FEDERAL COURT OF AUSTRALIA

Construction Forestry Mining & Energy Union v Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd [2003] FCA 787

EMPLOYMENT LAW – Superannuation – Coal-mining industry – Employer contributions made pursuant to State legislation, industrial awards and agreements – Relationship between such contributions and payments envisaged by Superannuation Guarantee (Administration) Act 1992

Superannuation Guarantee (Administration) Act 1992 (Cth) ss 6, 6A, 10, 13, 14, 16, 17, 19, 20, 21, 22, 23

Superannuation Guarantee Charge Act 1992 (Cth)

Coal and Oil Shale Mine Workers (Superannuation) Act 1941 (NSW) ss 2, 5, 15C, 18, 19, 19AD

Coal and Oil Shale Mine Workers Superannuation Act 1989 (Qld) s 4

The Coal Mining Industry (Production and Engineering) Consolidated Award 1997 cl 18

Construction Forestry Mining & Energy Union & Ors v Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd & Ors

N 745 of 2002

WILCOX J

30 JULY 2003

SYDNEY

THE COURT ORDERS THAT:

1. The proceeding be dismissed.

2. The matter of costs be reserved.

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

REASONS FOR JUDGMENT

WILCOX J:

1                     Construction Forestry Mining and Energy Union (“CFMEU”), and some of its members employed in the coal-mining industry, seek declarations concerning the operation, in relation to the coal-mining industry, of the Superannuation Guarantee (Administration) Act 1992 (Cth) (“the SGA Act”). They also seek orders for mandatory injunctions and writs of mandamus. The identity of the respondents has varied from time to time. At some stage, the respondents have comprised two companies carrying on business in the superannuation field (the 1^st and 2^nd respondents), 43 coal-mining companies (the 3^rd to 45^th respondents) and the Commissioner of Taxation (the 46^th respondent). The Commissioner of Taxation has responsibilities under the SGA Act.

2                     The purpose of the proceeding is to challenge aspects of the respondent companies’ calculation, for the purposes of the SGA Act, of the charge percentage applicable to superannuation contributions made by them for the benefit of their employees.

3                     The respondent coal-mining companies carry on business in New South Wales, Queensland or both of these States. Their superannuation obligations are governed by State legislation, industrial awards and/or agreements. As the positions vary between the two States, it is necessary to deal with them separately.

The New South Wales position

(i) The 1988 agreement

4                     On 6 September 1988, an agreement was made between five unions with members employed in the New South Wales coal industry and four coal-mining employer organisations. The agreement recited that, pursuant to a decision of the Coal Industry Tribunal (“the Tribunal”) made on 17 June 1986 that occupational superannuation be introduced for coal mineworkers, the parties had established a fund called the New South Wales Coal and Oil Shale Mineworkers’ Superannuation (Accumulation) Fund (“COSAF”) for the purpose of providing such occupational superannuation.

5                     By cl 1 of the agreement, the employers agreed to contribute the sum of $14 per week for each eligible employee, rising after 1 July 1989 in accordance with increases granted by the Australian Conciliation and Arbitration Commission in National Wage cases.

6                     The agreement was ratified by the Tribunal on 3 November 1988.

(ii) The 1991 agreement

7                     On 14 May 1991, a further agreement was made. This agreement involved the New South Wales Coal Association and one coal-mining company, on the one hand, and four unions with members employed in the New South Wales coal industry. The agreement dealt with many subjects. It included provision for an $8 weekly increase per employee in the employers’ contributions to COSAF from 1 May 1991 and a further $8 weekly increase from 1 May 1992.

8                     It is agreed between the present parties that the effect of this agreement was to bring the employers’ contributions per employee, after 1 May 1992, to $31.20.

9                     The COSAF Trust Deed, as amended from time to time, is in evidence. Clause 2.4.1 provides for an employer contribution of $31.20 per week, “or such other amount as prescribed under any applicable industrial agreement”. No other amount has been prescribed.

10                  The obligation imposed on employers by cl 2.4.1 of the COSAF Trust Deed is reinforced by s 19(3) of the Coal and Oil Shale Workers (Superannuation) Act 1941 (NSW) (“the NSW Act”).

(iii) The salary sacrifice agreement

11                  On 25 June 1992, the New South Wales Coal Association entered into a further agreement, this time with seven unions having members employed in the coal industry. The agreement was called “the New South Wales Coal Mining Industry Statutory Superannuation Fund (Salary Sacrifice) Agreement”. It has been generally referred to as the “salary sacrifice agreement”.

12                  In a preamble to the salary sacrifice agreement, the parties stated their recognition “that to serve the long term interests of the members of the Fund [that is, COSAF], a restructuring of the Fund must occur”. They also recited their intention that, as a result of the salary sacrifice agreement, “no employee will receive either a reduction or an increase in net weekly earnings”.

13                  In a clause headed “Objective”, the parties stated the “sole objective” of the salary sacrifice agreement was “to substitute certain provisions of” five specified industrial awards (as permitted by those awards) “to allow the payment of a proportion of Award Rates of pay in the form of a superannuation contribution by the employer”. The term “Award Rate” was defined as “the rate of pay prescribed in the relevant industry award or enterprise award or agreement”.

14                  The salary sacrifice agreement went on to provide: “From the date of commencement of this Agreement, the rate of pay for all ordinary hours shall be the Agreement Rate”. That term was defined as “the Award Rate less an amount of 8% of the Reference Rate”, with certain exceptions. The “Reference Rate” was defined to mean “Group B of the Coal Mining Industry (Production and Engineering) Interim Consent Award or such other rate as may be agreed between the parties”. As I understand the position, this was a reference to a rate of pay then prescribed by that award (“the Interim Award”). One effect of the salary sacrifice agreement, therefore, was to reduce the wage payable to affected employees by an amount equal to 8% of the Group B wage rate.

