Industrial Relations Commission of New South Wales in Court Session CITATION : Kenneth Brunette v Integral Energy Australia [2003] NSWIRComm 324 APPLICANT: PARTIES : Kenneth Brunette RESPONDENT: Integral Energy Australia FILE NUMBER: IRC1925 of 2001 CORAM: Kavanagh J CATCHWORDS : Section 106 unfair contract claim in the performance of contract - conduct of respondent in investigation into complaint - grievance proceedings in contract not followed - applicant not fully informed of ambit of broader issues to be further investigated - applicant refuses to perform special project duties allocated to him by respondent during investigation - constructive dismissal - repudiation of contract - employer makes clear contract in its existing form is not to continue - changed role of employee - contract of employment terminated by respondent in unreasonably requiring applicant to perform special project duties - compensation, just in the circumstances, determined by payment of order in form of Notice LEGISLATION CITED : Industrial Relations Act 1996 Bates v Finance Australia Pty Limited & Others Finance Australia Pty Limited & Ors v Gregory Scott Bates [2002] NSWIRComm 42 Brookton Holdings Pty Ltd v Kara Kar Holdings Pty Ltd (1994) 57 IR 288 Day v Lumley Life Ltd (1999) 90 IR 70 Elkins v Full Bloom Pty Ltd (2000) NSWIRComm 223 Malik v BCCI SA (In Liq) (1997) 3 All ER Marriott v Oxford & District Co-Operative Society Ltd (No.2) (1970) 1 QBE 186 CASES CITED : McIlraith v Bliss Corporation Ltd (unreported, Peterson J, No 4461 of 1997, 10 November 1998) Richtsteiger v Century Geophysical Corporation (unreported, Marshall J, 8 October 1996, No. 471 of 1996) R v Darling Island Stevedoring & Lighterage Company Ltd, Ex Parte Halliday (1938) 60 CLR 601 Van Tran v Calum Textiles Pty Ltd (1997) 42 AILR 353 Vision Publishing Pty Limited v PK Lane Holdings Pty Limited & Ors (1998) 84 IR 277 Western Excavating (ECC) Ltd v Sharpe (1978) 1 QB 761 HEARING DATES: 05/19/2003; 05/20/2003; 05/21/2003; 05/22/2003; 05/23/2003; 05/26/2003; 06/26/2003; 07/14/2003 DATE OF JUDGMENT: 11/06/2003 Applicant: Mr S.E.J. Prince of counsel Solicitors: Ms S. Vass Abbott Tout LEGAL REPRESENTATIVES: Respondent: Mr A.R. Moses and Ms S.B. Piedade of counsel Solicitors: Mr A. Woods/Ms A. Sharp Henry Davis York JUDGMENT: - 46 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: KAVANAGH J Date : Thurs 6 November 2003 IRC1925 of 2001 KENNETH BRUNETTE v INTEGRAL ENERGY AUSTRALIA Application under s106 of the Industrial Relations Act 1996 JUDGMENT [2003] NSWIRComm 324 1 This application is brought under the provisions of s106 of the Industrial Relations Act 1996 (the Act). Kenneth Brunette, the applicant, alleges the contract which he entered into with Integral Energy Australia, the respondent, in its terms and/or, in its performance, was unfair, harsh and unconscionable. The applicant claims as to his termination, which he alleges was unfair, in the conduct of his employment contract, a variation to his contract reflecting just compensation in the following terms: (a) A sum equivalent to twenty-four months pay in lieu of notice being $300,000; and (b) A sum equivalent to the "at risk" payment for a period of twenty-four months, being $45,000. Further Amended Summons 2 The applicant pleads his case as follows: The contract of employment and/or the arrangement and/or the collateral contract and/or the collateral arrangement whereby the applicant performance work in an industry is and was unfair, harsh and unconscionable and contrary to the public interest in that: (a) it contained a term relating to termination of the written contract that permitted the respondent to terminate the written contract by providing three months notice or payment in lieu thereof which term is, on its face, unfair, harsh and unconscionable and contrary to the public interest having regard to the history of the applicant's employment with the respondent, the applicant's age, qualifications and experience, the size of the applicant's remuneration package, the senior managerial nature of the position occupied by the applicant, the applicant's legitimate expectation as to the continuity of his employment for a fixed period of at least three years and the difficulties that the applicant will face in obtaining alternative, comparable career employment in the future; (b) it failed to contain an express term relating to termination in the form proposed by the applicant in this summons; (c) it operated unfairly, harshly and unconscionably in that at the point of termination in that it permitted the respondent to repudiate the written contract so as to be the effective cause of the termination of the contract in circumstances where the applicant was not guilty of any wrong doing or serious and wilful misconduct or other conduct that would have justified the termination of the written contract; (d) it failed to contain a term which would have been consistent with fairness, reasonableness and industrial fair play such that would ensure that the applicant would be accorded procedural fairness in the event of termination of the written contract or in the event that the respondent took action which resulted in the termination of the written contract; (e) it failed to provide for any reasonable, fair, adequate and just payments to the applicant by the respondent following termination of the contract of employment for any reason; (f) it failed to protect the applicant against harsh, unjust and unreasonable treatment in respect of termination of the contract of employment or in respect of such conduct by the respondent during the course of the operation of the contract; (g) it invested the respondent with significant discretionary powers to terminate the written contract, or to engage in conduct resulting in termination of the contract, to the substantial disadvantage of the applicant in circumstances where the applicant was an employee of some standing who had an unblemished employment history and had been promoted during the course of his employment with the respondent; (h) it operated so as to allow the respondent to avoid paying to the applicant any or any significant payment in respect of termination of the contract of employment for any reason; (i) it permitted the respondent to unilaterally and without the applicant's agreement to attempt to change the nature of the duties under the contract of employment to such an extent which was in itself unfair, harsh and unconscionable and contrary to the public interest; (j) it allowed the respondent to engage in a course of conduct which was designed to or had the effect of bringing the contract of employment to a conclusion in circumstances where the applicant was not accorded procedural fairness or any fairness at all; (k) it operated so as to permit the respondent to use its superior bargaining position in respect of its dealings with the applicant so as to avoid any fair, adequate or appropriate notice, warning, consultation, discussion or negotiation with the applicant concerning any changes to the applicant's duties of employment or the termination of the applicant's contract of employment or any other matter related to the applicant's contract of employment; (l) in so far as the at risk reward performance scheme was concerned it was unfair in that it reserved to the respondent a complete unfettered and unilateral discretion to determine whether or not the applicant would qualify for a payment under that scheme despite the applicant's completely satisfactory service during the period subject to the assessment; (m) it failed to contain any transparent policy or method of calculation in relation to the at risk performance scheme; (n) it failed to contain a term that ensured that the respondent would only have regard to the applicant's performance during a designated period and would not have regard to irrelevant considerations generally or particularly in determining the at risk reward payment to be made to the applicant; (o) it was otherwise unfair, harsh or unconscionable in that it failed to include any mechanism that permitted the applicant to have his at risk performance payment reviewed independently and on a fair, transparent and impartial basis; (p) it was otherwise unfair, harsh or unconscionable and contrary to the public interest upon such other grounds and for such other reasons as this Commission might find. 3 The applicant submits his contract of employment be varied in the following way reflecting a finding of unfairness in the conduct of the contract as to his termination: 4(a) Delete clause 10.1 and insert instead a clause as follows: "In the event that the employer decides to terminate this contract for reasons other than serious and wilful misconduct or in circumstances where the employer is the effective cause of the termination of this contract or takes any step resulting in the termination of this contract prior to the expiration of the term of the appointment provided for by this contract the employer will pay to the employee an amount equal to 24 months notice calculated on the basis of the employees total remuneration package at the time of termination". (b) Delete clause 10.6 and insert a new clause as follows: "The employees accrued statutory entitlements will be calculated on the basis of the employees total remuneration package." (c) Insert a new clause 15.7 as follows: "The employer may not take any action whatsoever whether by repudiation of this contract or otherwise so as to bring the contract to an end in circumstances where the procedures set out in this clause 15 have not been complied with. The employer will afford the employee procedural fairness and the resolution of all grievances prior to taking any step or doing anything that may bring this contract to an end." (d) Insert a new clause 1.1 as follows: "The employer must not unilaterally vary the position description or duties of the employee or change the position occupied by the employee and where such duties are varied or such position description is changed or the position of the employee is changed such conduct will constitute an effective termination of the contract for all purposes and in particular for the purpose of clause 10.1 of this contract." 4 The second aspect of the claim relates to the "at risk" component of the contract which the applicant submits was unfairly calculated. The applicant submits his contract be varied in the following way to reflect a finding of unfairness in the calculation of the "at risk" payment under the contract: (e) Insert a new clause 5.1.1 as follows: "The employee is entitled to participate in the employers "at risk payment" performance linked bonus scheme. Any dispute regarding the "at risk payment" (including any dispute over the assessment of the employee) will be resolved in accordance with clause 15." Further, and in addition, an order varying the terms of the "at risk payment" performance linked bonus scheme as follows: (f) By inserting a new clause as follows: "The employee shall be entitled to receive an at risk payment equivalent to a maximum of 15% of the employees salary calculated as follows: ( i) 50% of that at risk payment shall be determined in accordance with the balanced score card given to the employee during the annual performance review session; (ii) 30% of the payment shall be determined by the Board and will relate to the employee's business performance in the preceding financial year; (iii) 20% of the payment shall be calculated by the Board and will relate to the employee's corporate performance in the preceding financial year." (g) Insert a new clause as follows: Any dispute regarding the "at risk payment" bonus scheme (including any dispute over any of the matters concerning the assessment of the employees performance) will be resolved in accordance with clause 15 of the employee's contract of employment. 