Industrial Relations Commission of New South Wales in Court Session CITATION: Ian King v Regulatory Concepts Pty Limited & Anor [2006] NSWIRComm 310 APPLICANT: Ian King PARTIES: FIRST RESPONDENT: Regulatory Concepts Pty Limited SECOND RESPONDENT: Helena Wanda Dickenson FILE NUMBER(S): IRC 5181 of 2003 CORAM: Schmidt J CATCHWORDS: Unfair contract - IT industry - whether work performed by applicant was undertaken as an employee of first respondent or whether work performed was done on own account by way of investment - agreement to deferral of payment for work - work done for respondents - work never paid for - terms of agreement made - question as to the true size of shareholding - contract found unfair - money orders - superannuation - interest - costs LEGISLATION CITED: Industrial Relations Act 1996 CASES CITED: GingerMeggs Pty Limited v Regulatory Concepts Pty Limited & Ors (unreported, Miller A, 23 September 2004) Stevenson v Barham (1977) 136 CLR 190 HEARING DATES: 24/03/06, 23/05/06, 25/06/06, 26/06/06 DATE OF JUDGMENT: 09/27/2006 APPLICANT: Mr D Shoebridge of counsel SOLICITORS: LEGAL REPRESENTATIVES: Employment Lawyers RESPONDENTS: Mr S Cairns of counsel JUDGMENT: - 47 - INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Schmidt J 27 September 2006 Matter No IRC 5181 of 2003 IAN KING V REGULATORY CONCEPTS PTY LIMITED AND ANOTHER Application under s.106 of the Industrial Relations Act 1996 JUDGMENT [2006] NSWIRComm 310 1 These proceedings were brought by Ian King in September 2003, pursuant to s 106 of the Industrial Relations Act 1996 ('the Act'). They concern the fairness of the employment contract between Mr King and Regulatory Concepts Pty Limited ('Regulatory'), for whom Mr King worked for a period of about six months. The relationship came to an end in July 2003, when Mr King refused to perform further work for Regulatory, until he was paid for work which he claimed he had performed for the company on a project called the PharmaDirectory, but which it had failed to pay for. Regulatory thereupon terminated Mr King's employment. 2 The respondents' case was that the PharmaDirectory work had not been performed for Regulatory under the employment contract, but had been performed by Mr King on his own account, by way of investment in the establishment of the new PharmaDirectory company, by which he hoped to be employed full-time. 3 On the first day of the hearing, Mr King and the second respondent, Mr Alex Campbell, a director of Regulatory and Dr Dickenson's former husband, reached an agreement. Mr King was given leave to discontinue the proceedings against Mr Campbell. The case against Regulatory and Dr Dickenson, also a director of Regulatory, continued. 4 The summons initiating the proceedings sought the following orders: (1) A declaration that the contract between the Applicant and the First Respondent was unfair, harsh, unconscionable or against the public interest at the time it was entered into or at a later time in so far as it sought to characterise the Applicant as a casual employee during the life of the contract. (2) A declaration that the contract between the Applicant and the Respondent was unfair, harsh, unconscionable and against the public interest, at the time it was entered into or at a later time, in so far as it excluded or sought to exclude the Applicant from the benefit of section 12 of the Superannuation Guarantee (Administration) Act 1992 (Cth) . (3) A declaration that the contract between the Applicant and the First Respondent was unfair, harsh, unconscionable or against the public interest at the time that it was entered into or at a later time in so far as it failed to provide a reasonable notice period on termination or payment in lieu thereof. (4) A declaration that the contract between the Applicant and the First Respondent was unfair, harsh, unconscionable or against the public interest at the time it was entered into or at a later time in so far as it sought to exclude the Applicant the benefit of the Annual Holidays Act 1944 (NSW). (5) A declaration that the contract between the Applicant and the First Respondent was unfair, harsh, unconscionable, against the public interest or unlawful, at the time it was entered into or at a later time as a result of the Second Respondent's conduct inducing the Applicant to purchase a shareholding in PharmaDirectory Pty Limited. (6) A declaration that the contract between the Applicant and the First Respondent was unfair, harsh, unconscionable and against the public interest, at the time it was entered into or at a later time, in so far as the First Respondent unilaterally varied the hourly rate of remuneration from $45 per hour to $11.25 per hour. (7) A declaration that the contract between the Applicant and the First Respondent was unfair, harsh and unconscionable or against the public interest, at the time it was entered into or related time as a result of the Second Respondent's conduct in classifying work performed by the Applicant for the First Respondent's as work performed of PharmaDirectory Pty Limited, under and independent arrangement. (8) A declaration that the contract between the Applicant and the First Respondent was unfair, harsh or unconscionable or against the public interest, at the time it was entered into or at a later time as a result that the Second Respondent's conduct in her representation, for and on behalf of the First Respondent, that the Applicant continue working for the First Respondent despite unpaid arrears of remuneration with the promise of further employment with PharmaDirectory Pty Limited. (9) A declaration that the contract between the Applicant and the First Respondent was unfair, harsh or unconscionable or against the public interest, at the time it was entered into or related time as a result of the First Respondent's conduct in terminating the contract on the basis the Applicant's refusal to continue to perform work while arrears of remuneration remained unpaid. (10) An order that the Respondents pay on behalf of the Applicant superannuation contributions to a nominated complying superannuation fund so as to discharge the First Respondent's obligations to the Applicant. (11) An order varying the terms of the contract between the Applicant and the First Respondent to provide for the following express terms: (a) The employer (i.e "the First Respondent) is required to remunerate the employee (i.e "the Applicant") at the rate of $45.00 per hour during the life of the contract. (b) The employer (i.e "The First Respondent") is required to provide the employee (i.e. "the Applicant") four weeks' notice to terminate the contract of employment or alternatively a payment equivalent to four weeks to the Applicant's total remuneration in lieu thereof; (c) An order that the Respondents pay to the Applicant his accrued entitlements in accordance with the Annual Holidays Act 1944 (NSW). (d) The employer (i.e. "the First Respondent") is required to pay the employee (i.e. "the Applicant") superannuation contributions to a nominated complying superannuation funds so as to discharge the Respondent's obligations to the Applicant. (12) A declaration that the Respondents are jointly and severally liable for amounts payable to the Applicant, or alternatively, the Respondents liability to be apportioned. (13) An order that the employer (i.e. "the First Respondent") pay the employee (i.e. "the Applicant") a sum of money in connection with the contract such sum as determined by the Commission in accordance with Section 106(5) of the Industrial Relations Act 1996 (NSW) . (14) Interest. (15) Such other order as the Commission determines. (16) The Respondents to pay the Applicant's costs of these proceedings. 5 The money orders sought were: The Applicant claims $41,207.39 calculated as follows: 1. Underpayment of Wages During the life of the contract between the Applicant and the First Respondent, the Second Respondent continued to hold out the promise that the Applicant would be paid work which he undertook on the project associated with the PharmaDirectory Pty Limited and its letter dated 1 August 2003 stipulated that he was not to be paid by the First Respondent due to an independent arrangement entered into between the Applicant and PharmaDirectory Pty Limited. As a consequence the Applicant alleges he has been underpaid the sum of $28,151.00. The particulars will be provided in due course. 2. Annual Leave Entitlements Under the contract of employment between the Applicant and the First Respondent, the Applicant alleges that in truth and substance he was a common law employee employed a permanent part-time and /or full-time basis form 8 March 2003 to the date of termination, namely 31 July 2003. In this period the Applicant would have been entitled to accrued annual leave payable on termination estimated in the sum of $3750.00 The applicant claims this sum together with interest thereon accordingly. 3. Superannuation The Applicant alleges during the life of the contract of employment between the Applicant and the First Respondent the First Respondent has failed to pay superannuation guarantee charge of his total gross earnings of $45,355.50. The Applicant alleges the First Respondent owes the sum of $2,533 and claims this sum accordingly. 4. Share acquisition costs As a result of the Applicant's allegation that the Second Respondent induced the Applicant to purchase shares in PharmaDirectory Pty Limited in the sum of $1000. The Applicant seeks reimbursement together with interest thereon and claims this sum accordingly. 5. Notice or Payment in Lieu of Notice The Applicant alleges that the contract between the Applicant and the First Respondent commenced on 13 January 2003 and was terminated by the First Respondent without justifiable cause on 31 July 2003. The Applicant worked of a period of approximately 6 months for and on behalf of the First Respondent. The contract between the Applicant and the First Respondent did not make an allowance for appropriate payment in lieu of notice to terminate. The Applicant was receiving an average weekly wage of $1,595.42. The Applicant alleges he is entitled to 1 month's pay in lieu of notice and therefore claims the sum of $6,381.68 6. Interest The Applicant claims interest on the above losses. 6 The annual leave claim was not pressed. The issues which the parties agreed required the Court's determination in the proceedings were: 1. Is the contract an unfair contract? 2. Was the Applicant's work on the Pharma Directory Project work in the employment of the First Respondent? 3. Are the First Respondent and Pharma Directory Project separate entities in terms of the Applicant's work for Pharma Directory? 4. Was the contract unfair by reason of the Applicant's inferior bargaining position? 5. Was the contract unfair in that it allowed the First and Second Respondents to benefit from the Applicant's work on the Pharma Directory Project and did not require the First or Second Respondents to remunerate the Applicant for such work? 6. If the answer to 3, 4 or 5 is yes, was the contract unfair in that it characterised the Applicant as a casual employee and provided for a maximum of 14 hours per week? 7. If the answer is to 3, 4 or 5 is yes, was the contract unfair in that did not require the First Respondent to make payments for the Applicant's work on the Pharma Directory Project in a timely manner? 