Zammitt and Another v Trend Windows & Doors Pty Limited

LEGISLATION CITED: Industrial Arbitration Act 1940 Industrial Relations Act 1996

Adrians Transport Pty Ltd and Anor v Pacific Dunlop Ltd (t/a Olex Cables) (unreported) per Hill J, Federal Court, 8 March, 1996 Australian Blue Metal Ltd v Robert Frank Hughes and Others [1963] AC 74 Barry and Ors v Incitec Limited & Anor (1991) 45 IR 143 Bowman v Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited) [2007] NSWIRComm 204 Crawford Fittings Co and Others v Sydney Valve & Fittings Pty Ltd and Another (1998) 14 NSWLR 438 Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No. 11) [2002] NSWIRComm 354 CASES CITED: Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No. 15) [2003] NSWIRComm 173 Incitec Ltd and Another v Industrial Court of New South Wales and Others (1992) 29 NSWLR 83; (1992) 45 IR 155 Mark Trenter t-as 'Time Rite Onforwarders' v Australian Air Express Pty Limited [2006] NSWIRComm 314 Myer Stores Limited t/a Grace Bros v Stowart and Others (1994) 55 IR 21 Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661 Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121 Westfield Holdings v Adams (2001) 114 IR 241

HEARING DATES: 30 April 2007, 1 May 2007, 2 May 2007, 18 June 2007, 19 July 2007 and 6 August 2007.

APPLICANTS: Mr K J Pierce of counsel Solicitors: Stewart Cuddy & Mockler Solicitors (Mr D Mockler) LEGAL REPRESENTATIVES: RESPONDENT: Mr M J Moir of counsel Solicitors: K. P. O'Donnell & Associates (Mr B O'Donnell)

Vincent Michael Zammitt v Trend Windows & Doors Pty Limited

Application under section 106 of the Industrial Relations Act 1996

Stephen Robert Hill v Trend Windows & Doors Pty Limited

Application under section 106 of the Industrial Relations Act 1996

1 The present proceedings are brought by the applicants under s 106 of the Industrial Relations Act 1996. The parties agreed that the applications be heard together and that evidence received in one will be treated as evidence in the other. 2 In the summonses for relief both applicants seek orders that the "contract and arrangement" was unfair, harsh and unconscionable and/or became unfair, harsh and unconscionable. 3 The applicant, Vincent Michael Zammitt seeks orders in the following terms: 1. An order that the contract and arrangement under which the Applicant performed work for the benefit of the Respondent was unfair, harsh and unconscionable and/or became unfair, harsh and unconscionable.

2. An order declaring wholly or partly void the contract and arrangement under which the Applicant performed work for the benefit of the Respondent except for payments received by the Applicant from the Respondent to the date of the order.

3. An order that the contract and arrangement under which the Applicant performed work for the benefit of the Respondent be varied to the extent necessary to make provision to the effect that the Respondent cannot terminate such contract and arrangement without first giving the Applicant eighteen (18) months notice of its intention to terminate or such other period as the Commission considers fair.

4. An order that the contract and arrangement under which the Applicant performed work for the benefit of the Respondent be varied to the extent necessary to make provision for the payment by the Respondent to the Applicant of an amount of $250,000 or such other amount as the Commission considers fair. 4 Orders 1, 2 and 3 in the summons of Stephen Robert Hill are identical to the orders sought by Mr Zammitt. Order 4 in Mr Hill's summons seeks an amount of $200,000. According to the particulars of the amount claimed in Mr Zammitt's summons his claim of $250,000 appears to be based on an additional claim for compensation for loss of goodwill paid by Mr Zammitt in order to acquire his position with the respondent. This aspect will be discussed in detail later in these reasons for judgment. 5 Consequential orders seeking interest and costs are also sought in both summonses. The Evidence 6 Sometime in mid-October, 1995 Mr Zammitt purchased a delivery truck from John Frendo for $60,000. He borrowed $30,000 for the purchase of the truck from the Teachers Credit Union. The remaining $30,000 he provided from his own funds. Mr Frendo, until the purchase of the truck, had been an owner-driver engaged by the respondent to deliver windows and doors manufactured by the respondent to customers in the Sydney metropolitan area as well as regional New South Wales. 7 The respondent maintained a facility and office at Girraween in Western Sydney. From this site owner-drivers engaged by the respondent took delivery of the products. 8 It was Mr Zammitt's intention to take over Mr Frendo's delivery run. He said that prior to purchasing the truck he spent about one to two weeks with Mr Frendo familiarising himself with the business and the type of work performed. He also examined Mr Frendo's paperwork, mainly the profit and loss statements and took the paperwork to his accountant in order to obtain appropriate financial advice prior to the purchase. He maintained that at that time he knew little about the respondent's business, although he knew that the respondent manufactured windows and doors and engaged a small fleet of owner-drivers, including Mr Frendo, to effect delivery of the products to customers based in Sydney and regional New South Wales. As an added precaution he also spoke with the respondent's despatch manager, Tony Ciappara. Mr Frendo, he said, was with him at the time. In his affidavit, relied upon during the proceedings, Mr Zammitt said that, during the course of the discussion, Mr Ciappara said to him: "as long as you do the right thing by the company you've got a job here and last on, first off rule applies." 9 In cross examination Mr Zammitt said he went to see Mr Ciappara to talk about job security. He said Mr Ciappara gave him a guarantee of work. He was questioned several times during his evidence as to what precisely Mr Ciappara had said to him about that issue. He confirmed, with some minor variations, the content of the words he attributed to Mr Ciappara in his affidavit. Two extracts of the cross-examination on this particular aspect illustrate this: Q. Why were you meeting with Mr Ciapparra (sic)? Did you go to him? A. Yes.

Q. Why did you do that? A. To find out the security of the job.

Q. You were obviously interested to know how it would operate, so you wanted to speak with Mr Ciapparra (sic), didn't you? A. As far as operating the business, I'd spoken to John Frendo about that. I spoke to Tony Ciaparra (sic) about the security of the job.

Q. Did you ask Mr Ciaparra (sic) something along the lines of what your guarantee of work - "what's my guarantee of work"? A. Something along those lines, yes.

Q. And did Mr Ciaparra (sic) reply to you something like, "As long as there is work, you will have a job."? A. "As long as there's work, as long as you do the right thing by the company, " yes. ...

Q. And you obviously wanted to get an idea of how secure the work was going to be into the future? A. Yes. One thing out there with the security of the job, I actually asked him how secure the job is or, "What's the process of termination of trucks," and how he said that, "As long as there's work, as long as you do the right thing by the company there's a job there," and, "The last off first --" "last on, first off rule applies." That's if there's a downturn in work, obviously the last truck that was put on will be put off, and that's the way I understood him. 10 Mr Ciappara in his evidence agreed that he said to Mr Zammitt, "as long as you do the right thing by the company you have a job here". He also conceded that he knew that Mr Zammitt had approached him because it was important to Mr Zammitt to have, "continuing work with Trend." He agreed with a general proposition put to him that he gave assurances to both Mr Zammitt and Mr Hill of continuing work with the respondent. He disputes however that he told both applicants that the respondent had a policy of "last on, first off." In his affidavit Mr Ciappara admitted that the conversations he had on the issue with both applicants had occurred in the way deposed by both applicants, except for the words attributed to him, namely, "in the event of a large downturn of work there is a policy of 'last on, first off.' " 11 Mr Zammitt, in his affidavit said in relation to the issue: A man named Tony Ciaparra (sic) was in charge of despatch for the Respondent. I spoke with Tony Ciaparra (sic) when I was with John Fendo (sic) prior to purchasing Fendo's (sic) truck and delivery run. Tony Ciaparra (sic) said to me "As long as you do the right thing by the company you've got a job here and last on, first off rule applies". I was not told what would be paid or arranged for me if the last on, first off situation arose, and I was not concerned because I would not be the last on.

