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[2011] VSCA 396
Court of Appeal (Vic)
2011-11-29
Mr P, Neave JA, Nettle JA
Original judgment source is linked above.
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION (ABN 59 459 725 116)
AUSTRALIAN MUNICIPAL ADMINISTRATIVE CLERICAL & SERVICES UNION (trading as the AUSTRALIAN SERVICES UNION)
John Holland Group Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2010] VSC 322
EMPLOYMENT - Side agreement containing election to vary nominal expiry date of union greenfields agreement and clause requiring union to refrain from protected industrial action if election made - Election made after repeal of Workplace Relations Act 1996 (Cth) - effect of Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) - Whether 'protected industrial action' clause in side agreement remained operative
CONSTITUTIONAL LAW - s 51(xxxi) Australian Constitution - Whether Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) was a law with respect to the acquisition of property - Whether extinguishment of protected industrial action clause constituted an acquisition of property - Law not one with respect to acquisition of property - No acquisition occurred - Appeal dismissed.
For the Attorney-General of the Commonwealth (intervening)
2 This is an appeal against the decision and orders of a trial division judge, relating to the enforceability of clauses in a Deed of Settlement ('the Deed') made between the appellant, John Holland Group Pty Ltd ('John Holland'), and the five respondent unions ('the Unions') in April 2007.
3 The primary issue in the appeal relates to the construction of clause 8 of the Deed, under which the Unions agreed that they would not take, organise, or encourage 'protected industrial action' in support of any claim against John Holland, until after a specified date. This issue arose in the context of the repeal of the Workplace Relations Act 1996 (Cth) ('WR Act'), its replacement by the Fair Work Act 2009 (Cth) ('FW Act') and the transitional provisions which came into effect under the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) ('the Transitional Act').
4 The respondents' Notice of Contention also contests aspects of his Honour's findings on those two matters. The substance of the grounds of appeal and the Notice of Contention are set out below.
5 Because the appeal also raises the constitutional issue which is described below, the Commonwealth Attorney-General intervened in the proceedings under s 78A of the Judiciary Act 1901 (Cth).
6 The Deed was made following John Holland's purchase of Ansett Aviation Engineering Services ('Ansett Engineering') from the administrators of Ansett
Australia Ltd ('Ansett'), in order to set up a new business, 'John Holland Aviation Services', to provide engineering services to aircraft operators.
7 In February 2007, the appellant made written job offers to employees of both Ansett and Integrated Management Services Pty Ltd ('Integrated'), who were then working at the Ansett Engineering facility at Tullamarine. Under these offers, the workers were to be employed by John Holland Aviation Services under Australian Workplace Agreements ('AWAs') entered into under the WR Act.[1]
8 Shortly after the offers were made, the Australian Licensed Aircraft Engineers Association ('ALAEA'), the second respondent in this appeal, sent a memorandum to members employed by Ansett Engineering, warning them that they would lose entitlements payable by Ansett if they accepted John Holland's offers. On 9 March 2007, John Holland commenced proceedings in the Federal Court against the ALAEA, claiming that it had contravened s 401 of the WR Act by making false and misleading statements in the memorandum.
9 Following the institution of the Federal Court proceedings, there were meetings to resolve the dispute between representatives of John Holland, the Australian Council of Trade Unions ('ACTU') and the Unions. These meetings resulted in a settlement of the Federal Court proceedings, and the resolution of other issues relating to the employment of the staff by John Holland Aviation Services. It was agreed that John Holland and the Unions would enter into a deed of settlement.
10 The WR Act permitted an employer establishing or proposing to establish a new business to make a collective agreement known as a 'union greenfields agreement', with an organisation or organisations of employees.[2] The Act required the agreement to be entered into before the employment of any person who would be necessary for the normal operation of the business and who would be employed under the agreement.[3]
11 Under the Deed, John Holland, the Unions and the ACTU agreed to enter into a union greenfields agreement under the WR Act, which set out the terms on which staff would be employed by John Holland pursuant to this agreement. For workers previously employed by Ansett and Integrated, this agreement would take the place of the proposed AWAs.
12 It was agreed that the union greenfields agreement would have a 'nominal expiry date'[4] of 30 March 2010.[5] Once this nominal expiry date was reached, each party was to be able to extend the agreement by one or two years. It appears that the right to extend the agreement was a compromise between the objectives of John Holland and the Unions. John Holland wanted to ensure that part-time and casual employees could be hired on a flexible basis[6] until customer demand had stabilised[7] and to limit the potential for industrial action for as long as legally permitted under a greenfields agreement, which at that time was five years. The Unions wanted the ability to re-negotiate working conditions after a shorter period.
13 John Holland's and the Unions' right to elect to extend the agreement for up to two years after its 'nominal expiry date' was recorded in clause 6 of the Deed, executed in April 2007, but not in the union greenfields agreement, known as the 'John Holland Aviation Services Agreement 2007', which was executed on 18 April 2007 ('the Greenfields Agreement'). Under clause 8 of the Deed, the Unions agreed not to engage in protected industrial action before the 'new expiry date' of the Greenfields Agreement. The Greenfields Agreement was lodged with the Employment Advocate in May 2007.[8] It provided that:
This agreement will come into effect on and from the date on which it is lodged with the Office of the Employment Advocate, and will expire on 30 March 2010.[9]
14 Under s 347 of the WR Act (as it then stood), the Greenfields Agreement came
15 On 22 December 2009, John Holland purported to elect to extend the nominal expiry date of the Greenfields Agreement under clause 6 of the Deed. Part 8 of the WR Act permitted the Greenfields Agreement to be extended up to 30 March 2012, provided that (among other things) the employees agreed to the extension and the agreement was lodged with the Workplace Authority Director.[10]
16 However, by that time, the WR Act had been repealed and replaced by the FW Act. The Transitional Act allowed existing agreements to continue to operate and permitted them to be varied (including by extending their term of operation) in the circumstances described below. Four of the five unions which were parties to the Greenfields Agreement and the Deed[11] claimed that the Transitional Act did not permit the agreement to be extended by the time that John Holland had exercised its election. Consequently, it was said that clause 8 of the Deed, which prevented the Unions from engaging in 'protected industrial action', did not apply.
