Federal Court of Australia

Qube Logistics (Rail) Pty Ltd v Australian Rail, Tram and Bus Industry Union [2021] FCAFC 83

ORDERS

THE COURT ORDERS THAT:

1.    The stay imposed by the primary judge on 25 November 2020 be revoked.

2.    The appeal be dismissed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    This appeal is largely concerned with the true meaning of a single sentence of an enterprise agreement. The agreement in question is the Independent Railways of Australia Enterprise Agreement 2011 (Railways Agreement or Agreement), which was approved by the Fair Work Commission on 10 June 2011 and came into effect on 17 June 2011. The Railways Agreement had a nominal expiry date of 1 April 2014 after which it would continue to apply unless and until it was either replaced by another agreement or terminated.

2    The matter came before the Court on an application brought by the Australian Rail, Tram and Bus Industry Union (Union) against Qube Logistics (Rail) Pty Ltd (Qube).

Background

3    In the proceeding before the primary judge the Union alleged that Qube contravened s 50 of the Fair Work Act 2009 (Cth) (FW Act or Act) by underpaying some 32 current and former employees during the period from 1 April 2014 to 31 March 2016. The Union’s case was that employees were entitled to the annual remuneration increases for which the Agreement provided after its nominal expiry date unless and until a replacement agreement had been negotiated and that the affected employees were entitled to those increases on 1 April 2014 and 1 April 2015. The Union’s case was based on the terms of cl 5, which provided for annual pay increases “in the absence of re-negotiation”. The Union also alleged that cl 5 entitled employees to an increase in superannuation contributions of 1% on each of those dates. By failing to pay those increases, the Union claimed that Qube contravened the Agreement and therefore the Act, as s 50 of the FW Act provides that a person must not contravene a term of an enterprise agreement.

4    The Union sought declaratory relief and orders for payment of compensation, interest on the outstanding underpayments and pecuniary penalties.

5    The primary judge upheld the Union’s claim for annual wage increases but rejected its claim with respect to superannuation, determined to make orders requiring Qube to pay the amounts reflecting the unpaid wages, with interest, but declined to impose pecuniary penalties.

6    Qube appeals from the orders. There is no cross-appeal.

7    Qube contends that the primary judge erred in finding first, that there was any entitlement to wage increases where negotiations had started, albeit that they had not concluded in a new agreement; second, and in the alternative, that if there were an entitlement to wage increases the first date those increases were to be paid was 1 April 2015; and, in any event, interest should not have been awarded.

8    For the reasons that follow, each of Qube’s contentions must be rejected.

The Railways Agreement

9    Although the National Secretary of the Union signed the Railways Agreement on behalf of the Union, neither the Union nor Qube was a party to the Agreement. The parties to the Agreement were Independent Railways of Australia Transport Pty Ltd (IRA), a company providing rail freight services in New South Wales, and “employees employed by Independent Railways of Australia to perform work within the classifications contained within [the] Agreement”. But the evidence before the primary judge disclosed that the Union was a bargaining representative for the Agreement, that it had given notice under s 183 of the FW Act that it wanted the Agreement to cover it, and that, in accordance with s 201(2), the Fair Work Commission noted in its decision to approve the agreement that the Agreement covered the organisation. The evidence also disclosed that in 2012 Qube acquired ownership of Macarthur Intermodal Shipping Terminal Pty Ltd, which had been the owner of IRA. The former IRA employees were covered by the Railways Agreement. Other employees of Qube were then covered by three other agreements, two of them collective agreements made under the Workplace Relations Act 1996 (Cth) and the third, like the Railways Agreement, was an enterprise agreement made under the FW Act and approved by the Fair Work Commission.

10    Clause 5 of the Railways Agreement reads (without alteration):

This Agreement shall operate from the date of lodgement and shall have a nominal expiry date of 1st April 2014. In the absence of re-negotiation, the last increase of pay detailed in Remuneration will be the agreed increase of pay for each anniversary such date thereafter.

