Australian Federation of Air Pilots v Jetstar Airways Pty Ltd

REASONS FOR JUDGMENT 1 The Australian Federation of Air Pilots ("the Federation") seeks orders against Jetstar Airways Pty Ltd ("Jetstar") for alleged contraventions of item 2(2) of sch 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) ("the Fair Work (TPC) Act") and s 344(e) of the Fair Work Act 2009 (Cth) ("the Fair Work Act"). The contraventions of item 2(2) are said to arise from contraventions of cl 19.1.7 and Attachment 2 of the Jetstar Airways Pilots Agreement 2008 ("the Jetstar Industrial Agreement") being a workplace agreement made between the Federation and Jetstar under the Workplace Relations Act 1996 (Cth) ("the Workplace Relations Act"). This proceeding was heard with VID 212 of 2013 which was brought against Jetstar by the Australian and International Pilots Association ("the Association") and others ("the Association proceedings"). The two proceedings were heard together with the evidence tendered in each proceedings being tendered also in the other subject to relevance. 2 The Jetstar Industrial Agreement came into operation on 6 March 2008 and applies to all pilots employed by Jetstar. Jetstar is permitted by it to require its pilots to enter into agreements for training and endorsement for which the pilots may be required to pay specified amounts. Clause 19.1.7 of the Jetstar Industrial Agreement provides: Jetstar may require a pilot to enter into a training bond or endorsement agreement, for a term no greater than 36 months, for an amount set at the time vacancies are advertised and set in accordance with Attachment 2. Attachment 2 relevantly contains a provision for training costs with an indicative maximum cost of $36,000. 106 pilots entered into contracts for employment with Jetstar in which the pilots have been required under an endorsement agreement to repay an amount in excess of $36,000 for the cost of training and endorsement. The requirement to pay in excess of $36,000 is said by the Federation to be in breach of the obligations upon Jetstar arising from cl 19.1.7. 3 Jetstar contends in answer to the claim against it that the obligations under the Jetstar Industrial Agreement did not arise in respect of the pilots because the pilots were not employees of Jetstar within the meaning of the Jetstar Industrial Agreement at the time that the pilots entered into the endorsement agreement which required them to pay the training amount. It is otherwise common ground between the parties that the Federation and Jetstar were bound by the Jetstar Industrial Agreement between 6 March 2008 and 1 July 2009 by operation of s 351 of the Workplace Relations Act 1996 and from 1 July 2009 as a transitional instrument by operation of sub-items 2(1), 2(c) and 3(a) of sch 3 of the Fair Work (TPC) Act 2009. 4 Clause 4.1 of the Jetstar Industrial Agreement provides that it will apply to the "employment of pilots by" Jetstar. Clause 2 defines both "pilot" and "employee" in a composite definition as "a person who is the holder of a Commercial Pilot's Licence or Airline Transport Pilots Licence and is employed under [the] Agreement" (emphasis added). Jetstar contends that the relevant pilots were not employed by Jetstar at the time they entered into the endorsement agreement because they had accepted a conditional offer of employment which had specified a date upon which employment was to commence and that they were, therefore, not "employed" within the definition of "pilot" or "employee" of the Jetstar Industrial Agreement at the time they became obliged to pay the training amount. 5 Each of the pilots had received a written offer of employment from Jetstar in, relevantly, the same terms. The letters of offer were of two kinds but they did not materially differ in their effect for present purposes. Two examples were relied upon in evidence as representative of all of the letters. One was the letter of offer of employment to Mr Michael Warden dated 16 June 2009 and the other was the letter of offer to Mr Giles Richardson dated 11 April 2012. Each was addressed to the individual pilot and began with an expression of pleasure in formally offering the addressee a position with Jetstar. The first paragraph of the letter to Mr Warden referred to the Jetstar Industrial Agreement which was attached to the letter and which was described as being "separate to this offer of employment but [that it would] apply to [the] employment at Jetstar." There was then a heading "Conditions" which, in the letter to Mr Warden, included the following: Subject to your acceptance of the terms and conditions outlined in this Letter of Offer and the enclosed [Jetstar Industrial Agreement], your employment will commence on [a specified date] ("Commencement Date") or such other date as agreed between yourself and [Jetstar] in writing. This offer of employment and your subsequent employment is conditional upon and subject to the following fundamental conditions: […] you signing and returning the enclosed Endorsement Agreement, or you undertaking to [Jetstar] that you will arrange and pay for necessary training and associated costs to obtaining the appropriate aircraft endorsement; and […] Any failure to satisfy