Industrial Relations Commission of New South Wales in Court Session CITATION: David Cherny and Anor v Isbiz Pty Ltd [2005] NSWIRComm 452 FIRST APPLICANT: David Cherny SECOND APPLICANT: PARTIES: DC Consulting Pty Limited RESPONDENT: Isbiz Pty Limited FILE NUMBER(S): IRC 4400 of 2003 CORAM: Schmidt J Unfair Contract - printer and facsimile consumables supply business - whether agreement to purchase stock formed part of the contract - whether Court has jurisdiction in relation to the stock claim - whether contract was unfair in relation to stock claim and golden parachute clause - whether respondent discontinued the work contract for the purposes of the golden parachute provision or applicants terminated contract - contract unfair - orders to be filed - costs CATCHWORDS: Industrial Relations Act 1996 LEGISLATION CITED: Macdonalds Australia Holdings Ltd v Industrial Relations Commission (2005) 144 IR 219 CASES CITED: Solution 6 Holdings Ltd v Industrial Relations Commission of NSW (2004) 60 NSWLR 558 HEARING DATES: 08/29/2005; 08/30/2005; 08/31/2005; 11/10/2005; 10/11/2005 DATE OF JUDGMENT: 12/07/2005 APPLICANTS: Mr J Hammond of counsel SOLICITORS: Abrahams & Associates LEGAL REPRESENTATIVES: RESPONDENT: Mr MJ Easton of counsel SOLICITORS: TressCox JUDGMENT: - 1 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: Schmidt J 7 December 2005 Matter No IRC 4400 of 2003 DAVID CHERNY AND ANOTHER V ISBIZ PTY LTD Application under s.106 of the Industrial Relations Act 1996 JUDGMENT [2005] NSWIRComm 452 1 In these proceedings, the applicants seek orders under s 106 of the Industrial Relations Act 1996 ('the Act'). The claim relates to a contract under which they allege that the respondent, Isbiz Pty Ltd ('Isbiz'), acquired a printer and facsimile consumables supply business from DC Consulting Pty Limited ('DC') and engaged the services of Mr Cherny, a director and shareholder of DC, as a consultant. 2 The orders sought were: 1. An order declaring that the contract between the Applicants and the Respondent ("the Contract"), whereby the Applicants performed work in an industry was unfair, harsh and unconscionable and contrary to the public interest. 2. Further, in addition, an order declaring the Contract void ab initio insofar as it allowed the Respondent to unilaterally reduce, remove or diminish the applicants' role, responsibilities or remuneration without paying the Applicants the liquidated damages and outstanding money for stock sold to the Respondent payable under the contract in the event of the Respondent "discontinuing the current work contract and agreement". (3) Further, in addition, an order varying the Contract from its commencement so as to include the following terms: (a) any material reduction, diminution or removal of the responsibilities of the Applicants set out in the Contract by the Respondent shall be considered the Respondent "discontinuing the current work contract and agreement"; (b) any material change by the Respondent in the role of the Applicants agreed by the parties under the Contract shall be considered the Respondent "discontinuing the current work contract and agreement"; (c) any material change by the Respondent in the remuneration structure of the Applicants set out in the Contract, which is detrimental to the Applicants, shall be considered the Respondent "discontinuing the current work contract and agreement:; (d) where the Contract provides for the Respondent to pay the Applicants liquidated damages and outstanding money for the stock sold to the Respondent on the occurrence of certain events, the Respondent must pay such amounts to the Applicants immediately upon the occurrence of such events; (e) the Respondent must pay for stock sold to it under the Contract within 7 days of invoice by the Applicants; (f) the Respondent must reimburse the Applicants for the expenses reasonably incurred in performing work for the Respondent under the Contract within 7 days of receipt of evidence of such expenses. (4) Further, in addition, an order varying the Contract to include a provision that the terms of the Contract be strictly complied with and that in the event of a fundamental breach thereof by the Respondent, the Respondent must immediately pay the Applicants, as liquidated damages, a sum of $240,000 less $10,000 for every month worked by the Applicants from 1 November 2002 on a pro-rata basis plus any outstanding money 3 The money orders claimed were: (a) an amount of $203,214.29 for discontinuing the Contract; plus (b) an amount of $86,803.82 in respect of outstanding money for stock sold to the Respondent which the Respondent has not paid the Applicants for; plus (c) an amount of $3,065.64 in respect of expenses the Applicants has reasonably incurred in performing work for the Respondent under the Contract which the Respondent has not reimbursed the Applicant for; plus (d) such other amount of money in connection with the Contract so avoided or varied as may appear to be just in the circumstances. (6) An order that the Respondent pay to the Applicants interest upon such amount of money as is ordered to be paid to the Applicants in connection with the Contract as varied at such rates and from such time as this Honourable Commission considers appropriate. (7) An order that the Respondent pay the Applicants' costs of these proceedings. (8) Such further or other orders as this Honourable Commission considers appropriate. 4 The issues which the parties agreed arose for determination in the proceedings were: 1. What is the Contract in this case whereby it is claimed that work is performed in an industry? 2. What are the relevant terms of this Contract, including: (a) Does the agreement to purchase stock (CB00117) form part of the Contract under which work was performed? 3. Was the Contract unfair? Stock claim 4. Does the Industrial Relations Commission have jurisdiction to make a relevant order in reference to the stock claim because that part of the claim is not a contract whereby work is performed in an industry? 5. If so, were the terms of the contract or arrangement in relation to the payment for stock unfair? Golden Parachute Claim 6. Is the term of the Contract in relation to the golden parachute unfair? 7. If so what orders should be made? 8. Did the Respondent discontinue the work contract for the purposes of the golden parachute provision? The evidence 5 In the applicants' case, evidence was given by Mr Cherny and by Mrs Nicole Bird, public servant and Mrs Judy Wilson, account manager. The respondent called evidence from Mrs Isabel Fryer, sole director of Isbiz; Mrs Sarah Latner, salesperson and Mr Rodney Fryer, logistics manager. 6 Between 1994 and August 2001, Mr Cherny was a director and 33% shareholder of Cherny Enterprises Pty Limited, which traded under the name 'Tasman Supplies'. In August 2001, the Tasman Supplies business was transferred to DC. Mr Cherny held 100% of DC's shares. DC continued to operate the business under the Tasman Supplies name. 7 Mr Cherny had business dealings with the respondent, which traded under the name 'Toner Warehouse' from 1997. Isbiz operated a printer and facsimile consumables business. Mrs Fryer acquired control of Isbiz in 1994 and was its sole director. In October 2002, Mr Cherny approached Mrs Fryer with a proposal that Isbiz acquire the Tasman Supplies business and that he work for Isbiz as a consultant in the Toner Warehouse business. 8 Terms were discussed and agreement reached. Both Mr Cherny and Mrs Fryer made representations as to the current gross profits which their businesses were producing. It appears that neither party saw the others' accounts, or obtained accounting advice on what was agreed. 9 A series of documents recorded the agreement reached in October, to commence on 1 November. They comprised an email sent to Mrs Fryer by Mr Cherny on 16 October, responding to a draft offer letter provided by Mrs Fryer that day; the offer letter of 17 October on Toner Warehouse letterhead, which Mr Cherny accepted; a restraint agreement also dated 17 October between Mr Cherny and Isbiz; a further letter from Mrs Fryer to Mr Cherny of 17 October, again on Toner Warehouse letterhead, agreeing to purchase Tasman Supplies' stock, on the basis outlined in Mr Cherny's email of 16 October and a further letter containing a 'golden parachute clause', which Mrs Fryer accepted for Isbiz and Mr Cherny for DC. 10 It is unnecessary to set out the terms of the restraint agreement. I note however, that the agreement was drafted in the context of a 'restraint period' and a 'restraint area'. Neither term was defined and no such period, or area, was specified in the agreement. 11 It was Mrs Fryer's evidence that two other matters had been agreed between she and Mr Cherny. One was that the stock which DC had on hand would be sold within 3 to 4 months and the other, that Mr Cherny's salary of Tasman Supplies' products of $120,000 per annum was dependent upon Isbiz achieving sales of $20,000 per month. Neither of these terms were included in any of the parties' correspondence. Mr Cherny disputed that such terms had been agreed. The evidence was also inconsistent with evidence given by Mrs Fryer in cross examination, that she would have employed Mr Cherny even if he had not brought his stock in hand with him and that she would have paid him around $120,000, that being what a business development manager would be paid, depending on experience. 12 The 17 October offer letter proposed a title 'Business Development Manager (or a title similar to this)'. The title which Mr Cherny and Mrs Fryer later agreed that Mr Cherny should have, was general manager, agreed in the context of some publicity which they had attracted. Mr Cherny used the title, but it was Mrs Fryer's evidence that he was not, in reality, employed to perform the work of general manager. His true role was sales or business development. This evidence accorded with evidence called by the applicants. Mrs Bird, a sales assistant, for example in cross examination explained that she understood him to have been the sales manager. Sales staff called by the respondent gave similar evidence, Ms Latner for instance. 13 The parties' relationship came to an end the following April. Both the applicants and the respondent allege that the other was responsible for bringing the relationship to an end. 14 Isbiz employed four sales staff. At the commencement of the relationship, Mr Cherny and Mrs Fryer agreed upon which of the Tasman Supplies' customers were to be allocated to each member of staff. Mr Cherny was to train the sales staff in those products. Mrs Fryer came to the view that the training he provided was inadequate. The Isbiz records were not in evidence. However, it appears that expected sales of Tasman Supplies products did not materialise. Nor did Isbiz' other turnover remain at the monthly levels represented to Mr Cherny. The reasons for the latter problem were not much explored in the evidence, although it appears that both staff turnover problems and difficulties in the warehouse may have contributed to the overall performance of the business. 