Industrial Court of New South Wales CITATION: T D Preece & Co. Pty Ltd v Murton [2007] NSWIRComm 130 APPELLANT T D Preece & Co. Pty Ltd PARTIES: RESPONDENT Rick Murton FILE NUMBER(S): IRC 3638 of 2006 CORAM: Wright J President; Walton J Vice-President; Boland J Appeal - Application for leave to appeal and appeal - Unfair contract - Employment contract - Employee summarily dismissed for poor performance - Contract did not contain express provisions regarding termination of employment - Implied term of reasonable notice - Held at first instance no evidence of poor performance - Held contract unfair because it failed to protect employee from summary termination - Contract varied to provide for two months' pay in lieu of notice - Contended on appeal that contract not unfair because it contained an implied term of reasonable notice and that conduct of appellant in summarily terminating the respondent merely a breach of contract thus precluding the Commission's jurisdiction - Held on appeal that open to Full Bench to form own view about the contract - Held on appeal the contract became unfair because it permitted the appellant to act unfairly, harshly or unconscionably in summarily terminating the employment of the respondent on grounds that were not made out and in failing to apply fair termination procedures - No warning or counselling by appellant of the respondent in relation to alleged poor performance - Orders at first instance varied CATCHWORDS: Unfair contract - Appeal - Application for leave to appeal and appeal - Employment contract - Employee summarily dismissed for poor performance - Contract did not contain express provisions regarding termination of employment - Implied term of reasonable notice - Held at first instance no evidence of poor performance - Held contract unfair because it failed to protect employee from summary termination - Contract varied to provide for two months' pay in lieu of notice - Contended on appeal that contract not unfair because it contained an implied term of reasonable notice and that conduct of appellant in summarily terminating the respondent merely a breach of contract thus precluding the Commission's jurisdiction - Held on appeal that open to Full Bench to form own view about the contract - Held on appeal the contract became unfair because it permitted the appellant to act unfairly, harshly or unconscionably in summarily terminating the employment of the respondent on grounds that were not made out and in failing to apply fair termination procedures - No warning or counselling by appellant of the respondent in relation to alleged poor performance - Orders at first instance varied LEGISLATION CITED: Industrial Relations Act 1996 s 105, s 106, s 106(5), s 108, s 187, s 188, s 192(1)(a) Alliance Motor Auctions Pty Ltd v Industrial Relations Commission of New South Wales (2005) 146 IR 99 Fish and Another v Solution 6 Holdings Limited (2006) 225 CLR 180 Murton v TD Preece and Co. Pty Ltd [2006] NSWIRComm 367 CASES CITED: New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 Oracle Systems Australia Pty Limited v Michael John Pym [2005] NSWIRComm 15 Quinn v Jack Chia (Australia) Ltd (1992) 43 IR 91 Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661 Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121 HEARING DATES: 23 May 2007 DATE OF JUDGMENT: 28 June 2007 APPELLANT Mr T J Dixon of counsel Solicitor: Ms R Diesner Jones King Lawyers LEGAL REPRESENTATIVES: RESPONDENT Mr I Latham of counsel Solicitor: Mr D O'Sullivan Turner Freeman Lawyers JUDGMENT: INDUSTRIAL COURT OF NEW SOUTH WALES FULL BENCH CORAM: WRIGHT J, President WALTON J, Vice - President BOLAND J 28 June 2007 Matter No IRC 3638 of 2006 T D Preece & Co Pty Ltd v Rick Murton Application by T D Preece & Co Pty Ltd for leave to appeal and appeal from a judgment of Justice Backman given on 23 November 2006 in Matter No IRC 6239 of 2002 JUDGMENT OF THE COURT [2007] NSWIRComm 130 1 In Murton v TD Preece and Co. Pty Ltd [2006] NSWIRComm 367 Backman J found that a contract to which Rick Murton ('the respondent') and T D Preece & Co Pty Ltd ('the appellant') were parties was unfair within the meaning of ss 105 and 106 of the Industrial Relations Act 1996 because it failed to protect the respondent from the circumstances of summary termination. Her Honour made orders varying the contract and providing for compensation under s 106(5) of the Act. 2 The appellant now seeks leave to appeal and to appeal her Honour's decision and orders pursuant to sections 187 and 188 of the Act. Decision at first instance 3 In her Honour's decision, Backman J related the background facts. The foundational facts relevant to this appeal may be summarised in the following terms: · The respondent was an accountant who in January 2002 applied for a position with the appellant as a financial accountant/controller after seeing an advertisement for the position in the Sydney Morning Herald. · The respondent was successful in his application and commenced work for the appellant on 4 February 2002 performing the work of a financial controller whose priority task was to implement a new computer system and update the accounting records. The respondent's salary was $80,000 per annum payable through the respondent's company, Windjar Pty Ltd. · There was no written contract of employment. The respondent's letter of appointment simply stated, "Richard Murton is employed by T.D. Preece Pty Ltd as Financial Controller and his salary package including superannuation is $80,000." · Both the appellant and the respondent were parties to a contract pursuant to s 108 of the Act. · The work performed by the respondent was work performed in an industry. · The reality of the working relationship between the appellant and the respondent was one of employment. · The contract or arrangement to which the respondent and the appellant were parties was terminated by the appellant on 19 April 2002. · The respondent's services were summarily terminated without notice after about 11 weeks of engagement or employment, and that upon termination the appellant did not pay the respondent any moneys in lieu of notice. 