and/or maintain these security and qualification requirements will constitute a failure by you to meet a fundamental condition of your employment and may result in this offer being withdrawn, or your employment being terminated. The other form of offer from Jetstar was in the letter to Mr Richardson which was expressed differently but was to similar effect. The difference in form seemed to reflect a change in style at some point of time which was then used in all subsequent offers. In the alternative form of offer of the kind which Mr Richardson received, cl 4.1 identified the employment to commence from a specified date in substantially the same terms as those set out above, and in cl 7 made the contract subject to fundamental conditions including the signing and returning of an endorsement agreement in the same terms as quoted above. Clause 7.2 similarly provided that any failure to satisfy or comply with or continue to comply with the fundamental conditions would "constitute a failure by [the pilot] to meet a fundamental condition of [the pilot's] employment and may result in [the] contract being withdrawn, or [the pilot's] employment being terminated." 6 The Federation contended that the employment of the pilots commenced at the date of the contract and not at the subsequent date which was identified in the contract as the time from which the employment was to start. The Federation contended that the letters of offer should be construed as indicating a subsequent date for the commencement of duties pursuant to an employment relationship which was created upon acceptance of the offer rather than as the letters creating a contractual stipulation of a subsequent date for the commencement of an employment relationship. Its submissions relied on the principles relevant to the distinction between conditions precedent to the formation of a contract and conditions subsequent to its formation. In Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 Mason J (as his Honour then was) said at 551-552: There is an obvious difference between the condition which is precedent to the formation or existence of a contract and the condition which is precedent to the obligation of a party to perform his part of the contract and is subsequent in the sense that it entitles the party to terminate the contract on non-fulfilment. In the first category the transaction creates no rights enforceable by the parties unless and until the condition is fulfilled. In the second category there is a binding contract which creates rights capable of enforcement, though the obligation of a party, or perhaps of both parties, to perform depends on fulfilment of the condition and non-fulfilment entitles him to terminate. […] Generally speaking the court will tend to favour that construction which leads to the conclusion that a particular stipulation is a condition precedent to performance as against that which leads to the conclusion that the stipulation is a condition precedent to the formation or existence of a contract. In most cases it is artificial to say, in the fact of the details settled upon by the parties, that there is no binding contract unless the event in question happens. Instead, it is appropriate in conformity with the mutual intention of the parties to say that there is a binding contract which makes a stipulated event a condition precedent to the duty of one party, or perhaps of both parties, to perform. Furthermore, it gives the courts greater scope in determining and adjusting the rights of the parties. For these reasons the condition will not be construed as a condition precedent to the formation of a contract unless the contract read as a whole plainly compels this conclusion. This passage was recently referred to by Gordon J in Fowler v Commissioner of Taxation (2013) 212 FCR 149 where her Honour said at 180 [148]: This construction of the Board Resolution raises a question about the nature of the contract that was formed and, in particular, whether that contract was a conditional contract. As referred to by the primary judge, a construction which leads to the conclusion that a "subject to…" stipulation is a condition precedent to performance will, in general, be favoured as against that leading to the conclusion that the stipulation is a condition precedent to the formation of a contract unless the contract read as a whole plainly compels this conclusion." (Citations omitted) The Federation contended that the application of these principles in this case resulted in the conclusion that the relevant pilots had been employed as at the date upon which they accepted the offer and not upon the subsequent date identified in that offer once accepted. Jetstar contended that it was not to the point that a contract may have been entered into prior to the commencement of employment because, as was contended, those contracts (although binding agreements) were to be construed as only creating an employment relationship as at the commencement date specified in the relevant contract. 