Fair Work Ombudsman v Pocomwell Limited

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY FAIR WORK DIVISION WAD 241 of 2011

JUDGE: BARKER J DATE: 25 MARCH 2013 PLACE: PERTH

OVERVIEW 1 This proceeding is set down for trial on 8 to 12 April 2013. 2 The applicant brings the proceeding as a person with standing authority to do so under the Workplace Relations Act 1996 (Cth) (WR Act) as it continues to apply by virtue of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) after the WR Act repeal day and also under s 539 of the Fair Work Act 2009 (Cth) (FW Act). 3 The applicant alleges that: The first respondent, a company incorporated in Hong Kong, was at all material times a national system employer within the meaning of s 14 of the FW Act and the employer of certain employees who were engaged by the second respondent as agent for the first respondent. The first respondent authorised the second respondent to pay the employees US$900 per month for all hours worked on the rig Nan Hai VI. The second respondent was at all material times a company incorporated in the Philippines that acted as agent for the first respondent and in that regard had entered into a Manning Agreement dated 13 June 2002 and a power of attorney dated 3 July 2002, and as agent for the first respondent entered into the employment contracts with the employees and paid their wages. The third respondent was at all material times incorporated under the Corporations Act 2001 (Cth). In March 2009 the second respondent agreed to provide the employees to the third respondent to work on the rig Nan Hai VI. The second respondent was responsible for the payment of the employees' wages while the third respondent agreed to pay the second respondent a hire fee of US$92 per day for each of the employees. The third respondent was aware that the employees were being paid less than AU$92 per day by the second respondent. The third respondent encouraged the second respondent to provide their lowest possible price for the hire of the employees. Between March and July 2009 the operator of the Nan Hai VI, namely Maersk Drilling Australia Pty Ltd, agreed to pay the third respondent AU$400 per day for each of the employees. The fourth respondent, a natural person, was the sole director and shareholder of the third respondent and secretary of the third respondent and responsible for the third respondent's management. At various times between July 2009 and March 2011 the first respondent employed the employees as specialist painters (hereafter, painters), each required to work 12 hours per day, seven days per work on fixed term contracts which varied in duration between 28 and 35 days, whereby each of the painters was paid a salary of US$900 per month. From 14 February 2011 to 1 March 2011, two of the painters performed work on the rig Maersk Discoverer. The Nan Hai VI and Maersk Discoverer are either fixed platforms, or ships, as defined in s 12 of the FW Act. The Nan Hai VI and Maersk Discoverer were at all material times in the Australian Exclusive Economic Zone (EEZ). The painters were Filipino nationals and performed work in Australia pursuant to sub-class 456 visas and that all of the respondents were aware that the painters would be performing work in Australia. From 1 January 2010 the painters' entitlements were subject to the FW Act and the Hydrocarbons Industry (Upstream) Award 2010 (award). From 1 January 2010 the first respondent has been covered by the award and that at all material times the painters performed duties consistent with the classification of Hydrocarbon Service Industry Service Employee - Level One (basic). 4 The applicant alleges contraventions of the FW Act as follows: Failure to pay the painters at material times in accordance with the national minimum wage order, pursuant to s 293 of the FW Act. Failure to pay the minimum wage under the award to the painters at material times. Failure to pay allowances under the award to the painters at material times. Failure to pay overtime rates under the award to the painters at material times. Failure to pay weekend and public holiday rates under the award to the painters at material times. A total of $79,794.86 is alleged to have been underpaid to the painters. 5 The applicant alleges the involvement of the second, third and fourth respondents in the alleged contraventions. 6 Relief is sought by way of declarations, monetary penalties and payment of under payments to the painters with interest. 7 In advance of the commencement of the trial of the proceeding, I agreed to hear the interlocutory application of the first and second respondents that the proceeding should be stayed permanently, on two grounds: (1) That an Australian court is a clearly inappropriate forum to exercise jurisdiction in relation to the obligations of the first and second respondent to the painters for work undertaken by them allegedly in the EEZ; (2) Further and alternatively, s 33(1)(b) of the FW Act and reg 1.15E of the Fair Work Regulations 2009 (Cth) (FW Regulations) relating to jurisdiction respectively over fixed platforms and Australian majority crewed ships, as pleaded in paras 21 and 23 of the further amended statement of claim, are both subject to concurrent jurisdiction of other states and to Australia's international obligations. 8 The first and second respondents' interlocutory application was supported by the third and fourth respondents, but only in respect of ground 2 and only then in respect of reg 1.15E. 9 On 14 March 2013, following the hearing of the interlocutory application, I refused the stay. These are my reasons for doing so.

