Truelove v Sydney Water Corporation Limited and anor

Industrial Relations Commission (NSW)|2005-07-01|Before: Wright J, Walton J, Boland J, Staff J, Marks J

Industrial Relations Commission of New South Wales in Court Session

CITATION: Truelove v Sydney Water Corporation Limited and anor [2005] NSWIRComm 191

APPELLANT Stephen Neil Truelove

SECOND RESPONDENT Australian Water Technologies Pty Ltd

CORAM: Wright J President; Walton J Vice-President; Boland J; Staff J

CATCHWORDS: Appeal - Application for leave to appeal - Unfair contract - Summary dismissal for misconduct - Consideration of Reich v Client Server Professionals of Australia Pty Ltd (2000) 49 NSWLR 551 - Consideration of Sydney Water Corporation Ltd & Anor v Industrial Relations Commission of New South Wales & Anor [2004] NSWCA 436 - Whether breach of contract may render contract unfair - Procedural fairness - Breach of duty of fidelity - Reich not a relevant consideration - Leave to amend summons refused - Leave to appeal granted - Appeal dismissed

Industrial Arbitration Act 1940 (Repealed) LEGISLATION CITED: Industrial Relations Act 1996

Antonakopoulos v State Bank of NSW (1999) 91 IR 385 Baker v National Distribution Services Ltd (1993) 50 IR 254 Eagle Boys Dial-A-Pizza Australia Pty Ltd v Clifford (2003) 125 IR 35 Gow v Cronulla Sutherland Leagues Club Ltd (2002) 119 IR 122 Humphries v Cootamundra Ex-Services and Citizens Memorial Club (2003) 128 IR 37 Knowles v The Anglican Property Trust (No. 2) (1999) 95 IR 380 Lane v Commonwealth Bank [2000] NSWIRComm 274 Mitchforce Pty Ltd v Industrial Relations Commission of New South Wales and Others (2003) 57 NSWLR 212 Origin Energy Limited v Smith (2001) 111 IR 476 Perrott v Xcellenet Australia Ltd (1998) 84 IR 255 Port Macquarie Golf Club Limited v Stead (1996) 64 IR 53 CASES CITED: re Crown Employees (Teachers, Locality Allowance, etc) Award [1981] AR (NSW) 1017 Reich v Client Server Professional of Australia Pty Ltd (2000) 49 NSWLR 551 Rich River Golf Club v Power [1995] NSWIRComm 75 Schwartz v Sydney City Area Health Service and anor [2002] NSWIRComm 79 Solution 6 Holdings Ltd and Ors v Industrial Relations Commission of New South Wales & Ors (2004) 60 NSWLR 558, (2004) 208 ALR 328, (2004) 137 IR 123, [2004] NSWCA 200 Sydney Water Corporation Ltd & Anor v Industrial Relations Commission of New South Wales & Anor [2004] NSWCA 436 Truelove v Sydney Water Corporation and anor [2004] NSWIRComm 115 Truelove v Sydney Water Corporation Limited and anor [2004] NSWIRComm 298 United Globalcom.Inc v McRann (2003) 132 IR 3 Walker v Industrial Court of New South Wales (1994) 53 IR 121 Westfield Holdings v Adams (2001) 114 IR 241

APPELLANT Mr A Searle of counsel Solicitor: Mr G Francis Sagacious Legal Pty Ltd LEGAL REPRESENTATIVES:

FIRST AND SECOND RESPONDENT Mr R F Crow of counsel Solicitor: Mr B Williamson Workplace Law

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

CORAM: Wright J, President Walton J, Vice President Boland J Staff J

STEPHEN NEIL TRUELOVE v SYDNEY WATER CORPORATION and ANOR

Application by Neil Stephen Truelove for leave to appeal and appeal against a decision of Justice Marks given on 14 May 2004 in matter no. IRC 5850 of 1996