15                  However, as against this reduction in employees’ wages, there was to be an increase in superannuation payments made for their benefit by employers, either to COSAF or any other coal-mining superannuation fund of which the employee was a member. This increase was to be achieved by a provision of the salary sacrifice agreement that, in addition to contributions made by employers under existing agreements, each employer was to contribute “an amount equal to 10.5% of the Reference Rate”. In the result, each employee lost an amount in wages equal to 8% of the Group B wage rate, but gained an amount in superannuation contributions equal to 10.5% of the Group B wage rate.

16                  The salary sacrifice agreement was ratified by the Tribunal on 5 November 1992. It became operative from 3 January 1993. The Tribunal’s order stated it “shall remain in force for a period of two years or until further order”. It is common ground there has been no further order.

17                  Late in 1992, the SGA Act was amended to insert s 14(2B), making specific reference to the salary sacrifice agreement.

(iv) The restructuring agreement

18                  Contemporaneously with the salary sacrifice agreement, the same parties executed a second agreement (“the restructuring agreement”) for restructuring a statutory fund known as the Coal and Oil Shale Mine Workers’ Superannuation Fund. This is a different fund than COSAF. The statutory fund was to be closed to mineworkers who commenced employment after the effective date of operation of the agreement. As from that date, lump sum payments (calculated in accordance with specified formulae) were to be available to members on retirement after attaining the age of 55 years, on retrenchment, on death and to members who had proven incapacity to work in the industry. Clause 8(a) of the restructuring agreement provided:

“Employees currently pay 1.75% of the Reference Rate as special contributions and 2.5% of the Reference Rate as ordinary contributions from their post-tax income. These contributions will now be made by employers as follows:

Total employee contributions of 4.25% of the Reference Rate (ie 1.75% special + 2.5% ordinary) gross up to 8.0% of the Reference Rate (using the marginal tax rate of 47.25%).

to be distributed to:

the Statutory Fund 5.0% of the Reference Rate

COSAF (or Another Fund) 3.0% “

Provided that for those employees for whom the Agreement Rate is the Award Rate less an amount equal to 7% of the Reference Rate, the distribution shall be:

The Statutory Fund 4.0% of the Reference Rate

COSAF (or Another Fund) 3.0%”.

19                  The employer obligations undertaken in cl 8(a) of the restructuring agreement are now covered by s 19 of the NSW Act.

20                  Clause 8(c) of the restructuring agreement referred to the taxation implications of the new arrangement:

“The effect of Salary Sacrifice of employees’ ordinary and special contributions in this way is to create as additional [sic] 3.75% of the Reference Rate (before Contributions Tax) from income tax forgone by the Government of the Commonwealth of Australia.”

(v) The 1999 agreement

21                  On 22 December 1995, New South Wales Minerals Council Limited entered into a deed with six unions, including CFMEU, that was called the “NSW Coal Industry 1999 Superannuation Agreement”.

22                  The deed recited the two 1992 agreements and the fact that, in 1994, the old statutory fund had merged with COSAF to form the CoalSuper Retirement Income Fund (“CoalSuper”). The deed stated that the funding arrangements contained in the 1992 restructuring agreement “had significantly reduced the unfunded liability in Part 3 of CoalSuper” and, in the light of that circumstance, the parties had renegotiated the 1992 arrangements.

23                  Clause 4.1 of the deed provided:

“An Active Member shall be given the option to elect to convert their defined benefit in Part 3 to an accumulation benefit in Part 2. An Active Member who elects prior to 30 June, 2000, to convert their Part 3 benefit, shall have the transfer value of their Part 3 defined benefit calculated by the Actuary and transferred fully vested to the Part 2 Transfer Special Account, on 1 July, 2000.

The ‘transfer value’ calculation is consistent with the term ‘actuarial value of accrued benefit’ under Professional Standard 402 of the Institute of Actuaries of Australia for accrued benefits following adjustments to 1 January, 1993 with minimum transfer value of the member’s vested benefit. Subject to the Parties to this Agreement agreeing in writing to adopt an alternative formula recommended by the Actuary that deals with potential inequities related to early retirement of members.”

24                  By clause 5, a transferee was to have a “safety net” funded from Part 3 under which the transferee was guaranteed, on retirement or retrenchment, the greater of:

“(a) the amount credited to the members’ accounts established as a result of transfer to Part 2 (pursuant to Clause 4 of this Agreement) and the salary sacrifice contributions directed to Part 2 (pursuant to Clause 12 of this Agreement), at the date of payment; or

(b) the defined benefit entitlement the Transferee would have had at the date of payment if the transfer from Part 3 to Part 2 had not occurred (i.e. months of industry service prior to 1 January 1993 x the amount set out in Clause 3.12 of the Deed).”

25                  Clause 7 dealt with salary sacrifice. It provided:

“Employers will continue to make contributions as required by the MP Act. Mineworkers will salary sacrifice their award or agreement entitlements, pursuant to the Salary Sacrifice Agreement (which is intended to continue in force until 1 July, 2011) or such other industrial instrument that gives effect to the salary sacrifice for Industry superannuation, so that the costs of the additional Employer contributions created by the 1992 Restructuring Agreement are offset by Mineworkers’ salary sacrifice. If the Salary Sacrifice Agreement ceases to have effect, the parties agree to renegotiate this Agreement and the 1992 Agreement and to support the necessary legislative and Deed amendments to ensure that the cost to Employers of these Industry superannuation arrangements does not increase. (ie Employers continue to make superannuation contributions based on the Reference Rate and Employers continue to be able to deduct from Mineworkers entitlements the salary sacrifice amounts set out in the Salary Sacrifice Agreement.)”

26                  Clause 8 read:

“It is not intended that this Agreement will remove the right of Employers to continue to satisfy the SG Act requirements by making superannuation contributions based on a percentage of the Reference Rate.”

