FEDERAL COURT OF AUSTRALIA

Jemena Asset Management Pty Ltd v Coinvest Limited [2009] FCAFC 176

CONSTITUTIONAL LAW – section 109 inconsistency – federal industrial instruments regulating long service leave – application of Construction Industry Long Service Leave Act 1997 (Vic) – whether conflict between Workplace Relations Act 1996 (Cth) and State Act – subject matter of industrial instruments and State Act – whether industrial instruments cover the field – whether inconsistency between industrial instruments and State Act

Construction Industry Long Service Leave Act 1997 (Vic)

Construction Industry Long Service Leave Act 1983 (Vic)

Subordinate Legislation Act 1994 (Vic)

Workplace Relations Act 1996 (Cth)    

Airlines of New South Wales Pty Ltd v New South Wales (No 2) (1965) 113 CLR 54

Australian Boot Trade Employees Federation v Whybrow & Co (1910) 10 CLR 266

Blackley v Devondale Cream (Vic) Pty Ltd (1968) 117 CLR 253

CoINVEST Limited v Visionstream Pty Ltd (2005) AIRC 399; 144 IP 137

Compass Group (Australia) Pty Ltd v Bartram (2007) FCAFC 26; 161 IR 307

New South Wales v Commonwealth (Health Fund Levy/Hospital Benefits case) (1983) 151 CLR 302

P v P (1994) 181 CLR 583

Re Amalgamated Metal Workers Union, Ex parte Shell Co. of Australia (1992) 174 CLR 345

Telstra Corporations Ltd v Worthing (1999) 197 CLR 61

Wenn v Attorney-General for Victoria (1948) 77 CLR 84   

JEMENA ASSET MANAGEMENT PTY LTD (ACN 086 013 461), JEMENA ASSET MANAGEMENT (4) PTY LTD (ACN 009 641 187) and JEMENA ELECTRICITY NETWORKS (VIC) LIMITED (ACN 064 651 083) v COINVEST LIMITED

(ACN 078 004 985)

VID 321 of 2009

MOORE, MIDDLETON AND GORDON JJ

18 DECEMBER 2009

MELBOURNE

THE COURT ORDERS THAT:

1.                  The appeal be dismissed.

2.                  The appellants pay the respondent’s costs of the appeal, to be taxed in default of agreement.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

THE COURT:

THE ISSUE

1                     A Victorian Act creates a scheme requiring employers to contribute to a fund which is disbursed in a way which provides portable long service leave entitlements for workers in the construction industry.  Part of the workforce in that industry is itinerant.  The appellants are employers in Victoria who are said to be obliged to participate in the scheme but are also parties to federal industrial instruments which touch upon long service leave benefits for their employees.

2                     The issue in this appeal is whether there is an inconsistency (within the meaning of s 109 of the Commonwealth Constitution) between:

(a)        the federal industrial instruments binding the appellants (providing an entitlement to paid long service leave); and

(b)       the Construction Industry Long Service Leave Act 1997 (Vic) (‘the State Act’) and the scheme created by it (‘the State Scheme’).

The PARTIES

3                     The appellants (‘the Jemena companies’) are incorporated pursuant to the laws of the State of Victoria.  They are successors to part of the electricity distribution business formerly undertaken by the State Electricity Commission of Victoria (‘the SECV’). The third appellant, Jemena Electricity Networks (Vic) Ltd, was formerly known as AGL Electricity Limited.  The Jemena companies, at material times, employed persons in their business who were engaged in the construction industry.

4                     The respondent is the trustee of the Construction Industry Long Service Leave Fund (‘the fund’) established under the trust deed referred to in the State Act.

THE FEDERAL SCHEME INSTRUMENTS

5                     The Jemena companies are bound by the Power and Energy Industry Electrical, Electronic and Engineering Employees Award 1998 (‘the 1998 Award’) and by a succession of Certified Agreements (the AGL Electricity Limited Enterprise Agreement 1999, the AGL Electricity and Agility Certified Agreement (Victoria) 2002, and the AGL Electricity and Agility (Victoria) Certified Agreement 2004 (collectively ‘the Certified Agreements’)) which among other things oblige the Jemena companies to comply with the 1998 Award and current policies, customs and practices including the practice in respect of the granting of and payment for long service leave. 

