Wong v State Street Global Advisors Australia Limited & Anor

SECOND RESPONDENT: State Street Corporation Inc FILE NUMBER: IRC 4333 of 2001 CORAM: Schmidt J Unfair contract - financial services industry - jurisdiction - who terminated the employment - restructure - conduct - repudiation - redundancy - trust and conduct in the context of commercial sensitivity - notice period - pro rata bonus claim and bonus during notice period - shares and options - annual leave - long service leave - mitigation - unfairness found - orders made - interest and costs

Evidence - bolster evidence - issue of credit - evidence allowed CATCHWORDS : Evidence - admissibility of taped evidence - breach of Listening Devices Act 1984 - recording was reasonable - breach not found

Annual Holidays Act 1944 LEGISLATION CITED : Employment Protection Act 1982 Industrial Relations Act 1996 Listening Devices Act 1984 Adams v Westfield Holdings Ltd [2000] NSWIRComm 112 Brent v Bastian (2003) 124 IR 223 Brookton Holdings Pty Ltd No V & Others v Kara Kar Holdings Pty Ltd & Anor (1994) 57 IR 288 Brown v Rezitis (1970) 127 CLR 157 Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 David Jones Ltd v Cukeric (1997) 78 IR 430 Diver v Object Consulting Pty Ltd & Anor [2003] NSWIRComm 202 Gala v State Bank of New South Wales Ltd t/a Colonial State Bank (No 2) (1998) 84 IR 216 CASES CITED : Gillies & Ors v Health Administration Corporation and Anor [2003] NSWIRComm 243 Hartley v MGICA Pty Limited (2001) 108 IR 323 Jones v Department or Energy and Minerals (1995) 60 IR 304 Moray Vincent v Merryl Lynch Australia Pty Ltd (2000) NSWIRComm 160 Palmer v R (1998) 193 CLR 1 Port Macquarie Golf Club Limited v Stead & Anor (1995) 64 IR 53 Re Redundancy Awards (1994) 53 IR 419 Scanruby Pty Ltd v Caltex Petroleum Pty Ltd and Anor [2000] NSWIRComm 89 Cheryl-Anne Duffy v Lake Macquarie City Council (IRC 99/3682, unreported, 9 November 2000) HEARING DATES: 06/07/2004; 06/08/2004; 06/09/2004; 06/10/2004; 06/11/2004; 06/15/2004; 06/16/2004; 06/17/2004 DATE OF JUDGMENT: 07/28/2004

APPLICANT: Mr RM Goot AM SC with Mr SJ Stanton of counsel SOLICITORS: Aitken McLachlan & Thorpe

LEGAL REPRESENTATIVES: RESPONDENT: Mr PM Hall QC with Mr GKJ Rich of counsel SOLICITORS: Baker & McKenzie

JUDGMENT: - 83 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J

DAVID WONG v STATE STREET GLOBAL ADVISORS AUSTRALIA LTD AND ANOTHER Application under s106 of the Industrial Relations Act 1996 JUDGMENT

1 This application brought under s106 of the Industrial Relations Act 1996 ('the Act'), concerned the applicant's employment contract and the arrangement under which he worked for the respondents in the financial services industry. The first respondent was a subsidiary of the second respondent. The applicant received part of his remuneration benefits from the second respondent. The application arose out of the way the applicant was treated in his employment and what occurred when it was brought to an end in 2001.

2 The applicant was first employed by the first respondent in 1993, as a Senior Portfolio Manager. The first respondent's business was to manage superannuation funds on behalf of various other entities and governments. The applicant's case was that he was then responsible for the investment portfolio of approximately $500 million funds under management. The first respondent then had about six clients. In 1995, the applicant was appointed Director Investments, a position which he held until his employment came to an end in 2001. At that time he was responsible for $30 billion funds under management and a staff of 24, with six direct reports. The first respondent then had about 200 clients.

3 There was some dispute about the details of that evidence, which it is unnecessary to resolve. Indeed, the respondents denied various aspects of the applicant's case, including the detail of his duties and responsibilities and his remuneration from time to time. I find it unnecessary to deal with many of these controversies, given the respondents' own evidence about those matters.

4 Between 1994 and 2000, the applicant received bonuses ranging from 77.5% to 129.9% of his annual salary, an average of 119.2%. The bonuses were paid in accordance with written policies, which provided the bonuses were discretionary; had regard to company and individual performance and expressly provided that in the event of termination of employment, other than for reasons of death or disability, no bonus would be paid. No provision was made for redundancy.

5 In 1997, the applicant also participated in the '1997 Equity Incentive Plan', devised and administered by the second respondent, for employees of its global subsidiaries, including the first respondent. The plan dealt with the grant of options and shares, with staggered vesting periods. The Plan was later revised. On the termination of his employment, the applicant forfeited options which he had been granted under this scheme in 1998, 1999 and 2000, which were then unvested. He had also been granted shares in 1999 and 2000. The 2000 shares flowed from the second respondent's '2000 Equity Plan'. These shares vested over four years, at the rate of 25% each year, on the anniversary of the grant.

6 In 2001, there was a capital reconstruction of the second respondent's stock, which doubled the number of shares and options which the applicant held at that time and adjusted their grant prices. On termination, the applicant also lost various unvested shares. This scheme also provided that on termination, employees lost such rights, other than in the case of death or disability. There was a discretion to review an employee's position, but it was not one exercised in the applicant's favour by the respondents.

7 The applicant's case was that on 3 May 2001 he was removed from his position and replaced, as a result, he was told of concerns about his performance. It was the respondents' case on the pleadings, that such concerns had first been raised with him in March 2000, but there was no change. This, the applicant denied. It was his case that the concerns expressed in these proceedings by Mr Lazberger, the Managing Director ('MD') of the first respondent, about his performance were overstated, although he did not deny that questions of his people management and relationship with his team members had been raised with him from time to time.

8 It was the respondents' case that in late 2000, it became apparent that the applicant was an 'at risk' employee. He was stale and discussed with both Mr Lazberger and Mr Serhant, a director of the second respondent, his desire to be less involved in day to day management, to spend more time with his family, to take on more responsibilities and to increase his international profile. The applicant denied much of this, but it was the case that after this time, he began considering approaches from head-hunters. It was also the respondents' case that after the end of 2000, they began developing a new role for the applicant. This was first floated with the applicant by Mr Lazberger in April and was the subject of various unsuccessful discussions and negotiations. The applicant's employment came to an end and he actively started seeking other employment in May 2001. In June, he was approached by NRMA, accepted an offer in July and took up new employment with it in August.

9 The evidence showed that the applicant had ambitions to take over from Mr Lazberger as Managing Director. In 2000, Mr Lazberger told him that he had no overseas support for this position. A more senior role in his area of expertise, investment, was then explored unsuccessfully with the applicant. There was resistance from the second respondent to this development, as it transpired. The respondents soon became concerned that the applicant would leave.

10 It was the applicant's case that his employment was brought to an end by the first respondent on 25 May, either by way of repudiation and/or redundancy. The first respondent denied having brought the employment to an end. Its case was that the applicant had rather ceased attending work.

11 On 11 June, the first respondent paid the applicant some of his annual leave entitlements. No other payments were made to him.

12 The orders of variation sought were: 1. An order varying in whole or in part either ab initio or from some other time (except to the extent to which moneys have been paid to the Applicant) the Contract made between the Applicant, the First Respondent, and the Second Respondent under which the Applicant performed work in the financial services industry directly for the First Respondent, and indirectly for the Second Respondent ("Contract"). 2. Further, an order varying the Contract, from its commencement or from some other time by incorporating within it: (a) the 1997 Equity Incentive Plan; (b) the 2000 Equity Incentive Plan, provided that paragraph (g) on page 7 thereof shall be excluded. 3. Further, and in addition, an order varying the Contract as varied pursuant to A2 above, so as to incorporate terms to the following effect: (a) On termination of the Contract for any reason as set out in 3(c) below: (i) the First Respondent will give to the Applicant 12 months' notice of termination of the contract of employment ('Notice Period'), or make payment in lieu of the Notice Period; (ii) the First Respondent will pay to the Applicant a pro rata bonus up to the time of termination calculated on the basis of a full year's bonus of 70% of the Applicant's base salary at termination; (iii) the First Respondent will pay to the Applicant a bonus in respect of the Notice Period in the amount of 70% of the Applicant's base salary at termination; (iv) notwithstanding any provision in the 1997 Equity Incentive Plan or the 2000 Equity Incentive Plan to the contrary, the First Respondent, or alternatively the Second Respondent, will pay to the Applicant the value of all shares and options that would have vested or become exercisable during the Notice Period, calculated by applying the share price and exchange rate as at such date or dates; (v) the First Respondent will pay to the Applicant, the Applicant's annual leave and long service leave entitlement, accrued as at the expiration of the Notice Period and calculated in the case of annual leave by reference to 3(b) below and in the case of long service leave on the Applicant's base salary; (b) The payments referred to in paragraph 3(a)(i) will be calculated by reference to the Applicant's total salary package at termination; (c) For the purposes of the Contract: (i) the applicant's position being made redundant; or (ii) any substantial alteration to the terms of the Contract including remuneration and/or duties to be performed or persons or positions to which the Applicant reports or persons or positions reporting to the Applicant, will unless accepted in writing by the Applicant, constitute a termination of the Contract by the First Respondent. 4. An order that the First Respondent pay the Applicant the sums of money set out in Section D paragraphs 1 - 5, below. 5. An order that the Second Respondent or alternatively the First Respondent pay the Applicant the value of the shares and options in D 6 below. 6. An order that the First Respondent and/or the Second Respondent pay the Applicant interest at such a rate as the Commission considers appropriate on the amount or amounts awarded to the Applicant from such day as the Commission considers appropriate. 7. An order that the Respondents pay the Applicant's costs of these proceedings. 8. Such further or other orders as the Commission considers appropriate or just in the circumstances.

13 The money orders sought were: 1. Pro Rata Bonus (particulars of which have been supplied) $98,300

Notice Period (particulars of which have been supplied) $396,143

Bonus during Notice Period (particulars of which have been supplied) $236,000

Annual Leave (particulars of which have been supplied) $30,389

Long service leave (particulars of which have been supplied) $51,900

Shares and Options (particulars of which have been supplied) $265,717

14 The money claims were further refined during the course of the hearing. The issues which the parties agreed required the Court's determination were: 1. What were the terms of the applicant's contract of employment and/or any other arrangement pursuant to which he performed work.

Alternatively, whether the respondents: (a) repudiated the contract of employment with the applicant;

(b) alternatively constructively dismissed the applicant;

(c) alternatively made the applicant's position redundant.

If the applicant resigned, did the contract of employment nevertheless operate unfairly in relation to: (a) non-payment of a bonus from January 2001 until May 2001; and

(b) the denial to the applicant of participation in the Equity 2000 Plan from January 2001 until May 2001; and

(c) the forfeiture of 2,827 unvested shares, and 1,413 unvested options, and the loss of opportunity in holding for ten years 776 vested options which the applicant exercised in August 2001 prior to the expiration of three months from the date of termination of employment, in order to avoid forfeiture pursuant to the terms of the 1997 Equity Incentive Plan.

If the answer to 3 above is "repudiation" or "constructive dismissal" or "redundancy", did the contract of employment operate unfairly in relation to: (a) non-payment of any amount in lieu of noticed or as damages; or

Did the applicant request a change in position or indicate he was dissatisfied with his position of Director, Investments?

Was the alternate position offered to the applicant by the respondents (namely, Principal and Vice-Chairman) a reasonably comparable position to which the applicant was suited by his knowledge and experience?

Did the applicant act reasonably in: (a) declining to accept the alternate position of Principal and Vice Chairman;

(b) his dealings with the respondent concerning the alternate position and the continuation of his employment generally during May 2001? 9. Having agreed to all the circumstances in which the applicant's employment with the respondent came to an end, did the contract or arrangement pursuant to which the applicant performed work operate unfairly or unconscionably in the relevant sense?

10. If the contract operated unfairly in relation to non-payment of a bonus, should the respondent(s) be required to compensate the applicant in respect of that bonus and (if so) in what amount?

11 If the contract operated unfairly in denying to the applicant participation in the Equity 2000 Plan from January 2001 until May 2001, should the respondent(s) be required to compensate the applicant in respect of that non-participation and (if so) in what amount?

12. In relation to the issues in paragraph 4(c) above, if the contract operated unfairly in relation to the matters therein stated: (a) who is the correct respondent in respect of such matters; and

(b) should the terms of the Equity 2000 Plan be amended so that it operates fairly as regards to the applicant and (if so) how;

(c) if as a consequence of amending the terms of the 1997 Equity Incentive Plan so that it operated fairly as regards to the applicant, the applicant has lost the opportunity to hold vested options for a longer period, or has lost the opportunity to receive the forfeited unvested shares and forfeited unvested options entirely, should the respondent(s) be required to compensate the applicant in respect of that lost opportunity and (if so) in what amount? 13. In relation to the issue in 5(a) above, if the contract operated unfairly in relation to failure to make a payment in lieu of notice or as damages;

(a) what is the correct period over which such payment should be calculated; and

(b) what elements should be included in determining the proper payment for the fair notice period; and

(c) what is the amount (if any) that the respondent must pay to the applicant as damages or as payment in lieu of notice.

14. What moneys should be deducted from any award (if applicable) by way of mitigation for moneys earnt by the applicant since the cessation of his employment with the respondent?

15. What is the significance generally, and/or in law, of the applicant's conduct in recording telephone conversations with employees of the respondents without their consent?

16. Is the applicant compellable to give evidence in the absence of a determination as to entitlement to a certificate under section 128 of the Evidence Act in relation to items 226 and 227 of the tender bundle.

17. What is the correct amount of interest to which the applicant is entitled (if any) having regard to the determination of the issues set out above.

15 The applicant gave evidence and the respondents called evidence from Mr Lazberger, Mr Fleites, the first respondent's former MD, Mr Serhant, to whom Mr Lazberger reported and Mr York, the first respondent's Director of Human Resources. Numerous documents were tendered, including the respondents' redundancy and performance policies.

16 The applicant's evidence was that he had an engineering background, before undertaking further study and then taking up employment with Citibank, as a risk management analyst and subsequently with Westpac Investment Management Limited ('Westpac'), as the Manager, Equities Technology. There he developed a new investment process which used quantitative techniques in creating and investing portfolios. The first respondent marketed its services to Westpac and the applicant was subsequently approached by a recruiter, acting for the first respondent.

17 After discussions with Mr Fleites, and Mr Lazberger, who had recently been employed to take over from Mr Fleites, the applicant accepted employment as the Senior Portfolio Manager, reporting to the MD. The first respondent was then in its infancy in Australia. The applicant accepted a base remuneration package of $130,000.

18 It was the applicant's case on the pleadings, that certain representations had been made to him, prior to the commencement of his employment, that he would receive an annual bonus between 50% and 150% of his annual salary. The respondents denied this. The evidence of Mr Fleites was that it was usual in this industry for remuneration to include a bonus element and that for some employees, this comprised a significant part of their remuneration. He could not remember the detail of his conversation with the applicant in 1993, but accepted that bonus was likely to have been discussed. He disagreed that he would have represented to the applicant that he would receive bonuses of up to 150%, because at the time the respondents were not paying bonuses of over 100% of salary.

