Industrial Court of New South Wales CITATION: Murton v TD Preece and Co. Pty Ltd [2006] NSWIRComm 367 Applicant: Rick Murton PARTIES: Respondent: TD Preece and Co. Pty Ltd FILE NUMBER(S): IRC 6239 of 2002 CORAM: Backman J CATCHWORDS: Unfair contract - s 106 of the Industrial Relations Act 1996 - whether applicant a contracting party - s 108 of the Act considered - applicant found to be party to an arrangement with the respondent and Windjar Pty Ltd - whether circumstances of termination rendered the contract unfair - contract found unfair - orders. LEGISLATION CITED: Industrial Relations Act 1996 Brown v Rezitis (1970) 127 CLR 157 Buckman and Another v Burdekin Resources N/L (1998) 85 IR 415 Burks v Zanmarl Pty Limited (2000) 107 IR 187 Director General of the Department of Corrective Services v Mitchelson (1992) 26 NSWLR 648 CASES CITED: Faraci v The Leak Shop Pty Ltd [2003] NSWIRComm 169 Hammond v Manildra Flour Mills Pty Ltd [2003] NSWIRComm 64 Hyde and Others v Energy Australia (previously Metnorth Energy, Orion Energy, Sydney Electricity, Sydney County Council) (1999) 92 IR 409 Metrocall Inc v Electronic Tracking Systems Pty Limited (No. 2) 102 IR 309 Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661; 141 IR 14 Zahos v Industrial Relations Commission of NSW (2005) 148 IR 208 HEARING DATES: 11/04/2006; 12/04/2006. Written submissions: 24/05/2006, 27/07/2006, 17/08/2006 DATE OF JUDGMENT: 11/23/2006 Applicant: Mr I Latham of counsel Solicitors: Turner Freeman LEGAL REPRESENTATIVES: Respondent: Mr T Dixon of counsel Solicitors: Jones King Lawyers JUDGMENT: - 29 - INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Backman J Thursday, 23 November 2006 Matter No IRC 6239 of 2002 RICK MURTON v T D PREECE AND CO. PTY LTD Application under s 106 of the Industrial Relations Act 1996 JUDGMENT [2006] NSWIRComm 367 1 The applicant, Rick Murton, has commenced proceedings against the respondent seeking relief under s 106 of the Industrial Relations Act 1996 (the Act) arising out of circumstances of the termination of his employment and other matters said to arise out of his employment with the respondent. 2 The application which has proceeded by way of summons for relief seeks orders in the following terms: 1. An order declaring the contract of engagement or employment between the applicant and the respondent to perform work is an unfair contract pursuant to s.106 of the Industrial Relations Act, 1996. 2. An order declaring void in whole or in part ab initio , or at some later date, (except as to money or other benefits allowed already or due thereunder to the applicant) the contract between the applicant and the respondent under which the applicant performed work for the respondent. 3. Further, and in the alternative to 2, an order varying from its commencement or at some later date the contract by inserting the following provisions: (a) The contract shall not be terminated without the consent of the applicant except for serious misconduct unless the respondent gives the applicant 12 months' notice in writing or pays the applicant an amount in lieu thereof equal to 12 months' remuneration payable under the contract; (b) The terms and conditions of engagement of the applicant and the duties and responsibilities of the applicant shall not be altered without the consent of the applicant unless the respondent gives the applicant 12 months' notice in writing. If the respondent varies the terms and conditions of engagement of the applicant and the duties and responsibilities of the applicant without giving the applicant 12 months' notice in writing, the applicant shall be entitled to treat the respondent as having terminated the contract of engagement and shall be entitled to payment of an amount equal to 12 months' remuneration payable under the contract; (c) The respondent shall not conduct itself in such a manner as will be likely to damage without cause the confidence and trust in the engagement relationship that it has with the applicant and shall not make any decision adverse to the applicant unless: (i) the respondent shall give the applicant reasonable notice of any such intention and provide to the applicant reasons for the proposed adverse decision and adequate factual material in relation to the reasons; (ii) if the reasons for the proposed adverse decision relate to the applicant's conduct or performance of his duties, the applicant has been given an opportunity to defend himself against any allegations made in relation to his conduct or performance; (iii) if the reasons for the proposed adverse decision relate to the applicant's conduct or performance of his duties, the respondent has undertaken a thorough investigation of any allegation made in relation to the applicant's conduct or performance and any matter presented by the applicant in his defence; (iv) the respondent shall make any such decision reasonably having regard to: (A) the applicant's personal circumstances; (B) the satisfactory (or otherwise) performance by the applicant of his obligations under the contract. 4. In the event that the applicant's position with the respondent is made redundant, the respondent will, in addition to the notice required to terminate the applicant's engagement, pay the applicant an additional 12 months' pay as a severance payment for redundancy. 3 Other consequential orders sought include orders for interest and costs. Background 4 The applicant, who has a diploma in accounting, applied for a position with the respondent as a financial accountant/controller after seeing an advertisement for the position in the Sydney Morning Herald on about 18 January 2002. 5 He attended an interview on 29 January 2002 with Glen Preece the respondent's general manager. During the interview the applicant provided Mr Preece with documented details of his employment history. He recalls Mr Preece advising him during the interview: The accounts are a bit behind and it will be your job to bring them up to speed. 6 On or about 1 February 2002 the applicant attended a second interview with Mr Preece. The reason for this, according to Mr Preece, was that he had had little success in contacting the applicant's previous employers listed in the applicant's employment history. His most recent employer, according to the documentation was Windjar Pty Ltd. Independent enquiries conducted by Mr Preece in relation to this entity had revealed that the applicant was a director of that entity. Mr Preece said that this caused him some concern because the documentation provided to him by the applicant had left him with the impression that the applicant's connection with Windjar had been his employment as a finance manager and that otherwise Windjar was an, "unrelated entity". 7 During the second interview the applicant recalls Mr Preece informing him that his duties would include updating and implementing the new computer system in relation to which he would be required to prepare an implementation timetable and plan by 8 February 2002. In addition the applicant says he was offered the position of financial controller. In that role the applicant says all employees were to report directly to him on a day-to-day management basis and the applicant was to report directly to Mr Preece. The applicant told Mr Preece that he wanted a salary package of "$100,000 per annum inclusive". 