7 It is clear that the contracts in each case were not conditional in the sense of stipulating conditions precedent to the formation or existence of a contract between the parties. They were intended to create contractual relations from the date they were entered into and not only subsequently upon the fulfilment of conditions (whether or not described as fundamental). The question, however, is whether the contracts were ones that made the pilots employees as from the date of entering into the contracts or from the subsequent dates specified in the contracts as the commencement date for the employment relationship. The approach for the construction of contracts of employment requires consideration of what a reasonable person would understand the terms of a document to mean. The High Court said in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 176: What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration, not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. The purpose and object of the offers of employment in this case was for the recipients to be offered employment to specific positions as pilots. Thus, for example, in each case the formal offer was for the designated position of First Officer A320 with Jetstar. The recipient of the letter could not commence that position until after obtaining the appropriate aircraft endorsement and, without the endorsement, could not commence in the position offered. The express terms of the offers identified a date of commencement of the employment to that position which in each case was always after the date of the letter of offer or its acceptance. Thus, for example, the date specified for the commencement of employment in the letter dated 16 June 2009 to Mr Warden was 5 October 2009 and that in the letter dated 11 April 2012 to Mr Richardson was August 2012. In every case the letter of offer expressly dealt with the date of commencement of employment and in each case it was a date subsequent to the date of the letter of offer or its acceptance. In each case the recipient of the letter would not have been able to perform the duties in the position identified until after having secured the endorsement necessary for performing the tasks of pilot with the relevant designation. The natural and ordinary meaning of the words would objectively be understood by a reasonable person to intend to create an employment relationship as and from the date specified in the letters and not immediately upon acceptance of the offer. There is no reason to give business efficacy to the bargain between the parties to construe the words otherwise. 8 It may be accepted, as was contended by the Federation, that the purpose of the letters was to create a binding contract from its acceptance, but its terms expressly provided for the commencement of the relationship of employee and employer at a specified date after the contract was created. It may also be accepted, as was contended for the Federation, that the purpose of the offers was to secure pilots for Jetstar, but the achievement of that purpose did not require that the employment relationship begin from acceptance of the offer. It may also be accepted, as was contended for the Federation, that the offers were intended to induce prospective pilots to contract with Jetstar by offering a mechanism (through the endorsement agreement) for funding the payment of the training which was necessary for the pilots to obtain the appropriate aircraft endorsement, but that inducement did not require that employment was to commence other than as provided by the terms of the offer, namely, on the dates stipulated in the offers and not upon acceptance of the offer. The Federation also argued that any ambiguity in the terms of the contract should be construed against Jetstar, but the terms of the contract are not ambiguous in the respect contended by the Federation such as might justify the application of the contra proferentem rule: see Wesoky v Village Cinemas International Pty Ltd [2001] FCA 32 at [47]; Campbell v Bank of Queensland Ltd [2011] QSC 122 at [19]. Nor is it necessary to have regard to any of the background to the contracts entered into, or to the creation of the Jetstar Industrial Agreement, as an aid to construing any of its terms. If it were necessary to do so, however, it would have been relevant to note (contrary to the Federation's submissions) that Jetstar was established as a low cost airline seeking to minimise and confine its costs of operation and, therefore, that the parties to the offers of employment would understand that the obligations of Jetstar to its prospective employees would only commence on the dates anticipated since that would postpone Jetstar assuming additional financial obligations. 9 It follows that the terms of cl 19.1.7 of the Jetstar Industrial Agreement did not apply to the relevant pilots for whose benefit the Federation brought this proceeding. It becomes unnecessary, therefore, in this proceeding, to consider its terms; although its terms may need to be considered in the Association proceeding. 10 The Federation's second cause of action against Jetstar was that of coercion contrary to s 344(e) of the Fair Work Act 2009. Section 344(e) provides that an employer must not exert "undue influence or undue pressure on an employee" in relation to a decision by the employee to "agree, or not agree, to a deduction from amounts payable to the employee in relation to the performance of work". 