CORKE INSTRUMENT ENGINEERING (AUST) PTY LTD - BASS STRAIT ESSO ONSHORE/OFFSHORE FACILITIES CERTIFIED AGREEMENT 2000

Appeal - certified agreements applying to work in the oil and gas industry - application to terminate agreements - public interest - whether termination contrary to the public interest - role of client in contractor negotiations - relevance of employer demand for change in roster - Workplace Relations Act 1996 ss.45 and 170MH

[1] Esso Australia Pty Ltd (Esso) develops and operates oil and gas production facilities at Longford and Long Island Point in the Gippsland area of Victoria and nearby in Bass Strait. Esso enters into contracts for the supply of services to its business. This case concerns disputation which has arisen between some of the contractors engaged by Esso, and Esso itself, and a number of trade unions concerning the conditions of employment to be afforded to employees engaged by the contractors for the purpose of carrying out the Esso contracts.

[2] The contractors and the nature of their contracts are as follows. Kellogg Brown and Root Pty Ltd (KBR) and Worley ABB Joint Venture (Worley ABB) provide engineering, procurement and construction services to Esso. Their contracts involve regular scheduled engineering construction work primarily at the Longford Gas Plant, the Long Island Point facility and on offshore platforms. Worley ABB Joint Venture is a composite entity comprised of two companies being Worley Pty. Limited and ABB Service Pty. Limited. Corke Instrument Engineering (Aust) Pty Ltd (Corke) does not contract directly with Esso but provides electrical instrumentation services to KBR for the purposes of KBR's contract with Esso.

[3] In each case the contract commenced in March 2001 and, after extensions, was to expire on 31 December 2004. Esso has an ongoing need for the provision of these services and has called for tenders. It has indicated, however, that it will appoint one contractor only for all of the works. While the Worley ABB joint venture has not tendered for the new contract, Worley Pty Limited has tendered in its own right and ABB Service Pty Limited has tendered with a new joint venture partner. KBR has also tendered. There is at least one other bidder.

[4] Some idea of the scale of the works included in the present contracts is provided by the value of the new contract which is anticipated to be in the vicinity of $900 million over the next nine years. The number of employees engaged by the contractors for the purposes of the Esso contracts onshore was around 150. During the proceedings the number of employees engaged for the same purposes offshore fluctuated between 60 and 150.

[5] The contractors are parties to agreements certified by the Commission which regulate wages and conditions to be afforded by the contractors to their employees engaged for the purposes of the Esso contracts. The agreements are:

· Worley ABB Bass Strait On Shore/Off Shore Facilities Certified Agreement 2000 (Worley ABB Mechanical Agreement)[1];

· Worley ABB Bass Strait On Shore/Off Shore Facilities Certified Agreement 2000 (Worley ABB Electrical Agreement)[2];

· Corke Instrument Engineering (Aust) Pty Ltd - Bass Strait Esso Onshore/Offshore Facilities Certified Agreement 2000 (Corke Agreement)[3]; and

· Kellogg Brown and Root, Bass Strait (Esso) Onshore/Offshore Facilities Certified Agreement 2000 (KBR Agreement)[4].

[6] The agreements have a common expiry date of 30 June 2003 but remain in operation by force of s.170LX(3) of the Act. Despite extensive negotiations between the contractors and the unions, the Australian Workers' Union (AWU), the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) and the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU), no agreement has been reached on terms and conditions to replace those in the existing certified agreements. The major issue in the negotiations, and one on which the negotiations have broken down, is the type of roster to apply to employees working on the offshore platforms. Offshore employees currently work a roster of 7 days of 12 hour shifts offshore followed by seven days off duty onshore. Esso and the contractors wish to introduce a new roster requiring up to 14 days offshore followed by 14 days off duty onshore. The unions and the employees wish to retain the current roster and are strongly opposed to the proposed change.

[7] While what we have indicated so far gives the context for the proceedings, the applications before the Commission are ones made by the contractors for termination of each of the certified agreements. The applications were made pursuant to s.170MH of the Act on 13 February 2004. They were heard by Commissioner Whelan between February and June 2004. The Commissioner issued a decision on 7 September 2004[5] dismissing the applications. Esso and the contractors have lodged appeals, for which leave is required, against that decision. They seek orders quashing the Commission's decision and terminating the agreements.