1 Stephen Neil Truelove ("the appellant") has applied for leave to appeal and, if leave is granted, appeals the decision of Marks J of 14 May 2004 in Truelove v Sydney Water Corporation and anor [2004] NSWIRComm 115. 2 Mr Truelove had been employed by Sydney Water Corporation ("the first respondent" or "SWC") under a written contract of employment dated 12 January 1995 as Finance Director. With Mr Truelove's concurrence, his services were transferred to Australian Water Technologies Pty Ltd ("the second respondent" or "AWT") on 1 July 1995. In May 1996 Mr Truelove's employment was summarily terminated following the investigation of allegations of serious breaches of the employer's Code of Conduct. 3 The alleged breaches included: approval and use of a second mobile phone for the use of the appellant's de facto spouse; expenses incurred by the appellant on a corporate American Express card for social functions attended by some people who were not employees of, or did not have a definite business relationship with, the respondents; the use of a transport vehicle owned by the second respondent for private purposes to enable him to move furniture to the Central Coast; the ordering of twelve dozen golf balls with the AWT logo when the then Managing Director had expressed a view that no further golf balls of that kind were to be ordered; and, directing the corporate administrative staff of the second respondent to purchase two return airline tickets to Melbourne where the second ticket was for the use of the appellant's de facto spouse. 4 The appellant had been employed on a fixed term contract. Clause 19 of the contract gave the Managing Director the right to terminate the agreement: [A]t any time without prior notice in circumstances which are not harsh, unjust or unreasonable if the Employee shall: (a) Commit any serious or persistent breach of any of the provisions of this Agreement; (b) Be guilty of any grave or serious misconduct or wilful neglect in the discharge of his/her duties… 5 In November 1996, Mr Truelove commenced proceedings in the Industrial Relations Commission in Court Session against SWC and AWT seeking relief pursuant to s 106 of the Industrial Relations Act 1996. The relief sought was: 1 An order declaring void in whole or in part or varying in whole or in part either from its commencement or from some other time the contract, arrangement or collateral arrangement ("the Contract") between the Applicant and the First and Second Respondents under which the applicant performed work in an industry except to the extent that the applicant received remuneration and benefits from the First and Second Respondents or became entitled to receive such remuneration or benefits. 2 An order that the Contract between the Applicant and the First and Second Respondents under which the Applicant performed work in an industry was unfair, harsh and unconscionable and contrary to the public interest. 3 Further, in addition, an order varying the contract between the Applicant and the first and Second Respondents from its commencement so as to include the following terms: (a) "Upon termination of the Contract by the First and/or Second Respondent the First and Second Respondents shall either: (i) Pay to the Applicant a sum equivalent to two years notice of termination; or in the alternative (whichever is the greater benefit); (ii) Pay to the Applicant the sum (calculated at the Applicant's total remuneration package rate) for the period from the date of termination until 31 December 1999 plus any bonus the Applicant might reasonably have been expected to receive for the year in which such termination occurs. (b) For the purposes of sub-paragraph (a) above the payment shall be calculated by reference to the total value of all benefits the Applicant received under the Contract".

A number of other incidental orders were sought including orders relating to costs and interest. THE DECISION AT FIRST INSTANCE 6 Marks J dismissed the appellant's summons for relief. He held that no relevant unfairness attended the summary dismissal. His Honour described the events leading up to Mr Truelove's dismissal at [11]-[16] of his decision: 11 In March 1996 the applicant was advised by the then Managing Director [of AWT], Mr David Marchant, that the Board of the first respondent had directed that an internal audit investigation be conducted into the affairs of the second respondent, it being a wholly owned subsidiary. The applicant participated in discussions with audit personnel on 18 April, 1 May and 24 May 1996. On each occasion he was asked for certain information and said that he gave full explanations in response.

12 On 2 May 1996 the applicant was given a letter suspending his employment signed by Mr Paul Broad, the Managing Director of the first respondent. That letter referred to an investigation conducted by Internal Audit Services concerning certain matters, unspecified, involving the applicant and stated that the audit report would be considered at a special board meeting of the second respondent. The applicant was suspended from duty on full salary until 16 May 1996 and was advised that investigations would continue and that the applicant would be informed of the results of those investigations at a meeting in Mr Broad's office on that day.

13 The applicant complained that he was given no reasons for, nor any warning of, his suspension nor given an opportunity to respond to any allegations. By letter dated 14 May 1996 the applicant's then solicitor Mr Hayward sought particulars from Mr Broad. Solicitors for the respondents replied by letter dated 15 May 1996 setting out details of a number of allegations levelled against the applicant and fixing an appointment for the applicant to discuss them with the Director of Human Resources. The applicant's solicitor was also forwarded a copy of the discipline policy handbook which set out the procedures to be adopted at that meeting. I shall return to the specific allegations later, but I observe that a great deal of documentary material was enclosed with that letter.

14 Eventually a "disciplinary hearing" was conducted by Ms Kerry Stubbs, the Manager - Corporate Human Resources of the first respondent, and Mr Warren Hart, the then Director of Human Resources for the first respondent. These persons had been appointed to constitute a disciplinary committee by Mr Broad. That committee met with the applicant and Mr Hayward, solicitor, on 21 May 1996. The respondent's solicitor was also present as were certain other persons. At that meeting the allegations levelled against the applicant were discussed and he was afforded an opportunity of responding to them. 15 After that meeting Ms Stubbs and Mr Hart met with two other persons to discuss further information about these allegations. They then produced a report to Mr Broad dated 23 May 1996 in which they made certain findings and recommended that the applicant be summarily dismissed that day. There is appended to that document the word "approved" above what the parties have assumed is the signature of Mr Broad with the date 23 May 1996. A copy of that document was given to the applicant that day.

16 It may be assumed, therefore, that Mr Broad, who ultimately determined that the applicant's employment would be terminated, relied upon and adopted that document. 7 At [48]-[49], his Honour held: 48 However, assuming that I was to be persuaded that the respondents had in some way failed to afford procedural fairness to the applicant, this gives rise to a consideration as to what impact this should have on the outcome of these proceedings. In a classic unfair dismissal case brought under s 84 of the Act, a failure to follow appropriate processes might arguably result in an applicant succeeding in an order for reinstatement or being awarded monetary compensation. Much would depend upon the nature of the applicant's conduct overall and as to whether that might justify dismissal in circumstances which were not unfair for the purpose of s 84.