11    The reference to “Remuneration” is to cl 34 which reads:

Remuneration

Remuneration Increase

The Remuneration outlined in this agreement will be increased in the following manner:

Operative Date Percentage increase

From the beginning of the first pay period on or after lodgement of this Agreement

•    1st April 2012 – 3% plus an extra 1% added to Superannuation – rounded up to the nearest cent.

•    1st April 2013 – 3% plus an extra 1% added to Superannuation – rounded up to the nearest cent.

12    A number of other features of the Agreement should also be mentioned.

13    The wage rates were set out in Part B of the Agreement.

14    Clause 2 of Pt B, entitled “Wages”, included a table which was preceded by the following line:

The current Rates of pay for each classification, which will increase with the remuneration package.

15    The table provided for a 3% increase in wage rates for all classifications on 1 April 2011, 1 April 2012, and 1 April 2013, the last date being precisely one year before the nominal expiry date of the Agreement.

16    In cl 6 of Pt A of the Agreement the parties agreed “to move forward in ‘good faith’”.

17    On the signatures page, there are two matters worth noting.

18    First, there is a commitment to enter into negotiations for a new agreement. That clause (the future negotiations clause), which is unnumbered, reads:

Future Negotiations:

The parties agree to commence negotiations on a new agreement no later than 1st February 2014 being 2 months before the nominal expiry date. This agreement will not preclude the negotiation of other agreements between the parties during the term of this agreement.

19    The future negotiations clause is followed by another clause, also unnumbered:

No extra claims:

During the term of this Agreement that both parties agree that they, will not pursue any extra claims unless provided for in this agreement.

20    Negotiations for a replacement agreement began in about July 2013, when Qube approached the Union. Negotiations were protracted. Agreement was finally reached in March 2016 and the Railways Agreement was ultimately replaced by the QUBE Logistics (Rail) Train Crew and RTBU NSW Enterprise Agreement 2015, which came into effect on 25 March 2016.

The reasons of the primary judge

21    Not all the reasons are relevant to the present controversy. It is sufficient for present purposes to make the following observations.

22    The primary judge upheld the Union’s argument that “re-negotiation” in cl 5 refers to the completion of the negotiation process in a new or re-negotiated agreement and not to the commencement of the process, as Qube contended and maintains.

23    In concluding that “re-negotiation” referred to the outcome of negotiations, his Honour’s reasoning began with an analysis of the ordinary meaning of the word derived from recourse to dictionary definitions of “negotiation” and “negotiated”. His Honour observed that, devoid of context, the term was ambiguous; either party’s construction was available. His Honour said that it was “the context … which fixes its meaning” and read in context the meaning given to the term by the Union was to be preferred. The crux of his Honour’s reasons appears in [21] of his judgment:

It is the context in which cl 5 appears which fixes its meaning. That context is simply one in which the parties to the Railway Agreement had agreed upon the “term” during which it was to operate, and the potential continuation of an entitlement to a “remuneration increase” after the nominal expiry date of the Agreement. The term “re-negotiated” being, on this approach, simply a recognition of an agreement that the Railways Agreement may come to an end and an agreement of the parties that until a new and replacement enterprise agreement was agreed upon, the employees were to receive a “remuneration increase”. Such a construction promotes at least some degree [of] certainty of entitlement which, it may safely be assumed, was a matter of importance to both parties. Certainty as to any “remuneration increase” would be denied if, as Qube Rail would have it, the employees were not entitled to any “remuneration increase” whilst negotiations were ongoing, and potentially ongoing for some period of time. The “re-negotiation”, it is respectfully concluded, thus refers to the completion of the “negotiation” process and the successful “re-negotiation” of an agreement replacing the existing Railways Agreement.