17 John Holland claimed that the Transitional Act permitted extension of the nominal expiry date of the Greenfields Agreement until 30 March 2012. It also claimed that the Deed was a common law agreement which operated independently of the WR Act. It followed that even if the term of the Greenfields Agreement could not be extended under the WR Act, the Unions continued to be bound by clauses 6 and 8 of the Deed.
18 If, contrary to John Holland's primary argument, the Transitional Act released the Unions from the obligation imposed by clause 8, it claimed that item 9 in Part 3 of Schedule 3 of that Act was invalid under s 51(xxxi) of the Commonwealth Constitution.[12] It was said that this provision amounted to an acquisition of a chose in action from John Holland which was not made on just terms.
19 John Holland sought a declaration that the nominal expiry date of the Greenfields Agreement was 30 March 2012 and an order that the Unions specifically perform the Deed. Alternatively, it sought a declaration that Item 9 of Schedule 3 of the Transitional Act was invalid. In the further alternative, it sought a declaration that the Unions remained bound by clause 8 of the Deed.[13]
20 The relevant provisions of the Deed were as follows:
21 Clause 11 specified dates for the commencement of negotiations, and dates for the commencement of conciliation and arbitration if required.
22 Before the trial judge, John Holland made the following arguments supporting its claim to exercise the option to extend the Greenfields Agreement:
• even if the Transitional Act did not permit an extension of the expiry date of the Greenfields Agreement, John Holland retained a contractual right under the Deed, as against the Unions, to elect to extend the term of the Greenfields Agreement;[14]
• the Deed constituted a variation of the Greenfields Agreement from inception, such that the variation took effect pursuant to the WR Act;[15]
• the variation to extend the nominal expiry date fell within an exception to the Transitional Act, because the process to vary the Greenfields Agreement began before the WR Act was repealed;[16] and
• the repeal was invalid under s 51(xxxi) of the Constitution as an acquisition of property otherwise than on just terms.[17]
23 John Holland also sought compensation under s 32ZI(1) of the Fair Trading Act 1999 (Vic), on the basis that the Unions had received a valuable benefit under a discharged contract.
24 The learned trial judge held (among other things) that:
[t]he more natural construction of clause 8 is that it is predicated upon a valid exercise of the option in clause 6 resulting in an actual extension of the nominal expiry date of the greenfields agreement with the statutory consequences which it was anticipated to have had under the WR Act had it continued in force.[20]
25 The judge also held that although the operation of the Deed had been frustrated, John Holland was not entitled to compensation under s 32ZI(1) of the Fair Trading Act 1999. Since this finding is not the subject of the appeal, it is not discussed below.
26 The appellant's grounds of appeal raise the following three questions.
1. In circumstances where John Holland had elected to extend the Greenfields Agreement to 30 March 2012, did clause 8 of the Deed prohibit the Unions from taking, organising or encouraging industrial action before that date (proposed Amended Notice of Appeal grounds 1, 1A and 2)?
2. Does Item 11(1A) of Schedule 2 to the Transitional Act permit statutory approval of the variation of the Greenfields Agreement, so as to extend the nominal expiry date of that agreement to 30 March 2012 (proposed Amended Notice of Appeal grounds 3 and 4)?
3. If the effect of the Transitional Act is to release the Unions from the obligations imposed by clause 8 of the Deed, is that provision invalid under s 51(xxxi) of the Constitution (proposed Amended Grounds of Appeal grounds 5 and 6)?
27 The first, second, third and fourth respondents have filed a Notice of Contention alleging that the orders of the trial judge should be affirmed on the basis that:
28 Before us, and before the trial judge, the appellant submitted that the Deed was a common law agreement between John Holland and the unions which operated independently of the Greenfields Agreement. The appellant contended that the operation of clause 8 did not depend on the term of the Greenfields Agreement being capable of extension under the procedures then set out in the WR Act. Rather, it bound the Unions not to take 'protected industrial action' as soon as John Holland made an election under clause 6 to extend the expiry date of the Greenfields Agreement. It followed that even if the term of the Greenfields Agreement could not be extended, the Unions would breach clause 8 if they engaged in protected industrial action until the end of the period to which John Holland sought to extend the agreement, that is, 30 March 2012.
29 The appellant submitted that the reference in clause 6 to John Holland or the Unions electing in writing to extend the agreement should be read as a reference to John Holland or the Unions seeking to extend the operation of the Greenfields Agreement. It followed that the reference to 'the new expiry date' in clause 8 did not mean the date to which the Greenfields Agreement was actually extended, following compliance with the variation requirements in the WR Act. Instead, it meant the date which John Holland sought as the new expiry date by making the election to extend the agreement. As soon as John Holland gave notice of its election to extend the agreement on 22 December 2009, the Unions were bound by the prohibition on industrial action contained in clause 8, whether or not the nominal expiry date of the Greenfields Agreement was able to be extended. It followed that the repeal of the WR Act did not prevent clause 8 from operating.
30 The appellant submitted that this construction of clause 8 reflected the intention of the parties that in return for John Holland binding itself by clause 7 to give wage increases payable on the first of January each year, John Holland could, by exercising its power of election, have a period of up to five years from the date of the agreement, during which the Unions could not take, encourage or organise industrial action.