4 As to the legal relationship between the appellant and the respondent, Backman J did not make a specific finding it was an employer/employee relationship. At [43] her Honour stated: 43 Whatever the true extent of the applicant's duties, on either version in my opinion, he, "personally ... carried out the work" which he was engaged to do either directly or through Windjar as a financial controller. Moreover, the letter dated 28 March 2002 suggests on its face that the applicant and not Windjar was directly employed to do the work. It is not however necessary to decide this latter point, since in my view it is open in accordance with the terms of the summons and the available evidence to find that the applicant was party to an arrangement between himself, Windjar and the respondent, and therefore a party to a contract in its extended sense under s 108. This was the basis for the finding that the additional applicant could be joined as a party to the summons in Metrocall at [17]. The present applicant was entitled to commence proceedings under s 106 because he was a party to the arrangement. In the absence of a formal written contract, the available documentation and other evidence adduced during the proceedings confirms the existence of the arrangement. First, the work to be performed, being that of a financial controller, was performed solely by the applicant. Secondly, the applicant was the sole director of Windjar. Thirdly, although Windjar invoiced the respondent for the applicant's services, it is significant that some 7 weeks into the applicant's engagement, the respondent signed the letter dated 28 March 2002 which stated that the applicant "...is employed by (the respondent) as Financial Controller and his salary package including superannuation is $80,000". While the reference to the applicant being "employed" is not conclusive evidence of that fact it does, in my view, indicate the reality of the working relationship between the applicant and the respondent, in the absence of a formal contract and particularly given that as at the date of the letter the applicant had been working for the respondent under the direct supervision of Mr Preece, for 7 weeks during which time a number of invoices had been generated by Windjar for services provided by the applicant. The letter of 28 March suggests that the respondent at least viewed the nature of the working arrangement with the applicant as that of employer and employee. 5 Nevertheless, Backman J appears to have treated the relationship as one of employment and neither party on appeal demurred from that being the proper characterisation of the relationship. 6 At [48] her Honour referred to the appellant's reliance on the Court of Appeal's decision in Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661; 141 IR 14: 48 The respondent relies on a submission that all of the heads of alleged unfairness set out under paragraph 33 of the summons are outside the ambit of the Court's jurisdiction by reference to Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661; 141 IR 14. Upon closer analysis, however, the submission as I understand it really relates to the allegation of a failure to provide for adequate notice; the respondents' primary contention in this regard being that a reasonable notice period was implied (in the absence of an express term in the contract). In my opinion, however an implied term of reasonable notice, although not of itself unfair may nevertheless operate unfairly on the contract in circumstances where the termination of an applicant's engagement or employment under the contract constitutes unfairness under the contract by reason of, for example, the failure to make a monetary payment in lieu of notice, or make provision for any notice where there is no finding of misconduct. 7 The matters in paragraph 33 of the summons, said to have rendered the contract unfair, were set out in the summons as follows: (a) required the applicant to carry out the directions given by Mr Preece, even where the applicant had serious concerns about the legality of those directions; (b) failed to protect the applicant from a hazardous and stressful work environment; (c) failed to protect the applicant from summary termination of employment; (d) failed to provide for adequate notice provisions upon termination of the contract without cause; (e) required the applicant to work in an environment which was not compliant with Occupational Health and Safety guidelines; (f) failed to provide for the respondent to make contributions to a superannuation fund on behalf of the applicant; (g) exposed the applicant to frequent and public episodes of verbal abuse by Mr Preece. 