FEDERAL COURT OF AUSTRALIA

Construction, Forestry, Mining and Energy Union v Amcor Limited

[2002] FCA 610

INDUSTRIAL LAW – certified agreement – construction – redundancy – offer of new employment – gap in certified agreement – whether court can fill

WORDS & PHRASES – “redundancy”

Workplace Relations Act 1996 (Cth) s 170LT, s 170MB

Hollows v Federal Commissioner of Taxation (1994) 94 ATC 2032 referred to

Jones v Wrotham Park Settled Estates [1980] AC 74 referred to

Kingston v Keprose Pty Ltd No. 3 (1987) 11 NSWLR 404 referred to

Marshall v Watson (1972) 124 CLR 640 referred to

O’Connor v S P Bray Ltd (1936) 36 SR (NSW) 248 referred to

The Queen v Industrial Commission of South Australia; ex parte Adelaide Milk Supply Co-operative Limited (1977) 16 SASR 6 applied

The Queen v Industrial Court (SA); ex parte General Motors-Holden’s Ltd (1983) 35 SASR 161 applied

Re Clerks (State) Award [1976] I.A.S. Current Review 166 applied

Re Government Cleaning Services (Privatisation) Award No. 2 (1994) 55 IR 199 applied

Saraswati v R (1991) 172 CLR 1 referred to

Sargent v ASL Developments Ltd (1974) 131 CLR 634 referred to

Short v FW Hercus Pty Ltd (1993) 40 FCR 511 referred to

Steppes Pty Ltd v Australian Liquor, Hospitality and Miscellaneous Workers Union (1998) 86 IR 337 discussed

Termination, Change and Redundancy Case (1984) 8 IR 34 discussed

United Australia Ltd v Barclays Bank Ltd [1941] AC 1 referred to

CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION v AMCOR LIMITED

V414 of 2000

FINKELSTEIN J

MELBOURNE

13 MAY 2002

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY                                                           V414 of 2000

BETWEEN:               CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION

                                    Applicant

AND:                          AMCOR LIMITED

                                    Respondent

JUDGE:                      FINKELSTEIN J

DATE:                        13 MAY 2002

PLACE:                      MELBOURNE

REASONS FOR JUDGMENT

1                     Yet again it is necessary to determine the proper construction of an industrial agreement.  The object to be achieved is to discover what was meant by the parties to the agreement.  The task does not involve deciding what the parties actually intended, although it would be permissible to have regard to their actual intentions if they were in agreement on construction.  What must be done is to discover what the parties intended from the meaning that is conveyed by their words, construed in the context in which those words are used.  Sometimes that can be a straightforward exercise.  On the last occasion upon which I was required to construe an industrial instrument, I could apply the rule that the words mean what they say.  But things are not always so easy.  If the same rule were to be applied in this case then, on one view, the result may be an affront to commonsense.  Does this mean that the words can be given another meaning?  That is the issue that must be resolved.

2                     But first things first.  I must begin with the background against which the construction question is to be considered and set out the facts that give rise to the present dispute.  For the most part they are uncontroversial.  Amcor Limited, the respondent, is a public company.  It operated both a packaging business and a fine paper manufacturing business.  The assets of the paper manufacturing business included mills at Shoalhaven in New South Wales, Maryvale in Queensland and Burnie and Wesley Vale in Tasmania.  The terms and conditions of employment of the workers at the mills included those in an agreement known as the Australian Paper/Amcor Fibre Packaging Agreement 1997 made between Amcor and two unions, one being the applicant.  The agreement came into effect on 9 June 1998 when it was certified by the Australian Industrial Relations Commission (AIRC) under s 170LT of the Workplace Relations Act 1996 (Cth).  The nominal expiry date of the agreement was 30 June 2000.

3                     Amcor sold the four mills to its wholly owned subsidiary, Paper Australia Pty Ltd, by three agreements, two made on 26 June 1998 (relating respectively to the Shoalhaven mill and the Maryvale mill) and one on 20 March 2000 (regarding both the Burnie and Wesley Vale mills). Although it became the operator of the mills upon their acquisition, Paper Australia did not engage the employees who worked there.  They continued to be employed by Amcor.  By an agreement made on 14 December 1998, but which had effect from 1 July 1998, Paper Australia agreed to discharge all the obligations of Amcor in respect of those employees. 

4                     In February 2000 Amcor announced its intention to separate the packaging business from the fine paper manufacturing business.  In broad outline, the separation was affected by a reduction of capital and a scheme of arrangement.  For present purposes it is necessary to note only the following steps that took place.  Amcor transferred its shares in Paper Australia to PaperlinX Limited.  Newly created shares in PaperlinX were allotted to existing Amcor shareholders.  In due course the shares in PaperlinX were listed on the Australian Stock Exchange. The result was that the packaging business remained with Amcor and the fine paper manufacturing business was owned by a company that was now a subsidiary of PaperlinX.