6                     The Certified Agreements also contain dispute resolution procedures.

7                     The Certified Agreements and the 1998 Award (collectively ‘the Federal Scheme Instruments’) deal with the circumstances in which the employers bound by them are obliged to grant and pay for long service leave taken by their employees as well as the means by which any entitlement to take, or be paid, long service leave will accrue.  Clause 24 of the 1998 Award prescribes, among other things, the following:

·                    an entitlement to long service leave at the ordinary rate of pay of 13 weeks on 10 years service with an additional 1.3 weeks leave for each additional year of service;

·                    definitions of ordinary rate of pay and service which includes service with successors or transmittees of the SECV, service after retrenchment if the break in employment is less than 12 months or service with State or Commonwealth Government organisations or semi-government instrumentalities;

·                    that leave be applied for and be taken when approved or directed by the employer;

·                    leave to be taken in minimum periods of 4 weeks unless otherwise agreed with the employer;

·                    mechanisms for the extension of leave when taken on half pay;

·                    exclusion of public holidays from the period of leave;

·                    accrual of recreation leave whilst absent on leave;

·                    prohibition on acceptance of paid employment during periods of leave;

·                    suspension of the leave provisions during periods of industrial action;

·                    methods for the payment of salary during leave and the rate at which such salary is to be paid;

·                    offsetting of debts owing to the employer against payments in lieu of leave;

·                    payments in lieu of leave in the event of termination of employment covering various contingencies including termination on account of retirement, total and permanent disability or death.

8                     The 1998 Award deals with all the ordinary aspects of long service leave entitlements which might arise in the industrial relationship between employee and employer.

THE STATE ACT AND THE STATE SCHEME

9                     The purpose of the State Act is stated to be -

… to repeal the Construction Industry Long Service Leave Act 1983 and provide for the scheme established by that Act to be administered in accordance with a trust deed by a company incorporated under the Corporations Law.

10                  In the Second Reading Speech accompanying the State Act, the Minister said:

The purpose of this bill is to repeal the Construction Industry Long Service Leave Act 1983 and to provide for a portable long service leave scheme owned and administered by the construction industry.  The Construction Industry Long Service Leave Act 1983 established a compulsory long service leave scheme for the provision of portable long service leave benefits for workers and, on an optional basis, subcontractors in the construction industry.

…

This bill changes the legislative structure and the operations of the existing scheme while at the same time preserving the present entitlements of construction industry workers and also the obligations of construction industry employers.  This is achieved by converting the scheme into an industry-based and managed scheme, but preserving certain compulsory elements of the current scheme.

…

The bill continues to provide construction industry workers with the statutory right to take long service leave and for workers and working subcontractors to be paid out of the fund. 

(Emphasis added.)

11                  The scheme created by the Construction Industry Long Service Leave Act 1983 (Vic) (‘the 1983 Act’) referred to in the State Act and the Second Reading Speech had the following elements: the establishment of a construction industry long service leave fund (Pt III); a register of employers, working sub contractors and workers (Pt IV); the levying of a long service leave charge from employers and working sub contractors (Pt V); and significantly, an entitlement to long service leave on ordinary pay as defined (Pt VI and in particular s 40).  

12                  What then does the State Act provide?

13                  By operation of the State Act, the Jemena companies must register with the trustee of the fund or they are effectively prohibited from employing workers (s 8), and they must keep records and make returns regarding the employees (s 9).  There is a comprehensive disputes mechanism (leading to binding arbitration) which covers any dispute concerning the State Scheme dealt with by the trust deed between an employer and a person or persons employed or engaged by the employer (s 12). 

