card. 37 In this context, I need to deal with the conflicting evidence given by the applicant and Mr Camp as to whether Mr Camp had authorised the personal expenditure on the card, provided that expenditure was for tax related expenses as asserted by the applicant. It is difficult to determine which of the competing evidence about this matter should be believed. The factor that persuades me to accept the applicant's version of what occurred is that Mr Camp signed and thereby authorised the payment of expenses incurred on the Amex card in circumstances where it was quite clear that there was some personal expenditure. It will be remembered that with some of the items on one occasion Mr Camp changed the "paid" notation made by the applicant by adding the words "to be". I conclude that by doing so, Mr Camp was aware of the personal nature of the expenditure and that it is more likely than not that he had acceded to the applicant's request that personal expenditure, which was tax related, would be permitted to be incurred on the Amex corporate card. 38 However, of course, this leaves for consideration the nature of the expenses incurred by the applicant on the Amex corporate card and the fact that those expenses were paid by the respondent and not reimbursed by the applicant. In effect, the applicant availed himself of credit for the purchase of services and items, which were of a personal nature. 39 It is not necessary that I enter into any debate about the use by the applicant of an escort services agency. He explained that he used these services for companionship and it is not necessary in any way that I consider this aspect further. However, I cannot comprehend how anyone would think that escort agency services could possibly be characterised as an expense that was in some way tax related. The applicant conceded that he had not received any advice about whether or not he might possibly be able to make a claim for taxation purposes for these services. This was despite the fact that his brother is a chartered accountant. He said that he incurred the expenses on the basis that he would, at some appropriate stage, seek advice from an accountant about this. In my opinion, it beggars belief that any such claim could be thought by anyone to be tax related. There is no suggestion of any kind that the "companionship" which the applicant purchased had anything to do with any activities of his employer. It follows that these were expenses of a kind that could not be characterised objectively as being of the kind contemplated by the applicant and Mr Camp in the December 2004 discussions, which the applicant asserts he had with Mr Camp.

