Industrial Relations Commission of New South Wales CITATION: Thomson and anor v Societe Generale Australia Limited and anor [2006] NSWIRComm 24 FIRST APPLICANT Michael Thomson SECOND APPLICANT Bengoal Pty Ltd PARTIES: FIRST RESPONDENT Societe Generale Australia Limited SECOND RESPONDENT Societe Generale FILE NUMBER(S): 1795 of 2002 CORAM: Marks J s 106 - unfair contract - whether termination of employment unfair - whether terms of remuneration and entitlements unfair - code of conduct - several incidents in breach of code - warnings - ongoing dispute regarding applicant's bonus entitlements at time of termination - whether applicant terminated because of breach of code of conduct or entitlements dispute - determinative process of relevant unfairness. CATCHWORDS: Remuneration Entitlements: Terms of employment contract - special conditions clauses regarding bonus entitlements - applicant introduced significant clients to respondents - bonus entitlements dependant on completed transactions with introduced clients - wording of special conditions clauses - differing intentions of the parties regarding application of special conditions clauses - meaning of "net revenue" - "credit charge" or "return on equity" - claims for lost income and opportunity - consideration of Sydney Water v Industrial Relations Commission of New South Wales. HELD: Special conditions clauses did not reflect understanding of parties reached during negotiations - contract unfair by reason of respondents' conduct in applying special conditions - proceedings stood over to allow parties to consider reasons for judgment with liberty to apply - costs reserved. LEGISLATION CITED: Industrial Relations Act 1996 ss 105 106 Barclays Australia Investment Services Ltd v Nordby [1995] 99 IR 258 CASES CITED: Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Schwartz v Sydney City Area Health Service and another (2002) NSWIRComm 79 Sydney Water Corporation Ltd & Anor v Industrial Relations Commission of NSW & Anor [2004] NSWCA 436 HEARING DATES: 09/05/2005; 10/05/2005; 11/05/2005; 12/05/2005; 13/05/2005; 16/05/2005; 17/05/2005; 18/05/2005; 19/05/2005; 20/05/2005; 23/05/2005; 24/05/2005; 25/05/2005; 26/05/2005; 27/05/2005; 30/05/2005; 31/05/2005; 01/06/2005; 02/06/2005; 03/06/2005; 06/06/2005; 07/06/2005; 08/06/2005; 09/06/2005; 10/06/2005; 24/10/2005; 25/10/2005; 01/11/2005 DATE OF JUDGMENT: 03/24/2006 APPLICANTS Mr T D Blackburn SC with Mr I W Raine of counsel Solicitor: Mr H Williamson Debney Williamson Lawyers LEGAL REPRESENTATIVES: RESPONDENTS Mr B D Hodgkinson SC with Mr A B Gotting of counsel Solicitor: Mr A G Shanahan Shanahan Tudhope Solicitors JUDGMENT: - 1 - INDUSTRIAL COURT OF NEW SOUTH WALES CORAM: Marks J Friday 24 March 2006 Matter No IRC 1795 of 2002 MICHAEL THOMSON AND ANOTHER v SOCIETE GENERALE AUSTRALIA LIMITED AND ANOTHER Application under s.106 of the Industrial Relations Act 1996 JUDGMENT [2006] NSWIRComm 24 1 The applicants in these proceedings are Michael Thomson and Bengoal Pty Ltd ("Bengoal"). Mr Thomson is a director of Bengoal which, in effect, is wholly owned by him and, to the profits of which, he is solely beneficially entitled. For some time prior to the events which gave rise to these proceedings Mr Thomson utilised Bengoal for the purpose of certain transactions and for the purpose of providing his services to third parties. 2 The first respondent, Societe Generale Australia Limited ("SGAL") is a financial institution conducting business in Australia and is wholly owned by the second respondent, Societe Generale ("SG"), an international financial institution with headquarters in Paris. 3 These proceedings are instituted under s 106 of the Industrial Relations Act 1996 ("the Act"). It is convenient to set out the provisions of s 105 and 106 of the Act: 105 Definitions In this Part: contract means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. unfair contract means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument. 106 Power of the Commission to declare contracts void or varied (1) The Commission may make an order declaring wholly or partly void, or varying, any contract whereby a person performs work in any industry if the Commission finds that the contract is an unfair contract. (2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason. (3) A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time. (4) In considering whether a contract is unfair because it is against the public interest, the matters to which the Commission is to have regard must include the effect that the contract, or a series of such contracts, has had, or may have, on any system of apprenticeship and other methods of providing a sufficient and trained labour force. (5) In making an order under this section, the Commission may make such order as to the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case. (6) In making an order under this section, the Commission must take into account whether or not the applicants (or person on behalf of whom the application is made) took any action to mitigate loss. 4 The applicants allege that certain contracts and arrangements entered into by them with SGAL were, or became, unfair for reasons and in circumstances which I shall describe later in these reasons for judgment. It is sufficient to note at this stage that the two principal and substantive complaints of unfairness revolve firstly, around the circumstances of the termination of Mr Thomson's employment by SGAL; and secondly around certain entitlements to remuneration claimed by the applicants to be due and owing pursuant to the contract and arrangements which they had with SGAL or which, in fairness, should accrue to them by way of entitlement. Because there is an interrelationship between the relief sought by the applicants under the proceedings and the alleged unfairness surrounding Mr Thomson's termination of employment, it is convenient to deal first with this aspect. This is because any finding of unfairness with respect to the termination of the contract of employment and the circumstances surrounding that termination will impact upon the nature and extent of any relief to which the applicants might ultimately be found to be entitled. Was the Termination of Employment Unfair? 5 It was uncontroversial for the purpose of the proceedings that Mr Thomson had expertise in the structuring of foreign exchange transactions which could conveniently be utilised by mining and other businesses which required protection against movements in the value of the Australian dollar as against other foreign currencies, pending the delivery of product under delivery contracts with overseas purchasers. 6 Further details regarding the employment contract between Mr Thomson and SGAL will be discussed later in these reasons for judgment. For present purposes it is sufficient to note that Mr Thomson's employment was governed by his acceptance on 21 February 2001 of a letter of offer of employment dated 5 February 2001. His appointment was as "Associate Director FX Sales within Financial Markets". He was to receive a total package worth $180,000 per annum, together with other benefits. 7 The letter of offer contained a heading "Code of Conduct", which stated that Mr Thomson would be required to sign a "code of conduct undertaking and acknowledging that you will comply with SGAL's code of conduct. A copy of the undertaking is attached …". 8 The code of conduct, whilst extensive in nature, contained some references upon which the respondents relied for the purpose of these proceedings. It stated that "Employees are responsible for maintaining the integrity and reputation of SGAL. Each employee must avoid any activity or relationship that might reflect unfavourably on SGAL…". Furthermore, under the heading "Drug and Alcohol Abuse" the following appears: "The judgment and standard of conduct of individuals may be seriously distorted if they are affected by alcohol or drugs…". 9 There are a number of incidents which occurred during the course of Mr Thomson's employment with SGAL which were raised by the respondents during the course of these proceedings as being breaches of the code of conduct. Only some of those incidents found their way into evidence and it is necessary to refer to them here. The first occurred at a cocktail party in Melbourne on 22 March 2001, which was attended by a number of clients of SGAL. Mr Thomson was present, as was his immediate supervisor, Mr Martin Thurgarland, who was the head of the Foreign Exchange Sales - Director of Financial Markets of SGAL. Mr Thurgarland gave evidence that he received a number of complaints from representatives of the clients of the bank about Mr Thomson's behaviour; in particular, comments made by him with respect to his own ability and a sexist remark to the effect that there was "no place for women in financial markets". Mr Thurgarland deposed that he spoke to Mr Thomson about these incidents, indicating that the behaviour complained of was "unacceptable and inappropriate". Mr Thomson apologised and offered to apologise to the persons whom he had offended. In cross-examination, Mr Thomson confirmed that he had been spoken to by Mr Thurgarland about his conduct at the cocktail party and that he had offered to apologise. 10 Both Mr Thomson and Mr Thurgarland gave lengthy oral evidence in the proceedings, predominantly by way of cross-examination on affidavits. Mr Thurgarland said that, sometime in May 2001, in the course of conversation with Mr Thomson and another employee of SGAL, Mr Thomson made an inappropriate remark about a fellow employee. I should add that Mr Thomson denied that the incident occurred. Mr Thomson also denied evidence deposed to by Mr Thurgarland that, in either late 2001 or early 2002, Mr Thurgarland had asked Mr Thomson to leave the office and go home on a number of occasions because he was adversely affected by alcohol. It was my impression that Mr Thurgarland generally gave evidence in a careful and considered fashion, and was ready to concede areas and circumstances in which his memory may not have been accurate. Mr Thomson also attempted to recollect events and circumstances to the best of his ability, but in some areas his recollection was not clear. In the particular circumstances of the evidence to which I have referred above, I prefer and accept the evidence of Mr Thurgarland with respect to both incidents. This conclusion is reinforced by the existence of an email which Mr Thurgarland sent to Mr Thomson on the 16th of October 2001 entitled "Rules re Lunch". The email said: "Michael, Let's have a chat when you return but, as discussed informally before, the rules re lunch for you are: if you are not back reasonably 'fit' by 3:30pm then DO NOT come back that day at all…I am tired of the stories about you when you have done otherwise…And quite frankly nothing is gained by it". 11 I should add that by October 2001 it was clear that Mr Thomson was in dispute with SGAL concerning certain claimed entitlements pursuant to his contract of employment. In fact, complaints had been made to Mr Thomson about the fact that he had discussed his dispute with other employees of SGAL. It was put to Mr Thurgarland in cross-examination that he had sent the email of October 2001 because Mr Thomson was in dispute with SGAL. Mr Thurgarland vehemently denied this. I accept that denial. 12 On 11 January 2002, Mr Thomson attended a lunch hosted by SGAL at which were present two representatives from Standard Bank who had participated, together with SGAL, in a transaction involving Sons of Gwalia Limited. Also present were Messrs Farr-Jones, Thurgarland, Loxton, Jolly, all senior employees of SGAL and Mr Eric Dhoste, the Chief Executive Officer. The lunch was said to have lasted for about two and a half hours and Mr Thomson was said by Mr Jolly to have been drinking during the lunch. There can be no doubt that, during the lunch, Mr Thomson criticised what he described as the bureaucratic processes of SGAL and SG, including describing those processes as being slow. It was said by Mr Jolly that Mr Thomson referred to "those idiots in Paris," however Mr Thomson denied this. In any event, Mr Dhoste took exception to the criticism of the respondents made in the presence of representatives of another bank which had participated in the transaction. As Mr Dhoste had participated in the approval process, he also felt that the criticism made by Mr Thomson was directed to him personally. He said that he found those remarks to be offensive. Mr Dhoste said that he did not react at the time because he did not wish to make an issue in the presence of the Standard Bank representatives. However, on 16 January 2002, Mr Dhoste forwarded an email to Mr Thomson in which he said, inter alia: "…I wish to hereby express my deep astonishment and disappointment at such comments about 'SG's bureaucratic approval process' made by yourself during the Standard Bank luncheon last Friday. Let me tell you that throughout my career I have never experienced such a situation where an SG officer was openly criticising his own institution in the presence of other market players, partners and/or competitors. While I understand that we may wish to discuss these topics internally, any such comment in the presence of a third party is very unprofessional, even more so for an officer of your seniority. Needless to say such unprofessional behaviour can't be and won't be tolerated going forward". Mr Thomson replied by email on 17 January 2002 in which he apologised and said that such conduct would not happen again. 13 On 24 January 2002, during a meeting attended by Mr Thomson with Mr Dhoste and Mr John Harvey, Managing Director - Debt Finance of the first respondent, to whom Mr Thomson ultimately reported, Mr Thomson was handed a letter dated that day, the contents of which I set out verbatim: "Further to Eric Dhoste's email to you of 16 January 2002 in relation to your conduct during the Standard Bank Luncheon, I would like to advise that I am in complete agreement with Eric's comments and in particular, confirm that such behaviour will not be tolerated by SG going forward. The incident at the Standard Bank Luncheon represents a continuation of inappropriate behaviour on your part during the term of your employment with SG. It has been necessary for SG management to formally discuss with you on a number of occasions issues relating to your conduct. You will recall that the first occasion was following our client function in Melbourne in March of last year when it was necessary for SG to apologise for your discriminatory remarks made to clients who subsequently left the function and made formal complaints to the bank. On this occasion you were provided with a warning with respect to your behaviour by Martin Thurgarland and advised of the expected conduct in future. There have also been instances of your returning to the office after excessive alcohol consumption at lunch that have required Martin Thurgarland to instruct you to leave SG premises. Martin has also counselled you on the appropriate professional conduct expected in the dealing room. It is a term and condition of your employment that you should not attend our offices whilst intoxicated. It is unacceptable that you should return to the workplace unduly affected by alcohol. To do otherwise is both irresponsible and in breach of your duties and obligations to your colleagues as well as the bank and its customers. You are also required to keep your senior management informed of your whereabouts during office hours. There have been a number of unexplained absences from the office and Martin Thurgarland has again highlighted to you the bank's expectations in this regard. Continued absences from the office without the express prior consent of your management will not be tolerated. In early October last year, I spoke with you personally as to issues of confidentiality in relation to your terms of employment and reiterated to you in the strongest possible terms that you were expected to discuss your contractual issues only with Martin Thurgarland, Human Resources and myself. It has now come to my attention that notwithstanding my specific instructions on confidentiality, you have continued to discuss with fellow staff various aspects of your terms of employment including your intention to lodge a formal claim for your bonus to the bank. Finally, as evidenced by your comments at the Standard Bank luncheon, you are prone to making critical comments about SG and its senior management before third parties and other SG staff. I must emphasise that this type of behaviour is unacceptable. Alcohol would appear to be a significant issue in relation to a number of the matters that have provided SG with cause for complaint since your commencement with us. I would encourage you to seek counselling and Charlotte Gee will make appropriate and confidential inquiries as to the nature of assistance that is available in this regard if you so wish. I must reiterate Mr Dhoste's comments that any further unprofessional behaviour of the nature raised in this correspondence and in previous discussions will not be tolerated going forward, and confirm that this is a formal warning to you. A repeat of such behaviour in the future will lead to disciplinary action that may include termination of your employment." The letter was signed by Mr Harvey. 