Industrial Relations Commission of New South Wales in Court Session CITATION : Keycorp Limited v Michael Thomes [2004] NSWIRComm 376 revised - 17/12/2004 APPELLANT Keycorp Limited PARTIES : RESPONDENT Michael Thomes FILE NUMBER: IRC 7 of 2004 CORAM: Boland J; Staff J; Backman J Appeal - Application for leave to appeal - Unfair Contract - Senior executive - Whether there was impermissible bias on the part of the trial judge to the extent the trial miscarried - Whether pre-contractual misrepresentations rendered the contract unfair - Whether appellant had by its conduct repudiated the contract - Whether variation of contract by trial judge reflected his findings of unfairness - Respondent's entitlement to performance bonuses - Calculation of bonus entitlements - Whether notice / severance payments ordered by trial judge excessive - Leave to appeal granted - Appeal upheld - Orders of trial judge set aside - New orders made - Costs CATCHWORDS : Unfair Contract - Appeal - Application for leave to appeal - Senior executive - Whether there was impermissible bias on the part of the trial judge to the extent the trial miscarried - Whether pre-contractual misrepresentations rendered the contract unfair - Whether appellant had by its conduct repudiated the contract - Whether variation of contract by trial judge reflected his findings of unfairness - Respondent's entitlement to performance bonuses - Calculation of bonus entitlements - Whether notice / severance payments ordered by trial judge excessive - Leave to appeal granted - Appeal upheld - Orders of trial judge set aside - New orders made - Costs Practice and Procedure - Appeal - Application for leave to appeal - Unfair Contract - Senior executive - Whether there was impermissible bias on the part of the trial judge to the extent the trial miscarried - Whether pre-contractual misrepresentations rendered the contract unfair - Whether appellant had by its conduct repudiated the contract - Whether variation of contract by trial judge reflected his findings of unfairness - Respondent's entitlement to performance bonuses - Calculation of bonus entitlements - Whether notice / severance payments ordered by trial judge excessive - Leave to appeal granted - Appeal upheld - Orders of trial judge set aside - New orders made - Costs LEGISLATION CITED : Industrial Relations Act 1996 s 106 Armory v Delamirie (1722) 1 Stra 505, 93 ER 664 Bassett v Host [1982] 1 NSWLR 206 Bourke Air Charter v Easton (2001) 109 IR 443 Burwood Municipal Council v Harvey (1995) 86 LGERA 389 Cain v R (1936) 25 Cr App Rep 204 Dun & Bradstreet v Robbie (1999) 91 IR 150 Eagle Boys Dial-A-Pizza Australia Pty Ltd v Clifford [2003] NSWIRComm 101 Followes v Knight Frank (NSW) Pty Ltd (2003) 124 IR 206 Galea v Galea (1990) 19 NSWLR 263 GIO of NSW v Glasscock (1991) 13 MVR 521 Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 Johnson v Johnson (2000) 201 CLR 488 Jones v National Coal Board [1957] 2 QB 55 Kekatos v The Council of the Law Society New South Wales [1999] NSWCA 288 King State Bank of New South Wales (No 2) (2002) 126 IR 407 Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 Lavings v Barclay Mowlem Construction (NSW) (2000) 99 IR 247 Nordby v Barclays Investment Service (1993) 53 IR 319 LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (No.2) (1990) 24 NSWLR 499 CASES CITED : Mercer v R (1993) 67 A Crim R 91 Michael Thomes v Keycorp Limited [2003] NSWIRComm 459 Police Service of NSW v Batton (2000) 98 IR 154 Port Macquarie Golf Club v Stead (1996) 64 IR 53 R v Esposito (1998) 45 NSWLR 442 R v Gilson, R v Cohen (1944) 29 Cr App Rep 174 R v Hopper [1915] 2 KB 431 R v Mawson [1967] VR 205 R v Thompson [2002] NSWCCA 149 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) and Others (1999) 160 ALR 588 Tokyo Network Computing Pty Limited v Tanaka [2004] NSWCA 263 Vakauta v Kelly (1989) 167 CLR 568 Vision Publishing v P K Lane Holdings (1998) 84 IR 277 Western Excavating Ltd v Sharp [1978] QB 761 Westfield Holdings v Adams (2001) 114 IR 241 Wilson and Grimwade v R [1995] 1 VR 163 Wong v State Street Global Advisors Australia Ltd [2004] NSWIRComm 212 Woods v W M Car Services (Peterborough) Ltd [1981] ICR 666 Yuill v Yuill [1945] 1 All ER 183 HEARING DATES: 09/15/2004; 09/16/2004; 12/03/2004 DATE OF JUDGMENT: 12/10/2004 APPELLANT Mr M J Kimber SC, with Mr S R Meehan of counsel Solicitor: Mr B Belling Abbott Tout LEGAL REPRESENTATIVES: RESPONDENT Mr G Phillips SC with Mr A Connolly Solicitor: Mr P Brown Baker & McKenzie JUDGMENT: INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION FULL BENCH CORAM: BOLAND J STAFF J BACKMAN J Friday 10 December 2004 Matter No IRC 7 of 2004 KEYCORP LTD v MICHAEL THOMES Application by Keycorp Ltd for leave to appeal and appeal against a decision and orders of Acting Justice Curtis given on 17 December 2003 in matter no. IRC 5903 of 2001 JUDGMENT OF THE COURT [2004]NSWIRComm 376 1 Michael Thomes was the chief executive officer of Keycorp Limited ("the appellant"), a company engaged in the design, manufacture, installation and service of machines and systems associated with the electronic transfer of funds. Mr Thomes joined Keycorp in November 1999. Mr Thomes was 'headhunted' from a position as managing director for Lucent Technologies by the recruitment firm Korn Ferry. In August 2001, after a lengthy dispute between Mr Thomes and the appellant over the respondent's entitlements, especially as to performance bonuses, Mr Thomes' employment with the appellant came to an end on the basis that Keycorp had repudiated the contract of employment. 2 In July 2002 Mr Thomes commenced proceedings against Keycorp under s 106 of the Industrial Relations Act 1996. In a further amended summons for relief Mr Thomes alleged, amongst other things, that he gave up secure and well remunerated employment to accept employment with Keycorp on the basis of misrepresentations that were deceptive and misleading as to the appellant's products, the state of its business, the prospects for expansion, the strength of its share price, the future role of the managing director, the operation of arrangements for incentive bonuses and the trustworthiness of the appellant and certain directors of Keycorp. Such was the state of the business, it was alleged, Mr Thomes spent his time attempting to ensure its survival and not its expansion and consequently his capacity to earn his expected income was unfairly affected. This, it was contended, gave rise to unfairness within the meaning of s 106 of the Act. 3 Moreover, it was alleged in the summons that the respondent's contract of employment was unfair in that it allowed the appellant to: (a) Decide to terminate the respondent's employment for alleged poor performance without any prior consultation with the respondent; (b) Decide to terminate the respondent's employment and take steps to replace him without informing the respondent of those decisions; (c) Take unfair advantage of its secret decision to terminate the respondent's employment by refusing to negotiate with the respondent performance criteria for assessment of the respondent's bonus so that the respondent had no alternative but to elect to terminate the employment contract. 4 In Michael Thomes v Keycorp Limited [2003] NSWIRComm 459, a judgment given on 17 December 2003, Curtis AJ found as follows (at [195]): I find that because of the misrepresentations of the respondent which induced the applicant to enter the contract, and the respondent's unreasonable behaviour which brought the contract to an end, the contract was unfair in that it contained neither adequate provision for payments to the applicant in the event that the respondent failed to agree upon criteria for payment of incentive payments, nor adequate provisions for payment to the applicant upon termination of the agreement by the respondent's repudiation of its terms. 5 Curtis AJ varied the contract in the following terms: (a) Should the respondent [appellant] act in such a way as to wrongly bring about the termination of the contract, the respondent [appellant] will pay to the applicant [respondent] on the date of termination a sum equivalent to 18 months total annual remuneration. (b) Should the contract come to an end, then the respondent [appellant] shall pay to the applicant [respondent] all incentive or bonus payments which ought to have been paid during the course of the contract up to the date of termination. 6 The money orders made by his Honour under s 106(5), consequent upon his findings of unfairness, involved a payment relating to bonus totalling $391,132 and a termination payment of 18 months' pay totalling $1,161,250 making a total of $1,552,382. 7 Keycorp has applied for leave to appeal and, if leave is granted, to appeal against the judgment of Curtis AJ. LEAVE TO APPEAL 8 Section 188(1) of the Act provides that an appeal may only be made with leave of the Full Bench. Section 188(2) provides that leave will be granted if the Full Bench is of the opinion that the matter is of such importance that, in the public interest, leave should be granted. Appellant's application 9 In its amended application for leave to appeal and appeal filed on 9 March 2004 the appellant contended that leave should be granted on the following bases: (a) The appeal raises serious issues of bias and unwarranted intervention during the proceedings on the part of the trial judge; (b) The appeal raises the issue of the relevance and proper application of the principle enunciated in Armory v Delamirie (1722) 1 Stra 505, 93 ER 664, in proceedings under section 106 of the Industrial Relations Act 1996; (c) The appeal raises the issue of substantial bonuses for senior executives in the face of poor performance by the company; (d) The appeal concerns a case involving the award of a very substantial sum of money, namely $1,552,382.00 plus interest at Supreme Court rates from 10 August 2001, in circumstances where the Applicant was employed by the Respondent for under two years; 10 On 10 August 2004 the appellant filed submissions as to leave to appeal that went beyond the grounds specified in the application. Reduced to their essentials, the additional matters were: 1 Whether and to what extent senior executives ought to make their own inquiries regarding relevant matters prior to accepting a senior position and whether it is reasonably open for a trial judge in a s 106 case to readily accept an applicant's assertion of "reliance" on pre-contractual misrepresentations in circumstances where the applicant is, not only by way of qualification and experience but also by virtue of extensive material accessed prior to accepting the position, more than capable to make his own assessment of the opportunity. 2 The relevance, if any, of pre-contractual misrepresentations to the fairness or otherwise of express terms as to notice/severance payments especially in circumstances where the said misrepresentations did not bear upon either security or longevity of the proposed employment relationship. That is, the appeal raises for consideration the question of the nature of the necessary connection between unfairness found and the variations made and the compensation awarded. 3 The appropriateness and proportionality of the Court, in s 106 proceedings, varying the bonus provision of a contract to ensure that a senior executive received bonuses at a level substantially higher than was provided for in the contract in the circumstances where the company had performed poorly. 4 Whether it is "just" and proportional for a senior executive with only 21 months service to receive, inter alia , a severance payment that reflects 18 months' pay calculated by reference to the maximum possible salary package available to the executive and in circumstances where that maximum available salary package had already been varied significantly by the Court (by the substitution of cash equivalent shares for the contractual provision concerning share options). 5 The circumstances, if any, wherein an employer's course of conduct over a substantial period of time can be relied upon by a disgruntled employee as constituting a repudiation of the contract by the employer especially in circumstances where the employee has affirmed the contract in spite of the alleged repudiatory conduct. 11 Despite the lateness with which the appellant raised the additional leave issues, the respondent has had the opportunity of addressing them. We have, therefore, allowed the appellant to press its more expansive position on leave. Respondent's position on leave 12 The respondent strongly contested leave to appeal being granted. Citing the well known authorities in Knowles v Anglican Church Property Trust (No 2) (1999) 95 IR 380 at 381-382; Eagle Boys Dial-A-Pizza v Clifford (2003) 125 IR 35 at 43; Dun & Bradstreet v Robbie (1999) 91 IR 150 at 151; King v State Bank of New South Wales (No 2) 126 IR 407at [11]; and, Port Macquarie Golf Club v Stead (1996) 64 IR 53 at 59 regarding the principles as to appeals from decisions involving findings of fact, the application of the law and the exercise of discretion, the respondent contended leave should not be granted. It was submitted the judgment of Curtis AJ turned on its own set of facts and, importantly, on findings of credit. Moreover, it was submitted, there was no error by his Honour in the application of the law. Consideration as to leave 13 We have seriously considered not granting leave in this appeal but after careful consideration of all of the matters raised on appeal there are issues that are of such importance that in the public interest leave should be granted. A number of the issues raised in this appeal have wider implications for the Commission's jurisprudence relating to unfair contracts in the context of employment. Moreover, we consider Curtis AJ erred in relation to the period over which the severance payment was calculated and the basis for calculating the severance payment. Those errors need to be corrected on appeal. NATURE OF APPEAL 14 This is an appeal stricto sensu, that is, it is directed towards correcting error and does not permit the Commission to merely substitute its decision for that at first instance: s 191 of the Act; King v State Bank of New South Wales (No 2) [2002] NSWIRComm 353 at [58] to [77]. 15 In the proceedings at first instance the trial judge made findings of fact that depended to a substantial degree on assessment of the credit of witnesses. We are keenly aware of the advantage the trial judge had in hearing the evidence in its entirety, having the opportunity to ask questions of witnesses and assessing the demeanour of witnesses, whereas we are left to rely heavily on the "cold page of the appeal book" (Galea v Galea (1990) 19 NSWLR 263 at 265-266 per Kirby ACJ). 16 However, as the Acting Chief Justice in Galea v Galea also stated at 266-267 in relation to conclusions as found by the trial judge: If the conclusion reached was "glaringly improbable", such a conclusion may be disturbed: Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842 at 844; 62 ALR 53 at 57; 3 MVR 129 at 133; see also Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23; 8 MVR 445. But such a conclusion will rarely be drawn by the appellate court unless it follows clearly from the inferences to be derived from incontrovertible facts: Brunskill (at 844; 57; 133) and Jones v Hyde (at 351-352; 27; 449). Thus, where a trial judge has apparently failed to take into account contemporaneous correspondence which repeatedly states matters that are wholly at odds with the conclusions reached, the latter will not be immune from appellate review simply because the judge has expressed the conclusion as being based upon an assessment of the credibility of the relevant witnesses. If a contrary conclusion necessarily flows from incontrovertible facts, the appellate court will be authorised to shoulder the responsibility of reaching a conclusion different from the trial judge: Australian Estates Ltd v Palmer (Court of Appeal, 22 December 1989, unreported). 17 The findings of the trial judge must stand unless it could be shown that the trial judge palpably misused his advantage, or acted on evidence which was inconsistent with facts incontrovertibly established by the evidence or which was glaringly improbable: see Followes v Knight Frank (NSW) Pty Ltd (2003) 124 IR 206 at [15]. This sums up the approach we have taken in this appeal. GROUNDS OF APPEAL 18 There were 16 grounds of appeal, with the appellant having spelt out in some detail in its application, each of the grounds. We consider, however, the grounds of appeal may be distilled down to six relevant issues, those issues being whether Curtis AJ erred in: 1 Overstepping the line between advocate and trial judge with the result his Honour failed to have proper regard to the evidence and submissions of the appellant on critical issues in the trial and did not approach his task with the requisite degree of impartiality. 2 Finding that pre-contractual misrepresentations by the appellant had rendered the contract unfair. 3 Finding that the appellant had by its conduct repudiated the respondent's contract of employment thereby rendering the contract unfair. 4 Varying the contract in a way that did not reflect the findings of unfairness, namely findings relating to misrepresentation and repudiation. 5 Finding that the respondent was entitled to the maximum possible bonus for 2000 and 2001 and making money orders to that effect. 6 Finding that the severance pay provisions of the contract were unfair and varying the contract to provide for an 18 months severance pay provision based on the full value of the respondent's remuneration package including maximum possible bonus. THE LINE BETWEEN ADVOCATE AND TRIAL JUDGE 19 It was submitted by Mr M J Kimber SC with Mr S R Meehan of counsel for the appellant that Curtis AJ failed to pay proper regard to the evidence and submissions of the appellant on critical issues in the trial and did not approach his task with the requisite degree of impartiality: Vision Publishing v P K Lane Holdings (1998) 84 IR 277 at 301-302. 20 It was submitted his Honour's error in this regard was manifested in excessive interventionism as follows: (a) Taking over the questioning of the respondent (and other witnesses) by senior counsel for the respondent; (b) Taking objection to questions asked in cross-examination of the respondent that were not objected to by senior counsel for the respondent; (c) Asking further, often leading questions of the respondent during his cross examination with a view to repairing damage done by the cross examination; (d) Characterising unchallenged contemporaneous documentary evidence sought to be relied upon by the appellant as a "classic police verbal"; (e) Raising the suggestions of a finding by the Court that the appellant, being a publicly listed company had, in fact, misled the market in May 2000 in circumstances where the matter was not an issue in the proceedings. 21 In its submissions in reply the appellant contended that two of the essential issues to be determined on appeal were: (a) Whether His Honour departed from the required standard of impartiality and neutrality by excessive intervention in the trial process such that there was not a fair trial at all or, at very least, that His Honour's partiality led him into the appealable error of failing to take into account significant matters established by the Appellant (especially via concessions from the Respondent) and emphasised in the Appellant's written submissions to the Court; (b) Whether His Honour's behaviour was such that at the very least it is open to this appeal bench to give less deference and weight to His Honour's credit findings because those findings were not made from a position of neutrality and impartiality. 