The principles on illegitimate conduct
128 This brings me to the third aspect of the CFMEU's conduct: was it illegitimate? Having already reached the conclusion that the CFMEU contravened ss 343 and 348 of the FWA because its conduct was unlawful, it is not strictly necessary to answer this question. Nonetheless, because it became the focal point in the oral final submissions of both parties at the trial, I will proceed to consider it. Since those submissions centred on a number of single judge decisions and one Full Court decision, I will begin my consideration by reviewing the principles illuminated in those decisions.
129 The first single judge decision in time was the decision of Jessup J in Williams. In that matter, the applicant, Mr Andrew Williams, was an Australian Building and Construction Inspector appointed under the Building and Construction Industry Improvement Act 2005 (Cth) (BCII Act). Mr Williams claimed that the CFMEU and one of its organisers, Mr Robert Mates, had contravened ss 38 and 43 of the BCII Act. Putting aside the reason for the coercion, those provisions are similar in terms to ss 343 and 348 of the FWA. Specifically, Mr Williams claimed that Mr Mates had organised a work stoppage on 31 July 2006 with intent to coerce Kane Constructions Pty Ltd, a building contractor, to employ, engage or designate a labourer with occupational health and safety responsibilities at one of its work sites. The circumstances surrounding this work stoppage have close similarities to those of the present matter. This can be seen from the following passage of Williams where his Honour sought to establish a "baseline of normality" against which the legitimacy of Mr Mates' conduct could be assessed:
Was it illegitimate for Mr Mates to seek to achieve his purpose of having Kane employ a labourer on the site by organising the workers to have themselves relocated elsewhere, thereby bringing about a stoppage of work on the site itself? He was careful to do so in a way that did not involve any obvious breach of the workers' contracts of employment. Whether the withdrawal of labour by subcontractors (Northwest Concrete and BV Rigging) was a breach of their contracts with Kane was unclear: as matters were left in the evidence, I could not hold that it was in either case. However, the subcontractors had sent their employees to work on the site in accordance with normal commercial arrangements made by Kane and for the purpose of carrying out tasks which, at least to a significant extent, were on the critical path. It does not, in my view, require knowledge of the terms of the contracts between the subcontractors and Kane to conclude, as I do, that Kane was entitled - in a business if not a legal sense - to expect that, in the normal course, those employees would remain on site and carry out those tasks. It would, I consider, be rather odd for a court to hold that it was perfectly alright for a stranger to the relationship between the subcontractors and Kane to prevail upon the employees of the former to make a request to their employers that they be taken off site. I express these views not to suggest that they reflect anything like the actual situation on the site on 31 July 2006, but rather to establish a base-line of normality, as it were, by reference to which it should then be regarded as lying upon the respondents to establish that the situation on the site was such as to give legitimacy to Mr Mates' actions.
130 Given the obvious factual parallels with the present matter, I consider that a similar baseline could be struck here. That is to say, the baseline in this matter is that Hansen Yuncken was entitled to expect that, in the normal course of business and commercial arrangements, the employees of the structural subcontractors would remain on the Carrara project site and carry out the tasks that they were employed to undertake there and which their employers, the structural subcontractors, had contracted with Hansen Yuncken to perform. However, aside from reinforcing the need for this assessment to be objective, the remaining facts and surrounding circumstances of Williams are so different to the present matter that it provides no assistance in identifying any factors that may have a bearing on determining whether the CFMEU's conduct was illegitimate. For example, there is no evidence in this matter (as there was in Williams) that Mr Desmond or Mr Watson prevailed on the employees of the structural subcontractors to request their employers that they be taken off the Carrara project site. It is, however, worth recording that Jessup J ultimately determined Williams against the respondent based on the illegitimacy of Mr Mates' conduct (see at [114], [125] and [126]), having earlier rejected Mr Williams' contention that he had acted unlawfully (see at [74] and [108]). Furthermore, while his Honour does not appear to have considered whether Mr Mates acted unconscionably, it is reasonably clear that he considered illegitimacy to be a separate and distinct category from unlawfulness.
