SkyWest Airlines Pty Ltd v Australian Federation of Air Pilots [1996] IRCA 451

Note 1: The First Officer DHC-8 Pilots will hold two endorsements, they being F/O DHC-8 and CAPT E110. Note 2: One of the Alice Springs Captains will hold two endorsements, they being CAPT E110 and CAPT B200. The same principles shall apply to Skywest pilots. No Lloyd Aviation Jet Charter Pty Ltd pilot shall be made redundant unless the redundancy occurs as a result of reduced flying activity on the work described in the foregoing paragraph. In the event of redundancies, and regardless of the area in which they are created, pilot employed after 1 October 1990 shall first be retrenched before the foregoing principle shall apply. The adopted system shall not be unduly harsh or disruptive on the Company, and shall be a sound basis for future development by the Company. In so far as they are able, the Management of Skywest Aviation shall uphold the foregoing principles, and shall adopt the resultant system, in any future absorptions and mergers. The System The Company will compile a list which shows the new Skywest pilots occupying the number 112 to 139. There is an "L" annotation against all pilots originally employed by Lloyd Aviation Jet Charter Pty Ltd which denotes certain privileges and which is retained by the former Lloyd pilots as long as he chooses to remain on any work performed by Lloyd Aviation at the time of the absorption. Notwithstanding that the Company may substitute different equipment on that flying activity. A pilot holding an "L" annotation (regardless of his allocated seniority number) will have bidding seniority over any pilot not holding the "L" annotation in regard to all positions associated with Lloyd Aviation flying activity at the time of the absorption. This seniority will also apply to any equipment substitutions on that flying activity. A pilot holding an "L" annotation cannot be retrenched unless a redundancy situation occurs within the framework of the work performed by Lloyd Aviation at the time of the absorption." (emphasis added) We consider first the language of clause 30 in its present form without, for the moment, looking at the circumstances in which it was varied in February 1992. The meaning of the clause in its amended form is by no means clear. The first thing to be noted is that if the definition of Company is imported directly into clause 30, sub-clause A requires Airlines to maintain a seniority list of pilots "on the flight staff of the Company". It does not, in express terms, refer to pilots employed by the Company. Clause 30D does refer to "a pilot employed by the Company" though the obligation on Airlines in relation to such a pilot is subject to the proviso in clause 30D. The proviso directs attention to Appendix V. Indeed clause 30D requires that such pilots, that is pilots employed by the Company on 1 October 1990 who were formerly employed by Lloyd Aviation Jet Charter Pty Ltd, appear in the seniority list in the manner provided for in Appendix V. It can be seen from Appendix V that it deals with the absorption of pilots employed by Lloyd Aviation Jet Charter Pty Ltd by Aviation. In the third paragraph of Appendix V pilots from either Lloyd Aviation Jet Charter Pty Ltd or from Aviation are referred to as constituting "two Company pilots groups". It is to be noted that under the heading "The System", towards the end of Appendix V, there is a reference to the compilation by "the Company" of a list showing the "new Skywest pilots" as occupying specified numbers in the list. We earlier set out part of clause 4, "Area, incidence and duration". Clause 4B requires that "Skywest pilots" are to fly aircraft used in flying "involving Skywest Airlines Pty Ltd or under the control of Skywest shareholders". This provision would tend to indicate that the Agreement, in its initial form, contemplated that "Skywest pilots" would fly aircraft being used directly in the business of Airlines or less directly. The expression "under the control of Skywest shareholders" might reasonably be thought to be a reference to flying as part of the business of a wholly owned subsidiary such as emerged with the incorporation of Aviation. The expression "Skywest pilots" as it appears in clause 4 is an expression of indeterminate meaning. However the terms of clause 5, which deals with aspects of the contract of employment, indicate that the pilots to whom the Agreement applied, are pilots who are employees of Airlines. The terms of clauses 4 and 5 that we have just discussed appeared in the Agreement when it was certified. Thus the Agreement appeared to contemplate pilots being employed by Airlines flying aircraft in furtherance of its business or the business of a subsidiary. That being so the reference to "flight staff of the Company" in the Agreement in its original form might be viewed as a reference to pilots engaged in either type of flying. However the meaning of the Agreement, for present purposes, became even more obscure when clause 30D was varied in February 1992 and Appendix V was added. As already noted clause 30D speaks of pilots employed by the Company though Appendix V, which deals with those pilots, involves former pilots of a company "absorbed" into Aviation. On what, in our view, would be a narrow reading of Appendix V, it concerns only the seniority of pilots formerly employed by Lloyd Aviation Jet Charter Pty Ltd who were then employed by Airlines together with pilots employed also by Airlines but engaged in flying for the purposes of Aviation business. On this view of the Agreement a pilot employed by Aviation to fly for the purposes of Aviation's business would not be a