Commonwealth Bank of Australia v Finance Sector Union of Australia

Primary Decision 10 One of the alternative arguments raised by the FSU was that from 10 October 1997 the seconded employees were employed by EDSA and not the Bank. His Honour held that the seconded employees remained employees of the Bank after 10 October 1997 and there is no notice of contention filed to suggest that his Honour was wrong in that respect. The respondents to this application did not at any stage of these proceedings contend that the retention and secondment of the relevant employees was a sham. These reasons therefore do not address questions which would arise if it had been found that the employment and secondment of such employees was not a real transaction at all. 11 The primary judge commenced his consideration of the operation of cl 42 in relation to the seconded employees as follows (at [65]): "While there were limited areas of dispute about the facts, the central question raised in these proceedings is whether clause 42 of the Award is enlivened in a situation such as the present and if so, with what effect. I am satisfied that in the months leading up to 10 October 1997, the Bank proposed that the duties of the employees employed in the IS Department would still be undertaken by them if they elected not to take up employment with EDSA. The proposal that EDSA would take over the operations of the IS Department using, as its personnel, the individuals who had been employed by the Bank in that department was conditional on a sufficient number of the employees agreeing to take up employment with EDSA. On the other hand, the proposal contemplated that employees not taking up such employment would continue, at least in form and at law, to be employed by the Bank and perform the duties they had formerly performed at least in the short term. However does this lead to there being a "position redundancy" in relation to the employees who did not take up employment with EDSA?" 12 After referring to the decision in Hawkins v Commonwealth Bank of Australia (1996) 66 IR 322 ("Hawkins") and the decision of the Full Court in Hawkins v Commonwealth Bank of Australia (No 2) (1996) 70 IR 213 ("Hawkins (No 2)"), his Honour said (at [69]): "However what these observations leave unanswered is the question of whether the definition is satisfied and there is a "redundancy" if there has been a fundamental and radical change in the organisational context in which the position existed though the duties attaching to the position continue to be performed." 13 His Honour then considered a line of authority consisting of Termination, Change and Redundancy Case (1984) 8 IR 34 at 74-75 and also (1984) 9 IR 115 at 129; Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v United Milk Tasmania Ltd (2000) 48 AILR 4-315 (Print S7351); Steppes Pty Ltd (t/a The Beaufort Darwin) v Australian Liquor, Hospitality and Miscellaneous Workers Union (1998) 86 IR 337; Trustee Officers' Award Case (1983) 290 CAR 100 and the decision of the Full Bench on appeal in (1983) 291 CAR 200; In re Bank Officers (State) Board (1921) 20 AR (NSW) 303; Re Government Cleaning Service (Privatisation) Award (No 2) (1994) 55 IR 199; Re Government Cleaning Service (Privatisation) Award (No 3) (1995) 59 IR 348; Re Australian Education Union; Ex parte Victoria (1995) 184 CLR 188 at 232; Australian Municipal, Administrative, Clerical & Services Union v Greater Dandenong City Council (2000) 101 IR 143; and, on appeal, Greater Dandenong City Council v Australian Municipal, Administrative, Clerical & Services Union (2001) 112 FCR 232. His Honour deduced from these authorities the proposition that the notion of an employee becoming redundant can arise when there is, in prospect, the termination of the employee's employment even though the duties of the employee will still be undertaken (either by that employee or another employee) for the ultimate benefit of the original employer but in employment with another employer and for the immediate benefit of that other employer. His Honour recognised that that case was not analogous with the present. The question to be answered was reformulated by his Honour as follows (at [82]): "…whether there can be a "redundancy", as defined, if there has been a fundamental and radical change in the organisational context in which the position existed, with the result that the position has effectively been abolished though the duties attaching to the position continue to be performed." His Honour's immediate answer was as follows (at [83]): "At one level, the question can be simply answered, as the applicants submitted. The Bank no longer required the work to be done because it was no longer done for the Bank. It was done for EDSA. That is why the Bank's IS Department ceased to exist after 10 October 1997; why those IS employees who resigned from the Bank and moved to EDSA were not replaced; and why, when EDSA underwent a global restructure and no longer required many of the seconded IS employees, they were ultimately retrenched. On this approach, which I accept at this level of abstraction, there was a redundancy situation. In one sense, this conclusion disposes of the issue raised at this point in the proceedings in favour of the applicants. However, it is nonetheless desirable to consider, in a more detailed way, the language actually used in cl 42 though the ultimate result is, in my opinion, the same in the context of this case. Indeed it is appropriate to consider the language actually used because the approach of the Bank in defending the application was effectively to say that, consistent with the observations in Hawkins (No 1) (set out at [67] above), "work" means "duties" and the duties continued to be performed."