Did the summary dismissal render the contract of employment unfair? 40 A finding of unfairness is a pre-condition to the exercise of any jurisdiction and power under s 106 of the Act. Relevantly, s 106 is in the following terms: s 106 Power of Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as: (a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and (b) the performance of work is a significant purpose of the contractual arrangements made by the person. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 41 It is well established that any contract of the requisite kind can only be declared unfair by reference to its provisions or by reference to provisions that have been omitted from it. (See Sydney Water Corporation v Industrial Relations Commission of New South Wales (2004) 61 NSWLR 661 (New South Wales Court of Appeal)). The applicant's contract of employment with the respondent appears to be evidenced in writing by a letter of offer made to the applicant by the respondent, dated 8 October 2004, and accepted by him on 13 October 2004. That letter attaches "Standard Terms, Conditions and Benefits" which are said to apply to the applicant's employment. The attached Standard Terms includes the following: "Period of Notice Employment may be terminated by either party giving one month's notice in writing or immediately by EDI Rail by payment of one month's salary in lieu of notice." 42 During the course of the proceedings, neither counsel addressed the Court about the significance of the requirement to pay one month's salary in lieu of notice in circumstances where the respondent determined to terminate the applicant's employment "immediately". The proceedings had been conducted on the basis that the respondent had exercised a right of summary dismissal that did not require the giving of any notice. After the conclusion of the hearing, and whilst engaged in the process of reviewing the evidence, I sought supplementary submissions from counsel as to whether or not this provision with respect to notice displaced in some way the respondent's right of summary dismissal for misconduct which is usually not attended by any requirement to pay any monies other than statutory entitlements. 43 The applicant contended that this provision should be construed so that it applied to circumstances where the respondent purported to exercise a right of summary dismissal. Not unnaturally, the respondent submitted that such a provision did not replace a right of summary dismissal without payment of any monies in lieu of notice. 44 The usual provision encountered in contracts of employment gives both parties a right to terminate by reference to a period of notice (whether specified as a fixed period or as being "reasonable"), with a right to the employer to terminate upon payment of monies in lieu of that notice. Such a provision is usually expressed to be qualified by the right of the employer to summary dismissal on the grounds of serious misconduct etc. 45 The respondent submitted that a right of summary dismissal would always be implied by law, that this particular provision should be construed as one obviously intending to apply only to the circumstances of termination by notice and that the Court should not construe the provision as cutting across the employer's right of summary dismissal. 46 The applicant, on the contrary, said that the provision should be construed in accordance with the clear words used in it and that those words were clearly intended to exclude any right of summary dismissal for misconduct. In doing so the applicant relied upon the following passage from the joint judgment of McHugh and Gummow JJ in Byrne and Frew v Australian Airlines Limited (1995) 185 CLR 410. At [71] their Honours said, "However, the more modern and better view is that these rules of construction are not rules of law so much as terms implied, in the sense of attributed to the contractual intent of the parties, unless the contrary appears on a proper construction of their bargain. There is force in the suggestion that what now would be classified as terms implied by law in particular classes of case had their origin as implications based on the intention of the parties, but thereafter became so much a part of the common understanding as to be imported into all transactions of the particular description. The matter is put as follows in Halsbury: 'Perhaps the truth is that the ambiguous terminology enables the courts in the first instance to imply terms on the basis of the intention of the parties ... but later there comes a time when the particular implied term has become so much a part of common practice that the courts begin to import it into all transactions of that type as a matter of course; and the result is a rule of law of the type considered in this paragraph.' This understanding of the matter is consistent with the proposition that terms of this kind, although treated as implied by law, may be excluded by express provision made by the parties and also as a result of inconsistency with terms of the contract. The result is that, even if treated as rules of law, they only apply in the absence of an expression of contrary intent." (Footnote references omitted). 47 In the same case, comment was made about the circumstances in which a term would be implied into a contract in the joint judgment of Brennan CJ, Dawson and Toohey JJ. At [12], their Honours said, "However, by majority (Keely, Beaumont and Heerey JJ; Black CJ and Gray J dissenting), the Full Court held that there was no implied term in the contract of employment which reproduced cl 11(a). That question involved distinct sub-issues. Keely, Beaumont and Heerey JJ (Gray J dissenting) held that the terms of cl 11(a) were not implied in the terms of employment as a matter of business efficacy. Black CJ would have returned the matters to the trial judge to make findings of fact relevant to the determination of whether such an implication ad hoc should be found. Black CJ, Keely, Beaumont and Heerey JJ (Gray J dissenting) also held that the terms of the clause were not imported into the contracts as a matter of law and independently of the intentions of the parties." 48 The question for determination is, therefore, whether or not this provision may stand side by side with an implied term creating a right of summary dismissal, or whether it should be construed as excluding any such entitlement. 49 On the one hand, the provision may clearly be said to be directed to circumstances of the termination of employment by the giving of notice. Certainly, that is the manner in which the provision is entitled. On the other hand, it may be said that the provision arguably extends to all circumstances relating to the termination of employment because firstly it gives a right of immediate termination without notice (but upon payment of one month's salary in lieu) and makes no reference at all to any right of summary dismissal. 50 There being some obvious ambiguity, I intend applying the contra proferentem rule. It is the employer's document and in case of doubt ought to be construed against the party responsible for drafting it. 51 I conclude, therefore, that the provision should be construed so as to give the respondent a right to terminate the applicant's employment "immediately" but upon payment of one month's salary in lieu of notice, and to that extent the right of summary dismissal without the payment of any monies is excluded. 