Clark v Korda

• All payments are calculated using the weekly pay excluding shift penalties, overtime or allowances. ** Eligible family members for family status staff are spouse, de facto and dependent children under 18 years of age. Eligible family members for single status staff are parents, brothers and sisters. Employees over 50 receive a Retiree Card while those under 50 receive a Former Employee ID Card. All travel is sub load and non-up gradable. Fares are at Ansett domestic concessional rates prevailing at the date of leaving and at the fixed Ansett International fares at the time of travel. Example of BRP Redundancy Policy 22 years of service 0-5 years 5 years x 2 weeks 10 weeks 5-15 years 10 years x 4 weeks 40 weeks 15-22 years 7 years x 6 weeks 42 weeks Total 92 weeks (plus notice)

(ii) New Business Recovery Redundancy Program · Replaces the existing voluntary and compulsory redundancy policies. · All payments are capped at 104 weeks including the notice period. · The policy is effective from 1 November 1998. · Notice period is 4 weeks or as otherwise specified in the relevant Award. (iii) Long Service Leave · Accrued long service leave will be paid at the applicable rate. (iv) Superannuation · As per the retrenchment provisions of the applicable trust deed. (v) Annual Leave · Accrued annual leave is paid at the appropriate rate, plus either 17.5% loading or applicable shift penalty. (vi) Other issues · For redundancies processed under the new BRP Redundancy Plan, there will be a maximum redundancy payment of $175,000 per employee. · Regular casuals who can establish continuous service with Ansett will be eligible under this clause.' 14 The Pilots Award does not deal with redundancy. 15 In summary, Clause 21 of EBA IV provides: 1. Ansett employees who are made redundant by Ansett will be entitled to redundancy payments under the Business Recovery Redundancy Program (BRRP) which provides for redundancy pay as follows: (a) Two weeks pay per year of service for the first five years of service; (b) Four weeks pay per year of service for the 6th to 15th years of service inclusive; (c) Six weeks pay per year of service for each year of service thereafter; (d) Payments capped at: (i) 104 weeks, inclusive of notice payments available under the relevant award; or (ii) $175,000, whichever is less. 2. Where an employee would be disadvantaged under the BRRP then the CR91 Policy applies. 16 The CR91 Policy was contained in a document entitled 'The Ansett Airlines of Australia and Subsidiary Airlines - Non-Voluntary Redundancy Plan' which was dated 3 May 1991 and adopted by Ansett to apply according to its express terms to its permanent employees in respect of non-voluntary redundancy. Clause 1(a) provides: '1 APPLICATION (a) This plan will apply to permanent employees of the Company.' The plaintiffs and the pilots were permanent Ansett employees. 17 On 22 December 1998 Geoff Lynch, an Ansett employee sent an email to a number of other Ansett employees on the subject of redundancy. He wrote: 'As discussed, attached is Paul Birch's letter to all staff re the New Business Recover Redundancy Program of 2 December and a covering letter of today's date. Can I ask you to please copy these onto letterhead and place in all pilots' pigeon holes as soon as possible.' 18 Mr Paul Birch was Ansett's Executive General Manager Human Resources. His letter of 22 December 1998 which accompanied that email, written to all pilots in the employ of Ansett, including the pilots in this proceeding, was in the following terms: 'Dear Colleague, Re: New Business Recovery Redundancy Program The following letter, regarding the New Business Recovery Redundancy Program, was distributed to Ansett employees on 2 December 1998. Unfortunately, the distribution system was based on Ansett's Superannuation database and therefore a large number of pilots, who are not members of an Ansett Superannuation plan, would not have received it. Please note that in addition to the payment cap of 104 weeks' pay mentioned in the letter there is also a cap of $175,000 on redundancy benefits. The payment provisions are now capped at 104 weeks pay or $175,000, whichever is the lesser amount. If you have any questions, please contact your Flight Operations Manager or your local HR office.' 