Industrial Court of New South Wales CITATION: Boyd and Another v Maxx Implementation Pty Limited and Others (No 2) [2008] NSWIRComm 121 LINDSAY DOUGLAS BOYD First Applicant FINGER LIMEING GOOD PTY LIMITED (FORMERLY ALCONLEIGH PTY LIMITED) (ACN 076 969 465) AS TRUSTEE FOR THE ALCONLEIGH TRUST Second Applicant MAXX IMPLEMENTATION PTY LIMITED (ACN 073 058 849) First Respondent PARTIES: MAXX PTY LIMITED (ACN 098 422 354) Second Respondent GERHARD MARTIN LUDWIG Third Respondent EBENEZER GUMNUT PTY LIMITED (ACN 073 555 898) AS TRUSTEE FOR THE GM LUDWIG FAMILY DISCRETIONARY TRUST Fourth Respondent FILE NUMBER(S): IRC 1509 of 2004 CORAM: Schmidt J CATCHWORDS: Unfair contract - organisational change business - were proceedings against fourth respondent commenced within time - not brought within time - were claims made in relation to profit share within jurisdiction - was the business transferred to second respondent - was the first applicant employed by second respondent - claim established - were the contracts between the applicants and first respondent unfair - unfairness established - was the contract between first applicant and second respondent unfair - unfairness established - question as to who terminated employment contract - constructive dismissal established - contracts varied in relation to notice, payment of salary, expenses, statutory entitlements and calculation of profit share - money orders - no orders against first respondent - consideration of deed of company arrangement agreed by first and second applicants - discretion to make money orders declined, deed to be given effect - money orders made against second and third respondents - no case established for a money order against fourth respondent - money orders against second and third respondents LEGISLATION CITED: Corporations Act 2001 Industrial Relations Act 1996 Allison v Bega Valley Council (1995) 63 IR 68 Boyd and Another v Maxx Implementation Pty Limited and Others [2008] NSWIRComm 62 CASES CITED: Brown v Rezitis (1970) 127 CLR 157 Fish v Solution 6 Holdings Limited (2006) 225 CLR 180 Wirraway (NSW) Pty Ltd and Anor v Ultra Tune Australia Pty Ltd (2006) 156 IR 367 HEARING DATES: 31 March 2008, 1 April 2008, 2 April 2008, 3 April 2008, 4 April 2008, 30 April 2008, 1 May 2008, 2 May 2008, 8 May 2008 DATE OF JUDGMENT: 26 June 2008 APPLICANTS: Mr P Strain, counsel SOLICITORS: Hedges Bhatty Solicitors LEGAL REPRESENTATIVES: RESPONDENTS: Mr R Alkadamani, counsel SOLICITORS: Thomas and Company JUDGMENT: - 1 - INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Schmidt J 26 June 2008 Matter No IRC 1509 of 2004 LINDSAY DOUGLAS BOYD AND ANOTHER v MAXX IMPLEMENTATION PTY LIMITED AND OTHERS Application under s.106 of the Industrial Relations Act 1996 JUDGMENT [2008] NSWIRComm 121 1 These proceedings concern the fairness of various contracts between the applicants and the first and second respondents, under which Mr Boyd, the first applicant, performed work. The applicants were also entitled to 25% of the profits of the business in which the work was performed, at least while the business was conducted by the Maxx Productivity Trust ('the Trust'), a trust of which the first respondent, Maxx Implementation Pty Ltd ('Maxx Implementation') was trustee. The business involved the provision of services in relation to the implementation of organisational change in Australian businesses. 2 While initially there was an issue as to whether there was an entitlement to a 25% share in this business, or only a 25% share in the profits of the business, in cross examination Mr Boyd accepted that the entitlement was to a share in the profits, as the result of the ownership of certain units in the Trust. There was also a further issue between the parties as to whether the business was transferred to the second respondent, Maxx Pty Limited ('Maxx'), on 1 July 2003. While this was expressly denied in the affidavit evidence of Mr Ludwig and Ms Grove, Ms Grove, at least, conceded in cross examination that there had been such a transfer. 3 The third respondent, Mr Ludwig, was the managing director and a shareholder of the first and second respondents. The fourth respondent, Ebenezer Gumnut Pty Limited, as trustee for the GM Ludwig family Trust ('the GM Ludwig family Trust'), was an entity associated with Mr Ludwig and the owner of the balance of the units in the Trust, which entitled it to 75% of the profits of the business. There was no issue between the parties that through his ownership of various shares and various directorships, Mr Ludwig effectively controlled Maxx Implementation, the Trust and Maxx, at all relevant times. 4 The applicants' case was that an initial employment relationship between Mr Boyd and Maxx Implementation commenced in 1996, after Mr Ludwig approached Mr Boyd about joining a business venture, which Mr Ludwig was establishing. On his case, Mr Boyd was interested in the opportunity Mr Ludwig offered, because it gave him an equity position, Mr Ludwig having in mind floating the business, which Mr Boyd hoped would establish him, for his eventual retirement. 5 Mr Boyd commenced working for Maxx Implementation in 1996 and the working arrangement persisted, despite various changes in the legal relationships between the various parties, which were agreed, from time to time, prior to the termination of the relationship in October 2003. As well as being paid remuneration, Mr Boyd was repaid business expenses incurred for Maxx Implementation, on a monthly basis. 6 Mr Boyd was a director and 50% shareholder of the second applicant, Finger Limeing Good Pty Limited ('Finger Limeing Good'), the trustee of the 'Alconleigh Trust'. (The company had formerly been called Alconleigh Pty Limited ('Alconleigh')). Mr Boyd had taken advice from the first and second respondents' accountants, as to how he should structure his involvement in the business and as a result of their advice, this corporation and trust structure was established in 1997, for tax reasons. 7 In 1997, it was agreed that Finger Limeing Good would provide Mr Boyd's services to Maxx Implementation, for which it would be paid $3,000 per week. Mr Boyd was to be employed by Finger Limeing Good, although it was not until October 1998, that a written service agreement was entered by the two applicants and Maxx Implementation. 8 Later in 1997, Mr Boyd applied for 25% of all A class units in the Trust. In 1998, Finger Limeing Good became the holder of these units and in 2001, the units were issued to Finger Limeing Good, as trustee for the Alconleigh Trust. 9 Between July 1997 and September 2002, distributions of some $1 million were made from the Trust to Finger Limeing Good and the Alconleigh Trust. Mr Boyd continued working as the operations manager of the business throughout this time. 10 In September 2002, the 1998 service agreement was terminated and under a new oral agreement between Mr Boyd and Mr Ludwig, Mr Boyd became a direct employee of Maxx Implementation, with a remuneration package of some $156,000 per annum. This agreement was made in order to accommodate Mr Boyd's then tax position. On Mr Boyd's case, in June 2003, Maxx Implementation ceased making payments to him, without any warning or explanation. In July, Mr Ludwig advised Mr Boyd that the business had been transferred to Maxx. Despite being entitled to 25% of the profits of the business, this transfer had been implemented without notice to, or the consent of, the applicants. Again, this was disputed by the respondents. 11 Maxx Implementation ceased trading on 30 June 2003 and Mr Boyd then commenced working for Maxx. Mr Boyd was told by Mr Ludwig that Maxx was experiencing cash flow problems, because it had no work, but there were good prospects to pursue. As a consequence, all future and outstanding entitlements under Mr Boyd's former employment agreement with Maxx Implementation and his new employment agreement with Maxx, would be deferred, until Maxx had funds available. Maxx would then pay Mr Boyd what was outstanding to him. 12 Mr Boyd continued working for Maxx, but disagreements arose over expenses claims submitted by Mr Boyd and Maxx's continuing failure to pay him any salary and outstanding expenses. By October 2003, Mr Boyd came to the view that he could no longer continue working unpaid, without his expenses being met. Soon afterwards he came to the view that he had been constructively dismissed and ceased performing work for Maxx. This was denied by the respondents. There was an issue between the parties as to who brought this contract to an end. 13 In March 2004, these proceedings were commenced. Shortly afterwards Maxx Implementation went into voluntary administration. An administrator was appointed. A report to creditors was issued by the administrator in April 2004. It contained balance sheets and profit and loss statements, which alerted the applicants to what they claimed were a number of 'non commercial transactions, not relating to the business'. They included interest free loans to related parties, including Maxx; loans of over $700,000 to Mr Ludwig, and of over $1.2 million to the GM Ludwig family Trust. It was the applicants' case that these loans were financed by Maxx Implementation retaining profit distributions due to Finger Limeing Good; delaying creditor payments and taking out non-commercial loans, which incurred over $100,000 interest per year. These loans were for the benefit of Mr Ludwig and were made without Mr Boyd's knowledge, or consent. These claims were disputed. 14 It was the respondents' case that the applicants were precluded from pursuing various of the claims brought in these proceedings against Maxx Implementation, because of the terms of a deed of company arrangement, approved by Maxx Implementation's creditors, including the applicants, in June 2004. The respondents also claimed that the course which the various discussions and agreements between the parties actually took, was substantially different to the case advanced by the applicants. Nevertheless, they admitted that certain amounts might be owing to the applicants by Maxx, in relation to reimbursement of certain expenses, depending on some of those expense claims being verified. 15 There was an issue between the parties as to how the relationship was finally brought to an end. Otherwise, the applicants' claims were disputed, including the claim that 'non commercial' transactions, not relating to the operation of the Maxx Implementation business, had occurred, as the applicants claimed, or that they had not been within the applicants' knowledge. It was also the respondents' case that there were no undistributed profits due to the applicants; that Maxx had made no profits, which could be distributed to the applicants and that the contracts in question were not unfair. 16 The Court's jurisdiction to deal with claims which it was argued depended on the operation of a Trust Deed, was also disputed as being a 'contract' as defined by s 105 of the Industrial Relations Act 1996 ('the Act'). There was also an issue as to whether the further amended summons on which the applicants sought to move, had, in part, been brought out of time. The claims 17 The applicants' claims, advanced in the further amended summons filed in April 2007, were: (i) An order declaring the contract and/or contracts as defined by s.105 Industrial Relations Act (NSW) 1996 between the applicant and the respondents to be an unfair contract pursuant to section 106 Industrial Relations Act, (NSW) 1996. (ii) An order declaring void in whole or in part, from the commencement of the contract and/or contracts as described in order (i) between the applicant and the respondents under which the applicant performed work in an industry for the respondents as an Operations Manager in New South Wales. (iii) Further, and in the alternative to order (ii), an order varying from its commencement or at some later date the contract and/or contracts as described in order (i), by inserting the following provisions: (a) The First Applicant shall be paid his wages by the Respondents within seven days of submitting his invoice. (b) The First Applicant shall be paid out of pocket business expenses within seven days of submitting his invoice and/or credit card statement to the Respondents. (c) Upon termination of the contract or contracts the First Applicant shall be paid all outstanding moneys including, but not limited to, out of pocket business expenses, holiday pay, superannuation and wages within seven days of the termination of the contract or contracts. (iv) An order that the Respondents fully reimburse the First Applicant for any expenses paid by in or in connection with the contract and or contracts declared void. (v) An Order that the Respondents pay to the First Applicant a lump sum equivalent to six months remuneration. (vi) An Order that the Respondents pay to the Second Applicant its share of profits agreed to be paid to it in relation to the operation of the business, including profits denied to the Second Applicant by reason of loans from the First and Second Respondents and other non-commercial transactions. (vii) An Order for payment of interest on the sums of money ordered to be paid by the Commission. (viii) An Order that the Respondents pay the Applicant's costs of the proceedings, and (ix) Such further Orders as the Commission deems fit. 18 The money orders claimed were: Loss of the First Applicant: (a) Unpaid salary for period 11.06.03 - 14.10.03 $47,545 (b) Unpaid superannuation benefits $4,050 (c) Unpaid Severance pay (incl. super): $81,510 (d) Unpaid annual leave entitlements (incl. super): $13,500 (e) Unpaid expenses: (i) expense vouchers: $9,988 (ii) credit card: $7,368 (iii) telephone account: $1,759 $19,115 (f) 'Gross Up' for tax purposes: $58,960 (g) Statutory interest: $29,999 Total Loss of the First Applicant: $188,737 Loss of the Second Applicant: (a) Acquisition of Non-Business Motor Vehicles: $16,657 (b) Payment of Non-Business Expenses: $55,613 (c) Payment of Expenses for Previous Business Operated by Trust: $51,447 (d) Net Interest receivable by Trust from beneficiaries: $80,362 (e) Interest on Alconleigh's Loan to Trust: $181,385 (f) Undistributed Profit for Year ended June 97&98 $40,316 (g) Unpaid Beneficiary Loan 30 June 2003: $1,843 Loss before taxation: $427,533 Less taxation: ($144,617) Loss after tax: $282,915 'Gross Up' for taxation: $121,249 Statutory Interest: $92,381 Total Loss for Second Applicant: $496,546 19 It should be noted that Mr Gower in his evidence finally recalculated some of these claims (see exhibit 16). The issues which the parties identified as requiring the Court's resolution were: 1. Have the Applicants pleaded any relief or remedy referable to any allegation that the First Respondent agreed that Mr Boyd would have a 25% equity stake in the business ? [The Respondents accept that the 2 April 2007 Summons for Relief makes reference to an equity stake but dispute that anything arises from this and in particular that these references are pleaded as giving rise to any alleged unfairness or any remedy or relief.] 2. Did Mr Boyd have notice of the rights attaching to the units allocated to him ? 3. What, if anything, has been pleaded by the Applicants in relation to alleged unfairness caused by alleged interest free loans from the First Respondent to the Third and Fourth Respondent ? 4. Have the Applicants pleaded any relief or remedy referrable to interest free loans allegedly made by the First Respondent to the Third and Fourth Respondents ? 5. Was the Honda car given to Mr Boyd by way of remuneration for work in April and May 1997 ? 6. What were the terms governing the relationship between the Applicants and each of the Respondents or any combination of the Respondents from 1 July 2003 onwards ? 7. What projects, if any, did the Second Respondent have from 1 July 2003 to October 2003 ? 8. Were the terms governing the relationship between the Applicants and each of the Respondents or any combination of the Respondents from 1 July 2003 onwards unfair ? 9. Was the First Applicant constructively dismissed in about mid-October 2003 ? 10. What is the quantum of the expenses claimed in the 2 April 2007 Amended Summons for Relief which is referrable to business expenses ? 11. Does this Honourable Commission have jurisdiction to deal with the claims made by the Applicants in 2 April 2007 Summons for Relief in so far as they relate to the operation of the Maxx Productivity Trust and/or the calculation of the profits ? 12. Does this Honourable Commission have jurisdiction to deal with claims against a company (the First Respondent) which was the subject of a Deed of Company Arrangement pursuant to the Corporations Act ? 13. If the answer to the preceding question is in the affirmative should this Honourable Commission exercise its jurisdiction ? 14. Are the amendments to the 2 April 2007 Amended Summons for Relief permitted having regard to section 108B of the Industrial Relations Act ? 15. Were interest free loans made from time to time to RS Whitmore, the Forth Respondent and Third Respondent without the knowledge or approbation of the First or Second Applicant ? 16. Were there any undistributed profits to the First Applicant without the knowledge or approbation of the Applicants ? 17. If the answer to the preceding issue is in the affirmative, has any relief been pleaded in respect of the undistributed profits on the basis of alleged non-compliance with clause 9 of the signed Management Services Agreement ? 18. If the answer to the preceding issue is in the affirmative, was clause 9 of the signed Management Services Agreement applicable to the relevant facts ? 19. Has it been established that there were payments of "previous business expenses" as set out at annexure "E" page 11 of the Gower Report ? 20. Has it been established that there was payment of non-business expenses by the First Respondent set out in annexure "E" at page 6 of the Gower Report ? 21. Has it been established that there was an acquisition of non-business motor vehicles as set out at annexure "E", page 1 of the Gower Report ? 