31 It was argued that, in rejecting this construction, the trial judge had failed to take account of the circumstances in which the parties had entered into the Deed. It would have been 'commercially absurd' for John Holland to agree that clause 8 would only apply if a new nominal expiry date for the Greenfields Agreement had come into operation, by compliance with the requirements in the WR Act. Clauses 6 and 8 recognised that the Greenfields Agreement could not be extended without satisfying the requirements of the WR Act, but reflected the intention that, even if the employees were to reject the extension of the Greenfields Agreement, the Unions would continue to be bound not to encourage or assist the employees to take industrial action.
32 Counsel for the appellant submitted that the trial judge's construction of clauses 6 and 8 rendered clause 8 otiose. This was because s 494 of the WR Act prohibited employees and unions from engaging in industrial action until the nominal expiry date of the Greenfields Agreement had passed. Once the nominal expiry date of the Greenfields Agreement had been successfully extended, the unions would have been in breach of the Act if they had organised or engaged in industrial action.[22] It was therefore unnecessary to require them to contract not to do so.
33 The appellant submitted that because clause 6 of the Deed operated to impose obligations on the Unions in circumstances where the nominal expiry date of the Greenfields Agreement might never have actually been extended by compliance with the WR Act, there was no basis on which his Honour could have found that clause 6 was rendered 'inoperative and unenforceable from 1 July 2009, when the new legislation came into operation'. Consequently, clause 8 continued to operate.
34 Counsel for the respondents argued that clause 6 had no operation beyond committing the parties to a process to extend the expiry date of the Greenfields Agreement under the WR Act. The terms of clause 6 were said to mirror the statutory process for the extension of such agreements. In particular, once an election was made under clause 6, the other party to the agreement was required to agree to that election. Under the WR Act as it then operated, this was when the variation was 'made'[23] and was the 'first step' in the process for varying the statutory instrument.
35 According to the respondents, in exchange for the promise to refrain from organising industrial action, the unions derived benefit from clause 7 (wage increase) and clauses 9, 10 and 11 (which provided for an agreed process for the negotiation of issues). These benefits would disappear if the election made under clause 6 was not capable of being effective.
36 The respondents also argued that clauses 6 and 8 should be read in the context of the preceding heading, which refers to the 'Extension of Expiry Date.' This heading made it clear that clause 8 was referring to the actual 'nominal expiry date' of the Greenfields Agreement, which was 30 March 2010, unless it was extended by compliance with WR Act procedures.
37 Consequently, clause 7 of the Deed, which bound John Holland to pay specified wage increases, applied only '[i]f such an extension occurs'. Further, the Greenfields Agreement set out ancillary benefits such as overtime pay which were dependent on the worker's rate of pay during the currency of that agreement. John Holland could not be taken to have agreed to provide workers with unascertainable ancillary benefits during a five year period.
38 Similarly, clause 8 bound the Unions not to provoke strike action in the period between John Holland electing to extend the nominal expiry date and the new nominal expiry date being approved and documented in acceptance with clause 6. The reference in clause 8 to the election to extend the agreement thus required that election to be capable of being effective. It would make no sense for the Unions to relinquish their right to engage in industrial action simply because John Holland had given a notice of an intention to seek an extension of the term of the Greenfields Agreement, in circumstances where there could no longer be a new nominal expiry date.
39 In other words, the effect of the agreement was that the Unions bound themselves not to provoke industrial action for three years, with the possibility that this period could be extended if either John Holland or the Unions elected to extend the Greenfields Agreement under clause 6 and the election took effect under the WR Act. Because the repeal of the WR Act had made it impossible for John Holland to exercise its right to elect to extend the Greenfields Agreement by the time it purported to do so, clause 8 had become inoperable. Thus, the judge had correctly held that clause 8 was unenforceable.
40 I agree with the trial judge that, when clause 8 is read in combination with clause 6 and against the legislative background of the WR Act,[24] its objective meaning was to preclude the Unions from engaging in industrial action after John Holland exercised its election to extend the agreement by either 12 or 24 months, assuming that election was capable of taking effect under the WR Act. My reasons are as follows.
41 First, I consider that clause 6 was intended to operate as soon as an election was made by either John Holland or the Unions to extend the Greenfields Agreement. That is the plain meaning of the words:
If John Holland or the Unions makes any election to extend the expiry date of the Agreement, all parties hereby agree to extend the nominal expiry date of the agreement.[25]
42 Although counsel for the appellant submitted that this construction could be achieved by reading in the words 'seek to extend' instead of the word 'extend', this is unnecessary. Indeed, it would be surplusage to do so.
43 This construction of the first part of clause 6 is consistent with the concluding sentence of that clause, under which the parties agreed to do all things reasonably necessary to obtain approval of the variation and to lodge it. Under the WR Act (as it stood when the Deed was entered into), the date of lodgment was the date at which the extension of the Greenfields Agreement would take effect.[26]
44 Secondly, it is clear that clause 6 was based on the assumption that the process provided by the WR Act for the variation of greenfield agreements would continue. This is reflected in the reference in the clause to the 'nominal expiry date,' which was defined under s 352(1)(b) of the WR Act (as at the date of entry into the Deed) as the date specified in the agreement as the nominal expiry date, as long as it was no later than five years after the date when the agreement was lodged, or where no date was specified, five years from the date of lodgment. It is also apparent in the words contained in clause 6, which bind the parties to do all things necessary to obtain approval for the extension of the nominal expiry date, which refer to the manner in which a variation was required to be made under the WR Act.
45 For that reason, I agree with the trial judge that clause 6:
assumed the existence of the regime created by the WR Act and did not contemplate, as it could not contemplate, the terms of the FW Act or the Transitional Act which only subsequently came into existence after a general election and a change of government.[27]
46 Thirdly, clause 8 was 'subject to John Holland meeting the provisions of' (among other things) 'clause 6'. Thus, clause 8 assumed the continuing existence of the WR Act regime, as did clause 6.