131 The second single judge decision in chronological order was the decision of Buchanan J in National Jet Systems. In that matter, the question for determination was whether National Jet Systems had applied duress to some of its employees in order to have them make new Australian Workplace Agreements with it under the provisions of the Workplace Relations Act 1996 (Cth). In the course of determining that question, his Honour examined a number of authorities which identified what conduct could be characterised as unlawful, illegitimate or unconscionable conduct so as to constitute duress for the purposes of the statutory provisions in question. His Honour began (at [12]) by stating the two elements necessary to constitute duress as: "conduct negating effective or real choice; and application of pressure by unlawful, unconscionable or illegitimate means". Thereafter, he proceeded to examine the "emerging idea of economic duress" in explaining why those two elements were required. His Honour began that exercise by quoting from the majority and minority advices in Barton v Armstrong [1976] AC 104 and from Lord Scarman's advices in Pao On v Lau Yiu Long [1980] AC 614 and in Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 (Universe Tankships). These authorities demonstrated, among other things, how the law in relation to duress had developed and come to be applied, first, to threats to property and, thereafter, to threats to a person's business or trade. This development was described by Lord Scarman in Universe Tankships (at 400 quoted in National Jet Systems at [18]) as: "[T]he thread of principle which links the early law of duress (threat to life or limb) with later developments when the law came also to recognise as duress first the threat to property and now the threat to a man's business or trade." This led Buchanan J to note (at [19]) that Lord Scarman had identified the two elements involved in the wrong of duress as "pressure amounting to compulsion of the will and illegitimacy of pressure."
132 As to what was meant by the term "illegitimate", his Honour further quoted (at [20]) from Lord Scarman's advice in Universe Tankships (at 401), as follows:
In determining what is legitimate two matters may have to be considered. The first is as to the nature of the pressure. In many cases this will be decisive, though not in every case. And so the second question may have to be considered, namely, the nature of the demand which the pressure is applied to support.
The origin of the doctrine of duress in threats to life or limb, or to property, suggests strongly that the law regards the threat of unlawful action as illegitimate, whatever the demand. Duress can, of course, exist even if the threat is one of lawful action: whether it does so depend upon the nature of the demand. Blackmail is often a demand supported by a threat to do what is lawful, e.g. to report criminal conduct to the police.
133 In his subsequent analysis (at [21]), Buchanan J equated the first question above to the negation of choice element or the "application of pressure which vitiated consent". His Honour then turned to consider the second question, which he described as the "illegitimacy" element, and highlighted the difficulties that arose where the action concerned was lawful but nevertheless considered to be illegitimate, as follows (at [22]):
The other element, illegitimacy, may be more elusive. In his further discussion of this issue Lord Scarman observed (at 401) that unlawful action would be illegitimate. A more difficult question arises in cases where action, or threatened action, might be lawful, but is nevertheless "illegitimate". Lord Scarman gave, as an example, a case of blackmail constituted by a threat to do a lawful act, such as reporting a matter to the police. With respect, the example has a tendency to confuse because blackmail itself may be an unlawful act. However, it is clear that Lord Scarman intended to draw attention to the difference between an illegitimate demand (e.g. blackmail) and the means (perhaps a threat of otherwise lawful action) by which the demand was, if necessary, to be enforced. The point is an important one. If the means used to apply pressure are unlawful, the pressure will be illegitimate. The use of lawful means to achieve an unlawful demand will also constitute illegitimate pressure. And, as earlier observed, the pressure must be accurately described as compulsive, in the sense that it vitiates consent.
These difficulties obviously arise in this matter, so I will return to them later in these reasons.
134 Buchanan J next referred to the decision of McHugh J in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 (Crescendo) and set out two quotations from that decision, one of which related to illegitimacy as follows (at [24]):
Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.
It is to be noted that the first part of this quotation is addressing the second element of coercion (illegitimacy, unlawfulness or unconscionable conduct) and the second part is addressing the first element (negation of choice).
135 Buchanan J then observed (at [25]): "What is unlawful conduct may be readily ascertained in many cases. What is unconscionable, or otherwise illegitimate, conduct may be more difficult to establish." As to what conduct constituted unconscionable conduct, his Honour quoted (at [26] and [27]) from the judgments of Gleeson CJ and of Gummow and Hayne JJ in Berbatis, as follows:
26 Unconscionable conduct involves more than just taking advantage of someone, or their inferior bargaining position. In Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51 (Berbatis Holdings), Gleeson CJ said (at [7]):
7 … unconscionability is a legal term, not a colloquial expression. In everyday speech, "unconscionable" may be merely an emphatic method of expressing disapproval of someone's behaviour, but its legal meaning is considerably more precise.
and (at [11]):
11 A person is not in a position of relevant disadvantage, constitutional, situational, or otherwise, simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests.
27 Similarly, Gummow and Hayne JJ accepted (at [56]) that:
56 … a person in a greatly inferior bargaining position nevertheless may not lack capacity to make a judgment about that person's own best interests.
