FEDERAL COURT OF AUSTRALIA

Finance Sector Union of Australia v PP Consultants Pty Ltd [1999] FCA 1251

INDUSTRIAL LAW – Application of award – Transmission of business – Bank closed branch and appointed agent to conduct similar activities in conjunction with agent’s pharmacy business – Whether award continued to apply – Application of words “any successor, assignee or transmittee … to or of the business or part of the business of an employer” – Test for determining issue of transmission – Whether it is necessary that a “part of the business” be an independently viable business.

Re Australian Industrial Commission; ex parte Transport Officers Federation (1990) CLR 216 applied

North Western Health Care Network v Health Services Union of Australia [1999] FCA 897 followed

Workplace Relations Act 1996, s149(1)(d)

FINANCE SECTOR UNION OF AUSTRALIA v PP CONSULTANTS PTY LIMITED t/as BYRON BAY PHARMACY

N504 of 1999

WILCOX, RYAN & MADGWICK JJ

SYDNEY

10 SEPTEMBER 1999

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.                  The appeal be upheld and the orders made by Mathews J on 12 May 1999 be set aside.

2.                  The matter be remitted to Mathews J for further hearing and determination.

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

REASONS FOR JUDGMENT

THE COURT:

1                     This appeal involves the question whether, by force of s149(1)(d) of the Workplace Relations Act 1996, the respondent, PP Consultants Pty Ltd ("PP Consultants"), is bound by an award made by the Australian Industrial Relations Commission ("the Commission"), the Banking Industry – St.George Bank Employees Award 1995, in respect of the employment of Patricia Gail Moffat. The appellant, Finance Sector Union (“FSU”) claims PP Consultants is so bound, as the “successor, assignee or transmittee” of part of the business of the St.George Bank Limited (“the bank”).

The facts

2                     Until September 1997, the bank operated one of its branches from premises in a shopping centre at Byron Bay, New South Wales.  PP Consultants operated a pharmacy in the same shopping centre.

3                     In mid-1997 the bank was minded to close its branch and, to that end, commenced negotiations with Mr Bartholomew Vanarey, a principal of PP Consultants, for that company to conduct from its premises a "branch agency office together with automatic teller machine (‘ATM’) facilities".  On 10 September 1997 an agreement was concluded between the bank and PP Consultants (in the agreement called "the Bragent") and Mr and Mrs Vanarey (in the agreement called "the Guarantors").  That agreement ("the Bragency Agreement") was prefaced, so far as is relevant, by these recitals:

“A.      St.George is desirous of having a Branch Agency office together with Automatic Teller Machine ("ATM") facilities (hereinafter referred to as a ‘Bragency’) conducted at Byron Bay Plaza Pharmacy, Shop 4, The Plaza, Jonson Street, Byron Bay, New South Wales (the ‘Bragency address’) and the Bragent is desirous of conducting such Bragency for St.George at the Bragency address until such time as St.George opens a full branch operation at Byron Bay.

B.         The Bragent conducts a Pharmacy business at the Bragency address in conjunction with but not as part of the Bragency.

C.                St.George agrees at the request of the guarantors to enter into an agreement with the Bragent for it to conduct a Bragency for and on behalf of St.George upon the terms and conditions contained in this Agreement.”

4                     The agreement also contained these provisions, referred to in argument in this appeal:

"THE PARTIES AGREE AS FOLLOWS:

PREMISES

1.         The Bragent shall conduct a Bragency and thereby be a Bragent for and on behalf of St.George at the Bragency address.

…

TERM OF AGREEMENT

3.1       The Bragency Agreement will remain in force until such time as it is terminated by either St.George or the Bragent upon the expiry of one month's written notice given by one to the other without any reason needing to be provided.

3.2       In the event the Agreement is terminated by St.George prior to March 1999, St.George agrees to compensate the Bragent $1000.00 per month from the date of termination up to and including the end of March 1999.  No compensation will be paid pursuant to this clause if St.George terminates the Agreement pursuant to clause 16 or if at any time during the Agreement the Bragent engages in conduct prejudicial to the provision of the Bragency services.

GENERAL DUTIES

4.1       In conducting the Bragency the Bragent shall:

(a)       collect deposits for and on behalf of St.George customers;

(b)       open deposit accounts for St.George customers and persons who wish to become St.George customers;

(c)        make loan referrals subject to the conditions contained in Clause 5 of this Agreement;

(d)       transact withdrawals for St.George customers upon their accounts;

(e)        perform such other financial transactions and manage such other financial products for and on behalf of St. George as St. George may reasonably require from time to time in writing;

(f)        ensure that the Bragency is open for business from the hours of 9.00 am to 5.00 pm Monday to Friday inclusive (excepting for public holidays);  and

(g)       monitor the operation of the ATM to ensure that it is operating, including arranging for repair.