14 During the course of the meeting, Mr Harvey told Mr Thomson that the letter constituted a formal warning and that any repeat of the behaviour referred to would not be tolerated. 15 During the course of cross-examination, Mr Thomson said that he accepted that he was being accused of excessive consumption of alcohol and of being adversely affected by alcohol. He acknowledged the offer to take up counselling, but said that he did not accept the offer. He further recognised the letter as constituting a formal warning and acknowledged that there was a possibility of disciplinary action, including termination of employment, if the behaviour complained of was repeated. In particular, he acknowledged that SGAL would consider termination of his employment if he returned to the office adversely affected by alcohol. 16 After the meeting with Mr Thomson on 24 January 2002, Mr Dhoste said that he had formulated with Mr Harvey an approach to be taken to Mr Thomson's continuing employment at SGAL. At this time Mr Thomson was openly in dispute with SGAL with respect to the payment of remuneration which he asserted was due and owing to him under his contract of employment, and had retained legal representation for that purpose. In connection with this particular problem, Mr Dhoste indicated to Mr Harvey that he should endeavour to negotiate a solution with Mr Thomson with respect to the claim for remuneration but that if he could not do so then Mr Harvey should "negotiate a smooth and amicable exit" for Mr Thomson from SGAL. In coming to this conclusion, Mr Dhoste said that he weighed up the benefits of the significant technical expertise that Mr Thomson brought to SGAL against his adamant claim to be entitled to significant remuneration and the criticism which Mr Thomson had been levelling against SGAL and its senior executives. 17 Mr Dhoste was cross-examined extensively about the interrelationship between the warning letter of 24 January 2002 and the claim then being made by Mr Thomson for additional remuneration. Mr Dhoste vehemently denied that the two matters were interrelated. Having regard to his evidence, and having regard to the manner in which he responded to what was vigorous cross-examination, I accept the evidence of Mr Dhoste on this aspect. 18 Mr Harvey also deposed in his affidavit to the fact that the issue of Mr Thomson's performance benefit and the issue of his ongoing behaviour were separate matters and were not connected. Mr Harvey said that he confirmed that this was the position when he attended a meeting with Mr Thomson on 1 February 2002. 19 The next incident occurred on 22 February 2002. The applicants had lunch that day at the Verandah Restaurant with Mr Martin Thurgarland, Mr Nick Farr-Jones and Mr Charles Loxton, who was the Director - Mining Finance Division of SGAL. The lunch was to celebrate the recent birth of twins to Mr Thurgarland's wife. Mr Thurgarland arrived at about 1:15 pm, the others seemingly having arrived at about 1:00pm. The estimate as to what was drunk during lunch varies but it seems that at least 3 bottles of wine, and perhaps four, were shared between the four persons present. Mr Farr-Jones and Mr Loxton left the lunch between 2:30pm and 3:00pm and Mr Thomson and Mr Thurgarland remained at the venue drinking. During the course of a discussion about Mr Thomson's dispute with SGAL concerning payment of his entitlements, Mr Thurgarland observed that Mr Thomson became "animated and red-faced" and that he raised his voice. Mr Thurgarland said that he left Mr Thomson at the restaurant at around 3:30pm to 3:45pm, and at the time that he left he said to Mr Thomson words to the effect of "don't come back to work". Mr Thurgarland observed Mr Thomson returning to his desk at around 4:45pm. Mr Thomson said that he was only retrieving his computer and would then leave the premises. 20 In his version of the events, given in evidence, Mr Thomson said that he and Mr Thurgarland "shared another bottle of wine" after Messrs Farr-Jones and Loxton had left the restaurant. 21 In his written evidence, Mr Thomson said that when he returned to his office from the restaurant he retrieved his computer and then went to a different level to find Mr Farr-Jones, who was not in his office. He then went into an office which was shared by Mr Loxton and Stewart Jolly, who worked as a commodities analyst for SGAL. Mr Loxton was on the telephone so Mr Thomson had a conversation with Mr Jolly concerning his workload. Mr Thomson said that he became animated and spoke "loudly and aggressively" to Mr Jolly about certain matters which he should undertake. Mr Thomson said that: "I probably poked at him with my finger to emphasise the point. I absolutely deny that there was any physical contact between Stewart, and me but I accept that I alarmed him. Stewart lifted his hands up with his head down as if to fend me off and evade me …". Mr Thomson also said that, while he was talking to Mr Jolly, Mr Jolly's phone rang and he, Mr Thomson, cut off the call by putting his hand on the phone so that he could finish what he was saying to Mr Jolly. 22 There is some contention about Mr Jolly's version about what occurred. Mr Jolly said that, in the course of the conversation, Mr Thomson abused him verbally and he told Mr Thomson to go away. Furthermore, Mr Thomson physically precluded Mr Jolly from answering the phone on a number of occasions. He said that Mr Thomson also punched him twice in the chest. 23 In Mr Jolly's written evidence he said that he discussed what had happened with Mr Loxton and then left to go home. He considered the incident over the weekend and on the following Monday morning decided to see Mr Farr-Jones about it. It is clear from Mr Jolly's version of his conversation with Mr Farr-Jones that Mr Farr-Jones emphasised the fact that, if Mr Jolly took the matter further, this might impact upon Mr Thomson's employment situation. My impression from this evidence is that Mr Farr-Jones was more concerned with precluding any allegation being made rather than encouraging Mr Jolly to take the matter further. 24 The controversy to which I have earlier referred concerns the discussion which Mr Jolly had with Mr Loxton immediately after the incident. Mr Loxton was unable to recollect Mr Jolly making any reference to having been punched by Mr Thomson. Indeed, Mr Thomson strenuously denied that he had punched Mr Jolly. 25 Whether or not Mr Thomson punched Mr Jolly or had any physical contact with him was a matter which assumed some significance for Mr Thomson's case. Ultimately, the matter was investigated by Ms Charlotte Gee, the Human Resource Director of SGAL, and it was asserted that she had failed to properly investigate and consider whether or not Mr Thomson had actually punched Mr Jolly. Certainly, it is clear that when Ms Gee ultimately advised Mr Dhoste about the incident she failed to advise him that Mr Loxton was unable to recall Mr Jolly having complained about being punched on the afternoon of the 22nd of February. 26 Mr Thomson was cross-examined about what occurred on the 22nd of February. He was asked about a conversation with Mr Thurgarland in which Mr Thurgarland told him to pick up his computer and leave. Mr Thomson said that he had no recollection of this conversation with Mr Thurgarland at all. 27 Mr Thomson denied having been adversely affected by alcohol, describing himself: "I might have been mildly affected by alcohol". 28 It was the evidence of Mr Farr-Jones that Mr Thomson had telephoned him at home on the evening of the 22nd of February. In cross-examination, Mr Thomson said that he had no recollection of having done so. It was said by Mr Farr-Jones that this was the first occasion that Mr Thomson had ever telephoned him at home. Nevertheless, Mr Thomson said that he could not remember making any such telephone call. 29 Mr Farr-Jones said that on Monday, 25 February 2002, Mr Jolly complained to him that Mr Thomson had been in his office, drunk, the previous Friday afternoon, and that he had behaved aggressively, leaning over him and abusing him. Mr Jolly told Mr Farr-Jones that Mr Thomson had cut off incoming calls on his telephone and that he had punched him before leaving his office. Mr Jolly told Mr Farr-Jones that he wanted to "put it on the record". 30 Mr Farr-Jones sent an email to Mr Thomson which said: "Mate, I'm not happy with events on Friday afternoon with Stewart - he is particularly unhappy and your actions are totally indefensible. I am very distressed given your past warnings and need to work out how to handle this given Stewart's intentions and the likely outcome. In the meantime please refrain from visiting level 22. I'll talk to you later in the day". 31 Mr Thomson responded by email to Mr Farr-Jones in the following terms: "I'll be honest - I don't know what I did that was so bad. I thought I was giving Stewart encouragement to work hard for good results for him personally as he has not been happy of late. Obviously that's not the way it has been taken. If I have created a problem then I am genuinely sorry and I will do whatever I can to make it right. It was certainly not my intention to upset anyone". 32 On 26 February, Mr Farr-Jones showed Mr Thomson briefly a statement made by Mr Jolly indicating that it was to be taken to Charlotte Gee, the Human Resource Director. 33 On 5 March 2002, Mr Farr-Jones endeavoured to arrange a meeting between Mr Thomson and Mr Jolly for 11:00am that day so that Mr Thomson could apologise for what had occurred with a view to reconciling any differences. Mr Jolly did not attend the meeting. 34 Mr Dhoste was made aware of the complaint made by Mr Jolly that he had been assaulted by Mr Thomson. He instructed Ms Gee to undertake an inquiry. Mr Dhoste met with Mr Jolly on 5 March 2002 and discussed his version of what had occurred. He accepted the complaints made by Mr Jolly and formed the impression that Mr Jolly was neither lying about, nor exaggerating, what had occurred. Later that day, Mr Dhoste said that he met with Mr Thomson. Mr Thomson denied having assaulted Mr Jolly and denied having drunk excessively at lunch. 35 After meeting with Mr Thomson, Mr Dhoste conferred with Mr Harvey, Ms Gee, another employee of SGAL, and also with the bank's external lawyers. He then arranged to meet with Mr Thomson on 6 March 2002. Ms Gee was present at that meeting. At that meeting Mr Dhoste informed Mr Thomson that his contract of employment was terminated. 36 In the course of a vigorous cross-examination, Mr Dhoste was adamant that the decision to terminate Mr Thomson's employment was the result solely of the conduct of Mr Thomson, unaffected in any way by any dispute between Mr Thomson and SGAL with respect to any outstanding remuneration and with respect to any claim for, or entitlement to, any bonus, whether discretionary or otherwise. 37 There may be some doubt as to whether Mr Thomson punched Mr Jolly in the manner in which Mr Jolly alleges. That doubt is raised solely by the fact that Mr Loxton did not give any rendition of his conversation with Mr Jolly immediately after the incident, in which Mr Jolly specifically mentioned that he had been punched. However, in the context of Mr Thomson's overall recollection of what occurred, I have already pointed to particular matters about which Mr Thomson's recollection is faulty in terms of the occurrences of that afternoon. There can be no doubt that he had consumed a large amount of alcohol. There can be no doubt either that Mr Thomson had acted in an aggressive and abusive fashion towards Mr Jolly, and that he had upset Mr Jolly considerably. 38 Observations were made by a number of witnesses concerning Mr Thomson's propensity to indulge in alcohol, particularly during lunch. In his affidavit, Mr Thurgarland said that Mr Thomson would: "…often return to the office from lunch any time between 2:30pm and 4:00pm and sometimes not at all. I observed his demeanour after lunch on at least 30 occasions. Sometimes he would write where he was going in the diary in the dealing room, and sometimes he would not. On at least 6 occasions I told him upon his return from lunch to go home. On these occasions, I observed that he was ruddy faced, that he spoke louder than usual, and that his breath smelt of alcohol. I recall not less than 6 additional occasions when (Mr Thomson) would return from lunch after 4:00pm, would collect his belongings and leave the office soon thereafter…". 39 Mr Jolly also made similar observations about Mr Thomson's propensity to consume alcohol. He said that he observed Mr Thomson on between 10 and 15 occasions when he was drunk at the premises of SGAL. He said: "When he was drunk, I could smell alcohol on his breath. He also tended to get very close to people when talking to them and to speak loudly. On these occasions I also observed a change in his demeanour…". 40 I should also refer to a general comment made by Mr Anthony James Haggarty, an executive of Excel Mining, who had been called to give evidence on behalf of the applicants. In the course of cross-examination, Mr Haggarty was referred to the fact that he had been told by someone at SGAL that Mr Thomson had been dismissed by the bank and "…that he had come back to work after having too much to drink and assaulted another employee". When asked whether he had responded by saying words to the effect: "I am not really that surprised. Michael can be his own worst enemy sometimes", Mr Haggarty agreed that he had probably said that. 41 It is necessary to consider whether the termination of Mr Thomson's employment leads to a finding of relevant unfairness under s 106. This is a precondition for the exercise of any power under s 106 to make any orders of avoidance or variation or for the payment of monetary compensation. 