5 Mr S.E.J. Prince, of counsel, appeared for the applicant and Mr A.R. Moses with Ms S.B. Piedade of counsel, appeared for the respondent. The Employment 6 The applicant commenced employment with the respondent in September 1995. He was originally employed by the respondent as an Energy Purchasing Operations Analyst. He then was given a number of promotions. He became a Manager/Specialist Level 1, effective from 18 December 1995; Manager/Specialist Level 3, effective 29 April 1996; Manager/Specialist Level 109, effective 23 September 1996; Senior Manager/Senior Specialist Level 12, effective 23 March 1997; Senior Manager/Senior Specialist Level 13, effective 1 September 1997. 7 The applicant's position was retitled as Senior Energy Dealer in July 1998 reflecting a result of a restructure of a Division whereby a new project section, Portfolio Management was created to replace the former structure of Energy Purchasing Section. The applicant signed a "Service Agreement" for the four year period covering 1 April 1998 to 1 April 2002 at the request of the respondent on 17 June 1998. At that time, on inquiry, he was given an assurance as to the reason the contract was for a limited term by Mr Anneveldt, the Administrator of Contracts. The term he asserted: (a) acknowledged the applicant as one of the senior and more highly regarded managers at Integral Energy; and (b) the applicant would not need to reapply - the contracts, he was informed, are normally merely 'rolled over' at their expiry and new contracts offered. The applicant asked: Q. Then why the four year duration? Mr Anneveldt replied: A. Integral wishes to show a commitment and to give you some certainty for at least that period. 8 From about May 1997, the applicant's entitlement to "at risk" payments (read "bonus") was dependent upon his performance. When the contract as Senior Energy Dealer was negotiated, the applicant was sent a letter by Mr Chris Glenn, General Manager Energy Services stating the following as to his remuneration package: ... This will be reviewed according to the 'contract staff guidelines' including determination of two 'at risk' components. These at risk components will comprise the Variable Reward Program under the remuneration guidelines and an Energy Trading 'at risk' bonus of $8000 payable twice yearly. This letter is dated 27 June 1998. 9 Integral Energy was privatised during this period. There was significant management upheaval. There was a redesign of all Administrative Structures which reflected in major alteration to individual employees' duties and responsibilities. Some of those changes to both appointments to positions re-defined and the reallocation of areas of responsibilities held by employees affect the chronology of events in this matter. The Business Sales Division 10 As part of the ongoing restructure, Ernst & Young were retained as consultants to review the Sales and Marketing ranch of Integral Energy in which the applicant was employed. The applicant was for a period of time seconded to the Ernst & Young project team while he was the Senior Energy Dealer. It was as a result of this review a further new position, Manager, Business Sales was created. The applicant was first appointed as the Acting Manager, Business Sales and after six months secured the permanent position in March 2000. His remuneration was increased to $172,000 inclusive of superannuation. All other terms of his prior written contract were affirmed, save for the description of his position and duties. The applicant in this position became the highest paid manager at Integral Energy. 11 The applicant worked with three section managers in Business Sales. He had to liaise with other division managers to establish the Sales Branch. There were approximately 30 employees under him in the Forecasting Group. He originally reported to Ms Val Duncan but in about June 2000 he was directed to report to Mr Brian Lloyd, Acting General Manager, Retail Energy. Ms Duncan had served in the equivalent position but was not encouraged to make application when the position was re-advertised. She had then been assigned to "Special Projects". Performance Review 12 On 20 September 2000, in accordance with normal company procedure, which had been followed in his prior positions, the applicant undertook a Performance Review Session. This one was conducted by Ms Val Duncan with the Acting General Manager, Retail Energy, Mr Lloyd. It is relevant to note Mr Lloyd was never an employee of Integral Energy but a consultant appointed as Acting General Manager during the privatisation period. As to the applicant's performance review, Mr Lloyd's evidence was he left most of the review to Ms Duncan because she had had the more direct contact with the applicant in the performance of his duties as she had been his supervisor. 13 Ms Duncan assessed the applicant rated as an exceptional employee. He met, on average, 95 per cent of the targets that had been set for him. Arising from the review she, however, recorded the following comment: Ken took an acting role in leading the sales team during a particularly difficult period where prices had to be increased to ensure positive returns to the business. Since taking on the role the calibre of the financial information has improved out of sight, the systems are developing well. Ken needs to ensure he has a positive impact on those around him and becomes an encouraging influence . (emphasis added) Ms Duncan in her evidence stated the latter sentence was a criticism of the applicant and directed to his relationships with the staff. While she assessed the applicant received between 86 to 100 per cent for achievement in various criteria in the performance review, she asserted his people skills were not satisfactory and required attention. Meeting of 21 September 2000 14 The next day, following the performance review, a meeting was scheduled by Mr Brian Leighs, Consultant and Acting Commercial Manager for the respondent. The purpose of the meeting was to discuss the possible introduction of a procedure called Activity Based Costing (ABC). It was a controversial concept and it was agreed by all present who gave evidence it was a fairly "fiery" meeting. The applicant held the view, from the start of the meeting, he was being presented with "au fait accompli" rather than general discussion on the concept of the ABC. Relevantly, attending the meeting, representing the Marketing Manager, Ms Victoria Henderson, was Mr John Cropper. 15 At the meeting, the applicant admits he said: It is not good enough that Victoria has again chosen to avoid a scheduled meeting. If I had known that this matter was to be of such a low priority then perhaps I should have seen if the cleaner was available to attend in my place. . . . This is a waste of my time at this point and the topic needs more clarification before such an arbitrary review is undertaken - I still think that this is crap and I think this issue should not be steamrolled through. Mr Cropper: There is the door, you're free to leave at any time. Applicant: I spend so much of my time fixing what you and others in the Marketing area have mucked up, I do not intend to have this issue pushed through without my approval. I would no doubt be expected to fix this mess up too. Mr Cropper: We are so very lucky to have you. Applicant: You don't know just how lucky, no doubt when things fail with marketing, I will be expected to remedy that too. 16 After the meeting was completed, a Notice of Grievance or Complaint was filed by Mr Cropper. Mr Cropper complained of the applicant's conduct at the meeting. He laid his complaint in the following terms: Description: It became clear early in the meeting that Ken Brunette was having trouble accepting the purpose of the meeting and how the outcomes would be utilised. He was very disparaging of it's objectives and of the process being undertaken. His attitude and repeated, loud and forceful interruptions, often talking down other people in the room, were major disruptions to the meeting and threatened the meeting's chances of achieving its objectives. He took no notice of the efforts of several people, including Brian Leighs, Neil Crabb, David Lo Russo and myself, to explain the meeting and it's context to him, and he frequently rudely interrupted our attempts to do so. He created a very unpleasant atmosphere in the room. During one of his aggressive outbursts, he expressed the view that there was no reason for him to be at the meeting, so I suggested to him that he was free to use the door if he was not comfortable being there. Ken Brunette inquired as to why Victoria Henderson was not at the meeting. I advised that I was representing her. He then said, loudly, that he wished that he could delegate the meeting to the 'cleaner', using an insulting tone of voice that clearly inferred that that is what he felt Victoria Henderson had done. Ken Brunette made further remarks about Victoria Henderson in a derogatory manner: eg. her absence indicated her attitude towards the ABC project. David Lo Russo suggested that he should address these concerns with Victoria outside the meeting. Brunette then disparagingly referred to having to deal with David Lo Russo, 'a contractor.' Brian Leighs suggested to Ken Brunette that he was free to walk out of the meeting if he wished to do so. He did not leave, and the meeting finally worked through its agenda. Ken Brunette continued to make deprecating remarks about the Retail Marketing branch and its work: eg. Marketing did nothing for him, he had to do Marketing's work for it, he had to correct its mistakes. Upon leaving the room at the end of the meeting Brian Leighs said to me that it was understandable that I had taken offence at Ken Brunette's remarks. For any employee to be exposed, during the normal course of their work with Integral Energy, to the sort of unsavoury behaviour displayed by Ken Brunette is clearly not acceptable. As a branch manager, a senior member of the Retail Energy business, his public use of personal insults and demeaning remarks is indefensible. It also obviously reflects very poorly on Integral Energy. 17 Two other persons at the meeting, Mr Nash and Mr Lo Russo gave evidence. Mr Nash's recollection was Mr Brunette had said Mr Cropper "may as well have been the cleaner" although he conceded he could not directly recall the exact words. Mr Lo Russo's evidence was he had specific recall that Mr Brunette had used the word "janitor" not "cleaner". 18 Ms Henderson, as Mr Cropper's supervisor, received the complaint. She wrote the following comment on the Notice of Grievance: I consider this a serious matter and will forward this to GMRE to action. "GMRE" identifies the General Manager, Retail Energy, namely, Mr Lloyd who was acting in the position. 