19 That email also referred to a copy of a letter of 2 December 1998 which was also written by Mr Birch and forwarded to all pilots. That letter is in the following form: 'Dear Colleague, As reported in AN Update and a Great Business Briefing last month, Ansett has designed a "New Business Recovery Redundancy Program", offering enhanced benefits for award employees leaving the company through either voluntary or compulsory redundancy. This letter, being sent to all employees, is to clarify details of this important new program. Compulsory Redundancy As BRP initiatives inevitably impact jobs, compulsory redundancy (CR) will always be a last resort. However, when CR is unavoidable, the New Business Recovery Redundancy Program will give eligible employees access to enhanced benefits. Under some circumstances the old CR program or award benefits, until they are replaced, may offer a larger payment than the New Business Recovery Redundancy Program. In these situations, employees facing compulsory redundancy only may opt for whichever program offers the greater benefit. Employees may not, however, opt for payment provisions from one scheme and travel benefits from another. Voluntary Redundancy The New Business Recovery Redundancy Program benefits also apply to people volunteering to leave the company. We hope this incentive to take voluntary redundancy (VR), if and when it is offered, will enable us to minimise compulsory redundancies when employee numbers have to be reduced in any area of the business. If you have already expressed an interest in the old VR scheme, there is no need for you to do anything. If voluntary redundancy is offered to you, the new benefits will apply automatically. If you want to express an interest in redundancy for the first time, contact your local HR office for the necessary "Registration of Interest in New Business Recovery Redundancy Program" form. If you have already expressed interest and are no longer interested in redundancy, please contact your HR office. NB: There is no guarantee that expressing interest in redundancy will result in a redundancy package being offered. The program has to reflect the needs of the business and ensure maintenance of required skills for business continuity. The new program applies from 1 November 1998 to 1 November 2001. Benefits under the New Business Recovery Redundancy Program are set out below for your reference. If you have any questions regarding the New Business Recovery Redundancy Program, please contact your manager or your local HR office. Yours sincerely, Paul Birch Executive General Manager Human Resources COMPULSORY REDUNDANCY and VOLUNTARY REDUNDANCY benefits Years of Service Redundancy Payment Travel Benefits 0 - 5 years 2 weeks pay* per year of service 1 trip total (domestic or Ansett International) to be taken within 1 year. Trip may be taken by employee or eligible** over 5 - up to 15 years 2 weeks pay* per year for first 5 years, plus 6 trips total (can include up to 2 Ansett International trips) to be taken within 3 years. Trips can be taken by the employee or between employee and eligibles** 4 weeks pay* per year thereafter over 15 years 2 weeks pay* per year for first 5 years, plus Unlimited trips for employee plus 4 trips per annum for eligibles** (Can include 2 Ansett International trips per annum in total for employee and/or eligibles** 4 weeks pay* per year for years over 5 and up to 15, plus 6 weeks pay* per year thereafter (Capped at 104 weeks including notice where applicable)

• All payments are calculated using the weekly pay excluding shift penalties, overtime and/or allowances. ** Eligible family members for family status staff are spouse, de facto and dependent children under 18 years of age. Eligible family members for single status staff are parents, brothers and sisters. Employees over 50 years of age and with 15+ years of service receive a Retiree Card. Employees under 50 years of age and with 15+ years of service receive a Former Employee ID Card. All travel is subload and non-upgradeable. Fares are at the Ansett domestic concessional rates as per company policy and at the fixed Ansett International fares at the time of travel.' 20 There can be no doubt that Ansett advised all of the pilots then employed that they were entitled to the benefits of the CR91 Policy in the event that they were entitled to a larger sum under that Policy than the New Business Recovery Redundancy Program. 21 There is nothing surprising that the pilots were so advised. That information reflected the terms of Clause 21(b) of EBA IV and the CR91 Policy applied to all permanent employees of Ansett. The pilots were permanent employees. 22 Between 12 September 2001 and 31 March 2002, the pilots' employment with Ansett was terminated by the defendants by way of compulsory redundancy. 23 Such a termination was a compulsory redundancy within the meaning of Clause 21(b) of EBA IV and the CR91 Policy. 24 It is not disputed that if the BRRP applied to the pilots they would be disadvantaged compared with the redundancy entitlements payable under the CR91 Policy. 25 On 16 May 2003 the defendants provided each of the pilots with draft proofs of debt in Ansett's Deed of Company Arrangement which included the administrators' estimate of the particular pilot's employment entitlement and invited each of the pilots to submit that proof of debt. 26 The redundancy pay component of each pilot's employment entitlement was calculated in accordance with BRRP. 27 Some of the plaintiffs disputed the defendants' claim that their redundancy pay should be calculated in accordance with the BRRP rather than the CR91 Policy. They submitted proofs of debt claiming a larger entitlement. 