Alexander v Cambridge Credit Corporation

Pacific Power (Dissolution) Act 2003 LEGISLATION CITED:

Re Transport Industry Waste Collection and Recycling (State) Award (2000) 102 IR 192 CASES CITED: Alexander v Cambridge Credit Corporation (Receivers Appointed) (1985) 2 NSWLR 685

HEARING DATES: 03/31/2005; 04/04/2005 EXTEMPORE JUDGMENT DATE: 04/04/2005

APPELLANT Mr J P Phillips SC and Mr J W Fernan of counsel SOLICITORS Baker & McKenzie Mr Paul Brown/Ms Elizabeth Raper LEGAL REPRESENTATIVES:

RESPONDENT Mr M Barnes, solicitor SOLICITORS White Barnes

RESIDUAL BUSINESS MANAGEMENT CORPORATION AND NEW SOUTH WALES LOCAL GOVERNMENT, CLERICAL ADMINISTRATIVE, ENERGY, AIRLINES AND UTILITIES UNION

Application by Residual Business Management Corporation for leave to appeal and appeal against the extempore judgment of Deputy President Harrison given on 17 March 2005 and orders and award of 21 March 2005 in Matter No IRC 6483 of 2003

1 The Commission has before it today what is, on analysis of its particular circumstances, an unusual stay application. The unusual features of the application will become clear during the course of the decision. 2 On 29 March 2005 the Residual Business Management Corporation (RBMC) filed an application for leave to appeal and a notice of appeal against the decision of Harrison DP handed down on 17 March 2005. The respondent to the appeal is the New South Wales Local Government, Clerical, Administrative, Energy, Airlines and Utilities Union (USU). 3 In the notice of appeal RBMC sought a stay on the following grounds:

i. His Honour has erred in law in applying the Principles relevant to determining whether a particular case is a "Special Case"; ii. His Honour has erred in law in making Orders & Award retrospectively to persons who are not employees of the Appellant; iii. His Honour has erred in law in applying the Award retrospectively to persons who have ceased their employment with the Respondent. Those past employees have left the employ of RBMC for various reason(s) including inter alia, payment of voluntary redundancy, or the engagement of employment elsewhere; iv. The Appellant is not aware of the circumstances of past employees of the Appellant, including their known whereabouts; v. His Honour has erred in law in applying the Award retrospectively to persons who have ceased their employment with the Respondent, without giving due consideration to "payments" they may have received as at the time of their cessation of employment; vi. Further, for the matter(s) set out in the affidavit of Mr S La Spina. Herewith annexed and marked with the letter "A". vii. It is submitted the Appellant has an arguable case, with some reasonable prospects of success, in respect of both the question of Leave to Appeal and the substantive merits of the Appeal; and viii. The Appellant submits that in the exercise of the Commission's discretion the balance of convenience weighs in favour of the Appellant. 4 This decision concerns the stay application. In order to understand the present application and the decision in respect of which it is brought, it is necessary to refer to the nature of the appellant RBMC, the circumstances of its creation and certain associated matters. 5 In 2003 the New South Wales Parliament enacted the Pacific Power (Dissolution) Act which came into effect on 1 July 2003 (see s 2 of the Act). The purpose of the Act appears to have been to deal with the management of the affairs and property of Pacific Power upon the sale of that corporation. This is reflected in the long title of the Act which is in the following terms: An Act to dissolve Pacific Power and to constitute the Residual Business Management Corporation to manage the residual assets, rights and liabilities of Pacific Power, to provide for other consequential matters; and for other purposes. 6 The 2003 statute constituted the appellant as a Crown corporation. One of the objects of the RBMC was (see s 6(d) of the Act) "to achieve the efficient and timely winding up of residual business activities". The phrase "residual business activities" does not appear to be defined in the statute but it undoubtedly refers to the residual business activities of Pacific Power upon its sale. The statute also provides for the placement of the staff of RBMC who, again it appears, were the staff remaining in Government employ as a result of, and subsequent to, the sale and dissolution of Pacific Power: see ss 9 and 10 and clause 4 of Schedule 4, "Savings and Transitional Provisions", of the Act. 7 The decision appealed from was handed down, as previously indicated, by Harrison DP on Thursday 17 March 2005. His Honour made it clear that it was not only an extempore decision but also an interim one, indicating that he would publish a complete judgment dealing with all aspects of the matter in detail in due course. The application before his Honour was filed on 12 November 2003 and was an application for a Residual Business Management Corporation Employees' Award 2003. The precise application being dealt with, that is the subject of the decision, was for a ten per cent wage increase from 15 November 2003 and a further ten per cent wage increase from 15 November 2004 in the context of the making of a new award. The application was opposed by RBMC. 8 Early in the decision his Honour referred to the application being determined in terms of the Special Case Principle of the Wage Fixing Principles and found that a Special Case had been made out on the following basis: The very nature of the Residual Business Management Corporation as a wind-up and departure organisation is a special case in itself. There are other features surrounding the operation and functions of the organisation and the activities of the employees which also contribute to the finding of a special case. 9 His Honour then referred to the matter being determined by reference to the Memorandum of Understanding which provided for salary maintenance and the capacity of an employer to reduce salary maintenance if an employee failed to co-operate with redeployment or re-employment initiatives. His Honour described that aspect in this way: The means of salary maintenance has been to continue employees on their position in the 40 point salary scale. Loss of salary maintenance would result in a move down that scale. This has not happened though there is provision in the Memorandum of Understanding to allow for a withdrawal of salary maintenance should employees fail to co-operate or participate with a personal placement plan. 10 His Honour referred to the evidence before him which he described as indicating that there had been significant success in that placement of staff and that there had not been a situation where any individual staff member had been regarded as failing to comply with the provisions of the Memorandum of Understanding, the relevant provisions of that document being stated to be as follows: "Salary maintenance will be continued on the proviso that employees are able to demonstrate commitments for seeking external opportunities for alternative employment and any internal vacancies including redeployment opportunities using the criteria set out below. The review will commence within the initial 12 months salary maintenance period and will be ongoing.

