Hotville Pty Limited v New South Wales Nurses' Association

APPLICANT Mr P M Kite SC with Ms V Culkoff of counsel

SOLICITOR Steven Klinger, CHATSWOOD.

LEGAL REPRESENTATIVES: RESPONDENT Mr N Dawson of counsel

UNION New South Wales Nurses' Association SYDNEY.

JUDGMENT: - 15 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION

HOTVILLE PTY LIMITED v NEW SOUTH WALES NURSES' ASSOCIATION

Application for declaratory relief and orders pursuant to section 154 of the Industrial Relations Act 1996. JUDGMENT

1 The applicant, Hotville Pty Limited ('Hotville'), has brought an application for a declaration, pursuant to s154 of the Industrial Relations Act 1996 ('the Act'), in the following terms: The Commission declares:

1. The purported termination by the applicant on 26 July 2001 of the employees listed in Schedule A was void and of no effect.

2. No redundancy notice or severance pay was due or payable by the applicant to the employees under the Nurses' (Private Sector) Redundancy (State) Consolidated Award.

2 Schedule A to the application lists eight employees (of some 40) who had been employed by Hotville in nursing and related functions up to 26 July 2001 in a nursing home for the aged, named "La Salette", situated at Blaxland Road, Ryde.

3 La Salette had a 44-bed capacity within a single-storey building of some age (apparently, from an advertising brochure put in evidence, of the Federation period). It was a development proposition in that it was situated on a large block of land in respect of which development approval had been obtained for a three-storey, modern nursing home with greater bed capacity.

4 Hotville advertised La Salette for sale. It was described as a "Development Site with Existing Cashflow" and "Offered as a going concern on walk in walk out basis" - "Excellent cash flow"- "Huge development potential". On 28 March 2001 Hotville entered into a contract of sale with a corporation named Promet Holdings Pty Limited ('Promet'). Settlement was due to take place six weeks later; it was in fact delayed until 30 July 2001.

5 The sale of the nursing home, land and business was effected according to conditions set out in the contract, one of which was cl.31, which is in the following terms: 31 Employees

31.1.1 terminate the employment of all employees of the business with effect on completion; and

31.1.2 pay all employee entitlements to each employee.

31.2 The purchaser can re-employ any of the employees of the vendor with employment starting on completion, and if the purchaser intends to do this -

31.2.1 the purchaser must serve prior to completion a list of the employees whom the purchaser intends to re-employ;

31.2.2 the vendor must adjust under clause 18, as regards the employees on the list, an amount equal to - · the value of any long service leave entitlement of each employee, discounted by multiplying that value by that figure shown in Column 2 of the Long Service Leave Adjustment Table which corresponds to the length of continuous service shown in Column 1 of the Long Service Leave Adjustment Table; and · the monetary value of the other employee entitlements; and

31.2.3 the purchaser must pay to the vendor within 7 days of completion the amount paid under clause 31.2.2 relating to an employee named on the list who does not become an employee of the purchaser on completion.

31.3 The purchaser indemnifies the vendor against any claim by an employee against the vendor for employee entitlements . The maximum amount payable under the indemnity is the amount relating to that employee which was adjusted under clause 31.2.2 less any payment under clause 31.2.3.

31.4 Rights under this clause continue after completion, whether or not other rights continue. Long Service Leave Adjustment Table Column 1Column 2 Length of continuous serviceAdjustment Multiplier Less than 5 years0% At least 5 years but less than 6 years20% At least 6 years but less than 7 years30% At least 7 years but less than 8 years40% At least 8 years but less than 9 years50% At least 9 years but less than 10 years60% At least 10 years70%

6 That clause, although appearing in a standard form of contract, appears to be predicated upon a normality of termination of employment of existing employees by the outgoing business owner and re-employment by the incoming business owner of any employees the latter chooses to employ. Promet, apparently relying upon this clause, provided to Hotville a list of the persons it intended to re-employ, omitting therefrom a number (approximately 10, eight of whom are the subject of these proceedings) from the list thereby indicating, it would seem, those persons omitted would not be provided with future employment with Promet.

7 On 6 July 2001 the principals of Hotville contracted to purchase the Burdekin Hotel in Oxford Street, Sydney. The proceeds of the sale of La Salette were to be used to meet part of the purchase price ($7.7m) of the Burdekin Hotel, settlement of the contract of sale of which was to occur on 22 August 2001.

8 The application raises the meaning and effect of cl.37, Award Benefits to be Continuous, of the Nursing Homes, &c., Nurses' (State) Award (289 IG 5) ('the Award') which provides as follows:

(i) In the event of any change of ownership, licensee or management of any facility covered by this award, all employee rights and benefits provided by this award shall continue as if no such change in ownership, licensee or management had taken place, and no employee shall be dismissed for the reason of such change. Where such changes do occur, no employee shall be paid out for accrued annual leave, long service leave or any other benefits, but such benefits shall be continuous.

(ii) No employee, full-time or part-time, shall have their employment terminated or be required to take leave without pay where such termination or leave is used to avoid the requirements of any Act or to avoid payment of any rights or benefits provided by this award.

9 The application also raises the meaning and effect, in the circumstances of the case, of the Nurses (Private Sector) Redundancy (State) Award (295 IG 496). Clause 4, Introduction of Change, of that Award relevantly provides:

(a) Where an employer has made a definite decision to introduce major changes in production, programme, organisation, structure or technology that are likely to have significant effects on employees, the employer shall notify the employees who may be affected by the proposed changes and the union to which they belong.

(b) "Significant effects" include termination of employment, major changes in the composition, operation or size of the employer's workforce or in the skills required, the elimination or diminution of job opportunities, promotion opportunities or job tenure, the alteration of hours of work, the need for retraining or transfer of employees to other work or locations and the restructuring of jobs. Provided that where an award referred to in subclause (i) of clause 3, Application, makes provision for alteration of any of the matters referred to herein, an alteration shall be deemed not to have significant effect.

(a) Where an employer has made a definite decision that the employer no longer wishes the job the employee has been doing to be done by anyone pursuant to paragraph (a) of subclause (i) of clause 4, Introduction of Change, and that decision may lead to the termination of employment, the employer shall hold discussions with the employees directly affected and with the union to which they belong.