15 Mr Cherny disagreed that the training he provided to the sales staff in the Tasman Supplies' products was inadequate. He came to the view that the sales staff did not have sufficient time to sell the Tasman Supplies products, given the work they were already required to perform in selling the Toner Warehouse products. Two members of the sales team were particularly resistant to the new work, telling him that they did not have time and were already earning enough income from their existing customers, given their salary and commission arrangements. Mr Cherny believed that there were also problems with Isbiz' warehouse operations, resulting in customer complaints about incorrect orders. The new business Mr Cherny introduced, in his view, exacerbated these problems. Difficulties of staff turnover also emerged, with sales staff reduced to three at several points, until in February 2003, when Mr Cherny agreed to take over responsibility for the customers of one of the sales' positions. There was an issue between the parties as to what, in fact, was then agreed and what impact it had on Mr Cherny's position as general manager. 16 Mr Cherny also believed that the Isbiz' accounting system was overburdened and not accurately tracking sales of the former Tasman Supplies' products. On his case, Mrs Fryer had also transferred one aspect of the Tasman Supplies business to her father's business, so that the results being generated were not being reflected in the Isbiz accounts. 17 Under the agreement, after three months, Mr Cherny was entitled to 10% commission on Isbiz' gross profits in excess of $240,000. There were disagreements between Mr Cherny and Mrs Fryer as to what those profits in fact were and whether commission was payable. The result was that Mr Cherny was paid commission for only one month. 18 The parties' agreement expressly contemplated that Mr Cherny would provide a stock list and would invoice Isbiz for that stock on 31 October and Isbiz would pay for the stock in 3 to 4 instalments. The stock list was supplied, but the agreement was otherwise varied. It was agreed that some of the stock would be transferred to the Isbiz warehouse and the balance would remain where it was warehoused by DC. DC would invoice Isbiz for the stock as it was transferred and sold. 19 On Mrs Fryer's evidence, before Mr Cherny was appointed, the duties he was assigned had been shared between her and her husband. She was the managing director and believed the business was growing and required the assistance which Mr Cherny could offer. She was pregnant with her third child and proposed to take a period of leave when it was born, but that was not why he was employed. He was needed to help grow the business. Given that he had run his own business, was familiar with the industry, already knew the sales staff and had operated the same computer system as Isbiz was using, she expected that Mr Cherny would have no difficulty in his role of business development. 20 The duties of the position were spelt out in the letter of 17 September. It relevantly provided: I need to confirm what we expect out of you, 1. Train all sales people on your products that you are bringing across with you 2. Hand over existing accounts to sales people here & monitor activity on these key accounts & sales figures of this new area 3. Marketing activities for all new products & price lists 4. Report with my self on a weekly basis on the following areas § Activity levels, sales results, stock levels Purchasing etc 5. I would like you take an active Role in being the face & spokesperson of TONER WAREHOUSE, this will involve Supplier meetings & focusing with me on the direction of the company. 6. You will have to sign a confidentiality agreement. 7. You will eventually have a responsibility for all the sales area inc § Export § Oem § Compatible products Most important of all is getting new business & really getting the Sales of your products of (sic) the ground. With support form (sic) 4 Sales people & Admin. 21 On Mrs Fryer's evidence, she also expected that Mr Cherny would ensure that the Tasman Supplies' sales were maintained at $20,000 per month, even if that meant him doing some of the selling work he had formerly been doing while operating the Tasman Supplies business for DC, if the Isbiz sales staff did not have the time to do so. Mrs Fryer agreed that the appointment letter did not mention such sales work, but explained that was the work which she expected a business development manager to do - in a sense it was a glorified sales position. She herself got involved in sales. Mr Cherny was never employed to do the work of a general manager. She explained that she was not 'into titles' and accepted that she had agreed to give Mr Cherny the title of general manager, when he suggested that it would look better than the title of product development manager. She placed no importance on titles and Isbiz was a small business, the role of a general manager was the one she performed. Even her husband didn't have a particular title. 22 Mrs Fryer's evidence was that Isbiz was a small, albeit growing business, employing some 15 staff with an annual turnover then of some $25 million, although it had not been so high since. The synergies she expected from Mr Cherny coming into the business did not emerge. Given the size of the business, there was no need for both a managing director and a general manager, there was no real hierarchical structure in place. Sales staff met regularly to discuss products being offered. Until Mr Cherny came, there was no need for presentations about new products. Training was generally done on the job, the staff were experienced and sales targets had been set and reviewed by Mrs Fryer. 23 Difficulties soon emerged in the relationship between Mr Cherny and Mrs Fryer. She was concerned about his approach to introducing the new products to the sales staff and how he interacted with them. She raised these matters with him. Mr Cherny disagreed with her. 24 These difficulties were compounded by problems which arose between Mr Cherny and Mr Fryer. Ostensibly, Mr Fryer was responsible for the warehouse operation. Before Mr Cherny was appointed, Mr Fryer had also assisted his wife in work Mr Cherny was employed to perform. Mr Cherny believed that Mr Fryer cut across some of his responsibilities. Mr Cherny also saw problems in the warehouse operation and made suggestions for improvements, which Mr Fryer did not welcome. When problems were raised with Mrs Fryer, she took the view that Mr Cherny was being negative and in his view, did not appear to welcome his views and suggestions. In January, Mrs Fryer raised concerns with Mr Cherny about his attitude to being involved in a stocktaking and how he approached staff recruitment. Mr Cherny disagreed with the reproach. Some fairly acrimonious email communication followed. 25 As already noted, problems also emerged in the acquisition of the stock which Isbiz had agreed to purchase. The stock was housed in an independent warehouse. Isbiz did not have sufficient warehouse space to take the stock and rather than paying for it on the terms initially agreed, in four instalments, the stock was finally invoiced as it was sold. Mr Cherny explained he did not protest about this alteration to the agreement. He was concerned to ensure that he received payment for the DC stock and remained in his job, given that he had given up the Tasman Supply business. He did not wish to put Isbiz in a position where its cash flow was affected negatively and so accepted the variation to the arrangement. 26 Mrs Fryer's evidence revealed why this change was made. Mrs Fryer understood from Mr Cherny that while his business was generating gross profits of $20,000 per month, he was taking home a salary of only $36,000 per year. On her reckoning, she could pay Mr Cherny $10,000 per month, reduce his other overheads to about $5,000 and make a profit of $5,000 per month on the Tasman Supplies business which came with him from DC. These savings were achievable, because she could reduce costs, amongst other things, because she would not have to pay external warehousing costs which DC had to meet, of some $6,000 to $7,000 per month. 27 That saving did not materialise, because the Isbiz warehouse could not, in fact, house all the Tasman Supplies stock. The result was that Isbiz paid for the warehousing costs, even though it had not been invoiced for all of the stock, as originally agreed. Mrs Fryer also expected the stock to be sold more quickly than it was. This meant that the warehouse costs were incurred for a longer period than she anticipated and gross profits of $20,000 per month did not materialise. 28 It was not until after the parties had terminated their arrangement, that Isbiz was invoiced for the remaining stock by DC. At that stage, a dispute arose as to whether all of the stock was in 'good saleable condition'. The result was that Isbiz refused to take the stock. Mr Cherny sold some of the stock, but the balance remained in the warehouse, with Isbiz refusing to receive it and arguing that some of it, at least, was not in 'good saleable condition'. 29 Mr Cherny encountered problems in managing staff. On his evidence some of them refused to take directions from him and refused to sell the Tasman Supply products, being in their own view too busy attending to their existing work. Even Mrs Bird explained the difficulty in attending to these small accounts, as well as her existing larger customers. Her evidence was that Mr Cherny did nothing to assist with this difficulty. Ms Latner's evidence was that she found him negative and not helpful, so she turned to Mrs Fryer when she had problems. 30 Sales targets were fixed for sales staff by Mrs Fryer reviewing their sales on a monthly basis. Mr Cherny attended the November and December meetings with Mrs Fryer. There was no January meeting. On Mr Cherny's evidence, he was not invited to attend any subsequent meetings. Mrs Fryer could not remember that he had not attended those meetings, but explained that it had originally been her intention that he would perform the sales target work, together with her. There was no suggestion that Mrs Fryer ever provided Mr Cherny with sales targets in relation to the Tasman Supplies' products, other than perhaps, those allocated to him as a part of his sales territory after March when he took on one of the sales person's roles. 