19 Mr Lazberger also denied that such representations had been made, although he was not present for the whole of the interview.

20 There was no reference in the applicant's employment letter to the expected amount of any bonus. Others employed after the applicant had reference made in their appointment letters, to various ranges of 'usual bonuses', which they might expect.

21 When first employed, the applicant undertook training in Boston at the second respondent's head office. He then was involved in planning the strategy which would be pursued to grow the business in Australia; how the first respondent would manage Australian shares and existing client portfolios and how it would go about attracting new clients. In November 1993, the applicant was appointed a director of the first respondent.

22 The applicant's development work involved the application of quantitative techniques to funds management. A different model to that being used in Boston, was required for the management of Australian shares. The applicant and other staff who reported to him, developed this model in 1994 and 1995. It became known as the 'Active Aussie strategy' and required an extensive database of Australian listed companies, which was also developed. There was also a long testing process conducted. In July 1995, the model was used to attract a new client, which had $20 million funds under management. Over time this account grew to some $90 million. By the time of the termination of his employment, this model was generating some $4 million annual revenue for the first respondent. Again, there was some dispute about those figures which, is unnecessary to resolve.

23 Mr Lazberger's evidence was that when the applicant commenced his employment, the second respondent was one of the world's largest money managers globally, managing $US118 billion. In 2002, this had grown to $US807 billion. When the applicant commenced, the first respondent had six clients and five employees and was managing $A400 million. The applicant was only managing one employee.

24 The applicant's evidence was that the Active Aussie strategy was also later used by the second respondent in the US and Japan. The applicant also worked to improve a passive investment strategy mode, earlier designed by Mr Fleites.

25 The applicant was undoubtedly successful in his work. This was reflected in improvements in his remuneration. Over time, his base package increased from $130,000 to $337,640 in May 2001. He also was paid annual bonuses, which grew from $100,810 in 1995 to $350,800 in February 2001. As the first respondent's business grew, the applicant was promoted and was also appointed the Asia Pacific Representative of the respondents' Global Investment committee, which developed investment policies and approved global investment strategies. The applicant also established a quantitative research area, called the Advanced Research Centre, to provide infrastructure support for the first respondent's portfolio management group and to develop new products.

26 In 1996, the applicant received his first shares in the second respondent, with the allocation to him, at no cost, of 1,000 restricted special units of stock. These shares could not be converted to cash for a three year period and had other vesting requirements, including achievement of performance goals, the details of which were not, however, provided at that time. The applicant was also given one unit in a long term incentive plan, which was later discontinued, but gave the applicant some $58,000.

27 In 1996, the second respondent adopted a discretionary Equity Incentive Plan, approved by shareholders in 1997, which was later amended to increase the number of shares available to employees. The plan was designed to enhance the respondents' ability to attract and retain successful staff.

28 In 1997, the applicant was granted an option to purchase 700 shares at $US52.4375, with deferred vesting to June 2000. The applicant exercised all options. In 1998, he received 700 options at $US68.3125 per share again, with delayed vesting. The final tranche of these options was due to vest in June 2001. The opportunity to exercise those options was lost by the termination of the applicant's employment in May 2001. The other options were exercised.

29 In 1999, the applicant was offered 2,400 shares of deferred stock, at no cost to him, with vesting over three and a half years. 800 of those shares later vested. The applicant lost 1,600 shares on the termination of his employment. The applicant estimated that in April 2002, they had a value of some $A328,000.

30 The applicant also received the Chairman's Winner's circle award for his contribution in attracting a client which brought $24 billion funds to manage. In 1999, the applicant was also granted 926 options to buy common shares in the second respondent, at $81.0313 per share, again with delayed vesting. The termination of his employment led to the loss of 617 options, due to vest in June 2001 and 2002.

31 By 2000, the first respondent's staff had grown to 45 or 50. The applicant continued to report to Mr Lazberger. The heads of the first respondent's Structured Product Group, Active Equities Group, Advanced Research Centre, Tactical Asset Allocation and Currency Management, Bonds and Cash Management and Low Risk Alpha Group all reported to the applicant. The Portfolio Management area of the business for which he was responsible generated the revenue of the business, with the two other areas, Business Development and Operations, being support areas. The heads of these areas also reported to Mr Lazberger.

32 In 2000, the applicant was again offered a Deferred Stock Agreement for 700 shares of deferred stock, at no cost. He accepted the offer, but also lost 470 of these shares on termination, with an estimate value of $96,300. He was also granted 513 options in the second respondent, at $106.938 per share, with delayed vesting. All of these options were also lost with the termination of his employment.

33 The applicant and Mr Lazberger were the only two employees in 2000 to be selected for participation in the Equity 2000 programme. This was a part of the development of new compensation arrangements, involving a number of bands. The highest was Band 0, with some 10 people participating worldwide, the next was Band 1, with 2 people participating and Band 2 with 75 people, including the applicant and Mr Lazberger (the only two employees at this level in Australia). Under this arrangement the applicant was granted $US100,000 worth of shares, in September 2000. The applicant, in fact, received 757 shares valued at $A155,200.

34 Despite these significant successes and rewards, Mr Lazberger gave extensive evidence as to concerns which he had over time, with the applicant's 'performance in his position', relating to management and skills; the applicant's failure to find a potential successor; his client relationship and presentation skills, which, in his view, had not developed to a consistent standard and his failure to properly utilise the resources of the Advanced Research Centre. It is convenient to observe at this point that I found much of this evidence implausible, particularly when considered in the light of the increasing salary, bonuses and shares paid to the applicant over the course of his employment, with Mr Lazberger's support throughout. This culminated with the rewards the applicant received in 2001, after positive conclusions reached by Mr Lazberger in the applicant's only formal performance appraisal in late 2000. The efforts later made to retain the applicant in the respondents' employ in 2001, when, ostensibly, he was offered a promotion, were also quite inconsistent with the real existence of such concerns.

35 It is unnecessary to set out all of the evidence which led me to this conclusion. The evidence in relation to the appointment of a potential successor explains why. The evidence showed that the first respondent's business grew very significantly over the course of the applicant's employment. On the applicant's evidence, the question of a 2IC, rather than a successor, being found for him was the subject of discussion from time to time by he and Mr Lazberger, in the context of the applicant himself being appointed to a more senior position. On Mr Lazberger's evidence the matter of the applicant's successor was discussed often with the applicant and that he told the applicant 'you need to start grooming a successor or you will be locked into your current position'. The applicant agreed that a 2IC had been discussed but not pursued prior to the 2000 performance review. At one point, budget constraints had intervened.

36 In mid-2000, Mr Stephen Nash was appointed as senior Portfolio Manager Fixed Interest. It was common ground that the applicant discussed with Mr Lazberger, the possibility of Mr Nash being appointed his 2IC. The applicant believed Mr Lazberger to be dismissive of the possibility. In cross examination Mr Lazberger disagreed. In his view, such an appointment was possible, given Mr Nash's talents, but would require time to assess.

37 At the applicant's performance review in late 2000, the applicant was assessed by Mr Lazberger as a level 4, with above standard performance in this area. The observation made was that: "David can enhance his contribution to the company by anointing a 2IC in 2001." This was not elevated to an "identified goal" in the performance review, nevertheless on his evidence, Mr Lazberger regarded it as such.

38 In early March 2001, the applicant raised the matter again with Mr Lazberger in writing, in the context of another appointment he was then making. Mr Lazberger said nothing to dissuade the applicant from pursing this 'goal' of finding his 2IC.

39 Despite all of this, on his own evidence, earlier in the year Mr Lazberger had already concluded that the applicant had failed to satisfy the goal of finding a successor, and had decided to take an entirely different course, by creating a new position of Chief Investment Officer ('CIO'), to take over the work of the applicant's Director of Investments position and to recruit a Mr Crafter, then employed at Westpac, to fill that position. He did not inform the applicant of these developments, although they were a matter of detailed discussion with Mr Serhant and other senior executives of the second respondent. It was not until after Mr Crafter had been recruited, that Mr Lazberger informed the applicant of what had been decided. In May he told the applicant that Mr Crafter had been recruited; that he would not become his successor or 21C; that he would not report to the applicant, but rather, the applicant would report, in part to Mr Crafter and that the applicant would be removed from his Director of Investment position.

40 I will return to what then transpired, but note at this point, that the evidence did not establish that the applicant had failed to identify a successor, as he was required to do in 2001 or earlier, as was Mr Lazberger's evidence. To the contrary, it showed that the respondents had acted to ensure that their interests were protected, in the event that the applicant left, as they began to fear he would in late 2000. The applicant had informed the respondents that if Mr Reilly, (who reported to him), was appointed to the position of MD, in which he was interested, he would have difficulties. Given his job with the first respondent, this would have put the respondents in a difficult position with their clients. The evidence showed that the respondents' moved to deal with it. Having done so, with the creation of the CIO position and Mr Crafter's appointment, they also sought to retain the applicant's services, by offering him another position, which they thought he might find attractive. He did not. As it transpired, when Mr Lazberger was himself later promoted to a position outside Australia, Mr Reilly was appointed the first respondent's MD.

41 On all of the evidence, I was well satisfied that the applicant had not failed to recruit a successor or 2IC, as was Mr Lazberger's evidence. That was something he was to achieve in 2001. He was working to achieve it. It was Mr Lazberger who changed his mind. On Mr Serhant's evidence, that was because the respondents had reached the view in November 2000, that the applicant was an 'at risk' employee. If he departed, the respondents' business would be detrimentally affected. Accordingly, they moved to preclude that possibility.

42 The applicant was cross examined about his attitude at that time. He agreed that it was in November 2000 that he began responding to approaches which he received from head-hunters. He denied that he was seriously considering leaving. There was no evidence that he was either offered any other job, or considered resigning before May 2001. From his point of view, of course, there was much at stake, given his outstanding share and option entitlements, which he understood he would lose, if he resigned. I entirely accepted the applicant's evidence about those matters.

43 There were other reasons why I concluded that in case of conflict, the applicant's evidence had to be preferred over that of Mr Lazberger. Again, one example will suffice to explain why - the evidence of Mr Lazberger's concerns about staff turnover.

44 It is convenient to observe at this point that the applicant agreed quite freely in cross examination, that questions of his management style were the subject of discussion between he and Mr Lazberger from time to time. Suggestions for improvement were made and he sought to address them. He accepted that Mr Lazberger's concerns were genuinely held, even though he disputed the detail of much of Mr Lazberger's evidence and disagreed entirely that his performance was inadequate.

45 Staff turnover was said by Mr Lazberger to evidence the applicant's 'ineffective management skills'. The applicant gave detailed evidence in reply about these matters, much of which he was not cross examined on, although as I noted, he readily conceded in cross examination that there were performance issues which Mr Lazberger raised with him from time to time and he understood him to have sincerely held these views, even when the applicant disagreed with them.

46 This evidence needs, however, to be seen in the light of the undoubted growth achieved in the first respondent's investment business and the success that the applicant achieved in the course of his employment. Over the eight years that the applicant was employed, staff numbers grew very significantly from the five employed in 1993. The applicant was initially responsible for one employee. This grew to 24, with the numbers increasing from 13 in 1999. Eventually, six senior positions reported to the applicant. On Mr Lazberger's evidence, over the whole of the applicant's employment there was staff turnover of nine people in total, so far as it concerned the applicant.

47 In his evidence, Mr Lazberger sought to portray this turnover as a failing on the applicant's part, by attributing to him responsibility even for the resignation of a secretary in 1993, three months after the applicant's employment commenced, who, on the applicant's evidence, had been recruited by Mr Fleites and had not performed any work for him, because he had none to give her. The applicant was not cross examined about this, or about the resignation of another employee recruited in 2001, when the respondents acquired a business from MLC, who did not report directly to the applicant and remained in the first respondent's employment for only 10 days.

48 Mr Lazberger's evidence was such, that I was well satisfied that he sought to put a gloss on what had occurred in relation to these matters, in an endeavour to paint the applicant in a worse light in these proceedings, than strict adherence to the truth would have warranted. This conclusion was confirmed by the case later advanced in final submissions, where it was put that Mr Lazberger was not so much concerned about the applicant's performance, but rather with concerns about his management style. This led the applicant to complain that the submission involved a recasting of the respondents' case, a complaint with which I had some sympathy, given that the respondents opened their case by reference to performance issues. I was left to wonder why in that context, so much time was spent cross examining the applicant as to various alleged shortcomings in his performance. Perhaps the explanation lay in Mr York's evidence in cross examination, that the respondents' performance policy had been in operation during the applicant's employment, rather than having been introduced subsequently, as the applicant had earlier understood. This was, undoubtedly, a policy never implemented by Mr Lazberger, so far as the applicant was concerned. Mr York's evidence suggested that Mr Lazberger had taken a number of steps inconsistent with that policy, so far as the applicant was concerned, if, in truth, he had real concerns about the applicant's performance.

49 In relation to staff turnover, Mr Lazberger's evidence cast responsibility upon the applicant for the departure of those who left to take up employment elsewhere, when it advanced their careers and even that of employees who left after performance issues had been raised with them by the first respondent. This included a research assistant, who was dismissed for inadequate performance, in a process involving Mr York. Another employee, about whose departure Mr Lazberger was himself apparently happy, was also relied upon as an example of the applicant's deficiencies. Even the one employee who seriously suggested to Mr Lazberger in a letter that he had left, in part, because of his difficulties in working with the applicant, was an employee whose performance was the subject of discussion between the applicant and Mr Lazberger, before and after his departure. Mr Lazberger never showed the letter in question to the applicant and did not dispute the applicant's version of their conversation about the resignation at the time, when he accepted the views the applicant expressed about the departure and determined to take the matter no further.

50 As I noted, I accept that Mr Lazberger and the applicant discussed his performance from time to time and how it might be improved. Those discussions had a context however, of more than adequate performance by the applicant overall. As the respondents confirmed in submissions, in May 2001 Mr Lazberger declined to put any concerns as to the applicant's performance in writing, as the respondents' policies required him to do, because there were, in reality, no performance issues which necessitated such an approach. The termination of the applicant's employment was never a termination for cause, as the respondents themselves submitted.

51 In April 2001, Mr Lazberger first raised with the applicant, the possibility of he moving away from the day to day management of the investment team for which he was responsible and appointing him to a new position, which Mr Lazberger explained would have the title Vice Chairman and Principal, which would allow him to become more involved in business aspects of the respondents' operations. He would obtain a fully maintained car as a part of this new position. A Mercedes 300 Series E class was discussed. The discussions were not detailed and were to continue, upon Mr Lazberger's return from overseas. Unsurprisingly, in the context of their ongoing discussions about promotion prospects, the applicant was interested to hear more from Mr Lazberger. Mr Lazberger did not reveal to the applicant the decision which he had already made at that point, about the creation of the CIO position, or that it had been offered to Mr Crafter. On his evidence, the CIO position was a more senior one than the Director of Investment position and would take the respondents to 'the next level'.