22. If any of the matters in paragraphs 15 - 22 are established, is the contract unfair by reason of those matters (or any combination of them) ? 23. In relation to the issue 10, to what extent is the Second Respondent (or any other Respondent) liable to pay any outstanding legitimate business expenses ? 24. To what extent has the Second Respondent failed to pay the First Applicant's superannuation ? 25. To what extent is the Second Respondent (or any other Respondent) liable to pay the First Applicant's superannuation ? 26. To what extent has the Second Respondent failed to pay any entitlement to a 25% profit share ? 27. To what extent is the Second Respondent (or any other Respondent) liable to pay any 25% profit share ? 28. To what extent has the Second respondent failed to pay any entitlement to outstanding annual leave to the First Applicant ? 29. To what extent is the Second Respondent (or any other Respondent) liable to pay any outstanding annual leave to the First Applicant ? 30. Is the contract unfair by reason of the matters in paragraphs 23 to 29 (or any combination of them) ? 31. Were the Second, Third and/or Fourth Respondents culpably involved or associated within the meaning of the principles of Brown v Rezitis in any unfair conduct in respect of a contract whereby Mr Boyd performed work in an industry and if so to what extent ? 32. What relief, if any, are the Applicants entitled to and against which Respondents ? " Contract " has the same meaning as defined in section 105 of the Industrial Relations Act. The evidence 20 In the applicants' case, evidence was given by Mr Boyd and by an expert, Mr Gower. Mr Ludwig gave evidence and the respondents also called evidence from Ms Grove, a chartered accountant employed by both Maxx Implementation and Maxx. Numerous documents were also tendered. 21 Mr Boyd and Mr Ludwig had formerly both worked for a company known as The Alexander Proudfoot Company Gmbh ('Proudfoot'). It was Mr Boyd's evidence that in 1996, he was approached by Mr Ludwig, with a proposal that he run the operational side of Maxx Implementation's business, with a 25% share of the profits and an expectation that his salary and other payments would not be less than $500,000 per annum. Mr Boyd was interested in taking up this opportunity and began doing some work for Maxx Implementation. He left his former employment with Proudfoot in early 1997, having been on extended leave from that employment since December 1996. A tax effective structure was later devised and for that purpose, Finger Limeing Good was incorporated. Mr Boyd worked in the business in sales, marketing and operations, until the relationship came to an end in October 2003. 22 In April 1997, Mr Boyd rendered an account for his services totalling some $25,000. Further work was performed in May, when, on Mr Boyd's evidence, a car was transferred to him, by Mr Ludwig, to settle payments then due to him for various work performed up to that time for Maxx Implementation. With client billings underway, it was then agreed that Mr Boyd would commence receiving a weekly income stream of $3,000. This evidence was challenged in cross examination, it being put to Mr Boyd that the car had only ever been loaned to him and that it was only because it had not been returned, that the car was transferred to him in 2000, with a resulting adjustment to profits. Mr Boyd denied this and in re-examination, a transfer of the vehicle to Mr Boyd, signed by Mr Ludwig in May 1997 was tendered, without objection. 23 In July 1997, Mr Boyd signed an application for units in the Trust and began receiving profit distributions. In July 1998, Mr Ludwig advised that he was having cash flow problems and it was agreed that profit distributions to Mr Boyd would be delayed. Mr Boyd claimed that thereafter, profit distributions were paid irregularly. 24 In 1998, negotiations ensued over a written consultancy agreement. Mr Boyd took the view that drafts provided to him did not reflect the agreement he had earlier reached with Mr Ludwig. Despite being unhappy with certain terms, such as the imposition of a $500,000 cap on his profit entitlements and discretionary removal of his entitlement to a 25% share of the profits, in June 1998, Mr Boyd executed the agreement. He claimed that Mr Ludwig had told him that: I am getting irritated by this whole issue. Sign the bloody thing and get it over and done with so we can get on with the business and so too can the bloody accountants and lawyers. This whole thing is for tax related purposes and nothing more. 25 Mr Ludwig had responsibility for the sales functions of the business and Mr Boyd managed and controlled Maxx Implementation's operations. 26 In 1999, Mr Boyd and Mr Ludwig discussed the listing of Maxx Implementation and advice was taken, but it never proceeded. In 2000, Mr Boyd's accountant advised him that Maxx Implementation had refused to provide copies of the Maxx Implementation Productivity Trust balance sheet. When this was raised with Mr Ludwig, he, too, refused to supply the balance sheets. This meant that the details of the way in which the business was conducted by Mr Ludwig and how profits were calculated, were kept from Mr Boyd. 27 In 2000/01, Maxx Implementation's business' profitability began to decline, after several profitable years. 28 Mr Boyd used his American Express credit card to meet business expenses incurred in performing his work for Maxx Implementation. The monthly account was always paid by Maxx Implementation, when it was provided by Mr Boyd. In February 2002, Mr Boyd was advised that the account had been suspended, because it had not been paid as usual. Mr Boyd was advised by Ms Grove that this was as a result of cash flow difficulties which Maxx Implementation was then experiencing. Mr Boyd confirmed this with Mr Ludwig and as a result, rearranged his credit card facilities. 29 In August 2002, it was agreed that Mr Boyd would become an employee of Maxx Implementation. To that point, the business had moved from a position where significant repeat clients such as Australia Post, Pasminco and BHP, were generating significant profits, which in 1999 and 2000 were $1.6 million and $1.2 million respectively, to a position where profits as low as $30,000 were achieved in 2001. In 2002, profits rose to $500,000, but then in 2003, they shrank again to $55,000. 30 In Mr Boyd's view, this picture reflected Maxx Implementation's failure to achieve sales to new clients; existing clients maturing, with a resulting diminishing scope for repeat work and uncontrolled costs, given how Mr Ludwig conducted the business. 31 From September 2002, Mr Boyd issued fortnightly invoices for expenses and salary to Maxx Implementation. Mr Ludwig proposed, but never provided, a written employment contract. In November 2002, Mr Ludwig, Ms Grove and Mr Boyd, met to discuss Maxx Implementation's ongoing failure to pay Mr Boyd, as had been agreed in August; the diminished profitability of the business due to the performance of the sales team; and the failure to provide him with monthly profit and loss statements. Mr Ludwig assured Mr Boyd that substantial amounts of work were coming together; that he would be paid in due course and that he would be provided with profit and loss statements. It was also agreed that Mr Boyd would be paid outstanding superannuation contributions. They also discussed Mr Boyd's desire to be paid $10,000 per week, as they had first discussed in 1996, once cash flow improved. 32 In April 2004, Mr Boyd learned that in July 2003, a solvency declaration that Maxx Implementation was able to pay its debts, as and when they fell due, had been signed by Mr Ludwig. 33 Mr Boyd continued working until July 2003, when Mr Ludwig informed him at a meeting in Sydney, that the business had been transferred to a new company, Maxx 'effective from yesterday', but that otherwise 'it would be business as usual'. Mr Boyd claimed that this was the first he had heard of this re-arrangement. Mr Ludwig advised that it had come on suddenly and that he could not afford to pay Mr Boyd, because cash flow was bad; that business prospects were good, however, and that Mr Boyd would not have to wait long for payments to restart and there would be backpay. Their conversation continued: Mr Boyd, "What effect has the new Company on the 25% equity and profit distribution?" Mr Ludwig, " It's too messy at the moment and those things will be sorted out later you will just have to wait. I've really got myself in a mess with the Taxation Office however I've transferred everything out of my name and if they want to play hard then stuff them I don't care." Mr Boyd, "Why didn't you tell me this earlier?" Mr Ludwig, "I was too embarrassed. I need you to agree to defer the salary and travel allowance due to you." Mr Boyd, " I will need to talk with Jamie and will let you know next week ." Mr Ludwig, " Thanks and I want you to run a sales training session with the sales guys next Wednesday. I will get Tracey to arrange it and email you of the details." Mr Boyd, "OK" 34 Mr Boyd then spoke to Ms Grove about these changes. She told him that: Mr Boyd, "I have just met with Gerry (the third respondent) and he has told me about the changes and that it is business as usual". Ms Grove, "Yes everything has been transferred over and it is business as usual. All transfer arrangements had been completed and that it is essential to get Pasminco invoices into the correct bank account. I have spoken with Alan Sharp (one of the second respondent's project managers working at Pasminco) and he is arranging this. A bank submission for funds has to be completed quickly so that the next payroll can be covered. Can you help me with it? I will email it to you shortly." Mr Boyd, "Yes, I will assist you as best I can. My knowledge though is based on sales predictions from the guys rather than first hand knowledge." 35 Mr Boyd was initially not unduly concerned about a delay in being paid, because he accepted Mr Ludwig's assurances and accordingly rendered invoices for his salary and the expenses he incurred while working for Maxx, but did not press for payment. Later he began to become concerned about the personal liability he was accruing for Maxx's debts. 36 Ms Grove advised Mr Boyd by email of 2 July 2003: Hi Lindsay Here is a summary of what I am working with. It is just to give bank manager some grasp of what we may have in the pipeline .... If you could complete and than(sic) I will incoporate(sic) all or some of the companies depending on bill rates. etc ... Thanks heaps Catherine Summary of Expected Contract Work - Waratah Coal Service Limited - ... Pacific National - ... Qantas - ... Xtrata(sic) - ... BHP - ... Pasminco - ... 37 None of this work eventuated. Mr Boyd later learned that while other employees continued to be paid their salary and expenses under the new arrangement with Maxx, he was paid nothing, but was repeatedly told by Mr Ludwig and Ms Grove that he would be paid. On 17 July 2003, he wrote to Ms Grove, noting he had not been paid since 11 June; enquiring, amongst other things, what the status was, in relation to what he was owed to 30 June; whether Maxx Implementation's liabilities for his credit card had been 'rolled forward' to this financial year; whether his employment status had changed and whether changes in cash flow movements were anticipated. 38 Ms Grove replied that salary and expenses to 30 June would be paid as soon as cash flow permitted; expenses on credit cards would be carried over and paid off at $1,000 per week to keep within limits, superannuation was yet to be paid and that he should discuss his other queries with Mr Ludwig. 39 Mr Boyd continued working, understanding from Mr Ludwig that his employment and other arrangements remained the same. He worked on internal training as Mr Ludwig had asked and with sales and marketing to various clients. In August 2003, he conducted a business review for a client Eurest. 40 Mr Boyd was still not paid and in August, the ANZ bank advised him that his credit card had not been paid for some time, despite an earlier arrangement that $1,000 per week would be paid off by Maxx. Mr Boyd wrote to Mr Ludwig and Ms Grove: Catherine Some time ago you advised that a sum of $1000 per week would be paid off my credit card. I have been advised by the ANZ today that that in fact happened up to 7th August 2003 and has not happened since. This again has placed me in an embarrassing position. I understand that there is a current issue with cashflow and I have over the last (nearly) three months been prepared to make sacrifices in that regard particular in relation to deferment of salaries and allowances. This is an exposure that I am personally not prepared to wear and politely request that your original proposal be put back in place and the situation be brought back to where it should be. I know that there is pressure on all of us at this time however, I cannot have these surprises dumped on me without the courtesy of prior knowledge. Regards Lindsay 41 Ms Grove did not reply to Mr Boyd's email enquiry as to why the payments had not been made. Mr Ludwig informed him that: Mr Ludwig "I am totally pissed off with your email of 26 August 2003. You have no right to demand payment for anything given the current business circumstances. Don't forget that I also am not being paid and I know how hard it is." Mr Boyd "There was an agreement to pay for this and once again it has been stopped without advising me. This and the fact that these were legitimate business expenses incurred on behalf of Maxx Pty Ltd were the crux of the issue and they have to be paid". Mr Ludwig "There are more important issues. That's small change. My decision is final on the issue. You will have to wait until the cashflow improves". 42 Mr Ludwig denied this version of the conversation. On his evidence, it was to this effect: I said: "I am totally pissed off with your e-mail to Catherine. You have no right to demand payment of anything given the discussions we've had and the fact that we've got no work and no money coming in. Further, if you've got a problem, you should come to me rather than taking it out on Catherine. It's not her fault and she's doing the best she can in the circumstances." He said: "But she said that she would pay $1,000 per week in reduction of the credit card debt." I said: "That was on the basis that she would have the money to do that and there's no money. You know the position. It's hard on all of us, especially me as I'm getting nothing at the moment and everything that is paid out is coming out of my pocket. There's nothing that can be done until we have some cash flow." 43 Mr Boyd later learned, however, that Mr Ludwig's personal and business expenses continued to be met by Maxx at this time, which was also meeting payments for a $200,000 Bentley acquired by Maxx Implementation for Mr Ludwig's use. Mr Ludwig denied that this had occurred. 44 On 2 September, Mr Ludwig and Mr Boyd met. Mr Ludwig advised that he wanted 'a divorce'. They discussed the possibility of their relationship continuing and Mr Ludwig undertook to provide Mr Boyd with a paper and asked Mr Boyd to accompany him to a client meeting. Mr Boyd agreed. The paper was never forthcoming, Mr Ludwig later advising that he was too busy to deal with it. In late September, Mr Boyd informed Mr Ludwig that: Mr Boyd, "I have not received the "paper" you promised to forward to me". Mr Ludwig "I am too busy and I will get around to it when I have time". Mr Boyd "I am no longer comfortable with our business arrangements and it is time we formally sat down and sorted our business relationship once and for all. I can no longer rely on sales promises that fail to materialise. Furthermore I can no longer shoulder the burden of deferring salary and other payments whilst you and your team continue to fail in sales. In order to negotiate a way forward I intend to formally request a meeting between us with my counsel present. You should expect to receive a letter shortly". Mr Ludwig "If that's the way it has to be." 45 Mr Boyd also consulted his solicitor, who wrote to Mr Ludwig's on 25 September. Mr Boyd was not provided with his usual assignments or work but on 13 October, he received a phone message, requesting confirmation that he would attend a meeting with a client on 16 October. Mr Boyd advised by email that: I regret that I am unable to travel until Maxx Implementation has paid its debt on my credit card and telephone account in full. I am not prepared to incur any further personal expenses on behalf of Maxx Implementation. I trust this can be fixed up promptly so that business can resume as normal. Regards Lindsay 46 Mr Ludwig and Mr Boyd did not speak again. An exchange followed, with Mr Ludwig first leaving a phone message saying: "I have authorised Catherine to have your credit card and telephone bill paid on Friday. I can't believe that after all these years we have resorted to emails. I can't fucking believe it". 47 This was followed by another message, saying: 'Yoo-hoo Lindsay are you going to talk to me now.' 48 On 14 October, Mr Ludwig left a further message: Don't call back. Disregard all my previous calls. I will send you an email in a couple of days. 49 Mr Ludwig then sent an email, advising: Dear Lindsay, Thank you for your email. It would be remiss of me not to mention the expectant nature of your position. Given the fact that we had an agreement entered into at our last face to face, where you requested staying involved in the business, especially given the unaltered and unmentioned (by you) status of your affairs with Maxx. Now to the present, I have every intention of keeping my commitment to pay you your entitlements as at end 30 June once we have regained our cash flow in the coming weeks, including the payment of the subject email, plus any outstanding voucher items. I have asked Catherine to hold of(sic) on paying your accounts. I simply can not fund it at present as its pay week, until I get the Balance of the commercial bill I have applied for at the end of this month that remains the position. I have confirmed my appointment with Peter this morning for 3pm Thurs. 