22 In Vakauta v Kelly (1989) 167 CLR 568 at 573 the majority (Brennan, Deane and Gaudron JJ) observed that the line between comments by a judge that would be likely to have the effect of conveying an appearance of impermissible bias in the actual decision to a reasonable and intelligent lay observer and comments that would not, is necessarily an imprecise one. 23 In the present case, the extent of the trial judge's intervention in the proceedings is a matter of concern because we consider that it was excessive and, in many instances, inappropriate. However, we do not consider the questioning and observations by Curtis AJ and the extent of his intervention in the proceedings fell on the wrong side of the line such as to create an appearance of impermissible bias. 24 In Kekatos v The Council of the Law Society New South Wales [1999] NSWCA 288 at [61] Giles JA observed: The exercise of judgment must take into account the course of the trial, why and when the judge's interventions occur, and their frequency, length and terms. A distinction must be drawn between intervention which suggests that an opinion has been reached which can not be altered by further evidence or argument, and intervention which is neutral or which suggests only an opinion which is provisional, put forward to seek clarification, to test the evidence or to invite further persuasion. The distinction reflects that a judge finding the facts is, and is taken to be, able to correct and allow for preliminary opinions formed when reaching a final decision (see Galea v Galea at 281). 25 In R v Thompson [2002] NSWCCA 149 the Court (Ipp AJA, Sully and Bell JJ) was concerned with what was submitted by the appellant to be that repeated interventions by the trial judge led to an inquisitorial trial that denied the appellant a fair trial. In relation to the questioning by the trial judge, Ipp AJA made the following observations: 29 His Honour intervened many times in the running of the trial by asking questions of the witnesses. He questioned Crown witnesses as well as the appellant and not only in cross-examination but in chief. Many of the interventions involved the asking of a small number of questions. Others, however, involved extended questioning where the interchange between his Honour and the witness concerned occupied two to three pages of the transcript. … 32 When the questions Kinchington DCJ asked are examined without reference to the context of the trial as a whole, it could be said that he asked an unusually large number (relative to the amount of questions a judge might customarily ask). But when regard is had to the trial as a whole, and measuring the number of questions his Honour asked against those asked by counsel, that number is relatively very small. The judge's interventions, did result in him, for differing periods, occasionally taking over the questioning of witnesses. Nevertheless they do not, by any stretch of the imagination, give rise to an impression that he assumed the overall conduct of the trial, as would be the case in an inquisitorial process. 26 Ipp AJA at [34]-[44] canvassed the legal principles relating to the intervention of a judge in a trial and referred to the following as being pertinent: Galea v Galea (1990) 19 NSWLR 263 at 281 to 282; R v Mawson [1967] VR 205 at 207 to 208; Mercer v R (1993) 67 A Crim R 91; Jones v National Coal Board [1957] 2 QB 55 at 63 to 65; R v Esposito (1998) 45 NSWLR 442 at 472; R v Wilson and Grimwade [1995] 1 VR 163; Yuill v Yuill [1945] 1 All ER 183; Bassett v Host [1982] 1 NSWLR 206 at 207; GIO of NSW v Glasscock (1991) 13 MVR 521 at 530; R v Hopper [1915] 2 KB 431 at 435; Cain v (1936) 25 Cr App Rep 204; and, Gilson and Cohen (1944) 29 Cr App R 174 at 181. 27 In answering the question as to whether the interventions by the trial judge caused the trial to be unfair Ipp AJA stated: 58 In some instances the jury could have gained the impression from the manner of questioning and the content of the questions that Kinchington DCJ was sceptical about certain aspects of the defence case. Such an attitude on the part of the trial judge is not unknown in our system and the mere fact of its existence does not give rise to an unfair trial. As with all the pertinent factors in this case, issues of degree arise. It was undesirable and inappropriate for the judge to allow his views to become apparent. But I am not persuaded that the extent to which this occurred gave rise to an unfair trial. 59 His Honour at times became impatient with counsel (both for the prosecution and the defence), and in some instances where questions were not properly asked, but where the thrust of the questions was apparent, he simply took over the questioning, apparently in a desire to shorten the proceedings. There is little to commend this practice, and occasionally his Honour's questioning worked to the prejudice of the appellant. In the particular circumstances of the case, however, I do not think that that prejudice resulted in significant unfairness. 60 The practice of the judge in, at times, bringing out the salient points of the evidence of Crown witnesses, either during the course of examination in chief or after re-examination, was highly undesirable. I accept that to an extent the appellant was prejudiced thereby, but in the particular circumstances the extent of the prejudice was not so significant as to render the trial unfair. 61 Mr Brazier objected several times to questions asked by Kinchington DCJ. He asked the judge to stop "cross-examining" on more than one occasion. His Honour considered the term "cross-examining" to be offensive and asked that it be withdrawn. At one point Kinchington DCJ explained that he had asked certain questions to clarify the evidence as he did not understand it. Despite the several objections by counsel for the appellant, the judge persisted. Indeed, it appears, at times, that an objection by counsel would incite his Honour to further bouts of extended questioning. This was plainly inappropriate. Mr Brazier, however, did not apply for the termination of the trial and the discharge of the jury on the grounds of the judge's conduct. 62 In my view, several of Mr Brazier's objections to his Honour's questioning were without substance. There can be no doubt, however, that on some occasions, as I have noted, the judge's questioning went beyond clarification of the evidence and some of his Honour's interventions should not have been made. But I have concluded that these transgressions, on balance, did not result in significant prejudice sufficient to result in an unfair trial. 63 On reading the transcript I have had real misgivings about some of the judge's questions. Nevertheless, taking into account all the matters to which I have referred, individually and collectively, I am not persuaded that there has been a miscarriage of justice. I would dismiss the appeal against conviction. Justices Sully and Bell agreed with Ipp AJA. 28 In Johnson v Johnson (2000) 201 CLR 488 the High Court considered the issue of a trial judge making a statement during the course of the trial in respect of which one of the parties took objection and applied for the judge to disqualify himself on the grounds that his remarks had given rise to an appearance of bias. The trial judge refused to do so. In holding that the judge's statement did not create an appearance of bias the majority (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ) made the following observations regarding the relevant principles to be applied: 11 It is not contended that Anderson J was affected by actual bias. It has been established by a series of decisions of this Court that the test to be applied in Australia in determining whether a judge is disqualified by reason of the appearance of bias (which, in the present case, was said to take the form of prejudgment) is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide: eg Re Lusink; Ex parte Shaw (1980) 55 ALJR 12; 32 ALR 47; Livesey v New South Wales Bar Association (1983151 CLR 288; Vakauta v Kelly (1989)167 CLR 568; Webb v The Queen (1994) 181 CLR 41. 12 That test has been adopted, in preference to a differently expressed test that has been applied in England (cf Locabail (UK) Ltd v Bayfield Properties Ltd [2000] QB 451), for the reason that it gives due recognition to the fundamental principle that justice must both be done, and be seen to be done (cf R v Sussex Justices; Ex parte McCarthy [1924] 1 KB 256 at 259 per Lord Hewart CJ). It is based upon the need for public confidence in the administration of justice. "If fair-minded people reasonably apprehend or suspect that the tribunal has prejudged the case, they cannot have confidence in the decision." ( R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 263 per Barwick CJ, Gibbs, Stephen and Mason JJ). The hypothetical reasonable observer of the judge's conduct is postulated in order to emphasise that the test is objective, is founded in the need for public confidence in the judiciary, and is not based purely upon the assessment by some judges of the capacity or performance of their colleagues. At the same time, two things need to be remembered: the observer is taken to be reasonable; and the person being observed is "a professional judge whose training, tradition and oath or affirmation require [the judge] to discard the irrelevant, the immaterial and the prejudicial" ( Vakauta v Kelly (1988) 13 NSWLR 502 at 527 per McHugh JA, adopted in (1989) 167 CLR 568 at 584-585 per Toohey J). 13 Whilst the fictional observer, by reference to whom the test is formulated, is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge ( Webb v The Queen (1994) 181 CLR 41 at 73 per Deane J) the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation. At the trial level, modern judges, responding to a need for more active case management, intervene in the conduct of cases to an extent that may surprise a person who came to court expecting a judge to remain, until the moment of pronouncement of judgment, as inscrutable as the Sphinx. In Vakauta v Kelly (1989) 167 CLR 568 at 571 Brennan, Deane and Gaudron JJ, referring both to trial and appellate proceedings, spoke of "the dialogue between Bench and Bar which is so helpful in the identification of real issues and real problems in a particular case." (See also Re Lusink; Ex parte Shaw (1980) 55 ALJR 12 at 15 per Murphy J; 32 ALR 47 at 53). Judges, at trial or appellate level, who, in exchanges with counsel, express tentative views which reflect a certain tendency of mind, are not on that account alone to be taken to indicate prejudgment. Judges are not expected to wait until the end of a case before they start thinking about the issues, or to sit mute while evidence is advanced and arguments are presented. On the contrary, they will often form tentative opinions on matters in issue, and counsel are usually assisted by hearing those opinions, and being given an opportunity to deal with them. 14 There was argument in this Court, prompted by Anderson J's explanation of what he intended to communicate, about whether the effect of a statement that might indicate prejudgment can be removed by a later statement which withdraws or qualifies it. Clearly, in some cases it can. So much has been expressly acknowledged in the cases eg Re JRL; Ex parte CJL (1986) 161 CLR 342 at 372 per Dawson J; Vakauta v Kelly (1989) 167 CLR 568 at 572 per Brennan, Deane and Gaudron JJ, 577 per Dawson J. No doubt some statements, or some behaviour, may produce an ineradicable apprehension of prejudgment. On other occasions, however, a preliminary impression created by what is said or done may be altered by a later statement. It depends upon the circumstances of the particular case. The hypothetical observer is no more entitled to make snap judgments than the person under observation. 29 At [46] Kirby J identified a number of considerations that might be taken into account in determining the issue of prejudgment: 1. Appellate judges realise that most adjudicators strive to be independent and impartial and to make adjustments (so far as they can) for factors of which they are aware which might impact on their decision-making. By their training and experience, most such adjudicators are conscious of the high expectations imposed upon them. 2. Whatever may have been the tradition in earlier times, opinions favouring silence on the part of an adjudicator during a hearing ( Watson (1976) 136 CLR 248 at 294 per Jacobs J) (which is the surest means of avoiding most allegations of prejudgment) are now seen as carrying risks of an even greater injustice ( Vakauta v Kelly (1989) 167 CLR 568 at 571; cf Galea v Galea (1990) 19 NSWLR 263 at 281-282). Unless the adjudicator exposes the trend of his or her thinking, a party may be effectively denied justice because that party does not adduce evidence or present argument that could have settled the adjudicator's undisclosed concerns (cf Stead v State Government Insurance Commission (1986) 161 CLR 141 at 145; Shapiro, "In Defense of Judicial Candor", (1987) 100 Harvard Law Review 731 at 737). A frank dialogue will commonly be conducive to the avoidance of oversight and the repair of misapprehensions. Uninformed members of the public are doubtless sometimes surprised by the robust exchanges which take place in court, especially between a judge and experienced lawyers. But judges and other adjudicators and lawyers know that such dialogue can have great value. 3. Changes that have come about in the administration of justice, including the increase in the number of trials by single judges, have also required, to some extent, an adjustment to the rules of reticence in judicial observations that may still be appropriate where trials, criminal or civil, are conducted before a jury. One of the reasons for such changes has been the desire to increase the efficient management of the trial process. Yet it is in that context that the expressions of preliminary and tentative views may sometimes appear to an outsider to indicate prejudgment. Although some adjudicators may be hard to shift from tentative opinions, lawyers know that, in most judicial decision-making, the process is a continuous one. Preliminary inclinations do change (Kirby, "Judging: Reflections on the Moment of Decision", (1999) 18 Australian Bar Review 4). 4. The adversary system depends on vigorous interaction not only between the parties and their representatives but also between the adjudicator and those persons. Where the parties are represented by trained lawyers, the latter can be taken to be aware of (and presumed, if necessary, to have explained to their clients) the character and purpose of tentative opinions that guide the direction of the trial and encourage its proper focus. No rule of law should be adopted in relation to disqualification for prejudgment which unreasonably undermines, or is fundamentally inconsistent with, that system. 5. In earlier times, great confidence was placed in the capacity of adjudicators to discern the truth on the basis of their impressions of witnesses. However, the trend of modern authority has cast doubts on that supposedly unique perceptiveness ( State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306 at 327-330 [87]-[88]; 160 ALR 588 at 615-618; Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599 at 605-606 [29]-[35]). That is why many adjudicators now rest their decisions, so far as they can, on indisputable facts, contemporary documents and the logic of the circumstances, rather than mere impressions. This is a desirable development (cf Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 at 210-211; Chambers v Jobling (1986) 7 NSWLR 1 at 8-10). Upon one view, the interventions of the primary judge in the present matter amounted to no more than an affirmation of his acceptance, as applicable to the trial before him, of this modern and beneficial viewpoint. 30 Having regard to the foregoing observations and findings, we have examined the whole of the transcript and, in particular, those 64 instances of intervention by the trial judge about which the appellant complained. Often, the more prudent course for the trial judge would have been to refrain from intervening in the blunt way that he did, or to frame his questions and observations with more acute consideration being given to their implications for the course of the trial. It might also be said that the trial judge intervened at inappropriate points in the taking of the evidence thereby disrupting, unnecessarily, senior counsel's cross-examination of the respondent and jeopardising the effect of that cross-examination (see Galea v Galea at 281). However, despite these indiscretions we have decided there is no sustainable basis upon which to conclude that the trial judge conveyed an appearance of bias or partiality against the appellant, either from the outset or from a particular point in the trial. In many instances we note that what his Honour was really seeking to achieve was to clarify matters for his own benefit. 31 It is, nevertheless, obvious from the transcript that senior counsel for the appellant became frustrated with his Honour in intervening in the course of counsel's cross-examination and in what counsel considered to be judicial assistance offered to, and taken advantage of by, the respondent in giving his evidence. We acknowledge that the respondent may have gained the odd advantage from the trial judge's ill-timed forays into the cross-examination of witnesses by senior counsel for the appellant. However, we do not consider the respondent gained such a material advantage from questions asked, or comments made, by his Honour that the proceedings miscarried. 32 Moreover, we note that the interventions were not at a level that caused an experienced counsel to request that Curtis AJ disqualify himself on the grounds of bias, an option that was clearly open to counsel if he had considered the trial judge had crossed the line of conveying an appearance of impermissible bias. 33 The appellant contended that an important issue in the trial, namely, whether what was at stake in 2000 was the survival of the company, was one manufactured by the trial judge. The appellant pointed to other issues that it similarly contended were erected by Curtis AJ and which ultimately found their way into his judgment. A careful reading of the transcript and consideration of the evidence has led us to the view that this was not so. This was not a case such as Burwood Municipal Council v Harvey (1995) 86 LGERA 389 at 410, Vision Publishing or Bourke Air Charter v Easton (2001) 109 IR 443 where it could be said the trial judge "selected, espoused and pursued" the issues in the trial. Nor was it a case where it could be said that the trial judge's questioning was, considered as a whole, hostile or unfair to the appellant. His Honour indicated on more than one occasion he was attempting to keep an open mind on matters in issue and we consider, ultimately, he did so and thereby avoided prejudgment. 