8 There are a number of areas of significant divergence between the parties as to other topics of discussion during the second interview. 9 First, Mr Preece says that he offered the applicant a salary of $65,000 plus superannuation. According to the applicant Mr Preece said to him: I am looking at a figure of $80,000 per annum but because of your impressive references and previous experience, there will be a further $20,000 bonus scheme which will be based on increased profits and performance. Also, the $80,000 per annum will include paid annual leave of four weeks, plus sick leave and public holidays and will also be inclusive of superannuation. 10 Secondly, Mr Preece has deposed that because of difficulties he encountered in contacting any of the applicant's former employers in relation to his suitability for the position of financial controller, that it was a condition of the applicant's employment that he undergo a probationary or trial period of 3 months. The applicant recalls Mr Preece telling him that the position required a commitment from him for a minimum of 12 months, and that Mr Preece informed him that he would be provided with a written contract outlining his conditions of employment. The applicant also claims that Mr Preece never informed him that he had been unable to contact any of the applicant's former employers. 11 Thirdly, the applicant says that Mr Preece wanted to pay the applicant's salary through his company, Windjar. The applicant recalls Mr Preece saying: I can save on payroll tax and workers compensations (sic) payments if I pay you through your company. If you provide me with an invoice fortnightly, I'll give you your cheque. The applicant says he found the proposal satisfactory. 12 According to the respondent however, it was the applicant who first suggested that he preferred to work as a contractor through Windjar rather than as an employee, and that the respondent reluctantly agreed. As a result of the agreement Mr Preece says that he offered to engage Windjar to provide the applicant's services at a salary of $80,000 per annum payable fortnightly in arrears. The salary, the applicant was told by Mr Preece, was to be paid on the basis that it was inclusive of superannuation, annual leave sick leave and, "...regular employee entitlements". The respondent denied that the applicant was ever offered a $20,000 bonus per annum. It also denies receiving a request from the applicant or Windjar for a written contract. 13 The applicant commenced work on 4 February 2002. The applicant says his duties extended to the overall management and control of the respondent's accounting and financial reporting, accounts payable, wages and payroll, fixed assets and management of staff, the latter duty involving issues such as workers compensation and occupational health and safety. The respondent disputes that the applicant's duties were so wide-ranging. According to the respondent the applicant's supervisory duties extended to the receptionist only; and although it says the applicant was required to update the accounts, he was not responsible for maintenance of the computerised accounting system, nor for fixed assets. 14 On or around 8 February 2002 the applicant says he produced a 12 page report in relation to the implementation of the computer system and the updating of the accounts. He said the report estimated a time period of one month within which to catch up on two months of neglected work (a legacy of the respondent's previous financial controller, Mr Norm Tardiff) and that the estimated completion date for this task was October 2002. When he presented the report to Mr Preece the applicant says he was told: This is totally unacceptable, I want it finished now. If you don't get it finished now, I will get someone else to do it if it is not completed by 22 February 2002. The applicant says he then revised the tasks necessary for the completion of the accounts and implementation of the computer system. He spoke to the computer supplier of WIN Magi (the new computer system installed) and was informed that the version of Magi purchased by the respondent had some programming bugs which could be ironed out in the short term by a contractor. Following this advice the applicant says he spoke to Mr Preece on or around 15 February 2002 who agreed to retain the services of Leigh Heaseman, the Magi computer contractor, for 4 weeks after which the applicant's timetable as set out in the 12-page report would be reviewed. 15 The respondent denies being provided with a timetable during the week ending 8 February 2002 "...for the completion of the applicant's responsibilities". The respondent also denies that the applicant informed him that it would take until 31 October 2002 to bring its accounts up to an acceptable standard. Instead the respondent through Mr Preece says it became dissatisfied with the applicant's performance and poor work attitude during the first four weeks of his engagement. This opinion was formed because of a number of matters including: (i) the applicant often arrived late for work and departed in the early afternoon; (ii) Mr Preece often observed the applicant reading newspapers and taking personal calls on his mobile phone; (iii) Mr Preece "understood" that the applicant used the respondent's internet facilities to send personal e-mails, including a job application; (iv) in early March 2002 the applicant gave an estimate of 3 months in which to complete an updated aged debtors/creditors listing which Mr Preece found unacceptable and instead required the listing by the end of March; (v) Mr Preece had to speak to the applicant, "on a number of occasions" about his, "poor and inaccurate" work. 16 On 28 March 2002 Mr Preece signed on behalf of the respondent the applicant's letter of appointment which simply said: Richard Murton is employed by T.D. Preece Pty Ltd as Financial Controller and his salary package including superannuation is $80,000. 17 A number of collateral matters have been raised in the respective affidavits of the applicant and Mr Preece about which there is little or no agreement. Much of the material is hearsay or of doubtful relevance and therefore can be accorded little, if any, weight. Nevertheless reliance is placed by the applicant on at least some of the matters on the basis, as I understand it, that the matters lend support to the submission that the applicant was required to carry out directions given by Mr Preece that were clearly inappropriate and that this conduct in turn operated to make the contract unfair. These matters I will mention in brief. 