16th Oct. I will wait for you in the foyer until 2;45pm to go over our approach, if your(sic) there your(sic) there if not shit happens. There is a much bigger upside to this than the petty cash your(sic) all bent out of shape about, trust me. Have a good day Mate ps no mater(sic) how this plays out with you, you will always be my friend and I thankyou for your past efforts on Maxx'es(sic) behalf. I WILL BE TRAVELLING AND NOT IN A POSITION TO RECEIVE EMAILS 50 There was an issue as to when Mr Ludwig received the letter sent by Mr Boyd's solicitors, dated 25 September 2003. From evidence I will return to, it appears that it was not received until 15 October, for reasons which were not clear, given the date of the letter. Nevertheless, on the evidence, it was not received until after Mr Ludwig had sent this 14 October email to Mr Boyd. Amongst other things the letter advised that Mr Boyd understood that the business had been transferred to Maxx, without his consent; that he reserved his rights as to the recovery of his interest in the business; that he confirmed that he continued to work in the business, without payment of salary, superannuation or expenses; that these matters required urgent attention, if litigation was to be avoided and discussions were sought with Mr Ludwig's legal advisers, in an effort to reach a workable agreement, and in particular, to arrange for payment of what was owing and to re-establish his interest in the business. Mr Ludwig never responded to this letter. 51 Mr Boyd's evidence was that his interpretation of Mr Ludwig's email was: (1) that my employment affairs with Maxx had not changed since our meeting of 2 July 2003 and our subsequent meeting on or about 2 September 2003. (2) all entitlements including; commitments as at 30 June, outstanding credit card accounts, Telstra account plus all outstanding salary expense payments submitted through fortnightly vouchers would be paid once the business regained cash flow in the coming weeks. I was confused as to how this would be achieved through cash flow improvements as I knew that there was neither work nor the prospect of work inputs in the coming weeks. (3) with regard to his telephone call of 13 October 2003 the third respondent had effectively rescinded his agreement to pay the outstanding credit card and Telstra accounts until he received the balance of a commercial bill at months end. (4) there was a discretionary invitation to attend a client meeting on Thursday 16 October. However, as I was not prepared to in to incur further personal expenses on behalf of Maxx Implementation, as detailed in my email of 13 October 2003, I did not attend. 52 Mr Boyd concluded that he was no longer prepared to continue working without payment. He took the view that despite frequent promises, Maxx was reluctant to pay him; there was a refusal to discuss these matters in any meaningful way and there was no prospect of Maxx obtaining the work necessary to generate the cash flow Mr Ludwig insisted Maxx required, before it was prepared to pay him. Mr Boyd thus took the view that by its conduct, Maxx had brought the agreement to an end. He did not respond to the email, nor attend the meeting. 53 In March 2004, Maxx Implementation went into voluntary administration. In April 2004, the Administrator's report to creditors revealed to Mr Boyd that other staff had continued to be paid by Maxx Implementation, while payments to him had ceased; and that $3,000 per month lease fees for Mr Ludwig's Bentley, had also continued to be paid. Mr Boyd's evidence was that this report also revealed how Mr Ludwig had managed the business, while Maxx Implementation had conducted it, to his own benefit and that of the entities associated with him, and to the considerable detriment of the applicants. 54 Expert evidence was called from Mr Gower (see Boyd and Another v Maxx Implementation Pty Limited and Others [2008] NSWIRComm 62). His evidence was not based upon an assessment of the losses claimed in these proceedings, by reference to the respondents' accounts. He had advised the applicants as to the records to which he required access, in order 'to quantify the economic loss' suffered by the applicants (at [4]). Those documents were not then available to the applicants and so, Mr Gower was instructed to make various assumptions and to base his calculations on them. 55 It appeared that while the applicants had required the production of various records, Mr Gower was not given access to these documents after they were produced, until the hearing commenced. Mr Gower was never instructed to provide a revised report, on the basis of those records. It followed that whether or not the conclusions reached in Mr Gower's report could be accepted as being persuasive, had to be determined by reference to whether or not the assumptions Mr Gower had been instructed to make, were otherwise established on the evidence. 56 The applicants sought to achieve this, both by the evidence called in their own case and through the cross examination of witnesses called in the respondents' case, especially Mr Ludwig and Ms Grove. The evidence in the respondents' case 57 Mr Ludwig's evidence as to the history of the relationship between the parties was that as managing director of Maxx Implementation, he approached Mr Boyd about the possibility of working with the company in September 1996, after the business had successfully completed its first project and had a number of others in the pipeline, including for Australia Post. Two forms of remuneration were discussed, a profit share, or payment of an agreed amount. Mr Boyd was interested in a profit share arrangement and quarterly profit distributions, as well as payment of what Mr Boyd 'was getting now'. These matters were discussed, as was a tax effective structure for payments to be made to Mr Boyd. 58 On Mr Ludwig's evidence, he told Mr Boyd in October 1996: I said: If you are happy to come on board, I'll pay you what you are getting now and on top of that, you would have the units in the trust that would give you a 25% net profit share. It's always hard to predict the value of a profit share arrangement but if what I've been told as regards work actually happens there is no reason to expect that if you do your job properly you would have earned less than $500,000 at the end of the first year. I've got the big project with Australia Post in the pipeline and the work for Mount Isa Mines. At the present time, things are really looking quite good." He said: "I'm happy with that arrangement but we need to talk about how it can be put in place in a manner that is tax-effective, as I don't want to be paying more tax than I have to." I said: "As I previously told you, I don't have a problem with that at all, as long as everything is above board. You should probably get some advice from an accountant. I don't know if you have an accountant of your own but my accountant for years has been Murray Sallaway of Griffith Sallaway. If you don't have anyone you'd prefer to use, I'd be happy for you to go and see Murray. In fact, it's possible that using Murray might save you some money because Murray knows all the ins and outs of my financial affairs and that knowledge might be helpful in relation to the matters on which you need advice." He said: "That sounds a good idea. What do you propose in relation to the timing of making profit distributions?" I said: "I'm looking at doing it quarterly but we'll see how things pan out." He said: "That sounds good." I said: "I need to talk to you in some detail about the work Maxx Implementation has in the pipeline, and particularly the projects for Australia Post and Mount Isa Mines that I've previously mentioned. During the course of this year, I had a number of discussions with Graham John, the managing director of Australia Post. As a result, I have done a deal in theory for a significant project which is likely to provide ongoing work for some time. The only question remaining is as to how long the project will go on for and how big it will be. It is likely that the Australia Post job will be Maxx Implementation's next project so I need to acquaint you with what it will involve. There will almost certainly be meetings with the second and third tier of Australia Post people in the near future and it would be good to have you at those meetings so that I can introduce you to those people as the person in charge of operations. "The Mount Isa Mines project is also likely to start soon and I would like to introduce you to the people there. There is other potential work in the offing and I would like you to come with me to meetings with potential clients so that I can introduce you. I know you've already said that you don't want to be paid for attending those meetings but Maxx Implementation will meet the cost of your air fares and other out-of pocket expenses." He said: "I'm happy with that arrangement. 59 Mr Boyd commenced performing some work for Maxx Implementation in December 1996. Initially, Mr Boyd was only reimbursed for expenses, because he was not then worried about payment, as he was still employed elsewhere. Mr Ludwig denied that Mr Boyd was ever paid for this work, or that he was later paid by way of the gift of a car. 60 In April 1997, a $150,000 salary per annum was agreed for by weekly pay, commencing in May. Mr Ludwig's evidence was that he then loaned Mr Boyd a Honda Prelude, but it was never returned. In 2000, a $15,000 adjustment was made to Mr Boyd's profit share distribution to reflect that he had kept the car. In cross examination, Mr Ludwig claimed that he was not aware that the car had been transferred to Mr Boyd in 1997 and that he had not been paying for the registration. He claimed he had personally paid for the insurance, but there was no documentary evidence of this. 61 Later in 1997, Mr Boyd applied for units in the Maxx Productivity Trust and in 1998 the terms of the agreement between Maxx Implementation, Mr Boyd and Finger Limeing Good were finalised. In 2001, Mr Boyd wanted to wind back his working hours and have someone else take over day to day management of projects. This was agreed and Mr Ken Sidebottom was appointed 'group project manager'. Mr Boyd denied that this was what had occurred. 62 In 2002, Mr Ludwig advised Mr Boyd that he proposed that Maxx Implementation would cease trading in future and that he would then form a new company. Mr Boyd denied that he had received such advice. In September 2002, Mr Boyd became an employee of Maxx Implementation and in November, he raised concerns about being disadvantaged, from a monetary point of view, given the failure to achieve sales, the area of Mr Ludwig's responsibility. 63 At a meeting with Mr Ludwig and Ms Grove, Mr Boyd also complained that since becoming an employee, he wasn't being paid superannuation, in relation to his $3,000 weekly salary and it was agreed that this would be attended to. He also complained about not receiving profit and loss statements and Ms Grove explained that she had not been sending them, because there were no profits. It was agreed that they would be sent. 64 On his evidence, Mr Ludwig had been thinking about restructuring the business for some time and had discussed this from time to time with Mr Boyd. This was disputed by Mr Boyd. In March 2003, Mr Boyd raised his intention to retire from the business. Their conversation was: He said: "As you know, for some time now I've been thinking of easing myself out of the business. I don't want to work any more. On the other hand, I could do with an additional sum of about $250,000 to do various things and meet some commitments. In those circumstances, what I am thinking of is this: If you would like me to stay on, I'd be happy to do so for a period of 6 months on the basis that I am paid an all-inclusive amount of $10,000 per week." I said: "I'll have to run things past Catherine. I don't necessarily have a problem with an arrangement of that type in theory but I couldn't start paying an amount like that now." 65 Mr Boyd agreed that early retirement had always been one of his aims, in joining Maxx Implementation, but denied having had such a conversation. Mr Ludwig certainly discussed Mr Boyd's potential retirement with Ms Grove, who produced a document, making various recommendations in different scenarios, in the event that billings increased. There was no suggestion that this document was ever provided to Mr Boyd, but Mr Ludwig's evidence was that he then told Mr Boyd that: "I've run your proposal past Catherine. As long as we have some time, I think we can do a deal. You would need to wait until we had another decent job on board. Once the Qantas project comes on board I should be able to do it. You would need to work on the Qantas job as lead analyst for 6 months. At the end of the 6 month period, it should be possible to pay you the $250,000 you want in one hit as a severance package. By that time, I will have reorganised the structure, as I'm looking at Maxx Implementation ceasing to trade as at 30 June 2003. I would want you to train a replacement and possibly also to enter into a consultancy agreement to work on an hourly basis as may be needed." 66 This evidence was also disputed by Mr Boyd. 67 In June 2003, Mr Ludwig advised Mr Boyd that he was proposing to change banks, when the new business started and later that: I said: "I've just been to the bank. We don't have any work and we don't have money. If you think I'm going to borrow money to pay your salary you have rocks in your head because I can't borrow any more. You will therefore have to go without wages until the next job starts and is cashed up. When that occurs, all your entitlements from Maxx Implementation including salary and expenses will be paid up to 30 June 2003." He said: "Fine. I'm happy with that." I said: "The plan is that Maxx Implementation will cease trading as at 30 June and the new company, Maxx Pty Limited, will start off on 1 July. In relation to your further work with the new company, in view of our discussions my proposal is to initially go back to the arrangement that applied at the beginning when you first became involved with Maxx Implementation and the Australia Post project was about to come on board. Maxx will reimburse your expenses and once we get a job we can work out the terms of your arrangement" He said: "Okay. I'm happy with that" 68 Again, this evidence was disputed by Mr Boyd. 69 Maxx then commenced trading in July and on 9 July, Mr Ludwig and Mr Boyd met and Mr Boyd again raised his desire to retire, pressing for payment of $250,000 and only working for a further six months. Mr Ludwig said that: ... if we can get jobs with total billings of $120,000 per week for 6 months, we can do it. The problem at the moment is that we don't have any work and accordingly there is no money to do anything now. 70 Maxx pursued new work, with Mr Ludwig and Mr Boyd together pursuing potential clients, but they did not succeed. In August, they met with Mr Peter Coates of Xstrata and a further meeting was arranged for September. 71 On 2 September, Mr Ludwig and Mr Boyd met again and Mr Ludwig emphasised the need to get the Xstrata job, which would enable him to deal with Mr Boyd's $250,000 retirement package. Mr Boyd promised to be involved in the presentation. 72 On 4 September they met again with Mr Coates. A presentation was arranged for 19 September, but was postponed to 16 October. Again, Mr Boyd agreed to attend and agreed to undertake the work necessary to make a presentation to Xstrata at the meeting. 73 While having agreed to present at that meeting, in early October, Mr Boyd told Mr Ludwig that he had changed his mind. While he promised to send a letter, Mr Ludwig received no further communication from Mr Boyd. On 13 October, Mr Ludwig rang and left a message and in response, received Mr Boyd's email of 13 October, advising that he was unable to travel until his outstanding expenses were paid. 74 It was Mr Ludwig's evidence that it was Maxx's practice to pay bills as late as possible and Mr Boyd's bills were not then due. His travel expenses were paid by Maxx and so Mr Ludwig did not understand why Mr Boyd claimed that he could not travel to the meeting. 75 Mr Ludwig attempted twice to speak to Mr Boyd about this, unsuccessfully. He also discussed what was outstanding with Ms Grove and asked her to get the details of Mr Boyd's Telstra account, which was more than his own account. On 14 October he sent the email earlier set out to Mr Boyd. 76 On 15 October, Mr Ludwig received the letter of 25 September from Mr Boyd's solicitors. He did not respond and on 16 October, Mr Boyd did not attend the meeting with Xstrata. As a result, Maxx did not obtain the work it was pursuing. Mr Ludwig concluded that Mr Boyd no longer intended to work for Maxx. He denied that Maxx had breached any agreement to pay Mr Boyd, or that it had constructively dismissed him. Mr Ludwig also denied that Mr Boyd was an employee of Maxx. He claimed, nevertheless, that despite Mr Boyd's advice to him on 13 October and his response, he had expected that Mr Boyd would attend the Xstrata meeting on 16 October. 77 Much of Ms Grove's evidence was corroborative of evidence given by Mr Ludwig and parts of Mr Boyd's evidence. 78 Ms Grove expressed the view that the downturn in Maxx Implementation's profits, commencing in 2000, was due to business taxation reform and the introduction of GST. 79 On Ms Grove's evidence, in July and August of 2003, no salary was paid by Maxx to Mr Ludwig, nor were any drawings or expenses, other than lease fees for the Bentley supplied to Mr Ludwig ; Ms Grove herself worked without salary for six weeks, some employees received a reduced salary and payment of others' salary was also delayed. In cross examination, however, Ms Grove agreed that it was only Mr Boyd who was not paid anything and that Mr Ludwig received drawings. 