14                  Importantly for the purposes of this appeal, s 6 of the State Act headed “Entitlements” provides:

(1)       Every worker is entitled to long service leave, and to be paid benefits out of the fund, in respect of continuous service in the construction industry.

(2)       Every working sub-contractor who has paid long service leave charges is entitled to be paid benefits out of the fund in respect of continuous service in the construction industry.

(3)       The amount of the entitlement and the method by which that amount is to be calculated are as determined from time to time by the trustee in accordance with the trust deed.

15                  We observe at the outset that whatever entitlement is provided for pursuant to s 6(1), the ambit or content of that entitlement is dependent on the operation of s 6(3).  By that sub-section, the amount of the entitlement is determined from time to time by the trustee in accordance with the trust deed.  Therefore, depending upon the terms of the trust deed, such entitlement may only encompass an entitlement to monetary benefits out of the fund established under the State Act.  This will depend upon the construction to be given to the terms of the trust deed and rules made under it.  Despite the statement in the Second Reading Speech referred to in [10] above, s 6 does not necessarily provide workers with the statutory right to take long service leave, as was the situation expressly provided for under s 40 of the 1983 Act.

16                  The trust deed is defined to mean the trust deed executed by the respondent as trustee on the 1 April 1997 as amended and in force for the time being (see s 3(1)).  The trust deed allows for the making of rules and their amendment, subject to the State Act.  The rules are not subordinate legislation for the purposes of the Subordinate Legislation Act 1994 (Vic).  The rules were made and amended over time, and deal with many aspects of long service leave.  The relevant rules are those in existence as at 29 August 2006.

17                  By virtue of s 3(2) of the State Act, words and expressions used in the rules set out in Sch 2 to the trust deed and in the State Act have the same meanings in the State Act as they have in the rules as amended and in force for the time being.  Therefore, it is the rules that dictate the ambit of the entitlement under the State Act, in particular the entitlement under s 6(1).  We interpolate that no suggestion was advanced that this mechanism adopted by the State Act was itself invalid on the basis that it was an impermissible delegation of legislative power by the State legislature. 

18                  It is thus necessary to address the rules.

19                  It was submitted by the Jemena companies that the State Act and the rules contemplate both an entitlement to long service leave and an entitlement to be paid benefits out of the fund.  In this regard, so it was contended, the rules:

(a)        define Long Service Leave as a distinct and separate entitlement to the Long Service Leave Benefit (r 1.1);

(b)        provide for an entitlement to Long Service Leave on ordinary pay (r 27.2);

(c)        define what constitutes service for the purpose of calculating the entitlement (r 21);

(d)        contemplate payments being made in lieu of Long Service Leave where the worker is terminated from the construction industry or dies (rr 30 and 31);

(e)        subject to agreement, contemplate the entitlement to Long Service Leave being taken in separate periods (r 35.1); and

(f)         refer to the payments being made when leave is taken (see in particular r 35.2).

20                  Further, it was submitted that the rules set up the mechanisms for the calculation of the Long Service Leave Charge the employer has to pay (r 11) and the maintenance of registers of employers (r 8) and workers (r 10).

21                  The rules of the fund contain some inconsistencies.  Sufficient care has not been taken in their drafting over successive amendments, particularly taking into account the terms of the State Act.  However, we consider that the rules fundamentally provide for the entitlement to be paid monies out of the fund, and not the entitlement for actual long service leave or payment in lieu.

22                  The primary entitlement under the rules is to a ‘Long Service Leave Benefit’ (see eg r 27.1), defined as an entitlement out of the fund in accordance with the rules (see r 1.1). 

23                  The fund itself is only there to pay out moneys, including Long Service Leave Benefits (r 6.2).  Even if there is no entitlement to ‘Long Service Leave’, the trustee may pay a worker money from the fund (r 6.2(c)(ii)). 

24                  Admittedly, the amount of the entitlement in certain circumstances is ‘13 weeks’ Long Service Leave on Ordinary Pay’ (eg r 27.2(a)).  This is to be contrasted to the amount of entitlement of the Working Sub-Contractor, which in certain circumstances is a refund from the fund (see r 28.2(a)).  It is also to be contrasted to where a person is both a worker and a Working Sub-Contractor (see r 29).