4.2       The Bragent shall ensure that continuous and courteous service is provided by the Bragency and that such service is of the highest possible standard, including, but not limited to such standards which are contained in any service standards or other guidelines issued by St.George to the Bragent from time to time.

.......

5.2       The Bragent acknowledges that it is not entitled to conduct loan interviews with or accept loan applications from St.George customers and shall not hold itself out as being able to conduct such interviews or accept such applications.  The Bragent must not provide any financial, investment or other advice to St.George customers except as permitted by St. George guidelines.

......

6.1       St.George shall from time to time supply to the Bragent written procedures for the handling of deposits, withdrawals cash.  These procedures must be strictly adhered to by the Bragent.

6.2       The Bragent shall ensure that all transactions and operating procedures conducted by the Bragency are strictly and completely in accordance with St.George's Branch Manuals, operating instructions and other instructions issued by it in writing from time to time.

6.3       Any shortages of cash incurred by the Bragent or its employees in the course of conducting financial transactions for the Bragency shall be borne by the Bragent and shall be payable by the Bragent to St.George upon demand.

6.4       The Bragent and its employees shall maintain strict security at all times in relation to cash and other items of an accountable nature (including but not limited to St.George cheques, receipts, etc.) which must be held in a locked safe in a compartment exclusively used for the Bragency when not in direct use.

6.5       St.George will be responsible for the cleaning, emptying, resetting and replenishing of the ATM.

6.6       The Bragent acknowledges that it will be necessary for St.George to access the ATM to empty, reset and replenish it, both in and out of usual business hours.

.......

RELATIONSHIP

7.1       The relationship between St.George and the Bragent is one of an agency, the scope of which is limited by the terms and conditions of this Agreement, and the relationship is not to be deemed one of employer/employee, joint venture or partnership.

.....

7.3       This Agreement is strictly personal with the Bragent and neither the Agreement nor the services provided by the Bragency can be transferred, assigned or subcontracted in whole or in part by the Bragent.

STAFFING

8.1       The Bragent shall nominate at least one of its employees (called the ‘Nominated Employee’) to work in the Bragency.  Such Nominated Employee will at all relevant times remain the employee of the Bragent and is not in any way deemed to be an employee of St.George.

8.2       The Bragent shall ensure that the Nominated Employee attends St.George's Staff Training Department in Sydney (or at such other place as St.George may direct) for a minimum period of one week or, as St.George may reasonably require from time to time.  The travel, accommodation and training of the Nominated Employee will be arranged and paid for by St.George as set out in the Schedule A annexed to this Agreement.  The Bragent will remain responsible for the Nominated Employee's wages during periods of St.George's Staff Training Programs.

8.3       St.George shall supply to the Bragent from time to time such St.George staff to work in the Bragency as St.George deems necessary and such St.George staff shall remain at all relevant times employees of St.George and shall not in any way be deemed to be employees of the Bragent.

8.4       St.George shall provide, when in its opinion it is considered necessary and practicable, such relief St.George staff as is deemed necessary by St.George for the Bragency to cover periods of annual leave taken by the Bragent's Nominated Employee provided that the Bragent shall give the Controlling Branch Manager at Ballina of St.George at least four weeks notice of the date of Annual Leave to be taken by the Nominated Employee.  St.George shall bear the costs of providing the relief St.George staff who shall at all relevant times remain employees of St.George and shall not in any way be deemed to be employees of the Bragent.

8.5       The Bragent shall ensure that the Nominated Employee presents an image commensurate with that projected by St.George and in so doing require the Nominated Employee to wear St.George uniform colours of red and white or such other St.George corporate wardrobe as may be required by St.George during the times which the Bragency is open for business.  Any Nominated Employee who wears the corporate wardrobe shall be entitled to such a wardrobe in the same terms and conditions as St.George employees.

FITTINGS AND EQUIPMENT

9.1       All fittings and equipment supplied and installed by St.George at the Bragency premises and set out in Schedule B to this Agreement shall remain the property of St.George (the "St.George Assets") and shall be delivered up to St.George in a good state of repair (reasonable wear and tear only excepted) upon termination of this Agreement.

.....

COMPETITION

12.1     The Bragent shall not enter into any similar type of branch agency agreements with any other bank, credit union, building society or other financial institution during the term of this Agreement or for a period of three (3) months from the termination of this Agreement.

12.2     The Bragent acknowledges that St.George has the absolute and unfettered right at anytime during the term of or after the termination of this Agreement to establish and conduct a full branch operation of St.George at any location notwithstanding its proximity to the Bragency and that such full branch operation of St.George shall be under the independent exclusive control of St.George.”