27                  Clauses 10 and 11 related to increases in pension rates. Clause 12 provided for CPI increases of employers’ contributions to Part 3 of CoalSuper.

(vi) Coal and Oil Shale Mine Workers (Superannuation) Act

28                  Finally, reference should be made to the provisions of the NSW Act. This statute was enacted by the New South Wales Parliament in 1941, using, in the title, the word “Pensions” rather than “Superannuation”. The change of title is one of numerous amendments that have been made to the NSW Act since its enactment, most recently in 2001.

29                  The statute, as now framed, builds on the scheme established by the agreements mentioned above. Subject to a limited power of dispensation by the Corporate Trustee, s 5 of the statute prohibits the employment, or continued employment, of mineworkers who have attained the age of sixty years. [The Corporate Trustee is a body incorporated pursuant to a 1994 Statute.] Section 5AA of the NSW Act permits retirement, under some circumstances, of mineworkers who have attained the age of 58 years.

30                  By s 15C of the NSW Act, a reconstituted CoalSuper Trust Deed has effect as the trust deed and rules of the Corporate Trustee.

31                  Part 4 of the NSW Act deals with funds and contributions. Section 18 provides that, as from the commencement of a 1994 statute, the COSAF Fund is amalgamated with the statutory fund as CoalSuper, which the NSW Act calls “the Amalgamated Fund”. That Fund is to contain two reserves: first, a reserve in respect of Part 2 of the Fund, comprising the mineworkers’ special account, transferred benefits account and special salary sacrifice account; and, second, a reserve in respect of Part 3, including the pension account and dormant members’ account.

32                  By s 19(2A) of the NSW Act, and subject to exceptions, employee contributions, for each mineworker who is a member of Part 3 of CoalSuper, are to be made to Part 3 of that Fund at a weekly rate equal to the “special rate”; that is, the rate fixed from time to time by the Corporate Trustee by a determination published in the New South Wales Government Gazette: see s 19(7). It is agreed between the parties that the current special rate is one per cent of the reference rate.

33                  Counsel for the applicants place reliance on the fact that the special rate contribution is fixed by the Corporate Trustee, and is not directly related to the amount of a mineworker’s earnings. Counsel for the respondents point to s 19(7) of the NSW Act which requires the Corporate Trustee to determine the rate, from time to time, “after considering a relevant report of the actuary”.

34                  Additionally, in relation to mineworkers who are members of Part 3 of CoalSuper, employers are required to pay contributions at a weekly rate equal to four per cent or five per cent (depending on the individual mineworker’s classification) of the “Reference Rate”: see s 19(2B) and (2C). The “Reference Rate”, under the NSW Act, is “such rate as the Corporate Trustee declares in a determination” under s 2(5) of the NSW Act. That subsection provides:

“Where there is a variation in the weekly rate of wage prescribed for Group B of the Coal Mining Industry (Production and Engineering) Interim Consent Award, September 1990 (or such other rate as may be agreed upon by the parties to the Restructuring Agreement), the Corporate Trustee:

(a)               shall, in and by a determination published in the Gazette as soon as practicable after the variation is made:

(i)                 subject to subparagraph (ii) – specify that rate as so varied and declare it to be the specified rate for the purposes of the definition of Reference Rate in subsection (1), or

(ii)               where there are 2 or more such rates so prescribed – specify one of those rates as so varied and declare it to be the specified rate for the purposes of that definition, and

(b) shall, in the determination, specify the date as from which the determination takes effect, being the date as from which the specified rate became or becomes payable as wages to loadermen or any class of loadermen,

and any previous determination made under this subsection shall not be in force in respect of any period commencing on or after the date so specified.” (Original highlighting)

35                  The NSW Act also imposes obligations on employers in relation to employees who are not members of Part 3 of CoalSuper: to make the “pension CPI contribution” fixed by the Corporate Trustee (s 19(2A)(b)) and to pay a contribution at a weekly rate equal to either four or five per cent of the Reference Rate (s 19(2D) and (2E)).

36                  Finally, s 19(3) of the NSW Act requires employers to pay the contributions required under the COSAF Trust Deed; that is, the sum of $31.20 per week mentioned at para 9 above. The NSW Act contains no provision for adjustment of this amount.

(vii) Summary of the New South Wales position

37                  Counsel for the applicants provided a helpful summary of the superannuation contributions that New South Wales employers of mine workers (other than those in a special classification) are currently required to make. The accuracy of the summary was not disputed. It read as follows:

“

Except in the case of employees who are members of Part 3 of the CoalSuper Fund (the Pension Fund), the contributions to Part 3 are not contributions for the benefit of the employee concerned and are not contributions which reduce the charge percentage under the SGA Act.”

The Queensland position

(i) The Queensland Coal and Oil Shale Mining Industry Superannuation Fund

38                  On 18 May 1988, a trust deed was executed to establish the Queensland Coal and Oil Shale Mining Industry Superannuation Fund. The deed has been amended on numerous occasions. It is not necessary to refer to its terms. The trust deed is not a source of employer obligation; that comes from a statute, the Coal and Oil Shale Mine Workers’ Superannuation Act 1989 (Qld) (“the Queensland Act”).

(ii) Coal and Oil Shale Mine Workers’ Superannuation Act

39                  Section 4 of the Queensland Act imposes an obligation on mine workers to make a payment, for each pay period, “at the rate of 2.5% of the award wage for a coalcutting machineman under the Coal Mining Industry (Production and Engineering) Consolidated Award 1997”. The mine worker’s employer must make a payment equal to 7.5% of that award wage. Accordingly, although that award is a federal award, it is necessary to take cognisance of it in stating the Queensland situation.