19 Ms Henderson then requested Mr David Lo Russo who was mentioned in Mr Cropper's complaint, to file a report of the meeting. From evidence it could be inferred she encouraged Mr Lo Russo to file a formal complaint. Ms Henderson asked Mr Lo Russo if she could count on him to support "us" meaning Mr Cropper and herself. By email to Ms Henderson on 25 September 2000, under the sub-heading "Re complaint letter", Mr Lo Russo communicated the following: Victoria I would like to make a formal complaint over the verbal abuse delivered by Ken Brunette in our meeting on Thursday 21st September 2000. Never before have I witnessed such a callous and offensively arrogant behaviour from a person in a meeting in my entire working life. Most specifically, Ken Brunette verbally abused and demeaned the professionalism and reputation of John Cropper by calling him and referring to him as 'cleaner' and constantly abusing his level of superiority in the meeting. He not only stopped there, but also chose to cowardly abuse the marketing department and Victoria Henderson in her absence. When I tried to diplomatically defend and defuse the situation he responded by saying that 'he would not listen to any of my ... because I am only a contractor.' This level of behaviour was extremely disappointing to see for a person given the responsibility of Branch Manager in Integral Energy. It was the sort of behaviour you would expect from a school boy bully rather than a senior leader within the organisation. I do hope that some disciplinary and remedial action comes from this complaint for the sake of Ken Brunette and the rest of the Integral Energy management team. I wish for my complaint to be anonymous to maintain my professional credibility. Kind regards. David Lo Russo Director SEMG Consulting 20 Mr Brunette was never shown this email. Mr Lo Russo's request for anonymity caused it to be marked "not a formal complaint" by the Human Resources Department who had had Mr Cropper's complaint referred to them. 26 September 2000 Meeting re Grievance 21 On 22 September 2000, Mr Brunette received an entry in his electronic diary setting up a meeting related to a "Grievance issue". The meeting was set for 26 September 2000. Mr Cropper informed the applicant on the same day he had lodged a grievance about the applicant's conduct at the meeting. He also commented to the applicant that Ms Henderson and Mr Lloyd were pretty worked up about the matter. 22 On 25 September 2000, the applicant was advised by Ms Henderson it would be a "formal" meeting to discuss the formal grievance complaint. The applicant requested details from Ms Henderson of the allegations and a copy of the written formal grievance. He did not receive a copy until the day of the meeting. He had emailed Ms Henderson as follows: From: Ken Brunette To: John Cropper; Victoria Henderson Date: Monday, 25 September 2000 9:03:43 Subject: Formal complaint Victoria, I have received the Email message from John Cropper and today (approximately 10.0 am) you have called by my desk to advise that a 'formal' meeting is to be scheduled by Janene Harwood include Brian Lloyd. I believe that it is reasonable that I receive a copy of the formal complaint prior to the meeting. I do not intend attending a session without knowing the contents of the accusation so that I might prepare as I see necessary. Ken cc: Brian Lloyd 23 The applicant received a copy of the complaint on the day of the meeting. Mr Lloyd conducted the meeting with Mr Cropper and Ms Henderson. Mr Cropper said little. Mr Lloyd at the end of the meeting stated: Your refusal to accept your wrongdoing will be recorded on your record of service and I intend to take the matter further as I believe this is indicative of a broader issue with you. The applicant was not informed as to how the matter would be "taken further" nor what Mr Lloyd was referring to as the "broader issue". 24 Mr Brunette, after the meeting, wrote to Mr Lloyd seeking to lodge his own grievance in respect of the approach taken in the meeting of that day. He asked the complaint be dealt with in accordance with the requirements specified under the Grievance Resolution clause of his Contract of Employment. He wrote as follows: From: Ken Brunette To: Brian Lloyd Date: 9/26/00 6:22pm Subject: Grievance issue Brian, I wish to confirm the meeting today called by yourself on request from John Cropper under the heading "Grievance issue: I believe that you have indicated that you intend to place some item on my record of employment. I require (a) details and a copy of that matter and b) particulars of what, if any action is intended as an outcome of our meeting today. I regard your stated intention to append commentary to my service record at Integral Energy as a measure that may impune the integrity and reputation that I have strived to uphold since September 1995. Further I reserve all my rights in this regard. I further bring your attention to my concern that your action today is contrary to the requirements under my contract of employment, in particular article 17 "resolution of grievances". Ken Brunette Manager Business Sales cc: Ken Brunette 25 It appears the relevant clause of the employment contract is article 15 which states: 15. Resolution of grievances: 15.1 If a grievance arises out of or relates to this agreement (including any dispute as to breach or termination of the agreement) a party may not commence any court or tribunal proceedings relating to the grievance unless the party has complied with the provisions of this clause. 15.2 The aggrieved party must give written notice to the other party of any grievance which that party claims has arisen out of or in relation to the agreement. The notice must include details of the grievance. 15.3 As soon as practicable after the provision of written notice of a grievance to a party in accordance with subclause 15.2, the parties must meet in an endeavour to resolve the grievance expeditiously on an informal basis. The employer will be represented by the Chief Executive Officer or his/her delegate. 15.4 If the parties are unable to reach agreement within fourteen days of the receipt by either party of a grievance under 15.2 (the prescribed period), the grievance may be referred by either party to the Integral Energy Australia - Grievance Resolution Panel ('the panel') for resolution. 15.5 The constitution, rules and procedures of the panel, will be those set out in Schedule 3. The panel must deal with any grievance referred to it under clause 15.4 in accordance with Schedule 3. 15.6 The parties must comply with the rules of the panel set out in Schedule 3 and agree that any decision of the panel in relation to a grievance referred to it under this clause is final and binding upon them. It was the applicant's view the formal grievance should be conducted under the agreed article 15 of his contract which was directed to the "Resolution of grievances". 26 Mr Lloyd wrote a memorandum the same day arising from the meeting with Mr Brunette which reads as follows: Ken confirmed the comments attributed to him and steadfastly refused to resile from them or to offer any form of apology. In my opinion, any reasonable person would view these remarks as offensive and an inappropriate standard of behaviour from a senior manager. What concerns me more is that Ken was counselled only the day before by Val Duncan and myself on the need to moderate his behaviour in these types of forums. He determined to follow-up with another meeting. 27 Between 26 September 2000 and before 13 October 2000, the applicant had a further conversation with Mr Cropper. He told Mr Cropper if Mr Cropper believed his comment to him on 26 September 2000 was personal, the applicant was happy to apologise. However, the applicant would not otherwise withdraw the comment as he felt it was a business judgment that he, the applicant, was entitled to so make. Mr Cropper had thought the 26 September 2000 meeting was the end of the matter concerning his complaint. Mr Lloyd did not approach Mr Cropper after the 26 September 2000 meeting for any follow up of his grievance. 28 On 13 October 2000, the applicant attended a scheduled meeting with Mr Lloyd and Ms Duncan to discuss his expected "at risk" payment. Matters raised by Mr Lloyd at the meeting were as follows: 1. The notice of grievance. 2. The "at risk" component of the applicant's salary; and 3. The applicant's performance review and his reaction thereto. The applicant expressed his surprise to discover there were other issues not just the "at risk" payment which were to be discussed at this meeting. He had not been informed matters other than his "at risk" payments were to be discussed. The applicant expressed again his concern the grievance procedure in his employment contract was not being followed. 29 As to his "at risk" payment, the applicant was handed a letter from the Chief Executive Officer, Mr Richard Powis, advising him his aggregate performance section was 26.5 of a possible 100. The letter dated 9 October 2000 read: Dear Ken "At Risk Reward" Payment 2000 In keeping with my recent discussions with the contract staff group your pay under the "At Risk Reward" scheme will be under the old guideline formula and is due to be made in your October pay. The performance scores of the three components is as follows: Corporate 3 out 20 Retail Energy 10.5 out of 30 Individual 13 out of 50 This gives an aggregate score of 26.5 out of 100 resulting in a gross payment of $5,963. The Board in assessing the performance of the corporation and the business units was strongly influenced by the impact on the bottom line profit, however saw some positive elements in what had been achieved. The Board made the following observations: . Integral Energy's performance was well below expectation in relation to profit and customer billing but it maintained reliability of supply within acceptable limits. . Efforts to improve systems and processes were recognised. A number of people have worked hard to enable the at risk payments to be made in the October pay, however due to some difficulties with the process pay dockets will be unavailable until next week. In the meantime, if you have any questions regarding your pay docket please ring Marie Lancaster on extension 86288. I also remind you from the above discussions of my intention to review the remuneration guidelines and to keep you informed of progress. Yours faithfully 30 Mr Brunette expressed amazement at his performance score of 26.5 out of 100 given the average 92 out of 100 rating he had from Ms Duncan in his performance review. The applicant submitted his "at risk" payment was to address his work performance for the period 1 July 1999 to 30 June 2000 and any events occurring in September 2000 should not have been taken into account in any assessment of his entitlement to the "at risk" payment. As the applicant had received a balanced score card of nearly 95 per cent it was his view his "at risk" reward should be re-assessed. 31 As to the other issue on the agenda, namely, the applicant's reaction to his performance review, Mr Lloyd then informed the applicant he intended to consider further action be taken which may include an inquiry. Mr Lloyd did not specify in what context this would occur or what the inquiry would be about, that is, to what issues it was to be directed or who would conduct such an inquiry. 32 After the 13 October 2000 meeting, the applicant received the following letter from Mr Lloyd: 13 October 2000 Mr Ken Brunette Manager Business Sales Retail Energy Ground Floor West Dear Ken Work Performance Following our meeting on 21 September 2000 between yourself, Victoria Henderson, John Cropper and myself and your subsequent e-mail concerning formal notation on file and reference to the "resolution of grievance" clause of your contract, I have sought formal advice from Human Resources as to the proper procedures to be observed in the closure of this matter. From my discussions with Human Resources it appears clear that the manner of your dealings with other staff members is a broader issue than the John Cropper incident alone. I am therefore recommending an investigation of this matter in full by Corporate Human Resources and that a meeting be convened on a date to be confirmed to discuss this matter further. Yours faithfully Brian Lloyd Acting General Manager Retail Energy 33 The applicant was thereby informed that "the manner of your dealings with other staff members is a broader issue than the John Cropper incident alone". No one identified to the applicant what was the specific broader issue. Mr Lloyd agreed the letter of 13 October 2000 did not inform the applicant as to his perception of the "broader issue". The letter informed the applicant Mr Lloyd was "recommending an investigation of this matter in full by Corporate Human Resources". At this stage, there is therefore to be an investigation by Human Resources of his "manner of dealing with other staff" indicating a broader issue. No further details were provided to the applicant. The applicant expected a further meeting "to discuss the matter further" as Mr Lloyd's letter stated. 34 Mr Lloyd also addressed the issue raised by the applicant that the appropriate procedure to be followed was in accordance with that defined in the grievance clause of his contract. Mr Lloyd stated he was taking advice from Human Resources about the proper procedure to be followed. He said no more in the correspondence. 35 On or about 17 October 2000, the applicant commenced a period of six weeks annual leave which had been pre-arranged to follow the birth of his second daughter. 36 At 8am on 20 October 2000, the applicant returned to the respondent's offices to hand over to Ms Henderson who was acting in his position. At about 10am on that day he met with Mr Lloyd. There is some dispute about what occurred at the meeting of 20 October 2000. Mr Lloyd said Mr Brunette told him he was currently on medication for hypertension and depression. Mr Brunette denies this. Mr Lloyd in cross examination conceded he had no real understanding of what medical condition the applicant suffered from and made no further inquiry arising from the comment. It appears to be common ground on 20 October 2000 the applicant indicated he was willing to undertake "management coaching". He was initially prepared to pay for it himself but Mr Lloyd, at the meeting, suggested that Integral, the respondent, meet the cost. The applicant at that meeting also revealed to Mr Lloyd he had sought legal advice given "the tone of our earlier meetings". Mr Lloyd expressed the view he expected he would. 37 The applicant received the following letter, dated 30 October 2000, from Mr Lloyd while he, the applicant, was on leave: Dear Ken Further to our meeting of last Friday, I have subsequently held discussions with Ms Jennilyn Noack (Manager, Human Resources) with respect to the two issues raised: 1. At Risk Payment Jennilyn has confirmed that there are no internal recourse options in respect to this matter. As to the At Risk Payment it is not addressed within your contract of employment, the section 17 Grievance Resolution clause does not apply. 2. Coaching Program A proposal from Ms Debra Coulson (Choosing Life), an organisational and personal development specialist, has been received (copy attached). As the proposal contemplates, a 3 month procedure is required using both face to face and telephone coaching techniques. The establishment process suggests an initial three way meeting between yourself, Ms Coulson and your sponsor (the new GM Retail who will be starting on 2 November 2000.) I will ask Jennilyn to liaise with the GM Retail to initiate the process to coincide with your return from leave. For your information I will be on leave from 3-13 November 2000 but can be contacted either through the office or on my mobile should you wish to discuss any aspect of this letter. Yours faithfully 38 Mr Brunette replied to this letter on 3 November 2000 in the following way: Dear Brian Thank you for your letter dated 30 October 2000. Further to the issues addressed at our meeting and to the two items included in your letter, I wish to add a number of items. 1. At Risk Payment While I accept that the specific matter of At Risk Payments is not particularly addressed in my contract of employment, I question the extended assertion that this should somehow mean that ' ... there are no internal recourse options in respect of this matter.' This view seems to be at odds with the outcome in October 1999, where an attempt was made to arbitrarily reduce my personal component. This was subsequently reversed as result of internal discussions. I believe it needs to be acknowledged that, as a matter of course, I routinely negotiate many items that are not specifically itemised in my contract of employment. I wish to mention a number of points that were discussed at our meeting of 20 October 2000: (a) The process of At Risk Payments for 1999/2000 seems to have been somewhat rushed and disorganised. I contacted Janene Harwood on Tuesday 10 October, to ask that she query why I had received no communication at this point when At Risk Payments should be made as part of the October monthly salary (Sunday, October 15). You indicated that this was the catalyst for a hurried conclusion to the matter. No system was apparently in place at that point to ensure the At Risk Payments were made on time. (b) You accepted my position that the personal component of the At Risk review ratings that you (with Val Duncan, the previous General Manager Retail Energy) provided on 13 October 2000 were weighted (heavily) by events that occurred in September and October 2000. This was not related to performance in the 1999/2000 year that was meant to be under review. As a result of me pursuing this line you agreed to address the matter with Human Resources on my behalf. The ratings provided by Val Duncan, in relation to performance based on the 'Balanced Scorecard' at the review session in September 2000 gave an average of approximately 95%. This Balanced Scorecard includes a component on People. No mention was made at the meeting of the intended massive reduction in this rating. I left that meeting with the firm belief that (approximately 95%) was to be my rating for the personal component of the At Risk Payment. 2. Coaching Program I wish to have it as a matter of record that I advised you at our meeting (20 October 2000) that I have sought independent professional advice and that you responded that you believed this to be 'commendable'. You went on to recommend that I consider utilising a program offered by Integral Energy. I appreciate this offer and intend to accept. I look forward to the opportunity to discuss and progress these matters in the new future. Yours faithfully 39 Ms Noack, the head of Human Resources, had been in the organisation for about one month before she became involved in the matters surrounding Mr Brunette's employment. She had not met the applicant prior to providing advice to Mr Lloyd. In coming to the conclusion there was a wider problem than that of Mr Cropper's complaints Ms Noack says she relied on reports from Mr Lloyd. It is of note she had before her Ms Henderson's comment on the grievance complaint and Mr Lo Russo's email re the meeting. Mr Lloyd said he relied on Ms Noack's view of events that he had recited to her and her advice on how to handle what he perceived as a problem. 40 The letter of 30 October 2000 from Mr Lloyd gave the applicant no indication it had been determined not to conduct an investigation related to the applicant's employment through a Human Resources Review but instead through an Independent Review to be conducted at Mr Lloyd's initiative. 41 Ultimately, sometime in October, the respondent decided it would commission an external consultancy, Davidson Trahaire, to conduct an "inquiry" into Mr Brunette. Mr Lloyd recalled the independent investigation was recommended to him by Ms Noack of Human Resources and he acceded to that recommendation. Internal correspondence revealed a number of persons in Human Resources were dealing with Mr Lloyd's perceived concerns as to the applicant. It seems a Ms Kontamine from Human Resources suggested the independent involvement of Mr Wiggins of Davidson Trahaire. Ms Noack conveyed this idea to Mr Lloyd. Mr Lloyd recalls he agreed to the independent inquiry/investigation sometime in October 2000. He did not convey this to the applicant in the 30 October 2000 correspondence. 42 Mr Wiggins of Davidson Trahaire was first briefed by Ms Noack and Mr Rigby also from Human Resources on 26 October 2000. This briefing occurred after the applicant had agreed on 13 October 2000 to undertake the management coaching course. Mr Wiggins was given no instructions in writing. Mr Lloyd, despite signing off on the investigation, had no input into the instructions given to Mr Wiggins. Mr Wiggins was asked by the Human Resources personnel to investigate two matters: (i) the incident of the grievance; and (ii) Mr Brunette's past and present working relationship with staff. 43 Mr Wiggins was briefed at the 26 October 2000 meeting of the following facts, recorded as his contemporaneous notes of the meeting: (a) the applicant had been treating staff roughly and harassing people in meetings; (b) there were three formal complaints from Ms Henderson, Mr. Cropper and Mr. Lo Russo regarding the applicant; (c) the applicant had said of Mr. Cropper 'Why did she send the garbage over to make decisions?' (d) the applicant takes the view that the end justifies means and he intimidates people; (e) a previous incident had been investigated; (f) the applicant's behaviour was against the company's code of ethics and the General Manager had had several talks to the applicant as to his behaviour and the applicant had become irate; (g) Integral needed a robust investigation; and it could take disciplinary action; (h) Mr. Brunette consulted psychologist privately and after a session he admitted a problem; (i) Integral had offered the applicant a Life Coaching Programme; (j) the General Manager wants to draw line in the sand. 44 This briefing must be challenged as biased, full of gossip and unsubstantiated allegations. It contained misleading statements: for example, there had been filed only one, not three, formal complaints. A company code of ethics had never before been raised as an issue in breach. The briefing indicated an attitude of the General Manager. It even suggested the appropriate tone for the investigation – it be "robust". 45 The applicant returned again to the respondent from leave on 2 November 2000 for an "all hands" meeting called by Mr John Smith who had been appointed the new General Manager, Retail Energy. He replaced Mr Lloyd who had been "acting" in the position. Mr Lloyd had replaced Ms Duncan who had been moved to Special Projects. The applicant after the meeting had a short personal conversation with Mr Smith. 46 Mr Smith however, for personal reasons, resigned his position on 17 November 2000 after less than one month in the position. On the day before he left he wrote a memorandum for the respondent's records from his recollection of the meeting with the applicant after the general meeting on 2 November 2000. The memorandum stated: From: John Smith To: Jennilyn Noack Date: Thu, Nov 16, 2000 8:56 am Subject: Ken Brunette . . . Ken said he was pleased to me (sic) and I replied in the same manner. He went on to say that he had been under some stress and had sought external support and had agreed to take the company's offer for further help. He handed me a note addressed to Brian (which you now have) which confirmed that position. I then said that it would appear to be an error of judgment for me to put him back into a position of stress and that we should consider alternatives on his return. I expressed the view that his experience was valuable to the company and that he may be able to assist the business in a variety of ways. This response surprised him, and he asked directly "Are you telling me that I will not be returning to my existing job?" My reply was "I want you to consider all the options and we will make that decision when you return. Please make an appointment to see me the morning of your return." . . . 47 This was the first suggestion to the applicant there could be a change to his duties. The applicant was never informed of Mr Smith's view of him. The applicant denied saying he was under some stress from work to Mr Smith but agrees he had mentioned taking stress tablets. These, he revealed in evidence were related to a heart condition. He denied any suggestion he had been, or ever had been, treated for stress. 48 After the applicant's meeting with Mr Smith on 3 November 2000, and while still on leave, the applicant received a telephone call from Ms Noack. She said: Ken, I'd like to arrange a meeting for you with a consultant in the week commencing 6 November in line with Brian Lloyd's letter to you of 13 October. The applicant replied: Brian's letter refers to a further meeting. I had assumed this would be with Brian and not a consultant. I am on annual leave at the moment and have not planned to be in Sydney for some time. I will let you know if and when I am available to meet with the consultant. 49 The applicant then received a number of email messages about attending a meeting with this consultant. On 9 November 2000, he telephoned Mr Rigney in Human Resources. He requested a copy of what questions were to be asked by the consultant, and an articulation of exactly what was intended to be done with the outcome of the proposed interview. Mr Rigney confirmed the meeting with the consultant was for 16 November and sent the following document prepared by the independent investigator to the applicant: Integral Energy - Grievance Investigation Purpose : Davidson Trahaire has been requested to assist Integral Energy with an investigation of an incident that is the subject of a grievance that occurred on 21 September 2000. Process : Interview the parties to the incident and other relevant staff. Outcome : Prepare a written report to Integral Energy providing an assessment of the incident and making recommendations for a way forward to address the grievance. Some areas for exploration in the interview with Mr Ken Brunette Discuss the incident, which is the subject of the grievance: . What occurred? . Who were the parties involved? . Explore issues that may have contributed to the incident. . Explore any other issue that may be related to the incident. . Explore the parties behaviour, attitudes feelings, messages sent and messages received. . Explore the parties view and opinion about their behaviour in the incident and that of other staff. . Explore the parties understanding of the current situation/problem. . Explore the parties view and opinion of what would be necessary to resolve the grievance. . Explore the parties view and opinion of whom they feel has responsibility for resolution of the grievance. Discuss relevant background to the incident: . Relationship between the parties. . Issues of concern between the parties. . Previous similar incidents between the parties. . Any other incidents between the parties. Discussion other key relationships eg. subordinates, peers, senior managers and other staff. . Issues of concern. . Similar incidents. . Other incidents. Discussion organisational issues that may be relevant to the incident. Discussion individual issues that may be relevant to the incident. Discussion any other relevant issues. Yours truly DAVIDSON TRAHAIRE Howard C Wiggins 50 On receipt of this "investigation" document prepared by Mr Wiggins, consultant psychologist, the applicant called Ms Noack in Human Resources saying: Applicant: . . .What is the nature of the overall extensive investigation that seems to be under way into all of my dealings? Ms Noack: It is merely a basic part of Integral's policy with respect to people involved in a formal complaint. Applicant: I do not accept the validity of that view. I believe that Integral is setting a dangerous precedent if such an intense and extensive investigation were to be performed each time someone issued a formal complaint . . . 51 It had been arranged for the applicant to again see Mr Smith, the new General Manager at 9am on 27 November 2000 the day of the applicant's return from leave. Mr Smith however had left Integral by the time the applicant returned to work. The applicant's recollection of events on this day are as follows: at about 8am on 27 November 2000, he returned to work. He had attempted to contact Mr Smith to confirm the 9am appointment with him. He was then approached by a fellow employee who said: What is going on? Victoria advised me on about 21 November that John Smith had resigned and that Brian Lloyd would be Acting General Manager Retail Energy again. On Thursday last, Victoria advised me that you would not be returning to work as Manager Business Sales. This was the first time the applicant was informed he would not return to normal duties on his return from annual leave. 52 At about 8.20am on 27 November 2000, the applicant was called to Mr Lloyd's office. Mr Lloyd informed him Mr Smith had resigned and he was resuming the role of Acting Managing Director, Integral Energy. He raised with the applicant the respondent was aware the applicant had approached another company, Energy Australia, for employment. The applicant replied he routinely applied for various positions in a range of organisations. The following exchange then occurred: Mr Lloyd: ... Going forward, I would like you to complete certain Special Projects. You should conduct your work in an area near my office on the first floor. You should still complete the planned sessions with 'Choosing Life' during that period. On the conclusion of three months, your position will be reviewed. During that time, you are to have no contact with anybody in the retail business. Further, you are no longer the Manager, Business Sales. . . . Applicant: I do not accept your proposed arrangement, it will merely undermine my standing and credibility. I would prefer to continue in my role as Manager Business Sales and carry out the sessions with 'Choosing Life' with EAP. Mr Lloyd: That is not an option. Mr Lloyd then repeated his offer of the three month's work in Special Projects and the applicant refused again to take up those duties. Mr Lloyd then said: Ken, you are to go home. Integral Energy will formally advise you of our intended action. 53 Mr Lloyd revealed he formed the view Mr Brunette should be removed from the role of Business Manager on his return from leave. He did not have regard to the applicant's contract of employment before making that decision. In coming to the decision, Mr Lloyd confirmed he had regard to Mr Smith's written memorandum where Mr Smith expressed the view it would be inappropriate for any manager to operate as a manager if he/she was stressed. As to the alleged stress, Mr Lloyd could only recall stress being mentioned to him by the applicant at the meeting with him. Mr Lloyd said of his decision to remove the applicant from full duties: A: I believe it was on my return from leave when I resumed the role [of General Manager Retail Energy] after John Smith. I read the correspondence from John Smith who indicated that he met with Mr Brunette and that Mr Brunette had admitted to being under stress and that it was inappropriate for any of his managers to operate as managers if they were under stress. I then spoke with Ms Noack, the HR manager and her advice was it would be inappropriate to put Mr Brunette back into the role until such time as the investigation had reached its conclusion and we considered whatever outcomes that may give rise to that and that Mr Brunette had substantially completed his counselling programme. 54 Two day's later, on 29 November 2000, the applicant received the following letter from Mr Lloyd: Dear Ken I refer to our discussion which occurred on Monday 27 November, 2000 in regards to your current situation. Given the current situation that the person investigating the complaint made against you is not available until next Monday (4/12/00), you are directed to remain at home for the rest of this week (W/E 1/12/00) on paid Special Leave. On Monday 4 December (8.45 am) you will report to myself at Huntingwood for a meeting with Howard Wiggins (Davidson Trahaire - EAP) to finalise the investigations of the grievance. Following the meeting with the investigator, you will re-locate yourself to the Executive Office area on the 1st Floor at Huntingwood in order for you to concentrate on projects involving the strategic aspects of your position rather than on the operational ones until the investigation is completed. I note in your letter to me dated 3 November 2000, that you intended to accept our offer of a 'Coaching Program' organised through a company called 'Choosing Life.' Could you please advise what action you have taken in regards to this program. I look forward to your return on Monday 4 December, 2000. Yours sincerely. 55 Mr Lloyd, in cross examination, was questioned as to why after the initial meeting with Mr Brunette about the complaint had matters related to the complaint raised by Mr Cropper not been determined. He answered: A. No, it hadn't. It may have gone between Mr Brunette and Mr Cropper. I thought there was a broader issue. I was concerned that someone who could tell me that it is appropriate for him to be arrogant because he is that good and all the associated behaviour that goes with it. Q. You thought he was a bit too big for his boots? A. Yes. Q. You just didn't like him? A. No ... I had no personal problem with him. I didn't like his behaviour. That's an important distinction. Q. But really you were basing your actions on your perception of what you thought was his personality? A. It was what I had seen first hand. 56 He was then asked as to his determination to put a note on the applicant's personnel file: Q. Would that have been the end of the matter? A. No, because - it would have been the end specifically of the matter as it related to John Cropper but I thought there was a broader issue with Ken that needed to be pursued because to my way of thinking we didn't get a satisfactory result. What I wanted was for people to work civilly together. That's what I want at the end of the day. That would have been done for me if Ken was prepared to apologise to Mr Cropper on the day and I would have been happy and that would finalise the matter as far as I was concerned. ... Q. There was not a need to conduct an independent review into broader issues which were undefined was there? A. I believe there was, the reason being that it was a view that I had and it was a view that the HR Manager had - that there were problems at hand with Mr Brunette but the only way of really scooping that out and to understand that would be to have an independent come in to conduct an investigation, to have it in a forum which would allow staff to participate on an entirely confidential basis. It was felt that was the best way of understanding whether or not things were as bad as we have perceived them to be. 57 Mr Lloyd also determined on the advice of Human Resources that: I felt, and it was the opinion of the HR manager, if we were to put Ken back into his role without a change in his behaviour, without having substantially completed his counselling programme, we could well expose the organization to a claim of stress or something similar. 58 Mr Lloyd was questioned as to why, after the applicant agreed to undertake management coaching and after a note was placed on his personnel file he elected to continue with a further investigation. He said: A. We had to have the counselling programme and we had to have the investigation completed because we didn't know at that point how extensive and how exhaustive the problems were with Mr Brunette. The fact that Ken had said it was a problem and recognized that was one thing. It's the dimension of that that needed to be defined and attended to. Q: So you had no idea of the dimension of what you thought may be a problem before you commissioned the investigation? A: That was why we commissioned the investigation. He agreed as follows : Q. So you had this external consultant talking to people in your business about a particular employee, trying to ascertain if there were extensive concerns with this particular employee in order to put together a report, which report you did not know what form it would take and that was the investigation process you were referring to when you told Mr Brunette that he would be in Special Projects until the completion of the investigation? A. In addition I believe I said it would depend on his progress under the coaching programme. Q. And the outcome of the investigation? A. Could be yes. Q. You really had no idea what would happen at the end of the investigation? A. No idea. 59 The applicant, having being stood down from duties, attended the meeting with the consultant, Mr Wiggins, which had finally been arranged for 4 December 2000. The interview went for two hours. The applicant asserts he became suspicious of the direction the interview was taking and found the questions very personal. He expressed this view to Mr Wiggins. At the end of the interview the applicant asked, "What happens from here?" Mr Wiggins replied, "Integral Energy are keen to bring the investigation to a conclusion as quickly as possible. I have a number of interviews still to complete and once this is done I will present my report." 60 Evidence revealed the consultant, Mr Wiggins, interviewed 27 employees and the applicant. The applicant asserts of the 27 employees interviewed only five reported directly to him during his employment with the respondent. He had direct contact with only 12 of the 27 employees interviewed. As the number of people being interviewed expanded, Mr Rigney from Human Resources sent an email to Ms Noack questioning the necessity of further interviews but she approved the number to be called by the investigator. 61 On the day following the interview with Mr Wiggins, the applicant attended a meeting in Mr Lloyd's office. Ms Noack from Human Resources was present at this meeting. The applicant was told, in the position at Special Projects, he would have responsibility for three areas. He commented these defined areas comprised only a small part of his responsibilities as Business Sales Manager and he would therefore no longer be Manager, Business Sales. The following exchange then took place: Ms Noack: You are definitely still Manager Business Sales. That has not changed. The applicant: That is ridiculous. How can you argue that this is the same role? Mr Lloyd: You still hold the same title. It was confirmed to the applicant he was specifically excluded from any contact with his staff in Business Sales and had to perform the Special Projects in an area beside Mr Lloyd and physically away from the Business Sales Division. The applicant declined the offer to perform duties in Special Projects. 62 By 4 December 2000, the applicant had sought legal advice. He instructed his lawyers to send to the respondent correspondence which indicated, notwithstanding what occurred on 4 December 2000 at the meeting, he perceived that the respondent had constructively dismissed him. Submissions 63 The applicant submitted he had effectively been dismissed. He submitted he held such a view, and it was a reasonable view in circumstances where it was an acknowledged practice of the respondent to move employees from their contracted positions, without their consent, to Special Projects before they left the employ of the respondent. Ms Duncan's circumstances were relied upon as an example. She had been Manager, Retail Energy but was moved to Special Projects which the applicant referred to as "the kiss of death". 64 The applicant submitted the respondent unilaterally varied his position description and duties and it therefore breached his contract of employment. The applicant submitted the procedure adopted, for investigation of broader issues not particularised, was the effective cause of his termination and the respondent in taking those steps, including moving him before the report from the independent investigation was completed, effectively brought about the termination of his contract of employment. 65 The respondent submitted through the endeavours of Mr Lloyd and Ms Noack, it sought to continue the applicant's employment and had retained the applicant's service. The duties the respondent was seeking to allocate to the applicant were not a sham or some device to avoid its legal obligations (Richtsteiger v Century Geophysical Corporation, unreported decision of Marshall J, 8 October 1996, Matter No. 471 of 1996). 66 It is the respondent's view the applicant did not negotiate with the respondent in a reasonable manner concerning his perception of duties performed out of Special Projects. While the applicant may not have believed the statements of Mr Lloyd he was the still the Manager, Business Sales his belief could not change Mr Lloyd's bone fide assurances he was intending to keep the applicant in employment as Manager, Business Sales. 67 Further, the respondent submitted given the applicant's skills and expertise the proposed duties he was to perform in Special Projects were "reasonable" and as a consequence there can be no suggestion there was a breach of the contract of employment by the respondent. There was a genuine desire on the part of the respondent and its senior officers to continue the contract of employment. The applicant, the respondent submitted, is required to show the contrary in order to establish a repudiation on the part of the respondent (see Brookton Holdings Pty Ltd v Kara Kar Holdings Pty Ltd (1994) 57 IR 288 at 289.7-290.8). 68 The respondent submitted further a temporary re-assignment of duties cannot be a breach of the contract of employment. There must also be an intention to no longer perform the existing contract (see Marriott v Oxford & District Co-Operative Society Ltd (No.2) (1970) 1 QBE 186 (at 191). The respondent's preference of a temporary assignment in Special Projects whilst an investigation and counselling was to take place is consistent with the view there was no termination of employment. The respondent's attitude was made clear to the applicant at the meeting of 4 December 2000 and also through its solicitor's correspondence of 8 December 2000 to the applicant's solicitors. 69 The respondent submits there was an abandonment by the applicant of his employment and accordingly, a clear repudiation of his contract of employment specifically through his refusal to attend work and perform the reasonable Special Projects duties offered to him. While the respondent elected to treat his employment as at an end, effective from 5 December 2000, this was a decision made only after the applicant was given the opportunity to re-consider his position. 70 The respondent submitted the applicant is not entitled to any payment in lieu of notice as he brought the employment contract to an end (Vision Publishing Pty Limited v PK Lane Holdings Pty Limited & Ors (1998) 84 IR 277 and Elkins v Full Bloom Pty Ltd (2000) NSWIRComm 223). Consideration 71 As to whether there was an unfairness under s106 of the Industrial Relations Act 1996 in the terms and/or performance of this employment contract it is necessary, in my consideration, to make comment as to the working environment within Integral Energy in which this employment contract was performed and came to an end. The applicant was an experienced administrator. Ms Duncan, his immediate supervisor confirmed he was very good at his job. From the evidence however I conclude, as did Ms Duncan and Mr Lloyd, his people skills were not refined, his dealings with other staff reflected the behaviour of a bully and his use of language towards others was sometimes offensive, certainly uncivil and entirely unacceptable in a working environment particularly one in which he carried such senior managerial responsibility. 72 The respondent however appears to have been conducting its business and the process of privatisation amidst managerial disarray. Consultants were re-designing divisions recently established. Persons were appointed to positions but then moved out of those positions without discussion or agreement. A newly appointed Managing Director, Retail Energy, stayed only some weeks. Consultants were appointed to act in positions they designed. The Acting Managing Director who embarked upon this disciplinary procedure was not an employee of Integral Energy but a consultant to Integral. He took the advice of a Human Resources Manager who was but one month into the position at Integral. She had never met the applicant when she proffered much of her advice and made her recommendations. 73 While I accept the Acting Managing Director, Mr Lloyd, identified a true managerial problem in the applicant's performance and that such a problem required attention, I find the procedures he allowed to be followed were manifestly unfair to the applicant. The instructions to the independent consultant revealed Human Resources were affected by the Acting Managing Director's attitude. The applicant was not informed of two other complaints, that of Mr Lo Russo and Ms Henderson. The applicant attended a grievance meeting but was only told the content of the complaint on the day of the meeting. The applicant had agreed to counselling. He was notified a note was put on his personnel record about which he expressed concern only related specifically to its terms and content. This concern was never addressed. 74 The Acting Managing Director, Mr Lloyd, assessed, however, the grievance meeting with the complainant revealed an attitudinal problem which he identified as a "broader issue" which was to become the focus of a further general inquiry into the applicant. Yet the consultant was also asked to address the original grievance complaint. The more general aspect, which grew out of the original grievance, was not particularised to the applicant. However, the Human Resources Division felt able to give an analysis of the broader based concerns to an independent investigator. They referred to other documents not brought to the attention of the applicant. The "broader based concerns" were not formally brought to the applicant's attention until he asked. They were never truly identified. He received a document from the consultant which directed itself to the consultant's summary of his belief. There was then what could only be called a "witch hunt" environment created as 27 staff members were called for interview, only five of whom directly worked with the applicant. 