10 Clause 6, Termination of Employment, provides varying periods of notice of termination of employment where those terminations by the employer arise "for reasons arising from production, programme, organisation or structure in accordance with paragraph (a) of subcl.(1) of cl.4, Introduction of Change. These notice periods were ultimately employed by Hotville in giving notice to its employees at the point of change of ownership of La Salette.

11 In circumstances where the employment of an employee is terminated pursuant to cl.6, Termination of Employment, cl.7, Severance Pay, provides that ". . . subject to further order of the Industrial Relations Commission of New South Wales, the employer shall pay the following severance pay in respect of a continuous period of service". A scale of severance payments ranging from nil for less than one year's service to 16 weeks for six years' and over service or nil to 20 weeks in the case of an employee 45 years of age or over, is provided. Clause 7(3) provides for the reduction or elimination of any obligation to pay severance pay where the employer has obtained acceptable alternative employment for an employee.

The Evidence 12 Before detailing the evidence, I observe that some of it, from both sides, touched a question difficult to avoid in the proceedings but not an issue for present determination: whether the employees are not entitled to redundancy pay from Hotville for the reason they were offered suitable alternative employment by Hotville at a Lindfield nursing home called Whitehall. A subsidiary question is whether the work undertaken by some of the employees as casual employees of Promet may not have the same result. I have for completeness of understanding of the matter included references to that evidence although, strictly, it does not bear upon the declaratory relief issues with which this judgment is concerned.

13 The evidence called by the applicant in support of the declaration was from Anna Maria Stillone, a director of Hotville. Ms Stillone deposed that she has owned and operated nursing home facilities, through various entities, for over 23 years. Hotville owned and operated La Salette for approximately 10 years. La Salette was offered as a "going concern" due to the restrictions placed on owners under the Nursing Homes &c., Nurses' (State) Consolidated Award preventing the termination of employees (full-time or part-time) due to a change of ownership.

14 She said that the day after the auction of La Salette, on about 28 March 2001, she called an informal meeting with the staff and announced that the home had been sold and bought as a going concern. She said her words included: None of you need to worry. It has been bought as a going concern. The people running it will be responsible for everything just as if I was here. Nothing changes for you. You will all remain here and everything will continue the same. All your entitlements will run on.

15 Ms Stillone deposed that Promet appointed a company, Innovative Business Improvement Systems Pty Ltd ('Innovative') to finalise the purchase. She had a number of discussions with Messrs Brotherhood and Cliff and Ms Chadwick from Innovative. Mr Brotherhood said to Ms Stillone: As part of the transfer we need to do interviews with the staff. I will be sending Tony Cliff to do the interviews. Can you point out any particular person you would not employ, anyone with disciplinary action. We would also like to look at all the employee files. She said: I don't have anyone like that. All the staff are good, but I can't release the records because they are confidential. You will need to ask the employees to see their records.

16 Ms Stillone did not interpret Mr Brotherhood's comments as indicating the possibility that a selection process was underway. She deposed: There was no suggestion from anyone at Innovative that all employees would not be retained.

17 On 12 April 2001 Ms Stillone received a letter from Innovative which referred to the requirement "that the business will continue to run as a going concern".

18 On or about 17 July 2001 Ms Stillone received a further letter from Innovative requesting "information from Hotville Pty Ltd in order to take over staffing, payroll etc, list of all leave accruals, current roster, latest fortnightly payroll transaction listings, staff banking details and access to any other payroll information in order to process future pays".

19 On 19 July the solicitors for Hotville received a letter from the solicitors for Promet advising that Promet would only employ 20 of the 40 staff at La Salette. This seems later to have increased to 30 staff. Again, the letter reminded Hotville that the business was to continue to be conducted as a going concern. The letter relied on cl.31 of the contract of sale and effectively required the termination of all employees by Hotville and the re-employment of those employees indicated in the Notice by Promet.

20 There then followed a series of exchanges between solicitors for Hotville and those for Promet, the former asserting the operation of cl.37(1) of the Nursing Homes &c. Nurses (State) Award prevented the termination of staff and the latter indicating that unless cl.31 of the contract of sale was complied with, Promet would refuse to settle on 30 July 2001.

21 On 26 July 2001 Ms Stillone met individually with each of the employees the subject of this application and said to them words to the following effect: Something has happened that is beyond my control. I have been served with a notice by the purchasers that they don't want some of you. Here is the list. You are on it. I don't have any choice. We were supposed to be settling this week. I have told them that I can't do that under the award but they are holding a gun to my head. I am really sorry this has happened. I tried everything. I told them you can't be terminated under the Award. They are using a term in the contract which I was not aware of. That term is inconsistent with the Award. My understanding is I cannot terminate you. I can offer you alternative employment at Whitehall Nursing Home. I have looked at all the rosters and prepared a letter for each of the 10 on the list setting out the hours that are available at Whitehall for you. They are very similar hours to what you are doing here. The job is the same. Whitehall is only about 15 minutes from here. Your entitlements will not be affected. If you do not accept the position at Whitehall I may have to pay you redundancy.

22 Ms Stillone deposed that during the course of those meetings she received a number of responses from staff indicating interest in a redundancy payment. Some, she said, indicated that they would accept a position at Whitehall but later changed their minds. In each case she asked the employees to let her have their decisions in writing.

23 Of the 11 employees involved, one accepted the alternative position at Whitehall and has remained there; one indicated she would not go to Whitehall because it was too far but said to Ms Stillone "I will get back to you". She has not done so. She remained working at La Salette for Promet; and a third employee was overseas at the time and is not making a claim in these proceedings.

24 On 26 July 2001 Ms Stillone wrote to each of the employees the subject of this claim making an offer of an alternative employment. The letters varied according to the position classification and the days and hours of work. One, in the case of Mrs Fifita, is in the following terms:

Further to meeting held with you on 26 July 2001, due to the fact that La Salette Aged Care Facility has sold and the new owners do not require your services, management has arranged a position for you at Whitehall Aged Care Facility with view to providing you with suitable alternative employment.