49 In my opinion a similar situation applies in the circumstances of these proceedings. The applicant seeks a finding that the contract of employment was unfair. On one view of it, the attack made by the applicant is not directed in any way to any of the provisions, either express or implied, in his contract of employment with the second respondent or any previous contract of employment with the first respondent. The applicant has not pleaded reliance upon an overall arrangement between the second respondent and the first respondent concerning the investigation and determination of complaints made against him arising out of his employment with the second respondent. It is arguable that the applicant is then thrown back on a consideration of s 106(2), namely whether the applicant's contract of employment was or became an unfair contract because of any conduct of the parties. In view of the conclusion to which I have come, concerning the disposal of these proceedings, it is not necessary that I consider submissions made by Mr Crowe of counsel who appeared for the respondents that I should apply the decision of the Full Bench of this court in Reich v Client Server Professionals of Australia Pty Ltd (2000) 49 NSWLR 551 and that I consider the comments of the Chief Justice in the New South Wales Court of Appeal in Mitchforce Pty Ltd v Industrial Relations Commission of New South Wales (2003) 57 NSWLR 212 at 233. 8 It was his Honour's belief that it was sufficient that initially he consider whether the appellant had demonstrated any unfairness to justify making a relevant finding of unfairness, with that demonstration of unfairness being a precondition to making any orders under s 106. His Honour also adopted the reasoning of Schmidt J in Lane v Commonwealth Bank [2000] NSWIRComm 274 where her Honour stated at [171] that in determining whether a failure to follow fair procedures warrants dismissal for misconduct, consideration must be given to whether the relevant employee was given an opportunity to advance an innocent explanation for that alleged misconduct: [50]. 9 His Honour stated at [51] that: [E]ven if, allowing for some deficiency in the processes adopted by the respondents, I am unable to find that there was any relevant unfairness then this would ipso facto determine the outcome of these proceedings, provided that the failure to follow those processes could not unduly impact upon the validity of the finding that there was no unfairness. 10 However, his Honour proceeded on the basis that that last qualification did not apply. At [53] his Honour held: 53 I therefore proceed to embark upon a determination as to whether in all the circumstances the court is entitled to or ought to make a finding that the relevant unfairness exists for the purpose of these proceedings. This is, as I have observed, a precondition for the exercise of any power under s 106 to make any orders of avoidance, variation or for the payment of monetary compensation. 11 At [54] his Honour articulated his understanding of the provisions of s 106 as expressed in his decision in Schwartz v Sydney City Area Health Service and anor [2002] NSWIRComm 79. Schwartz essentially adopted the test for unfairness as elucidated in Baker v National Distribution Services Ltd (1993) 50 IR 254. 12 In Schwartz at [72] his Honour held: It is my understanding that in determining whether there is unfair conduct for the purpose of proceedings brought under s 106 and especially under subsection (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. 13 After indicating the difficulty with which community values are to be determined, his Honour held at [55]: 55 In the circumstances of these proceedings I take into account, in particular, the obligations, responsibilities and duties incumbent upon the applicant as the Chief Financial Officer and, from time to time, acting Managing Director of the second respondent. The respondents in their submissions emphasised the applicant's contractual duties and those duties imposed upon him by the Corporations Law, submitting that the applicant was an officer within the meaning of s 82A of the Corporations Law at all relevant times. In my opinion this matter may be dealt with without considering the detailed provisions of the Corporations Law or, indeed, the detailed provisions of the applicant's contract of employment. The applicant at all times had a duty to act with fidelity and to ensure that the respondent's policies were implemented. He was responsible in particular to ensure the fiscal integrity of the second respondent's operations with particular emphasis on the respondent's resources and its funds. 14 Consequently, his Honour held: 57 In my opinion the circumstances which apply to the applicant in these proceedings are different from those about which I have made general observations. Here, the applicant is alleged to have participated himself in questionable activities and is alleged to have breached not only his duty of fidelity but also particular policies established by the respondents. In my opinion the attitude taken by the applicant to the allegations against him, as manifested by the explanations which he has given both during the course of these proceedings and as recorded in documentation reflecting discussions held with the respondents' personnel, reflects a lack of insight as to his conduct and as to the consequences of what has been described on his behalf as "errors of judgment".