5                     The remuneration of PP Consultants was to be governed by Schedule A to the agreement, which contained this provision:

6                     In July 1997 PP Consultants acquired the lease of Shop 5, Stage 1 Byron Shopping Plaza.  This shop adjoined the bank’s branch, in Shop 4B.  PP Consultants then took an assignment of the bank’s lease over Shop 4B.  On Friday 12 September 1997, the bank ceased to operate the branch.  Building contractors engaged by PP Consultants immediately began to reconstruct the premises.  The position was described by Ms Moffat, a former employee of the bank who became a "Nominated Employee" of PP Consultants under the Bragency Agreement, in this way:

"This construction work continued throughout the weekend.  As part of that reconstruction, banking equipment was moved to an area at the front of the premises, while the balance of the premises were reconstructed for the purposes of the operation of the Respondent's pharmacy business.

On Monday, 15 September 1997 [PP Consultant's] business which had been substantially relocated into the former premises of the Bank, opened for business."

7                     Mr Vanarey also gave evidence about the changes:

"On 12 September 1997 the Pharmacy vacated the premises at Shop 1 & 2, Stage 3, Byron Bay Shopping Plaza, Jonson Street, Byron Bay.

On 10 September 1997 the Byron Bay Branch of the St.George Bank was closed.  On 11 September 1997 and 12 September 1997 the wall between Shop 4B and Shop 5 was demolished and the two premises were renovated as the new premises for the Pharmacy.  As these renovations took place, St.George organised for the installation of its computer equipment in the new premises required pursuant to the terms of the Agreement.  This equipment is owned by St.George.

After the renovations were complete I arranged for the fixtures, fittings and stock of the Pharmacy to be moved into the new premises.  The Pharmacy opened in the new premises on Monday 13 September 1997.

.......

In March 1998 I was notified by the lessee of Shop 6 that he had decided to move.  In April 1998 PP Consultants acquired the lease over Shop 6 and demolished the wall between Shop 5 and Shop 6 to extend the Pharmacy to cover the area previously occupied by three different shops.  The lessor of Shop 6 is Eric Roberts Investments Pty Limited (ACN 055 081 311).  My wife and I are the guarantors of the lease over Shop 6."

8                     Prior to the commencement of the building work, Mr Vanarey interviewed Ms Moffat, then a part-time employee of the bank Mr Vanarey offered her work as an employee of PP Consultants after the Bragency Agreement commenced to operate.  She agreed to work twenty hours a week for PP Consultants, for the same hourly rate of pay as she was then receiving from the bank.  Similar arrangements were made with a Mrs Mort, who had been a full-time employee of the bank and also became a "Nominated Employee" of PP Consultants under the Bragency Agreement.  It seems both employees did substantially the same work after 12 September 1997 as they had performed when employed by the bank although, at least in Mrs Moffat's case, there was a minor admixture of pharmacy work.  This increased from February 1999.

The primary judge’s decision

9                     Against this factual background, the learned primary judge identified two questions which she considered required to be addressed:

1.         Can it be said that the activities conducted by the respondent in its pharmacy premises are part of the business of the bank?

2.         If so, does the respondent conduct those activities as successor, assignee or transmittee from the bank?

10                  That identification of the issues reflects the language of s 149(1)(d) which provides:

"(1)     Subject to any order of the Commission, an award determining an industrial dispute is binding on:

........

(d)       any successor, assignee or transmittee (whether immediate or not) to or of the business or part of the business of an employer who was a party to the industrial dispute, including a corporation that has acquired or taken over the business or part of the business of the employer;"

11                  There is no definition of "business" in the Act, although the definition of "industry" in s 4(1) commences as follows :

"industry includes:

(a)       any business, trade, manufacture, undertaking or calling of employers; …"

12                  After summarising the facts of the case, the primary judge referred to a number of decided cases.  They included the decision of the High Court of Australia in an eligibility case, Re Australian Industrial Relations Commission; ex parte Australian Transport Officers Federation (1990) 171 CLR 216 (“ATOF”), and the first instance decision of Marshall J in Health Services Union of Australia v North Eastern Health Care Network and Western Health Care Network (1997) 79 FCR 43.  [That case went on appeal to a Full Court, whose decision was announced after the date of her Honour’s decision in this case:  see North Western Health Care Network v Health Services Union of Australia [1999] FCA 897].  The primary judge said:

“These cases would appear to support the applicant’s contention that the respondent, after September 1997, was conducting part of the business of the bank.  For there was a substantial identity between the previous activities of the branch and those subsequently carried on by the respondent.  Moreover they were being conducted in the same place, and by the same staff, who were doing substantially the same work as previously.