18 The first matter concerns an allegation made by the applicant that in either late March or early April 2002 he had a discussion with Mr Preece about the Metal Trades picnic day which apparently employees are entitled to take as a day off under the Metal Trades award. During the discussion Mr Preece, according to the applicant, asked how the respondent's obligations to allow the picnic day under the award could be avoided. The applicant duly made some enquiries which confirmed that the workers were entitled to the picnic day under the Award. When the applicant passed this information on to Mr Preece he says that Mr Preece said: They can't have the picnic day at all. Mr Preece gives a very different account. He says the respondent's staff wanted to have their picnic day on the day after the Anzac day holiday, which in 2002 fell on a Thursday, but that it was not the respondent's practice to allow staff to take time off when this extended public holidays into weekends. In addition Mr Preece says the applicant also requested the day off on the picnic day. Mr Preece says he considered it "unbelievable" that the applicant would apply to have the day off because he had only recently commenced work and he was behind with his work. 19 The second matter concerns an allegation made by the applicant that the respondent had a practice of not banking cash sales. The applicant says he discovered this after a discussion with Mr Preece which occurred some 3 weeks after he commenced working for the respondent. He says he told Mr Preece that the practice was illegal for tax purposes and that Mr Preece informed him: I've been doing this since day one, I'm not interested in your view. Mr Preece denies the allegation. 20 The third matter related to the applicant's attempt to form an occupational health and safety committee. He says he was told by Mr Preece to immediately stop the formation of the committee. Mr Preece denies that the applicant attempted to form the committee or even that such a function formed part of his duties. 21 The final matter concerns an alleged failure on the part of the respondent to provide its employees with procedural fairness upon dismissal from employment. This particular allegation appears to have been made in the context of an incident involving Peter Lane, an employee of the respondent who the applicant says was summarily dismissed on 18 February 2002 by Mr Preece following a heated argument at the end of which Mr Preece told Mr Lane, "you're sacked". The applicant says that Mr Preece then asked him to investigate whether the respondent could be exposed to a claim for unfair dismissal as a result of the termination of Mr Lane's employment. The applicant says he informed Mr Preece that a claim for unfair dismissal if brought by Mr Lane may well be successful. According to the applicant Mr Lane returned to work on or around 21 February 2002. The respondent's response to this particular allegation is to point out that Mr Lane continues to be employed by the respondent as its manufacturing manager. 22 The applicant says that during his period of employment with the respondent he regularly worked 10 hours per day from 8.00am to 6.00pm. He says that during this time he was under constant pressure to implement the new computer system and update the accounting records. He had two sick days leave for the entire period although he experienced headaches and nausea because of the level of work-related stress as well as smoking in the workplace. He also maintains that no superannuation contributions were made on his behalf by the respondent despite the respondent's agreement to do so. During his oral evidence given during the proceedings, however, the applicant amended his statement to relate only to life insurance contributions and not superannuation, and later conceded that at his second employment interview he was informed by Mr Preece that his $80,000 salary, payable through Windjar, was to be inclusive of superannuation. 23 On 17 April 2002 the applicant says he was taken to lunch by Mr Preece for the purpose of discussing his work performance but that Mr Preece made no adverse comments regarding his performance, nor was any indication given to the applicant that Mr Preece was considering terminating his employment. 24 On 19 April 2002 the applicant's agreement was terminated by the respondent. The applicant recalls Mr Preece saying to the applicant: "I'm terminating your agreement, you'll be paid your annual leave calculated up to today". The applicant then asked Mr Preece why the agreement was being terminated but he says Mr Preece did not respond. Mr Preece agrees that the applicant's services were terminated on 19 April 2002. He says he told the applicant at that time that the arrangement, "was not working out", and that he reminded the applicant of the numerous occasions he had warned the applicant about his performance. He also says he told the applicant that he was on a "trial period" which had now come to an end. Contract under which work performed 25 The work performed by the applicant for the respondent as a financial controller clearly conforms to the description of work performed in any industry as required under s 106(1). A central issue, however, is who was the contracting party, the applicant or Windjar? The issue assumes importance because Windjar is not a party to the proceedings. 26 Putting aside the conflicting accounts as to who made the initial suggestion that the applicant be remunerated through Windjar, or whether the applicant indicated a preference to work as a contractor through Windjar, the applicant's primary contention is that he was the respondent's employee. The respondent contends that the proper party to the contract was Windjar. 27 In order to place the issue properly in context, it will have been readily observable from the summary of the background factual material in this judgment that no formal written contract was entered into between the parties. Nor is there any dispute about this. A related issue about which there is contest between the parties, but which in my view is not a necessary consideration as to whether relief may be granted, is whether the applicant may be classified as an employee or an independent contractor. In either case, so long as the necessary pre-condition for a finding that the impugned contract is unfair exists, the applicant may become entitled to relief: Hammond v Manildra Flour Mills Pty Ltd [2003] NSWIRComm 64 at [21]; Faraci v The Leak Shop Pty Ltd [2003] NSWIRComm 169 at [13]. 28 The respondent's primary position, that Windjar and not the applicant, was the contracting party, is based on several matters, namely: (i) all invoices were rendered through Windjar; (ii) the applicant took advantage of the tax amelioration advantages and at his own discretion attributed all income in his tax returns to Windjar and not as personal services income; (iii) the applicant could have commenced proceedings through Windjar, but the applicant made no mention of Windjar in his summons for relief; (iv) an application by the applicant made during the proceedings to join Windjar as a party to the summons was later abandoned. 