80 In cross examination, Ms Grove also conceded that much of her affidavit evidence was wrong, in other respects. For instance, she agreed that contrary to her affidavit evidence, Mr Boyd had, in fact, claimed payment of salary from Maxx from July 2003; that he had pursued payment of his salary with her; that payments were made to Mr Ludwig; that the business was transferred to Maxx in July 2003, as were Maxx Implementation's various assets, other than the trademark; that Maxx had, in reality, paid nothing for those assets, so that they had never, in truth been 'purchased' from Maxx Implementation; and that Maxx did acquire the goodwill of the business and certain of its debts, including debts to employees. The applicants' case 81 The applicants' case was that the evidence showed that Mr Ludwig had sought Mr Boyd out, to join a start up company, in a business which provided a great opportunity, but required some sacrifices to be made, at the outset. The promised $500,000 a year did not materialise, but for some years, the business traded successfully. 82 As to the claim in relation to the entitlement to shares in the profits of the business, the evidence showed that the business was operated as if it were Mr Ludwig's own 'slush fund', seemingly unaware of the applicants' rights. The records also showed that year after year, money had been effectively lent back to the Trust, by Alconleigh, for which it was never paid any interest. Mr Ludwig accepted that year after year, Ebenezer was paid more than its fair share, with the result that Alconleigh got less. Mr Ludwig's repeated explanation of how things were run, was on the one hand that he left everything to his professional advisers, on the other, that he had certainly instructed them in what to do. The evidence showed how unfair this arrangement was, from the outset. 83 While the records showed that only some $1,800 unpaid profits was owed to Alconleigh at the end, a claim for outstanding interest, over the years was pressed, as was a claim for interest on the interest free loans made to Mr Ludwig personally, as well as to Ebenezer. Mr Ludwig claimed that he had personally financed this business, through loans and guarantees, but the records showed that he was not the borrower, it was Maxx Implementation, using its own assets, which had borrowed funds. That money was then lent by Maxx Implementation, to Ebenezer and Mr Ludwig. The bank records established that it was Maxx Implementation paying interest on the loans, not Mr Ludwig, or Ebenezer, thereby reducing the profits of the business, available to be distributed to Alconleigh, in accordance with the Trust Deed. 84 On the evidence, the reality was that Mr Ludwig treated the business as his personal bank, to the detriment of the applicants and without Mr Boyd's knowledge. Orders would consequently be made against Maxx Implementation, Mr Ludwig and Ebenezer. Mr Ludwig was entirely responsible for the unfairness demonstrated and Ebenezer was the beneficiary of that unfairness. 85 In 2003, the business was performing poorly and on 1 July, it was transferred to Maxx. It was to the respondents' benefit, to claim that was not what had occurred and both Mr Ludwig and Ms Grove, sought to establish that there was no transfer, by their evidence. Ms Grove finally conceded that there had been a transfer, while Mr Ludwig did not. His evidence would not be accepted. 86 It was uncontested that Mr Boyd was paid no wages after 11 June 2003. Mr Ludwig claimed that he had agreed to go unpaid, but both commonsense and the evidence showed that he continued to pursue payment. He was the only one who went unpaid. The evidence showed what an extraordinary situation this was, because Mr Boyd was effectively paying, in order to work. The situation became untenable and, on the evidence, in October, with Maxx still having no work and no payment in sight for Mr Boyd, he was constructively dismissed. 87 Mr Ludwig was cross examined as to the matters dealt with in Mr Gower's report, which he had not contradicted in his own evidence. Ms Grove dealt with some of the assumptions made by Mr Gower, in his report. While the result was that it might be difficult for the applicants to succeed on some of their claims, the 'big ticket items' had been established. 88 As to the deed of company arrangement on which the respondents relied, to defeat much of the applicants' claims, it was argued that it would not be overlooked that the business was transferred to Maxx and Mr Boyd continued working in the business for Maxx until October 2003. The applicants did not sue Maxx Implementation as a company, but as trustee of the Trust, which did not go into administration. Mr Boyd had been employed by the trust, the company was no longer in administration and there was nothing in law which would prevent the Court taking the order sought. 89 On Ms Grove's evidence, all employee entitlements were transferred to Maxx. This meant that, in any event, the applicants were entitled to press their claims for the period prior to 1 July 2003, against Maxx, even if the deed of company arrangement precluded orders against Maxx Implementation, although it was accepted that in making money orders, what had been received from the administrator, would be taken into account. On the evidence, a case had also been made out for orders to be made against Mr Ludwig and Ebenezer, given their involvement in the unfairness demonstrated. 90 As to severance pay, in relation to the contract with Maxx, six months was sought. In his evidence, Mr Ludwig had said that he thought a figure of $250,000 to be fair. Mr Boyd denied that such an agreement had been made, but the Court could properly have regard to what Mr Ludwig himself thought to be fair in the circumstances, which was more than was claimed, but the Court would not be restrained by that fact. The respondents' case 91 The respondents argued that the contracts here in question had not been shown to be unfair. Mr Boyd had freely made an agreement, whereby he took a risk as to the variability of the profits which the business could generate. Mr Ludwig, by way of contrast not only took that risk, he also gave personal guarantees to financial institutions, he borrowed money from financial institutions and put his family home up for security. That home was now known to be in the hands of mortgagees. 92 Initially, Mr Boyd wished to be a contractor and when he wanted to become an employee, his wishes were accommodated, increasing his remuneration by the resulting 9% superannuation, to which he thereby became entitled. In 2002 and 2003, Mr Boyd wanted to exit the business. It was agreed that: The elements of the agreement or arrangement that Mr Ludwig and Mr Boyd came to was that Mr Boyd would receive, over the course of six months $250,000, when there was a major project. The payments would be $10,000 per week and Mr Boyd would work for the six month period. In other words, it was also agreed that Mr Boyd would be working during that six month period. Of course, 26 weeks multiplied by $10,000 is $260,0000. The arrangement was not $10,000 per week plus $250,000. 93 Contemporaneous documents supported the view that such an agreement was reached, although it was impacted by subsequent events, which resulted in further agreement, that Mr Boyd would not be paid until cash flow improved. The result was that while it was initially agreed that Mr Boyd would be paid $10,000 per week, when cash flow permitted, the necessary work was never generated and then, he was paid nothing at all. Mr Boyd did not complain about non-payment until mid October. The arrangement was not then unfair. Not only was it the same arrangement as had been made in 1997, which had proven to be extremely lucrative, over time, it was an arrangement made at a time when Mr Ludwig had to attend to refinancing the operation. 94 It was also argued that Mr Boyd had not been constructively dismissed. Maxx was desperate for work and Mr Boyd's presentation at the meeting on 16 October, represented its best opportunity to obtain such work. In their email exchange, Mr Ludwig encouraged Mr Boyd to attend. His refusal to incur any further expenses, was petty and capricious, given that the additional expense then involved in attending the meeting was, in reality, limited to petrol costs going to and from the airport. Mr Boyd had no contractual entitlement to the full payment of outstanding expenses which he then claimed, before he was prepared to perform further work, given what he had earlier agreed with Mr Ludwig. In any event, there was no evidence that these expenses were then due and some of what was being claimed, were clearly not business expenses, in any event. Given the timing of his ultimatum, his conduct was plainly unfair. It followed that he did not come to the Court with clean hands, in relation to his claims of constructive dismissal and that he had no right to pursue any notice claim. In any event, it would not be overlooked that Mr Boyd had walked away from a lucrative agreement, which would have led to his early retirement and that in cross examination, he accepted that if he had elected to attend the meeting on 16 October, as he was free to do, the relationship would have continued. 95 The applicants' claims in these proceedings were later subsumed by the deed of company arrangement which they entered in 2004, after the commencement of these proceedings. Even if possible as a matter of jurisdiction, it would be unfair for those matters to be revisited in these proceedings, given the scheme of the Corporations Law under which that deed had been agreed. 96 As to the claims flowing from Mr Gower's evidence, it was argued that there was, in any event, an evidentiary gap in relation to assumptions he had been instructed to make, not filled by the cross examination of the respondents' witnesses, or other evidence led. Ms Grove's evidence and Mr Gower's concessions in cross examination, showed that the factual assumptions Mr Gower had been instructed to make were incorrect and so the orders sought by the applicants, finally had no basis in the evidence. 97 Further, Ms Grove's evidence was consistent with the business records. Mr Gower was not asked to undertake an examination of those records. His instructions were flawed in various respects, so that when cross examined, he agreed, for example in relation to the provision made for Mr Turner's dismissal in 1996, that there was no diminution in profits in later years. The position was the same in respect of provision for payments to Mr Spencer and Mr Jamieson. 98 As to Mr Ludwig's concessions in cross examination, as to undistributed profits to Alconleigh, which should attract interest, Mr Gower's report itself showed that profits had been distributed, other than in relation to provision made in respect of employees, which Mr Gower had conceded in cross examination, had been properly dealt with. 99 As to the 1996/1997 year, the bulk of the profits in that year, related to a time when Mr Boyd was not involved in the business and the evidence showed that the main project in which he was involved in for Australia Post, represented some 20% of the revenue for the year and generated a loss. 100 As to the interest claim, Mr Gower had not attempted to make any calculations, based on a scenario where no interest free loans had been made. His report explained that he would require further information to attempt such an exercise. He was cross examined as to the types of matters which he would have to take into account. The exercise had never been undertaken and the claim had not been made out on the evidence, given the matters which would require consideration, such as the resources Mr Ludwig and Ebenezer had provided, in order to fund the operation, before it could be concluded that anything was, in truth, outstanding. As to the submission that profits which were delayed in being paid to Alconleigh, should have attracted interest, that was a claim not made in the summons, and in any event, Mr Gower's report itself showed that profits had not been retained. That report was consistent with the relevant balance sheets. 101 As to the claim for taxation grossing up, it was submitted it would not be entertained, given Mr Gower's evidence in cross examination, that he was uncertain as to what the relevant tax rates in the relevant years were, as well as the introduction of GST. There was insufficient evidence before the Court for such an exercise even to be attempted. 102 In any event, it would not be overlooked that in April 2004, after these proceedings had been commenced, the applicants had pursued a claim for outstanding profit share with the administrator. That claim had been settled by the deed of company arrangement which was agreed. This Court would not exercise a discretion to permit Mr Boyd to go behind that agreement, or to pursue such a claim against Maxx. 103 As to the claim that Mr Boyd was pursuing the Trust in these proceedings, not Maxx Implementation, the fact was that the Trust was not a separate legal entity, itself able to be sued, except under statutes such as income tax legislation, which expressly recognised trusts as a tax entity, for example. Mr Boyd's employer was Maxx Implementation, as named on his group certificates. 104 It was also not accepted that the agreement that Alconleigh was entitled to a 25% share in the business, was an agreement collateral to Mr Boyd's employment contract with Maxx, or itself a contract under which work was performed. In any event, the trust deed was not attacked as unfair in the proceedings, nor could it be. 105 As to Ebenezer, it was argued that the amended summons by which it was sought to be made a party to the proceedings, had been brought out of time, a matter which had been left to be argued at the trial. 106 Submissions were also directed to the respective credibility of Mr Boyd and Mr Ludwig. Submissions were also advanced in relation to Ms Grove's evidence. It was submitted that in this case, where there were significant conflicts on the evidence, as to matters in contention, that close attention would be paid to what contemporaneous documents revealed. It was also argued that it would not be overlooked that Mr Ludwig made various concessions against interest which were plainly inaccurate, reflecting his erroneous understanding of the financial records he was being cross examined on. It would be concluded that he was not seeking to mislead the Court, but was confused about the details. Consideration 107 The case is brought under s 106 of the Act, which provides: 106 Power of Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (2A) A contract that is a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance by a person of work in an industry, so long as: (a) the contract to which it is related or collateral is a contract whereby the person performs work in an industry, and (b) the performance of work is a significant purpose of the contractual arrangements made by the person. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. (6) In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 108 Section 105 of the Act provides: 105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. 109 In Wirraway (NSW) Pty Ltd and Anor v Ultra Tune Australia Pty Ltd (2006) 156 IR 367 at [42], in relation to the High Court's judgment in Fish v Solution 6 Holdings Limited (2006) 225 CLR 180, the Full Bench observed: '... in applying s106 the Court is to first establish whether any work has been performed in an industry and then to identify the contract or arrangements whereby that work is performed. The High Court specifically stated that it was to invite error to begin by identifying the contracts and the way in which they are related. Were the proceedings against Ebenezer commenced within time? 110 Section 108B of the Act provides: 108B Time for making application (1) An application for an order under this Division in relation to a contract that has been terminated must be made not later than 12 months after the termination of the contract. (2) The Commission does not have jurisdiction to extend the time for making any such application or, subject to subsection (3), to accept an application made after the time prescribed by subsection (1). (3) The Commission may accept an application made within 3 months after the time prescribed by subsection (1) if the applicant satisfies the Commission that there are exceptional circumstances justifying the making of the late application. 111 These proceedings were commenced in March 2004, within the time prescribed, given the termination of the applicants' relationship with Maxx Implementation in June 2003, when Maxx Implementation ceased operating the business, which was then transferred to Maxx and the termination of the relationship with Maxx, in October 2003. Ebenezer was not then named as a respondent, although the summons claimed relief in relation to a share of the profits of the business (Section A claim (vi)). 112 In the amended summons filed on 23 September 2004, Ebenezer was named as a respondent. Claim (vi) was amended to refer to profits denied by reason of loans from Maxx Implementation. It was also claimed that Ebenezer was culpably associated with the claimed unfairness, 'in knowingly receiving funds which it knew should have been retained by Maxx Implementation' for the benefit of' Finger Limeing Good. It was also claimed that Ebenezer was liable under the principles in Brown v Rezitis (1970) 127 CLR 157. Money orders reflecting 25% distributions from Maxx Productivity Trust and Maxx 'to be quantified upon discovery and completion of accountants reports' was sought. 113 It follows that the claim first brought against Ebenezer in September 2004, was brought within the time prescribed by s 108B, in so far as it related to the contractual arrangements between Mr Boyd and Maxx, which terminated in October 2003. The claim made in relation to the contractual arrangements between the applicants and Maxx Implementation, which terminated in June 2003, were, however, brought out of time. 114 In December 2006, the claim was amended in a further amended summons, to refer to loans from Maxx Implementation and Maxx and 'other non commercial transactions'. These were later specified, as 'uncommercial interest free loans to Maxx, Mr Ludwig and Ebenezer'. 