Other considerations however militate against this proposition.  Some of these are referred to in cases involving continuity of employment for the purpose of long service leave.  Whilst these cases are not directly on point here, many of the issues they raise are relevant to the application of s149(1)(d).”

13                  Her Honour suggested one of the countervailing considerations arises when the subject employer does not receive a “going concern” .  She took this consideration primarily from an English decision, Kenmir Ltd v Frizzell [1968] 1 All ER 414.  The question in that case was whether, for the purpose of calculating a redundancy payment, a business had been “transferred from one person to another”.  At 418 the Court said:

“In deciding whether a transaction amounted to the transfer of a business, regard must be had to its substance rather than its form, and consideration must be given to the whole of the circumstances, weighing the factors which point in one direction against those which point in another.  In the end, the vital consideration is whether the effect of the transaction was to put the transferee in possession of a going concern, the activities of which he could carry on without interruption.  Many factors may be relevant to this decision though few will be conclusive in themselves.  Thus, if the new employer carries on business in the same manner as before, this will point to the existence of a transfer, but the converse is not necessarily true, because a transfer may be complete even though the transferee does not choose to avail himself of all the rights which he acquires thereunder.  Similarly, an express assignment of goodwill is strong evidence of a transfer of the business, but the absence of such an assignment is not conclusive if the transferee has effectively deprived himself of the power to compete.  The absence of an assignment of premises, stock-in-trade or outstanding contracts will likewise not be conclusive, if the particular circumstances of the transferee nevertheless enable him to carry on substantially the same business as before.”

14                  The primary judge also noted two Australian cases:  R E Hayman v Neill [1960] AR 363 and Crosilla v Challenge Property Services [1982[ 2 IR 448.  In Hayman a Full Bench of the New South Wales Industrial Commission expressed the opinion (at 370) “that to be a part of a business the part must itself constitute a business”.  In Crosilla the South Australian Industrial Court held there had not been a transmission of a business where a motel proprietor ceased to employ its own cleaning staff and, instead, contracted with a cleaning company for the provision of cleaning services.  The applicant had been employed as a cleaner by the motel proprietor but, upon conclusion of the “outsourcing” agreement, became employed by the cleaning contractor.  She continued to perform the same duties.  The legislation defined “business” as including a part of a business.  Nonetheless, the claim failed.  Richards J held at 457:

“In order to constitute a transmission of business, or part of the business, it must be shown that the business itself, or a severable part of the business itself,has been transferred to the transmittee.  It is not sufficient merely to show that, as a result of the contract entered into with a contractor, the contractor has been given a licence to enter the principal’s premises to perform certain functions, which are ancillary to the running of the business, by the principal.”  [Original emphasis]

15                  After referring to these decisions, the primary judge said:

“With this background I return to the immediate case.  It raises issues which have not directly been dealt with in any of the decided cases.  On the one hand, ATOF and Health Services might be seen as supporting the proposition that a person who commences to conduct a group of activities formerly conducted as part of a predecessor’s business is himself conducting a part of that business.  However I do not take those cases to be suggesting that a substantial identity between the activities carried on by the two successive entities is, on its own, sufficient to establish succession under s149(1)(d).  If it were, it would, for example, encompass the contracting out of cleaning work in Crosilla, a decision which, with respect, I think is patently correct.

As Mr Dixon points out, the respondent has no direct interest in any of the transactions conducted from its premises.  The profit from these transactions is retained by the bank, which makes a monthly payment to the respondent based on the number of transactions completed.  The respondent has no discretion as to how the bank business is to be transacted.  It cannot, for example, determine the interest rate upon which loans are to be granted.  It is bound by the terms of the bragency agreement to conduct the whole of the bank’s business in accordance with the bank’s direction.  In effect, the respondent has become the intermediary for transactions between the Byron Bay community and the bank, thus enabling the bank to continue its operations in that area.  Can it then be said that the respondent is conducting part of the bank’s business?  In my opinion the answer must be in the negative.  Certainly it could not be said that the part of the bank’s business conducted by the respondent itself constitutes a business (Hayman).  Nor has the respondent acquired a going concern which it can conduct without interruption (Kenmir).

To this I would add a further element, namely that in order to conduct a business a person must be able to exert at least some control over its activities.  The respondent has, as already mentioned, virtually no control at all over any of the bank’s activities conducted from the pharmacy premises.

To conclude on this issue, the respondent is the lessee of the pharmacy premises; it owns the fixtures and fittings in those premises; it employs the pharmacy staff and provides ‘administration and management support’ for Mr and Mrs Vanarey in the pharmacy.  It now also, pursuant to the bragency agreement, employs staff to perform bank duties as set out in cl 4.1 of the agreement.  To suggest that in doing so it is conducting part of the business of the bank is, in my view, extending the concept of a ‘business’ beyond all realistic levels.  I therefore find that the respondent is not conducting any part of the business of the bank.”