Further to the above, the following position has been arranged for you.

• Whitehall Aged Care Facility Assistant in Nursing

Monday 2.00-9.30 Tuesday 2.00-9.30 Wednesday 2.00-9.30 Thursday 2.00-9.30 Friday 2.00-9.30

Please be aware that "suitable alternative employment" encompasses of your employment. Service and entitlements and you retaining the same employment classification and rate of pay and maintenance of guaranteed hours.

Should you require any clarification of the above, please do not hesitate to contact me.

25 On 27 July 2001 Ms Stillone supplied each of the employees in question with a letter in the following terms: 27 July 2001

I refer to our meeting held on 26 July 2001. As you are aware, La Salette Aged Care Facility sold and the new owners do not require your employment and your position made redundant I am therefore writing to you to confirm a number of matters.

Due to the sale of La Salette Aged Care Facility, I am required to provide you with notice of cessation of employment. Under the relevant award, there is a set minimum notice period and I wish to confirm that given your age and length of service to (sic - the) period applicable to you is 4 weeks. This means that your services will no longer (sic - be) required from 30th July, 2001.

I trust that you find these details to be acceptable. If there is anything further you require then please feel free to contact me at any time. On 0414606361.

Anna Stillone Director. The period of notice and the date of termination varied although the termination dates ranged between 28 July and 30 July 2001.

26 On or about 27 July Ms Stillone received a telephone call from Ms Chadwick of Innovative who said: I know that you have just terminated these people but if any wish to remain at La Salette they can. Ms Stillone replied: What is going on. Why are you doing this now. I have had so much trouble over this. I have had the Union here. I have been so stressed out. You know I have terminated these people against the Award. You bought a going concern and you forced me to do this and now you want me to tell them they can stay. I will ask them.

27 She approached four employees in the corridor at La Salette and informed them of this telephone call but each of them said they would not be staying, making it clear that the money was significant for them. She telephoned five others, one of whom said that she would stay but four said they would not. One, Donna Morrissey, said: Yes I'll stay at La Salette. What about my entitlements?" Ms Stillone replied: They will be transferred to the new owners and carried over as if nothing has happened.

28 Ms Stillone had a number of discussions with Nurses' Association representatives. A meeting was called by the Association to be held at La Salette on 30 July, the date of settlement of the purchase. On 30 July Ms Walters of the union attended and was informed by Ms Stillone that Promet had said the employees could remain at La Salette and that she had offered them positions at Whitehall before Promet had said this. She said none of them had replied to her.

29 Following the meeting Ms Stillone was provided with letters signed by each of the eight employees indicating that they would take the redundancy package offered to them on 26 July. Three simply said that "I (name inserted) will take the redundancy package offered to me on the 26th July". Two, after the phrase "offered to me" omitted the balance but added "and decline the position at Whitehall". One followed the same abbreviation of the first sentence and added "And I don't want the shifts at Whitehall is too far to me and also is not suitable for my times" (sic).

I did not offer any of the employees "redundancy packages". I did not offer any of the employees a choice if employment was available either at La Salette or if they wished to accept alternative employment at Whitehall.

31 The settlement did not proceed on 30 July. It was deferred until 31 July. Ms Stillone said to her solicitor: What about all the employees. What do I do about tomorrow. The licence is still in my name I am responsible. The Nursing Home has to be properly staffed.

32 Ms Stillone's affidavit continued: On the morning of 31 July 2001 at approximately 7 a.m. I telephoned La Salette and Carol Stewart answered the telephone. She was one of the employees I had been forced to terminate. Ms Stewart had also declined the alternate employment offered to her at Whitehall Nursing Home, without informing me at our earlier meeting that she had in fact decided to stay on at La Salette. Ms Stewart sounded surprised and said to me "Anna, what do you want". I said "What are you doing there? I am just checking that everything is OK as I am still the licencee". She said "How come". I said "the matter did not settle". The telephone call was terminated and half an hour later Ms Stewart telephoned me and said "What's going on?" I said "I don't know. I just know it did not settle". She said "What do you mean. What happens to us". I said "I don't know, how come you are there". She said "We're all here". I terminated the call. I became suspicious as to why Ms Stewart was obviously still employed at La Salette. I immediately drove to La Salette and conducted my normal inspection as the Licencee. I observed that Jodie Exley, Carol Stewart, Tanya Ivkovic and Fokikovi Vaivao - all of whom had been "terminated" - were on the premises working their normal shifts. I photocopied the Roster which had been prepared by me and which had the terminated employees crossed out. I observed an identical Roster on display which had all 8 of the "terminated" employees rostered for normal duties. I also looked at the Daily Diary as well as the Roster and observed that Ann Logan, Donna Morrissey and Iasinita Fifita appeared on the roster and the Daily Diary to perform their normal duties.

33 On 1 August 2001 Ms Stillone wrote to each of the terminated employees informing them that as they had "continued employment with the purchaser of the nursing home" that their employment "will be regarded as continuous. You should look to the new purchaser in respect of your employment rights".

34 In the course of cross-examination Mr Stillone profferred the following evidence: (a) She did not at any time say to any of the eight employees that she would not be paying them redundancy pay.

(b) In describing the amounts of money to each employee she supplied them with a lump sum figure including the matter of redundancy.

(d) She did not supply letters to Mrs Logan or Mrs Vaivao.

(e) She had told Mr Howard of the Department of Health that she was terminating staff. This caused his attendance at La Salette on 31 July, apparently to ensure compliance with a statutory requirement to have sufficient staff on roster.

(f) She told her solicitor on 31 July "I am not paying any redundancy". She said this was "because we were going to pay redundancy when it ("the sale") was settled ".

35 The Nurses' Association called oral evidence from Anthony John O'Grady, an administrative officer within the Association who had contact with Ms Stillone about the developing circumstances in July 2001. From his conversations with Ms Stillone he was able to say that her concern was that the nurses wanted to know, from her, their options. She had two options and the choice was theirs. She wanted the nurses to indicate to her what option they wished to choose. He was not aware that an offer of employment at Whitehall was one of those options. She did not mention Whitehall to him. Mr O'Grady drafted a letter on 2 August but did not send it. It recorded the effect of the conversation. It was not sent because the nursing staff had received correspondence from Ms Stillone. His letter then seemed redundant.