Through the review process employees will be provided with assistance and access to counselling in relation to their performance.

At any time after the guaranteed minimum 12 months salary maintenance period where an employee's performance against the criteria is not satisfactory the employee will be given a month in which to meet the performance criteria. If by the end of that month the employee meets the performance criteria salary will be maintained." 11 Deputy President Harrison concluded that, in the circumstances before him, the proceedings were not about salary maintenance or about individual work value but rather they concerned the appropriate contemporary value of the 40 point salary scale which currently applied to the employees of RBMC (and which previously applied to Pacific Power). His Honour reached this conclusion as he held that the "award continues to provide for reclassification and re-evaluation of the work or the activities of any employee where circumstances justify [it]". 12 His Honour also had regard to the fact that the evidence before him showed that the staff in question had involved themselves in secondment for up to 89 per cent of the relevant time period, although there had been no secondment for some individuals. There were 14 people at the time of the decision still remaining in the redeployment pool. As to the difficulties that appear to have been experienced by some of the employees in seeking or obtaining redeployment his Honour referred to the example of a Mr Legge. In that context his Honour referred to the administrative hurdles which occurred in effecting the transfer of Mr Legge to employment with TAFE, to which Mr Legge had been apparently actively seeking a transfer for some time. His Honour described the matter in this way: The evidence of Mr Legge which will be detailed further in the fuller judgment demonstrates that there were administrative hurdles in effecting that transfer until the co-operation between the Union and the management of Residual Business Management Corporation removed those administrative hurdles and Mr Legge is now placed with TAFE. 13 His Honour concluded his decision in the following way: The application is to be examined in the light of the undertakings made by the NSW Government to the Unions in the reorganisation of the electricity generation industry. I refer to a statement made by the then Treasurer and Minister for Energy Mr Egan to all employees on 24 October 1995 which states in part: "In discussions with Pacific Power Unions I have guaranteed that the restructuring will take place with no forced redundancies, no forced transfers and no reduction of entitlements. Implementation will be co-ordinated with a high level consultative committee established with the Unions".

This commitment has been reiterated in various forms by Government, the marketing implementation group and various managements and has under-pinned a decade of reform in the power industry which on analysis of treasury reports by Mr Barnes in these proceedings resulted in dividends to Government in excess of $6 billion and earnings before interest and tax in excess of $10 billion.

A failure to maintain contemporary values of the 40 point salary scale would in my opinion amount to a loss of entitlement, would constitute industrial injustice and be contrary to the objectives of the Industrial Relations Act which provides for the facilitation of appropriate industrial regulation through award. It would also fail to meet the tenets of equity, good conscience and the substantial merits of this case.

Having regard to all of those circumstances it is appropriate that an award be made with effect from the first full pay period to commence on or after 15 November 2003 and apply in the way in which the application seeks in exhibit 62 to all of those persons at that time employed by RBMC up until their departure.

In respect to quantum I believe it is appropriate to maintain parity with Eraring Energy from 15 November 2003 for 12 months. To that end I determine an increase of 9.2 per cent to apply on and from 15 November 2003 which will for example move salary point 1 of the 40 point salary scale from $303.40 per week to $331.40 per week.

A further increase will apply from 15 November 2004 of 4 per cent.

In determining that amount I accept the submissions of Mr Fernan that productivity amounts negotiated throughout the active parts of the electricity industry are not appropriate to be transported into the Residual Business Management Corporation though the employees in my view on the tenets of equity of fairness are entitled to a wage increase of 4 per cent, which has for the relevant period, represented the reference point for productivity bargaining.

I make that determination. Mr Barnes , I require you to prepare draft Orders for the execution of that determination and file them with my Associate through the Registry by close of business on Monday 21 March 2005.

I will then execute those Orders. Those Orders should include for rescission of the existing award and the making of the award in the terms that you seek in accordance with this determination. 14 The solicitor for the USU subsequently, in compliance with the decision of Harrison DP, filed a document entitled "Order and Award of the Industrial Relations Commission of New South Wales" which was duly executed by his Honour and which provided for the rescission of the previous award, the "Pacific Power Employees Consent Award 2002", its replacement by the new award to be known as "The Residual Business Management Corporation Employees Award 2003" and provisions otherwise in accordance with his Honour's decision. 15 At the hearing of the stay application, the RBMC called evidence from Mr Sam La Spina, who had held the position of Human Resources Manager of RBMC since 15 September 2003. Mr La Spina gave evidence that in his role as a senior consultant to RBMC he instructed solicitors on its behalf in the proceedings before Harrison DP and had given evidence on behalf of the Corporation. He drew particular attention to para 4 of the orders made by Harrison DP on 21 March 2005 in that they were to apply to: All employees of Residual Business Management Corporation in service on or after 15 November 2003, irrespective of whether any employee or employees has or have subsequently ceased employment with Residual Business Management Corporation. 16 Mr La Spina thus noted that the new award would apply to two classes of persons; first, the employees of RBMC currently employed by it and, second, the persons who were employed by RBMC during the period commencing after 15 November 2003 but who had subsequently left its employment. 17 Mr La Spina also indicated that although there were 14 current employees of RBMC at the time of the proceedings before Harrison DP and the same number at the time he swore his affidavit in the proceedings (29 March 2005), he noted that at the time he gave evidence (two days later on 31 March) there were only two employees remaining in the employment of RBMC. He also noted that it was anticipated that the remaining employees (other than some secondees) would have their employment terminated on 31 March 2005 (it should be interpolated here that the Commission was informed today that the remaining two employees earlier referred to had taken voluntary redundancy between the hearing before me on 31 March and today). 18 Mr La Spina gave evidence as to the administrative and practical difficulties in complying, in a timely way, with the new award made by Harrison DP. In that respect he referred particularly to there being approximately 105 persons who are no longer employed by RBMC, although they had been previously employed by it in the period between 15 November 2003 and 21 March 2005. He anticipated that it would take a significant amount of time to calculate entitlements under the new award for such employees and to make payment arrangements, having regard to the fact that it would involve contact with a large number of former employees, and that RBMC had lost contact with some of them. It would also involve significant recalculation of salary and other substantial amounts paid on termination of employment of those employees. His affidavit concluded as follows: 12. Furthermore, in the event that the appeal is successful, there will be significant difficulties for RBMC in trying to recoup the additional amounts paid to these Former Employees in the event that the order is complied with at this date.