24    The primary judge rejected Qube’s argument that such a construction would lead to “a series of unreasonable or clearly obviously unintended outcomes”, including that employees could refuse to enter into negotiations or not agree to Qube’s offers and be guaranteed the 3% wage rises for which the Railways Agreement provided, thereby “potentially” exposing Qube to cost increases beyond its control if the approval of a new agreement were delayed in the Fair Work Commission. In doing so his Honour reasoned (at [29]):

Whatever may be the construction of the term “re-negotiation”, be that construction the one advanced by the Union or by Qube Rail, cl 5 proceeds on an assumption that the parties will “negotiate” in good faith and that negotiation will be on-going. The entitlement to the increase in remuneration, upon such an approach, would only continue so long as there were on going negotiations in good faith. The entitlement conferred, upon such an approach, expresses an agreement that employees would receive an increase in pay in the interim between the end of the existing Railways Agreement and a new agreement. No construction of the clause would be open, with respect, which would confer any entitlement in “perpetuity” or any obligation on the part of Qube Rail to pay if (in the example provided) the Union ceased to negotiate in good faith. If negotiations were to break down and a conclusion reached that there was no prospect of any future “replacement” agreement, the entitlement to the “remuneration increase” in cl 5 would come to an end. Clause 5 does not confer any entitlement to any “increase of pay” in the absence of negotiation in good faith. Irrespective of when “re-negotiation” may start, be it either before or after the “nominal expiry date” of the Railways Agreement, the “re-negotiation” being referred to is bona fide negotiation or re-negotiation being carried on in good faith. Clause 5 is thus silent, does not address and certainly confers no entitlement to any “increase of pay” in the absence of bona fide negotiation or re-negotiation. Time taken on the part of the Commission to approve any new agreement, it may be further assumed, was envisaged by the parties when the terms of cl 5 were agreed.

25    His Honour also held that, for the purposes of cl 5, each anniversary date thereafter was 1 April 2014 (the nominal expiry date of the Agreement) and 1 April 2015.

26    On the question of interest, the primary judge observed that s 547(2) of the Act contemplates an order for the payment of interest on application “unless good cause is shown to the contrary”. His Honour noted that “good cause” could be demonstrated where, for example a claimant had already received “early payment of part of the arrears, together with the practical difficulties of calculation” as in National Tertiary Education Union v Royal Melbourne Institute of Technology [2013] FCA 451 at [154], 234 IR 139 at 188–189 (Gray J). On the facts of this case, however, his Honour observed that Qube had not pointed to any reason not to award interest in accordance with s 547(1). For the purposes of s 547(3), his Honour held that the “the relevant cause of action arose” when payments were not made as required. He rejected the argument that the fact that the first demand for payment of increases to wages was not made until some years later was a sufficient reason to deny the Union’s claim.

27    In orders made on 25 November 2020, after the publication of judgment, his Honour issued a declaration in the following terms:

1.    Pursuant to clause 5 of the Independent Railways of Australia Enterprise Agreement 2011 (Railways Agreement), the Respondent was required to increase the minimum rates of pay (but not superannuation) published in the Railways Agreement for employees covered by it by 3 percent on 1 April 2014 and by a further 3 percent on 1 April 2015 (Wage Increases).

2.    By failing to pass on the Wage Increases, the Respondent contravened s 50 of the Fair Work Act 2009 (Cth).

28    His Honour ordered that Qube pay the employees named in a schedule to those orders the amounts of the underpayments but stayed the order “pending” the appeal.

The issues

29    There were three grounds of appeal, raising the following issues.

(1)    What is the true meaning of “absence of re-negotiation” in cl 5?

(2)    When was the “first anniversary … date” after “the last increase of pay detailed in Remuneration”?

(3)    Did the primary judge err in deciding that interest should be paid on the unpaid pay increases?

What is meant by “absence of re-negotiation” in cl 5?

30    The principles of construction of enterprise agreements are well established.

31    First, the task of interpreting the agreement turns on the language it uses “understood in the light of its industrial context and purpose”: Amcor Ltd v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 at [2] (Gleeson CJ and McHugh J).