29 In relation to the first matter, it will be recalled that the applicant commenced working for the respondent on 4 February 2002. The tender bundle contains five invoices presented fortnightly between the period 15 February 2002 until 11 April 2002 and a final invoice dated 19 April 2002 detailing payments due and payable on termination. Each of the invoices are on the letterhead of Windjar. The first five invoices contain identical information except for the relevant dates and the tax invoice number. All the invoices contain handwritten notations to the effect that they have been paid either on, or close to, the date of presentation. A sample invoice dated 15 February 2002 serves to illustrate the information which appears on all five invoices: TAX INVOICE NO: 1225 DATE: FRIDAY, 15 FEBRUARY 2002 TIME 11.16AM TO: T.D. PREECE PTY FROM: WINDJAR PTY LTD PHONE: 02 9680 9710 Rick Murton FAX 02 9634 3415 RE: SERVICES RENDERED FEBRUARY 2002 CC: Message For assistance to T.D. Preece Pty for installation of WinMagic for Debtors, Creditors & General Ledger $3,076.92 GST 10% $ 307.69 TOTAL DUE & PAYABLE $3,384.61 30 The final invoice dated 19 April 2002 is, unlike the other invoices, expressed to be from Windjar alone and includes an amount expressed to be for, "annual leave to date of termination" in the sum of $1,299.54. 31 The second matter asserts that the applicant took advantage of the "tax amelioration advantages" and attributed his income in his income tax returns to Windjar. The applicant's income tax return for the year ending 2002 does not form part of the tender bundle. An Australian Taxation Office document dated 30 October 2003 sent to the applicant and headed "Income Tax Return 2002" suggests that the applicant for the year ending 30 June 2002 had a taxable income of $2,900. In cross-examination, the applicant conceded that all monies paid by the respondent to Windjar were not treated by him as personal services income, but as monies received by Windjar. As to whether the arrangement proved advantageous to the applicant, I note that it would also have been advantageous to the respondent who would have been relieved of the burden of making workers compensation payments, as well as paying payroll tax. Moreover, whoever initiated the suggestion that the applicant's services be paid through Windjar, it seems that both parties acquiesced in that arrangement, as evidenced by the fortnightly invoices from Windjar and the handwritten notation indicating that the amounts due were paid. 32 As to the third matter, the applicant's position has been made clear from the outset, namely, that he, and not Windjar, was employed by the respondent. 33 As to the fourth matter, the applicant, on the second day of the proceedings, made an application to amend the summons to include Windjar as a party. The application was opposed by the respondent and the applicant abandoned the application later in the proceedings on the same day. 34 The applicant's response to the four matters outlined above has been to first emphasise his primary submission that he was, at all relevant times, an employee of the respondent, and, secondly, to rely in the alternative, on a submission that even if it were correct that Windjar was the contracting party, the Court would still have jurisdiction to determine the application "because the contract was one whereby work was performed by the applicant for the respondent". The applicant quotes a passage from the Court of Appeal decision of Zahos v Industrial Relations Commission of NSW (2005) 148 IR 208 in support of this alternative submission. The passage is extracted below: [55] Brown established that the persons who may be party to proceedings under the predecessor of s106 are not confined to the parties to the relevant contract etc. The power of the Commission to make an order for the payment of money under the provision now found in s106(5) is not limited to the making of an order for the payment of money by one of the parties to the contract etc found to have been unfair. The remedial power extends to such orders as can reasonably be thought to have a real connexion with the making, variation or avoidance of that contract etc. 35 This decision does not however assist the applicant. One of the issues considered in Zahos was whether respondents to the proceedings under s 106 who were not parties to the impugned contract with the applicant were liable to have money orders made against them under s 106(5) in accordance with the principles set out in Brown v Rezitis (1970) 127 CLR 157. Under s 106(5) respondents who are non-parties to an impugned contract or arrangement are not excluded from liability for money orders under that sub-section if it can be shown that they benefitted from the making or the execution of the contract or otherwise received the proceeds of that contract or were in some other way culpably associated with its making or operation: Brown v Rezitis per Barwick CJ at 163-166, 168. 36 These principles do not apply to applicants who are not contracting parties. This is because of s 108 of the Act which limits the class of applicants who may make applications under s 106 to those applicants who are contracting parties, and to certain types of associations such as employer organisations and unions. 37 The relevant parts of s 108 are set out below: An order may be made under this Division on the application of: (a) any party to the contract, or (b) any person who, but for the making of such an order, would be a party to the contract, or . . . and not otherwise. 38 In my view the issue as to who is the contracting party in the present proceedings falls to be decided by reference to s 108. Neither party sought to rely on this provision nor was it mentioned by the parties in their respective submissions. In Metrocall Inc v Electronic Tracking Systems Pty Limited (No. 2) 102 IR 309 the Full Bench heard an appeal brought by the respondents to an application under s 106, against an interlocutory judgment at first instance granting the joinder of an additional applicant. The issue to be decided by the Full Bench was whether it was open to the trial judge to find that the additional applicant (the second respondent to the appeal) was a party to a contract in terms of s 108 of the Act (at [11]). The Full Bench in upholding the decision at first instance to join the additional applicant endorsed as correct the judgment of Wright J, President in Hyde and Others v Energy Australia (previously Metnorth Energy, Orion Energy, Sydney Electricity, Sydney County Council) (1999) 92 IR 409 at 423 where his Honour made the following observations as to the ambit of s 108: The submissions of the respondent as to limitations said to arise as to the Court's jurisdiction from the terms and form of s 108 of the Act should not be accepted. Section 108 does not, on its proper construction, preclude the bringing of proceedings such as the present. The intention of the limitations expressed in that section is, in general terms, to limit those who may make an application to the parties to the contract, as defined, or to registered organisations and thus precludes non-parties to such contracts from having standing to commence such proceedings. The origin of s 108 is subs (2C) of s 88F of the Industrial Arbitration Act 1940 , which was included in that section by Act No 162 of 1985 and which was apparently intended to preclude applications by a non-party of the kind considered in F Sharkey & Co Pty Ltd v Metropolitan Water Sewerage & Drainage Board [1981] 2 NSWLR 824; [1981] AR (NSW) 286 and Metropolitan Water Sewerage & Drainage Board v Judges of the Industrial Commission (NSW) [1981] AR (NSW) 305. 