36 Oral evidence was also called from each of the eight nurses the subject of the matter. Mrs Anne Logan gave evidence which clearly was consistent with that of Ms Stillone which had confirmed that she was truly redundant. She said Whitehall was never mentioned to her. She asked whether she was redundant, to be informed by Ms Stillone that she was. She spoke to the matron on the Friday night before the settlement who said the new owners are offering jobs back "but there's nothing here for you". She was encouraged to ring the new owners by comments from other nurses, for example, "a nurse is never redundant" and "don't worry there'll be something there for you". Mr Cliff said to her "You can do a night on a casual basis. Permanent employees get the first call". Thereafter she rang each night before she worked. She received casual rates of pay, working Wednesday, Thursday and Friday nights until the closure of the hospital. She then asked Mr Cliff about any redundancy pay to be told that "there is no money here for you because you were terminated and made casual". She had expected that she would be paid by Ms Stillone on the Saturday morning.

37 Mrs Savi Thirunavukarasu regularly worked night work on Saturdays, Sundays and Monday nights. She had three children in private schools and was working to meet the associated expense. She understood that the staff would continue under the new owners. She was interviewed by Mr Cliff but did not ask him about a job because she had been reassured that the jobs would continue. On 26 July she met Ms Stillone and was informed that she would have to be terminated. She was offered alternative employment at Whitehall but this was insufficient to meet her costs. She would reduce her income by $100.00 per fortnight, an amount which she said was "a must for me". She did not contact the union because she did not think there would be any problem. She just took Ms Stillone's word. She was later phoned by Ms Stillone to be told that the new owners were offering employment on a casual basis and if she wanted she could stay on with all entitlements passing to the new owners. She responded negatively to that on the basis that the new owners could do the same thing again. She was not then aware that the home was to close. Subsequently, Mr Cliff rang and asked her to help out at La Salette as a Deputy Director of Nursing on a casual basis. Two weeks after she had been terminated she commenced work on Monday, Thursday and Friday, working three to four shifts but earning less money. She continued to work for Promet until La Salette was closed on 1 October 2001.

38 The evidence of Tanya Ivkovic was consistent with the picture which emerged from Mrs Thirunavukarasu's evidence. Ms Ivkovic was employed on a casual basis for Promet after having a break of two or three days. She had to apply for that work. Her written indication that she would take the redundancy package offered to her on 26 July, she said, was written after she received the notice from Ms Stillone that her services would no longer be required from 31 July. She said she wrote her note because Ms Stillone asked her to put in writing whatever she chose to do. Jodie Exley helped her write it.

39 Ms Jodie Exley had worked for three years on a 6am to 2pm shift at La Salette. She continued to work the same shifts for Promet but on a casual basis, commencing on 31 July. The casual work was offered by Promet representatives. She said she was not definite that she would start work at 6am on 31 July and rang the night nurse to say that she was not going to turn up for that shift. However, Mrs Stewart rang her and said there was no staff there so she went in at 7am. She had an interview with Mr Cliff that day and filled out an application form.

40 Ms Exley had been employed at La Salette from December 1994. She said the 10 employees not required initially by Promet were the longest serving employees of Hotville at La Salette. She said that when she had an interview with Ms Stillone she did not ask what her package would be. She denied she said "I could go on holiday with that". She said she was crying and just walked out of the office. She was too distressed to speak at the time. She said Ms Stillone had stopped crying and showed her the paper identifying her package.

41 She said that no-one suggested to her what to write in the note to Ms Stillone. She did assist Tanya Ivkovic and suggested what she should write.

42 Ms Donna Morrissey also said that she had no direction or assistance in writing the note she supplied Ms Stillone. Mr Cliff offered her casual work on the same shifts she had worked for Hotville. She decided over the weekend prior to 30 July 2001 that she would not accept the alternative offer of work at Whitehall. That offer was that she work the same number of hours but not at the same times. She deposed that she rejected the offer of employment due to the travelling time needed to go to work and the fact that she has child care restrictions involving the picking up of children from preschool.

43 Ms Iasinita Fifita had initially indicated she would accept the work at Whitehall but later declined it because it was too far to travel and did not suit her with her children. She had worked short shifts at La Salette of 5 x 5.5 hours and 1 at 4 hours on Sunday morning. The offer of Whitehall was 2pm to 9.30pm Monday to Friday. She applied for and was offered casual employment of three shifts per week with Promet and worked on that basis until the nursing home closed. She now works night shift four nights per week 11pm to 5am at a Beecroft nursing home. She said she wrote her letter accepting redundancy herself.

44 Mrs Carol Stewart resided in North Ryde. She had been employed at La Salette from June 1990 working Monday to Friday day shift. She met Ms Stillone on 26 July when she was told that she had to be made redundant and be given five weeks' notice. This was because of her age. She was then offered employment at Whitehall working 6.30am to 2pm. She said "I cannot accept the offer of employment due to difficulties in travelling to Lindfield, Jim is to go into day surgery on Friday and I will let you know by 3pm on Friday" or words to that effect. She said she does not drive and public transport to Whitehall would be difficult.

45 She was interviewed on 31 July by Mr Cliff of Promet who indicated casual work would be available. She said she would be available for it. She went in at 6.15 on Tuesday morning of her own volition knowing that there would be a shortage of staff. As to Ms Stillone's letter indicating termination she said that she received it in the afternoon of Thursday, 26 July even though it was dated 27 July. She said she read it Friday morning in the presence of her husband and brother-in-law before going to the surgery with her husband.

46 Mrs Stewart strongly disputed that she received a written offer of an alternative employment at Whitehall. She said she saw such a document in Ms Ivkovic's hand. She had formerly worked at Whitehall but she had too much to throw away at La Salette. She asked Ms Stillone some years before if she could transfer across her benefits but was told it could not be done because it was a different company.