(iii) The Coal Mining Industry (Production and Engineering) Consolidated Award 1997

40                  This award (“the Consolidated Award”) was made by the Australian Industrial Relations Commission (“the Commission”) in 1997. It has been amended from time to time. As at 26 October 2000, cl 18.2 specified minimum rates for various groups of mine workers. The wage rate for Group B workers (which included those classified as “Coal Cutting Machineman”) was $578 per week.

41                  On 26 October 2000, a Full Bench of the Commission announced its decision in an appeal concerning simplification of the Consolidated Award. The Full Bench decided to amend the Consolidated Award in several respects, including by adoption of a new classification structure and new rates of pay. The new pay rates were to be minimum rates, rather than paid rates.

42                  In its reasons for decision, the Full Bench said:

“The key classification in the current Award is the Group B classification which includes a number of trades occupations. The base trades equivalent to the Group B classification in the proposed structure is Mineworker – Induction Level 2. It is therefore appropriate that the properly fixed minimum rate of $492.20 (100%) for the C10 classification in the Metals Award be applied to this classification together with a residual component of $85.80. The total rate for the new classification is therefore $578, being the current Group B rate.”

43                  As I understand the position, the Full Bench intended that a person who was formerly classified as Group B (including a coalcutting machineman) would continue to receive $578 per week. However, only $492.20 would be treated as the person’s wage. The remaining $85.20 would be regarded as a “residual component” which would absorb future wage increases, so the mineworker would not be entitled to any increased remuneration under the Consolidated Award until future wage increases totalled more than $85.80 per week. Moreover, $492.20, rather than $578, would be the yardstick for calculating some non-wage elements of the mineworkers’ remuneration.

44                  In handing down its decision on 20 October 2000, the Full Bench directed the parties to confer about the orders necessary to give effect to its decision. Presumably, they did so. On 12 January 2001, the Full Bench made formal orders. They included substitution in the Consolidated Award of a new cl 18. Clause 18.6 set out the minimum rates, residual component and total payment for four different categories of mine worker. In relation to “Mineworker – Induction Level 2”, the figures were $492.20, $85.80 and $578.00 respectively. The Full Bench directed its order should come into force from the beginning of the first pay period commencing on or after 1 March 2001.

45                  On 5 December 2002, the Full Bench of the Commission again varied the Consolidated Award. It did so in response to an application made by two employers, and as a result of the institution of this proceeding. At paras 4–7 of its reasons, the Full Bench explained the background to its decision:

“Before dealing with the substance of the application it is appropriate to outline the circumstances which have led to it. The CFMEU and a number of individual applicants have instituted proceedings in the Federal Court of Australia in which they contend that the change in the classification structure brought about by the Commission’s order of 12 January 2001 had the effect of fundamentally changing the superannuation arrangements in the coal industry in Queensland and New South Wales.

On 24 July 2002 an application and a statement of claim seeking declarations was filed by the CFMEU and two individual applicants. Although the proceedings were originally commenced against the trustees of the Queensland Coal and Oil Shale Superannuation Fund and the Coalsuper Retirement Income Fund and two companies in the Rio Tinto Group, subsequent orders of the Court have joined as respondents a large number of coal mining companies including the applicants.

Commonwealth legislation obliges all employers to make superannuation contributions on behalf of their employees. The Superannuation Guarantee (Administration) Act 1992 (the Administration Act) governs the amount of the contribution required. By ss 5 and 6 of the Superannuation Guarantee Charge Act 1992 it is provided that a charge is imposed on any shortfall in the contributions required of an employer in a year and that the charge is in the amount of the shortfall.

Under the Administration Act contributions are calculated by reference to the actual earnings of each employee, but the obligation may be discharged by contributions pursuant to schemes established by state legislatures, provided those schemes comply with criteria set out in the Act. The applicants in the Federal Court proceedings contend that the legislative schemes established by the states of Queensland and New South Wales do not satisfy the criteria in the Commonwealth legislation and therefore, pursuant to the Administration Act, contributions must be based on actual earnings. In an additional, alternative contention the applicants allege that even if the schemes did at one time satisfy the criteria in the Administration Act, they ceased to do so when the old structure was removed from the award. It is this alternative contention which has led to the present application. In order to show the basis for the contention it is necessary to outline the operation of the relevant state and Commonwealth legislation.”

46                  The Full Bench then noted the terms of s 4(1) of the Queensland Act and the fact that it sets a rate of contribution by reference to the Consolidated Award wage rate for a coalcutting machineman. The Full Bench said the position in New South Wales was similar; contributions were calculated by reference to the weekly wage rate prescribed for Group B of the Interim Award and “(t)hat award has become the award which is the subject of the current application”.

47                  The Full Bench summarised its reasoning in the October 2000 decision. The summary including the following passage at paras 22-23:

“Turning to the rates which were prescribed for the new structure, the fixation was governed by the principles to be found in the Paid Rates Review Decision. Those principles are to be applied by the Commission in fixing minimum rates of pay. The requirements of those principles and their application to the case are dealt with in the decision and do not need to be repeated here. The salient point, however, is the requirement to identify the key classification in the award for the purposes of comparison with the tradesman fitter under the Metals Award. The Commission accepted the submissions of the employees, the CFMEU and the CEPU that the key classification in the old structure was the Group B classification. The rate for Group B at that time was $578 per week. The Bench decided that the key classification in the new structure should be the Mineworker Induction Level 2 . It fixed the rate for that classification at $578 per week, the rate for Group B in the old structure.