58 Perhaps, taken in isolation, it might be asserted that each of the items referred to was of minor consequence and might justify a reprimand or counselling of some kind. However, in my opinion, taken in their totality all of the matters in the aggregate constitute an attitude on the part of the applicant and conduct on the part of the applicant which is inconsistent with his duties, responsibilities and obligations and which, in my opinion, would not allow this court to characterise the summary dismissal as constituting unfairness for the purposes of s 106 of the Act. 15 At [59]-[64], his Honour dealt with each alleged breach as described above at [3], finding that the appellant had breached his duty of fidelity in each instance (except in relation to the golf ball allegation where his Honour held that he was unable to reach any conclusion adverse to the appellant as Mr Marchant, the second respondent's Managing Director, did not give evidence). In finding, therefore, that the actions of the second respondent in terminating the appellant's services summarily did not constitute or create an unfair contract for the purposes of s 106, his Honour held that: 64 The respondents were entitled to expect that the applicant would not only enforce all of its policies but would lead by example. A chief financial officer who breaches policies designed to ensure the integrity of an employer's fiscal resources sends a message to others which undermines those policies. These fundamental breaches of the applicant's duty of fidelity towards the second respondent are compounded by their potential impact on others. The amounts involved were small, but this does not detract from the nature of the breaches and their potential impact. They were such that the second respondent's reaction to them cannot be characterised as constituting unfair conduct or as rendering the contract of employment in some way as being unfair. 16 In finding that the actions of the second respondent did not constitute unfairness and, therefore, that the summons should be dismissed, his Honour observed at [66]: 66 Consistent with the observations which I have earlier made, I reach this conclusion notwithstanding the alleged failure to follow appropriate processes during the investigative and determinative aspects of the respondents' processes. Viewed objectively the termination of the applicant's employment by reason of his conduct did not in all the circumstances constitute relevant unfairness, and the alleged failure to follow these provisions can have no effect on this conclusion. 17 His Honour considered it unnecessary to take into account the actions of the second respondent in relation to the conduct of three other employees who were investigated for misconduct. PROCEEDINGS IN COURT OF APPEAL 18 Following the appellant's application for leave to appeal and appeal, the respondents sought to have the appeal hearing vacated on the basis of a challenge in Court of Appeal. There the respondents sought a declaration that the Court Session was without jurisdiction to hear or determine the current appeal and an order that the Commission was prohibited from taking any steps to further exercise, or purport to exercise its power under s 106 of the Act. The Full Bench of the Court Session declined the application to vacate and instead adopted the approach of the appellant i.e., if the Court of Appeal had not delivered judgment by 8 October 2004 it would vacate the appeal proceedings scheduled for 14 October 2004: Truelove v Sydney Water Corporation Limited and anor [2004] NSWIRComm 298. As it turned out, the Court of Appeal did not give judgment until 1 December 2004 and the appeal hearing in October was vacated. The focus of the discussion in the Court of Appeal was the correctness of the principle in Reich v Client Server Professional of Australia Pty Ltd (2000) 49 NSWLR 551. 19 The majority Full Bench decision in Reich, it would appear, has assumed a significance out of all proportion to its narrow and relatively orthodox application in the unfair contracts jurisprudence of the Commission. In short, Reich is perceived as being of more of a concern than it actually is. 20 After an exhaustive examination of the terms of s 106 of the Industrial Relations Act 1996 and a long line of relevant authorities (including several decisions by the Court of Appeal of New South Wales and the Full Bench of the Industrial Relations Commission), the majority followed the orthodox position that a contract (or arrangement, related condition or collateral arrangement) may be found to be unfair due to the conduct of a party under the contract (or arrangement) at the time of termination. In Reich, the relevant conduct was the employer's failure to perform one of its obligations under the contract. The minority expressly agreed that conduct in breach of an implied term may, in the particular circumstances of a case, demonstrate the unfairness of the contract in question. Any other finding, in the face of the very wide language of s 106 when read with s 105, would have been revolutionary indeed. 21 The reaction to Reich appears to be a reaction to the conclusion in that case that conduct in breach of a contract may render a contract unfair. There is a perception that the true remedy (or the only remedy) in such a case should be for breach of contract at common law. However, the conclusion in Reich is inescapable given the broad terms of the section and was explicitly acknowledged to be so by Mason P at [28] in Sydney Water Corporation Ltd & Anor v Industrial Relations Commission of New South Wales & Anor [2004] NSWCA 436. As Kirby P (as he then was) observed in Walker v Industrial Court of New South Wales (1994) 53 IR 121 at 134-135, it is not unusual in our legal system for one set of circumstances to give rise to a number of remedies, but the existence of alternatives has never excluded a person from pursuing rights expressly conferred by statute. The existence of other remedies in this context (such as statutory claims for redundancy payments or common law claims for breach of contract) does not control or limit the ample language of the section (in Walker, Kirby P considered a predecessor to s 106, s88F(1) of the Industrial Arbitration Act 1940 (Repealed)). Notably, not one of those who seeks to impugn Reich has attempted to reconcile their argument with the clear words in ss 105 and 106. In our view, it cannot be done. 22 It may also be a reaction to the idea that any conduct in breach of a contract will necessarily, without more, render the contract (or arrangement, related condition or collateral arrangement) unfair. This appears to be at the heart of Mason P's critique in Sydney Water Corporation Ltd. But this is not the case: as the decision in Origin Energy Limited v Smith (2001) 111 IR 476 (which we discuss later) makes clear, nothing in the decision of the majority in Reich substantiates such a principle. We also refer to the decision of the Full Bench in United Globalcom.Inc v McRann (2003) 132 IR 3, which endorsed the submissions of Mr J West QC in that matter that Reich stood for nothing more than the following proposition: a contract (or arrangement, related condition or collateral arrangement) may be found to be unfair due to the failure of a party at the time of termination to perform its obligations under the contract. 23 The litigation in this matter is a good example of the misuse of Reich and of the ill advised forensic advantage a party may seek to gain by virtue of the confusion at the expense of timely, efficient dispute resolution. As we discuss later (at [37]-[38]), it is difficult to see how Reich had any relevance to the proceedings before the Court of Appeal. It is not surprising that, notwithstanding the attention given to Reich's perceived flaws, the end result was a mere declaration effectively restating ss 105 and 106 of the Act. In our view, the manipulation of courts' time for such purposes should be discouraged. 24 According to Mason P at [22], in Reich: The Commission held (by majority) that a contract can be found to be unfair because of conduct which is in breach of contract. The availability of an action for breach of contract at common law did not preclude relief under s106. The key reasoning is in the joint judgment of Wright J (President), Walton J (Vice-President) and Hungerford J at 567 [26]-[32]. The passages in the dissenting judgment of Glynn and Schmidt JJ are at 603 [166] -[177] and 608 [187]. 25 The Court of Appeal had made it known in other proceedings not involving any application of Reich, that it had reservations about the correctness of the majority judgment in that case: Solution 6 Holdings Ltd and Ors v Industrial Relations Commission of New South Wales & Ors [2004] NSWCA 200; 60 NSWLR 558, 208 ALR 328, 137 IR 123 per Spigelman CJ at [20] and per Handley JA (Mason P agreeing) at [162]-[164]; and Mitchforce Pty Ltd v Industrial Relations Commission of New South Wales and Others (2003) 57 NSWLR 212 per Spigelman CJ at [93]. The respondents in this case clearly believed, given the Court of Appeal's obvious preparedness to entertain a challenge to Reich, that if they could show the Court of Appeal that the appellant's case was one that relied on the Reich principle (regardless of the fact that the appellant had never sought to expressly argue Reich and Marks J did not decide the matter on the basis of Reich), they had a better chance of success in the Court of Appeal than in the Commission in Court Session. 26 In the Court of Appeal proceedings, the appellant submitted that Reich was only authority for the proposition that conduct that is unfair and also in breach of a contract may, depending on the circumstances, enliven the jurisdiction conferred on the Commission by s 106. In Sydney Water Corporation Ltd & Anor v Industrial Relations Commission of NSW & Anor [2004] NSWCA 436 Mason P held that this was too narrow a reading of Reich: see [23]. 27 The Court of Appeal considered that Reich held that the Commission may find contractual unfairness in particular cases based on no more than conduct in breach of contract, even if it attracts adequate remedy under the general law. The Court of Appeal held that s 106 did not go that far; it treated the finding that the contract is unfair as the necessary pre-condition to the remedial options. It was held that Reich was wrongly decided; that the relief that s 106 contemplates is relief flowing from the contract found unfair on the evidence and not merely any unfair conduct, which may or may not demonstrate the unfairness of the contract under review. 28 Mason P stated (McColl JA agreeing): 35 I am unable to conceive how a contract allows or fails to prevent conduct that is in contravention or a fundamental breach thereof, whether or not that contract is unfair. To be contravening or repudiatory the conduct must be in defiance of the contract, exposing the party at fault to a range of adverse consequences under the general law. … 40 Section 106 is available to a party whether or not in breach of contract, and whether before or after termination has been effected. Walker makes this clear in the reference (at 149) to a contract being unfair because of the limited or discriminatory rights conferred in the particular case on an employee at the stage of his or her dismissal. (See also per Kirby P at 134 and Incitec v Industrial Court of New South Wales (1992) 45 IR 155 at 156-7 per Gleeson CJ.) But it simply does not follow that a contract of employment is unfair because or whenever it leaves the employee to remedies under the general law. There would need to be a finding that those remedies were relevantly "unfair" generally or in regard to the contract at hand before the Commission's remedial jurisdiction would be enlivened, assuming that such a finding is within the contemplation of the section. I doubt that it is, although it is unnecessary to resolve that matter finally. 29 Hodgson JA at [76] thought that the occurrence of unfair conduct in breach of contract could in some circumstances go towards supporting a finding that the contract was unfair, because it might help to demonstrate that the contract was itself unfair in lacking provisions that could have rendered such conduct less likely or in failing to provide adequate remedies for breach. 30 We note that the Court of Appeal, in determining what Reich stood for, did not have before it the decision of a Full Bench of the Commission in Court Session in Origin Energy Limited v Smith (2001) 111 IR 476 where the Full Bench observed at [19]-[20]: 19 We would add one final observation. It was undoubtedly open to her Honour to deal with the matter in the way she did; that is as a "conduct" case. It may be that she had little alternative to doing so in view of the way in which the respondent framed his case. Nevertheless applicants, in framing their proceedings, and judges in hearing and deciding them, should not overlook the consideration that s 106 is directed to the fairness, etc of contracts and arrangements and with the fairness, etc of their terms, either in themselves as to what they actually provide or fail to provide. There is nothing in the Full Bench judgment in Reich that should lead to any different approach. It would have been preferable for the case before her Honour to have been framed and dealt with in that way.