115 While it was suggested that in the further amended summons filed in April 2007, that such claims were first made then, it is clear on the documents, that they were, in fact, made earlier, in December 2006. 116 Nevertheless, I am satisfied, on this history, that it must be concluded that the claims first made against Ebenezer in September 2004, were not brought within time, so far as the contractual arrangements which concluded in June 2003, were concerned. 117 No application was made for the exercise of any discretion given by s 108B(3), in favour of the applicants. On this history, it is difficult to see what argument could have been advanced to establish that 'exceptional circumstances' existed, which would permit the exercise of the discretion. There was nothing which explained why the claim brought against Ebenezer in September 2004, had not been brought within the prescribed time, given Ebenezer's role in the matters at issue and having regard to the fact that the proceedings had first been brought in March 2004, well within the prescribed time. Were the claims made in relation to profit share within jurisdiction? 118 The evidence was that from the outset, Mr Ludwig attracted Mr Boyd to work in the business, with the offer of a share of the profits of the business. Initially, the way in which this aspect of the deal was delivered to Mr Boyd was through shares in the Trust, which he held personally. Later, those shares were transferred to Finger Limeing Good. 119 Initially, Mr Boyd worked direct for Maxx Implementation in the business. Later his services were provided by Finger Limeing Good and in November 2002, it was agreed he would become a direct employee. Until June 2003, he continued to receive a share of the profits of the business, through his ownership of the shares in Finger Limeing Good. 120 There is no question on Mr Ludwig's own evidence that the overall arrangement which Mr Boyd and Mr Ludwig agreed from the outset, was that Mr Boyd would receive a 25% profit share for his work in the business, as well as salary. Over the years, that reward for his services was delivered to Mr Boyd, under various contractual arrangements, but there was no doubt that what was always agreed in relation to profit share, was to compensate Mr Boyd for the work which he performed in the business. I am satisfied that the arrangement, so understood, was within jurisdiction. 121 Even if that view were wrong, it is unarguable, in my view, even on the evidence led in the respondents' case, that the contracts whereby his profit share was delivered to Mr Boyd, fell within the provisions of s 106(2A) of the Act. They were plainly related to, or collateral to the contracts under which the work was performed by Mr Boyd, either directly, or through Finger Limeing Good. The performance of work was a significant purpose of those contractual arrangements. Was the business transferred to Maxx in July 2003? 122 In this case, there is no question that Mr Boyd performed work, initially in the business conducted by Maxx Implementation, as trustee of the Trust, between 1996 and June 2003. That work was performed pursuant to a series of contracts between Maxx Implementation, Mr Boyd and Finger Limeing Good. There was an issue as to whether or not the business was transferred to Maxx as a going concern in 2003, but no dispute that Mr Boyd performed work in the business Maxx undertook after July 2003, although Mr Ludwig claimed that he was not an employee of Maxx and that it conducted a new business, separate to that formerly conducted by Maxx Implementation. 123 It was Mr Boyd's case that there was a transfer of the business to Maxx and that he continued to work as an employee in the ongoing business, albeit Maxx failed to pay him for his work, or to reimburse the expenses which he incurred on its behalf. The respondents claimed that there was no transfer of the business to Maxx, rather it started up a new business; that while Mr Boyd performed work for Maxx between July and October 2003, he never became an employee and the work was performed under an agreement that Mr Boyd would be paid no salary; that he would have his expenses met, but would not be entitled to any share in the profit of Maxx's business and that payment of various of his expenses would be deferred, until cash flow improved. This was denied by Mr Boyd. 124 Mr Ludwig's affidavit evidence was that there was no transfer of the Maxx Implementation business to Maxx. There was no current work to be transferred, apart from the completion of one job for Pasminco. What occurred was that Maxx Implementation ceased conducting the business on 30 June and Maxx began operating a similar, but not the same business, on 1 July. Ms Grove provided corroborating evidence, in her affidavits. 125 Mr Ludwig departed, at one point, from this evidence, when he was cross examined, but later reverted to it, insisting that in June 2003, there was no business to be transferred to Maxx, the relationships with its clients were his. Ms Grove's oral evidence was to entirely different effect. The result was that Ms Grove's evidence finally corroborated Mr Boyd's version of what had transpired in July 2003, despite Mr Ludwig's ongoing denials. 126 Other evidence also provided such corroboration. This included what Maxx said on its website, where, under the banner of 'Maxx Implementation', a trademark, on Mr Ludwig's evidence, still owned by Maxx Implementation, but which Maxx has the right to use, it was said that Maxx had been in business for some 10 years. This, Mr Ludwig claimed was an error, because in fact, Maxx had only operated since July 2003. He claimed that the website also contained other errors, in relation to companies which were identified as Maxx clients. Mr Ludwig's evidence was that they had in fact only ever been clients of Maxx Implementation and that if the website gave the impression that Maxx had continued the business, it was a wrong impression. Ms Grove's evidence in cross examination was to entirely different effect, confirming that there was no error on the website, but that the website reflected the fact that the clients were clients of the business, which had been transferred to Maxx as a going concern. 127 It is convenient, at this point, to make some observations about Mr Ludwig's approach to his evidence. I am well satisfied that Mr Ludwig did not always give his oral evidence in a way which was consistent with his obligation of strict adherence to the truth. On occasions, Mr Ludwig gave the distinct impression that he was giving answers which, in his view, advanced the respondents' defence of the claims brought in these proceedings, given his view of where Mr Strain was seeking to take his questioning, rather than simply answering the questions he was being asked, truthfully, as he was bound to do. 128 The end result of Mr Ludwig's approach, was that not only was some of the evidence which he gave implausible, it was often contradictory. Mr Ludwig not only contradicted evidence which he had earlier given in his affidavit evidence, but also contradicted oral evidence he had earlier given in his cross examination. On some occasions, when he realised what he had done, he resorted to making claims that he had become confused; or that he did not understand the question then asked; or repeatedly, that the matters about which he was being asked, were matters which he had left entirely to his various professional advisers and, so, he was unable to answer the question. At some points his evidence was simply unresponsive, at others, it can only be described as somewhat incoherent. 129 Mr Ludwig claimed, for example, that he had not read the letter of 25 September sent by Mr Boyd's solicitors, before the crucial Xstrata meeting on 16 October 2003. When it was drawn to his attention, that Ms Grove's evidence was that the letter was received on 15 October, when she had faxed it to him, he conceded that her evidence must have been accurate. Still, he denied that he knew about the letter, before the Xstrata meeting, suggesting that the time of the meeting was changed. When his attention was then drawn to his own affidavit evidence, where he confirmed that the meeting took place on 16 October, he finally accepted that he was aware of the 25 September letter, before he went to that meeting. That concession then made other evidence he had already given, rather implausible, including his insistence that he was still surprised when Mr Boyd did not attend the meeting, despite Mr Boyd having told him, in early October that he would not attend; what had been said in Mr Boyd's email of 13 October, confirming that he would not attend unless his expenses were paid and Mr Ludwig's own response of 14 October. The letter from Mr Boyd's solicitor also made his position quite clear. Mr Ludwig cannot sensibly have expected that Mr Boyd would attend the meeting, if he did not take steps to pay him what was outstanding. Mr Ludwig took no such steps, nor did he respond to the letter. 130 The end result was that not only did Mr Ludwig's oral evidence finally corroborate parts of Mr Boyd's evidence, which had earlier been disputed in his affidavit evidence, Mr Ludwig's evidence contradicted evidence given by Ms Grove. 131 In his evidence, Mr Ludwig repeatedly claimed that he did not understand the details of his complex business affairs, which he left almost entirely in the hands of professional advisers, including Ms Grove. On that evidence alone, Mr Ludwig's evidence as to these matters cannot be preferred over that of Ms Grove. 132 Tellingly, no attempt was made to clarify any of Mr Ludwig's evidence, in re-examination. 133 As the end result of Mr Ludwig's approach to his evidence, in trying to determine what, in truth transpired as between these parties, considerable caution had to be adopted, in relation to parts of Mr Ludwig's evidence. Regrettably, other difficulties arose in relation to Ms Grove's evidence. She was also not asked any questions in re-examination. 134 Ms Grove was a chartered accountant of some 12 years' experience, still employed as Maxx's in-house company accountant, when she gave her evidence. She had formerly held that position with Maxx Implementation and before that employment, had worked for Maxx Implementation's external accountants. 135 Like Mr Ludwig, in her affidavit evidence, Ms Grove claimed that the business had not been transferred from Maxx in July 2003; that Maxx had not acquired Maxx Implementation's liabilities to employees and that it had purchased various assets from Maxx Implementation, but not goodwill. In her oral evidence, Ms Grove conceded that much of this evidence was not accurate. For example, she confirmed that, contrary to what she had said in her affidavit evidence, as she had advised employees other than Mr Boyd in July 2003, the operations of Maxx Implementation had been transferred to Maxx; the reality was that the business had then been transferred to Maxx as a going concern; Maxx had not purchased any assets from Maxx Implementation, they were transferred, with a book entry made, but no money ever changed hands; Maxx had taken on Maxx Implementation's liabilities to employees, when the employees and their leave entitlements were transferred to Maxx. It also acquired the goodwill of the business; and thereafter, Maxx held itself out as having had the business transferred to it. 136 It was entirely obvious from Ms Grove's oral evidence, that in swearing her affidavits and adopting them when she was called to give evidence, Ms Grove did not properly adhere to her oath. It was only when confronted with the sheer implausibility of her evidence in cross examination, that Ms Grove conceded that her earlier evidence was wrong in various relevant respects. Regrettably, Mr Ludwig was not prepared to make the same concession. 137 I return then to the question of whether there was a transfer in 2003, of the consultancy business formerly conducted by Maxx Implementation on behalf of the Trust, to Maxx. On all of the evidence, I am entirely satisfied that what occurred, was, in fact, what Ms Grove conceded had occurred, namely that the business was transferred 'as a going concern' to Maxx. 138 Mr Ludwig and Ms Grove's affidavit evidence, that there was no transfer of business, was entirely inconsistent with the reality of the transactions which had occurred in 2003 and with documents which Ms Grove herself created at the time. Mr Ludwig, in this respect at least, plainly told the truth when at one point of his cross examination, he agreed that the business was transferred to Maxx. Later in his cross examination, he resiled from what he had earlier accepted, claiming that because Maxx Implementation had no ongoing projects to transfer, other than the Pasminco project, but only prospects which were being pursued, the business was not transferred. 139 That evidence was nonsensical. The business which was transferred was not only that concerned with the completion of the Pasminco project. There was no question that Mr Ludwig was engaged in his usual pursuit of other work with clients of the business. Mr Boyd was assisting him. Other employees, including Ms Grove, were attending to their ongoing work in that business. That the business was struggling when it was transferred in 2003, was undoubted. That the business was still trading, on a basis essentially unaltered, by comparison to what was occurring before it was taken over by Maxx, was entirely evident. That was what all employees other than Mr Boyd were advised by Ms Grove and that was what occurred. Indeed, that same business continues to trade today. Was Mr Boyd employed by Maxx from July 2003? 140 Despite Mr Ludwig's denial of such a relationship, that was certainly Mr Boyd's understanding, which was corroborated both by contemporaneous material and the oral evidence given by Ms Grove. 141 Despite not including Mr Boyd in the general advice given to other employees, that their employment in the ongoing business would be transferred to Maxx, on his own evidence, Mr Ludwig did promise to pay Mr Boyd what was owed to him by Maxx Implementation, once Maxx's cash flow improved. This promise was confirmed by Ms Grove. While they disagreed as to the basis upon which it was agreed that Mr Boyd was to work for Maxx, there was no question that Mr Ludwig and Mr Boyd agreed that they would continue working together, pursuing work for Maxx after July 2003. That is what they did. 142 Consequently, Mr Boyd continued submitting the usual forms Maxx Implementation had created for its employees, to submit fortnightly to Ms Grove, for payment of salary and expense claims. That system was continued by Maxx after July 2003. Contrary to Mr Ludwig's evidence, that he was unaware that Mr Boyd was seeking payment of his salary from Maxx, it was Ms Grove's oral evidence that she had told Mr Ludwig that Mr Boyd was making both expense and salary claims. I take the view that Mr Ludwig's evidence, that he was not aware that Mr Boyd was seeking payment of salary in respect of his work for Maxx, was simply untruthful, given Ms Grove's evidence. 143 It was Mr Ludwig who instructed Ms Grove not to pay Mr Boyd, telling her that he had an agreement with Mr Boyd, that he would not be paid until cash flow improved. There was no suggestion that he ever told Ms Grove that Mr Boyd was not working for Maxx as an employee. 144 In his oral evidence, Mr Ludwig insisted that Mr Boyd did not become an employee of Maxx. Clearly, he was aware that Mr Boyd had a different understanding, but did nothing to correct, what, if his evidence in these proceedings is to be believed, he must have known was a misunderstanding, on Mr Boyd's part. I do not accept that there was such a misunderstanding. In any event, if this had truly reflected the basis upon which the agreement under which Mr Boyd performed work for Maxx rested, the unfairness of that arrangement, so far as Mr Boyd was concerned, would have been even more starkly revealed. Of all of Maxx Implementation's employees, only Mr Boyd's employment was not transferred to Maxx. Other employees' entitlements were transferred and they were paid for the work they performed for Maxx, although in some cases payment was delayed. Even Mr Ludwig kept taking drawings. Only Mr Boyd was entitled to nothing, for his ongoing work. I do not accept that such an agreement was ever made. 145 At one point in his oral evidence, Mr Ludwig claimed that while working for Maxx 'that everyone was a happy camper'; at another, that Mr Boyd was 'paid out'; then that an accommodation was made; and then that Mr Boyd's desire to be paid $240,000 was worked 'into the cash flow.' What Mr Ludwig meant by these various answers, was difficult to understand. Mr Boyd was never paid salary by Maxx for his ongoing work after July 2003, despite his ongoing pursuit of payment; various of the expenses he incurred for Maxx were never paid; and he was certainly never paid any amount in respect of his share of the business transferred as a going concern to Maxx in July 2003, even after its cash flow recovered, after his departure in October 2003. 146 On the evidence, it appears that Mr Ludwig decided that, unlike other ongoing employees, he could not afford to continue paying Mr Boyd, given his salary of $156,000. Mr Ludwig was struggling to pay himself and other staff, but he needed to keep Mr Boyd 'on board', so that he could help Maxx pursue work, which the business then potentially had in the pipeline. According to Mr Ludwig, Mr Boyd's work was crucial to Maxx obtaining the work it so desperately needed, particularly in relation to the Xstrata work being pursued in September and October 2003. 