It is evident from the reasoning employed by the Commission in fixing the rates for the new structure that it found that the Mineworker - Induction Level 2 in the new structure should be the equivalent in work value terms to the Group B classification in the old structure. From there it is a small step, and an inevitable conclusion, that the work comprehended by the various classifications which were set out in Group B is now included in the classification Mineworker Induction Level 2/Mineworker - Training. It will be recalled that in the old structure the coalcutting machineman was included in Group B.” (Footnotes omitted)

48                  The Full Bench rejected an invitation by the applicant employers to fix the appropriate level of superannuation. However, it decided to clarify the order made on 12 January 2001. The Full Bench did this by inserting, at the end of cl 18 of the Consolidated Award, the following note:

“NOTE:

The Mineworker – Induction Level 2/Mineworker – Training classification includes the classifications formerly listed in Group B, including the classification of coalcutting machineman. This note is inserted in accordance with the decision of a Full Bench of the Commission dated 5 December 2002.”

49                  The operation of the order was back-dated to 12 January 2001.

The Commonwealth legislation

(i) The two Acts

50                  In 1992 the Commonwealth Parliament enacted two related statutes, the Superannuation Guarantee Charge Act 1992 (“the SGC Act”) and the SGA Act. The scheme intended to be implemented was explained in an Explanatory Memorandum circulated by the Treasurer, Mr John Dawkins MP, in relation to the Bills for the two Acts. The memorandum included the following:

“Purpose of the Bills

The Superannuation Guarantee (Administration) Bill 1992 and the Superannuation Guarantee Charge Bill 1992 implement the Government’s decision, announced in the 1991-92 Budget, to impose a tax on an employer where the employer provides superannuation support below a minimum level. The purpose of the Bills is to encourage employers to provide a minimum level of superannuation support for employees.

Administration

The Bills will be administered by the Commissioner of Taxation.

Commencement date

The Bills apply from 1 July 1992.

Level of employer superannuation support

All employers are potentially liable for the tax. However, the tax will not apply if the employer has provided the minimum level of superannuation support for each employee, or the employer is exempt in respect of a particular employee.

The minimum level of employer support will be expressed as a percentage of the employee’s earnings base. The employee’s earnings base is:

(a)               the earnings base on which contributions to a superannuation scheme are based (as defined in the formal documents of, or associated with, the scheme) provided that the employer was contributing to the scheme on 20 August 1991 and the earnings base used is no narrower than that used on 20 August 1991; or

(b)               the earnings base on which contributions to the scheme are based provided it is a base that the employer is required to use under an industrial award; or

(c)               a base not less than ordinary time earnings.”

51                  Mr Dawkins said an employee’s maximum earnings base would commence at $50,000 and be indexed annually. The starting percentage contribution required of employers would depend upon whether the employer’s payroll was more or less than $500,000; but in either event would rise to 7% in 1997-98, 8% in 1998-99 and 9% in 2000-01 and subsequent years. Certain exceptions were provided. Under the heading “Calculation of the tax”, Mr Dawkins said:

“If an employer does not provide the minimum level of superannuation support, a tax will be imposed on the employer. The tax will be equal to the superannuation guarantee shortfall. The superannuation guarantee shortfall will be made up of:

. the total of the individual superannuation guarantee shortfalls for all employees:

. an interest component: and

. an administration component.

An individual superannuation guarantee shortfall for an employee is the amount calculated by applying to the employee’s salary and wages the percentage difference between the minimum level of superannuation support and the actual employer superannuation support.

The interest component is a proxy for superannuation fund earnings. The rate of interest is based on the rate for underpayments and overpayments of income tax (currently 14.026% per annum). The interest will be calculated from the commencement of the financial year until the time the superannuation guarantee charge is payable.

The purpose of the administration component is to recover costs incurred in administering the tax. The component will consist of a flat amount of $50 plus an amount of $30 for each employee in respect of whom the employer has an individual superannuation guarantee shortfall.”

52                  Mr Dawkins also referred to redistribution of the tax. He said:

“There is a standing appropriation from the Consolidated Revenue Fund which allows for the redistribution of any tax collected.

The amount to be redistributed in respect of an employee is equal to the amount of the superannuation guarantee charge which relates to the particular employee. The administration component as well as certain penalties paid by the employer will not be redistributed.

The redistribution will be to a complying superannuation fund chosen by the employee to whom the redistribution relates. However, if the employee is deceased or is under age 55 and has retired due to illness the redistributed monies may be paid direct to the employee or the deceased employee’s representative.”

(ii) The SGA Act

53                  It is not necessary to refer to the provisions of the SGC Act. However, the case put to the Court by the applicants depends on provisions of the SGA Act that should be set out.

54                  The SGA Act comprises nine Parts. Part 1 (ss 1 to 5C) contains preliminary material. Part 2 (ss 6 to 15A) offers an explanation of terms used in the SGA Act. Some of these terms will need to be examined. Part 3 (ss 16 to 32) deals with the liability of employers to pay the superannuation guarantee charge. They are of critical importance. Parts 4 and 5 (ss 33 to 45) relate to administrative matters, Part 6 (ss 46 to 58) to collection and recovery of the charge and Part 7 (ss 59 and 62) to penalties. Part 8 (ss 63 to 71) provides for distribution of the shortfall component of the charge, in the manner explained by Mr Dawkins, and Part 9 (ss 72 to 80) contains miscellaneous provisions.

55                  It is convenient to start with Part 3, taking in references to the interpretative provisions in Part 2.

56                  Section 16 of the SGA Act provides that superannuation guarantee charge imposed on an employer’s superannuation shortfall for a year – that is, by the SGC Act – is payable by the employer. Section 17 specifies how shortfall is to be worked out:

“If an employer has one or more individual superannuation guarantee shortfalls for a year, the employer has a superannuation guarantee shortfall for the year worked out by adding together:

(a)                  the total of the employer’s individual superannuation guarantee shortfalls for the year; and

(b)                    the employer’s nominal interest component for the year; and

(c)                    the employer’s administration component for the year.”

57                  Section 18 deals with shortfall for the 1993-94 year. It is not relevant to the present case. Section 19 relates to 1993-94 and subsequent years. Relevantly, it provides:

“(1) An employer's individual superannuation guarantee shortfall in respect of an employee for a year (other than the 1992-93 year) is the sum of the employer's quarterly shortfalls in respect of that employee for that year.