31 Up until his agreement to take on a sales territory, the other sales assistants shared their allocated sales targets with Mr Cherny. On his evidence, this ceased at that point, when the other sales assistants stopped reporting to him. Mrs Fryer's evidence was that it had not been her intention to remove his other responsibilities from Mr Cherny, when she appointed him to the sales territory and that he did continue performing such work and representing himself to customers and others as the general manager. The sales appointment was to be temporary, but there was no evidence that steps had been taken to appoint another sales assistant for that territory, while Mr Cherny remained in the employ of Isbiz. 32 Shortly prior to the termination of the relationship, Mrs Fryer raised with Mr Cherny the idea that his commission structure should be altered, so that commission was payable on sales achieved in his territory, rather than on company profits. Mrs Fryer explained that this was because Mr Cherny was not making any Commission under the existing arrangement and she had only raised this possibility for his benefit. Mr Cherny saw this as another illustration of Mr Fryer's desire to remove him from the role he had agreed and to relegate him to a more junior position. 33 Mr Cherny found that while he was initially involved in decisions about matters such as staff recruitment, he was excluded when final interviews were conducted; he was initially involved in the process pursued in selecting a new accounting system, but Mr and Mrs Fryer excluded him from the final decision making process; he was initially involved in approaching big new accounts, but later excluded by Mr Fryer, who pursued such accounts himself. Over time Mr Cherny believed that his responsibilities reduced until he was mainly concerned with sales in his territory. Mrs Fryer disagreed. Contrary to Mr Cherny's affidavit evidence, computer records showed that even shortly before the termination of his arrangement, Mr Cherny was sending Isbiz information to his home computer. In cross examination, he explained that this was connected with his work for Isbiz, and not with another business which he was then engaged in his spare time in developing. This evidence tended to confirm that Mr Cherny's duties were at that stage, still broader than simply sales. 34 Part of Mr Cherny's complaint went to the unilateral alteration of his role in ways he did not accept. When Mrs Fryer asked Mr Cherny if he would take over a sales position when one of the salesman, Mr Brookes left, he agreed, but regarded the change as inconsistent with his contract. Mrs Fryer's evidence was to the contrary. She understood he was happy to take on the sales work, but would have been content to engage another salesperson if he had not been. Mr Cherny's evidence was that other staff understood he had been demoted. Ms Wilson's evidence was that she was shocked when it was announced that he was to take on a sales role, but agreed in cross examination, that she had never been told Mr Cherny would no longer be general manager. She also agreed that she had made an assumption, which could have been wrong. 35 Ms Latner's evidence was that she understood Mr Cherny had taken on the sales work, but that otherwise his position had not altered. She understood he was responsible for business development and sales. Mr Morton also understood he was responsible for managing the sales team. After Mr Cherny took on a sales role, his work changed, but Mr Morton kept reporting to him and there were no other changes in his responsibilities of which Mr Morton was aware. 36 In early April, Mr Cherny asked Mrs Fryer by email to confirm his responsibilities. Mr Cherny then took some leave and they met on his return, on 29 April. By this time the relationship was acrimonious. At an earlier general sales meeting in March, Mr Cherny had raised a concern about problems he was experiencing in the warehouse. On his evidence, Mrs Fryer then swore at him in front of other staff. Mrs Fryer's evidence was somewhat different, namely that this had occurred afterwards, when they were alone together. In cross examination, Mrs Fryer agreed that she had sworn at him. On her evidence Mr Cherny used similar language. Mr Cherny's evidence was that at this stage, he was concerned to ensure both that he had a job and that he was paid what was outstanding for stock. He did not regard himself to be in a position to raise with Mrs Fryer, what he regarded to be breaches of their agreement. 37 It was common ground that on 29 April, Mrs Fryer and Mr Cherny discussed the concerns which they each had about various matters, including the failure to achieve gross profits of $20,000 per month on Tasman Supplies products and the unsold stock remaining in the external warehouse. Mrs Fryer's evidence was that she had expected the sales he had formerly been able to achieve entirely on his own to have grown, after he came to Isbiz. Mr Cherny accepted no responsibility for the failure to meet the agreed targets fixed at the level of the business he had done on his own. She accepted that business was generally slow in January and February, but Mr Cherny's view was that everyone but he had contributed to that failure. His conflicts with sales staff and problems with the warehouse were also discussed. Mr Cherny agreed to provide a report to Mrs Fryer about sales and to give staff another presentation on Tasman Supplies products, to attempt to improve those sales. Mrs Fryer again regarded the presentation later given as inadequate. 38 On 8 May, Mr and Mrs Fryer met with Mr Cherny and asked him whether he had 'suggestions about how to improve your role at Toner Warehouse'. Mr Cherny had earlier agreed to put some proposals together, but did not provide any at the meeting. Mrs Fryer told him that she would keep him on his salary of $120,000, but proposed a change to his commission arrangement. As a consultant, she told him that she also did not wish to pay him sick leave and holiday pay. Mr Cherney had no difficulty with this, given that he was a consultant. Mrs Fryer asked Mr Cherny to provide her with ideas for a new job description. Mrs Fryer then left the meeting. 39 On Mr Cherny's evidence, before Mrs Fryer left, she said she did not want him to return to the office. She denied this. Consistent with his understanding, Mr Cherny left the meeting after a further discussion with Mr Fryer and went home. He never returned to work, despite repeated requests that he do so. 40 There followed a series of correspondence by email, with Mrs Fryer asking Mr Cherny to contact her, to return to work and to provide her with a proposed job description. Mr Cherny did not return to work, or return her calls, or those of Mr Fryer, but asked her to provide him with a position description and an outline of what she proposed. Mr Cherny's access to the computer system was removed on 9 May. The parties sought legal advice. The relationship came to an end, but who was responsible for that outcome was the subject of dispute. The parties' respective cases 41 The case advanced for Mr Cherny by Mr Hammond of counsel was that the parties' agreement comprised the various emails and correspondence and restraint agreement of 16 and 17 October. Mrs Fryer's evidence not only differed from that given by Mr Cherny in a number of respects, but also as to that given in her affidavit evidence and that given in oral evidence. Her evidence should be rejected, in so far as it conflicted with that of Mr Cherny. 42 In relation to the purchase of stock, it was agreed that it would be acquired by Isbiz on 31 October and then paid for, in three or four instalments. The arrangement in relation to payment changed at least twice, for reasons which Mr Cherny explained, until invoices were only rendered after stock had been transferred to Isbiz' warehouse and had been sold from there, but title had already passed. This was consistent with the business going from DC to Isbiz, including customer lists, trademarks and copyright, as both Mr Cherny and Mrs Fryer understood. It was relevant that the offer letter described the arrangement as a merger of the businesses. 43 This made it clear that the whole of the agreement had to be understood as one which led to the performance of work. (See Euphoric Pty Limited v Ryledar Pty Ltd (2002) 117 IR.) This was not a contract merely for the sale of stock, but one which required the performance of work, with Mr Cherny not only being expected to organise and supervise the sale of the stock, but himself to sell it, as a part of the arrangement. 44 The conduct of the parties in relation to the stock threw into relief the unfairness of the contract. The variations to the time at which payment for the stock had to be made, made the contract relevantly unfair. Mr Cherny had agreed to these changes, given his concerns about Isbiz' cash flow and fearing that otherwise, he would not be paid for the stock. He rendered numerous invoices for which he was not paid and was powerless but to agree to the alterations Isbiz proposed. This permitted Isbiz to claim, after termination, that the stock was not in good, saleable condition, a matter which, in fairness, should have been resolved at the outset. Even stock which Isbiz had retained and sold had not been paid for, despite what had been advised in correspondence by its solicitors, after the arrangement was terminated. 45 At that point Mr Cherny had transferred DC's business and its assets to Isbiz. He had been promised a position with certain responsibilities, supervising four sales staff and taking the burden from Mrs Fryer. Instead, he was faced with staff already overburdened with work, who could not attend to the sales of his products, as well as those of Toner Warehouse, there was considerable resistance from staff to his role, staff turnover resulted, there was warehousing problems and falling sales figures, so that Mr Cherny had to step in and take over the duties of one of the staff positions. The result was that he was being distanced from the duties he was engaged to perform, because Mrs Fryer expected him to take on sales work. 46 This change in duties was not one provided for by the golden parachute clause, which the parties had agreed. Mr Cherny's agreement, given under duress, to take on the sales work in February 2003, ought in fairness to have triggered the agreed requirement that he be paid $240,000, less the $10,000 per month, he had already earned during the course of the employment to that point. 47 As to the circumstances in May, when the relationship came to an end, it was relevant that the result was that the applicants, having a successful business at the outset, were left with nothing at the end, but stock which they could not sell, no longer having a business in which to sell it. They understood the stock then belonged to Isbiz. Isbiz did not even pay Mr Cherny's outstanding the stock then expenses. The relationship came to an end as the result of the respondent's conduct, which should be reflected in the orders of variation sought in relation to the golden handshake clause. 