Mr Hill in his affidavit said: [5.] A man named Tony Ciapparra (sic) was the employee in charge of dispatch for the Respondent. In about late 1995 I said to Mr Ciapparra (sic) at the Respondent's premises, "I know that you are looking to get rid of the current transport people. What the are chances of me getting my own truck?". Mr Ciapparra (sic) reply included, " Yeah, that won't be a problem", and to the effect that this could not happen for some months yet. [6.] Accordingly, I continued my discussions with Mr Ciapparra (sic) before I bought a truck for the Respondent's work. I did so because, as I discussed, to buy a truck would be a large outlay for me, tying me to the Respondent and I had to be sure of ongoing work. I had several meetings with Tony where these things were discussed. During one of those meetings I said to Mr Ciapparra (sic). "What is my guarantee of work?".

"As long as there is work you will have a job. As long as you do the right thing by the company and keep signage on the truck".

I was also told by Mr Ciapparra (sic) to the effect that,

" ... in the event of a large downturn of work there is a policy of "last on, first off".

Mr Ciappara confirmed his account of the conversation set out in his affidavit during his cross-examination. The relevant parts are reproduced below: Q. You refer to, in paragraph 2 of your affidavit you had referred to the paragraph of each of the affidavits of Mr Zammitt and Mr Hill that refer to the conversation you were giving evidence about in paragraph 2 of your affidavit? A. That is correct.

Q. And you agree then, don't you, as you set out that during the meetings with the respondent (sic), that is Mr Hill and Mr Zammitt, you were asked what is my guarantee of work? A. That is correct.

Q. And you knew that they were asking you that in relation to incurring the expense of being an owner-operator working for Trend and working for Trend on an ongoing basis? A. That is correct.

Q. And your answer to them was a long as there is work you will have a job? A. That is correct.

Q. As long as you do the right thing by the company and keep signage on the truck? A. Correct. ...

Q. And that was said by you at the place of work? A. Correct.

Q. And you were - and at that time you held a higher managerial position for the respondent? A. Correct.

Q. And you also told Mr Zammitt, didn't you, that as long as you do the right thing by the company you have a job here? A. Correct.

Q. And you knew that Mr Zammitt was asking you likewise because it was so important to him in entering and continuing the obligations ongoing responsibilities of continuing work for Trend? A. Yes.

Q. And you say that if there was any reference to - sorry, in relation to Mr Hill and Mr Zammitt you are quite clear aren't you, that you gave assurances to them to the effect that I put to you? A. To my knowledge, correct.

Q. And you are quite sure, aren't you, that if you said it, there was a policy of last on first off that they are mistaken? A. Correct.

Q. And throughout your dealings with Mr Zammitt and Mr Hill included in the papers they are found to be good reliable workers and honest? A. In my dealings with Mr Zammitt and Mr Hill was a period of three months, in that case, yes.

Q. And your understanding of them otherwise is that they were good and honest people? A. Correct. ...

Q. And you wouldn't have told them anything about last on first off because you were telling them as long as there was work and they did the right thing by the company and in Mr Hill's case kept the signage on the truck, they would continue working? A. Correct.

Q. And you said nothing to them about that they could be terminated or put off from the contract did you? A. At the time, no.

Q. Never? A. I can't recall that conversation 11 years ago.

The effect of the foregoing evidence is that without the respondent's advice and its assurances to the applicants of security of work (via Mr Ciappara) they would not have purchased their trucks for use in the respondent's business. 12 The money Mr Zammitt paid to Mr Frendo comprised, according to Mr Zammitt, a sum of $10,000 for the truck, and $50,000 for the goodwill in the delivery run. He was unable to produce a receipt for the purchase price of the truck which may have verified this. In cross examination he volunteered that he had given the receipt to his solicitor. When asked whether the receipt, "identified the amount of $50,000 for goodwill," Mr Zammitt responded, "I think it does, by memory."

13 Mr Zammitt conceded in cross examination that the amount paid for goodwill, is not recorded in his affidavit. He also conceded that he did not inform the respondent that he paid Mr Frendo $50,000 for goodwill. 14 Whether Mr Zammitt in fact paid Mr Frendo an amount of goodwill, and, if so how much, were issues during the hearing. It emerged during cross-examination that the truck he purchased from Mr Frendo for $10,000 in October 1995 was involved in an accident sometime in September 1998. Documentation from National Transport Insurance Ltd, the insurance company that insured the truck, was tendered into evidence. That documentation discloses that on 7 October 1998 Mr Zammitt claimed and received insurance monies for the truck in the sum of $17,785.17, following an accident involving the truck on 8 September 1998. When cross examined about this seeming discrepancy between the amount initially paid for the truck to Mr Frendo ($10,000) and the amount received in settlement of his insurance claim, Mr Zammitt explained that about one month before the accident he had put a new motor in the truck at a cost of about $13,000 to $16,000; and, that he had adjusted his insurance after he put in the new motor, to reflect its cost. Mr Zammitt's solicitor, Denis Mockler, gave some short evidence during the proceedings in relation to the receipt which according to Mr Zammitt, records the purchase price of the truck and the amount paid for the goodwill. Mr Mockler confirmed in his evidence that Mr Zammitt did produce to him a handwritten receipt in relation to the truck with Mr Frendo's name on it. He recalled two discrete amounts on the receipt, one for goodwill and the other for the truck. He could not recall "which amounts". His evidence on the issue is extracted below: Q. Do you understand some evidence has been given by Mr Zammitt as regards the production of a receipt to you provided to him by Mr Frendo? Would you like to say anything about that? A. Yes, I can recall that.

Q. Thank you. What can you tell the court by way of assistance in that regard? A. At one stage, at the request of counsel, I asked Mr Zammitt to produce the receipt, if he had one, in relation to the vehicle. He produced a handwritten receipt with his - Mr Frendo's name on it which, from recollection, had an amount for both goodwill and the amount of the vehicle. I don't recall which amounts.

Q. Do you recall what happened to that? A. Yes, it was given to me and I believe it was given to counsel. I have had a long search and -- Pierce (counsel for the applicants): Thankyou I indicate I have no recollection of receiving it. If you would like me to place that on oath I will do so.