147 Accordingly, in response to Mr Boyd's ongoing enquiries, Ms Grove was directed to promise payment of Mr Boyd's credit card account at $1,000 per week; to promise payment of what else Maxx Implementation owed him, when Maxx's cash flow improved, but otherwise to direct Mr Boyd's enquiries to Mr Ludwig. Mr Ludwig also promised to pay Mr Boyd when cash flow improved. Mr Boyd understood this to include his ongoing salary. Mr Ludwig was plainly aware of that understanding and the basis on which Mr Boyd was performing the work Maxx asked of him, work of entirely the same kind that he had previously performed as an employee of Maxx Implementation. Mr Ludwig never told Mr Boyd that his understanding was wrong, or that he was wrongly claiming payment of his salary for his work. Despite this, no such payment ever eventuated and Maxx also failed to make even the promised payments of $1,000 per week, off Mr Boyd's credit card. 148 On all of this evidence, I am entirely satisfied that Mr Boyd's claim to have become an employee of Maxx, was established. Were the contracts between the applicants and Maxx Implementation shown to be unfair? 149 I am also well satisfied that Mr Ludwig's oral evidence, particularly his explanation of how the respondents had conducted themselves, revealed the unfairness of these contracts. Ms Grove's evidence confirmed that unfairness. 150 Through the contracts made between Maxx Implementation and Finger Limeing Good, Mr Boyd was entitled to a share of the profits of the business operated by Maxx Implementation. These contracts did not entitle him to access to the records of the business, so that he could understand how it was that the business was conducted and the profits calculated. The evidence showed that Mr Ludwig operated the business for his own benefit and that of the other respondents, without paying proper regard to Mr Boyd's interests. It was not until 2004, when Mr Boyd received the administrator's report, that the extent of this unfair conduct, which these contracts undoubtedly permitted, was revealed. 151 Maxx Implementation had stopped paying Mr Boyd's salary in June 2003. I am entirely satisfied that this was unfair, albeit accepted at the time by Mr Boyd, who was assured of payment when cash flow improved and that the business had good prospects. Despite this, the contract was brought to an end by Maxx Implementation as at 30 June, without notice, or payment in lieu of notice, of what was then outstanding to Mr Boyd, in relation to expenses, salary or other entitlements. 152 It does not seem that what was owed to Finger Limeing Good was then discussed, understandably perhaps, given that at that stage, profits were not being generated in the business, which was having significant cash flow problems. Indeed, in the Administrator's later report, it was suggested that Maxx Implementation may have been trading insolvently. That was never pursued however. Maxx Implementation later came out of the administration, as the result of steps taken by Mr Ludwig. 153 There can also be no doubt that the relationship between the applicants and Maxx Implementation had earlier been brought to an end in June 2003, as the result of steps taken by it and Mr Ludwig. I accept Mr Boyd's evidence that the applicants received no prior notice of that termination. Given the agreement that Mr Boyd would continue working in the business, transferred as a going concern to Maxx, questions of notice of the employment contract did not arise for discussion and need not be further considered here. 154 Further, I accept Mr Boyd's evidence that despite the applicants' interest in a share in the profits of the business, his prior consent to this course was neither sought, nor obtained. The business was transferred without notice, or adequate arrangements being made, as to how Maxx would meet Maxx Implementation's outstanding obligations, when the business was transferred to it, as a going concern. That transfer effectively terminated Finger Limeing Good's contractual entitlement to a share in the profits of the business. Despite this, no steps were taken to ensure what fairness required in the circumstances, namely ensuring Mr Boyd's entitlement to a similar share of the profits of the business when operated by Maxx. This conduct shed further light on the unfairness of these contracts. 155 All of the evidence showed that unbeknownst to Mr Boyd, given how the business was run by Mr Ludwig, with his own interests primarily in mind, the affairs of the respondents truly were inextricably interlinked, without real attention being paid to Mr Boyd's interests. The same approach was adopted when the business was transferred to Maxx, in a way which removed Mr Boyd's entitlement to a 25% share of the profits of the business, without either notice, or compensation. 156 The evidence showed that Mr Boyd had earlier been exploited by the respondents, both during the operation of the business by Maxx Implementation and on transfer to Maxx. That Maxx and Mr Ludwig received the benefit of that conduct, was undoubted. 157 Mr Ludwig's explanation of how the business and his own affairs were conducted, was that the details were handled by professional advisers and that, in reality, he had little idea, or interest in such details. This, for instance, was why he could not even explain who the trustee of the Maxx Implementation Trust was, although he agreed that he had effectively controlled the Trust and that while he may not have understood the details of all the various transactions, he understood their gist. 158 The administrator's report showed that as at June 2003, Maxx Implementation had loaned some $700,000 to Mr Ludwig over preceding years, which he was unable to repay, the money having been spent in operation of an unprofitable farming business. There were also distributions of profit, in advance to Ebenezer Gumnut, used to build a residence for Mr Ludwig. He explained that he was entitled to operate in this way, because he had provided personal guarantees for the Maxx Implementation business and at the end of the day, he was 'responsible for the whole shebang.' He also agreed, however, that Mr Boyd was never made aware of these arrangements. 159 Mr Ludwig's explanation for Maxx being set up in 2003 was: Well, I was going to become insolvent, there wasn't any work and I had, I am talking about Maxx Implementation and it would have been illegal to continue to trade past a certain point and there came, having the benefit of weekly cash flows and proper management tools to be able to manage these things, my level of expectation in terms of the work I was told was coming in wasn't eventuating, there were a couple of reasons for that, one of them was the Y2K bug the other was the introduction of the GST, companies weren't, there was a glitch in the consultancy business that was unusual at that time. 160 He agreed that in 2003, Maxx Implementation was doing very poorly and that despite this, it lent some $300,000 to Maxx and refinanced his personal loans. In late 2002, it had financed the acquisition of a $200,000 Bentley for Mr Ludwig to drive, but at that time, he explained the position was that he was very confident that work was coming in and he had to drive 360 kilometres 'one way to work'. This was because this business never had business premises. It operated a 'virtual office' with Mr Ludwig, Mr Boyd and Ms Grove, working from home. To suggest, as Mr Ludwig did in his cross examination, that he needed to be provided with a Bentley in order to safely make that trip, was just nonsensical. Commonsense makes entirely clear that others are able to safely make that drive, in vehicles other than a Bentley. 161 Undoubtedly, Mr Boyd must have been aware that Mr Ludwig was driving a Bentley. The basis on which it had been acquired, however, cannot have been known, given the respondents' refusal to let Mr Boyd see the relevant financial records. On any view, provision of such a vehicle to Mr Ludwig, must have had an impact on the profits of the business. Had Mr Ludwig made other available decisions, such as having Maxx Implementation acquire a vehicle which cost less than $200,000, the profits of the business would have been increased. 162 On the evidence, the contracts with Maxx Implementation were clearly shown to have been unfair. They permitted the respondents to conduct themselves in ways which were unfair, so far as the applicants were concerned. They were also unfair in what they provided, and failed to provide for, including, fundamentally, that Mr Boyd be paid for his work and have his expenses reimbursed and that the business be operated in a transparent way, so that Mr Boyd would be able to understand how profit was calculated and distributed. Both calculation of profit and distribution, unfairly advantaged Mr Ludwig and entities associated with him, to the detriment of the applicants. Was the contract between Mr Boyd and Maxx shown to be unfair? 163 On the evidence, I am also satisfied that the unfairness of this contract was established. 164 There was never any written employment agreement entered by Maxx and Mr Boyd. In the circumstances of this case, the absence of such a document, specifying what was obliged to be done in relation to Mr Boyd's outstanding entitlements, was plainly unfair. That unfairness was exacerbated by the circumstances in which Mr Ludwig assured Mr Boyd that he would be paid, when cash flow improved. The transfer of the business to Maxx failed to address this problem, although unbeknownst to Mr Boyd, payments continued being made to other employees, including, in the case of Mr Ludwig, payment of leasing expenses for the Bentley which he was provided to drive, by both Maxx Implementation and Maxx. On this evidence, there can be no doubt that Mr Boyd was exploited and that the contract which facilitated this exploitation, was relevantly unfair. 165 Whatever the reason for the respondents' suggestion in these proceedings that the business was not transferred to Maxx as a going concern, the reality of what occurred was entirely different. The only thing which changed in truth, so far as the respondents were concerned, was that Maxx replaced Maxx Implementation as the corporate vehicle through which the business was conducted. Mr Boyd's interest in a share of the profits of the business was thereby removed. 166 Perhaps the explanation lay with Mr Ludwig's evidence about Mr Boyd's desire to retire and his consideration of a payment of $250,000 to Mr Boyd, and increased salary in the meantime, to what he had been promised in 1996, namely $10,000 a week, before he retired. It was not in dispute that Mr Boyd was interested in early retirement. What was in issue was Mr Ludwig's version of the basis upon which this possibility had been discussed and agreed. 167 Given Mr Ludwig's evidence, there can be no doubt that what he claimed had been agreed, was of considerable advantage to him, given his control of the business and the other respondents. 168 On Mr Ludwig's version, despite this agreement, he was then able to bring about the termination of Mr Boyd's employment with Maxx Implementation and his clear entitlement to a 25% share of the profits of the business, without any notice or payment to Mr Boyd and to Finger Limeing Good. 169 On Mr Ludwig's evidence, the possibility of Maxx Implementation being replaced by another corporate vehicle, had been one he had been considering since 1996 and had discussed from time to time with Mr Boyd. When he moved to create Maxx in 2003, Mr Ludwig claimed that he was able to secure Mr Boyd's ongoing services for Maxx, performing the identical work he had previously performed for Maxx Implementation, on the basis that not only was Mr Boyd not paid what Maxx Implementation then owed him, but that he would work for Maxx, which would pay him no salary at all, let alone the $10,000 per week Mr Ludwig claimed had earlier been agreed; Mr Boyd would personally have to bear the costs incurred in performing that work and he would only be reimbursed those expenses by Maxx, when its cash flow improved. Maxx was never obliged to pay him any salary for the work performed, even if cash flow was achieved, unless some other agreement was later made; nothing was promised. Further, no matter what profits might be achieved by the business as the result of Mr Boyd's efforts, he had no entitlement to any share; that possibility was left to be discussed in the future. 170 That this would have been a considerably advantageous arrangement for Mr Ludwig, was further reinforced by his claim that the business was never transferred to Maxx at all, rather it began an entirely new business. After all, if the business in which Mr Boyd had a right to a share of profits, ceased entirely in June 2003, what basis would Mr Boyd have had to negotiate an interest in the new business Maxx then embarked upon? On Mr Ludwig's approach, Mr Boyd never even became an employee of Maxx, in that new business. 171 Telling was this evidence: Q. Mr Ludwig, you delivered nothing to Mr Boyd from 11 June 2003, did you? A. No, absolutely. You see -- Q. Let's go through it. What did you deliver to him after 11 June 2003? A. Well, I think you have got to go back a little further than that -- Q. Please. Please. I have given you a very free rein for nearly a day and a half. I am asking you a specific question. From 11 June 2003 what did you what did Maxx Implementation, what did Maxx Pty Limited deliver to Mr Boyd? A. The possible continuation through cash flow and loans that I took on personally for the business to continue based on all of the scenarios that we have described. In fact, when Maxx Implementation first made an operating loss, which I guaranteed by way of all of the material things that we have already gone through had of chosen then to stop financing the business beyond that first loss, we wouldn't be here and Mr Boyd would now be working somewhere else. So you can interpret what I delivered to Mr Boyd you know I mean that's just an interpretation I mean I was the enabler, without me at the beginning of the Maxx Implementation exercise, through whatever cash flow I made available, we did what we did. Mr Boyd could have come along to Maxx Implementation sorry, Maxx Pty Limited after that and we could have, you know, continued the arrangement which we continued. 172 For his part, Mr Boyd denied any such arrangement ever having been agreed. On his version, in June 2003, Mr Boyd was prepared to wait for payment, given the difficulties the business was then confronting and the assurances he received from Mr Ludwig, who was then refinancing. He assured Mr Boyd that new contracts were in the pipeline. Mr Boyd's version was that he was never informed of what Mr Ludwig planned to do with the business, before he was told that Maxx Implementation had ceased operating it in June 2003. While surprised when the business was transferred to Maxx, with Mr Ludwig's assurances, he agreed to continue, anticipating that cash flow would improve. Otherwise, he never agreed to the terms Mr Ludwig claimed. 173 This issue is one which must be resolved on the basis of credit. I have already discussed the considerable problems with Mr Ludwig's evidence. Mr Boyd's credit was also attacked. I accept that there were certain difficulties with what his evidence revealed, particularly in relation to the understatement of the value of the motor vehicle transferred to him in 1997. Nor would I have described him as a co-operative witness. Neither, however, was Mr Ludwig. Overall, I am satisfied that the type of difficulty apparent in Mr Ludwig's evidence, which I have earlier described, could not be found in that given by Mr Boyd. 174 Having given this matter careful consideration, I have concluded that I am simply unable to prefer Mr Ludwig's evidence over that of Mr Boyd, in relation to this matter. Mr Ludwig's version of what was agreed, was so implausibly to his advantage and to Mr Boyd's disadvantage, that I am unable to conclude, over Mr Boyd's denials, that was what he agreed. Had I come to any other conclusion, the unfairness of this aspect of the arrangement would only have been reinforced. 175 Several other matters reinforced the conclusion which I came to. Mr Ludwig claimed that this agreement was but a reversion to the arrangement he had with Mr Boyd in 1996 and early 1997. In 2003, he and Mr Boyd were again content to wait to negotiate what should happen in future, once Maxx's cash flow improved. 176 There were several difficulties with this version of what had occurred, including, importantly, that Mr Boyd also denied that he had made such an agreement in 1996. Other evidence confirmed that this was not the basis of the initial arrangement made between Mr Ludwig and Mr Boyd, at that time. While Mr Boyd plainly accepted in 1996, that he would have to wait for cash flow to improve, before he could be paid what was owing to him by Maxx Implementation, he never agreed that he would not be paid at all. 177 The invoices in evidence showed that Mr Boyd claimed payment for the work which he began to perform in 1996, as well as expenses which he then incurred, before it was agreed in April 1997, that he would begin receiving $3,000 per week salary. Mr Boyd claimed these invoices were later settled by the transfer of a car in 1997. Mr Ludwig denied this, but the evidence showed that he had himself executed a transfer of the vehicle to Mr Boyd in 1997. I am unable to accept Mr Ludwig's version of events. His explanation for how it was that the transfer to Mr Boyd came to be signed almost three years before he claimed that the 'loan of the car', had resulted in a transfer in 2000, with a resulting adjustment to profit, was that he had signed the transfer form in 1997 blank, and he had left it in the car, before he went overseas, because he was then selling the car. This was a rather implausible explanation. Even if it were correct, why would Mr Ludwig not have asked Mr Boyd to give him that transfer back, if he was only loaning him the car? Mr Ludwig did not suggest that he had continued paying the registration fees thereafter, although he claimed that he paid insurance. There was no evidence of such a payment having been made. A more likely explanation was, as Mr Boyd claimed, that the car was transferred to him in 1997, in settlement of Mr Boyd's outstanding claims for payment for the work he had earlier performed for Maxx Implementation, which otherwise remained unpaid. 