48 The case advanced for the respondents by Mr Easton of counsel, was that the fundamental question in the case was who had terminated the contract. The evidence showed that Mr Cherny had left of his own volition. If he had not, the golden parachute clause was triggered by the respondent's actions and if that were so, no conclusion that the contract was relevantly unfair was open. Nor would it be concluded, in fairness, that there should be a golden parachute payment if the contract came to an end as the result of Mr Cherny's actions. 49 It followed that the case was, in substance, an enforcement case, both as to the golden parachute and in relation to the claim for stock. The acquisition of stock was the subject of a separate contract, under which no work was performed. It followed that contract was not within the Court's jurisdiction. 50 It was argued that in the case of conflict, Mrs Fryer's evidence would be preferred to that of Mr Cherny. It was common ground that some of his duties changed, when he agreed to take on sales work after the departure of one of the salesmen. There was disagreement as to whether this involved a demotion or a fundamental change in the relationship. The contemporaneous documents and evidence given by Mr Cherny in reply and in cross examination, demonstrated that there had been no such demotion or change. He continued thereafter working in his former position, performing his former duties and describing himself as general manager, as well as taking on the extra duties which he had accepted. His evidence that he had agreed to the changes because he was scared about his position, would not be accepted, given his correspondence at the time. His evidence was not frank as to these matters and would be rejected. 51 So, too, would be his explanation of how the relationship came to an end. His evidence in cross examination showed he had made a decision he would not return and had then taken steps to make it appear as if it was the respondent which had brought the relationship to an end. At that stage, Mrs Fryer was aware of his discontent and was trying to resolve it, by changing his role and duties to overcome his concerns. Repudiation was not an available conclusion, given the concerted efforts being made to resolve his concerns. There had been no change to his remuneration structure. The proposal made was designed to improve it. 52 It was also relevant that while the arrangement was described as a merger, there was, in fact, no sale of the Tasman Supplies business by DC to Isbiz. Rather, Mr Cherny was to work as a consultant for Isbiz and to take a share of profits. The separate agreement in relation to stock had to be understood in that context. Title to stock under that agreement was not to pass until it was sold and DC had supplied and invoiced for that stock. Mrs Fryer's evidence was that she did not understand she was buying the stock as at 31 October, otherwise she would have undertaken a due diligence exercise at that point. 53 Even if the agreement in relation to stock formed a part of the agreement in relation to work and it was concluded that title had passed on 31 October, the claim was still not within jurisdiction. 54 As to payment for stock, it was pointed out that the parties had still not agreed on the three categories of stock in question - the stock supplied and not paid for; the stock supplied, but unsaleable and the third, the goods never supplied and never paid for. If orders were made as to these matters, the parties would have to consult further on figures. It was also relevant that the values of stock fluctuates. Some of the stock was later sold by Mr Cherny, which would also need to be taken into account. 55 Questions of mitigation also arose, because after his departure, Mr Cherny was involved in another business, an online catalogue, commenced by a separate entity, in which DC held shares. This was relevant because the logical order, if the conclusion was reached that there had been termination by the respondent, was not the golden parachute clause, but notice in the order of five months, in the circumstances of this employment, as comprising reasonable notice. 56 In reply, it was argued by Mr Hammond that the weight of the evidence showed that there had been a demotion when Mr Cherny agreed to take on the sales work. It would also be accepted that Mr Cherny had been told on 8 May to come back as a salesperson or not to come back at all. 57 The argument that here had been a separate agreement as to the purchase of stock would be rejected. There was but one contract, comprised of a number of documents, with the stock purchase an integral part of what had been agreed. Without that part of the agreement, Mr Cherny would not have accepted the consultancy. In any event, even if a separate agreement, on the evidence it could not be doubted that the contract led directly to the performance of work. The contractual term provided was that title to the stock passed on 31 October. Consideration 58 I will deal at the outset with the nature of the contract between the parties, given the jurisdictional question raised in relation to the claims made as to the acquisition of stock. Given the emails and correspondence exchanged by the parties, as well as the evidence of Mr Cherny and Mrs Fryer as to the course which the negotiations took, about which there was no real controversy, I am satisfied that the parties entered one contract, comprised of a number of documents. Firstly, the offer letter of 17 October, which included, in relation to stock, at p 2: I also need a detailed stock list from you so we can purchase the stock from Tasman, I have spoken to my lawyer & they recommend the stock to be invoiced to Toner warehouse that is the only legal requirement , as we will not be taking on any debt or ownership of the Tasman Company. I have known you for years now & trust that if we buy the stock from you, you will stay with us & help grow TONER WAREHOUSE as if it were your own company. 59 Secondly, the email of 16 October, which relevantly provided (in response to a draft of the first letter, in identical terms to the 17 October letter: Stock list -no probs. At the moment total value is approx$145K. Let me send it to you after Friday by which time a few more items will be sold and it will look more accurate. Happy to invoice all to you on 31st October 2002 if that is okay. If possible I would like to have stock paid to me in 3-4 instalments on a monthly basis. This will allow me to meet my committments(sic), is that okay with you? Inbound stock. I have 2 orders in the works. One will arrive in Mid November and will need to be paid either when it lands or 15 days after it lands. Total value $AUD $85k. The second order is worth $13K Singapore dollars and has been paid 50% on my Amex card and the balance will probably be charged to my card because it will probably arrive into my warehouse before 1st Nov. So this will then be part of the stock figure. 60 Thirdly, the letter of 17 October which provided: I agree to purchase Inventory from Tasman that is in good saleable condition. At cost, as explained in David Email on the 16th October 2002 in 3-4 instalments. It must be invoiced to Toner Warehouse from Tasman Pty Ltd. 61 The promised stock list was then supplied on 17 October. The restraint agreement and the golden parachute clause earlier mentioned, also formed part of the contract here at issue. 62 I am satisfied that there was no separate contract between the parties in relation to the purchase of the stock. That is consistent with the whole basis of the arrangement, which was not just the provision of Mr Cherny's services as a consultant by DC, but the 'bringing across' as Mrs Fryer described it, of the products sold in the Tasman Supplies business, together with its existing accounts and assets such as customer lists, trademarks and copyright. 63 Both Mrs Fryer and Mr Cherny at various times described what had been agreed as a merger of the two businesses. In the offer letter of 17 October for example, in explaining the proposed commission arrangement, Mrs Fryer said: For example if you grow the business to 300K per month you will get paid 10% of 60k, which is 6K. This will be paid monthly. I trust you agree that the merger of both companies will give you an opportunity to earn additional money over & above the 120K. 64 The end result of the agreement reached was that Isbiz acquired the Tasman Supplies business, its stock in trade and assets other than debtors, together with Mr Cherny's services as a consultant. He was to ensure the stock was sold and that sales were maintained at the target lead per monthly. If he did, he would be entitled to a share of profits. The applicants received the golden handshake, which effectively guaranteed payment of two years' consultant's fees of $240,000, even if Isbiz decided to terminate the consultancy before the end of that time. There was to be no such payment if it was Mr Cherny or DC who brought the consultancy to an end within the two year period. In that event, the restraint would apply. 65 While Isbiz did not pay DC for the Tasman Supplies business, the reality was that under the parties' contract, Isbiz obtained that business as a going concern, its intention being to operate the business on a profitable basis and to grow it, with the assistance to be provided by Mr Cherny under the agreed consultancy. While it was Mrs Fryer's evidence that she would have engaged Mr Cherny as a consultant without the agreement in relation to stock, it was his evidence that he would not have made such an agreement. He was not in a position to do so. 66 What was common ground was that the parties expected synergies to be available to be exploited from the bringing together of the two businesses. There was, in truth, but one contract between the parties, which gave effect to the whole of this agreement. One part of the contract was concerned with the acquisition of stock in hand and that on order, at cost. This, it would appear, was of real value to Isbiz, which had in the past purchased stock from Tasman Supplies, for its own business purposes. It was of real value also to the applicants, having no way other to dispose of the stock, once the agreement was made. The sale of the stock was also anticipated to enable Isbiz to pay Mr Cherny $10,000 a month. 