52 It was common ground in the proceedings that the respondent paid no monies in lieu of notice to the applicant upon termination of his employment. It follows that the applicant is therefore entitled to payment of one month's salary pursuant to the provisions of his contract of employment with the respondent. 53 The applicant submitted that he was entitled to relief under s 106 of the Act, which would allow the Court to make a monetary order in his favour for the payment of one month's salary because the failure to pay that money on termination rendered the contract unfair. I can think of no way in which the failure to pay one month's salary in lieu of notice on the termination of the employment would not ipso facto amount to a breach of the applicant's contract of employment and, per se, fall outside the jurisdiction and power of this Court under s 106 of the Act by reason of Sydney Water, referred to above. The failure to pay monies in lieu of notice would only arise in circumstances where some other basis of unfairness was established. I now proceed to consider this aspect. 54 The proceedings were conducted on the basis that the respondent's conduct in purporting to summarily dismiss the applicant was unfair in all the circumstances. This conduct was, presumably, then asserted to be made referrable to either a provision of the contract of employment or some provision that should have been contained within the contract of employment but was not present so as to render the contract itself unfair in accordance with the Sydney Water principle to which I have referred. 55 I now turn to consider whether the termination of employment was "unfair" so as to ground an argument that such conduct rendered the contract of employment unfair in a manner, which, as I have said, has not been clearly described. 56 For reasons that I have given in discussing the factual background to these proceedings, I do not accept the respondent's assertion that the applicant was in some way in breach of his contract of employment solely by incurring expenses of a personal nature on the Amex corporate credit card. However, for the reasons which I have earlier expressed, the clear agreement between the applicant and the respondent was that the applicant was entitled to use the credit card for tax related personal expenses, being expenses which might arguably be the subject of some claim for taxation relief by reference to the relocation of the applicant from Melbourne to Sydney. 57 For reasons that I have earlier expressed, I do not accept that some of the expenditure might be so characterised. At the least, expenditure on escort services would not and could not be so characterised. 58 It was submitted on behalf of the applicant that at all times the applicant disclosed the personal nature of his expenditure. It is true that the Amex monthly statements did refer to the providers of a number of goods and services with sufficient particularity to enable the personal nature of the expenditure to be recognised immediately. This included the names of restaurants, particular supermarkets, airlines, hotels and the like. However, the reference to "Delfare Annandale NSW" does not fit into the same category. The applicant's position was that if the respondent had a query, this could be raised by it with the applicant. However, I disagree with this approach. The position was that the respondent was affording credit to the applicant by, in effect, loaning him monies, which he undertook to repay. I will infer that the applicant was obliged to discharge any personal liability accruing on the Amex corporate card promptly and within a reasonable period. In circumstances where the nature of the personal expenses were not capable of ready identification by the respondent's personnel, I infer that the applicant should, as a matter of fairness, have identified the nature and character of any such expense. This latter observation is, however, not critical to the determination that I make concerning the unfairness or otherwise of the conduct of the respondent in dismissing the applicant from employment. 59 As I have previously stated, I am of the opinion that no reasonable person acting reasonably could proceed on the basis that expenses incurred for escort services could possibly be the subject of some form of taxation concession or relief in some manner. Even if the applicant had, in some way, some underlying impression about the possibility of any such claim being made, it was, in my view, incumbent upon him to obtain some advice at the least before availing himself of the right to use the respondent's assets in extending credit to him via the Amex corporate card. 60 Even if I were incorrect in adopting such an approach with respect to this expenditure for escort services, the fact remains that the applicant did not discharge his personal indebtedness on the Amex corporate card in a sufficiently regular and timely fashion, as might reasonably have been contemplated at the time that he said that he made the arrangement with Mr Camp. 61 The applicant, having negotiated an entitlement to utilise the respondent's assets, had, in my opinion, not only misused that entitlement but, more importantly, failed to discharge his personal indebtedness. 62 Even though the applicant protested that at all relevant times he was willing to discharge his debt, the only evidence in the proceedings concerning the applicant's ability to discharge this debt was the credit of approximately $1,600 standing to his account with the Commonwealth Bank of Australia. He adduced no evidence of any other capacity to pay. 63 In determining whether conduct is fair or unfair, there are well known principles, which have been applied by this Court and its predecessors. I sought to summarise those principles and what I comprehend to be the proper approach to the determination of what is fair or unfair in Schwartz v Central Sydney Area Health Service & Anor [2002] NSWIRComm 79 in the following terms: "71 It is a trite observation that a pre-condition for the exercise of any power under s 106 is a finding that the relevant contract is unfair. A helpful discussion as to the approach of the predecessor tribunals to this Court to the determination of whether a contract etc is unfair is contained within the joint judgment of Fisher CJ and Hungerford J in the Industrial Court of New South Wales Full Court in Baker v National Distribution Services Ltd (1993) 50 IR 254. At 271 their Honours said: 'The test of unfairness within the meaning of s 88F of the Industrial Arbitration Act, and hence s 275 of the present Act, has received much attention by the Court and by the previous Industrial Commission over very many years, but, in our review of the cases, the approach stated by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 over 26 years ago has endured; his Honour commented (at 374) that unfairness of a contract or arrangement was to be determined according to "the common sense approach characteristic of the ordinary juryman ....It is a plain matter of morals not law." His Honour cautioned, however, (at 374,375) that the section's "massive power makes it imperative that it should be exercised with proper restraint ... it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms. ... the discretion should be exercised to protect victims of wrong dealing not to prescribe anodynes." Those words by his Honour echoed what had been said earlier by Beattie J in Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77 at 89 that it was a matter of deciding "in each particular case by the application of the tribunal's common sense and sense of justice whether a particular transaction is unfair, harsh and unconscionable".