28 Some pilots therefore completed and returned their proofs of debt to the defendants after ticking the box on the form 'Disagree with entitlements' having inserted the following in the 'Comments' section of the form: 'I am entitled to have my severance pay calculated in accordance with the Ansett Airlines of Australia and Subsidiary Airlines - Non-Voluntary Redundancy Plan - May 1991 (CR91) and refer to correspondence already sent or to be sent to you by the APA (of which I am a member). I reject the figure you have provided as my Gross Total Employee Entitlements because you have calculated the severance pay component of the figure using the Business Recovery Redundancy Program rather than the CR91.' 29 On 20 June 2003 the defendants disallowed the proof of debt of each of those pilots. They caused a Formal Notice of Rejection of Proof of Debt or Claim to be sent to those claiming redundancy payments under the CR91 Policy which contained the following: '· Your redundancy entitlement has been calculated pursuant to clause 21 of the Ansett Australia Union Collective Bargaining Agreement 1999 ("EBA IV"). · The "CR Policy" referred to in Clause 21 of EBA IV does not apply, nor was it intended to apply to pilots, as pilots were not the subject of any redundancy program at the time the policy was set, nor indeed, were pilots, or the Australian Pilots' Association part of the Australian Council of Trade Unions which negotiated the policy with Ansett. · The uncapped benefits contained in the CR Policy are only accessible under Clause 21(b) of EBA IV. As the CR Policy does not apply to pilots, as indicated above, the cap of $175,000 provided in EBA IV applies.' 30 The plaintiffs' case is that the pilots would be disadvantaged under the BRRP Program compared with the entitlements they would receive under the CR91 Policy. 31 The plaintiffs contend that Clause 21(b) of EBA IV operates in its terms and if an employee (a pilot) is disadvantaged under the program provided for in EBA IV itself, the CR91 Policy applies. 32 The defendants have pleaded in paragraph 22(a) of their defence: 'Further to paragraph 22 above: (a) clause 21(b) of EB IV, inter alia, replaced the CR91 Policy; (b) clause 21(c)(ii) of EBA IV contained and imposed a "temporal cap" on all redundancy payments in the following terms: "all payments are capped at 104 weeks including the notice period"; and (c) clause 21(c)(vi) of EB IV contained and imposed a "quantum cap" on all redundancy payments in the following terms: "for redundancies processed under the new BRP Redundancy Plan, there will be a maximum redundancy payment of $175,000 per employee".' 33 That plea takes up the matters raised in the Notice of Rejection of Proof of Debt or Claim. 34 Clause 21 of EBA IV introduced, for the first time, a Business Recovery Redundancy Program which became effective from 1 November 1998. As Clause 21(a) itself provides, it is a new policy to replace all existing or previous compulsory redundancy policies. The CR91 Policy was an existing compulsory redundancy policy. EBA IV applies to all employees covered by the agreement. So much is evident from the words in the second sentence of Clause 21(b) which read, 'it will apply to employees covered by this Agreement where Ansett deems a redundancy to have occurred or an application for voluntary redundancy is accepted'. 35 Clause 21(b) covers all employees of Ansett bound by EBA IV, which includes the plaintiffs. Clause 21 therefore applies to all pilots who have been made compulsorily redundant. All the pilots have been made compulsorily redundant. 36 As I have said, there is no Award entitlement offering an advantage over and above the BRRP entitlements. However, it is not disputed that the CR91 Policy would offer pilots, if they were entitled to the benefits of that policy, a greater sum than EBA IV itself. 37 That means consideration must be given to the further provisions of Clause 21(b): 'Where compulsory redundancy is necessary and an employee will be disadvantaged under the new program either the previous CR Policy (ie: the May 1991 "Ansett Airlines of Australia and Subsidiary Airlines - Non-Voluntary Redundancy Plan and Procedures Document") or award entitlements will apply.' 38 The CR91 Policy entitlements only apply: (1) where compulsory redundancy has occurred; and (2) where a pilot would be disadvantaged under the new program. 39 The pilot would only be disadvantaged under the new program if the pilot were entitled to the benefits under the CR91 Policy prior to the introduction of EBA IV. 40 Therefore, if a pilot was entitled to rely on the CR91 Policy prior to EBA IV and can establish a disadvantage, then the pilot is entitled to the benefits under the CR91 Policy. 41 The plaintiffs contend that all pilots were subject to the CR91 Policy. In support of that contention they point to the opening words of the CR91 Policy. 