16                  Her Honour went on to say that, even if PP Consultants were conducting part of the business of the bank, she would be unable to find it was doing so by way of succession, assignment or transmission from the bank.  She said:

“The respondent under the bragency agreement acquired nothing from the bank except the entitlement to conduct certain banking activities for which it was to receive a monthly fee.  The arrangement was terminable on one month’s notice.  No goodwill passed hands.  Nor would one expect it do so under such an arrangement.  As the court observed in Kenmir, an assignment of goodwill is strong evidence of a transfer of a business, but the absence of such an assignment is not conclusive ‘… if the transferee has effectively deprived himself of the power to compete.’  (Kenmir, p418).  The court continued (p418): ‘[t]he absence of an assignment of premises, stock-in-trade or outstanding contracts will likewise not be conclusive, if the particular circumstances of the transferee nevertheless enable him to carry on substantially the same business as before.'

’Every one of these elements is absent in this case.  The bank has expressly preserved its power to compete (if ‘compete’ is the right word, for in reality the bank would be competing with itself).  Certainly the respondent obtained a lease of the premises previously occupied by the bank, but this was not achieved through any arrangement with the bank itself.  No equipment was acquired from the bank:  under the bragency agreement all fittings and equipment which were supplied and installed at the respondent’s premises remained the property of the bank and were to be delivered up to the bank upon termination of the agreement.

However broadly the concept of succession, assignment or transmission under s149(1)(d) is to be construed it cannot, in my view, encompass the arrangement between the bank and the respondent in this case.  The respondent acquired no business in its own right.  It gained the entitlement to transact the bank’s business from its premises, but it did not gain any interest in the bank’s activities.”

Submissions for the appellant

17                  Counsel for FSU commenced with an unexceptionable proposition:  that s149(1)(d) of the Workplace Relations Act, like similar earlier provisions, is a remedial provision that ought to be beneficially construed.  They refer to George Hudson Limited v The Australian Timber Workers’ Union (1923) 32 CLR 413, and especially to what was said by Isaacs J at 436, Higgins J at 452 and Starke J at 455.  These passages have subsequently been applied in numerous cases.  Counsel also point out that s149(1)(d), which was inserted in the Act in 1988, differs from its predecessors in that it extends to “part of the business” of an employer who was a party to the industrial dispute.  Previous provisions referred only to “the business” of the employer.  Counsel argue this change is explicable only on the basis that Parliament intended to broaden the reach of the paragraph.

Submissions for the appellant

18                  Counsel for FSU rely heavily on ATOF.  As mentioned, that was an eligibility case.  It arose out of the amalgamation of two New South Wales government departments (the Department of Motor Transport - headed by the Commissioner for Motor Transport - and the Department of Main Roads) to form the Roads and Traffic Authority.  Most of the staff of the new Authority were former employees of the Department of Main Roads.  The eligibility rule of the Australian Transport Officers Federation covered persons employed by “a successor or assignee or transmittee of the business” of (amongst others) the Commissioner for Motor Transport.  One of the matters decided by the High Court was that the activities of the Department of Motor Transport amounted to a “business” for the purposes of the rule, even though the Department had not carried on a commercial undertaking for profit.  The Court also held the Roads and Traffic Authority was the “successor” of the business of the Commissioner for Motor Transport, within the meaning of the rule, because there was a substantial identity between the functions formerly carried on by the Commissioner and those of the Roads and Traffic Authority.  It did not matter that these functions were only a minor part of the Authority’s activities.  At 229 Mason CJ, Gaudron and McHugh JJ noted a submission by the Authority, and the Public Service Association of New South Wales, “that a substantial identity between the business formerly carried on by the CMT and the business now carried on by the RTA must be shown to exist in order to constitute the RTA as a successor of the business of the CMT”.  Their Honours went on:

“The respondents’ notion of substantial identity invites a comparison between the nature of the business as it was formerly carried on and the nature of the business now carried on by the new entity with a view to ascertaining an identity between the two.  According to the natural reading of the language of the successor clause, the inquiry should be directed to ascertaining whether the business or the activities formerly carried on by the C.M.T. are still carried on by the R.T.A., notwithstanding that the R.T.A. also carries on one or more other substantial activities.”  (emphasis added)

19                  Counsel for FSU argue that a similar approach ought to be taken in the present case.  They say the relevant question is whether the activities formerly carried on by the bank at Byron Bay are now carried on by PP Consultants; if they are, it is immaterial that PP Consultants also carries on another substantial activity, a pharmacy.

20                  Counsel also cite the Full Court decision in North Western Health Care Network.  That case arose out of the transfer of the management of certain adult mental health services from the State of Victoria to health care networks.  The Health Services Union of Australia claimed the appellant network was a successor, assignee or transmittee of part of the “business” of the State of Victoria.  A question arose whether the management of health care services could properly be described as a “business”.  Marshall J at first instance held that it could, in reliance on ATOF.  The Full Court affirmed that view.  Another issue was whether there had been a transmission within the meaning of s149(1)(d) of the Workplace Relations Act.  Once again affirming Marshall J, the Full Court held there had been a transmission.  R D Nicholson J said at paras 63 to 68:

“I do not accept the primary argument for the appellant that nothing has changed because the function of providing mental health services remains with the State of Victoria and all that has changed are the ‘means of performance’.  Once it is accepted that the object of the transmission must be ‘the business or part of the business of an employer who was a party to the industrial dispute’ attention is directed to what it is that the employer who is party to the dispute is doing.  It is that which identifies the object of the transmission.  The fact that government as an employer may have continuing functions in relation to the provision of mental health services is not a determinative factor in relation to whether there has been a transmission of the relevant business of the employer.  Specifically, transmission of part of the business is expressly made possible by the section in determining the extended application of an award.

I also do not agree that the primary judge fell into error because he looked at what was occurring before contracting out and contrasted it with what was occurring after contracting out without examining the nature of the nexus between the two stages.  Once it is accepted that the reference to ‘the business’ in s149(1)(d) has the wide reference which the primary judge found, it is not necessary to search for some legal form of succession, assignment, transfer, corporate acquisition or takeover.  What is necessary is to determine as a question of fact whether ‘the business’ understood in the wide sense so found has been transmitted to other hands.  That does not require a search for some legal mechanism as a nexus between the pre and post transmission stage.

It follows that I do not accept the appellant’s argument that the ‘substantial identity test’ utilised in the ATOF case is wrong in the context of the WR Act.

I agree with the submission for the respondent that the High Court in the ATOF case was determining whether there was a transmission and the court there developed a concept or a criterion for identifying whether or not a transmission had occurred.  The formulation of that concept was not dependent upon the particular nature of the rule in that case.

…

The findings established that the same patients become the responsibility of the networks; the medical records and stock were transferred; leased assets were assigned; and staff were transferred.  While the State retained control over funding and audit that was but the consequence of it having transferred the responsibility for the provision of the relevant mental health services so that it was now required to pay for the delivery of such services.  What was involved was a transmission of the core of the relevant services not, as in Crosilla or Kelman v Care Contract Services (1995) ICR 260, a peripheral activity.”

21                  Madgwick J referred to the rationale of s149(1)(d).  He said at para 97:

“Finally, I would say that, although it has been convenient to segregate arguments and questions about ‘business’, the successor terminology and (to a lesser but still appreciable extent) what is necessary to constitute an overriding order of the Commission, they are in truth but aspects of a single, overriding conception.  That is that settlements by award-making, aimed at quelling present industrial disputes and the prevention of future disputes, should be kept effective, pending conscious variation or replacement of the award, regardless of mere changes in arrangements as to which legal entity might be the employer of an unchanged industrial class of employees, regardless of such matters as whether the original employer had other classes of employees as well and may have remained their employer, and regardless of whether the legal ownership of all of the plant and equipment used by the employees for their work and the other resources of the employer utilised in the undertaking should have likewise changed.”

22                  Counsel for FSU draw from these cases the proposition that the ultimate question is whether there is a “substantial identity” between the old activities and those carried on by the new employer; it is necessary to focus on “what it is that the employer who is party to the dispute is doing, as that approach identifies the object of the transmission”.  Counsel submit that, once that approach is accepted, it is apparent the appeal must succeed.  The primary judge found “there was a substantial identity between the previous activities of the branch and those subsequently carried on by [PP Consultants]”.

Submissions for the respondent

23                  Counsel for PP Consultants emphasise the form of the transaction between the bank and PP Consultants.  They submit:

“In no true sense of the term, did PP Consultants acquire a business from St.George.  It paid no money to St.George for the transaction.  It acquired no assets, no goodwill, no liabilities, no book debts, no intellectual property, no going concern, no work in progress, no other intangibles, or any other of the usual features making up a business.”