42 In Schwartz v Sydney City Area Health Service and another (2002) NSWIRComm 79, I summarised my understanding of the approach to the determination of such an issue and as to the principles to be adopted in the following way: "[71] It is a trite observation that a pre-condition for the exercise of any power under s 106 is a finding that the relevant contract is unfair. A helpful discussion as to the approach of the predecessor tribunals to this Court to the determination of whether a contract etc is unfair is contained within the joint judgment of Fisher CJ and Hungerford J in the Industrial Court of New South Wales Full Court in Baker v National Distribution Services Ltd (1993) 50 IR 254. At 271-272 their Honours said: 'The test of unfairness within the meaning of s 88F of the Industrial Arbitration Act , and hence s 275 of the present Act, has received much attention by the Court and by the previous Industrial Commission over very many years, but, in our review of the cases, the approach stated by Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 37 over 26 years ago has endured; his Honour commented (at 374) that unfairness of a contract or arrangement was to be determined according to "the common sense approach characteristic of the ordinary juryman ...It is a plain matter of morals not law." His Honour cautioned, however, (at 374,375) that the section's "massive power makes it imperative that it should be exercised with proper restraint ... it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms. ... the discretion should be exercised to protect victims of wrong dealing not to prescribe anodynes." Those words by his Honour echoed what had been said earlier by Beattie J in Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77 at 89 that it was a matter of deciding "in each particular case by the application of the tribunal's common sense and sense of justice whether a particular transaction is unfair, harsh and unconscionable. The nature of the unfairness attracted by s 88F was considered later by the Industrial Commission in Court Session (Perrignon and Dey JJ, Cahill J dissenting) in A & M Thompson Pty Ltd v Total Australia Limited [1980] 2 NSWLR 1 at 13 as follows: It has been said that fairness is determined by the commonsense approach of a juryman and that it is a moral and not a legal issue ( Davies' case). Whether this be so or not, it does seem that in distinguishing between what is fair and what is not fair the Judge must apply standards which appear to him to provide a proper balance or division of advantage and disadvantage between the parties who have made the contract or arrangement. In doing so he would always have to bear in mind the conduct of the parties, their capability to appreciate the bargain they had made and their comparative bargaining positions when entering into the contract or arrangement.' [72] It is my understanding that in determining whether there is unfair conduct for the purpose of proceedings brought under s 106 and especially under subsection (2), the Court is required to exercise a value judgment reflecting contemporary community values. The contemporary values may be derived from the commonsense approach characteristic of the ordinary, reasonable, hypothetical "standard" member of the community. Such a person will be neither an employer nor an employee, must be careful to weigh up the competing interests of the applicant as an employee and the respondent as an employer and those interests must be accommodated and viewed objectively and balanced within the context of the factual matrix which applies to them. Such a process will accommodate the reasonable requirements and understanding of an applicant as an employee and the reasonable requirements and understanding of a respondent as an employer in the context of the needs of the employer to undertake its activities in an efficient, effective and competent manner. [73] Of course the identification of contemporary community values is not without its own difficulties. Some insight as to the difficulties involved may be gained from the discussion by Professor John Braithwaite in the article entitled "Symposium on Community Values in Law" published in vol.17 of the Sydney Law Review at 351. Professor Braithwaite draws on a body of literature to make a distinction between community attitudes and community values, the former not necessarily assisting a court in determining a matter, the latter having much greater relevance. An obvious example of an attitudinal matter is the debate concerning abortion. The corollary and underlying value against which such debate is conducted is 'respect for human life, health, freedom of choice.' … [81] I have already referred to the process which is involved in determining whether a contract or arrangement etc or conduct is unfair. In the context of this process it is important to observe that there will be many cases where there is no absolute defining boundary which delineates what is fair from what is unfair. Often a range of conduct or activities may be said to fall within the limits of what is assessed to be fair, and, by corollary not unfair. This is because of the lack of absolute and scientifically determined criteria which differentiate the concept of what is unfair. [82] The assessment which is to be made judged by the standard of the ordinary, reasonable, hypothetical "standard" member of the community is not capable of precise analysis and delineation. There will be a variety of opinions held by such a person. The exercise of a value judgment in these circumstances is obviously made more difficult, but it is a difficulty which is not confined to judges of this Court. By way of analogy, evaluations of what is "reasonable" are made daily by judges in all courts determining claims based on breach of duty of care in negligence, and those brought under certain provisions of the Trade Practices legislation. [83] It must be also be observed that the determinative process by which a judge ascertains whether the relevant unfairness exists cannot be undertaken in a factual vacuum. There has to be a contextual framework within which the value judgment may be made, as with any judgment. I am unable to ascertain how a value judgment can be made concerning conduct of persons without considering as a potentially important contextual matter the circumstances of any relationship between them. Where the parties are employer and employee, in many, but not necessarily all, cases the fact of employment and the circumstances surrounding the employment situation will be important contextual matters…" 43 In my opinion it cannot be said that in terminating Mr Thomson's employment, SGAL conducted itself in a manner which can be described as unfair. I have already observed that the determination of whether conduct is or is not unfair involves the exercise of a value judgment made by reference to an objective assessment of all of the relevant circumstances. These circumstances must include not only the interests of an employee in terms of the impact that the termination of employment may have on him or her, but also the interests of the employer. In considering the employer's interest, it is legitimate to take into account the impact that an employee's conduct may have on its overall operations, and upon other employees. 44 There can be no doubt that Mr Thomson had a propensity to engage in the consumption of alcohol during business hours. There can be no doubt also that Mr Thomson had been warned that if he engaged in such activity he should keep away from SGAL's premises. Furthermore, there can be no doubt that Mr Thomson had been made aware of SGAL's views about excessive consumption of alcohol and the need to keep away from SGAL's premises. He had been warned, as he acknowledged, that conduct in breach of this directive would put his employment in jeopardy. Indeed, a formal written warning had been delivered to him not long before the incident of the 22nd of February. 45 There can be no doubt also that the incident which occurred that day was a serious one. By any standard, Mr Thomson had drunk a large quantity of wine and must have been adversely affected by this quantity of alcohol. The incident with Mr Jolly, even accepting that he may not have been actually punched, as claimed, was nevertheless a serious one and one which would justify the termination of Mr Thomson's employment in all of the circumstances to which I have referred. I am unable to characterise the conduct of SGAL in terminating his employment as being unfair. 46 I accept the evidence of Mr Dhoste to the effect that the decision to terminate Mr Thomson's employment was motivated solely and for no other reason than Mr Thomson's conduct. I accept that no consideration was given in reaching that decision about any impact on any claim made by Mr Thomson with respect to outstanding remuneration, or by any claim with respect to any bonus. Furthermore, I accept that no consideration at all was given by Mr Dhoste to the fact that the termination of Mr Thomson's employment, and the potential impact that this would have on any entitlement to any discretionary bonus, might result in a larger bonus pool being available to other employees. 47 The evidence of Mr Farr-Jones is consistent with him having endeavoured to assist Mr Thomson to remain in employment. There is no suggestion that Mr Farr-Jones acted in any contrary manner. Similarly, there is no evidence that Mr Thurgarland was involved in the process. 48 I previously referred to the fact that Mr Dhoste had communicated with Mr Harvey concerning the possibility of negotiating Mr Thomson's departure from SGAL. It is obvious that the incident of the 22nd of February 2002 presented SGAL with an opportunity to terminate Mr Thomson's employment. However there is no evidence that anything other than the incident itself, against the background circumstances to which I have previously referred, motivated Mr Dhoste in determining to terminate Mr Thomson's employment. Counsel for Mr Thomson sought to persuade the court that SGAL seized upon this incident as creating an opportunity to effect Mr Thomson's removal from employment. This is a logical possibility but, as I have said, there is simply no evidence that would allow such a conclusion to be drawn. If anything, the situation as revealed by the evidence is that Mr Thomson, being aware of concerns previously expressed on behalf of SGAL about his conduct and having been formally warned about it, created the circumstances which entitled SGAL to terminate his employment. 49 In these circumstances it is now necessary to determine whether there was any other relevant unfairness, as alleged by the applicants, and, if so, what consequential relief, if any, should be granted. The Contract of Employment 50 It is first necessary to examine the circumstances leading up to the making of the contract of employment between Mr Thomson and SGAL, and the deed entered into between Bengoal and SGAL. 51 Mr Thomson had considerable experience in structured foreign exchange transactions, having worked previously at Macquarie Bank, where he was appointed head of structured foreign exchange in 1993. He left that bank in 1995 to take up a position as director and head of structured currency derivatives at Natwest Markets Australia Limited. He was made redundant in 1998 when that bank relocated its foreign structured exchange business to Hong Kong. He then worked for some months as a consultant to Natwest in London. After that, Mr Thomson determined to pursue other interests because of his perception concerning the then-state of the foreign exchange market, having regard to the steady decline in the value of the Australian Dollar. 52 Towards the end of 2000 Mr Thomson again sought opportunities for employment undertaking structured foreign exchange transactions. He thought that there was a significant opportunity for a bank to do business in this area. Mr Thomson at that stage had a number of contacts with mining companies and the like, who he thought would be interested in undertaking structured foreign exchange transactions so as to gain protection against movements in the Australian dollar. 53 Mr Thomson was put in touch with SGAL through the services of a Mr Hancock, a recruitment consultant. Mr Thomson met with Mr John Harvey, Managing Director of financial markets at SGAL on 5 December 2000. He explained his background to Mr Harvey and said that he believed that there was a significant opportunity for structured foreign exchange transactions to be undertaken at that time. Mr Harvey arranged for Mr Thomson to meet with Mr Martin Thurgarland, head of foreign exchange at SGAL, on 7 December 2000 to discuss a possible engagement to work in foreign exchange. 54 The following week Mr Thomson again met with Mr Thurgarland and with two other persons within the SGAL organisation. After that meeting, Mr Thomson had lunch with Mr Thurgarland, where they discussed possible bonus entitlements. Mr Thomson said that he discussed three situations which might arise if he were to take a position with SGAL. This was in the context of a discussion about the manner in which Mr Thomson would interact with other people in the foreign exchange area of the bank. With respect to clients of Mr Thomson with whom he had an existing relationship and who may have had an existing banking relationship with SGAL but no foreign exchange relationship, Mr Thomson said that any bonus entitlement from deals executed with those clients should be his alone. Mr Thomson also identified transactions with clients of the bank who already had a relationship in connection with foreign exchange transactions but where if he became "involved to create a more sophisticated deal or to make a deal happen" then he would expect a share of any bonus applicable to that deal. Mr Thomson said that Mr Thurgarland indicated that he, Mr Thomson, should receive 50 per cent. In cross-examination, Mr Thomson clarified his understanding as representing 50 per cent of the credit for the revenue from the transaction. A third category was circumstances in which Mr Thomson would be happy to assist others within the foreign exchange area to make deals happen. For completeness, I note that Mr Thurgarland in his evidence denied that he had mentioned 50 per cent as being an appropriate share of revenue. 55 It is important to note that where Mr Thomson had been referring to a number of transactions between clients of Bengoal and financial institutions, he was, at all relevant times, talking about "the prospects of transactions with those clients on an ongoing basis" as conceded in cross-examination. 56 Mr Thomson said that there then followed a discussion concerning base salary. Mr Thomson said that he made Mr Thurgarland aware that he had a consulting "brief" for Macquarie Bank which extended to the end of January 2001 and that he would not be able to start work for SGAL until then. He also said that he had "established broking relationships" with Macquarie Bank and another bank by which he took a share of the profits of any transactions which he introduced to the bank. He said that he did this through his company, which is clearly a reference to Bengoal. 57 Mr Thomson also mentioned that he had a "consulting relationship" with a coal group which required a working capital facility and a banking relationship which would involve "significant FX dealing opportunities" down the track. 58 In late December 2000 Mr Thomson introduced the Excel Mining organisation, which was acquiring Wambo Mining Corporation ("Wambo"), to SGAL. It was said that Excel was seeking an overdraft facility of $10 million, together with currency hedging facilities. Mr Thomson met with Mr Nick Farr-Jones, director of the commodities division of SGAL, and other officers of SGAL to discuss an application to assist Excel Mining. 59 During the same period, Mr Thomson contacted a number of clients with whom he had previously dealt, including Newcrest Mining, Anaconda Nicol, the Australian Wheat Board and Goldfields to ascertain whether they would be interested in undertaking foreign exchange transactions. 60 Mr Thomson met with Mr Thurgarland and Mr Harvey on 18 January 2000. Mr Harvey told him that the relationship must be one of employer and employee and that he would be unable to work through Bengoal as a consultant. Mr Thomson said he agreed with this, but added the caveat: "there are a number of deals that I am working on through Bengoal that I would like to be able to complete". Mr Harvey offered to see if that situation could be accommodated. He said he would forward a draft document to Mr Thomson. 61 In their affidavit evidence, Messrs Thurgarland and Harvey refer to a discussion revolving around gold sales. They said that Mr Thomson raised this as an issue at the end of the meeting on 18 January 2001. Mr Thomson is asserted to have said that he executed gold sales for clients, that at Macquarie Bank a lot of money was made from the mining sector out of gold, and that he had hoped that that profit would be taken into account in calculating his bonus. He was informed that the gold desk was not part of the foreign exchange work and that any profit which accrued to a gold transaction was not to be taken into account for the purpose of any bonus accruing to Mr Thomson. As will be seen, the profitability of commodities transactions associated with foreign exchange transactions was another area of controversy in the proceedings. 62 Subsequently, Mr Harvey had a number of discussions with Mr Thurgarland in which the latter related ongoing discussions with Mr Thomson. He and Mr Thurgarland discussed a concept which would allow Mr Thomson to share in broking fees for a period of 6 months, together with the possibility of offering a guaranteed minimum bonus to Mr Thomson for the period ending 31 December 2001. 