178 Mr Boyd also denied that he had made an agreement in 2003, that he would work for no pay. He accepted that he had then agreed to wait for payment, initially until Maxx Implementation's cash flow improved and then that of Maxx, but not that he would not be paid at all. I accept that evidence. Not only is it consistent with common sense, it is consistent with the parties' dealings with each other, from the outset of this relationship and with contemporaneous documents, including those generated by the respondents. To Mr Ludwig's knowledge, Mr Boyd continued providing salary claim forms in the normal way, to Ms Grove after July 2003. Neither Mr Ludwig nor Ms Grove suggested he had no basis upon which to make that claim. Mr Boyd pursued both Ms Grove and Mr Ludwig about payment. It was not forthcoming, but that did not establish that there was no right to such payment. 179 Also of relevance is the evidence that, given the way in which Mr Ludwig had operated the business over the years, cash flow difficulties had arisen on more than one occasion. As a result, Mr Boyd had also agreed to delays in payment of profit shares due to him at various prior times. I accept that was what he again agreed in 2003, albeit at that point, a delay in relation to salary and expenses. 180 It is convenient to observe that had I come to a different conclusion, I would have found an agreement to work for no pay at all, the result when Maxx's cash flow had not improved prior to the termination of the relationship, on Mr Ludwig's version of the arrangement, entirely unfair. Other employees were not treated in that way and on Ms Grove's evidence, Maxx's affairs were operated on a basis which ensured cash flow to Mr Ludwig, while he and Mr Boyd worked together to chase work for Maxx. The way Mr Boyd was treated was, on any view, unfair. Of all of those employed in, or involved in this business, only Mr Boyd was paid nothing. Mr Ludwig's treatment of Mr Boyd plainly became unconscionable. 181 In fact, what the evidence finally suggested, was a conscious plan on Mr Ludwig's part, to ease Mr Boyd out of the business, while retaining his services, unpaid, while more work was pursued for Maxx. Mr Ludwig claimed that Mr Boyd had initiated discussions about his early retirement, which Mr Boyd denied, although agreeing the possibility had been discussed. The evidence showed that it was something which Mr Ludwig was actively considering. Earlier in 2003, he had Ms Grove prepare various scenarios, involving significant investment payments to Mr Boyd. These scenarios all depended on cash flow improving very significantly, a problem for Mr Ludwig at the time. There was no suggestion that Mr Ludwig gave this document to Mr Boyd. 182 It appears that having made these calculations, instead of pursuing such discussions with Mr Boyd, Mr Ludwig then embarked on a different course. He brought Maxx Implementation's activities to a halt, later claiming that its business had ceased one day and that Maxx had commenced a different business the next. Thereby, Mr Ludwig ensured that there was no need to pay Mr Boyd or Finger Limeing Good, anything for their entitlement to a share of the profits of the business. It also enabled him to claim that not only was Mr Boyd not to be paid at all for the work he performed for Maxx, he was not an employee of Maxx and had no entitlement to a share of the new business it established and pursued. 183 By October 2003, Mr Boyd had been paid no salary for some four months and was having ongoing problems in having the expenses he had incurred, repaid. Again, Mr Ludwig's own explanation of his approach to Mr Boyd, was revealing. Mr Ludwig's evidence was that he told Mr Boyd 'he had rocks in his head', if he thought he was going to be paid; he expressed outrage, when Mr Boyd later sought payment of his outstanding expenses from Ms Grove, eventually promising to pay them off at the rate of $1,000 per week, but then failing to do so. Mr Ludwig then reacted with further outrage, at Mr Boyd's pursuit of that payment with Ms Grove, when the payments were not made. 184 There was no doubt on the evidence that Mr Ludwig failed to ensure that Maxx met the fundamental obligation which an employer has to an employee, namely payment for the work performed - in a timely way, or at all. While it might be understandable that a person in Mr Boyd's position might agree to a delay in payment, when there is a cash flow problem, Mr Ludwig's treatment of Mr Boyd finally amounted to what can best be described as quite unconscionable exploitation. Who brought the contract with Maxx to an end ? 185 There is no doubt, that Mr Boyd's employment with Maxx came to an end in October 2003. 186 Mr Boyd claimed that the continuing failure to meet the payments due to him and the way in which Mr Ludwig continued fobbing his enquiries off, ultimately led him to the conclusion in October 2003, that he could no longer work unpaid, incurring expenses for Maxx, which it refused to reimburse. On Mr Ludwig's own evidence, this was what Mr Boyd told him in early October. Mr Boyd also had his solicitor write to Mr Ludwig, seeking discussions to resolve the problem and then himself confirmed his position, by email of 13 October. 187 In his reply, Mr Ludwig still refused to pay Mr Boyd anything and the relationship came to an end. On any view that was as the result of a constructive dismissal, or repudiation by Maxx, given its ongoing failure to pay Mr Boyd his salary, superannuation and expenses; his ongoing pursuit of payment; his agreement to wait while cash flow improved; Mr Ludwig's assurances that the necessary work was in the pipeline, but his ongoing failure to secure the work which would produce that cash flow, which he kept assuring Mr Boyd about; Mr Boyd's advice that he was no longer prepared to work without reimbursement of expenses; and Mr Ludwig's refusal to ensure that Maxx paid Mr Boyd, either salary or expenses. 188 That Mr Boyd may have misjudged the situation is not to the point. It may well have been the case, that had he been prepared to do the work necessary to pursue the Xstrata job on 16 October, while still not being paid, that the Xstrata job might have been secured, resulting in cash flow for Maxx and payment for him. Given the evidence, that this was likely, was not at all certain. Clearly more had to be done, than attending one meeting, before any payments would have been forthcoming from Xstrata. 189 The respondents' case was, nevertheless, that Mr Boyd would, in fact have incurred little further expense, in travelling to Sydney to attend the Xstrata meeting on 16 October and that it was entirely unreasonable that he did not do so, particularly given the short notice which he gave. On the evidence, attending that one meeting was not all that was involved in securing that job, but Mr Ludwig took the view that Mr Boyd's presence was vital, given the work he had undertaken, to prepare Maxx's presentation. 190 In early October, Mr Boyd told Mr Ludwig he could not work any longer unpaid; he was asking Mr Ludwig for his expenses to be met. He was still content however, to wait for salary. In those circumstances, Mr Ludwig's refusal to meet, what he claimed was the little expense then involved in reality, is quite inexplicable, given his own explanation of how vital Mr Boyd's presence at the meeting of 16 October was, to Maxx obtaining work. At that point, it still had no work at all and so no cash flow or profits. 191 On his own evidence, Mr Ludwig had been told of Mr Boyd's position in early October. Had he been prepared to pay Mr Boyd's outstanding expenses, Mr Boyd was prepared to continue, under this extraordinary arrangement. It was Mr Ludwig who was unprepared to treat Mr Boyd in the ordinary way that all employees are entitled to be treated and how others were being treated, namely by Maxx paying expenses incurred on its behalf, let alone paying Mr Boyd for his work. That there may have been a dispute as to the basis of some of the expenses being claimed and whether all of them were then due to be paid, seems to be somewhat beside the point. For example, on the evidence, all of Mr Boyd's telephone expenses had previously been met, but now Mr Ludwig claimed to be entitled to a breakdown, before any payment was made. He also claimed that Mr Boyd was being unreasonable in insisting on payment then, because Maxx was paying its bills only when they were due and some of the expenses Mr Boyd wanted paid, were not yet due. 192 These, it seems to me, are all concerns which seek to justify Maxx's ongoing failure to pay Mr Boyd's expenses, even having earlier promised that they would be paid off at the rate of $1,000 per week, a promise which was not honoured. 193 It cannot sensibly be overlooked that on his own evidence, Mr Ludwig had earlier told Mr Boyd that he had 'rocks in his head' if he thought he would be paid. In truth, given Mr Boyd's claimed pivotal role in securing Maxx the Xstrata job, Mr Ludwig's attitude was inexplicable, unless designed to ensure that the relationship was brought to an end. He was well aware that Mr Boyd was not prepared to incur further expenses for Maxx and so would not attend, unless his outstanding expenses were met. Mr Ludwig refused to meet that demand, sending an email, which was a blunt refusal, even though otherwise difficult to understand, given how it was couched. Mr Ludwig plainly knew Mr Boyd would no longer accept a refusal to pay those expenses. The consequence was undoubted. If the meeting on 16 October went ahead, it would be without Mr Boyd. Nevertheless, Mr Ludwig did not himself prepare to make the presentation, nor did he take any steps to rearrange the time of the meeting, or to otherwise prepare Maxx for it. 194 What was clear, on the evidence, was that it was Mr Ludwig's actions which permitted the respondents to later claim that it was Mr Boyd who brought the relationship to an end. On the evidence, it was plain that it was what Mr Ludwig did and failed to do, which brought this relationship to its final end and which resulted in Maxx not being in a position to make the presentation to Xstrata. The evidence suggested that outcome was both known, and finally sought by Mr Ludwig. 195 On the well settled approach discussed in Allison v Bega Valley Council (1995) 63 IR 68 at 72-3, there can be no doubt that the contract between Mr Boyd and Maxx was brought to an end as the result of steps which Mr Ludwig took. Maxx was the real and effective initiator of that termination. In reality, Maxx repudiated the contract, by Mr Ludwig's continuing refusal to pay Mr Boyd. That repudiation was accepted. Should the contracts be declared void or varied? 196 I am satisfied, given these conclusions, that orders of variation must be made to the contracts here in question. I am satisfied that Mr Ludwig unfairly engineered a situation where the applicants were deprived of their entitlement to a share of the profits of the business which was transferred to Maxx as a going concern. That unfairness must be remedied by the Court's order. Mr Boyd received no notice of the termination of his employment by either Maxx Implementation, or later by Maxx. That was, undoubtedly, unfair given the course which this relationship took, over the years from 1996. That was but the final unfolding of Mr Ludwig's running of the business, without any proper attention being paid to Mr Boyd's interests. 197 I have found that Mr Ludwig set out to achieve Mr Boyd's removal from the business. He succeeded, but justice requires that Mr Boyd's contract with Maxx be varied to include a fair period of notice, which I have concluded, given the evidence as to the parties' relationship, the business, the nature of Mr Boyd's interest in the business and the circumstances of its termination, should have been six months. Had I not come to the conclusion that there was an employment relationship with Maxx, consideration would have had to be given to Maxx Implementation's failure to give Mr Boyd any notice. 198 In relation to the employment contract between Maxx Implementation and Mr Boyd, I am satisfied that fairness requires that the contract be varied to provide that: 1. On termination, Mr Boyd be paid outstanding salary, statutory entitlements and the expenses incurred for Maxx Implementation, prior to 30 June 2003. 2. Mr Boyd be entitled to access to the financial records of the business operated by Maxx Implementation and to be properly consulted about how the profits of the business are calculated. 3. The profits of the business be fairly calculated, having proper regard to both the interests of Mr Boyd and Mr Ludwig. 199 Given the evidence of the basis upon which Mr Boyd and Mr Ludwig had agreed with each other, from the outset, that Mr Boyd's work would entitle him to a 25% share of the profits of the business, I am satisfied that these variations to his employment contract with Maxx Implementation, would have fairly protected his interests in this respect, while also properly taking into account Mr Ludwig's interests. 200 I am also satisfied that orders of variation must be made in relation to the contract between Maxx and Mr Boyd, which require that, irrespective of whether or not Maxx made any profit: 1. On termination, Mr Boyd be paid salary and statutory entitlements for the work which he performed, between 1 July 2003, until termination on 14 October 2003, at the rate to which he was entitled under his contract with Maxx Implementation. 2. On termination, Mr Boyd be repaid the expenses which he incurred for Maxx, on the same basis as his expenses had been met by Maxx Implementation. 3. On termination, Mr Boyd be entitled to payment of six months salary in lieu of notice. 4. On termination, Mr Boyd be paid what Mr Ludwig had promised in relation to outstanding salary, statutory entitlements and expenses not paid by Maxx Implementation. 5. Mr Boyd be entitled to a 25% share of any profits of the business up to the time of termination. Should consequential money orders be made? (a) Against Maxx Implementation 201 I turn then to consider the impact of the appointment of an administrator to Maxx Implementation and the deed of company arrangement later signed by the creditors of Maxx Implementation, including the applicants. 202 It was not until April 2004, that Maxx Implementation went into voluntary administration. That was long after the transfer of the business to Maxx in July 2003, Mr Boyd's departure in October and after these proceedings had been commenced in March 2004. Mr Boyd and Finger Limeing Good then decided to make claims in the administration, in relation to outstanding salary, expenses, superannuation and a share of profits. 203 When the deed of company arrangement was agreed in June 2004, Maxx Implementation was no longer operating the business. It had long been transferred to Maxx, which had failed to pay Mr Boyd anything Mr Ludwig had promised, in relation to what Maxx Implementation owed him and the relationship between the applicants and Maxx had come to an end. It was unsurprising, in those circumstances, that the applicants decided to pursue claims with the administrator, but whether they did or not, was a matter for them to determine. 204 Mr Ludwig had promised that if Mr Boyd went to work for Maxx, it would make good what Maxx Implementation owed to him, once it began generating a cash flow again. Mr Ludwig claimed that Maxx never achieved any earnings or profits, in the period up to the termination of Mr Boyd's employment in October 2003. All of this was undoubtedly unfair. In those circumstances however, given that Mr Boyd never came to have a right to pursue Maxx for payment, it was understandable that he pursued Maxx Implementations, when the administrator was appointed. Finger Limeing Good had no alternative. It had not been promised anything by Mr Ludwig and never entered any contract with Maxx. 205 Mr Ludwig was a director and shareholder of both Maxx Implementation and Maxx. The administration of Maxx Implementation proved to be to his personal advantage, given that despite what he and entities associated with him owed Maxx Implementation, those debts were not repaid in full and the company's creditors agreed to enter a deed of company arrangement, allowing the company to come out of administration, rather than being put into liquidation. 206 Mr Boyd was not a shareholder or director of Maxx Implementation, or of Maxx. Nor, it appears, did the basis upon which he and Mr Ludwig entered their relationship from the outset, namely an entitlement to a 25% share of the profits, entitle him, or Finger Limeing Good, to any notice of the business being transferred, as a going concern to Maxx. It certainly did not require their consent. I have found that what here transpired, revealed the unfairness of the parties' contracts. 207 In all of those circumstances, I am, nevertheless, satisfied that it would not be consistent with the public interest, to now exercise the Court's discretion to make consequential money orders against Maxx Implementation, in relation to outstanding salary, expenses, superannuation or profits, given the deed of company arrangement, which Mr Boyd and Finger Limeing Good voluntarily agreed to, in June 2004. 208 The deed of company arrangement was a part of the processes established by the Corporations Law, to provide a measure of protection, for those who find themselves in the position in which the applicants found themselves. Mr Boyd was then given access to information he had previously been denied and he took advantage of that opportunity. As a result, the applicants pursued their claims in the administration. Like other creditors, they agreed to accept certain payments in the administration of Maxx Implementation. The applicants should be bound by the agreement which they freely made, after these proceedings had been brought. I take the view that agreement ought to be recognised by this Court, as properly dealing with these matters, so far as Maxx Implementation is concerned. 