15 Mr Hill purchased his truck in order to work for the respondent delivering its products sometime in November or December 1995. He said he borrowed the entire purchase price at commercial interest rates from a finance company. The truck cost $32,000. He said he did not pay a premium for goodwill although he added that to his knowledge, " the payment of a premium for goodwill was, usual in the industry". 16 Both applicants said in their affidavits that, upon commencement of their respective engagements with the respondent, the rates of payment were not negotiated but were set by the respondent. In addition, according to both applicants neither received any rate rises for the work, although during the period of their engagements the trucks depreciated and required regular maintenance and repair; and, running costs and the costs of living increased. Both applicants employed an offsider to help them with the work. The applicants worked exclusively for the respondent. Each was paid according to the number of loads delivered. Each said that they were paid $200 per load in the Sydney metropolitan area and between $400 to $600 for a country load.

17 Sometime in early August 2000, the respondent was approached by Mr Brad Wickett, a representative of one of its owner-drivers, PRW Window Service Pty Ltd (PRW). Mr Wickett operated PRW with his father, Brian Wickett. Mr Wickett spoke to Peter Krotky, the respondent's operations manager, about a proposal concerning the respondent's transportation and warehousing arrangements. According to Mr Krotky, about one week later he had a meeting with Brad and Brian Wickett during which they produced a written document entitled "Agreement between PRW Window Services Pty Ltd and Trend Windows & Doors Pty Ltd." The document which is unsigned and undated, was received into evidence. Mr Krotky was able to identify it as the document handed to him because of notations made in his handwriting appearing on the back of the last page, which he said were made by him at the meeting. The agreement was expressed to be for a term of five years. One of the clauses in the agreement provided that PRW would make available five non-articulated vehicles for transportation of the respondent's products. In the Rates Schedule, annexed to the agreement, PRW set out its proposed hourly rates for deliveries within the Sydney metropolitan area, to regional New South Wales, and to other Australian cities. It also proposed 3.68 per cent of total net sales of products in the Sydney branch. This was a significant reduction in the transportation costs at that time borne by the respondent, which were in the vicinity of between 4.8 per cent to 5.1 per cent of total net sales. 18 According to Mr Krotky, following the meeting he took the agreement to senior management, who looked at it and formed the view, with Mr Krotky, that before any decision was made, other owner-drivers should be afforded the opportunity to submit their own proposals for the work. 19 On 23 August 2002, Mr Krotky met with the applicants and one other owner-driver in the respondent's boardroom. According to Mr Krotky, he informed the drivers that they would have an opportunity to submit tenders for the delivery work. He said that the purpose of the meeting was to explain to the drivers that PRW had submitted a proposal for the work currently being undertaken by the owner-drivers which was under consideration by the respondent; and, that he was extending to the drivers an invitation to submit their own tenders. He also advised them that the respondent's current transport and warehousing costs were between 4.8 per cent and 5.1 per cent of the cost of the product, and that its performance needed to be improved. He said he was asked by Mr Hill, "[w]hat is going to happen to our work?", to which he replied: "No decision has been made about the transport and we will not be making any decision until you guys have an opportunity to provide us with tenders for you continuing to carry out the work for us. It will not be merely a cheap price that will influence our decision. Any tender from existing contractors needs to be substantiated and logical. It has to add up. Also when a decision is made we will make that contract conditional on the successful tenderer being required to negotiate with existing owner drivers. That doesn't mean Trend will stipulate the conditions of existing owner drivers continuing to do the work. Trend will not do that." 20 Mr Krotky also said that he told them that no deadline had been fixed for the submission of tenders, but that he expected that they could prepare a tender, "within the next few weeks." He ended the meeting with an assurance to each of the participants that in the meantime he was happy to discuss any questions they might have. 21 The applicants gave a similar account of the discussion that occurred during the meeting, although both said that they were required to submit tenders and neither recalled PRW being specifically mentioned, nor Mr Krotky's advice to them that the successful tenderer would be required to negotiate with the existing drivers about terms and conditions of employment. 22 A further meeting was held between the applicants and Mr Krotky on 30 August 2002. Mr Zammitt said the meeting was initiated by him and Mr Hill, after they had agreed between them to submit a joint proposal. Mr Krotky's account of the discussion during this meeting was set out in his affidavit as follows: "VZ: "Can you tell us what you expect the workload to be in the next year or so?"

PK: "The level of Sydney sales are expected to be $1.5M to $2.0M. We can't be certain, but about that level."

VZ: "That sounds about right. Steve and I are going to put in a joint tender. We are working on it now. When do you need us to submit the paperwork? Can we get ours in by the end of this week?"

PK: "That will be no problem. Yes you can submit your tender by then."

SH: "Can you tell us when a decision will be made?"

PK: "The decision will be made fairly quickly after the tenders were submitted." 23 The applicants submitted a joint tender on 4 September 2002. It was handed to Mr Krotky.