63 On 23 January 2001 Mr Thomson sent Mr Harvey a note which indicated that Bengoal had been "working with a number of clients developing currency risk management strategies…". Six clients were named specifically, including Excel Mining/Hunter Valley Coal. There was also a reference to "a number of other clients" with whom Bengoal had a relationship but with respect to which no work was being undertaken at the present time. Mr Thomson proposed in that note that Bengoal and he would present… "…all of the prospective trading clients to SG and act on behalf of SG exclusively. An exception to this exclusivity applies to the transactions already in train as outlined above where other institutions are already involved". Mr Thomson then said that if SG declined to transact business on behalf of a client, Bengoal should be permitted to pursue the transaction with other institutions. Importantly for an issue in the proceedings is the reference in that note to the receipt by Bengoal of "consulting fees" which are paid by banks which transact currency risks for clients introduced to them by Bengoal. Any fees generated would be split 60 per cent to Bengoal and 40 per cent to SG, that 40 per cent being credited to Mr Thomson's profit and loss account with SG for the purpose of calculating bonuses. It may be assumed that the reference to these fees is a reference to consulting fees. 64 In his affidavit evidence, Mr Thomson said that when he discussed his proposed employment with Mr Thurgarland and with Mr Sean Rahilly, the Company Secretary of SGAL, at a meeting on 23 January, he referred to profits from deals transacted through Bengoal. He said that he wanted an arrangement "that gives me 50% of the profit from the deals I currently have in progress…". He said that at a meeting with Mr Thurgarland on 1 February 2001 he was offered "50% of the profits from deals you are currently working on for the first 6 months, but we will require the right of first refusal on all of those deals…". It is clear from the approach taken by Mr Thomson to his perceived entitlement to bonus remuneration that he regarded the profit from the deals as being the profitability of the deal itself, rather than the amount of any consultancy fee. This was especially so with respect to a later transaction effected with Wambo. However, the respondents took the position in the proceedings that the 50% payment agreed to was 50% of any consultancy fee, and relied on the fact that the contract of employment eventually signed by Mr Thomson referred to "net broking fees". The positions taken by each of the parties, if accepted without more, would indicate a misunderstanding as to what was intended by each of them. As will be seen, the respondents submitted that the reference to consultancy fees in Mr Thomson's note of 23 January 2000 is entirely consistent with the reference to net broking fees contained in the ultimate contract of employment. I shall return to this aspect and the controversy with respect to it later. 65 As will be seen, there was also controversy in the proceedings as to the nature and extent of the transactions which were the subject matter of the discussions between Mr Thomson on the one hand and Messrs Thurgarland and Harvey on the other. 66 There was a further meeting on 1 February 2000 at which Mr Thomson said that Mr Thurgarland offered him a job as an associate director in the foreign exchange division as the head of structured FX sales. Mr Thomson alleges that Mr Thurgarland told him that his salary would be $190,000 and that he would be guaranteed a total package of a minimum of 15 per cent of "what you make for the bank". He was also offered "50 per cent of the profit from deals you are currently working on for the first six months…". In cross-examination, Mr Thomson said that he understood the reference to current deals were those which he had previously referred to, namely those that he was then currently involved with. 67 At that meeting, Mr Thurgarland also told Mr Thomson that the contract would provide that any bonus would only be payable on deals which met a particular rate of return with reference to "SG's Return on Equity criteria". I shall refer later to what was intended by reference to "Return on Equity". I observe also that there was disagreement between Mr Thomson and Mr Thurgarland about the precise return on equity rate which was said to have been mentioned. 68 Mr Thomson received some documentation by mail on 7 or 8 February 2000, which consisted of an offer of employment and a draft deed between Bengoal and SGAL, together with a photocopy of the SGAL code of conduct. There were other specific documents which it is not necessary to refer to. The offer of employment did not include a guaranteed minimum 15 per cent bonus condition or a reference to 50 per cent of profits from deals which were in progress. Furthermore, the draft deed referred to Bengoal having formal mandates from clients, which was not the case. Mr Thomson raised these concerns with Mr Thurgarland, who indicated that further documents would be forwarded to Mr Thomson, but that the matter would be delayed because the documents had to be referred to the head office of SG in Paris. 69 On 15 February 2001 Mr Harvey sent an email to Mr Michel Macagno, the Chief Executive Officer of SGAL, concerning a proposed basis for the employment of Mr Thomson. In that email he referred to "two categories of clients" of Thomson, being "those that he has been currently working with in a private capacity (and after reviewing the four names, we are unlikely to deal with from a credit perspective)" and "former clients eg AWB that we will deal with in the normal course of business". With respect to the first category, Mr Harvey referred to Mr Thomson's "ongoing role" as effectively being that of "advisory/broker". He proposed a 50/50 split of any revenue after "any SG ROE requirements. The life of this agreement will be six months". With respect to the second category of clients, Mr Harvey proposed that Mr Thomson would receive "a minimum of 15% of profit (less credit charges) total remuneration (salary + bonus…)". This guaranteed minimum remuneration would apply for the 2001 year only, after which Mr Thomson would participate in "the normal bonus scheme". 70 It will be seen that this document contemplates a split "of any revenue" after taking into account ROE requirements during a period of 6 months. When read in conjunction with the notes for discussion document this email is capable of indicating that Mr Harvey, in negotiating with Mr Thomson, contemplated that there be a 50/50 split between SGAL and Mr Thomson of any revenue earned with respect to any of the clients of Mr Thomson during the 6 month period. This is consistent with the use of "Net Deal Return". 71 By email dated 19 February 2001, Mr Harvey sought the approval of SG in Paris to what was being proposed, such approval having been requested by Mr Macagno. Mr Harvey said that later the same day he had a telephone conference with Mr Macagno and an officer of SG in Paris in which approval had been given to him to offer employment to Mr Thomson. With respect to the first category of client, Mr Harvey said that there was agreement that he could offer a 50/50 split of revenue for a limited period of 6 months "provided that the company involved does not deal with SG and become a client of SG's". With respect to the second category of clients he was told that any payments must be made "after credit and equity charges". 72 Mr Thomson denied that he was informed that there would be any offset against revenue for credit and equity charges in the calculation of his bonus entitlement. In his version of his discussions with Mr Thurgarland he concedes that there was a discussion about return on equity criteria but that this was in the context of an explanation by Mr Thurgarland that any deals which were submitted to SGAL for approval would need to comply with the bank's minimum return on equity target rate. This was said by Mr Thurgarland to be either 22% or 25%. Mr Thomson denies that there was any discussion about any allowance being made for credit and equity charges in the calculation of bonus entitlement. However, Mr Thurgarland said that he specifically advised that the bonus received would be after a deduction for return on equity ("ROE") and credit charges. 73 On 20 February 2001, Mr Harvey drafted the special conditions which were ultimately inserted into Mr Thomson's contract of employment. They were as follows: "SGAL recognises that you have existing relationships with specific clients that are contemplating hedging activities in the next six months. It is also agreed that a key job performance objective for you is to introduce new clients and transactions to SGAL. SGAL agrees to pay specific performance benefits as follows: (i) 50% of net broking fees for new clients introduced by you to SGAL for a period of 6 months from the commencement of your employment. This only applies to transactions that do not require use of SGAL credit lines or capital; (ii) Minimum total remuneration (TPC plus performance benefit) of 15% of net revenues generated by you and earned by SGAL Financial Markets (excluding those transactions covered by paragraph (i)) after SGAL's charges for credit usage and return on equity. This benefit will apply for the period ending 31 December 2001. SGAL will have first right of refusal on all hedging transactions" 74 There was a meeting on 21 February 2000 at the offices of SGAL attended by Mr Thomson, Mr Thurgarland, Mr Rahilly and Ms Charlotte Gee. Mr Thomson said that he was told that there had been difficulty in securing the approval of Paris in the finalisation of the documentation and that he should therefore not try to change anything "or it will take forever". 75 Mr Thomson said that Mr Rahilly took a great deal of time in explaining the Bengoal deed but, in effect, did not go through the personal contract of employment and, in particular, the special conditions with him. Nevertheless, Mr Thomson agreed in cross-examination that he was given an opportunity to read the personal contract of employment for himself and, in particular, the special conditions. 76 I should refer also to the fact that a draft of the special conditions was not discovered to be in existence and was not made available to the applicants' solicitors until very late in the proceedings. The draft consists of typed material which has been struck out using blue ball-point pen. There appears on the back of the previous page some handwritten material in pencil which is identical to the words used in the contract of employment as signed by the parties. The printed material in dealing with what became special condition (i) refers to: "…a performance benefit equal to 50% of net revenues which are both generated by you and earnt by SGAL Financial Markets from the specified clients…Net revenues are to be calculated in good faith by SG and will reflect deductions for SGAL's charges for credit and required return on equity usage". With respect to the material which became special condition (ii) there is a reference to "…net revenues generated by you from non-specified clients" and an entitlement "…to receive total benefits 'being total package costs plus performance benefit' equal to 15% of those net revenues less SGAL's charges for credit and required return on equity usage". 77 This language is relevantly modified in the blue ball-point pen variation so that it refers to net revenues from "your normal day to day activities with clients both existing and prospective to SGAL". The applicants' counsel complained that he was denied an opportunity of cross-examining Mr Harvey and another witness on this draft document. However, no application was made to recall Mr Harvey for this purpose. There may or may not be anything of significance in this draft, which would impact upon the conclusion which I have reached with respect to the meaning of the special conditions and the manner in which they should be applied. In my opinion it would be unsafe to rely on any of the material in this draft, particularly by reference to the variations which have been made, in the absence of any specific evidence about it, the circumstances in which the drafts were created and the reasons for the changes which were made, culminating in the existing wording. I observe, however, as a matter of coincidence only, that there is a reference in the typed material to the manner in which net revenues are to be calculated which is similar to the conclusion which I have reached as to the manner in which the special condition should be applied as a matter of fairness, for the reasons which I have advanced elsewhere in these reasons for judgment. 78 Mr Thomson then signed an offer of employment letter dated 5 February 2001 and executed a deed between Bengoal and SGAL. He said in the course of the same meeting that there was a possibility that there would be payment made in the future by Excel Mining to Bengoal for work carried out "over the last few months". 79 After the contract of employment had been signed, Mr Harvey received a copy of an email from Mr Macagno to SG in Paris raising concern about the payment of monies to Mr Thomson from monies which would otherwise form part of the bonus pool applicable to the bank's "dealing room". The meaning of the special conditions 80 In drafting the special conditions, Mr Harvey said that he took into account the following specific matters: 1. The first part of the special condition was designed to apply to transactions which were completed by another financial institution. 2. The second part was intended to allow SGAL to deduct credit usage charges, the amount of which would depend upon the "quality" of the bank's clients from any profit calculation. That is why he said that he used the expression "after SGAL's charges for credit usage and return on equity". 3. In referring to "net revenues generated by you", Mr Harvey intended to reflect the fact that Mr Thomson would only be entitled to a… "…fair share of net revenues generated from transactions he was associated with. I did not anticipate that the clause would permit (Mr Thomson) to be entitled to a percentage of the net revenues arising from work performed by other members of the financial markets division or by members of other divisions of the first respondents". 81 The position advocated by Mr Harvey in evidence and reflected in submissions by the respondents is somewhat different to that revealed by the documentation. Mr Harvey prepared a document entitled "notes for discussion: Michael Thomson conditions of employment" which bears a handwritten date, 14 February 2001. Paragraph [3] of that note is in the following terms: "Where you can accommodate client specific and transaction specific WIP then insofar as you can effect those deals in your full-time position at SG within the first 6 months of your employment, then you will be awarded a separate SG payment to be calculated as follows: (Net Deal Return - SGAL Credit Margin) divided by 50%. SGAL Credit Margin is determined on an ROE basis, having due regard to the credit rating of the client". 82 Paragraph [4] was in the following terms: "For all other normal business activities you will be awarded an aggregate remuneration of salary bonus of 15% for the first year of employment as per the SGAL accounting methods for income determination". 83 In the course of giving evidence, Mr Harvey said that the reference in paragraph [3] to the SGAL credit margin would only be utilised where a transaction was done with SGAL. If a transaction were effected with a bank or other financial institution other than SGAL then the SGAL credit margin would not apply. There is a reference in that document to "net deal return". Also, on the basis of the evidence of Mr Harvey, the 50% remuneration was not confined to transactions with financial institutions other than SGAL. 84 In submissions, counsel for the applicants emphasised that construing special condition (i) in this way was consistent with Mr Thomson's understanding and intention in negotiating with representatives of SGAL and consistent also with the understanding of those representatives, albeit that special condition (i) utilised the term "net broking fees", and albeit that the Wambo deal was ultimately effected through SGAL. 85 Equally, the respondents emphasised that at all times Mr Thomson, through Bengoal, had been operating on the basis that he would be paid broking fees with respect to business introduced though Macquarie Bank and other institutions and there was no reference to or contemplation of a sharing of the profits from any such transaction. 86 In evidence, Mr Harvey expanded on his understanding of the application of the special conditions. He said that special condition (i), because of the use of the term "broking fees", applied only to fees earned by SGAL "acting as a broker, in the sense that it acts as an (sic) intermediary between the client and another financial institution which actually carries out the transaction and pays (SGAL) a fee for broking the transaction". Accordingly, it was the view of Mr Harvey that subclause (i) would not apply where SGAL acted as a principal and not as a broker with respect to a transaction. The same situation would apply where a transaction involved the use of a credit line established by SGAL or SGAL capital. 87 With respect to the operation of subclause (ii), Mr Harvey said that this would apply only to transactions executed on or before 31 December 2001, would be confined to the "net revenue" from those transactions, would have deducted "the applicable charges for credit usage and return on equity from that net revenue" and would require a determination of the proportion of the net revenue which was generated by Mr Thomson. The resultant amount would be multiplied by 15% and would need to take into account Mr Thomson's total package costs of $190,000. 