The nature of the unfairness attracted by s 88F was considered later by the Industrial Commission in Court Session (Perrignon and Dey JJ, Cahill J dissenting) in A & M Thompson Pty Ltd v Total Australia Limited [1980] 2 NSWLR 1 at 13 as follows:

"It has been said that fairness is determined by the commonsense approach of a juryman and that it is a moral and not a legal issue ( Davies' case). Whether this be so or not, it does seem that in distinguishing between what is fair and what is not fair the Judge must apply standards which appear to him to provide a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement. In doing so he would always have to bear 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."' (at 271-2).

72 It is my understanding that in determining whether there is unfair conduct for the purpose of proceedings brought under s 106 and especially under sub s(2), the Court is required to exercise a value judgment reflecting contemporary community values. The contemporary values may be derived from the commonsense approach characteristic of the ordinary, reasonable, hypothetical "standard" member of the community. Such a person will be neither an employer nor an employee, must be careful to weigh up the competing interests of the applicant as an employee and the respondent as an employer and those interests must be accommodated and viewed objectively and balanced within the context of the factual matrix which applies to them. Such a process will accommodate the reasonable requirements and understanding of an applicant as an employee and the reasonable requirements and understanding of a respondent as an employer in the context of the needs of the employer to undertake its activities in an efficient, effective and competent manner." 64 A determination of what is fair or unfair cannot be made in a vacuum. Not only is the Court required to take into account all of the relevant factual circumstances, but also the appropriate values and standards, which the Court recognises as apply in a contemporary sense within the community. This would relevantly seem to extend to the geographical area within the State of New South Wales. 65 Having regard to all of these matters, I conclude that the respondent was entitled to terminate the applicant's contract of employment and his employment "immediately" when it did so on 31 August 2005, albeit not for the reasons that the respondent gave at the time. Based on such a conclusion, it cannot be suggested that the respondent conducted itself unfairly on that occasion. There being no unfair conduct by the respondent, any attempt to vary or avoid his contract of employment would be futile. 66 Accordingly, this aspect of the applicant's claim must fail. Accordingly, this court is not empowered to make any order in the applicant's favour for payment of one month's salary on termination of employment, notwithstanding his contractual entitlement to that payment.