5                     To complete the separation, it was also necessary to move the employees who worked at the mills to Paper Australia.  The proposal was that Amcor terminate their employment and Paper Australia offer to engage their services.  Accordingly, on 21 February 2000 Amcor wrote to all affected employees advising them that their employment would come to an end on 31 March 2000.  Enclosed with the letter of termination was an offer of employment from Paper Australia.  The offer was made by the managing director of Amcor Printing Papers Group Limited, but nothing turns on this.  The relevant parts of the letter of offer read:

“I am writing to offer you employment with the operating company of your business, Paper Australia Pty Ltd (trading as Australian Paper), on the same terms and conditions as you currently enjoy.  All benefits will be preserved, including continuity of service for all employment-related purposes, salary/wage, superannuation and accrued leave entitlements.

We encourage you to accept this offer of employment effective 1^st April, 2000.  Your acceptance of this offer will be confirmed by you reporting for duty at your usual workplace on your first normal working day on or after 1st April 2000 or, if you are on approved leave, on the first working day following the end of that leave.”

6                     Almost all Amcor employees accepted the offer by turning up for work.  In their new employment the employees performed tasks identical to those they had performed while employed by Amcor.  The terms and conditions of their employment, including rates of pay, leave entitlements and the like, were also identical, that being the effect of their new contracts of employment.  In addition to their contractual rights, it is possible that the employees were still entitled to the benefits of the certified agreement.  Section 170MB provides that a new employer who takes an assignment of a business is bound by a certified agreement that bound the previous employer in relation to that business.  The section could not operate to impose obligations on Paper Australia at the time it acquired the mills because it was not then the “new employer” of the men who worked at the mills.  Amcor was still their employer.  Paper Australia became their employer in April 2000, and, perhaps at that point s 170MB bound Paper Australia to the certified agreement.  The position is not clear because on one view s 170MB seems to contemplate that the transfer of the business and the change of employment from the previous to the new employer will occur simultaneously.  As the resolution of this issue is of some significance, I do not propose to rule upon it.  It is an issue upon which I have not heard argument and it need not be dealt with to resolve the current dispute.

7                     The union has commenced this proceeding seeking the imposition of penalties and other relief for the alleged breach by Amcor of cl 55 of the certified agreement.  Clause 55.1.1 relevantly provides:

“Should a position become redundant and an employee subsequently be retrenched, the employee shall be entitled to the following payments:

(a)       All accumulated sick leave credits;

(b)       All accumulated annual leave credits;

(c)        Pro-rata long service leave if the employee concerned has five or more year’s continuous service with the Company;

(d)       Three weeks’ pay at the employee’s ordinary weekly wage rate for each full year of service and pro-rata for part years provided that this amount does not exceed the amount the employee would have received up to nominal retirement age.”

8                     The union contends that the employees who were given notice that their employment with Amcor was terminated, had their respective positions made redundant within the meaning of cl 55 and so became entitled to severance payments.  It says that the fact that most employees took up employment with Paper Australia with the same jobs and on the same terms and conditions of employment, does not deny the proposition that they had been made redundant.  For its part, Amcor denies that, in the circumstances which occurred, the positions of its former employees had become redundant.  It says that, having regard to the reality of the situation (that is, that all employees continued to work as usual with no diminution in their rights), there had been no redundancy.

9                     I will begin the resolution of this dispute by considering the meaning of the word “redundant”.  In the context of employment law it is generally accepted that becoming redundant means that the employee is no longer required by his (or her) employer because the employer no longer has a need for the work that the employee was performing.  In examining the relevant authorities it is convenient to begin with Re Clerks (State) Award [1976] I.A.S. Current Review 166, a decision of the New South Wales Industrial Commission.  The NSW Commission was considering an application to vary an award to make provision for redundancy payments.  In the course of its decision, the NSW Commission said (at 175):

“It can fairly be said that in industrial circles the term redundancy payment has come to mean compensation for losses of various kinds suffered by employees who have given substantial service to an employer and whose services are terminated because, for one reason or another, the employer no longer needs them.”