47 Fourthly, the competing interpretations of the words of clause 8 must be resolved against the background of the WR Act provisions which permit 'protected industrial action' in some circumstances. The WR Act provided a process under which employees and unions who entered into a collective agreement with an employer (including a greenfields agreement) could engage in 'protected industrial action' after the nominal expiry date of the agreement.[28] Once the agreement was extended, or a new collective agreement was made, they would be in breach of the Act to do so.[29]
48 In the absence of clause 8, there were two situations in which the Unions could have engaged in protected industrial action. They could have done so while John Holland was bargaining with its employees for an extension of the nominal expiry date of the Greenfields Agreement, having elected to extend that agreement under clause 6. They could also have done so if the employees had declined to approve the extension and John Holland was bargaining with the employees to obtain a new collective agreement. If and when the agreement was actually extended, following compliance with WR Act procedures, neither the Unions nor the employees would have been able to engage in protected industrial action without breaching the WR Act.
49 Fifthly, in light of the above, it would have been otiose for John Holland to obtain the agreement of the Unions not to engage in 'protected industrial action' after the extension of the Greenfields Agreement took effect, because the Unions would have breached the Act if they had done so.
50 But for the repeal of the WR Act, the quid pro quo for the Deed would have been that if John Holland had elected to extend the Greenfields Agreement, and the variation had come into operation in accordance with the terms of the WR Act, Union members would have gained the benefit of clause 7. Both John Holland and the Unions also agreed to refer matters (other than the rates of pay referred to in clause 7) to conciliation or arbitration. This would have given the Unions the benefit of having binding arbitration of other terms and conditions, if these issues could not be resolved by the parties. That benefit would not have been available to the Unions in the absence of the Deed.
51 Sixthly, apart from the reference to the 'new expiry date', all of the language in clause 8 indicates that it operated immediately after either John Holland or the Unions made the election for which clause 6 provided. For the reasons explained above, the reference in the clause to 'protected industrial action' can only refer to the period between the expiry of the nominal expiry date of the agreement and the time when and if the new expiry date comes into operation. It cannot refer to the period after the agreement is extended, when the industrial action would no longer be protected.
For the avoidance of doubt, if John Holland elects to extend the Agreement to either 30 March 2011 or 20 March 2012, the Unions hereby agree not to take or organise protected action against John Holland before that date.[30]
53 The reference to 'that date' necessarily refers to the date to which John Holland elects to extend the agreement.
54 Seventhly, it must be conceded that the literal meaning of the words 'new expiry date' is the date to which the Deed is actually extended by compliance with the WR Act provisions. However, the conjunction between the use of this expression and the other parts of clause 8 creates an ambiguity. In my opinion, this ambiguity can only be resolved by reading the word 'nominated' or 'putative' into clause 8 before the words 'new expiry date'.
55 To do so does not breach the parole evidence rule or the limitations which exist on resorting to the surrounding circumstances to alter the plain meaning of the words of a contract which were articulated by the High Court in Royal Botanic Gardens and Domain Trust v South Sydney City Council.[31] It is simply an example of interpreting an ambiguity in clause 8 by reference to the context of the Deed as a whole and the legal background against which the Deed was made. If clause 8 had been intended to preclude the Unions from taking industrial action for five years from its commencement, it could have made specific provision to that effect.
56 Finally, I reject the argument that to so construe clause 8 would make the effect of the clause uncertain. The prohibition on industrial action would apply until either 30 March 2011 or 30 March 2012, depending on the date to which John Holland or the Unions elected to extend the Greenfields Agreement.
57 For the same reasons, I also agree with the learned trial judge that clause 8 of the Deed was predicated on a valid exercise of the option in clause 6, and so can no longer operate.
58 As I have explained, clause 6 depended on the continued operation of the WR Act. Clauses 6 and 8 are interconnected. Clause 8 seeks to limit the right of the Unions to engage in 'protected industrial action', which was a concept defined by the WR Act.[32] Because of the repeal of the WR Act and the introduction of the FW Act as from 1 July 2009, as qualified by the Transitional Act, clause 8 can no longer operate.
59 For these reasons, I agree with the trial judge that:
The repeal of the WR Act and the introduction of the FW Act as from 1 July 2009 provided no mechanism to extend the nominal expiry date of the greenfields agreement other than through the Transitional Act. An effect of the Transitional Act was to make the greenfields agreement a transitional instrument for the purposes of FW Act. Schedule 3 of the Transitional Act provides that a workplace agreement under the [WR Act] is a 'WR Act instrument'.[33] It also provides that a transitional instrument cannot be varied except as provided for in the Transitional Act.[34] The variations permitted in the Transitional Act include those in schedule 8 (which the parties agree in this proceeding are not available to be relied upon by John Holland) and those in part 3 of schedule 2 which deal with conduct and processes begun before the repeal of the WR Act[35] ... [I]t follows that clause 6 cannot be invoked under the WR Act (because it has been repealed), the FW Act or the Transitional Act (because they do not permit variation).[36]
60 Since clause 6 could not operate, nor could clause 8.
61 For these reasons, grounds 1, 1A and 2 are not made out.
Question 2: Could the nominal expiry date of the Greenfields Agreement be extended to March 2012?
62 On 1 July 2009, Part 8 of the WR Act, which provided for employers and employees to make workplace agreements (including union greenfields agreements), was repealed and Schedules 1 to 5 of the Transitional Act commenced.[37] However, the Greenfields Agreement continued in existence as 'a transitional instrument'[38] under Item 2 in Part 2 of Schedule 3 of the Transitional Act.[39] Part 3 of Schedule 3 limits the circumstances in which a 'transitional instrument' (in this case, the Greenfields Agreement) can be varied.
63 Item 9(1)(g) in Part 3 of Schedule 3 provides that '[a] transitional instrument cannot be varied except under...Part 3 of Schedule 2 (which deals with conduct before the WR Act repeal day)'.