88 Mr Harvey amplified his understanding with respect to the net revenue referred to in special condition (ii) by stating that the special condition applied only to the net revenue earned by "Financial Markets" after allocation of revenues earned by others within the commodities division. That is, where part of the overall transaction involved hedging on gold or tin futures, that part of the revenue associated with those matters would fall outside net revenue to be taken into account in calculating Mr Thomson's entitlement. 89 In the same way, Mr Harvey said that special condition (ii) operated so that there was to be deducted from net revenue any charge levied by SGAL for the use of its credit facilities and its return on equity ("ROE"). The credit charge would vary, depending upon the nature of the transaction and the circumstances of the borrower. The ROE referred to a nominated return on the capital or equity of the parent company, SG, utilised for the purpose of the transaction. Because, as Mr Harvey said, it was difficult to calculate ROE on a single transaction, it was more appropriate to use gross profit of operations ("GPO") to calculate the return from a particular transaction rather than ROE. I shall refer to the difference between ROE and GPO shortly. 90 Mr Harvey said in cross-examination that he did not discuss the drafting of special conditions (i) and (ii), which he had undertaken, with Mr Thomson. He also confirmed that he was not present at many of the conversations between Mr Thurgarland and Mr Thomson which had occurred since he had first met Mr Thomson. 91 In cross-examination, Mr Harvey also said that at no time before 21 February 2001 did he communicate to Mr Thomson that the guaranteed minimum bonus would be calculated on the basis of net revenues generated by Mr Thomson. He said he included those words in the clause because he had always intended that Mr Thomson would be rewarded for business that he introduced. He did not inform Mr Thomson that if part of a profit on a foreign exchange transaction was to be booked to another part of the bank then Mr Thomson's bonus would not be calculated on that part of the transaction so booked. Mr Harvey conceded that the position as understood by Mr Thomson was that he would be entitled to be remunerated regardless of where a profit on a transaction had been booked by SGAL. Indeed, as will be seen, this was acknowledged by Mr Harvey in a filenote that he made of a discussion with Mr Thomson held on 3 September 2001. 92 It was part of Mr Thomson's case that Mr Harvey and others had endeavoured to manipulate his entitlement under the special conditions in a way which did not compromise an entitlement to a bonus of other persons involved in foreign exchange and commodities transactions. During the course of cross-examination, Mr Harvey was asked whether in February 2002 it was intended that the entitlement of Mr Thomson to a payment of 15% under special condition (ii) was intended to come out of the gross revenue of transactions and not out of the bonus pool. He responded that: "All the transactions that Mr Thomson worked upon and the revenues generated on those transactions went into the bank's formulation of bonus pool for the dealing room. So, in fact, the 15%, as calculated by Mr Thomson's special conditions, came out of the revenue attributable to the transaction, but that revenue also made up the revenue for determining the bonus pool for the room". On that basis, the profit for a transaction was calculated prior to deducting any entitlement to Mr Thomson. This formed the basis of what was available to be paid within the general bonus pool. 93 Mr Harvey again confirmed that he had never had any discussion with Mr Thomson about any profit sharing arrangements with respect to clients in whose dealings Mr Thomson was involved. 94 On 3 September 2001, Mr Harvey made a filenote of a discussion that he had with Mr Thomson concerning complaints about non-recognition of what Mr Thomson perceived to be his entitlement under the special conditions. Mr Harvey said in that document that he "appreciated" the concerns expressed by Mr Thomson and stated "off the record" his "personal view" included an entitlement by Mr Thomson to remuneration regardless of where any profit was booked. 95 Evidence was given by Mr Thurgarland about his negotiations with Mr Thomson. He had initially held discussions with him but deferred to Mr Harvey with respect to the detail of any negotiations, especially those relating to any guaranteed level of remuneration. 96 Mr Thurgarland said that during the course of initial meetings with Mr Thomson and Mr Harvey, Mr Harvey made it clear that where commodity sales were involved in association with a foreign exchange transaction, any profit with respect to the commodity sale would be booked through the appropriate commodities desk and would not be included within a profit calculation for the purpose of the payment of bonuses on foreign exchange transactions. It was Mr Thurgarland's recollection that Mr Thomson understood this. 97 In cross-examination, Mr Thurgarland was taken to an email which he received from Mr Farr-Jones on 30 January 2001. This was at a time when Mr Thurgarland was in discussions with Mr Thomson about his possible employment and the terms thereof. In that email Mr Farr-Jones made reference to the Wambo transaction which had been introduced to SGAL by Mr Thomson. The email pointed out that if the Wambo transaction was undertaken by SGAL there would be little or no profitability available to Mr Farr-Jones' area, known as CTY. The substantial income from the bank would relate to the foreign exchange transactions. Mr Farr-Jones asked Mr Thurgarland whether there could be a split of the foreign exchange income on a two-thirds, one-third basis and whether "you can book up to 50% of the cookie in decc". 98 Mr Thurgarland explained that this email was part of a discussion about how business of the kind typified by the Wambo deal would be written by Mr Farr-Jones' business unit "with enough incentive for them to do this sort of business". Mr Thurgarland did not tell Mr Thomson at any time between 30 January and 21 February 2001 that any foreign exchange income from structured transactions, if accomplished, would be in part booked to a different business unit in the bank. 99 I now refer in some greater detail to the provisions of the special conditions which were the subject of controversy in the proceedings. Duration of Special Condition (i) 100 The applicants submitted that Special Condition (i) would apply to all new clients introduced within a 6 month period from the commencement of employment, no matter when the fees were earned. The respondents submitted that such a construction strained the language used in the Special Condition. They submitted that it was intended to apply to net broking fees which were earned during a period of 6 months from the commencement of employment with respect to new clients introduced by Mr Thomson. Such an interpretation is, in my opinion, consistent with the evidence adduced in the proceedings. That was, that Mr Thomson was involved in negotiating a number of transactions for clients which he expected to be concluded within the next few months. The 6 month period was selected by Mr Harvey to reflect the fact that the transactions were expected to conclude within that time. The opening words used in the special conditions, namely a reference to specific clients contemplating hedging activities "in the next six months" supports this view. I reject the interpretation contended for by the applicants. SGAL Credit Lines or Capital 101 Prima facie the use of these words in Special Condition (i) would preclude the 50% of "net broking fees" applying to any transaction which used an SGAL credit line or capital; in other words, any transaction where credit was provided by SGAL. This interpretation appears to be inconsistent with the evidence of the discussions between the parties leading up to the drafting of the special conditions. There were clearly discussions between Mr Thomson and Mr Thurgarland with respect to the transactions which Mr Thomson said were in contemplation of his existing clients' involvement. The discussion revolved around the fact that SGAL would be given the first right of refusal to undertake those transactions. Accordingly, it was within the contemplation of Mr Thomson and Mr Thurgarland that what became Special Condition (i) would accommodate transactions in which SGAL was involved. This is also consistent with the evidence given by Mr Harvey as to his understanding of the agreement reached, and in particular by reference to the notes for discussion document to which I have earlier referred. 102 Of course, the concept of net broking fees is in itself inconsistent with the evidence as to what was discussed. Certainly, Mr Thomson always referred to the fact that he was acting as a consultant and would be entitled to consulting fees, but the language used by Mr Harvey to which I have earlier referred is indicative of a sharing of the net profit from any deal. This reflected Mr Thomson's understanding of the 50% sharing of "profits" from transactions which he was involved in at the time that he was in negotiations with SGAL. "Credit charge or return on equity" 103 It follows from this conclusion that any such transaction to which SGAL became a party would need to have applied to it a reduction by reference to SGAL credit lines or capital before determining any net amount available for sharing between SGAL and Mr Thomson. It will be necessary to consider this matter in some greater detail when dealing with the Wambo transactions later in these reasons for judgment. However, at this stage I note that there is considerable tension between what Mr Thomson understood by reference to the expression "SGAL's charges for credit usage and return on equity" and what the respondents assert is meant by that expression. As I have indicated, there is little or no evidence of any discussion between the parties about what was intended by the use of this phrase in the special conditions. 104 It is clear from the submissions made by the parties that the applicants understood that SGAL reserved the right to make a charge for both credit usage and return on equity. However, in written submissions in reply to supplementary submissions made by the applicants filed on 1 November 2005 the respondents said that they construed the Special Conditions "as conferring the right to deduct a charge for either credit usage or return on equity, with the appropriate deduction being dependant upon the type of transaction undertaken". They said that this was made "plain" in earlier written submissions nominating the specified paragraphs. Whatever basis there might be for any assumption made by the applicants as to the respondents' position, I for my part have had great difficulty in reading the respondents' principal submissions in the manner contended for in the supplementary submissions. In summary, the position appears to be that there was no discussion between the parties about the use of any such expression and what was intended with respect thereto prior to the making of the contract of employment. The later position of the parties as to the meaning of the expression and its component terms is at variance, and the respondents have adopted a position with respect to the application of the component parts, indicating that they have an alternative application, which indicates some uncertainty of meaning and application. 105 At this stage I shall summarise as briefly as possible what the respondents asserted was the meaning of each of these terms and consider that meaning and the applicants' contentions in the course of dealing with specific transactions. 106 In his affidavit, Mr Harvey said that charges for credit and ROE ("Return on Equity") are the means used by SGAL "to set target returns that it requires to be achieved from transactions". He said that the first respondents' "charges for credit usage and target ROE must be deducted from the net revenue generated by each transaction before determining the payment due in respect of that transaction". He then went on to describe charges for credit as being "the fixed annual return that the first respondents requires to be earned from a transaction based on the credit risk of that transaction". In discussing return on investments/return on equity, Mr Harvey said that it was a return on regulatory capital or equity that the European Central Bank required SG to hold against any particular transaction to which it was a party. SGAL, as a subsidiary of SG, was said to be subject to the same regulation. 107 Mr Harvey then introduced the term "gross profit of operations" ("GPO") which was used to measure the percentage return on regulatory capital. He said that the difference between ROE and GPO is that… "ROE is a net figure, which is arrived at after deducting all costs, including things such as tax, rent, salaries and IT support; and …GPO is a gross figure that has not had costs deducted from it". Mr Harvey said that, because it was difficult to calculate ROE for a single transaction as this required "an assessment of how costs such as salaries, rent or IT support should be allocated to that transaction", SGAL used GPO rather than ROE to calculate the return from a particular transaction. 108 Mr Harvey said that he used the term ROE rather than GPO when drafting Mr Thomson's employment contract because… "In my experience ROE is a term that is commonly used in the banking industry, whereas GPO is a term used internally by the respondents. For this reason, I considered the first applicant was more likely to be familiar with the term ROE than the term GPO". He said that he used both terms in the contract of employment ... "…to cover all of the possible types of transactions in which I anticipated the first applicant might be involved. My intention was that, depending on the counterparty and the nature of the transaction, the target return for some transactions would be set in terms of charges for credit, while for other transactions it would be set in terms of ROE (or GPO as appropriate)". 109 Figures discussed by Mr Harvey indicate that, depending upon the credit worthiness of a borrower and the assessment of the credit risk involved in the transaction, the GPO could be more than double the ROE. He gave one example of a GPO of approximately 46.4% to achieve a ROE of 18%. It was the evidence of a Mr MacKay, to whom I shall shortly refer, that, in assessing GPO and the impact of a credit charge applicable to a client for the purpose of that calculation, the longer the period of the transaction, the higher the margin required. 110 The respondents sought to have applied to special condition (ii) a GPO calculation which was much greater than an ROE calculation in circumstances where Mr Harvey assumed that Mr Thomson would be familiar with what was meant by the term ROE but completely unfamiliar with the term GPO against a background of neither of them having discussed what Mr Harvey intended to be meant by the use of those terms in the contract of employment, and in particular in special condition (ii). 111 The respondents' submissions in this regard were based substantially on evidence given by Mr Harvey as to his understanding of the meaning of the various terms used in the special conditions which he had drafted. In discussing this evidence, however, I bear in mind that the affidavit in which the evidence appears was sworn on 30 June 2004 and, in my opinion, does not reflect the substance of the negotiations conducted predominantly between Mr Thomson and Mr Thurgarland and the evidence which discloses Mr Harvey's understanding of what was being negotiated. To some extent, therefore, the evidence given by Mr Harvey about these matters involves a degree of ex post facto rationalisation. A prime example of Mr Harvey's approach is his attempt to substitute GPO for ROE to the substantial disadvantage of Mr Thomson, even though GPO was never discussed or referred to in special condition (ii). The same comment applies to the technical meaning which Mr Harvey ascribed to the words "broking fees". 