(2) … an employer's quarterly shortfall in respect of an employee for a quarter is the amount worked out using the formula:

Total salary or wages paid Charge percentage for the

by the employer x employer for the quarter

to the employee for the 100

quarter

where:

Charge percentage for the employer for the quartermeans the number ascertained in relation to that employer and that quarter according to section 20 or 21 or that number as reduced, in respect of the employee, by section 22 or 23, as the case may be.

(3) If the total salary or wages paid by an employer to an employee in a quarter exceeds the maximum contribution base for the contribution period that corresponds to that quarter, the total salary or wages to be taken into account for the purposes of the application of subsection (2) in relation to the quarter is the amount equal to the maximum contribution base.” (Original highlighting)

58                  It will be noted that the scheme of this section is that quarterly shortfall for an employee is calculated by multiplying the total salary or wages paid by the employer to that employee by a percentage. The percentage is ascertained in accordance with s 20 (which applies to persons who were employers for the whole of the 1991-92 year) or s 21 (which applies to persons who were not).

59                  The differences between s 20 and s 21 are:

(i)                  in s 20 the “base year” is 1991-92, whereas in s 21 it is the first year commencing after 1 July 1992 in which the person is an employer for the whole year;

(ii)                in the employer’s charge percentage (before reduction under s 22 or s 23), but only in the years before 1996-97.

60                  Sections 22 and 23 allow for reduction of the percentage stipulated by s 20 or s 21 for the relevant year. Section 22 applies where the employer contribution is made to a “defined benefit superannuation scheme”, a term defined in s 6A of the SGA Act. However, it is agreed between the parties that only one of the employee applicants (Mr Stanford) is a participant in a defined benefit superannuation scheme and that there is no shortfall in his case. Consequently there is no need to refer further to s 22.

61                  Section 23 applies where the contribution is made to a scheme which is not a defined benefit superannuation scheme. This is the situation in relation to all the other employee applicants.

62                  Section 23 is extremely lengthy. However, as it is critical to the applicants’ case, I set out the pertinent parts.

“(1) This section applies only in relation to RSAs [retirement savings accounts] and to superannuation funds other than defined benefit superannuation schemes.

…

(2) Subject to subsections (6), (6A) and (7), if, in a contribution period:

(a) an employer is required by an industrial award or a law of a kind referred to in paragraph 13(1)(ab) or 14(1)(ab) to contribute for the benefit of an employee to a superannuation fund or an RSA; and

(b) the requisite contribution is a specified percentage of the employee's notional earnings base or a percentage of that base calculated in accordance with the award or law; and

(c) the employer contributes to a complying superannuation fund or an RSA for the benefit of the employee in accordance with the award or law;

the charge percentage for the employer, as calculated under section 20 or 21, in respect of the employee for the contribution period is reduced, in addition to any other such reduction made under this section or section 22, by the amount worked out using the formula:

A x B

where:

A is the amount of the percentage figure that expresses the contribution to the fund or the RSA referred to in paragraph (c) as a proportion of the total amount of the employee's notional earnings base:

(A) if the employee is employed under the industrial award or law for the whole of the contribution period—for the whole of that period; or

(B) if the employee is employed under the award or law for a part of the period—for that part of the period.

B is:

(A) 1; or

(B) if, in relation to the contribution period, the period for which the employee is employed by the employer is greater than the period of employment under the industrial award or law referred to in paragraph (a)—the fraction that represents the period of employment under the award or law as a proportion of the period of employment in the contribution period.

…

(5) Subject to subsections (6), (6A) and (7), if, in a contribution period:

(a) an employer contributes for the benefit of an employee to a complying superannuation fund or an RSA; and

(b) the contribution is not taken into account for the purpose of reducing the employer's charge percentage in respect of the employee for the contribution period under subsection (2), (3), (4), (4A) or (4D);

the charge percentage for the employer, as calculated under section 20 or 21, in respect of the employee for the contribution period is reduced, in addition to any other such reduction made under this section or section 22, by the amount worked out using the formula:

A x B

where:

Ais the amount of the percentage figure that expresses the contribution to the fund or the RSA referred to in paragraph (a) as a proportion of the total amount of the employee's ordinary time earnings:

(A) if the employer contributes for the benefit of the employee to the complying superannuation fund or the RSA for the whole of the contribution period—for the whole of that period; or

(B) if the employer contributes for the benefit of the employee to the fund or the RSA for a part of the period—for that part of the period;

B is:

(A) 1; or

(B) if, in relation to the contribution period, the period for which the employee is employed by the employer is greater than the period for which the employer contributes for the benefit of the employee to the fund or the RSA referred to in paragraph (a)—the fraction that represents the period for which the employer contributes to the fund or the RSA as a proportion of the period of employment in the contribution period.

…

(9) An industrial award, an occupational superannuation arrangement, a law of a kind referred to in paragraph 13(1)(ab) or 14(1)(ab) or a superannuation scheme is to be taken not to specify the requisite employer contribution as a percentage of an employee's notional earnings base if the award, arrangement, law or scheme:

(a) determines the earnings of the employee by reference to which the requisite employer contribution is to be calculated by specifying an amount of money; and

(b) makes no provision for adjustment of that amount by reference to changes in the earnings of an employee.” (Original highlighting)

63                  The term “industrial award” is defined by s 6 of the SGA Act to include an industrial award or determination made under a Commonwealth, State or Territory law and also an industrial agreement approved or registered under such a law. The reference in s 23(2)(a) to a “law of a kind referred to in paragraph 13(1)(ab)” is erroneous; there is no such paragraph. However, there is a para 14(1)(ab). It refers to “a law of the Commonwealth, a State or a Territory for the benefit of the employee in relation to a contribution period”.