20 Although conduct of a party which renders a contract or arrangement unfair or otherwise actionable under s 106 of the Industrial Relations Act may well provide jurisdiction for relief under that provision, the primary focus of the exercise of the Court's jurisdiction should be, where relevant and available, the contract or arrangement and its respective terms or omitted terms as to the effect thereon of the impugned conduct. This approach will usually lead to orders (where orders are made) more certainly well-founded jurisdictionally and will be less likely to result in appeals which, whilst superficially thought to be available, upon examination on appeal are soon shown to lack substance. 31 Mason P considered whether the present appellant intended to rely on the Reich principle, as determined by his Honour, in this appeal. His Honour found this to be the case based to a significant degree, it would appear (see [56]-[58] of the Court of Appeal's judgment), on the appellant's submissions filed on 26 July 2004, particularly paragraphs 85-86, which were in the following terms: The evidence is clear that the level of performance of duties by the appellant was never questioned or at issue. The issues in the proceedings went to whether the conduct of the appellant complained of justified the summary termination of employment. In this regard, the respondents bore the onus of proof. For the reasons set out above, it is submitted that by operation of law, either as a matter of general principle or in the circumstances of this case, the respondents could not or did not discharge the onus upon them and that no justification for summary termination has been established. Consequently, the termination was unjustified, was unlawful and therefore the contract was or became relevantly unfair (emphasis is that of Mason P). 32 Mason P appears to have accepted that the substance of the appellant's case was that the (mis)conduct that was established on Mr Truelove's part did not justify summary dismissal and/or that the purported dismissal was otherwise in breach of the existing terms of the contract. 33 His Honour also held that the respondents had "established that some (probably much) of the submissions for the forthcoming appellate proceedings in the Commission would, if accepted, involve application of the Reich principle" (at [58]).