64 Item 11(1A) in Part 3 of Schedule 2 of the Transitional Act provides as follows:
If:
(a) a process to vary or terminate a WR Act instrument is begun under the WR Act before the WR Act repeal day; and
(b) the WR Act instrument becomes a transitional instrument because of the operation of Part 2 of Schedule 3;[40]
The WR Act continues to apply, on and after the WR Act repeal day, for the purposes of completing the process.
66 On 22 December 2009 (that is, after the WR Act repeal date),[43] John Holland wrote to each of the unions advising them that:
John Holland Group Pty Ltd elects to extend the John Holland Aviation Services Agreement 2007 by 24 months from its nominal expiry date of 30 March 2010.
This election is made in accordance with Clause 6 of the Deed of Settlement.
67 In response, the ALAEA and the AMWU informed John Holland that they had been advised that the purported extension of the expiry date of the Greenfields Agreement did not operate and that the clauses of the Deed did not apply.
68 In the proceedings below, counsel for John Holland advanced three arguments in support of the claim that the variation of the Greenfields Agreement could take effect under the Transitional Act.
69 The first argument was based on s 368(d) of the WR Act, which provided that a variation is 'made' to a union greenfields agreement at 'the time when the employer and the organisation or organisations agree to the terms of the variation'. It was submitted that clause 6 of the Deed, when read in combination with the Greenfields Agreement, varied the Greenfields Agreement at the time when the Deed was executed.
70 Thus, when John Holland made its election on 22 December 2009 to extend the term of the agreement, the variation was to be treated as having occurred in April 2007, rather than when that election was actually made. The judge rejected the argument on the basis that the election had not been made until 22 December 2009 and that s 368 did not permit the use of a legal fiction.
71 The second argument was that the Item 11(1A) in Part 3 of Schedule 2 of the Transitional Act permitted the variation to extend the nominal expiry date because a process to vary a WR Act instrument had began before the WR Act repeal day. In addressing this issue, the trial judge said that:
[The Transitional Act] provided that a transitional instrument (which for present purposes includes the greenfields agreement) could not be varied except under one of seven specified provisions.[44] One of the exceptions was a variation under schedule 8 which included an unlodged variation of agreements such as the greenfields agreement.[45] Another exception was under part 3 of schedule 2 which deals with conduct before the repeal day of the WR Act. John Holland correctly accepted that it cannot bring itself within the terms of schedule 8 but maintained that it may come within the terms of part 3 of schedule 2 on the basis that a process to vary the greenfields agreement was begun before the repeal date of the WR Act.
The critical question for this issue is whether before 1 July 2009 there was begun 'a process to vary' the greenfields agreement within the meaning of the words 'a process to vary' as enacted in the Transitional Act.[46] The existence of clause 6 may be relevant to a process to vary but no process to vary had begun until an election was made. That did not occur until 22 December 2009 by which time the WR Act had been repealed and, therefore, John Holland's contention of a variation under the Transitional Act must also be rejected.[47]
72 Before us, counsel for the appellant contended that, when John Holland and the Unions executed the Deed and made the Greenfields Agreement in April 2007, they had begun 'a process to vary' the Greenfields Agreement which fell within item 11(1A) in Part 3 of Schedule 2 of the Transitional Act. They had 'made' the variation by agreeing on its terms. Those agreed terms were contained in clauses 6 and 7 of the Deed which provided for extension of the nominal expiry date and the agreed wage increases. As the Deed was made before 1 July 2009, item 9 in Part 3 of Schedule 3 did not render clause 6 inoperative and unenforceable and therefore, the Unions remained bound by clauses 6 and 8.
73 The respondents contended that this submission could not be sustained for two reasons. First, item 11(1A) in Part 3 of Schedule 2 applied only where the process to vary a WR Act instrument was begun under the WR Act before 1 July 2009. Its purpose was to allow parties to a WR Act instrument who had begun the process of variation before 1 July 2009 to complete those procedures. It did not apply where the statutory procedures for variation had not begun before the repeal date. Nor did it apply to a document which was not a WR Act instrument and the Deed was not such an instrument.
74 The respondents contended that the judge had correctly held that the terms of the variation relied on by John Holland were not agreed when the Deed was made. Clause 6 left open the following four possibilities:
• the nominal expiry date of the Greenfields Agreement would not be varied;
• one of the parties to the Deed would elect to extend the Greenfields Agreement to 30 March 2011 and the nominal expiry date would be extended by compliance with the procedures in Division 8 of Part 8 of the WR Act;
• one of the parties to the Deed would elect to extend the Greenfields Agreement to 30 March 2012 and the nominal expiry date would be extended by compliance with the procedures in Division 8 of Part 8 of the WR Act;
• the parties would agree to extend the nominal expiry date of the Greenfields Agreement to some other date, as they were permitted to do under Division 8 of Part 8 of the WR Act and the procedures in Part 8 would be complied with.
75 Hence, there was uncertainty as to the terms of any variation. These terms did not become certain until the clause 6 election was exercised by one or other party to the Deed. That did not occur until after 1 July 2009.
76 Secondly, the respondents relied on the first ground in its notice of contention, which asserted that the appellant could not rely on item 11(1A) in Part 3 of Schedule 2 to the Transitional Act in order to vary the Greenfields Agreement, because that general provision must yield to the specific provisions in Division 2 of Part 2 of Schedule 8 of the Transition Act relating to variations of collective agreements made before the WR Act repeal day. It was said that the appellant had accepted and his Honour had held that the provisions of items 6 to 8 in Part 2 of Schedule 8 to the Transitional Act did not apply.