67 What the parties plainly contemplated at the outset was that when the agreement came into operation, Isbiz would acquire the stock, but would pay for it over time, in three to four monthly instalments, to ensure that the applicants could meet their commitments, as Mr Cherny had explained in his 16 October email. I am unable to accept Mrs Fryer's evidence, that it had also been agreed that the stock would all be sold in that timeframe, or that it was contemplated that payment would be delayed, until the stock was sold. 68 Undoubtedly, these variations came later. Nevertheless, the evidence showed that while Mr Cherny had not taken any legal advice, Mrs Fryer had, particularly in relation to this aspect of the agreement. That advice was taken after the parties' initial discussions, but before the correspondence of 16 and 17 October. The parties' dealings with each other were quite careful, they each seeking to ensure that the matters of concern to them were dealt with in the contract. Had such terms been a part of the discussions, undoubtedly they would have been included by Mrs Fryer in the contractual documents. Mrs Fryer's account of her conversation with Mr Cherny, was, in fact quite inconsistent with the terms agreed, as she later drafted them: D. Cherny: 'Are you interested in buying my stock at cost price? I. Fryer: 'What stock levels have you got?' D. Cherny: 'About $150,000.' I. Fryer: 'How old is the stock.' D. Cherny: 'It is all stock which I will be able to move in 3-4 months.' I. Fryer: 'Can I pay for the stock when we sell it.' D. Cherny: 'That's fine because it won't take too long to sell it all.' I. Fryer: 'If you can move it, I have no problems paying for it. Could you send me a stock list so I know what you have got.' D. Cherny: 'No problems.' 69 Mr Cherny denied such a conversation. I am unable to prefer Mrs Fryer's evidence on this issue. 70 The time at which payment for stock was required under the contract was later varied by agreement. Mr Cherny explained that at that time, he was content to agree to the variations, because he wanted to make sure that Isbiz wasn't in a position where its cash flow was restricted to the point where it couldn't pay its bills. That was an understandable concern, given that the sales he had represented to Mrs Fryer were not being achieved and that by this stage, it was apparent that the Toner Warehouse business was also not operating at its pre-existing level. 71 Nevertheless, I am satisfied that thereby, the contract came to be unfair, because of the events as they then unfolded. This variation had the result that not only did it permit Isbiz to delay paying for the stock, it allowed it to sell stock through Mr Cherny's efforts, but not to pay for it at all and eventually, to refuse to accept the remaining stock, once the relationship came to an end. At that point, having been unable to accept the stock into its own warehouse, because of space constraints, it refused the remaining stock entirely, later taking the attitude that much of it by then was not in good saleable condition, a matter disputed in large part by the applicants. 72 This situation undoubtedly worked real unfairness on the applicants. On the respondent's case, the goods did not have unlimited lifespan. After termination, the applicants were no longer in the Tasman Supplies business, that remained with Isbiz, which was, undoubtedly, thereby in a better position than the applicants to sell the goods. Despite successfully selling some of the stock, the applicants were unable to sell most of it. Such an attempt on the one hand could be regarded as a proper attempt at mitigation. On the other, arguably it would have put the applicants in breach of the restraint agreement, had it been drafted in effective terms, as it was, no doubt, intended to be by Isbiz. This, nevertheless, is an element of the contract as the parties intended it, which cannot now be overlooked. 73 It is convenient at this point to deal with Isbiz' argument that the Court has no jurisdiction to deal with this aspect of the claim, even if the agreement in relation to stock formed a part of the one contract. In Solution 6 Holdings Ltd v Industrial Relations Commission of NSW (2004) 60 NSWLR 558, Spigelman CJ observed at [83] and [95]: 83 Section 106 must be read and understood in an industrial context for the reasons I set out in Mitch force at [6]-[17]. In my opinion, the power to declare void or vary a contract, etc. under s106(1) extends only to such aspects of it as closely relate to the performance of work in an industry. It does appear that litigants before the Commission have proceeded on the basis of a literal interpretation of the power in s106. 95 In my opinion, the power of the Commission to declare void or to vary a contract or arrangement does not extend to a provision which has no relationship whatsoever to the performance of work. Specifically, the formula for computation of the purchase price, in my opinion, has no such relationship and the Commission has no power to vary it. 74 Handley, J, who agreed with the Chief Justice added: 175 A decision that the Commission has no jurisdiction to review the Share Sale Agreement is not inconsistent with the decisions of the Commission and the superior courts dealing with composite transactions. In appropriate cases a share farming agreement ( Stevenson v Barham (1977) 136 CLR 190) a lease of land ( Mitch force Pty Ltd v Industrial Relations Commission (2003) 57 NSWLR 212, 226, 247) or a licence to occupy land ( Caltex Oil (Australia) Pty Ltd v Feenan [1981] 1 NSWLR 169; Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1992) 28 NSWLR 443) may be a contract whereby a person performs work in an industry so that all its terms are susceptible to avoidance or variation by the Commission. 176 Thus in Stevenson v Barham the right to occupy the land for share farming purposes, and the remuneration of the share farmer for his work by a share of the profits, were inseparable parts of one transaction. In Caltex Oil (Australia) Pty Ltd v Feenan the licence to occupy the service station and the licence fees and prices payable by the licensee for products supplied by the company were also inseparable parts of one transaction. The remuneration of the licensee for his work could only be determined by considering all his rights and obligations under the overall arrangement. The Commission has jurisdiction in such a case whether the licence agreement and the fuel supply contract are in separate documents or not. 177 The point is illustrated by the decision of this Court in Ex parte V G Haulage Services Pty Ltd Re Industrial Commission [1972] 2 NSWLR 81. The overall contract or arrangement whereby a person performed work in an industry comprised the sale of a truck on terms over five years, a work agreement with the vendor under which the purchaser paid a premium of $2500 to obtain haulage and freight contracts over five years, and an agreement for the allotment by the vendor to the purchaser of one thousand preference shares of £1 each. This Court held that the whole contract or arrangement was within the jurisdiction of the Commission under s 88F and the decision has never been doubted. The Commission's jurisdiction in sale of truck in work cases was frequently exercised before and after that decision. See eg Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371. 75 In Macdonalds Australia Holdings Ltd v Industrial Relations Commission (2005) 144 IR 219 applying Solution 6, Spigelman CJ concluded: 83 McDonald's relied on the proposition that the relief sought does not closely relate to the performance of work. In my opinion, this submission should be upheld, indeed, as was held to be the case in Solution 6 at [95], the relief sought in this case does not merely fail a test of having a close relationship to the performance of work, the relief sought has no relationship to the performance of work, or alternatively, to use the alternative formulation in Solution 6 at [87], the relief does not relate to the performance of work in a reasonably direct manner. 84 It is not sufficient to say, as the Opponents did, that any aspect of the relationship between the parties can be modified so long as the modification can be seen to have some consequence on the profitability of the business and, therefore, upon the remuneration of Mr McLaughlin or, perhaps, other employees. Something more direct, indeed in my opinion something close, is required. Nothing more direct was suggested to exist. 76 I am of the view that even on this approach, the evidence in this case demonstrates that the claim falls within jurisdiction. What was agreed in relation to stock was a fundamental aspect of the agreement, or as Handley J put it, an inseparable part of the one transaction - without it, the applicants would not have been in a position to have Mr Cherny perform work for Isbiz. Further, on the evidence, what was agreed in relation to stock had a direct relationship to the performance of that work. Mr Cherny's services were provided by DC to ensure that the Tasman Supplies business continued and grew, once merged with the Toner Warehouse business, as well as taking advantage of available synergies, so that the Toner Warehouse business could also grow. That could not occur without the Tasman Supplies stock. Isbiz had no such stock otherwise to sell. Without it, a significant aspect of the work Mr Cherny was engaged to perform and upon which he and DC depended, in order to achieve commission payments based on profit share, would simply not have been possible. On Mrs Fryer's evidence, Isbiz also depended on the sale of that stock, to fund what it had promised to pay DC and Mr Cherny. 77 I am also entirely satisfied that in fairness, the contract ought to be varied, to reinstate the original terms, which required payment for all of the stock, by the end of four months from the date the contract commenced, namely from 1 April 2003, but with two exceptions. The first is in relation to those goods which the applicants accepted were not in good saleable condition. While Mr Cherny's evidence was that as at 31 October, the stock was all good saleable stock, his acceptance after the termination of the relationship that some of it was not, cannot in fairness now be ignored. The second, those goods which the applicants in fact sold. The value of the goods falling within those two categories should be deducted - the calculation being done, as agreed, at cost. It also follows that an order for interest for the balance should flow as from 1 April 2003, until the date of judgment. 78 I am satisfied, on the evidence, that this will achieve a fair adjustment of the parties' respective positions, having regard to the unfairness of the contract demonstrated. It also follows that the parties must co-operate to make the necessary arrangements to hand the goods other than those identified by Mr Cherny as not being good saleable stock, from the applicants to the respondent. 79 I turn then to the claim made in relation to the golden parachute clause. 