ground 1 10 The particulars to ground 1 provided in the interlocutory application state that: There is no real connection between the first and second respondents with Australia. That the first and second respondents are foreign corporations with no place of business, residence or other connection with Australia. There is no real connection between the painters and Australia and the painters are Filipino nationals and have no residential or other connection with Australia. The two oil rigs upon which the painters worked have no real and substantial connection with Australia and that they fly the flag of foreign states and do not dock in Australia. Payments made by the first and second respondents to the painters arose under contracts prescribed by the Philippine Overseas Employment Administration (POEA), an agency of the government of the Republic of the Philippines attached to the Philippines Department of Labour and Employment (POLE). The asserted imposition of the terms of Australian industrial instruments infringes the contractual and legal obligation owed to and by the first and second respondents under Filipino law. It is inappropriate, vexatious, oppressive and an abuse of process to impose the terms of Australian industrial instruments upon foreign corporations and upon foreign seafarers subject to a different work environment, different labour conditions and a different legislative disciplinary regime. The institution and conduct of a proceeding relating to civil penalties in Australia is inconsistent with the principles of international law adopted by the Australian government and principles of international law as these principles apply to a coastal state's rights and obligations in the EEZ. 11 I accept the submission made on behalf of the applicant that it is not true to say that the first and seconds respondents have no connection whatsoever with Australia. The fact is they have a connection in that they are alleged to have entered into employment contracts in respect of work to be conducted within the Australian EEZ. 12 I accept that this is not a case in which the principles of forum non conveniens are properly engaged. 13 In Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 559, the majority (Mason CJ, Deane, Dawson and Gaudron JJ) said that the relevant test to be applied is whether the Court is a clearly inappropriate forum, not whether there is some comparatively appropriate forum. 14 In circumstances where it is the FW Act that the applicant is seeking to apply, it cannot be said that this Court is a clearly inappropriate forum. As the applicant points out, there is no prospect that any alternative foreign forum would be available to determine the rights and duties of workers pursuant to the application of an Australian law such as the FW Act, a law that on its face appears mandatory. 15 The interlocutory application fails so far as ground 1 is concerned.

ground 2 16 In relation to ground 2, the first and second respondents note that the applicant contends that at all material times the two rigs (mobile offshore drilling units or MODUs) were "fixed platforms" as defined in s 12 of the FW Act or, alternatively, were "ships" as defined in s 12 of the FW Act having "majority Australian crew". Accordingly, the applicant contends that s 33 of the FW Act extends to the rigs because they were fixed platforms or, alternatively, extends to the rigs pursuant to reg 1.15E of the FW Regulations, made under s 33(3) of the FW Act, because they were ships as defined. 17 The first and second respondents contend that when the FW Act and FW Regulations are read, consistent with Australia's international obligations which are recognised under the FW Act to have application, the FW Act is not designed to apply to conduct such as that alleged against the first and second respondents. It is submitted there is a presumption that municipal legislation such as the FW Act and FW Regulations should be construed, where possible, so as to avoid a conflict with international law. 18 The first and second respondents undertake an analysis of the United Nations Convention on the Law of the Sea of 10 December 1982 (UNCLOS) in order to advance this argument, which is put this way: The EEZ is defined in s 12 of the FW Act to have the meaning given to it in the Seas and Submerged Lands Act 1973 (Cth), where s 10B in effect states the EEZ is to have the same meaning as it has in Art 55 and Art 57 of UNCLOS. Article 55 states both the rights and jurisdiction of the coastal state (Australia) and the rights and freedoms of other states are governed by UNCLOS provisions. Article 55 states the EEZ is subject to the specific legal regime established under Pt V (headed the EEZ) of UNCLOS (Art 55-75). Article 57 defines the extent of the EEZ. Article 58(2) states that Art 88-115 (Pt VII) relating to the high seas and other pertinent rules of international law "apply to the exclusive economic zone in so far as they are not incompatible with [Pt V]". Accordingly, the EEZ definition under the Act limits the sovereign rights and jurisdiction of Australia, as the coastal state, to its rights and jurisdictions under UNCLOS. Article 56 describes rights over the seabed and also requires the coastal state in exercising its rights and duties in the EEZ, to have regard to the rights and duties of other states (Art 56(2)). Under Art 58 all states enjoy the freedoms