"170MH Terminating a certified agreement in public interest after nominal expiry date

(1) After the nominal expiry date of a certified agreement:

(b) a majority of the employees whose employment is subject to the agreement; or

(c) an organisation of employees that is bound by the agreement and that has at least one member whose employment is subject to the agreement;

may apply to the Commission to have the agreement terminated.

(2) On receiving the application, the Commission must take such steps as it considers appropriate to obtain the views of persons bound by the agreement about whether it should be terminated.

(3) If, after complying with subsection (2), the Commission considers that it is not contrary to the public interest to terminate the agreement, the Commission must, by order, terminate the agreement.

(4) The termination takes effect when the Commission's order takes effect."

[9] It can be seen from s.170MH(2) that on receiving an application for termination the Commission is obliged to take steps to obtain the views of the persons bound by the agreement about termination. Subsequently, the Commission is required by s.170MH(3) to terminate the agreement if it considers it is not contrary to the public interest to do so.

[10] Commissioner Whelan's decision is a thorough one in which she carefully set out her reasoning. It is a difficult task to summarize such a closely reasoned decision but we think it can fairly be said to consist of the following essential steps.

[11] The Commissioner pointed out that because of its effect on the employees' wages and conditions the termination of the agreements would result in confusion and a deterioration in the industrial climate and might lead to a change in the relative bargaining strength of the parties. The Commissioner found that such consequences appeared to be within the scheme of the Act and did not of themselves raise issues affecting the public interest. In the particular circumstances of this case, however, the Commissioner found that there were two considerations which indicated that termination of the agreements would be contrary to the public interest. The first concerned Esso's role in the negotiations. The second concerned the offshore roster. Since they were the focus of most of the submissions we shall deal with these two considerations in some detail later.

[12] The Commissioner also considered a number of other factors which were potentially relevant to the public interest. These were the effect on gas production of any industrial action should the agreements be terminated, any adverse impact on the Latrobe Valley community should the rosters be altered as sought by the contractors and Esso, the alleged futility and prematurity of the application, whether termination of the agreements would be beyond jurisdiction and whether public benefits would result from termination.

[13] The Commissioner was not satisfied that there was a "real and probable threat" to gas supplies should the agreements be terminated. In relation to the impact of the proposed roster change on the Latrobe Valley community, she was unable to reach a firm conclusion but expressed the view that the potential impact should be properly investigated. The Commissioner rejected suggestions that the application was premature because the contractors had not exhausted other courses of action. She nevertheless found that termination could be of little benefit to Worley ABB and unlikely to facilitate bargaining between Worley ABB and the unions because the joint venture was not continuing after the termination of its contract at the end of December 2004. She also rejected a submission that termination of the agreements would be beyond jurisdiction because it would assist in the achievement by Esso of an improper purpose. Finally, the Commissioner found that to the extent that termination of the agreements might promote bargaining, termination would be in the public interest.

[14] In the concluding section of her decision the Commissioner indicated that she decided that it would be contrary to the public interest to terminate the agreements and she dismissed the application. The Commissioner relied squarely on the two considerations she had earlier identified - Esso's role in the negotiations for a new agreement and the 14 day roster claim. She decided that each consideration formed a separate and sufficient basis to reject the applications.

[15] On the question of Esso's role in the negotiations the Commissioner said:

"[280] In my view, genuine bargaining cannot occur where one of the parties is unable to reach an agreement with the other or others without the concurrence of a party which is a stranger to the Agreement. This is not analogous to a government department or a subsidiary which is required to seek the approval of the relevant Minister in the one case or the parent company in the other.

[281] Public concerns have been expressed in other industries about contractors determining the form and content of agreements under which the employees of subcontractors are engaged. The fact that these contractors are prepared to acquiesce in that process and pursue such an agreement on the basis that what is in the principal's best interest is also in their best interest, does not make this situation significantly different.

[282] I am satisfied that the level of control exercised by Esso in this case has served to prevent the contractors from freely bargaining with their employees and their representatives.