32    Second, while one starts with the ordinary meaning of the words, the words are not to be interpreted in a vacuum divorced from industrial realities: City of Wanneroo v Holmes (1989) 30 IR 362 at 378 (French J). Rather, as the Full Court put it in Workpac Pty Ltd v Skene (2018) 264 FCR 536 (Tracey, Bromberg and Rangiah JJ) at [197]:

[I]ndustrial agreements are made for various industries in the light of the customs and working conditions of each, and they are frequently couched in terms intelligible to the parties but without the careful attention to form and draftsmanship that one expects to find in an Act of Parliament (Holmes at 378-379, citing George A Bond & Company Ltd (in liq) v McKenzie [1929] AR (NSW) 498 at 503 (Street J)). To similar effect, it has been said that the framers of such documents were likely of a “practical bent of mind” and may well have been more concerned with expressing an intention in a way likely to be understood in the relevant industry rather than with legal niceties and jargon, so that a purposive approach to interpretation is appropriate and a narrow or pedantic approach is misplaced: see Kucks v CSR Ltd (1996) 66 IR 182 at 184 (Madgwick J); Shop, Distributive and Allied Employees’ Association v Woolworths SA Pty Ltd [2011] FCAFC 67 at [16] (Marshall, Tracey and Flick JJ); Amcor at [96] (Kirby J).

33    By ground 1 of the notice of appeal, Qube alleged that the primary judge misconstrued cl 5 of the Railways Agreement because, on its proper construction, it did not provide for remuneration increases if Qube continued to negotiate for a replacement agreement. Qube argued that the ordinary meaning of the noun “re-negotiation” is to engage in negotiation “again or further” and the words “in the absence of re-negotiation” simply refer to the absence of that process. Thus, Qube reasoned, construed in accordance with its ordinary meaning, the words “[i]n the absence of re-negotiation” in cl 5 of the Railways Agreement mean in the absence of the parties to that agreement taking part in the process of negotiation. As long as negotiations had begun, Qube maintained, there was a “re-negotiation” and the primary judge erred in finding otherwise.

34    Qube submitted that its construction was supported not only by the text but also by considerations of context and purpose.

35    As to context, Qube pointed to the inclusion on the signatures page of the future negotiations clause. It argued that this clause was “instructive” in several respects. First, by using the terms “new agreement” and “other agreements” the parties were aware of the “critical distinction” between “negotiations” and the product of negotiations (a new or other agreement). Second, the words used in this clause are different from the words used in cl 5, a point which appears to be no different in substance from the first. Third, this clause “informs the obligation in cl 5”. Qube submitted:

The parties intended to commence negotiations two months before the nominal expiry of the IRA Agreement. Clause 5 of the IRA Agreement seen in context was a mechanism to provide an incentive to do so or penalise Qube Rail for not doing so. If there was no re-negotiation, certain pay increases would follow. The parties could not have contemplated that the negotiation process would commence and conclude (with an approved replacement agreement) in a two month period. It is incongruous to confer upon the parties the objective intention that they had in mind that a comprehensive and concluded replacement agreement would be reached within this period of two months or that the result of not being able to reach a concluded agreement within such a period would mean an automatic payment of a 3% wage increase on 1 April 2014 and each year thereafter until such an agreement could be reached. Such an interpretation would not be in line with the industrial realities of the enterprise agreement making process. That agreement making process (which occurs in the context of the FW Act) involves a number of procedural requirements including the issue of notice of employee representational rights, appointments of bargaining representatives (including ones other than the Union), negotiations with those bargaining representatives, the conclusion of the drafting of a new agreement, explanation of its terms, and all of the steps involved in putting it to a vote, providing for an access period and an approval process before the Commission: see, generally, ss 173, 178, 180, 181 and 228 of the FW Act.