77 Part 2 of Schedule 8 made detailed provisions relating to workplace agreements made under the WR Act. Item 6 applies certain provisions in Division 8 of Part 8 of the WR Act to a variation of a collective agreement 'if the variation is made before the WR Act repeal day'.[48]
78 As noted above, under the WR Act (as it stood at December 2009), a variation to a union greenfields agreement was 'made' at the time when the employer and the organisation or organisations agreed to the terms of the variation.[49] The variation was required to be approved by relevant employees,[50] and then lodged with the Workplace Authority Director.[51] If the agreement passed the 'no-disadvantage test' under s 346D, the Workplace Authority Director was required to provide written notification to the relevant parties of that decision.[52] Under s 380, the variation then came into operation on the seventh day after the date of issue specified in that notice.
79 The purpose of Division 2 of Part 2 of Schedule 8 was to apply the WR Act requirements in cases where employers and unions had agreed to variations to a union greenfields agreement before the WR Act repeal day, even though the variation had not yet come into operation. As discussed below, I do not accept that any such variation had been made to the Greenfields Agreement prior to the WR Act repeal day. Accordingly, Division 2 does not apply to the purported election made by John Holland.
80 Reference was made in submissions to item 7, which provides that various provisions in Part 8 of the WR Act continue to apply in relation to the variation on or after the WR Act repeal day. Item 7 must be read together with Item 8, which imposes time limits on the processes of approval, lodgment[53] and satisfaction of the no-disadvantage test which the WR Act required to be satisfied before the variation could take effect.
81 Item 8 prevents the Workplace Authority Director from considering whether the varied agreement passes the no-disadvantage test (which was a requirement for its operation under s 346D of the WR Act prior to the commencement of the Transitional Act) unless:
(i) the variation is lodged before the end of the period (the cut-off period) of 14 days referred to in subsection 375(1) of that Act; and
(ii) for a variation of a union collective agreement or a union greenfields agreement ― the variation was approved before the WR Act repeal day.[54]
82 The judge rejected the argument that the election power contained in clause 6 of the Deed had the effect that the variation was to be treated as having been made at the time when the Deed was executed. He said as follows:
The contention for John Holland was that a consequence of the particular wording of this section was that the variation effected by the subsequent notice on 22 December 2009 was, for the purposes of the WR Act, to be regarded as having occurred at the time of the agreement in April 2007 rather than when actually made some 20 months or so later. I do not consider this argument to be tenable on the terms of the provision.
Clause 6 of the Deed of Settlement did not purport to have the effect of constituting an agreement as at April 2007 that the nominal expiry date would then be some date other than 30 March 2010 as might (or might not) be elected subsequently. At best what was agreed to was that as at April 2007 the parties would in the future agree to a variation of the date. This argument of John Holland is not that the Deed of Settlement and the greenfields agreement depend upon common law rights in disregard of the legislation. The argument, rather, depends upon the incorporation of the opening words of s 368 to enable John Holland to maintain that what occurred on 22 December 2009 (in exercise of the right in clause 6 of the Deed of Settlement) must be seen to speak as from April 2007. Fundamental to the argument, however, is not the opening words of the section but, rather, the meaning of the words 'the time when the employer and the organisation or organisations agree to the terms of the variation' in subclause (d) of the section. There is no warrant to read those words as having been satisfied by legal fiction when the facts clearly show that the terms of the variation had not been agreed until, at best, the election in December 2009 (and might never have been made). It may be accepted that the parties agreed something in April 2007 and that the something which they agreed to related to an extension, but it does not follow that what was agreed by clause 6 satisfies the statutory description of agreement of terms which depended upon a future act which might or might not have occurred. Whether the statutory condition was satisfied requires a finding of fact and does not contemplate the operation of legal fiction as between the parties. In any event, a fair reading of clause 6 is that the parties agreed in April 2007 to agree to something in the future and was not an acknowledgement of an agreement in April 2007 of some event which was plainly contemplated as only a possibility.
It is therefore unnecessary for me to consider the various sub issues that were raised in connection with this contention but it may be desirable for me to state in summary form some views about them. The variation contended for by John Holland as effective upon the agreement in the Deed of Settlement could not have come into operation because it was not the Deed of Settlement but the greenfields agreement that had operation under the WR Act. Section 367 of the WR Act limited the way in which the greenfields agreement was capable of variation. For present purposes what needed to be complied with was the terms of division 8 which, amongst other things, required lodgement of the variation with the Workplace Authority Director under s 377. That did not occur. The WR Act, the FW Act and the Transitional Act provide no mechanism to amend the greenfields agreement by judicial order or to permit the Court to waive compliance with any of the procedures in division 8 of the WR Act or elsewhere in that legislation.[55]
83 I agree with his Honour that clause 6 of the Deed did not amount to a process to vary a WR Act instrument falling within item 11(1A) in Part 3 of Schedule 2. I accept the submission of the intervener that the relevant processes are those contemplated by Part 8 of Division 8 of the WR Act. Although clause 6 contemplated that a process to vary the Greenfields Agreement might be initiated by an election made by John Holland or the Unions, John Holland did not actually begin that process. There was no agreement as to the terms of the variation, which might have extended the agreement for one year or two years or a lesser period.
84 I also accept the respondents' contention that the specific provisions in Part 2 of Schedule 8 which apply to variations made before the WR Act repeal day, prevail over the more general provision in the Transitional Act that conduct occurring before the WR Act repeal day remains subject to the WR Act provisions. That interpretation of the legislation is consistent with the Explanatory Memorandum for the Bill, which says that:
Item 11 provides a general rule that conduct that occurred before the WR Act repeal day remains subject to the WR Act provisions...
Importantly, however, these general rules are subject to the specific rules set out in other Schedules to this Bill. The specific rules often modify, and sometimes exclude altogether, the general rules. For instance ... Schedule 8 contains detailed rules, which displace the general rules, about the continued application of the WR Act to agreements made under the WR Act before the WR Act repeal day. ... In effect, the general rules in items 11 and 12 apply as default rules where the other Schedules to this Bill do not apply.[56]
85 It follows, in the circumstances of this case, that item 6 of Schedule 8 prevents the purported variation from taking effect because it was not 'made' before the WR Act repeal day.