80 Earlier, I rejected evidence given by Mrs Fryer, as to the nature of the agreement reached in relation to stock. In respect to this aspect of the claim, I am unable to accept the case advance by Mr Cherny, having regard to his own evidence, particularly that given in cross examination. 81 The golden parachute clause which he drafted and which Mrs Fryer accepted, provided: The current work contract will exist in place from 1st November 2002 until 1st November 2004. In the event of Isbiz P L discontinuing the current work contract and agreement a sum of $240,000 less $10000 for every month completed after date of commencement is to be paid on a pro rata basis to David Cherny. Any outstanding money for stock is also to be repaid. 82 This flowed from the suggestion Mr Cherny had made in his email of 16 October: I think we should formalise all of the above and sign off it. We should also include some clause to protect everyones(sic) interest in the event of something not going as planned. 83 The clause proposed and accepted only dealt with Isbiz 'discontinuing the current work contract', not the applicants doing so. Isbiz' position was protected by the restraint agreement. In these proceedings, the applicants seek to improve the golden parachute clause, so as to trigger its operation from February 2003, the time Mr Cherny agreed to take on sales work. That claim is advanced on the basis of a claim that this amounted to a demotion, which Mr Cherny was forced to accept and that further, the whole relationship came to an end in the following May, as the result of the actions of the respondents. 84 This claim has to be approached in light of the case as opened, as well as Mr Cherny's evidence. 85 The case opened was that the contract was unfair, because it did not provide that 'a demotion and removal of responsibilities should also be considered as a discontinuance of the work contract' and that 'any material change in the remuneration package of the applicant will also be a discontinuance of the work contract', either or both of which trigger the golden handshake clause. It was explained that Isbiz had failed to pay for stock as agreed, had changed Mr Cherny's responsibilities and had also tried to alter his remuneration. The result was that it had tried to squeeze him out and so the contract had come to an end, as the result of the respondent's conduct. 86 The difficulty with the case, so advanced, was that while the evidence demonstrated that the variations agreed to the contract in relation to stock had unfairly disadvantaged the applicants, I am unable to conclude that the other circumstances were as Mr Cherny portrayed them. 87 Mr Cherny's oral evidence was that he initially approached Mrs Fryer, because he was having difficulty coping in the business with the approaching birth of his second child and: I had failed to grow the business with extra staff to support me and I needed to look for another opportunity to perhaps expand my business or sell out my business so I could take a bigger role in the company so I would have more flexibility in my life. 88 The business gross profit was then $360,000 per annum and he was having trouble growing the business because he had to fund stock and debtors. Mr Cherny wanted to earn $120,000 per annum, which he believed would leave $240,000 for the respondent. In cross examination, Mr Cherny explained his careful approach to the negotiations. He did not believe he was then in an inferior bargaining position. He agreed that the net profit of the business was then $60,000, he having received salary of $21,000, with other expenses such as car, phone computers and so on, having been met by the business. 89 In re-examination, Mr Cherny explained that he believed he was selling his business, without any goodwill component and that the two year guarantee, took account of that and the tangible assets he was providing. 90 Mr Cherny had earlier explained in his affidavit evidence how, over time, he became unhappy that he was not being involved in all aspects of management, as he had expected to be in his role as general manager, in relation to a variety of matters. In cross examination, he explained that he was not happy with the way in which certain of Isbiz business systems and the warehouse operated, which impacted on his sales. He was not successful in raising his concerns with either Mr or Mrs Fryer. Mrs Fryer had yelled at him and wasn't interested in hearing about the problems, or resolving them. 91 Mr and Mrs Fryer's evidence was to quite different effect, explaining aspects of inadequate performance on Mr Cherny's part, which they had not anticipated and steps which had to be taken to deal with these and other problems, including the loss of parts of the Tasman Supplies business, which Mr Cherney had not revealed to them before the agreement was reached, despite being aware of this. Mr Cherny denied that this was so and ascribed other reasons for the loss of that business. On the respondent's case however, Mr Cherny had never been demoted or had his remuneration package reduced, nor had Isbiz terminated his employment, or threatened to do so. 92 The case which was advanced for Mr Cherny was that he was demoted from the position of general manager, to a sales position. One of the difficulties with this aspect of the case was that if in truth there had been such a demotion, one might have expected some reduction in salary and an alteration to the commission structure, to that which other sales staff received. On the evidence, their remuneration was considerably less. This did not occur. Furthermore, in his affidavit evidence, Mr Cherny explained that while he did not feel that he had a choice but to take on the sales territory, when Mrs Fryer asked him if he was prepared to do so, he was 'aware that Rick Brookes' role needed to be filled quickly because the accounts for which he had been responsible were suffering and needed quick attention. I was motivated by a desire to prevent sales falling further'. 93 This evidence was entirely consistent with that of Mrs Fryer, that neither the Tasman Supplies nor the Toner Warehouse businesses were performing at the levels reached before the parties entered their agreement. Undoubtedly, this was a matter of concern to Mr Cherny, whose profit share depended on specified targets fixed by reference to those figures being reached. In his affidavit in reply, Mr Cherny denied, however, that the sales position was an 'additional role' as was Ms Fryer's evidence and that 'This necessarily prevented me from performing my previous position as General Manager'. I am unable to accept that evidence. 94 Mr Cherny's own oral evidence, as well as documents tendered, suggested, that was not how he perceived his own position, at the time. In cross examination, he conceded that he continued performing the general manager's role after he took on the sales position. What became of concern to him, in reality, was having to perform that work, given his ongoing concerns about Mr and Mrs Fryer's attitude towards him, as well as looking after sales in a territory. In his oral evidence, Mr Cherny explained, for example, that after he took over Mr Brooke's territory in February 2003, " I felt there is a lot of pressure to be doing everything, like manager role and running Rick Brooke's territory and, it was very difficult to do two jobs at once'. 95 Mr Cherny sent an email to Mrs Fryer on 4 April to which she replied. It provided: Dear Isabel, Now that I have moved into Rick Brooks' old role as account manager I wanted to clarify what my responsibilities in this role are. As far as I know I am responsible for making sales both to existing and new customers. I am also responsible for the pricelist and monthly specials. Please let me know if there is anything else I am responsible for. Regards David Cherny. FROM: Mrs Fryer to Mr Cherny DATE: Friday, 4 April 2003 Yes there are quite a number of other Things(sic) that you are responsible for I will go over with you on Monday . I would not say so much responsbile(sic) for but almost aware of what is happening in certain areas. That software programme which was going to change the world is one that i(sic) would still like to implement . I like you to keep tunned(sic) in on Hi fax really is important as you have all the knowledge in this area. That was the whole point of the merger so although you still have your own area I think that , your remuneration reflects that there are still a few challenges ahead . When you leave here on a Friday you should just relax . i(sic) thought you were not allowed to work. A few other things that come ton mind but will chat on Monday . Have a good weekend. 96 Mr Cherny explained that he sent the email, because he was then confused as to his role. While initially denying that he continued calling himself general manager when dealing with customers and suppliers, after he took on the sales work he conceded, in cross examination, that he had, in fact, done so, in various documents. In re-examination, however, he again asserted that 'I had gone from being a general manager to a sales rep'. That evidence directly contradicted evidence Mr Cherny earlier gave in cross examination, in a number of respects, as well as documents he had acknowledged were his own, when they were put to him. 97 In considering all of the evidence led, I have come to the conclusion that in relation to this aspect of the claim, Mr Cherny's evidence cannot be preferred to that of Mr and Mrs Fryer. Mr Cherny's evidence was not given in a way which strict adherence to the truth required. 98 On 15 and 16 April, there was another exchange of emails: From: Mrs Fryer to Mr Cherny Date: Tuesday, 15 April 2003 When it comes to lunch could you please let every one else know what time you would like to go & make sure that it is ok with everyone else. As a few people have mentioned that you get up & just go . This is not respectable to the other staff members. Thanks From: Mr Cherny to Mrs Fryer Date: Tuesday, 15 April 2003 I do From: Mrs Fryer to Mr Cherny Date: Wednesday, 16 April 2003 Ok that is fine then. Can you copy me a message in the future. Thanks. I hope you are feeling better, The holiday will do you good. Would you be open to me putting you on a course for commination(sic) I sometimes feel we do not really communicate real well I am not saying it is just you . But I some times find you a little negative.