64                  The term “notional earnings base” (used in the s 23(2) explanation of the formula) is defined by s 13, s 13A, s 13B or s 14 of the SGA Act, depending on the employer’s circumstances. The two main situations are an employer, not otherwise dealt with, who (or whose predecessor) was contributing to a current superannuation fund immediately before 21 August 1991 (s 13) and an employer, not otherwise dealt with, who was not (s 14).

65                  Section 13(2) defines “notional earnings base” (subject to two irrelevant exceptions) as:

“… the reference earnings in relation to the current employee that, under the applicable authority as in force on:

(a) the first day of the contribution period; or

(b) the first day of employment;

whichever is the later, constitute the earnings by reference to which the requisite employer contribution is to be calculated in relation to the current employee.”

66                  That definition leads to s 13(5), where the term “reference earnings” is defined, in relation to an employee, in the following way:

“(a) if the employer is contributing for the benefit of the employee in accordance with an industrial award, or a law of the Commonwealth, a State or a Territory (other than this Act), that specifies the requisite employer contribution by reference to the earnings of a member of a class of employees identified by the award or law—those earnings; and

(aa) if the employer is contributing for the benefit of the employee in relation to a contribution period to the superannuation fund known as the Seafarers' Retirement Fund that was established by a trust deed on 3 May 1973—the benchmark rate stated in the trust deed; and

(ab) if the employer is contributing for the benefit of the employee in relation to a contribution period to the superannuation fund known as the Aberfoyle Award Superannuation Fund that was established by a trust deed on 18 May 1987—the amount that is the earnings base for the purposes of the Aberfoyle Limited (Superannuation) Award 1987; and

(b) in any other case—the earnings of the employee.”

67                  Section 14 contains a different definition of “notional earnings base”, for the purposes of that section. However, this definition does not apply if the meaning of the expression “notional earnings base” is dealt with, in relation to a particular employee, by s 13 or s 14(1A). Moreover, s 14 provides:

“(2A) If:

(a)   the employer is contributing for the benefit of the employee to the fund in accordance with an industrial award, or a law of a kind referred to in paragraph (1)(ab), that was operative immediately before 21 August 1991; and

(b)   section 13 would operate to determine a notional earnings base in relation to the employee if the employer had been so contributing immediately before 21 August 1991;

the notional earnings base in relation to the employee is the notional earnings base referred to in paragraph (b).

“(2B) If:

(a) the employer is contributing for the benefit of the employee to the fund in accordance with the agreement referred to in Order No. 292 of 1992 of the Coal Industry Tribunal of New South Wales and known as the New South Wales Coal Mining Industry Statutory Superannuation Fund (Salary Sacrifice) Agreement; and

(b) section 13 would operate to determine a notional earnings base in relation to the employee if the employer had been so contributing immediately before 21 August 1991;

the notional earnings base in relation to the employee is the notional earnings base referred to in paragraph (b).”

68                  It is not immediately obvious which para (b) is referred to in the final phrase of these subsections. However, it seems to be common ground that this was intended as a reference to para (b) of s 14(2A) or s 14(2B), as the case might be, and, therefore, is a reference back to s 13. It is certainly common ground that, for the purposes of the application of s 23 to this case, the notional earnings base is to be determined under s 13 rather than s 14. Although s 14(2B) covers only the New South Wales position, s 14(2A) covers both States.

The proceeding

69                  When this proceeding was instituted, there were three applicants: CFMEU and two of its members employed in the coal-mining industry. There were four respondents: the two superannuation companies and two Queensland-based coal-mining companies. However, as the trial date got progressively closer, other coal-mining companies sought to be joined as respondents. They perceived their interests to be affected by the proceeding. I allowed them to be joined, although a few withdrew from active participation prior to the hearing.

70                  At a directions hearing, counsel for some respondents suggested CFMEU might not have standing to claim the relief it sought. Accordingly, application was made to add additional applicants, being one CFMEU member employed by each of the respondent coal-mining companies. This application was granted and amendments were made. It was presumably as a result of this that no argument about standing was raised at the hearing. However, it was strongly argued, especially by counsel for the 39^th to 44^th respondents, that the Court lacks jurisdiction to determine the proceeding as it does not involve a “matter”, within the meaning of Chapter III of the Constitution and s 39B(1A)(c) of the Judiciary Act 1903; alternatively, if it has jurisdiction, the Court ought to decline to exercise that jurisdiction on discretionary grounds.

71                  At the hearing, Mr S Crawshaw SC and Mr M Gibian appeared for the applicants. Neither of the two first-named respondents, the superannuation companies, took an active part in the hearing. However, most of the coal-mining companies disputed the applicants’ arguments. Those companies were represented by five separate teams of counsel. Mr J N West QC and Mr G J Hatcher SC appeared for the 3^rd and 4^th respondents; Mr R J Buchanan QC and Mr B K Cross for the 5^th and 6^th respondents; Dr C N Jessup QC and Ms D Harding for the 7^th, 8^th, 9^th and 45^th respondents; Mr M Goot SC and Mr M J Heath for the 10^th to 38^th respondents (excluding the 18^th, 25^th, 29^th, 34^th and 36^th respondents who were unrepresented); and Mr J W Durack SC and Mr A B Gotting for the 39^th to 44^th respondents. The Commissioner of Taxation was represented by Mr A Robertson QC and Mr M J Leeming.

The applicants’ case

(i) The claimed relief

72                  By an Amended Application filed on 29 November 2002, the applicants claimed the following relief:

“1. A declaration that, in respect of the applicants listed in Part A of the attached Schedule, the charge percentage applicable to the respondents designated in Part A of the attached Schedule under the Superannuation Guarantee (Administration) Act 1992 (Cth) is not reduced by the operation of section 23(2) of that Act as a result of those respondents making superannuation contributions in accordance with the Coal and Oil Shale Mine Workers (Superannuation) Act 1941 (NSW).