8. If the answer to 3, 4 5 is yes, was the contract unfair in that it did not require the First Respondent to make payments to the Applicant's superannuation fund in respect of the work he performed for Pharma Directory Project? 9. If the answer to 3, 4 5 is yes, was the contract unfair in that it did not require the First Respondent to make payments to the Applicant's superannuation fund in respect of the work he performed for the Pharma Directory Project? 10. Was the contract unfair in that it did not require reasonable notice to be given/or a payment in lieu thereof on termination by the First Respondent? 11. Was the contract terminated by reason of the First Respondent's repudiatory conduct or the Applicant's abandonment? 12. Ought any orders for compensation made in favour of the Applicant be made jointly or severally against the First and Second Respondents? 13. What compensation is payable by the Respondents or each of them with respect to: i) Unpaid remuneration; ii) Unpaid superannuation; iii) Payment in lieu of notice; and iv) Interest. The evidence 7 Evidence was given by Mr King and Dr Dickenson, as well as by Ms Beatrice Gill, formerly employed as Regulatory's operations manager, Mr Michael Lowe, chartered accountant and Mrs Sharon King, also formerly employed by Regulatory. Various documents were also tendered. 8 It was common ground that Mr King was employed by Regulatory as a casual employee, under a written contract of employment which contemplated that he would work for 14 hours per week undertaking various IT work, at a rate of $45 per hour. What was not agreed was whether or not additional work which Mr King performed in connection with PharmaDirectory, was work performed for Regulatory, as its employee. It was the respondents' case that the work was performed by Mr King on his own account, as an investment of his time in that business, he having acquired a shareholding in the company and hoping to be appointed to a full-time position there, once the venture was fully operating. 9 Mr King's evidence was that his wife worked for Regulatory and it was as a result of this connection, that he came to be employed by the company in early 2003, he being unemployed at the time and seeking work. Mr King's expertise was in computers and IT and in January 2003, he was offered a casual position as an information, communication and technology assistant. He reported to Ms Gill. Initially there was a 3 month probationary period agreed, due to end in April 2003 and in March, Ms Gill advised him that there was no need for any formal review of his performance, as it was satisfactory. 10 Dr Dickenson approached Mr King about working on the PharmaDirectory project in March. On his evidence, on 10 March, Dr Dickenson advised him that a new company would later be set up to pursue this project; that there would be tight cash flow at the start of the project and hence a delay in paying him for his work until May. Mr King was concerned about this prospect and on his evidence, he and Dr Dickenson had the following conversation, in the presence of his wife: Ian: "That concerns me a little bit because as you known money is very tight for us (indicating my spouse) as I've been unemployed before I got this opportunity." Helena: "Then how about I offer you some shares in the project which will give you some security in the knowledge that the company is going to be around for a while?" Ian: "What sort of shares are you talking about and what's involved in us obtaining these shares?" Helena: "What I could offer you Ian (at this time she referred to a piece of paper on her desk which she was reading from) approximately five thousand shares and an option to purchase a further five thousand shares for $5,000.00." Ian: "Well OK, I will need to have a discussion with Sharon about it before we make any decision?" Helena: "That's OK, that's quite understandable it's a big decision." 11 Mrs King's recollection of the conversation accorded with that of Mr King. Mr King understood from this conversation that Dr Dickenson proposed that he and his wife would receive 5,000 shares ex gratia and could purchase another 5,000, but that did not happen. On Mrs King's evidence, they told Dr Dickenson that they were concerned that they could not afford to buy the shares, but would consider it. They later received and accepted a written offer of 2000 shares in PharmaDirectory Pty Limited, at a price of 50 cents per share. They paid $1,000 for the shares. 12 It was common ground that Mr King worked on the PharmaDirectory project - on both its website and data base, as well as in other ways - both before and after the establishment of the new company. He kept a record of his hours of work, which involved an increase in his hours from 14 per week to a 5 day working week, averaging about 38 hours. On Mr King's evidence, those records were provided to Ms Gill in the usual way, along with his records of other work performed for Regulatory. Ms Gill's evidence was to similar effect, but Dr Dickenson denied that Regulatory had ever been provided with the records as to the hours allegedly worked for Regulatory on the PharmaDirectory project. On her evidence, the first time such a claim was made was on 31 July, when Mr King's employment with Regulatory came to an end. 13 Mr Malcolm Pendlebury became the general manager of the PharmaDirectory company and Mr King then reported to him, in respect of some aspects of the PharmaDirectory work. On Mr King's evidence, he continued reporting to Ms Gill, in relation to his Regulatory work, as well as his other work for PharmaDirectory. Again, this evidence was supported by that of Ms Gill. 14 On his evidence, Mr King understood that he performed the PharmaDirectory work as an employee of Regulatory, having agreed with Dr Dickenson to a deferred payment for that work, while the PharmaDirectory business was established. It was Dr Dickenson's evidence that Mr King performed PharmaDirectory work for the PharmaDirectory company, as one of those involved in the establishment of the new business, not as an employee of Regulatory. 15 There was no suggestion that Mr King ever became an employee of PharmaDirectory, or that he had any relationship with that company, other than as a shareholder. 16 It was also common ground that Mr King was not paid for the work performed for PharmaDirectory. On his evidence, he pursued payment for that work with Mr Pendlebury, Ms Gill and Dr Dickenson, at various times, without success. Again this was denied by Dr Dickenson. Mr Pendlebury later parted company with PharmaDirectory over the question of payments outstanding to him and Ms Gill also left Regulatory's employment, as did Mr King. The parties' respective cases 17 For Mr King it was argued by Mr Shoebridge of counsel, that the critical issues here to be determined would, in part, depend on questions of credit. It was submitted that Mr King's evidence would be preferred; he was not shaken in his evidence. Dr Dickenson's evidence could not be accepted, particularly when regard was paid to the relevant contemporaneous documents, which did not support her evidence, but that of Mr King. 18 There was no question that Mr King was a casual employee of Regulatory. The documents showed that his work increased from 2 to 5 days when the PharmaDirectory project was pursued. Mr King agreed to a deferred payment for that work, because cash flow was expected to be tight. Other Regulatory staff who worked on the project were paid by Regulatory. They and Mr King worked from Regulatory's premises, utilising its equipment and resources. Mr King was directed to record the hours he worked and to keep the time worked on the PharmaDirectory work separate from his other Regulatory work. Ms Gill acknowledged the timesheets he submitted for PharmaDirectory work and kept the originals. 19 Mr King repeatedly complained about the continued delays in payment of his PharmaDirectory work. In responding to those complaints, Dr Dickenson never clarified her understanding that Regulatory was not obliged to pay for that work. No payments were ever made, thereby compounding the unfairness of what had been agreed. 20 The suggestion that Mr King had been granted an additional 2,000 PharmaDirectory shares in part payment for his work, was submitted to be an invention, unsupported by the company records and contrary to Mr Lowe's evidence. Even if such shares had been granted, the unfairness of this arrangement would not thereby have been mitigated. 21 The only evidence as to an arrangement of the kind described by Dr Dickenson came from her. Not even Ms Gill was cross examined as to the existence of such an arrangement, which was contrary to her evidence. Neither party called Mr Pendlebury and the respondents did not call Ms Watters. The proper conclusion to be drawn was that those witnesses would not have assisted the respondents' case, which required contemporaneous documents to be disregarded, because they supported Mr King's version of what had been agreed. 22 The timesheets relied upon also demonstrated that the work was being done for Regulatory. Mr King used its documents to make his claim, as he had been directed to do. 23 The agreement about a delayed payment plainly became unfair, because the necessary cash flow was never generated and Mr King was never paid. The claim for superannuation followed, but the notice claim, it was conceded, depended on the view being formed that the applicant had became a permanent employee of Regulatory. 24 The case advanced for the respondents by Mr Cairns of counsel was that the Court should not exercise its discretion to set aside a business arrangement which Mr King had freely entered into. Just because Mr King was an employee of Regulatory, did not preclude him from participating in the venture involved in the establishment of the new PharmaDirectory company. 25 Mr King had been unemployed prior to his casual employment by Regulatory. The attraction of involvement in the PharmaDirectory project was that he thereby hoped to increase the value of the shares he had acquired and to obtain a full-time position with the new company. That was why he invested his time in the project. The evidence showed that Mr King understood what he was doing and the claim that Regulatory owed him for the work performed, only arose late in the day, when the relationship with Dr Dickenson had soured. 26 The evidence showed that there had been delays in payment for some of his Regulatory work. Mr King had discussed those concerns with Dr Dickenson. That he had sought payment for the PharmaDirectory work from Regulatory was not established. In this respect, it was submitted that it was relevant that Mr King had not called Mr Pendlebury to give evidence. The proper conclusion was that his evidence would not have assisted Mr King's case. An email from Mr King to Ms Gill in June, recording his position as a casual employee of Regulatory, was also relevant in this respect. Mr King did not there mention the payment he alleged was outstanding in these proceedings, but acknowledged that he was a casual employee of Regulatory. 