[283] Bargaining in those circumstances can hardly be `fair' or `genuine'. As such I am satisfied that it is contrary to the public interest to facilitate it."[6]

[16] In relation to the 14 day roster claim the Commissioner said:

"[284] Further, while the Commission must exercise its functions under Part VIB in such a way as to facilitate the making and certifying of Agreements, it must also act in a way which is consistent with its obligations under the Act as a whole. Section 93A requires the Commission to take account of the principles embodied in the Family Responsibilities Convention in performing its functions under the Act. Schedule 12 of the Act sets out the terms of that Convention.

[285] The principles contained in that Convention include enabling persons with family responsibilities who are engaging or wish to engage in employment, to exercise their right to do so without being subject to discrimination and, to the extent possible, without conflict between their employment and family responsibilities. Further those principles include enabling workers with family responsibilities to exercise their right to free choice of employment.

[286] The evidence before me leads me to conclude that for these employees the extension of the time they would be required to be separated from their families would compromise that right to free choice of employment. That is not simply a matter of personal interest but of interest to the public and the community in general."[7]

[17] We agree with the appellants that the appeal raises important questions of construction and application of s.170MH. We are satisfied that the matter is of such importance that in the public interest leave should be granted to appeal. Our reasons for that satisfaction appear later. We grant leave to appeal.

[18] An application under s.170MH requires the exercise of a discretion. Accordingly the correctness of the decision can only be challenged by showing error in the decision-making process: Coal and Allied Operations Pty. Limited. v Australian Industrial Relations Commission and Others[8]. As the majority noted in Coal and Allied[9], the errors that might be made in the decision-making process were referred to in House v The King as follows:

"If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so."[10]

[19] The appellants submitted that the Commissioner's decision is affected by the following errors:

(c) allowing extraneous or irrelevant matters to affect the decision, and

(d) not taking into account material considerations.

[20] All parties to the appeal made submissions about the operation of s.170MH(3). We were referred to a number of decisions including Re Joy Manufacturing Company Pty Ltd[11], Re Geelong Wool Combing Ltd[12] and Re Mount Thorley Operations Enterprise Agreement 1996[13]. It is sufficient to say that the unions, generally speaking, supported Commissioner Whelan's view that the interests of the parties, in the particular context of s.170MH as a whole, are to be taken into account in considering the effect of termination of the agreements upon the public interest. This submission was bolstered by reference to the requirement in s.170MH(2) that the Commission take steps to obtain the views of persons bound by the agreement. The appellants, on the other hand, sought to persuade us that the Commissioner's approach reflected an impermissible mingling of the interests of the parties with the public interest in exercising the discretion in s.170MH(3).

[21] It seems to us that confusion will arise if attempts are made to paraphrase the statutory test and to formulate rules or guidelines for its application. All that need be said is that despite the requirement in s.170MH(2) to take steps to ascertain the views of the parties to the agreement, ultimately the test is that set out in s.170MH(3). That test is based on the public interest alone. If the legislature had intended that the interests of the negotiating parties should also be considered it could have made specific reference to those interests. The terms of s.170MH(3) can be contrasted with 170MX(5)(c) which reads:

"170MX What happens if Commission terminates a bargaining period under subsection 170MW(3) or (7)

(5) In exercising those arbitration powers, the Full Bench must have regard to the following:

(c) the interests of the negotiating parties and the public interest;

[22] The absence of any reference to the interests of the negotiating parties in s.170MH(3) is significant. It follows that the views of persons bound by the agreement may be relevant to the exercise of the discretion if they shed light upon the effect of termination on the public interest, but they should not be given any independent weight. To do so would be to import into the application of the section something which on its proper construction it does not include.

[23] The notion of public interest refers to matters that might affect the public as a whole such as the achievement or otherwise of the various objects of the Act, employment levels, inflation, and the maintenance of proper industrial standards. An example of something in the last category may be a case in which there was no applicable award and the termination of the agreement would lead to an absence of award coverage for the employees. While the content of the notion of public interest cannot be precisely defined, it is distinct in nature from the interests of the parties. And although the public interest and the interests of the parties may be simultaneously affected, that fact does not lessen the distinction between them.