112 The applicants submitted that at all times the emphasis in the special conditions was on revenues rather than profits. The applicants further submitted that the concept and understanding of what was meant by charges for credit usage and return on equity is at variance with the discussions between the parties which led up to the making of the contract of employment. Mr Thomson understood that his performance bonus of 15% was to be calculated by reference to the net revenue generated with respect to particular transactions after deduction of expenses. Nothing that was discussed between Mr Thomson and Mr Thurgarland appears to have detracted from this understanding. As I understand what is intended to be comprehended within the terms "charges for credit usage" and "return on equity" as explained by Mr Harvey, was that they accommodated firstly a fixed annual return required to be earned from a transaction based on the assessed credit risk of that transaction, and secondly, a return expected to be earned on capital utilised in connection with a transaction. Both of these terms, therefore, include elements of what might be regarded as within the profitability of a transaction. Whilst I concede that the focus of attention in special condition (ii) is net revenue, that is revenue generated after charges and expenses, such a consideration leads in an approximate sense to a determination of the net profitability of a transaction on a cash basis. If one were to take the net revenue from a transaction and then deduct from it a fixed amount calculated by reference to the profit of the transaction or a fixed percentage amount by reference to capital used in a transaction, this would involve a portion of what otherwise might be a profit on a cash basis being deducted from net revenue. Such a concept is alien to what was discussed between the parties as understood by reference to the evidence in the proceedings. 113 To this extent, I agree with the submissions of the applicants that the words used must have some other meaning. The applicants submitted that the words should be understood as referring to "a small internal charge". Those submissions distinguish between "a charge for credit usage" and "a credit charge". In the same way, a distinction was made between "a charge for return on equity" and a "return on equity". It was said that the meaning which Mr Harvey has attempted to assign to these terms created confusion. The applicants relied on evidence given by Mr Anthony John MacKay, then Head of Market Risk of SGAL, that it levied a small internal charge of about 5% of equity used. They suggested that this would be an appropriate amount to charge. In making this submission, the applicants relied in particular on evidence given by Mr MacKay to the following effect: "Q. The bank has an internal charge for credit usage, doesn't it? A. No, we work under a system of gross profitability, not a charge for credit usage. Q. The bank did not, in 2001 and 2002, have an internal charge for credit usage of 5 per cent - is that not correct? A. The 5 per cent is a notional replacement cost of capital, which it is assumed that the bank earns on that capital, which is part of the equity of the bank. It's tier 1 capital". And also: "Q. Is it a simple, immediate and certain means of calculating SGAL's charges for credit usage? A. No, for capital only, not for credit usage. Q. Sir, they are the same thing, aren't they - the credit usage is the cost of capital, isn't it? A. No, credit usage includes default." 114 It should be borne in mind that in cross-examination Mr McKay firmly rejected any proposition that regulatory capital usage and credit usage were one and the same thing. "Generated by You" 115 There was also tension between the parties as to what was meant by the expression "generated by you". The respondents said that this expression only applied to transactions where Mr Thomson was the sole person who brought the transaction into existence or produced the total net revenues from the transaction. If other persons were involved, then there would need to be an assessment made of the respective contribution of each person, and this is what occurred. It was the understanding of Mr Thomson, however, that if he was involved in a foreign exchange transaction, then all of the revenue generated by that transaction would be counted for the purpose of the application of the special condition. The evidence as a whole supports the applicants' understanding of the term. Revenues earned by SGAL financial markets 116 Finally, there is reference to revenues "earned by SGAL financial markets". The respondents said that this was a reference to the financial markets division of SGAL and was certainly not a reference to the commodities division. There is evidence, as I have indicated, that Mr Thomson appreciated that pure commodity transactions would not count for the purpose of the application of the special conditions. Conclusions About Basis of Negotiations of Contract of Employment 117 It is necessary to draw together the evidence and conclusions thereon concerning the negotiations which led up to and formed the basis of the making of the contract of employment against the background of the provisions of the special conditions. They are as follows: 1. The language used by all participants in the discussions was varied, but the intention remained clear. The language used by Mr Harvey in drafting the clause did not reflect the language of the discussions. Perhaps this came about because Mr Harvey was not directly involved in the discussions to any extent, although, as I have pointed out, the language used is also inconsistent with Mr Harvey's understanding of the basis of the negotiations. 2. At all times Mr Thomson was under the impression, as known to Mr Thurgarland, that what became special condition (i) would operate so that he would receive 50% of the profit of any transaction effected by a client with whom he had been dealing prior to the employment provided that the transaction was concluded within 6 months. This was so even if the transaction was effected thought SGAL. 3. The reference to "consulting fees" in Mr Thomson's memorandum was a reference to his consultancy arrangement with Macquarie Bank, and not a reference to the nature of the fees themselves. They were always described by Mr Thomson and accepted by representatives of SGAL as being referrable to the profits of the transaction. Whether or not Mr Thurgarland discussed with Mr Thomson the fact that a deduction would be made against the profitability of a transaction to take into account ROE, the calculation of the profitability of a transaction after deducting ROE does not reflect the overall understanding of Mr Thomson on the one hand and the representatives of SGAL on the other as reflected in the totality of the evidence. In my opinion, the preponderance of the evidence is to the effect that the parties intended that if SGAL credit was involved, there would be an allowance deducted from revenue earned in accordance with SGAL's usual accounting principles to arrive at the profitability of the transactions. Those usual accounting principles would, however, involve a calculation specific to the transaction itself, and would not involve any deduction for expenses and outgoings associated with the SGAL organisation as a whole, whether of a fixed or recurring nature as would be involved in applying the ROE concept about which Mr Harvey gave evidence. 4. The reference to "ROE requirements of SG" was a reference to a threshold profitability which would need to apply to any transaction in which SGAL was involved. 5. With respect to special condition (ii), the intention was that Mr Thomson's remuneration would be the lesser of $190,000 and 15% of net revenue generated by him from transactions other than those in which his clients were involved. This arrangement was to apply to transactions concluded by 31 December 2001. 6. The same approach as was set out in paragraph [3] above should apply to the calculation of "net revenues" for the purpose of special condition (ii). Even though the terms "credit usage" and "return on equity" were used, there was no discussion about them or what was meant by them. Again, the intention of Mr Harvey as referred to in his "notes for discussion" accords with that of Mr Thomson, namely there would be deducted from revenues an amount determined in accordance with SGAL accounting methods for income determination. I take the same approach to what was so intended as applied to paragraph [3] above. 7. In determining whether revenue was generated by Mr Thomson, it would be necessary to have regard to the role he played in structuring and dealing with the foreign exchange transactions. He contemplated that if another person was handling a transaction and he was able to add value to it he would be given a one-half share of the revenue generated for the purpose of bonus calculations. No other scenario was discussed between the parties involving contributions or input from or by any other person with respect to a foreign exchange transaction. Thus, there was no discussion of sharing with or apportioning revenue to any other division within SGAL. Mr Thomson was under the impression that no such apportionment or sharing would occur, as acknowledged by Mr Thurgarland. On this basis, if Mr Thomson was principally involved in the structuring of a foreign exchange transaction, the relevant revenue generated from that transaction would form the basis of the assessment of the 15% bonus, whether or not SGAL determined to allocate some part of the profit to another division or, indeed, to another individual. 8. It was the intention of the parties that revenue generated specifically by reference to a commodities transaction, even one associated with a foreign exchange transaction, would not be counted for the purpose of special condition (ii). 118 The language used in the contract is, in my opinion, inconsistent with the intention of the parties as disclosed in the evidence to which I have referred and, to the extent that that language does not reflect the intention of the parties, the contractual provision is, in my opinion, unfair and should be varied accordingly so as to remove any unfairness. In addition, the conduct of SGAL in seeking to apply the provisions of the special conditions in a manner which does not reflect the intention of the parties is also relevantly unfair. That conduct is illustrated by the evidence of Mr Harvey as to the manner in which the special conditions should be applied, including the attempted use of GPO. Perhaps it might be said that Mr Thomson should have made inquiries about what was meant by the use of the terms "return on equity" and "credit charges" but in my opinion his failure to do so, given the context in which the discussions were occurring, does not preclude the court from making a finding of unfairness in the manner indicated. The Wambo Transactions 119 One of the "clients" with whom Mr Thomson had been dealing prior to becoming employed by SGAL was Excel Equities Pty Ltd ("Excel"), a shareholder of Hunter Coal Pty Ltd, the operator of the Wambo coalmine in the Hunter Valley, New South Wales. At the time of purchasing the Wambo mine, Excel wished to borrow AUD$10 million for working capital and to obtain currency hedging facilities. Mr Thomson introduced Excel to SGAL for this purpose, unsuccessful approaches having been made to other banking institutions. Initially Excel sought, in total, credit facilities and a credit line of up to US$60 million but this was rejected by SG. That occurred in mid-March 2001. A credit approval was then sought for up to US$40 million from SG in Paris, and this application was pursued vigorously by Mr Farr-Jones and was ultimately approved on about 30 March 2001. It was the evidence of Mr Thomson that Mr Farr-Jones had always been involved in obtaining credit approval for the working capital facility. 120 A foreign exchange transaction with Wambo was completed on 12 April, 2001. Mr Thomson said that the profit derived by SGAL from this transaction was of the order of AUD$1 million. He said that none of Excel's credit lines were used for the transaction because Excel had paid a $4 million cash deposit as collateral against the transaction. The sum of $4 million was asserted by Mr Thomson to be funds provided independently of any working capital facility established by SGAL. 121 The respondents asserted that some part of the working facility provided to Excel had been used to secure this foreign exchange transaction. In support of this assertion, the respondents relied on a letter dated 12 April 2001 from Mr Tony Haggarty, Chairman of Wambo Mining Corporation Pty Ltd, addressed to Mr Farr-Jones. This letter said: "We acknowledge that the funds of Aud 10 million held on deposit by SG have been provided as a cash collateral ("the Collateral") and in consideration for SG Australia Ltd entering into Foreign Exchange transactions with Wambo Mining Corporation Pty Ltd (the same to be subject of usual written confirmations). The Collateral shall remain under the control of SG until either replaced by the Aud 4 million being a portion of the Aud 10 million Working Capital Facility to be provided by SG or until the expiration of the said FX transactions. We acknowledge that in the event of any default under the terms of the ISDA contract to be entered into between Wambo and SG or any non delivery on expiration of the said FX contracts which results in SG sustaining any loss then the Collateral is available to compensate SG to the full extent of such loss." 122 In response, Mr Thomson relied upon the fact that 4 million dollars had been deposited with SGAL on April 12 as collateral for the foreign exchange transaction, that it was not part of the working capital facility provided by the respondents and therefore did not require the use of an SGAL credit line or capital as contemplated by special condition (i). 123 The argument advanced by Mr Farr-Jones in evidence was that: "It was possible for the exchange rate positions held by Wambo to have moved to the extent that they were 'out of the money' by more than $4 million of the cash deposit. Due to this risk, it is my view that the First Respondent's credit lines were used by the Wambo transaction…". 124 The difficulty in resolving this particular controversy between the parties is that the letter from Mr Haggarty and the evidence of Mr Farr-Jones appears prima facie to create some inconsistency. Assuming that the collateral is to remain under the control of SG, as contemplated, it is uncertain as to whether it is to be replaced at the earlier of the payment of AUD$4 million or the expiration of the FX transactions, or the later of these events. If the former, then arguably the collateral would not remain under the control of SG once AUD$4 million has been paid, as occurred, albeit that the payment appears to have come from Excel's own resources rather than out of the working capital to be provided by the respondents. However, as against this, there is the acknowledgment in the last part of the letter that the collateral is available to compensate SG in the event of any loss occurring on the expiry of the FX contract. 125 On balance, I would conclude on the basis of this documentation that this transaction did require the use of SGAL credit lines or capital as referred to in special condition (i). 126 However, this is not the end of the matter. For reasons which I have previously given I am of the opinion that it would be unfair to allow this Wambo transaction to be dealt with by reference to the manner in which special condition (i) is framed. As I have previously indicated, as a matter of fairness the reference to "net broking fees" should not be applied in the strict sense contended for by the respondents. In the same way, an exclusion of the application of special condition (i) because of the use of SGAL credit lines or capital is inconsistent with the discussions between the parties and the general understanding reached between the parties prior to the entry into the contract of employment. 127 For completeness, I should add that the applicants in submissions sought to limit the provisions of special condition (i) so that they applied only to credit lines or capital established by SGAL and did not apply to such facilities provided by SG. In the context that it must have been contemplated that ultimate funding for SGAL activities would have involved SG, I am not prepared to apply special condition (i) in this manner as contended for by the applicants. 