27 As for Ms Gill, it was relevant that she had left the employ of Regulatory at the same time as Mr King and that various records had gone missing. The documents relied on by Mr King, while signed by Ms Gill, did not accord with Regulatory's systems, or her normal practices. 28 It was submitted that the evidence as to the shares granted to Mr King was confused. While various documents pointed to 2,000 shares being issued, on Dr Dickenson's evidence this was corrected in 2005, to reflect 4,000 shares, because Mr King had been granted a further 2,000 shares. It was conceded that Dr Dickenson gave no evidence as to the circumstances in which Mr King was granted those shares. Again, the relevant documents were missing. 29 It was argued, however that just because PharmaDirectory, a speculative undertaking failed was not a proper basis for making Dr Dickenson responsible for paying Mr King in the way here claimed. Further, just because Regulatory's premises, or computer system, or employees were used for the PharmaDirectory business, was also not a basis for imposing any liability on the respondents, for the work Mr King performed for the venture. 30 There was no real dispute as to the hours worked by Mr King in trying to build the enterprise. The forms utilised to claim payment from Regulatory were submitted fortnightly. It was submitted, however, that those relating to the PharmaDirectory work did not form part of Regulatory's records and were not produced until these proceedings were commenced. There had simply been no claim for payment made by Mr King prior to these proceedings. If they had been made on Regulatory, the forms would appear in Regulatory's records. 31 It was also conceded that there was a small sum outstanding for work performed for Regulatory by Mr King. 32 In reply, it was argued for Mr King, that the cross examination of Mr King as to how he obtained copies of certain emails, could not lead to the conclusion that he had been involved in a process where documents were removed from company records such as share registers, share transfers or timesheets, as had been inferred. Nor had such a suggestion been put to Mr King in cross examination. 33 The documentary evidence demonstrated continued pursuit of payment for the PharmaDirectory work by Mr King, with Ms Gill, Mr Pendlebury and Dr Dickenson. The casual employee timesheets utilised by Mr King to seek payment from Regulatory for his Regulatory work, were the same forms which he used to seek payment from Regulatory for the PharmaDirectory work. The former were paid by Ms Gill, who noted the timesheets accordingly and the latter were signed by her, acknowledging that the work had been done, but no payment was made. These were the forms used by Regulatory as the means for Mr King to seek his payment. Ms Gill's uncontested evidence was that the originals of those forms were in the possession of Regulatory when she resigned. The fact that they had not been maintained by the respondents, was not a basis upon which Mr King's claims could be defeated now, particularly given that a search made by Dr Dickenson during her cross examination, showed that there were computer records held, which corroborated the claims. Consideration 34 It was common ground that Mr King performed considerable work on the PharmaDirectory project before and after the PharmaDirectory company was established; that he was not paid for that work, or for a small amount of work which he had performed for Regulatory on other work; that he and Mrs King paid $1,000 for 2,000 shares in PharmaDirectory Pty Ltd; and that the PharmaDirectory venture failed. 35 The nub of the issues lying between the parties was whether the PharmaDirectory work performed by Mr King was undertaken as an employee of Regulatory, or as an investment on his own account, given that he was one of the shareholders of PharmaDirectory. There was also a question as to the true size of Mr and Mrs King's shareholding - 2,000, or 4,000 shares. 36 It is well settled that the Court will not interfere with bargains freely made by a person under no constraint, or inequality, or whose labour was not being oppressively exploited (Stevenson v Barham (1977) 136 CLR 190 at 192). Accordingly, in this case, what initially requires determination is what bargain the parties in fact made with each other and then, whether or not that contract was unfair, permitting the exploitation of Mr King's labour, as he claimed. 37 Mr King's recollection of the arrangement he made for deferred payment for the PharmaDirectory work, was supported by the evidence of Mrs King. They were concerned when approached by Dr Dickenson that they could not afford the deferred payment of wages which Dr Dickenson proposed. She offered shares in the new PharmaDirectory company, as an inducement to agree to that deferral. While they could not afford to take up the 5,000 shares offered, they later agreed to take 2,000, for which they paid. 38 Dr Dickenson flatly denied this version of events. On her evidence, Mr King was offered and accepted the opportunity to participate in a new business venture. He took the risk that the work which he performed in the establishment of the new company's business would not be paid for. He was offered shares in the business, which he took up at a price of $1,000, in the hope that the business would become successful, the value of the shares would increase and that he would then be able to take up a full-time position with the new company on a salary of $50,000. He was, in fact, granted a further 2,000 shares, to compensate him for the work he had done. Mr King never performed work on the PharmaDirectory project as an employee of Regulatory, as he claimed. 39 On all of the evidence, I have come to the view that the question of what bargain the parties made, must be resolved by preferring Mr King's evidence about the agreement made and rejecting that of Dr Dickenson, for reasons which I will explain. 40 Not only was Mr King's evidence supported by that of Mrs King and Ms Gill, but various contemporaneous documents were also consistent with his version of what had been agreed. Even some of the evidence called in the respondents' case, supported Mr King's account and not that of Dr Dickenson. By way of contrast, no document in evidence recorded an agreement of the type asserted to have been made by Dr Dickenson. Dr Dickenson's explanation of evidence which did not support her version of what had been agreed, was that others, as well as Mr King, had misunderstood the agreement she had made with Mr King. I have come to the conclusion that this explanation was implausible and could not properly be accepted. 41 On all of the evidence, I have come to the view that either Dr Dickenson's evidence was not honestly given in various respects, or that she failed to convey her proposals about PharmaDirectory, in a way that others, including Mr King, could understand what she really had in mind. In either case, the conclusion that Mr King's contract of employment with Regulatory thereby became relevantly unfair, was unavoidable. 42 It was common ground that Mr King performed substantial work for the PharmaDirectory project which Dr Dickenson was promoting, utilising Regulatory's staff and resources. Mr King's understanding was that he was to do the PharmaDirectory work as a Regulatory employee, but that he would be paid when cash flow in the new business improved. It follows that if the contract had provided for payment by Regulatory, but delayed until the PharmaDirectory company generated sufficient cash flow to pay Regulatory for Mr King's work, as was Mr King's case, the conclusion that the contract was unfair was still unavoidable. Despite having performed considerable work on the PharmaDirectory project, Mr King never became entitled to any payment, because the investment funds Dr Dickenson expected to attract to the new business did not materialise; PharmaDirectory's business did not succeed and so no funds ever became available to enable Regulatory to pay Mr King. 43 By way of contrast, on Dr Dickenson's version of what had been agreed, not only did Dr Dickenson induce Mr and Mrs King to invest in the new company, Mr King was not to be paid for his work by Regulatory, or indeed by PharmaDirectory. Dr Dickenson also claimed that he was later granted additional shares for that work. This was relied on in order to avoid the conclusion that what had been agreed, permitted Mr King's exploitation. I will return to the question of what shares were issued, but for present purposes note that Dr Dickenson's claim was not made out. 44 Even on Dr Dickenson's own case, that Mr King was supposed to take on the risk that he would neither be paid by Regulatory, nor by PharmaDirectory, if its business did not become viable, was plainly not made clear to him. Nor it seems, was it an arrangement revealed by Dr Dickenson to others involved, until the venture failed. That Regulatory thereby achieved a considerable saving, to Dr Dickenson's advantage was obvious, given her shareholding in both Regulatory and PharmaDirectory. That Mr King was thereby exploited, was likewise clear. 45 On her evidence, the idea for the new PharmaDirectory business was Dr Dickenson's. She proposed to establish a new company whose business would be a web-based portal of suppliers of healthcare services and materials. Dr Dickenson and her then husband Mr Campbell, proposed to take up 100,000, 50c shares and to both become directors of the company. She also sought investors for that business and utilised the offices, equipment and staff of her existing business, Regulatory, to pursue that project. She approached Mr Pendlebury, who was interested in becoming involved in the project, as well as Mr and Mrs King, other Regulatory employees and various external investors. 46 Mr Pendlebury agreed to take on the role of PharmaDirectory's general manager. On 7 March, Dr Dickenson directed her administrative assistant, Ms Watters, to send Mr Pendlebury an email, confirming their conversation: Dear Malcolm, Confirming our conversation regarding RC staff requirements for the PD project. Please utilise the following pepole (sic). Cassie - Minor tasks Laura - Admin Jan - PA services Ian - Database, web liaison etc Beatrice - Accounts Please ensure that all staff are aware of the need to keep timesheets identifying PD as the product code so we can keep track of staff costs for this project. Also as discussed please keep a track of your time for later invoicing. Could you please also give me an update on the business/marketing plan? Also please arrange for another meeting with Multibase to further discuss our needs. 47 The 'Ian' referred to in the email was Mr King. In other documents he was referred to as 'IK'. 48 Dr Dickenson's evidence was that PharmaDirectory was not one of Regulatory's projects, but was always planned to be a separate company and business. It was treated as a Regulatory client. Dr Dickenson's explanation of this email was that while initially she had contemplated Regulatory providing Mr King's services to PharmaDirectory, as she advised Mr Pendlebury in this email, a different arrangement was later agreed between she and Mr King. It was also her evidence that similar arrangements were made with Mr Campbell, Mr Pendlebury and Ms Watters. No document evidenced the existence of such agreements and Dr Dickenson called no evidence from Mr Campbell, Mr Pendlebury and Ms Watters, to confirm their existence. 49 In cross examination, Dr Dickenson suggested that minutes of a meeting had recorded the agreement reached with Mr King, but that document was not tendered. This was explained on the basis that various documents had gone missing from the respondents' records, including this one. The existence of such a document was not, however, put to Mr King in cross examination, nor were the circumstances in which the documents went missing put in evidence. While at one point it was sought to be inferred that Mr King and Ms Gill had some involvement in the disappearance of various documents, no such conclusions were available on the evidence and the suggestion was not pressed. It is unnecessary to come to any conclusions about that matter. 50 On Mr King's evidence, on 10 March, Dr Dickenson told he and Mrs King that: Helena: "Ian and Sharon, thanks for coming, I called you in to discuss a product that I'm looking at. At this stage I'm looking at calling it Pharmadirectroy, but there's an issue with the name so at the moment I will just refer to it as Pharmasomething. Essentially it will mean a considerable amount of work for you Ian as largely what I'm hoping to do is get an online web based service which we can sell to our clients by way of subscription which will enable them to have up to date information as to the health care professionals and services that they offer." Ian: "Well that sounds great but what would it involve for me?" Helena: "You would be required to look after the web site including web site design and the data base. All that is necessary to ensure that it is an online service and it's up to date. I would require you to work very closely with Malcolm Pendlebury the Managing Director of Ginger Megs. Hopefully if all goes well I can see putting you on a salary, because it will require you to work full time, of approximately $50,000.00 per annum. Meanwhile you need to work as required on the project as directed by me." Ian: "When is this likely to get up and running?" Helena: "See Jan for any work. I am hoping that we can have a first meeting with everyone involved in the project next Friday." 51 On Mr King's affidavit evidence there was also discussion about deferred payment, due to financial difficulties experienced by Regulatory at the time. This evidence was: 39. In order to provide me with some consideration for my decision to agree to late payment or a delay in payment of my remuneration was the offer by Helena of shares in the Pharmadirectory project. The following conversation occurred: - Helena: "Because cash flow is going to be pretty tight with the start of this new venture, I would like to discuss with you your agreement to delaying payment on the PharmaD project to around about the end of May." 40. From this exchange I understood Helena to be indicating that the work that I undertook on the Pharmadirectory project and in particular the payment or remuneration for same would be payable in a lump sum in May 2003. I recall I responded with words to the effect: Ian: "That concerns me a little bit because as you known money is very tight for us (indicating my spouse) as I've been unemployed before I got this opportunity." Helena: "Then how about I offer you some shares in the project which will give you some security in the knowledge that the company is going to be around for a while?" Ian: "What sort of shares are you talking about and what's involved in us obtaining these shares?" Helena: "What I could offer you Ian (at this time she referred to a piece of paper on her desk which she was reading from) approximately five thousand shares and an option to purchase a further five thousand shares for $5,000.00." Ian: "Well OK, I will need to have a discussion with Sharon about it before we make any decision?" Helena: "That's OK, that's quite understandable it's a big decision." 52 Dr Dickenson denied aspects of this conversation, particularly the idea that Regulatory would pay Mr King for his work. On her affidavit evidence, what occurred was: I approached Ian and said "Ian are you interested in continuing doing work on PharmaDirectory?" Ian replied, "Yes I am" "You know that if you did continue to work on PharmaDirectory, you could not receive any payment immediately", I said. He replied, "Yes I know that" I then said, "well, if you are prepared to make the investment of time and get this thing off the ground we could possibly start getting an income within 12 months. According to the budget figures, Malcolm and I have set up we believe PharmaDirectory could eventually employ you as its Administrator with an annual salary of about $50,000. You would then have to be paid back for the time put in until then. Up until then, Regulatory Concepts would continue to employ you as a casual IT person. "That sounds quite interesting" replied Ian. I then said, "What we could do to secure your place with PharmaDirectory is provide you with a nominal amount of shares at a value of 50c each. When the company is in a position to reimburse you, you can then decide whether it pays you back in more shares or in payment' Ian replied "That sounds OK, I'll discuss it with Sharon and get back to you" This conversation took place on or around the 10th March 2003. 53 In cross examination, Dr Dickenson agreed that she put her proposal to Mr King, because Regulatory was short of money, as it could not invoice PharmaDirectory for the work its employees were doing. She denied however, that she was offering to pay Mr King as a casual Regulatory employee for his work on the PharmaDirectory project, or that she was asking him to agree to a deferred payment by Regulatory. She explained that what she was seeking to propose, was that Mr King would agree to provide his services as an investor in the PharmaDirectory business and that he would not be paid at all by Regulatory for that work. It was to be done by Mr King as a personal investment in PharmaDirectory. In cross examination, she explained that before the incorporation of PharmaDirectory, it was being set up and the proposal was "for certain people to come in and became part of this joint venture". 54 That such an arrangement would be of considerable benefit to Dr Dickenson and Regulatory was obvious. After all, the PharmaDirectory business was to be web-based; it was Mr King who was to be its website administrator and was to perform much of the work which would get the business up and running in practical terms; PharmaDirectory was to reimburse Regulatory for various expenses incurred, once it was operating, but no expenses would be incurred by Regulatory in providing Mr King's services, because he was never to be paid for his work, he was to invest his time. 55 It is inescapable on Dr Dickenson's own evidence as to the words she used on 10 March, particularly when considered with what happened subsequently, that contrary to her evidence, Dr Dickenson conveyed to Mr King that he would be paid by Regulatory as a casual employee, for the PharmaDirectory work, even though payment would be delayed. On her own evidence Mr King was at that time already doing PharmaDirectory work for Regulatory, for which it was paying him as a casual employee. It was Dr Dickenson who approached and asked him if he was interested in 'continuing doing work on PharmaDirectory', on the basis that he could not receive payment 'immediately'; that if he was prepared to make an investment of his time, income was expected within 12 months, when he would be paid back. Until then, Regulatory would continue to employ him as a casual. 56 The suggestion that he was not to continue performing the work as a Regulatory employee and that he would risk never being paid, if the PharmaDirectory venture did not succeed, was not mentioned at all, on either version of the conversation. Rather, on Dr Dickenson's version, she told Mr King, that he would later be given a choice as to whether he would be paid in money, or shares. 57 That Dr Dickenson appreciated that her words might not have conveyed what she sought to portray in her affidavit evidence as having been agreed, became apparent in her cross examination. At one point, she said that the discussion on 10 March 'had nothing to do with Regulatory Concepts, the discussion was separate and to do with PharmaDirectory. Regulatory Concepts was never mentioned in that discussion'. That evidence was plainly incorrect, as Dr Dickenson conceded, when taken to her own earlier affidavit evidence. Later she sought to characterise the conversation as the beginning of the discussion of a separate contract between Mr King and PharmaDirectory. That company was not formed until April and there was no evidence that any contract was later made between Mr King and PharmaDirectory. Indeed, in August, Dr Dickenson told other PharmaDirectory shareholders that there was no contract with Mr King. 58 Unsurprisingly, given even Dr Dickenson's evidence of what she said on 10 March, Mr King never understood that Dr Dickenson was proposing that he would not continue to be working as a Regulatory employee on the PharmaDirectory project, but that he would be taking on a business risk, by investing his time in working on the project, in addition to buying shares in the new company. 59 Even assuming some misunderstanding, there was no evidence that Dr Dickenson ever put her version of their agreement to Mr King, not even when Mr King repeatedly pursued payment from Regulatory for the PharmaDirectory work. Such a misunderstanding, if it in truth existed, must thereby have become entirely apparent, but it was not until the meeting of 31 July when Dr Dickenson announced that the PharmaDirectory business was to be postponed, that she denied that Regulatory owed Mr King any money. It follows that none of the evidence established that an agreement of the type Ms Dickenson asserted, was ever discussed between herself and Mr King. 60 That his understanding of what Dr Dickenson had proposed to him on 10 March was correct, was no doubt confirmed by the email advice which Mr King then received on 12 March. That day, Dr Dickenson directed her assistant Ms Jan Watters, to send Mr King an email. It confirmed that he was to work as a Regulatory employee, advising him that: Helen has asked me to let you know that there will be a meeting on Friday 14/3 to run through some details for this project. You will be required to work the whole day. Please confirm that you will be able to attend. Also as from Monday 17th March your services will be required up to five days a week for Reg con on this project. This is as per your conversation with Helena. Beatrice has asked me to remind you that even though you are going from 2 to 5 days per week that you ensure you keep timesheets. 61 Dr Dickenson agreed that this advice was not consistent with her version of the agreement reached with Mr King, but explained that Ms Watters had misunderstood her instructions. Ms Watters was not called to give evidence in the proceedings. Dr Dickenson explained that she had lost contact with her. 62 There was another meeting on 14 March, which Mr King, Dr Dickenson and Ms Gill, amongst others, attended, after which Ms Gill sent Mr King an email advising: To confirm what was said in today's meeting. For PharmaDirectory tasks you are to report firstly to Malcolm Pendlebury. As with your time on other projects Helex-A etc, please you ensure that you clearly identify your time for this project on your timesheets so I may apply these figures to the correct budget. I have been made aware of the agreement to delay payment for your time spent on the PharmaDirectory project till the first pay period after the end of March. 63 Helex-A was another of Dr Dickenson and Mr Campbell's projects, on which Mr King was performing work for Regulatory. Again, while Ms Gill's advice was consistent with Mr King's understanding of the arrangement, on Dr Dickenson's evidence in cross examination, it did not reflect what had occurred at the meeting referred to. Ms Gill and Mr King, however, acted consistently with that email advice. Mr King provided separate Regulatory timesheets for the PharmaDirectory work, which Ms Gill signed when she received them, acknowledging the time Mr King had worked, keeping the originals and providing Mr King with a copy. He submitted separate timesheets for other Regulatory work. He was paid by Regulatory for his other work, but not for the PharmaDirectory work. Dr Dickenson's evidence in cross examination was that Ms Gill had no authority to sign the timesheets, recording PharmaDirectory work and that any such acknowledgement should have been given by herself, or Mr Pendlebury. That suggestion was not, however, put to Ms Gill in cross examination. 64 What Ms Gill said in the 7 March email, was also inconsistent with Dr Dickenson's 7 and 20 March emails to Mr Pendlebury; with the evidence given by Mr King and Ms Gill and that of Mr Lowe, Regulatory's accountant, as to what he was subsequently instructed by Dr Dickenson. 65 Dr Dickenson did not advise Mr Pendlebury that she had reached a new arrangement with Mr King. To the contrary, on 20 March, consistently with her earlier advice of 7 March, Dr Dickenson advised Mr Pendlebury by email that: Your concerns regarding wages and payment for services are noted. As I explianed (sic) to you we are seeking investment monies from PDF -$240k, Opus - $40-$50k and the share offer. On finalising these monies we will then pay for all the work to date. We will then offer some of the people currently working on the project, in particular yourself, Jan, Ian, Alex and one other, an opportunity to move into a fulltime employment arrangement with Pharmadirectory. As you are aware we have forecast and estimate of $255k for this purpose. Until such time as these monies are received, or when Pharmadirectory is able to produce a cashflow to sustain employees, we will continue as we are with RC staff and an invoice for the wages for all the above except Alex being generated upon PharmaDirectory for future payment back to RC. 66 Dr Dickenson was unable to explain in cross examination why this email described Mr King as a member of the Regulatory staff, working on the PharmaDirectory project, whose wages were later to be invoiced 'upon PharmaDirectory for future payment back to RC'. That email also confirmed that Dr Dickenson's version of the agreement earlier made with Mr King may not properly be accepted. 67 Dr Dickenson then sent Mr and Mrs King a letter of offer of 26 March, which relevantly provided: You have been offered the opportunity to become a founding member of PharmaDirectory and in return for your investment of money, time or resources as indicated by Annexure A, you have been given an allocation of 2% shares at a cost of $0.50 per share. Your total share value is $1,000.00. 68 There was no Annexure A to the letter and there was an issue as to how many shares were, in fact, issued to Mr and Mrs King - 2,000 or 4,000, when the company was later established in April 2003. What the letter plainly did not do, was to record an agreement of the kind Dr Dickenson asserted she had earlier made with Mr King. Nor did it deal with the question of payment for work which Mr King was to perform. Both Mr and Mrs King signed the letter accepting "the offer of 2,000 shares at cost of $0.50 per share. The total worth of the shares being $1,000" and enclosing the payment of that sum. It was Dr Dickenson's evidence that Mr King had been granted a further 2,000 shares to compensate him for the PharmaDirectory work. The letter did not refer to such a grant. Nor was there any subsequent communication about such a further grant of shares. 69 Also necessary to be considered was Ms Gill's evidence as to what work Mr King did for Regulatory and how Mr King kept the records of his PharmaDirectory work. Ms Gill's affidavit evidence included that: 24 I tasked Ian King to work on several projects whilst employed by Regulatory Concepts including, but not limited to, Helex-A, Pharmadirectory & OFF THE GROUND. 32. The name PHARMADIRECTORY Pty Limited (Pharmadirectory) was registered on the 11th April 2003. 33. I am aware that this was done at this stage to secure the name for marketing purposes. 34. Until such time as Pharmadirectory became viable it would remain a project of Regulatory Concepts under the direct management of Regulatory Concepts. 35. Mr Malcolm Pendlebury of Gingermegs (sic) Pty Ltd was appointed as the acting General Manager of the Pharmadirectory project. 36. I can categorically state there were never any employees for Pharmadirectory. 37. Regulatory Concepts employees were tasked as required to work on the Pharmadirectory project with Mr Malcolm Pendlebury. 38. Ian King was tasked as the Website Administrator for Pharmadirectory and was to receive his instruction from Mr Malcolm Pendlebury for website related matters. For all other matters such as the set-up of MYOB accounts for Pharmadirectory he would receive direction from me. 40. At the time I left Regulatory Concepts, these still had not been set up, as the employees conducting the work were to be paid via Regulatory Concepts. Job descriptions were being worked on for the various positions ready for when the project turned into a viable company and could operate on it's own without the financial support and management of Regulatory Concepts. 42. It was decided that remuneration for employees working on the Pharmadirectory project would come from Regulatory Concepts and be invoiced back to Pharmadirectory for payment at a later date when it became viable. 43. Except for Ian King there were 5 employees, including myself, that were remunerated by Regulatory Concepts for work on the Pharmadirectory project. 52. I instructed Ian King to ensure that he kept timesheets and to submit the logs and enter them onto the company system. 53. Ian King kept meticulous records and submitted them as required up until the time of his dismissal on the 31st July 2003. 54. Soon after starting the system in paragraph (52) I instructed Ian King to change this. His new instruction was to keep one timesheet but to separate his time onto separate logs. One for the Pharmadirectory project and the other for all other projects he worked upon. 55. This was so that the Pharmadirectory time could be more easily identified for payment at a later date. 56. Helena Dickenson instructed that separate log entries be kept for Pharmadirectory and Regulatory Concepts times. 57. In late May or early June I instructed Ian King to remove all reference to the Pharmadirectory project from his computerised time logs. 58. I was aware that Ian King was accumulating a considerable amount of hours that were continually rolled over for future payment. 59. Ian King routinely had me sign his copy of the time logs for the Pharmadirectory project and kept the signed copy. 60. All logs, Hard & soft copy, for all projects were in the filing systems of Regulatory Concepts as at the time I left the company. This was approximately 3pm on the 31st July 2003. 77. At no time during my employment with Regulatory Concepts was there ever any talk that '... the time spent by IK & MP was in their capacity as an active & interested investor - not as an employee or contractor' as quoted from the 'Notes of Informal Meeting of Shareholders of Pharmadirectory Pty Ltd" Held on the 6th August at approx 12.15pm. This simply was not the case. 70 In her affidavit evidence, Dr Dickenson disputed what Ms Gill said in [54] of her affidavit, but she did not directly challenge these other aspects of Ms Gill's affidavit evidence. In cross examination, Dr Dickenson explained that Helex-A was another separate company of which she and Mr Campbell were directors and that it, too, was a client of Regulatory for which Regulatory staff performed work and for which they kept separate time records. She agreed that when Regulatory staff did such work, they were not doing so as Helex-A employees. 71 In cross examination, Mr King further confirmed aspects of Ms Gill's evidence. For example, he accepted that it was Ms Gill, as operating manager, to whom he presented his claims for payment and with whom he raised his concerns about delays in payment. 72 Ms Gill was not cross examined on the accuracy of much of her evidence. Indeed, in cross examination, it was put to Ms Gill and she accepted, that the information provided by employees such as Mr King on timesheets was used by them to create an Excel programme spreadsheet record of the time worked, which Regulatory maintained. She also accepted that in signing Mr King's timesheets, she was binding Regulatory to "pay him for his PharmaDirectory work, in her capacity as Dr Dickenson's representative." Dr Dickenson, nevertheless, maintained in her evidence, that Mr King's timesheets had never resulted in any claim for payment upon Regulatory and that Ms Gill signing them "did not authorise their payment and that she had no jurisdiction to sign any time for PharmaDirectory", that being Mr Pendlebury's work. That evidence was implausible, given Ms Gill's account of what had occurred and given Dr Dickenson's evidence in cross examination, that overnight she had been able to locate computer records, confirming information in Mr King's timesheets. 73 Mr King kept copies of the timesheets he had provided and which Ms Gill had accepted when he submitted them, (apart from the sheets which related to the period in which Ms Gill's employment came to an end). The evidence showed that the form of timesheets used were part of Regulatory's system and were the way in which Mr King claimed and received payment for his other Regulatory work, on a fortnightly basis. Mr King utilised the same form of Regulatory timesheets to record his PharmaDirectory work, as had been required of him. While Dr Dickenson could not find such timesheets amongst Regulatory's records, Ms Gill's evidence was that Regulatory had kept the originals and that they were amongst these records, when she left Regulatory's employment. There was no reason to doubt that evidence. What became of those timesheets is not known, but that they were provided and retained by Regulatory at the time Mr King performed the PharmaDirectory work was well established. 74 It was also Mr King's evidence that in accordance with Regulatory's system, a computer record of the time worked was also created. In cross examination, it was suggested to him at one point, that such records had never existed, which he denied. During her cross examination, despite her earlier denials, Dr Dickenson found computer records which confirmed what appeared in the copies of the timesheets Mr King had kept. Dr Dickenson's explanation was that those records appeared in the part of Regulatory's computer system which contained PharmaDirectory records in separate files, rather than those of Regulatory. She explained that she had not earlier checked that part of the computer system, because Mr King's claim was made against Regulatory, not PharmaDirectory. This was yet another rather implausible explanation for evidence which supported Mr King's version of what had occurred and not Dr Dickenson's evidence. It was Mr King's evidence that it was on Dr Dickenson's instructions that separate computer records were created for Regulatory and PharmaDirectory work. Originally, one record had been made and it was on Dr Dickenson's instructions that he had separated them. 75 Dr Dickenson also asserted that Mr King had not followed the Regulatory system, because he had not used the 'official forms' and had used the wrongly coloured timesheets, for recording his various work. That evidence was inconsistent with some, at least, of the timesheets in evidence and, in any event, cannot be a basis upon which Mr King's claim could now fail. On the evidence, Mr King provided the forms which Ms Gill required and which, as Regulatory's operations manager, she accepted and acknowledged, by signing the forms in the case of PharmaDirectory work, although she did not arrange for their payment. That was consistent with the arrangement that payment for PharmaDirectory work would be deferred. In the case of Mr King's other Regulatory work, Ms Gill did not sign the forms, but dated them and stamped them as being paid. I am unable to conclude that anything turns on Ms Gill's evidence that on her recollection she had signed all of Mr King's timesheets. Plainly she had not. She only signed those that were not paid. 76 Ms Gill arranged payment for Mr King's other Regulatory work, although there were even difficulties in payment for some of that work being made when due on some occasions, when that work exceeded 14 hours and when payment was held over. Indeed, it was accepted by the respondents that there was a sum due to Mr King for work of that kind which had remained unpaid, since the end of the employment. 77 On all of that evidence, the assertion that Mr King had never claimed payment for the PharmaDirectory work from Regulatory before these proceedings were commenced, was plainly wrong and cannot be accepted. He regularly claimed for that work, utilising Regulatory timesheets, in accordance with the Regulatory system, as was required of him, but was not paid, as had been agreed between he and Ms Dickenson. When Mr King became concerned about the length of time that payment was being deferred, he pursued Ms Gill, Mr Pendlebury and Dr Dickenson for payment. 78 Mr Lowe's evidence confirmed that this is what occurred. He attended a meeting at Regulatory on 21 March, at which Dr Dickenson and Ms Gill were present. The new PharmaDirectory venture was then discussed and he was instructed to arrange for the incorporation of the company. He was told that there were to be numerous shareholders and that: I was advised at the meeting on the 21st March 2003, that prior to that meeting, Regulatory Concepts Pty Ltd had incurred costs on behalf of the proposed PharmaDirectorey business, primarily in the form of wages paid to Regulatory Concepts Pty Ltd staff in preparatory work for PharmaDirectory. 79 As far as he knew, this arrangement was never changed. While various staff had been paid by Regulatory, as far as he was aware, Regulatory had never sought any payment from PharmaDirectory, because 'there was never any likelihood of being paid'. Mr Lowe's firm was the accountant for both Regulatory and PharmaDirectory. He gave no evidence about the existence of any arrangement that Mr King would invest his time in the PharmaDirectory venture, on the basis that he would not be paid by Regulatory, like other employees. On his evidence, it was in July, when Mr King complained about Regulatory's failure to pay him for the work he had done for PharmaDirectory, that Dr Dickenson denied that he was owed any payment for that work. On the evidence, this was the first occasion that Dr Dickenson made this assertion. 80 It is convenient at this point to deal with the question of the size of Mr and Mrs King's shares. Mr Lowe was aware that Mr and Mrs King had become shareholders in the PharmaDirectory company when it was incorporated in April. He had checked the PharmaDirectory file before coming to Court to give evidence and confirmed in cross examination, that Mr and Mrs King only received the 2,000 shares they had paid for and that a further 2,000 shares had not been allocated to them, as he had earlier said in his affidavit. In that respect, he said his affidavit evidence was inaccurate. That evidence was consistent with Mrs King's evidence in cross examination. She was asked if she had received a share allocation in exchange for no payment, as well as the shares she and Mr King had paid for. She said that she had not. Mr King was not cross examined as to such a share allocation. 81 Mr Lowe's evidence was also consistent with the application for shares which Mr and Mrs King had signed in March 2003 and with the consents which they later signed in April. Mrs King's evidence in re-examination was that the March share offer was the only one which she ever accepted. 82 The share certificates issued to Mr and Mrs King at that time contained an error however, suggesting that $1 shares had been issued, which was not the case. The Share Register as at June 2003, suggested that they held 1,000 $1 shares, although an ASIC search conducted in September 2003, indicated that no shareholder information had yet been lodged. A document as to the shareholding in PharmaDirectory, which Dr Dickenson had on her evidence provided to Mr Lowe, showed that the shares had a value of 50 cents and that Mr and Mrs King had each been issued 2,000 shares of that value. That document was undated. 83 Dr Dickenson's evidence was that in 2005, the PharmaDirectory share register had been rectified to show that Mr and Mrs King had been issued 4,000 shares. Dr Dickenson was the only witness who gave evidence that 2,000 further shares had been issued to compensate Mr King for his work for PharmaDirectory. She gave no evidence as to when this occurred, or who had made the decision. No minutes of any meeting in evidence recorded such a decision. To the contrary, minutes of a meeting of 18 March, suggested only that shares were available for purchase. Again, Dr Dickenson explained that this was not an accurate reflection of the arrangement made. There was however, no document in evidence which reflected any decision made that further shares be granted to Mr King, other than the share certificates Dr Dickenson created in 2005 and the other undated document I referred to, which Dr Dickenson had also created. 84 If a decision to grant Mr King additional shares had been made, one would expect that it would have been communicated to Mr King. Dr Dickenson gave no evidence about such a communication and the question of the grant of such shares was not put to Mr King in cross examination, or to Ms Gill, also a shareholder in PharmaDirectory. It was put to Mrs King in cross examination, who denied ever receiving such an allocation, in addition to the shares she and Mr King had purchased. 85 Mr Lowe's evidence was that at a meeting in August 2006, after Mr King's employment with Regulatory had come to an end, over his claim for payment of the PharmaDirectory work, Mr Campbell asked whether Regulatory was liable to pay Mr King for his PharmaDirectory work and Dr Dickenson advised that: You may remember that we had a previous company resolution stating that Ian was to be remunerated by Pharmadirectory at $50,000 pa once the company became profitable, but that this remuneration was not to be backdated for past services. It was simply to commence once the company became profitable. 86 The omission, at this time, of any reference to the 2,000 shares that Dr Dickenson later asserted in her affidavit evidence in these proceedings, had already by then been allocated to Mr King for his services was, in the circumstances, a very curious one, which also tends to suggest that in truth, there was no such allocation. What Dr Dickenson told this meeting was, of course, also quite different to her own evidence in these proceedings, as to the terms of her discussion with Mr King earlier in March. The minutes of the meeting regarding the 'previous company resolution' that Dr Dickenson referred to at the August meeting were not in evidence. Nor were there minutes of any meeting, at which the alleged additional share allocation was discussed. 87 Dr Dickenson's evidence in cross examination was that the new share certificates were issued in 2005 to correct an 'administrative error', by which the company records showed that Mr and Mrs King had been issued 2,000 rather than 4,000 shares, as at the date of incorporation of the company in April 2005. She could not explain why Mr Lowe's evidence was that they had only ever been granted 2,000 shares. On her evidence, the new share certificates had been issued on his advice, in 2005, after the error had been picked up in 'early meetings' in 2003, when Ms Gill had been directed to have the register corrected, but had not done so. This was not, however, put to Ms Gill in cross examination. It was not until 2005 that Dr Dickenson attended to correcting this 'administrative' error, because of illness and various personal difficulties in the intervening period. 88 The only errors that any contemporaneous documents refer to were the error in recording that the shares had a value of $1, rather than $0.50. This appears, for example, in the minutes of the 6 August meeting. Again, on all of the evidence, it follows that it must be concluded that Dr Dickenson's evidence as to the size of Mr and Mrs King's shareholding and that Mr King had been granted an additional 2,000 shares, for which he had not paid, cannot be accepted. 