34 Parties cannot any longer expect a judge to be a "silent spectator" (Kekatos v The Council of the Law Society New South Wales [1999] NSWCA 228 at [60]) and Curtis AJ was certainly not that. However, we do not consider his Honour's interventions signalled partiality thereby leading him into the appealable error of prejudgment or failing to take into account significant matters established by the appellant. PRE-CONTRACTUAL REPRESENTATIONS 35 Curtis AJ found that in the course of pre-employment negotiations various misrepresentations were made by the directors of Keycorp or its agent Mr Dumitrescu (of Korn Ferry) for the purpose of inducing Mr Thomes to accept the position of CEO and concluded at [27], "I have no doubt that were it not for these representations Mr Thomes would not have left secure and highly paid employment to join the respondent". Further, his Honour found (at [195]) that, amongst other things, the misrepresentations of the appellant that induced the respondent to enter the contract rendered the contract unfair. At [191] of his judgment the trial judge found as follows: 191 I find that the applicant was induced to leave highly paid secure employment to take up employment with the respondent by misleading representations made to him by directors of the respondent and its agent Mr Dumitrescu [the representative from Korn/Ferry] concerning: (a) the effectiveness of the Respondent's products; (b) the strength of its business (c) the probability of a large increase in its share price in the near future which probability was supported by "independent expert advice" (d) the Respondent's willingness to negotiate fairly with the Applicant criteria for assessment of the Applicant's performance for the purpose of determining the Applicant's performance bonus; (e) the Respondent's intention to conduct itself in dealings with the Applicant on the basis that the employment relationship between the Applicant and the Respondent would be based on trust and partnership; and (f) the financial benefits that the Applicant would receive as a result of the Respondent's future business success. Whether representations induced respondent to leave former employment 36 The appellant submitted his Honour erred in a number of important respects in relation to his conclusion that were it not for the representations made by the directors and Mr Dumitrescu, Mr Thomes would not have left Lucent Technology. It was submitted that had Curtis AJ accorded proper weight to the relevant evidence the only conclusion open to him was that Mr Thomes entered into the contract of employment with his "eyes open", based on his own detailed assessment of the information that he had access to prior to signing the employment contract. It was further submitted: (a) His Honour failed to give any weight to the evidence that Mr Thomes did not register any complaint of pre-contractual misrepresentation with Keycorp once he allegedly became aware of the "true" state of the company in early 2000. (b) His Honour also ignored the clear evidence that Mr Thomes drafted/negotiated the contracts of some of his key staff members and used therein some of the same terms that appeared in his contract (that he asserted to the Court he had misunderstood) and used $130 m (and even higher) revenue forecasts for their bonus targets (even though he told the Court that $130 m was fanciful and not a figure he supported). (c) Mr Thomes made no complaint, especially in the first quarter of 2000 (when the alleged "true facts" would have been known to him) either to Mr Clayton [chairman of Keycorp up to 31 December 2000] or to the Keycorp Board about having been induced to leave Lucent and join Keycorp on the basis of a series of misrepresentations made by, or on behalf of, the Respondent. (d) The evidence was that the first occasion upon which Mr Thomes made allegations of pre-contractual misrepresentation was in his brief note to Irving in April 2001 being complaints that were then more fully particularised, following legal advice, in the Applicant's letter of 17 July 2001. 37 In relation to his Honour's finding that if it were not for the representations made by the directors and Mr Dumitrescu Mr Thomes would not have left Lucent Technology, the appellant submitted no evidence was given by Mr Thomes that he would not have left Lucent Technology but for the representations. We note, however, that in a letter dated 17 July 2001 from Mr Thomes to Mr Malcolm Irving, who at that time was chairman of the appellant, Mr Thomes said: Furthermore, as part of my decision making process in deciding to leave what for me was secure and well remunerated employment at Lucent, I relied on upon (sic) a number of representations as to the then well being of the business of Keycorp. 38 Mr Thomes went on in his letter to refer to the representations made to him. In an email to Mr Irving of 2 August 2001 Mr Thomes said: You indicated that you have spoken to the previous chairman, Brian Clayton, and that he stated that there were no representations made to me to induce me to take the position of CEO at Keycorp. Further, that Brian stated that all that Brian had informed me prior to my employment was that the process of Keycorp had to be improved. You also said that Brian had stated that he had invited me to do a full due diligence of the company. I reject this response in its entirety. Do you think that I would have been remotely interested in joining Keycorp, if I had known about the incomplete state of the products and the appalling state that the Company was in? 39 Whilst it was the case the respondent did not say directly that he would not have left Lucent but for the representations, we consider the trial judge was entitled, on the evidence, to infer this was the case. 40 It was submitted that his Honour failed to give any weight to the evidence that Mr Thomes did not register any complaint of pre-contractual misrepresentation with Keycorp once he allegedly became aware of the "true" state of the company in early 2000. We observe at [36] of the judgment his Honour referred to a conversation in February or March 2000 when Mr Thomes said to Mr Dumitrescu: What have you done to me? Keycorp is a different company from the one that I was told about. It is a catastrophe. The company is in a dire situation. The company has an acute solvency problem, the new products do not work. I do not know whether this company will be able to survive. 41 As Curtis AJ pointedly noted at [37], Mr Dumitrescu was not called by the respondent. Moreover, his Honour said at [38]: 38 Mr Thomes was in a most invidious position. He had left one new employer within one year of his engagement at the urgings of Mr Dumitrescu, Mr Clayton and Mr Wood. He could not immediately walk out of his new position without ruin to his career. He had to stay and do his best. This he did. 42 It was reasonably open for Curtis AJ to have concluded that Mr Thomes did not complain to Keycorp in early 2000 about pre-contractual misrepresentations because he wished to get on with the job of trying to improve the company's "dire situation". Further, that the appellant did not call Mr Dumitrescu seems to us to largely cancel out the validity of any submission that we should regard Mr Thomes in an adverse light for not raising his concerns about pre-contractual misrepresentations. 43 We also observe that the appellant did not call Mr Wood who was the chief executive officer of the appellant at the time efforts were being made to recruit Mr Thomes. Mr Wood made certain representations to the respondent and it would have been expected that the appellant would have called Mr Wood regarding those representations. 44 In light of Mr Thomes' evidence regarding the pre-contractual misrepresentations and the appellant's failure to call either Mr Dumitrescu and Mr Wood, who were both involved in the pre-contractual negotiations with Mr Thomes, it is hardly surprising that Curtis AJ accepted that there were misrepresentations made to the respondent. The fact that Mr Thomes may not have raised the misrepresentation issue with Mr Malcolm Irving (chairman from March 2001) until about March or April 2001 (by which time he was becoming increasingly concerned with the company's goals as set by the Board and the fate of his promised remuneration), or that Mr Thomes drafted/negotiated the contracts of some of his key staff members and used therein some of the same terms that appeared in his contract, does not carry sufficient weight to displace the direct evidence of Mr Thomes regarding the misrepresentations. 45 We find that Curtis AJ did not err in failing, as the appellant put it, to give weight to the lack of complaint by Mr Thomes about pre-contractual misrepresentations. Whether respondent entered contract with eyes open 46 The appellant submitted the respondent entered into the contract of employment with his eyes open and that he was capable of making his own assessment. In this respect the appellant submitted: (a) His Honour failed to give any weight to the evidence that Mr Thomes actively represented himself as having the training, skills and capacity to undertake the CEO role effectively. The Applicant had tertiary qualifications, more than 20 years experience in industry rising to hold extremely senior positions in large corporations, including a "successful track record growing businesses through periods of change, involving major shifts in product and service offering and structural and cultural transition". (b) The Applicant's roles and experience should have led his Honour to conclude that Mr Thomes was capable of making his own assessment of a publicly listed company and the position on offer, both from the publicly available information, and from the extensive material that he was provided by the Respondent. (c) His Honour failed to take into account the evidence of Mr Thomes that: (i) He knew he could access an enormous amount of material about the performance of Keycorp on the internet including annual reports and ASX releases (it being a public company); (ii) he looked at the internet and talked to people in the market. (d) His Honour erred in his analysis of documents of critical relevance, namely: (i) The Candidate Briefing Report document, which was not squarely attacked by Mr Thomes in the proceedings at first instance, and which stood as unchallenged as to its accuracy; (ii) The Position Specification/Chief Executive document; (iii) The Board Papers – 22 June 1999, 16 July 1999, and 17 August 1999. 47 It is undoubtedly the case that the Court will examine very carefully claims made under s 106 by applicants with business and commercial experience, especially those at senior executive level, that they were misled into entering a contract or arrangement because, for instance, they were not provided with a full picture as to the viability of a company or were not given full details of their remuneration package, particularly bonus arrangements or stock options. There is clearly an obligation upon such applicants to take all reasonable steps to satisfy themselves that what they are being promised is what they will encounter or receive under the contract or arrangement they have entered into. 48 In the present proceedings, however, the respondent cannot be compared to the respondent in Westfield Holdings v Adams (2001) 114 IR 241. The Full Bench in that case observed that the employee had made no investigations and had sought no additional information about the option scheme other than what he had been told, he had not enquired what the option price would be, he did not request a copy of the relevant document, he did not seek to negotiate anything about the options and it was as though the share options were entirely unimportant to him at the time he negotiated the terms of engagement and that they were a "blue sky" issue. 49 In contrast, the evidence in this case shows that Mr Thomes did make his own enquiries about the state of the company and about the terms of his employment. The evidence was that Mr Dumitrescu and Mr Clayton, the appellant's chairman up to 31 December 2001, assured Mr Thomes that the company had a bright future and that he should accept these assurances as true and factual. Mr Clayton told Mr Thomes that Keycorp was a company with excellent products and that it had enormous potential. Mr Wood told Mr Thomes that Keycorp's share price and market capitalisation could be multiplied many times within a short timeframe, that the product problem issue was overstated, that products were being shipped to customers and that Keycorp's potential was unlimited. Accordingly, it was not just the solicitations of a "headhunter" that led Mr Thomes to take up employment with Keycorp but he was subjected to much the same message from very senior executives of the appellant. 50 Mr Thomes had access to board papers for three months in mid-1999. He told Mr Dumitrescu that he did not feel that the board papers gave him a full picture, that the directors of Keycorp needed to understand that he was about to make a crucial decision affecting his career and he was not comfortable with the level of information he had received. Mr Dumitrescu told Mr Thomes that the Chairman and the directors felt he had asked too many questions in too aggressive a manner. 51 Mr Thomes raised with Mr Dumitrescu questions about the process for determining performance parameters and about the Keycorp share plan. Mr Dumitrescu told Mr Thomes that Mr Clayton could not provide a copy of the share plan, that Mr Thomes would receive fully paid shares, not options and that Mr Clayton had told Mr Dumitrescu that Keycorp shares would be worth more that $20 each within one year. Mr Dumitrescu told Mr Thomes that Mr Clayton had told Mr Dumitrescu that the respondent would have to trust Mr Clayton and Keycorp and that they would be very reasonable, fair and generous in respect of the process of determining performance parameters. 52 Mr Thomes raised with Mr Dumitrescu a number of concerns about the terms of his proposed contract and asked for another meeting with Mr Clayton. Mr Dumitrescu told Mr Thomes that his incentive targets would be easily achievable and that the 50,000 shares given to Mr Thomes as a sign-on bonus easily represented a value of $1 million to Mr Thomes. Mr Dumitrescu subsequently told Mr Thomes that Mr Clayton had been irritated upon learning of Mr Thomes' concerns and said that Mr Thomes had to trust him. Mr Dumitrescu told Mr Thomes not to focus on the details of the contract and remuneration when meeting with Mr Clayton. Mr Thomes asked for another meeting with Mr Clayton. 53 Mr Dumitrescu told Mr Thomes that Mr Clayton was a person of high standing and could not afford to say things that were untrue, that Mr Thomes would never be able to find out all the facts regarding the state of the company and that Mr Thomes would have to accept the information provided at face value. 54 Mr Thomes also looked at material on the Internet and press releases from Keycorp and he talked to people in the market. Mr Thomes asked directors of Keycorp about the state of Keycorp's products. Mr Thomes said in his oral evidence: I asked them [the directors] about the state of the products which was the key issue and actually stated to me that the products now they were excellent products and delays caused in the future had been overcome. And actually said that was a weakness of the company. But that is why we need a new CEO so that something like that didn't happen any more in the future. 55 Mr Thomes also asked to speak to staff but when this was refused he accepted that it might not be appropriate given the sensitivities associated with moving Mr Wood aside. Nevertheless, Mr Thomes did make the request, and an appropriate one in normal circumstances. 56 In relation to the Board papers' portrayal of the company's cash flow position Mr Thomes said in his oral evidence: Mr Kimber, the board papers when you read them, there is an overview by the managing director and attached to them are individual reports of the individual managers like chief financial officer, the product manager the development manager and all these reports said, well, the cash flow position will improve in November, December and these reports also said yes, we are very very confident that the product issues are being resolved. 57 It is clear that Mr Thomes did attempt to find out by reasonable means information about the viability of Keycorp and about his remuneration package. He was provided with glowing reports on both accounts and cautioned, on more than one occasion, to take what he had been told on trust. There is some irony in the fact that the appellant now relies on contentions that the respondent should have dug deeper on his own account and not relied on the word of senior executives of the company and its agent, Mr Dumitrescu, as to the health of the company and the terms of his remuneration package. 58 Mr Thomes, of course, did not wholly rely on what was put to him by the company and its agent but as we have found, did in fact seek to make his own inquiries. The publicly available information, however, was quite limited and there was no opportunity for Mr Thomes to discover from this information the state of product development, for example. Moreover, information that should have been provided to Mr Thomes was not given to him. This included the Board papers for September 1999, which contained Mr Clayton's report that expressed a negative opinion about the release of Keycorp's products. This report opened with the words, "The frustration of the past months in product release delays and crisis caused by component availability continued worse than I could have estimated. These caused follow-on problems with very significant revenue and deals being lost through non-performance." Mr Clayton conceded the information in the report would have been relevant to a man deciding whether to leave highly secure employment. 59 It was submitted for the appellant that the Board papers identified the difficulties that had been confronting the business in relation to product delays. However, Mr Clayton conceded in cross-examination that Keycorp's Board papers for June, July and August 1999 and Keycorp's press release in August 1999 contained statements that could be understood to mean that problems that had delayed the release of new products were being resolved and the company's cash position would improve. In the August 1999 statement under the heading "Outlook for the next six months" it was said: The major factors that contributed to the first half shortfall in revenue were extended contract negotiations with some customers, and delays in bringing new products to market, particularly the K78 mobile payment terminal and Phase III of the K80 self service terminal. These factors are now largely resolved, and the company expects to report a profit for the full year to 31 December 1999. 60 As Curtis AJ noted at [19] of his judgment the problems with K78 were not over until July 2001. K80 proved unsaleable. 61 In relation to the Candidate Briefing Report the appellant submitted the respondent made no attack on it. The Report, it was submitted, included important information about Keycorp and the challenges it was facing including "internal challenges" and "external challenges" that would need to be addressed if the company was to "deliver against imperatives". Product delays were expressly identified in the section dealing with "external challenges". In this regard, it was submitted, his Honour erroneously concluded that, "It contains no mention of product or financial problems". 62 His Honour was correct, in our opinion, in finding that the Report contained no mention of financial problems; it does not. The Report twice refers to delays in bringing products to market: once, when referring to the past, to identify the cause of the loss experienced in the half-year to June 1999 and once to explain such delays as "largely due to long lead times for critical components". This characterised the delays as arising from component supply difficulties not inherent problems with the products themselves that led to K80 being unsaleable. 63 There is no basis for finding that Curtis AJ in any way erred in not concluding that Mr Thomes was capable of making his own assessment of a publicly listed company and the position on offer, both from the publicly available information, and from the material that he was provided by the appellant. Whether there was misrepresentation regarding status of products 64 In relation to the question of products, Curtis AJ found that it was misrepresented to Mr Thomes that all problems with new products were resolved and that the new products were, in September 1999, in the process of distribution pursuant to orders already in place. It was submitted for the appellant that the trial judge failed to pay proper regard to the content of the Board Papers that Mr Thomes was given after his meeting with Mr Clayton in September 1999 in which was contained information in relation to Keycorp's business and its products suite. The Board Papers, it was submitted, identified the difficulties that had been confronting the business in relation to product delays. Further, it was submitted, Curtis AJ apparently accorded no weight to Mr Thomes' evidence that, before he signed the employment contract, he knew that the company had problems in the production area and he knew that from his analysis of the Board Papers. 65 Mr Kimber submitted that Curtis AJ appeared to have placed significant weight on the failure by Keycorp to include in the Board Papers provided to Mr Thomes, a copy of a report of the Managing Director, Mr John Wood dated 21 September 1999 and also the failure of Mr Wood to mention to Mr Thomes the problems that were the subject of his report. It was submitted his Honour erred in failing to give any weight to Mr Thomes' oral evidence in chief wherein, despite seeking to emphasise the significance of misrepresentations about the extent of product problems, he did not suggest that if he had been armed with Mr Wood's report he would have either declined the offer from Keycorp or would not have agreed to the final "at risk" remuneration terms. 