14 His Honour gave attention to some authorities as to the meaning of the word "work" and said (at [88]):

"… The entire expression has a clear meaning if "work" is intended to mean only duties. That is, a redundancy arises when a major portion of an employee's duties is no longer required to be performed. However the definition is no less comprehensible if "work" means not only duties but the organisational context in which they are performed and the terms and conditions under which they are performed which effectively define and create the position to which the duties attach. A change, particularly if it was a significant one, in the organisational context in which an employee performed his or her duties where the duties remained the same but the position was abolished, could aptly be described as a situation where a major portion of the work was no longer required to be done. … It can be seen from sub-par (2) of the definition of "redundancy" that the clause is intended to comprehend a situation where it is proposed the employee's work is to be performed at a different location requiring a change of residence. This suggests that the entire clause is directed to situations where there is a significant and material change in the context in which the work reflected in the pre-existing position is to be performed as well as circumstances where the work is not done at all. It is tolerably clear, in my opinion, that the word "work" is not intended to be a reference simply to "duties"." 15 In relation to redeployment, his Honour concluded (at [92]) that: "It would, in my opinion, be inconsistent with the purpose of the clause viewed as a whole to treat an employee as not being in a redundancy situation when, for virtually all practical purposes, the employee ceased working for the Bank within its organisational structure." 16 His Honour's ultimate conclusion was as follows (at [93]): "While it has by no means been an easy issue to resolve, I am satisfied that each member of the representative group on whose behalf these proceedings are brought was, at 10 October 1997, in a redundancy situation. The Bank proposed that each group member would continue to perform generally the duties they had, to that point, been doing. However the context in which those duties were performed was to be changed profoundly. The pre-existing duties continued, in substance, to be performed, but the position in which they had previously been performed had disappeared. They were performed in an entirely different context. While the Bank continued to play a role in the supervision of their employment at a general level, so did EDSA. The changed context was a fundamental one and it was only in a nominal sense that the position each employee occupied continued to exist. In a real and substantial sense each position had been abolished. Each seconded employee no longer worked in the IS Department of the Bank but rather each performed their duties at the direction and for the benefit of EDSA. While it might be said that the positions they held continued, such an approach gives pre-eminence to form over substance. In my opinion, the positions they occupied before 10 October 1997 were, in substance, abolished as soon as EDSA took over the activities formerly undertaken by the IS Department of the Bank. At that time the Bank no longer required the work they had formerly done to be done in the future. Each of the group members was at that time, in a redundancy situation. It follows from what I have just said that the continuation of the performance of the duties by the seconded employees did not constitute, as the Bank submitted as a subsidiary or alternative submission, redeployment either to a directly comparable position or another alternative position as contemplated by subcl (d). That is because the continued employment of the seconded employees by the Bank was not employment "within" the Bank as contemplated by cl 42."