89 At one point Dr Dickenson suggested in cross examination, that there was another missing document, namely another "share offer". That document was not mentioned in her affidavit evidence and the existence of such a document, or the issue of such shares, was not put to Mr King in cross examination. In that light, I am simply unable to accept Dr Dickenson's evidence, as to the issue of the additional 2,000 shares to Mr King. 90 It is also convenient at this point to deal with the parties' failure to call evidence from Mr Pendlebury. The respondents' explanation was that they had been in litigation with him and so would not be expected to call evidence from him. Mr King's explanation was that his case was consistent with the documentary evidence, it was the respondents who were seeking to establish that the records did not accurately reflect the parties' agreement and so it was not a matter for him to call Mr Pendlebury. 91 Mr Pendlebury was a shareholder of the PharmaDirectory company and on Dr Dickenson's evidence in cross examination, its general manager, his services being provided through his company GingerMeggs Pty Ltd ('GingerMeggs'). The evidence showed that company unsuccessfully pursued Regulatory for monies claimed to be outstanding for Mr Pendlebury's work. The claim failed, with Arbitrator Miller concluding that he was unable to find that the services claimed to have been performed by Mr Pendlebury had been provided. It was GingerMeggs's case that Mr Pendlebury had kept and provided timesheets recording his work, but they were not in evidence and so the claim failed. (See GingerMeggs Pty Limited v Regulatory Concepts Pty Limited & Ors (unreported, 23 September 2004). 92 If it had been agreed that Mr King was to be issued shares additional to compensate him for the work he had performed for PharmaDirectory, given his position, one would expect Mr Pendlebury to have been aware of the decision, indeed, he would presumably have participated in it. One would also expect that he would have had an appreciation of the nature of the agreement which Mr King and Dr Dickenson had made. However, neither party called him. 93 I take the view, in those circumstances, that the case must be decided on the evidence, which includes contemporaneous email correspondence from Dr Dickenson to Mr Pendlebury, in terms inconsistent with her version of the arrangement reached with Mr King; where Dr Dickenson gave no evidence as to who decided to issue additional shares to Mr King and when that decision was made; where the only documents recording the grant of such shares in evidence were created by Dr Dickenson, and in the case of the share certificate, not until 2005, on her evidence as the result for Mr Lowe's advice and where Mr Lowe's evidence in the proceedings was that no such shares were ever issued. Mr King's failure to call Mr Pendlebury can give rise to no inferences favourable to Dr Dickenson's case, which could outweigh all of the other evidence led which was contrary to her version of what had been agreed, particularly given that she was the author of some of that evidence. 94 Against those conclusions, I return to the question of the fairness of the arrangement made between Mr King and Dr Dickenson. The question of the work being performed for PharmaDirectory and its payment was placed on the agenda of a meeting of shareholders of the PharmaDirectory company on 14 April. It was not, however, then discussed. Both Mr King and Dr Dickenson explained that the meeting was chaired by Mr Pendlebury and that the item was not reached. Mr King then pursued the matter of payment with Mr Pendlebury and with Ms Gill on 2 May, by email. Ms Gill promised to raise the matter with Dr Dickenson. 95 Email correspondence between Mr King and Dr Dickenson also showed that they met on 8 May, at Mr King's request, he asking: I would like to have some of your time today to discuss the situation with regard to my hours. In particular the fact that I need to start receiving some of the monies for my work over and above the 14hrs I am currently paid for. As you are aware the work for PD, Reg Con, Helex-A etc far exceed the 14 hours that I am getting paid for. I understand from Beatrice that the cash flow for Reg Con is tight however, so is mine and the continuing broken promises about the PDF & other investment monies are coming are now irrelevant to me. 96 The note Mr King made in his diary as to this conversation was that: "Spoke to HD she advises that all monies will be sorted by end June. She will speak to BG re possibly allocating some more funds fortnightly in the meantime. - told Shaz. Spoke to MP re this. HD wants me to do admin work @ home?!? 97 Dr Dickenson denied in cross examination, that she was aware that Mr King was then pursuing Regulatory for payment of his PharmaDirectory work, despite what he had said in the email. She also denied that she had made Mr King any promise for payment, given the arrangement with Mr King that he was not to be paid, but was to invest of his own time in PharmaDirectory. She could not remember what had been discussed at this meeting, but recollected that at the time, there were also delays in payment for other Regulatory work and she supposed that this was the matter Mr King was raising with her. That explanation was inconsistent with the terms of the email and with Mr King's evidence as to the discussions. I am unable to accept Dr Dickenson's reconstruction of what might have been discussed, given that she had no recollection of that discussion. Dr Dickenson's explanation was: If an employee comes to me with a complaint I address each complaint. If he came to me with a complaint I would clarify whatever issues were raised at that time. The fact I do not have a recollection of the specific dialogue tells me that the matter was satisfactorily addressed. If it was not satisfactorily addressed it would still be up in the air. I have looked at his timesheets and I know there were hours that he worked for Regulatory Concepts which were carried over to the other weeks and he has been paid everything he has submitted in his log sheets. 98 Nevertheless, no payments for the PharmaDirectory work emerged. Mr King continued raising his need for payment. On 14 May, he again raised with Mr Pendlebury by email that he had worked over 300 hours and some $13,000 was now outstanding. 99 On Mr Lowe's evidence, at a meeting on 31 July, which Mr King attended, Dr Dickenson advised that she was 'postponing the business of PharmaDirectory because of there are no current sales and we are exposing the company to insolvent trading.' On his evidence, both Mr Pendlebury and Mr King said words to the effect of 'That's not fair; that is going to take away our capacity to earn back our money.' They had, of course, each paid for a shareholding in the company, by that stage. Mr King also claimed at the meeting that Regulatory had undertaken to pay him for his work, which Dr Dickenson denied. 100 The parties' relationship soon came to an end. Dr Dickenson refused to pay Mr King any of the money he claimed was outstanding from Regulatory for his PharmaDirectory work. Mr King informed Dr Dickenson that in those circumstances, he was not prepared to work further for Regulatory until he was paid what was outstanding. On 31 July, Dr Dickenson wrote to Mr King, terminating his employment. 101 The correspondence respectively provided: Regulatory Concepts Att: Helen Dickenson Thank you for your time in the meeting this morning. I acknowledge your instruction to cease work on the pharmadirectory project, as it is 'on hold' I understand and accept your instruction to reduce my RC hours back to two days a week. However I am not prepared to do anymore work for Regulatory Concepts on any projects until such time as I am paid fully for my time. At which point I will then return to my two days a week. Naturally I will be available by phone if you have any questions with regards to the projects I have been working on. ( mobile phone omitted ) As my regular pay cycle has been missed and even when paid I have not been paid fully. I request that you give this matter your urgent attention. Yours Faithfully Ian S. King Dear Ian, You suggest that Regulatory Concepts owes you money. This is not correct except for the period of 28th - 31st July referred to below. You have received all payments due to you. Your work for PharmaDirectory is entirely and independent arrangement. It is with deep regret that I have to confirm that termination of your casual position of Information and Communication Technology Assistant with Regulatory Concepts. As explained it was essential for you to come into the office to restore the lost outlook files. You were aware of this as you knew that a new backup tape was to be made which would make the restoration of any lost files prior to 25th July 2003 impossible. I also explained that upon legal advice, I was informed that you could not refuse to come in to do work on the basis of a dispute in regard to pay. You chose to ignore this advice and insisted that you would not return to work until the disputed payments were made. This consequently has left me with no choice other than to terminate your position. Enclosed is confirmation of your pay for hours that you been accounted for in timesheets dated to the 25th July 2003. Unfortunately, due to Beatrice Gill no longer being employed. I have not located any timesheets for the week of the 28th July to 31st July 2003. If you are able to supply time sheets fro (sic) this period that are consistent with your work under the above position, I will be more than happy to make arrangements for your pay. Yours sincerely Helena Dickenson Director, Regulatory Concepts Pty Ltd Helena, I am very disappointed and confused with the fact that you have terminated my position with Regulatory Concepts based solely on my refusal to continue to work without pay and any prospect of getting paid. This letter will serve as notice of my demand to be paid by Regulatory Concepts for the outstanding hours that I have worked. According to the records I have at hand the total of hours that I have not been paid for since being employed by Regulatory Concepts is 558 Hours. This amounts to $25110.00. There is also the matter of proper superannuation contributions for this time. Which, by my calculation, appears to be somewhere in the order of $5525.00. This figure is based on the fact that Beatrice appears to pay super for me of $138.60 for every 14 hours worked. There were promises made by you and your staff (being my direct manager - Beatrice) regarding payment for these hours, however none of these promises have ever been upheld. Therefore I demand full payment to be in my nominated account (for which you have details on file) no later then 7th August 2003. Suggest that your urgent attention be applied to this matter. Regards Ian S. King 102 The minutes of a meeting of PharmaDirectory