52 Mr Lazberger confirmed in cross examination that consideration of a CIO position had arisen in February and that one of the consequences of its creation was that there was no need for a separate Director of Investment position to continue. He explained that he had not earlier raised this with the applicant, because his aim was to ensure a smooth transition to the new structure. It was not discussed with any Australian employees. Mr Lazberger agreed that while a move to a new role was discussed with the applicant in April, removing him from the investment area was not, although he believed that the necessity for that result was self evident. Mr Lazberger also agreed that he never discussed with the applicant any failure to achieve the 2001 objective of appointing a 2IC, even though he came to the view that no progress had been made. He denied, however, that the creation of the CIO role was intended to harm the applicant.

53 In April, the applicant was working under the impression that he had Mr Lazberger's complete support, especially given the discretionary rewards which he had recently received, with thanks 'for the significant contributions you have made to the success of our business throughout 2000 and I look forward to another successful year in 2001'.

54 Mr Lazberger went overseas in April and soon after his return, on 3 May he informed the applicant that he wanted to employ Mr Crafter as CIO, whereupon the applicant would become the 'Vice Chairman and Principal' and that he and Mr Crafter would then both report to Mr Lazberger. This was again not completely frank. By that time Mr Crafter had already been offered and had accepted the position. The applicant was surprised by this development and asked to be shown where the new position would sit in the first respondent's organisation chart. To that point, he had still expected the appointment of a 2IC and that his new role would involve him in expanded responsibilities in the investment area, not a removal from them. Mr Lazberger drew a picture on a whiteboard, showing the new position off to one side, with no staff reporting to it, but quickly rubbed it off. The applicant was not happy with this development and wanted more details of what was proposed. They agreed to continue the discussion, after Mr Lazberger provided a position description. In cross examination, Mr Lazberger explained that it was, in his view, prudent at that point to mention Mr Crafter, because news of his appointment would shortly become public. He did not, however, tell the applicant that he had already offered Mr Crafter the position and that he had accepted it.

55 In cross examination, Mr Lazberger also explained that he had kept the discussions with Mr Crafter confidential to that point, because he did not wish to cause problems for him in his current employment. He also agreed that once the CIO role had been created and offered to Mr Crafter, it was necessary to find a role for the applicant. This was contrary to Mr Serhant's evidence, which was that the CIO role had been developed because of the new role developed for the applicant. Mr Lazberger's version, however, accorded with the documentary evidence, which showed that consideration of the development of a new role for the applicant, had followed the identification of Mr Crafter as the person to be recruited for the CIO position.

56 On 7 May the position description was first provided. Mr Lazberger prepared it in consultation with Mr York. On seeing what was in it, the applicant asked what was driving the changes. Mr Lazberger explained that while there was a perception that the applicant was 'demanding and unreasonable', he understood that this reflected the day to day management of the investment team and investment decisions. Mr Lazberger assured the applicant that the new role was not in response to this, but a new opportunity and a promotion, which would permit him to become involved in potential acquisitions and joint ventures. Understandably, the applicant was concerned and pressed for information as to his perceived shortcomings. Mr Lazberger refused to provide written details of any problems in the applicant's management style and also refused to disclose to the applicant when Mr Crafter had been offered his new position. The applicant was upset, but agreed to consider the position description and to respond. Mr Lazberger also said that he would have Mr Serhant and Mr Alan Brown call him.

57 Despite his denials in cross examination, in May 2001, Mr Lazberger plainly expected that he might encounter some resistance from the applicant to these changes. He sought assistance from Mr Serhant and others, in convincing the applicant to take on the new role. He was fairly confident that they would be successful. He wanted the applicant to stay. Nevertheless, he also began pressing the applicant to make a decision quickly about what he was proposing, because he wanted to announce Mr Crafter's appointment on 9 May.

58 In cross examination, Mr Lazberger explained that he refused to provide written details of the applicant's shortcomings when asked, because he believed no benefit would come from it. In his view, these matters could be the subject of discussion, if necessary. He was not attempting to give the applicant any warning, or to suggest that his employment was in jeopardy, although he also explained that he had not considered the applicant for the CIO position because of his perceptions of his shortcomings, which in his view, had resulted from the applicant being unsettled.

59 Mr Lazberger also spoke further to Mr York, who had also had some discussions with the applicant. Mr York advised that: 'There are times when a managing director needs to make structural/organisational changes which he believes are best for the business. Sometimes these decisions are not easy, particularly when staff are asked to take on new responsibilities. It comes down to making sure everyone impacted is treated fairly and that they are no worse off. I do not think what you are requesting of David is unreasonable. Given my conversation with him, I would have thought he would jump at the chance to be more involved in the strategic side of the business.'

60 Mr York's evidence was that while he had from, time to time, discussed with Mr Lazberger his concerns about the applicant's performance, he had not himself discussed any performance concerns with the applicant. That was a matter for Mr Lazberger.

61 The applicant was concerned about the nature of the proposed role as outlined in the position description. In his assessment, it permitted advice and strategic thinking, but no role in making any project happen, with no staff support for research to develop any new products. He was concerned as to whether any proposed projects would be sustainable; who would be in charge of them and what would happen if they did not proceed. He was also concerned about what remuneration, in reality, he could earn in such an ill-defined role, which removed him from his area of expertise, investment. His experience of the respondents was that strategic functions were usually transitory and that such roles were filled by the hiring of extended consultants. During his employment, there had only ever been two senior people employed for such a role. Most employees' functions were active and hands on, consistent with the nature of the respondents' business, namely funds management.

62 Mr Serhant soon telephoned the applicant and explained to him that the new role had been developed to give the applicant more time with his family. It was the applicant's view that, to the contrary, the role was likely to lead to more time away from his family, particularly working with Mr Serhant in Boston, as was proposed.

63 In cross examination, Mr Serhant agreed that his position was that the new role was a great opportunity from the applicant's point of view. It would help his career progression with the respondents and involved a series of duties designed to utilise the applicant's talents. Mr Serhant at first declined to describe that new position as a promotion however. Rather he saw it as "at least, equivalent to his current duties, if not a promotion." Later, however, his evidence was to somewhat different effect. He explained that the applicant was asked to take a new role "that is very common in SSgA, and we expected him to do so. We expected the role of CIO to be filled by one (sic) new, in this case, Crafter. We had no expectation of removing David from a role, we were promoting him to a better role, to a different role".

64 On Mr Serhant's evidence, the applicant's new position was driven by the needs of the business, to help the business grow. He denied that it was driven by the creation of the CIO position. The creation of the CIO position was a consequence of the new role developed for the applicant, who was ready to move on. Spending more time with his family would be a benefit of the job. This evidence, I note, was inconsistent with that of Mr Lazberger and documents in evidence. Mr Serhant explained that the respondents were looking for a fit between the applicant's talents and their future needs. The applicant was a wonderful money manager, but not a particularly effective people manager.

65 Mr Serhant also explained that the applicant had not been involved in these decisions, they had been made by he and Mr Lazberger, although Mr Serhant allowed 'his' managing directors, in large part, to run their own offices. The applicant at that stage was seen as an at risk employee. There was a perceived risk that he would leave. The new job was seen as a way of keeping the applicant, but he was not taken into their confidence, in relation to the changes planned. Mr Serhant agreed that he never asked the applicant if he wanted the new role they had developed. He explained that they had adopted this approach because they "could not afford to put our investment teams at risk in a period where they would have no leadership."

66 Mr Serhant also disagreed that this required secrecy, so far as the applicant was concerned, but explained that was a matter he left to Mr Lazberger to determine. He also disagreed that the applicant was deliberately kept in the dark about these matters. The discussions were managed by Mr Lazberger.

67 As to the later termination of the applicant's employment, Mr Serhant's evidence was: Q. Unless he took that role up he would have no job at SSgA - correct? A. Well, if people do not do in our business what we need for them to do they tend to remove themselves. The sadness of it is we didn't want David to remove himself, we wanted David to be part of our future success.

Q. If people don't do what you tell them to do, whether it is in their interests or not, they are removed, that's right, isn't it? A. Sir, we run a business, we don't run a democratic group of people who choose to be together because they are only able to do as they see fit They need to do as the management requires and that is something that meets the business and the skills set of individuals, that's correct.

68 On 9 May, the applicant met again with Mr Lazberger and provided him with a written response, refusing the position and explaining why. He told Mr Lazberger that he could not accept the position, because he viewed it as a demotion. Mr Lazberger asked him if he was looking for 'a catalyst to leave', which he denied. Mr Lazberger sought to reassure the applicant that there was no demotion in terms of status or remuneration, despite the position having no responsibility for staff. It was to be a new phase in his career. Mr Lazberger's evidence was that it was not unusual for senior executives to move to strategic positions. He did so himself in January 2002, when he became Regional Managing Director of State Street Global Advisors.

69 Mr Lazberger then spoke to Mr Crafter, to inform him that the applicant had not accepted his new role and discussed with him the alteration of some of the responsibilities which they had already discussed. Mr Crafter agreed to consider these. At that point, the applicant was asked by Mr Lazberger not to attend further client meetings.

70 On 10 May, Mr Lazberger responded to the applicant in writing, criticising him for not taking sufficient time to consider and discuss the position offered. He 'reluctantly' agreed that the applicant could report only to him, in relation to all of his work. The applicant also met with Mr Lazberger and Mr York that day. He raised his concerns again. They included that the position had no reports; that he had been told he had management style issues, which Mr Lazberger refused to detail in writing; that he had been given so little time to consider his position, being told on the previous Monday that a new appointment, was to be announced on the next Friday; that he was being removed from his area of expertise - management of investments and not being involved in the selection, or appointment of his successor; that in terms of organisation structure the position was not senior; it was given no reports and no resources, no budget or professional staff and involved the work of a business strategist, providing only advice. In his view, the change would damage his career, by he being forcibly removed from his position, and being appointed to a position which no-one had ever asked him if he wanted. He told Mr Lazberger that the approach taken had damaged their working relationship. On the applicant's evidence, Mr Lazberger was angered by his response.

71 Mr Lazberger's evidence of the conversation was to similar effect, but that the applicant also said that he viewed the mention of performance issues as having damaged his reputation and prospects within the organisation. Having him report to the CIO, confirmed that the position was a demotion. He was concerned that he had not been consulted about his successor. He believed that such a sidelined role would damage his future career prospects. Mr Lazberger tried to reassure the applicant that he had no desire for him to leave and that he appreciated understanding the applicant's real objections, so that they could agree on his new role. The applicant said that he wanted the CIO position to report to him. Mr Lazberger told him that the new role had been developed in response to their ongoing discussions. The changes were not a negative reflection on him. The applicant, nevertheless, said that he was not interested. It might have been different if Mr Lazberger had taken him into his confidence, but his trust had been broken. He would receive no respect in the new position, because it would have no authority. It was a vote of no confidence in him. The meeting concluded with Mr Lazberger agreeing to reflect on the applicant's comments and to contact him shortly, because they needed to reach a resolution.

72 In cross examination, Mr Lazberger confirmed that he was, at that stage, not prepared to countenance any suggestion that the CIO report to the applicant. He wanted a smooth transition, conducted in a collegial way. There was, in his view, no need for Mr Crafter to be groomed as the applicant's successor. He agreed that in order for the applicant to accept the new position proposed, he would have to be interested in it, to agree on the objectives of the new position and that aspects of the role, in terms of the support provided for the position, would have to involve mutual agreement. Despite this, in his view, the areas of final contention between he and the applicant, revolved around remuneration.

73 Later in the day Mr York contacted the applicant and floated with him the possibility of him being in charge of 'Regional Tactical Asset Allocation for the Asia Pacific Region', which the applicant agreed to consider. The next day, however, Friday 11 May, Mr York told the applicant that he should forget about that possibility. A three month handover to Mr Crafter was proposed instead, with the applicant then going to Boston for two to three months to work with Mr Serhant in the Global Active Group. The respondents were unsure whether the applicant could take his wife with him. On his return he could take up the new position. A weekend away with his family was also offered and an independent party to discuss his position, at the respondents' expense. The applicant asked Mr York to put the proposal in writing. Mr York sent an email, requiring a response by the following Monday.

74 In cross examination, Mr York explained that he was aware at that stage that the CIO role meant that the applicant's position would be superfluous. It did not occur to him, however, that the applicant would be redundant, because of the new position being discussed with him, which he thought was 'suitable alternative employment', although that was not something which he ever discussed with Mr Lazberger. Mr York also explained that while he did not see the new position as a promotion, it was certainly "a good opportunity for him."

75 Over the weekend the applicant took advice from an organisational and career counsellor, who suggested that he consider the offer, if he could get guaranteed tenure for say three years and clarification of deliverables; the respondents' expectations and key performance indicators for the role. He discussed the matter again with Mr Lazberger on Sunday, 14 May and raised with him the suggestion of a three year contract, with a two year option. Mr Lazberger was not attracted to this, because while the role was new, the applicant was not joining a new organisation. The applicant also wanted an assurance that he would receive the second highest bonus and changes in the reporting lines for other positions. Mr Lazberger agreed to consider these proposals. He urged that the applicant accept the position in principle. He wanted to make an announcement about the CIO in 24 hours.

76 At a later meeting, Mr Lazberger explained to the applicant that he could not agree to these terms, because it would create an inequitable position and would give him a fixed term contract, which no other employee in Australia had. In cross examination, Mr Lazberger agreed that he had forgotten that he had earlier agreed upon a nine month fixed term contract for another employee, in 2000, when the first respondent had acquired a business from MLC. The applicant told Mr Lazberger that he would not accept the role without a contract. He needed to have a feeling of tenure associated with the new role.

77 By email Mr Lazberger confirmed his rejection of a three year term and rejected an assurance that the applicant's bonus would be second only to that of himself in future. Mr Lazberger required an answer by 5pm, Tuesday and confirmed with Mr Crafter that he should commence the following week.

78 On Tuesday the applicant again spoke to Mr Serhant, who told him that Mr Crafter had been interviewed six to eight weeks earlier and that he had thought that there was a risk that the applicant would resign. He suggested that Mr Lazberger's deadline be changed to Wednesday. This was later confirmed.

79 The applicant sent another email to Mr Lazberger on 15 May, asking him for clarification as to the longevity of the role offered and what would happen if it did not work out. Given the new role being proposed, he sought a 12 month fixed term contract and a 12 month notice period thereafter. He asked that his bonus and equity compensation should be no less than that of the CIO and only below that of Mr Lazberger. Clarification of the responsibilities and resources for the role was sought, as well as the deliverables. The role involved product development, so the appellant proposed that the Advance Research Centre should report to him and the applicant and a strategic analyst be employed to support the role. He also asked that the interaction with the CIO also be clarified.

80 Mr Lazberger replied declining any fixed term or extended notice period, any assurance about discretionary aspects of remuneration, other than if he performed well in the new role, he should expect "the level of remuneration that you have received in the recent past." Any further clarification of responsibilities, resources or deliverables, was also refused.