10                  An important case to which reference should be made is the decision of the Full Court of the Supreme Court of South Australia in The Queen v Industrial Commission of South Australia; ex parte Adelaide Milk Supply Co-operative Limited (1977) 16 SASR 6.  The question at issue was whether the State’s Industrial Commission had jurisdiction to make provision by award for redundancy.  In the course of dealing with that question each member of the court considered the meaning of the word “redundancy”.   Bray CJ presided over the court and delivered a separate judgment, but I will first refer to the judgment of Bright J.  He said (at 26):

“The word ‘redundant’ does not occur in the [Industrial Conciliation and Arbitration] Act.  In its industrial sense it is not defined in the Oxford Dictionary.  The application which I have already set out attempts a definition for the purpose of the proposed award.  A consideration of the cases leads me to think that the question of the redundancy of an employee is linked to the question of the continued utility of the job which he is performing.  In other words it does not relate to the personal competence of the employee in the job which he is performing.  If I am right in this, then in its widest form the concept of redundancy connotes that an employee becomes redundant whenever (and for whatever reason) his employer no longer desires to have performed the job which that employee is doing.”

The Chief Justice said (at 8):

“I should begin by saying that I agree with Bright J that the concept of redundancy in the context we are discussing seems to be simply this, that a job becomes redundant when the employer no longer desires to have it performed by anyone.  A dismissal for redundancy seems to be a dismissal, not on account of any personal act or default of the employee dismissed or any consideration peculiar to him, but because the employer no longer wishes the job the employee has been doing to be done by anyone.”

Mitchell J, the remaining member of the court, cited with approval the passage from the decision in Re Clerks (State) Award previously mentioned.

11                  The meaning which Bray CJ gave to the word “redundancy” has been applied in a number of cases including the Termination, Change and Redundancy Case (1984) 8 IR 34; Short v FW Hercus Pty Ltd (1993) 40 FCR 511; Hollows v Federal Commissioner of Taxation (1994) 94 ATC 2032; and Steppes Pty Ltd v Australian Liquor, Hospitality and Miscellaneous Workers Union (1998) 86 IR 337. 

12                  It has always been assumed that an employee has been made redundant if his employment is terminated because the employer has sold the business in which the employee was working.  That the employer has been able to arrange for the new owner to engage the employee is beside the point.  In Re Government Cleaning Services (Privatisation) Award No. 2 (1994) 55 IR 199 the NSW Commission was required to consider whether certain employees had become redundant when the Government Cleaning Services was privatised although they had been offered employment by the new operators.  The NSW Commission found that the employees had been made redundant.  Schmidt J referred to Bray CJ’s judgment in ex parte Adelaide Milk Supply Co-operative Limited and then continued (at 218):

“When a business is sold, or a governmental undertaking privatised, the original employment comes to an end.  Employees do not always obtain work with a new employer.  The fact that the old employer assists the employees to obtain work with the new employer, does not alter the consequence, that the termination of the original employment arose as a result of the employer’s decision, that it no longer wished any of its employees to perform the jobs they were performing and not through any fault on the employee’s part.  It seems to me that employees in that situation have been made redundant, whether or not they are assisted in obtaining alternate employment.”

13                  Another case is the Termination, Change and Redundancy Case.  That was a test case to determine whether, among other conditions, provision should be made for redundancy in a number of awards. The AIRC decided that this was appropriate noting that, upon redundancy, employees “equally experience the inconvenience of hardship associated with searching for another job and/or the loss of compensation for non-transferable credits that have been built up such as sick leave and long service leave”:  8 IR at 62.  But the AIRC observed that it did “not envisage severance payments being made in cases of succession, assignment or transmission of a business”:  8 IR at 75.  Accordingly, the redundancy clause that was included in the awards contained a proviso that it was not to apply in those cases.

14                  Then there is Steppes Pty Ltd v Australian Liquor, Hospitality and Miscellaneous Workers Union.  This was an application to the AIRC to exempt an employer from the requirement to make severance payments due under an award upon the transfer of the applicant’s hotel business to another hotel group who would employ the applicant’s workers.  The AIRC granted the exemption because it was of opinion that severance payments were not justified in the case of the sale of a business and a “transfer” of employees to a new employer who would maintain their full entitlements to sick leave, annual leave and long service leave.  Had the employees not been made redundant on sale there would have been no need to grant the exemption.  The AIRC plainly proceeded upon the assumption that the workers had been made redundant.

15                  It may be said that the question in this case is not to be answered merely by ascertaining the meaning of the word “redundant”.  The obligation to make the payments mentioned in cl 55 is dependent upon the satisfaction of two conditions:  (1) that the employee’s “position become[s] redundant”; and (2) that the employee is subsequently retrenched.  In the course of submissions attention was directed to the first condition. The union submits that the condition referred to a position with the company (that is Amcor) so that in this case it is plain that the position held by each employee had in fact become redundant.  Amcor, on the other hand, argues that it was only necessary to consider whether or not the position itself continued in existence after sale, without also having regard to the fact that such a position was no longer required by Amcor, the workers’ former employer.  So, on Amcor’s case, the first condition would not be satisfied.