24 Two days later, on 6 September 2002, the applicants were informed by letter that their tender had been unsuccessful. On the same day, the applicants separately received letters signed by Mr Krotky on behalf of the respondents. The letters informed the applicants of the following: "As you are aware from our discussions on the 23rd August 2002 Trend Windows & Doors Ltd (TWD) is reviewing its transportation arrangement. As a result our transportation and store operation in/from Sydney is planned to be contracted out to a single operator to meet our total warehouse and transport needs. TWD is now in position to inform you that your transport arrangements with TWD will cease on 30th September 2002. During discussions with the new transport/warehouse operator TWD has secured a commitment from them to negotiate with you continuing work. TWD would like to take this opportunity to thank you for services that you provided to the company over the period of time and looking forward to seeing you in your new engagement." 25 Some two weeks later PRW wrote to both applicants offering them employment in an amount of $27,560 per annum plus superannuation. A condition of employment was that the applicants submit to a three month trial period of employment on a casual basis. The terms of the offer sent to Mr Zammitt under cover of letter dated 17 September 2002, are set out in full below: "As the new transport contractors appointed to Trend Windows for the next five (5) years, we would like to take the opportunity to offer you a position with our company as a Driver. In the past, you have proven to be a reliable contractor with Trend and we feel that the experience you have gained would be an asset to our company. As part of our company policy and by mutual agreement there is a three month trial period which you would be employed on a casual basis to assess your suitability to the position. This also affords you the opportunity to assess your suitability to the job and your future employment with PRW. Should you decide to accept this offer we would require a full medical and an RTA printout on your licence. The package we are offering as an employee is $27560 per annum + superannuation. As indicated above, the commencing position is in a casual capacity and as per industry awards your wage is increased by 25% for this period with no annual leave or sick pay applicable. We would need your discussion (sic) by this Friday 20th September so as we can finalise employee numbers prior to the commencement of the contract and we take this opportunity to extend our best wishes for your future should you choose not to accept." 26 The proposed salary was significantly less than both applicants had earned as owner-drivers engaged by the respondent. No arrangements were suggested in the correspondence in relation to Mr Zammitt's truck. The offer of employment did not include any reference to annual leave or sub-leave entitlements, in addition to the base salary. 27 Both applicants rejected the offers of employment. Mr Zammitt submitted a counter-offer of employment to PRW which was declined. Each applicant worked out their period of notice, a period of three weeks and three days. The Contracts 28 The respondent conceded in written submissions that the contracts between it and each of the applicants were contracts whereby work was performed in an industry in New South Wales. The evidence tends to confirm this. Mr Zammitt commenced work for the respondent in October 1995 as an owner-driver transporting the respondent's products, namely its windows and doors. Mr Hill undertook similar work from some time in November 1995. Both applicants purchased their own trucks before entering into their respective engagements and both financed and arranged maintenance and repairs of their vehicles throughout the period of the engagements. The applicants operated throughout the terms of their engagement as independent contractors. This characterisation of the working relationship, although initially put in issue during the proceedings by the applicants, both of whom contended that they were employees of the respondent, later resolved itself, with the concession by the applicants that they had indeed been engaged by the respondent as independent contractors. There can be little doubt that the applicants operated as independent contractors. Each applicant, as earlier mentioned, purchased his own vehicle and assumed maintenance and repairs of the vehicle in order to perform the work. Each employed an offsider to assist with the work. Each ran his own business, deducting expenses from the gross profits made from payments generated by the respondent. 29 The contracts contained no express terms. The applicants' counsel, Mr Pierce contended in oral submissions that a term of each contract was that each applicant was guaranteed work, for an indeterminate or perpetual period by Mr Ciappara on behalf of the respondent. This guarantee of perpetual work is said to have been made when Mr Ciappara said to the applicants, "as long as there is work you will have a job" and; "as long as you do the right thing by the company you have a job here." Mr Ciappara agreed in his evidence that he said to the applicants, "as long as you do the right thing by the company you have a job here." This is a different statement from the earlier statement attributed to Mr Ciappara. The former statement suggests on its face that the ongoing engagements of the applicants would or could depend upon the respondent's operational requirements. Inherent in the words is a qualification, that is, any assurance of ongoing work is dependant upon the availability of the work. The latter statement could suggest an assurance of ongoing work subject to satisfactory performance for example. Earlier extracted in this judgment was the evidence of Mr Ciappara on the issue. He agreed that he told both applicants following their questions about a guarantee of work "as long as there is work you will have a job"; and, "as long as you do the right thing by the company and keep signage on the truck". He also said in evidence that he told Mr Zammitt, "as long as you do the right thing by the company you have a job". 30 The latter representation, which I find was said by Mr Ciappara to both applicants, indicates in my view a preparedness at that stage on the part of the respondent to provide secure work for an ongoing or indefinite period, contingent upon any conduct or performance issues on the part of each applicant which might otherwise affect the working relationship. It does not, in my view, amount to a promise of a "job for life." It falls for assessment in the context in which it was given, as well as by reference to commercial realities. These aspects will be elaborated upon shortly. I should add for completeness that I am unable to find on the state of the evidence that Mr Ciappara also said to the applicants that in the event of a downturn in work the "first on, last off " rule applied. The contingency in any event did not arise. Rather, the decision was made to accept PRW's proposal to operate the delivery runs to the exclusion of the other owner-drivers. 31 Other terms of the contracts, according to the applicants, were that each applicant would be paid on a monthly basis calculated by reference to the number of loads delivered; and, each applicant was to provide his own truck available to carry out deliveries. Were the Contracts Unfair? 32 As I understand the instructions put on behalf of the applicants in relation to Mr Ciappara's representation concerning ongoing work, it is sought to elevate the meaning behind the words to a guarantee of perpetual work. If this was the intent behind the submission I cannot agree. Insofar as the applicants were concerned each of them had received a guarantee of work from Mr Ciappara. This was particularly important to them and critical to their respective decisions to outlay significant capital and resources in order to work for the respondent. Nevertheless, both applicants were aware to some extent of some of the risks associated with entering into the arrangements with the respondent. Mr Zammitt gave evidence that he obtained paperwork from Mr Frendo dealing with the profitability of the business and took it to his accountant for financial advice. Mr Hill discussed going into business with his father as well as with Mr Frendo. His father, he said, had worked for the respondent for many years. Mr Zammitt was also aware that a restructure of the respondent's business had occurred at an earlier time which had affected transportation arrangements and he appeared to agree in his evidence that it might, or could, occur again. He also knew that the respondent was one of the biggest manufactures of windows and operated in a competitive market. Mr Hill conceded that the respondent's customers operated in the building industry and that that industry was subject to fluctuations which could in turn affect the demand for his services as a truck driver for the respondent. He also agreed that if a downturn in work was severe enough, that the respondent might have to close its business. Mr Hill was also aware, as is apparent from his affidavit, that his engagement with the respondent arose in circumstances where the respondent was considering "(getting) rid of the current transport people." Mr Ciappara in his evidence said Mr Hill secured engagement as an owner-driver because of a restructure within the company following the departure of an owner-driver. Mr Zammitt conceded that while he was working for the respondent, it was, or would always be, interested in ways to reduce its costs, including its transportation costs. 33 These matters recognise commercial realities. No doubt, at the time, the respondent's assurances to the applicants of ongoing work, made via Mr Ciappara, were genuine; but underlying the assurances would have been the respondent's appreciation of changing operational requirements in the context of a competitive market and a prevailing interest in reducing costs. Neither of the applicants, on the evidence, can be said to have been unaware of these factors. In addition the contracts between the parties were in the nature of commercial agreements. There is authority for the proposition that there is no presumption of perpetuity of commercial agreements. In Crawford Fittings Co and Others v Sydney Valve & Fittings Pty Ltd and Another (1998) 14 NSWLR 438 at 443 and 444 McHugh JA observed: In Martin-Baker Aircraft Co Ltd v Canadian Flight Equipment Ltd , McNair J said (at 577) that there is no presumption of permanency in the case of an indefinite commercial agreement but that if there is it is in favour of termination and not perpetuity. Buckley J has also expressed the view that there is no presumption either way: Re Spenborough Urban District Council's Agreement (at 150). To the same effect is the judgment of Lockhart J in State Bank of New South Wales v Commonwealth Savings Bank of Australia (1985) 6 FCR 524 at 554; 60 ALR 73 at 101. However, it is not easy to reconcile these statements with the principle that there is a general presumption against adding to a contract a term which the parties have not expressed: Luxor (Eastbourne) Ltd v Cooper [1941] AC 108 at 137 per Lord Wright. In principle, the better view would seem to be that, although there is presumption against implying a term that an agreement is terminable, ordinarily the nature of a commercial agreement will lead to the conclusion that the parties must have intended it to be terminable on notice. This was the effect of the approach of the courts in Winter Garden; Martin-Baker; Spenborough and Decro-Wall. 34 The decision in Adrians Transport Pty Ltd and Anor v Pacific Dunlop Ltd (t/a Olex Cables) (unreported) per Hill J, Federal Court, 8 March, 1996 dealt with a factual background with some similarities to the present matters. The proceedings were for breach of contract following the termination of the first applicant's engagement on one week's notice. The breach was said to be of the implied term of reasonable notice. The facts in brief were that the first applicant (Adrians) entered into a contract with Olex to provide to it the services of carriers to transport cables. Adrians in turn contracted with owner-drivers to perform the carriage for Olex. The contract between Adrians and Olex contained no express terms providing for termination. The second applicant (Andrews) gave evidence of a conversation that he had with McFarlane, the administration manager of Olex, shortly before Andrews entered into the arrangement with Adrians to transport the cables for Olex. According to Andrews, McFarlane said to him, "while ever Olex is producing cables you'll have a job"; and, "[a]s long as you perform your duties properly, don't abuse any customers and don't steal anything everything should be fine". 35 It was in the context of those representations that Hill J observed that there is no presumption of perpetuity of commercial agreements (at [44]). The arrangements between Adrians and Olex had been extant for some two years. In the circumstances, his Honour found that the period of notice was unreasonable and that Olex was in breach of its contract with Adrians in failing to give reasonable notice of termination. His Honour found that a reasonable period of notice was in the order of three months. (I should add that the words attributed to McFarlane by Andrews do not appear to have influenced this finding.) 36 While I do not agree with the present applicants' submission that the representation made by Mr Ciappara conveyed a guarantee of perpetual work, I am of the view that based on the representation, the applicants had an expectation of long term work and that this in turn is a relevant consideration in assessing whether the circumstances of termination of the contracts rendered those contracts unfair. The expectation of long term work was fostered by the respondent and was critical to the applicants' respective decisions to outlay considerable expenditure in purchasing the trucks for use in their businesses. These matters are relevant to the circumstances of the applicants' termination, and, to the issue of whether, as a direct result of the respondent's conduct at the time of termination, the contracts became unfair. 37 This approach to the issue of unfairness of the impugned contracts under s 106 of the Act is both long-established and uncontroversial. In Incitec Ltd and Another v Industrial Court of New South Wales and Others (1992) 29 NSWLR 83; (1992) 45 IR 155, Gleeson CJ (Kirby P, Priestly JA concurring) affirmed (at 157, 158) Hill J's reasons in the Industrial Court of New South Wales in Barry and Ors v Incitec Limited & Anor (1991) 45 IR 143 where Hill J, in commenting on s 88F of the Industrial Arbitration Act 1940, the predecessor provision to s 106, said (at 146, 147): On the other hand s 88F of the Act deals with the matter of what for present purposes may be briefly described as unfair contracts. It applies to a contract or arrangement between the particular persons who are party thereto. Unfairness may arise either from the terms of the contract itself, the surrounding circumstances, and/or from the manner of performance or operation of the contract. The section deals largely with private rights inter partes. Despite that a general and relevant industrial prescription governing benefits payable to employees in termination of employment situations may exist, unfairness in relation to a particular contract of employment may nevertheless arise in a situation of redundancy or termination of employment for reasons unrelated to or not relevant to the basis of award prescription of an objective and fair general standard of redundancy or severance benefits. It may arise simply in the special circumstances of and surrounding the particular contract. 38 The same passage was again approved by Kirby P (as he then was) in Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121 at 133, where his Honour immediately before citing the passage commented: Whatever doubts may have existed earlier, it is now beyond argument that the "unfairness" referred to in s 88F(1)(b) IAA can arise, not only from positive provisions of the contract or arrangement which offend unfairness in the relevant sense, but also from the failure, on the part of the contract or arrangement, to provide in a way that such fairness requires. 39 In relation to s 106 the approach was more recently affirmed in Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661 at 668 per Mason P (Hodgson JA and McColl JA concurring):