39 In commenting on the observations in Hyde v Energy Australia the Full Bench in Metrocall said (at [16], [17]): We consider that his Honour's analysis of s 108 is correct and, in particular, that its intention is to limit those who may bring an application under s 106 to the parties to the contract, that word being given the extended meaning provided to it by s 105. It is to be observed that s 105 is a definitions provision for the whole of Pt 9 of the Ch 2 of the Act, which Part includes both ss 106 and 108. Further, s 105 plainly states that the definitions apply to Pt 9 without any qualification. There is, therefore, no basis in either the text of s 105 or in the construction of Pt 9 viewed as a whole whereby it could be found that a reference to a "contract" in s 108 is to be construed other than by reference to the extended meaning of that term provided by s 105. Her Honour was determining the interlocutory application before her on the basis of the limited evidence filed at that stage by the first respondent in the proceedings proper and the second respondent in relation to his motion. It is unnecessary for us to traverse that evidence. It is, however, sufficient to note the primary ground the first respondent relied on in the summons originally filed was that it performed work in an industry pursuant to a contract from approximately August 1991 whereby the appellant granted an exclusive licence to the applicant to market, lease, operate and maintain a system referred to as the "Pronet Tracking System" in Australia. There was evidence to support that claim. There was also evidence which showed that the second respondent was the managing director of the applicant and personally carried out the significant majority of the work in relation to the grant of the exclusive licence and attempts to market the system and to obtain contracts in relation to it. As such, it was open to the trial judge to find for the purposes of the motion that there was, or was arguably, an arrangement involving the appellant and both respondents to which the second respondent was a party. Accordingly, it was therefore open to the trial judge to find the second respondent could have himself commenced proceedings under s 106 in relation to that arrangement on the basis that he was a party to that arrangement and therefore a party to a contract, in its extended sense, pursuant to s 108. 40 Turning to the present circumstances and adopting the analysis of the Full Bench in Metrocall the evidence reveals that the applicant was the sole director of Windjar and personally performed the work as financial controller for the respondent. In order to illustrate the latter point it is instructive to look at what the applicant actually did while working for the respondent, not so much for the purpose of assessing whether the work performed was done in the capacity of employee or independent contractor but whether it can be said that the applicant, "personally ... carried out the work". 41 The evidence discloses that the applicant commenced work on a full-time basis as the respondent's financial controller on 4 February 2002. The extent of his duties has been a matter of some dispute but the tax invoices, for example contain a brief description of his duties, namely the installation of "WinMagic" (sic) (the computer system), and, "For Debtors, Creditors and General Ledger". The terms of the advertisment in the Sydney Morning Herald sought a person for the position of financial accountant/controller with a minimum of 5 years experience in the manufacturing field, preferably a practising accountant, and "strong computer skills essential". The advertisement also sought the services of a "self-motivated person with team management exp., management and accounting and financial reporting... Experience in export-foreign cover/forward cover would be an advantage". The applicant is a qualified accountant who when he commenced work with the respondent had some 15 years experience as a financial controller and manager of various companies. This experience is indicated in the applicant's curriculum vitae which is annexed to the affidavit of Mr Preece. 42 According to the applicant he regularly worked about 10 hours per day for the respondent from 8:00am to 6:00pm. During that time he worked on implementing the new Magi computer system and updating the accounting records, as well as other duties. Mr Preece says the applicant was in charge of the paymaster duties and that through Windjar he was engaged to perform duties limited to maintaining the respondent's aged creditor/debtor listings, maintenance and updating of the general ledger and associated accounts, supervision of the receptionist and management reporting including the quarterly preparation of profit and loss statements and balance sheets. 43 Whatever the true extent of the applicant's duties, on either version in my opinion, he, "personally ... carried out the work" which he was engaged to do either directly or through Windjar as a financial controller. Moreover, the letter dated 28 March 2002 suggests on its face that the applicant and not Windjar was directly employed to do the work. It is not however necessary to decide this latter point, since in my view it is open in accordance with the terms of the summons and the available evidence to find that the applicant was party to an arrangement between himself, Windjar and the respondent, and therefore a party to a contract in its extended sense under s 108. This was the basis for the finding that the additional applicant could be joined as a party to the summons in Metrocall at [17]. The present applicant was entitled to commence proceedings under s 106 because he was a party to the arrangement. In the absence of a formal written contract, the available documentation and other evidence adduced during the proceedings confirms the existence of the arrangement. First, the work to be performed, being that of a financial controller, was performed solely by the applicant. Secondly, the applicant was the sole director of Windjar. Thirdly, although Windjar invoiced the respondent for the applicant's services, it is significant that some 7 weeks into the applicant's engagement, the respondent signed the letter dated 28 March 2002 which stated that the applicant "...is employed by (the respondent) as Financial Controller and his salary package including superannuation is $80,000". While the reference to the applicant being "employed" is not conclusive evidence of that fact it does, in my view, indicate the reality of the working relationship between the applicant and the respondent, in the absence of a formal contract and particularly given that as at the date of the letter the applicant had been working for the respondent under the direct supervision of Mr Preece, for 7 weeks during which time a number of invoices had been generated by Windjar for services provided by the applicant. The letter of 28 March suggests that the respondent at least viewed the nature of the working arrangement with the applicant as that of employer and employee. Was the contract unfair? 