Argument for the Bank 17 Counsel for the Bank drew attention to the fact that in Hawkins it had been pointed out that the literal wording of the definition of "redundancy" makes little apparent sense because of the terms of par 3 of it. The decision in that case was as to the identical clause in the 1990 Agreement. It was concluded (at 333): "It [redundancy] has an accepted meaning as describing a situation which might lead to termination of an employee's employment because the duties of the job or position are no longer to be performed by an employee as the occupant of that job or position and often as a result of technological or organisational change. It is consistent with the ordinary meaning of redundancy to treat par (1) as reflecting that meaning, par (2) as an extension of it, and par (3) as identifying the circumstances in which a redundancy arises which attracts the operation of the Agreement. So construed, this par (3) limits the general operation both of pars (1) and (2) … In my opinion par (3) of the definition of "redundancy" is intended to identify the circumstances in which either of the two events referred to in pars (1) and (2) would constitute a redundancy." That construction of the clause in the 1990 Agreement was approved by the Full Court in Hawkins (No 2) and it is common ground that cl 42 should be so construed. 18 The submission of counsel for the Bank was that it followed from the decision of the Full Court in Hawkins (No 2) that there was no redundancy on the present facts. No position had been abolished. The work of the position, in the sense of the duties of the position, remained the same as it had been. The holder of the position continued to be employed by the Bank, with all of the normal benefits and allowances provided for by the 1990 Award, the 1990 Agreement and other benefits available to bank employees. It was submitted that the approach of the primary judge introduced uncertainty and indefiniteness to a straightforward situation, and that this was likely to detract from, rather than assist, the object of cl 42, which was to minimise the potential for industrial disputation. It was said that there was no warrant in any of the authorities considered by the primary judge for the notion of constructive or situational redundancy where the same duties continued to be performed, for the same employer, on the same basis. Indeed, it was submitted that these authorities were against the application of redundancy provisions on transmission of a business. If this were so, then the present case was obvious. It was submitted that once it was recognised that the employees continued to be employees of the Bank there was not room for any concept of real or deemed employment by EDS. It was submitted that the argument based upon substance rather than form was misconceived. There was no case of sham made at any stage. 19 It was further submitted for the Bank that if there were such a deemed redundancy, then the position which continued to be occupied should be regarded as a "directly comparable position" within the redeployment provisions. If it is appropriate to deem redundancy where none had occurred, it was appropriate to deem there to have been offers of a directly comparable position.

Argument for the Respondents to the Application for Leave 20 Counsel for the respondents defended and adopted the reasons of the primary judge. They submitted that the agreed facts made it clear that the intention of the Bank was to outsource the whole of the information technology function and that the secondment of employees who did not transfer was a device to avoid the payment of severance pay. The fact that real employment was continued and there was no sham was no answer to that conclusion. The position of an employee in a large in-house information technology group, with the career path that that entailed, was quite different from that of one of a few permanent secondees with no information technology career path in the Bank. Defining work by reference only to actual day-to-day duties was too narrow. 21 Counsel submitted that much of the criticism of the primary judge's reasoning related to what was, in reality, an alternative basis for decision. The Bank did not "require" the work to be done within the meaning of cl 42 - it is clear that the Bank would have much preferred the work to be completely done by EDS and its direct employees, and only tolerated the work being done in part by secondees because of the effect of cl 42. It was submitted that although it was correct that none of the cases dealt with facts like the present, this is explicable because permanent secondment is an unusual (and anomalous) situation. It was submitted that neither Hawkins nor Hawkins (No 2) governed this case. In that case, the position had been abolished and the Court had been dealing with the Bank's argument that it had been abolished in name but not in substance. It was submitted that a purposive approach to the construction of cl 42 should be adopted. 22 So far as redeployment is concerned, it was submitted that construing the words "within the Bank" as being automatically satisfied if employment is by the Bank is a triumph of form over substance. It was submitted that the phrase "a position which is at the same classification within the Bank" means that the employees should be employed for practical purposes within the Bank's organisational structure and seconded employees do not fall within that category.