referred to in Art 87 relating to the operation of ships and navigation and other lawful uses of the sea, such as innocent passage (for which see Art 17, 18, 19 and 24). Article 59 states where conflict between the coastal state and any other state arises, this should be resolved on the basis of equity and other named factors. Further, Art 78 states such rights of a coastal state over the continental shelf, which includes much of the EEZ though may not be co-extensive with the EEZ, must not infringe or result in any unjustifiable interference with navigation and other rights and freedoms of other states under UNCLOS. Nor do these rights affect the legal status of superjacent water. As to the applicant's contention that the MODU's are "ships", exclusive jurisdiction would vest in the flag state, not Australia. Article 58(2) invokes the operation of Art 92(1), as there is no incompatibility between Art 92(1) and Pt V of UNCLOS. Article 94(3)(b) expressly recognises the obligation of the flag state in relation to the manning of ships, labour conditions and the training of crews, taking into account applicable international instruments. The coastal state's rights have been summarised as being essentially related to the management and exploitation of natural resources (UNCLOS Art 56). The rights enjoyed by other states in the EEZ include freedom of navigation (Art 58(1)). Therefore, the jurisdictional competence of the coastal state over foreign ships in the EEZ is quite limited. It has legislative and enforcement jurisdiction only in respect of conservation and management of fish and other living resources (Art 62(4) and Art 73); certain forms of pollution from ships (Art 210, Art 211(5) and (6), Art 216, Art 220 and Art 234); the conduct of marine scientific research (Art 246 and following); and the entry into, and presence within, safety zones (normally no more than 500 metres in width) around artificial islands, installations and structures (Art 60 and Art 80). It follows that the coastal state has no jurisdiction to prescribe international (or national) standards concerning seafarers' rights for foreign ships within its EEZ. Under general international law, states may exercise legislative jurisdiction over their nationals, even when outside Australia. Under the 1958 Convention on the High Seas (1958 Convention) to which Australia is a member, the flag state exercises jurisdiction and control in administrative, technical and social matters over ships flying its flag, and to ensure safety must take all necessary measures in regard to manning and labour conditions, taking into account applicable international labour instruments. Accountability for incidents of a penal or disciplinary nature rests either with the state of which the person is a national or the flag state in respect of incidents at sea. Under the 1958 Convention the "high seas" comprises all parts of the sea not included in the territorial sea or internal waters of the state. Under s 3(a) of the FW Act, the objects of the Act require account to be taken of Australia's international labour obligations. Australia and the Philippines have ratified the Maritime Labour Convention 2006 whereby each member state shall adopt the laws and regulations specifying the matters that are to be included in the seafarers' employment agreement "governed by its national law". All seafarers shall be paid for their work in accordance with their employment agreement. Minimum wage levels for seafarers are established after conferral with stipulated national representatives. Although the Maritime Labour Convention 2006 will not come into force until later in 2013 the Convention embodies the UNCLOS principles, including Art 94 which provides that the flag state shall take all necessary measures in regard to the manning of ships, labour conditions and the training of crews. Under the Acts Interpretation Act 1901 (Cth), s 15AA requires an interpretation that best achieves the purpose or object of the Act and those objectives are set out in s 3 of the FW Act. In Barcelo v Electrolytic Zinc Company of Australasia Limited (1932) 48 CLR 391, Dixon J said every statute is to be interpreted and applied as far as its language admits as not to be inconsistent with the comity of nations or with established rules of international law. It is to be understood and implied that the legislation of a country is not intended to deal with persons over which, according to the comity of nations, the jurisdiction properly belongs to some other sovereign state. In Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581, Dixon J said that where an enactment describes acts, matters or general words so that its intended application would be universal, it is to be read as confined to what, according to the rules of international law administered or recognised in Australian courts, is within the province of the law to affect or control. General words should not be understood as extending to cases which according to rules of private international law administered by the courts, are governed by foreign law. The Explanatory Memorandum to the Fair Work Bill 2008 states that limits are recognised as to the extent to which the Bill's extraterritorial application is possible and appropriate under Ch 1, Pt 1-3, Div 3. Section 3 says the object of the FW Act is, inter alia, to take into account Australia's international labour