FEDERAL COURT OF AUSTRALIA

Hanlon v Refined Sugar Service Pty Ltd [2002] FCA 1395

WORKPLACE RELATIONS – agreement made between employer and employees’ association granting extra redundancy benefits to employees should termination occur within five years – agreement uncertified and probably unenforceable – certain employees later resigned to take up positions with a new employer - certified agreement concluded between new employer and employees which purported to, for the life of the agreement, preserve the terms and conditions of employment that existed at the time of the employee’s termination by the previous employer – whether the earlier agreement imported – whether the time limit within the earlier agreement continued to apply

Workplace Relations Act 1996 (Cth) ss 170LT, 170LX, 177A, 178, 179, 422.

City of Wanneroo v Homes (1989) 30 IR 362, followed.

Ryan v Textile Clothing and Footwear Union of Australia [1996] 2 VR 235, considered.

JON HANLON v REFINED SUGAR SERVICES PTY LIMITED

N553 OF 2002

EMMETT J

4 NOVEMBER 2002

SYDNEY

THE COURT ORDERS THAT:

1.         the application be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The applicant is the Secretary of the CSR Officers’ Association (“the Association”).  The Association is an organisation registered under the Workplace Relations Act 1996 (Cth) (“the Act”).  On 22 August 2001, the applicant commenced a proceeding, by information laid under s 178 of the Act in the Chief Industrial Magistrates Court, against the respondent, Refined Sugar Services Pty Ltd (“RSS”).  In the proceeding, the applicant sought the imposition of a penalty in respect of alleged breach by RSS of an agreement certified under Division 4 of Part VIB of the Act (“the Certified Agreement”).  On 22 May 2002, Mr G.A. Miller, Chief Industrial Magistrate (“the Magistrate”), dismissed the information.  The applicant now appeals from that dismissal to the Federal Court of Australia pursuant to s 422 of the Act.

2                     Under s 170LT(1) of the Act, if an application is made to the Australian Industrial Relations Commission (“the Commission”) to certify an agreement, the Commission must certify the agreement if it is satisfied that the requirements of s 170LT are met.  Under s 170LX, a certified agreement comes into operation when it is certified and remains in operation at all times afterwards.  However, it ceases to be in operation if its nominal expiry date has passed and it is replaced by another certified agreement.  Section 170LX also provides for other circumstances in which a certified agreement ceases to be in operation or does not otherwise operate.

3                     Section 178(1) of the Act provides that, where an organisation or person bound by a certified agreement breaches a term of the agreement, a penalty may be imposed by a court of competent jurisdiction.  Under s 177A of the Act, the Chief Industrial Magistrates Court is a court of competent jurisdiction.  Under s 422 of the Act, an appeal lies to the Federal Court of Australia from a judgment of a court of the State in a matter arising under the Act.  It is not necessary to obtain the leave of the Federal Court or the court appealed from in relation to such an appeal.  This appeal has been brought pursuant to notice of appeal filed on 12 June 2002.  The facts giving rise to the issue before the Court are not in dispute. 

4                     In late 1995, CSR Limited (“CSR”) and the Association executed an instrument (“the Redundancy Agreement”) that bears the following title:

“                             REFINED SUGARS GROUP LIMITED

&

CSR OFFICERS’ ASSOCIATION

REFINING OPERATIONS

PERFORMANCE BASED REDUNDANCY AND RETRENCHMENT AGREEMENT”

While the title refers to “Refined Sugars Group Limited” it is common ground that the name “Refined Sugars Group” is a business name under which CSR carries on business.

5                     The Redundancy Agreement, in terms, was expressed to be between CSR and the Association.  It recited the background to it as follows:

·          CSR is restructuring its operations;

·          Redundancies will occur amongst staff working in CSR;

·          A number of CSR sites have wage earner redundancy agreements, which give redundancy payments more favourable than those provided to CSR staff employees under the Redundancy and Retrenchment Agreement of January 1993 between CSR and the Association (“the Principal Agreement”);

·          The Association sought negotiations with CSR under Clause 6.2 of the Principal Agreement for higher additional benefits for staff on refinery sites.

6                     The Principal Agreement is expressed to be binding on the Association, its members and CSR.  Its provisions were to be in addition to the provisions of the CSR Staff (Consolidated) Award 1992.  Clause 6.2 relevantly provided that where CSR staff employees were to be retrenched at a particular site and that site had a site redundancy agreement for non-staff employees, and such agreement gave higher level of overall benefits than the Principal Agreement, then the Association could negotiate with CSR for additional benefits.  The Redundancy Agreement states that the need for it arose as a result of Clause 6.2 of the Principal Agreement. 