36    Qube also submitted that the purpose of cl 5 was not only to identify the nominal expiry date, which is a legislative requirement, but also “to incentivise negotiation for a replacement agreement, and in turn disincentivise delay in entering negotiations”. Qube argued that the Union’s construction, which the primary judge accepted, would lead to the unintended consequence that, regardless of the prevailing economic conditions or the state of the business, employees could simply refuse to enter negotiations or not agree to Qube’s offers and be guaranteed wage increases of 3% per annum in perpetuity. Qube noted that the primary judge said (at [29]) that cl 5 proceeded on an assumption that the parties will negotiate in good faith and that negotiation will be on-going. Consequently, his Honour explained, the entitlement to the increases in remuneration would only continue as long as negotiations proceeded in good faith. Qube submitted, that this “assumption” was not reflected in the words of cl 5 and there was nothing in the clause to support the inference his Honour drew. It argued that his Honour’s reliance on the so-called assumption and “implied limitations” “underscored” the correctness of Qube’s construction.

37    We are not persuaded by Qube’s arguments.

38    First, stripped of context the meaning of the phrase “in the absence of re-negotiation” is ambiguous. As the primary judge recognised, “negotiate” can mean “to bring about by discussion and settlement of terms”, which was the meaning urged by the Union, and it can also mean “to treat with another or others … in the preliminaries to a business deal”, which was the meaning urged by Qube. His Honour referred to the definitions in the Macquarie Dictionary (3rd ed., 2002). “Negotiation” is defined as the “mutual discussion and arrangement of the terms of a transaction or agreement”. “Renegotiate is defined as “to negotiate (something) again or further”. Renegotiation can refer to the process of renegotiation or the achievement of a renegotiated agreement. What it means in the present case is entirely dependent on context. When the relevant contextual matters are brought into consideration, we are persuaded that the Union’s construction is the correct one.

39    As the Union submitted, cl 5 reflects first, a settlement as to the term of operation; second, an understanding that the Railways Agreement might nonetheless continue to operate beyond the nominal term; and third, an agreement as to what would happen in that event, namely that the employees would receive the annual increases in remuneration guaranteed during that term. The purpose of the third matter is to deal with the question of pay in the interregnum between the nominal expiry date and the negotiation of a replacement agreement by ensuring that the agreed wage increases were maintained if there was delay in making a replacement agreement.

40    We reject the notion that the purpose of the provision was to provide an incentive to the parties to enter into negotiations. Nor do we accept that the prospect of delay in reaching agreement means that it was unlikely that the interpretation urged upon, and accepted by, the primary judge was intended.

41    As the Union pointed out, by their commitment in the future negotiations clause, the parties had agreed to start negotiations on a new agreement before the end of the nominal term of the Railways Agreement — at least two months before. The agreement made in the future negotiations clause meant that either party could compel the other to start negotiations on pain of a penalty (for contravening the Agreement). Further, the parties had agreed to “move forward in ‘good faith’” and, once negotiations began, they were entitled to rely on the good faith bargaining obligations imposed by Div 8 of Pt 2-4 of the FW Act.

42    In these circumstances, it is unlikely that the purpose of cl 5 was to provide an incentive to negotiate. There was no need for such an incentive.

43    Clause 5 was in substantially similar terms to cl 3 of the predecessor enterprise agreement, the Independent Rail Australia Union Collective Agreement 2008 (2008 Collective Agreement) and was obviously based on it. Clause 3 of the 2008 Collective Agreement read:

This Agreement shall operate from the date of lodgement and shall have a nominal expiry date of 1st April 2011. In the absence of renegotiation, the last increase of pay detailed in Clause 26.4 will be the agreed increase of pay for each anniversary of such date thereafter.

44    Clause 26.4 provided:

This company agrees that it will increase the rates of pay each year on the anniversary of the lodgement date in line with the Consumer Price Index (All Groups) that is posted in the previous September Quarter by the Australian Bureau of Statistics.

45    This appears to be the origin of the 3% annual wage increase for which the Railways Agreement provided. According to the Australian Bureau of Statistics, the CPI rose 3.3% through the year to the March quarter 2011.

46    Both parties would have been alive to the possibility of delay in negotiations for a new agreement. The evident purpose of providing for increases in wages after the nominal expiry date was to ensure that employees were not prejudiced by delay in negotiations. In circumstances where the CPI is rising, it would be unsurprising that the employees would have been concerned to protect the real value of their wages while the negotiations were under way. There is no reason to believe that the IRA, or a reasonable employer in its position, would not have agreed to do so.

47    Ground 1 of the notice of appeal should be dismissed.

When was the “first anniversary … date” after “the last increase of pay detailed in Remuneration”?

48    Ground 2 should also be dismissed.

49    It will be recalled that cl 5 states:

This Agreement shall operate from the date of lodgement and shall have a nominal expiry date of April 2014. In the absence of re-negotiation, the last increase of pay detailed in Remuneration will be the agreed increase of pay for each anniversary such date thereafter.

50    It was common ground that the reference to “Remuneration” is to cl 34 and that the preposition “of” had been inadvertently omitted after the noun “anniversary”. It was also common ground that “anniversary” denotes an annual event described in cl 5 as “such date”. The parties were at odds, however, about what that annual event was.

51    Qube argued that the nominal expiry date of 1 April 2014 was the relevant date since it was the only date mentioned in the clause and therefore contended that his Honour should have found that “each anniversary such date thereafter” is a reference to the anniversary of the nominal expiry date. It claimed that this construction conforms to “the natural and ordinary reading” of the clause. Since the nominal expiry date itself could not be an anniversary because it is the event for which there is an anniversary, Qube submitted that the primary judge erred in finding that the anniversary dates were 1 April 2014 and 1 April 2015. Instead, there was only one anniversary date, namely 1 April 2015, being the anniversary of the nominal expiry date. The effect of Qube’s argument is that only one year’s wage increases were payable, not two.

52    Qube’s argument must be rejected. The primary judge did not err in this respect either.

53    Contrary to Qube’s argument, two dates were mentioned in cl 5, not one. Clause 5 is concerned with two matters. The first is the term of the Agreement. That is the subject of the first sentence. It designated the term by providing for the nominal expiry date. The second sentence is concerned with a different, though not entirely unrelated, subject: the provision after the “term” (ending on the nominal expiry date) of pay increases “[i]n the absence of re-negotiation”. Nothing about the meaning of the second sentence depends on the first sentence. The second sentence takes its meaning from “Remuneration”, that is to say from the remuneration clause, cl 34. It refers to another date, being the date when the last increase detailed in the remuneration clause came into effect. That date was 1 April 2013. The first anniversary thereafter was on 1 April 2014.

54    If there were any doubt about the correctness of this construction, it is entirely removed when the clause is read in its broader context.

55    The critical words in the second sentence of cl 5 appear to have been taken from cl 3 of the 2008 Collective Agreement in which the pay increases were “detailed” in cl 26.4 and where cl 26.4.1 stipulated that the company agreed to increase the pay rates each year “on the anniversary of the lodgement date”.

56    It follows that his Honour was right to hold that Qube should have paid the 3% wage increases to the employees in question on both 1 April 2014 and 1 April 2015.

Did the primary judge err in deciding that interest should be paid on the unpaid pay increases?

57    The Union did not complain about Qube’s failure to pass on the pay increases after the nominal expiry date of the Railways Agreement until 5 October 2018, which was some four years after the cause of action arose. The evidence indicates that it first came to the Union’s attention in August 2018 when one of its members raised the issue with his organiser. In these circumstances Qube submitted, “[t]he Union’s claim for interest was a historical claim, raised for the first time years after the entitlement was said to crystallise, to obtain a financial windfall by reason of the interest that has accrued in those years of inaction”. The submission to the primary judge was to the same effect. Qube argued that that the primary judge should not have awarded interest in these circumstances.

