Vincenzo Paparo v Moree Plains Shire Council [2005] NSWIRComm 4 (14 January 2005)

Last Updated: 16 February 2005

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Vincenzo Paparo v Moree Plains Shire Council [2005] NSWIRComm 4

FILE NUMBER(S): IRC 8234

HEARING DATE(S): 15/11/2004, 16/11/2004, 17/11/2004, 18/11/2004, 19/11/2004, 22/11/2004, 23/11/2004

DECISION DATE: 14/01/2005

PARTIES:

Vincenzo Paparo v Moree Plains Shire Council

JUDGMENT OF: Haylen J

LEGAL REPRESENTATIVES

APPLICANT:

Mr M J Heath of counsel

SOLICITORS:

Carneys

DEFENDANT:

Mr A Moses of counsel

SOLICITORS:

Hunt & Hunt

CASES CITED: Bryant v Gunnedah Shire Council [1998] NSWIRComm 51

Northwest County Council v Dunn (1971) 126 CLR 247

Sydney Water Corporation Ltd and anor v Industrial Relations Commission of New South Wales and anor [2004] NSW CA 436

LEGISLATION CITED: Local Government Act 1993

JUDGMENT:

- 60 -

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN COURT SESSION

CORAM: HAYLEN J

14 January 2005

Matter No. IRC 8234 of 2001

Vincenzo Paparo v Moree Plains Shire Council

Application under s 106 of Industrial Relations Act 1996

JUDGMENT

BACKGROUND

1 On 16 November 1998, the applicant, Mr Paparo, commenced employment as the General Manager of the respondent, the Moree Plains Shire Council. Mr Paparo's professional qualifications were in Science and Engineering and he had no close connection with local government prior to this appointment. Over the years, Mr Paparo had been involved in a number of senior administrative and policy positions, firstly in government departments in Western Australia including the Department of Cabinet where he became the Deputy Chief Executive Officer, and later the Chief Executive Officer of the Western Australian Land Authority. In 1995, he was engaged as a consultant on commercial reforms for the State Rail Authority of New South Wales and in 1997 was a consultant on strategic projects in the Premier's Department in New South Wales.

2 His contract with the Council provided for a salary of $110,000 per annum. On appointment, the then current mayor expressed satisfaction in securing the services of such a highly qualified person even though he had no direct local government experience. It was accepted at this time that Council finances were in a parlous state and that there were difficulties facing Mr Paparo in his new role.

3 By April 1999, Mr Paparo had reported to Council that there had been a depletion of cash reserves over a number of years resulting in an underlying deficit of $4 million and that a cut in expenditure over a number of years would be required. In May 1999, following extensive public consultation, Mr Paparo proposed to Council that the deficit be eliminated over three years and that a major programme to revitalise villages, towns and neighbourhoods in the Shire needed to be undertaken to address the neglect of the past. This required an increase in rates well above the rate pegging figure but that recommendation was endorsed.

4 In the course of addressing structural change as well as the finances of the Council, Mr Paparo prepared and had accepted a number of proposals including workplace reforms and management plans. A number of these were regarded as controversial: the workplace reforms drew protests from the union movement and later led to public protests. Other proposals supported by Mr Paparo drew strong opposition from some Councillors and over a period of time tensions grew between Council staff and some members of the Council. While Mr Paparo was able to turn around the financial deficit and quickly turn the budget into surplus, a number of his plans and his approach to management drew continued and mounting opposition. By September/October 2001, Mr Paparo was aware of a public campaign by some Councillors to remove him from the position of General Manager and he was later informed by the Mayor, Mr Brooks, that the Councillors who opposed him now had the numbers to pass a no confidence motion and remove him from the position of General Manager. Between October and mid November 2001 a number of issues came to a head. Council called upon Mr Paparo to address a number of issues of concern. In November 2001, an extraordinary meeting of Councillors was called to consider the performance of the General Manager and a number of meetings were held during that month, culminating in a meeting on 19 November 2001 when Council resolved to terminate Mr Paparo's employment. In accordance with the provisions of his contract, Mr Paparo was paid three months in lieu of notice.

5 On 11 December 2001, solicitors representing Mr Paparo commenced proceedings under s 106 of the Industrial Relations Act seeking a declaration that the contract or arrangement under which he worked was unfair, harsh or unconscionable. The application sought to vary the contract to secure the payment of a performance bonus in the sum of $20,000 and the insertion of a provision giving the applicant twelve months' notice or twelve months' remuneration in lieu of notice upon termination of employment for any reason.

6 Mr Paparo's claim was listed for hearing for two weeks in mid-2004 but those dates were vacated because of Full Bench commitments. In setting the matter down again for hearing, the Court was informed that Mr Paparo was now suffering from a serious medical disorder and was receiving treatment that had the capacity to interfere with his ability to give evidence. In those circumstances, other matters were re-scheduled in order to secure the earliest possible hearing date for Mr Paparo's claims.

THE CONTRACT

7 Mr Paparo's contract was to operate for a period of four years commencing on 17 November 1998 and terminating on 16 November 2002. Renewal of appointment was possible with Mr Paparo being required to give at least nine months' notice before 16 November 2002 if he was seeking re-appointment. At least six months before the expiration of the contract, Council was required to determine whether it proposed to offer the employee a new contract and if so on what terms: at least three months before the expiration of the contract, Mr Paparo was required to advise the Council if its offer was accepted. In the absence of re-appointment or appointment to another position, employment with the Council would terminate on 16 November 2002. The initial salary was set at $110,000 but by August 1999 Council had agreed to an increase in excess of 20 per cent resulting in a total salary of $135,000 per annum.

8 Under the contract, one of Mr Paparo's responsibilities was to take all reasonable steps to meet the performance measures which were contained in a schedule to the contract. There was a requirement that the parties sign a performance agreement within three months of the commencement of the contract and annually thereafter. The performance agreement was to set strategic objectives and performance measures consistent with the responsibilities of Mr Paparo as set out in a schedule. Performance was to be monitored on a six monthly basis and reviewed annually. The Council was to give Mr Paparo at least ten days' notice in writing that a performance review was to be conducted and, within one month of the conclusion of a performance review, the Council was to prepare and send to the employee a statement setting out Council's conclusions about the employee during the period of the review, any proposals by Council to vary the performance measures as a consequence of the review and any directions or recommendations made by the Council to Mr Paparo in relation to his future performance. The level of remuneration was to be reviewed annually and was to be subject to satisfactory performance reviews.

9 Clause 9 of the contract dealt with termination and provided that the contract could be terminated before 16 November 2002 in the event of any of the circumstances specified in the clause. Under this clause, the Council could terminate Mr Paparo's employment on one month's notice or the payment of one month's salary where the employee did not meet performance measures or the terms of the performance agreement. The Council could also dismiss without notice if the employee committed any act which would entitle the employer to summarily dismiss the employee, in which case the employee would be entitled to the payment of benefits and remuneration up to and including the date of termination or dismissal. Under clause 9.1.6, the Council could terminate the contract for any reason other than those previously specified and in such a case the Council should give notice calculated at the rate of three months for each year of service remaining under the contract from the date of notice or, in the absence of notice, the payment in lieu thereof of three months' remuneration or the balance of the term of the contract remaining, whichever was the lesser. Council resolved to terminate Mr Paparo in accordance with the provisions of clause 9.1.6 of the contract.

THE BONUS ISSUE

10 In late July 1999, a committee of Council conducted a formal performance review and concluded that Mr Paparo had met or exceeded the standard in 72 of 76 factors which were considered in the review process. Of the four areas where improvement was needed, one dealt with Mr Paparo's technical knowledge and his maintenance of a knowledge base appropriate to his role, while a second concerned skills and staying current in the field. A twelve month development plan was then instituted. The review was sent to Council which resolved that a copy of the review be placed on Mr Paparo's personal file, that he be congratulated on his performance to date and that his package be increased from $110,000 to a $135,000 to take effect from 9 November 1999.

11 In June 2000, Council adopted a management plan which required $1 million in savings. In mid-July 2000, the Council was briefed on workplace changes that were needed in order to meet the budget and which included the prospect of reducing staff by approximately 39 persons. This proposal was opposed by the union and protests were organised against the measures. Some members of the Council made public comments in opposition to the workplace reforms. One Councillor publicly stated that the General Manager would not be receiving a pay increase. There was a public protest march against the General Manager and a petition seeking his dismissal was presented to the Council. At the end of July 2000, the General Manager's performance review was placed on the Council agenda. Mr Paparo addressed Council on the measures required to rein in the budget deficit and noted the opposition to those measures including public statements by members of Council. He asked whether it was appropriate in those circumstances that the review be undertaken when there seemed have been a pre-judgment of his position by at least some Councillors. The Council then resolved that the General Manager's performance review be finalised within two months and further that Council express its confidence in the General Manager in the current process of workplace reform.

12 On 19 October 2000, Council considered a report from the Mayor showing that the General Manager had met or exceeded the standard in 71 of 76 factors considered for the purposes of the review. The Mayor's report noted that Council had an obligation to review the performance of the General Manager annually and that there were three areas of concern which were particularly highlighted. The report concluded that the performance of the General Manager was assessed as generally meeting the standards required, but there were some areas of longstanding yet to be addressed which reflected badly on the individual and the organisation and needed to be corrected in the short term. There were a high number of areas assessed as strengths, which mirrored the review carried out the previous year. The report made the following recommendations:

1. That the General Manager's efforts to establish a culture of positive change in the organisation be recognised and endorsed.

2. That Council adopt the report and place the document on the General Manager's file.

3. That no change be made to the General Manger's base package but that Council's Review Committee negotiate with the General Manager to amend his contract to allow for a performance based bonus, using financial, customer service, staff development and internal process criteria with a view to any payment being made after 30 June 2001.

4. That the General Manager provide a report as to the processes implemented to address the issues highlighted by this Report.

These recommendations were endorsed by the full Council.

13 Mr Paparo said that, prior to the performance review being considered by the full Council on 19 October 2000, he had met with the Mayor Mr Montgomery and the Deputy Mayor Mr Brooks to discuss his performance review. Mr Montgomery had told him that, although he had done an excellent job, the pressure created by the workplace change process made it politically very difficult to increase his salary. Mr Paparo pointed out that the workplace changes were necessary to balance the budget but asked if his contract could be amended by making any annual increase dependent upon meeting specific performance targets. There was a discussion about the possibility of a performance based bonus with Mr Montgomery referring to the need to meet some tough targets. Mr Brooks had said he would be happy with a performance bonus if it was paid at the end of the financial year after the completion of the workplace change process. Mr Paparo said he could agree with that approach but thought he was entitled to some reward for the extremely difficult task of turning around Council's financial fortunes. Mr Montgomery asked him what type of bonus he thought would be a fair thing: Mr Paparo said that, if he achieved a balancing of the 2000-2001 budget, an increase in road construction and maintenance and open space management and resolved the back pay issue, then a performance bonus of $20,000 would be reasonable. He said that Mr Montgomery thought that was not a problem if all of those matters were achieved.

14 In mid-August 2001, it was reported to Council that the final outcome for the 2000-2001 budget showed a surplus of just under $1 million. Council resolved that the General Manager and staff were to be congratulated for the effort put into the budget and in achieving the surplus. Later in that month, Mr Paparo settled the long running dispute with the union over the back pay issue which had been referred to him in his discussions with Mr Montgomery and Mr Brooks.

15 In September 2001, Mr Paparo forwarded a report to Council regarding his performance review, reminding Council that an annual performance and remuneration review was required. He also noted that in October 2000 the Council had recognised and endorsed the General Manager's efforts to establish a culture of positive change in the organisation and that any bonus payment based on addressing key issues would be made after 30 June 2001. The report to Council then outlined the steps taken in the identified key areas and gave details of the progress made in those areas. Council received the report and resolved to reconvene the Review Committee with a view to providing a report to the October meeting of Council. It was also resolved to approach the Local Government and Shires Association with the Mayor to investigate the most appropriate process for the General Manager's next performance review and to report to Council on that matter.