34 The consequence, therefore, was that the respondents were entitled to an appropriate remedy. However, as his Honour noted at [59]: In so holding, I have not presumed in any way that the Commission would regard itself free to depart from a legal proposition clearly established by this Court. Nor have I found it more probable than not that Reich would come to be invoked in the forthcoming appeal (cf Truelove v Sydney Water Corporation Ltd & Anor [2004] NSWIR Comm 298 at [10]). I have, however, assumed that the Commission would follow Reich unless persuaded to reconsider it in the absence of a positive ruling by this Court or the High Court that Reich was wrongly decided. 35 As a final issue, his Honour considered whether following Reich would involve jurisdictional error and whether in any event, it was appropriate for the Court to grant the remedy of prohibition. At [63] his Honour held: 63 It is however open to this Court to frame relief in such manner as to allow the Commission to exercise its jurisdiction to determine, subject to the grant of leave to appeal, whether or not the Contract was or became unfair for the purposes of s106. This, as stated in Stevenson (at 201 per Mason and Jacobs JJ) and in Mitchforce (at 246[169] per Handley JA), is the very jurisdictional question committed to the decision of the Commission. The claimants ultimately sought no more than relief directed at precluding the Commission from giving effect to the Reich principle, which the claimants submit involves either jurisdictional error or a significant misapplication of the Act. This Court has power to issue a partial prohibition (or prohibition quoad ) (see Ex parte Thomas; Re Arnold [1966] 2 NSWR 197, Re Media, Entertainment and Arts Alliance; Ex parte Arnel (1994) 179 CLR 84). Alternatively, declaratory or injunctive relief with similar effect could issue, in a proper case, without the need to find threatened error of a jurisdictional nature (see Connor v Sankey [1976] 2 NSWLR 570 at 595-3, 622-3, Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421). 36 Whilst it was his Honour's view that the application of Reich would involve jurisdictional error (at [67]), he declined to grant the remedy sought: see [68]. His Honour (Hodgson and McColl JJA agreeing) considered this a proper case for a declaration to issue and proposed the following order at [74]: Declare that s106 of the Industrial Relations Act 1996 does not permit the granting of relief unless the contract or arrangement otherwise falling within that section is or is found to have become an "unfair contract" as defined in s105 thereof. 37 Whilst Mason P considered that "probably much" of the submissions of the appellant in the appeal proceedings before the Commission in Court Session would involve the application of the Reich principle, it is apparent that his Honour felt there may also have been scope for the granting of relief on grounds other than on the basis of an application of Reich, otherwise there would have been no reason why prohibition would not have issued. 38 The circumspection in his Honour's approach is understandable given that, firstly, despite the deficiencies in the framing of the appellant's claim, no claim was pleaded as being based on a breach of contract e.g., wrongful dismissal, arising from the conduct of the respondents. Secondly, there was no mention by the appellant of Reich in any submissions at first instance which, on the Court of Appeal's view as to what the majority judgment in that case stood for, would have been the central authority relied upon by the appellant if he were arguing unfairness brought about by breach of contract by conduct. Thirdly, the appellant pleaded, amongst other things, that the contract "whilst it limited the Respondents right to terminate the Applicant's employment to circumstances which were 'not harsh, unjust or unreasonable', it did not contain adequate procedures to ensure both procedural and substantive fairness". Thus, the appellant laid the foundation for a claim that the contract was unfair because it did not contain adequate procedures to ensure the appellant was dealt with fairly in the investigation of the alleged misconduct. Fourthly, Marks J made no finding at first instance of a breach of the contract by virtue of the respondents' conduct, having found it unnecessary to do so because of the view his Honour took of the appellant's conduct. Fifthly, the appellant maintained that the substance of his case was that the contract permitted or failed to proscribe certain conduct by the respondents in relation to the investigation and determination of allegations of misconduct against the appellant. 39 It appears to us that Reich emerged as an issue in the proceedings because of a lack of precision in the framing of the appellant's claims in the amended summons. If the appellant's case was that the contract was unfair because it permitted the respondents to adopt an unfair investigative or disciplinary procedure (and this is clearly supported by the pleading that the contract did not contain adequate procedures to ensure both procedural and substantive fairness), the obvious remedy to be sought, if the court were to find unfairness, would have been a variation of the contract to include a fair procedure. This is what the appellant belatedly seeks to do by further amending the summons and we will come to that application shortly. The amended summons, however, relevantly sought only "An order declaring void in whole or in part or varying in whole or in part either from its commencement or from some other time the contract, arrangement or collateral arrangement ("the Contract") between the Applicant and the First and Second Respondents …" The nature of the variation sought was not identified. 40 Clause 19 of the contract between the appellant and the respondents gave the Managing Director the right to terminate the agreement "[A]t any time without prior notice in circumstances which are not harsh, unjust or unreasonable …" The appellant did submit, as Mason P pointed out, that the issue in the proceedings went to whether the conduct of the appellant complained of justified the summary termination; that the termination was unjustified; and, therefore, the contract was or became unfair. In the absence of precise pleadings, which would have, undoubtedly, kept the focus of the appellant's submissions on the deficiencies in the contract (i.e., absence of fair investigative/disciplinary procedure), the respondents were able to contend the appellant's case was, in effect, that the termination was "harsh, unjust or unreasonable" and that, therefore, the respondents had breached the contract. 41 As the Full Bench made plain in Origin Energy, applicants in framing their proceedings should not overlook the consideration that s 106 is directed to the fairness, etc., of contracts and arrangements and with the fairness, etc., of their terms, and that the primary focus should be the contract or arrangement and its respective terms or omitted terms as to the effect thereon of the impugned contract. THE APPELLANT'S NOTICE OF MOTION 42 On 11 February 2005, the appellant filed a motion seeking to amend its notice of appeal and its amended summons for relief. The proposed amendment to the amended summons was in the form of an additional claim for an order varying the appellant's contract of employment by the insertion of a new term providing for a comprehensive disciplinary process.