pilot in respect of which Airlines had any obligation under the Agreement. However the variations to Clause 30D and the addition of Appendix V can be considered against the factual matrix in which they arose. We should, at this stage, note that the evidence, in any real sense, before the trial judge was limited in the extreme. The evidence comprised just as much statements from the Bar table, as evidence in an accepted form and reflected the way the parties elected to conduct the hearing. The variation of clause 30D and the addition of Appendix D arose from proceedings initially heard by Commissioner Leary whose decision and orders were reviewed, and modified, by a Full Bench. In neither the Commissioner's nor the Full Bench's decision was a distinction drawn between employment with Airlines on the one hand and Aviation on the other. However Commissioner Leary's decision did contain the following: "The Companies argued in response to the submission relating to corporate ownership that the fact that Lloyd Aviation Jet Charter Pty Limited is still a separate legal entity, although it does not hold a current air operator's certificate, should be considered as a relevant factor. I have been previously advised that the two Skywest operations are separate legal entities also but note that they share a common integrated seniority list." It would thus seem that the variation to clause 30 and the inclusion of Appendix V was made against a background of an acknowledged separateness of legal identity between Airlines and Aviation and, notwithstanding that fact, the maintenance of a "common" seniority list. We infer that the maintenance of that list and the making of the variation was not influenced by who might, in law, be the employer of a particular pilot. These matters constitute, in our opinion, part of the objective framework of facts in which the relevant variations to the Agreement were made which bear upon its construction in its amended form: see Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 per Mason J. That the Agreement, as varied, was intended to operate in a comparatively flexible way is reinforced by the terms of Appendix VI which was inserted into the Agreement in 1994. It, in express terms, concerned pilots employed by Aviation. The Appendix authorised Aviation to "employ and utilise (temporary) and/or existing pilots out of seniority order". They were then to be paid at a daily rate which was in lieu, inter alia, of entitlements under clause 30. The entitlements under clause 30 depend upon seniority in the list maintained under clause 30A. In our view clause 30 of the Agreement in its amended form was intended to require Airlines to maintain a seniority list for all pilots, whether employed by Airlines or Aviation, engaged in flying either directly for Airlines or indirectly. Flying might be undertaken indirectly for Airlines through the operations of a wholly owned subsidiary. Accordingly the trial judge was correct in concluding that Airlines breached clause 30A of the Agreement by failing to maintain, from, at the latest, September 1994, a seniority list of that character. The trial judge also concluded that clause 30F was breached by Airlines not offering to employ Captain Batty for one of the Perth positions and filling one of them with a pilot who, in the last common seniority list, was less senior than Batty. The operation of Clause 30F, in terms, depends upon seniority. While that would ordinarily be established by reference to a current seniority list, it need not be. In the absence of evidence to the contrary, an inference may reasonably be drawn that if Captain Batty was more senior than Captain Russell in June 1994 then he would have remained more senior and would have been more senior in October 1994. This, in effect is what the trial judge concluded. If, as we consider is the case, clause 30F of the Agreement confers a right on a more senior pilot, a choice of assignments entitled that pilot to be preferred, when exercising that choice, to a less senior pilot making the same choice. Implicit in the conferral of that right is the creation of an obligation on Airlines to render it effective. If that involves Airlines employing the pilot, either without qualification or on the basis recognised at common law in cases such as Mersey Docks and Harbour Board v Coggins and Griffith (Liverpool) Ltd 1947 AC 1, then that must be done. In the present case Airlines failed to recognise Captain Batty's right by failing to employ him on the assignment he sought. In our view the trial judge correctly concluded Airlines breached clause 30F of the Agreement. We dismiss the appeal. I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Full Court. Associate: ...................... Dated: 27 September 1996

APPEARANCES Counsel for the Appellant: Dr C Jessup with Mr F Parry Solicitor for the Appellant: Freehill Hollingdale & Page Counsel for the Respondent: Mr H Borenstein Solicitor for the Respondent: Mahony Galvin Rylah Dates of Hearing: 6 May 1996 Date of Judgment: 27 September 1996

IN THE INDUSTRIAL RELATIONS COURT) OF AUSTRALIA ) No. VI.5816 of 1995 VICTORIA DISTRICT REGISTRY ) BETWEEN: SKYWEST AIRLINES PTY LTD Appellant AND: THE AUSTRALIAN FEDERATION OF AIR PILOTS Respondent CORAM: LEE, MOORE and MADGWICK JJ PLACE: SYDNEY DATE: 27 SEPTEMBER 1996 CORRIGENDA Please note on p.15 in the list of appearances of the above judgment dated 27 September 1996 and delete "Dr C Jessup" and in its place, insert "Dr C N Jessup QC". Also delete "New South Wales District Registry" at top of Orders and Judgment title page and substitute with "Victoria District Registry". Associate: Dated: 4 October 1996