7                     The Redundancy Agreement provided that it was to apply only to CSR staff working at specified locations.  The Redundancy Agreement relevantly provided as follows:

“5.       Redundancies Covered.  The Agreement applies to all bona fide redundancies, as defined in Clause 2.1 of the Principal Agreement, which occur during the term of the Agreement.

………………………

6.         Operative Date.  The Agreement will apply to all redundancies occurring on or after 1^st September 1995.

………………………

8.         Redundancy Package.  The Redundancy Package to apply is:

(1)        all staff will receive the basic redundancy benefits as set out in the Principal Agreement;

(2)        in addition to the basic benefits, a work performance related benefit, will be paid…

9.         Duration.  The conditions of the agreement will hold for a period of five years from 1 September 1995…:

8                     In about 1998 CSR, Mackay Sugars Co-operative Association (“Mackay”) and ED & F Mann Australia Pty Ltd (“Mann”) entered into a joint venture (“the Joint Venture”) to produce, distribute and market refined sugar products.  The Joint Venture was managed by Sugar Australia Pty Ltd (“SAP”).  RSS, which is a wholly owned subsidiary of CSR, co-ordinates and utilises employees for the provision of labour and personnel services required by SAP for the conduct of the Joint Venture.

9                     Upon the commencement of the Joint Venture, nine persons (“the Employees”) were offered employment by RSS.  That occurred in March 1998.  At the time that the Employees were offered employment by RSS they were employed by CSR.  They resigned their employment with CSR and accepted employment with RSS.

10                  However, prior to the Employees commencing employment with RSS, the Association and RSS negotiated and concluded the Certified Agreement, which was certified by the Commission on 24 April 1998.  The Certified Agreement is entitled:

“REFINED SUGAR SERVICES PTY LIMITED

STAFF EMPLOYEES

CERTIFIED AGREEMENT”.

11                  The Certified Agreement is expressed in Clause 3 to apply to the employment of all persons who may be employed by RSS and who are, or who are eligible to be, members of the Association.  It is expressed to be binding on:

·          RSS;

·          the Association; and

·          all employees of RSS who are or are eligible to be members of the Association.

It was to come into operation on the date of certification and to continue in force for a period of twelve months.

12                  Clause 6 sets out the “OBJECTIVE” of the Certified Agreement as follows:

“RSS is a wholly owned subsidiary of [CSR];

[CSR, Mackay and Mann] (collectively, the ‘Participants’) are establishing an unincorporated joint venture for the conduct of commercial operations relating to the sugar refining and processing industry…

RSS will employ persons for the purposes of the Joint Venture business.

The Participants… currently employ staff who may be offered employment by RSS for the purposes of the Joint Venture business.

………………………

It is the objective of this Agreement to ensure that all former salaried employees of the Participants… who are employed by RSS will, subject to the possible of harmonisation of terms and conditions of employment, for the life of this Agreement, retain the terms and conditions of employment which applied at the time of termination of their former employment.”

13                  The critical provision of the Certified Agreement for the purposes of this appeal is Clause 7, which deals with “TERMS AND CONDITIONS OF EMPLOYMENT”.  Clause 7 is relevantly in the following terms:

“7.1     In recognition of Clause 6, it is agreed that any person employed by RSS who was employed by a Participant… immediately before becoming employed by RSS will, subject to clause 8, for the life of this Agreement, be employed under the same terms and conditions of employment, whether provided by an award or agreement or by contract, as existed at the time of that person’s termination from employment with the Participant…

7.2       Any person employed by RSS who was not employed by a Participant… immediately before becoming employed by RSS will be employed under terms and conditions of employment to be determined by RSS, such terms and conditions to be consistent with the implementation of the harmonisation process referred to in Clause 8.”

Clause 8 provides for the possibility of the harmonisation of the varying terms and conditions of employment that were maintained under the Certified Agreement.

14                  On or after 22 February 2001 the Employees were made redundant by RSS.  Upon termination of the employment of the Employees, RSS failed to make any payment pursuant to clause 8 of the Redundancy Agreement.  The applicant charges that, in failing to do so, RSS breached a term of the Certified Agreement, namely Clause 7.1.

15                  There are two bases upon which RSS asserts that it has no obligation under Clause 7.1 in the present circumstances.  First, it says that the Redundancy Agreement does not constitute any part of the terms and conditions of employment under which the Employees were employed at the time of the termination of their employment with CSR.  Secondly, RSS contends that, even if the terms of the Redundancy Agreement constitute terms and conditions of employment at the time of termination, the terms of the Redundancy Agreement limit any payment under Clause 8 to a redundancy that occurred during the term of the Redundancy Agreement, namely the period of five years from 1 September 1995.  That period had expired prior to the redundancy of the Employees.