Decision on Appeal 23 Hawkins (No 2) is of critical significance to the resolution of the present problem. It was decided by a Full Court of the Industrial Relations Court of Australia. From 30 March 1994 that Court took over the jurisdiction previously exercised by this Court (Industrial Relations Reform Act 1993 (Cth) Pt 7). From 25 May 1997 the jurisdiction of that Court was transferred back to this Court (Workplace Relations and Other Legislation Amendment Act 1996 (Cth) s 2 and Schedule 16). At all times, the judges of the Industrial Relations Court of Australia were also judges of this Court. We note that the original application in Hawkins was filed in this Court prior to the transfer of this Court's jurisdiction to the Industrial Relations Court of Australia. In the circumstances, although not technically binding on this Court, a judgment of a Full Court of the Industrial Relations Court of Australia is entitled to great weight. We are of the view that Hawkins (No 2) should be followed in the present case. Indeed, as the FSU and the Bank were each parties to the decision in Hawkins (No 2), it would not be appropriate for a different construction to be accorded to the same clause (albeit in different instruments) in a later decision without a compelling reason. Whilst counsel for the FSU is correct in submitting that the decision in Hawkins (No 2) does not directly decide the present case, it does construe a clause identical with that with which we are concerned in a manner difficult to reconcile with the judgment under appeal, in that "work" in the definition of redundancy was judged by the duties actually performed by the officer of the Bank concerned. As the primary judge acknowledged, if that view of "work" is taken then the application of the clause to the present circumstances is straightforward and the applicants must fail. We should, therefore, take a closer look at Hawkins and Hawkins (No 2). 24 In Hawkins it was said (at 333-334): "Thus, in the present case, it is necessary to consider whether the work of Hawkins, or a major portion of it, was no longer required to be performed and whether that arose relevantly, as a result of reorganisation. I should add that the definition speaks of a position redundancy. That is a reference, in my opinion, to a situation where the work done by an occupant of an identified position is no longer done by the occupant of that position and the position is abolished. That might be because the work is not done at all or the work is allocated to a range of other identified positions in which some of the reallocated work is done but is done in conjunction with other work. As Ryan J said in Jones: "It has generally been accepted that a dismissal is not unfair if it results from genuine redundancy, in the sense that an employee is no longer required to perform his or her job because of changes in operational requirements. In R v Industrial Commission of South Australia; Ex parte Adelaide Milk Co-Operative Ltd (1977) 44 SAIR 1202, Bray CJ defined redundancy at 1205, where he stated: 'a job becomes redundant when an employer no longer desires to have it performed by anyone.' That definition was endorsed by a Full Bench of the Australian Conciliation and Arbitration Commission in the Termination, Change and Redundancy Case (1984) 8 IR 34 at 55-56. On Mr Jones' evidence, this case would not satisfy that narrow definition of genuine redundancy, as some of his former duties were still being performed. However, it should be noted that Bray CJ's description of what can constitute a redundancy is not expressed to be exclusive. His Honour's description was cast in terms of a 'job' in the sense of a collection of functions, duties and responsibilities entrusted, as part of the scheme of the employer's organisation, to a particular employee. However, it is within the employer's prerogative to rearrange the organisational structure by breaking up the collection of functions, duties and responsibilities attached to a single position and distributing them among the holders of other positions, including newly-created positions. It is inappropriate now to attempt an exhaustive description of the methods by which a reorganisation of that kind may be achieved. One illustration of it occurs when the duties of a single, full-time, employee are redistributed to several part-time employees. What is critical for the purpose of identifying a redundancy is whether the holder of the former position has, after the reorganisation, any duties left to discharge. If there is no longer any function or duty to be performed by that person, his or her position becomes redundant in the sense in which the word was used in the Adelaide Milk Co-Operative case." What then were the changes in the duties of the position occupied by Hawkins? That involves an analysis of the work done by Hawkins in his capacity as head of institutional banking, South Australia and as relationship executive under the new structure." (emphasis added) Later it was said (at 337): It is plain from the evidence that the position of head of institutional banking was abolished. A literal reading of the definition might, as the applicants submit, indicate that if this was so, the former position did not exist at all and thus Hawkins was involved in a position redundancy. However, the definition operates, not on names or titles, but on the aggregation of duties that