16 At the 18 October 2001 meeting of Council, the Mayor presented a report concerning the General Manager's performance review and a summary of his discussions with Mr Mitchell, a consultant in executive staff services with the Local Government and Shires Association. That report noted that in October 2000 Council's Review Committee would negotiate with the General Manager to amend his contract to allow for a performance based bonus using specified criteria which would be payable after 30 June 2001. This negotiation did not occur and the General Manager's contract was not amended to include such provisions for payment of a performance bonus. The contract required the General Manager's level of remuneration to be reviewed annually subject to a satisfactory performance review but was silent as to how that might be achieved. Mr Mitchell noted that there was no movement of salary in October 2000 but that, in 1999 after one year of the General Manager's four year term, an increase of $25,000 representing 22.73 per cent was granted by Council. Mr Mitchell then noted that in the October 2000 assessment the General Manager either met or bettered the required standard in all but five of 76 factors and that it appeared that on the basis of the five sub-standard factors, no change was made to the General Manager's level of remuneration. It was noted, however, that achieving 93.4 per cent satisfactory performance indicated that a satisfactory review had been achieved under the contractual terms. The General Manager had also complied with a direction to provide a report on actions designed to address the Council's concerns in the five sub-standard factors and that report had been delivered by the General Manager. The report then stated:

Given the apparent overall reasonable performance indicated in the individual profile document of 19/10/2000 and the explanations provided in the General Manager's status report, Mr Mitchell's view would be that it warranted some payment to reward the employee. Council needs to be aware however, that in the light of above facts, Council is under no contractual obligation to pay the General Manager a performance bonus. It could also be argued that the large increment paid two years ago has put the General Manager's level of remuneration well ahead in terms of internal relativities and at the upper reaches of General Manager remuneration in Councils of similar location, size and/or complexity.

It is a concern of Mr Mitchell that the contract does not have a provision for annual incremental movement in the General Manager's level of remuneration, subject to satisfactory performance and preferably at Council's discretion. Modest annual movement of remuneration would have the effect of maintaining remuneration relativities both within and external to Council's organisation. Erosion of these relativities may result in the employee losing motivation and possibly reducing performance or moving on. One off performance bonuses do not maintain relativities and need to be carefully drafted so as to be unambiguously clear as to their payment conditions. Despite these issues regarding incremental movement and the lack of contractual obligation to pay a performance bonus, it may serve Council will (sic) in these circumstances to consider a one off, ex gratia bonus of say, $3-5000 (2.2-3.7 per cent). Payments on these grounds could be seen as reflecting Council's goodwill and may contribute to maintaining the General Manager's motivation and level of performance. If it is not paid, the argument could be put that Council failed to act on its own resolution that its performance review committee initiated negotiations to amend the contract to accommodate a performance bonus.

17 The Mayor's report was simply "noted" by the Council and no amount of increase was agreed. Council resolved to establish a new committee to review the General Manager's performance and accepted a proposal from the Local Government and Shires Association to assist in establishing a new performance agreement based on a performance management model which reflected the needs of the Council.

18 During this period, there was intense speculation about the future of the General Manager. Mr Paparo had been informed that there was probably a majority of Councillors who were prepared to terminate his employment. On 2 November 2001 the Mayor, Mr Brooks, wrote to Mr Paparo following an extraordinary meeting of Council held the previous day. In that letter the Mayor stated that, while Council was committed to conducting the General Manager's performance review for the 2000/2001 financial year Council had become aware of a number of issues which required Mr Paparo's urgent response. He was invited to a meeting with the Mayor and Deputy Mayor at which responses from him were required to eight matters of concern relating to the performance of his duties. Those eight matters were: "unco-operative to Councillors' request for financial and other information; delayed in getting financial reports to the Minister's office; failed to comply with staffing levels as requested by the Minister's office; failed to adhere to Council's organisational structure; failed to appoint directors to the organisational structure; abusive behaviour towards Councillors in breach of the Council's code of conduct; acting in an unsupportive and threatening manner to senior staff members; entered into a contract with the Moree Tennis Club without authority from Council".

In the interview with the Mayor and Deputy Mayor, the General Manager asked if the performance review would be completed and whether it would be a fair review. The Mayor thought the review team was a good team: he would arrange a meeting with Mr Mitchell before amending the contract and to go ahead with the review.

19 Ultimately, the review did not take place and there was no finalised position agreed with the Council as to a performance based bonus before Mr Paparo was terminated on 19 November 2001.

20 Mr Paparo's evidence was that, on 17 October 2000, just before the full Council meeting held on 19 October 2000, he met at a local cafe with the Mayor Mr Montgomery and the Deputy Mayor Mr Brooks. His evidence was that Mr Montgomery congratulated him on an excellent job in changing the culture of the organisation but that, in view of the pressure being applied to Council because of the workplace change process, it was politically very difficult to increase the General Manger's salary. Mr Paparo expressed his disappointment considering the programmes he had introduced. He then suggested that, if a salary increase was not available, consideration should be given to amending his contract by making any annual increase dependent upon meeting specific performance targets. Mr Montgomery expressed the view that he was sure Council would be party to paying a performance bonus if he met some tough targets. Mr Brooks said that he would be happy with a performance bonus arrangement if it was paid at the end of the present financial year and after the completion of the workplace change process. Mr Paparo responded that he did not have a problem with a performance bonus being in that timeframe, but he believed he should receive some reward for the extremely difficult task of turning Council's fortunes around. Mr Montgomery spoke of key performance measures including balancing the 2000-2001 budget, increasing expenditure in road construction and maintenance and open space programme and resolving the back pay issue. Mr Brooks said he was confident that Council would agree to a change to the contract to incorporate a performance basis as long as it was a year by year matter. Mr Montgomery then raised the appropriate amount,to which Mr Paparo replied that, if achieved all of the things mentioned bearing in mind how difficult it was to balance the budget, a performance bonus of $20,000 would be reasonable. He understood Mr Montgomery to say that was not a problem and that, if all that was achieved, then he would be more than happy to pay a $20,000 performance bonus or more.

21 Mr Montgomery's version of this conversation was different in important respects. The meeting had been arranged by Mr Paparo to discuss the General Manager's performance review: Mr Montgomery referred to the tight budgetary position and the fact that Mr Paparo had received a big increase of $25,000 the previous year. He referred to considerable fallout about the restructuring and the disquiet in the community about the reforms and said that the chances of an increase in salary were highly unlikely. Mr Paparo had then suggested an increase on a performance basis which Mr Montgomery said could be looked into. Mr Paparo then suggested some agreed performance criteria and also suggested that he could work the criteria into a document for Mr Montgomery to have a look at: Mr Montgomery agreed to that proposal. While walking back to Council chambers, Mr Montgomery asked what range of bonus was being considered and Mr Paparo said between zero and $20,000 to which Mr Montgomery replied: "That works for me".

22 It was Mr Montgomery's understanding that nothing would occur in relation to a performance bonus until Mr Paparo provided the criteria in writing. About six months after this meeting, Mr Montgomery asked Mr Paparo for his proposal for the bonus and was told that it was Mr Paparo's responsibility and he would do something about getting a document to the Mayor. Mr Montgomery's evidence was that Mr Paparo did not provide a proposal for the payment of a performance bonus.

23 Mr Brooks' recollection of this meeting in October 2001 was much less expansive. He recalled that Mr Paparo said that Council needed to save a $1 million to balance the books and that he would like a $20,000 bonus if he could successfully achieve a $1 million surplus for Council. Mr Brooks told Mr Paparo that he thought that Council would look favourably at that proposal so long as it was on a year by year basis. He at no time promised Mr Paparo a bonus payment and denied that at this meeting Mr Montgomery committed the Council to paying a bonus.

The growing tension between the General Manager and Councillors

24 Although a great deal of evidence was filed and admitted without objection dealing with numerous issues, observations and criticisms, the thrust of the respondent's case was that the termination of the General Manager was warranted on the basis of his actions in ignoring a decision of Council. I will return to this matter in dealing with the issue of unfairness of the contract.

The result of the admission of all this material was, undoubtedly as a matter of caution, that there was extensive cross-examination of a number of witnesses as to the basis of their statements, allegations and/or criticisms, with the result that a large amount of evidence was received which ultimately did not feature in the case. That material does however set a background to the decision made in November 2001 to dismiss Mr Paparo. For that reason alone, a short summary of those matters follows.

25 It appears that, for the first year of his service Mr Paparo's work was appreciated and his new approach enthusiastically adopted, even by some who very shortly thereafter became trenchant critics. As already indicated, by July 1999, the first performance review showed that Mr Paparo had met or exceeded the required standard in 72 of the 76 factors reviewed and it seems a fair inference that in the remaining factors a significant element was his unfamiliarity with local government practices and procedures. By August 1999, the Council had approved a salary increase in excess of 22 per cent and had congratulated him on his performance.

26 Mr Paparo traced his growing difficulty with Councillors as beginning with the election of six new Councillors in September 1999. It was Mr Paparo's view, and there was some support for it in the evidence, that the new Councillors had a particular interest and support bases in common. Mr Brooks gave evidence of growing factionalism amongst the Councillors and, on observing voting patterns, discerned two separate groups of significant size on the Council, with one or two Councillors being regarded as swinging voters rather than block or factional voters. In his oral evidence, Mr Brooks and other witnesses agreed that over time relations between Councillors led to the Council being largely dysfunctional to the extent that, by February 2001, in the wake of unjustified public attacks on senior staff by some Councillors and their expulsion from Council, Mr Montgomery as Mayor arranged for a mediated process to resolve difficulties occurring within Council. Following that mediation process conducted with the assistance of Mrs Armitage (former Mayor of Waverley), all Councillors and the management team signed an agreement making a commitment to work to ensure that Council was not brought into disrepute and to treat each other with respect and courtesy at all times.

27 In November 1999, Mr Paparo recommended the adoption of the Gosport Street By pass which was a controversial local issue. Council endorsed the proposal by eight votes to three, but Cr Dillon was critical of the General Manager over the proposal.

28 In May and June 2000, Mr Paparo concentrated on financial issues. In late June 2000, the Council adopted the management plan for 2000-2001 which required $1 million in savings. The adoption of the plan meant staff reductions, management change and workplace reform. Mr Paparo said that this put him in conflict with the members of the Municipal Employees Union. On 13 July 2000, Mr Paparo briefed Council on the budget and the changes that were needed, including staff cutbacks. At the same time, union members and other protesters held a meeting outside the Council Chambers and called for the General Manager to address the meeting. When Mr Paparo addressed the meeting, he said that he was jeered at and shouted down and that three Councillors had stood with the protesters. Some of the Councillors made public statements to local newspapers and the union called a strike on 14 July 2000 to protest at the workplace changes proposed. On 15 July 2000, a protest march was organised ending at the Council chambers building. A number of signs were held by the protesters, referring to the General Manager in derogatory terms and calling for him to be dismissed rather than the employees. Local press coverage estimated that the protest march involved over 200 employees and their supporters. On 18 July 2000 Mr Paparo was interviewed on local radio and answered numerous questions about the budget cuts and was asked a question about his own performance and whether he would receive a pay rise. Councillor Brazel was also present and stated that, while the General Manager had done a good job up until that time, he gave an assurance that Mr Paparo would not be getting any increase this year. On the same day, an extraordinary meeting of Council was called by a number of Councillors to consider the workplace change process. At this meeting, Mr Paparo proposed a tripartite committee to oversee the workplace change process and to minimise forced redundancies. A number of Councillors opposed this proposition and a large crowd of Council staff in the public gallery were invited to speak and voiced their criticism over the workplace changes proposed. At this meeting, a petition was circulated requesting the Council to take immediate action to permanently remove the General Manager.