on 6 August, which Mr and Mrs King did not attend, indicate that the meeting was advised that 'due to a dispute that had arisen in IK's role with Reg Concepts - that is IK's incorrect assumption that Reg Concepts had undertaken to remunerate him for his time spent on PD - IK no longer worked for Reg Concept & as such it was thought likely that he would no longer wish to continue in his role with PD.' The minutes did not suggest that any contract had ever been entered by Mr King and PharmaDirectory, as Dr Dickenson sought to suggest in her cross examination. To the contrary, it was noted that: AC then asked specifically was Reg Concepts liable to pay MP & IK for past services rendered for PD. HD answered no, there was never such an agreement. HD reminded the meeting of a previous company resolution that IK was to be remunerated by PD @ $50,000 pa once PD became profitable but this remuneration was not to be back dated for past services rendered - it was simply to commence once the company became profitable. HD remunerated by PD & $50,000 pa once PD became profitable but his remuneration was not to be back dated for past services rendered - it was simply to commence once the company became profitable. The only work to be paid for during the developmental stage was for PD was for work carried out by Reg Concepts staff for PD during normal business hours. Reg Concepts staff had been requested to keep a log of their time which would then form the basis of an invoice to be raised by Reg Concepts to PD. 103 What is recorded in the minutes was consistent with Dr Lowe's recollection, but was quite inconsistent with Dr Dickenson's evidence that in March she had told Mr King that he would not be paid for his work 'immediately' and that he could choose later to be paid in money or shares. It is also notable that the minutes made no reference to Mr King having already been allocated additional shares to compensate him for his work. 104 It follows that even the evidence of Dr Dickenson's conduct after the termination of Mr King's employment with Regulatory, does not permit the conclusion that Dr Dickenson reached an arrangement with Mr King of the kind which she asserted. Mr King and Ms Gill both understood that Mr King's services were being provided by Regulatory, in the same way as Regulatory was providing PharmaDirectory with the services of other of its employees. That was confirmed to Mr King by Ms Watters and that was what Mr Pendlebury was informed by Dr Dickenson on more than one occasion, both before and after Dr Dickenson reached her alleged agreement with Mr King in March. It appears that they all acted accordingly, until Dr Dickenson decided in finding that the PharmaDirectory business was to be postponed. 105 I am satisfied that the agreement reached was that Mr King would perform that PharmaDirectory work as a Regulatory employee but would not be paid by Regulatory for that work, until improved cash flow permitted that to occur. Had the necessary cashflow materialised, putting PharmaDirectory in a position to pay Regulatory for the work its employees had done for PharmaDirectory, Mr King was entitled to be paid by Regulatory. Regulatory however, never bothered to seek such payment, given PharmaDirectory's position. 106 Given her interest in both Regulatory and PharmaDirectory, no doubt it became convenient at that point, for Dr Dickenson to deny that any promise at all had been made by Regulatory, that it would pay Mr King for his work on PharmaDirectory's failed business. On the evidence, the first time Dr Dickenson made that denial, was when she advised at the meeting on 31 July that the PharmaDirectory business was to be 'postponed'. 107 It follows from this evidence that it must be concluded that the contract between the parties was unarguably unfair in the circumstances. While it may not have been unfair when Mr King first agreed to postpone his payment while cashflow improved, the contract became unfair, when the necessary cashflow was not generated, so that Regulatory thereby entirely avoided paying Mr King for the work Dr Dickenson had asked him to do on the PharmaDirectory project. The contract thereby permitted Mr King's unconscionable exploitation, to the respondents' benefit. 108 It was Dr Dickenson who was promoting the new business venture, through a new company of which she was the majority shareholder and who had much to gain thereby, given her shareholding in Regulatory. It was one thing to encourage Regulatory employees to take on the business risk involved in the establishment of that new venture, by taking up a shareholding in PharmaDirectory. That was a commercial matter for them to decide. It was another entirely, however, to have Mr King agree to continue to perform the work which was at the very heart of the new business, as a Regulatory employee, on the basis that he would accept a deferred payment while Regulatory's cashflow improved. The delayed payment certainly became unfair, as the period during which payment was deferred by Regulatory stretched out. The contract became unconscionable, when it permitted Mr King to be entirely deprived of any payment for his work, when the new venture failed. Money orders 109 For all these reasons, it must be concluded that the contract here in question was relevantly unfair, as that term is defined in s 105 of the Act and its variation ordered, to require payment for the work in question by the respondents. As to the calculation of the money orders sought, there was in truth no suggestion that the hours Mr King claimed had not been worked and that a rate for the work had not been agreed. The money orders claimed for the PharmaDirectory work must accordingly flow from the conclusions reached, as a matter of justice between these parties. 110 The applicant also claims a money order in relation to superannuation. I am satisfied, as matter of justice, that such an order must flow, having regard to the conclusions I have reached in relation to the PharmaDirectory work. There was no issue that superannuation had not been paid by Regulatory, in accordance with the applicable statutory scheme. 111 An order for interest should also follow in justice. Given the agreement to the deferred payment, I have concluded that the interest should be calculated from the date of termination of the contract, the point beyond which deferral should plainly not have continued, as a matter of fairness between the parties. 112 The other money claims pressed by Mr King included a claim for payment of notice, which depended, in part, on the acceptance of the claim that 'in truth and substance he was a common law employee employed a permanent part-time and /or full-time basis'. The evidence does not permit such a conclusion. Rather, it showed that Mr King was engaged as a casual, as he confirmed in his note to Ms Gill in early June, on the terms offered in Regulatory's initial employment letter, to be paid at the rate of $45 per hour. 113 Mr King agreed to work extra hours on the PharmaDirectory project and to accept a deferred payment from Regulatory, for that work in the hope that when PharmaDirectory was operating, he would be offered a full-time position paid at the rate of $50,000 per year. He and Mrs King also agreed to purchase 2,000 shares. Despite Mr King's evidence that he believed he become a permanent part-time employee when his work increased to five days per week, on the evidence there was never any agreement that Mr King would become a part-time, or permanent employee of Regulatory, nor was it established that the contract was unfair in not so providing. After all, a $50,000 position equates to a weekly salary of about $962. 38 hours per week, paid at the casual hourly rate of $45, equates to a weekly rate of $1,710. Once the payment was made, Mr King would have benefited substantially, given the casual rate he was to be paid by Regulatory for his work in helping to establish the PharmaDirectory business in the meantime. That payment would then have been recovered from PharmaDirectory. There was no agreement with Regulatory to a full-time position at such a rate. It follows that the treatment of Mr King as a permanent employee for notice purposes, rather than as a casual, could not, in justice, be required in this case. 114 Furthermore, Mr King's note to Ms Gill in early June, should not be overlooked. There he acknowledged that his position remained casual, with his main Regulatory work to be done on Mondays and Tuesdays, with those hours to be restricted to 14 per week, with any extra to be 'carried over' to the following week and that he would be on call for that work, when on the premises doing PharmaDirectory work on other days. 115 While it does not follow from this evidence, that Mr King was thereby acknowledging that he was not to be paid at all by Regulatory for his PharmaDirectory work, it does confirm his acceptance of his continuing casual status, being paid at casual rates. That left him free to refuse to perform further work for Regulatory, without notice as his casual contract permitted, when his claim for payment for the PharmaDirectory work was denied at the end of July. I am satisfied that the conclusion that Regulatory should be obliged to give him notice, in accepting that refusal and thereby bringing the relationship to an end, is not one in justice available on the evidence in this case. 116 Finally, I take the view that justice requires in this case that the respondents be made jointly and severally liable for the money orders which I propose to make. That conclusion flows from Dr Dickenson's causal connection with the unfairness in the contract here demonstrated and the benefits which flowed to her from that unfairness, given her directorship and shareholding in Regulatory and PharmaDirectory. Orders 117 For the reasons given, I find the parties' contract unfair and order: 1. The variation of the contract from 10 March 2003, to require Mr King to be paid for the work performed on the PharmaDirectory project at the agreed rate of $45 per hour, upon provision of the timesheets recording the work so performed. 2. That the respondents pay Mr King a sum calculated by reference to the sum agreed to be outstanding for the unpaid work performed by Mr King for ordinary Regulatory work, plus the sum claimed for the unpaid work on the PharmaDirectory project, plus the superannuation as claimed, plus interest on that sum calculated at Supreme Court rates, calculated from the date of termination of the contract, to the date of judgment. 3. That the respondents are to be jointly and severally liable for payment of the money order. 118 The usual order as to costs would be that the respondents bear the applicant's costs, as agreed or assessed. The parties have liberty to approach in respect of the costs' order, if there is any issue as to the appropriate order in this case. They also have liberty to approach in the event of any disagreement about the calculation of the money order. Such liberty should be exercised within 28 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.