[25] Section 106(2) states in the plainest of terms that a contract may become unfair, so as to attract the jurisdiction of the Commission, because of post- contract conduct of the parties. But it is the "contract" that is to be held unfair, and not the conduct, in the final analysis. Unfairness may of course stem from what the contract fails to provide, for example as regards termination procedures.

[26] The Commission may examine not merely the terms of the contract (or arrangement) as originally negotiated, but also the manner in which it has ultimately "worked out and operates as between the parties to it" (Walker v Industrial Court of New South Wales (1994) 53 IR 121 at 133-134, per Kirby P. See generally Walker (at 145-149); Rothmans Distribution Services Ltd v Full Court of the Industrial Court of New South Wales (1994) 53 IR 157 at 160). 40 Recently, in this jurisdiction, the Full Bench in Bowman v Ricegrowers Limited (formerly Ricegrowers' Co-operative Limited) [2007] NSWIRComm 204, affirmed these principles, commenting (at [66]) that, "a contract may be found to be unfair because it permits termination that is unfair and discriminatory," (see also [75]). The expression "permits" has been said to mean, in the context of an unfair contract, "that which the contract did not proscribe ...": Sydney Water at [32] and [33].

41 Returning to the present proceedings, in my view the contracts became unfair because they permitted termination or failed to proscribe (or prevent) the respondent terminating the applicants' services where the termination of those services occurred in unfair circumstances. Those unfair circumstances included the following matters:

(i) the applicants had worked for the respondent for some seven years when their services were terminated, during which time they had given efficient and reliable service;

(ii) the working relationships between the parties, were both amicable and mutually beneficial;

(iii) the respondent represented to both applicants immediately prior to entry into their respective engagements as owner-drivers, that the work would be long-term; the applicants had relied upon the representation of long-term work by expending considerable sums of money purchasing the trucks;

(iv) the period of notice of three weeks and three days was inadequate. The applicants were in business for themselves. The amount of notice on any reasonable basis was not sufficient to enable them time to make alternative arrangements, to divest themselves of their assets if necessary, or if not, to secure other work. Both applicants employed offsiders for whom, no doubt, alternative arrangements had to be made at short notice;

(v) the applicants also worked exclusively for the respondent during their seven year engagements;