42 There is nothing to suggest that the CR91 Policy does not apply to the pilots. On its face, it applies to all employees within Ansett. The plain words of the document support the plaintiffs' argument. The CR91 Policy applies to the pilots employed by Ansett and who have been made compulsorily redundant. 43 There are other facts and circumstances to support that construction. The CR91 Policy was included in the Ansett Australia Redundancy Manual without any restriction or limitation on its applicability to any employees of Ansett and, in particular, the pilots. 44 In its letter of 2 December 1998 which was enclosed in Ansett's letter of 22 December 1998, which was written to all pilots, Ansett itself represented to the pilots that it applied. 45 In those circumstances, in my opinion, it must be held and I do hold that the CR91 Policy applies to all pilots who have been made compulsorily redundant and who would suffer a disadvantage if obliged to accept the entitlements under EBA IV. 46 Plaintiffs' counsel, Mr Borenstein QC, put an alternative argument in the event that I did not think the plain words of the CR91 Policy meant what they said and in case I was not persuaded by Ansett's own actions in informing the pilots that the CR91 Policy would apply in the circumstances predicated in Clause 21(b). 47 He argued that the CR91 Policy had become a term and condition of the pilots' contract of employment. 48 He argued that Mr Birch's letter of 2 December 1998 constituted an offer to the pilots to whom the letter was sent and that those pilots had accepted that offer by continuing in their employment with Ansett. He relied upon a decision of J.D. Phillips J in the Supreme Court of Victoria in Ajax Cooke Pty Ltd t/a Ajax Spurway Fasteners v Anthony Nugent (Unreported, Supreme Court of Victoria, J.D. Phillips J, 29 November 1993). 49 Because I have no doubt that the plaintiffs' primary arguments must be accepted, I do not need to address this further argument. I would observe, however, that on the face of it the argument, if correct, would not be of assistance to any pilot who commenced employment after 22 December 1998 and who did not receive Mr Birch's letters. 50 It follows that if the pilots are disadvantaged by the entitlements available under BRRP, compared with those accruing under CR91, then CR91 is to apply to those pilots. 51 The defendants also argued that the cap which is contained in Clause 21(c)(vi) of EBA IV applies both to EBA IV and the CR91 Policy if that applies by force of Clause 21(b). 52 Of course, the cap applies to benefits calculated in accordance with the formulae in EBA IV. However, in my opinion, it has no application whatsoever to entitlements calculated in accordance with the CR91 Policy. There are two reasons for that. 53 First, Clause 21(c)(vi) states: 'For redundancies processed under the new BRP Redundancy Plan, there will be a maximum redundancy payment of $175,000 per employee.' 54 In its terms, it only applies to an employee whose redundancy is processed under the new BRP Redundancy Plan. If Clause 21(b) operates to allow an employee to have their entitlements calculated in accordance with the CR91 Policy it cannot be said that the redundancies are processed under the new BRP Redundancy Plan. 55 Secondly, if the cap applied to entitlements assessed under the CR91 Policy, it would mean that Clause 21(b) would have no work to do where an employee's entitlement under the CR91 Policy exceeded $175,000. There is no reason to give Clause 21(c)(vi) such a limited construction. 56 In those circumstances, the maximum redundancy payment of $175,000 per employee does not apply to those entitlements assessed under the CR91 Policy. 57 The proper construction of Clause 21 of EBA IV was considered by Gyles J in Australian Licenced Aircraft Engineers' Association v Ansett Australia Limited [2003] FCA 249. 58 After referring to EBA IV, the Award and CR91, Gyles J stated the question before him. He said at [21]: 'The principal question of interpretation which arises is whether, as contended by Ansett, the cap of 104 weeks included in cl 21 of the amended 1999 EBA applies in the event that the rider as to no disadvantage in the same clause operates and the benefits provided for by the other instrument apply. It is contended for Ansett that the 1999 EBA as amended remained the operative agreement which governs the relationship, and should apply according to its terms. Furthermore, it is submitted that the cap or limitation is not just part of the calculation for determining entitlement pursuant to the 1999 EBA. It is a separate provision having wider operation.' 