8 As to these allegations, her Honour found at [45]-[46]: 45 The applicant has not in submissions expanded upon the reasons as to why it is alleged that the respondent's conduct operated upon the contract and rendered it unfair. Some submissions were advanced in relation to an attempt on the part of the applicant to introduce an occupational health and safety committee (arguably referable to (e) above). The allegation that the applicant was required to carry out directions with possible illegal consequences may relate to the applicant's account concerning the Metal Trades picnic day, as well as the allegation that the respondent did not bank cash sales. The alleged failure to protect the applicant from a hazardous and stressful environment may relate to the applicant's complaint set out in his affidavit that staff including Mr Preece smoked in the workplace. The allegation concerning the frequent verbal abuse probably concerns the verbal abuse the applicant says he endured from Mr Preece. Mr Preece conceded that he threatened the applicant with dismissal on about 20 occasions during the applicant's 7 week engagement. The applicant has not sought however to connect the alleged conduct associated with these allegations to the contract. Rather, the applicant's case that the contract was unfair appears directed more to the issues of the failure to make provision for adequate notice and the circumstances of the applicant's termination (our emphasis). 46 This approach is supported in the applicant's written submissions where it is contended: The contract is alleged to be unfair because it did not contain sufficient protective mechanisms against the termination of the contract without notice, procedural fairness and with regard to the circumstances of the applicant; see... paragraph 33(c)(d) of the summons. 9 At [55] her Honour noted that the respondent's services were terminated summarily: 55 It remains to decide whether the circumstances of the applicant's termination and the failure to provide for adequate notice provisions in the contract were unfair. The applicant's services were summarily terminated without notice in circumstances where the applicant had worked for the respondent for just under 11 weeks in a relatively senior position which involved a significant degree of responsibility and trust (the applicant was for example the paymaster) and which, at the time the applicant commenced in the position, he would have had a reasonable expectation of long term employment. This latter point is borne out in my view by reference to the terms of the advertisement in the Sydney Morning Herald which indicated an arrangement in the long term. The advertisement does not, for example, refer to employment for a fixed term or for a period confined to the completion of a particular project. Certainly no competing or contrary inference is available from the evidence. 10 The appellant had claimed that the respondent's services had been terminated for reasons related to poor performance. Backman J dealt with this issue at [56]: 56 The respondent asserts that the applicant's services were terminated because of poor performance. There is little substance to this allegation in my view. First, the allegation is supported by little detail either by way of oral evidence from the respondent or by way of any supporting documentation. Many indications revealed by the evidence are in fact to the contrary. First, the very short period of employment, on 11 weeks, is not necessarily a satisfactory period of time in which to properly and reasonably assess someone's standard of work. Secondly, the respondent apparently without any resistance or complaint consistently paid the fortnightly invoices submitted by Windjar. Thirdly, there was no evidence of any letters or other types of correspondence, an otherwise common device for alerting employees about employer dissatisfaction with work performance, which the respondent could have at any time sent to the applicant in order to give him some notice of its particular concerns. Fourthly, the letter of 28 March 2002 is sent some 7 weeks after the applicant has commenced work. Any concerns about his work performance could have been readily addressed in that letter. Mr Preece in his evidence during the proceedings said he had become dissatisfied with the applicant's work performance after only 4 weeks. Instead the letter of 28 March 2002 simply confirms in writing the applicant's employment and his annual salary. 11 Having held there was little substance to the allegations relating to poor performance, at [57] Backman J found as follows: 57 I find for the reasons outlined above that the applicant's summary termination was not influenced by any considerations pertaining to work performance. I therefore find that the contract operated unfairly against the applicant because it failed to protect him from the circumstances of summary termination. The following reasons have influenced my decision: (i) the applicant's services were summarily terminated in the absence of any substantiated allegations of misconduct such as poor work performance and without notice; (ii) the applicant was not paid any monies in lieu of notice consequent upon his termination; (iii) the applicant had a reasonable expectation that his engagement or employment would be for a lengthy period of time; (iv) at the time of his summary termination the applicant had been engaged in a relatively senior position which entailed a significant degree of responsibility and trust. 