(vi) the engagements, of some seven years duration, were lengthy engagements. 42 In oral submissions the applicants emphasised that the principle ground of unfairness alleged in the summonses was the failure of the respondent to guarantee them work for an indeterminate or perpetual period. A corollary of that failure, also alleged in the summonses and developed during oral submissions, was said to be, that if the respondent did not guarantee them work, it had an obligation to ensure that comparable work would be provided by PRW. 43 It is instructive in examining this submission, to look again at the words spoken by Mr Ciappara to both applicants which I have found fostered in them expectations of long-term work although not "jobs for life." They were told that as long as they did the right thing by the company there would be work. The uncontested evidence was that they did, "the right thing by the company." They worked diligently and efficiently. There were no unsatisfactory performance issues during the period of their engagements. It does not follow from this however that the respondent had an obligation to ensure (my emphasis) that the applicants found comparable work , or, that the respondent was not entitled to seek out new avenues of reducing its costs with regard to its transportation arrangements. But if it chose to explore new avenues, which it did here, and which resulted in its acceptance of PRW's proposal, it was incumbent upon it either to make a genuine effort to find comparable work for the applicants or, if it could not, then the notice period should have been of sufficient length to enable the applicants time to make suitable alternative arrangements. In my view the respondent's efforts fell far short of what it should have done, and the failure of the contracts to proscribe its conduct in that regard, rendered the contracts unfair. 44 All that the respondent did was to secure an informal commitment from PRW to negotiate with the applicants for work. Without further support from the respondent the applicants were in somewhat of a disadvantage as regards their respective bargaining positions. Their services had been terminated at short notice. They were both entirely dependant upon the respondent for their income. They were small independent contractors and they had little choice but to tender for the work. If they did not, they faced the real prospect of losing their livelihoods. PRW was well aware of this predicament. Either they entered negotiations with PRW and accepted what was offered to them or they could attempt to find comparable work themselves within a narrow time frame of just over three weeks. As it transpired the work offered to them by PRW was at about half their annual net revenue earned when they worked as independent contractors. It was a further condition of the offer from PRW that they work as casual employees on a trial basis for the first three months. Mr Zammitt declined the offer and sought unsuccessfully to negotiate a higher salary. Mr Hill described the terms of employment offered as "insulting". Both applicants in my view were entitled to decline the offers from PRW. 45 The applicants also contended that the tender process rendered the contracts unfair. I do not agree. PRW submitted its proposal and shortly after the respondent decided to afford an opportunity to the other owner-drivers to submit proposals for the same work. A meeting was held between the respondent's representative, Mr Krotky, and interested owner-drivers to discuss the tender process. Mr Krotky offered further assistance to interested parties in the preparation of the tenders. The fact that his assistance did not include the disclosure of details of the PRW proposal is entirely appropriate and in accordance with commercial practice. There is no evidence that might sustain an inference that the respondent had made up its mind to accept the PRW proposal before the submission of tenders from other owner-drivers. Nor is there any evidence to suggest that the respondent's acceptance of PRW's proposal was for reasons other than the achievement of costs-savings on product delivery and warehousing arrangements at its Girraween facility. 46 During oral submissions the applicants' counsel Mr Pierce sought to erect another category of unfairness of the contracts by contending that the respondent's failure to pay redundancy packages to each applicant also rendered the contracts unfair. A difficulty with the contention is that this head of unfairness was not pleaded in the summonses nor was it pleaded in relation to the claims for relief set out in both summonses. When this was brought to the applicants' attention by the Court during submissions, no application was made to amend the summonses. In addition, the applicants operated throughout the terms of their respective engagements as independent contractors, not employees, and it is to this latter category of workers that the issue of redundancy payments may assume relevance. In these circumstances I decline to consider the issue of redundancy in the context of both applications. 47 A further head of unfairness of Mr Zammitt's contract relied upon what is said to be the failure of the contract to make provision, in the event of termination, for fair and adequate consideration of the loss of goodwill paid by Mr Zammitt to Mr Frendo to aquire his position with the respondent as an owner-driver. 48 The evidence in relation to this aspect of Mr Zammit's claim was that he said he paid Mr Frendo $50,000 for the goodwill in the delivery run. This amount was not substantiated by other evidence. Mr Zammitt could not produce any receipts. His solicitor, Mr Mockler, recalled collecting a handwritten receipt from Mr Zammitt which he said itemised an amount for goodwill and an amount for the purchase price of Mr Frendo's truck. He did not however recall, "which amounts." Mr Zammitt was not entirely certain that the receipt he said he handed to Mr Mockler was for goodwill in an amount of $50,000. Other documentation appeared to be inconsistent with the claim that $50,000 was paid for goodwill. Although Mr Zammitt said in his evidence that he paid $10,000 for Mr Frendo's truck and $50,000 for goodwill, a total of $60,000, other records disclosed that following an accident involving the truck, Mr Zammitt claimed and received insurance monies for the truck in the sum of $17,785.17. Mr Zammitt in my view gave a plausible explanation for the discrepancy between the purchase price and the insurance monies, namely that an adjustment had been made to his insurance following the installation of a new motor in the sum of $13,000 -$16,000. 49 A difficulty however faced by Mr Zammitt in relation to the issue of goodwill is that according to the evidence, the respondent was not made aware of any payment for goodwill made by Mr Zammitt to Mr Frendo when he purchased the truck. Nor, it seems, was this a requirement imposed by the respondent on incoming owner-drivers. Mr Hill for example expressly stated in his evidence that he did not pay a premium for goodwill when he purchased his truck from one of the respondent's outgoing owner-drivers. Apart from an assertion by Mr Hill that to his knowledge, goodwill payments were "usual" in the industry there was no evidence led during the proceedings from which an inference could be drawn that there was, for example, a culture of goodwill established or encouraged in the business in which Mr Zammitt operated as an owner-driver; cf Myer Stores Limited t/a Grace Bros v Stowart and Others (1994) 55 IR 21 at 34.