[24] We were referred to a number of authorities concerning the ascertainment of the public interest. It is sufficient to refer to two. The first is the decision of the High Court of Australia in Queensland Electricity Commission; Ex parte Electrical Trades Union of Australia[14](the QEC case). In that case the Court was considering the exercise of the discretion conferred on the Conciliation and Arbitration Commission by s.41(1)(d)(iii) of the Conciliation and Arbitration Act 1904. A similar discretion is now conferred upon this Commission by s.111(1)(g)(iii) of the Act. That section reads:

(g) dismiss a matter or part of a matter, or refrain from further hearing or from determining the industrial dispute or part of the industrial dispute, if it appears:

(iii) that further proceedings are not necessary or desirable in the public interest;"

[25] The QEC case was concerned with whether or not the Commission had failed to exercise its jurisdiction in upholding an application by the Queensland Electricity Commission to refrain from further hearing or from determining an industrial dispute between it and the Electrical Trades Union of Australia. The following passage appears in the joint judgement of the majority:

". . . Ascertainment in any particular case of where the public interest lies will often depend on a balancing of interests, including competing public interests, and be very much a question of fact and degree. In this case the Commission was called upon to weigh in the balance two competing public interests. One was the importance of settling in its entirety the dispute initiated by the E.T.U.'s log of claims. The other was the importance of leaving the dispute to be resolved by the State tribunal despite the limitations on its jurisdiction if that course was likely to maintain the marked improvement in industrial relations in the industry that had occurred since the dispute arose and thereby contribute to industrial peace and an efficient power supply."[15]

[26] It is clear from this passage that the ascertainment of the public interest may involve balancing countervailing public interests. That the Commission should take all of the circumstances into account is made clear by Dawson J in Re Australian Insurance Employees Union; Ex parte Academy Insurance Pty Ltd.[16] These authorities provide useful general guidance in the application of the test in s.170MH(3). They illustrate the types of interests which can be properly described as public interests and confirm the breadth of circumstances which may be relevant to the ascertainment of those interests.

[27] It should be emphasized that the Commission's consideration of the public interest for the purpose of s.170MH(3) is directed to the consequences of terminating the agreement. In a given case, some consequences will be clearly predictable, others will be less so. For the most part the Commission should be guided by the likely foreseeable consequences of termination rather than speculation about possible consequences.

[28] We turn now to the first basis for the Commission's decision - Esso's role in the negotiations. The Commissioner found that the contracts gave Esso a great deal of control over changes sought to be implemented by the contractors and over the bargaining process as a whole. It is appropriate to set out some of her other findings in full.

"[83] Two steps in the process clearly illustrate the level of control exercised by Esso. These are, the decision to revise the offer to employees and the role of Mr Lane in negotiations for resolution of the impasse over the 14/14 roster. Esso would countenance no compromise.

[84] It is also clear from the evidence that all the benefits to be derived from a 14/14 roster would be gained by Esso. Indeed the contractors could, at least in the short-term, be worse off.

[85] Further these negotiations were occurring in a context where it was possible that none of the existing contractors might gain any long-term benefits from a new EBA. At stake were contracts worth up to $900 million over the next nine years. The major incentive for the contractors appears to have been to do what Esso wanted in order to place themselves in a better position in relation to the tenders for 2005 and beyond.

[86] Esso were not just concerned with the delivery of productivity savings but how those savings were delivered. Esso not only strongly supported the contractors in making the claim for the 14/14 roster but also ensured that there would be no back down on that claim. It is clear that Esso wanted, and still wants, to introduce a 14/14 roster for its own employees. It was unable to achieve this in their last enterprise bargaining negotiations but saw a benefit in incremental change by having the construction contractors move to such a roster. Even if the contractors had wanted to compromise on the claim or to allow the matter to be arbitrated, they could not have done so without Esso's concurrence.

[87] There was contradictory evidence given by Mr Joyce on the one hand, and Mr Lee and Mr Mooney on the other, concerning the issue of referral of the matter to the Commission for arbitration. It is not a matter about which I need to reach any final conclusions. In the context of the negotiations however I am satisfied that the Unions understood that the intent of such a process was to determine if there should be a move away from the 7/7 roster. It is inconceivable that they would have considered an arbitration on the conditions under which a 14/14 roster might be implemented when neither the union nor their members were prepared to concede a move from the 7/7 roster.

[88] It is clear that the Unions were prepared to risk an adverse outcome. Esso was not. Esso was the hand pulling the strings."[17]

[29] These findings of fact were the basis for conclusions that Esso's role in the negotiation raised an issue affecting the public interest. It was expressed this way:

"[89] In my view, you cannot have `genuine bargaining' where one of the negotiating parties is unable to reach agreement without the concurrence of an entity which is not a party to negotiations. The scheme of the Act, in so far as it based on agreement-making, is predicated upon the concept of negotiating parties, employers and employees, employers and unions having a representative role in relation to those employees, freely entering into agreements which relate to the employer/employee relationship of the parties to the agreement.

[90] Esso is not the employer. Esso is a stranger to the agreement and yet Esso has ultimate control not only over whether an agreement is made or not made but upon what terms it may be made. The contractors clearly were, at one stage, prepared to consider different options for resolving the impasse with the Unions over the roster proposal. Esso clearly indicated that any resolution which did not deliver a 14/14 roster would not be acceptable to Esso.

[91] It is not in the public interest that the freedom of the parties to negotiate and reach agreement is nullified by the involvement of a party which stands outside the process."[18]

[30] Esso's role in the negotiations should be seen in its full context. That context includes the following circumstances. Esso is the operator of the offshore platforms and onshore facilities at which work was carried out by the contractor's employees. Esso has its own employees at these locations. It is to be inferred that in these circumstances Esso has a legitimate interest in the conditions to be offered to the employees of the contractors. It is not surprising that the claim by the contractors for the adoption of the 14 day roster was rightly seen by all parties and by the Commissioner as having implications not only for the contractors' offshore employees, but for Esso's offshore employees as well. It is also relevant that under the contracts Esso was obliged to reimburse the contractors for increases in labour costs. Given these considerations we are unable to attribute to Esso's involvement in the negotiations the characterization which the Commissioner gave to it. Furthermore we do not regard Esso's role in this case as unusual. Other examples can be found in contemporary industrial relations of head contractors and indeed Governments reserving a right to influence or even to control the outcome of negotiations between their contractors or agencies and the employees of the contractors or agencies. Nothing in Part VIB prohibits conduct of this type, provided there is no coercion.[19]

[31] On the hearing of the appeal senior counsel for the unions advanced a number of propositions based on the evidence before the Commissioner which were said to support the decision. A number of the propositions were adopted by the Commissioner. The first was that in the context of the agreement negotiations the contractors were under economic pressure to appease Esso because Esso was calling for tenders for a single contract. Leaving the pejorative reference aside, the likelihood that in future there would be only one contract with Esso rather than two was an everyday commercial reality which all parties had to grapple with and could not be regarded as in any way raising public interest considerations. The next proposition was that Esso had a strong incentive to pursue and control roster change because it would be the direct beneficiary of any resulting productivity improvements. We find nothing exceptional in this. The situation is similar as between client and contractor whenever the contract operates on a cost plus basis. The next proposition was that Esso had the incentive that roster change for the contractors' employees would help it pursue its desire to change rosters for its own employees. Accepting that Esso wished to introduce the 14 day roster for its offshore employees but had so far been unsuccessful, its support for and encouragement of the contractors' pursuit of the 14 day roster is not extraordinary. Presumably Esso supports many other conditions of employment for the contractors' employees which are consistent with the conditions of its own employees. Next it was submitted that historically Esso had involved itself in managing the contractors' industrial negotiations. There are questions of degree of involvement, but accepting that the evidence supports the proposition advanced, it cannot be suggested that a client could not, by contract, reserve to itself the responsibility for managing the industrial relations of its contractor. Once that is accepted, as it must be, there is nothing sinister, or even unusual, about the role adopted by Esso in the negotiations. The next proposition was that the contracts gave Esso a high degree of control over changes in the industrial conditions of the contractors' employees. In a context where increases in costs would be borne by Esso, and changes in conditions might impact on Esso's direct industrial interests, it is understandable that Esso might retain a contractual right to veto or approve any proposed changes.

[32] A number of propositions were advanced concerning the level of Esso's influence over the contractors in relation to the negotiations in general and the 14 day roster in particular. An Esso document indicating that only the introduction of the 14 day roster would meet its expectations for a successful outcome to the negotiations was relied upon as were various other documents passing between Esso and the contractors in connection with the contractors' tactics in the negotiations. This material indicated that Esso executives were deeply involved in the preparation of various positions adopted by the contractors and in their responses to proposals from the unions. Esso also reviewed various documents the contractors circulated to their employees and gave advice to contractor representatives as to what they should say at meetings with employees. Accepting that this series of propositions is correct, in our view it does not establish that Esso's conduct is unacceptable either by reference to the objects of the Act or to some other legitimate source of public policy.

[33] We do not think it is productive to examine in detail the evidence as to the degree of control which Esso may or may not have exercised over the contractors during the negotiations. It is sufficient to indicate that there was no evidence before the Commission to support a finding that the representatives of the contractors were forced to adopt positions in negotiations against their will. To the contrary, they appear to have been willing participants in a cooperative exercise which was appropriate from a contractual point of view. Esso's close involvement with the negotiations provided commercial protection for the contractors. Should they make an agreement with the unions leading to increases in labour costs without Esso's approval, they would not be able to recover those costs under the contract. Far from being coerced by Esso, the contractors' interests were the same. Commercially and industrially the interests of Esso and the contractors were interlocked; commercially, because of the provisions in the contract and industrially, because of the implications of the negotiations for Esso's own employees and presumably also other employees working offshore in Bass Strait. It was to be expected that the contractors would not make an agreement which Esso believed was unacceptable either because of the cost or because of the possible ramifications for the Bass Strait workforce. Indeed it was in the contractors' interests to ensure that Esso, their client, was satisfied with any agreement they made. And at another level there were operational interdependencies. For example, changes in work scheduling or rostering, because of the offshore environment, would require cooperation and coordination from Esso's helicopter fleet, a matter to which the Commissioner referred in the context of the 14 day roster claim.[20]

[34] It follows from these considerations that the Commissioner was wrong to conclude that the influence exercised by Esso over the contractors was contrary to the Act. It follows also that the Commissioner's conclusion that termination of the agreements would be contrary to the public interest, because it would facilitate a process contrary to the Act, was also erroneous.

[35] Before leaving this part of the decision it is opportune to comment on the submission advanced by some of the appellants that the conduct of a party in bargaining is not a relevant consideration in the exercise of discretion required by s.170MH(3). This proposition must be rejected as too wide. There may be circumstances in which unconscionable conduct by a party in connection with the renegotiation of an agreement touches the public interest and should be taken into account.[21] This, however, is not such a case.

[36] We turn now to the second, discrete ground for the Commissioner's decision, namely: that it would be contrary to the public interest to facilitate the contractors' pursuit of the 14 day roster claim by terminating the agreements.

[37] As we have indicated above, the contractors were seeking a change in the length of the roster cycle from the current 7 days on duty/ 7 days off duty to a roster cycle of up to 14 days on/ 14 days off. The Commissioner found that the contractors wanted to introduce the 14 day roster and that the termination of the agreements would, by placing pressure on the employees, facilitate that objective.

[38] To fully understand the basis for the Commissioner's conclusion it is necessary to mention some of the statutory context. The Act enjoins the Commission to take account of the principles in the Family Responsibilities Convention. Section 93A reads:

"93A Commission to take account of Family Responsibilities Convention

In performing its functions, the Commission must take account of the principles embodied in the Family Responsibilities Convention, in particular those relating to:

(a) preventing discrimination against workers who have family responsibilities; or

(b) helping workers to reconcile their employment and family responsibilities."

[39] The Family Responsibilities Convention is defined in s.3 of the Act to mean the Workers with Family Responsibilities Convention, 1981, a copy of which is Schedule 12 to the Act. Article 4 of the Convention reads:

With a view to creating effective equality of opportunity and treatment for men and women workers, all measures compatible with national conditions and possibilities shall be taken:

(a) to enable workers with family responsibilities to exercise their right to free choice of employment; and

(b) to take account of their needs in terms and conditions of employment and in social security."

[40] The principal object of the Act includes reference to family responsibilities in these terms:

The principal object of this Act is to provide a framework for cooperative workplace relations which promotes the economic prosperity and welfare of the people of Australia by:

(i) assisting employees to balance their work and family responsibilities effectively through the development of mutually beneficial work practices with employers;

[41] Section 170MH is in part VIB of the Act. The object of that part is in s.170L. That section reads:

The object of this Part is to facilitate the making, and certifying by the Commission, of certain agreements, particularly at the level of a single business or part of a single business."