16                  In dismissing the information, the Magistrate concluded that the Redundancy Agreement was, “not an agreement or contract between the employees and [their employer] and does not…create a term or condition of their contract.”  His Worship found that the Redundancy Agreement, whatever its terms, was not an agreement that would be enforceable under ss 178 or 179 of the Act, but was, at best, an agreement between CSR and the Association.  Since the Redundancy Agreement was not a term or condition of employment of the Employees, the Certified Agreement could not import its terms into the terms and conditions of employment of the Employees once they were employed by RSS.

17                  Having found against the applicant on that point, the Magistrate went on to hold that, even if the Redundancy Agreement was enforceable under the Act, and had been imported into the terms and conditions of employment between the Employees and RSS, by early 2001, the Redundancy Agreement had, in any event expired, since it applied only to redundancies occurring up to 31 August 2000.

18                  Subject to the observations made below, the Certified Agreement may be a contractual instrument, although the Act gives it consequences beyond merely contractual obligations.  While it is an instrument entered into in a particular context, namely that of industrial relations, it is to be construed having regard to the natural and ordinary meaning of its words.  The words of the Certified Agreement, and Clause 7.1 in particular, are to be read as a whole and in context.  If there is ambiguity, that ambiguity may be resolved by reference to the history and subject matter of the instrument.  The words are not to be interpreted in a vacuum divorced from industry realities. 

19                  Such agreements frequently result from an accord between parties couched in terms intelligible to themselves but often framed without the careful attention to form and draughtsmanship that one might expect to find in an Act of Parliament or in an instrument settled after careful negotiation between lawyers.  In construing such an instrument, one must be careful to avoid a too literal adherence to the strict technical meaning of the words.  Rather one must endeavour to give such an instrument a meaning consistent with the general intention of the parties, to be gathered from the whole of the instrument.  Ultimately, however, a tribunal interpreting such an instrument must attribute to the words used their true meaning, even if, so construed, they would not necessarily carry out what might have been the intention of the author of the instrument.  See generally, City of Wanneroo v Holmes (1989) 30 IR 362 at 378-379.

20                  It is a characteristic of many industrial instruments, albeit instruments that are expressed to be agreements, that they are made between an employer on the one hand and an employee organisation on the other.  That is a characteristic of the Redundancy Agreement.  It is also a characteristic of the Certified Agreement, although the Certified Agreement is expressed to be binding on all employees of RSS who are, or are eligible to be, members of the Association.  However, they are not parties to the Certified Agreement in any contractual sense. 

21                  It is common ground that the provisions of the Redundancy Agreement did not constitute terms or conditions of the contracts of employment between CSR on the one hand and the Employees on the other hand.  The question is whether, nevertheless, its provisions can be said to be terms and conditions of employment under which the Employees were employed at the time that their employment with CSR was terminated, within the meaning of Clause 7.1 of the Certified Agreement.  In other words, can the provisions nevertheless be regarded as terms and conditions of employment as existing at the time of termination? 

22                  The phrase “terms and conditions of employment” in clause 7.1 is qualified by the words “whether provided by an award or agreement or by contract”.  It is common ground that, in ordinary circumstances, an award would not be a term or condition of a contract of employment that was governed by the award.  In fact, there was an award in force in respect of the Employees at the time of termination of their employment with CSR.  While the terms of that award were not terms of the contracts of employment of the Employees, its terms could nevertheless have been enforced by recourse to the provisions of the Act. 

23                  It is not clear what distinction was intended to be drawn between the terms “agreement” and “contract”.  The phrase in question appears to draw a distinction between:

·               an award or agreement, on the one hand and

·               contract on the other.

That distinction is suggested by the insertion of the word “by” twice rather than three times.  On that basis, “agreement” is to be construed as meaning something akin to “award”.  Indeed, RSS contends that “agreement” should be construed as meaning “certified agreement” within the meaning of the Act and “contract” would be given its ordinary meaning as referring to a contract of employment between one of the Employees and one of the Participants.

24                  The Redundancy Agreement was not an agreement or contract within either of those concepts.  Indeed, on one view, it had no legally binding effect as a contract.  Although it is clear that CSR and the Association intended, by their signature to the Redundancy Agreement, to record something that was serious and significant, they are not necessarily to be taken as intending to reach an agreement enforceable at law.  Rather, they may be taken to have intended only to reach an accord that would or might have significance in relation to future industrial relations between the parties but would not be enforceable by resort to the Courts – see Ryan v Textile Clothing and Footwear Union of Australia [1996] 2 VR 235 at 264.  There is no suggestion that the Association was acting as agent of its members in making the Redundancy Agreement, so as to make them parties to it.  Indeed, it is common ground that its provisions did not constitute terms or conditions of the contracts of employment between the Employees and CSR. 