The Senior Management Incentive Scheme 67 The applicant's terms and conditions of employment, as provided for in the letter of 8 October 2004, state, as I have previously observed, that he is to be included in this scheme. I have previously set out those terms and conditions that were included in the letter of offer and I have referred also to the letter from Mr Wannop, the Chief Executive Officer of the respondent, to the applicant dated 24 February 2005. 68 Although the applicant reminded Messrs Camp and Moore by email on 10 July 2005 that his KPI's had not been fixed, the respondent failed to do so. 69 The evidence is that there was, at all material times, a representation made by the respondent to the applicant prior to the making of the contract of employment that there would be an entitlement to earn up to 15% of base salary by participation in the Senior Management Incentive Scheme and that to achieve a bonus payment for the year 2004/2005, the applicant must remain employed by the respondent as at 1 July 2005. Although it was said that the entitlement was discretionary, there was reference to the setting of a number of KPI's and other indicia by which the quantum of the bonus might be assessed. Indeed, evidence in the proceedings was that a spreadsheet was established by Mr Moore in co-operation with the Chief Executive Officer, which set out with respect to each of the employees a number of benchmarks that had to be achieved. The spreadsheet, which became evidence in the proceedings, indicated in respect of the applicant four benchmarks and a percentage weighting to be assessed with respect to each of them. There was evidence in the proceedings that two of these benchmarks were met, one was not and there was no evidence about the fourth. 70 The respondent helpfully prepared a schedule for the purpose of the proceedings which calculated the bonus that would have been received by the applicant on a pro rata basis assuming that three of the benchmarks were met and assuming a period of 29 weeks employment. The calculations were made by reference to the applicant's base salary as at 30 June 2005, rather than any increase that he received subsequent to that date. I agree that this is an appropriate basis for calculation. The resultant figure was $10,172.31. I am prepared to accept this as being the appropriate calculation. The applicant did not submit to the contrary. 71 The amended summons claimed that the applicant's contract of employment was unfair in that the applicant was denied pro rata entitlement to bonus which became payable under the incentive scheme for the year ended 30 June 2005 and which the respondent had declined to pay. The applicant sought a variation of the contract to provide for pro rata payment on termination and including not only the payment that had become due as at 30 June 2005, but with respect to any payments that might be payable under the scheme for the following months during which the applicant worked, namely July and August 2005. 72 In my opinion, the applicant should have been paid a pro rata amount calculated as if the scheme applied to him for the year ended 30 June 2005. This is because there was clearly a representation made to the applicant that he would be entitled to participate in such a scheme at the time that he entered into his contract of employment and representations continued to be made to that effect. Furthermore, the respondent failed, through Mr Moore and Mr Camp, to assess the applicant in consultation with him as to which of the KPI's and benchmarks applied to him and in what way. 73 Although the respondent sought to argue faintly that, as the bonus was not declared by the Chief Executive Officer until some time in October 2005, a date after the applicant had ceased to be employed, he was therefore not entitled to receive any pro rata payment of bonus, it is clear from the respondent's own documentation that entitlement to the bonus accrued provided the applicant was in employment on 1 July 2005. It is clear that either the applicant met or ought to have met sufficient criteria to have enabled him to be paid on a pro rata basis $10,172.31 referrable to this incentive scheme. It was, in my opinion, in all the circumstances unfair for the respondent to have attempted to preclude the applicant from entitlement to be paid these monies. The contract of employment was unfair in not providing for payment of accrued entitlement on termination of employment. Pursuant to this finding of unfairness, I intend varying the applicant's contract of employment to provide that, if on 1 July in any year during which the contract of employment subsists, there is entitlement to payment under the Senior Management Incentive Scheme either for the whole or part of a year by reference to criteria established by the respondent or which ought to have been established by the respondent, then the respondent will make payment to the applicant accordingly. 74 The position is, however, different with respect to the period commencing 1 July 2005. The applicant was not in employment as at 1 July 2006 and, prima facie, would therefore not be entitled to participate in the scheme for that year. Furthermore, in circumstances where the applicant's employment has justifiably been terminated by the respondent for misconduct, it is not appropriate to vary the contract of employment to provide for pro rata payment under any such scheme. The circumstances might arguably be different if the respondent had terminated the applicant's employment for reasons other than misconduct, such as redundancy. I conclude, therefore, that no unfairness attaches to the failure to make any pro rata payment under this scheme for the months of July and August 2005.