obligations and the Act is directed to "social inclusion of all Australians" and Australia's future economic prosperity. Regulation 1.15E itself recognises that it is "subject to" concurrent jurisdiction of other states and international obligations owed to foreign flagged ships. The first and second respondents and the painters are statutorily obligated to comply with the contractual conditions laid down by the law of the Philippines as applying to such contracts and that includes the level of wage payments made. They are also subject to disciplinary process under the law of the Philippines. It follows that the purpose of the FW Act and s 33 in particular is only to extend the operation of the FW Act to work connected with platforms or ships in the EEZ and, where doing so, is consistent with obligations under UNCLOS. UNCLOS in Pt V gives no support to the applicant in these circumstances. Regulation 1.15E is expressly made subject to concurrent jurisdiction and Australia's obligations under international law, both of which indicate that the Philippines is the appropriate sovereign state to enforce any breaches of the kind found to be committed. Further, if reg 1.15E is to be construed as enabling action under the FW Act to be taken, not just in respect of Australian employers of majority Australian crewed ships, but as extending to overseas employers who make contracted payments to foreign residents on majority Australian crewed ships in the EEZ, then reg 1.15E is ultra vires the FW Act. 19 The third and fourth respondents in comprehensive written submissions undertake a not dissimilar analysis of the FW Act but, as noted above, do so only in relation to s 33(3) and reg 1.15E made thereunder. They recognise that their arguments do not support the grant of a stay order given that the applicant's primary case is advanced under s 33(1)(b). In summary they submit that: (1) Australia has "sovereign rights" in the EEZ and over the continental shelf for the purpose of exploring and exploiting the natural resources. However, the rights are required to be exercised with "due regard to the rights and duties of other states", "in a manner compatible with" the other provisions of UNCLOS and so as not to "infringe or result in any unjustifiable interference with navigation and other rights and freedoms of other states as provided for in" UNCLOS. (2) all states (foreign ships) enjoy the right to freedom of navigation on the high seas and in the EEZ "subject to the relevant provisions of" UNCLOS; and (3) flag states have exclusive jurisdiction over ships flying their flags in the high seas and EEZ, including over manning and labour conditions, save "in exceptional cases as expressly provided for" in international treaties or in UNCLOS and insofar as that is "not incompatible with" Pt V of UNCLOS. 20 The third and fourth respondents also make submissions in this regard concerning port state control, the system of which was considered in Sellers v Maritime Safety Inspector [1999] 2 NZLR 44, a decision of the Court of Appeal of New Zealand. 21 The third and fourth respondents submit it follows that, to the extent reg 1.15E purports to extend the FW Act to foreign ships in the EEZ, it violates the exclusive jurisdiction of the flag state and is inconsistent with UNCLOS 22 These respondents also submit that it appears from the "note" in reg 1.15E that the regulation is not intended to contravene international law. However, it is submitted that, short of relying on the note to construe the regulation as not applying to foreign ships (which would give the regulation no work to do since the FW Act already applies to any Australian ship in the EEZ or above the continental shelf by virtue of s 33(1)(a)), it is difficult to see how the regulation can be read down so as not to conflict with UNCLOS and the exclusive jurisdiction of a flag state over foreign ships in the EEZ. For this reason, it should be found to be ultra vires s 33(3) of the FW Act. 23 The difficulty with the submissions made on behalf of the first and second respondents is that the interlocutory application for a stay must necessarily be determined on the assumed basis that the two rigs in questions are, as a matter of fact, fixed platforms for the purposes of the FW Act. That is the question primarily to be determined at trial. 24 Section 33(1)(b) of the FW Act relevantly provides as follows: (1) Without limiting subsection (3), this Act extends to or in relation to: … (b) any fixed platform in the exclusive economic zone or in the waters above the continental shelf; … 25 On its face, s 33(1)(b) effects a clear and express extension of the operative provisions of the FW Act to a fixed platform in the EEZ. There is nothing obviously ambiguous about it. 26 That there is any relevant ambiguity about the reach of the FW Act to the rigs, in these circumstances, is a difficult argument to press and, as noted above, is not one the third and fourth respondents currently press. 27 In these circumstances, the stay application cannot succeed and the proceeding should proceed to trial on this basis alone. 28 The arguments concerning the validity of reg 1.15E, which relate to the alternative case advanced by the applicant (that the rigs are ships as defined), are more complex and I need not, at this stage, do more than note them. They may need to be determined at trial, depending on the findings made on the primary case advanced by the applicant. 