66 It was further submitted for the appellant in relation to the product misrepresentation issue: (a) His Honour erred in failing to give any weight to the respondent's evidence that: (i) he was not complaining about a need to have more information about the nature and extent of product problems, because he was "well aware of the problems, in particular with the roll out of the new K78 before he signed the contract; (ii) he was told by Mr Swanson or Mr Bowra (directors of Keycorp) that there were still problems that needed to be resolved. (b) His Honour's findings that it had been represented to the respondent the new products were, in September 1999, in the process of distribution pursuant to orders already in place, were contrary to the respondent's evidence that what Mr Wood had told him, namely that the K78 product was being shipped at the time, was factually correct. 67 We have largely dealt with the product issue under the previous heading but there are a number of additional matters to which we should respond. Firstly, as we have already stated, we do not consider the Board papers provided to Mr Thomes revealed the true extent of the product problem and it was open to the appellant to have provided the managing director's report in the September 1999 Board papers to Mr Thomes expressing a more negative view about the problem but the appellant did not. The submission that Mr Thomes did not suggest that if he had been armed with Mr Wood's report he would have either declined the offer from Keycorp or would not have agreed to the final "at risk" remuneration terms does not carry much weight. Mr Thomes gave evidence that, if he had been shown certain documents that dated from September 1999 (including the Managing Director's report) and that disclosed problems in Keycorp's business, his decision whether to enter employment with Keycorp would have been affected. Further, as we have already noted, Mr Clayton conceded that the Managing Director's report of September 1999 would have been relevant to a man deciding whether to leave highly secure employment. 68 There can be no doubt that Mr Thomes was aware of product problems but he was told the problems were resolved or in the process of being resolved. As Curtis AJ found at [34] of his judgment, Mr Thomes discovered shortly after commencing with Keycorp that: [T]he new products, far from being distributed in satisfaction of existing orders were not in fact yet commercially viable. Mr Clayton has since confirmed that the product K23 was not saleable until some time in the year 2000 when the first shipments were released. The shipment of the K78, other than in insignificant numbers of pre-production units for testing, did not begin until around July 2001, and the product K80 proved unsaleable. 69 We do not consider Curtis AJ erred in finding that applicant was induced to leave highly paid secure employment to take up employment with the respondent by misleading representations made to him by directors of the respondent and its agent, Mr Dumitrescu, concerning the effectiveness of the appellant's products. Whether there was misrepresentation regarding strength of appellant's business 70 Curtis AJ found the appellant had misrepresented the strength of its business to Mr Thomes in that it was said to him Keycorp was in a sound financial position and well placed to expand globally. It was submitted for the appellant his Honour erred in failing to give any weight to the respondent's evidence that: (a) he made his own assessment of the company's cash position from his analysis of the Board Papers which he was given and satisfied himself that the position was satisfactory; (b) he knew that the company had been struggling in terms of its cash flow; (c) he was told that the company's income stream was "lumpy" and that it needed "annuity income to even the revenue". 71 Mr Kimber also submitted the trial judge erred in failing to give any weight to the evidence which made it clear that the respondent understood that the capacity for global expansion depended fundamentally on Keycorp being able to meet the internal and external challenges that it was facing at the time and that he was being brought in as the "agent of change", with his job being to develop and implement the strategies to optimise the company's potential. 72 We have addressed the issue of misrepresentation as to the strength of the business and we do not consider Curtis AJ erred in this respect. As to Mr Thomes' understanding of his role as an agent of change the respondent understood that his role was to introduce processes and procedures that would prevent a repetition of the problems with product release that had occurred in the past. The difficulty for Mr Thomes, however, as his Honour found at first instance, was that Mr Thomes had not been told the whole story about the problems plaguing the company. Mr Thomes was aware of problems; he understood the problems were either resolved or were in the process of being resolved. We accept that Mr Thomes did not understand that the company's key products were not commercially viable at the time he joined the company and he did not realise the extent of cash flow problems because the true picture had been misrepresented to him as found by Curtis AJ. Whether there was misrepresentation regarding share price movement 73 Curtis AJ found that for the purpose of inducing the respondent to accept the position of CEO of Keycorp, Mr Dumitrescu represented to Mr Thomes that the directors of Keycorp believed that the share price would sharply increase in the short term and would be worth more than $20 each within one year. This finding would appear to have been based on what Mr Dumitrescu said to Mr Thomes that: Brian Clayton has told me that the Keycorp shares were clearly undervalued, would rise significantly in value and would be worth more than $20 each within one year. Brian Clayton has also told me that this is not only his own personal opinion, but this statement was based on advice that had been provided to him by external independent experts. 74 It was submitted for the appellant his Honour erred in making his finding that the respondent relied upon this representation because his Honour failed to give any weight to the following evidence: (a) In cross-examination Mr Thomes conceded that he was never "promised" the share price would be $20 within 12 months; and (b) The respondent did not, either after the first 12 months of his employment or indeed at any time prior to his detailed letter of complaint of 17 July 2001 make any reference whatsoever to a promise or representation about a $20 share price and certainly made no complaint that he had been somehow robbed of a promised $1 million windfall profit based on Keycorp's share price improvements. (c) The respondent did not insist that any rider be added to his contract to reflect the representation with respect to the company's share price. 75 We note that apart from the representation that Mr Thomes claimed was made by Mr Dumitrescu regarding the share price, Mr Thomes also said in his oral evidence that Mr Clayton had told him "the share price would soar". Further, in his letter to Mr Irving of 17 July 2001 Mr Thomes said Mr Clayton had told him he had received independent expert advice that the share price of Keycorp was "heading north". 76 The respondent submitted the evidence before his Honour included Mr Thomes' proposal during the contract negotiations that his sign-on bonus by way of 50,000 units of stock in Keycorp should vest in two tranches respectively upon the achievement of a 25 per cent increase and a 50 per cent increase in the company's share price. It was not reasonable to suppose, it was submitted, that Mr Thomes would have made such a proposal if he had not accepted the representations made to him about the share price. 77 Further, in relation to the appellant's submission regarding the time taken by the respondent to raise the share price issue, senior counsel for the respondent submitted the first tranche of the sign-on bonus shares was not exercisable until 21 April 2001 and the second tranche was not exercisable until 21 November 2002. Accordingly, the issue of the share price did not arise until Mr Thomes was already in discussions with Mr Irving about the failure of the company to agree on performance parameters. 78 Finally, on this issue the respondent submitted the appellant did not call Mr Dumitrescu who made the representation on behalf of Keycorp. It was submitted the appellant could not now deny the representation. The absence of any rider on the contract was further evidence that Mr Thomes trusted the repeated representations made to him about the share price. In any case, the proposal by Mr Thomes regarding the vesting of the stock in two tranches showed that Mr Thomes accepted representations that Keycorp's share price would rise significantly. 79 Mr Thomes accepted in cross-examination that he was not promised the share price would be $20 within 12 months. It was submitted for the appellant that if Mr Thomes overstated the position regarding this "promise" the Court should consider whether other elements of the respondent's claim were "overstated". We have had regard to this submission in considering all of the evidence. However, as to the share price, Mr Thomes was certainly led to believe by Mr Dumitrescu and Mr Clayton that it would increase significantly and that, consequently, he would benefit considerably. 80 We consider the weight of the evidence is in favour of the finding of the trial judge that the respondent was induced to leave highly paid secure employment to take up employment with the appellant by misleading representations made to him by directors of the respondent and its agent Mr Dumitrescu concerning the probability of a large increase in its share price in the near future which probability was supported by "independent expert advice". Whether there was misrepresentation that performance parameters would be agreed in advance 81 Curtis AJ found that one of the representations made by directors of Keycorp, or by its agent Mr Dumitrescu, to Mr Thomes for the purpose of inducing him to accept the position of CEO of Keycorp, was that Keycorp would pay to Mr Thomes annual incentive bonuses based upon objective parameters or targets to be agreed in advance by and between Mr Thomes and Keycorp each acting in good faith. 82 It was submitted for the appellant that it was apparent that his Honour's finding in this respect was critical to his finding that it was the failure of Keycorp to agree upon parameters for Mr Thomes' incentive bonus that was the real and effective cause of the termination of the respondent's employment (see [96]). Further, his Honour found that the contract of employment entered into by and between the appellant and the respondent on 22 November 1999 required that the applicant be paid in addition to his base salary an annual incentive bonus based upon objective parameters or criteria to be agreed in advance by the appellant and the respondent (see [192]). 83 Mr Kimber contended there was no allegation, in any of the versions of the respondent's summons, that the contract was unfair in that it did not require that the performance "parameters" had to be agreed at or before the commencement of any particular year of employment. Further, that the respondent agreed in cross-examination that he made no complaint about the absence of any agreement as to parameters prior to March 2000 because it would not have been sensible or reasonable to try and agree parameters until at least that time and that even thereafter in the period between March and May 2000 that he was "not concerned enough about the matter to raise it with the Board or anybody else". 84 In our view it was open to Curtis AJ to find on the evidence that performance parameters were to be agreed in advance by the appellant and the respondent. That did not mean such parameters had to be agreed at or before the commencement of any particular year of employment. But as a matter of logic if a person's performance is to be measured according to objective parameters or targets set for the purpose of providing an incentive to achieve a bonus, it seems to us that the parameters would be agreed sufficiently in advance of when the bonus was payable so that the person had something to aim for. In this regard we note what his Honour said at [91] of his judgment: 91 Mr Irving in cross-examination disagreed with the proposition that the performance incentives should be agreed either before or very soon after the commencement of employment and said that it would be quite unusual for this to occur. This answer leaves one wondering why the payments are described as "incentives". The contract with Mr Thompson, the CEO who replaced Mr Thomes at Mr Irving's suggestion, set out in advance and in some detail the four performance goals against which his incentive remuneration was to be measured, and the percentage weighting to be assigned to each. Whether there was misrepresentation regarding the respondent's financial benefits 85 Curtis AJ found that the appellant made certain pre-contractual misrepresentations regarding the financial benefits that the respondent would receive as a result of the appellant's future business success. These were that: (a) Performance targets having been agreed, the incentive payment for achieving these targets was to be $400,000, being $ 200,000 in cash and $200,000 worth of shares as "cash equivalent" in any one year. (b) That the share options programme pursuant to which Mr Thomes would receive incentive payments provided relevantly that the shares allocated to him would be fully paid shares up to the value of $200,000. 86 As to the misrepresentation regarding shares as a cash equivalent, the appellant submitted his Honour erred in reaching his conclusion in that respect because: (a) There was no complaint in the pleadings that the appellant represented to the respondent that he would be entitled to an incentive payment for achieving targets that comprised $200,000.00 worth of shares as "cash equivalent"; (b) There was no complaint in the summons about the express terms in the employment contract in relation to annual performance incentive payments; (c) There was no complaint or contention in the proceedings that there was a collateral arrangement between the parties such that the reference to "participation in the options programme" appearing in the respondent's contract was to be treated as a reference to the allocation of shares. (d) His Honour apparently paid no regard to the evidence (and submission in relation thereto) referred to in the appellant's detailed submissions about this matter. 87 In its submission in reply the appellant contended that one of the primary or essential issues in the appeal was: Whether it was not reasonably open and indeed "glaringly improbable" that the Respondent believed that the express terms in his contract with respect to "share options" were to be taken as a reference to "shares" in spite of the fact that:- (i) the Respondent was a well qualified and experienced senior executive officer with significant experience with share option schemes and well understood the difference between shares and share options; (ii) where the contract itself distinguished between shares and share options in very clear and obvious terms; and (iii) the Respondent actively utilised exactly the same formulation as found in his contract when he sought to finalise the terms of contracts for some of his senior staff. 88 The appellant cited the findings of the trial judge relating to the shares versus options issue as an instance of where he made conclusions based on credit without paying proper regard to clear documentary and other uncontested evidence: State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) and Others (1999) 160 ALR 588 at [93]-[95] per Kirby J. The appellant submitted Curtis AJ ignored "the clear terms of the contract with respect to share options versus shares (or stock) and the concessions made by the Respondent as to his knowledge of such matters in reaching his glaringly improbable finding that when the contract said options it really means shares". 89 We should indicate that we do not accept the appellant's submission that there was no complaint in the pleadings that the appellant represented to the respondent that he would be entitled to an incentive payment for achieving targets that comprised $200,000.00 worth of shares as "cash equivalent". It was also contended by the appellant that there was no complaint in the summons about the express terms in the employment contract in relation to annual performance incentive payments and that there was no complaint or contention in the proceedings a collateral arrangement between the parties such that the reference to "participation in the options programme" appearing in the respondent's contract was to be treated as a reference to the allocation of shares. It was not the case that Mr Thomes wished to challenge the express terms of his contract and there was no need for Mr Thomes to complain or contend that there had been a collateral arrangement in respect of the allocation of shares as part of the incentive bonus. As it will be seen, Mr Thomes relied upon the terms of a letter of appointment, as he understood them on the basis of representations made to him by Mr Dumitrescu. 90 Curtis AJ addressed the issue of shares versus options at [156]-[160] of his judgment: 156 Similarly, the transcript at 140.41 reveals that Mr Thomes knew perfectly well how an incentive scheme based upon share options operated. He had however, given earlier evidence in his affidavit that in negotiation with Mr Dumitrescu he read the words of the draft contract which spoke of eligibility to an annual performance bonus of "-up to $200,000 equivalent participation in the options program. . .". He then had a conversation with Mr Dumitrescu to this effect: Thomes: I am concerned about the loose wording in regards to the option program, and the share allocation. I want to see the Keycorp share plan and want to understand how I can achieve the payment hurdles. It is important to me that the "$200,000 equivalent participation in the options programme" represents real value to me paid in shares. I can accept payment in shares as an alternative to payment in cash. Issuing options that I will have to pay for at a later stage is not an acceptable proposition to me. Dumitrescu: Brian Clayton cannot provide a copy of the share plan, because he would have to contact the HR Manager, and of course the HR Manager does not know as yet. But Brian Clayton has assured me, the plan is straightforward, no surprises there, and you will receive a copy the moment you have started. You will receive fully paid shares, not options. The payment in shares is a true alternative to payment in cash. He also promised to find a fair solution for the performance hurdles for the 50,000 shares. 157 In that context he gave the following evidence (tpt 142.26): Q. So you do understand how stock option schemes work, correct? A. Of course. Q. Do you say to his Honour but in this case you believed insofar as your package involved stock options that it wasn't going to operate the way that I've just set out, is that your evidence? A. My evidence is that term was in one of the final drafts of the letter of offer and it didn't reflect the discussions I had with Korn/Ferry and I said, "I do not understand what options program mean", because what we discussed is that I get shares to the value of $200,000. I don't and then Korn Ferry went back to Clayton and they came back and orally and through that letter and said to me, at least that was my understanding, the option program - that's what it's called but it also provides for the allocation or the distribution of shares, and for me it's funny it didn't make sense. That's why I asked. Because options are options, I agree with you, and shares are shares, that's why I check back and say, "Hey, you said I get shares". They came back and confirmed it's shares. So funny but if that's what it is that's what it is. 158 Mr Thomes added in evidence that in his years in commerce he had seen many different option and share plans providing different alternatives. 