47 Ms Fokikovi Vaivao had worked at La Salette since 1966 as an assistant in nursing. She worked 15 hours per week, 7am to 3pm Monday and Tuesday. She has four children and lives less than five minutes walk from La Salette. She does not drive. She deposed that on 26 July Ms Stillone said to her "You can go to work at Whitehall Nursing Home or take redundancy". She responded "I will not be accepting the offer of employment. I will take redundancy". Ms Stillone said "Notify me in writing".

48 She received a letter of termination from Hotville on 27 July. On 31 July she applied for and was offered employment as a casual by Promet. She was not supplied details of any employment at Whitehall. In cross-examination she agreed with the statement made by Ms Stillone on 26 July recorded in paragraph 17 of this judgment but not references to having looked at the rosters, or that the hours and job would be the same.

49 Mr O'Grady's draft letter was put to Ms Stillone in evidence in reply. It recorded: (iii) You had put two alternatives to those staff with respect to redundancy which were:

To make them redundant effective from the time of sale and to pay them all their entitlements . . . and the relevant redundancy . . . including 5 weeks' pay in lieu of notice or

Because of the need to ensure the provision of nursing care at such notice, arrange to continue their employment for a limited period with the new owner, in which case you would provide funds for their redundancies through an arrangement with the new owners. In such a case you could not guarantee payment in lieu of notice.

50 Ms Stillone testified that she had not seen the draft before; and that none of this conversation took place. She said the only thing she discussed with him was that the staff had not identified what they would do. There were now three options available to the staff: to take redundancy; work at Whitehall or continue at La Salette with Promet.

51 Mr Kite SC who, with Ms Culkoff of counsel appeared for the applicant, submitted that the overall proposition advanced by Hotville is that it is not liable for any redundancy payments due to the particular employees and that if anybody is liable for these benefits it is Promet. Hotville had no intention to terminate employment. It was submitted that Ms Stillone did not offer redundancy packages although she advised the employees of the calculation of benefits to them. While she terminated their employment, she did not make them redundant under the meaning of the Award. Ms Stillone was under extreme pressure to settle on terms which, as she understood, would require a breach of the Award. The culmination of late notice, delayed settlement and the breach, all amounted to duress of an economic kind which would vitiate the number of discussions undertaken by Ms Stillone; they would not be enforced against her or Hotville.

52 It was submitted that cl.37(1) of the Nurses Award is a form of transmission clause. While the clause is novel or unusual, it deals with a not unusual concept (see the Termination, Change and Redundancy Case (1984) 9 IR 115 at 129 concerning the transmission of business). The intention here is to preserve employment and entitlements of employees. For cl.37(1) to have effect as intended, it must create a series of interconnecting duties: (a) a duty not to dismiss for this reason; (b) a duty on the purchaser to employ staff; (c) a duty on the employee to accept employment; (d) a duty not to pay out accrued entitlements. The clause will not have effect unless all of these interconnecting duties arise.

53 It was submitted the duty not to dismiss is problematical. A duty to employ can only arise after a prior termination. It is probably better expressed as a duty to facilitate continuing employment (see Re Derole Nominees AIRC Full Bench Print J4414). The duties created cannot be waived by agreement. They proscribe certain conduct. They introduce principles of illegality (see Nelson v Nelson (1995) 184 CLR 538 at 550-552 per Deane and Gummow JJ). Here there was an express statutory prohibition on the doing of the particular act (ibid at 552).

54 In the present case no terminations arose save for the refusal to employ by the purchaser; albeit conduct in breach of the award, it should not be enforced. Terminations were permissible in the sense utilised by cl.37, to facilitate a new employment. The engagement of the employees here under casual employment constituted a breach of cl.37.

55 In the context of economic duress, the reliance by one on pressure will not be enforceable providing it is illegitimate. Here Promet would be in breach of the award if refusing to employ, relying on economic pressure upon Hotville (see Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 and Equiticorp Finance Ltd (In Liq) v Bank of New Zealand (1993) 32 NSWLR 50).

56 Mr Dawson of counsel for the respondent Association, disputed that the effect of cl.37(1) was to create the duties postulated by the applicant. He adopted the position that the correct approach to the meaning and effect of the clause is one consistent with that adopted in Byrne v Australian Airlines, namely that a termination contrary to the clause, rather than constituting a void or voidable act, was effective in law although in breach of the Award. He referred to the chain of letters which were exchanged between the solicitors for the applicant and those for Promet. On 20 July Ms Stillone became aware of the difficulty which Hotville now says amounts to duress and led to terminations under duress. The correspondence of 25 July shows an express indication on behalf of Hotville that it will not terminate the employees but will proceed in the Supreme Court against Promet. On 26 July Hotville changed its mind, with the settlement on the Burdekin due not until 22 August. It was then almost one month out from settlement when the terminations were effected. Duress was not operative. In the course of her evidence Ms Stillone said that she was not stressed regarding the sale; her concern was for the staff. Any duress which Hotville was subjected to which led to loss would be actionable as against Promet. The $7.7 million cost for the Burdekin amounted to a point of pressure but not extreme pressure. Any pressure was not immediate. Hotville did not attempt to resist any pressure from Promet; it gave in too fast.

57 As to the suggestion that redundancy was not offered, the employees were supplied with the value of their termination payments including redundancy pay. They were never told there was no intention to pay redundancy pay. It was submitted that it is not credible that an experienced employer would do this or would ask employees to write and accept a notice of termination.

Conclusions 58 I accept the evidence of the dismissed employees that in their conversations with Ms Stillone they were actually offered redundancy pay as an alternative to work at Whitehall. The preponderance of evidence is clearly in favour of that conclusion, including the provision by Ms Stillone of the details of moneys due embracing redundancy pay.

59 I consider the argument advanced for Hotville relating to economic duress is not sustained. In Crescendo Management v Westpac (ibid at 45), McHugh JA (as he then was) explained economic duress this way: The rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised upon one party by another party when the law regards that pressure as illegitimate: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384 per Lord Diplock. As his Lordship pointed out, the consequence is that the "consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind" (at 384). In the same case Lord Scarman declared (at 400) that the authorities show that there are two elements in the realm of duress: (a) pressure amounting to compulsion of the will of the victim and (b) the illegitimacy of the pressure exerted. "There must be pressure", said Lord Scarman "the practical effect of which is compulsion or the absence of choice".