24                  Counsel point out that the agreement was personal to PP Consultants (cl 7.3) and terminable on the expiry of one month’s written notice by either party to the other (cl 3.1), or sooner for breach (cl 16), and that the relationship created by the agreement was stated to be one of agency (cl 7.1).  Specifically, the relationship is not one of employer/employee, joint venture or partnership (cl 7.1).  They say in their Outline of Submissions:

“PP Consultants, in supplying the services of some of its employees who were engaged in the Pharmacy to perform certain functions as agent for St.George:

(a)               carries no risk in respect of the transactions – any losses on the transactions lie with St.George;

(b)               is not entitled to the profits associated with or gained from the transaction;

(c)               cannot assign any interest in the transactions to any third party for reward or otherwise;

(d)               does not and is not permitted to introduce its own product into the ‘industry’ in which the Appellant says it is engaged;

(e)               cannot determine the terms and conditions on which the products (in respect of which its employees perform processing functions) are offered in the market for such products.”

25                  Counsel submit:

“the primary judge was clearly correct in holding that:

(a)     it could not be said that the activities conducted by PP Consultants itself constituted a business;

(b)           in order to conduct a business a person must be able to exert at least some control over its activities;

(c)           PP Consultants had virtually no control at all over any of St.George’s activities conducted from the Pharmacy premises.”

26                 Counsel for PP Consultants argue ATOF and North Western Health Care Network provide no assistance to FSU.  They say:

“Both those cases were concerned with the transfer or governmental activities from (in ATOF) one branch of government to another or (in North Western Health Care) from government to the private sector.  What was transferred was not a ‘business’ in any normal sense of the term, but the Rule (in ATOF) or statutory provision (in North Western Health) contemplated that the relevant governmental activity could be the subject of the provision.  It is in this sense that the Courts were concerned to enquire whether the activity being carried on by the new body was the same as that previously carried on by the Crown or former responsible instrumentality.  The concept of ‘business’ was affected by the subject matter to which it was regarded as applicable.”

27                  Finally, counsel submit that, for a business or part of a business to be transmitted, “it must be capable of itself constituting a business”.  In response to a request to reconcile that submission with the reference in s149(1)(d) to “part of a business”, counsel asserted these words were included in 1988 in order to rebut any suggestion that it was necessary for the old employer to have disposed of all of several discrete businesses; each separate business was part of the employer’s business.  In counsel’s submission it is central to the concept of “part of a business” that it be a discrete profit centre.

Conclusions

28                  We see no basis for the suggestion that a “part of a business” must be a discrete profit centre or that, to use the words of Hayman, “the part must itself constitute a business”.  Nothing in the Workplace Relations Act imposes that limitation on the very general words used in s149(1)(d).  A benevolent construction of the word "business" in the predecessor of s 149, without the express reference to "part of a business", would treat part of a larger business that was itself a business as a "business" within the meaning of the section.  The words “part of a business” mean something more.  They denote a particular bundle of activities that constitute an identifiable portion of the total activities that constitute a business.  Sometimes the part will be a discrete profit centre, sometimes it will not.  That does not necessarily mean that everything done in the course of conducting a business is a “part of a business”.  We find it unnecessary to comment on the correctness of Crosilla.  It is undoubtedly the case here that conduct of banking transactions with bank customers at specified premises and the functions engaged in by the employees themselves, were constituent, indeed "core", functions of a bank.  Further, both the volume of those transactions, it may readily be inferred, and the amount of work necessary to perform those functions were not insubstantial.  There is no reason to think that the conduct of those transactions and the performance of those functions were not an apt and sufficient bundle of business activities to constitute "part of a business".  But we disagree with the stipulation in Hayman that the part must itself constitute a business in the sense of being economically viable if conducted independently of any other commercial activity.

29                  We do not find relevant either of the English cases cited by the learned primary judge; Kenmir and Woodhouse.  They related to legislation whose purpose and terms were different to those of s149(1)(d) of the Workplace Relations Act .  In any event, they would not assist the respondent’s argument.  The two decisions were concerned to draw a distinction between a situation in which a new employer merely takes over physical assets, and uses them for a new, different business, and one where the employer takes over something that may be called “a going concern”.  In the present case, the new employer did that.  Although PP Consultants acted as the bank’s agent, in carrying out its banking activities on and after Monday, 15 September 1997, it carried out business activities that were almost identical to those carried on by the bank as principal up to and including the preceding Friday.  There was a continuity of activity and a continuity of service to customers.

30                  As counsel for FSU pointed out in the course of argument, there is a fundamental difference in the approaches taken by each party to this case.  PP Consultants concentrates attention on the nature of the transaction between the old employer and the new employer; FSU looks at the degree of identity between the activities carried out by the two employers.  It seems to us the latter approach is the correct one.  Not only is it better supported by authority, it makes more sense in terms of the policy evidently underlying s149(1)(d).