50 The weight of this evidence does not enable the Court to make findings, first that Mr Zammitt, in fact paid an amount of $50,000 to Mr Frendo for goodwill, and, secondly, that if he did, it was part of an accepted culture within the business in which Mr Zammitt operated, or, that it was a requirement imposed by the respondent on, or a practice encouraged by the respondent, in relation to incoming owner-drivers. I am therefore unable to make any relevant findings of unfairness in relation to whether Mr Zammitt's contract was unfair because it permitted termination without consideration of or compensation for the loss of goodwill. Relief 51 Mr Zammitt seeks relief in an amount of $250,000 which is said to be based, "on the estimated profit that the applicant would have earned had it (sic) been provided with 18 months notice of termination of its contract and arrangement with the respondent together with compensation for the premium or goodwill paid by the applicant to acquire his position with the respondent". 52 Since the amount paid for goodwill was said to be $50,000, this leaves $200,000 which is sought by Mr Zammitt and which is said to be equivalent to profits which would have been earned over a period of eighteen months. A document handed up by the applicants' counsel appears to suggest that Mr Zammitt earned a gross weekly amount while working for the respondent in the sum of $3,015, or $217,080 for eighteen months. The Court was able to ascertain from the applicants during oral submissions that the sum of $3,015 indeed represented Mr Zammitt's gross weekly earnings. The applicants also conceded in submissions the accuracy of certain tables prepared by the respondent's counsel, Mr Moir, which reflected the gross business earnings of Mr Zammitt and net profits after expenses were deducted for the financial years ending 30 June, 1996 until 30 June 2002. The tables show that for the financial year ending 30 June 2002 (the financial year preceding termination) Mr Zammitt had a gross business income of $159,000. After expenses were deducted, Mr Zammitt's net profit was $66,577. 53 Mr Hill seeks relief in an amount of $200,000 said to be based, "on the estimated profit that the applicant would have earned had it (sic) been provided with 18 months notice of the termination of its contract and arrangement with the respondent." According to the document handed up to the Court by the applicants' counsel, Mr Hill earned a gross weekly income of $3,225 while working for the respondent, or $232,200 for eighteen months. The tables prepared by the respondent's counsel, the accuracy of which was conceded by the applicants, discloses that for the financial year ending 30 June 2002 (the financial year preceding termination) Mr Hill earned $163,400 gross with a net profit after expenses were deducted of $69,417. 54 In oral submissions the applicants' counsel submitted that the amounts sought of $250,000 and $200,000 are "compromise figures" which represent payments by way of redundancy and payments in lieu of notice. Insofar as the issue of goodwill was proposed to be treated it appears to have two aspects. The first aspect was said to relate to both claims and arise, "because of the premium arising from the creation of the agreement." The second aspect appeared to relate only to Mr Zammitt's claim, with Mr Pierce advising the Court that, "what is sought is compensation for the loss of those on-going delivery runs in accordance with the affidavit." 55 As regards the issue of redundancy payments it is not the subject of any claim in the summonses and no application to amend the summonses was made during the proceedings which would have entitled the issue to be considered. In relation to Mr Pierces' submissions concerning the first aspect of goodwill, it also is not the subject of any claim in the summonses and was not the subject of any application to amend the summonses at any stage of the proceedings. There was no evidence led during the proceedings which might have enabled the Court to embark on an assessment as to whether, over time, the applicants had built up any goodwill in their respective businesses while working for the respondent. There is therefore no basis upon which the Court may properly consider the issue. As to the second aspect of goodwill, giving my earlier findings on this issue, it simply does not fall for consideration at this stage. Calculation of Notice 56 The respondent contends that if the Court determines that the contracts were unfair in relation to the provision of notice, then any further payments ordered to be made in lieu of notice should be restricted to the applicants' net profits or net income. This was the approach adopted by her Honour Justice Staunton in Mark Trenter t-as 'Time Rite Onforwarders' v Australian Air Express Pty Limited [2006] NSWIRComm 314. 57 The applicants sought to distinguish the judgment from the present circumstances on the basis that it did not concern an "unqualified guarantee of work" and there was a subsequent "souring of relations" between the contracting parties. According to the applicants the Court in assessing whether any further payments should be made in lieu of notice, would be guided by the gross income made by the respective businesses. In this regard, the applicants' counsel submitted: In those circumstances your Honour would find that the applicants, in conducting their business, were entitled to the benefit of the gross receipts from the respondent which provided, in accordance with the contract, whilst they incurred various expenses and employed offsiders and so on, they had the corresponding benefit of an ongoing business and there was no stipulation, as I understood the evidence from the respondent, that any of those particular expenses had to be incurred. Rather, it was a contract that was made whereby they were entitled to the gross receipts and to the extent there is any other work taken up, that did not distract from the requirement they be paid by the respondent. The only question that would arise as to the ongoing work to them was whether the work continued to be available and it did, save that the respondent took upon itself to enter this agreement with PRW for what it perceived as its advantage, but did not take account of the pre-existing situation with the respondents. 58 What the applicants' counsel seems to be suggesting, based on the passage extracted above, is that the applicants are entitled to receive, by way of payments in lieu of notice, the gross income paid by the respondent during the currency of their engagements because the respondent did not impose a requirement that particular expenses be incurred, and, the contracts were interminable. If this is correct, it provides no proper basis for the inclusion in any orders for payments in lieu of notice, the applicants' business expenses. First, there was no evidence that might sustain a suggestion that the respondent did not stipulate that particular expenses had to be incurred by the applicants. The incurring of particular expenses was, in any event, necessary for the operation of the businesses. Secondly, I have already found that the contracts of engagement were not for perpetual terms. 59 I intend therefore to adopt the approach of Staunton J in Mark Trenter to any assessment undertaken in relation to any orders made for payments in lieu of notice, consequent upon my findings of unfairness in the contracts, which arose in the circumstances of termination of the engagements. 60 It is appropriate for the reasons earlier expressed, which formed the basis for my findings that the contracts between the applicants and the respondent were unfair, to make compensatory orders based on an assessment of what, in the circumstances, might constitute a reasonable period of notice. The issue, in the context of commercial arrangements, was dealt with by Boland J in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 at [743] to [757] and in Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No 15) [2003] NSWIRComm 173 at [114] to [198]. In Gough & Gilmour (No 15), his Honour extracted certain factors identified in Crawford Fittings as applicable to the issue of whether a notice period is reasonable. In doing so, his Honour proceeded upon the basis that the Crawford Fittings factors, although not determinative of what may constitute a fair period of notice to terminate contracts under s 106 (Crawford Fittings concerned a breach of contract), nevertheless were of assistance as going to the issue of notice by providing certain objective standards (at [115]). 61 At [163] of Gough & Gilmour (No 15), five factors, including the Crawford Fittings factors (factors (2) to (5)), were relied upon to assess a period of notice: "(1) The need to ensure that any notice period is consistent with the findings in the primary judgment, particularly those relating to the question of unfairness and the reasons for refusing the primary relief.

(2) The need to provide a reasonable opportunity for the applicants to enter into alternative arrangements.

(3) The need to allow time for the parties to carry out existing commitments.

(4) The need to allow time for the applicants to bring current negotiations with customers and suppliers to fruition.

(5) The need to allow time for the applicants to recoup extraordinary expenditure or loss where appropriate." 62 I intend to apply the same factors in my assessment of a reasonable period of notice in relation to both contracts. I also adopt Boland J's observations in Gough & Gilmour (No 15) (at [164] where his Honour said: "[164] Before addressing each of these factors, it is to be noted that what period of notice is reasonable is essentially a matter of judgment: Futuris Industrial Products Pty Ltd v Arrow Industries Pty Limited (unreported, Federal Court of Australia ( Beaumont, Foster and Beazley JJ, No G611 of 1993, 18 April 1994) at 23. In Stenhouse Australia Ltd v Phillips [1974] AC 391 at 402 Lord Wilberforce observed: An opinion as to ... reasonableness ..., particularly of the time during which [the matter in question] has to run, can seldom be precise, and can only be formed on a broad and common sense view [after the Court has informed itself as fully as it can of the facts and circumstances]." 63 The first factor, raises matters directly relevant to s 106 of the Act. In the present proceedings, a relevant matter, as I have found, was the expectation of long-term work fostered by the respondent. The applicants relied upon Mr Ciappara's representations to them and outlaid considerable sums of money for the purchase of their vehicles for the use in their businesses. There was nothing to suggest in the evidence that the respondent did not hold a similar expectation. Moreover, the expectation was borne out by periods of lengthy engagement characterised by good working relationships and the complete absence of any unsatisfactory performance issues. The applicants not only expended considerable sums in setting up their businesses, they also each employed an offsider to assist with the work. They each operated their businesses for the exclusive benefit of the respondent. 64 In relation to the first factor, Boland J in Gough & Gilmore (No. 15) also took the view that the interests of the terminating party should be taken into account. This approach recognises the existence of a common purpose between contracting parties which requires a reasonable notice period at the date notice is given: Crawford Fittings (at 445). A common purpose between contracting parties at the date notice is given might be to afford the contractor enough time for the deployment of labour and equipment profitably and enough time for the principal to find a suitable replacement. In an extract from Australian Blue Metal Ltd v Robert Frank Hughes and Others [1963] AC 74, considered by McHugh JA in Crawford Fittings in relation to the circumstances relevant to the reasonableness of a period of notice, Lord Devlin said (at [99]); "The implication of reasonable notice is intended to serve only the common purpose of the parties. Whether there need be any notice at all, and, if so, the common purpose for which it is required, are matters to be determined as at the date of the contract; the reasonable time for the fulfilment of the purpose is a matter to be determined as at the date of the notice. The common purpose is frequently derived from the desire that both parties may be expected to have to cushion themselves against sudden change, giving themselves time to make alternative arrangements of a sort similar to those which are being terminated." 65 In the present circumstances the applicants, who had prior to termination enjoyed continuous and consistent work, required sufficient time to make alternative, suitable arrangements in relation their vehicles and their offsiders. The respondent on the other hand needed no additional time to find suitable replacements, having already done so by its engagement of PRW. 66 The respondent submitted that in assessing a reasonable period of notice the Court should be guided by the principle, "the shorter the period of notice within the limits of reasonableness the better." The principle was referred to by Priestly JA in Crawford Fittings (at 440, 441), in recognition that conflicts of interest may arise between contracting parties during the notice period, which were not present before the notice period. Such a situation could arise where the terminated party commences a new business in competition with the other party, after notice has commenced to run. These considerations are not however applicable to the present circumstances. No conflict of interest between the parties has been identified in the evidence. 67 In relation to the second failure the Court must consider the need to provide a reasonable opportunity to the applicants to enter into alternative arrangements. This in turn requires a consideration of how much notice might be reasonable in order for the applicants to enter into alternative arrangements. 68 The respondent in relation to this factor asserted that, "it is clear on the evidence that the applicants were able to obtain alternative employment relatively quickly after termination of their contracts with the respondent." The Court's attention was not directed to any evidence in support of the assertion. In any event, in my view, what evidence there is on the issue, supports a contrary construction. The applicants did not obtain, "alternative employment relatively quickly." Mr Zammitt was unable to find comparable or alternative work. At the time of swearing his affidavit (some two years after his services were terminated), he said: "Because my work with the Respondent was terminated I tried to reduce my loss. I had my own truck converted to a tipper at an approximate cost of $25,000. I increased my hours desperately trying to get work picking up recycled cardboard. I also rented a truck to try to get delivery work, eg of refrigerators. For about 18 months now I have been driving a forklift for BOC cranes. Whilst working at BOC I sold the truck for $45,000."