29 An industrial dispute about the redundancies was dealt with by the Commission and, by early November 2000, the Commission had found that there had been no breach of award provisions by the Council in this reform process. On 13 November 2000, following a stop work meeting, the union called for a full scale strike and set up picket lines at the Council depot and Council administration and engineering building. The strike was said to be about workplace safety matters, but Mr Paparo said all the issues were related to workplace change. Again, a number of Councillors joined the protesting Council workers and that was reported in the local press. On 14 November 2000, at a further hearing before the Commission a Recommendation was made that Council staff return to work immediately.

30 Following the industrial action taken on 13 November 2000, three Councillors moved for an urgent meeting of Council which was held on 16 November 2000. A large number of staff members and their supporters, numbering approximately 100, were in the public gallery for the meeting and a number of critical comments were made of the General Manager. During this meeting, a union organiser walked from the public gallery and told the Councillors that they should take action to sack the General Manager or there would be action taken against them. The following day, Mr Paparo wrote to the Mayor expressing his concern that he and management had been unfairly abused at the Council meeting without the opportunity to defend themselves.

31 Mr Paparo stated that after these events he found himself working in an atmosphere of ongoing public clashes with a number of Councillors over the reform process. Allegations were made by two Councillors that there was an unapproved budget overspending amounting to $708,000 but, by December 2000, Council had censured those two Councillors for bringing the Council into contempt by making false allegations. By late December 2000, the Council's auditors had confirmed a $330,000 surplus after the first quarterly review, not a deficit as claimed by the two Councillors. The Council expelled the two Councillors over their allegations of financial impropriety.

32 Opposition to reforms introduced by the General Manger continued and in late January 2001, Mr Paparo attended a community meeting at the Moree Cemetery where there was a protest about maintenance work having been outsourced to contractors. There was a demand for Mr Paparo to meet the group. When he attended their meeting he claimed he was jostled by an angry crowd and, although he made a commitment to the maintenance of the cemetery and that it would be a priority, some members of the public continued to try to jostle him: one person in fact grabbed him by the neck and punched him in the mouth, an event that was recorded on local television and reported in the local papers.

33 At the end of May 2001, Council approved a $2 million loan for the Moree sewerage augmentation project, but by June 2001 a staff member complained to a Councillor that the Council did not approve the loan and that the General Manager had changed the Minutes of the meeting. The May Minutes approving the $2 million loan were approved in late June 2001. There was also a suggestion that a tape recording of the meeting of Council when this item was dealt with was tampered with, so that all that remained was approximately a 20 minute blank rendering the allegation unable to be substantiated.

34 In and around August 2001, a member of Council suggested financial impropriety in the handling of the Council's financial affairs and suggested that the Minister intervene. On 8 August 2001, the General Manager and 12 managers wrote to the Councillor expressing concern over these allegations of financial impropriety. By 16 August 2001, the Councillor apologised to the senior staff if his comments had offended but claimed his public criticism was directed at the General Manager.

35 In October 2001, the General Manager became aware of a claim of sexual and racial harassment made by a staff member against one of the Councillors. Mr Paparo obtained legal advice that it was his obligation to investigate the allegations against the Councillor, and he arranged for a letter to be sent to the Councillor seeking a response to the allegation. On 17 October 2001, the Councillor was informed by telephone of the investigation into the allegations and, on the same day, the Councillor complained to the Department of Local Government regarding expenditure authorised by the General Manager with respect to the Moree Tennis Club. By 22 October 2001, the Local Government and Shires Association advised that the additional expenditure on the Moree tennis facilities was legal and the General Manager sent a memorandum to Councillors enclosing that advice.

36 On 24 October 2001, the Councillor who was being investigated by Mr Paparo for sexual and racial harassment contacted the Independent Commission Against Corruption expressing concern that the General Manager might be acting corruptly concerning GST matters. In a lengthy discussion, the Councillor outlined his concerns about Mr Paparo and his performance as General Manager and was advised to send a document by facsimile, which the Councillor did later that day. The Council was later informed that the matters raised were properly matters for the Department of Local Government. Also, on 24 October 2001, the same Councillor contacted the Australian Taxation Office raising concerns that the General Manager might not have dealt properly with GST on a number of transactions. He was asked to send documents to the Australian Taxation Office which he attended to on the same day. Approximately two weeks later, he received a letter from the Australian Taxation Office advising that the matters raised were properly matters for the Department of Local Government. By 1 November 2001, the Council had resolved to appoint an external investigator into the claims of sexual and racial harassment against the Councillor.

Developments leading to the termination resolution

37 Although Mr Paparo's first two performance reviews rated him highly, there was growing opposition to his policy approaches especially in relation to the Council's financial affairs which seemed to have risen to a new level after the elections in 2001. The first review picked up deficiencies in Mr Paparo's knowledge of the statutory regime which was totally new to him. These matters had been addressed by the second performance review and out of the areas said to have been of concern to councillors, they numbered only two where he was thought to be below the performance standard. Mr Mitchell from the Shires Association advised Council that as Mr Paparo achieved an overall result of 94 per cent at the required or exceeding the required level of performance, the result could be regarded as a satisfactory performance and a satisfactory review being achieved under the contractual terms. Given the apparent overall reasonable performance indicated by the review and the explanations provided by the General Manager, Mr Mitchell recommended that some payment was warranted. Without expressing any reason, Council simply noted this report and declined to pay any increase by way of salary or bonus to Mr Paparo. This view was taken even though in mid-1999 the General Manager had been congratulated on providing Council with full details of its financial position and congratulated him on his performance generally when being given a 22 per cent increase in August: in July 2000, Council expressed confidence in the General Manager in relation to workplace reforms. In October 2000, Council had endorsed the General Manager's efforts to establish a culture of positive change in the organisation. The third performance review was well overdue but was never completed by Council before Mr Paparo was terminated.

38 While the workplace reforms encountered fierce union opposition and protests, the majority of Council continued to endorse the General Manager's approach and the reform process survived scrutiny in dispute proceedings in the Commission. It appears from Mr Brooks' evidence that the future of Mr Paparo as General Manager became something of an issue in the mayoral election which took place in September 2001. During the course of the mediation process in February 2001, Cr Brooks had formed the view that Mr Paparo had lost the support of the majority of councillors. He had also been told shortly before the mayoral election that, if elected as mayor, Cr Dennison would sack Mr Paparo. Mr Brooks saw the factions in Council as comprising the largest number supporting, generally, his position, a smaller faction in opposition to him and certainly to Mr Paparo, and two councillors who were swinging voters but who could force any vote to a decision by the casting vote of the mayor.

39 The day after being elected as mayor, Mr Brooks had a meeting at his home with Mr Paparo. According to Mr Paparo's evidence, although he was informed by Mr Brooks that a number of councillors opposed him as General Manager, he left the meeting with a positive feeling for future relations in the council and believed his employment was secure. Mr Brooks' version is somewhat more direct: he informed Mr Paparo that he had lost the support of the majority of council which reduced Mr Paparo to tears. They spoke about options, including trying to get the dissident councillors on side or, alternatively, leaving council with a suitable payout and with some dignity. Approximately five days later, Mr Brooks travelled to Sydney for discussions with the Shires Association concerning the appropriate way to go about a performance review for the General Manager.

40 After Cr Brooks reported on the advice received from the Shires Association regarding the performance review of the General Manager, four councillors called for an extraordinary meeting of Council to discuss issues arising from the General Manager's performance review. After receiving that requisition, Mr Brooks spoke to Mr Paparo about the meeting and told him that he had heard whispers that there may be a motion of no confidence. Although this meeting was said to deal with issues arising from the General Manager's performance review, only three days earlier the Council had established a committee and had resolved to use the Shires Association to undertake the General Manager's 2000/2001 performance review. Significantly, at that meeting, one of the councillors suggested that there had been inappropriate expenditure authorised by the General Manager in relation to the Moree Tennis Club facility, a Council asset. One of the four councillors who requisitioned this meeting was the councillor who, four days earlier, had been telephoned and informed of an investigation into sexual and racial harassment allegations against him. At about the same time, another councillor had approached Mr Brooks informing him that Cr Dennison was "hell bent" on seeing the end of Mr Paparo and that the "pressure is on" - Mr Brooks was asked what he was going to do and he replied that he would enquire whether Mr Paparo would take a payout. This councillor had suggested that Mr Paparo had spent money on the Moree Tennis Club without authority. Following this meeting, the Shires Association advised of the legality of the expenditure on the Moree Tennis Club and Mr Paparo sent a memorandum to Council in relation to the matter.

41 On 19 October 2001, the day after the Council had noted the Shires Association's recommendation and had not endorsed an increase in salary for the General Manager, Mr Paparo asked Mr Brooks what had happened at the meeting. When told that there was a committee to undertake the performance review, Mr Paparo said that he had been promised by Mr Brooks and Mr Montgomery a bonus of $20,000 if he delivered on some tough targets. Mr Brooks told him that he should forget about the bonus because there were strong moves by some councillors to remove him from the position and that a motion of no confidence was possible. Mr Brooks was purportedly critical of the councillors who took this view. On 22 October 2001, the day after four councillors had requisitioned an extraordinary meeting to deal with issues arising out of the General Manager's performance review, a meeting was arranged between Mr Brooks and Mr Paparo. Mr Paparo was at home, apparently suffering stress-related symptoms. This meeting was attended by the Human Resources Co-ordinator Ms Taylor, Mr Brooks and Mr Paparo. Mr Paparo's version of the meeting was that Mr Brooks told him that Mr Dennison was the driving force behind attempts to have him sacked and that he wanted to do so before Mr Paparo dealt with him over the sexual harassment complaint. Mr Brooks said that Cr Dennison also hated Mr Paparo because he thought that Mr Paparo assisted Mr Brooks in the mayoral election. Mr Brooks felt that the position was not necessarily hopeless but that if Mr Paparo wanted to stay, he would try to broker a deal. Mr Paparo said that he would get back to Mr Brooks after obtaining legal advice. Mr Brooks recalled this conversation but believed that it happened some time during November.

42 On 23 October 2001, Mr Brooks spoke to Mr Mitchell of the Shires Association seeking advice as to the mechanisms for terminating the General Manager's employment as a number of councillors had expressed no confidence in the General Manager. Mr Brooks said he had sought this advice because he wanted to be prepared for the extraordinary meeting and had formed the view that the number of councillors who disapproved of the performance of Mr Paparo was increasing - he was aware that six councillors had lost confidence in the General Manager and that, if one councillor was absent from the extraordinary meeting, then the numbers would be there to terminate Mr Paparo. Mr Brooks wanted to be in a position to ensure that any action taken was done in accordance with correct procedures so as to protect the interests of Council. It was his view, however, that Council should not terminate Mr Paparo's employment.

43 On 25 October 2001, Mr Brooks received a letter from Mr Paparo's solicitors which indicated that the proposals to terminate the General's Manager's employment were unlawful and that a number of courses of action were open to Mr Paparo. Some propositions were canvassed as to how the issue might be resolved. Mr Brooks also received a letter from Mr Paparo's solicitors claiming that a number of councillors had defamed Mr Paparo and that he was prepared to take action to protect his good name. Mr Brooks was told that proceedings would be taken against him and that he should not dispose of any of his assets. In oral evidence, Mr Brooks said that at that point Mr Paparo lost his support: he had been prepared to support Mr Paparo but now he was being threatened by Mr Paparo's solicitors. Mr Paparo stated that he had become aware that, after the supportive meeting with Mr Brooks on 22 October, the very next day Mr Brooks had sought advice from the Shires Association on the appropriate means by which the General Manager's employment could be terminated. In light of that development, Mr Paparo said he took the matter up with his legal advisers.