136 On this point, Buchanan J concluded (at [28]):
In my view a similar rigour should be applied to the notion of what is illegitimate conduct. Conduct correctly described as illegitimate in this context must infringe a legal standard. The issue is not a moral one, nor one for personal value judgments. The test is necessarily objective.
137 His Honour reiterated these observations later in his reasons when he said (at [39]):
… The cases make it clear that unconscionable pressure is pressure which must pass a legal, not a moral, threshold. Although there may be value judgments involved, it is legal values, not moral values, which must be assessed.
I interpolate that, during oral final submissions, the CFMEU placed particular emphasis on the need to adopt and apply a legal standard in determining whether its conduct was illegitimate, rather than one based on moral or personal values.
138 In the intervening paragraphs of his reasons in National Jet Systems ([29]-[37]), Buchanan J reviewed the authorities dealing with coercion under the FWA or its predecessors. In that process, his Honour stated (at [31]) that the element of illegitimacy "generally [involved] either unlawful or unconscionable conduct". It would appear that his Honour intended this observation to be read with his earlier observations, for example, those in the penultimate sentence of [22] (see at [133] above) and with the open ended categories of illegitimacy described by McHugh J in Crescendo (see at [134] above). That is so because, in the concluding paragraphs of his consideration of this issue when he turned to consider the decision in Williams, his Honour raised the possibility of what he described as "freestanding legitimacy". In those paragraphs, he said (at [40]-[42]):
40 The concept of "illegitimate" pressure (when it is not used to signify unlawful or unconscionable pressure, but something else) is not without its difficulties. Until recently it does not appear to have been used as a separate category in its own right. In Crescendo McHugh J used it as a term to embrace both unlawful and unconscionable pressure. So did Lord Scarman in Universe Tankships. However, it has in this Court recently been spoken of separately from unlawful or unconscionable pressure.
41 In Williams v Construction, Forestry, Mining and Energy Union (2009) 179 IR 441, and in Williams v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2010) 196 IR 365 Jessup J found that illegitimate conduct occurred without finding that the conduct was unlawful or unconscionable. Detailed reasons were given.
42 In my respectful view, some further discussion of this aspect is necessary, when a suitable case is presented. However, in light of my factual conclusions it will not be necessary to explore the concept of free-standing illegitimacy in the present case, and it would be inappropriate to do so.
139 Finally, there are the primary judge and Full Court decisions in Victoria. Those decisions post-date Williams and National Jet Systems and pre-date Grocon. Parts of Victoria have already been quoted above with respect to the effect of the presumption in s 361 of the FWA (see at [49]). In their judgment, Buchanan and Griffiths JJ also considered the question of unlawfulness and illegitimacy under the second element of coercion in s 343 of the FWA. That question arose because the primary judge had decided that the conduct of the State was not unlawful, but was illegitimate. That conclusion appeared from [255]-[257] of the primary judge's findings, which are set out in Victoria at [88].
140 In considering this question, Buchanan and Griffiths JJ examined the judgments in National Jet Systems and Williams. With respect to the former, their Honours noted the quote from Crescendo (set out at [134] above) and observed (Victoria at [92]): "In that passage, McHugh J folded the category of illegitimate conduct into the other two categories of unlawful or unconscionable conduct." By this statement, I do not consider their Honours intended to suggest that illegitimate conduct did not represent a separate and distinct category and would always be subsumed by the categories of unlawful or unconscionable conduct. The inclusion of the concluding words of the quote from Crescendo, "[b]ut the categories are not closed", speaks against such a conclusion. Moreover, after pointing out that the primary judge had found that the State's conduct was not unlawful and that it did not meet the "legal content of the notion of unconscionable conduct" (Victoria at [92]), their Honours proceeded to consider whether the approach to illegitimacy adopted by Jessup J in Williams might be relevant to the determination of the appeal. Of the first Williams case (the second Williams case, Williams v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2010) 196 IR 365; [2010] FCA 754, is not relevant for present purposes) their Honours said (at [93]):
… In the first of the cases, Jessup J found the conduct constituted an interference ("in a business if not a legal sense", at [109]) with the terms of the contracts between a contractor and subcontractors. His Honour found, further, that the conduct was not "legitimised" by concerns about safety. His Honour appeared, therefore, to regard the conduct as illegitimate because it constituted, at least in a practical sense, an interference with contractual relations and with the normal expectation that subcontractors would perform their works without outside intervention. There was no appeal.