13. In addition, RBMC is a special purpose corporation created by the State Government. RBMC is not a viable business. It does not generate revenue but obtains grants from the State Government. Therefore, once RBMC is aware of the revenue required in order to comply with this order, RBMC needs to formally apply for the additional funding from the State Government for the financial period between 2005 and 2006. This will take some time. 19 It was also noted that in the last paragraph (para 13) of Mr La Spina's affidavit he refers to the fact that the appellant does not generate revenue but obtains grants from the State Government, the implication being that it could not itself fund the award increases granted by Harrison DP or, relevantly, for the purposes of the present appeal and related stay application, the appellant (RBMC) was not able to itself fund any award increases to the extent to which it might be unsuccessful in the appeal. That led the Commission, during the stay proceedings, to raise the implications of those matters with counsel for the appellant. 20 In response, counsel advised the Commission that he had taken instructions from the Assistant Director General of the Premier's Department and was instructed to give the undertaking to the Commission that if the appeal failed, or to the extent that the appeal was unsuccessful, the moneys awarded to the relevant employees would be paid. 21 It might be appropriate to note that today during the closing submissions in respect of the stay application Mr Barnes, solicitor for the respondent USU, when he concluded his strenuous submissions vigorously opposing any stay being granted, indicated however that if the Commission did not accept those submissions he sought to put submissions as to the terms upon which any stay might properly be granted. In that regard he tendered extracts from the Supreme Court Practice relating to Practice Note No 92 which refers to certain mechanisms for computing interest for the purposes of s 94 of the Supreme Court Act. The relevant schedule to the Practice Note indicates that for the period subsequent to 28 February 2002 the relevant interest rate is nine per cent. 22 Senior counsel for the appellant (RBMC) indicated that his client did not oppose, should the stay be granted, a condition being imposed by reference to that Supreme Court Practice Note. I should indicate that in the very particular circumstances of this matter which, as I have noted elsewhere in these reasons, are quite unusual, I consider the approach adopted by the appellant to be appropriate. 23 I should pause here to briefly indicate more particularly why I consider this application is unusual. Its relative uniqueness extends from the fact that although it relates to an award application, the practical effect of granting the stay - and this is even clearer today than it was on the first day of the hearing last week - will be not in relation to ongoing payments of award rates of pay to persons currently in employment, but rather payments to persons who had ceased to be employed by the relevant employer between the date of applying for the award, which happens to be the date of its operation, and today. It is not inappropriate to describe the practical effect of any decision in this matter as being largely on the rates of pay on which termination payments will be calculated, although there will obviously also be, depending on the actual cessation date of service of particular employees, some periods of increased wages at times when work was done. I make this observation without in any way pre-empting any arguments in the appeal proper as to the application of Special Case Principle or any other Wage Fixation Principle as to the value of the work that had been carried out by employees, the subject of the application, between 15 November 2003 and the time their work for RBMC concluded. 24 The principles in relation to stay applications have been the subject of consideration by various members of the Commission over the last few years. A number of these statements were referred to by the legal representatives of the parties, and there does not appear to be any material difference for the purposes of the present stay application as to which particular authority the Commission has been referred to should be specifically cited. In the circumstances, it seems to me sufficient for present purposes to refer to my earlier decision in another appeal in award proceedings, being that of Re Transport Industry Waste Collection and Recycling (State) Award (2000) 102 IR 192. The particular parts of that decision presently relevant are the references in para [18] to authorities such as Alexander v Cambridge Credit Corporation (Receivers Appointed) (1985) 2 NSWLR 685 and the extract from the Cambridge Credit judgment; also relevant are the summary of principles set out in para [19] of that decision and the terms of para [20]. It is not necessary to repeat those matters here. 25 It is sufficient to note that it is clear that the mere filing of the notice of appeal will not, of itself, provide a reason or demonstrate an appropriate case for the grant of a stay, nor will it discharge the onus which the applicant for such a stay bears. Nevertheless, as the authorities, including the ones referred to, make clear, the grant of a stay is essentially a discretionary exercise and the discretion extends not only to whether or not to grant a stay but as to the terms that would be fair if a stay were granted. 26 It is essential in this area, as indeed in all areas of the Commission's functions, to ensure that any determination it makes, be it final or in the case of a stay on an interim basis, will be fair to all the parties. There are, of course, a number of other touchstones, as it were, against which the exercise of a discretion is often to be judged, such as whether the appeal would prove nugatory or abortive if a stay were granted. I do not consider it appropriate in this case to consider the last mentioned consideration. 27 The authorities, of course, emphasise the limited way, if at all, the question of the appellant's prospects of success should be considered in the process of considering whether a stay should be granted. The emphasis seems to be - and this is clear in the Transport Waste Collection case - on that matter being considered largely in the context of the consideration of the specific terms of the stay that will represent a fair adjustment of the interests of the parties. 28 Subject to one matter which it is relevant to deal with as to the nature of the appeal, I consider that the decision on the stay in this matter essentially depends upon a judgment of where the balance of convenience lies. 29 A matter that should be dealt with as to quality of the appeal relates to the nature of the proceedings at first instance. It is clear from the detailed material that the parties have put before me on the stay, and it is to be stressed that that material represents only a fraction of what was before Harrison DP who heard the proceedings over some eight hearing days, that the proceedings were hard fought and because of that, and no doubt because of the relatively unusual set of circumstances before his Honour, they were proceedings a decision in respect of which would inevitably be intrinsically difficult. 30 I should digress for one moment to express my appreciation to the parties for being as selective as they could be in the material they put before me. There was certainly an attempt to assist the Commission by putting selective material before the Commission so that it could make this decision as quickly as possible and it is also fair to say that the quality of the assistance provided to the Commission was in the best traditions of industrial practitioners before the Commission. 31 As earlier observed, Harrison DP in making the decision, was confronted with a hard fought case and one which presented a very difficult decision to be made, not only it appears as to whether a Special Case had been made out but also, if such a case had been found to be made out, as to the particular basis upon which any final award should be made. 32 The Commission has to make a decision as to what I have described as the quality of the appeal, having regard to that assessment of the case at first instance. 33 It seems to me that it can be reasonably assumed for the purposes of the stay application that the appellant has an arguable case. That, however, says no more than that, in the context of a case of the kind described as having been mounted at first instance, the Full Bench on appeal will itself have a difficult decision to make in relation to what will clearly be, also at the appeal level, a hard fought case. Lest there be any misunderstanding, the Commission is not saying, by its very limited discussion of the quality of the appellant's case on appeal, any more than it has specifically said: that is, it is appropriate to assume for the purposes of the stay application that there is an arguable case. 34 I place one other caveat on the statement made as to arguable case, and that is that as presently advised - and I hasten to add that this matter was not argued before me in any way - that I have some doubts as to the likelihood of success of the appeal on the jurisdictional issues, such as the one which was referred to earlier in these reasons in para (ii) of the grounds upon which the stay has been sought, which is parallelled in ground (vii) in Part F of the appellant's notice of appeal. 35 As was noted earlier, it seems to the Commission as presently constituted that the issue in this matter largely comes down to a question of balancing the relevant factors which are traditionally described as the balance of convenience. That is a question not without difficulty because the Commission is mindful that if the decision of Harrison DP is confirmed on appeal, any grant of the stay will result in employees who work for salaries being kept out of, for some time, the salary which had been adjudged to be just and reasonable by an experienced member of the Commission. 36 A related aspect is that for all of the employees the salary increases awarded by Harrison DP will be relevant to any adjustment of payments for voluntary redundancy where that has occurred. In relation to those employees where voluntary redundancy was taken, it is reasonable to expect that they may be undertaking employment in quite different areas and, in a practical way, they may be seeking to "move on" from their previous employment with Pacific Power or RBMC. 37 It is clearly a serious matter to defer the recalculation of any severance payments or other payments to such persons for some time. On the other hand, it may not be fair to the affected employees to have their severance payments and related payments recalculated, only to be told some time later that they are obliged to repay certain amounts of money to their former employer. 38 I do not think the practical and administrative difficulties of RBMC in calculating the payments are significant enough of themselves to lead to the grant of the stay. However, those matters when coupled with the inappropriateness of having employees and indeed the employer put in a position of facing a number of possible calculations or recalculations of final benefits, does not seem to represent a convenient situation to anyone, even the employees concerned. 39 In those circumstances, the balance of convenience in my view does tip in favour of granting the stay. The Commission considers, as earlier indicated, that it is appropriate to grant the stay on terms and the terms will be those that have been accepted by the respondent, on terms referable to the Supreme Court Practice Note relied upon by the USU's solicitor.