159 Of particular relevance in the present case is the content of an enforceable undertaking given by Keycorp in September 1999 (p92 AX10) which reveals that the remuneration package agreed with Mr Clayton in 1998 included "a once only payment of approximately $120,000 to be used to purchase 135,000 Keycorp shares through the Keycorp shares ownership plan (ESOP)". The shares were to be "purchased by way of remuneration sacrifice by RPC Employee Benefit Plan (No 2) and held on the chairman's account in accordance with the terms of the ESOP". On 20 October 1998 Keycorp was advised by Australian Stock Exchange Ltd that the purchase of shares by a director by way of remuneration sacrifice did not require shareholder approval pursuant to the listing rules. 160 An explanatory memorandum to the notice of General Meeting of 31 May 2000 relating to changes to the Employee Share Option Incentive Plan included this passage: In respect of participation of non-executive directors in employee share schemes, market practice for many listed companies in Australia shows a clear trend to the provision of significant at-risk remuneration in the form of company shares or options. 91 It is apparent that his Honour accepted the respondent's evidence that notwithstanding the significant difference between a stock options scheme and a shares based incentive scheme and notwithstanding the terms of the employment contract which provided that the respondent would be eligible for an annual performance incentive of "up to $200,000 equivalent participation in the options programme depending on performance against agreed parameters", the respondent understood that if he achieved the performance objectives he would be provided with fully paid up shares to the value of $200,000 and not an allocation of stock under an options scheme. 92 His Honour's findings in this respect were obviously influenced by the evidence of Mr Thomes regarding the discussion he had with Mr Dumitrescu ("It is important to me that the "$200,000 equivalent participation in the options programme" represents real value to me paid in shares") and the email of 15 October 1999 from Mr Dumitrescu to Mr Clayton where, in discussing the terms of the draft contract, Mr Dumitrescu said: Michael [Mr Thomes] did not understand the meaning "$xxx equivalent participation in the options programme" and the difference between this and "$xxx equivalent paid in stock". Based on your comments, I explained to Michael that, in essence, the wording had the same meaning; the options programme is now the formal way to allocate stock. The important point here is that the options he will receive does (sic) not have to be purchased by him at the vesting time (the options are granted). Michael is happy with this explanation. 93 The appellant submitted it was "glaringly improbable" that a well qualified and experienced senior executive officer with significant experience with share option schemes would sign a contract that referred to an options program on the basis that he believed he would thereby receive incentive payments in the form of an allocation of fully paid shares up to the value of $200,000. This has been a matter that has troubled us. Given the respondent's admitted understanding of share option schemes, which would not ordinarily be understood as an arrangement where the beneficiary would receive an allocation of fully paid shares as a "cash equivalent", there must be some doubt about the veracity of the respondent's claim in this respect. 94 However, in light of the discussions between the respondent and Mr Dumitrescu as to the meaning of "equivalent participation in the options programme", we are not able to be satisfied that it was "glaringly improbable" the respondent believed, on the basis of the representations made to him, that he would receive incentive payments in the form of an allocation of fully paid shares up to the value of $200,000 if he reached his performance targets. It was open to his Honour to find that it was represented to the respondent by directors of Keycorp or by its agent, Mr Dumitrescu, for the purpose of inducing him to accept the position of CEO of Keycorp that performance targets having been agreed, the incentive payment for achieving these targets was to be $400,000; being $200,000 in cash and $200,000 worth of shares as "cash equivalent" in any one year. 95 As to the misrepresentation that the shares allocated to the respondent would be fully paid shares up to the value of $200,000, the appellant submitted his Honour was in error in that he failed to give any weight to the following matters: (a) The respondent made no complaint in his summons about the express terms of the employment contract dealing with share options which relevantly provided: "You will also be eligible for an annual performance incentive of … up to $200,000 equivalent participation in the options program depending on performance against agreed parameters." (b) The respondent's evidence as to Mr Dumitrescu's representation was that he stated, "You will receive fully paid shares, not options. The payment in shares is a true alternative to payment in cash". Mr Dumitrescu made no reference as to the value of the shares. (c) Mr Dumitrescu's comment was not a representation about the meaning of the terms of the employment contract, as the alleged representation preceded the receipt by the respondent of the employment contract in draft form that was thereafter accepted by the respondent as fairly reflecting what had been agreed. (d) When the representation was made, the respondent made it clear that he would require further negotiation in relation to the terms upon which he would be prepared to join the appellant. Indeed he stated at the time that he was "open to continue" and "I am happy to look at a final contract". (e) Clearly, on his own evidence, the respondent did not regard Mr Dumitrescu's representation as reflecting the final offer on the incentive component of the remuneration package, nor did he rely on the representation other than to confirm in his own mind that it was worthwhile for him to continue with negotiations and to review a draft contract. (f) The respondent thereafter met with Mr Clayton but at no time raised any question as to why the terms of the employment contract dealing with the share options did not reflect the understanding that he asserts was earlier reached. (g) The respondent obviously understood the difference between options and stock. 96 The respondent submitted that the $200,000 value of the shares was clearly part of the discussion between Mr Thomes and Mr Dumitrescu. Further, that the appellant did not call Mr Dumitrescu and it is not now open to question Mr Thomes' evidence on the value of the shares as represented to him by Mr Dumitrescu in circumstances where his Honour found that Mr Thomes was a truthful and reliable witness and his evidence was consistent with contemporaneous documentary evidence. 97 We consider the respondent was correct in this submission. Moreover, the evidence was that the respondent was to receive a remuneration package of a base salary of $400,000 (plus superannuation and health insurance) with an incentive component of $400,000. Because the incentive component was divided on a 50/50 split between a cash component and a shares component, it seems to us there is little room to doubt that the shares component was represented to be a cash equivalent of $200,000. It was open to Curtis AJ to find it was represented to Mr Thomes that the cash value of the shares component of his remuneration package was $200,000. REPUDIATION 98 Curtis AJ found (at [193] - [194]) that the appellant had breached the terms of the contract with the respondent in that it failed at all times to engage with the applicant in good faith so as to agree upon criteria for the payment of a performance incentive bonus and failed to review in writing the applicant's performance criteria at the end of his first year of service. His Honour found that the breaches constituted a repudiation of the respondent's contract of employment by the appellant. 99 There are a number of considerations in determining whether or not the trial judge erred in relation to the repudiation issue and we deal with each of these in turn. Whether there was an agreement reached on or about 1 June 2000 as to respondent's performance parameters 100 Curtis AJ rejected the appellant's contention that an email sent by Mr Clayton to Mr Thomes on 1 June 2000 recorded the content of an agreement reached between them in a private discussion after the Board meeting held the previous day and that the terms of the email constituted the parameters agreed for the year 2000 incentive bonus. The appellant contended this finding was critical to the outcome of the proceedings because it was the alleged refusal by the appellant to negotiate performance parameters that was, on the respondent's evidence, pivotal in his approach to deciding to bring about the termination of his employment with the appellant. 101 Mr Kimber for the appellant submitted that his Honour failed to find, as he should have, that Mr Clayton's evidence as to such an agreement about parameters was corroborated by a contemporaneous document that was not attacked by the respondent. It was submitted Curtis AJ inappropriately, and in error, characterised the document during closing submissions as a "classic Police verbal". The appellant submitted that his Honour's approach to the consideration of Mr Clayton's evidence was unbalanced, subjective and manifested in erroneous findings of which this impugned finding was a critical example. 102 It was submitted his Honour further erred in failing to give proper weight to the fact that Mr Thomes contended that he had rejected the proposed parameters in a fax he sent to Mr Clayton at that time and yet that document did not refer to performance parameters or register any disagreement with any proposal concerning them. 103 His Honour further erred, it was submitted, in failing to give proper weight to Mr Thomes' evidence that despite what he regarded as a critical feature of the remuneration package that he needed clarity about, namely the performance parameters, at no stage before or after June 2000 did he ever send an email, letter or fax proposing particular performance criteria or otherwise seek to bring the issue to a head. Such conduct, or lack thereof, was much more consistent with agreement or acquiescence. 104 As Curtis AJ noted at [76] of his judgment: On 1 June 2000 Mr Clayton sent to Mr Thomes the following email: Michael, Now the AGM is behind us you now own, and have total responsibility for the performance against, the forecast we announced yesterday. Your MBO's for 2000 are for a breakeven result, reinvigorating the sales team and effort, managing the balance sheet, securing a major strategic alliance, establishing robust and cost-effective operational processes whilst building strong staff morale. An additional performance criteria would be to vastly improve the harmony with John. As we have discussed many times; John is a valuable asset of the corporation and we/you need to ensure we optimise his value. What I saw yesterday was not healthy. I am not going to debate who is right or wrong I simply take the view that you are the CEO and have the responsibility to protect the assets of the company. It is therefore up to you to take the lead with this relationship. I will discuss the above with you at our next meeting. Thx Brian 105 At [77] his Honour stated: 77 It is the respondent's contention that the email records the content of an agreement reached between Mr Clayton and Mr Thomes in a private discussion after the Board meeting held the previous day and that the terms of the e-mail constitute the parameters agreed for the year 2000 incentive bonus. Mr Thomes denies that there was any such discussion or any such agreement. For reasons to which I will come, I generally prefer the evidence of Mr Thomes to that of Mr Clayton whenever there is inconsistency between them. 106 Curtis AJ went on in his judgment to set out his findings adverse to Mr Clayton's credit and, accordingly, rejected Mr Clayton's evidence that the email recorded the content of an agreement reached between Mr Clayton and Mr Thomes as to performance parameters. We can discern no error in that respect; his Honour's conclusions as to credit were open to him. 107 In relation to the email itself, it is very much open to the interpretation that the "MBOs" were Mr Clayton's unilateral creation and that rather than reflecting an agreement, the email constituted an instruction to Mr Thomes. If the MBOs were agreed, one wonders why it was necessary to discuss them at the "next meeting". 108 We refer to the submission by the appellant that his Honour inappropriately, and in error, characterised the document as a "classic Police verbal". The document was an email from Mr Clayton to Andrew Swanson, a director of the appellant, dated 8 June 2000. 109 The document relevantly conveys to Mr Swanson that "I [Clayton] have impressed on Michael that results are now his total responsibility, it is his forecast, his operational plan and his staff and management. His performance will be specifically judged over the next 7 months." The document does not, in our view, provide evidence in support of an agreement between Mr Clayton and Mr Thomes regarding performance parameters and when weighed up against Mr Thomes' direct evidence that there was no agreement and his Honour's findings regarding the credit of Mr Clayton, the document's corroborative value is negligible. We would observe, however, that the disparaging description of the document by his Honour as a "classic Police verbal" was quite inappropriate and ill judged; there was nothing to support such a description. But we do not consider that, in light of the evidence against an agreement having been reached on performance parameters, the words complained of indicated a degree of bias on his Honour's part against Mr Clayton that produced appealable error. 110 The appellant submitted the respondent did not attack the email of 8 June 2000. It does not seem to us there was much to attack. In any event, the question of whether there was an agreement on performance parameters was very much in issue in the proceedings and both Mr Thomes and Mr Clayton were subject to extensive cross-examination in that respect. 111 The appellant contended that despite what Mr Thomes regarded as a critical feature of the remuneration package that he needed clarity about, namely the performance parameters, at no stage after June 2000 did he ever send an email, letter or fax proposing particular performance criteria or otherwise seek to bring the issue to a head. This is not entirely correct. There was evidence from Mr Thomes that immediately after he received the email from Mr Clayton he sought to have a discussion with the chairman regarding his remuneration. Mr Clayton said he did not have time and so Mr Thomes sent him a handwritten facsimile message attaching his letter of offer and indicating that he "would be grateful, if we could discuss and clarify this topic at your earliest convenience." 112 Then in October 2000 a meeting was arranged between Mr Thomes, Mr Clayton and Dr Keith Barton, a director of the appellant, in whom Mr Thomes had confided about the state of the company and his remuneration. The meeting was for the purpose of discussing these two issues, namely the state of the company and Mr Thomes' remuneration. However, when the meeting got to the latter issue Mr Clayton indicated he had to go to another meeting and the issue was not discussed. 113 There appears to be no further attempt by Mr Thomes to raise the issue of his remuneration again with Mr Clayton and on 31 December 2000 Mr Clayton resigned as chairman. There was then a hiatus over January and February and the best part of March 2001 when Keycorp operated without a formal replacement of Mr Clayton. In late March 2001 Mr Irving took over as chairman and at his first meeting with the new chairman Mr Thomes raised the issue of his remuneration. 114 We have some concern that if the respondent was so concerned about his remuneration and had not agreed to the performance parameters in Mr Clayton's email of 1 June 2000, why did he only seek to raise the issue once in the period June to December 2000? We accept, however, that he did, indeed, actively seek to pursue the matter in October 2000 but without success and that no doubt he was fully occupied in his role as chief executive. We also note that at his first meeting with Mr Irving in March 2001 Mr Thomes raised the question of his remuneration. 115 In the circumstances, we consider it was open to the trial judge to conclude that the respondent had not acquiesced in the performance parameters set out in the 1 June 2000 email. Whether Curtis AJ erred in finding that the appellant had repudiated the contract in the year 2000 by failing to agree on performance parameters. 116 Curtis AJ found (at [71]) that Keycorp, contrary to the terms of the letter of offer, failed to negotiate in good faith and agree upon the parameters against which Mr Thomes' performance was to be evaluated for the purpose of calculating the annual performance incentive which he was to be paid and, further, that it failed to conduct any performance review in the terms required. 117 Whilst the appellant submitted that there had, in fact, been an agreement on performance parameters reached on or about 1 June 2000 - a submission we have rejected, the appellant contended that, in any event, Curtis AJ erred by failing to give weight to the respondent's evidence that it was not unreasonable for performance parameters not to be set at least until March 2000, and his concession that it would not have been sensible or reasonable to try and agree parameters until at least March 2000. The appellant contended it was not properly open on Mr Thomes' evidence to conclude that there was a refusal by Mr Clayton to discuss performance parameters, let alone a repudiation of the contract by him at that time. 118 This submission ignores to some extent that Curtis AJ did not find the appellant had repudiated the contract in 2000 by failing to agree on performance parameters. The finding of repudiation arose out of the appellant's failure "at all times to engage with the applicant in good faith so as to agree upon criteria". It also overlooks the evidence that Mr Thomes tried to raise the question of his performance parameters with Mr Clayton in March or April 2000 without success and again immediately after 1 June 2000 and again in October 2000. Whilst it might be correct to say Mr Clayton never refused outright to discuss performance parameters, Mr Clayton did not carry through with his undertaking in his 1 June email to discuss parameters at the "next meeting" and then put off that discussion in October 2000. Eventually, Mr Clayton resigned as chairman in December 2000. Up to that point, however, it could not be said there was any repudiation of the contract, although in failing to come to terms with the need to address the issue of performance parameters Mr Clayton's conduct could be described as repudiatory because the letter of offer of employment accepted by Mr Thomes provided as follows: You will also be eligible for an annual performance incentive of: - $200,000 in cash. This amount is based on 100% performance and will be adjusted depending on evaluated performance against agreed parameters (our emphasis) - up to $200,000 equivalent participation in the options programme depending on performance against agreed parameters (our emphasis). 119 There was, in our opinion, an obligation on Mr Clayton to settle by agreement, in a timely way, the respondent's performance parameters. The remuneration depending upon the achievement of agreed performance targets was a fundamental term of the respondent's employment contract. 120 Alternatively, senior counsel for the appellant submitted Curtis AJ erred in failing to find that Mr Thomes had affirmed the contract in spite of the alleged repudiatory conduct of the appellant during that year (such that this behaviour could not be relied upon by the respondent in August 2001 to justify the termination of the contract). If there was repudiatory conduct in the period from commencement of employment (November 1999) to June 2000, Mr Thomes, it was submitted, clearly elected to affirm the contract at that time and it was too late to seek to rely on alleged repudiatory conduct by Clayton in early 2000 or even in late 2000 as providing a foundation for the respondent's decision to bring the contract to an end in August 2001. 