44 The applicant's case that the contract was unfair must be examined by reference to how the case has been pleaded in the summons. Those pleadings appear to rely on a number of allegations of conduct on the part of the respondent in its dealings with the applicant as well as alleged failures of the contract to provide for adequate notice and superannuation contributions and to protect the applicant from summary termination of employment. The allegations said to render the contract unfair are set out in the summons as follows: (a) required the applicant to carry out the directions given by Mr Preece, even where the applicant had serious concerns about the legality of those directions; (b) failed to protect the applicant from a hazardous and stressful work environment; (c) failed to protect the applicant from summary termination of employment; (d) failed to provide for adequate notice provisions upon termination of the contract without cause; (e) required the applicant to work in an environment which was not compliant with Occupational Health and Safety guidelines; (f) failed to provide for the respondent to make contributions to a superannuation fund on behalf of the applicant; (g) exposed the applicant to frequent and public episodes of verbal abuse by Mr Preece. 45 The applicant has not in submissions expanded upon the reasons as to why it is alleged that the respondent's conduct operated upon the contract and rendered it unfair. Some submissions were advanced in relation to an attempt on the part of the applicant to introduce an occupational health and safety committee (arguably referable to (e) above). The allegation that the applicant was required to carry out directions with possible illegal consequences may relate to the applicant's account concerning the Metal Trades picnic day, as well as the allegation that the respondent did not bank cash sales. The alleged failure to protect the applicant from a hazardous and stressful environment may relate to the applicant's complaint set out in his affidavit that staff including Mr Preece smoked in the workplace. The allegation concerning the frequent verbal abuse probably concerns the verbal abuse the applicant says he endured from Mr Preece. Mr Preece conceded that he threatened the applicant with dismissal on about 20 occasions during the applicant's 7 week engagement. The applicant has not sought however to connect the alleged conduct associated with these allegations to the contract. Rather, the applicant's case that the contract was unfair appears directed more to the issues of the failure to make provision for adequate notice and the circumstances of the applicant's termination. 46 This approach is supported in the applicant's written submissions where it is contended: The contract is alleged to be unfair because it did not contain sufficient protective mechanisms against the termination of the contract without notice, procedural fairness and with regard to the circumstances of the applicant; see... paragraph 33(c)(d) of the summons". 47 The applicant in submissions also contended that the contract was unfair because it, "...failed to require the respondent to make contributions to a superannuation fund". In the applicant's second affidavit he states that he does not recall Mr Preece informing him that the $80,000 yearly salary was to be inclusive of superannuation. In his first affidavit he asserted that the respondent did not make any superannuation contributions despite an agreement to do so. In cross examination however the applicant said that the reference to "superannuation contributions" related to the applicant's inclusion in the respondent's life insurance plan. The applicant also in cross examination retracted his earlier statement that he did not recall Mr Preece informing him that the $80,000 yearly salary was to be inclusive of superannuation, conceding that his earlier statement was, "incorrect". These clarifications in my view lend support to the respondent's contention that superannuation was neither owed nor owing to the applicant at the time of his termination. In addition the 28 March 2002 letter clearly states that the applicant was employed as a financial controller and, "... his salary package including superannuation is $80,000". Taking all these matters into account I find that the contract did not fail to require the respondent to make superannuation contributions on the applicants behalf. On the contrary it appears that this was never the intention of the parties. Consequently no issue of unfairness arises. 48 The respondent relies on a submission that all of the heads of alleged unfairness set out under paragraph 33 of the summons are outside the ambit of the Court's jurisdiction by reference to Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661; 141 IR 14. Upon closer analysis, however, the submission as I understand it really relates to the allegation of a failure to provide for adequate notice; the respondents' primary contention in this regard being that a reasonable notice period was implied (in the absence of an express term in the contract). In my opinion, however an implied term of reasonable notice, although not of itself unfair may nevertheless operate unfairly on the contract in circumstances where the termination of an applicant's engagement or employment under the contract constitutes unfairness under the contract by reason of, for example, the failure to make a monetary payment in lieu of notice, or make provision for any notice where there is no finding of misconduct. In Hammond v Manildra Flour Mills, Marks J found that the contract there under consideration (which did make provision for one week's notice) was unfair in relation to the circumstances of the applicant's termination on the following bases: 1. Whether the contract be one of employment or principal and independent contractor, the courts will imply a right to terminate upon reasonable notice, in the absence of any express term to the contrary. What is reasonable will depend upon all of the circumstances. Such a provision can never, in my opinion, be unfair. The converse is that any period which is not reasonable must ipso facto be prima facie unfair. I do not regard the fixing of a period in a contract by reference to an arbitrary period (here, one week) as indicating in any way that that period is reasonable. 2. It is more likely than not that the applicant was an independent contractor and that he anticipated that his engagement would last for approximately 12 months. It is more likely than not that the respondent had the same contemplation. 3. The applicant at the time of commencement of the proceedings was aged 59. He gave evidence that work was difficult to obtain in the central west area of New South Wales and, in any event, his age inhibited his ability to obtain alternative employment. 4. The applicant was required to relocate from Lithgow to Manildra in order to take up the engagement. 5. The respondent acted unfairly in terminating the engagement of the applicant. 6. The unfair termination took place at the very beginning of the contemplated period of engagement. 49 Whether the circumstances of the applicant's summary termination rendered the contract unfair will be considered shortly, but plainly a relevant consideration will be the fact, which is not in dispute, that at the time of termination the applicant received no payment in lieu of notice. 