constitute the position. It is thus necessary to consider whether "a major portion" of the work of the position formerly held by Hawkins was to be performed by the occupant of the position to which he was to be appointed, it being the only position identified by the Bank as substantially reflecting the work of the old position." (emphasis added) The conclusion in that case on that question was (at 337): "In the present case, the position assumed by Hawkins had very few of the managerial functions that constituted a significant part of the duties of the position he formerly occupied. It involved a significant change in the duties that were, in my opinion, material. They constituted the loss of a major portion of the work performed by Hawkins in the position of head of institutional banking, South Australia. He was thus involved in a position redundancy." (emphasis added) 25 The Full Court in Hawkins (No 2) said (at 220): "The purpose of the Agreement is to give a measure of flexibility to the Bank in redeploying staff on the one hand and, on the other hand, to give a measure of certainty to those whose positions have been abolished." Later (at 226) the Full Court said: "Earlier in the jugment [sic] his Honour posed the question … namely, whether the work of Mr Hawkins, or a major portion of it, was no longer required to be performed and whether that arose relevantly as a result of reorganisation." Later (at 226-227) the Full Court said: "Under the definition of redundancy in cl (iii) the question was not whether Mr Hawkins personally had become redundant to the requirements of the Bank, but whether the position which he formerly occupied had become redundant. The new position was to have none of the personnel functions of the old position. He would no longer be responsible for managing a large group of employees of the Bank. He would have no direct managerial role in relation to the Treasury Department and International Trade. His role in credit assessment was to become indirect and collaborative rather than direct. … In our opinion his Honour posed the correct question to determine if Mr Hawkins was in a position redundancy for the purpose of the Agreement, and that the conclusion which he reached on the facts was justified." 26 Counsel for the FSU was unable to refer to any authority which gave the special meaning to "work" for which he contended. No doubt there can be debate as to whether particular activities may be regarded as "work" for various purposes (eg, Warramunda Village Inc v Pryde [2002] FCA 250). There are, however, features of cl 42 which, taken in context, lead us to the same conclusion as appears from Hawkins (No 2). 27 One is that redundancy within cl 42 means a position redundancy, not an employee redundancy. The usual meaning of "redundancy" in an employment context is "denoting or relating to an employee who is or becomes superfluous to the needs of the employer" (Macquarie Dictionary, 3rd ed). There are numerous indications, both within cl 42 and in other parts of the Award, which indicate that an officer of the Bank is appointed to an actual nominated position with nominated duties. The primary application of cl 42 is where, as a result of reorganisation, the nominated position becomes redundant and is abolished. That was the case in Hawkins. There is no finding that that occurred here, and the evidence indicates to the contrary. We accept that there may be circumstances where leaving the nominal position in place, but substantially altering the duties, could amount to making a position redundant. To hold otherwise would be to prefer form over substance. There is no room for application of that principle where the duties remain, in substance, the same. Indeed, it follows from Hawkins (No 2) that the formal abolition of a position will not amount to a position redundancy unless the change in duties is substantial enough to amount to a change of position. The test for position redundancy which cl 42 chooses is that the work to be done by the holder of the position is no longer required to be done, and it is common ground that that means no longer required by the Bank. We do not agree that (leaving aside any question of sham) the requirement by the Bank can be second-guessed. "Require" is used in the sense of demanded or called upon or enjoined. The agreed facts make it clear that the Bank did continue to require that the work be performed. 28 A significant indicator internal to cl 42 that "work" is used in the sense of duties to be performed is the definition of "directly comparable position" which appears in juxtaposition with the definition of "redundancy" and which has, what appears to us to be, a symmetrical relationship with it. Read as Hawkins (No 2) decides, the definition of "redundancy" has two alternative criteria or gateways and a third which limits each alternative. The third has no relevance to the concept of a directly comparable position. The words in the definition of "directly comparable position": "a position … which does not entail a change of duties significant enough as to be unreasonable in the circumstances of the skills or potential skills … and abilities of the officer concerned and which is at the same location or at another location which is within reasonable commuting distance" (emphasis added) illuminate the definition of position redundancy where: "… work" (or a major portion of it):