11 It was common ground between the parties that there were some 120 pilots engaged by Jetstar of which 106 had signed the endorsement agreement. It was they whom the Federation contended had been subject to undue influence in that (as was contended) it was put to them that unless they signed the endorsement agreement they could not enter into the agreement with Jetstar for their subsequent employment. None of the letters of offer, however, was in those terms and there was no evidence either to that effect or that the letters had that effect. What the pilots were offered was an option of either entering into the endorsement agreement or of themselves undertaking to Jetstar that they would arrange and pay for the necessary training and associated costs to obtain the appropriate aircraft endorsement. It was also common ground that at least some 14 of the 120 pilots elected to make their own arrangements and did not enter into the endorsement agreement. 12 In any event, the requirement that the pilots agree to repay Jetstar's cost of training would not constitute undue influence within the meaning of the section. There is little authority concerning s 344 which is found in the division dealing with workplace rights which makes provision for such different concepts as "adverse action", "coercion" and "undue influence or pressure". Each concept must be understood as dealing with distinct matters, although there may be some overlap between them. Coercion may be understood as requiring "an intent to negate choice, and to do so by conduct which is unlawful, illegitimate or unconscionable": John Holland Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2009) 174 FCR 526 ("John Holland"), 540 [47]. Undue pressure, in the context of industrial law, should not be assumed to carry with it the same meaning as that comprehended by the equitable doctrine of undue influence: John Holland at 542-3 [56]-[57]. 13 In this case it may be accepted for the purposes of the argument, but without deciding, that a requirement to sign the endorsement agreements as a condition for receiving the funding was something capable of being regarded as an influence or a pressure for the prospective pilots if they wished to secure, amongst other things, the funding which was also offered as an option to enable them to pay for the necessary endorsement to take up the position. However, the condition required by Jetstar of the prospective employees to secure funding for their training could not in the circumstances be regarded as "undue". The conduct prohibited by s 344 is that described by the composite phrase "undue influence or undue pressure" and a fundamental aspect of the phrase is that the influence or pressure must be "undue". For pressure or influence to be "undue" it must, at least, be unwarranted or inappropriate by being excessive or disproportionate: see Australian Oxford English Dictionary, 4th ed, "undue" at 1561. The notions of excess and disproportionality are implicit in the concept of something being "undue"; that is, that the pressure or influence is something other than that which is "due". Pressure or influence arising from an attractive inducement for the benefit of pilots and for the ultimate mutual benefit of pilots and Jetstar alike is not apt to be described as "undue". The obligation to pay Jetstar was for the benefit of the pilots to obtain endorsement which Jetstar's funding facilitated. The pilots each secured an endorsement through Jetstar's funding of the training which enabled the pilot to take up employment of specific positions. Not all of the 120 prospective pilots took up the offer of funding. The requirement for payment by the pilots was to enable Jetstar to recover its costs for the training which the pilots needed for them to take up the employment which they sought and which had been offered. Completion of the training, and obtaining the endorsement, gave the pilots something of value which was facilitated by the funding upon the condition of repayment. 14 The written submissions in reply for the Federation seemed to imply that an inference of undue influence or pressure should be drawn from the fact that 106 of the cohort of 120 pilots which had been the subject of the proceeding had entered into the endorsement agreement. The written submissions referred to this fact and added that "[h]aving regard to the cost of training, it is readily understandable why that would be". The fact that so many of the pilots adopted the option which required them to sign the endorsement agreement, however, is consistent with it being an attractive option enabling them to defer bearing the cost of the training which was necessary for them to obtain the endorsement necessary to fly the A320 aircraft whether with Jetstar or some other airline. There is no reason to draw any adverse inference from the fact relied upon by the Federation. If it were necessary to draw any inference from the number of pilots who took up the offer it would be that the offer was attractive to those who accepted it. 15 Accordingly, the proceeding will be dismissed. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone.