National Tertiary Education Industry Union v Commonwealth of Australia

background 1 This is an application by the National Tertiary Education Industry Union ("the NTEU"), an organisation of employees registered under the Workplace Relations Act 1996 (Cth) ("the Act"), seeking the imposition of penalties under s 170NF of the Act on the respondents, the Commonwealth of Australia and the Honourable Dr David Kemp, formerly Minister for Employment, Education, Training and Youth Affairs ("the Minister"). The applicant originally sought declaratory and injunctive relief in addition to the imposition of penalties, but the claim for injunctive relief is no longer pursued.

2 The members of the NTEU constitute academic and general staff of thirty-seven tertiary institutions throughout Australia. These institutions receive much of their funding from the Commonwealth in the form of operating grants. The grants are made under the provisions of the Higher Education Funding Act 1988 (Cth) ("the HEFA"). The term "institution" is defined in s 4(1) of that Act to mean any of the institutions of higher education specified in the following tables:

Table A Australian Catholic University Charles Sturt University Southern Cross University Macquarie University The University of New England The University of New South Wales The University of Newcastle The University of Sydney University of Technology, Sydney University of Western Sydney University of Wollongong Deakin University La Trobe University Monash University Royal Melbourne Institute of Technology The University of Melbourne University of Ballarat Victoria University of Technology Central Queensland University Griffith University James Cook University of North Queensland Queensland University of Technology The University of Queensland University of Southern Queensland Curtin University of Technology Edith Cowen University Murdoch University The University of Western Australia The Flinders University of South Australia The University of Adelaide University of South Australia University of Tasmania Batchelor College Northern Territory University Australian Maritime College The Australian National University University of Canberra The University of Notre Dame Australia Table B Avondale College Marcus Oldham College

3 The primary allegation made by the NTEU is that the respondents, by their conduct in December 1999 in introducing a Government initiative known as the "Workplace Reform Program" ("the WRP"), contravened s 170NC of the Act. That section relevantly provides:

"(1) A person must not: (a) take or threaten to take any industrial action or other action; or (b) refrain or threaten to refrain from taking any action; with intent to coerce another person to agree, or not to agree, to: (c) making, varying or terminating, or extending the nominal expiry date of, an agreement under Division 2 or 3; or (d) approving any of the things mentioned in paragraph (c). (2) Subsection (1) does not apply to action, or industrial action, that is protected action (within the meaning of Division 8). …" 4 Section 170NC appears in Div 9 of Pt VIB of the Act. That Part deals with the certification by the Australian Industrial Relations Commission of certain agreements including, in particular: · agreements between employers and organisations of employees under s 170LJ; and · agreements between employers and employees under s 170LK. 5 The NTEU claimed that the institutions whose members it represents receive in excess of 65% of their funding from the Commonwealth, taking into account amounts recoverable under the Higher Education Contribution Scheme ("HECS"). This funding was said to be provided mainly in the form of operating grants under the HEFA. It was said that the dependency of those institutions upon this funding, coupled with what was alleged to have been an overall reduction in financial support by the Commonwealth to the institutions, rendered them susceptible to pressure from the Commonwealth. It was further said that the introduction of the WRP was intended to coerce those institutions to agree to "making, varying or terminating" agreements under Div 2 or 3 of Pt VIB, and thereby constituted a contravention of s 170NC of the Act.

The relevant legislative regime under the hefa 6 The provisions of the HEFA which are relevant to this application are ss 15 to 18, inclusive. These sections appear in Pt 2.2 which is headed "Operating and other grants". 7 Prior to 8 December 1998, when the HEFA was amended, these sections were in the following terms: "15. Grants for expenditure for operating purposes There is payable to an institution to which this section applies specified in Table A in subsection 4(1), for the purpose of financial assistance in relation to the expenditure of the institution for operating purposes in respect of a year to which this Chapter applies, such amount as the Minister determines having regard to the educational profile of the institution. 16. Grants for expenditure for limited operating purposes There is payable to an institution to which this section applies specified in Table B in subsection 4(1), for the purpose of financial assistance in relation to the expenditure of the institution for limited operating purposes in respect of a year to which this Chapter applies, such amount as the Minister determines having regard to the educational profile (if any) of the institution. 17. Maximum grants The total of the amounts that are payable under sections 15 and 16 in respect of a year shall not exceed: (a) in the case of the year 1989 - $2,213,382,000; (b) in the case of the year 1990 - $2,441,844,000; (c) in the case of the year 1991 - $2,599,025,000; (d) in the case of the year 1992 - $2,733,557,000; and (e) in the case of the year 1993 - $2,943,153,000; and (f) in the case of the year 1994 - $3,520,163,000; and (g) in the case of the year 1995 - $3,652,019,000; and (h) in the case of the year 1996 - $3,803,406,000; and (i) in the case of the year 1997 - $3,855,623,000; and (j) in the case of the year 1998 - $3,857,921,000; and (k) in the case of the year 1999 - $3,266,436,000; and (l) in the case of the year 2000 - $3,124,476,000. 18 Conditions of grants (1) Financial assistance is granted to an institution under section 15 or 16 in respect of a year on the conditions that: … (b) the institution will spend each amount of financial assistance received by it only in accordance with the educational profile of the institution provided to the Minister as at the time of the making of the determination under section 15 or 16 that resulted in the payment; (c) the sum of the amounts spent by the institution for operating purposes or for limited operating purposes, as the case may be, in respect of that year is not less than the sum of the following amounts: (i) the amount determined by the Minister under the section concerned in relation to the institution in respect of that year; (ii) any amounts paid to the institution by students under subparagraph 41(1)(a)(i), paragraph 41(1A)(a) or 56(b) in that year less any amounts paid to students by the institution under paragraph 56(a) in that year; (iii) any amounts paid to the institution by the Commonwealth under subsection 57(2) or (3) in that year; … (g) the institution gives to the Minister, not later than such date as the Minister specifies, such statistical and other information as the Minister requires from the institution in respect of the provision of higher education by the institution during that year. …" 8 Section 17 of the HEFA has been amended annually since that Act first came into force. It sets out the maximum grants available under ss 15 and 16. 9 The HEFA was significantly amended in 1999 by the Higher Education Funding Amendment Act 1999 (Cth) ("the Amendment Act"). That Act came into force on 8 December 1999. By s 3 and Sch 1, pars 17(k) and (l) of the HEFA were repealed and the following paragraphs substituted: "(k) in the case of the year 1999-$3,438,938,000; and (l) in the case of the year 2000-$3,417,075,000; and (m) in the case of the year 2001-$3,351,623,000." 10 The effect of the Amendment Act was to increase substantially the total of the amounts payable under ss 15 and 16 of the HEFA. In 1999, the maximum operating grant increased by $172,502,000, in 2000 by $292,599,000, and in 2001 provision was made for an operating grant of $3,351,623,000.

the introduction of the WRP 11 The increases in operating grants provided for by the Amendment Act were part of the WRP. The Commonwealth described the primary aim of that initiative as being to enable the institutions of higher education for which it provided funding to adopt "flexible and more efficient governance and management structures". This would enable them to respond to emerging student, employer and community demand. The Commonwealth said that the WRP would: "… foster arrangements which reflect the needs of individual institutions and more direct relations between employers and employees, and to improve the efficiency of management and administration processes". 12 The Minister, through his Department, ("DETYA"), published three documents concerning the WRP ("the Programme documents"). These were: · Guidelines for the Workplace Reform Programme ("the Guidelines"); · Explanatory Notes for the Workplace Reform Programme ("the Explanatory Notes"); and · Questions and Answers on the Workplace Reform Programme Guidelines ("the Q & A Document"). 13 There was a somewhat sterile debate between the parties as to whether it was the Minister or the Commonwealth who had responsibility for the introduction of the WRP and publication of the Programme documents. For reasons that will soon become apparent, that debate need not be resolved in this proceeding.

The Guidelines 14 The Guidelines, as drafted in their final form, were intended to provide assistance to institutions of higher education wishing to submit proposals for a grant to be made under s 15 of the HEFA "to assist reform aimed at enhancing efficiency in the higher education sector". 15 The approach taken was as follows: "… Grants will be provided to enable higher education institutions to develop more flexible management practices and to utilise resources in a more efficient way. Institutions will be required to apply for the grants and additional funding will only be provided where institutions commit to, and implement, significant reform in workplace relations arrangements and management and administration. Grants will be provided in two stages, with institutions required to apply separately for each stage: 1. An initial grant will be given after a consideration of a submission addressing criteria in paragraph 5, including certified enterprise agreements covering both academic and general staff, which demonstrates that a framework is in place which allows institutions to increase flexibility and to improve management and administration. 2. Where an initial grant has been made, a subsequent grant will be available, no sooner than 12 months after the approval of the initial grant, subject to an assessment of the effectiveness of the reforms undertaken by the institution. The assessments will be undertaken by the Department of Education, Training and Youth Affairs (DETYA) as part of the annual profiles process, in consultation with the Department of Employment, Workplace Relations and Small Business (DEWRSB)." 16 The Guidelines provided that payments to individual institutions would be fixed at 2 per cent of the notional salary component, which was 75 per cent of the operating grant. The criteria for assessing applications for funding were as follows: "5. Criteria for assessing applications for funding For the purposes of the initial grant assessment, institutions will be expected to have demonstrated a commitment to workplace reform consistent with these guidelines. Institutions will be assessed as demonstrating that commitment if they meet 9 of the fourteen criteria set out below, ie 9 of 5(i) (a)-(j), 5(ii) (a)-(c) and 5(iii). Initial grant tied to: (i) Enterprise agreements which include measures which promote institution‑specific terms and conditions, cost savings and freedom of association. Agreements would be expected to: a. give all employees, collectively and individually, equal opportunity to participate in future bargaining processes; b. promote an institution‑specific focus through approaches including: i. ceasing reliance on sector-wide industrial instruments (i.e. developing agreements which are comprehensive and closed); and ii. ensuring that any award provision (allowable or non‑allowable) included in an agreement is tailored to the needs of the institution; c. provide for Australian Workplace Agreements (AWAs) to be made with staff; d. enable AWAs to operate in conjunction with certified agreements; e. utilise flexible/facilitative terms which allow employment conditions to be tailored to needs at the local level; f. include initiatives which promote cost savings, discretionary revenue generation and productivity gains, particularly gains in quality and administrative efficiency; g. include effective performance management arrangements; h. reinforce the achievement of the institution's strategic objectives; i. simplify procedures for redeployment and retrenchment; and j. guarantee freedom of association, and refrain from any indication of disposition towards, or against (or other encouragement or discouragement of) union membership. AND (ii) Initiatives which: a provide, where payment for union fees is effected through payroll deduction, an opportunity for staff to elect whether or not to continue to make such payments through payroll deduction; b. reflect active pursuit, either directly or through representative bodies, of award simplification consistent with the objectives of the Workplace Relations Act; and c. where appropriate, encourage youth employment, including junior rates of pay. AND (iii) Commitment to initiatives to improve management and administration, which could include: a. sharing educational courseware, technology, library and administrative services, cutting costs and improving quality; b. rationalisation of governance structures and committees by reducing the number and size of committees and councils; c. better use of academic staff and physical resources, including the capacity for a trimester year, and to change workload and working hours over weeks and over the year. Academic work agreements could also cover a full year; d. appropriate training for staff, for example, by ensuring that heads of schools/departments have appropriate management training as well as academicexpertise; e. streamlining of recruitment and selection processes, including reducing interview panels and promotion to a position rather than promotion on merit irrespective of the organisational need; and f. discretionary revenue generation through fee-paying courses and other activities. Second grant To qualify for a further grant, institutions would need to demonstrate their progress in implementing the workplace reforms arising from the provisions incorporated in their enterprise agreements and improving management and administration. Where an institution made a successful application for an initial grant on the basis of current certified agreements only (ie certified agreements which had not passed their nominal expiry dates), the assessment to determine whether the institution receives a second grant will be based on the institution's achievements in implementing the initiatives to which it committed itself in its application for the initial grant. Where an institution made a successful application for an initial grant on the basis of one or more certified agreements beyond their nominal expiry date(s), the material submitted by the institution for consideration for a second grant will need to include any certified agreements which have succeeded the agreements upon which the institution relied in its initial application. The assessment for the second grant will be based on a review of current agreements (that is, prior to their nominal expiry dates) against the criteria. Where an institution made a successful application for an initial grant on the basis of one or more certified agreements beyond their nominal expiry date(s) and an application for a second grant is made in circumstances in which each such certified agreement has not been succeeded by a current certified agreement, an institution will need to incorporate, in its application for a second grant, a statement of its policy on the use of AWAs. In order to satisfy this aspect of the assessment for a second grant, the policy would need to indicate that the use of AWAs will be considered in relation to all classifications covered by each certified agreement beyond its nominal expiry date. Where an institution has made a successful application for an initial and second grant on the basis of one or more certified agreements beyond their nominal expiry date(s) referred to above, the institution will need to reapply for approval against the established criteria if a new agreement is entered into, as an additional condition of approval of the second stage." 17 The Guidelines went on to provide that grants would be made at the discretion of the Minister. 18 The initial grant would be for twelve months, calculated on a pro-rata basis over the years 2000 and 2001, commencing from the date that the submission approved by the Minister was lodged with DETYA, or 1 January 2000, whichever was later. Those institutions which failed to gain a grant could reapply. 19 The second grant would be available from 1 January 2001. Each institution which received an initial grant would be able to submit a report demonstrating progress in implementing the reform commitment upon which that grant had been made. That report could be lodged no sooner than nine months after the commencement of the initial grant. If endorsed, the second grant would be paid as an increase of 2 per cent in the notional salary component of the operating grant. As with the initial grant, those institutions failing to gain the second grant could reapply.

The Explanatory Notes 20 The Explanatory Notes were intended to assist institutions of higher education in preparing submissions under the WRP. The Notes were drafted by DETYA, in conjunction with the Department of Employment, Workplace Relations and Small Business ("DEWRSB"). They provided guidance to those institutions as to the types of clauses in certified agreements that might meet the criteria set out in pars 5(i) (a)-(j) of the Guidelines. The Explanatory Notes were in the following terms: "Assessing the initiatives in 5(i) of the guidelines Types of certified agreement clauses that may meet or not meet the criteria in 5(I) of the guidelines for the WRP (a) Gives all employees, collectively and individually, equal opportunity to participate in future bargaining processes. Most current certified agreements in the university sector are made with the union or unions concerned under section 170LJ of the Workplace Relations Act 1996 (the WR Act.). Most of the agreements purport to commit "the parties" to commence negotiations for a new agreement prior to the expiry of the current agreement. Such provisions can have the effect of committing a university to commencing negotiations with the union(s) and limiting the scope to proceed by way of alternative arrangements available under the Workplace Relations Act.

Agreements might meet this criterion if they · Propose the development of subsequent agreements under section 170LK of the WR Act · Make provision for the university to negotiate future agreements with staff · Do not specify how the next agreement is to be negotiated · Allow for staff membership of consultative committees without references to union membership/ non‑membership or limiting membership to representatives or nominees of unions · Are made under section 170LK of the WR Act (and therefore require that variations are agreed between the university and all staff) Agreements might not meet this criterion if they · Commit the university to negotiate future agreements with the union or under section 170LJ of the WR Act · Exclude staff representatives (as distinct from union representatives or members) from consultative committees. (b) Promotes an institution‑specific focus through approaches including: Most of the current agreements are not comprehensive and closed. Their terms generally require the agreement to be read in conjunction with at least one, and usually more, of the awards covering higher education, with the agreement to apply in the event of any inconsistency between the two. Incorporation of an award into an agreement in pre‑simplified form (prior to 30 June 1998) prevents the outcomes of award simplification flowing through until at least the end of the agreement unless particular provision has been made. In some cases, there may be a case for including unmodified award clauses (allowable or non‑allowable) in agreements. This could be acceptable as long as it is clear that the university has genuinely reviewed the award clauses and only included those whose inclusion can be justified. Where it is proposed to include a clause, it should be done so by incorporation, not by reference, so that the agreement itself stands alone. Criterion 5(i)(e) is also relevant in this regard. Large-scale importing of award clauses would be unlikely to be acceptable. (i) ceasing reliance on sector‑wide industrial instruments; and Agreements might meet this criterion if they · Do not operate in conjunction with or incorporate by reference the provisions of any sector‑wide awards · Operate in conjunction with awards which are specific to the institution or a small group of institutions Agreements might not meet this criterion if they · Operate in conjunction with or incorporate the provisions of any sector‑wide awards (ii) ensuring that any award provision (allowable or non‑allowable) included in an agreement is tailored to the needs of the institution. Agreements might meet this criterion if they · Include the terms of award provisions tailored to meet the needs of the university, or parts of it ‑ if an award provision (allowable or non‑allowable) is incorporated into the agreement without modification, the university's submission should outline the reasons for doing so Agreements might not meet this criterion if they · Include matters removed from awards under the simplification process which have not been recast to meet the specific needs or circumstances of the university, or parts of it (c) Provides for Australian Workplace Agreements (AWAs) to be made with staff; Some current agreements specifically exclude staff above a certain level from coverage by the agreement. Common law contracts or other forms of engagement are not inconsistent with the guidelines but they will not be regarded as a substitute for a provision for making AWAs. The criterion is intended to enable AWAs to be made with employees who would otherwise be covered by the certified agreement. Nothing in the guidelines compels an employee to enter into an AWA. Agreements might meet this criterion if they · Expressly and without limitation allow the university to enter into AWAs with all staff Agreements might not meet this criterion if they · Inhibit the making of AWAs during the life of the agreement (d) Enables AWAs to operate in conjunction with certified agreements. Unless a certified agreement makes express provision for an AWA to override the certified agreement, the certified agreement, prior to its nominal expiry date, will prevail over the AWA to the extent of any inconsistency. (e) Utilises flexible/facilitative terms which allow employment conditions to be tailored to needs at the local level. Agreements might meet this criterion if they · Enable some terms and conditions to be varied at the local level · Express provisions in facilitative terms Agreements might not meet this criterion if they · Contain one set of terms and conditions for all staff which cannot be varied at the local level · Hinder flexible employment of staff · Hinder flexibility in the provision of courses (e.g. commit to maintaining courses regardless of the demand) (f) Includes initiatives which promote cost savings, discretionary revenue generation and productivity gains, particularly gains in quality and administrative efficiency. Agreements might meet this criterion if they · Make provision for adjustments in remuneration based on achievement of specified revenue or productivity targets · Facilitate revenue generating activities · Allow for course delivery outside the standard semesters Agreements might not meet this criterion if they · Effectively limit revenue generating activities (g) Includes effective performance management arrangements. Provisions for disciplinary action/termination of employment on the grounds of unsatisfactory performance were previously contained in the Universities and Post Compulsory Academic Conditions Award 1995, along with misconduct provisions. These detailed provisions were removed from the award in the simplification process. If an agreement included these provisions with little or no amendment, as well as being unlikely to meet criterion b(ii), it would be also unlikely to meet this criterion, as termination on the grounds of unsatisfactory performance could be considered to be part of performance management. It may be that elements of performance management arrangements are specified in policy or administrative documentation outside the framework an (sic) a certified agreement. The guidelines are not intended to oblige universities to include either such material, or references to such material in an agreement. An application for a first grant should, however, include sufficient material as to demonstrate the scope of the performance management arrangements and their effectiveness. Agreements might meet this criterion if they · Commit the university to developing and implementing a performance management scheme (or reviewing or continuing an existing scheme). The details of the scheme need not be included in the agreement, but there would have to be a clear reference to another document which included the details of the scheme and this would have to be provided for assessment. The scheme need not link pay to performance but would need to include - clear objectives - regular reviews of performance against agreed targets/goals - procedures for managing unsatisfactory performance · Provide evidence of streamlining of performance management procedures Agreements might not meet this criterion if they · Do not include a provision for a performance management system · Commit to continuing existing promotion procedures · Provide no evidence of any link between remuneration and performance (h) Reinforces the achievement of the institution's strategic objectives. Agreements might meet this criterion if they · Indicate how the agreement will contribute to the achievement of the strategic objectives Agreements might not meet this criterion if they · Do not include reference to the strategic objectives · Include reference to the strategic objectives but do not indicate how the agreement will contribute to the achievement of these objectives (i) Simplifies procedures for redeployment and retrenchment. Provisions for redundancy are contained in the Universities and Post Compulsory Academic Conditions Award 1999, which is the simplified version of the 1995 award of the same name. The 1995 provisions have been simplified in the 1999 award Agreements might meet this criterion if they · Include redundancy procedures similar to those in clause 11 of the (simplified) Universities and Post Compulsory Academic Conditions Award 1999 · Simplify review procedures for excess employees Agreements might not meet this criterion if they · Incorporate redundancy provisions along the lines of the Universities and Post Compulsory Academic Conditions Award 1995 (j) Guarantees freedom of association, and refrains from any indication of disposition towards, or otherwise, encouragement of association membership. Agreements might meet this criterion if they · Do not include union facilitation clauses · Expressly guarantee freedom of association Agreements might not meet this criterion if they · State that the university encourages union membership · Require the university to distribute union material, provide the names of unions to new employees or of new employees to union · Include right of entry provisions which are inconsistent with the WR Act · Allow for payroll deductions of union dues without requiring staff to nominate whether or not they wish to use this method of payment · Allow for union representatives to represent staff on university committees without also including employee representatives." 21 The Explanatory Notes also provided guidance to the institutions of higher education regarding the process of assessing the initiatives in par 5(ii) of the Guidelines. These were in the following terms: "The initiatives in 5(ii) need not necessarily be covered by the certified agreement(s). Examples of evidence which might be provided to support the initiatives are outlined below: (a) Initiatives which provide, where payment for union fees is effected through payroll deduction, an opportunity for staff to elect whether or not to continue to make such payments through payroll deduction Universities would need to provide a statement regarding their initiatives in this area, backed up with any supporting documentation (e.g. notice to all staff). Examples where the criterion may be met · Issue a notice requiring all staff currently using payroll deduction to indicate whether they wish to continue this method of payment or whether they wish it to cease. Continue payroll deductions for those staff who indicate they wish to continue this method. This could be done, for example, annually. Examples where the criterion may not be met · Provide no evidence that staff have been asked to reconfirm their preference for payroll deduction (b) Reflect active pursuit, either directly or through representative bodies, of award simplification consistent with the objectives of the Workplace Relations Act Although the scope for individual institutions to involve themselves directly in award simplification may be limited, there are opportunities to provide input, either directly or through industry bodies, into the process and proceedings associated with award simplification. A university, in its application, would need to include a statement of its contribution to award simplification. (c) Where appropriate, encourage youth employment, including junior rates of pay In some areas of university employment, in particular in terms of academic employment, youth employment and junior rates of pay may not be relevant. However where there is some scope for encouraging junior employment (for example in the general staff area), measures which institutions might consider to encourage youth employment could include apprenticeship and/or trainee programs with regular (e.g. annual) intakes and encouraging students to apply for some positions at the university. Where the general staff award to which an institution is party contains junior rates provisions, the institution could be expected to include provision for junior ratesin their general staff certified agreement. An agreement which committed to abandon junior rates would probably not meet this criteria. Pay for apprentices and trainees would be expected to be in accordance with the relevant training awards and/or through training rates of pay specified in certified agreements Universities would need to provide evidence of any programs they run which encourage youth employment and evidence as to whether or not youth wages apply to relevant staff (e.g. clauses from their agreements)." 22 Finally, the Explanatory Notes provided guidance regarding the process of assessing the initiatives in par 5(iii) of the Guidelines. The Notes provided: "Commitment to initiatives to improve management and administration, which could include: a. sharing educational courseware, technology, library and administrative services, cutting costs and improving quality; b. rationalisation of governance structures and committees by reducing the number and size of committees and councils; c. better use of academic staff and physical resources, including the capacity for a trimester year, and to change workload and working hours over weeks and over the year. Academic work agreements could also cover a full year; d. appropriate training for staff, for example, by ensuring that heads of schools/departments have appropriate management training as well as academic expertise; e. streamlining of recruitment and selection processes, including reducing interview panels and promotion to a position rather than promotion on merit irrespective of the organisational need; and f. discretionary revenue generation through fee‑paying courses and other activities. These initiatives are examples only and may not all be suitable for all institutions. It is not the intention of the Workplace Reform Programme that these issues be dealt with in any way through the agreement-making process, although there may be elements which are appropriately given effect by, or taken into account in, agreements. It could be expected that initiatives in this area would be given effect through strategic and/or operational plans or implemented administratively."

The Q & A Document 23 The Q & A Document provided a series of answers to various questions regarding the WRP. It emphasised that the WRP funding was additional to the operating grant funding already provided to institutions of higher education under the HEFA. In other words, failure to secure a WRP grant would not mean a reduction of the institution's guaranteed operating grant. 24 The Q & A Document went on to observe that the second grant was a continuation of the initial grant. If an institution were successful in the second assessment stage, it would have the initial 2 per cent supplementation continued, and included in its base operating grant. 25 The Q & A Document provided guidance to the institutions as to the nature of the information required to support an initial grant. This information included: "1. All certified agreements, and any associated side or other documents, which cover academic and general staff at the university, together with an accompanying document that indicates the clause(s) in each agreement that the university considers meets each criterion in part 5(i) of the guidelines. The university may include explanatory notes or other material (eg extracts from policy documents, strategic plan) in support of the application; 2. A statement outlining how the university intends to meet the criteria in part 5(ii) of the guidelines. This could be achieved by including and identifying clauses in certified agreements as in 1 above or by including relevant parts of policy documents; 3. A statement outlining how the university intends to meet the criteria in part 5(iii) of the guidelines. This could include relevant parts of the university's strategic, operational and/or other plans and decisions of appropriate university management bodies; and 4. Any further documentation or statement of claims supporting the university's application which clearly demonstrates that the university meets the criteria. It is a matter for the university to prove that new practices are an improvement over past practices. This detail should be included in applications. Applications should also include performance indicators or other information that the university considers will assist in assessing outcomes in the context of any application which the university may make for a second grant." 26 The Q & A Document made it clear that there would be no part payments. If an institution met only half the criteria set out in the Guidelines, it would not receive half the WRP grant. If a certified agreement covered only some of the staff of the institution, but met the criteria, funding would not be provided in relation to those staff covered by that agreement. Funding would only be provided as a complete package. 27 Importantly, the Q & A Document emphasised that the institutions of higher education could apply for a WRP grant upon the basis of their existing certified agreements, a matter upon which the respondents placed great reliance in this proceeding. 28 To receive a second grant, the institution would be required to provide evidence demonstrating progress made in implementing the reforms committed to in its application for the initial grant. That evidence included: "1. Progress made in implementing the workplace reforms arising from the provisions incorporated in its enterprise agreement(s); 2. Achievements in relation to the measures outlined in paragraph 5(ii) of the guidelines; and 3. Progress made through improvements to management and administration processes as per paragraph 5(iii) of the guidelines." 29 The Q & A Document made it clear that it was DETYA's role to assess the applications for WRP grants and to provide advice to the Minister. DETYA would consult DEWRSB in relation to any relevant workplace relations issues. 30 The Q & A Document indicated that the objectives of the WRP included allowing all employees an opportunity to participate in future bargaining, irrespective of whether they were members of a union. Furthermore, agreements should cease reliance on sector-wide industrial instruments. To that end, agreements should be comprehensive, and override all awards, and any other agreements. 31 The Q & A Document noted that institutions were not obliged to incorporate all matters covered by the Guideline criteria in certified agreements. Some of those matters could best be handled by policies, or administrative guidelines. 32 The Q & A Document emphasised that the WRP was intended to encourage the institutions to consider whether the award clauses currently incorporated into their certified agreements ought to be retained. Its attitude to awards was reflected in the following observation: "There is no reason why a university has to exclude or make changes to award provisions if it thinks that the provision as it stands is the best way for it to address the matter contained therein. A university should provide justification for the retention of any such clause in its application." 33 The Q & A Document then dealt specifically with Australian Workplace Agreements ("AWAs") as follows: "5.4.1 How do AWAs relate to certified agreements? [5(i)(c) & (d)] If there are no provisions allowing for AWAs in the certified agreement, the certified agreement will prevail over any AWA that is made prior to the nominal expiry date of the certified agreement. To allow an AWA that can override the certified agreement to be made prior to the nominal expiry date of the certified agreement, the certified agreement must expressly allow such an AWA to be made. 5.4.2 If some staff are excluded from the agreement and employed, for example, under contract, do agreements have to provide for AWAs as well? [5(i)(c)] Yes. The criterion entails providing scope for universities to offer AWAs during the life of the certified agreement to staff who would otherwise be covered by the certified agreement. 5.4.3 Does this mean that staff can be compelled to take up AWAs? No. Staff cannot be compelled to take up AWAs. The criterion requires only that agreements do not constrain universities from offering AWAs to staff covered by the agreement."

THE MEMORANDUM OF AGREEMENT 34 The NTEU originally proposed to call a large number of witnesses in support of its case. Among them were a number of its Industrial Officers, who had sworn or affirmed affidavits. Many of these Officers had extensive experience in representing both general and academic staff during the course of negotiations for new certified agreements. Had these witnesses actually been required to give evidence, they would have described the friction which had been generated within the institutions as a result of the introduction of the WRP, and its offer of funding, referred to by some as the "Kemp 2%". 35 These Officers referred specifically to existing enterprise agreements which recognised the important role played by unions, and in particular the NTEU, in workplace relations in tertiary institutions. They expressed the opinion that that role would be diminished if those institutions were required to comply with the Guidelines in order to obtain the additional WRP funding. 36 The NTEU had also proposed to call members of the academic staff of particular universities who were members of the NTEU bargaining team in the current round of enterprise bargaining. Had these persons been required to give evidence, they too would have commented upon the adverse effect which the criteria set out in the Guidelines would have had upon the NTEU under any new certified agreement. 37 At the commencement of the trial, I was informed that the parties had reached agreement upon a number of matters. I was told that the agreement obviated the need to call many of the witnesses who were originally intended to give evidence. The agreement had been reduced to writing and, at my suggestion, was tendered as an exhibit in the proceeding. It was in the following terms: "MEMORANDUM OF AGREEMENT BETWEEN THE PARTIES 1. By this memorandum the parties, through their Counsel record the agreement reached between them as to the evidence upon which the Applicant will rely at the trial of the above proceeding and the basis upon which the trial will proceed. 2. The parties agreed with the contention that section 170NC of the Workplace Relations Act 1996 (Cth) does not require proof that the coercive conduct has prevailed upon its object(s) or that its object(s) has or have acted under its influence. 3. The parties agree that, including as a result of paragraph 2 above, the Applicant will at trial rely only upon the documents referred to in the pleadings and the following affidavit material filed on its behalf in the proceeding, and not upon any other affidavit material which has been filed on its behalf or other documents: (a) the affidavit of Graeme [sic] McCulloch affirmed 2 March 2001, but limited to paragraphs 1-18 (inclusive); (b) the affidavit of Julie Wells affirmed 13 March 2001, but not paragraph 21, paragraph 23.1 (other than the first sentence) or exhibit "JW4" thereto. 4. The parties agree that the Applicant will not seek any injunctive relief and seeks only declaratory relief and the imposition of penalties." 38 As a result of this agreement, the NTEU decided that it would no longer be necessary to call all of the witnesses who had filed affidavits in this proceeding. It elected to rely primarily upon the Programme documents, and the inferences to be drawn from them, and also upon the affidavits of only two witnesses, in order to prove its case.

the NTEU'S claim 39 As noted earlier in these reasons for judgment, the NTEU contended that by reason of the matters alleged in its amended statement of claim, the Commonwealth's decision to introduce the WRP contravened s 170NC of the Act. That was because the institutions of higher education, being in a desperate financial state, had no real choice but to comply with the criteria set out in the Guidelines in order to obtain the two percent supplementation. On that analysis, the introduction of the WRP either constituted the taking of "other action", or amounted to a threat to take "other action", within the meaning of s 170NC. Moreover, the "other action" had been taken, or threatened to be taken, "with intent to coerce another person" (the institutions of higher education) "to agree, or not to agree, to making, varying or terminating" an agreement under Div 2 or 3 of the Act. 40 Paragraph 18 of the amended statement of claim sets out the nub of the NTEU's case. That paragraph is in the following terms: "The success or otherwise of the Tertiary Institutions in obtaining additional funding either under an initial grant or a second grant under the Programme, will be crucial to the future viability of the operations of those Tertiary Institutions in what has become, in the last five years, an extremely competitive industry, and their ability to negotiate any certified agreement with the Applicant on terms desired by them and the Applicant." 41 As mentioned, the NTEU relied, in support of its claim, upon the affidavits of two witnesses. They were Ms Julie Wells, who had been Policy and Research Coordinator in the National Office of the NTEU since September 1998, and Mr Grahame McCulloch, who had been its General Secretary since its formation in 1993. 42 The evidence established that since 1998, the NTEU had been involved in negotiations for certified agreements with a number of institutions of higher education. It had initiated bargaining periods with some of those institutions and, by the time this application was heard, had reached agreement with eleven of them. Seven of those agreements had been certified by the Australian Industrial Relations Commission. 43 The evidence also established that in excess of 65% of the funding of those institutions was received from the Commonwealth, including amounts recoverable under HECS. That funding was provided mainly in the form of operating grants under the HEFA. 44 The evidence established that three universities, the University of Sydney, the University of New South Wales, and the Queensland University of Technology, had all been refused funding under the WRP. However, three other universities, the University of Melbourne, Monash University, and the University of Queensland, had been granted funding. Applications had been lodged by a number of other institutions of higher education. These had not yet been determined. 45 It is necessary to set out in some detail the evidence given by Ms Wells and Mr McCulloch. 46 Ms Wells was responsible for the day-to-day operation of the NTEU'S Policy and Research Unit. That Unit engaged in research and analysis of issues relevant to the funding and management of tertiary education. She said that she had a good understanding of funding policies "as they affect some specific universities". She had carried out detailed analyses of the financial statements published by those universities and claimed to have a sound appreciation of trends in university funding generally. She had written extensively upon that subject. 47 Ms Wells claimed that notwithstanding the many different features of institutions of higher education in this country, they shared a number of characteristics. For example: · they were all reliant upon the Commonwealth as their most significant source of funding; · variations arose chiefly from the fact that some were better equipped than others to generate income from external sources. These included investments, student fees and contract research; · they were all funded by the Commonwealth according to the same principles; · they negotiated their share of Commonwealth-funded student load on an annual basis; · they were all allocated an additional amount for capital funding, and competed for further funding under various grant programs; and · they were all subject to the same regulatory requirements, as set out in s 18 of the HEFA, in order to qualify for operating grant funding. 48 Ms Wells said that Commonwealth funding came mainly in the form of operating grants. In 1998, these grants constituted approximately 84.5% of the total funds provided by the Commonwealth to the higher education sector. The institutions which received those grants were required to account to DETYA, in broad terms, for the manner in which those monies were spent. However, within that general regulatory framework, they had considerable autonomy in allocating finds for particular purposes. 49 According to Ms Wells, over the past decade, institutions of higher education had become far more dependent upon external sources of income. The Australian Vice-Chancellors' Committee had reported that much of this externally sourced income had had to be channelled into commercial activity, and could not be used to support teaching and general research. 50 Ms Wells claimed that since 1996, when the Howard Government was elected, the funding of universities had changed significantly. The main impact was to reduce forward estimates on university operating grants by 1% in 1997, 3% in 1998, and a further 1% in 1999. The Government had foreshadowed a further 1% reduction in 2000. 51 Ms Wells said that the actual impact of these reductions in operating grants varied between institutions. Some, notably those in Queensland and Western Australia, had been projected to receive substantial growth funding under the previous Labor Government. It followed that the impact of the reductions upon those institutions was simply to reduce the size of those projected increases. By contrast, more than half the institutions in receipt of HEFA funding would be expected to suffer actual reductions between 1996 and 2003. For example, in 2003, the operating grant funding available to the University of New England would have fallen by 8.1% in constant dollars. Similarly, the operating grant funding available to the University of Melbourne would have fallen by 6.1%, that available to the University of Tasmania and to Monash University by 5.9%, to Deakin University by 5.8% and to the University of South Australia by 5.2%. 52 Ms Wells claimed that the decision by the Howard Government to reduce the amount, in real terms, of operating grants had "had a significant effect upon the operations of all universities, including those which received increased funding, insofar as they reflected a reduction in terms of what had been anticipated". She claimed that the higher education sector had been unable to replace public funding with private income at a rate sufficient to enable it to keep pace with increasing expenditure. She noted that according to the Government, total university revenue had increased by $1.05 billion between 1996 and 1999, while expenditure had grown by $1.23 billion during the same period. 53 Ms Wells claimed that this had resulted in most universities having had to adopt tighter fiscal policies. There had been course closures and rationalisations, and an overall reduction in university staff. According to DETYA, the total number of university staff (on a full-time equivalence basis) fell by approximately 2.5% between 1996 and 1999. 54 Ms Wells said that salary costs were the most significant single item of expenditure in Australian universities. In 1994, according to published university financial data, salary and related costs across the sector totalled $4.12 billion. By 1998, that figure had increased to $4.912 billion. 55 A Howard Government policy that had substantially affected the funding situation of universities was the refusal to provide supplementation for salary increases. Until 1995, salary increases were the subject of specific Government grants for supplementation. Since 1996, enterprise bargaining had been "unfunded" in the sense that no additional grant was made to institutions to cover negotiated salary increases. The gap between operating grant indexation and actual salary outcomes had risen to around 15%. 56 According to data compiled by the Australian Vice Chancellors' Committee, student/teaching staff ratios had increased from 14.8 in 1995 to 18.3 in 1999. 57 Ms Wells stressed the importance to the universities of the additional funding available under the WRP. She noted that provision had been made under that programme for an increase in the amount of operating grant funding available of $259 million. She said that this amount represented approximately 2% of salary cost averaged across the higher education sector over three years. It was the only additional funding which had been made available by the Commonwealth to assist universities in meeting the impact of unfunded enterprise bargaining since 1996. She drew attention to the fact that, in 1999, five universities had reported that their current liabilities exceeded their assets. She said that the Commonwealth had reported that in 1999 university borrowings were $350 million, some $32 million (or approximately 10%) higher than in the previous year. Since 1996, those borrowings had increased by $83 million (or approximately 31%). 58 Mr McCulloch said that he had been directly involved in the negotiation of all key academic industrial matters and award negotiations from 1982 onwards. Since becoming General Secretary of the NTEU, he had been responsible for its national bargaining strategy, and all certified agreements and awards. 59 Mr McCulloch said that the election of the Howard Government in 1996 had significantly altered industrial relations in the higher education sector. He referred to the Government's decision to commit itself only to indexation based on increases in minimum wages expressed as a percentage of average weekly earnings (around 1-1.5% per annum). At the same time, the Government had announced cuts of up to $800 million over a five year period.

the RESPONDENTS' DEFENCE 60 The respondents', by their defence to the amended statement of claim, denied almost all of the central allegations made against them. They relied upon the evidence of one witness only, Ms Monica Theresa Andrew, the Acting Assistant Director, Projects and Equity Unit, Information and Analysis Group within the Higher Education Division of DETYA. 61 Ms Andrew said that between November 1999 and June 2000 she had worked as a project officer in the unit responsible for administering the WRP. She said that the final assessment of all applications for first round funding had been made on the basis of the Guidelines as published on the DETYA website on 23 May 2000. 62 Ms Andrew said that as at 23 June 2000, the date on which this proceeding was commenced, twenty-two of the forty-one tertiary institutions eligible for first round funding under the WRP had not applied. By 12 September 2000, the date the amended statement of claim was filed, that number had been reduced to nineteen. By 22 June 2001, the date on which she swore her affidavit, there were only two institutions which had not applied. 63 Ms Andrew said that of the thirty-nine institutions which had applied for funding, fourteen had relied, in support of their applications, upon enterprise agreements which had been certified before the WRP had been announced. Of those fourteen, all but one had been successful. The fourteenth had not yet been assessed.

the NTEU's contentions 64 The NTEU's case, put simply, was that the respondents acted "with intent to coerce" institutions engaged in negotiations for certified agreements by making the approval of additional funding under the WRP contingent upon compliance with the criteria set out in the Guidelines. Given the parlous financial state of those institutions, and their heavy dependence upon the Commonwealth for funding, it was clear that they had little choice but to comply with those criteria. In effect, the institutions were put under such pressure as to amount to coercion within s 170NC. 65 The NTEU recognised that one of the central elements that it would have to establish in order to succeed was to prove "an intent to coerce". 66 As may be seen from the Memorandum of Agreement, it was common ground between the NTEU and the respondents that s 170NC, in its terms, does not require proof that the conduct which is said to be coercive "has prevailed upon its object(s)" or that "its object(s) has or have acted under its influence". Nonetheless, the NTEU contended that proof that "a person" was indeed so prevailed upon may be relied upon to support an inference that what was done was done with the "intent to coerce". That submission perhaps reflected the last vestiges of the so-called "presumption of intention" in criminal law, namely, that a person is presumed always to intend the natural and probable consequences of his or her acts. That is a doctrine long since rejected by the High Court as misleading: Vallance v The Queen (1961)108 CLR 56 at 82. Be that as it may, there was no evidence adduced in relation to the actual effect of the WRP upon any individual institution of higher education. 67 The NTEU contended that the respondents had set out to apply pressure to the institutions to induce those institutions to include in certified agreements provisions which met the criteria contained in the Guidelines. It recognised that in order to establish a contravention of s 170NC, it had to demonstrate that any such pressure had been "unlawful, illegitimate or unconscionable" Finance Sector Union v Commonwealth Bank of Australia (2000) 106 FCR 16; Community and Public Sector Union v Telstra Corporation (2000) 108 FCR 52; National Union of Workers v Qenos (2001) 108 FCR 90; and Seven Network (Operations) Ltd v Communications, Electrical, Electronic, Energy Information, Postal, Plumbing and Allied Services Union of Australia & Ors (2001) 109 FCR 378. 68 The NTEU submitted that the expression "intent to coerce" in s 170NC required an intent to bring pressure to bear which, in a practical sense, negated choice. It did not require an intent completely to overbear the will of another. In the present case, the offer by the Commonwealth to the institutions of a significant financial inducement to meet the criteria set out in the Guidelines when concluding certified agreements was capable of satisfying that requirement. 69 In support of that contention, the NTEU referred to Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40. That case concerned the proper approach to be taken to the doctrine of "economic duress" in the law of contract. 70 McHugh JA, as his Honour then was, (with whom Samuels and Mahoney JJA agreed), said at 45-46: "…The rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised upon one party by another party when the law regards that pressure as illegitimate: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384… … In my opinion the overbearing of the will theory of duress should be rejected. A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take the alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress. … It is unnecessary, however, for the victim to prove that the illegitimate pressure was the sole reason for him entering into the contract. It is sufficient that the illegitimate pressure was one of the reasons for the person entering into the agreement. Once the evidence establishes that the pressure exerted on the victim was illegitimate, the onus lies on the person applying the pressure to show that it made no contribution to the victim entering into the agreement: Barton v Armstrong…" 71 The NTEU next submitted that there was no reason why the expression "other action" in s 170NC (1)(a) should not encompass the introduction of a government initiative such as the WRP. The language used was of the widest amplitude, and should be given its ordinary and natural meaning. 72 The NTEU contended that the introduction of the WRP had at least been "illegitimate" conduct even if it could not be characterised as unlawful. That was because the programme had been introduced to give effect to an extraneous purpose, namely that of industrial relations reform, and not to give effect to any legitimate statutory purpose under the HEFA. 73 The NTEU also submitted that the respondents' conduct had been "illegitimate" because it involved their intrusion into the bargaining process in order to impose their will upon those parties engaged in negotiations. That conduct was, so it was submitted, "a blatant corruption of the free bargaining process between employers and employees" which s 170NC was intended to promote: Hanley v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2000) 100 FCR 530 at 541. 74 The NTEU submitted that the respondents' conduct was "unconscionable". It referred in that regard to Blomley v Ryan (1956) 99 CLR 362 at 405 and Commercial Bank of Australia v Amadio (1983) 151 CLR 447 at 474. It submitted that the respondents had sought to exploit the dependence of the institutions upon Commonwealth funding, taking advantage of their financial vulnerability.