29 Regulation 1.15E purports to extend the operation of the FW Act to other types of vessels, including, relevantly, majority Australian-crewed ships in the EEZ (reg 1.15E(5)) and at material times provided: (1) For subsection 33 (3) of the Act, the Act is extended to and in relation to a ship (a) that is a licensed ship in the exclusive economic zone or the waters above the continental shelf; and (b) for which the licence: (i) was in force on 1 January 2010; or (ii) is issued on or after 1 January 2010. … (5) For subsection 33 (3) of the Act, the Act is extended to and in relation to a majority Australian-crewed ship in the exclusive economic zone or the waters above the continental shelf. Note The extension of this Act to emergency licensed ships, general licensed ships, temporary licensed ships, transitional general licensed ships and majority Australian-crewed ships in the exclusive economic zone and the waters above the continental shelf (including provisions relating to compliance and enforcement, administration and right of entry by reason of the extension of the rest of the Act, so far as it relates to the specified provisions) is subject to: (a) Australia's international obligations relating to foreign ships; and (b) the concurrent jurisdiction of a foreign State. 30 The respondents say s 33(3) itself should not be construed as authorising a regulation which purports to ignore Australia's international law obligations. Further, they contend the note is a clear reflection of an intention that the regulation not be applied so as to cause Australia to be in breach of its international obligations, including in relation to foreign flagged ships on the high seas. It is also submitted the note makes the regulation uncertain and invalid in the way the regulation was considered invalid in King Gee Clothing Pty Ltd v Commonwealth (1945) 71 CLR 184. 31 The applicant submits that the submissions made by the respondents that s 33(3) and reg 1.15E ought to be read down because they extend beyond the scope of the power of regulation within an EEZ as a matter of international law and because the flag state has power to the exclusion of the coastal state to regulate vessels in the EEZ and in waters above the continental shelf in the same manner as on the high seas, are wrong. 32 The applicant contends first, that UNCLOS expressly permits coastal states to regulate all aspects of activities on board vessels engaged in activities within the EEZ and in waters above Australia's continental shelf for which the coastal state has jurisdiction. 33 The applicant notes that Art 56 of UNCLOS grants: (a) sovereign rights for the purpose of exploring and exploiting, conserving and managing the natural resources, whether living or non-living, of the waters superjacent to the seabed…, and with regard to other activities for the economic exploitation and exploration of the zone…. 34 And that Art 77(1) of UNCLOS states that: 1. The coastal State exercises over the continental shelf sovereign rights for the purpose of exploring it and exploiting its natural resources. 35 The applicant submits the grant of sovereign rights therefore encompasses all powers "reasonably incidental" to the exploration and exploitation of the natural resources of the EEZ and seabed resources. In this regard, Art 60 of UNCLOS expressly includes in the sovereign rights of the coastal state the right of exclusive jurisdiction over artificial islands, installations and structures (such as the structures here at issue), including jurisdiction with regard to customs, fiscal, health, safety and immigration laws and regulations. 36 Secondly, the applicant submits neither s 33(3) nor reg 1.15E is ambiguous and the Court should give effect to the plain language of the statute. There is no particular reason why these provisions should be read as not having the extraterritorial application, in the EEZ, that they purport to have. 37 It is unnecessary for me finally to rule on the respondents' contentions that reg 1.15E is not authorised by s 33(3) of the FW Act or that by reason of the note to the regulation the regulation is not intended to be read incompatibly with Australia's obligations to foreign ships in the high seas, including in the EEZ; or the related submission of the third and fourth respondents that the note relevantly introduces uncertainty into the regulation such that a person such as the third or fourth respondents do not know what is required of them under the regulation and so the regulation is invalid. 38 Nor do I need to express any view on the applicant's submission that the grant of sovereign rights to Australia in the EEZ encompasses all powers "reasonably incidental" to the exploration and exploitation of natural resources of the EEZ and seabed resources, and that this includes regulation of the matters to which the alleged contraventions under the FW Act relate. 39 Suffice it to say that the issues raised by the third and fourth respondents in relation to the validity of reg 1.15E will need finally to be determined at trial in the event the applicant's primary case, that s 33(1)(b) applies, fails.

conclusion and order 40 For these reasons, relatively shortly expressed, the interlocutory application of the first and second respondents for a stay of the proceeding is refused. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.