75 The applicant had a contract of employment containing a grievance procedure. The applicant rightly pointed out to the respondent on at least two occasions this procedural clause of his contract. His expressed concern was ignored by the Acting Managing Director and the head of the Human Resources Division. It was considered and dismissed as irrelevant related to the dispute arising from the "at risk" payment but not considered as to the grievance procedure. 76 The applicant agreed to counselling after the particular complaint was made but this agreement was interpreted as a reason for removing him from his full duties. "Stress" seems to have been a word used to Mr Smith and Mr Lloyd which affected the decision made to move the applicant but no inquiry was made as to the reasons for or condition referred to. There was an effect without a causal connection. A note was made on his file but this also did not finalise the original complaint. 77 A broad independent investigation was set up. During its conduct, the applicant was informed he would temporarily be moved to Special Projects for three months. The applicant, in the work environment which pervaded at Integral at the time, felt a move to Special Projects was the first step to his dismissal. 78 The applicant explains his reaction to this move given Ms Duncan's experience. Her job had been advertised. It was no different in description from the position she held. Ms Duncan, through discussion, agreed she had been informed Integral were looking for skills she did not hold. She was moved into Special Projects and out of the position to which she had been appointed. She had not agreed to the move. She revealed she productively served in Special Projects before she left Integral. 79 Mr Lloyd, a consultant, replaced Ms Duncan and undertook all of her normal duties in an acting capacity. Ms Duncan had been moved to Special Projects in September 1999 and her last day of work was 13 to 16 January 2000. Mr Lloyd himself, when Mr Smith was appointed Managing Director went into Special Projects and only came back into the mainstream when Mr Smith suddenly left. Mr Cropper had also been moved from his contractual role without his consent. In September 2001 there was a total 'spill and fill' of all positions in Retail Energy. Others had been moved sideways through Special Projects. In this context the applicant says his employment felt threatened. I accept this was so. 80 The implied power of an employer to temporarily vary the duties of an employee was stated by Dixon J in R v Darling Island Stevedoring & Lighterage Company Ltd; Ex Parte Halliday (1938) 60 CLR 601 (at 621-2): If a command relates to the subject matter of the employment and involves no illegality, the obligation of the servant is to obey it . . . at common law upon it being reasonable. In other words, lawful commands of an employer which an employee must obey are those which fall within the scope of the contract of service and are reasonable. 81 Employers do not however have an unfettered discretion to alter an employee's duties in a substantial manner without an express agreement between the parties. Reasonable alteration to duties cannot require an employee to render services which do not properly appertain to the character of the position which the employee had been employed to perform (see Van Tran v Calum Textiles Pty Ltd (1997) 42 AILR 353). 82 Even accepting the temporary Special Project role involved the applicant receiving the same level of remuneration and he was keeping the title of the position, his duties and responsibilities were dramatically altered. 83 I find in the circumstances where, after the initial complaint there was agreement for counselling and a note to be placed on the applicant's personnel file, that the ambit of the further investigation ordered and conducted and the arbitrary move of the applicant from his duties as Manager, Business Sales to Special Projects, the respondent created an environment untenable for the applicant. The move reduced his credibility and took away from him all of his managerial responsibility. The effect of the move was to leave him with a research role which meant he would have a different role within the company. 84 The grievance clause in his contract was ignored both in relation to the handling of the Mr Cropper's complaint and in relation to the more broad or general complaint as identified by Mr Lloyd and those in Human Resources but never particularised to the applicant and independently investigated. The applicant had clearly raised at the 26 September 2000 meeting the procedures being followed were contrary to the requirements of his employment contract and in particular its Grievance Resolution Clause. Mr Lloyd acknowledged same. Ms Noack it appears did not consider the clause in relation to the grievance or other issues but determined it was not relevant to his "at risk" claim. 85 The investigation itself in its conduct and broad reach must also be challenged. The ambit of the issues canvassed through questions put to the applicant, through the process of interviewing 27 persons most of whom had little to do with the applicant, instructions given to the independent investigator by Human Resources and not revealed to the applicant, all cast doubts on the fairness of the investigation. Significantly, the independent investigation report did not recommend the applicant be moved from his substantive position. 86 Circumstances which constitute a breach of an employment contract must be of such significance they go to the heart of the contract of employment. In Western Excavating (ECC) Ltd v Sharpe (1978) 1 QB 761 (at 769), the applicant's employment was terminated following what was found to be an unfair investigation. The respondent distinguishes the case alleging, not only in this circumstance was the applicant not terminated, but the review being conducted by Mr Wiggins was not completed as at 5 December 2000 when the applicant chose to leave his employment while being offered temporary duties. 87 Employers in the modern industrial context choose to hire employees under fixed term contracts. Terms and conditions of employment are agreed to between the parties. A contract of employment requires agreement between parties. An employer has obligations upon them within such an agreement. The very nature of contractual fixed term contracts displaces the old way of master/servant. Under contract, the parties agree for the performance of duties there will be an agreed wage and agreed terms and conditions of employment. Under such contracts there are specified terms which if not complied with, by either party, lead to a breach of contract. There is no room for unreasonable conduct. Even under the master/servant relationship an employee and an employer still had to act reasonably. 88 Each party to a contract is bound by an implied term to act with fidelity and good faith (see Malik v BCCI SA (In Liq) (1997) 3 All ER 1 and Day v Lumley Life Ltd (1999) 90 IR 70). The respondent submitted the applicant failed to meet his obligation under the contract because he did not express his concerns to the respondent that his move to Special Projects was in fact the first step towards termination. The applicant's failure to engage the respondent in any meaningful discussion about his ongoing employment because of his misconceived understanding as to the implications in being assigned to Special Projects or his suspicions about the motives of his employer (in circumstances where there was no unconscionable conduct alleged against the respondent which justified the suspicions) the respondent submitted does not entitle him to any relief. I do not accept this submission. 89 A contract may be accepted as terminated by a party where the other party has breached a condition of the contract; or breached an intermediate term which breach is sufficiently serious to entitle the innocent party to terminate the contract (a fundamental breach); or in respect of an absence of readiness or willingness to perform; constituting a repudiation or capable of being treated as an anticipatory breach. In the employment law context, it is the latter conduct which gives rise to a right on the part of the innocent party to treat the contract as being at an end. This is commonly called a "constructive dismissal". 90 In Bates v Finance Australia Pty Limited & Others Finance Australia Pty Limited & Ors v Gregory Scott Bates [2002] NSWIRComm 42, Peterson J considered submissions based on the concept of constructive dismissal observing at [51]: This history shows a misunderstanding about the legal effect of what was happening to the relationship between the parties. The concept of constructive dismissal seems to me to have had no application. The applicant raised that matter in his e-mail of 7 January 2000 but at that date he remained in employment and continued thereafter until 9 February. The concept of constructive dismissal requires a termination by the employee but at the behest of the employer. As the Full Commission said in Allison v Bega Valley Council (1995) 63 IR 68 at 72: "It is necessary to determine whether the actual determination was effectively initiated by the employer or by the employee particularly where the dynamics within a factual situation might change." In Brookton Holdings v Kara Kar Holdings (1994) 57 IR 288 at 289 Young J in the Equity Division of the Supreme Court of New South Wales spoke of constructive dismissal this way: However, the authorities are sufficiently full of examples of situations where an employer has repudiated the contract and the employee accepted that , or alternatively where there has been a constructive dismissal . I really do not think that there is any real difference between those two situations, though some philosophers might find some ground for distinction. Essential in both is that one side to a contract of employment has made it clear that the contract in its existing form is not to continue , but the employer puts forward a proposal that the employee will have a changed role. (emphasis added) 91 In the present case it is not contended, as submitted above, there has necessarily been a constructive dismissal in the Allison v Bega sense, but rather a breach which entitled the applicant to treat the contract as being at an end. The assignment to "Special Projects" was to continue subject to a vague reference to three months or alternatively any decision arising from the content of independent investigation report and/or alternatively the result of the agreed counselling sessions. Mr Lloyd conceded he did not know what would be the fate of the applicant after three months. I accept this attitude was conveyed to the applicant. 92 Ms Duncan, who had considerable experience within the respondent and had had supervision of the applicant, was of the view the coaching programme was a good suggestion while she continued to stress the applicant's behaviour towards staff was not acceptable. She saw it as important however to keep the applicant in the job he was in because he was technically very good at it. It was her view the applicant should not have been moved out of his role. However, she was not consulted. Human Resources while appearing to give advice to Mr Lloyd were clearly affected by his attitude as indicated by their view he wanted to "draw a line in the sand" and wanted a "robust" inquiry and as reflected in their interpretation to the independent investigation that there were three, not one, formal complaints. 