the respondents' contentions 75 The respondents submitted that the NTEU's case must fail on several bases. 76 First, there was no evidence to support the inference that they had acted with the requisite intent. Ms Wells' evidence, taken at its highest, was no more than an expression of opinion that, as far as the institutions of higher education were concerned, the funding available under the WRP was "significant". Her evidence fell short of providing a proper foundation for the conclusion that the introduction of the WRP had occurred in order to coerce the institutions into complying with the government's industrial relations agenda. 77 Second, the respondents submitted that s 170NC, upon its proper construction, required more than the moderate amount of pressure which the NTEU claimed would be sufficient to give rise to coercion. They submitted that the term "coerce" should be construed more narrowly, as connoting an overbearing entirely of the will of another. Merely offering an inducement could not give rise to coercion. An inducement in the form of a financial reward could always be declined. 78 Third, the respondents submitted that the expression "other action" in s 170NC(1)(a) did not bear the broad interpretation for which the NTEU contended. They submitted that this expression had to be read in conjunction with the expression "industrial action" which immediately preceded it. It was plainly intended to include conduct such as picketing and other industrial practices which are not included within the definition of "industrial action" in s 4 of the Act. 79 Fourth, the respondents submitted that the NTEU's failure to adduce evidence specific to any particular institution, and to that institution's own funding needs, meant that it was impossible to determine whether it was in the position of having been potentially compelled to comply with the Guidelines in order to obtain WRP funding. It was submitted that the structure and text of s 170NC required that it be applied only to conduct carried out in respect of a particular proposed certified agreement between a specific employer and its employees. Accordingly, the section could not be applied globally in the manner for which the NTEU contended. 80 In support of that submission, the respondents pointed to the particular words of the section, giving "an agreement" in s 170NC(1)(c) as an example. They contended that even assuming that a global claim of the type alleged in the present case was theoretically sustainable, it at least required specific evidence in relation to each certified agreement which was said to have been the subject of intended coercion by the respondents. 81 The respondents submitted that there was no basis for the contention that their conduct had been in any relevant sense illegitimate or unconscionable. The respondents also submitted that the NTEU needed to establish that they had actual knowledge of the circumstances that made their conduct illegitimate, or unconscionable, and therefore relevantly coercive. They submitted it had failed to establish any such knowledge. 82 The respondents agreed with the NTEU that coercion, in the context of s 170NC(1), required not merely pressure, but conduct that was also unlawful, illegitimate or unconscionable. In addition to the authorities cited by the NTEU in support of that proposition, they referred to Cadbury Schweppes P/L v Australian Liquor, Hospitality and Miscellaneous Workers' Union [2000] FCA 1793 at [19], where Finkelstein J suggested that coercion in an industrial context usually involves the exertion of illegitimate economic pressure. 83 Applying these principles to the facts of the present case, the respondents submitted that, even if it were to be accepted, in accordance with Ms Wells' evidence, that the additional funding available to the institutions of higher education under the WRP was "significant", that of itself could not give rise to a finding that they had the requisite intent to coerce. There was nothing to suggest that those institutions had their will overborne, or that they had no practical choice but to seek to obtain the additional funding, and hence to comply with the criteria laid down in the Guidelines. They submitted that it would require more cogent evidence than that of Ms Wells to convert what was, at most, the offer of an inducement into something that could properly be described as coercion. 84 The respondents also attacked Ms Wells' evidence upon the basis that it did not deal separately with the position of each institution despite the fact that it was obvious, as she herself recognised, that their economic and bargaining positions differed greatly. 85 The respondents submitted that a calculation based on the figures given by Ms Wells revealed that the annual funds available to the institutions of higher education under the WRP constituted only 0.86% of total sector revenues. They submitted that such a small amount, in percentage terms, could hardly form the basis of an inference that they intended to coerce those institutions into doing something that they were not prepared to do. 86 The respondents then turned to the Programme documents. They submitted that it would be remarkable if the introduction of a Government funding programme which was entirely voluntary were capable of being characterised as "other action" within s 170NC(1)(a). They relied upon the evidence of Ms Andrew to demonstrate that the institutions themselves regarded the WRP as a voluntary programme. 87 Moreover, the respondents submitted that of the fourteen criteria set out in the Guidelines, four related to matters that were not susceptible to being dealt with in a certified agreement, or would not normally be dealt with in that way. It was difficult, in those circumstances, to see how any pressure applied to the institutions to meet those particular criteria could possibly constitute a contravention of s 170NC. 88 The respondents also noted that in order to obtain additional funding an institution needed only to satisfy nine of the fourteen criteria specified. As a result, funding could be obtained without necessarily complying with any of the more contentious criteria set out in par 5(i) of the Guidelines. 89 Moreover, the Explanatory Notes and the Q & A document only contained suggestions as to the fulfilment of the Guideline criteria and not, as the NTEU contended, a mandatory requirement that future certified agreements contain particular terms. 90 The respondents drew attention to the fact that, of the thirty-nine institutions which had applied for an initial grant, fourteen had based their applications upon pre-existing certified agreements. Of the thirteen applications which had been assessed, all had been successful. Thus, they submitted, the NTEU's contention that the WRP had been introduced in order to coerce institutions into promulgating new certified agreements on particular terms could not be sustained.

CONCLUSION 91 It appears to me that there are two broad questions to be resolved in this proceeding. These are: · whether, by introducing the WRP, the respondents, or either of them, took or threatened to take "other action" within s 170NC(1)(a)? · whether, assuming that they did, that "other action" was taken or threatened to be taken "with intent to coerce" another person within s 170NC(1)(b)? 92 The answer to the first question depends upon the meaning to be accorded to "other action". Are these words to be read in their broadest sense, in which case the introduction of a government funding programme might well fall within their terms? Or are they to be read more narrowly, in conjunction with the words "industrial action" which immediately precede them? 93 In my opinion, the introduction of a government funding policy which rewards those institutions which meet policy objectives is not "other action" of the type contemplated by the section. The conjunction of the words "other action" with the words "industrial action" is strongly suggestive of an intent on the part of the legislature to limit the scope of what might otherwise be an extraordinarily wide definition of the conduct caught by the section. 94 The words "or other action" in the composite expression "industrial action or other action" should be read in accordance with the maxim noscitur a sociis. A word or phrase in an enactment must always be construed in the light of the surrounding text. In Attorney-General v Prince Ernest Augustus of Hanover [1957] AC 436, Viscount Simonds said, at 461: "…Words, and particularly general words, cannot be read in isolation; their colour and their content are derived from their context." 95 The expression "industrial action" is defined in s 4 of the Act. It describes conduct of various types on the part of employers and employees, and organisations registered under the Act, and is limited to matters relating to the performance of work. Significantly, there is no mention of conduct by third parties within that definition. Section 4 also describes action which is not "industrial action", but it too only relates to employers and employees. The expression "other action" in s 170NC(1)(a) can be given a sensible interpretation if one reads it as including conduct of a kind taken by an employer, or employee, or an organisation registered under the Act, which related to the performance of work but is not included within the definition of "industrial action". Picketing is one example of such conduct. 96 Given that s 170NC is penal in character (albeit a contravention does not create an offence: s 170NF) the expression "other action" should not be accorded any undue width. Penal provisions are construed strictly, although this is now a canon of construction of less significance than was formerly the case: Beckwith v The Queen (1976) 135 CLR 569 at 576. 97 With regard to the second issue to be determined, in my view the expression "intent to coerce" should be construed as requiring something more than a mere inducement to comply. The term "coercion" connotes something akin to the use of force, or at least the threat of harm to the interests of another. 98 In Hanley v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2000) 100 FCR 530 the Full Court considered the purpose underlying the introduction of s 170NC. The Court observed, at 541: "… [Section 170NC] is found in Pt VIB of the Act which establishes a detailed regime for the creation of certified agreements including procedures for their negotiation, execution and certification. That regime contemplates free bargaining between employers and their employees or organisations of employees and allows the parties to undertake industrial action within a framework created by that Part. It is consistent with the purposes of Pt VIB to treat s 170NC as proscribing conduct which might result in an agreement which is not the product of free bargaining. That result could as well be achieved by conduct which had as only one of a number of objectives the coercion of a person as by conduct which had that as its sole objective. Section 170NC is contravened if a person engages in conduct intending to coerce a person to agree to make an EBA even if the conduct has one or several other purposes or objectives. It is, to adopt the language of General Motors Holden Pty Ltd v Bowling (1976) 51 ALJR 235, sufficient that the proscribed reason is a substantial or operative reason." 99 In Finance Sector Union v Commonwealth Bank of Australia (2000) 106 FCR 16 Gyles J, gave careful consideration to the meaning of "intent to coerce" in the context of s 170NC. His Honour observed, at 23-27: "18. The critical question is the meaning of the word "coerce" in s 170NC. There is an inconclusive discussion of that question by the Supreme Court of Victoria Court of Appeal in National Workforce Pty Ltd v Australian Manufacturing Workers' Union (No 2) (1997) 76 IR 200 at 221. The only other general statement in the cases which have dealt with the section to which I have been referred is that by Finkelstein J in his interlocutory judgment in Finance Sector Union v Commonwealth Bank of Australia [2000] FCA 1372, where his Honour said (at [44]): "What constitutes coercion? Presumably it is no more than one form of inducement, but a particularly nasty form. A person will coerce another to act in a particular way if the first person brings about that act by force. It is for that reason that a threat will amount to coercion. Coercion will cause a person to act in a way that is, in a sense, non‑voluntary (I do not mean involuntary in the legal sense)." That was said in a context in which his Honour was considering s 298M as well as s 170NC. … 19. The Macquarie Dictionary defines "coerce" in the following way: "1. To restrain or constrain by force, law, or authority; force or compel, as to do something. 2. To compel by forcible action." The New Shorter Oxford English Dictionary defines "coerce" as: "1. Forcibly constrain or impel (into obedience, compliance, etc); force or compel to do. (b) Enforce. 2. Enforce obedience; use coercive measures." "Coercion" is defined in the New Shorter Oxford English Dictionary as: "1. Constraint, restraint, compulsion; the controlling of a voluntary agent or action by force. 2. The faculty or power of coercing or punishing; the power to compel assent. 3. Government by force; the employment of force to suppress political disaffection and disorder. 4. Physical pressure; compression. Now rare." 20. The legal dictionaries refer to line of authority which was summarised in National Workforce v Australian Manufacturing Workers' Union (No 2) at 221 as holding that the word "coerce" required wrongful, illegitimate or illegal action or, at any rate, the negation of choice (Allen v Flood [1898] AC 1 at 98, 128-129; Hodges v Webb [1920] 2 Ch 70 at 86-87; White v Riley [1921] 1 Ch 1; and Goddard v Osborne (1978) 35 FLR 122). I confess to having some difficulty in understanding the discussion of a legal as opposed to an ordinary meaning of "coercion" in National Workforce v Australian Manufacturing Workers' Union (No 2) at 221. All of the dictionary meanings involve the negation of choice or compulsion. In my opinion, there is a significant difference in ordinary meaning between concepts such as influence, persuasion, inducement and the like, on the one hand, and coercion, on the other. … 25. I am satisfied that the ordinary meaning of "coerce", the line of cases beginning with Allen v Flood to which I have referred (particularly in an industrial setting) and the authorities in relation to s 170WG, particularly that of the Full Court in Schanka, all point in the same direction, and are to be applied. This conclusion is directly contrary to proposition (3) put by Mr Hodgkinson, and requires further consideration of his propositions (1) and (5). 26. The genesis of proposition (3) (see at [16]) is to be found in the interlocutory judgment of Merkel J in Australian Workers Union v Yallourn Energy Pty Ltd (2000) 95 IR 207. In that case (as here) the parties were engaged in bargaining during a bargaining period initiated pursuant to s 170MI of the Act. Industrial action caused the Yallourn Energy site to cease functioning, leading to financial losses by Yallourn Energy of many millions of dollars (and serious power shortages in Victoria). The unions claimed that the industrial action was protected action for the purposes of the immunity granted under s 170MT(2). Merkel J held that on a prima facie basis on the evidence before him it was likely that the action was protected. 27. Yallourn Energy gave notice to the Industrial Relations Commission (IRC) under s 166A of the Act of its intention to bring an action in tort against the unions and their officers, members and employees arising out of the industrial action. In the event, a certificate was only sought in relation to the conduct of the unions and not of its members. The IRC granted the certificate, with the consequence that Yallourn Energy was entitled to commence proceedings in tort in relation to the industrial action. Proceedings were brought by the unions to restrain the bringing of any such proceedings as to do so would be a breach, inter alia, of s 170NC(1) of the Act. Reliance is placed on behalf of the Bank upon the following passage from the judgment in relation to the finding that there was a serious issue to be tried under s 170NC )at 221 [73]): "There is a degree of unreality about the submission of counsel for Yallourn Energy that the threatened proceeding is extraneous to and is unconnected with the employer's bargaining position in relation to the new enterprise agreement. Earlier in these reasons I outlined the steps taken by the various parties in the course of the present dispute. In my view each step and counter step by the parties in the current dispute appears to be intended to advance their respective bargaining positions in relation to the new enterprise agreement. Whilst there will be additional reasons for particular conduct to be engaged in during the escalation of the dispute, each step appears to be integrally related to each party's position in the bargaining process. Thus, whilst a reason for the proposed proceeding might be to recover loss,I would infer from the limited evidence before me that, on a prima facie basis, the proposed proceeding is another step to assist the position of Yallourn Energy in the bargaining process." (Emphasis added) 28. This concept appears to be directly reflected in the interlocutory judgment of Marshall J in Construction, Forestry, Mining & Energy Union v Multiplex Constructions at 299 [27]: "27. A reason for the Supreme Court action, or further proposed Supreme Court action, may well be to recover financial loss but if it is also taken with intent to advance a position in a bargaining process or detract from the position of a party in the bargaining process s 170NC(1) of the Act will be contravened." 29. For the sake of completeness, I should say that I derive little assistance on the question of construction from the interlocutory decisions in Construction, Forestry, Mining & Energy Union v Master Builders Association of Victoria (No 1) [2000] FCA 168, Construction, Forestry, Mining & Energy Union v Mirvac Constructions Pty Ltd (2000) 96 IR 458 and Auspine Ltd v Construction, Forestry, Mining & Energy Union (2000) 97 IR 444. 30. It is clear that if the passages of Merkel J and Marshall J relied upon by the Bank are intended to state the test for breach of s 170NC, then they are far wider than, and inconsistent with, my construction of the section. Mr Kimber SC, for the Union, submits that they do not represent the considered view of either judge as the proper construction of intent to coerce in s 170NC, but are merely observations in the course of urgent interlocutory proceedings during a far reaching industrial campaign. He submits that they are to be understood in a context where it was held that there was a prima facie case that most of the industrial action had been protected action. 31. I agree with Mr Kimber's submissions. Neither of their Honours express themselves in a manner which suggests that he was resolving an issue as to the construction of the section, and neither refer to pertinent authority. This is not surprising in view of the nature of the proceedings. The fact that the result in these, as well as other, interlocutory decisions might have been different if what I regard as the proper test had been applied is not to the point. 32. I should also refer again to the decision of Finkelstein J in Finance Sector Union v Commonwealth Bank of Australia, a case between these parties arising out of the very negotiations which are the context for this case. I have already set out [44] (see [18]). His Honour later said (at [51]): "The question for the bank then was how it could force the union to accept its July offer, remembering that it was of the view that a higher offer was not commercially justified. The bank needed to find a lever to compel the union to act. The union was reasonably aggressive in its negotiations, with the support of its members." 33. These passages are consistent with my view as to the necessity for compulsion if coercion is to be intended within the section. His Honour does not, however, refer to the necessity for the means of coercion to be unlawful, illegitimate or unconscionable. The Bank submits that his Honour must have taken the view that it was unnecessary to so find, because it is difficult to see how it could be concluded on any basis that offering Australian workplace agreements to workers could be so described without denuding that requirement of all content. Far from being unlawful, illegitimate or unconscionable, the Act encourages the offer of Australian workplace agreements by employers to employees (cf Ryan J in Maritime Union of Australia v Burnie Port Corporation at [61]-[72]). Indeed, it is submitted on behalf of the Bank that if the decision of Finkelstein J was correct, it follows that it should succeed on its cross-claims. 