59 In answer to those contentions, his Honour said at [22]: 'In my opinion, counsel for the applicant is correct in submitting that this interpretation is untenable. The "no disadvantage" rider is based upon the premise that there are three separate regimes for administering compulsory redundancy. The first is the new Business Recovery Redundancy Program ("BRP") provided by the 1999 EBA itself. The second is the CR May 1991 Policy. The third is the Award. As counsel for the applicant points out, each regime had its own structure, including limits. In my opinion, there is no escape from the conclusion that the 104 week cap is one (and only one) aspect of the BRP and that the benefits to be obtained under that program (including the cap) must be compared (in the case of a particular employee) with the operation of the previous CR May 1991 Policy regime as a whole, with its limits, and with the Award entitlements as a whole with their limits. The other capping provision in the 1999 EBA of $175,000 per employee illustrates the point - it is expressly for redundancy processed under the BRP and is indistinguishable in this respect from the 104 week cap.' 60 In the case at bar, the question of the Award does not arise and does not need to be addressed. 61 I agree, with respect, with his Honour's reason in relation to the interaction of EBA IV and the CR91 Policy, and the effect of the $175,000 cap in EBA IV. 62 Gyles J's decision went to the Full Court of this Court: Ansett Australia Limited (subject to Deed of Company Arrangement) v Australian Licenced Aircraft Engineers' Association [2003] FCAFC 209. 63 After setting out Gyles J's dicta, to which I have referred, the Full Court said at [11]-[18]: 'Whether or not it is correct to say, as the primary judge said at [22], that there are three separate regimes for administering redundancy, it is plain that the two regimes which preceded the EBA were preserved. Thus, although the EBA purported to replace the earlier regimes when the EBA came into effect in 1999, it did not exclude their operation. What was required when an employee was made redundant was a comparison of the overall benefits provided under each instrument. The 104 week cap was part of the package of entitlements provided by the Business Recovery Redundancy Program ("BRP") which was referred to in clause 21(c) of the EBA. The $175,000 maximum payment referred to in clause 21(c)(vi) has the same character. To construe the 104 week capping provision as operating independently from the package of benefits so as to thereby limit the operation of the amounts payable under the Award or the 1991 Policy would be to vitiate the effect of the "no disadvantage" clause. It would be contrary to the purpose of the EBA which was to avoid the employee being put in a less disadvantageous position under the new regime than he or she was under the old. In this regard it is to be noted that each of the earlier regimes had its own separate capping mechanism; see clause 4(j) of the Award and clause 5(b) of the 1991 Policy. Thus, when comparing the package of benefits under the old regime with that which is afforded under the new one, the cap provided in each case must be taken into account. It follows that the 104 week cap in the new regime cannot override the capping provisions provided for in the old ones in comparing the benefits payable.' 64 I am, of course, bound by that decision but, in any event, in my respectful opinion, the decision is plainly right. 65 Although these decisions were concerned with the cap of 104 weeks rather than the cap of $175,000, the defendants' counsel did not seek to distinguish the reasoning of Gyles J or the Full Court in the proceeding before me. In my opinion, the reasoning cannot be distinguished. 66 In my opinion, the plaintiffs' contentions must be accepted. 67 The plaintiffs are entitled to a declaration. The plaintiffs submitted draft Minutes of Order at the hearing. I have modified the draft declaration to limit the declaration to pilots who were permanent employees. The document which contains the CR91 Policy only applied to permanent employees. I make the following declaration: The airline pilots who were permanently employed by Ansett Australia Limited (subject to Deed of Company Arrangement) as at 12 September 2001 are entitled to have the amounts due and payable to them for severance and redundancy pay calculated and paid in accordance with the 'Ansett Airlines of Australia and Subsidiary Airlines Non-Voluntary Redundancy Plan and Procedures Document' dated 3 May 1991 (the CR91 Policy) where such entitlements would be greater than if calculated under the Ansett 'Business Recovery Redundancy Program' effective 1 November 1998 (the BRP), as provided for in Clause 21 of the Ansett Australia Union Collective Bargaining Agreement 1999 (EBA IV). 68 There is no need to make any consequential order because Mr Tracey QC, the defendants' counsel informed me during the hearing that if I made the declaration sought the defendants would reconsider all pilots' claims for redundancy. 69 I will merely give the plaintiffs' liberty to apply. 70 I will hear the parties as to costs. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.

Counsel for the Plaintiffs: H Borenstein QC with M Gronow

Counsel for the Defendants: R Tracey QC with A Young

Solicitor for the Defendants: Arnold Bloch Leibler