[Submissions made by parties as to form of the stay order] 40 I note that after discussions between the Commission and the parties the form of the stay has been agreed as follows:

1. The Commission orders the stay of the orders and award of Harrison DP until further order of the Commission, such stay to be granted on the term that, to the extent to which the appeal is unsuccessful, the gross amount of moneys due to employees affected shall be paid with interest in terms of Supreme Court Practice Direction No 92, such interest to be calculated from 17 March 2005. 2. There shall be liberty to apply in relation to such stay order (it being made clear that the liberty to apply is granted for more abundant caution). Orders are made accordingly. 41 There were also discussions with the parties as to hearing dates, directions etc and, subject to confirmation with the other members of the Full Bench, this matter is set down for hearing on 11 and 12 July 2005 on the basis of an estimate of two days.

[the parties were subsequently advised that the hearing dates were confirmed as 11 and 13 July 2005] 42 I make the following directions as to submissions and appeal books:

(a) The appellant is to file and serve its submissions and the appeal books no later than 4pm on Tuesday, 17 May 2005. (b) The respondent to file and serve its submissions in reply no later than 4pm on Tuesday, 14 June 2005. (c) Any submissions by the appellant in reply to those of the respondent to be filed no later than 4pm on Tuesday, 28 June 2005 (if the appellant does not intend to file any submissions in reply but will rest on its submissions in chief, it would be appreciated if it could advise my Associate in writing of that fact). Liberty to apply is granted in respect of these directions if there is any difficulty with the preparation of the appeal books or if the hearing dates cannot be confirmed after enquiries are made.

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