58    Qube accepted that the decision was discretionary and that the principles in House v The King (1936) 55 CLR 499 apply. In House v The King at 504–5 Dixon, Evatt and McTiernan JJ summarised the way in which an appeal against an exercise of discretion should be determined. Their Honours said:

It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

59    Qube submitted that his Honour “failed to consider and take into account” the Union’s delay in making the claim. Qube’s submissions must be rejected. While his Honour certainly gave the matter short shrift (and deservedly so), we are not satisfied that he failed to consider or, if there be a difference, take into account the Union’s delay. His Honour dealt with the question of interest in [49] of his judgment. There, he observed that the first demand for payment had not been made until “some years thereafter”. It is apparent from his Honour’s reasons that he did not think that Qube demonstrated “good cause” not to award interest. Not only was it open to his Honour to come to that conclusion but the weight of authority demanded that he do so. For this reason, even if we are wrong in our construction of his Honour’s reasons and the better view is that he did fail to take into account the delay in making the demand, Qube has failed to establish a House v The King error. Delay in making the claim was not a material consideration.

60    Section 547 of the Act provides:

(1)    This section applies to an order (other than a pecuniary penalty order) under this Division in relation to an amount that a person was required to pay to, or on behalf of, another person under this Act or a fair work instrument.

(2)    In making the order the court must, on application, include an amount of interest in the sum ordered, unless good cause is shown to the contrary.

(3)    Without limiting subsection (2), in determining the amount of interest, the court must take into account the period between the day the relevant cause of action arose and the day the order is made.

61    It follows from the terms of the section that the Court was bound to award interest unless it was satisfied that “good cause … to the contrary” had been shown. Section 51A(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) imposes the same obligation. So, too, does s 30C(1) of the Supreme Court Act 1935 (SA). The relevant part of the comparable provision of the Supreme Court Act 1970 (NSW), s 94(1), merely provides that the Court may order that interest be included in the sum for which judgment is given in any proceedings for the recovery of any money.

62    The basis of an award of interest is that the defendant has kept the plaintiff out of his or her money and had the use of it himself or herself: Harbutt’s “Plasticine” Ltd v Wayne Tank and Pump Co. Ltd [1970] 1 QB 447 at 468 (CA).

63    Speaking of the power in s 51A(1) of the FCA Act, Lander, Gilmour and Gordon JJ observed in Management 3 Group Pty Ltd (in liq) v Lenny’s Commercial Kitchens Pty Ltd (No 2) (2012) 203 FCR 283 at [32] that:

[D]elay simpliciter is not enough to necessarily prevent an applicant from obtaining an award of interest because the respondent has continued to have the benefit of the use of the money during the period of the delay: Kazar [197 FCR 113]; Kalls Enterprises Pty Ltd (In liquidation) v Baloglow (No 3) [2007] NSWCA 298.

64    The purpose of an award of interest is to compensate a plaintiff for the loss or detriment he or she has suffered by being kept out of his or her money: MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 663 (an appeal from the South Australian Supreme Court); Batchelor v Burke (1981) 148 CLR 448 (Gibbs CJ) (another appeal from the South Australian Supreme Court). In Andjelic v Marsland (1996) 186 CLR 20 at 39 (an appeal from the NSW Court of Appeal) McHugh and Gummow JJ emphasised that the power to grant interest is purely compensatory and “should not be used to penalise either party for delay …”.

65    For these reasons, even if his Honour’s discretion did miscarry, we would not exercise the discretion any differently. Good cause was not shown. Interest should be awarded. Ground 3 must be dismissed.

Conclusion

66    Each of the grounds of appeal has failed. It follows that the appeal must be dismissed

67    Neither party sought costs in the event it was successful. Given the limits imposed by s 570 of the FW Act on the Court’s power to award costs in a matter of this kind, there should be no order as to costs.

Associate:

Dated: 28 May 2021