[42] It is also appropriate to note that in exercising the discretion in s.170MH the Commission is bound by s.170LA(1) which is:

(1) The Commission must, as far as practicable, perform its functions under this Part in a way that furthers the objects of this Act and, in particular, the object of this Part."

[43] The Commissioner examined the evidence concerning the predicted impact of the 14 day roster on occupational health and safety, family responsibilities and discrimination. She found that while the evidence was inconclusive as to the effect of the 14 day roster on occupational health and safety, the introduction of rosters requiring more than 7 consecutive days offshore would have a detrimental effect on the family responsibilities of the employees. In her view this was a consideration affecting the public interest. Her findings are summarized in the following passage:

"[198] Given the material before the Commission and, in particular, the survey material and employee evidence, I am satisfied that a removal of the current restriction on shifts in excess of seven days would not serve to assist these employees to engage in employment of their choice and is only likely to exacerbate the conflict between their employment and family responsibilities.

[199] The Applicants submit that the employees and their families will adapt to the longer periods of absence. People can adapt to imprisonment. That does not mean that in the absence of a pressing need for them to do so, they should be required to make such an adaptation.

[200] Further, at a time when for reasons of public policy emphasis is being given to the need for children to have greater involvement of males in their day-to-day lives, to lengthen the time period for which the father is totally absent from these families seems to me to be contrary to that policy and to the public interest.

[201] I am satisfied that it would be contrary to the public interest to terminate Agreements where the sole purpose of such termination is to facilitate the introduction of rosters which would require the off-shore employees to be absent from their families for significantly longer periods of time.[22]

[44] The appellants submitted that the Commissioner erred in two respects. The first error was said to be that by focussing on the predicted effect of the 14 day roster on the family responsibilities of the contractors' employees, the Commissioner took into account an irrelevant consideration. The substance of the submission on this point was that there was no necessary causal connection between the termination of the agreements and the imposition upon offshore employees of the 14 day roster with the deleterious effects upon family life which the Commissioner attributed to it. The second error was alleged to be that the Commissioner's findings about the harmful effects of the 14 day roster were not open to her in any event. This part of the submission relied upon a number of propositions such as the difficulty of predicting whether such a roster would be introduced, if so how it would operate and the evidence about the seemingly satisfactory operation of a similar roster in many parts of Australia and overseas.

[45] To deal with these submissions it is necessary to start with an assessment of the direct consequences of the termination of the agreements. As we understand it, the immediate legal effect would be that the employees would fall back under the coverage of the relevant safety net awards. Under those awards, the contractors submitted, hours of work were regulated in such a fashion that the existing offshore roster could not be altered by the contractors without the agreement of the employees. We understand that to be so. As to wages, it is to be inferred that the wages provided for in the agreements are significantly in excess of those in the applicable awards. The contractors undertook to maintain the employees' wages for a period of one month while negotiations continued. After that time, if agreement had not been reached, the contractors proposed a scheme of remuneration involving maintenance of the current roster but a reduction in earnings of something around 10%. The contractors volunteered to give undertakings to the Commission about these issues or to incorporate them in a deed or a certified agreement if necessary. These offers to render the post-termination arrangements more certain were not taken up by the unions nor were they mentioned by the Commissioner.

[46] It may safely be assumed that the termination of a certified agreement, carrying with it the loss of significant benefits, is not itself contrary to the public interest. That is evident from the terms of s.170MH(3). Bearing in mind the material before the Commissioner, we think it is clear that the effect of termination upon the wages and other conditions of the contractors' employees does not have any implications for the public interest. The Commissioner was of a similar mind.