86 It is unnecessary to decide whether or not John Holland's acceptance in the proceeding below that items 6 to 8 in Part 2 of Schedule 8 were not satisfied precluded it from relying on that argument on appeal.
87 For the reasons I have given, grounds of appeal three and four are not made out.
Question 3: If the Unions were released from the obligations imposed by clause 8 of the Deed, does s 51(xxxi) of the Commonwealth Constitution apply?
88 The learned trial judge held that s 51(xxxi) did not apply because item 9 in Part 3 of Schedule 3 of the Transitional Act could not be characterised as a law with respect to the acquisition of property.[57] The effect of the Transitional Act on John Holland's contractual right against the Unions was:
at best incidental and subservient to the principal purpose and effect sought to be achieved by the legislation.[58]
89 Counsel for the appellant argued that the judge should have held that the practical effect of the Transitional Act was to acquire John Holland's chose in action against the Unions and that this amounted to an acquisition of property which had not been made on just terms.
90 Item 9 in Part 3 of Schedule 3 of the Transitional Act could not be characterised as a law concerned with the adjustments of competing rights, claims or obligations such as had been held by the High Court not to be a law relating to the acquisition of property. Further, in its Outline of Submissions, John Holland formally submitted that:
High Court decisions and dicta regarding the characterisation, for the purposes of s 51(xxxi), of laws concerned with the adjustment of competing rights, claims or obligations in a particular relationship or area of activity should not be followed.
91 Both the Unions and the intervener submitted that item 9 in Part 3 of Schedule 3 was not a law with respect to the acquisition of property. Reliance was placed on the analysis of Mason CJ in Mutual Pools and Staff Pty Ltd v The Commonwealth,[59] where it was accepted that a law which provides a means of resolving or adjusting competing claims, obligations or property rights as an incident of a relationship between parties is not a law for the acquisition of property. It was contended that the main purpose of the Transitional Act was to phase out the regime created by the WR Act and to replace it with the different processes for the regulation of workplace relations established by the FW Act.
92 In their Notice of Contention, the Unions also alleged that even if item 9 in Part 3 of Schedule 3 deprived John Holland of a chose in action, this of itself was not sufficient to amount to an acquisition of property caught by s 51(xxxi). The extinguishment of the obligation created by clause 8 of the Deed did not confer any correlative benefit on the Unions and the 'fact that the Union respondents were able to engage in industrial action which would otherwise have been prohibited under clause 8 was not the result of any acquisition of property belonging to John Holland'.
93 In support of the argument that s 51(xxxi) did not apply, the intervener contended that, although the extinguishment of contractual rights can constitute an acquisition of property, the cases in which it had been held to do so resulted in one party to the contract receiving direct financial or proprietary benefits as a result of the extinguishment of the contractual right. In this case, the Unions did not receive any money or other property, but were simply free to take industrial action without the restraint imposed by the contractual obligations in clause 8.
94 In my opinion, grounds 5 and 6 are not made out, because item 9 in Part 3 of Schedule 3 of the Transitional Act was not a law with respect to the acquisition of property. The FW Act and the Transitional Act were exercises of the legislative powers contained in ss 51(xxxv) and 51(xxxix) of the Constitution. The purpose of Item 9, Schedule 3 was not to acquire property (in this case John Holland's contractual right against the Unions), but to adjust the relations of employers and employees by providing for the phasing in of the new industrial relations regime created by the FW Act.
95 As Mason CJ, Deane J and Gaudron J observed in Georgiadis v Australian & Overseas Telecommunications Corporation:[60]
Not every Commonwealth law with respect to the acquisition of property falls within s 51(xxxi) of the Constitution...[I]t may fall outside s 51(xxxi) because it cannot fairly be characterized as a law for the acquisition of property for a purpose in respect of which the Parliament has power to make laws. That will generally be the case with laws directed to resolving competing claims or providing for 'the creation, modification, extinguishment or transfer of rights and liabilities as an incident of, or a means for enforcing, some general regulation of the conduct, rights and obligations of citizens in relationships or areas which need to be regulated in the common interest'.[61]
96 The fact that one of the many effects of the Transitional Act was to bring John Holland's right of action against the Unions to an end, does not make it a law with respect to the acquisition of property. I agree with the judge that:
The law which John Holland seeks, and must succeed, to impugn does not bear that character. Any effect which the Transitional Act had upon a contractual entitlement of John Holland against the unions was at best incidental and subservient to the principal purpose and effect sought to be achieved by the legislation. The provision is an integral part of the set of statutes designed to phase out the earlier provisions. It is not a law that destroyed a right which John Holland could have had against the unions if the terms of the right had been directed to prevent the unions from engaging in industrial disputation at the election of John Holland for a period of time. What the law does is to set its sights upon the means by which industrial agreements were to be entered into and modified after 1 July 2009. It happened that a contractual term John Holland had against the unions was linked to the statutory regime by which a date for the term of an industrial agreement could be varied. The loss by John Holland of any right against the union was but an incident of its indirect entitlement having been made to depend upon the workings of the statutory regime which was repealed and substituted with that now in place. Its claim under s 51(xxxi) of the Constitution cannot succeed.[62]
97 My conclusion on this issue makes it unnecessary to consider clause 2 of the Unions' notice of contention, which claims that item 9 in Part 3 of Schedule 3 of the Transitional Act did not affect any 'acquisition' of any property of the appellant or the submissions to that effect made on behalf of the Commonwealth Attorney-General. In case it matters, however, I should say that I think this argument is correct. Although John Holland's contractual right against the Unions was extinguished, neither the Commonwealth nor the Unions acquired any proprietary rights or financial gain as a result of that extinction. As Brennan J said in the 'Tasmanian Dams case':[63]
Where neither the Commonwealth nor any other person acquires proprietary rights under a law of the Commonwealth, there is no acquisition upon which par (xxxi) may fasten.[64]
98 The Unions did not derive any proprietary rights as a result of the extinction of their contractual obligation.[65] Nor did they obtain any direct benefit or financial gain from that extinction. Similarly, the Commonwealth did not acquire property rights or any other benefit as a consequence of the extinction of John Holland's chose in action. For these reasons, grounds of appeal five and six must fail.