1. is no longer required to be performed (or) 2. is to be performed at a new location which requires a change in residence of the officer concerned." The first limb of "redundancy" is that "work is no longer required to be performed". The equivalent in relation to "directly comparable position" is "does not entail a change of duties significant enough as to be unreasonable …". The second limb of redundancy is that "work is to be performed at a new location which requires a change in residence …". The equivalent in relation to "directly comparable position" is "which is at the same location or at another location which is within reasonable commuting distance". Whilst the language of the definitions is not identical, the concepts are the same. This reading of the clause (particularly the first limb) provides support for the contention that "work" in respect of position redundancy relates to the actual duties to be performed by the holder of the position. 29 It may be accepted that the career path for an employee of the Bank who is seconded to work with EDS will be different to the career path which would have existed if the Bank's information technology division remained as it was, and that, in particular, there will be less opportunity for promotion or advancement in the field of information technology. Counsel for the FSU was not able to refer to any authority which establishes that this consideration is relevant to redundancy as it has been understood before now, whether in relation to redundancy in general or position redundancy. Severance pay is primarily designed to deal with situations in which either the person or the position is redundant in the usual sense of the word and retrenchment follows. Clause 42 extends that notion so that if there is a substantial enough change in duties, or if the location of the job is sufficiently changed, then there is, effectively, a constructive redundancy and if retrenchment follows severance pay becomes payable. Loss of a collateral advantage by virtue of reorganisation is not within the ordinary concept of redundancy, and cl 42 has not been drafted so as to pick up that circumstance. 30 The appeal to purposive construction is misplaced. The 1990 Award was a consent award, negotiated between a union and an employer. Such an award, as with all industrial agreements, is necessarily a compromise between various interests. Purposive construction does not mean that an award, or a clause in an award, of this character should be construed favourably to one side or the other. In the present case cl 42 itself states the purpose of the clause and the Full Court in Hawkins (No 2) (in relation to the identical clause in the 1990 Agreement) expanded upon that by describing it as: "… to give a measure of flexibility to the Bank in redeploying staff on the one hand and, on the other hand, to give a measure of certainty to those whose positions have been abolished." As Finkelstein J recently pointed out in dealing with a not dissimilar issue: "… there comes a point when a court of construction must resist the temptation of forcing a meaning to a bargain which the parties did not intend and to substitute for the arrangements actually made, an arrangement which the court believes is a better one." (Construction, Forestry, Mining & Energy Union v Amcor Ltd [2002] FCA 610 at [18]). Even if such an approach were open, it would not be possible for the Court to decide what would be a better bargain having regard to the interests of both parties, or to decide what other consequences that might have for other parts of the industrial award or agreement. 31 Our opinion as to the substance of that matter would not alter if the additional facts found by the primary judge were taken into account. It is unnecessary to consider the arguments as to redeployment or the relevance or admissibility of events after 11 October 1997. Our conclusion that the appeal should be allowed makes it unnecessary to consider any procedural question which might otherwise have arisen.

Conclusion 32 Leave to appeal is granted and the appeal is allowed; the orders below should be set aside, and, in lieu thereof, the separate question should be dealt with by an order that the claims for relief sought in paragraphs 1, 2 and 3 of the application be dismissed. The proceeding otherwise should be remitted to the primary judge. No order for costs should be made because of the terms of the Act. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Gray, North and Gyles.

Counsel for the Applicant: RJ Ellicott QC and J Fernon

Counsel for the Respondents: R Kenzie QC and P Ginters

Solicitor for the Respondents: Geoffrey Edwards & Co