[47] While appreciating the Commissioner's concern that termination would facilitate the contractors' pursuit of the 14 day roster, it seems to us that in the circumstance no true public interest issue arose. There was no necessary causal connection between the termination of the agreements and the imposition upon the offshore employees of the 14 day roster. The scheme of the Act contemplates the parties taking industrial action as part of the enterprise bargaining process. In relation to Division 2 agreements, protected action, as identified in s.170ML, may be taken in support of agreements of the kind identified in s.170LI: Electrolux Home Products Pty Limited v The Australian Workers' Union and Others.[23] The only limitation on the subject matter of the proposed agreement is that it should be about matters pertaining to the relationship between the relevant employer and its employees. In relation to Division 3 agreements, protected action may be taken in furtherance of negotiations for agreements of the kind identified in ss.170LO and 170LP. The limitation on the subject matter of the proposed agreement is relevantly the same as that in s.170LI because of the definition of industrial dispute in s.4. The Act stipulates the requirements for an agreement to be certified[24] and the matters which will prevent it from being certified.[25] Given these provisions, the Commission should be slow to censor the subject-matter of bargaining by exercising the discretion in s.170MH(3). That discretion should be exercised in harmony with the freedom to bargain and to take protected action in the course of bargaining which Part VIB permits.

[48] Furthermore, it does not follow that because a party is pursuing a particular claim that claim will be the subject of agreement or that any agreement reached will take a particular form or will have a particular effect. Experience suggests otherwise. In other words, there is a speculative element bound up with the Commissioner's conclusion.

[49] For these reasons we consider that the Commissioner erred in giving weight to the fact that the contractors were seeking a form of roster which, in her view, was one contrary to the public interest.

[50] It is neither necessary nor desirable that we pass judgment on the merits of the 14 day roster. In a survey of the offshore employees which was conducted on behalf of the unions, 23% of employees with spouses and dependent children indicated that they would resign immediately if a 14 day roster was introduced and 55% indicated that they would work on in the short term but seek other employment. The Commissioner formed the view, largely because of the views of the employees, that the roster would impact unfavourably on the ability of employees to balance their work and family responsibilities. There may be grounds for concluding that this view was not open having regard to the evidence of Dr Parker and the evidence of a number of witnesses with experience of the 14 day roster. While there is no doubt the employees opposed the roster and that their opposition was sincere, evidence based on proper research, if it could be obtained, may be a better guide. Also it goes, almost without saying, that when it comes to the effect on family responsibilities much may depend on the precise form of the roster and the manner of its introduction. In that connection it should be recalled that the contractors sought rosters of up to 14 consecutive days offshore.

[51] There is nothing we can usefully add, other than to encourage the parties to develop mutually beneficial work practices to assist employees to balance their work and family responsibilities effectively.[26] We appreciate that this is a challenging task in an industrial environment in which the ability of parents to return home at the end of each day to participate in normal family activities is necessarily absent. We note that whether a roster requiring more than 7 consecutive days offshore might be contrary to the terms of s.170LU(5) is a matter better considered if and when it arises in the context of an application for certification of an agreement dealing with such a roster.

[52] In light of our conclusions as to the basis for the Commissioner's finding that termination of the agreements would be contrary to the public interest the Commissioner's decision must be quashed. We agree with the Commissioner, broadly for the reasons she gave, that the other grounds relied upon by the unions in opposition to the applications should be rejected. We do not consider that termination of the agreements would be contrary to the public interest. In the circumstances the applications must be granted. We think it appropriate that the contractors' proposals in relation to the wages and conditions to apply after termination of the agreements should be rendered certain by the execution of a deed or deeds as was volunteered to the Commissioner. Seven days after the filing and service of such deed or deeds we shall issue the orders necessary to give effect to this decision.

F. Parry SC with R. Dalton of counsel for Kellogg Brown & Root Pty Ltd, Worley ABB Joint Venture and Corke Instrument Engineering (Aust) Pty Ltd.

Dr C. Jessup SC with C. O'Grady of counsel for Esso Australia Pty Ltd.

S. Wood of counsel for the Australian Mines and Metals Association.

M. Bromberg SC for the Australian Workers' Union, the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia and the Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union.

8 [2000] HCA 47; (2000) 203 CLR 194.

10 [1936] HCA 40; (1936) 55 CLR 499 at 505, per Dixon, Evatt and McTiernan JJ.

14 [1987] HCA 27; (1987) 61 ALJR 393.

16 (1988) 78 ALR 466 at 467.

23 [2004] HCA 40 per Gleeson CJ at para [25], McHugh J at para [114] and Gummow, Hayne and Heydon JJ at para [164].

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