81 Mr Lazberger was satisfied that such questions could be "resolved over time". In cross examination, Mr Serhant also explained that he didn't think that the duty statement "entirely encompassed what we had in mind for Mr Wong". He believed that it would evolve. Mr Lazberger explained that the vagueness and uncertainty of what was proposed "comes with a senior role. Ambiguity is something one has to wear."

82 Mr Lazberger also spoke to the applicant on 16 May. The applicant had fallen ill and had sought medical attention. He told Mr Lazberger that he had been advised to take sick leave and that he was not in a position where he could make any final decision. Mr Lazberger again urged him to take the job, but said that a fixed term contract was out of the question. He also told the applicant he now had a problem as to what to tell clients and staff. Mr Lazberger had, however, already announced Mr Crafter's appointment to the staff. Various steps were then taken to test the reaction of clients and the market to Mr Crafter's appointment. The next day the applicant was denied access to the respondents' email system.

83 On 18 May Mr Lazberger again spoke to the applicant. He told him to take the doctor's recommended week off.

84 On Sunday, 20 May the second respondent's CEO, Mr Lopardo, telephoned the applicant and also urged him to take the job. The applicant found his comments inconsistent with what he had earlier been told. He wrote to him, pointing out that the new role proposed no involvement in the Asia Pacific region. He attached the job description he had been provided, and again outlined his concerns about the matters which required clarification. Mr Lopardo's reply was short, urging the applicant to take the job, which he described as a "great assignment with excellent visibility".

85 In cross examination, it was put to the applicant that he could have trialled the new position for six months and he agreed that he had not made this suggestion to the respondents. Nor, I observe, was this suggestion made to him by the respondents, even though it was put to him in cross examination that his concerns about lack of resources could then have been tested, to see if the respondents lived up to their word. The applicant explained that, in his view, accepting what he was offered, without first reaching agreement on his areas of concern, could only result in him setting himself up to fail. He did not believe that what was being proposed was playing to his strengths, lacked clarity in aspects such as deliverables and was not a job which he had sought, given that he was an investment professional. He was interested in the investment function and had sought an expanded role with the respondents in that area, not what was, in fact, proposed to him. He described his condition when he finally refused the respondents as one of depression and despair, even though he then set about pursing other employment.

86 On 23 May, the applicant received further medical treatment. On 25 May, he wrote to Mr Lazberger, refusing the new job and explaining why. He said that after having been removed from his position without notice for 'alleged management issues', he had sought clarification of specific duties and responsibilities, without success. He sought assurances as to the duration of the job and any notice period, the remuneration available and his relationship with the new CIO. None were provided; all was to be worked out over time. He could not make that leap of faith and therefore accepted the respondents' repudiation, as bringing his contract to an end on 25 May. He sought details of his termination payments.

87 On 6 June, Mr Lazberger replied, asserting that assurances as to pay could not be given and that there had been no repudiation by the respondents, rather a refusal by the applicant to return to work despite repeated requests since 8 May. His letter was treated as a resignation and he was paid some of his annual leave entitlements but nothing more. Mr York's evidence was that a sum was later deducted from the payment made to the applicant for his annual leave entitlements, to reflect an 'overpayment' of salary. In July legal action was threatened, if the applicant breached his obligations of confidentiality.

88 In cross examination, Mr Lazberger agreed that he had never asked the applicant to trial the job. He was aware of the applicant's concerns about bonus and how it would be measured, given the job offered, after he had been in the job for about a year. Nevertheless, these matters were not negotiable, even though he accepted that bonus and equity formed a very important aspect of remuneration for the respondents' senior executives. On his approach, the applicant had been looked after in the past and this would continue. His other concerns would be resolved in ongoing discussions which would involve Mr Crafter and other senior members of the management team.

89 In re-examination, Mr Lazberger explained that there were clear areas in the job description where deliverables could quite quickly have been set by the parties. As to the applicant's concerns about the lack of reports, the position was one which was "very much based on using his influence and standing within the firm, his experience to essentially work with members of the group in a group and collegial way."

90 The position which the applicant had been offered was never filled. On Mr Lazberger's evidence he later performed some of the duties proposed. Others were never performed by anyone.

91 In July, the applicant accepted an offer of employment from NRMA and commenced on 13 August.

92 It is convenient to note at this point that there was an objection taken to evidence called from Mr York, on the basis that it was called merely to bolster the evidence of Mr Lazberger, whose credit was at issue, both in relation to the question of whether he had any concerns about the applicant's performance and if he did, whether he had discussed such concerns with the applicant. I allowed the evidence, indicating that I would give reasons later.

93 The test is that discussed by McHugh J in Palmer v R (1998) 193 CLR 1 at 21-22, where his Honour considered the difficulty which can arise in distinguishing evidence going to credit and that going to a fact in issue. (See also Cross on Evidence at [19005] and [1725])

94 Mr York's evidence went to a discussion which he had had with Mr Lazberger at a particular time, in relation to his concerns about the applicant's performance. The question of the admissibility of the evidence was somewhat complicated by the fact that evidence in chief in proceedings such as this, is given by way of affidavit and so the tender of Mr York's affidavit arose before Mr Lazberger's cross examination. Nevertheless, I was satisfied that Mr York's evidence did not go to Mr Lazberger's character or credit, but rather to the existence of Mr Lazberger's concerns about the applicant's performance. At the time the objection arose, it appeared that was a fact in issue in the proceeding and so it followed that Mr York's evidence could not be excluded, on the basis that it merely sought to bolster Mr Lazberger's credit.

95 The submissions finally advanced for the respondents raised some question about this. Nevertheless, it was the view which I formed on the respective cases being advanced at the time that the question as to bolster evidence arose.

96 It is also convenient to deal at this stage with a recording made by the applicant of a telephone conversation between he and Mr Serhant on 15 May 2001. During the hearing, I announced my conclusion that its making did not involve a breach of the Listening Devices Act 1984, indicating that I would later give reasons for that conclusion.

97 The parties each relied upon a judgment given by Peterson J in Scanruby Pty Ltd v Caltex Petroleum Pty Ltd and Anor [2000] NSWIRComm 89. There his Honour considered the proper construction of various provisions of the Listening Devices Act, which also here arose for consideration. The question being whether the tape-recording offended the provisions of s5(1) of that Act, or rather fell within the provisions of s5(3). Section 5 provides: 5 Prohibition on use of listening devices (1) A person shall not use, or cause to be used, a listening device: (a) to record or listen to a private conversation to which the person is not a party, or (b) to record a private conversation to which the person is a party. (2) Subsection (1) does not apply to: (a) the use of a listening device pursuant to a warrant granted under Part 4, (b) the use of a listening device pursuant to an authority granted by or under the Telecommunications (Interception) Act 1979 of the Commonwealth or any other law of the Commonwealth, (c) the use of a listening device to obtain evidence or information in connection with: (i) an imminent threat of serious violence to persons or of substantial damage to property, or (ii) a serious narcotics offence, if it is necessary to use the device immediately to obtain that evidence or information, (d) the unintentional hearing of a private conversation by means of a listening device, or (e) the use of a listening device to record a refusal to consent to the recording of an interview by a member of the police force in connection with the commission of an offence by a person suspected of having committed the offence. (3) Subsection (1) (b) does not apply to the use of a listening device by a party to a private conversation if: (a) all of the principal parties to the conversation consent, expressly or impliedly, to the listening device being so used, or (b) a principal party to the conversation consents to the listening device being so used and: (i) the recording of the conversation is reasonably necessary for the protection of the lawful interests of that principal party, or (ii) the recording of the conversation is not made for the purpose of communicating or publishing the conversation, or a report of the conversation, to persons who are not parties to the conversation. (4) Where a listening device is used in the circumstances referred to in subsection (2) (c) and its use would, but for subsection (2) (c), be contrary to this section, the person who used the device shall: (a) forthwith cause to be served on the Attorney General or a prescribed officer notice of that fact, and (b) within 7 days after its use, furnish a report, in writing, to the Attorney General: (i) containing particulars of the circumstances in which the device was used, and (ii) without affecting the generality of subparagraph (i), containing the same particulars, and specifying the same matters, as are required by section 19 (1) (b) in relation to the use of a listening device pursuant to a warrant granted under Part 4.

98 In Scanruby, Peterson J was considering a videotape made by the managing director and a major shareholder of Scanruby, after an issue had arisen between it and Caltex, as to Scanruby's right to remain in occupation of certain premises which it was occupying under a lease. Caltex had purported to give six months' notice terminating the applicant's occupancy.

99 Peterson J concluded that the circumstances before him were sufficient for it to be concluded at [45] to [48]: 45 Accordingly, the focus for the purposes of s.5(3)(b)(i) is upon the recording being reasonably necessary for the protection of the lawful interests of either Mr Dimis, as the principal party who speaks in the conversations, or Scanruby, if Mr Dimis is to be viewed for the purposes of the conversations as the personification of Scanruby. Counsel were agreed that the point in time to which the determination as to whether the recording of the conversation was "reasonably necessary" must relate, is the time at which the recording was made. Of course, before the recording may be thought to be reasonably necessary there must exist a relevant lawful interest. Whether the principal party to the conversations in question is viewed as Mr Dimis or as Scanruby, both have for the purposes of these proceedings an interest which I consider may be described as a lawful interest. In the case of Mr Dimis, the interest is not a lawful right although it may be contended otherwise in the case of Scanruby. It appears that the conversation arose at a time when Scanruby and Mr Dimis were claiming a right to continue in occupation of the relevant premises, while Caltex, through its representatives, was intending to terminate the occupancy. The "interest" in pursuing what was perceived to be, whether rightly or wrongly in the final analysis, an entitlement to remain in occupation of the premises, would readily satisfy the lawful interest requirement.

46 In my opinion, the reasonable necessity for the recording, if assessed prior to its being undertaken, cannot be determined by reference to the material later recorded. It matters not whether the material is completely innocuous or damning; if the lawful interest is there and one party is claiming an earlier representation by the other which is denied, it would seem that the recording of conversations in which the position of the other party might be contradicted, whether induced by the recorder or not, would be "reasonably necessary" within the meaning of the section.

47 This view is consistent with a view taken by her Honour Judge Truss in Udini . Her Honour there found, on the balance of probabilities, that the recording by the applicant of the conversation in question was "reasonably necessary for the protection of the applicant's lawful interests, those interests being his entitlement to proper remuneration for the services performed for the first respondent . . . .".

48 I am satisfied that the applicant is not prevented by the Listening Devices Act from relating the relevant parts of the conversation the subject of this motion. Those parts of the conversations are confined, as Mr Donovan submitted, by the scope of the affidavits of the filed (sic). That confinement disposes of any suggestion of oppression or prolixity.

100 The respondents argued that here the applicant had no similar rights to protect. The test established by the section was an objective one. The Court would not seek to encourage the taping of telephone conversations by trickery. Peterson J followed his decision in Scanruby in Cheryl-Anne Duffy v Lake Macquarie City Council (IRC 99/3682, unreported, 9 November 2000) when a videotape recording had been made by an employee.

101 Here, the applicant recorded a telephone conversation with Mr Serhant. The applicant and Mr Lazberger were both directors of the employer company. Mr Serhant was a director of the second respondent. Mr Lazberger reported to Mr Serhant. The evidence showed that in his position, Mr Serhant was closely involved in the management of the employer company and with the decisions taken in relation to its senior management structure and the applicant's ongoing employment. Mr Serhant was also closely involved in the various endeavours made by the respondents to have the applicant accept their decision as to his future, in a variety of ways.

102 By the time the applicant came to tape the conversation in question, he understood that he had been removed from his position, in part, because of concerns about his performance; there had been restructure of the senior management of the first respondent, without his knowledge; an appointment had been made to the new position without consultation with him; the new position was not to report to him, he rather was to report to the new appointee; the new position would absorb his existing duties and responsibilities; he was being offered a new position, portrayed to be a promotion; he had reason to believe that this was untrue and that Mr Serhant was involved in a deception which the respondents were seeking to put in place. The applicant was his family's only breadwinner and he was concerned to take steps to learn the truth and to protect his position, given the situation into which he had unilaterally been placed by the respondents.

103 On his evidence, the applicant taped the conversation, believing this course to be wrong and even illegal. I am satisfied that he was incorrect in the latter view. Like the conclusion reached by Peterson J, I have reached the view that the applicant had a relevant lawful interest in ascertaining what, in reality, the respondents had done and what they were further intending to do, so far as his employment was concerned.

104 The evidence showed that until his employment was terminated, with the giving of the notice to which the applicant was contractually entitled, any removal of the applicant from his position was a breach of that contract. In that context, I was satisfied that the recording was reasonably necessary for the protection of the applicant's lawful interests. The evidence showed that the respondents had to that point not been truthful with the applicant and had not acted in accordance with the obligations which flowed from the parties' contract. Their conduct had plainly been most unfair.

105 While it was unnecessary to determine the matter from this point, I also took account of the fact that that the applicant had an interest in these matters, from the point of view of his obligations as a director of the first respondent. Directors of companies have well known and onerous obligations flowing from that office. It seems to me unarguable that a director is entitled to receive the truth from the executives employed by the company of which he is a director, when they provide information to him about the company and its activities, even if that be in relation to his own contract with the company. A director also has an interest in the company of which he is a director, abiding by its contractual and other legal obligations. It seems to me that a director who believes he is being misled as to such matters, may be seen to be taking steps reasonably necessary to protect such lawful interests, by taping a telephone conversation with an executive such as Mr Serhant, who he believes is involved in the deceit being perpetrated.

106 The case advanced for the applicant by Mr Goot SC, appearing with Mr Stanton of counsel, was that the contract and the respondents' conduct had been amply demonstrated to have been unfair. In so far as there had been any concerns about the applicant's performance, Mr Lazberger had failed to act in accordance with the applicable policy, on Mr York's evidence, in existence since the 1990s. The respondents had also failed to apply to the applicant the respondents' redundancy policy, also in existence since the 1990s. They had also breached the requirements of legislation such as the Annual Holidays Act 1944.

107 The applicant would be accepted as a witness of truth on the facts in issue. His evidence must be preferred over that of the respondents' witnesses. Their case was that the CIO position took over the duties of the Director of Investments. On Mr Lazberger's evidence, this decision flowed from the applicant's performance. This was inconsistent with evidence of the applicant's 2000 performance review and how he was rewarded for that work. The respondents' case was submitted to be a curious one, given this evidence of poor performance on the one hand, but the alleged decision to promote the applicant on the other. Mr Serhant's evidence was to different effect. He spoke of business needs in a context where the view had been reached that the applicant would depart.

108 The view which would be reached on the evidence was that the decision to create the CIO position and to recruit Mr Crafter, was one taken in the interests of the business and in response to alleged performance concerns. In these proceedings the respondents sought to rationalise their decisions as being driven by the applicant's desires. That was submitted to be an extraordinary story because, if true, there was no reason at all to keep the applicant in the dark about what was proposed. This idea had, in fact, first been proposed by Mr Lopardo. It was a 'spin' which the respondents had adhered to ever since.

109 The evidence showed that the applicant was successful in his job and happy to have an expanded role with the respondents and the idea that he was at risk was nonsense. It was never discussed with him and the only support for it was to be found in the fact that head-hunters had approached him. Promotion was a shabby rationalisation for what occurred. Mr Serhant's evidence in cross examination put the position in its real light when he said: 'We asked David to take a new role, that is very common in SSgA, and we expected him to do so. We expected the role of CIO to be filled by one new, in this case, Crafter. We had no expectation of removing David from a role, we were promoting him to a better role, to a different role.'

110 The concerns about the failure to appoint a 2IC were said to have been overstated and had in fact been attended to, in any event. Other concerns were similarly overstated, particularly given that no attention had ever been paid by Mr Lazberger to following them up in any way.

111 The evidence showed that after the decision had been made to employ Mr Crafter, something had to be found for Mr Wong. No-one appeared to consider him at risk at that stage and so something was developed for him on the run. The evidence showed that the respondents were aware he might react badly and hence senior executives were called in to help manage him. The job offered was not well developed and significantly, the job described to him as crucial to the future of the respondents was never filled when he refused it.

112 The evidence showed that what was offered was not a promotion. The evidence of Mr Serhant and Mr York in cross examination put this beyond doubt.

113 The result was plainly that the employment had come to an end as the result of the respondents repudiation of the contract, which the applicant accepted. (See Brookton Holdings Pty Ltd No V & Others v Kara Kar Holdings Pty Ltd & Anor (1994) 57 IR 288 at 289.) The respondents were not entitled to require the applicant to take the new position. (Gala v State Bank of New South Wales Ltd t/a Colonial State Bank (No 2) (1998) 84 IR 216.) The position was finally put to him on a take it or leave it basis. The duty statement raised more questions than it answered. The applicant raised his concerns in writing and sought assurances which he did not receive. He proposed that he undertake the job for a year, with an agreement as to notice. That was refused.

114 In the circumstances, the arrangements in question were undoubtedly unfair as to notice. Twelve months' notice should be ordered in the circumstances, although how that was apportioned as between notice and redundancy was a matter of discretion. (See Hartley v MGICA Pty Limited (2001) 108 IR 323.) Under the redundancy policy alone he should have received at least an additional three months' notice to the contractual one month and twenty weeks redundancy pay. Given his age, seniority, and tenure, that amount would have been too little, as a matter of fairness and because it excluded bonus from consideration.

115 It was submitted that annual leave and long service leave should continue to accrue during the notice period and should be paid for at a rate which included bonus. (See David Jones Ltd v Cukeric (1997) 78 IR 430.) Bonus comprised a very significant part of the applicant's remuneration, described by the respondents as an important part of total remuneration and the subject of a specific representation. (See Moray Vincent v Merryl Lynch Australia Pty Ltd (2000) NSWIRComm 160.) The approach adopted in Diver v Object Consulting Pty Ltd & Anor [2003] NSWIRComm 202, would not be applied in the circumstances of this case; although it was argued that aspects of that decision supported the claim here made.

116 It was submitted that the idea that the role offered was a reasonably alternate one, was nonsense, given that the applicant's duties as Director of Investments had lain at the very core of the respondents' business, the management of investment funds. The new role was far removed from that and did not satisfy other requirements discussed by Boland J in Hartley at [41].

117 As to mitigation, the principles established by the Full Court in Adams v Westfield Holdings Ltd [2000] NSWIRComm 112 would be applied. In that case, while six months' pay in lieu of notice had been ordered, only one month's pay had been taken into account for mitigation, even though Mr Adams had earned more in the new employment he achieved. Here, the applicant was worse off in his new employment. What the respondents sought to argue in respect of shares flowing in the new employment, would not be accepted, because those rights were entirely speculative, nothing had vested and might never vest, given the criteria which had to be met in respect of share price. In any event, those shares had not been received during the notice period claimed.

118 The case advanced for the respondents by Mr Hall QC, appearing with Mr Rich of counsel, was put in the context of written submission, where it was argued that the discretion given the Court should be approached in the manner discussed in Port Macquarie Golf Club Limited v Stead & Anor (1995) 64 IR 53 at 59 -60 and Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371. The need for restraint was emphasised, given the applicant's position, his education his understanding of the various contractual provisions in question, including that they were discretionary and clearly stated the position which would prevail in the event of termination of his employment. The applicant was under no misapprehension as to the terms of the relevant policies and had not complained about their operation during the employment. There was also no suggestion of exploitation or mistreatment, prior to May 2001.

119 It was also put that the 'fundamental plank' in the applicant's case was that he was subject to a concerted plan to move against him without forewarning, when he should have been treated, in procedural fairness terms, as if he were being threatened for poor performance. The question of motivation and the reasons for the changes initiated in April 2000 was thus fundamental to the Court's just determination of the circumstances that unfolded. In that context, attention had to be paid to the first respondent's desire, through Mr Lazberger, to put in place an expanded role in its operations in a context of considerable growth to that point. This led to the creation of the CIO position. Whether to fill the position from within, or without, required commercial judgment by the decision maker.

120 The 'so-called' performance issues raised had two aspects - their nature and their significance. As to their nature, they were submitted to be issues of management style, rather than management performance, which had been the subject of discussion from time to time. In making the decision to look outside the organisation, the respondents were entitled to have regard to the total mix of attributes of potential candidates. The fact that the applicant was not chosen, was no reflection against him and did not disentitle him to anything he was entitled to. It was accepted that the decision to employ Mr Crafter had a knock on effect, because the new role took up the applicant's existing position. But it did not result for reasons of poor performance. The respondents were not moving against the applicant in a disciplinary sense and so no procedural process in relation to caution, or providing opportunities to improve performance, arose.

121 It was further submitted that a proper analysis of the central issues in the case would lead to the conclusion that the decision to appoint Mr Crafter and to create the CIO position were valid and open to the respondents. There was no mala fides or ulterior motivation. A proper identification of that motive was important in a termination case such as this, because otherwise the facts could be misconstrued. There was no basis for concluding that termination resulted for performance reasons. It was otherwise based. The consequences of the commercial decisions made had an impact upon the applicant, but it was never the respondents' objective that there should be any parting of the ways.

122 It was also explained that it could not be submitted that there was no association between the ultimate severing of the employment relationship and the action taken by the respondents. The authorities showed that if an employee was asked to go to a job which is a demotion, a case of repudiation could arise. Here, however, there was a bona fide offer, which the applicant refused, so a combination of events had led to termination. Even if there were a repudiation, the fairness of what had been offered arose for consideration. It could not be put that the respondents had failed to deal commercially with the consequences of their decision for the applicant.

123 It was also argued that while the applicant said he should have been consulted earlier, that would not be accepted. A commercial decision such as this had to be made by management, as a part of everyday legitimate commercial decision-making. This would be the first case, if it were said that before a company could consider its options and decide upon implementing a selection process, it would have to consult with any or every employee who could possibly be affected by the consequences before completing the planning of making this decision. The law requires no such consultation, nor could s106. Nor could any such decision give rise to a breach of trust.

124 Indeed, the method adopted by the respondents was required for reasons of commercial confidentiality. Once the decision was made, there was consultation about what was offered. The applicant had misconstrued and misunderstood the process. The applicant's position as a director but confirmed this. If a commercial decision impacted upon an employee director, to bring him into the planning process would create the potential for conflict in the ordinary course of ethics and commercial law and the director would have to withdraw from any decision-making process. In a highly competitive market such as this, involvement before a decision was made, would create complications in a situation where hundreds of millions of dollars and clients who required commercial confidentiality, were involved. Obvious commercial barriers could inadvertently be breached, with serious consequences for clients and the respondents and their shareholders.

125 If the applicant were involved in the decision-making process he would be likely to oppose the notion put forward. The Court would have regard to the commercial realities of life and the potential for disaffected investors. It was argued that in no circumstances could there have been an obligation upon the respondents to bring into the boardroom, or the manager's room, considerations of those who are to be affected downstream and get their views. There was no such obligation. It also followed that there was no trust breached.

126 It was further argued that the applicant was wrong to have proceeded on the footing that there had been a breach of trust. This led him to make a series of unacceptable demands. The business was highly competitive. There were risks. No-one had tenure or guarantees. A refusal of the offered new position, because he could not trust any of the senior executives any longer, had no basis. The decision was not capricious or arbitrary. The respondents wanted to maintain their relationship with him. There was no inconsistency with paying him a bonus and still proceeding with the restructure. In reality, the applicant had every reason to accept the offer of a new position and indeed was obliged to accept it.

127 It followed that there was nothing relevantly unfair about the terms of the contract of employment, or the wider arrangement between the parties. Unfairness only arose in relation to the manner of performance of the contract in the circumstances which led to the termination of the employment.

128 In this respect, it was relevant that there was no right or expectation of fixed term employment. It was agreed that the contract could be terminated on one month's notice. It was only because the respondents did not wish to terminate the employment, that they had been brought before the Court. The case proceeded on allegations of deception and betrayal of trust, which proceeded on a false premise. The applicant had no right to tenure in his position and it was a matter for the respondents, as to whom they would employ and in what position. They had no obligation to consult the applicant in advance of any decision, including in relation to the possibility that he might be replaced. Nor was there any no conspiracy amongst senior executives to trick the applicant into accepting a dead end job.

129 The respondents had acted for legitimate commercial reasons. They valued the applicant's skills and experiences as an investor and wished him to remain an employee. The steps taken by the senior executives of the respondents confirmed this. The applicant had enjoyed a relationship of trust with these people to May 2001. The Court should not proceed on a case theory that for no reason, they all turned on him in early 2001 and set out to damage him.

130 The evidence showed three reasons for the removal of the applicant from his position and the creation of the CIO. They were the respondents' commercial assessment that it was in their interests; that the applicant was not a 'particularly effective people manager' and that he was looking for a new challenge and was undoubtedly an at risk employee. In those circumstances, there was nothing improper in deciding that the business was better served by making the changes determined.

131 As to the performance issues, the evidence showed that Mr Lazberger had a genuine concern about the applicant's management style, but they were not relied upon to terminate the applicant's performance for cause. They were rather taken into account in determining the changes proposed, including the new role proposed for the applicant. On the evidence, the Court should conclude that the applicant was looking for a new role.

132 The respondents were not obliged to take the applicant into their confidence about these matters, given the many millions of dollars of funds which the first respondent managed. Its clients were wary of instability and change in the respondents' personnel. Such concerns had significant consequences. Commercial realties were a fact of modern business life, especially in highly competitive markets, as senior executives generally know. A balance needed to be struck against the applicant's outrage at his treatment and the respondents' real and understandable concerns.

133 It would have been damaging if the applicant was aware of the steps taken to recruit Mr Crafter and took vigorous exception, as he later did. It would also be of concern if the Court found that an employer had to consult with an employee being replaced, before terms had been agreed with the replacement.

134 Mr Crafter accepted the position on 26 April, five days before the applicant was informed of his appointment on 3 May, when he had not resigned from Westpac. Obvious confidentiality concerns thus arose.

135 The implied term of trust and confidence had no role to play 'insofar as company executives are making commercial decisions within the scope of their responsibility'. Here, the respondents' conduct was reasonable. Mr Lazberger, as a director, was motivated by the respondents' best interests. The applicant's position as a director did not require him to be consulted at the planning stages regarding a decision such as here arose for consideration. It gave him no additional rights as an employee and given that position, he in fact had an obligation to act in the best interests of the respondents. He also had a conflict of interest, if he were involved in the decisions Mr Lazberger was making.

136 The evidence showed that the new position offered to the applicant was a senior one, which fitted with his desire to further his career path. He was assured that his base salary and other fixed entitlements would not be adversely affected; he would receive a car; he would not lose any deferred benefits and he was assured he would receive support in respect of bonus. The reporting lines were changed and he was to be responsible, with Mr Lazberger, in a hand over period.

137 While the description was said to be vague, it would develop with the identification of new business opportunities. It was 'naive' to expect such a role to be the subject of a highly prescriptive job description.

138 The respondents were not prepared to accept the applicant's terms for the new position in relation to term or remuneration. The result that the employment came to an end, was not one that the respondents wanted or intended. It followed that no unfairness could be found.

139 If the contrary view were reached, it was argued that any notice assessed must have regard to the one month agreed, as well as to the fact that the applicant had no difficulty in finding alternative employment. Any extended period should be less than six months. Reference was made to various authorities to support this submission.

140 It was also argued that there was no redundancy, because, amongst other things, the work of overseeing the investments of the first respondent's clients was always required; the CIO position took on these functions; it was irrelevant that it also had other responsibilities. This was in fact the reverse of a redundancy. Even if that view were rejected, no orders should follow, because other acceptable alternate employment had been offered.

141 As to bonus, no order should be made because the scheme had not been demonstrated to be unfair. (See Diver at [77] - [81].) For similar reasons the claims made in relation to shares and options should be rejected. As to mitigation, all earnings from the new employment in any notice period should be taken into account, including bonus and shares, otherwise the applicant would receive a considerable windfall.

142 In reply it was put by Mr Goot that the respondents' case as closed was fundamentally different to that advanced in the pleadings, where it was put that the new position had been developed to meet the applicants' aspirations for advancement. There were also a litany of performance issues raised against the applicant in the reply and in Mr Lazberger's evidence, which were now sought to be swept away. Mr Lazberger's evidence was that this had all come about because of the applicant's shortcomings. It could not now be said that such views did not require the application of the respondents' policies which were designed to deal with such situations.

143 The evidence well left open the finding that the applicant had been made redundant. Mr Lazberger and Mr Serhant were at pains to point out that while the CIO position absorbed the duties formerly performed by the applicant, the positions were different. Mr York conceded the redundancy. It occurred in the context of a restructure. The concept of a reasonable alternative position, on which the respondents relied, could not arise unless there had been a redundancy.

144 This case is one of those which initially requires determination of whether or not the employment was brought to an end by the employer, which gave the employee no notice of termination of the employment and made no payment to the employee, in lieu of giving such notice. That question arises in a context where the case pressed by the respondents was that the applicant's removal from his position of Director of Investments resulted from decisions which they had legitimately taken in their commercial interests and that there was nothing unfair about what they had done. Given the evidence as to how the respondents conducted themselves, a matter which the Court is required to consider under s106(2) of the Act and the way in which that conduct was variously sought to be portrayed in these proceedings, it is necessary to make a general observation about the case, so advanced.

145 It is undoubted that companies such as the respondents run their businesses in order to maximise profits for their shareholders and that they do so, by making decisions which they regard as being in their commercial interests. Such an approach is entirely consistent with the public interest and important for the economy of this State. As the respondents submitted, in this case, those interests were considerable, given the billions of dollars of investments which the respondents managed in Australia and elsewhere.

146 Even so, it is unarguable that commercial interests cannot be an overriding concern for any corporation. Adherence to applicable laws and contractual obligations, including to a company's employees, is both in the public interest and also in the company's commercial interests. There is no reason in logic, or morality, to think otherwise, no matter that a lot of money might be at stake in a particular case, because the business in question is large and successful. A company's failure to ensure that proper regard is paid to its obligations, may well impact negatively on its commercial interests, particularly if legal proceedings result.

147 While the Court's attention was drawn to what was said to be an absence of jurisdiction to deal with a part of the claim advanced, when the case first opened, submissions as to jurisdiction were not later pressed by the respondents. Perhaps this flowed from the amendment to the summons later made by the applicant, without objection. It is unnecessary to come to a view about this.

148 On the evidence, the applicant and the two respondents were parties to an arrangement which comprised the employment contract and various other schemes and policies which applied to the employment. They related to bonus, share and options schemes and performance and redundancy policies. I am well satisfied that the claims pursued were within jurisdiction, notwithstanding that the proper law of some of these schemes was not that of New South Wales.

149 The evidence of how the second respondent directed the operations of the first respondent, including in relation to how it would meet its contractual and other obligations and how its employees would be treated, rewarded and paid, put this conclusion beyond any argument.

150 The law in relation to constructive dismissal and repudiation is well settled. On the evidence, it can only be concluded that the employment came to an end, as the result of steps taken by the respondents.

151 As Mr Lazberger's evidence in cross examination put beyond doubt, it was the respondents' decision to restructure the first respondent's management structure, with the creation of a CIO position, which absorbed the applicant's former duties as Director of Investments. Mr Serhant's evidence showed that this decision was made in the respondents' commercial interests, notwithstanding the consequences for the applicant. The CIO position was overall designed to be a more senior position than that of the Director of Investments position. The applicant was not considered for appointment to the new position. The new position meant that there was no longer a need for the applicant's position to continue. Accordingly, a new role was proposed for him. An offer to employ Mr Crafter as the CIO was made and he had accepted it, before the applicant was even informed of the restructure. It was intended that in his new role, the applicant would, in part, report to the new CIO.

152 What prompted the decision to restructure is, in one sense, irrelevant. It was undoubtedly one for the respondents to make and they did so, in their own business interests. It is the consequences of the decision and how it was given effect, which here arises for consideration.

153 The evidence showed that the respondents were not contractually entitled to remove the applicant from his position and to appoint him to another. As I observed in Gillies & Ors v Health Administration Corporation and Anor [2003] NSWIRComm 243, an attempt to force a unilateral variation upon the other contracting party, is likely to involve a breach of contract amounting to repudiation. Some corporations, of course, employ their executives to undertake whatever duties their employer might allocate to them from time to time, as discussed for example by Young J in Brookton Holdings at 289 and by the Full Court in Gala. Despite Mr Serhant's evidence as to how 'modern corporations' conduct their businesses, the evidence showed that the applicant was not employed under such a contract. The applicant was first employed as a Portfolio Manager. He was later appointed the first respondent's Director of Investments. The respondents had no contractual right to unilaterally remove him from that position, even if the new position he was then offered was, in truth, a promotion. In reality, that step involved the termination of his contract of employment and an offer of a new contract. The applicant was entitled to accept or reject that offer, although different consequences would have flowed from whichever decision he made.

154 The evidence showed that the respondents well appreciated this reality. In an email of 25 May, Mr Lazberger informed Mr Serhant that: "I have faxed to you the letter I received from David today. The bottom line is that he believes he has been removed from his job and is, therefore, now redundant. We obviously refute this accusation. He set the time that this is effective at 5pm today and wanted our response by that time. Given that he has ignored every deadline we set for him, I did not reply today. Interestingly he sent his letter out whilst he is on sick leave due to "anxiety and depression".

He will receive a letter that has been vetted by our law firm in the first part of next week that states that he will only receive his basic entitlements, ie one months salary plus leave allowances. The next step will inevitably be us receiving a writ from his law firm and this will then start a well defined legal process that involves mediation and if all else fails a court case. It sounds dire (and it probably is) but it happens every day of the week."

155 On 6 June Mr Serhant directed Mr Lazberger: "mark, he is wrong about the facts. nick felt our original non negotiable offer was too generous. there is no offer. we will not be threatened, pay only what is specified by law. do not disparage him to the market. it is sad to see that he does not recognize the role he played in our success in the correct proportion. he was by his own words well paid for his past contribution. why should he be paid again. further when one resigns, as he most assuredly did when he failed to accept his new and more lofty position vice chairmen, why does he expect anything?"

156 The evidence does not permit the conclusion that the applicant resigned. Rather, he accepted the respondents' repudiation of their contract, as he was entitled to do. Given the evidence as to the second respondents' decision as to how the applicant was to be treated and how it was put into effect, there can be no doubt at all, that the way in which the respondents conducted themselves involved a breach of their contractual and statutory obligations to the applicant and that the strategy pursued was entirely deliberate. On the evidence, it must also be concluded that this involved a blatant misuse of a position which was undoubtedly vastly superior to that of the applicant. This litigation must be seen in the light of that unfair conduct.

The restructure and the new position offered to the applicant - was it a promotion?

157 The evidence given by the respondents' witnesses as to why the applicant was offered a new position was inconsistent, as I earlier observed. It was Mr Serhant's evidence that the respondents were concerned that the applicant was an at risk employee and that it was the applicant's proposed new position, designed to retain him and to meet his career aspirations, which had led to the need to create the new CIO position. This was not consistent with other evidence, including that of Mr Lazberger and what was said in contemporaneous documents. In an email sent by Mr Lazberger to Mr Alan Brown in early March 2001, in which the new CIO position was discussed, Mr Lazberger floated the idea of a Sydney based position for the applicant, with responsibilities for Asia Pacific markets, reporting to Mr Brown. He concluded "I feel that before we progress much further with filling the CIO position we need to have something to offer David, hence the above suggestions".

158 Such a position was never offered to the applicant. When Mr Lazberger first raised the position of Vice Chairman and Principal with the applicant in April, it was accompanied by the offer of a fully maintained car. What duties and responsibilities the position would have, where it would fit in the management structure, what remuneration it would lead to and what longevity it might have, were not explained to the applicant. Again, the respondents' commercial interests drove what then occurred, not what their obligations to the applicant required.

159 The evidence showed that by this stage the respondents wanted to retain the applicant in their employ, but only on terms advantageous to them. The decision to create the CIO position was a commercial one, driven by the concern that the applicant would leave. Given the sensitive position he occupied, a sudden departure was likely to have a negative affect on the respondents' commercial operations. Under the contract the parties were only obliged to give each other one month's notice of termination. The respondents moved to protect themselves from this risk. Mr Lazberger wanted to ensure a smooth transition. The new position of CIO was developed and Mr Crafter was recruited. All of those steps were hidden from the applicant, on the respondents' case because it was in their commercial interests to do so, even though such secrecy was not required, in Mr Serhant's opinion. He, however, left implementation of the decision to Mr Lazberger. Once Mr Crafter had been recruited, the respondents then raised with the applicant a range of new duties, with an attractive job title and a car.

160 I am satisfied on the evidence that the new position proposed to the applicant was, in reality, not a promotion. This conclusion was directly supported by the evidence of both Mr Serhant and Mr York.

161 Other evidence pointed to the same conclusion. Under the structure in place before the development of the CIO proposal, the applicant was one of three of Mr Lazberger's direct reports. The applicant occupied the first respondent's second most senior position, as reflected both by his responsibilities and remuneration. Mr Lazberger was unable to assure the applicant that this would not change with his new appointment. This no doubt reflected the creation of the CIO position, as a more senior position than that which the applicant had occupied. In his old position, the applicant was responsible for the management of all of the first respondents' considerable investment funds and was also a member of the second respondents' global investment committee. Once the details of what was proposed began to be fleshed out, it became clear that the new position had no such responsibilities and would only report in part to Mr Lazberger, and in part to the new CIO. Understandably, the applicant could not regard this as reflecting a promotion.

162 It was also proposed that the applicant not have responsibility for any employees, or in respect of the management of any aspect of the first respondent's operations. The job was described as being 'strategic', rather than involving day to day operations. It involved aspects of product development work. The resources which would be made available to the applicant to perform this work had not been developed, nor were they a matter of agreement, as Mr Lazberger, on his own evidence, had represented to the applicant in early 2000, would be the case, in the development of any new role for the applicant. There was no budget proposed for the position and no accountabilities developed.

163 The applicant was pressed to take the respondents on trust and that all would work out, down the track. This suggestion has to be appreciated in a context where the respondents had in late 2000 implemented a new policy, structuring their senior executives' remuneration on the same basis world-wide, by reference to a base salary reflecting level of responsibility; bonus based on results achieved, individuality and collectively; and equity, based on future value to the firm. Whether or not the new position was a promotion, or a demotion, thus also depended, obviously enough, on the remuneration which would attach to the position. The applicant sought reassurances about this, to no avail. Under the new policy determination of remuneration depended, in part, upon the band into which an employee's position fell. Position ranking had regard to four key factors: Industry visibility: Expertise associated with position Current importance to firm: Revenues, profits, AUM Strategic importance to firm: Expected future profit growth contribution Leadership: Number and seniority of staff managed

164 The applicant's old position as Director of Investments fell into Band 2, the same band as Mr Lazberger, they being the only two employees at that level in Australia. The respondents refused to assure the applicant that his bonus would continue to remain second only to that paid to Mr Lazberger. He was not even assured that the new position would fall into Band 2. There was no evidence that the matter had even been considered by the established compensation committee.

165 Perhaps this reflected the difficulty in what was being proposed in the new position description, being able to be assessed as a Band 2 position, under the applicable criteria. As Mr Serhant described it, the aim of the new remuneration policy was to create a "framework whereby people were paid similar remuneration for performing similar positions throughout the world." The applicant was not even given any assurances as to what range of bonus levels he might expect in his new job, even though, on the evidence, this information was by that time being provided by the first respondent to employees in their offer letters. He was rather told that Mr Lazberger and Mr Serhant would look after him in the bonus process, as they had in the past. In one of the emails being exchanged between Mr Lazberger and Mr Serhant at this time, Mr Serhant refused to give the applicant the assurances he sought about remuneration, saying "he may expect fair treatment and has the opportunity to be well compensated however we will not guarantee that he is the second most highly compensated as our future needs might change."

166 The evidence showed that while the respondents did not to wish to lose the applicant's services in May 2001, there was a limit to what they were prepared to offer him, in order to retain his services. This, no doubt, reflected the fact that they proposed to appoint the applicant to a new position, comprising duties which they were happy to engage him to perform, given his particular skills, rather than a particular position, necessary in the business structure they had established, which they required to be filled either by the applicant or someone else. On Mr Serhant's evidence, management of this process was left with Mr Lazberger. 'Reluctantly', as a result of their discussions, Mr Lazberger told the applicant he was prepared to change the applicant's reporting lines, so that he would not report to Mr Crafter, but only to him.

167 The respondents, however, refused to reassure the applicant that the new position was a real and ongoing one, despite the vagueness of the responsibilities proposed; no apparent resources being devoted to the position and no tangible criteria set for the applicant to achieve and have assessed, when bonus and other incentives arose for annual consideration. In cross examination, Mr Lazberger explained that he had refused to respond further to the applicant's written questions about these matters, even though he had pressed the applicant to reconsider his refusal of the offer and to clarify his concerns, because he believed that these matters had already been sufficiently discussed between them. In his view, after the applicant took on the new job, these issues could have easily been finalised between them. If that were really the case, one wonders why Mr Lazberger refused to deal with them at that point. The answer lies in Mr Serhant's attitude, that the applicant would not be given the guarantees he sought, because the respondents' commercial interests might change subsequently. The respondents plainly did not wish to be bound by any promises as to such matters, which would have provided a foundation for the representation that the applicant was being promoted, upon which he could have later relied. Plainly, he was not, in reality, being promoted at all, as even Mr York appreciated.

168 The result was that the new job was finally put to the applicant on a take it or leave it basis. When he did not accept what was proposed, he was treated as having resigned his employment.

169 It is also relevant that this attitude was adopted by the respondents in a context where the position description Mr Lazberger had developed, referred to the proposed new position developing in a five year timeframe. Despite this, the respondents refused to agree to any fixed term - either three years, as the applicant first proposed, or even 12 months, with a 12 months notice period, if the position then disappeared. This latter proposal seemed quite a reasonable one, in a context where the new position was not finalised and what remuneration it might actually generate, would not become apparent for some considerable time. Mr Lazberger explained that this proposal was declined, because other employees were not employed by the respondents on a fixed term basis. He had entirely forgotten that in 2000, he had agreed upon a fixed term 9 month contract for a more junior employee, reporting to the applicant, recruited when a business was acquired from MLC.

170 There can be no doubt of the importance of the operation of the implied duty of trust and confidence between senior executives such as the applicant and the respondents. The respondents insisted that the applicants take them on trust in relation to all of the matters which were concerning him about what they proposed for his future employment. In the case advanced for the respondents, it was argued that the applicant had no basis for concluding that they had broken his trust. In my view, given the treatment he had received in being removed from his position, without any warning and being informed that he was being appointed to a new one, which had never been discussed with him and which he had never sought, it was quite understandable that the applicant's trust and confidence in the respondents had been shattered. Given what he was told about his performance inadequacies at the same time, there can only have been distrust resulting. That advice was quite inconsistent with the idea that he was to be promoted. The respondents' refusal to confirm that his remuneration would continue at its former levels, second only to Mr Lazberger, only provided a further basis for distrust and a proper basis for the applicant seeking assurances about the details of the new contract which the respondents were, in reality, proposing to him. Even Mr Lazberger accepted in cross examination that these matters really required the applicant's agreement. That was not how the respondents conducted themselves at the time.

171 It was the respondents' case that there was no basis upon which the applicant could properly have come to the view that he could not trust the respondents, given that they were entitled to create the new CIO position and to appoint Mr Crafter to it, in their own commercial interests. They had no obligation to consult the applicant about that decision, before it was made, or implemented. In the circumstances of this case, I cannot accept that submission, for reasons to which I will return.

172 The respondents' attitude that the applicant had resigned, was then adopted in a context where they were not contractually entitled to insist that the applicant take the new position which they had offered. The evidence of Mr Serhant was that in his view, what modern corporations require of their senior employees is that they turn their hands to whatever they are asked to do from time to time. While account is taken of employees' aspirations, this is not done at the expense of business need. When such an attitude is pursued, irrespective of the company's obligations to its employees, it cannot be doubted that this is likely to lead to a resulting breakdown of necessary trust.

173 The respondents removed the applicant from his position, which had ceased to exist because of the restructure which they had devised and implemented with Mr Crafter's appointment. As Mr Lazberger explained it in his affidavit evidence, the new position differed from that to which the applicant was appointed, it was designed to take the company 'to the next level' in the investment industry and was a more senior role. The evidence showed that while the applicant had participated in the discussions which the respondents wished to pursue with him, about he accepting a new position which did not involve a real promotion, the respondents took various steps to reassure themselves that their appointment of Mr Crafter would be well received by the market and their clients. It was after they had satisfied themselves about their market position, that the new position was pressed upon the applicant on a take it or leave it basis. The applicant took the view that his contract had been repudiated, accepted the repudiation and thereby the contract came to an end.

174 The respondents denied that this was what had occurred. Nevertheless, it undoubtedly reflected the reality, which the evidence showed the respondents in fact appreciated at that time. The evidence also demonstrated that the applicant was redundant. On the respondents' own case, his position had ceased to exist as a direct result of the steps they had taken in their commercial interests to restructure their senior management positions. The decision was not one taken in order to remove the applicant from his position for cause, as the respondents explained in their submissions. Were it otherwise, of course, the respondents having entirely ignored the policy which applied to such circumstances, their conduct would thereby also have been most unfair.

175 The observations of Ryan J in Jones v Department or Energy and Minerals (1995) 60 IR 304 at 308, with which I entirely agree, put the question of redundancy beyond doubt. His Honour said: It has generally been accepted that a dismissal is not unfair if it results from genuine redundancy, in the sense that an employee is no longer required to perform his or her job because of changes in operational requirements. In R v Industrial Commission of South Australia; Ex parte Adelaide Milk Co-operative Ltd (1977) 44 SAIR 1202, Bray CJ defined redundancy at 1205 where he stated: "a job becomes redundant when an employer no longer desires to have it all performed by anyone."

That definition was endorsed by a Full Bench of the Australia Conciliation and Arbitration Commission in the Termination, Change and Redundancy Case (1984) 8 IR 34 at 55-56.

On Mr Jones' evidence, this case would not satisfy that narrow definition of genuine redundancy, as some of his former duties were still being performed. However, it should be noted that Bray CJ's description of what can constitute redundancy is not expressed to be exclusive. His Honour's description was cast in terms of a "job" in the sense of a collection of functions, duties and responsibilities entrusted, as part of the scheme of employer's organisation, to a particular employee. However, it is within the employer's prerogative to rearrange the organisational structure by breaking up the collection of functions duties and responsibilities attached to a single position and distributing them among holders of other positions, including newly-created positions. It is inappropriate now to attempt an exhaustive description of the methods by which a reorganisation of that kind in may be achieved. One illustration of it occurs when the duties of a single, full-time, employee are redistributed to several part-time employees. What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the re-organisation, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Milk Co-operative case.

176 Mr York's evidence was that while he was involved in some of the discussions with the applicant, the preparation of the new position description and the engagement of Mr Crafter, he never considered that the applicant might be redundant, because he was being offered a suitable alternative position, even though it was not a promotion, as it was represented by others to be. The first respondent had a redundancy policy which Mr York administered. The concept of a suitable alternative position is not one mentioned there. In any event, Mr York's opinion was not made out on the evidence, given the respondents' refusal to give the applicant firm assurances about his remuneration entitlements and the other matters of concern which he raised, matters which Mr York plainly never considered.

177 The evidence did not permit the conclusion that the position was a suitable alternative. The respondents' witnesses were at pains to emphasise that it was a job which the applicant could perform and suited his abilities. The applicant even agreed that there were aspects which interested him and which he believed he could perform. Nevertheless, given the matters about which the respondents were not prepared to reach agreement with the applicant, including in relation to remuneration, longevity, duties and responsibilities, the conclusion that the position was a suitable alternative, was simply not available on the evidence.

178 As I noted, the first respondent in fact appreciated that it had no right to require the applicant to take up the new job. The respondents witnesses also accepted that they never asked the applicant if he wanted it, before telling him that his former job was gone and he had a new one. Despite this, Mr Serhant's direction precluded the first respondent paying the applicant even the contractual notice period which Mr Lazberger initially proposed be paid. Indeed, termination pay was finally approached on a basis which resulted in the applicant not even receiving his bare statutory entitlements. As Mr York explained, the respondents even deducted from his final annual leave payment, what had been 'overpaid' to him, by way of his regular monthly pay.

179 This approach was also adopted despite the requirements of the respondents' redundancy policy, which were entirely ignored. In the circumstances, the policy provided for at least three months' notice, additional to the applicant's contractual entitlement to one month's notice, on an ex gratia basis; redundancy pay of 20 weeks and the payment of long service leave, after five years service; as well as other benefits, for senior executives such as the applicant. It is relevant to note that the parties' contract did not permit the respondents to make a payment in lieu of notice, although the redundancy policy provided: 8It is suggested that in cases of bona fide redundancy we stay with standard contractual notice, standard redundancy calculations and then add in any other payments to meet the requirements for reasonable notice as an ex-gratia payment. This is to ensure that entitlements to unvested options/stock do not occur, as can be the case when a long period of notice is provided. This is different to cases of executive termination where redundancy is not involved as there we pay reasonable notice to avoid the risk of "unfair contract" claims.

9Depending on the age, seniority, and tenure of the employee, as well as the circumstances in each case the ex gratia payment could be higher than this. Advice will be taken from Mallesons in each case.

181 The respondents' treatment of the applicant was most unfair. The applicant's work for the respondents over the period of his employment had undoubtedly been extremely productive, both for him and the respondents. He was responsible for the management of billions of dollars of investment funds in Australia alone. He was a director of the first respondent and a member of its Executive Committee. He was very well remunerated for his work, no doubt reflective of the very considerable returns which his efforts generated for the respondents. While Mr Lazberger had some concerns about the applicant's performance, which had been the subject of discussion from time to time, including at his only performance review in late 2000, the resulting assessment was, nevertheless, extremely positive, including in relation to the people management areas in respect of which, on the evidence led in this case, the applicant was allegedly deficient.

182 The 2000 review preceded a substantial salary increase and the highest bonus the applicant had received, over all of the years of his employment. Despite Mr Lazberger's extensive evidence about his concerns, the idea that the applicant's performance was inadequate, is simply not sustainable on the evidence, as I earlier noted. Nor, indeed, was that the way in which the respondents' case was finally put in submissions. In cross examination, Mr Lazberger persisted with his evidence that the applicant's performance formed a part of what motivated the creation of the CIO position. Mr Serhant's evidence, however, threw a much different light on what had transpired - the respondents were motivated by a concern as to what the applicant's sudden departure would do their commercial position. Given the evidence of the control which the second respondent exercised over the first respondent's activities, this evidence had to be given considerable weight.

183 There was no doubt that the applicant was a most valuable employee who the respondents wished to retain in their employ. The evidence suggested that the market in which the respondents operate in Australia is small and extremely competitive. Mr Lazberger and the applicant had worked closely together throughout the applicant's employment in successfully growing the respondents' business. In 2000 there was a reshuffle of the respondents' senior management positions globally. For some time the applicant and Mr Lazberger had been discussing their own respective ambitions and futures with the respondents. The applicant was interested in promotion to the MD position, when Mr Lazberger moved on. Mr Lazberger wanted a more senior position which took his responsibilities beyond Australia. In fact, he achieved this after the applicant's departure. Mr Lazberger told the applicant in late 2000, that there was no support at senior levels for his appointment to the Australian MD position and that in his view, many of the duties of the position were boring and not what the applicant would be interested in.

184 An expanded role in the investment area for the Asia Pacific Region was then discussed with the applicant by Mr Lazberger and Mr Lopardo. In August 2000, a budget was prepared by the applicant with this possibility in mind. This did not eventuate at that time, for various business reasons, from the second respondent's point of view. The applicant discussed this with Mr Serhant in November, who promised to get back to him again after Christmas. He did not do so. It was unsuccessfully raised again by Mr Lazberger in early 2001.

185 At the performance review in late 2000, Mr Lazberger set the applicant a goal of finding a 2IC in 2001, something they had been discussing for some time. The applicant acted accordingly, taking various steps to pursue the matter. Mr Lazberger had told him that until he achieved this, his ambitions of an expanded role could not, in reality, be achieved.

186 The applicant had also earlier told Mr Lazberger that he would have concerns if someone such as Mr Reilly were promoted to the MD position, rather than him. On his evidence, Mr Lazberger became concerned that the applicant was stale in his position and not as motivated as he had been previously. It was the applicant's evidence that it was Mr Lazberger who described them both as stale and needing more challenge. He was not stale, but like other executives, was ready to move into an expanded role. Mr Serhant's evidence was that in November 2000 he came to the view that the applicant was an 'at risk' employee, after a discussion over dinner with the applicant. There was plainly some basis for this concern, but Mr Serhant did not discuss his concern with the applicant, or how the applicant's aspirations might be met by the respondents, after Christmas, as he had promised to do, even when the applicant was with him in Boston in March. Rather, in February the respondents set about finding a replacement for the applicant, while he continued to look for a 2IC.

187 With Mr Lazberger's decision to create the new and more senior position of CIO and to recruit Mr Crafter, the respondents' problems were solved. The applicant leaving would not result in the respondents' investment operations in Australia being left vulnerable. Having addressed this commercial need, the respondents were, however, still anxious to retain the applicant's services, rather than to have him depart to a competitor. This was understandable, given the evidence of the applicant's successes in his employment. The respondents did not have an expanded role in the investment area available for him in the Asia Pacific Region and so the proposal for the Vice Chairman's position emerged.

188 Seen against that background, it was not surprising that the way in which the applicant was removed from his position and the proposal of appointment to another was put to him, led him to view the respondents' intentions with suspicion, despite the offer of an attractive title and a car. Given what was discussed with the applicant about his future in 2000; what was put to him about the creation of the CIO position and his resulting removal from his own position, without discussion or warning; the proposed new duties outside an expanded investment role and the proposed reporting structure, when considered with what he was told by Mr Lazberger as to the decision having been motivated in part by concerns about his performance, that the applicant did not accept that the new position involved a real promotion; that it had real longevity and that it would not lead to a diminution of his remuneration, was entirely unsurprising.

189 This perhaps explains what Mr Lopardo did. In an email to Mr Serhant, Mr Lazberger and others, he reported that when he spoke to the applicant: 'i called david at home on saturday night. my purpose was to let him know that we care and we do want him to be a part of ssga. i told him it was MY desire to move him into this new role which i saw as extremely important to the future of not only ssga but also the asia pacific region. i mentioned to him that he was instrumental enough in our plans going forward as a strategist and new product guy that we wanted to bring in another day to day cio type person in order to free him up (sic) to take a broader yet more focused role - i said that it was my fault that we didn't position the communication to him quite clearly enough and for that he should blame me not ..."the rest of the management team".

190 On the evidence this was also quite an untrue representation of what had occurred to that point.

Trust and confidence in the context of commercial sensitivity

191 It is appropriate to return, at this point, to the submission that the applicant had no proper foundation for concluding that the respondents had broken trust with him and to therefore seek assurances from them, in relation to the new role he had been offered, rather than taking them on trust. It was put that the decision to create the CIO position was commercially sensitive; that given the applicant's position as a director, he had a conflict of interest and ethically, he could not be involved in the decision to create the position and the respondents had no obligation to advise him that they were considering such a restructure, before making the decision. Nor would the Court impose such an obligation in proceedings such as this.

192 The submission had only superficial attraction. There is no reason to think that such orders could not be made, if a case were made out on the evidence. Even the Commission's standard award redundancy provisions, which emerged from the test case Re Redundancy Awards (1994) 53 IR 419, imposes obligations on employers where a 'definite decision' to introduce changes in organisation, structure and other matters which are likely to have significant effects on employees, have been made. Significant effects include termination, the elimination of job tenure, the need for transfer to other work or the restructuring of jobs. Employers are thereupon obliged to notify affected employees of the proposed changes and to discuss them, in order to avoid or mitigate their effects. Such discussions must commence as early as practicable, after a definite decision has been made and requires the provision and discussion of information of various kinds.

193 It is unnecessary to consider the possibility of such orders being made in these proceedings, because they were not sought by the applicant. Rather, the applicant was concerned with the consequences of the unfair conduct which the respondents undoubtedly pursued and the contract which permitted them to do so.

194 In this case, the decision to restructure was a commercially sensitive one. That it was one which had to be hidden from the applicant does not however, follow. He was a director of the first respondent and a member of its Executive Committee. The proposed restructure did not go either to the Board or the Executive Committee for consideration. It was a decision made by Mr Lazberger, in consultation with Mr Serhant. Mr Lazberger agreed that the decision came about because he had changed his mind about the applicant seeking a successor, so that he could move on to expanded responsibilities. Other commercial considerations had arisen, as I have outlined.

195 Conceptually, it might well be that the applicant would have had to abstain from any involvement in a decision as to whether he, or someone else, should be appointed to any newly created position, given his obligations to the first respondent as a director. I am satisfied, however, that completely hiding from a director a decision to restructure the company's senior management structure, is a different matter. I do not understand that the Corporations Law operates as was submitted in the circumstances of this case. No provision of the legislation, any authority or even the first respondent's articles of association were referred to, to support the submission. Nor did the evidence suggest that the respondents had given any consideration to the question of whether any conflict arose for the applicant at all. They were rather motivated by the view that the applicant had become an at risk employee and had moved to ensure that this would not give rise to any problems for their business. That the respondents had such a concern was understandable.

196 On the evidence, the applicant's position was pivotal to the respondents' operations in Australia. Implicit in the respondents' case, however, was the view that if the reorganisation was discussed with the applicant, a commercial risk would arise, because the applicant would not himself keep the matter confidential. I am well satisfied that there was no basis for such a concern established on the evidence. There was not even a hint of it. To the contrary, even Mr Serhant took the view that the creation of the CIO position did not have to be hidden from the applicant, however that was a decision which he left entirely to Mr Lazberger. Mr Serhant was only called in to help manage the applicant, when the adverse consequences of what had been done became clear. Even Mr Lopardo was then called upon and the negotiations with Mr Crafter were revisited. As the applicant told Mr Lazberger in their discussions, he might have viewed what was proposed to him quite differently, if he had been taken into Mr Lazberger's confidence and had been involved in the change in direction which Mr Lazberger had embarked upon. It was being presented with a fait accompli, as he was, being removed from his position in conjunction with being informed that the decision was motivated in part by performance issues, which destroyed his trust in the respondents' other senior executives.

197 The evidence not only showed that the decision to restructure was hidden from the applicant, who continued working in accordance with the goals set in his 2000 performance review and his long ongoing discussions with Mr Lazberger and Mr Serhant, about an enhanced position with the respondents; when Mr Lazberger did finally raise the topic with him in April, he plainly misled the applicant about what was proposed.

198 This became entirely obvious when Mr Lazberger revealed to the applicant in May, that not only had the decision to create the CIO position been made; the applicant was not to be appointed to it; he had in mind appointing Mr Crafter; he was not to have expanded responsibilities in his area of expertise, investment, rather he was to be removed from his investment responsibilities, which were to become those of the CIO; the new CIO was not to report to him, to the contrary, he was in part to report to the new CIO and otherwise, he was to take on a new set of 'strategic' responsibilities, which were ill-defined and had not even been documented, so that he could understand what was being proposed.

199 Not even this information was entirely accurate. Mr Lazberger did not reveal that Mr Crafter had, in fact, been offered and accepted the appointment. Thereby Mr Lazberger's own ability to negotiate with the applicant was hampered by what had already been agreed with Mr Crafter. Indeed, Mr Lazberger found it necessary to raise with Mr Crafter the difficulties he was having and to secure his agreement to some possible changes in what had already been agreed between them, before he could advance his discussions with the applicant.

200 After receiving the position description which, as Mr Lazberger expected, raised numerous questions for the applicant, which were not satisfactorily responded to, the applicant refused the position. When asked by the respondents to reconsider, he agreed. Unsurprisingly, he sought assurances, as to what was concerning him about the proposal. The assurances were not given and the applicant came to the view that those with whom he was dealing were not being honest with him. On the applicant's evidence, up until these events he had nothing but trust and confidence in the respondents and its officers. He was entitled to proceed on the basis that they would continue to be honest with him, particularly given his position as a director of the first respondent. He was also entitled to assume that they would not ignore their contractual obligations to him. The evidence abundantly revealed that the applicant's views that he was misled were well founded. I reject the submission that he was naive in refusing the respondents' offer. To the contrary, he was quite alert to what they were about, as revealed by the emails exchanged by Mr Lazberger and Mr Serhant.

201 The applicant finally became distressed about his treatment. His health was affected and he sought medical treatment and took sick leave. Unsurprisingly on the evidence, the applicant could not accept the respondents' assurances. That his reservations had a proper foundation was completely confirmed by how the respondents then acted, without regard to their statutory or contractual obligations, let alone those provided for in their own policies.

202 For their part, the respondents thereupon became incensed that the applicant was not accepting them at their word, that they would look after him in the future. The respondents' obligations to honour the terms of the applicant's contract and the applicable statutes, let alone their policies, ultimately became a casualty of this reaction, as the emails in evidence demonstrated. The respondents' conduct then provided an even stronger platform for the applicant's conclusion that he could not trust them.

203 Given the parties' relationship up to this time, and the evidence of what the respondents' business generated by way of revenue from the applicant's endeavours, that outcome was really a most petty form of revenge. The evidence amply showed what little importance paying the applicant what was due to him had to the respondents, given their own situation. The respondents' commercial interests plainly did not require this conduct.

204 As a result of the second respondent's directions, the respondents wrongly sought to portray the applicant's refusal of the new appointment as having led to a termination of the employment at his instigation. This was untrue and involved conduct of a most unfair kind, persisted with even in the case advanced at the hearing.

205 The applicant's contract required the giving of notice. None was given and nor was any payment in lieu thereof made. The respondents did not even pay the applicant his bare statutory entitlements and refused to give any consideration to early vesting of shares and options which he had earlier been awarded for his work and in order to retain his services. Under the policies in question, such a discretion was available to be exercised. There was no evidence that it was even considered, consistently with Mr Serhant's instructions.

206 In light of the evidence as to all of the circumstances of this employment and how it came to be terminated, I am satisfied that not only was the respondents' conduct to the applicant most unfair, so too was the parties' contract. The contract, first agreed in 1993, reflected what appeared to be the respondents' standard terms. The respondents, nevertheless, considered what they were obliged to do for the applicant on termination. Mr Lazberger's view was that payment should be made for the bare contractual notice period. The second respondent's executives were not even prepared to meet that obligation. Nor was any thought at all given to the provisions of the redundancy policy, which required that at least a further three months' notice be forthcoming and that thought be given to what period of notice was reasonable in the particular circumstances. The contract was plainly unfair, in so far as it permitted that outcome.

207 I also note that this case had many of the features of the circumstances considered by the Full Court in Gala, which there also led to the conclusion that the contract was relevantly unfair. A point of obvious distinction was that the contract there in question expressly permitted the employer to require the employee to taken on duties which the employer might reasonably allot from time to time. That was not so in this case. Other factors present in Gala were, however, here present. They included the absence of notice, or warning, of removal from the position to which the applicant was there appointed; immediate transfer away from the applicant's area of expertise; the new position put on a take it or leave it basis; and a failure to properly consider or respond to the applicant's concerns. The conclusions reached in Gala have reinforced the views which I have here reached as to the unfairness of this contract.

208 Given the senior position which the applicant held with the respondents, the evidence as to the respondents' position in the industry in question, the applicant's age, remuneration and length of service, as well as the circumstances in which the employment came to an end and the redundancy policy which applied to such an eventuality, I am satisfied that in the circumstance of the redundancy which flowed from this re-organisation, the contract should have provided for more than a bare one month's notice of termination of employment.

209 It is convenient at this point to deal with a submission made by the respondents that the period of notice fixed should have regard to the fact that the applicant was later able to obtain employment elsewhere. I do not agree that this is a matter to which regard may properly be had in determining what a fair period of notice should have been, at the time of termination of the employment. The respondents will derive a benefit from the applicant having successfully obtained employment elsewhere in the approach adopted to the formulation of money orders. His good fortune in this respect is not, however, a factor relevant in determining what the respondents should have done, as a matter of fairness, when they earlier terminated his employment.

210 Having considered all of the evidence and the submissions advanced in relation to what a fair period in these circumstances would have been, I have concluded that notice of seven months was appropriate. An order for payment of 20 weeks' redundancy pay which the applicable policy required must also follow, as a matter of justice in all of these circumstances ordered. That policy appeared to adopt the test case safety net minimum established by the Commission, which is now reflected in the Regulations made under the Employment Protection Act 1982.

Pro rata bonus claim and bonus during notice period

211 The applicant sought a pro rata bonus payment for the part year completed prior to the termination of his employment to 25 May and during any notice period ordered. The applicant's contract of employment required the giving of notice. The redundancy policy contemplated that additional notice be paid.

212 Consistent with my observations in Diver, I am well satisfied that there is nothing inherently unfair in a bonus system which rewards employees annually, having regard to the performance achieved by the employee and the company. Such discretionary schemes are commonplace and give employees access to benefits, which would otherwise not be available to them. Companies such as the respondents use such schemes in order to attract and retain staff, as well as rewarding them for their work when it achieves measurable success for the employer. Provided the discretions retained by the employer in such a scheme are exercised fairly, there is no reason to think that the scheme is inherently unfair.

213 What here arises for consideration, however, is whether some additional payment in respect of bonus should be forthcoming, given the time and circumstances in which the employment was brought to an end; the redundancy which led to that termination; the failure to give the respondents any notice of termination and what would have resulted, had such notice been given.

214 The scheme did not provide for pro rata bonus for partial years of employment, or during any notice period. On the evidence, bonus formed a substantial part of the applicant's remuneration. Bonuses paid to ongoing senior employees for the 2001 year was also substantial, although much lower than that paid for the 2000 year. The respondents argued that fairness did not require any order in respect of bonus, given that the applicant had not participated in the work which led to the basis upon which bonus was later assessed for ongoing employees, for the 2001 year.

215 I am satisfied that in the circumstances of this case, some allowance must be made for bonus up to the time of termination. The evidence showed that the applicant was attracted to his employment by representations made as to bonus. Letters of offer to other employees stated expected bonus ranges. Like in Merryl Lynch, in this industry, bonus played a very significant part of employees' remuneration for their work. Like the circumstances which arose for consideration in Diver, the applicant did not seek to be removed from his position. That resulted from a concern on the respondents' part, that it would be in their commercial interests to remove him. They were obliged to give him one month's notice of termination under his contract, and indeed more, because of the provisions of the redundancy policy. They gave him none and even made no payment in lieu to him. Thereby they removed from him the opportunity to earn the bonus which would have flowed to him from continued employment in the position in which he had been so successful. This was a serious disadvantage from the applicant's point of view. By way of contrast, the respondents' position was quite different, particularly given that the applicant was plainly involved in work of a kind from which the respondents continued to derive significant benefits, well after the termination of his employment. This, no doubt, impacted on the ability of other employees later to achieve bonus and the respondents to pay it.

216 In all of the circumstances, I am well satisfied that a properly cautious approach to this aspect of the claim, as discussed in Adams, is to order that the applicant should receive pro rata bonus for the period up to the termination of his employment, but not in respect of the notice period. During the latter period, the applicant did not perform work for the respondents, but successfully pursued the opportunity to work elsewhere. In that new employment, the opportunity to earn bonus also arose. I cannot see that justice requires an order for bonus in these circumstances for the notice period.

217 The rate I adopt is that finally pressed by the applicant, which achieves an average for other senior executives of the first respondent and so has proper regard to company performance. It also pays appropriate regard to the applicant's performance, given that there was no evidence that there had been any deterioration in his performance.

218 I have been further confirmed in these conclusions, by the view I have come to as to bonus in the context of mitigation, to which I will return below. These two approaches, in my view, achieve a just balance between the parties, in relation to this aspect of the claim.

219 I am also satisfied that there is no reason to think that share and options schemes which operate on a discretionary basis, in order to reward employees for good performance and to encourage them to remain in employment, are inherently unfair. To the contrary, they also give employees access to benefits not otherwise available to them. It is when such schemes are structured or operate unfairly, that the question of whether any relief should flow arises for consideration, if a case is brought under s106.

220 The scheme here in question made no provision for what was to happen in the event of redundancy. Under the scheme, termination of employment on that account, was treated in the same way as termination resulting from an employee's decision to resign, or that flowing from summary dismissal.

221 I have difficulty in accepting the fairness of a scheme such as this, which seeks to attract, retain and reward employees, but which draws no distinction at all between such circumstances. While there was a discretion to consider the applicant's position, the evidence suggested that no such consideration was here given by the respondents, even though the resulting consequences of the termination, as between the parties, were quite uneven. I am satisfied that in such circumstances, as a matter of fairness, some consideration should be given to the employee's resulting position.

222 I have not been dissuaded from that conclusion, given the evidence as to the new position offered by the respondents and why it was refused. The applicant had sound reasons for concluding that he was not being offered a promotion and that his career would be damaged if he accepted what the respondents sought unilaterally to impose upon him.

223 Here, the claim advanced was for those shares and options which would have vested in the applicant during the notice period sought. I am satisfied that such an approach is a just one in the circumstances which here arise for consideration. The applicant must have an order in respect of the shares and options which would have vested during the seven month notice period, which I have concluded was fairly required in the circumstances of this case. That, in my view, achieves a fair balance between the position of the two parties in relation to this aspect of the claim, given that the applicant thereby loses a considerable number of shares and options which would have vested in him had his employment continued, but retains those which would have vested in the notice period.

224 The outstanding accrued leave must obviously be paid. The basis upon which the respondents made deductions from what was due to the applicant under the Annual Holidays Act was not apparent to me. In so far as the contract permitted this result, it was undoubtedly unfair. As observed by Barwick CJ, the power to make money orders under s106(5) extends to money payable under the contractual arrangements; what is necessary to effect restitution to the parties' former position in part or in whole; as well as moneys to be paid in connection with the variation or avoidance of the contract. (See Brown v Rezitis (1970) 127 CLR 157 at 165).

225 I do not, however, propose to order leave calculated by reference to the notice period. That is an approach which has been adopted in some cases, particularly where the evidence showed that it was especially important for the applicant in question, that the obligation to give notice was adhered to, rather than making a payment in lieu. This is not such a case. Annual leave is a benefit which ordinarily flows from the performance of work. I am satisfied in this case that justice does not require such an order. It is also relevant that entitlements to annual leave flowed from the work performed by the applicant for his new employer.

226 No long service leave was paid by the respondents. The applicant had been in employment for over 8 years. On the evidence he must have an order in his favour in respect of that entitlement. Not only did the legislation require that payment in the circumstances which here arose, it should also have followed from the respondents' redundancy policy. The contract was unfair in not requiring it.

227 For similar reasons to those given in relation to annual leave, I am satisfied that in this case, justice does not require that an order be made for the payment of long service leave in respect of the notice period.

228 The evidence showed that the applicant successfully pursued other employment with NRMA, commencing in August 2001. The position was not as senior as that which he had occupied with the respondents. Nevertheless, I am satisfied that it is appropriate that in making money orders, account be taken of what was earned in that new employment, from commencement in August 2001, to the end of the notice period I have ordered.

229 In that new employment, the applicant received salary and in addition, was paid a bonus and in 2002, received an entitlement to shares.

230 I have concluded that account should be taken of the salary earned in the new job, but not the bonus and shares. I have come to that conclusion, having regard to the discussion of the concept of mitigation by the Full Court in Adams and later in Brent v Bastian (2003) 124 IR 223. It is also pertinent to observe that, contrary to the respondents' submission, questions of a 'windfall' for an applicant do not arise in a case where it is the respondent which has failed to observe contractual and other obligations it has to an employee, when employment is brought to an end. To the contrary, respondents derive an obvious benefit from the operation of the principle of mitigation, in any case where money orders in respect of unfair notice periods arise, if the applicant has been able to obtain other employment. If there be any windfall, it is in the respondents' favour, in such a case.

231 Here, the bonus in the new employment was paid for performance. While I have made an order for payment of bonus in respect of the work performed by the applicant for the respondents, prior to termination, I have declined to make such an order in respect of the notice period ordered, in part, because of the views which I reached in relation to the question of mitigation. I have concluded that the applicant should not have an order for bonus for notice, given that he was not required to perform work for the respondents during that period and had the opportunity to perform work for another employer, which also generated a bonus payment. In those circumstances, justice also requires that no account be taken of bonus which the work in the new employment might have generated, during the notice period.

232 As I observed in Diver, what work actually results in a payment under a bonus scheme assessed annually, is difficult to determine. There was no examination of the new employer's bonus scheme in these proceedings. It was, for example, unclear to me whether performance in the new employment was assessed only having regard to personal performance, or also by reference to company performance, or the performance of a group or team, as arises under some schemes.

233 The respondents also argued that some account should be taken of the value of the shares flowing from the new employment. I cannot, as a matter of justice, reach that conclusion. The shares were awarded in February 2002, after the conclusion of the notice period I have fixed. How these shares came to be awarded was not the subject of examination in the proceedings. What was clear is that they have still not vested. Vesting is not due until between 2005 and 2012 and then only if the applicant remains in employment and the new employer's shares reach certain targets. The evidence was not such as to permit any conclusions properly to be reached as to such matters, in favour of the respondents.

234 I am satisfied that justice requires that an order for interest and costs must follow as from the date of termination to the date of judgment.

235 For all of the reasons given, I find the parties' contract and arrangement relevantly unfair and make the following orders:

1 The contact and arrangement is varied ab initio to require the giving of seven months' notice of termination or payment in lieu; a payment on account of redundancy; pro rata bonus to the date of termination and the vesting of outstanding shares and options during the notice period.

2 The respondents are to pay the applicant the sum of:

2.1 (a) Seven months' pay in lieu of notice, less what the applicant earned in his new employment, in that period;

(b) pro rata bonus for the period up to the termination of the applicant's employment;

(c) the agreed value of the shares and options due to vest in the notice period;

(d) the outstanding annual leave unpaid on termination;

(e) the outstanding long service leave unpaid on termination;

(f) 20 weeks' redundancy pay; plus 2.2 Interest on that sum from the date of termination to the date of judgment.

236 The usual order as to costs would be that the respondents bear the applicant's costs, as agreed or assessed. If the parties are unable to agree upon costs, or the calculation of the money sums deriving from the orders made, they have liberty to approach. That liberty should be exercised within 28 days. ------------------------

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.