141 Ultimately their Honours did not consider Williams assisted them to determine the appeal because it was distinguishable on its facts. They said (Victoria at [94]):
Whilst we appreciate that that case was mentioned in argument as illustrative of the concept of illegitimacy, its circumstances were entirely different from those in these appeals and it has no relevant parallels with the present case. It is not desirable that we attempt to forecast how a circumstance of that kind might be viewed in any future case, or whether in some future case the same view would be taken about what might constitute illegitimate conduct which might evidence an intent to coerce. It is sufficient to concentrate on the facts of the present case.
142 Two observations may be made about the above observations and the conclusions reached. First, their Honours did not need to, and did not, disapprove of the approach taken by Jessup J in Williams. In particular, I reject the CFMEU's contention that the words "[t]here was no appeal" (Victoria at [93], see at [140] above) suggest such disapproval. Secondly, it would appear from their Honours' comments in Victoria at [94], and the observations in the succeeding four paragraphs (Victoria at [95]-[98]), that they accepted that illegitimacy, or illegitimate conduct, constituted a separate category of conduct for the purposes of coercion under s 343 of the FWA. This is, of course, consistent with the views of Jessup J in Williams (see at [130] above) and also those of Tracey J in Grocon (see at [112]-[114] above). However, for his part, Buchanan J left this question open in National Jet Systems (see at [138(42)] above), after positing the need for illegitimate conduct to infringe some legal standards.
143 This need to determine illegitimacy by reference to a legal standard was adverted to by Steyn LJ in CTN Cash and Carry Ltd v Gallaher Ltd [1994] 4 All ER 714 at 718 where his Lordship cited similar views expressed by Professor Birks (albeit with respect to a threat of lawful action in the restitutionary context) as follows:
Can lawful pressures also count? This is a difficult question, because, if the answer is that they can, the only viable basis for discriminating between acceptable and unacceptable pressures is not positive law but social morality. In other words, the judges must say what pressures (though lawful outside the restitutionary context) are improper as contrary to prevailing standards. That makes the judges, not the law or the legislature, the arbiters of social evaluation.
See also R v Moncilovic (2011) 280 ALR 221; [2011] HCA 34 at [400].
144 In Edelman J and Bant E, Unjust Enrichment (2nd ed, Hart Publishing, 2016) at p 211, after citing Professor Birks' views above, the authors note that "the prospect of developing an inherently uncertain doctrine of lawful act illegitimate pressure" led the New South Wales Court of Appeal in Australia and New Zealand Banking Group Ltd v Karam (2005) 64 NSWLR 149; [2005] NSWCA 344 (Karam) to reject its existence outright. Karam involved a commercial dispute between banker and customer. However, in the course of reaching its conclusion, the Court did acknowledge the possibility that the concept of illegitimate pressure may apply in the field of industrial relations as follows (Karam at [61]):
Concepts of "illegitimate pressure" and "unconscionable conduct", if they do not refer to equitable principles, lack clear meaning, outside, possibly, concepts of illegitimate pressure in the field of industrial relations.
(Emphasis added)
145 Of course, on this aspect, I am bound by the ruling in Esso and the other cases cited above (at [45]-[46]) that illegitimate conduct is one of three kinds of conduct that meets the second element of coercion under ss 343 and 348 of the FWA. The critical question then is to identify the legal standard that is to be applied in the field of industrial relations to determine when the threat, or application, of lawful pressure is illegitimate.
146 Before I endeavour to answer that question, it is well to recall that the characterisation of conduct constituting coercion as "unlawful, illegitimate or unconscionable" emerges from authorities in England which reflected developments in the common law and equity relating to the law of duress (see the discussion in National Jet Systems reviewed at [131]-[133] above). They are not therefore statutory constructs appearing in the FWA, whether that be in ss 343 and 348, or elsewhere. That being so, it is worth recalling what Allsop CJ said in Paciocco v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 199; [2015] FCAFC 50 at [262] speaking about the construction of the word "unconscionable" in s 12CC of the Australian Securities and Investments Commission Act 2001 (Cth), as follows:
… an understanding of the meaning conveyed by the word "unconscionable" in the statute is not simply restated by substituting other words for those chosen by Parliament; danger easily lurks in the use of other words to capture the meaning of the statutory language. The task involved is not the choice of synonyms; rather, it is to identify and apply the values and norms that Parliament must be taken to have considered relevant to the assessment of unconscionability: being the values and norms from the text and structure of the Act, and from the context of the provision.