50 A further issue raised by the parties during the proceedings concerned whether the applicant was subject to a 3 months period of probation as a condition of his engagement or employment. There appeared to be some confusion between the parties as to whether the allegation of a 3 month probation period went to the issue of credit alone (the applicant's contention) or to the issue of unfairness (the respondent's contention). 51 I intend to dispose of the issue in the following way: (i) the applicant denied any discussion with the respondent as to the imposition of a 3 month probation period or that it was a condition of his engagement or employment. The respondent, in contending to the contrary, said that because it had trouble contacting the applicant's former employers or supervisors it imposed the condition for a 3 month period; (ii) Mr Preece asserted in evidence that the respondent had a probation policy but that it was not in writing; (iii) the letter of 28 March 2002 contains no reference to a probation period, nor does any other document tendered during the proceedings contain any reference to a probation period; (iv) if the respondent is correct then, in any event, the existence of a probation period during which a worker's services are terminated does not necessarily preclude the payment of "reasonable compensation": Buckman and Another v Burdekin Resources N/L (1998) 85 IR 415, at 418, 420. By analogy, and consequent upon a finding of unfairness under s 106, the existence of a probation period would not necessarily preclude relief in terms of a monetary order reflecting for example a payment in lieu of notice. (v) the respondent's reliance on Director General of the Department of Corrective Services v Mitchelson (1992) 26 NSWLR 648 at 658 for the proposition that the probation period was "an extension of the interview process...(and)... not a permanent engagement" is misconceived insofar as it purports to provide support for the submission that the applicant's summary termination was not unfair. Similarly, reliance by the respondent on Burks v Zanmarl Pty Limited (2000) 107 IR 187 for the proposition that the probationary period of 3 months is commonplace and not, " ipso facto unfair". 52 A brief analysis of the above points reveals that the existence of a 3 month probation period depends entirely on the unsupported assertion of Mr Preece, that is, in the absences of any supporting documentation and in the face of an express denial by the applicant that it was a condition of his engagement or employment. In my view, if the respondent was sufficiently concerned about the necessity to impose a period of probation on the applicant then the condition could or would have been expressed in the letter signed by Mr Preece on 28 March 2002. In any event the existence of the condition would not, as I earlier observed, preclude a finding of unfairness referable to the contract, that is, termination of service without more, during a period of probation may not necessarily disentitle an applicant from obtaining relief if the circumstances of the termination were found to be unfair. Further, the applicant relied in the first instance on the issue as one going to the credit of the parties and not as an indicia of alleged unfairness. 53 As to the question of credit, it is difficult to ascertain on the submissions of the parties to what issues it was intended to be directed. There is no dispute for example that the applicant's services were summarily terminated without notice after about 11 weeks of engagement or employment, and that upon termination the respondent did not pay the applicant any moneys in lieu of notice. 54 These are the principal issues which the Court has to decide in relation to whether the contract was unfair. These issues are independent of issues as to credit (because they are not disputed) and therefore the necessity to make adverse credit findings against either party may be dispensed with. I should however note for completeness that I found both the applicant and Mr Preece to be unsatisfactory witnesses in relation to some aspects of their evidence. The applicant's evidence in relation to the issue of superannuation, which I have earlier outlined, contained internal inconsistencies, although I am unable to conclude whether this was because the applicant was being untruthful or simply being unreliable as to his recollection of events. Mr Preece on the other hand said in his affidavit that he had been unsuccessful in his attempts to speak to any person who could provide a reference for the applicant. In cross examination Mr Preece was systematically asked about each of the applicant's former employers nominated in his curriculum vitae as to whether he had attempted to speak to any of them about providing a reference for the applicant. In relation to each nominated employer Mr Preece's response was either that he could not recall whether he had made any attempt or he didn't know. This alleged inability to make contact with any of the applicant's former employees was according to the respondent the basis upon which it decided to impose the three months probation period as a condition of the applicant's engagement. The failure to recall by Mr Preece as to whether he in fact attempted to contact anyone with a view to obtaining a reference must undermine to some extent the purported rationale for allegedly imposing a period of probation in the first place. 55 It remains to decide whether the circumstances of the applicant's termination and the failure to provide for adequate notice provisions in the contract were unfair. The applicant's services were summarily terminated without notice in circumstances where the applicant had worked for the respondent for just under 11 weeks in a relatively senior position which involved a significant degree of responsibility and trust (the applicant was for example the paymaster) and which, at the time the applicant commenced in the position, he would have had a reasonable expectation of long term employment. This latter point is borne out in my view by reference to the terms of the advertisement in the Sydney Morning Herald which indicated an arrangement in the long term. The advertisement does not, for example, refer to employment for a fixed term or for a period confined to the completion of a particular project. Certainly no competing or contrary inference is available from the evidence. 56 The respondent asserts that the applicant's services were terminated because of poor performance. There is little substance to this allegation in my view. First, the allegation is supported by little detail either by way of oral evidence from the respondent or by way of any supporting documentation. Many indications revealed by the evidence are in fact to the contrary. First, the very short period of employment, on 11 weeks, is not necessarily a satisfactory period of time in which to properly and reasonably assess someone's standard of work. Secondly, the respondent apparently without any resistance or complaint consistently paid the fortnightly invoices submitted by Windjar. Thirdly, there was no evidence of any letters or other types of correspondence, an otherwise common device for alerting employees about employer dissatisfaction with work performance, which the respondent could have at any time sent to the applicant in order to give him some notice of its particular concerns. Fourthly, the letter of 28 March 2002 is sent some 7 weeks after the applicant has commenced work. Any concerns about his work performance could have been readily addressed in that letter. Mr Preece in his evidence during the proceedings said he had become dissatisfied with the applicant's work performance after only 4 weeks. Instead the letter of 28 March 2002 simply confirms in writing the applicant's employment and his annual salary. 