25                  However, we see no significance in this, as in all these situations the basic entitlement is to a ‘Long Service Leave Benefit’, or ‘benefits’, which benefit or benefits could only be in the form of a payment from the fund (see rr 27.1, 28.1 and 29.1).  In fact, the only obligation of the trustee is to pay from the fund monies upon receipt of a request for the Long Service Leave Benefit (rr 27.4, 28.3 and 29.7).

26                  Therefore, in our view, the primary rules are rr 27, 28 and 29, which read in conjunction with ss 6(1) and 6(3) of the State Act, clearly define the entitlement under the State Act.  The whole focus of the rules is upon payment from the fund, not the provision of Long Service Leave by the employer.  Consistent with this approach, the rules further deal with payments from the fund in respect of Long Service Leave, such as entitlements of the employer to reimbursement where it has paid Long Service Leave (r 40.3) and refunds of workers benefits that have been overpaid (r 50.2).  The rules ensure that there is no doubling up on charges over and above award long service leave payments and no worker may recover money from the fund where the amount has been received from a non-State Act source (r 23 (10)).

27                  Provision is made for the payment of the Long Service Leave Benefit by reference to certain periods of the time the worker can take Long Service Leave (see r 35.1).  However, if the entitlement is from the fund, which only relates to the payment of moneys, the provision in the rules relating to the way in which the worker may take leave, can be seen as an administrative arrangement when and how payment is to be made.  We do not construe r 35 as a provision which in itself provides the entitlement which is referred to in s 6(1) and s 6(3) of the State Act.

28                  It is also true that s 12(1)(c) of the State Act anticipates that disputes concerning the State Scheme dealt with by the trust deed could arise between the employer and employee, which could involve a dispute regarding the Long Service Leave provisions in the rules.  This may suggest that the State Act concerns more than the payment of monies from the fund.  However, a dispute between a worker and employer could readily arise even in the context of a dispute as to a payment from the fund, as where there is a dispute between a worker and employer as to whether or not a person is a worker within the construction industry.  This dispute would necessarily involve the interests of the employer and worker, as well as the trustee (see eg r 45), and would involve a disputation between worker and employer.  We do not consider that the provisions of s 12 of the State Act dealing with disputes advances the argument that the State Act or the rules envisage necessarily the giving of an entitlement for Long Service Leave as distinct from an entitlement to payment of monies from the fund.

CONSIDERATION OF INCONSISTENCY

29                  The principles applicable to s 109 are relatively well settled: see Telstra Corporations Ltd v Worthing (1999) 197 CLR 61 at [27]-[28].  Relevantly for the purposes of this appeal, a law of a State will be inconsistent with a law of the Commonwealth where –

(a)        the State law would alter, impair or detract from the operation of a Commonwealth law or the exercise of a power under a Commonwealth law; or

(c)        the State law enters a field that the law of the Commonwealth was intended to cover exclusively or exhaustively.

30                  We do not take the reference by Mason J (as he then was) in New South Wales v Commonwealth (Health Fund Levy/Hospital Benefits case) (1983) 151 CLR 302, at p 330, to the ‘object or purpose’ sought to be achieved by the Commonwealth law in considering inconsistency as suggesting a different test than that adopted in Worthing (1999) 197 CLR 61 at [28] where reference was made to ‘the operation of a law of the Commonwealth Parliament’.  So much was accepted by Senior Counsel for the Jemena companies.

31                  Sections 170LZ(1) and 152 of the Workplace Relations Act 1996 (Cth) (‘the WR Act’), as they stood before 27 March 2006, and s 17(1) of the WR Act, as it stood from 27 March 2006, sought to ensure that an award, certified agreement or workplace agreement would prevail over inconsistent State laws, even though the relevant award, workplace agreement or certified agreement is not a ‘law of the Commonwealth’ within s 109 of the Constitution.  The inconsistency would be between the relevant statutory provision and the State law.

32                  In Compass Group (Australia) Pty Ltd v Bartram (2007) FCAFC 26; 161 IR 307, Jessup J (with whom Lander J agreed and Marshall J in a separate judgment reached the same conclusion) after describing the matter at issue in that case (which also concerned an alleged inconsistency between State long service leave legislation and a Federal certified agreement) formulated the test as follows at [22]:

Where a question of that kind arises, the test of inconsistency is whether the State law, if valid, would alter, impair or detract from the operation of the certified agreement and therefore the WR Act itself:  Metal Trades Industry Association of Australia v The Amalgamated Metalworkers’ and Shipwrights’ Union (1983) 152 CLR 632, 643 and 648.

33                  We first consider the question of whether the State Act and the State Scheme would alter, impair or detract from the operation of the Federal Scheme Instruments.

34                  It is sufficient to engage s 109 if the State law authorises a State tribunal or body to make an order or implement a scheme which alters, impairs or detracts from the Commonwealth law.  In P v P (1994) 181 CLR 583, the majority of the High Court of Australia (Mason CJ, Deane, Toohey and Gaudron JJ) said (at p 601):

Subject to that question, s 109 of the Constitution will, in such a case, invalidate any State Law to the extent that it would directly or indirectly (e.g. by conferring authority on a State court, instrumentality or officer) preclude, override or render ineffective the exercise by the federal court of the jurisdiction so conferred.

35                  In Worthing (1999) 197 CLR 61, the High Court observed at p 76 that a State law would not qualify, impair or negate the essential legislative scheme established by Commonwealth law if:

… the Commonwealth law operates within the setting of other laws so that it is supplementary to or cumulative upon the State law in question. 

36                  Undoubtedly, when considering whether there is the relevant alteration, impairment or detraction, a characterisation of the laws is not required, nor indeed to be undertaken.  As the High Court said in Worthing(1999) 197 CLR 61 at p 78:

It would be no answer that the subject-matters of the two laws are not co-incident. Rather, the State law, by granting certain rights, would deny or vary a right, power or privilege conferred by the federal law.

37                  In our view this appeal does not concern the direct collision between the two pieces of legislation, where obedience to one is disobedience to the other: see eg Blackley v Devondale Cream (Vic) Pty Ltd (1968) 117 CLR 253, at p 258 (per Barwick CJ).  Here, there is an imposition of an additional duty on particular employers under the State Act, but no inconsistent duty or conflicting duty to that imposed by the Federal Scheme Instruments: see eg Australian Boot Trade Employees Federation v Whybrow & Co (1910) 10 CLR 266.  In no way does the State Act or State Scheme deny or vary any right, power or privilege conferred by the Federal Scheme Instruments.  There is no negating of the essential Federal legislative scheme set up by the Federal Scheme Instruments.

38                  As the trial judge observed the State Act and the Federal Scheme Instruments ‘co-exist in harmony such that each of them may be considered supplementary to or cumulative upon the other’ (at [40]).  We agree.

39                  The High Court in Worthing(1999) 197 CLR 61 at p 76 did refer to the Barwick CJ in Blackley (1968) 117 CLR 253, p 258 to a ‘direct collision’ occurring where the State law, if allowed to operate, would impose an ‘obligation greater’ than that for which the Federal law provided.  However, this was in the situation where the statute of the State required payment of a larger sum by way of wages than the amount prescribed by the federal award.  This was not just a case of a greater obligation, but payment by the employer of wages conforming to the federal award involving the employer in disobedience to the State provisions: see Blackley (1968) 117 CLR 253 at p 258-9.  This is not the situation confronting the employer under the State Act and State Scheme.

40                  We turn then to the question of whether the law of the Commonwealth covers the field entered into by the State Act and State Scheme.

41                  For the purposes of determining whether the Federal Scheme Instruments cover the field, it is important to characterise and identify the field of the contending two legislative schemes.  The purpose and end to be achieved by each legislative scheme is an important matter to consider in this context. 