128 For these reasons, it is my opinion that all of the Wambo transactions which were completed within 6 months of the commencement of employment should, as a matter of fairness, attract a bonus in favour of Mr Thomson in accordance with an application of special condition (i) to be varied in the manner which I have indicated. This leads to an important question as to how the profitability of the transactions should be calculated for the purpose of making an order under s 106(5).. I have already determined that as a matter of fairness the profitability should be calculated by reference to SGAL's usual accounting principles, confined, however, to any outgoing charges which were specific to the transaction. This raises the question whether there is any or sufficient evidence to allow the Court to make any appropriate order so as to reflect a particular monetary amount. The applicants urged that a 5% charge be applied by reference to use of credit, but in reality this was, in my opinion, something of an arbitrary assessment. The respondents advocated the use of GPO, or, perhaps, ROE, but did not advance any evidence which would allow the profitability of a transaction to be assessed on any other basis. 129 This situation is not unlike that confronted by the court in Barclays Australia Investment Services Ltd v Nordby (1995) 99 IR 258, a judgment of a Full Bench of the former Industrial Court of New South Wales. Those proceedings concerned, inter alia, a claim for remuneration based on commission consequent upon the unfair termination of a contract of employment. The judge at first instance had determined to award a monetary payment under the former s 175 of the Industrial Relations Act 1991, having regard to changed circumstances in the employer's organisation. The basis for the formulation of the payment was not one which had been advocated by the employer. Indeed, its case was that there was no entitlement to any commission. Neither was it a basis asserted by the employee applicant who had presumably pitched his case at the highest attainable level. Some flavour of the approach adopted by the judge at first instance, as accepted as appropriate by the Full Bench, may be gathered from the following extract from the Full Bench judgment which appears at 280-1 of the report. The appellants referred to are the employer and associated entities. "As to the appellants' submissions that they were denied natural justice in that they did not have an opportunity to be heard on the form and content of the monetary order made because it was based on a 'scheme' (presumably of commission) not sought by either party, it is sufficient to say that this submission proceeds upon a misunderstanding of the function which her Honour was exercising at the time. Her Honour was not devising a new commission scheme; she was formulating a basis for assessment of the amount of money which in her opinion was just to be awarded to the respondent in connection with the unfair contract and arrangement in the circumstances of the case. The fact that neither party may have expressly addressed the particular method adopted by her Honour to calculate the loss, was a matter for them; the amount to be awarded, if the contact and arrangement were found unfair, was obviously an issue which was within the ambit of matters raised for determination; and the amount awarded was substantially less than that claimed. It is a matter for parties to determine the extent to which they will address issues or the basis upon which they will rest their cases. The appellants' submissions in relation to this aspect of the matter are, in our opinion, without substance. It is hardly surprising that the appellants did not volunteer and address a formula or method to calculate an amount, least of all a substantial one, to be awarded to the respondent; their position was simply that the contract was not unfair and that the respondent could not demonstrate any monetary entitlement. Indeed, it was argued, both before her Honour and again on appeal, that an employment contract providing for remuneration of $188,000 pa could not be unfair within the meaning of the Act. We reject that argument, as did her Honour; all things are relative and each case must be determined on the basis of its own facts and circumstances." 130 In these proceedings the respondents have asserted that the profitability of a transaction is to be calculated not by reference to ROE as referred to in the special condition, but by reference to GPO. The applicants have proposed a 5% charge be applied to the revenue earned from the transaction in circumstances which I have earlier outlined. It may be that there is, in effect, no evidence or insufficient evidence which would allow the Court to make an appropriate order which is "just" in all the circumstances as required by s 106(5) . There are a number of means by which this controversy may be determined. Rather than speculate as to the most appropriate course to be adopted I propose to defer making any final order until the parties have had an opportunity of considering these reasons for judgment and the nature and extent of any evidence given in the proceedings which might be relevant to such a determination. The Newcrest Transactions 131 There was a claim under special condition (ii) regarding the "Newcrest Transactions". The controversy with respect to this claim revolves around certain transactions undertaken for Newcrest Mining. Mr Thomson said that this business had been secured through his efforts. The respondents asserted that SGAL had been approached by Newcrest Mining because that corporation had appreciated that SGAL had the capacity to effect the transactions. I am of the opinion that it is unnecessary to determine this issue because, whether or not the business was introduced through the offices of Mr Thomson does not impact upon whether any revenue generated by the transactions need be dealt with under special condition (ii). In the same way, the parties differed about the contribution made by Mr Thomson to the structuring of the transactions and their implementation. 132 The respondents said that these were simple FX options and not complex or "exotic". Again, whether these transactions may be characterised as exotic or not is, in my opinion, irrelevant as to whether they are to be considered under special condition (ii). The respondents sought to construe special condition (ii) as applying only to exotic foreign exchange transactions to which Mr Thomson had made a significant contribution. Such an approach, in my opinion, is inconsistent with the evidence of the intentions of the parties and is inconsistent with the language used in the special conditions. Furthermore, no such suggestion seems to have been made by or on behalf of the respondents prior to submissions to this effect being made by counsel for the respondents during the course of the hearing. In my opinion, special condition (ii) should apply to all foreign exchange transactions otherwise falling within the description used, whether or not they are exotic in nature. 133 There were three aspects of the Newcrest transactions. The first involved a novation of existing foreign exchange option contracts which Newcrest held with the Royal Bank of Scotland. There were certain features of those contracts which required amendment to satisfy the auditors of Newcrest. The second aspect consisted of new foreign exchange option contracts effected by Newcrest with SGAL to apply to dates later than those applying to the novated contracts. The third consisted of a number of gold futures contracts between Newcrest and SGAL. These contracts we used to fund payment by Newcrest of the foreign exchange transactions. 134 There was conflict between the parties as to the involvement of Mr Thomson in initiating the transaction and as to the acceptance or rejection of various proposals which he had put to Newcrest mining during the course of negotiations. I accept the submissions made on behalf of the applicants to the effect that, in considering whether or not these transactions are to be dealt with in accordance with special condition (ii), it is not necessary to determine whether and to what extent Newcrest was introduced to the respondents by Mr Thomson and whether or not he initiated the particular transactions. What is to be determined is whether Mr Thomson had generated revenues which were earned by SGAL financial markets as contemplated by special condition (ii). 135 In the context in which special condition (ii) evolved by reference to the evidence to which I have earlier referred, and having regard to what was contemplated by the parties, what was intended by the use of the words "generated by you" was that regard would be had to the work performed by Mr Thomson and the contribution which he made to the production of revenue from the transaction. This is opposed to any concept of him having initiated the particular transaction or having been involved in some exclusive manner in all facets of the transaction. To attempt to apply the special condition in any other way constitutes relevant unfair conduct. 136 I accept the evidence of Mr Thomson with respect to his involvement in the Newcrest transaction. It had been the respondents' position during the course of the proceedings that the transaction involved a mere novation of existing foreign exchange option contracts, which Newcrest held with the Royal Bank of Scotland, together with some additional contracts with SGAL for later dates and the gold transactions to fund payment of the foreign exchange contracts. 137 In his evidence, Mr Thomson pointed out that the existing Royal Bank of Scotland contracts were not just novated but were overlayed with "a matching strip of AUD call options with the same expiry dates". He said "we have converted what was effectively a 'naked' strip of barrier put options at RBS into a 'levered par forward' structure at SGAL. The total number of options in the final structure at SGAL was 48. The total number of options held by RBS at the time of the novation and structure was 35. These included three 'knock-out' AUD call options which were not novated to SGAL". He said also that "at no time did anyone other than me have any involvement whatsoever in the pricing or execution of the foreign exchange leg of this transaction. As I have earlier mentioned, the only parts of the transaction that I did not control were the credit approval process…and the pricing and restructure of the gold positions that was done to pay for the FX restructure and novation". 138 On the other hand, the evidence is equally clear that Mr Thomson did not, as he conceded, participate in the gold futures transactions which were used to fund the foreign exchange transactions. Accordingly, any revenue earned from the gold transactions was not generated by Mr Thomson for the purpose of determining the application of special condition (ii), and such an approach is not unfair. 139 There is one further qualification which needs to be considered with respect to the Newcrest transactions. It will be remembered that special condition (ii) not only requires that the net revenues be generated by Mr Thomson but that they be earned by SGAL financial markets. Financial Markets was part of the debt and finance division of SGAL (known as "DEFI"). Another of SGAL's divisions was its commodities division (known as "CTY"). When DEFI applied for credit approval for the Newcrest FX transactions it was ultimately determined that the risk was to be shared equally between the CTY and DEFI divisions and that the fees generated would be credited in the same manner. This was communicated in an email from Mr Macagno to SGAL personnel dated 10 August 2001, forwarded at 6:35pm. 140 I should add that the decision of Mr Macagno elicited a response from Mr Thurgarland to representatives of SG at 6:59pm on the same day. Mr Thurgarland complained that the FX transaction produced a greater level of income than the gold commodities transaction and that all of the premium income should be assigned to FX Sales, even though 50% of the risk had been assigned to CTY. Furthermore, Mr Thurgarland expressed disappointment that Mr Macagno had determined that some of the profit from the FX transaction should not accrue until later, given the structure of the transaction. Mr Thurgarland concluded his email by saying: "What can I say…This is obviously an extremely disappointing outcome given the level of work that has gone into the deal by FX Sales Sydney (and of course our colleagues in CTY and Credit) and the scarcity of acceptable counterparts with whom to transact such deals, and certainly will have a negative impact on the morale of the staff concerned. I understand that the development of this type of value-added business to be a core strategy of the FX Sales business…it is therefore desirable and indeed essential that the income and associated bonus contribution flowing from it is retained by the deal originators and not distributed elsewhere within SGIB as this undermines the whole principle of any bonus scheme which is to reward those who produce the income and not those who do not…". 141 It is obvious from the email communications which I have referred to above, that considerations of bonus payments played a significant part in the remuneration of SGAL personnel and that the impact of transactions generally and the Newcrest transaction in particular on bonus was at the forefront of at least Mr Thurgarland's concerns. I should observe generally that with respect to other evidence given in the proceedings that concern for bonuses was not confined to Mr Thurgarland. Mr Harvey and Mr Farr-Jones were equally concerned with respect to their own circumstances. 142 The respondents contended that so much of the revenue from the Newcrest FX transactions as was generated from that part of the risk assumed by CTY did not represent revenue earned by SGAL financial markets, and therefore should be excluded from consideration under special condition (ii). Such a contention is, however, contrary to the understanding reached between Mr Thomson and representatives of SGAL when the contract of employment was negotiated. As Mr Thurgarland put it in his email set out above, the concept was that the income and associated bonus be retained by the "deal originators". The fact that SGAL chose to allocate the risk elsewhere within its organisation does not create, in my opinion any disentitlement by Mr Thomson to the inclusion of all of the revenue for the purpose of the calculation of his bonus under special condition (ii). The situation would have been different if SGAL had laid off part of its risk to another financial institution. This conduct by SGAL in seeking to rely on the words used in the special condition so as to exclude part of this transaction was unfair. 143 Whilst the deferral of some of the income from the Newcrest FX transactions might justly be seen by Mr Thomson to have been manifestly unfair, given the circumstances in which that decision was taken and its general application to all persons affected by it I do not find that that decision either was unfair for the purpose of s 106. 144 Finally, in connection with the Newcrest transactions it is necessary to determine the application of the provisions for "SGAL's charges for credit usage and return on equity". For the purpose of the application of special condition (ii) in this regard, I would propose that the same approach as was applied to the Wambo transactions also applied to the Newcrest transactions. Sons of Gwalia transaction 145 Mr Thomson was involved, on behalf of SGAL, in restructuring existing foreign exchange positions for Sons of Gwalia. Foreign exchange transactions were ultimately completed through the respondents providing facilities for Sons of Gwalia, but settlement was not effected until after 31 December 2001. The respondents declined to pay any monies to Mr Thomson under special condition (ii) because that condition was expressed to only apply until 31 December 2001. The applicants asserted that in all the circumstances it was unfair that Mr Thomson would be deprived of the application of special condition (ii) to these transactions. They also alleged that settlement had been deliberately delayed so as to ensure that it occurred after 31 December 2001 and thereby expressly deprive Mr Thomson of any entitlement. 