The reference in Universe Tankships Inc of Monrovia v International Transport Workers Federation and other cases to compulsion "of the will" of the victim is unfortunate. They appear to have overlooked that in Director of Public Prosecutions for Northern Ireland v Lynch [1975] AC 653, a case concerned with duress as a defence to a criminal proceeding, the House of Lords rejected the notion that duress is concerned with overbearing the will of the accused. The Law Lords were unanimous in coming to the conclusion, perhaps best expressed (at 695) in the speech of Lord Simon of Glaisdale "that duress is not inconsistent with act and will, the will being deflected, not destroyed". Indeed, if the true basis of duress is that the will is overborne, a contract entered into under duress should be void. Yet the accepted doctrine is that the contract is merely voidable.

In my opinion the overbearing of the will theory of duress should be rejected. A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.

60 Further, in Equiticorp (ibid) Kirby P at p106, after referring to the judgment of McHugh JA in Crescendo said: What precisely the law is prepared to countenance as "legitimate" begs the question which needs to be answered in characterising particular conduct as impermissible economic duress (on the one hand) or the permissible (even necessary) operation of the market economy (on the other).

61 Hotville was, towards the end of July 2001, in a position where it was necessary for it to settle the sale of La Salette in order to accommodate its financial obligations with the purchase of the Burdekin Hotel. It was being asked by Promet to take the relevant steps to give effect to cl.31 of the Agreement, which would require the applicant to terminate the (eight) employees in question.

62 Hotville sought to avoid that contractual obligation by calling in aid cl.37(1) of the Award. Solicitors acting for Promet indicated that were Hotville not to conform with cl.31 of the contract of sale, Hotville would not be in a position to complete settlement.

63 The applicant had, by its own actions, put itself in a position where it needed to complete both sales. It did so, despite its earlier resistance, by giving notice to the employees to terminate their employment. That act enabled both settlements to proceed.

64 It is true that Hotville wished to sell La Salette as a going concern. It wished to ensure that its staff, some of whom had been there for many years (of the eight employees terminated, up to 30 years) were provided with continuing employment. Hotville was unaware at this time that Promet would close the hospital in October 2001, although for the purchaser to take advantage of the development approval for a three-storied nursing home would presumably, perhaps very obviously, have necessitated a closure of the existing home.

65 If the effect of cl.37(1) was understood by Hotville to preclude termination at the point of sale of La Salette of any existing employees, a significant error was made in permitting cl.31 to remain in the contract.

66 Here, the source of the alleged pressure was said to be Promet. However, on the material before me, Promet was merely relying upon the contract it had entered into with Hotville, cl.31 of which imposed particular obligations upon Hotville. The fact that Hotville later determined to seek to avoid those obligations is a matter relevant only to its contractual arrangements with Promet. There is no evidence that Promet had any knowledge of Hotville's plans so far as the Burdekin Hotel was concerned, let alone that it was utilising the Burdekin problem of Hotville as a point of illegitimate pressure to achieve a result at Hotville's expense. In these circumstances, the concept of illegitimate pressure being applied to Hotville simply cannot arise.

67 Hotville now seeks protection from the consequences of its own actions. Its application for a declaration that the terminations were void and of no effect and that no redundancy or severance pay is due from Hotville to the employees, depends upon the proposition that to have terminated the employees, as Hotville purported to do, was in breach of, or contrary to, cl.37(1) of the Award and void.

68 Both parties accepted that the proper approach to interpretation of the Award's provisions is that outlined by French J in City of Wanneroo v Holmes (1989) 30 IR 378. Relevantly, the principles there extracted include a consideration of the natural and ordinary meaning of the words; ambiguity, if any, may be resolved by a consideration, inter alia, of the history and subject matter of the award. The awards are not to be interpreted in a vacuum divorced from industrial realities. A too literal adherence to the strict technical meaning of words ought be avoided in an endeavour to give the award a meaning consistent with the general intention of the parties to be gathered from the whole award. It is no part of the court's task to assign a meaning in order that the award may provide what the court thinks is appropriate. See the authorities cited by French J (ibid at 378-379).

69 To find that the terminations breached the clause does not provide the answer to the problem at the heart of this application, whether or not the terminations effected by Hotville were effective to achieve their intention. The answer to that question must depend upon the nature of the burden imposed by cl.37(1), which involves a consideration of whether the intention and effect of the clause is to prohibit an act in a way which makes any attempt to perform the act ineffective or void (Automatic Sprinkler Fitters v Watson) or effective in law but nevertheless in breach of the Award (Byrne v Australian Airlines). Another aspect of the matter requiring resolution is whether the action of Hotville, in terminating the employees is void on the ground of illegality.

70 There can be no question that the prefatory words of cl.37(1) are met in this case; the sale of La Salette involved a "change of ownership, licensee or management". The following phrases in mid-sentence provide that an employee's rights and benefits shall continue as if no such change had taken place. This language seems to me to embrace the proposition, one advanced indeed by Mr Kite, that the substitution of one employer for another necessarily involves a termination of the pre-existing employment relationship. The second sentence in cl.37(1) has an obvious intention to ensure that the continuity referred to in the first sentence will confer no loss of benefits which relate to continuity of service. The right to receive a redundancy payment based upon length of service would seem to fit comfortably within that notion.

71 These provisions appear to be predicated upon the assumption that the terms and nature of the employment pre-existing the change of ownership will continue thereafter. In other words, the clause does not anticipate a change in the terms and nature of the employment after or as a result of the change of ownership.

72 The crucial phrase in cl.37(1), for present purposes, is that which prescribes "no employee shall be dismissed for the reason of such change". This provision can only be read as a positive requirement not to dismiss an employee because of the change of ownership etc. It does not purport to interfere with an employer's right to dismiss an employee for any other appropriate reason, nor does it extend to, or preclude, the necessary termination which occurs when a new employer comes to the relationship. I consider the word "dismissed" provides a key to the intention of the clause; it is concerned with the permanent ending of an employment.

73 There is also no question that the behaviour of Hotville, Promet and indeed the employees, in writing their letters of acceptance of redundancy, reflected a common understanding that, at least at the time Ms Stillone wrote to the employees, the employment contracts with Hotville were being brought to an end.

74 The evidence establishes that the provision was not complied with. Notice of termination was given. Offers of a fresh employment were made and employments of a different kind, namely casual, were offered and undertaken, in some cases different times and different work.

75 In Byrne v Australian Airlines (1994) 120 ALR 274 at 320 Beaumont and Heerey JJ said, in the context of a dismissal alleged to be in breach of a award clause providing that termination shall not be harsh, unjust or unreasonable, after referring to the judgment of the High Court in Automatic Fire Sprinklers Pty Limited v Watson (1946) 72 CLR 435 where a purported termination of employment occurred in breach of national security regulations, said:

The appellants need to show that the award has a similar effect so that a termination which is harsh, unjust or unreasonable is a nullity at law and can, and indeed should, be treated by the parties as though it never occurred. As is clear from Watson , and in particular the judgment of Dixon J in the passage quoted above, this is a question of construction.

We start with the observation that awards fulfil a very different function from those of wartime regulations of the kind considered in Watson where there was an obvious national interest in preserving stability of employment in occupations which were essential to the war effort. Industrial awards on the other hand are made for the purpose of resolving industrial disputes and prescribing "rules of conduct for the future in respect of the disputing parties": R v Kelly; Ex parte Victoria (1950) 81 CLR 64 at 81.

An examination of the award does not indicate an intention that a termination of employment in breach of cl 10(a) is to be a nullity. As has already been noted, there are legislative sanctions in the form of penalties recoverable by the person affected.

There is also a provision for dispute settlement in cl 41, which cl 11(f) makes specifically applicable to termination disputes. Under cl 41 the matter is to be discussed between aggrieved employee and supervisor, then between union representative and the employer's personnel officer, then between union branch secretary and appropriate employer representative, then between the federal body of the union and an employer representative and if still not settled submitted to a member of the Conciliation and Arbitration Commission "whose decision shall, subject to any appeal in accordance with the Act, be final and shall be accepted by the parties". Until the matter is determined, work shall continue as instructed by the employer. All this seems inconsistent with the purported termination being a nullity.

Finally, there is a marked difference between the objective fact which rendered the termination unlawful in Watson , viz the non consent of a designated official, and the cl 11 criteria of harshness, injustice and unreasonableness. These criteria are inherently likely to raise questions of disputed facts and value judgments. The question whether a particular termination is harsh, unjust and unreasonable can only be conclusively determined between the parties in proceedings in a court for breach of an award. In such proceedings the court may need to take into account evidence which was not necessarily available to the employer at the time of the termination: see the decision of Gray J in Gregory at first instance (1987) 77 ALR 77 at 99. We think it a quite impractical intention to impute to the award-maker that the validity (as distinct from the lawfulness) of a termination must await the outcome of proceedings for breach of an award, while perhaps having some provisional effect in the meantime. An example is Bostik (Australia) Pty Ltd v Gorgevski (No 1) (1992) 36 FCR 20 where the termination took place on 27 August 1990, proceedings were taken in the Federal Court which resulted in a judgment at first instance on 18 September 1991 and a decision by a Full Court on 14 May 1992. It does not seem a sensible intention that in the meantime employee and employer should have to organise their affairs without knowing whether the termination was valid or totally without legal effect.

76 The circumstances arising in the present case have aspects somewhat akin to those in Automatic Fire Sprinklers v Watson. Here, as there, there is a (statutory) provision in language which seemingly expresses an intention to effectively prohibit dismissal in the circumstances to which the clause applies. Clause 37(1) relevantly provides ". . . no employee shall be dismissed for the reason of such change", being "any change of ownership, licensee or management". However, any prohibition contained in that provision is subject to the qualification, strangely expressed, "for the reason of such change". Of course, the postulation in Byrne v Australian Airlines about employers and employees having to organise their affairs without knowing the legal effects of their conduct arises very sharply in the present matter. More than one year has passed after the purported terminations and the matter awaits determination in two different proceedings. It would seem inappropriate at this late stage to seek to impose on the events of July 2001 a legal effect entirely inconsistent with the parties' conduct, unless the law permits of no other consequence. The attempt to terminate by Hotville's letters to that effect, the acceptance thereof by the employees in the context of redundancy and the subsequent engagements by Promet on different terms, namely, of casual employment, in some cases working different hours and on different work, supports that view.

77 I am persuaded that upon its true construction, cl.37(1) purports to impose a requirement, the breach of which was intended to give rise to a potential penalty in respect of any proven breach of the Award but not a void act.

78 Generally, the law will prevent a party to a suit relying upon an illegal transaction, except by way of substantive defence. Here, Hotville is seeking to rely on its own act, accepted by it to be illegal, in my view correctly, to avoid a liability arising from its own conduct. This is not a case in which Promet is sought to be restrained from relying on, or insisting upon compliance with, a purpose prohibited by the Award. However, Promet's reliance on cl.31 as presenting a difficulty for Hotville in terms of its readiness to settle the sale of La Salette, did not require Hotville to breach the Award. It was Hotville's desire, or necessity, to settle which caused it to take that course of action.

79 In Nelson v Nelson (1995) 184 CLR 538 the High Court was required to consider who held the beneficial interest in the proceeds of sale of a house. A mother had purchased the house and subsequently transferred it into the names of her adult son and daughter with a view to thereby enabling her to purchase another house with the benefit of a subsidy under the Defence Service Homes Act 1918. She achieved that end by falsely declaring that she did not own or have a financial interest in a house other than the one for which the loan was sought. Subsequently, the first house was sold and the mother and son sought a declaration that the balance of the proceeds of sale was held on trust for the mother, the daughter claiming that she had a beneficial interest in the proceeds of sale. For present purposes the judgment is relevant for its consideration of the application of the principles of illegality and also for the determination of the majority that the transfer of the interest in the first property achieved an illegal purpose, the effect of which was to cause equity to deny the benefit obtained by her unlawful conduct.