12 Her Honour made the following orders: (1) The contract entered into between the applicant and the respondent under which the applicant commenced work for the respondent on 4 February 2002 is declared unfair. (2) The contract referred to in Order 1 above is varied from its inception to include a term that the contract shall not be terminated without the consent of the applicant except for serious misconduct unless the respondent pays the applicant $13,330, representing 2 months remuneration payable under the contract. (3) The respondent is to pay the applicant $13,330 representing 2 months remuneration payable under the contract. (4) The respondent is to pay interest on the amount specified in Order 3 above in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. The interest shall be payable from the date of the filing of the summons for relief on 6 November 2002 until the date of this judgment. (5) The matter is set down for a directions hearing in relation to costs Thursday 30 November 2006 at 9.30am. 13 We note that costs were dealt with on the basis of the usual rule that costs follow the event. Accordingly, the appellant was ordered to pay the respondent's first instance costs. Leave to appeal 14 In the light of a number of errors that have occurred at first instance we have decided to grant leave to appeal in order that the errors might be corrected and so that the issues raised by the appellant as described above may receive attention by the Full Bench given their general importance for the jurisdiction. Grounds of appeal 15 In an amended application for leave to appeal and appeal filed on 3 May 2007 the appellant formulated the grounds of appeal as follows: (i) Her Honour erred in fact and in law in failing to find that if the contract was one in which a notice period applied as a matter of fact or law, the contract did not operate unfairly against the Respondent because it failed to protect him from the circumstances of summary termination; (ii) Her Honour erred in fact and in law in failing to find the applicable terms of the contract or arrangement prior to finding unfairness; (iii) Her Honour erred in fact and in law in failing to uphold the Appellant's jurisdictional objections relating to the decision of the Court of Appeal in Sydney Water Corporation Ltd & Anor v Industrial Relations Commission of NSW & Anor [2004] NSWCA 436. Consideration 16 The main issue on appeal is a relatively narrow but important one. The appellant contended that in the absence of an express term in the contract between it and the respondent dealing with notice of termination, the common law implied a term of reasonable notice: Quinn v Jack Chia (Australian) Ltd (1992) 43 IR 91; New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68. It followed, therefore, that the contract itself could not have been unfair, as a notice provision was provided for in the contract. The appellant submitted that the fact that the notice period was not paid out in the circumstances of summary termination made this "a pure breach case amenable to damages at general law" and, therefore, on the authority of Sydney Water and Alliance Motor Auctions Pty Ltd v Industrial Relations Commission of New South Wales (2005) 146 IR 99, the Court had no jurisdiction to entertain the respondent's summons for relief. It was also submitted her Honour erred in failing to identify the terms of the contract or arrangement before deciding the question of fairness or unfairness: Fish and Another v Solution 6 Holdings Limited (2006) 225 CLR 180 at [19] and [43]; Alliance Motor Auctions at [20]. 17 Whilst we have some reservations, we have little choice but to accept that the contract between the appellant and the respondent was one of employment. As we earlier observed, it is apparent from the judgment at first instance that whilst Backman J did not make a specific finding in this respect, as her Honour should have, she decided the matter on the basis that Mr Murton was an employee of the appellant. Moreover, the parties on appeal accepted that the relationship was one of employment. 18 Further, we agree with the appellant that Backman J erred in failing to identify the terms of the contract between the appellant and the respondent. In Fish, the majority (Gleeson CJ, Gummow, Hayne, Callinan and Crennan JJ) stated at [19] (references omitted): Because "contract" is given the extended definition that has been noted earlier, it must be understood as extending to any arrangement or related condition or collateral arrangement of the requisite kind, namely, a contract or arrangement whereby a person performs work in any industry. But what must be identified is the set of arrangements (leaving aside, for the moment, whether those arrangements are or may be contractual or otherwise) according to which (that is, "whereby") a person performs the relevant work. What may be declared void or varied is any part of those arrangements: the arrangements in accordance with which a person performs work. 19 Such an error is not necessarily fatal. Provided that it is apparent from the material in the appeal that the trial judge understood what were the terms of the contract or arrangement whereby a person performed work in any industry, which terms caused the contract or arrangement to be unfair and that the contract or arrangement was declared wholly or partly void, or varied, in order to remedy the terms found to be unfair, then there will be no error requiring appellate intervention. 20 The trial judge was clearly alive to the fact that there was no written contract and that its express terms were quite limited. Her Honour also obviously understood the contract did not expressly provide for any terms relating to termination of the contract, including the amount of notice for termination with or without cause or payment in lieu of notice and it did not make provision for procedures to be followed to ensure that any termination of the contract would be undertaken fairly. 21 In the summons for relief it was pleaded that the contract was unfair because it "failed to protect the applicant from summary termination of employment" and, in a separate pleading, that it "failed to provide for adequate notice provisions upon termination of the contract without cause". Further, the orders sought in the summons included an order declaring the contract void or, in the alternative, varying the contract to provide, inter alia, that the respondent was to be treated fairly by the applicant and included a requirement that the respondent be given an opportunity to defend himself against any allegations made in relation to his conduct or performance, a requirement that any such allegations be properly investigated and a requirement that any decision regarding the respondent be taken having regard to the respondent's personal circumstances and his satisfactory performance under the terms of the contract. 22 In his submissions at first instance, the respondent submitted that he was not seeking damages for breach of contract but rather he was seeking to vary the contract "to insert protective provisions to make it fair" and referred in particular to the pleading that the contract failed to protect the respondent from summary termination. The respondent at first instance referred to protective provisions as including provisions relating to "procedural fairness" as well as a period of notice. 23 Her Honour found at [57] that the contract operated unfairly against the respondent because it failed to protect him from the circumstances of summary termination. Mr Dixon of counsel for the appellant, however, submitted that her Honour's reference to the failure to provide for protective provisions was limited to the appellant's failure to provide payment in lieu of notice. In this regard, Mr Dixon referred to the reasons relied upon in [57] by her Honour qualifying the finding that contract operated unfairly against the respondent because it failed to protect him from the circumstances of summary termination. Those reasons were: i) the applicant's services were summarily terminated in the absence of any substantiated allegations of misconduct such as poor work performance and without notice; (ii) the applicant was not paid any monies in lieu of notice consequent upon his termination; (iii) the applicant had a reasonable expectation that his engagement or employment would be for a lengthy period of time; (iv) at the time of his summary termination the applicant had been engaged in a relatively senior position which entailed a significant degree of responsibility and trust. 24 Counsel for the appellant contended that nowhere in the reasons that Backman J said influenced her decision in finding the contract was unfair did her Honour refer to the absence of procedural fairness provisions. Moreover, it was submitted, the orders made by her Honour varying the contract involved a requirement to pay an amount of money that was, in effect, two months' pay in lieu of notice, which counsel contended amounted to damages for breach. Mr Dixon noted that no reference was made in the orders to remedying any unfairness arising from the absence in the contract of procedural fairness provisions. 25 Counsel also contended that, in any event, there was no absence of procedural fairness because the evidence was that the appellant had warned or counselled the respondent on some 20 occasions. 26 It is not apparent from the decision at first instance that in finding the contract between the appellant and respondent was unfair the trial judge did so on the basis that the contract failed to provide for fair procedures on termination, notwithstanding that this was clearly pleaded and argued as part of the respondent's case at first instance. Whilst her Honour at [57] stated that the contract operated unfairly against the respondent because it failed to protect him from the circumstances of summary termination, the reasons her Honour gave as to how she was influenced to come to that conclusion do not include a failure to provide for fair procedures on termination, but they did include that the respondent was not paid any monies in lieu of notice consequent upon his termination. 27 Furthermore, in varying the contract to remedy the unfairness found, her Honour confined it to a variation providing for what was a payment in lieu of notice. Such a variation suggests that the basis upon which her Honour found the contract to be unfair was due essentially to the fact that the respondent was not paid any monies in lieu of notice consequent upon his termination and not because of the absence in the contract of fair termination procedures. 28 It may have been the case that in finding unfairness the trial judge had in contemplation the absence in the contract of fair termination provisions; her Honour was most certainly aware of the absence of such provisions. However, the omission in the orders of a variation remedying the absence of those provisions leads us to the conclusion that her Honour erred as to the basis upon which the contract was unfair and as to the form of variation ordered. 