147 Ultimately, therefore, it remains necessary to construe ss 343 and 348 of the FWA having regard to their text, context and purpose. The purpose of Part 3-1 of the FWA (in which ss 343 and 348 appear) was described by the Full Court in Construction, Forestry, Mining and Energy Union v Endeavour Coal Pty Ltd (2015) 231 FCR 150; [2015] FCAFC 76 (at [182]) as follows:
The evident purpose of Pt 3-1 is to protect the workplace rights conferred by that Part including by protecting the exercise of those rights and providing effective relief for persons discriminated against, victimised or otherwise adversely affected. So much may be discerned from the title to Pt 3-1, the summary of Div 3 given by s 334 and the objects of Pt 3-1 set out in s 336.
148 Sections 343 and 348 are therefore intended to protect the victims of coercive action when, among other things, it constitutes illegitimate conduct, and where that coercive action is applied with respect to the exercise of their workplace rights or engaging in industrial activity. With that purpose and context in mind, I return to the question posed above: what legal standard is to be applied to determine when the threat, or application, of lawful pressure is illegitimate? In answering this question I consider some further guidance can be obtained from authorities in the commercial field relating to duress. One such authority on point is Electricity Generation Corporation T/As Verve Energy v Woodside Energy Ltd [2013] WASCA 36 (Verve Energy), where McLure P observed (at [25]):
If the pressure involves an actual or threatened unlawful act, it is prima facie illegitimate. If the pressure is lawful, it may be illegitimate if there is no reasonable or justifiable connection between the pressure being applied and the demand which that pressure supports: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 401 (Lord Scarman); R v Her Majesty's A-G for England and Wales (NZ) [2003] UKPC 22 [15]-[20]
149 In Unjust Enrichment by Edelman and Bant, addressing threats of action in the restitutionary context, the authors referred to the above judgment and stated the principle arising from it as the "disproportionality between (i) the lawful threat and (ii) the defendant's legitimate interest in the demand it supports" (p 212). They then proceeded to provide a number of examples of decisions where this approach has been applied in the courts in various contexts (see at pp 212-214). They included a threat of a prosecution to pressure a person to enter into a settlement agreement (Tsarouhi v Tsarouhi [2009] FMCAfam 126), a "return to unit" threat issued by the Ministry of Defence (MOD) for any member of the United Kingdom Special Forces who failed to sign a confidentiality agreement (R v Attorney-General for England and Wales [2003] UKPC 22 - this threat was held to be proportionate to the goal which the MOD sought to achieve), blackmail (Thorne v Motor Trade Association [1937] AC 797) and an abuse of legal process (too numerous to list - see footnote 112 on p 213).
150 Later (at p 216), the authors discussed Universe Tankships, the decision Buchanan J examined in National Jet Systems (see at [131]-[132] above). Importantly in the present context, Universe Tankships related to an industrial dispute involving action taken to "black" (prevent services to) a ship. In that discussion, the authors mentioned the peculiar statutory provisions - the Trade Union and Labour Relations Act 1974 - which provided an immunity for certain tortious acts, if they were committed in the furtherance of a trade dispute. In this respect, it is worth interpolating that a similar form of legislative immunity has applied in England dating back to 1906 and its existence has effected a difference in the judicial approach to the development of the economic torts in England with respect to industrial disputes compared with that in Australia: see Balkin & Davis, Law of Torts (5th ed, LexusNexus, 2013) p 608. For completeness, it is to be noted that, while Part 3-3 Div 2 of the FWA grants some immunity along similar lines, those provisions do not appear to have the same significance for Australian jurisprudence in this area.
151 Returning to the discussion of Universe Tankships, the authors of Unjust Enrichment made the following pertinent observations about disproportionality in the English industrial and legislative environment described above:
The provisions of the [Trade Union and Labour Relations Act 1974] were a strong indication of where the line was to be drawn between legitimate (proportionate) union pressure and illegitimate pressure. On the other hand, a separate threat to black the ship unless money was paid into the union's welfare fund was illegitimate, because it was disproportionate to the legitimate goals of the defendant in the context of a trade dispute.
152 So, having regard to all these matters, I consider the disproportionality principle identified in Verve Energy and discussed in Unjust Enrichment provides an answer to the question I have posed above. That is, disproportionality between a lawful threat of action, or the lawful action itself, and the legitimate interest in the demand the threat, or action, supports is the appropriate legal standard to be applied to determine whether the threat of action, or actual action, is illegitimate.