& I AM SURE YOU FIND ME A NUMBER OF THINGS I look at it as my job to bring out the best in people, & I feel I probably do not do that with you . I think we need to resolve a few issues I know they can be resolved. IF YOU THINK IT WOULD BE BEST TO HAVE A MEDIATOR I AM PREPARED FOR THAT As we have had such a long history together. I Just feel you have a lot of hidden Resentment towards me & I would like to resolve it, as I think we can do well for each other. i REALLY FEEL IT I do not know if it is because I have made you feel insecure about your position here, & you feel like you are on the edge but if that is the case then you need to talk to me about it . As this could be the cause of your sickness of late . I know that you never got sick when you had your own business. after the hols if we can have a chat about this then i think you will have a load of(sic) your mind & si(sic) will I . Because at the end of the day I do value having you here . But I want you to be Happy & me to 99 Mr Cherny did not find Mrs Fryer's email conciliatory. His evidence was that at this time he was very scared and worried, concerned that he would have no job and no money. However, he didn't pay much attention to Mrs Fryer's email. He thought the best approach was to keep his 'head down, try and do whatever I could do as best as possible, which I did, which was selling - and my figures were actually quite good on the account that I took over and I thought that would make the problem go away'. 100 Again, I did not find this evidence plausible. Mr Cherny was at this stage on his own evidence, concerned that he had not been paid for his stock and was anxious to improve sales, to ensure that Isbiz could pay for it, hence his decision to keep working at producing sales. At that time, if his employment was brought to an end by Isbiz, he then had the protection of the golden parachute clause, which also required payment to be made for stock. The fact was that he was then engaged in building another business and was considering leaving to pursue employment elsewhere. It was common ground that he himself soon raised the prospect of leaving with Mrs Fryer. 101 Mr Cherny took annual leave from 17 to 25 April. Upon his return, he met with Mrs Fryer on 29 April. In cross examination, he agreed that the meeting commenced with Mrs Fryer asking him if he was 'OK at work?' and he replying that: D. Cherny: 'I am angry that at last week's sales meeting that you told everyone you have found a new computer system. I am annoyed that you did not involve me in the process. I think you are making a premature decision. I Fryer: 'Pastel is hopeless, it is on its last legs.' 102 Mr Cherny agreed that they then discussed Mrs Fryer's concerns about sales figures and an imminent sale. He agreed that she asked him to put something to her in writing about utilising his skills better, in a way which would make him happier. He agreed that he then told Mrs Fryer that 'there were plenty of people out there who would want my employment' and that she had replied 'if you want to go, go'. On his evidence, they had then each 'backed off' and talked through other issues. Another email exchange followed: From: Mrs Fryer to Mr Cherny Date: Tuesday, 29 April 2003 Thanks for the talk I think we both had some very valid points. I hope that the issues can be resolved & we can continue to grow the business together. Looking forward to hearing your suggestions on the topics we discussed. From: Mr Cherny to Mrs Fryer Date: Thursday, 1 May 2003 Hi, We can and will. I will come back to you with some ideas very soon. From: Mrs Fryer to Mr Cherny Date: Friday, 2 May 2003 On Monday can we sit down & go thru what we discussed the other day & put something in writing. That would be great. From: Mr Cherny to Mrs Fryer Date: Friday, 2 May 2003 I have started to draw something up but have not finished it. Give me till Wednesday if possible. Is that okay ? From: Mrs Fryer to Mr Cherny Date: Friday, 2 May 2003 Yes but it has to be agreed on both sides. From: Mrs Fryer to Mr Cherny Date: Monday, 5 May 2003 Can we have a chat about your figures Please & also you mentioned that you would have something to me about having something on my desk about what we spoke about last weds . We need to define a new job role with you. 103 Mr Cherny never, in fact provided the promised document, although he started to draft something. He met again with Mrs Fryer and Mr Fryer on 8 May. He agreed, in cross examination, that she then asked him if he had suggestions to make about how his role could be improved. Sales figures were discussed, as well as whether staff respected him or not and whether he had been aware that they were to lose a part of the Tasman Supplies business, as well as product figures and the accounting system. Mr Cherny agreed that Mrs Fryer said: I. Fryer: 'I agreed to take you on at $120,000 a year plus commission. I don't intend to change this but if you want to, we can talk about changing your commission structure so that it is in line with your territory sales rather than the company profit. You aren't earning anything extra at the moment. Let me know if you want to talk about changing your pay structure... . We have a bit of a problem over your status. I don't want to continue to pay you as an(sic) consultant and then continue to pay you holiday and sick leave. This is not right and not what we agreed to. If you want to be an employee, that's fine, but it has to be one or the other. 104 Mr Cherny explained that he understood that this was a 'dig at me and rubbing salt into a sore wound'. He explained that in two earlier months he had believed that he was entitled to commission, but because of adjustments in figures made by Mrs Fryer, he had not received commission payments. He believed this proposal was designed to ensure he received less commission. Mrs Fryer's evidence was to the contrary. She raised this because he was receiving nothing under the existing arrangement, because Isbiz' profits weren't high enough and she wanted to propose another structure, which would have resulted in some payments. Mr Cherny agreed that no particular structure was discussed at that meeting, or subsequently. 105 Mr Cherny's evidence was that, amongst other things, he was told at this meeting that he was no good as general manager and that he could have a sales role with an altered commission arrangement and if he did not want that job he could leave. Mrs Fryer told him to go home and think about that and finished by saying 'I don't want you back in the office'. Both Mr and Mrs Fryer denied this. The fact was, however, that Mr Cherny never returned to work, despite the email communications which followed. It must be noted, in those emails, Mr Cherny made no reference to an ultimatum, that he could take a sales job or leave. 106 After Mrs Fryer left the meeting, it continued with, on Mr Fryer's evidence, him suggesting that the commission structure could be altered, so that it reflected only Mr Cherny's own performance and not that of the company generally. He assured Mr Cherny that they did not wish to reduce his remuneration, but were concerned that he was earning no commission and wanted to ensure that he had the opportunity to do so. He understood that Mr Cherny was to take the afternoon off, to draft a proposal which could be discussed. Mr Cherny did not deny this evidence. 107 The email communication which followed, did not support Mr Cherny's version of events. It was to quite different effect: From: Mr Cherny to Mrs Fryer Date: Friday, 9 May 2003 Hi Isabel, Can you please email a full job description and details for the new position. Regards David Cherny From: Mrs Fryer to Mr Cherny Date: Monday, 12 May 2003 I would like to talk about it together so you can have your input into the job as well. As I discussed with you last week I asked for your input & what you would like to do as well . I do no want it to be a job that does not suit you . There fore I would like to sit down face to face & go through it together . I am sure we can work something out . As said before I do not want you leave . But I need to work out something with you today . I woudl(sic) appreaicte(sic) you calling & coming in ASAP. From: Mr Rodney Fryer to Mr David Cherny Date: Monday, 12 May 2003 David, We have left three messages for you to call the office and are just a little concerned that either Isabel or myself have not heard from you. Please call Isabel we want to structure the job description with your input. We are want(sic) to maintain your employment with Toner Warehouse. Please contact the office. Best Regards Rodney From: Mr Cherny to Mrs Fryer Date: Monday, 12 May 2003 Hi Isabel, Its my understanding that you have been trying to contact me today. Can you please email a full job description and details for the new position you are proposing. I will review it and then let you know what I want to do. Regards David Cherny From: Mrs Fryer to Mr Cherny Date: Monday, 12 May 2003 I would like to go thru it with you David as I want it to be what you would like to do as well . As discussed the other week you told me you would like to be not so much on the phones. That is why I hired the extra customer service person to free your time up more, so you could concentrate on the larger accounts. I did listen to what you wanted & that is why I asked for you to give me some points for last wed so we could make something up which would suit you better & that you liked doing more. I am not going to give you all list of job description which does not fit in with what you want to do. I would like to put something together that fits in with us both that is why I suggest us to go thru it together . Is there any reason why we cold not do this. From: Mrs Fryer to Mr Cherny Date: Monday, 12 May 2003 I have put together a Job Description, Based on pur(sic) previous discussions. It is very similar to the original position that was given to you. In fact I have just added a few more detailed points . I will have something for you tomorrow. I would invite you to tell me if there are any specific roles that you would like that was not included in the original contract. From: Mr Fryer to Mr Cherny Date: Wednesday, 14 May 2003 We have a customer requesting urgent information that you have been dealing with. Please phone the office as this requires immediate action. From: Mrs Fryer to Mr Cherny Date: Wednesday, 14 May 2003 Dear David, Yesterday, the 12 the(sic) May 2003, I tried to call you at 8.45am & 12.00pm & 4.00pm to discuss with you your work contract. I have yet to receive a return call from you. I also called you on Thurs 8th May at 8.00PM to discuss with you when you will be coming into the office to discuss your work contract. You told me you would let me know Friday. I am confused as to why you are not giving me details of the change in the work contract that you wanted to be made, I cannot understand why you will not let me know what other roles you would like at this office. You told me that you would like to have input into the re-negotiation of the agreement. I have emailed you three times and asked you to tell me what your ideas were. I also spoke with you the week before and you told me you needed a week to