57 I find for the reasons outlined above that the applicant's summary termination was not influenced by any considerations pertaining to work performance. I therefore find that the contract operated unfairly against the applicant because it failed to protect him from the circumstances of summary termination. The following reasons have influenced my decision: (i) the applicant's services were summarily terminated in the absence of any substantiated allegations of misconduct such as poor work performance and without notice; (ii) the applicant was not paid any monies in lieu of notice consequent upon his termination; (iii) the applicant had a reasonable expectation that his engagement or employment would be for a lengthy period of time; (iv) at the time of his summary termination the applicant had been engaged in a relatively senior position which entailed a significant degree of responsibility and trust. Orders sought 58 The summons for relief sets out the monetary relief sought by the applicant: (i) Payment in lieu of notice - 12 months payment $80,000 (ii) Compensation for loss of other employment benefits $10,000 (iii) Interest (iv) Costs 59 In relation to the first head of relief, this has been amended in the applicant's written submissions to 3 months payment, or $20,000. In relation to the second head of relief I have earlier found that no claim based on unfairness of the contract for superannuation contributions has been made out. In relation to other "employment benefits" there is very little evidence upon which a reasonable assessment may be made as to whether the applicant should be paid any outstanding entitlements. Putting aside the question as to whether the applicant's services were retained in the capacity of employee or independent contractor it seems for example that the applicant was paid a monetary sum equivalent to outstanding annual leave entitlement in an amount of $1,299.54 set out in the final invoice rendered to the respondent by Windjar and dated 19 April 2002. In these circumstances it would appear, in the absence of other material that no statutory entitlements, if available, are outstanding. This leaves the consideration as to whether the applicant should receive any payment in lieu of notice consequent upon my findings of unfairness in relation to the circumstances of his termination. 60 The applicant's short term of engagement or employment, approximately 11 weeks might at first glance preclude a payment of any substance being made to the applicant. In Hammond v Manildra Flour Mills however this circumstance operated in the applicant's favour. In that decision the applicant's services were terminated after about 2-3 months. Marks J assessed a period of 5 months as reasonable notice. His Honour's reasons for doing so were expressed as follows (at [22]): I have been influenced to select a period of five months because the applicant's engagement was terminated at an early stage when he had only been working there for a short period. In some respects it might be thought that the converse should apply namely that given such a short period of engagement a shorter period of notice would be reasonable. However there are circumstances where, in my opinion, the termination of an engagement without justifiable cause which occurs shortly after it is entered into should require the assessment of a longer period of reasonable notice. I instance the recent decision of the Full Bench of this Court in King v State Bank of New South Wales [2002] NSWIRComm 353 where the Court on appeal extended the period of reasonable notice from six months to nine months albeit that there was a short period of employment only, given the circumstances which applied in those proceedings. 61 In my view adopting the reasoning of Marks J above, a reasonable period of notice in all the circumstances (referable to my findings of unfairness in relation to the applicant's circumstances of termination outlined above) is 2 months, or $13,330. In assessing this amount I have also taken into account whether the applicant has taken steps to mitigate his loss. The applicant's evidence in this regard is that following the respondent's termination of his services he did contracting work through Windjar. This work apparently entailed short term arrangements through a business called Accounting Placements. The work was not full-time and for the first three months following his termination the applicant estimates he obtained about 2 weeks work. This evidence shows that the applicant made reasonable attempts to mitigate his loss. I do not therefore consider it appropriate to reduce any payment made on the basis of the principle of mitigation. 62 I also take into account the applicant's contention that his salary package included a $20,000 bonus. I decline to consider this claim for a number of reasons. First, there is little or no evidence as to the nature or character of the bonus or how it is to be calculated. Secondly, there is nothing documented to confirm that the respondent had a bonus scheme of some description or that the applicant would be guaranteed any bonus payment. Thirdly, and perhaps of greatest significance, is the fact that it does not form part of the applicant's claim for relief as set out in the summons nor was any application made during the proceedings to amend the summons to include a $20,000 bonus payment as part of the relief sought. 63 Interest should also be payable on the amount assessed above as payable from the date of the application, that is, from 6 November 2002. 64 I note the applicant's submission that he wishes to be heard on the issue of costs. Orders 65 I make the following orders consequent upon the findings of unfairness which I have made: (1) The contract entered into between the applicant and the respondent under which the applicant commenced work for the respondent on 4 February 2002 is declared unfair. (2) The contract referred to in Order 1 above is varied from its inception to include a term that the contract shall not be terminated without the consent of the applicant except for serious misconduct unless the respondent pays the applicant $13,330, representing 2 months remuneration payable under the contract. (3) The respondent is to pay the applicant $13,330 representing 2 months remuneration payable under the contract. (4) The respondent is to pay interest on the amount specified in Order 3 above in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. The interest shall be payable from the date of the filing of the summons for relief on 6 November 2002 until the date of this judgment. (5) The matter is set down for a directions hearing in relation to costs Thursday 30 November 2006 at 9.30am. ________________ 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.