44 On 29 October 2001, Mr Paparo advised Mr Brooks in writing of the allegation of sexual and racial harassment against a councillor and informed him that, under the Anti-Discrimination Act, he was required to thoroughly investigate the matter. In the letter he stated that he treated the allegations as serious but that they remained allegations until the investigation was concluded. Mr Paparo expressed his concern when he heard that the councillor involved was seeking to remove him from his position as General Manager before the investigation was completed. He felt that the calling of the extraordinary meeting by four councillors, including the councillor against whom the harassment allegations had been made, was intimidatory of him and the investigation he was conducting. He asked Mr Brooks to inform councillors that it was an offence under the Act to intimidate a person in the conduct of an investigation.

45 The extraordinary general meeting of Council was convened on 1 November 2001. Mr Paparo's evidence was that, while the meeting was called to deal with senior staff matters, the motion was framed in terms of dealing with matters arising from the General Manager's performance review. He recalled that Mr Brooks said that the meeting was, in fact, to consider the letter sent by solicitors acting on behalf of the General Manager. The Council then moved into committee and Mr Paparo was requested to leave the meeting. During the course of this meeting, Council resolved to appoint an external investigator to investigate the allegations of sexual and racial harassment against one of the councillors. The councillor involved had threatened legal action over a denial of natural justice and it was agreed that the best course would be for the investigation to be conducted externally.

46 Two further matters were dealt with at this extraordinary meeting of Council. Mr Brooks gave evidence that he was given authority to offer Mr Paparo one year's salary if he were to leave the position of General Manager. Mr Brooks said that he was attempting to look after the interests of Council and did not immediately enter into discussions with Mr Paparo about a payout. The second resolution raised eight matters of concern expressed by councillors relating to the General Manager's performance. As Mr Montgomery pointed out, these issues did not represent the view of all the Council, but were a collection of "concerns" raised by individual councillors during the meeting. By letter dated 2 November 2001, Mr Brooks as Mayor, requested Mr Paparo to respond to these concerns. On 7 November 2001, Mr Paparo wrote to the Mayor pointing out that a number of the so-called concerns were not particularised, nor were they substantiated in any way and that some of them were in fact matters which had already been the subject of information supplied to Council. Later that day, a meeting took place with Mr Brooks and the Deputy Mayor. The matter had now been aired publicly and Mr Paparo complained that Council's concerns had somehow been linked in the media with the sexual harassment issue in such a way that made him appear to be under investigation for sexual harassment.

47 According to Mr Paparo, Mr Brooks said that the meeting of 1 November 2001 was called to conduct a performance review and that Mr Paparo should be satisfied because he was not sacked and that should have told him that sacking was not in the wind. When Mr Paparo raised the question of the lack of detail in the claims, Mr Brooks replied that the biggest concern of the meeting was the sexual harassment investigation and that "everything else was a smokescreen". Mr Brooks also raised the correspondence received by him raising allegations as being disturbing and Mr Paparo reminded him that it was Mr Brooks himself who had informed him that Cr Dennison was the driving force behind getting rid of him. Mr Brooks assured him that a fair performance review could now be conducted because all the concerns raised in the letter had been answered. During this meeting there were a number of issues where particulars were requested by Mr Paparo but neither the Mayor nor Deputy Mayor could provide such particulars. On 8 November 2001, Mr Paparo wrote to Mr Brooks outlining his position again and giving some further information about some specific issues which had arisen at the extraordinary general meeting and putting his position rejecting a number of the very generalised claims. He reminded the Mayor that on 18 October 2001, Council had already resolved to go through a formal performance review process with the assistance of the Shires Association and that the extraordinary general meeting had suddenly raised eight "concerns" with no details or evidence being supplied and none given to him during the course of the meeting between the Mayor and Deputy Mayor.

48 Prior to this meeting, the Deputy Mayor told Mr Paparo that two councillors had been the authors of the letter of "concern" and that they were simply out to "hurt" the General Manager. One of those alleged by the Deputy Mayor to be an author of the letter was the councillor who had been accused of sexual and racial harassment.

49 On the day that Mr Paparo had responded in writing following the meeting with the Mayor and Deputy Mayor, a local newspaper carried a story that the Council was dissatisfied with his services and that the performance review was considering whether or not he should be retained in employment. On 9 November 2001, Mr Paparo's solicitors wrote to Mr Brooks claiming that there were numerous articles appearing in the local press and broadcasts on local radio and television concerning their client and the review of his performance. There was an imputation linking the review to the external investigation into a staff member's sexual harassment allegations. It was alleged that these articles had been instigated by certain councillors and that the articles had defamed Mr Paparo and damaged his reputation and that he was currently considering commencing defamation proceedings against individual councillors. Mr Brooks was asked to assure Mr Paparo's solicitors in writing within seven days that he did not instigate or support the imputations against Mr Paparo or action would proceed against him. Mr Brooks was put on notice that an application would be made to the Department of Local Government for Mr Brooks and other councillors to be "surcharged personally" for the total amount of any damages awarded to Mr Paparo as a result of his defamation action. Mr Brooks was asked to refrain from "divesting yourself from any assets until the conclusion of such proceedings".

50 On 12 November 2001, Mr Brooks rang Mr Paparo to discuss the press reports that Mr Paparo had complained of in his letter of 8 November 2001. Mr Brooks said that the purpose of the meeting on 7 November was to consider the points of concern raised by a number of councillors contained in his letter of 2 November, and he agreed that the Council proposed to proceed with the 2000/2001 performance review and was committed to carrying out a fair performance review that year.

51 Later that day, Mr Paparo was requested to attend a meeting with Mr Brooks and Mr McKendry, who had been engaged as the independent investigator into the allegations of sexual and racial harassment against a Council member. During the course of this meeting, Mr Brooks raised the issues affecting Mr Paparo and proposed that they sit down without lawyers but with the assistance of Mr McKendry to see whether a deal could be worked out by which Mr Paparo could leave Council. Mr Brooks proposed that the two of them meet with the assistance of Mr McKendry in Sydney at the Shires Association offices on Friday, 23 November 2001. Mr Paparo agreed to that meeting. Mr Brooks said he would go to the next Council meeting on 15 November 2001 to seek a further delegation so that he could finalise a deal at the meeting in Sydney. He was sure that some councillors would oppose that course but he would speak to his own supporters: he was confident he could obtain a delegation. Mr Brooks told Mr Paparo that he was anxious that he should leave with dignity and that, once a deal had been worked out, he should go on leave. Mr Paparo agreed that that was a suitable course.

In his affidavit evidence, Mr Brooks said that, following that conversation, he formed the belief that with the assistance of Mr McKendry a settlement could be reached with Mr Paparo on 23 November 2001. He did not put an offer to Mr Paparo that day, but recalled saying to Mr Paparo words to the effect that he had "money in his pocket today to make a deal".

52 The eight matters of concern were apparently left or put aside until the discussions proposed by Mr Brooks were concluded. Another development, however, intervened and, it was submitted, Council came to consider another matter as fundamentally affecting the continuing employment of Mr Paparo.

The voluntary redundancy issue

53 At the end of June 2001, Council endorsed a management plan prepared by the General Manager for the 2001/2002 financial year. Mr Paparo had recommended a minimal increase in rates, no increase in water and sewerage charges but a 17.6 per cent cut in corporate overheads. Mr Paparo's evidence was that, in July 2001, Ms Carsley, a consultant to the Shires Association, was contracted to review the corporate services functions of the Council to achieve the 17.6 per cent cost savings which had been endorsed by Council.

54 On 16 October 2001, Ms Carsley's report was provided to the General Manager. In a handwritten note, the report was "adopted in principle" by Mr Paparo on 17 October 2001. The report proposed a new structure and identified three positions which would be directly affected as a result, being Information Services Manager, Strategic Development Co-ordinator and Human Resources Co-ordinator. The report then stated:

Those staff who wish to take voluntary redundancies will be offered the same conditions as was offered to staff during the workplace changes last year.

55 Under the heading "Conclusion" the following was stated:

This report outlines the many positive outcomes in terms of productivity improvements and improved co-operation between functional areas. The potential overall cost saving is $21,700. As can be seen above a number of structural changes that will need to be made along with job redesign and up to three (3) redundancies. Moree Plains Council currently has a resolution of no forced redundancies until February 2002. Consequently staff affected by the above proposals will need to be offered voluntary redundancies or re-deployment to other areas of the organisation. This is consistent with the approach adopted from the major workplace change programme initiated last year. It is recommended that discussions with affected staff be held as soon as possible on this matter. Communication should be clear and alternatives simply put out to avoid any of the sort of misinterpretation that occurred last year.

Ms Smith was the Strategic Development Co-Coordinator and Ms Taylor was the Human Resources Manager: both appeared to have been regarded as being very close to Mr Paparo and had been promoted by him.

56 Mr Paparo wrote to the three persons who occupied the positions that were to be made redundant in accordance with Ms Carsley's report informing them that they could stay with the Council in another position or could opt for voluntary redundancy. In oral evidence, Mr Paparo believed that he would have had a discussion, face-to-face, with the three employees because of the sensitivity of the matter. Ms Smith and Ms Taylor indicated they would take voluntary redundancy but the third person declined voluntary redundancy and sought another position with the Council. It appears that letters were sent by Mr Paparo on 23 October 2001 outlining these options. On 29 October 2001 it appeared that both Ms Taylor and Ms Smith wrote to Mr Paparo accepting the offer of voluntary redundancy and nominating a date for their last day of service. On the following day, 30 October 2001, Mr Paparo wrote to both Ms Smith and Ms Taylor advising them that in accordance with clause 29 of the Local Government (State) Award their services would be terminated on a specified day on account of redundancy following the acceptance of their applications for voluntary redundancy. The letter to the two employees in these terms was also forwarded to the payroll officer dated 31 October 2001 whereby Mr Paparo requested that all payments and accrued entitlements were to be processed. Ms Taylor had nominated the third week of November 2001 as her last day of service and Ms Smith had nominated the end of November 2001 as her last day of service.

57 On 15 November 2001, Mr Brooks recalls that the Council payroll officer, Ms Reeves, telephoned him and asked what she should do about "these redundancies". Mr Brooks did not understand what redundancies she was referring to and was told that approval had been given to make Ms Taylor and Ms Smith redundant. Mr Brooks told Ms Reeves that it was an operational matter and that she should refer any issues to the General Manager as it had nothing to do with him and was beyond his power as Mayor. Mr Brooks stated that this was the first time that he was aware of the proposed redundancies of Ms Smith and Ms Taylor. In her affidavit evidence Ms Reeves makes no reference to this telephone conversation.

58 On 15 November 2001, Mr Paparo was in Sydney. On that day a meeting of the Council was held and the following resolution was passed:

1. That no position in the draft Corporate-Executive Review Report adopted in principle by the General Manager to be advertised and no redundancies be paid out until all matters to do with the draft Corporate-Executive Review Report has been dealt with by Council.

2. All Councillors be given a copy of the Human Resources Co-Coordinator employment contracts.

That Council meeting was adjourned to be resumed on 19 November 2001.

59 On 16 November 2001, while Mr Paparo was still in Sydney, Ms Taylor telephoned him in some distress and informed him that Council had resolved that she and Ms Smith were not to be paid redundancies arising from the review of Corporate Services. Mr Paparo told her that the redundancies had already been accepted weeks ago and asked if Council was specifically referring to these two redundancies or to any future redundancies, as he had not at this stage been informed of the resolution. He was told that the resolution referred to the two of them and Mr Paparo asked what was the legal position. Ms Taylor told him that advice was being sought from Mr Clarke of the Shires Association and he would send it to Ms Reeves. Ms Taylor expressed her deep disappointment at Council's reaction considering the work she had performed.

60 On 16 November 2001 at about 4.30 pm Ms Reeves rang Mr Paparo and told him that Ms Taylor and Ms Smith had requested that their termination dates for redundancies be brought forward to the close of business that day. She asked if he had a problem with them leaving today and Mr Paparo indicated that he had no difficulty with that proposition. He asked whether Ms Reeves received legal advice from Mr Clarke and she said that he had advised that the Council's resolution on the redundancies could not impact on redundancies already accepted. Ms Reeves, however, said that she had Councillors coming in and telephoning all day telling her that she should not be paying the redundancies and that Mr Campbell, the Director of Planning and Development, had been in and out of her office all day. Mr Paparo said that he told Ms Reeves that he just wanted to do the right thing and asked her if she was satisfied everything in regard to the payment of redundancies was legal and correct to which she replied that she was satisfied and that she proposed to process the voluntary redundancies in the normal way.

61 Ms Reeves' version of the conversation on 16 November 2001 was that she had telephoned Mr Paparo in Sydney and asked him whether he knew about the Council resolution to which he replied, "Yes" - she then asked what she should do with the redundancies to which Mr Paparo replied, "Pay them". Mr Paparo denied the terms of Ms Reeves' recollection of the conversation.

62 Ms Reeves said that she was concerned that she was acting against a resolution of Council if she proceeded to make the payments to Ms Smith and Ms Taylor. She decided to check the position with Mr Campbell. She told Mr Campbell that Mr Paparo had told her to pay the redundancies but Mr Campbell said he would not be doing that in his position and to contact Mr Paparo and tell him that was Mr Campbell's view. Ms Reeves said that she again telephoned Mr Paparo and told him that she had spoken to Mr Campbell and that Mr Campbell said he would not go against a resolution of Council. Ms Reeves said that Mr Paparo replied, "Go ahead and pay them" to which she asked. "Are you directing me to pay the redundancies?". Mr Paparo replied, "Yes". Ms Reeves had arranged for this conversation to be heard by the Manager of Information and Technology Mr Di Dio. There was no evidence from Mr Di Dio called in the proceedings. Mr Paparo recalls only one conversation with Ms Reeves on 16 November 2001 and he did recall a reference being made to Mr Campbell. He otherwise denied Ms Reeves' version of the conversation.

63 The advice from Mr Clarke from the Shires Association was in evidence. He pointed out that under s 332(1) of the Local Government Act the Councillors determine the organisational structure and the positions within that structure which were to be senior staff positions and the resources to be allocated towards the employment of staff. Council did not determine individuals to occupy those positions expect for the General Manager. Under s 333 the organisational structure could be reviewed from time to time but such a review was of the structure "per se" rather than the way in which the structure functioned. Under s 335 of the Act various functions were conferred on the General Manager, including the day to day management of the Council, the appointment of staff within the organisation structure as determined by the Council and the direction and dismissal of staff. He said there was a degree of blurring between these functions and Council's functions of determining the organisational structure particularly when a review took place under s 333. He assumed that what was happening presently at the Council was no more than a flow-on from a larger restructure undertaken the previous year. In relation to the specifics of the resolution, Mr Clarke said that while it was open to Council to determine positions in the organisation structure and not the individuals to fill them, the position now before Council seemed to be a demarcation between the respective functions of Council and the General Manager: a decision not to fill positions could be seen as impacting on both the organisation structure and the day to day management of the Council and it was preferable for such a decision to be made by both Council and the General Manager in consultation. He pointed out that a Council resolution took effect from the moment it was passed unless it specified some other time in the future. The resolution as passed could not act to defer action on offers of redundancy previously made to staff where those offers had been accepted prior to the resolution being passed: such acceptance effectively amounted to a contract between the Council and the staff member by which the staff member agreed to leave the Council service in consideration of payment of various entitlements. The resolution would apply to offers of redundancy made but not yet accepted at the time the resolution was passed.

64 On 16 November 2001 at approximately 6.00 pm, Mr Paparo rang Mr Campbell to enquire what was going on in relation to the redundancies and asked why Councillors and Mr Campbell had been putting pressure on Ms Reeves not to pay the redundancies. Mr Campbell told him that he had not put any pressure on Ms Reeves but had simply gathered information for the Mayor and he had assumed he was doing so as the Acting General Manager. Mr Paparo pointed out that he was not delegated as the Acting General Manager and that Mr Paparo was only away for one day and that nobody, including the Mayor or Councillors, had telephoned him about the matter. Mr Campbell told him that there were Councillors who did not want the redundancies paid and expressed his view that it was in Mr Paparo's best interests not to do so. Mr Paparo told him that the redundancies were accepted weeks ago and once they had been signed off it was purely a procedural matter in the hands of payroll. All that happened since was that the staff had elected to leave earlier than originally planned and that was always the prerogative of redundant staff subject to the agreement of the relevant manager. Mr Campbell in his affidavit evidence did not contradict the terms of this discussion as recountered by Mr Paparo.

65 Mr Brooks records that on 16 November 2001, he received approximately 20 telephone calls from Councillors and employees of Council asking him to stop the proposed redundancy payments to Ms Taylor and Ms Smith. His understanding of the Council resolution was that the redundancies and the payment of redundancies was to be stopped. He recalled one conversation with Cr Dillon where he was asked to stop the redundancies but advised the Councillor that it was not within his power. He also advised Cr Dennison on the same day that it was not within his power as Mayor to stop the redundancies when Cr Dennison had asked him to do so. Councillor Barlow had also telephoned him on the same day advising that some of the Councillors were getting "very anxious" about what was happening to the redundancies. Mr Brooks said that he was aware of his responsibilities in the position of Mayor pursuant to the Local Government Act and knew that he did not have the power to stop the redundancy payments to Ms Taylor and Ms Smith. Nevertheless, Mr Brooks was of the view that Mr Paparo's action in proceeding with the payment of redundancies was in breach of his responsibilities as General Manger under the Act and that Mr Paparo had ignored the resolution of Council.

66 On 18 November 2001, Mr Paparo wrote to the Mayor, Mr Brooks, complaining that while he was absent on 16 November 2001 a number of Councillors contacted the payroll officer regarding the payment of redundancies to two employees and that the Mayor had also asked the Director of Planning and Development for information on the issue. He noted that he had not been contacted about the matter. Mr Paparo then advised that two staff in an area subject to workplace change sought voluntary redundancies and these were accepted prior to Council's resolution of 15 November 2001. As a result the acceptance of voluntary redundancy was a contract between Council and the staff members involved and Council's resolution could not act to defer action on the redundancies. Mr Paparo also stated in the letter that legal advice had been sought from Mr Clarke of the Local Government and Shires Association and this had been received by the payroll officer late on Friday afternoon. The redundancies were therefore processed in the normal way. Mr Paparo ended the letter by expressing the hope that this information had clarified the issue.

67 On 19 November 2001 at 9.00 am, Mr Paparo attended the Council meeting that had been adjourned from 15 November 2001. He was presented with a Council resolution in the following terms:

1. The General Manager or in his absence, a senior staff member appointed by Council, obtain the following information and arrange, if deemed necessary, for the appropriate staff to address Council to clarify certain matters.

(a) Did two or more staff members resign from Council since this meeting was adjourned on Thursday evening, 15 Nov at approx. 7.00 pm?

(b) What positions did they occupy when they resigned and for what period of time did these staff hold these positions?

(c) Were these staff members, payroll and senior staff made aware of Council's resolution not to offer voluntary redundancy?

(d) Did any of these staff, after tendering their resignations, proceed to delete records from Council's computer system? If this is the case, why were they allowed to continue and why were their access codes not removed?

(e) Under Chapter 11, Part 1, Section 332 of the Local Government Act 1993, did Council approve the restructure of Council as outlined in the "Report on Corporate and Executive Services Review" dated 16/10/01, or did the General Manger proceed with re-determination of structure without Council approval?

68 Mr Paparo left the Council meeting to obtain information as requested and returned at approximately 10.00 am to deal with those issues. He told Council that the redundancies had been approved on 30 October 2001 and that the framework of the organisational structure had been approved by Council on 27 June 2001. The review of Corporate Executive Services, aimed at reducing overhead costs, was entirely consistent with the approved organisational structure.

69 After receiving this report the Council resolved to go into Committee and also resolved that Mr Paparo leave the meeting and that another Council officer take the Minutes. Just before midday, Mr Paparo was informed that the media wished to speak to him about his sacking as General Manager. He said he was "absolutely stunned" at that news and soon after the Mayor came to his office and handed him a resolution of Council which terminated his services as General Manager. The resolution passed by Council was in the following terms:

(1) That the contract of employment between MPSC of PO Box 420, Moree, NSW, 2400 in the State of NSW and Vince Paparo of 20 Boston Street, Moree 2400 in the State of NSW due to terminate on 16 November 2002 be terminated today, Monday, 19/11/01.

(2) That the termination of the contract be without notice under Clause 9.1.6 of the employment contract.

(3) That Mr Paparo be instructed to adhere to Clause 9.2 of his contract.

(4) That the termination take place immediately the motion is passed.

Immediately before that resolution was adopted, Council resolved as follows:

That Council immediately seeks legal advice into the legalities to do with the redundancies.

70

Mr Paparo gave evidence that he had made extensive efforts to obtain employment since his termination by the respondent but had been unable to do so. In March 2002, he decided to retrain and took up the study of law on a full time basis. In April 2002, he had obtained casual employment in a paralegal position but that employment ultimately ceased. In two years, he had earned approximately $20,000 less tax.

DELIBERATION

A jurisdictional issue raised

71 The respondent has raised the question whether or not s 340 of the Local Government Act 1993 deprives the Court, operating under the Industrial Relations Act 1996, of jurisdiction to make orders under the unfair contract provisions of that Act. Section 340 provides as follows:

Industrial arbitration excluded

(1) In this section, a reference to the employment of the general manager or another senior staff member is a reference to:

(a) the appointment of, or failure to appoint, a person to the vacant position of general manager or to another vacant senior staff position, or

(b) the removal, retirement, termination of employment or other cessation of office of the general manager or another senior staff member, or

(c) the remuneration or conditions of employment of the general manager or another senior staff member.

(2) The employment of the general manager or another senior staff member, or any matter, question or dispute relating to any such employment, is not an industrial matter for the purposes of the Industrial Relations Act 1996

(3) Subsection (2) applies whether or not any person has been appointed to the vacant position of general manager or another vacant senior staff position.

(4) No award, agreement, contract determination or order made or taken to have been made or continued in force under the Industrial Relations Act 1996, whether made before or after the commencement of this section, has effect in relation to the employment of senior staff members.

(5) No proceedings for an order in the nature of prohibition, certiorari or mandamus or for a declaration or injunction or for any other relief, lie in respect of the appointment of or failure to appoint a person to the position of general manager or to another senior staff position, the entitlement or non-entitlement of a person to be so appointed or the validity or invalidity of any such appointment.

72 It is to be noted that, pursuant to the provisions of s 334 of the Local Government Act 1993, the position of General Manger is declared to be a "senior staff position". These provisions appear in Chapter 11 which is entitled "How are Councils staffed?". Section 332 requires council to determine the organisation structure, the positions within that structure that are senior staff positions and the resources to be allocated towards the employment of staff. There are restrictions placed on which positions may be specified as senior staff positions. Section 333 permits the Council to re-determine the organisation structure. Part 2 of Chapter 11 deals with the General Manager and other senior staff. By s 334 the Act requires Council to appoint a person to be General Manager and specifies the General Manager as a senior staff position. Section 335 specifies that the General Manager is generally responsible for the efficient and effective operation of the Council's organisation and, by sub-section 2 specifies particular functions to be exercised by the General Manager. Section 336 deals with the filling of a vacancy in the position of General Manger and s 337 states that the General Manager may appoint or dismiss senior staff only after consultation with the Council. Section 338 deals with the nature of contracts for senior staff and requires that the General Manager and other senior staff are to be employed under contracts that are performance based. Section 339 requires the General Manager to report to Council at least annually on the contractual conditions of senior staff. Section 340 carries the heading, "Industrial Arbitration excluded" and the full text of that section has been set out in paragraph [71]. The last section in Part 2, s 341, requires that a senior staff member who becomes a bankrupt or makes certain specified arrangements, is to immediately give notice to the General Manager.

73 The respondent's submission did not analyse s 340 in the context of Part 2 of Chapter 11 but concentrated upon the section itself. The submission noted the extended meaning given to the word "employment" by sub-section 1 and the fact that it dealt with the termination of employment or other cessation of office, as well as the remuneration of the General Manager. Most emphasis was placed on the word "order" in sub-section 4, and the fact that sub-section 4 dealt with an award, agreement, contract determination or order and was therefore to be taken to encompass an order made under s 106 of the Industrial Relations Act. It was submitted that the word "order" was not confined and was to be given its ordinary meaning, which would include an order made under s 106. Such a general meaning was consistent with the use of the word "order" in sub-section 5 dealing with a privative provision.

74 There are a variety of circumstances in which the Court or the Commission may make an "order". Section 106(1) equates a declaration that a contract is unfair with an "order": s 106 (5) refers to the ability of the Court to make such "order" as to the payment of money in connection with any contract declared void or varied as the Court considers just in the circumstances of the case. There are other provisions permitting the making of an "order". Section 366 permits the Court to make an order that an employer pay an amount to a person under a contract relating to the employment of that person that remains unpaid. Section 154 permits the Commission in Court Session to make binding declarations of right in relation to a matter in which the Commission, however constituted, has jurisdiction and the Commission may do so whether or not any consequential relief is or could be claimed. Applying the respondent's approach, giving the word "order" its normal meaning, a declaration would be treated simply as another form of order, then orders could not be made not only under s 106 but under s 154 or any other provision. If the operation of s 340(4) of the Local Government Act 1993 extends not only to awards, agreements, contract determinations or effectively any order that could be made by the Commission, including the Commission in Court Session, then the entirety of the jurisdiction of the Commission has been excluded by s 340 without the section precisely providing for a general ouster of the jurisdiction. The legislative framework of Chapter 11, and in particular, Part 2 does not support such a construction.

75 Section 340(2) operates so that a dispute about the employment of a general manager is not an industrial matter for the purposes of the Industrial Relations Act 1996 - in effect, it prohibits industrial arbitration about such disputes. This construction seems to be consistent with the provisions of s 338 requiring general managers to be employed "under contracts that are performance based". The operation of Ch 2 Pt 9 of the Act, dealing with unfair contracts, has not been regarded as "industrial arbitration" in the traditional sense of making awards governing terms and conditions of employment. In this respect, it is relevant that the Dictionary to the Industrial Relations Act 1996 defines "award" to mean and include any order of the Commission under the Act that sets conditions of employment. The word "order" is not otherwise defined in the Dictionary. Bearing in mind this extended meaning of the term "award" in the Industrial Relations Act, s 340(4) of the Local Government Act specifically excludes the operations of awards, agreements and, interestingly, contract determinations. Chapter 6 of the Act allows persons operating under contracts of bailment and contracts of carriage to be treated as employees, giving jurisdiction to the Commission to determine minimum rates of commission, other payments and remuneration, a variety of leave matters and hours. The Commission is specifically empowered to order reinstatement of a contract of bailment or carriage. In this way, Ch 6 provides, effectively, a system of industrial arbitration for such persons. The exclusion of contract determinations in s 340 of the Local Government Act lends weight to the approach that the section was designed to exclude only industrial arbitration and not matters arising under Ch 2 Pt 9 of the Industrial Relations Act. Further, the fact that contract determinations made under Ch 6 have been specifically mentioned in s 340, whereas there is no specific reference to unfair contracts dealt with in Ch 2 of the Act, tends to confirm that the legislature was not making a general exclusion of the jurisdiction of the Commission but was excluding only industrial arbitration. Approached in this way, the word "order" in s 340(4) appears to be a reference to any order that operates like an award or an agreement in setting conditions of employment - an approach itself which is consistent with the terms of s 340(2). It is not an apt description of orders made under Ch 2 Pt 9 of the 1996 Act that such orders operate like an award or agreement in setting conditions of employment.

76 Much of the respondent's submissions on this aspect were directed to a critical analysis of an unreported judgment of Hill J in Bryant v Gunnedah Shire Council [1998] NSWIRComm 51. Mr Bryant had been employed by the Council as the Director of Engineering Services and had commenced proceedings under s 106 of the Act following the termination of his employment by the Council. The Council by Notice of Motion sought to set aside or dismiss the application on the ground that any order which might be made by the Court would be of no force or effect having regard to the provisions of s 340 of the Local Government Act 1993. While Hill J determined that no step had been taken by the Council to finally establish Mr Bryant's position as a senior staff position in accordance with s 332 of the Local Government Act 1993 his Honour went on to express the view that s 340 did not affect the Court's jurisdiction to make orders under s 106 of the Industrial Relations Act 1996.

77 The opinion of Hill J may be summarised as follows:

(a) although expressing reservation at the preliminary stage of this case that an order that might be made under s 106 would necessarily be an order in relation to the employment of Mr Bryant within the meaning of s 340, in the absence of full argument it was unnecessary to decide that point;

(b) the word "order" in s 340(4) did not comprehend an order made under s 275 of the Industrial Relations Act 1991 or s 106 of the Industrial Relations Act 1996;

(c) s 340(4) was to be construed in the context of the Local Government Act as a whole and in the context of s 340 and Chapter 11 and the purposes of those provisions;

(d) it was relevant that s 340 removed the rights of subjects and should not receive a benevolent or liberal construction;

(e) s 340(1) defined "employment" in expansive terms and s 340(2) provided that such employment or any matter, question or dispute relating thereto was not "an industrial matter for the purposes of the Industrial Relations Act". The result was to remove the jurisdiction of the Commission to deal with and/or determine matters, questions or disputes relating to the employment of senior staff members of a Council, but only to the extent that the jurisdiction depended upon such matter, question or dispute being an "industrial matter" within the meaning of the Act;

(f) the primary provision was s 340(2). It was a substantive provision which prevented any matter, question or dispute relating to the employment of senior staff being an industrial matter under the Act. Its purpose was to give effect to the provisions of ss 332 and 338. It deprived the Commission of the jurisdiction it otherwise had;

(g) on the other hand, s 340(4) did not deprive the Commission of jurisdiction but simply rendered any relevant award, agreement, determination or order inoperative. It was an ancillary or machinery provision, the purpose of which was to give full force and effect to s 340(2) and the intention manifested by that section. In the absence of a complementary provision to s 340(4) the application and operation of awards, agreements, determinations and orders in operation at the time of the enactment of s 340 would not be affected, thus defeating in part the intention manifested in s 332, s 338 and s 340(2);

(h) if the legislature intended to exclude the operation of the Act and its 1991 predecessor to senior staff positions and their holders under the Local Government Act 1993 it would have been a simple matter to have done so in direct terms;

(i) it was difficult to see what was the utility or effective purpose of s 340(2) if s 340(4) had the wide meaning and operation contended for by the respondent Council.

78 The respondent pointed out, in the circumstances of the view expressed by Hill J, that Mr Bryant was not the occupant of a senior staff position as declared under s 332 of the Local Government Act 1993, his Honour's views in relation to whether s 340 excluded effective orders being made under s 106 of the Industrial Arbitration Act were views that were obiter - the views were also said to be wrong and failed to give full effect to the word "order". While I accept that his Honour's views on the construction of s 340 of the Local Government Act were not necessary for the determination of the matter before the Court, I find his Honour's analysis persuasive and consistent with the views that I have earlier expressed especially in paragraphs [74] and [75].

79 In dealing with this issue, mention should be made of the judgment of the High Court in Northwest County Council v Dunn (1971) 126 CLR 247. That case established that the provisions of the Local Government Act operated as a code so that a review available under the Act left no jurisdiction in the Industrial Commission of New South Wales to entertain an application for reinstatement. The structure and content of the Local Government Act has changed considerably since the High Court's judgment and there was no suggestion in the present case that the Local Government Act operated as a code in relation to the employment of a General Manager so as to oust the jurisdiction of the Commission in any matter relating to the termination of a General Manager or senior staff member.

Was the contract unfair?

80 As earlier observed, the respondent filed considerable evidence raising a miscellany of complaints, opinions and observations which reflected adversely in one way or another on the manner in which the applicant had performed his duties as General Manager. Not surprisingly, in addresses, counsel for the respondent stated that this material would not feature in the respondent's case - the issue would be the appropriateness of the Council's action in terminating the General Manager following Mr Paparo's defiance of the Council's resolution to stop redundancy payments being made to two employees following a restructure. I propose to deal with the matter on that basis.

81 The respondent pointed out that in the Summons for Relief the applicant had not alleged that he was unaware of the decision of Council that redundancy not be paid to the two employees. The provisions of the Local Government Act 1993 and the provisions of Mr Paparo's contract required him to obey the lawful resolutions of Council - the resolution regarding redundancies was not obeyed but circumvented by the applicant. All that was required of the applicant was to obey this resolution, a resolution which simply sought that the payment of redundancies be delayed pending the Council reviewing the draft report from Ms Carsley, which had been accepted in principle by the General Manager. The resolution did not say that the redundancies be stopped and did not say that the redundancies were not to be paid "full stop". Council was merely trying to look at the situation and examine the facts, as they were entitled to do as the elected representatives. The Court was not asked to deal with the legality or otherwise of the actions of the General Manager on the day the redundancies were paid, or whether there was a breach of fiduciary duty in relation to seeking and obtaining legal advice on the ability to pay the redundancies, because the simple fact was that the resolution of Council was a lawful resolution and one with which the General Manager failed to comply. The General Manager proceeded to do what he wanted to do and did so at a time when he knew he was badly out of favour with the Councillors and that it was likely that his contract would be terminated.

82 The respondent's case therefore centred on the failure of the applicant as General Manager to obey Council's resolution that the two officers not be paid redundancy. The resolution of Council, immediately before it terminated the applicant, sought advice as to the legality of the redundancies, apparently a recognition of the discussion about which Mr Brooks gave evidence wherein he told a number of Councillors that he was unable to stop the redundancy payments because that was a matter under the Local Government Act 1993 that lay within the hands of the General Manager. The respondent insisted that these two resolutions stood separately and were not connected. The Council was entitled to seek advice as to the legality of the redundancies, but it had terminated the General Manager for failing to obey a lawful resolution of Council. The Council had formed the view that the General Manager's conduct on 16 November 2001 resulted in it being able to exercise its right to terminate the contract of employment.

83 It was accepted by the respondent that the resolution terminating the employment of the applicant did not state the reasons for the termination. There was, however, evidence from both the Mayor, Mr Brooks and Cr Dillon which supported the view that the Council had terminated the applicant's employment because of his failure to comply with the resolution withholding payment of redundancies to the two officers. Ultimately, it was accepted that because the Council was a body corporate for the purposes of the Local Government Act 1993, the Court could only look to decisions of Council as a group rather than going through the individual minds of those who made up the body corporate.

84 While the applicant had not, in terms, been given an opportunity to address Council as to why it should not terminate him, Council had asked to be supplied with certain information regarding the redundancies and the General Manager had supplied that information. Having received the General Manager's report and answers to Council's questions, the resolution to dismiss was then passed, but in the absence of the applicant and without the applicant being provided with an opportunity to address Council as to its stated concerns.

85 The contract of employment was not a contract providing for a fixed period of four years but was one which could be terminated on notice at any time during its four year period of operation. The contract had been terminated in accordance with the provisions of Clause 9.1.6 and the Council had paid three months' salary in lieu of notice. It was submitted that there was no unfairness in such a provision. Moreover the applicant was in breach of Clause 4.1 of the contract which went to the heart of the relationship between the applicant and the respondent: that clause, in part, required the applicant to comply with lawful Council resolutions.

86 While the respondent's case focused upon the single issue of Mr Paparo's failure to comply with the Council resolution regarding redundancies, it is appropriate, when assessing the fairness of the contract, to have regard to the entirety of the surrounding circumstances. Mr Paparo was well qualified in policy and administration but the respondent Council appointed him with the knowledge that he had no relevant or specific local government knowledge. The Council appeared to accept that it had obtained a highly qualified person for this important position regardless of the fact that the applicant lacked local government experience. Despite continued opposition from a section of Council, initially Mr Paparo's reforms were endorsed by Council, and he was congratulated and encouraged to continue his efforts to change the culture existing at the Council. The first yearly review, resulting in an increase of over 20 per cent in his salary, reflects his success and the Council's acceptance and encouragement of the reforms he had introduced. The evidence also demonstrates that, when the yearly review required by the contract was under discussion, Mr Paparo did not hesitate to offer the attainment of specific goals or performance levels in order to qualify for an increase in salary - he readily accepted that changes needed to be made and was willing to back his capacity to bring about changes to the way in which Council operated to ensure that it was financially stable and administratively effective. Despite Council's formal support for Mr Paparo's workplace reforms, the evidence suggests that opposition to those changes within the community including union opposition began to drain personal support for Mr Paparo amongst Councillors and, indeed, it was accepted by Mr Brooks in his oral evidence that, after Mr Paparo had been removed from the position of General Manager, the capacity for workplace and other reform had largely evaporated.

87 On the view I have formed of the evidence, it appears that over time the strength of the opposition to Mr Paparo's reforms amongst Councillors drained the political will of Council to continue with the process. I accept the evidence of Mr Brooks, who spoke with candour about the difficulty of maintaining support for Mr Paparo in a highly factionalised Council. Mr Brooks had formed the view well before the termination of Mr Paparo that he had lost the confidence of a majority of Councillors and that he was in danger of being the subject of a no confidence motion and removed from his position. Throughout this period, Mr Brooks had remained a supporter of Mr Paparo while attempting to keep his small majority on Council, requiring him to deal with opponents of Mr Paparo, with an eye to maintaining Mr Paparo's dignity and at the same time his own majority vote on Council. On occasions, this involved Mr Brooks telling opponents of Mr Paparo things they wanted to hear and to give them the impression there could be opportunities provided under the provisions of the contract whereby steps could be taken to ensure that Mr Paparo was not re-appointed for a further term as General Manager, or that a payout of his contract might be negotiated in order to bring about a consensual resolution to the differences between members of the Council and the General Manager.

88 It is no part of this Court's role to comment on the political decisions made by members of the Council. However, if the initial support for Mr Paparo had evaporated, Mr Paparo was entitled to be dealt with fairly in the manner in which the relationship between the General Manager and the Council was to be brought to a conclusion. I am not satisfied that this occurred. It is clear from the evidence that a number of decisions made by Mr Paparo raised opposition amongst particular Councillors, such as the Gosport Street By Pass, an issue which had been unresolved for some considerable time prior to Mr Paparo's appointment. There may well be valid reasons for Councillors to oppose such decisions arising from the constituency they represent, but the existence of those issues makes it impossible to determine on what basis Mr Paparo lost the support of Council and precisely why his employment as General Manager was terminated.

89 The variety of issues raised by Councillors opposed to Mr Paparo is indicated by the extraordinary meeting of Council held on 1 November 2001, in which eight issues were raised concerning his performance. Although those eight matters did not represent the concerns of all Councillors or even a majority of Councillors and only represented issues raised by individuals, nevertheless, Mr Paparo was called upon to respond to those matters in a meeting with the Mayor and Deputy Mayor. Mr Brooks' oral evidence was that the explanations proffered by Mr Paparo at this meeting were accepted and those issues regarded as resolved, so permitting the performance review to be undertaken. There does not appear to be any formal report to Council of these matters or any formal acceptance of explanations given by Mr Paparo in relation to each of the issues. The meeting between Mr Paparo the Mayor and Deputy Mayor occurred on 7 November 2001 and was followed by a letter of complaint from the applicant dated 8 November 2001 as to the unsubstantiated nature of each of the allegations. On 19 November 2001, Mr Paparo was terminated.

90 It is clear that there were numerous constituency issues, personal issues and policy issues which were combining to erode Mr Paparo's support, especially in the period between September 2001 and his dismissal on 19 November 2001. The reasons for stances taken by the Council were clouded by the terms of the language used, especially in resolutions critical to the termination of Mr Paparo. On 15 November 2001, the Council had resolved that no position in the draft Corporate and Executive Review Report, adopted in principle by the General Manager, was to be advertised and no redundancies were to be paid out until all matters dealt with in the draft Review Report had been dealt with by Council. Councillors were to be given a copy of the Human Resources -Coordinator employment contracts, but not the contracts of the other two positions which the Review Report recommended should be made redundant. This resolution was portrayed in the respondent's submissions as representing no more than an interim measure postponing the payment of redundancies until Council had the opportunity to consider the terms of the Report and its implications. That view of the resolution of 15 November 2001 is inconsistent with the resolution passed on the morning of 19 November 2001, requiring the General Manager to provide information as to whether two or more staff members resigned from Council since the 15 November 2001 meeting, what positions they had occupied and whether the staff members concerned, the payroll staff and senior staff had been aware of Council's resolution "not to offer voluntary redundancy". Significantly, the last part of the resolution asked whether, under Chapter 11 Part 1 Section 332 of the Local Government Act, Council had approved the restructure as outlined in the report on Corporate and Executive Services Review or whether the General Manager had proceeded with re-determination of the structure without Council approval. The first thing to notice about this request for information was that it clearly states that it was Council's intention by its resolution of 15 November 2001 to stop the offers of voluntary redundancy which had already been made by Mr Paparo and accepted by two members of Council staff. Secondly, Council was unsure whether Mr Paparo's acceptance in principle of the Report was something within his statutory powers or whether it amounted itself to a re-structure not otherwise approved by Council.

91 Mr Paparo's view was that the re-structure to achieve a 17 per cent saving had already been approved by Council, and that the implementation of that decision was a matter for him in his role as General Manager. Under s 335 of the Local Government Act 1993, the General Manager was generally responsible for the efficient and effective operation of Council's organisation and for ensuring the implementation without undue delay of decisions of the Council. Section 335(2) provided that the General Manager had a number of particular functions, including the day to day management of Council, the appointment of staff in accordance with an organisational structure and the direction and dismissal of staff. The report he had received from Ms Carsley, a report obtained in pursuance of Council's adoption of the plan to reduce corporate overheads by 17.6 per cent, had advised that there were to be redundancies and, in view of the Council's policy against forced redundancies, those staff who were made redundant would have to be advised that they could take voluntary redundancy or be offered a position on the same conditions as they presently enjoyed. Mr Paparo had not made the decision himself to make these positions redundant but had acted in accordance with the recommendations of Ms Carsley's report and accordingly had notified the three staff members concerned that their positions had become redundant and informed them of their options, including voluntary redundancy. Before the end of October 2001, two staff members had accepted voluntary redundancy and had nominated a last day of service. The Council's resolution of 15 November 2001, if it was a resolution, (as it appears ultimately to be) to prohibit the offering of voluntary redundancy was too late to have that effect. Legal advice had been obtained from the Shires Association to the effect that offers of voluntary redundancy already made could not be affected by the Council resolution. It matters not whether Mr Paparo encouraged the obtaining of that advice or directed that that advice be obtained: the important fact is that it was obtained before any payment was made to the redundant staff members. At this point, Mr Paparo had done no more than confirm that his late October 2001 direction to payroll to process the voluntary redundancies of the two staff members was a decision that was binding and not affected by the later Council resolution. It is also to be remembered at this point that the decision about the redundancy of 15 November 2001 was taken in the absence of the General Manager and without informing him of its terms nor involving him in the process: the resolution seeking information made on the morning of 19 November 2001 followed a full explanation given by Mr Paparo to the Mayor as to the circumstances and, importantly, the time frame in which the decision was made to offer voluntary redundancy and when those redundancy offers were accepted. How much of that information was passed on to Council on 19 November 2001 and what was made of it is unknown.

92 There is also significance in the view of these matters formed by the Mayor, Mr Brooks, especially as expressed to Councillors on or about 16 November 2001. Mr Brooks' evidence was that, after the resolution of 15 November 2001, on the following day he had fielded many calls from members of Council concerned that the redundancies would be implemented and severance payments made to the two officers concerned. In his oral evidence, Mr Brooks described how he informed those Councillors and members of staff that he was powerless to intervene because the issue of the offer of voluntary redundancy and the payment out to the officers concerned was an operational matter resting within the jurisdiction of the General Manager. Mr Brooks gave the appearance of being a careful person who had closely studied the provisions of the Local Government Act 1993, especially the financial recording and reporting provisions. He had satisfied himself as to his powers and the extent of his capacity to give directions to the General Manager but, on 16 November 2001, felt unable to interfere with the payment of redundancies which had been arranged in late October 2001 by Mr Paparo. Mr Brooks could only have come to that view on the basis that the requirement to achieve savings in excess of 17 per cent in the Corporate Services area required a restructure, and that Ms Carsley's report and recommendations had in effect been sanctioned by Council in mid 2001 in order for those savings to be achieved. It seems implicit in Mr Brooks' approach that Mr Paparo was not attempting to determine the structure in a section of the Council's operation but was acting in accordance with an authority already given by Council. While he thought that Mr Paparo was acting imprudently he was not prepared to give him a direction to cancel the redundancy payouts or to rescind the offer of voluntary redundancy made to and accepted by the two staff officers. It may well have been this clearly expressed view as to the powers of the General Manager which prompted Council on 19 November 2001 to firstly question whether, under Chapter 11 and s 332 of the Local Government Act 1993 Council had approved the restructure in the Corporate Services area or whether the General Manager had proceeded with a redetermination of the structure without Council approval and, secondly, later on that day, resolving to seek immediate advice as to the "legalities of the redundancies".

93 These resolutions demonstrate that Council was unclear about what it had resolved at its 15 November 2001 meeting and in doubt about the legality of the redundancies and their payout having regard to the Council's resolution on 15 November 2001. In those circumstances, it does not appear to have been open to the Council, as suggested in its submissions, to proceed to terminate the General Manager because he had flouted a resolution of Council - Council were still in an uncertain state even after terminating Mr Paparo as to whether the redundancies were authorised and whether its resolution of 15 November 2001 had any effect on the offers already made and accepted by the redundant staff. Council was not even certain whether it had resolved to implement changes in Corporate Services or to what extent that had occurred. The more likely explanation is that this event triggered another step in the loss of confidence in Mr Paparo and a majority was now available to terminate his services. That opportunity was taken.

94 Some indication of what was in the mind of Council, however, is available from the terms of the resolution to terminate Mr Paparo. Having resolved to seek legal advice as to whether the redundancies were authorised thus accepting that they were in a state of uncertainty about that matter Council then resolved to terminate Mr Paparo's contract "under Clause 9.1.6" of the contract. Under Clause 9 of the contract, the Council could terminate Mr Paparo's employment on one month's notice or the payment of one month's salary where he did not meet performance measures or the terms of a performance agreement. The Council was clearly not operating under this provision. Clause 9 also permitted the Council to dismiss without notice if Mr Paparo committed any act which would entitle the employer to summarily dismiss the employee, in which case the employee would be entitled to the payment of benefits and remuneration up to and including the date of termination or dismissal. Clearly, the Council did not act under this part of Clause 9. The Council specified Clause 9.1.6 as the provision under which it was acting: under that provision it could terminate the contract "for any reason other than those previously specified" and in such a case the Council would give notice calculated at the rate of three months for each year of service remaining under the contract from the date of notice or, in the absence of notice, the payment in lieu thereof of three months remuneration or the balance of the term of the contract remaining, whichever was the lesser. Applying that provision, Mr Paparo was to receive and did receive three months' salary in lieu of notice. In submissions for the respondent, it was argued that Mr Paparo's failure to comply with the resolution of 15 November 2001 concerning the redundancies was a breach of Clause 4.1 of his contract and went to the heart of the relationship between the General Manager and the Council. If the Council had taken that view then it would have proceeded to summarily dismiss him without notice - Council chose not to act under that part of Clause 9, but specified the provisions of Clause 9.1.6 being termination "for any reason other than those previously specified". The resolution in those terms seems to be a recognition that they simply no longer wanted Mr Paparo as the General Manager, that the differences between General Manager and Council were such that it was preferable for Mr Paparo to leave the position and he would therefore be paid out in accordance with his contract as provided in Clause 9.1.6.

95 Having formed those views, I am therefore unable to accept the respondent's submission that Mr Paparo was dismissed because he breached a fundamental duty to Council, namely, to obey a resolution of Council. It also follows that I am unable to accept the respondent's submission that it was justified on that ground to terminate the applicant's employment and no unfairness was involved because of that fact. The applicant's case therefore comes to be considered on the basis of whether or not the termination for "any other reason" was unfair because the contract provided for the payment of a maximum of three months' salary having regard to Mr Paparo's length of service. So stated, the question becomes one of assessing what was reasonable notice in all the circumstances surrounding Mr Paparo's situation.

96 Mr Paparo was 51 years old when he was terminated. He had held policy and administrative positions in the public sector in Western Australia before taking up similar duties in New South Wales. It is an open inference that Mr Paparo came to the eastern states to seek better employment opportunities and his decision to seek and take up the position of General Manager in local government might be seen as a decision to take a different career path in the hope of bettering his position until retirement. Mr Paparo exhibited many of the attributes necessary to manage the difficult finances of a Council which had experienced economic problems. He had moved his family to Moree and, whether or not he had an ambition to improve his financial position by seeking appointment to larger Councils is a matter of speculation, it is clear that his termination effectively deprived him of that opportunity. Mr Paparo may well have been prepared to spend the rest of his working life at Moree Council but it is undoubtedly true that, having been terminated as the Council's General Manager, a future in local government was a bleak prospect. The evidence demonstrates that he had financially committed himself to the Moree area and had purchased a home for his family. It is not contested that after being terminated he made many applications for employment but was unsuccessful in obtaining a position. Those circumstances appeared to have forced Mr Paparo to reconsider his career and led to a decision to take up the study of law. Over a period of two years after his termination he was able to earn a total of approximately $20,000, mainly from part-time work, but the evidence did not specify how much of that was earned in the first year after his termination and how much was earned in the second year. Counsel for the respondent noted the modest earnings and indicated that in the circumstances mitigation of the applicant's loss was not a real or significant issue.

97 I accept the respondent's submission that this was not a fixed term contract but I also accept that it was a contract that was renewable and, subject to satisfactory service, might continue until retirement where the applicant was 51 years old on termination. Having regard to all of these matters, I am of the view that appropriate reasonable notice in Mr Paparo's circumstances would have been 12 months: allowing for the three months' notice already paid by the respondent, there should be an order for the payment of an additional 9 months' salary.

98 The applicant's Summons for Relief, amongst other things, raised as unfairness the respondent's capacity to terminate the employment prior to the expiration of four years' service without paying the applicant the balance of the term of the contract and, generally, raised the lack of reasonable notice, having regard to the applicant's position with the respondent, the term remaining on his contract with the Council, the applicant's remuneration level, his ability to obtain suitable alternative employment in the near future, his family responsibilities and financial commitments and the applicant's substantial achievements during his employment with the respondent.

I do not think this is a case where the assessment of reasonable notice is simply to adopt the unexpired term of the contract. The term of the contract is a general consideration but it is an overall assessment of Mr Paparo's circumstances that leads me to conclude that 12 months' notice was reasonable notice for the termination of his contract. I note that Mr Brooks had been given authority by the Council in October 2001 to negotiate the payment of up to a year's salary in order to secure Mr Paparo's resignation. While I am conscious of that authority, it has not been an element I have taken into account in arriving at an assessment as to appropriate notice. Having reached an assessment of what was appropriate reasonable notice in this case, it is a useful check, however, to measure that assessment against what the respondent itself was prepared to pay to Mr Paparo in order to terminate the contract.

99 As earlier noted, the applicant has mounted a general challenge to the inadequacy of the notice provisions of the contract. A curious feature of this contract during its four year term was that the shorter the service the longer the period of notice to be given the applicant in the event of termination. Having already concluded that the operation of the contract providing three months' notice to Mr Paparo after three years' service was unfair, it perhaps adds little to the analysis that Mr Paparo may have received longer notice had he been terminated earlier. The operation of the contract in this manner is a further element, however, of unfairness which appears to arise under the applicant's generally-framed attack on the inadequacy of the notice provisions of the contract.

100 The other issue pressed by the applicant was the respondent's failure to pay a bonus following the successful implementation of economic policies which yielded a $1 million surplus to the Council. This part of the applicant's case was put forward on alternative bases: firstly, there was a contract or an arrangement arising from the applicant's discussion with the Mayor Mr Montgomery and the Deputy Mayor Mr Brooks in June 2000 that a bonus of $20,000 would be paid as a performance bonus if certain criteria were met. It was alleged that the criteria discussed were in fact met, but the bonus was not paid. Alternatively, it was submitted that it was unfair that a bonus of $20,000, or at least between $3,000 to $5,000 as recommended by the Shires Association was not paid.

101 Having considered the evidence surrounding the discussions between the Mayor, the Deputy Mayor and the applicant regarding this matter, I am unable to conclude that a contract, informal agreement or arrangement resulted from those discussions. There is no doubt that Mr Paparo raised the issue that a performance bonus up to $20,000 might be paid in circumstances where the Mayor had informed him that the political reality was that an increase could not be given to the applicant at that time in view of the redundancies taking place in Council and the public protest about those measures. I am satisfied that certain criteria were discussed which were ultimately met by Mr Paparo but those discussions fell well short of a contract, agreement or arrangement. I find in those circumstances that there is no basis for the applicant's claim for the payment of an agreed $20,000 bonus.

102 There is, however, merit in the alternative submission put on behalf of the applicant. It is to be remembered that the contract required the applicant to take all reasonable steps to meet performance measures which were contained in a schedule to the contract. The contract also required the level of remuneration to be reviewed annually and was to be subject to satisfactory performance reviews. Mr Paparo was the subject of two reviews that showed he met or exceeded the vast majority of 76 nominated criteria. Mr Mitchell from the Local Government and Shires Association had reported to Council in October 2001 that achieving over 93 per cent satisfactory performance in these reviews indicated that the General Manger had achieved a satisfactory review under the contractual terms governing his employment. That report also noted that, apart from the large increase of $25,000 in 1999 after one year's service, there had been no further increase granted to Mr Paparo. Mr Mitchell noted that there was no provision in the contract for an annual incremental movement of the General Manager's level of remuneration and that a modest annual movement would have the effect of maintaining remuneration relativities within and external to the Council's organisation. The approach of a one-off performance bonus was criticised as not maintaining relativities and having other detriments. Noting that there was no incremental movement provided in the contract nor was there a contractual obligation to pay a performance bonus, Mr Mitchell suggested a one-off ex gratia bonus of between $3,000 and $5,000. He noted that if it was not paid it could be argued that Council failed to act on its own resolution, and that its performance review committee initiate negotiations to amend the contract to accommodate a performance bonus. It is common ground that no bonus was paid or increase in remuneration granted as a result of that report from Mr Mitchell nor was there any increase granted after 1999.

103 The terms of the contract provided that there was to be an annual review of the applicant's remuneration and it was unfair that such an annual review did not take place. Allowing for the policy differences and factionalism which bedevilled the respondent, it is nevertheless clear on the evidence that Mr Paparo was achieving the economic and financial goals that had been adopted by Council. Nevertheless, he was denied one increase because of political considerations arising from the workplace reforms he introduced. The establishment of a sub-committee to consider amending the applicant's contract to provide for a performance bonus was a further representation that steps would be taken to recognise by an increase in remuneration the considerable achievements of the applicant. While Mr Mitchell noted that the $25,000 increase paid in 1999 was sizeable, he was clearly of the opinion that there should be some annual increase available to the applicant subject to satisfactory service. The applicant had met the performance criteria to a high level, and I believe it was unfair in those circumstances that an increase by way of bonus or increment was not granted to him. The assessment of such a bonus by the Court might normally face considerable difficulties in the absence of clear criteria related to a specified bonus range. In this case, the evidence suggests that both the Mayor and Deputy Mayor were comfortable with a $20,000 bonus if certain tough goals were achieved, while at the other end of the spectrum Mr Mitchell had recommended an increase of between $3,000 and $5,000. In my view, Mr Paparo should have been paid a bonus of $4,000 for his considerable achievements. Although there are grounds for considering that such a bonus should have been paid earlier, that bonus should have been paid by October 2001. I accept Mr Mitchell's description of this bonus as being modest and, based on his report and the requirement for an annual review I see no reason why the period of 12 months' notice which should have been provided to the applicant should not be calculated on the basis of a salary of $135,000 together with a bonus of $4,000. This approach is not meant to determine that a minimum bonus of $4,000 should have been payable each year under the contract but recognises that in 2001 such a bonus should have been paid as a matter of fairness to the applicant having regard to his achievements, the terms of the contract in holding out a yearly review of remuneration and the advice of Mr Mitchell in 2001 as to an appropriate and modest amount. That is the package to which regard is had in determining an appropriate order for the provision of reasonable notice.

104 After judgment in the matter had been reserved, the Court of Appeal delivered its judgment in Sydney Water Corporation Ltd and anor v Industrial Relations Commission of New South Wales and anor [2004] NSW CA 436. That judgment was delivered on 1 December 2004 and shortly thereafter the parties were given leave to file further written submissions dealing with the possible effect of that judgment on the claims pursued by the applicant.

105 In those further submissions, the respondent argued that the effect of the Court of Appeal's recent judgment was that a mere breach of contract would not fall within the Court's jurisdiction such as to enable orders to be made pursuant to s 106 of the Act. The submission then dealt with the applicant's claim for a bonus based on a contractual obligation, an agreement or arrangement. It was submitted that a claim framed in this way was not one which came within s 106. Understandably, no submission was made in relation to the application to vary the contract to provide a greater period of notice. Having determined that the bonus issue was not the subject of a contract, formal agreement or arrangement but rather, it was unfair that the contract did not provide for a yearly increment and /or performance bonus, it seems that the Court of Appeal's decision has no relevance to the present matter.

ORDERS:

106 The parties are directed to confer on appropriate orders giving effect to this judgment. Those orders will provide for the payment of a bonus of $4,000 and the payment of 12 months' notice calculated on the basis of a salary of $135,000 per annum and a bonus of $4,000, and shall give credit for the three months' equivalent of base salary already paid by the respondent. I shall hear the parties on any issues arising as to costs. The matter may be relisted at a convenient time, arranged by contacting my Associate.

LAST UPDATED: 31/01/2005