121 Again, this submission overlooks the continuing attempts by the respondent to have Mr Clayton and later Mr Irving, as the respective chairmen of the appellant, to address Mr Thomes' requests to determine by agreement his performance parameters. It could not be said that at some point during 2000, or later, Mr Thomes gave up on his endeavour to have the appellant address the question of his performance parameters and affirmed the contract. Clearly he did not. 122 The appellant further submitted that there could be no proper finding of repudiation in the period 2 June 2000 to 31 December 2000. Of significance, it was submitted, was Mr Thomes' evidence that during that period: (a) He never sent any email, letter or fax proposing particular performance criteria as appropriate; (b) the proposal of criteria by him was inappropriate; (c) he didn't raise the matter of performance parameters at a meeting in late October 2000 organised to discuss the state of the company and his remuneration; (d) he never told Mr Clayton that the criteria set out in the 1 June 2000 email were unacceptable to him; (e) he never raised the matter with the Board or otherwise complained that Mr Clayton was unresponsive to his requests. 123 As we have already stated, we consider that during this period there was a continuing, clear failure on Mr Clayton's part to address the issue of performance parameters as Mr Thomes had requested him. 124 In relation to the period 1 January 2001 to 30 June 2001 it was submitted his Honour erred by failing to give proper weight to Mr Thomes' evidence wherein he denied that he wanted Mr Irving to agree with him on parameters for the year 2000 when he met with the new chairman, Mr Irving in 2001. Mr Thomes stated that he wanted Mr Irving to be a mediator. Further, his Honour erred by failing to give proper weight to the fact that the respondent gave no evidence that he told Mr Irving what he wished or expected Mr Irving to do in relation to performance parameters for the 2000 year. 125 Whilst the evidence about this matter was somewhat confused, we consider that it was the respondent's objective to have his performance parameters settled for 2000 and 2001. There was evidence that Mr Thomes wished Mr Irving to act as a mediator to help resolve the issue with the previous chairman, Mr Clayton. But whatever the means employed, it is clear that Mr Thomes wanted the matter resolved. It is equally clear that Mr Irving did not engage in a proper exercise of attempting to reach agreement with Mr Thomes on performance parameters for 2000 or 2001. 126 The position, therefore, was that between March and December 2000, despite requests by Mr Thomes to resolve the issue of performance parameters, Mr Clayton failed to do so. Mr Irving similarly failed or refused to do so during 2001 again despite repeated requests by Mr Thomes. Whether Curtis AJ erred in finding that the appellant had also repudiated the contract by failing to review in writing the respondent's performance criteria at the end of his first year of service 127 The appellant submitted the trial judge erred in that it was no part of Mr Thomes' case that the appellant should have reviewed the respondent's performance criteria at the end of his first year of service. Nor did the respondent contend that the omission by the appellant to review in writing the respondent's performance (as opposed to performance criteria) constituted repudiation. 128 In any event, the appellant submitted that such failure did not, and could not, support a finding of repudiation, as an omission of this nature did not go to the root of the contract or otherwise support a conclusion that the appellant was refusing to abide by the contract. 129 The General Terms and Conditions of Employment that were incorporated into Mr Thomes' contract provided for written performance reviews. The appellant failed to review in writing the respondent's performance criteria at the end of his first year of service. The letter of offer accepted by Mr Thomes provided: Performance Review: Objectives will be set for employees and their performance will be reviewed each year, on a date determined by the Company. At such reviews each employee will have the opportunity to discuss and make comments on all aspects of their employment and performance. The Company will keep written records of the reviews and employees will be invited to make written responses and address any concerns they may have in relation to their employment. 130 Whilst there was a failure by the appellant to review in writing the respondent's performance, taken in isolation it is difficult to see how such a failure could amount to repudiation of the contract. However, when it is considered that: 1 Mr Thomes' employment contract provided for him to be paid in addition to his base salary an annual incentive bonus based upon objective parameters or criteria to be agreed in advance by the appellant and the respondent; 2 The criteria having been agreed, the incentive payment for achieving those criteria was to be $400,000 made up of cash in the sum of $200,000 and the vesting of shares in Keycorp to the extent of $200,000 market value; 3 In the event and to the extent that the criteria was underachieved or overachieved the cash component of the bonus was to be reduced below or increased above $200,000; 4 At the end of each year of employment the respondent's performance criteria were to be reviewed in writing and that the respondent was to have the opportunity to discuss all aspects of that review; 5 On 5 June 2001 Mr Thomes was informed by Mr Irving his performance on all the major categories agreed with the previous chairman was unsatisfactory with the exception of the Telstra deal and informed that no bonus payment for the 2000 year would be paid additional to the $100,000 paid in advance upon his commencing employment; 6 No performance parameters had in fact been agreed with the previous chairman against which Mr Thomes' performance could have been judged unsatisfactory; 7 At the end of 2000 the respondent's performance criteria were not reviewed in writing and the respondent was not given the opportunity to discuss all aspects of that review; it was open to Curtis AJ to find that the appellant repudiated the respondent's contract of employment. 131 In Western Excavating Ltd v Sharp [1978] QB 761 at 769 Lord Denning MR observed: If the employer is guilty of conduct which is a significant breach going to the root of the contract of employment, or which shows that the employer no longer intends to be bound by one or more of the essential terms of the contract, then the employee is entitled to treat himself as discharged from any further performance. If he does so, then he terminates the contract by reason of the employer's conduct. He is constructively dismissed. The employee is entitled in those circumstances to leave at the instant without giving any notice at all or … he may give notice and say that he is leaving at the end of the notice. But the conduct must in either case be sufficiently serious to entitle him to leave at once. Moreover, he must make up his mind as soon after the conduct of which he complains: for, if he continues for any length of time without leaving, he will lose his right to treat himself as discharged. He will be regarded as having elected to affirm the contract. 132 In Police Service of NSW v Batton (2000) 98 IR 154 the Full Bench considered a number of cases dealing with repudiation. In particular, the Full Bench cited Woods v W M Car Services (Peterborough) Ltd [1981] ICR 666 at 670-672: In our view it is clearly established that there is implied in a contract of employment a term that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee: Courtaulds Northern Textiles Ltd v Andrew [1979] IRLR 84. To constitute a breach of this implied term it is not necessary to show that the employer intended any repudiation of the contract: the tribunal's function is to look at the employer's conduct as a whole and determine whether it is such that its effect, judged reasonably and sensibly, is such that the employee cannot be expected to put up with it: see British Aircraft Corporation v Austin [1978] IRLR 332 and Post Office v Roberts [1980] IRLR 347. The conduct of the parties has to be looked at as a whole and its cumulative impact assessed: Post Office v Roberts . 133 A unilateral reduction by an employer of an agreed salary payable to an employee is a repudiation of the contract of employment. In Tokyo Network Computing Pty Limited v Tanaka [2004] NSWCA 263 Handley JA at [6]: Mr Simpkins did not dispute that as a general rule a unilateral reduction by employer of the agreed salary payable to an employee is a repudiation of the contract of employment. The Judge quoted authority in support of this proposition including a statement by Lord Oliver, albeit dicta, in Rigby v Ferodo Ltd [1988] ICR 29 HL, at 33. There is other authority which supports the same proposition. This includes Stratton v Illawarra County Council [1978] 2 NSWLR 494, reversed on other grounds not affecting the present proposition, [1979] 2 NSWLR 701, and Marriott v Oxford and District Co-Operative Society Ltd [1970] 1 QB 186 CA, at 191. 134 In agreeing with Handley JA, Tobias JA observed at [17]-[18]: This is therefore a case of Tokyo Net saying that it does not take seriously its obligation to pay Mr Tanaka's salary in full and that it would not in fact pay his full salary unless, in the particular circumstances, it suited it to do so: see Carr v JA Berryman Pty Ltd [1953] 89 CLR 327 at 351 per Fullaghar J, cited with approval by Mason CJ in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd [1989] 116CLR 623 at 633. Accordingly in terms of the question posed by the Chief Justice in Laurinda at 648, namely, would a reasonable person in the shoes of Mr Tanaka clearly infer that Tokyo Net would not be bound by the contract or would fulfil it only in a manner substantially inconsistent with its obligations and in no other way, in my opinion the clear answer is in the affirmative. There was, therefore, an anticipatory breach by Tokyo Net of Mr Tanaka's employment contract which entitled him to treat that anticipatory breach as a repudiation capable of acceptance by his terminating the contract. This he did. I therefore agree with the orders proposed by Handley JA. 135 The failure by Keycorp to agree on performance parameters as required by the contract, such parameters determining a significant element of the respondent's remuneration, followed by a unilateral decision not to pay the respondent a bonus for the 2000 year on the ground he had not achieved agreed performance objectives that were, in fact, not agreed despite repeated attempts by the respondent to have them agreed, was a significant breach going to the root of the contract. Mr Thomes was, therefore, entitled to treat himself as discharged from any further performance. 136 Bonus schemes, especially in the case of senior executives, have been commonplace for many years. Such schemes often promise very substantial rewards and are regarded by employees as a fundamentally important part of their remuneration package and, indeed, they are. Yet too often employers do not give sufficient attention to managing the implementation and operation of their incentive plans, hoping somehow they will look after themselves. When these plans become derailed because of a lack of management attention on the part of the employer they can lead to bitter disputes as this case illustrates. 137 In the present case, the failure on the part of the employer to properly attend to establishing the parameters on which the parties could gauge the respondent's performance for the purpose of determining his incentive based remuneration, led to a finding that the appellant repudiated the contract. In this respect there was no error on the part of the trial judge. VARIATION OF THE CONTRACT 138 Curtis AJ ordered (at [197]) that the contract be varied to include the following terms: (a) Should the respondent act in such a way as to wrongly bring about the termination of the contract, the respondent will pay to the applicant on the date of termination a sum equivalent to 18 months total annual remuneration. (b) Should the contract come to an end, then the respondent shall pay to the applicant all incentive or bonus payments which ought to have been paid during the course of the contract up to the date of termination. 139 The unfairness found by his Honour that underpinned this order was expressed at [195] of the judgment: 195 I find that because of the misrepresentations of the respondent which induced the applicant to enter the contract, and the respondent's unreasonable behaviour which brought the contract to an end, the contract was unfair in that it contained neither adequate provision for payments to the applicant in the event that the respondent failed to agree upon criteria for payment of incentive payments, nor adequate provisions for payment to the applicant upon termination of the agreement by the respondent's repudiation of its terms. 140 Curtis AJ went on to order in relation to bonus as follows: 219 In the result Mr Thomes should have been paid upon termination an amount corresponding to 100 per cent of his base salary for a 12 month period commencing six months after termination and 80 per cent of a target bonus of $400,000, the total in respect of the period being $747,500. Had he not been wrongly dismissed he would probably have earned that sum. 141 It was submitted, firstly, for the appellant that in making the variation order in relation to the incentive or bonus payments, his Honour erred in that he failed to vary the contract in a way that reflected the unfairness in the contract arising from the misrepresentations that he found to have been made and relied upon. Instead, he made an order not sought by the respondent that begged the very question as to what provision, if any, was necessary in the contract to enable bonus entitlement to be assessed if, for any reason, the parties had not agreed on parameters for a particular year. 142 In Eagle Boys Dial-A-Pizza Australia Pty Ltd v Clifford [2003] NSWIRComm 101 the Full Bench observed at [43]: Whilst this is plainly a matter which will depend upon all the circumstances, when determining to vary a contract under s 106(3), it would generally be inappropriate to order variations to a contract that travel beyond providing a remedy for the unfairness found - that is, as it were, righting the wrong found in the relevant contract or arrangement. 143 The question, therefore, is whether his Honour's variation of the contract in relation to incentive or bonus payments was, as the appellant contended, at odds with the findings of unfairness and, secondly, not one sought by the respondent. As to the second matter, the order made, in our opinion, was sufficiently and relevantly connected to the relief sought by Mr Thomes in relation to the incentive component of his remuneration. 144 As to the first contention, we consider the order fell within the scope of his Honour's discretion to vary the contract in a way that was connected to the unfairness. In this respect, we agree with the respondent's submission that: The misrepresentations resulted in the contract being unfair. In particular, they caused Mr Thomes to enter into a contract under which he assumed a much greater risk than might otherwise have been the case. His Honour's orders gave relief to Mr Thomes in relation to the incentive bonus payments by providing for payment of a just sum reflecting what Mr Thomes ought to have been paid if his actual performance had been fairly assessed against criteria that would have been fair in the actual (as opposed to the falsely represented) circumstances of Keycorp. 145 Curtis AJ held (at [200]) that he was entitled to make "robust findings" upon the question of what those parameters "ought to have been". He cited in support of that conclusion the decision in Armory v Delamirie (1722) 1 Stra 505, 93 ER 664. 146 In applying Delamirie senior counsel for the appellant submitted his Honour erred in choosing to penalise the appellant for its conduct, rather than make an assessment of "just" compensation based on the available evidence relevant to the respondent's 'performance'. It was submitted Delamirie was concerned with evidentiary difficulties confronted by a court in the assessment of damages: Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 at 59 per Handley JA. 147 In Armory v Delamirie, the plaintiff was unable to prove the value of a jewel wrongly detained by the defendant. It was held that the Court would "presume the strongest against him, and make the value of the best jewels the measure of [the] damages". In the present case, Curtis AJ took the view, as we have noted, that because the appellant failed at all times to engage with the applicant in good faith so as to agree upon criteria for the payment of a performance incentive bonus he should take a robust view as to what the parameters ought to have been. 148 In applying the provisions of s 106 the Court is not concerned with assessing damages in the common law sense. And remedies that might be available under the common law may only be relevant to the application of s 106 to the extent described in Westfield Holdings v Adams at [130]. As it was emphasised in that case, "the relevant guiding principle for the Commission in Court Session under s 106(5) is not confined to a question of what loss or damage an aggrieved party has suffered but rather a wider test, namely, what is just in the circumstances of the case." 149 Whether or not a trial judge takes a "robust view" about the remedy that should be accorded to an applicant is neither here nor there provided that it does not lead to an outcome that inappropriately or unjustifiably travels beyond providing a remedy for the unfairness found. To do so may well lead the court into error. Any variation or avoidance of the contract to remedy the unfairness cannot lead to a windfall gain for an applicant or be out of all proportion to the unfairness that gave rise to the variation or avoidance. Any money order must be just in the circumstances of the case. That is, after considering what has taken place or been done under the contract, what is "just" is to be determined not only in respect of the applicant but also the respondent. 150 That is not to say, however, that in the appropriate case, in determining the remedy under s 106(3), the court is precluded from "resolving doubtful questions against the party 'whose actions have made an accurate determination so problematic'": Houghton v Immer at 59 per Handley JA citing LJP Investments Pty Ltd v Howard Chia Investments Pty Ltd (No. 2) (1990) 24 NSWLR 499 at 508. 151 In considering what the performance parameters in Mr Thomes' contract "ought to have been", it was submitted that his Honour was not making findings about matters in respect of which there was no (or insufficient) evidence. In that regard the appellant submitted that there was ample unchallenged evidence upon which his Honour could have satisfactorily determined the question of what the parameters "ought to have been". His Honour erred in that he rejected the appellant's evidence as to appropriate performance parameters for the respondent given that: (a) The evidence of Mr Sutton and Mr Irving on the point was unchallenged and uncontradicted; (b) the respondent accepted in cross examination that, but for the 'Mr Woods parameter', the criteria set out in the Clayton email of 1 June 2000 were reasonable (although he contended they were not agreed at any time) and as such, he corroborated the evidence of Sutton and Irving; and (c) in the above circumstances there was no proper basis for his Honour to reject Sutton and Irving on this point because they "were not fairly disposed towards Mr Thomes". 152 At [203]-[204] Curtis AJ stated: 203 Mr Kimber has submitted that in the exercise of my discretion I ought not set aside the concession by the applicant that the parameters contained within the email of 1 June 2000 were reasonable parameters nor the considered judgment of Mr Irving and Mr Clayton in relation to Mr Thomes' performance against those parameters. 