80 Deane and Gummow JJ referred (at 550) to the principles of illegality and particularly that by statute. At 552 their Honours referred to one category being "an express statutory prohibition, not of the formation of a contract or creation or implication of a trust, but of the doing of a particular act; an agreement that the act be done is treated as impliedly prohibited by the statute and illegal". McHugh J, (at 611) identified similar classes of statutory prohibition. Interestingly, his Honour refers (at 612) to the level of sanction to be imposed in relation to an illegal transaction, in these words:

If courts withhold relief because of an illegal transaction, they necessarily impose a sanction on one of the parties to that transaction, a sanction that will deprive one party of his or her property rights and effectively vest them in another person who will almost always be a willing participant in the illegality. Leaving aside cases where the statute makes rights arising out of the transaction unenforceable in all circumstances, such a sanction can only be justified if two conditions are met.

First, the sanction imposed should be proportionate to the seriousness of the illegality involved. It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach. The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the reference point for determining the seriousness of the illegality; otherwise the courts would embark on an assessment of moral turpitude independently of and potentially in conflict with the assessment made by the legislature.

Second, the imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct that breaches or evades the operation of the statute and its policies. In most cases, the statute will provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that contravenes the statute or its purpose. It is this policy that must guide the courts in determining, consistent with their duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be. Thus, the statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be unenforceable. On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation .

81 Toohey J, consistently with the other judgments in the matter, indicated (at 593) "In asking where is the illegality . . . it is necessary to identify the policy which underlies the relevant provisions of the Act, bearing in mind the amendments made to the Act and the chronology of events".

82 Applying that approach, in my view the Award by cl.37(1) manifests an intention to ensure that employment should not be terminated due to a change of ownership, but not that any such termination would be void.

83 Accordingly, there is no room on the facts of the matter for acceptance of the proposition that notices of termination by Hotville did not achieve that legal end. In my view, the notices of termination were effective to achieve a termination of the relevant employees on their various dates of termination. It must follow that the Commission could not make a declaration in terms of the first declaration sought, namely, "the purported termination by the applicant on 26 July 2001 of the employees listed in Schedule A was void and of no effect."

84 In Construction, Foresty, Mining and Energy Union v Amcor Limited [2002] FCA 610, 13 May 2002, unreported, Finkelstein J had occasion to consider the construction of an industrial agreement in a context outlined by his Honour as follows: 4 In February 2000 Amcor announced its intention to separate the packaging business from the fine paper manufacturing business. In broad outline, the separation was affected by a reduction of capital and a scheme of arrangement. For present purposes it is necessary to note only the following steps that took place. Amcor transferred its shares in Paper Australia to PaperlinX Limited. Newly created shares in PaperlinX were allotted to existing Amcor shareholders. In due course the shares in PaperlinX were listed on the Australian Stock Exchange. The result was that the packaging business remained with Amcor and the fine paper manufacturing business was owned by a company that was now a subsidiary of PaperlinX.

5 To complete the separation, it was also necessary to move the employees who worked at the mills to Paper Australia. The proposal was that Amcor terminate their employment and Paper Australia offer to engage their services. Accordingly, on 21 February 2000 Amcor wrote to all affected employees advising them that their employment would come to an end on 31 March 2000. Enclosed with the letter of termination was an offer of employment from Paper Australia. . . .

6 Almost all Amcor employees accepted the offer by turning up for work. In their new employment the employees performed tasks identical to those they had performed while employed by Amcor. The terms and conditions of their employment, including rates of pay, leave entitlements and the like, were also identical, that being the effect of their new contracts of employment. In addition to their contractual rights, it is possible that the employees were still entitled to the benefits of the certified agreement.

85 The CFMEU commenced proceedings seeking the imposition of penalties and also the payment to employees transferred by this process of accumulated sick leave credits, sick leave and annual leave credits, pro rata long service leave and redundancy pay. In considering that claim, his Honour said: 12 It has always been assumed that an employee has been made redundant if his employment is terminated because the employer has sold the business in which the employee was working. That the employer has been able to arrange for the new owner to engage the employee is beside the point. In Re Government Cleaning Services (Privatisation) Award No. 2 (1994) 55 IR 199 the NSW Commission was required to consider whether certain employees had become redundant when the Government Cleaning Services was privatised although they had been offered employment by the new operators. The NSW Commission found that the employees had been made redundant. Schmidt J referred to Bray CJ's judgment in ex parte Adelaide Milk Supply Co-operative Limited and then continued (at 218): "When a business is sold, or a governmental undertaking privatised, the original employment comes to an end. Employees do not always obtain work with a new employer. The fact that the old employer assists the employees to obtain work with the new employer, does not alter the consequence, that the termination of the original employment arose as a result of the employer's decision, that it no longer wished any of its employees to perform the jobs they were performing and not through any fault on the employee's part. It seems to me that employees in that situation have been made redundant, whether or not they are assisted in obtaining alternate employment." 17 I accept that it might be attractive to accede to Amcor's argument for a number of reasons. The stand taken by the union will produce a result which, in this case, may be seen by some as both contrary to commonsense and unfair. That is because on one view there is no reason why employees who, for all practical purposes, have maintained continuous employment should be given the benefits that accrue on redundancy. To take a more extreme example, which is not too far removed from the present case, assume that before the separation of the two businesses, and perhaps even in contemplation of that separation, Amcor decided that for reasons of internal management it would no longer be the employer of the workers, and they should be "transferred" to Paper Australia. On the union's argument, the employees would be made redundant. But when looked at from a practical viewpoint, their positions are unchanged. 18 Yet 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.

86 His Honour found the terminations created an entitlement to be treated as redundant to Amcor's needs. I consider the same reasoning operates here. This was a situation, for the reasons I have given, in which the employees are properly to be treated as having been made redundant by Hotville as at the date of their terminations. It follows that the application for declarations must be refused.

87 The application is dismissed. The respondent should have its costs on a party party basis as agreed or as assessed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.