69 In examination in chief Mr Zammitt said that he commenced work picking up recycled cardboard sometime in January 2003. At that time he was working for himself. After that he delivered some refrigerators and later drove a forklift. Mr Zammitt thought that he commenced to drive the forklift as an employee on a casual basis sometime in April or May 2003. He could produce no bank statements or wage records to confirm how much he earned for the work except for a credit union statement dated in August 2003 which recorded weekly payments in the order of $980, from a company, Chandler McCloud. He said that prior to commencing work with that company the money he earned, "just paid the bills". 70 Mr Hill said that about one week after he finished working for the respondent he commenced employed work as a driver for a company called Midwest. He continued work in that position for some two-three months. Although he did not produce any banking or wage receipts, he said that he earned about $700 gross per week while working at Midwest. Following that he commenced sub-contracting work for BOC Bramley working as a driver and administrator. His take home weekly pay was about $900. In his affidavit he says that following his termination by the respondent he could not afford to keep up repayments on his truck and sold it at a loss for $45,000. 71 The three remaining factors do not appear to have any application to the circumstances of each applicant. Apart from the costs associated with the trucks there was no evidence led during the proceedings as to any outstanding financial commitments. In relation to staffing issues Mr Zammitt said that he employed an offsider on a casual ongoing basis for six or seven years, and, that he was obliged to give him a payout figure. This may suggest that Mr Zammitt was able to terminate the services of his employee by late September 2002 but without the benefit of other evidence I am unable to conclude one way or the other. It doesn't appear that Mr Hill was asked any questions about the issue. Neither applicant had any customers or suppliers and neither appeared to have incurred any extraordinary expenditure or losses which they needed to recoup. 72 Taking all these factors into account I consider that a reasonable period of notice for both the applicants is six months commencing from 1 October 2002 until the end of March 2003. This period is in addition to the original period of notice of three weeks and three days given to each applicant following their letters of termination.

Mitigation 73 The issue to be addressed now is whether the principle of mitigation operates to reduce any compensation ordered to be paid in lieu of notice; see Westfield Holdings v Adams (2001) 114 IR 241. In the case of Mr Zammitt the evidence suggests that for the period between 1 October 2002 until 31 March 2003 he obtained some work, but the money he earned, "just paid the bills". Given the state of this evidence I see no basis for reducing any monies payable to Mr Zammitt in lieu of notice of six months commencing from 1 October 2002. 74 In relation to Mr Hill the evidence suggests that from about 1 October 2002 he worked for about three months as an employee on a wage of $700 gross per week and after that as a sub-contractor with a take home weekly pay of about $900. Applying the principle of mitigation and bearing in mind Mr Hill's net weekly earnings while working for the respondent I intend to reduce the amount of six months compensation in lieu of notice to five months. 75 The respondent has requested that the issues of interest and costs be reserved and that the parties have liberty to apply in respect of interest following judgment. I intend to set down the proceedings for a directions hearing on 3 April 2008 so that the parties may be heard in relation to these issues. Orders 76 The Court makes the following orders and declarations:

1. The contract under which the applicant Vincent Michael Zammitt performed work for the respondent Trend Windows & Doors Pty Limited was unfair.
2. The contract between the applicant Vincent Michael Zammitt and the respondent Trend Windows & Doors Pty Limited is varied ab initio as follows:

Trend Windows & Doors Pty Limited cannot terminate the contract without first giving Vincent Michael Zammitt six (6) months notice of its intention to terminate, or payment in lieu of notice, such notice or payment in lieu of notice to commence on 1 October 2002 until 31 March 2003. The amount of payment in lieu of six (6) months notice is to be calculated by reference to the applicant's gross yearly earnings for the financial year ending 30 June 2002 ($159,000) less all operating expenses incurred during that financial year. 3. Trend Windows & Doors Pty Limited is to pay Vincent Michael Zammitt an amount equivalent to six (6) months notice payable from 1 October 2002 until 31 March 2003. The amount is to be calculated by reference to the applicant's gross yearly earnings ($159,000) for the financial year ending 30 June 2002 less all operating expenses incurred during that financial year. 4. The proceedings are set down for a directions hearing at 9:30am on Thursday 3 April 2008 in relation to the issues of interest and costs.

1. The contract under which the applicant Stephen Robert Hill performed work for the respondent Trend Windows & Doors Pty Limited was unfair.
2. The contract between Stephen Robert Hill and Trend Windows & Doors Pty Limited is varied ab initio as follows:

Trend Windows & Doors Pty Limited cannot terminate the contract without first giving Stephen Robert Hill five (5) months notice of its intention to terminate, or payment in lieu of notice, such notice or payment in lieu of notice to commence on 1 October 2002 until 31 March 2003. The amount of payment in lieu of five (5) months notice is to be calculated by reference to the applicant's gross yearly earnings for the financial year ending 30 June 2002 ($163,400) less all operating expenses incurred during that financial year. 3. Trend Windows & Doors Pty Limited is to pay Stephen Robert Hill an amount equivalent to five (5) months notice payable from 1 October 2002 until 31 March 2003. The amount is to be calculated by reference to the applicant's gross yearly earnings ($163,400) for the financial year ending 30 June 2002 less all operating expenses incurred during that financial year. 4. The proceedings are set down for a directions hearing at 9:30am on Thursday 3 April 2008 in relation to the issues of interest and costs.

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