34. I do not agree. It would be rare (if ever) that a decision as to whether to grant an interlocutory injunction would be of later precedent value on a substantive issue of law, particularly an issue of law not directly addressed in the decision. I am not concerned with the correctness or otherwise of the decision. I appreciate that the result is that the Bank may have the worst of all worlds in relation to the current negotiations, but I cannot let that govern my construction of the statute. The interlocutory orders restraining the Bank will only be in operation until further order of the Court, and presumably there will be an urgent final hearing to alleviate the unfairness to the Bank which will ensue if it ultimately succeeds. In any event, as I have said, his Honour did apply an intent to compel test which is consistent with my view of the section." 100 In National Union of Workers v Qenos (2001) 108 FCR 90, I set out these same passages and said that, in my view, they correctly stated the reach of the relevant provision. 101 In Community and Public Sector Union v Telstra Corporation Ltd (2000) 108 FCR 52, Ryan J said that he agreed with Gyles J in Finance Sector Union, that the concept of coercion in s 170NC bore the same meaning as the concept of duress in s 170WG. He referred to Schanka v Employment National (Administration) Pty Ltd (2000) 97 FCR 186 in which a Full Court had construed the term "duress" in that section as requiring a different, and narrower interpretation than the same concept in the context of cases in which courts have been concerned to relieve a victim from the consequences of a contract or payment procured by duress. Crescendo Management Pty Ltd v Westpac Banking Corporation (supra) was distinguished on that basis. By analogy with s 170WG, his Honour considered that an intent to coerce in s 170NC required proof of an intention to overbear, by illegitimate or unconscionable pressure, the will of another. 102 In Seven Network (Operations) Ltd v Communications, Electrical, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (supra) Merkel J observed at 388: "41. The above cases establish that there must be two elements to prove "intent to coerce" under s 170NC(1). First, it needs to be shown that it was intended that pressure be exerted which, in a practical sense, will negate choice. Secondly, the exertion of the pressure must involve conduct that is unlawful, illegitimate or unconscionable. The requirement that the pressure exerted be unlawful, illegitimate or unconscionable must be considered in the context of the scheme of the Act and of the fact that, subject to the immunity in respect of protected industrial action under s 170MT of the Act, many forms of industrial action are unlawful: see Ansett Transport Industries (Operations) Pty Ltd v Australian Federation of Air Pilots [1991] 1 VR 637. 42. The requirement of unlawfulness etc might, in a sense, be said to have been superimposed upon the ordinary meaning of "coercion": cf Hanley at 534 [11]. However, without such a requirement s 170NC(1) could have an anomalous operation in so far as it might prevent the legitimate exercise of rights by employees or employers. In Hanley the Full Court did not really consider this issue. In all the circumstances I consider that it is appropriate to apply the approach taken to s 170NC(1) in Cadbury Schweppes, Finance Sector Union and Qenos unless I am satisfied that that approach is clearly wrong, which I am not." 103 The approach to the expression "intent to coerce" taken in each of the authorities set out above makes it clear that what is required is an intent to negate choice, and not merely an intent to influence or to persuade or induce. Coercion implies a high degree of compulsion, at least in a practical sense, and not some lesser form of pressure by which a person is left with a realistic choice as to whether or not to comply. 104 I am fortified to some degree in my view that this is the correct meaning to ascribe to the expression "intent to coerce" by the observations of Lord Romilly MR in Ellis v Barker (1871) 40 LJ Ch 603. His Lordship accepted that coercion may take an infinite number of forms. However, he noted that the moment that a person who influences another does so by threatening to take away something he then possesses, or by preventing him from obtaining an advantage he would otherwise have obtained, it then becomes coercion and ceases to be persuasion. 105 I also note the observations of Peterson J in Hodges v Webb [1920] 2 Ch 70 to which Gyles J referred in Finance Sector Union. Peterson J said at 86-87: ""Coercion" is a word of ambiguous import. In one sense anyone is coerced who under pressure does that which he would prefer not to do; but a reluctant debtor who pays under stress of proceedings is not coerced within the legal meaning of the word. … "Coercion" involves something in the nature of the negation of choice. … an employer cannot properly be said to be coerced if, having two alternative courses presented to him, he follows that course which he considers conducive to his own interests." (emphasis added) 106 It may be noted that the primary definition of the term "coercion" in the Oxford English Dictionary is: "constraint, restraint, compulsion; the application of force to control the action of a voluntary agent". The secondary meaning of that term is: "Government by force, as opposed to that which rests upon the will of the community governed; the employment of force to suppress political disaffection and the disorder to which it gives rise". 107 It should also be noted that the term "coercion" derives from the Latin coercitio which, in Roman law, was the power of a magistrate to insist upon compliance with his orders or commands, including the power to punish for disobedience. 108 "Coercion" is sometimes used in the context of the exclusion of confessional evidence. At common law a confessional statement made out of court by an accused person is not admissible in evidence unless it is shown to have been made voluntarily. 109 In Cornelius v The King (1936) 55 CLR 235 Dixon, Evatt and McTiernan JJ said, in a joint judgment, at 246: ".. When it appears that, but for a particular promise or threat made by a person in authority, the prisoner's confession would be voluntary, it becomes necessary for the Judge at the trial to decide whether the promise or threat in question was really calculated, that is, really likely, to cause an untrue admission of guilt to be made. But a promise of advantage and a threat of harm are not the only matters which may deprive a statement of its voluntary character. For instance, a confession which is extracted by violence or force, or some other form of actual coercion is clearly involuntary, and, therefore, cannot be received in evidence." (emphasis added) 110 The distinction drawn between a promise or threat, on one hand, and actual coercion on the other, is instructive. It suggests that a high degree of pressure is required in order to amount to coercion. That interpretation is further strengthened by a line of authority which holds that answers made under compulsion of law are not, on that account, involuntary: R v Kempley (1944) 44 SR (NSW) 416; R v Owen [1951] VLR 393 and R v Zion [1986] VR 609. 111 In Smith v William Charlick Ltd (1924) 34 CLR 38 it was necessary to consider the meaning of the term "compulsion" in relation to a payment of which refund was sought. Isaacs J said that this term was analogous to "coercion", "exaction" or "force" and included every species of duress or conduct analogous to duress, actual or threatened. 112 If my view of the interpretation to be accorded to the expression "intent to coerce" in s 170NC is correct, it is clear that the NTEU has failed to establish that the respondents have contravened that section. The offer of an additional two per cent on top of existing operating grants, though subject to the need to satisfy the criteria contained in the Guidelines, can hardly be said to form the basis of an inference that the respondents intended to overbear the will of the institutions, and negate their choice. The evidence does not support any such conclusion. The additional funds may be "significant", as far as those institutions are concerned. However, there is nothing to indicate that they are so vital as to negate any realistic choice on the part of those institutions, compelling them to include in any certified agreements terms which meet the criteria set out in the Guidelines. 113 I accept that the evidence demonstrates that the institutions of higher education in this country, or many of them, are under significant financial pressure. I have no doubt that any additional funding would be keenly sought, and would be of substantial benefit to those institutions in their struggle to maintain reasonable standards in teaching and research. 114 The WRP clearly provides an incentive to include in any certified agreement terms which meet the criteria set out in the Guidelines. Some of those criteria may fairly be regarded as having little to do with the proper functioning of universities in this country, and rather more to do with the Government's industrial relations agenda. The preference for AWAs provides a good example of this. 115 However, there remains a clear distinction between offering a person an incentive to do something, and acting with intent to coerce. An incentive, no matter how powerful, can still, as a matter of practical reality, be refused. Coercion involves negation of choice. 116 Even if I were to construe the expression "intent to coerce" in the broader manner for which the NTEU contended, I would still conclude that it had failed to establish its case against the respondents. Coercion requires conduct which is relevantly unlawful, illegitimate or unconscionable. The implementation of policy by a democratically elected government, however contentious in political or moral terms that policy may be, is not easily translated into conduct which is in any relevant sense "illegitimate" or "unconscionable". 117 I have no doubt that within the academic community, and beyond, a substantial body would hold that the criteria contained in the Guidelines are, in a political sense, both illegitimate and unconscionable. It must be remembered, however, that some of those criteria reflect Government policy towards higher education not just since 1996, when the Howard Government was elected, but since the late 1980's and the era of the so-called "Dawkins reforms". Governments, both Labor and Liberal, have long acted in the belief that exposing the higher education sector to increased competitive pressures would enhance its efficiency and productivity. That approach may be misconceived. Many would say that it has led to a serious decline in the quality of higher education in this country, a view that has been the focus of attention in recent times. Many would also say that it has undermined academic freedom, and has had a profoundly negative effect upon staff morale. However, whatever view one takes with regard to these matters, that can have no relevance to the determination of the legal issues raised in this proceeding. 118 I am conscious of the fact that the terms "illegitimate" and "unconscionable" are not the words of a statute, but rather represent judicial exegesis upon a very different expression. Nonetheless, these terms capture one or more of the requirements which must be proved in order to establish the contravention of the penalty provision in question in this case. They are not to be understood as connoting mere disagreement, however strongly felt, with Government policy. 119 The suggestion that the introduction of the WRP was illegitimate or unconscionable because it was implemented for extraneous purposes requires some comment. The allegation of improper purpose is well-known to administrative lawyers and, where established, may vitiate an exercise of public power: R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170 and see the discussion in Aronson and Dyer, Judicial Review of Administrative Action 2nd ed, 246-251. However, the NTEU's difficulty with making good that proposition in the present case stems, in part, from the width of the power conferred by the HEFA upon the Minister to make operating grants,and to impose such conditions as meet the very broad requirements of s 18 of that Act. 120 An allegation of improper purpose must, of course, be proved to the requisite standard: Briginshaw v Briginshaw (1938) 60 CLR 336 at 362. The evidence relied upon by the NTEU does not meet that standard. 121 I should also indicate that I have some doubts as to whether the concept of unconscionability, as it has developed though the authorities, has any direct application to the operation of s 170NC. The notion of unconscionable conduct is one well known to equity. Duress and undue influence may amount to unconscionable conduct, as can exploitation of vulnerability or weakness: Blomley v Ryan (supra); and Commercial Bank of Australia Ltd v Amadio (supra). See also Legione v Hateley (1983) 152 CLR 406; Louth v Diprose (1992) 175 CLR 621 and Garcia v National Australia Bank Ltd (1998) 194 CLR 395. It is difficult to extrapolate from such cases any principle which can usefully be said to underlie the meaning to be accorded to the term unconscionable as a criterion for delimiting the scope of coercion in the context of industrial relations, and in particular, enterprise bargaining under the Act. I note that there is some precedent for the use of the term unconscionable in a statutory context separate from general principles of equity: see s 51AA of the Trade Practices Act 1974 (Cth) and C G Berbatis Holdings v ACCC (2001) 185 ALR 555. 122 Having regard to the findings set out above, it is unnecessary to come to any final conclusion as to whether the respondents are correct in their contention that the NTEU must also fail because it has not adduced evidence which relates specifically to each of the institutions potentially affected by the WRP, but has sought instead to present a global claim. 123 Nor is it necessary to come to any final conclusion as to whether s 170NC can be invoked against a third party, not involved in the enterprise bargaining process. 124 The application must be dismissed. In accordance with s 347 of the Act there should be no order as to costs. I certify that the preceding one hundred and twenty four (124) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.

Counsel for the Applicant: Mr H. Borenstein, with Dr K.P. Hanscombe

Solicitors for the Applicant: Maurice Blackburn Cashman

Counsel for the Respondents: Dr G. Griffith QC, with Mr D.J. Batt

Solicitor for the Respondents: Australian Government Solicitor

Date of Hearing: 2, 3 and 4 July 2001