43 At the directions hearing on 17 February 2005, the President, granted leave to amend the notice of appeal and stood over the grant of leave to amend the amended summons for relief to be determined by the Full Bench. There were three reasons submitted by the appellant in his motion to amend the summons: first, to reflect better the manner in which the matter was conducted at first instance; second to reflect better the case being brought on appeal; and, third to take account of the decision in the Court of Appeal in Sydney Water Corporation v Industrial Relations Commission of NSW. The respondents opposed the amendment. 44 Because of the view we take in respect of leave to appeal, we do not propose to grant leave to further amend the amended summons for relief. That is, there is no utility in granting the amendment, even if it were appropriate to do so (a matter about which we have serious doubts) because, as we have already indicated, we intend to grant leave to appeal only because of the history of the litigation. LEAVE TO APPEAL

45 The requisite test for leave to appeal is found in s 188(2) of the Industrial Relations Act 1996, which states that the Full Bench is to grant leave to appeal if, in its opinion, the matter is of such importance that, in the public interest, leave should be granted. Leave is not a mere formality and is to be applied judicially by the Full Bench upon a proper case being made out by the appellant: Perrott v Xcellenet Australia Ltd (1998) 84 IR 255 at 265-266. A matter of importance may include substantial questions of law and principle, or something of importance for the jurisprudence of the Commission beyond the inter partes litigation: see Knowles v The Anglican Property Trust (No. 2) (1999) 95 IR 380; Eagle Boys Dial-A-Pizza Australia Pty Ltd v Clifford (2003) 125 IR 35 at [23]. Further, significant weight must be given to the decision of the trial judge when approaching findings of fact or the exercise of a discretion: see Port Macquarie Golf Club Limited v Stead (1996) 64 IR 53 at 59, Westfield Holdings v Adams (2001) 114 IR 241 at [73]. Appellant's submissions on leave