93 Notwithstanding his contract of employment as Manager, Business Sales, Mr Brunette was unilaterally moved to Special Projects and his contracted role as Manager Business Sales significantly altered when he was placed on Special Projects for an indeterminate period of time. He was never given an assurance he would be returned to his duties. Mr Lloyd conceded he had no idea what would happen. The employment contract of Mr Brunette in its existing form was not to continue. The employer had put forward a proposal of a changed role. There was never any assurance the existing form of his contract would be restored. 94 The assignment to "Special Projects" I find was not a reasonable direction by the respondent in the circumstances. Neither Ms Duncan nor Mr Wiggins in his report produced after the investigation recommended this course. The failure to even consider whether the Grievance Procedures under Clause 15 of the employment contract should have been followed in the investigation procedures also led to a breach of the contract. 95 The Special Projects assignment represented only the strategic planning part, and I accept, not the most significant part of the applicant's role as Manager, Business Sales. He could not make decisions, be near his staff nor manage their performance. Further, the move to Special Projects was ordered before the independent investigation was completed but after the applicant had agreed to counselling and had accepted if not agreed to the form of a note to be placed on his personnel file. I find the applicant did not terminate the contract nor did he resign, rather he was faced with conduct by the respondent which was unreasonable and which constituted a breach such that he was entitled to no longer consider himself bound by the contract of employment. I therefore find an unfairness in the performance of this employment contract. Compensation 96 Having found an unfairness in the performance of the contract the court must determine whether to vary the contract and if so whether there should be an order for just compensation in the circumstances (s106(5)). 97 The applicant proposes a number of variations to the contract which in effect would re-open and require a further consideration of the broad issues generally identified but not particularised by Mr Lloyd. I reject these orders. In the circumstances, I find they would not provide compensation just in the circumstances. I reject any of the proposed amendments to the contract of employment which would give further life to this employment contract. 98 As to the element of mitigation claimed by the respondent, if the court did proceed to orders following the termination of the applicant in December 2000, the evidence reveals the applicant did not succeed in obtaining any work until early 2002. He applied for many positions. He received a positive initial response and then potential employers did not follow through. He expresses concern as to the quality of any reference sought from the respondent. He undertook a "bar training" course in the form of the Responsible Service of Alcohol Certificate to assist him in finding employment. 99 For the first six months after leaving the respondent, Mr Brunette and his family lived from advance payments they had made on their mortgage reimbursed back to them by the mortgagor. After six months, they were obliged to sell the family home in Sydney. They then lived off its sale proceeds by moving out of Sydney to Newcastle. Newcastle was chosen because it was both cheaper and was where his wife's family was based. I find there was no failure by the applicant to mitigate his loss. I find he made every endeavour to secure further employment. He is qualified for employment in a very restricted area where his skills can be best used. The unfair conduct of the respondent has had a very significant effect on the life of the applicant and his family and especially on his employment prospects. 100 I find a period of notice would be fair in the circumstance of this termination. No notice has been paid to the applicant. The contract allows for the applicant to be paid three months' notice on termination. The applicant was employed pursuant to a four-year contract which was terminable on three months' notice. 101 Under s106(5) of the Act, it is appropriate to assess as just compensation what would be a reasonable period of notice in the circumstances. The respondent submits three months notice is not too short a notice period for a person of the status of the applicant (see McIlraith v Bliss Corporation Ltd, unreported decision of Peterson J, Matter No 4461 of 1997, 10 November 1998). 102 I find in consideration of the circumstances leading to the termination of this employment contract, the length of the applicant's service, the seniority of the applicant and the expectation through the representations of the respondent of long term employment that 12 months' notice is just in the circumstances. 103 As to the "at risk" claim, I accept an individual performance score required also an assessment of an employee's achievements and how such goals were achieved. In early October 2000, the applicant's "at risk" bonus payment was determined by Mr Powis and a panel of General Managers including Mr Lloyd and Ms Duncan. Reliance was placed on Ms Duncan's assessment of the applicant. The performance appraisal process was undertaken on 20 September 2000 and signed off on 17 October 2000 related to the period to 30 June 2000. The "at risk" component of the salary is in respect of each financial year and is for a defined period. Nothing which occurred after 30 June 2000 would have been relevant to the company's assessment of his performance in the financial year ending June 2000. 104 However, Ms Duncan made the decision "to send a clear message" to Mr Brunette that part of his performance was not acceptable. When it was determined the applicant did not qualify for a significant "at risk" payment, the decision was not taken by Ms Duncan but a committee although Ms Duncan's views were noted. 105 The applicant relies on Ms Duncan's comments made as to his overall performance to assert the decision to grant him little "at risk" performance monies was unfair. He relies on the fact he achieved a 95% rating on meeting his targets. However, he was only awarded 27.5% for performance. 106 At the meeting, which determined bonus, Ms Duncan read out the band widths of the scoring system and determined the applicant should be in the second last band. She however was of the view the decision as to his level of payment was made by Mr Lloyd and Mr Powis. Mr Powis and the panel did not query her assessment. Mr Lloyd made no inquiry of Ms Duncan to determine whether her assessment related to the period before or after June 2000 and Mr Powis, the CEO ultimately responsible for the allocation of the "at risk" payments, accepted the recommendation. Later, Mr Lloyd confirmed the issue of the bonus would not be revisited. 107 I am not persuaded from the evidence the grievance and general investigation affected the "at risk" payment of the applicant for the financial year 1 July 1999 to 30 June 2000. It appears the decision to reduce his "at risk" payment simply reflected Ms Duncan's assessment of his personnel skills which view was supported by Mr Lloyd. I do not believe a specific incident has to have been canvassed for Ms Duncan to have formed a view as to his people skills. From the evidence it appears even before the grievance was filed, in her fair assessment, she expressed concern as to the need to address this area of the applicant's performance. The "at risk" payment is based on the overall rating an employee achieves. The concerns of the respondent about the applicant's interaction with staff were relayed to him by his manager, Ms Duncan, in February 2000; the concern was documented in the applicant's performance appraisal in May 2000 and discussed with him on several occasions, including in his performance review in September 2000. 108 I find the applicant has not established on the evidence the court should make an order in relation to the "at risk" claim in terms set out in the Further Amended Summons. The applicant's claim for orders related to an unfairness in the application of his "at risk" payment is rejected. 109 Interest is claimed on monies so ordered to be paid at rates in accordance with s94 of the Supreme Court Act 1970 from such date as the Commission thinks fit. 110 As to the claim for interest made by the applicant, Schmidt J in Abboud v The State of New South Wales (Department of School Education) (No 2) (2000) 99 IR 299 held in a consideration as to interest as follows at [45]: The role of an interest component in monetary orders made under s88F of the Industrial Arbitration Act 1940, a predecessor to s106, was discussed by two members of the Industrial Commission in Court Session in Thomas Nationwide Transport Ltd v Thomas & Anor (1990) 34 IR 378. That approach has since been followed by the Court and its predecessors: see Westfield v Helprin (1998) 82 IR 411 at 443-444). Her Honour in Abboud then considered the reasoning of Bauer and Hungerford JJ in Thomas Nationwide Transport Ltd v Thomas & Anor (1990) 34 IR 378 as to what was an appropriate order for interest. She also, in consideration as to money orders under s88F, adopted the reasoning of Barwick CJ in Brown v Rezitis (1971) 127 CLR 157. Barwick CJ adopted the principle (at 165) that orders should ". . . effect wholly or partially the restitution of the parties to their former position upon the variation or avoidance of the contract or arrangement". Her Honour in Abboud then held at [49]: Here, the question which now arises is whether the express provision for a minimum of two weeks notice was unfair, where misconduct warranting summary dismissal has not been established, in the circumstances outlined. I take the view that the proper approach in the circumstances of this case is to make an order as to the payment of money "just in the circumstances of the case", which requires that interest should flow from the date of application and no earlier. While there undoubtedly have and will be cases brought under s106 where the issue is notice and where a proper basis for making an order in relation to interest calculated from a date earlier than the date of application will be established, there was nothing advanced in evidence or submissions in this case, which would provide a proper basis for going beyond that date. 111 The Full Bench of the Commission has adopted her Honour's reasoning. The circumstances of this case persuade me there is reason to adopt the view of Barwick J to effect partially at least the restitution of the applicant to his position from the date of termination. As Schmidt J acknowledged, this is a case where the issue is Notice and the calculation should, I find, be made from the date of termination. 112 Interest is to be paid on the amount ordered from the date of termination, namely, 5 December 1997, in accordance with s94 of the Supreme Court Act 1970 as amended. 113 The parties are to file detailed orders reflecting these findings within 14 days. ORDERS 1. The respondent to pay the applicant 12 month's payment as to Notice calculated at his full salary package rate. The applicant is to receive the payment of all his statutory entitlements from 5 December 2000; 2. Interest on that amount calculated at rates in accordance with s94 of the Supreme Court Act 1970; and 3. The respondent to pay the applicant's costs 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.