42                  This was made clear in Airlines of New South Wales Pty Ltd v New South Wales (No 2) (1965) 113 CLR 54, where the High Court of Australia rejected a challenge to the Air Transport Act 1964 (NSW) which, it was claimed, was inconsistent with the Air Navigation Regulations (Cth).

43                  The Commonwealth regulations prohibited (regs 198 and 199) commercial air operations, including operations within any State, unless licensed by the Director General of Civil Aviation, who was directed to consider only ‘safety, regularity and efficiency of air navigation’ when deciding an application for a licence.  The State legislation prohibited commercial air operations inside New South Wales, unless licensed by the Commissioner of Motor Transport, who was directed to consider public transport needs, the encouragement of competition and the suitability of the applicant, when deciding an application for a licence.

44                  Justice Kitto (at 113 CLR 121-2) dealt with the argument that the Air Navigation Regulations covered the field of the licensing of commercial air operations in the following way:

The topic and the only topic to which regs 198 and 199 direct their attention, so far as they apply to intra-State operations, is the safety, regularity and efficiency of air navigation.  Regulation 199(4) makes that clear.  The State Act, on the other hand, does not concern itself with that topic in any way.  The fact that each piece of legislation sets up a licensing system operating independently of the licensing system established by the other may from time to time lead to a situation in which A, though holding a licence under the State Act for a proposed service, may be unable to obtain a licence for that service under reg 199, while B, though holding a licence for the service under reg 199, may be unable to obtain a licence for it under the State Act.  But any ground for suggesting inconsistency disappears if the situation is more fully described, as by saying that consideration of matters concerning the safety, regularity and efficiency of air navigation has led the Federal Director-General of Civil Aviation to conclude that A, though not B, should be debarred from conducting the service, while consideration of matters concerning public needs in relation to air transport services or concerning other topics mentioned in s 6(3) of the Sate Act has led the State Commissioner for Motor Transport to conclude that B, though not A, should be debarred from conducting the service.  The Federal Regulations and the State Act each employ a licensing system to serve a particular end; but the ends are different, and that means that the two sets of provisions are directed to different subjects of legislative attention.  In my opinion there is no mutual inconsistency in any relevant sense. 

45                  It may be accepted that the Federal Scheme Instruments deal with, and intend to deal with, exhaustively, long service leave entitlements of employees in relation to their particular employers.  It can also be accepted that the provisions of the State Act impact upon long service leave entitlements of employees, in that the provisions enhance the entitlement of workers by virtue of the creation and administration of the fund.  However, this is not to say that the State Act or the State Scheme pertains to the industrial relationship between employers and employees in the context of the Federal Scheme Instruments and their enforcement: see CoINVEST Limited v Visionstream Pty Ltd (2005) AIRC 399; 144 IR 137 and Re Amalgamated Metal Workers Union, Ex parte Shell Co. of Australia (1992) 174 CLR 345.

46                  The proper characterisation of the field or subject matter of the Federal Scheme Instruments is that they relate to the industrial relationship between employee and particular employer, and the obligations and liabilities created through and by that relationship.  The field does not extend to the complete subject matter of rights and liabilities of the employees and employers sourced otherwise than through that relationship.

47                  The field of the State Act and State Scheme is the provision of a portable scheme for the benefit of workers to access a fund set up by and under the State Act.  That field does not intrude into the field of the industrial relationship between employer and employee in a way that the Federal Scheme Instruments expressly or impliedly exclude.

CONCLUSION

48                  For the above reasons, the State Act and the State Scheme are not inconsistent with the Federal Scheme Instruments because –

(a)        the State Act and the State Scheme do not alter, impair or detract from the operation of the Federal Scheme Instruments, and

(b)       the State Act and the State Scheme do not enter a field that the law of the Commonwealth covered or intended to cover exclusively or exhaustively.

49                  The appeal should be dismissed with costs.

Associate:

Dated:         18 December 2009