46 The appellant submitted that whilst Marks J made a number of findings that together led to the conclusion that the conduct of the appellant constituted a fundamental breach of his duty of fidelity to his employer, those findings did not constitute a fundamental breach of any duty so as to justify summary termination of employment. 47 It was submitted that the present situation was analogous to that in Humphries v Cootamundra Ex-Services and Citizens Memorial Club (2003) 128 IR 37. In Humphries the Full Bench held at [53] that if the issue was whether the findings of fact and the conclusions able to be reasonably drawn from them in relation to the alleged serious misconduct were wrong: [T]here emerges a significant basis for the grant of leave in order to ensure the proper administration of justice. 48 Humphries also affirmed the "general industrial principle" elucidated in re Crown Employees (Teachers, Locality Allowance, etc) Award [1981] AR (NSW) 1017 that "the interests of employees are an important aspect of public interest." The appellant submitted that in the present case, the "interest" aspect was enhanced by the fact of the senior position held by the appellant in a State owned corporation. 49 The appellant also submitted that pursuant to Humphries at [54], there was a general question raised by this appeal that went to the question of the determination of s 106 applications where the approach of an employer prior to termination was procedurally unfair. 50 It was submitted that the investigating and reporting of the allegations were flawed and unfair as the material supporting the allegations was never independently verified by the Disciplinary Committee, and the appellant was never given an opportunity to respond to those allegations. 51 Further, the appellant submitted that there was evidence that the purported decision maker, Mr Broad (the then Managing Director of the first respondent), was biased against the appellant before the investigation took place. Importantly, it was submitted, Mr Broad was not called to give evidence before the Court and despite stating the contrary (at [16] of the decision), his Honour never considered the significance of this fact. 52 Counsel for the appellant submitted that pursuant to the principle in Humphries at 64 the obligation upon parties to afford procedural fairness was not a hollow or technical requirement, and was significant in determining whether there has been any relevant unfairness. Further, this requirement was of particular significance where the unfairness complained of derived from a breach of a legal obligation: see Humphries at [119]; Gow v Cronulla Sutherland Leagues Club Ltd (2002) 119 IR 122 at [319]; Antonakopoulos v State Bank of NSW (1999) 91 IR 385 at 390; and, Rich River Golf Club v Power [1995] NSWIRComm 75. 53 The appellant submitted that pursuant to cl 19.1 of the appellant's contract of employment, only the Managing Director of the employer (here the second respondent) could terminate the appellant's employment. That was not the case as the decision to terminate the appellant's employment was made by the Managing Director of the first respondent. Therefore, it was submitted that decision was unlawful, and in the circumstances, relevantly unfair. However, the appellant conceded that whilst this precise point was not made at the trial, the evidence was before the Court. Respondents' submission on leave 54 The respondents opposed the grant of leave on several bases. First, it was contended that the appellant's case on appeal was different to its case at first instance in at least one respect, namely the lawfulness of termination by the Managing Director of the first, rather than second respondent. 55 Secondly, it was submitted that the ultimate conclusion reached by Marks J was reasonable on the evidence. 56 Thirdly, the appeal did not raise substantial and important considerations, or issues of principle or law, or matters having wide implications for either the jurisdiction of the Commission or the community in general. 57 Further, it was submitted that the appellant's submissions on leave also summarised the submissions in the appeal itself on the matter of procedural fairness, and that the law in this area was well settled. The question of procedural fairness was of no consequence at first instance, as it did not affect the ultimate decision of Marks J. The evidence of the appellant's conduct adduced at first instance demonstrated the employer's entitlement to dismiss the appellant summarily. Furthermore, the rectification of any denial of procedural fairness would not have altered that evidence or its legal consequences. 58 The respondents also contended that as the substance of the appellant's case before Marks J was not unfairness of contract but conduct of the respondents that was unfair because it was in breach of the contract, the true nature of the appellant's case precluded a finding that the contract itself was unfair, thereby denying the Commission power to grant relief: Sydney Water Corporation v Industrial Relations Commission of NSW. CONSIDERATION AS TO LEAVE TO APPEAL AND APPEAL 59 We have considered each aspect of the appellant's complaints regarding the judgment at first instance as set out in the grounds of appeal, namely, that Marks J: (a) failed to apply the correct legal test as to the burden of proof in a case where the employer asserts conduct on the part of an employee justifying termination of the employment relationship; (b) alternatively, incorrectly determined that the evidence before the court enabled the respondents to discharge the onus laying upon them; (c) failed to apply the correct legal test as to conduct on the part of an employee that would justify summary termination of the employment relationship; (d) alternatively, wrongly characterised the conduct of the appellant as constituting fundamental breaches of the duty of fidelity owed by an employee to an employer; (e) reached conclusions regarding the conduct of the appellant that were not supported by the evidence or reasonable on the evidence before the court; (f) failed to have proper or full regard to the effect of the legal and procedural flaws in the investigative and determinative process to which the appellant was subject; (g) failed to properly evaluate and/or characterise the evidence before the court in that the omissions identified in the contract were such as to make the contract relevantly unfair within the meaning of s 105 of the Act; (h) failed to have proper or full regard to the separate legal identity and governance of the second respondent; (i) failed to have proper or full regard to the appellant's record of service; (j) failed to have proper or full regard to the effect of the termination upon the appellant in all the circumstances; and (k) failed to exercise jurisdiction in determining the matter properly. 60 In particular, we have considered closely the issues of procedural fairness, and the nature of the appellant's conduct and his Honour's treatment of those issues. Marks J found that "[v]iewed objectively the termination of the applicant's employment by reason of his conduct did not in all the circumstances constitute relevant unfairness" and that the alleged failures to follow appropriate processes during the investigative and determinative aspects of the respondents' processes could have no effect on this conclusion. His Honour further found that "the second respondent's reaction to them [the appellant's breaches] cannot be characterised as constituting unfair conduct or as rendering the contract of employment in some way as being unfair."

61 We consider that his Honour's findings of fact were open to him and that there was no error in the exercise of his Honour's discretion. Further, given the way we have approached the issues on appeal, the appeal raises no issue of general importance. But for the history of the litigation between the parties and the particular need for finality in the light of that history we would have declined leave to appeal. However, in the circumstances, the more appropriate course is to grant leave to appeal and dismiss the appeal for the reasons we have set out. COSTS

62 Although the respondents have succeeded in the appeal the proceedings have been extraordinarily complicated by the late challenge in the Court of Appeal to the appeal proceedings in this jurisdiction. Although it was open to the respondents (on the approach they have taken) to mount that challenge at any stage of the proceedings before Marks J, or in the early stages of the appeal processes of this Court (it being, of course, a matter for the Court as to the appropriate stage at which such an application should be heard and determined), the Court of Appeal Summons was not filed until the appeal here had been fixed for hearing and the parties had filed their submissions or should have filed them. Those circumstances inevitably led to additional proceedings before the Full bench of this Court and the adjournment of the original appeal fixture on 14 October 2004. The additional costs incurred should, we conclude, be matters for which the respondents should be liable. The overall circumstances of the appeal proceedings in this Court, however, incline us to the view that a global approach to costs is appropriate. There should accordingly be no order for costs in these proceedings.

63 We make the following orders: 1 Leave to appeal is granted. 2 The appeal is dismissed. 3 There shall be no order as to costs.

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