29 Section 192(1)(a) of the Act provides that on an appeal the Full Bench may confirm, quash or vary the decision of the Commission concerned. We consider it is open to us, on the material before the Full Bench on appeal, to form our own view about the contract (see Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121 at 149 per Sheller JA) and having done so, to vary the decision at first instance consistent with that view. No party on appeal demurred from that proposition. Of course, if an issue of credit had been involved it may not have been open to the Full Bench to form its own view, but that is not the case here. 30 The trial judge found that the respondent's summary termination was not influenced by any considerations pertaining to work performance. This finding was not challenged on appeal. No other basis was contended at first instance as justifying summary dismissal. The evidence in the proceeding makes clear that the contract between the appellant and the respondent did not provide for fair termination procedures. The absence of such procedures as counselling or warnings relating to the respondent's performance or conduct, or provisions giving the respondent the opportunity to defend allegations of poor performance before dismissal was effected, thereby permitted an unfair, harsh or unconscionable dealing by the appellant with the respondent. What a contract permits, or does not proscribe, may make the contract relevantly unfair under s 106 (see Sydney Water at [32]-[33] per Mason P referring to the observations of Sheller JA in Walker v Industrial Court of New South Wales & Anor (1994) 53 IR 121 at 149; see also Oracle Systems Australia Pty Limited v Michael John Pym [2005] NSWIRComm 15 at [50]). 31 It follows that the contract was or became unfair because it permitted the appellant to act unfairly, harshly or unconscionably in summarily terminating the employment of the respondent on grounds that were not made out and in failing to apply fair termination procedures: see Walker at 149 where Sheller JA (with whom Meagher JA agreed) indicated he preferred the conclusion of Hill J who, in his dissenting judgment in the appeal from Hungerford J in the Industrial Court, held that Hungerford J was correct in finding the contract became unfair because the employer acted unfairly, harshly and unconscionably in terminating the services of the employee on grounds that were not made out and in failing to apply fair termination procedures. See also Kirby P at 135. 32 An alternative way of considering the matter is that the contract was or became unfair in that it permitted summary termination of the respondent's employment on grounds that did not support such a peremptory step being taken by the employer, poor performance (if such a ground had been made out) not being conduct that is a sufficiently serious breach of the contract, or not being conduct that evinces an intention by the respondent that he longer wished to be bound by the contract, and because the contract permitted the appellant to adopt unfair procedures in terminating the services of the respondent. 33 Either way, it may be concluded the contract was unfair, thereby leaving it open to the Full Bench to vary the contract in a manner modelled on the claims in the summons for relief, thus providing the basis for the making of an order under s 106(5) of the Act requiring the appellant to pay the respondent two months' pay. 34 Before taking this conclusion any further we need to deal with the appellant's submission that there were "20 warnings, counselling" during the period of the respondent's employment and "a meeting to discuss performance" two days prior to the dismissal. In other words, that the respondent had been warned on numerous occasions about his poor performance so that it could not be said the dismissal was procedurally unfair. In any event, it was submitted the trial judge made no findings about these matters. 35 The respondent agreed in cross-examination that he had been threatened with dismissal on at least 20 occasions. However, the respondent did not accept that on those 20 occasions Mr Preece discussed with him his performance or that at the meeting two days prior to his dismissal his performance was discussed. Rather, the respondent described the communications with Mr Preece as "one sided" and abusive and where he, the respondent, did not get an opportunity to respond, and in relation to which he regarded the threats to be nothing more than idle threats because he was "one of 25 people that suffered those same threats." 36 Mr Preece, on the other hand, stated in his evidence that he spoke to the respondent on at least 20 occasions about his work, which Mr Preece considered was poor and often inaccurate and that he had warned the respondent about a number of work-related matters. 37 Backman J found that the termination of the respondent's employment was not influenced by any considerations pertaining to work performance. Indeed, her Honour considered there was little substance to the allegation of poor performance and that there were "many indications revealed by the evidence… to the contrary". In this respect, her Honour noted that although Mr Preece said he was dissatisfied with the respondent's performance after only four weeks, Mr Preece did not take the opportunity to advice Mr Murton in a letter to him dated 28 March 2002, some seven weeks after the respondent had commenced work. Instead, the letter simply confirmed in writing the respondent's employment and his annual salary. 38 Given her Honour's view that there was little substance to the allegation of poor performance, it is unsurprising that her Honour did not make any findings regarding the 20 so-called warnings/counselling; there was no need to because of her Honour's finding that the summary termination was not influenced by any considerations pertaining to work performance. 