209 Consistently with the public interest, this approach, in my view properly, takes into account the policy behind Division 10 - Execution and effect of deed of company arrangement, of the Corporations Act 2001, particularly ss 444D(1), 444E and 444H, which provide respectively: 444D Effect of deed on creditors (1) A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i). 444E Protection of company's property from persons bound by deed (1) Until a deed of company arrangement terminates, this section applies to a person bound by the deed. (2) The person cannot: (a) make an application for an order to wind up the company; or (b) proceed with such an application made before the deed became binding on the person. (3) The person cannot: (a) begin or proceed with a proceeding against the company or in relation to any of its property; or (b) begin or proceed with enforcement process in relation to property of the company; except: (c) with the leave of the Court; and (d) in accordance with such terms (if any) as the Court imposes. (4) In subsection (3): property , in relation to the company, includes property used or occupied by, or in the possession of, the company. 444H Extent of release of company's debts A deed of company arrangement releases the company from a debt only in so far as: (a) the deed provides for the release; and (b) the creditor concerned is bound by the deed. 210 Having come to that view, it is strictly unnecessary for me to deal with Mr Gower's evidence. Nevertheless, given the arguments which the parties advanced, I propose to make some observations about that evidence. In Boyd and Another v Maxx Implementation Pty Limited and Others, I noted: 6 It follows that admissibility of an expert's report does not require that all of the assumed facts on which it is based be already established, when it is received. Here, Mr Gower identified in his report that he had not been provided with documents he regarded as necessary to quantify the economic loss suffered by the applicants and so he had proceeded to undertake that task, on the basis of assumptions he had been instructed to make. That approach was not one which could lead to the conclusion that the opinions Mr Gower expressed were not based upon his expert knowledge, as the respondents argued. Whether or not those assumptions would be established by the applicants, had to await subsequent determination, as did the question of what weight Mr Gower's opinions should finally be given, if those assumptions are established. 7 As to the complaints as to Mr Gower's failure to reveal his reasoning process, I took the view that in his report, Mr Gower had identified what he had been instructed to assume and then went on to explain the conclusions he had reached, in a summary form, supported by schedules where the details of his calculations had been set out. Those schedules also contained notes, which identified the source of various figures used in the calculations, along with other matters. 8 No doubt the validity of Mr Gower's approach; the persuasiveness of his reasoning process; the accuracy of his calculations, given the assumptions he has made and the source of the figures which he has used, are all matters which may be relied on by the respondents, in submitting that his conclusions, even if finally supported by evidence which 211 In Mr Boyd's case, Mr Gower's opinions were sought to be made good, in part through cross examination of Mr Ludwig. He explained, for example, that the reasons why, over time, less than 25% of the profits were paid to Mr Boyd and Alconleigh was: Q. Were you aware that Alconleigh was paid less than its 25 per cent share? A. Yes that is what we are talking about. Q. Why was Alconleigh paid less than its 25 per cent share year after year? A. I think it was to do with the cash flow of the business, the borrowings and all those kind of things all wrapped in together together with the various trusts. That is really a question I can't answer in detail because all, you know, the intricate nature of my trusts and the way they were set up and like I say you would have to ask my accountancy people about it. Q. Your instructed your accountancy people presumably to pay Alconleigh less than the 25 per cent share? A. No I wouldn't have done that. Q. They would have done it if they are not? A. I think it is a matter of interpretation. I would not consciously do that. That would be a silly thing to do. Q. Silly or not you are telling this court that your accountants off their own bat without instructions gave Alconleigh less year after year and Ebeneezer Gumnut more year after year. Is that right? A. It was not a conscious awareness, no. Q. It was not a conscious awareness of whom? A. It was not a conscious awareness of anybody, I would have thought. I believe it to be a matter of interpretation but I certainly was not consciously aware that I was duding Alconleigh of any money and I wouldn't do that. If I had have been aware of it I would have dealt with it but it was not something that I was aware of. Q. You are aware of it now? A. Yes I assume so. Q. What have you done about it? A. The company Maxx Implementation went into liquidation and it is the only legal avenue open to any member of society to rearrange his or her affairs. 212 Mr Gower's evidence, including his report, did not however, suggest that apart from a final outstanding amount of some $1,800, that the 25% profit share had not been paid. It was also subsequently confirmed that Maxx Implementation had not been liquidated. Mr Ludwig also explained that he considered the matter of Mr Boyd's claims against Maxx Implementation was closed, by the deed of company arrangement, which Mr Boyd had voted in favour of. Mr Ludwig explained that the business failed because Maxx Implementation did not generate enough revenue, not because he had operated it to his own benefit. I have difficulty in accepting that evidence as representing the complete picture. 213 Mr Ludwig agreed that when Maxx Implementation went into administration, it owed the Commissioner of Taxation nearly $450,000 for unpaid tax and $120,000 for unpaid employee superannuation. The biggest debts owed to it were $273,000 which Maxx owed it; a $700,000 loan to Mr Ludwig; as well as an interest free loan of $450,000 to Ebenezer Gumnut. In the preceding November, at a time when it was plainly in difficulty, Maxx Implementation had also acquired the Bentley financed by borrowings for the purchase price of some $200,000. Mr Ludwig had utilised loans and other monies advanced to him, to build a residence and meet other personal expenses. This approach was justified, in his view, because at the end of the day, he had personally guaranteed the business. 214 The administrator reported to creditors that the debts owed to Maxx Implementation by Mr Ludwig and Maxx, of some $1 million, were not recoverable, because they had insufficient assets. Plainly, these arrangements, not just the level of revenue which the business had achieved, put Maxx Implementation into the position where the business finally failed. 215 Mr Ludwig also agreed that he, personally, contributed nothing towards the administration. He also explained that he had expected the business to begin operating profitably again under Maxx and it was his intention then to repay what was owed, including to Mr Boyd, but confirmed with the execution of the deed of company arrangement, he took the view that he had no legal obligation to do so. 216 Mr Gower's evidence dealt with various matters I have already dealt with - such as salary, superannuation and expenses. I do not need to deal further with them. 217 He also dealt with profit share, including claimed losses flowing from various non commercial transactions. His report noted that he had been instructed to make various other assumptions, not all of which were made out in the evidence, including, for example, that Alconleigh held a 25% interest in the Maxx Trust. In his evidence, Mr Boyd accepted that there was only ever an entitlement to a 25% share of the profits of the business. 218 Ms Grove gave evidence disagreeing with the details of various of the matters dealt with in Mr Gower's report, which was essentially unchallenged. It follows that various other assumptions on which Mr Gower's report was based cannot be accepted, despite Mr Ludwig's agreement, in cross examination, that he had, not himself, raised with his solicitors, any aspect of Mr Gower's report, which he had found to be inaccurate. That evidence, when considered with other evidence which dealt expressly with these assumptions, including the relevant financial records, could not establish a basis upon which the assumptions Mr Gower had been instructed to make, could be established. That would require even Mr Gower's answers in cross examination, as to various of the assumptions he had been instructed to make and which Mr Gower agreed did not accord with the relevant financial records to be overlooked. 219 It would also require aspects of Ms Grove's unchallenged evidence to be ignored. For example, an assumption Mr Gower was instructed to make, was that in 1998 and 2003, motor vehicles were acquired, which were not used for business purposes. Ms Grove's evidence was that Maxx Implementation acquired no motor vehicles in 1998 and that the only vehicle it ever acquired was in November 2002, when a Bentley was acquired to be used by Mr Ludwig, for business purposes. I have elsewhere dealt with the evidence as to that vehicle. 220 The second assumption related to payment of non business expenses. Ms Grove explained that this related to a number of expenses. In 1998, a light plane was hired from Shanair, to transport a consultant to a job at Mount Isa and that subsequently, Shanair had been retained to transport other employees and contractors to other locations where they were working. Other payments made to Shanair reflected payment of salary owed to a consultant Mr Rebgetz, which it was agreed with him, should be paid direct to Shanair. 221 The next matter related to a sum paid for fringe benefits tax associated with the 1998 and 1999 Maxx Implementation Christmas party and an employees' salary sacrifice medical benefits insurance; cost of sponsorship of a dressage event; payment of a novated lease for an employee salary sacrifice vehicle and cost of opera tickets for clients. Ms Grove's evidence as to another claim was that it related to bank charges, for day to day banking transactions in 1999, 2000 and 2001. 222 As to the assumption that previous business expenses had wrongly been paid out of profits, Ms Grove's evidence was that Mr Boyd had no entitlement to a share of profits before 1 July 1997. The amounts referred to related to the 1996/1997 year and did not affect Mr Boyd's entitlements to a share of profits. 223 It is unnecessary to deal further with the balance of Mr Gower's report, especially that dealing with interest calculations and uncommercial loans. As the respondents submitted, that would require a close consideration of Mr Gower's report and the answers which he gave in cross examination, as to whether the assumptions he had been instructed to make, were made out, especially having regard to the relevant financial records. It is significant to observe that I am entirely doubtful that even if it were possible to make out such claims, that they were established through Mr Gower's report and his evidence, given his answers in cross examination. It is not, however, necessary to come to a concluded view about this question, given the views I have otherwise reached. 224 What, in fairness, should happen, as between Mr Boyd, Maxx and Mr Ludwig, is a different matter, to which I now turn. (b) against Maxx 225 Transferring the business to Maxx was not only of potential benefit to Mr Ludwig, it was also potentially to the benefit of Mr Boyd. Otherwise, given the difficulties Maxx Implementation found itself in, the business may have come to an end entirely. Its continuation by Maxx, plainly required financial support, not provided by Mr Boyd. This, no doubt, helps explain Mr Boyd's agreement to wait for payment for his work. For his part, Mr Ludwig was able to engineer a situation where Mr Boyd agreed to work for no pay for Maxx, promising that Maxx would pay him what Maxx Implementation owed him when cash flow improved, there being good prospects in sight. He also promised that Maxx would pay him for his work when cash flow improved. Those promises were not made good. On his evidence, Mr Ludwig expected that the business would get back on its feet, cash flow would resume with Mr Boyd's assistance and he could then meet the promises he had made. Creating new business had always been Mr Ludwig's responsibility. He promised that such work was in the offing. Mr Boyd relied on his promises, which were not made good. That proved to be entirely unfair. Mr Ludwig's evidence was that when he and Mr Boyd parted company with each other in acrimonious circumstances, he no longer felt bound to ensure that Mr Boyd was paid what he had promised. He also took the view that the payment which Mr Boyd later accepted from Maxx Implementation, after the administrator was appointed, resolved him and Maxx of any obligation to make good his promises. 226 That view, I am well satisfied, further reveals the unfairness of the contract between Mr Boyd and Maxx. There is no reason, as a matter of justice, why Maxx should be sheltered from its own unfair dealings with Mr Boyd, while he was employed by Maxx in 2003, through the deed of company arrangement he later made with Maxx Implementation. Maxx is a separate legal entity, as Mr Ludwig well understood. Neither Maxx, nor Mr Ludwig may fairly be permitted to shelter behind it, given the evidence of their own unfair dealings with Mr Boyd, permitted by the unfairness of Maxx's contract with Mr Boyd. It follows that a money order should be made against Maxx, for the balance of what was outstanding to Mr Boyd from Maxx Implementation, which Mr Ludwig had promised it would pay, namely in relation to outstanding salary, expenses and other statutory entitlements flowing from his employment. 227 There was no suggestion in the evidence that Finger Limeing Good, or Mr Boyd had been promised that Maxx would pay them for any outstanding profit share. It was on the basis of such a promise in relation to Mr Boyd's employment entitlements, that I have found a basis for orders to be made against Maxx, in that respect. On his own evidence, Mr Boyd was promised nothing in relation to profits. On transfer, the business had no work and had not been trading profitably for some time. The administrator later thought Maxx Implementation had been trading insolvently. Despite the efforts made up to October 2003, the business never achieved any cash flow before the termination of Mr Boyd's employment. How it was that the business continued after Mr Boyd's departure, was not explored, but it was clear that it was not as the result of any financial support provided by Mr Boyd, that Maxx was able to trade. I am unable to see any basis, in all of these circumstances, for an order to be made against Maxx in relation to any past failure by Maxx Implementation to conduct the business so that profits were properly or fairly calculated, having regard to Mr Lindsay's and Mr Boyd's respective interests. 228 The respondents properly accepted that this money order should, however, be calculated by deducting from what was properly due to the applicants, what was paid under the deed of company arrangement with Maxx Implementation. I accept that is a fair approach to the calculation of the money order to be made. 229 Money orders must also be made against Maxx, in relation to salary, expenses and statutory entitlements, in respect of the work Mr Boyd performed for it, as well as notice. There were no profits and so no order can be made, in that respect. (c) against Mr Ludwig 230 I am well satisfied that money orders should also be made against Mr Ludwig, on a joint and several basis. There is no doubt on the evidence that he was the controlling mind of both Maxx and Maxx Implementation and that he operated all of the respondents' affairs, to his personal advantage and to Mr Boyd's disadvantage. He not only personally benefited from that approach, he was the author of the unfairness I have found. It is entirely appropriate, in these circumstances, that money orders be made against him. (d) against Ebenezer 231 I have earlier dealt with its position. On the evidence, given its entitlement to a 75% share of the profits of the business, which was run to benefit Mr Ludwig and his interests, it was the recipient of the benefits of the unfairness I have found, in relation to the contracts with Maxx Implementation. Nevertheless, I have also concluded that the claim was brought out of time, in respect of those contracts. It follows that no orders may be made against it. 232 I can see no connection between Ebenezer and the claims advanced in relation to Maxx and therefore can find no basis upon which orders can be made against it, in relation to those claims. Orders 233 For the reasons given, I find the contracts here in question relevantly unfair. I propose to order their variation, in accordance with the terms of this judgment. The parties are directed to confer as to the terms of the orders to be made, to reflect this judgment. If they are unable to agree on such terms, they should each file the orders which they will submit that the Court should make and I will hear them on the terms of those orders. Such draft orders should be filed within 21 days of the date of this judgment. 234 The usual order as to costs would be that the respondents, other than Ebenezer, bear the applicants' costs, as agreed or assessed, on a party/party basis. If the parties are unable to agree on the question of costs, they have liberty to apply. That liberty should also be exercised within 21 days. ------------------------ 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.