decide. I left you on Thursday, 8th May after coffee with the conversation "please get back to me with amendments that you would like to add into the work agreement". I have been waiting to hear from you since that date. If you are considering the agreement to be ended I kneed to know. I cannot wait much longer for you to contact me, as I do not know if I need to hire someone to replace you. I want to make it clear to you that I am not considering the agreement to be ended. As there have been some grey areas, I wanted to formalise in more detail your contractual role here. If you are not coming back I will have to implement some changes, as not having you here is causing me considerable problems. Not only is it costing me money, it is putting pressure on everyone to handle the duties done by yourself. I will have to seek someone else to fill your shoes if you choose not to come back. Isabel From: Mr Fryer to Mr Cherny Date: Wednesday, 14 May 2003 David We have requested on at least 9 (4 email, 5 mobile message) occasions for you to call the office over the last 4 days, yet you have made no contact. We have items that require your urgent action and are creating a poor perception of Toner Warehouse to our customers. Please phone. Best Regards Rodney From: Mr Cherny to Mrs Fryer Date: Thursday, 15 May 2003 Dear Isabel, You said you would forward me a written copy of the work contract, but to date I have not received it. Please send it when it is ready. Regards David Cherny From: Mrs Fryer to Mr Cherny Date: Thursday, 15 May 2003 Refer to the original agreement. From: Mr Fryer to Mr Cherny Date: Monday, 19 May 2003 David, Since leaving our premises Friday the 9th you have been in contact with the office once. It is know(sic) the 19th and as yet we have had no communication to state your intentions. Perhaps you could let us know what are you doing. Rodney From: Mr Cherny to Mr Fryer Date: Tuesday, 20 May 2003 Dear Rodney, Since being asked by yourself and Isabel not to return to the office on Thursday, 8th at 11:30AM after our meeting, I have repeatedly asked for a copy in writing of the new job description that you offered me verbally at the meeting so that I could consider the offer and therefore rely to you. I have requested it numerous times but nothing has been sent to me. I am waiting for it to be sent to me so I can reply. Regards David Cherny From: Mr Fryer to Mr Cherny Date: Tuesday, 20 May 2003 David, You were never asked by Isabel or Myself not to return to the office. We suggested you should take the afternoon off to consider what you want. Isabel has said to you that the contact would be as initially agreed as business development. You have taken upon yourself not return to work nor return any telephone or email communications to us or staff. This behaviour is most unprofessional. From: Mrs Fryer to Mr Cherny Date: Wednesday, 21 May 2003 We did not ask you to not return , that is not true at all. We asked you to think about changes that you wanted to be made to your contract. I think you are twisting the situation now . We have emails & records of all our conversations stating you to please call * (sic) come back to work . I Called you that night & asked you when you were going to come Back , you have totally ignored our requests to come Back. I think you know that I would never terminate you . I told you I need you to sell your product as now we have stock we cannot sell. It has put us in an awkward situation . The offer still stands to come back . As I have said all along . The Contract is the same as the original and Stated all along there is no change as you have not told me what changes you wanted after repeated attempts of asking you. And you ignoring our calls & emails to give us indication as when you will be returning to this office to complete the rest of your contract . I would like to know when you will be coming back . 108 In cross examination, Mr Cherny agreed that during this time, he was considering his legal position. He explained he did so because he was confused. As to his emails and the advice he received from his lawyers, he explained: A Well, I wouldn't have sent that email unless they told me to do it because I certainly don't want to have anything more to do with them. Q Well, why didn't you just say 'I don't want to have anything more to do with you"? A Because then I thought I would have jeopardised all the money that they still owed me for stock. 109 Mr Cherny also explained that he did not regard the requests for contact from Mr and Mrs Fryer to be genuine. He believed they were just covering themselves and while he was asking them to provide him with a position description, he had already decided he would not go back. In asking for it, he was just covering himself, from a commercial point of view, in case things went sour and ended up in Court. Even when he was offered the opportunity to return to the general manager's position, he did not believe the offer was genuine and he did not respond to it. 110 Mr Cherny explained that while working for Isbiz, he had also been working on the establishment of a new business and that the company which now operated that business was incorporated later in May, after the parties' relocations ended. He denied sending to his home computer Isbiz documents such as customer lists, certain codes and information about its computer system and customers in March and April, which he used for the purposes of that business. He admitted receiving emails while at work relating to that business, but denied working on them while at work for Isbiz. On Mr Cherny's evidence, he just forwarded them to his home computer. His explanation as to the Isbiz documents which he sent home during this period was that they all related to his work for Isbiz, in his role as general manager. He worked on them at home, because he was too busy attending to sales work, to attend to these matters while at the office. 111 I am satisfied that what must be concluded from all of this evidence was that Mr Cherny was never demoted from the position of general manager. He agreed also to take on sales work, because of his concerns at that time about the inadequate level of sales generally, being achieved in the business, which resulted in him not achieving commission payments. He also wanted to ensure he could be paid for the outstanding stock. He was not happy about this, nor with the way in which he was generally treated in his position as general manager. Plainly, both Mr Cherny and Mrs Fryer were disappointed with the outcome of the arrangement they had agreed upon. Mrs Fryer had concerns with Mr Cherny's performance and the inadequate levels of sales being achieved. Neither got what they had expected, namely increased sales, let alone sales at the level either business was achieving before the agreement was made. Mr Cherny was not however, demoted to a sales position, nor was his remuneration package reduced as a result. 112 It was common ground that an altered basis for commission was raised with him, by Mrs Fryer but he did not agree to it, nor was it imposed upon him. He never suggested that he was told his consultancy fee would be reduced. If, in truth all he was to do was sales work, it seems most unlikely that the respondent would not also seek to reduce his fees to those commensurate with such a sales role. 113 In those circumstances, I am satisfied that the applicants have not made out the case advanced - namely that the contract was unfair in not providing that the golden parachute clause was triggered either by a demotion, or by a reduction in Mr Cherny's remuneration package. 114 I am also unable to conclude on the evidence that the termination of the relationship resulted from the actions of the respondents. I am unable to accept Mr Cherny's evidence in preference to that of Mr and Mrs Fryer, as to what they told him on 8 May, particularly having in mind the email correspondence between the three of them, which I have set out in detail, both before and after that date. 115 There was no question that Mr Cherny was unhappy at that point. Mrs Fryer was conscious of this and plainly took steps to address his concerns with him. It was common ground that the meeting on 8 May concluded with Mr Cherny agreeing to consider what had been discussed, including a change designed to ensure that he began earning some commission. He agreed to provide a proposal, which he had been promising since 29 April. He took the discussion no further, having decided he would not return. 116 Mr Cherny's evidence that he believed Mr and Mrs Fryer's email communications after 8 May, seeking his return to work, were not genuine, must be weighed with his other evidence, that he had himself decided he would not return to Isbiz, even though he did not tell Mr or Mrs Fryer of his decision. As he explained, he took this course with his own communications at that time being designed to protect his position. That Mr Cherny had been told not to return to work after the meeting on 8 May, unless he was prepared to accept a sales role is not plausible. Had the Fryers taken this step, the golden parachute clause would thereby undoubtedly have been triggered and Mr Cherny, who took legal advice at the time of the email exchange would have said so. Both Mr and Mrs Fryer emphatically denied having said this. This suggestion was first mentioned by Mr Cherny in his email of 20 May, after he had been repeatedly asked to return to work in the meantime. It was immediately denied by Mr and Mrs Fryer. It was inconsistent with both their earlier emails after the 8 May meeting and with Mr Cherny's replies. 117 On his own evidence, Mr Cherny himself decided after the 8 May meeting that he would not be returning. At that stage, what he was concerned to protect was what was owed to him in relation to stock. The idea that he might be entitled to something considerably more in respect of the golden handshake clause, on the basis of a dismissal or even a constructive dismissal, was clearly an afterthought, not a true reflection of who had, in truth, brought the relationship to an end. 118 It follows that this aspect of the claim must be refused. Orders 119 Given the calculations which must be made in relation to stock and interest, it is not possible to make orders at this point. The parties are directed to confer on the appropriate orders to reflect this judgment. The applicants are to file draft orders within 21 days of the date of the judgment. The orders shall include orders finding the contract unfair and varying it, in relation to payment for stock; consequential money orders, including interest and orders as to costs. The usual order as to costs would be costs in favour of the applicants, as agreed or assessed. ------------------------ 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.