99 For the above reasons, I would dismiss the appeal.
[1] Workplace Relations Act 1996 (Cth) ('WR Act') s 326.
[2] Ibid s 329; cf, an 'employer greenfields agreement', provided for under s 330, in which unions are not involved.
[3] Ibid s 329, as it stood at March 2007. The WR Act was amended by the Workplace Relations Amendment (A Stronger Safety Net) Act 2007 (Cth) to replace the Employment Advocate with the Workplace Authority Director from 1 July 2007.
[5] John Holland Aviation Services Agreement 2007, cl 4.
[7] John Holland Group Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2010] VSC 322 (Pagone J) ('Reasons') [4].
[9] John Holland Aviation Services Agreement 2007, cl 4.
[10] WR Act pt 8 div 8. The Workplace Authority Director replaced the Office of the Employment Advocate from 1 July 2007.
[11] The fifth respondent to this appeal, the National Union of Workers, did not object. However, it was made a party to the proceeding below for conformity, and is therefore a party to this appeal. It took no part in the proceeding before Pagone J.
[12] Commonwealth of Australia Constitution Act ('The Constitution').
[13] It also sought an order that the unions pay compensation to John Holland under s 32Z1 of the Fair Trading Act 1999, on the basis that the contract had been frustrated.
[22] WR Act ss 440, 494(1). For the pecuniary penalty which applies see s 494(6).
[24] For discussion of the approach to interpretation of industrial agreements, see Amcor Ltd v Construction, Forestry, Mining and Energy Union and Others [2005] HCA 10; (2005) 222 CLR 241, cited in Oceanic Coal Australia Pty Ltd v Parker [2010] FCA 1018, [39].
[31] [2002] HCA 5; (2002) 240 CLR 45, 62−3; See also Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337, 352 (Mason CJ) and Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 [2], refusing leave to appeal against the decision of the New South Wales Court of Appeal in Jireh International Pty Ltd t/as Gloria Jean's Coffee v Western Exports Services Inc [2011] NSWCA 137, [55]-[58] (McFarlan JA).
[33] Transitional Act sch 3 item 2(2)(c), sch 3 item 2(1), sch 3 item 3.
[38] Item 2(c) covers a 'workplace agreement'. This is not a defined expression in the Transitional Act but refers to Part 8 of the WR Act, under which union greenfields agreements are a type of workplace agreement: see Part 8, Division 2.
[40] This Part deals with the continued existence of WR Act instruments as 'transitional instruments'.
[41] Transitional Act sch 2 pt 1 item 2.
[42] Schedule 2 Part 1 defines a WR instrument as 'see subitem 2(2) of Schedule 3'.
[43] Transitional Act sch 2 pt 1 item 2.
[47] Reasons[19]-[20]. His Honour considered it unnecessary to deal with the alternative submission for the Unions that the general provision dealing with conduct which had begun before the appeal day was overridden by the specific provisions relating to workplace agreements in Schedule 8 of the Transitional Act.
[53] This required lodgment of an approved variation with the Employment Advocate within 14 days after the variation was approved: WR Act s 375.
[56] Explanatory Memorandum, Fair Work (Transitional Provisions and Consequential Amendments) Bill 2009 (Cth) [19] and [23] (emphasis added).
[57] Mutual Pools & Staff Pty Ltd v The Commonwealth of Australia [1994] HCA 9; (1994) 179 CLR 155, 188 (Deane and Gaudron JJ); Nintendo Co Ltd v Centronics Systems Pty Ltd [1994] HCA 27; (1994) 181 CLR 134, 161 (Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ).
[59] [1994] HCA 9; (1994) 179 CLR 155, 171.
[60] (1994) 179 CLR 297, 306−7.
[61] Mutual Pools & Staff Pty Ltd v The Commonwealth of Australia [1994] HCA 9; (1994) 179 CLR 155, 172 (Mason CJ), see also 189-90 (Deane and Gaudron JJ). See also Nintendo Co Ltd v Centronics Systems Pty Ltd [1994] HCA 27; (1994) 181 CLR 134, 161 (Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ). See however the criticisms of this approach by Heydon J in ICM Agriculture Pty Ltd v The Commonwealth [2009] HCA 51; (2009) 240 CLR 140, 227−8, and by Callinan J in Smith v ANL Ltd [2000] HCA 26; (2000) 204 CLR 493, 550−2.
[63] The Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1, 247.
[64] See also, The Commonwealth v Tasmania [1983] HCA 21; (1983) 158 CLR 1, 145 (Mason J), Georgiadis v Australian & Overseas Telecommunications Corporation (1994) 179 CLR 297, 305 (Mason CJ, Deane and Gaudron JJ).
[65] See also ICM Agriculture Pty Ltd v The Commonwealth [2009] HCA 51; (2009) 240 CLR 140, 179−80 (French CJ, Gummow and Crennan JJ), although see also 201 (Hayne, Kiefel and Bell JJ).
John Holland Group Pty Ltd
Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union & Ors [2011] VSCA 396
(2005) 222 CLR 241
(2002) 240 CLR 45
(1982) 149 CLR 337
(1994) 179 CLR 155
(1994) 181 CLR 134
(1994) 179 CLR 297
(2009) 240 CLR 140
(2000) 204 CLR 493
(1983) 158 CLR 1