31                  We do not agree with counsel for PP Consultants that ATOF and North Western Health Network ought to be seen as dealing only with the question what activities constitute a public “business”.  In each case there was an issue about the application of the word “business” to an aspect of public administration.  However, in ATOF, the High Court also discussed whether it mattered that the transferred activities constituted only a minor portion of the activities of the new employer, as is perhaps the situation in the present case.  In North Western Health Network, the Full Court discussed whether it mattered that the old employer, the State of Victoria, had retained general control of the provision of mental health services, using the new employer as its agent for delivery of those services to a local community, a situation similar to that in this case.  In our opinion, the principles adopted in those two cases dictate the upholding of the present appeal.  For the reasons given by Madgwick J in North Western, ATOF is to be treated as highly persuasive notwithstanding that it concerned the interpretation of a union rule and not s 149(c) itself.

32                  Counsel for PP Consultants argue that the bank’s business was unchanged; it had disposed of nothing, it had merely replaced a branch by an agency.  We accept the bank still carried on a banking business in which it sought to earn profits by exploiting lending margins and charging fees of various kinds.  But it disposed of an important aspect of operating that business in Byron Bay:  the maintenance of premises, and employment of staff to service the customers who were the source of its loan funds, lending margins and bank fees.  It substituted PP Consultants for itself, in relation to this aspect of the business.  It seems to us this amounted to a transmission of a part of the bank’s business, notwithstanding that the transmission was revocable on one month’s notice or immediately on breach of the agency agreement.  In reliance on ATOF, North Western established that the words "successor, assignee or transmittee", despite their lawyerly ring, are to be given no narrow or technical meaning in the context of s 149(1)(d).  In ATOF the High Court evidently accepted that the terms in the phrase should be accorded their "natural meaning":  see, in particular, at 230.  In North Western members of the Court pointed out that (a) "business" is not a legal term of art and it would be very strange if technical notions of succession, assignment or transmission must be applied to a concept not apt for them:  see para 21 per R D Nicholson J and para 6 per Madgwick J and (b) the term has a "catch-all" intention:  per Madgwick J ibid.  On a natural reading of the phrase in question, what occurred here fell within it.  Before the agreement was made between the bank and the respondent, the bank had the right to conduct its business, including the part now conducted by the respondent, at the subject premises.  After the agreement, the bank did not have the right so to conduct that part of the business, unless it terminated the agreement on notice, the respondent had acquired that right.  Plainly the right was not of merely negligible value.  In the ordinary use of the terms, one could therefore say that the bank had assigned that part of its business to the respondent, and that the respondent was the successor to that part of the business.  It is not to the point that, by agreement between the bank and the respondent, the respondent had the right to conduct that part of the business only as the agent of the bank:  the right had passed.  Neither does it matter that the bank could readily recover that right:  the right had passed notwithstanding that it might be reclaimed.

33                  The policy considerations supporting this approach were touched on in North Western Health Care Network, especially by Madgwick J.  Section 149(1)(d) is designed, among other things, to protect employees against a loss of their award entitlements following a transfer of the business, or the part of the business, in which they are employed.  That being so, it is logical to focus on the nature of the activities undertaken by the two employers and the question whether there is any material change in the nature of the employee’s duties or working conditions.  This is more pertinent to the underlying policy of the paragraph than the characterisation of the detail of the legal arrangements between the two employers. 

34                  Our conclusion does not mean the award entitlements are immutable.  Where there has been a merger of different operations, as in a case like ATOF or this case, with a potential mixture of the activities of individual employees, it may be appropriate for the parties to negotiate a new regulatory regime (perhaps a certified agreement covering the whole of the new employer’s activities or Australian Workplace Agreements), or for the Commission to bring about such a regime by arbitration.  Even so, it will be a protection to the employees that those negotiations will have to be conducted against the background that the relevant employees will, in the meantime, retain the same rights as were available under the applicable industrial prescription before the transmission occurred.

Disposition

35                  The Statement of Claim filed by FSU claimed two declarations:

“(a)   The Respondent is a successor, assignee or transmittee of the business or part of the business of the Bank within the provisions of Section 149 of the Workplace Relations Act 1996, and

(b)          The Respondent is bound by the Award in respect to the employment of the employee.”

36                  Because of the view taken by the primary judge regarding the topic referred to in proposed declaration (a), her Honour did not consider the topic mentioned in proposed declaration (b).  There was apparently some issue at first instance about the work performed by Ms Moffatt, the person referred to in para (b) as “the employee”.  This issue has not been resolved.  It is obviously critical to proposed declaration (b).  Under these circumstances, counsel agreed that, if the appeal succeeded, the appropriate course would be for the Court to refer the matter back to her Honour for further consideration.  We will take that course.

37                  The orders of the Court will be that the appeal be upheld, the orders made by the primary judge be set aside and the matter remitted to the primary judge for further hearing and determination.

Associate:

Dated:              10 September 1999