204 I reject these submissions. At no time did Mr Thomes concede that those parameters were appropriate or fair to his circumstance or this company at that time. They were not. On the day before the email was sent, Mr Thomes told Mr Clayton a break even result was improbable: the balance sheet could not be managed in the face of the Board's refusal to close down overseas operations which prevented the establishment of "cost effective operational procedures". A significant flaw in the respondent's case is that in the face of suggested targets of "reinvigorating the sales team" and "building strong staff morale" not one employee of Keycorp is called to give evidence critical of Mr Thomes. I have expressed at some length my reasons for rejecting the opinions of Mr Irving and Mr Clayton upon these and other issues. 153 Clearly then, the trial judge turned his mind to the appellant's submissions regarding the reasonableness of parameters in the 1 June 2000 email and rejected them for the reasons expressed. Curtis AJ indicated earlier in his judgment that where there was a conflict in the evidence of Mr Thomes on the one hand and Messrs Clayton and Irving on the other, his Honour preferred the evidence of Mr Thomes. His Honour spelt out the reasons for reaching this view and as we earlier found there was no error in this respect. In particular, we do not accept "there was no proper basis for his Honour to reject Sutton and Irving on this point because they 'were not fairly disposed towards Mr Thomes'". It is transparently clear from the evidence that Mr Sutton was not fairly disposed to Mr Thomes and in so far as Mr Irving was concerned,Curtis AJ regarded him as an unreliable witness and we have no basis upon which to conclude otherwise. 154 The position in which his Honour found himself in considering what the performance parameters ought to have been was: 1 Messrs Clayton and Irving claimed the parameters set out in the 1 June 2000 email were reasonable and adhered to them. 2 It was a requirement under the terms of Mr Thomes' contract that performance parameters were to be agreed. There was no agreement because the appellant failed at all times to engage with the respondent in good faith so as to agree upon criteria for the payment of a performance incentive bonus and failed to review in writing the respondent's performance criteria at the end of his first year of service. 3 At no time did Mr Thomes concede that the parameters in the 1 June 2000 email were appropriate or fair to his circumstance or the appellant's at that time. Mr Irving weighted the parameters unilaterally and without any consultation with the respondent. 4 The parameters were flawed given the company's financial and trading position. 5 Where there was a conflict in the evidence of Mr Thomes on the one hand and Messrs Clayton and Irving on the other, his Honour preferred the evidence of Mr Thomes. 6 Mr Thomes' position was that he should be paid the maximum bonus. 155 In our view, Curtis AJ was entitled to reject the parameters set out in the email of 1 June 2000 and vary the contract in the terms that he did in respect of bonus, namely: Should the contract come to an end, then the respondent shall pay to the applicant all incentive or bonus payments which ought to have been paid during the course of the contract up to the date of termination. BONUS 156 In determining what the incentive or bonus payments "ought to have been" Curtis AJ decided that in respect of the first year of his employment the respondent was entitled to recover: [H]is full bonus of $100,000 in cash being the balance of $200,000 to which he was entitled under the contract and he should have been then given 23,800 (rounded to 100) shares in Keycorp at the day's closing price of $8.40 (an equivalent value of $200,000). 157 For the remainder of his employment (November 2000 to August 2001) his Honour decided "Mr Thomes should have been paid his full cash bonus pro rata in the sum of $132,000 and he should have been given 115,800 shares at the day's closing price of $1.14." 158 The appellant submitted his Honour erred making orders that it described as granting the respondent the "maximum possible bonus". 159 The issue is whether the orders made by Curtis AJ granting the respondent the bonuses for 2000 and 2001 were "just in the circumstances of the case" (see s 106(5)). The issue is not without some complexity. In relation to the first 12 months of Mr Thomes' employment (November 1999 to November 2000) he was paid a base salary of $457,000 plus $100,000 as bonus in advance. If, in the normal course of events, performance parameters had been properly agreed upon and it had been agreed Mr Thomes had achieved all of his performance objectives he would have been entitled to an additional cash bonus of $100,000 plus shares to the value of $200,000 (although the appellant contended it was share options not shares). 160 Curtis AJ determined that the "sole appropriate criteria for the determination of the performance bonus payable to Mr Thomes for the first year was to sell a merger to Telstra". As this had been achieved, his Honour made orders granting the respondent the additional $100,000 cash bonus plus 23,800 shares in Keycorp at the day's (22 November 2000) closing price of $8.40 (an equivalent value of $200,000). 161 As for the period 23 November 2000 to 10 August 2001, his Honour determined (at [209]-[210]): … [A]gain the primary goal of management was survival. Mr Thomes had in March of 2000 proposed plans by which the overheads may be slashed and the company turned to profit. He again presented his plans to the February 2001 Board meeting and was told to re-present them to the March 2001 Board meeting when the new directors would be in attendance. As he relates the course of that later meeting the new directors said "Gee this is big stuff. We need more time to think about it", hence the May strategy meeting. After the May strategy meeting, the board approved the plans that Mr Thomes said "had been in my drawer for over a year". Most of the execution of those plans was effected before Mr Thomes left the company. The plans when implemented turned the company to profit as was conceded by Mr Irving. 210 I conclude that on 10 August 2001 Mr Thomes should have been paid his full cash bonus pro rata in the sum of $132,000 and he should have been given 115,800 shares at the day's [10 August 2001] closing price of $1.14. 162 In determining what the bonus entitlement ought to have been in relation to the 2000 year it is apparent that the trial judge took into consideration that the appellant failed at all times to engage with the respondent in good faith so as to agree upon criteria for the payment of a performance incentive bonus and failed to review in writing the respondent's performance criteria at the end of his first year of service. His Honour determined he was entitled to make robust findings upon the question of what the parameters ought to have been: Delamirie. His Honour found that given the chairman of the appellant instructed the respondent that his major priority was to find a strategic partner because the company's survival was at stake and that the respondent had achieved this, he was entitled to the full bonus. 163 The appellant contended there was ample unchallenged evidence upon which his Honour could have determined what the parameters ought to have been other than the sale to Telstra, namely the opinion of Messrs Clayton and Irving regarding the criteria in the email of 1 June 2000. However, we have rejected that submission. 164 Next, it was contended his Honour erred in that he failed to pay any regard to the fact that the respondent accepted that the performance bonus payments were intended to reward him in circumstances where there were major improvements and results and the share price went up (which had not, in fact, occurred). The respondent did accept the connection between on the one hand "major improvements and major results" and the share price going up and, on the other, payment of the performance bonus. But this connection was in the context of the pre-contractual representations made to the respondent, which did not raise the spectre of a company battling for its survival. It is apparent from the evidence, and Curtis AJ found this to be the case, that the major priority for Mr Thomes in 2000 was to find a strategic partner because the company's survival was at stake. The focus for Mr Thomes, therefore, shifted from one of what was undoubtedly a significant challenge of expanding the company and increasing its share price, to the more urgent task of securing a merger with Telstra in order for the company to survive. Mr Thomes was successful in that respect but devising and implementing a survival strategy was not his expectation when he agreed to the terms of his employment with Keycorp, including the terms relating to incentive bonuses. 165 We note Mr Irving considered that he could not attribute any more than 15 per cent of Mr Thomes' total performance objectives to the Telstra deal. We find it difficult to understand that assessment when it is accepted by Mr Irving that Mr Thomes as the CEO developed all of the plans and projections connected with the deal, was "very active" and the merger almost certainly staved off insolvency for Keycorp. The merger was clearly the key achievement for Keycorp in 2000. 166 We must confess, nevertheless, to some misgivings regarding the reliance by the trial judge on just one criterion in determining the respondent's entitlement to the bonuses for 2000 and 2001, namely, survival of the company. However, we note the list of alternative potential goals and performance parameters for the 2000 year submitted by Mr Thomes to Mr Irving in or about December 2000, namely: "Save KYC from bankruptcy; Find strong strategic and financial partner to help rebuild the company; Maintain market capitalisation and protect shareholder value". 167 The evidence was that Keycorp's cash flow was managed and the company avoided becoming insolvent; the Telstra merger was consummated, and; shareholder value and market capitalisation were protected and increased. The goals proposed by Mr Thomes do not present themselves as being unreasonable in the circumstances, that is, where the respondent entered the company in the expectation that his task was to expand Keycorp and increase the share price but quickly found the major priority was survival. Having achieved these goals we find it difficult to accept that his Honour erred in making the orders he did in respect of bonus for the year 2000. 168 The appellant contended, however, at least inferentially, that as multiple criteria were utilised for the respondent's successor and as his Honour relied on this fact for other purposes, namely, to assist in determining the monetary relief payable to the respondent in respect of incentive payments for the post termination period, Curtis AJ could have applied these parameters to Mr Thomes. The criteria applicable to Mr Thompson, the respondent's successor, was not, in our opinion, especially relevant for the 2000 and 2001 years, those criteria being heavily influenced by the merger with Telstra. 169 As to other potential criteria, we have considered the appellant's contention that in relation to the bonus payable for the 2001 year Mr Thomes failed to contain costs and that there was no evidence upon which Curtis AJ was able to conclude that the company became profitable during the respondent's employment or in the 12 months thereafter. 170 The evidence that Mr Thomes failed to contain costs came from Mr Sutton. At [144] of his judgment Curtis AJ made the following observations about this evidence: 144 Mr Sutton in evidence sought to cast the applicant's management in an adverse light by reference to cash flow because "no progress had been made to reduce operating expenses to the necessary levels to return the business to positive cash flow". This attack is unfair. The Board under Mr Clayton's chairmanship for 12 months ignored Mr Thomes' request that loss making overseas operations be closed down. The Board under Mr Irving's chairmanship delayed the necessary decisions from March 2001 until May 2001 so that the new directors could "understand the business". 171 His Honour proceeded to explain the reasons why he had no confidence in the objectivity with which Mr Sutton viewed the performance of Mr Thomes. There is no basis for considering that his Honour committed appealable error in his assessment of Mr Sutton's credibility and in his refusal to accept Mr Sutton's evidence regarding the alleged failure of Mr Thomes to cut costs. 172 As to the issue of profitability, it would appear from the evidence that cost cutting proposals put to Keycorp's Board and subsequently implemented by Mr Thomes contributed to bringing the company back into profitability. Whilst Mr Irving said in his evidence that the return to profitability was achieved under Mr Thomes' successor, Mr Irving accepted that the company "came back into profitability" under the cost cutting program implemented by Mr Thomes. 173 The appellant submitted that the respondent was paid $457,000 per annum by way of guaranteed salary in 2000 with such money obviously being paid to the respondent for his efforts in ensuring, inter alia, that the company survived. One of the performance parameters set by Mr Clayton was to secure a major strategic alliance. That is, if Mr Thomes was to succeed in this goal it was to be a factor taken into account in assessing his bonus. The Telstra deal ensured Keycorp's survival. The appellant cannot have it both ways. It cannot contend on the one hand the guaranteed base salary was paid to ensure Keycorp survived and on the other hand ignore the fact that one of the performance parameters for assessing bonus over and above the base salary was to secure a major strategic alliance to ensure the company's survival. 174 As we have conceded, we have some misgivings about the extent of the trial judge's reliance on company survival to justify the orders he made relating to bonus for the 2000 and 2001 years. Nonetheless, the orders he made were reasonably open to his Honour given all of the circumstances of the case. These included the fact there was a singular failure on the part of the appellant to meet its legal obligation under the contract to engage with the respondent in good faith so as to agree upon criteria for the payment of a performance incentive bonus. 175 The appellant complains that the trial judge's "robust" approach to the assessment of what ought to have been the performance parameters, was to penalise the appellant rather than determine what was just in the circumstances of the case. We do not agree. That his Honour resolved the issue of what ought to have been the performance parameters against the appellant in circumstances where the appellant had made that issue so problematical by its failure to meet its legal obligations, cannot be regarded as a punishment in our view. 176 Whilst we might have taken a different view to the judge at first instance as to what were appropriate orders in relation to bonus for the 2000 and 2001 years, we consider that it was open to Curtis AJ to make the orders that he did. SEVERANCE PAY 177 The severance pay provision in the respondent's contract was as follows: (i) If the Company terminates your employment [other than for misconduct], you will receive 6 months of your total cash remuneration. (ii) If you are made redundant or the Company is acquired or merged and your responsibilities change significantly resulting in you terminating your employment, you will receive 9 months of your total cash remuneration. (iii) In the event of (i) and (ii) any unexercised Stock Options previously granted to you will become immediately exercisable by you. 178 At [212] Curtis AJ found as follows in relation to the foregoing severance pay provisions: 212 Although Mr Thomes applied his mind to those provisions when negotiating with Mr Dumitrescu, and then agreed to them, they may now be seen to be unfair for the reasons that: (1) In negotiating the terms Mr Thomes was unaware of the ill health of the company and the poor prospects of an increase in its share price, that is, the prospect of increased personal wealth was not such as had been represented to him and the scope of his risk was greater than he had had reasonable cause to believe at the time he agreed. (2) The terms have proved to be unfair by the occurrence of subsequent events and the conduct of the respondent. 179 The appellant submitted that there was no proper foundation for linking the pre-contractual representations to the fairness or otherwise of the severance pay provision especially in circumstances where: (i) the respondent did not contend in his evidence that his acceptance of the severance pay provision was in any way based on pre-contractual representations. Indeed, when pressed in cross examination as to why he asserted that six months pay was unfair, but 18 months pay was fair, the respondent stated, "because the termination of the agreement was unfair"; (ii) the representations were not directed to security or intended longevity of the employment relationship; (iii) the respondent was capable of negotiating his contractual terms and did so with considerable vigour in this case; (iv) the respondent accepted that the contract reflected what had been agreed. 180 The appellant submitted further that his Honour erred in not giving any or any proper weight to the fact that the respondent gave contradictory evidence about whether he did in fact seek to negotiate a more generous severance payment provision. In this respect, when he was first cross examined about the notice period/severance payment provisions in the employment contract the respondent gave evidence that: (a) he could not remember whether there was any negotiation in relation to the six month payment provision; (b) he could not remember whether or not he sought to negotiate the notice period up to any higher figure; (c) he never raised any complaints about the fairness of the six month provision; (d) the respondent then gave evidence that he did in fact try to negotiate a notice provision, but said that he could not remember what he asked for. 181 Mr Kimber also submitted his Honour erred in failing to give any weight to the fact that the respondent relied heavily on the record of the discussions that took place between Mr Dumitrescu and Mr Clayton in relation to the "comments" of the respondent about the then proposed draft employment contract. Yet the only reference to notice in that document refers to one month. 182 Further, it was submitted that the severance provision was not objectively unfair especially given the relative youth of Mr Thomes and the fact that at the time of the termination he had less than two years' service: see Lavings v Barclay Mowlem Construction (NSW) (2000) 99 IR 247; Nordby v Barclays Investment Service (1993) 53 IR 319; and, Wong v State Street Global Advisors Australia Ltd [2004] NSWIRComm 212. 183 Curtis AJ took the view that the severance/notice provisions of the contract were unfair because "Mr Thomes was unaware of the ill health of the company and the poor prospects of an increase in its share price, that is, the prospect of increased personal wealth was not such as had been represented to him and the scope of his risk was greater than he had had reasonable cause to believe at the time he agreed." 184 However, it appears from the evidence that, unlike the position regarding remuneration Mr Thomes did not, in fact, apply his mind to the issues of notice and severance in negotiating the terms of his contract. Mr Thomes' evidence was that he thought he did. However, he could not remember whether there was any negotiation in relation to the six months' payment provision; he could not remember whether or not he sought to negotiate the notice period up to any higher figure; and, he never raised any complaints about the fairness of the six months' provision. 185 On this basis the appellant contended, in effect, that there was no reliable evidence of pre-contractual representations being the basis upon which the respondent accepted the terms of the contract in relation to notice and severance. That being the case, there was no connection between the unfairness and the variation of the contract in relation to severance and, therefore, there was no basis for the order varying the contract in relation to severance. 