16                  There are three factors which go against Amcor’s approach.  The effect of them is that in deciding whether a person has been made redundant, that he (or she) has a new employer is irrelevant.  The first is the authorities to which I have referred.  They establish that the word “redundant” refers to the situation where an employee has been dismissed for a particular reason.  They do not suggest that there will be no redundancy if the position established by the employer is continued by another employer.  That is to say, “redundancy” is a word which describes the reason why an employee has been dismissed.  The second factor is the second condition that must be satisfied to obtain the redundancy payment, namely that the employee has been retrenched.  I take the word retrenched to mean “dismissed”:  see The Queen v Industrial Court (SA); ex parte General Motors-Holden’s Ltd (1983) 35 SASR 161, 187.  This confirms that the question whether or not an employee has been made redundant is to be determined at the point of dismissal.  If the employer no longer requires the work previously carried out by the employee to be performed and dismisses that employee for that reason, both conditions are satisfied and the employee has been retrenched for reason of redundancy.  Finally, cl 55 assumes that the dismissal (or retrenchment) will be by the employer who is bound by the certified agreement.  This is clear not only from cl 55.1.1 (see the reference to “the Company” in cl 55.1.1(c)), but also from cl 55.1.4 which provides that the redundancy payments “are subject to the employee concerned continuing in employment to a date notified by the Company to the union”.  I should add that when one reads cl 55 in the context of the certified agreement as a whole, the “position” to which reference is made in cl 55.1.1 is a position maintained by “the Company” and does not refer to a position that may be established by another employer.

17                  I accept that it might be attractive to accede to Amcor’s argument for a number of reasons.  The stand taken by the union will produce a result which, in this case, may be seen by some as both contrary to commonsense and unfair.  That is because on one view there is no reason why employees who, for all practical purposes, have maintained continuous employment should be given the benefits that accrue on redundancy.  To take a more extreme example, which is not too far removed from the present case, assume that before the separation of the two businesses, and perhaps even in contemplation of that separation, Amcor decided that for reasons of internal management it would no longer be the employer of the workers, and they should be “transferred” to Paper Australia.  On the union’s argument, the employees would be made redundant.  But when looked at from a practical viewpoint, their positions are unchanged. 

18                  Yet there comes a point when a court of construction must resist the temptation of forcing a meaning to a bargain which the parties did not intend and to substitute for the arrangements actually made, an arrangement which the court believes is a better one.  The problem that exists in the present case seems to be the result of oversight, in the sense that the parties failed to anticipate the particular situation which occurred and would have dealt with it had they adverted to it.  It is often the case that, where there is a drafting error which is the product of carelessness in the expression of the text, a court of construction can cure the mistake.  It is not so easy when there is an oversight.  Here the court is not being asked to construe the agreement in question, but to fill a gap.  It is by no means clear whether the court can do this in the case of an instrument such as a certified agreement.  When one is concerned with a gap in a statute it was once thought that it could not be filled by the court:  Marshall v Watson (1972) 124 CLR 640, 649.  It now appears to be accepted that a court can fill a gap when words have been omitted, or where, because of inadvertence, Parliament has failed to deal with a matter required to be dealt with, if the purpose of the Act is to be achieved:  Kingston v Keprose Pty Ltd No. 3 (1987) 11 NSWLR 404, 422; Saraswati v R (1991) 172 CLR 1.  However, before the court can undertake that task it must be possible to state with certainty precisely what Parliament would have inserted in the statute had its attention been drawn to the omission:  Jones v Wrotham Park Settled Estates [1980] AC 74.  Here, if the same reasoning allows the court to fill a gap in a certified agreement, I can only surmise what the parties would have done. 

19                  If the construction argument were to go against Amcor, as it has, Amcor sought to avoid the consequences by arguing that the employees had “elected” to allow Paper Australia to assume the obligation of making provision for redundancy whereby it is inconsistent for them to claim redundancy payments against Amcor.  Without wishing to be disrespectful, I found the argument difficult to follow.  An examination of the cases shows the common law doctrine of election comes into play when a person has alternative and inconsistent rights.  If that person chooses one right he (or she) is forever precluded from exercising the other: United Australia Ltd v Barclays Bank Ltd [1941] AC 1; O’Connor v S P Bray Ltd (1936) 36 SR (NSW) 248; Sargent v ASL Developments Ltd (1974) 131 CLR 634.  This is not a case of inconsistent rights.  There is also a doctrine of election according to equity but that can have nothing to do with this case.

20                  I will hear the parties on the orders that should be made.

Associate:

Dated:              13 May 2002