146 Negotiations with Sons of Gwalia commenced in August 2001. A credit application was submitted by SGAL to SG in September 2001 but was rejected in part because of concerns with respect to the credit application. An amended proposal was submitted in September 2001 and discussions ensued between representatives of Sons of Gwalia and representatives of both respondents throughout October. SG ultimately rejected the amended application on 31 October 2001 but this was reconsidered when the transaction was restructured with the introduction of a "tin component" to reduce the amount of the foreign exchange cover. There were further negotiations in November 2001, but SG maintained its concerns about providing the necessary credit for the transactions. A proposal was resubmitted to the second respondents on 3 December 2003 containing a variation involving a sell-down of part of the transaction to another financial institution. There were further discussions with representatives of the second respondents which were conducted in Paris in early December 2001. The additional financial institution confirmed its approval of participation in the transaction on 18 December 2001 and a further application was made by SGAL to SG on 19 December 2001. There were discussions between Mr Thurgarland and Mr Thomson concerning the completion of the transaction, and on 21 December 2001 Mr Thurgarland stated in an email to Mr Thomson that the transaction should not be executed without his prior approval. As at 24 December 2001, Mr Farr-Jones discussed completion of the transaction with a representative of Sons of Gwalia and it was decided that it would be effected in January. One of the reasons was that outstanding documentation needed to be finalised and, in addition, there was some concern about the illiquidity of the market during that period of the year. 147 On 28 December 2001 final credit approval was given by SG to SGAL for the transaction subject to certain conditions, including the finalisation of all documentation before execution of the transaction. In addition, there was a requirement that the auditors of Sons of Gwalia certify that the transaction complied with Australian accounting principles. This required additional negotiations with representatives of Sons of Gwalia. It was also necessary at that stage to finalise negotiations with the third party financial institution and formal approval from that institution was not forthcoming until early January 2002. The documentation was not concluded until 9 January 2002 and the transaction was completed the following day. 148 The circumstances surrounding the completion of this transaction were the subject of a great deal of oral and documentary evidence. In particular, SGAL's chief executive officer, Mr Eric Dhoste, was cross-examined extensively on the circumstances surrounding the delay in completion. I am satisfied that the narration of events which I have set out above accurately records the various circumstances leading up to the completion of the transaction. I am satisfied that there is no evidence of any conspiracy between any persons within the first and second respondents' organisations or within Sons of Gwalia to bring about a deferral of the completion of the transaction so as to deprive Mr Thomson of entitlement to have any of the revenues generated by the transaction included within his bonus entitlement under special condition (ii). Certainly, some of the persons involved were aware that Mr Thomson had a great deal to lose if the transaction was not completed by 31 December 2001. Nevertheless, this was not, in my opinion a motivating factor. 149 As with many conditions of this kind, the cut-off date of 31 December 2001 was one fixed by discussion between the parties. That date and the circumstances in which it was agreed as being an applicable cut-off date do not in my opinion create any relevant unfairness for the purpose of s 106 when applied to any of the transactions the subject of these proceedings, and in particular to the Sons of Gwalia transaction. A date having been fixed, and there being no indication of any manipulation of the transaction so as to deprive Mr Thomson of entitlement to any remuneration, no relevant unfairness results. Whilst one might sympathise with Mr Thomson in terms of disappointment and in terms of his own perception of the result of what occurred as being "unfair", what might be perceived by him to be unfair does not necessarily create circumstances which would justify a finding of unfairness for the purpose of s 106. Goldfields transactions 150 Whilst employed by SGAL, Mr Thomson introduced Goldfields Limited to SGAL to undertake certain foreign exchange transactions. That company had a previous relationship with SGAL, particularly with respect to gold futures transactions. 151 Three foreign exchange transactions were undertaken during the course of 2001. Mr Thomson claimed that the revenues generated by these transactions should be taken into account in their totality for the purpose of the application of special condition (ii). 152 The respondents resisted this claim on three bases. The first was that it was necessary to take into account ROE and charges for credit, the second was that other persons were involved with the foreign exchange transactions, and the third was that gold futures transactions which were undertaken contemporaneously should be excluded in any assessment of revenue. 153 The evidence of Robert Dougall, the then General Manager - Commercial of Goldfields Limited, was to the effect that the foreign exchange transactions required the payment of a premium by Goldfields. That company arranged, through the SGAL gold desk, to sell gold call options to satisfy the premium requirements of the foreign exchange restructure. A reference by Mr Harvey in his affidavit evidence to this transaction indicates that the revenues generated by the gold transactions were claimed through the CTY division. On this basis, and because the gold transactions were utilised to fund the foreign exchange transaction I agree with the contentions of the respondents that the revenue so generated should not be included within Mr Thomson's entitlement under special condition (ii). 154 The evidence with respect to Mr Thomson's involvement in the foreign exchange transaction is to the effect that he substantially undertook all of the work but was not present when one of the transactions was concluded, so that some work was undertaken by others. However, in accordance with the in principle approach which I previously adopted, it would seem unfair in these circumstances to exclude any portion of the foreign exchange revenue from Mr Thomson's entitlement under special condition (ii). 155 This leaves for consideration the approach to ROE/charge for credit. Again, this should be dealt with in the same manner as the Wambo transactions. The Whitehaven transaction 156 The Whitehaven transaction was a foreign exchange transaction undertaken on 21 August 2001. The applicants claim one third of the revenues generated by reason of the involvement of a Mr Faassan. This does not appear to be resisted by the respondents other than for the application of an allowance for charges for credit usage or return on equity. This needs to be dealt with in the same manner as the Wambo transactions. Other transactions post-31 December 2001 157 In view of the conclusions which I have reached with respect to the Sons of Gwalia transaction I do not find any unfairness in excluding from the provisions of special condition (ii) any transaction which was completed after 31 December 2001 absent any particular circumstance which would require special consideration. I find that there are no such circumstances with respect to the transactions the subject of the applicants' claim, including transactions involving Aurion Gold and South Coal. The Discretionary Bonus Pool 158 It was a term and condition of Mr Thomson's contract of employment that he would be entitled to participate in a discretionary bonus performance scheme operated by SGAL. It was obvious that for the period up to 31 December 2001 Mr Thomson would be entitled to bonus payments under special conditions (i) and (ii). No circumstances have been adduced which would enable the Court to conclude that any unfairness was created by not giving consideration to Mr Thomson's performance up until 31 December 2001 with respect to his participation in the discretionary bonus scheme. 159 Of course, as at the date that the discretionary bonus was paid with respect to the 2001 year, namely 13 March 2002, Mr Thomson was no longer employed by SGAL. Given the circumstances of the termination of his employment I see no relevant unfairness in denying Mr Thomson any entitlement to participate in the 2001 bonus pool. Claims for lost income and opportunities to generate income post termination of contract of employment 160 In the course of the proceedings the applicants made, in general terms, three heads of claim with respect to loss of income after the termination of the contract of employment. 161 The first related to the period of notice which Mr Thomson should have been given on termination of employment. I have already found that the circumstances of the termination of the employment did not create any relevant unfairness for the purpose of s 106. It follows, therefore, that the payment by SGAL of one month's pay in lieu of notice was not unfair in all the circumstances. 162 The second claim arises out of dealings between SGAL and the Excel Group after the termination of Mr Thomson's employment by reference to the course of dealing which Mr Thomson had continued with the Excel Group. Following the termination of his employment with SGAL, Mr Thomson continued to arrange foreign exchange transactions for the Excel Group using facilities at Macquarie Bank. At the same time, the Excel Group maintained its relationship with SGAL both for general banking as well as for foreign exchange transactions. SGAL provided working capital and other financial facilities to the Excel Group. 163 By 2003, Macquarie Bank, through the services of Mr Thomson, was undertaking about half of the foreign exchange business of the Excel Group, the other half being undertaken through SGAL. SGAL approached the Excel Group, principally through Mr Farr-Jones, and said that it wished to undertake a substantial portion of the foreign exchange transactions to consolidate its relationship with that group. The evidence is to the effect that Mr Farr-Jones did not seek that all of the foreign exchange transaction facilities be placed through SGAL but that a substantial proportion of that business be so placed. There is a reference to a percentage of between 80 and 85. The Excel Group determined to place all of its foreign exchange transactions through SGAL. 164 The applicants claimed that this conduct on the part of SGAL unduly interfered with Mr Thomson's arrangements with the Excel Group and Macquarie Bank, albeit through the services of Bengoal. It was said that this created relevant unfairness for the purpose of s 106 of the Act. 165 I reject these submissions. The conduct complained of occurred some considerable time after the termination of Mr Thomson's employment and the cessation of the operation of the deed between Bengoal and the respondents. It is accordingly too remote in time to be considered as part and parcel of any unfairness in the contracts or arrangements which are the subject of these proceedings. In addition, any such loss of income sustained by Mr Thomson and Bengoal by reference to the cessation of business between the Excel Group and Macquarie Bank is not a consequence of any relevant unfairness which I have found to exist for the purposes of s 106. 166 The third claim is that the applicants lost the opportunity to conduct a number of transactions by reason of circumstances in which the contracts and arrangements with the respondents came to an end. It was said that there was a loss of opportunity by Mr Thomson to negotiate foreign exchange transactions through Bengoal with organisations with whom he had a relationship prior to his employment with SGAL. Presumably the claim relates to those organisations whose names were disclosed to the respondents at the time Mr Thomson commenced negotiations with representatives of SGAL. 167 It might be thought that if there was any substance to such a claim there would have been evidence that Mr Thomson had endeavoured to facilitate foreign exchange transactions with these "clients" whilst he was employed by SGAL, having regard specifically to the provisions of special condition (i). There is no such evidence other than with respect to the Excel Group and the Wambo Mine. Furthermore, there is no evidence that, consequent upon the termination of his employment, Mr Thomson was precluded from dealing with any of those clients, save for the Excel Group, through Macquarie Bank or any other financial institution. Furthermore, when he negotiated his contract of employment with SGAL, Mr Thomson knew and understood that he was essentially leaving an environment which would entitle him to deal with clients on a freelance basis and that he would be compelled to deal with them as an employee of SGAL, with all of the restrictions that this created. In the circumstances in which Mr Thomson's employment came to an end, through no fault of the respondents, there can be no suggestion of any relevant unfairness in and about any of the contracts or arrangements sought to be impugned in these proceedings because of any lost opportunity to deal with his clients. For these reasons this claim is also rejected. Sydney Water Corporation Ltd & Anor v Industrial Relations Commission of NSW & Anor [2004] NSWCA 436 168 The respondents relied on the above decision, being a decision of the New South Wales Court of Appeal in rejecting the applicants' claims. It was said that all that the applicants were doing was to seek to enforce provisions of the relevant contracts and arrangements which was not permissible having regard to the above decision. 169 The principal judgment in Sydney Water was that of Mason P. His Honour held that it was impermissible to apply s 106 of the Act to a contract in circumstances where the unfairness complained of was conduct which constituted a breach of the contract and for no other reason. The contract must otherwise be found to be unfair. 170 The findings of unfairness which I have made, and the circumstances in which the unfairness has arisen go beyond what was established in Sydney Water as being beyond consideration in s 106 proceedings. The findings of unfairness and the consequent relief which the Court is empowered to grant go beyond the mere enforcement of the provisions of the contract. Indeed, it has been necessary to determine to vary the provisions of the contract so as to remedy the unfairness of the manner in which the contract was drafted. This is a process which is far removed from merely construing and applying the provisions of the contract in accordance with established principles (see, for example, Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, especially at [348] to [352] per Mason J). 171 The contract of employment between Mr Thomson and SGAL was not only unfair when entered into but also became unfair because of the manner in which it was drafted. In these circumstances the restrictions identified by the New South Wales Court of Appeal in Sydney Water are not applicable. ORDERS 172 Consequent upon the findings of unfairness which I have made; 1. Special conditions (i) and (ii) of the contract of employment are varied from inception so as to provide that, notwithstanding any other term; (a) Special condition (i) is to apply notwithstanding that the transaction required use of SGAL credit lines or capital and is to apply to all Wambo transactions completed within 6 months of the commencement of Mr Thomson's employment. (b) Mr Thomson is to be paid 50% of the revenue generated by such transactions calculated in accordance with SGAL's usual accounting principles to arrive at the profitability of the transactions, such calculations confining any allowance for expenditure to that which is specific to the transaction, themselves. (c) Special condition (ii) is to apply to all foreign exchange transactions, of no matter what complexity, in which Mr Thomson was substantially involved which were completed on or prior to 31 December 2001 provided that any such transactions complied with SGAL's threshold profitability requirements. (d) 15% of net revenues referred to in special condition (ii) shall be calculated in accordance with SGAL's usual accounting principles to arrive at the profitability of the transactions, such calculations confining any allowance for expenditure to that which is specific to the transactions themselves. 2. The proceedings are stood over to allow the parties to consider these reasons with respect to any order for the payment of monetary compensation; 3. The parties are at liberty to forward short minutes of order or to have the proceedings re-listed for mention or directions; 4. Costs reserved with liberty to apply. 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.