39 It must follow, given Backman J considered there was little substance to the allegations of poor performance, that her Honour also considered there was little substance to the appellant's claim that it warned or counselled the respondent regarding poor performance or that the warnings issued and consultation conducted by the appellant could not have satisfied the clauses sought to be inserted in the varied contract contemplated by the summons.. In any event, if there was no poor performance there could not have been any warnings issued or counselling undertaken, at least of a kind that was fair and constructive. 40 It is open to us to find that the warnings/counselling given or adopted by the appellant did not constitute fair procedures and would offend the contract if varied to include the procedural clauses concerning termination sought in the summons. The evidence revealed that the 20 so-called warnings/counselling delivered to the respondent by Mr Preece were merely episodes of verbal abuse, about which the respondent had complained in his evidence, in the course of which he was threatened with dismissal. The very fact that the respondent was threatened with dismissal on 20 occasions in such a relatively short space of time suggests the threats were empty gestures containing no genuine warning that the respondent's employment was in jeopardy for any good reason. The threats were certainly not accompanied by counselling of the respondent with the objective of improving his work performance. Mr Murton inferred in his evidence that there were so many threats, directed at so many people, he did not take the threats seriously. We find there were no warnings given or counselling undertaken by the appellant in relation to any alleged poor work performance of the respondent that might be regarded as constituting elements of a fair termination procedure. 41 Having found the contract was unfair, we have assessed compensation as two months' pay. We note that Backman J arrived at the same conclusion regarding compensation, although on a different basis to that determined on appeal. There was no contention by any party on appeal that two months was inappropriate. 42 We propose to vary order (2) of the trial judge's Orders consistent with our findings on appeal. Varied order (2) will be in the following terms: (2) The contract between the applicant and the respondent under which the applicant commenced work for the respondent on 4 February 2002 is varied ab initio to provide that the contract shall not be terminated without the consent of the applicant except for serious misconduct justifying summary dismissal and after investigation, consultation and warnings in accordance with the requirements set out below. The contract is further varied to provide that the respondent shall not make any decision adverse to the applicant unless the following requirements are met: (a) that the respondent gives the applicant reasonable notice of any such intention and provides to the applicant reasons for the proposed adverse decision and adequate factual material in relation to the reasons; (b) that if the reasons for the proposed adverse decision relate to the applicant's conduct or performance of his duties, the applicant has been given an opportunity to defend himself against any allegations made in relation to his conduct or performance; (c) that if the reasons for the proposed adverse decision relate to the applicant's conduct or performance of his duties, the respondent has undertaken a thorough investigation of any allegations made in relation to the applicant's conduct or performance and any matter presented to the applicant in his defence; (d) that the respondent shall make any such decision reasonably having regard to the satisfactory (or otherwise) performance by the applicant of his obligations under the contract. Orders 43 We make the following orders: (1) Leave to appeal is granted. (2) The appeal is upheld to the extent determined in this decision. (3) Order (2) of the orders made by Backman J in Matter No IRC 6239 of 2002 is quashed and the following order is substituted: (2) The contract between the applicant and the respondent under which the applicant commenced work for the respondent on 4 February 2002 is varied ab initio to provide that the contract shall not be terminated without the consent of the applicant except for serious misconduct justifying summary dismissal and after investigation, consultation and warnings in accordance with the requirements set out below. The contract is further varied to provide that the respondent shall not make any decision adverse to the applicant unless the following requirements are met: (a) that the respondent gives the applicant reasonable notice of any such intention and provides to the applicant reasons for the proposed adverse decision and adequate factual material in relation to the reasons; (b) that if the reasons for the proposed adverse decision relate to the applicant's conduct or performance of his duties, the applicant has been given an opportunity to defend himself against any allegations made in relation to his conduct or performance; (c) that if the reasons for the proposed adverse decision relate to the applicant's conduct or performance of his duties, the respondent has undertaken a thorough investigation of any allegations made in relation to the applicant's conduct or performance and any matter presented to the applicant in his defence; (d) that the respondent shall make any such decision reasonably having regard to the satisfactory (or otherwise) performance by the applicant of his obligations under the contract. (4) The appellant shall pay the respondent's costs as agreed or, failing agreement, as assessed. (5) The stay order made by the President on 21 December 2006 is dissolved. ___________________________________________________ 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.