Annual leave 75 The amended summons claims unfairness and payment of compensation with respect to outstanding annual leave. The parties reached sensible agreement that the respondent would pay to the applicant, on a without prejudice basis, the sum of $655.16 in discharge of this claim.

Interest 76 The applicant claimed interest on any monies that would be awarded in his favour as just compensation. The respondent did not resist any order for interest per se but submitted that with respect to any orders for payment made in connection with the Senior Management Incentive Scheme bonus, interest should be made payable only from the date of filing the applicant's amended summons for relief on 9 November 2006. It was said that this was the first occasion upon which the applicant made a claim in the proceedings with respect to that matter. 77 The question of awarding interest in proceedings brought under s 106 was discussed comprehensively by Schmidt J in the Full Bench of this Court in Abboud v NSW Department of School Eduction (2000) 99 IR 299. Wright J President and Walton J Vice-President agreed with her Honours reasons. 78 At [47] to [49] her Honour said, "47 It follows that the awarding of an interest component is a matter of discretion to be exercised in the particular circumstances of the case in order to discharge the statutory duty, now arising under s106(5), to make a monetary order in connection with the contract varied, 'just in the circumstances of the case'. This will not necessarily require that interest at commercial rates and for commercial reasons be awarded in every case, even those with a commercial flavour.

48 Following that approach, in my view, this is not a case where interest should run from the date of termination of the contract, having in mind the nature of the jurisdiction under s106 of the Act and the particular case brought here. The claim advanced was not, for instance, that the contract be declared void, so that restitution of the parties to a pre-existing position be effected, or where the contract was sought to be varied to give effect to promises made or to rectify misrepresentations, in which cases a proper basis could well be advanced for an order for interest from a date earlier than the date of judgment, as an appropriate exercise of the discretion given to the Court under s106(5).

49 Here, the question which now arises is whether the express provision for a minimum of 2 weeks' notice was unfair, where misconduct warranting summary dismissal has not been established, in the circumstances outlined. I take the view that the proper approach in the circumstances of this case is to make an order as to the payment of money 'just in the circumstances of the case', which requires that interest should flow from the date of application and no earlier. While there undoubtedly have and will be cases brought under s106 where the issue is notice and where a proper basis for making an order in relation to interest calculated from a date earlier than the date of application will be established, there was nothing advanced in evidence or submissions in this case, which would provide a proper basis for going beyond that date." 79 It was evidence in the proceedings that in general terms entitlement accrued to payment under the Scheme as at 31 October 2005. In my opinion, notwithstanding that the applicant did not include a reference to that Scheme in the summons as initially filed, he should be entitled to interest payable on the agreed amount as and from that date. This is the date upon which, if the respondent had not acted unfairly, payment to the applicant, at the latest, would have accrued. I intend to proceed accordingly.

Costs 80 The parties agreed that costs should be reserved and I shall do so.

Orders 81 Consequent upon the findings of unfairness that I have made, I make the following orders. 1) The contract of employment between the applicant and the respondent is varied from the time that it was entered into so as to provide that the respondent will pay to the applicant the whole or any pro rata entitlement to a bonus payable under the respondent's Senior Management Incentive Scheme which has become or would become payable on 1 July in any calendar year prior to date of termination. 2) The respondent is to pay the applicant the sum of $10,172.31 together with interest thereon calculated from 31 October 2005 to this date pursuant to Schedule 5 of Uniform Civil Procedure Rules 2005 3) Costs are reserved. 4) Liberty to apply with respect to costs.

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Judgment (22 paragraphs)

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Cases Cited (5)