186 Mr Phillips for the respondent contended, however: The misrepresentations formed a substantial part of the representations that were the basis upon which Mr Thomes left secure employment with Lucent Technology and entered into the contract of employment with Keycorp. The unfairness of the misrepresentations taints the entire process of negotiation of the contract of employment and the resulting terms contained in it. Had Mr Thomes known the true state of the company, it would have been open to him to negotiate terms that reflected the true risks he faced in moving from Lucent Technologies to Keycorp. Further, had Mr Thomes known that Keycorp's representations that it would agree on performance parameters in good faith were unreliable, it would have been open to him to negotiate more specific terms regarding the process of the determination of his parameters and his bonus. As it turned out, Keycorp repudiated the contract of employment by refusing to agree upon performance parameters. Accordingly, the pre-contractual misrepresentations are relevant to the fairness or otherwise of the express terms of severance in that they were a substantial contributing factor in the creation of a contract of employment that was inadequate to give fair protection to the legitimate interests of Mr Thomes in circumstances that were the opposite of those he could reasonably have expected, on the basis of the misrepresentations, to have come to pass. 187 It was further submitted for the respondent that the misrepresentations were not the only source of unfairness that was relevant to the variation of the contract of employment in respect of notice/severance payments. Mr Phillips adopted all of the matters set out in [213] of the reasons for judgment, namely (references omitted): (a) Mr Thomes left secure employment with Lucent Technologies to join Keycorp; (b) As Keycorp was aware, Mr Thomes had only been with Lucent Technologies for 7 months. It was foreseeable that a short period of service with Keycorp could reflect poorly on Mr Thomes in the job market and make it difficult for him to obtain suitable alternative employment quickly; (c) It was foreseeable that, if Mr Thomes left Keycorp in circumstances where his performance was questioned, he would encounter difficulty in obtaining suitable alternative employment quickly; (d) It was foreseeable that Mr Thomes' opportunity to obtain suitable alternative employment quickly would be adversely effected by the press release that was published by Keycorp immediately after Mr Thomes left; (e) Whereas it had been represented to Mr Thomas that he would be able to do very well financially if he left Lucent Technologies and took up employment with Keycorp, it turned out that Keycorp repudiated his contract of employment, that Mr Thomes was unable to find suitable alternative employment for approximately 2 years and that he had to live off his savings; (f) Whereas the contract of employment expressly provided for 9 months' severance in the case of redundancy (in which case the termination would be the fault of neither Keycorp nor Mr Thomes), a figure of 18 months' severance was fair in circumstances where the termination was not the fault of Mr Thomes but arose from Keycorp's repudiation of the contract and came about in circumstances that were likely to hinder Mr Thomes' chances of re-employment. 188 Consequently, it was submitted, there was a clear, reasonable and proportionate connection between the unfairness found by Curtis AJ, the variations to the severance provisions of the contract made by his Honour and the resulting compensation ordered to be paid. 189 On balance, we consider the respondent is correct. We consider a reasonable inference to be drawn from the evidence is that the respondent accepted the terms of the contract, including those terms relating to notice and severance, on the basis of the representations made to him, including those relating to the strength of the business and the effectiveness of its products, and that he was not entering into a situation where survival of the company was to be the priority. If the respondent had known the true state of Keycorp and had not relied on the appellant's misrepresentations, as the trial judge observed, "Mr Thomes would not have left secure and highly paid employment to join the [appellant]". 190 Accordingly, we consider the necessary connection between unfairness and the variation of the contract relating to severance was established. That is, the appellant's pre-contractual misrepresentations induced the respondent to accept the terms of the contract, including those terms relating to notice and severance thereby misleading the respondent as to the viability of the appellant (and consequently the security of the respondent's employment) and depriving the respondent of the opportunity of negotiating terms that the respondent may have considered better protected his interests. Whether Curtis AJ erred in varying the contract to insert an 18 months severance payment provision 191 At [213] Curtis AJ determined as follows: 213 In the circumstances it is just that the terms governing severance be varied. I believe that a term providing that the applicant be paid 18 months remuneration is fair for these reasons: (1) Upon the evidence a position suitable to a man of Mr Thomes' seniority and experience becomes vacant once every two to three years (per Mr Dumitrescu). (2) Mr Thomes was induced by the respondent's misrepresentations to harm his long-term career prospects by leaving Lucent after only seven months employment. Those prospects were further harmed by a press release issued by Keycorp on 10 August 2001 linking Mr Thomes' departure from Keycorp with the announcement of substantial losses by that company. Such losses on the evidence would not have occurred if the Board had undertaken the restructure, proposed by Mr Thomes in March 2000 rather than in June 2001. (3) In the event Mr Thomes was unemployed for a period in excess of 18 months before finding less congenial employment in Taiwan. (4) Although pleaded as a separate claim, the applicant has submitted that compensation for damage to his professional reputation and distress may fall within the rubric of the present claim. "The hurt, anxiety, loss of self esteem, the sense of indignity and the sense of outrage" felt by Mr Thomes may be fairly redressed by the extent of his public remedy. 192 It was contended for the appellant that his Honour erred by placing too much weight on the period of the respondent's unemployment, especially given the complete absence of any expert or other evidence to suggest that the appellant's 10 August 2001 announcement to the Australian Stock Exchange ("ASX") did or might have had an adverse impact on his employment prospects. Further, there was no proper evidentiary basis for his Honour to conclude that Keycorp's announcement to the ASX on 10 August 2001 harmed Mr Thomes' employment prospects. Indeed, that was not the contention of Mr Thomes at all. The case of the respondent in this regard was that the announcement was crafted in a manner to deliberately harm his reputation. 193 As to the proposition that Keycorp would not have made substantial losses "if the Board had undertaken the restructure proposed by Mr Thomes in March 2000 rather than in June 2001", it was submitted that there was no proper evidentiary foundation for his Honour to come to such a conclusion. It was submitted the respondent gave evidence that there were two restructures proposed by him. The first restructure, proposed in 2000, was to cut the appellant's international operations. The second restructure was not proposed until March 2001. There was no probative evidence, it was submitted, that could have properly led Curtis AJ to conclude that had the Board cut the appellant's international operations in 2000, it would have avoided or reduced the company's losses. Furthermore, his Honour was in error in finding that Keycorp's Board was "unco-operative" and "ignored" Mr Thomes' proposals to close down or restructure the overseas operations. 194 It was contended for the appellant that the trial judge erred in that Mr Thomes' claim for compensation based on "hurt, anxiety, loss of self esteem, etc" was not established by reference to any probative evidence. His Honour made no finding that the contract was unfair in that it permitted conduct that caused such hurt, anxiety etc. There was no foundation for varying the contract at all (let alone the severance provision thereof) based on the respondent's claim of "hurt". 195 We do not consider Curtis AJ was correct in ordering an 18 months' severance pay provision. We agree with the appellant that his Honour erred by placing too much weight on the period of the respondent's unemployment (approximately two years). We also agree with the respondent there was no foundation for ordering compensation based on "hurt, anxiety, loss of self esteem, etc". Whilst the respondent contended that the announcement to the ASX on 10 August 2001 was calculated to damage his reputation and did so because he was unable to obtain suitable employment in Australia, there was no evidence this was in fact the case and we are left to speculate whether it was the announcement of Mr Thomes' departure at the same time as it was announced Keycorp had incurred a loss or the fact that there were simply no positions available at the time, or some other reason, that led to Mr Thomes being unable to find employment. 196 The severance payment provision in the respondent's contract required the payment to the respondent of "6 months of your total cash remuneration" in circumstances where the employer terminated the contract other than for cause. The payment may properly be seen as a payment in lieu of notice given that the notice required to be given to the respondent under the contract was only one month and that the contract makes separate provision for a redundancy payment. The rationale for notice or a payment in lieu is to give an employee the opportunity to adjust to the change in circumstances that is to occur and to seek other employment: Westfield Holdings v Adams at [144]. Notice or payment in lieu, is to be determined according to what is just in the circumstances of the case. The circumstances may require a consideration of those factors that common law courts have had regard to in determining what is reasonable notice such as age, length of service, nature of the employment, salary, degree of job mobility and the expectation regarding the period of time it may take the person to find alternative employment. 197 In the present case the respondent was 44 years of age and had been employed by the appellant for a period of 21 months. There was no certainty that absent the unfairness visited on Mr Thomes he would have continued with the appellant for a great deal longer because the major shareholder, Telstra, had lost confidence in him. If the appellant had not repudiated the contract the respondent could normally have expected to receive one month's notice and six months' pay in lieu of notice. If the employee had been made redundant he would have received one month's notice and nine months' pay. In all of the circumstances, we consider that what the respondent may have received if he had been made redundant is an appropriate yardstick for determining pay in lieu of notice and so we intend to reduce the 18 months' payment ordered by Curtis AJ to ten months. Whether Curtis AJ erred in concluding that severance payments for the first six months should include the full value of prospective bonus 198 At [215] Curtis AJ found: 215 In respect of the first six months there can be little doubt but that the remuneration should include the full value of prospective bonus with the share value paid as cash (in the event the share price did not move much in the following year). That is a total payment of $213,750 (one half of $427,500) plus $200,000 equals $413,750. Mr Clayton conceded that such an approach would be fair where irreconcilable but "genuine" differences between a Board and a Chief Executive Officer lead to his departure. The justice of this course is even more apparent when the differences arise because the Board refuses to honour the company's contractual obligations to the departing executive. 199 Mr Kimber submitted there was no proper basis for concluding that severance payments for the first six months should include the full value of prospective bonus because there was no proper basis for regarding the existing contractual provision as unfair and the evidence of Mr Clayton did not support this finding. Mr Clayton was merely answering his Honour's hypothetical questions and not expressing views about what would have been fair to the respondent in all the circumstances as at August 2001 (noting that Clayton retired in December 2000). 200 We consider it was open to Curtis AJ to conclude that the severance payments for the first six months, which we regard as a payment in lieu of notice, should include the full value of prospective bonus. Thus, for the period 10 August 2001 to 10 February 2002 Mr Thomes shall receive, as his Honour ordered, a payment of $213,750 (one half of $427,500) plus $200,000, which equals a total payment of $413,750. Whether Curtis AJ erred in finding that the respondent should receive bonus entitlement payments for the (12 months) balance of the 18 months period calculated on the basis of the bonus payments actually made to the respondent's successor. 201 At [216]-[219] Curtis AJ found: 216 In relation to the balance of 12 months I believe it appropriate to have regard to the document entitled "On Target Incentive Remuneration-13 August 2001 to 30 June 2002" which comprised Schedule A to the contract of employment offered by Keycorp to Mr F B Thompson who replaced Mr Thomes. The document is as follows … 217 Upon the evidence of Mr Irving that the financial plans devised by Mr Thomes proved successful, (Mr Thomes' plan provided for initial savings of $19 million), I infer that the 60 per cent component of Mr Thompson's bonus related to financial targets was achieved. 218 Because the two remaining targets are more subjective ("as agreed by the Board" "suitable" "more effective" "enhance the relationship"), the same inference is not available. Nevertheless Mr Thomes, who was wrongfully if constructively dismissed, should be compensated for loss of a chance to achieve the targets. I allow 50 per cent of each of components 1 and 2. 219 In the result Mr Thomes should have been paid upon termination an amount corresponding to 100 per cent of his base salary for a 12 month period commencing six months after termination and 80 per cent of a target bonus of $400,000, the total in respect of the period being $747,500. Had he not been wrongly dismissed he would probably have earned that sum. 202 Apart from the submission by the appellant that there was no warrant for an 18 months' severance payment at all, let alone based on the full value of the respondent's remuneration package, the appellant contended that the fact CEO jobs only come around every 2-3 years was not relevant to any education of the fairness of the severance provision in this case and, in any event, this fact could not render the variation made here appropriate or proportional. 203 Further, it was submitted his Honour's approach to this finding was to consider the incentive arrangements for the respondent's successor, Mr Thompson. It was submitted the trial judge did not identify his reason for doing so, and it was submitted that His Honour's approach was flawed. The only evidence in relation to those incentive arrangements was contained in Mr Thompson's contract and the email from Mr Irving to Mr Thompson dated 30 July 2002. There was no proper basis for concluding that Mr Thomes' performance would have mirrored his successor's performance, during the period 13 August 2001 to June 2002. 204 Mr Kimber submitted that Curtis AJ inferred (at [217]) that the 60 per cent component of Mr Thompson's incentive arrangement related to financial targets was achieved. In relation to this component it was submitted his Honour was in error because the evidence revealed that Mr Thompson did not achieve the financial targets, and he received only 22.5 per cent for this component, not 100 per cent as found by his Honour. Further, it was submitted, there was no proper basis for his Honour's assessment of 50 per cent for the respondent's loss of chance to achieve the parameters set for his successor. This is a fortiori given the evidence that Telstra had by May 2001 lost confidence in Mr Thomes and wanted him removed. 205 Senior counsel for the appellant submitted there was no evidentiary foundation for Curtis AJ to conclude that, but for his termination, the respondent "would probably have earned" $747,500 in the full twelve months "commencing after termination" (see [219]), especially given Telstra's view of the respondent and the prospect that he may otherwise have left in that period for his own reasons. 206 It was submitted that whilst his Honour gave considerable weight to respondent's 2001 view as to appropriate parameters for 2000, his Honour failed to give any weight to the respondent's own proposed goals for 2001 which included, "Positive EBITDA for 2001", which target was not achieved by the appellant. Had his Honour given proper weight to the respondent's own goals, no substantial bonus for 2001 could have been justified. 207 His Honour also failed, it was submitted, to give any weight to the evidence of an understanding reached between Mr Irving and the respondent as to his performance goals for the period 1 July 2001 to July 2002, as referred to in Mr Irving's letter to the respondent dated 26 July 2001, the content of which the respondent took no issue with in his affidavits. The understanding was that goals were to be based upon the outcome of the May 2001 strategy meeting and the agreed 2002 budget, which was presented to the Board on 18 July 2001. 208 Given that we have reduced the 18 months' period ordered by his Honour to ten months, we are left to consider the rate of pay to apply for the remaining four months, rather than the twelve considered by Curtis AJ. It may be seen that in determining the rate of pay his Honour paid particular regard to the bonus arrangements applied to Mr Thomes' successor, Mr Thompson. 209 We consider that, in the circumstances, his Honour erred in inferring that Mr Thomes would have achieved the 60 per cent component of Mr Thompson's bonus related to financial targets. There was no proper foundation for such an inference to be drawn, especially in circumstances where Mr Thompson only achieved 22.5 per cent of the 60 per cent component. If Mr Thompson was to be used as a benchmark, as he was, then it seems to us there was no evidence to suggest Mr Thomes would have done any better if he had continued in the role of chief executive and to assume otherwise only provides Mr Thomes with a windfall gain. We note that Mr Thompson achieved 62.5 per cent of his available incentive bonus. We propose to order that for the four months' period from 11 February 2002 to 10 June 2002 the respondent shall receive one third (four months) of the annual base salary of $427,500 and 62.5 per cent of one third (four months) of the annual bonus of $400,000. Orders 210 We intend to make the following orders: 1 Leave to appeal is granted. 2 The appeal is upheld to the extent identified in this judgment. 3 The order made by Curtis AJ for judgment in favour of Mr Thomes in the sum of $1,552,382.00 is set aside. 4 The appellant, KeyCorp Limited, shall pay to the respondent Michael Thomes an amount of $1,030, 715. 5 The appellant is to pay interest on the revised money amount in Order 4 hereof at the Supreme Court rates from 10 August 2001. 6 The appellant shall pay 70 per cent of the respondent's costs. 7 The stay order made by Staunton J is dissolved. 211 The respondent shall file and serve draft orders reflecting this judgment within 14 days. If it is indicated that the terms of the draft orders are agreed Boland J will make the necessary orders in Chambers. In the event there is no agreement within that time the respondent is to advise the Associate of Boland J and his Honour will list the matter for one hour for the purpose of resolving any outstanding disagreement as to the terms of the orders. _______________________________ 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.