25                  Further, there is no express promise by the Association to CSR contained in the Redundancy Agreement so as to make it enforceable as a matter of contract.  There is no consideration for the enforcement of the obligations against CSR.  If consideration is to be found, it must be found in some promise by the Association, being a promise that is sufficiently certain to admit of enforcement and one given by the Association and not by some third party.  There is none.  (see Ryan’s Case at 269).

26                  Thus, the Redundancy Agreement does not give rise to an obligation on the part of CSR enforceable in a court of law, at the suit either of the Association or of any of the Employees.  Even if Clause 7.1 is to be construed with a view to avoiding a too literal adherence to the strict technical meaning of words, it is nonetheless difficult to see how its provisions can be said to be terms and conditions of employment that existed at the time of the termination of the employment of the Employees with CSR, being terms and conditions under which those Employees were employed at that time.

27                  The applicant contended, in essence, that the effect of Clause 7.1 of the Certified Agreement, in conjunction with Clause 6 was to freeze or crystallize the terms and conditions of employment of the Employees as at the time when their employment was terminated by CSR, and to hold those conditions in a state of suspense until the expiration of the Certified Agreement.

28                  If Clause 7.1 does incorporate into the terms and conditions under which the Employees were employed by RSS, the terms of the Redundancy Agreement, then it must incorporate the Redundancy Agreement, as a whole, not merely several parts of it that the applicant contends should be adapted.  In particular, that means incorporating into the terms and conditions, the provisions of Clauses 5, 6 and 9 of the Redundancy Agreement.  If the extra benefits payable upon redundancy were part of the terms and conditions then the expiration of the entitlements to those extra benefits in August 2000 was also. 

29                  That is to say, even if it could be said that, in some sense, the provisions of the Redundancy Agreement are part of the terms and conditions of employment of the Employees that existed at the time of the termination of their employment with CSR, the whole of those provisions must be treated as forming terms and conditions of employment.  The provisions of the Redundancy Agreement are explicit in providing that it applies only to redundancies that occur during the term of the Redundancy Agreement. That must be a reference to Clause 9, under which the conditions of the Redundancy Agreement were to “hold” for the period of five years from 1 September 1995.  The redundancies of the Employees did not occur during the term of the Redundancy Agreement.  Accordingly, even if its provisions were terms and conditions of employment within the meaning of Clause 7.1 of the Certified Agreement, there has been no failure to comply with the provisions of Clause 7.1 on the part of RSS. 

30                  It may be possible to draw a distinction between those parts of the Redundancy Agreement that specify the circumstances in which it is to operate, on the one hand, and those parts of it that specify benefits for employees, on the other.  If there were truly such a distinction, it may be that only the latter could be said to form part of the terms and conditions under which employees were employed.  However, once it is accepted that the entitlement of an employer, if it can be termed an entitlement, as it existed at the time of termination of employment with CSR, was that the redundancy package referred to in Clause 8 would apply, but only in the case of the redundancy that occurred during the term of the Redundancy Agreement, the Employees had no entitlement to have the Redundancy Package apply in respect of the redundancy that did not occur during the period of five years from 1 September 1995.  The language of the Certified Agreement does not suggest that the parties to the Certified Agreement were intending to put in place an arrangement that ignored the limitation of the Redundancy Agreement. 

31                  Clause 7.1 provides that relevant employees were to be employed under the same terms and conditions of employment “for the life of this Agreement”.  The applicant contended that that phrase would have no work to do if Clause 7.1 were construed as incorporating those provisions of the Redundancy Agreement that limit its operation to the period of five years from 1 September 1995.  However, the phrase will operate even if the limitation to the term of the Redundancy Agreement is incorporated into the terms and conditions under which the Employees were to be employed by RSS.  Thus, if the Certified Agreement came to an end before the expiration of the period of five years from 1 September 1995, RSS would no longer be under an obligation, pursuant to Clause 7.1, to employ the employees under the same terms and conditions of employment as existed at the time of termination from employment with CSR.

32                  On the other hand, if the expression “for the life of this agreement” were construed as overriding the reference to the period of five years in the Redundancy Agreement, the effect of the Certified Agreement would have been to change significantly the arrangement as it existed between the Association and CSR as at the date of the Certified Agreement.  I do not consider that such an intention is to be gleaned from the language of the Certified Agreement.

33                  I consider that, if the provisions of the Redundancy Agreement are to be regarded as forming terms and conditions of employment of the Employees, those provisions require that the redundancy package of Clause 8 apply only to redundancies that occurred during the period of five years from 1 September 1995.  The redundancies of the Employees did not occur during that period.  Accordingly, RSS did not breach the terms of Clause 7.1 of the Certified Agreement by failing to provide to the Employees the redundancy package contemplated by Clause 8 of the Redundancy Agreement.  It follows that the conclusion of the Industrial Magistrate was correct and that the appeal should be dismissed. 

Associate:

Dated:              13 November 2002