2. A declaration that, in respect of the applicants listed in Part A of the attached Schedule, the charge percentage applicable to the respondents designated in Part A of the attached Schedule under the Superannuation Guarantee (Administration) Act 1992 (Cth) is reduced only by the operation of section 23(5) of that Act as a result of those respondents making superannuation contributions in accordance with the Coal and Oil Shale Mine Workers (Superannuation) Act 1941 (NSW).

3. A declaration that, in respect of the applicants listed in Part B of the attached Schedule, the charge percentage applicable to the respondents designated in Part B of the attached Schedule under the Superannuation Guarantee (Administration) Act 1992 (Cth) is not reduced by the operation of section 23(2) of that Act as a result of those respondents making superannuation contributions in accordance with the Coal and Oil Shale Mine Workers’ Superannuation Act 1989 (Qld).

4. A declaration that, in respect of the applicants listed in Part B of the attached Schedule, the charge percentage applicable to the respondents designated in Part B of the attached Schedule under the Superannuation Guarantee (Administration) Act 1992 (Cth) is reduced only by the operation of section 23(5) of that Act as a result of those respondents making superannuation contributions in accordance with the Coal and Oil Shale Mine Workers’ Superannuation Act 1989 (Qld).

5. An order that the each [sic] of the respondents listed in Part A and B of the attached Schedule determine whether they have a superannuation guarantee shortfall under the Superannuation Guarantee (Administration) Act 1992 (Cth) in respect of the applicant who is the employee of that respondent on the basis that their charge percentage is reduced as a result of contributions made under the NSW Act or Queensland Act only by the operation of section 23(5) of that Act and submit a superannuation guarantee statement to the Commissioner of Taxation in respect of any superannuation guarantee shortfall.

6. An order that a writ of mandamus issue to the Commissioner of Taxation requiring the Commissioner to undertake an assessment of any superannuation guarantee shortfall for the respondents and in so doing determine in accordance with law the charge percentage applicable to the respondents by determining that the charge percentage is reduced as a result of contributions made under the NSW Act or Queensland Act only by operation of section 23(5) of the Superannuation Guarantee (Administration) Act 1992 (Cth).”

73                  It should be noted – and this point was much emphasised by counsel for the various coal-mining companies – there is no claim for a declaration that any of their clients had a superannuation guarantee shortfall. Nor did the applicants make such an allegation in their statement of claim. The closest they went to doing this were the allegations in paras 31 and 44 of the statement of claim. Paragraph 31 reads:

“At least since 1 July 2001, superannuation contributions made only in accordance with the NSW Act were not sufficient to reduce the NSW respondents’ charge percentage in respect of the NSW applicants to zero and there was a superannuation guarantee shortfall unless sufficient supplementary superannuation contributions were made by the respondents for the benefit of those applicants.”

74                  Paragraph 44 was identical, save that it substituted references to “Queensland”, for “NSW”, wherever appearing.

(ii) The applicants’ submissions

75                  In a filed document entitled “Applicants’ Outline of Contentions”, counsel for the applicants identify what they call their “primary contention” and an “alternative contention”.

76                  The primary contention is expressed in this way:

“The applicants [sic] primary contention is that section 13(5)(a) of the SGA Act does not operate to determine the applicant’s ‘notional earning base’ because the NSW and Qld Acts do not specify the requisite employer contribution by reference to the earnings of a member of a class of employees.

As a consequence (or in any event), the NSW and Qld Acts are not laws under which the requisite contribution is a specified percentage of that ‘notional earnings base’ and contributions made under those Acts do not reduce the charge percentages of the respondents by operation of s 23(2) of the SGA Act.”

77                  The alternative contention is as follows:

“The applicants’ alternative contention is that even if it is found that the NSW and Qld Acts satisfied the requirements of ss 13(5)(a) and 23(2) of the SGA Act, the Acts ceased to do so from 1 March 2001.”

The primary contention

(i) The applicants’ argument

78                  At the hearing, counsel for the applicants argued that “neither the NSW Act nor the Queensland Act is a law that specifies the requisite employer contribution as a percentage of the ‘notional earnings’ base for the purposes of s 23(2) of the SGA Act”. They concede paras (a) and (c) of that subsection are satisfied but they contend para (b) is not.

79                  Section 23(2)(b) requires that “the requisite contribution is a specified percentage of the employer’s notional earnings base or a percentage of that base calculated in accordance with [an industrial] award or law”. Counsel for the applicants say it is, therefore, “necessary to examine the total contribution required by a law and determine whether it is a percentage of the ‘notional earnings’ base as determined by the Act”.

80                  It may be recalled that s 13(2) of the SGA Act defines “notional earnings base” to mean “the reference earnings in relation to the current employee” in force under the “applicable authority” at a specified day. The term “applicable authority” includes an industrial award and a State law: see s 13(5). The applicants argue, however, that payments under the NSW Act are not contributions within the meaning of para (a) of the definition of “reference earnings” in s 13(5), because that part of the contribution which is calculated by reference to a percentage (as distinct from being a specified money sum) is based on the “reference rate”, a rate based on the weekly wage rate of a hypothetical Group B employee. Counsel say there is no necessary relationship between that rate and the actual earnings of any employee. Accordingly, the reference earnings of the relevant employees are not to be determined under para (a) of the definition in s 13(5) of the SGA Act. As it is common ground that paras (aa) and (bb) of the definition are inapplicable, counsel for the applicants say para (b) applies. It is a residue provision: “in any other case – the earnings of the employee”.

81                  Counsel for the applicants assert their submission has practical importance. In their written submissions they contend, I think correctly, that recent Commonwealth industrial relations legislation “has revolutionised the concept of awards since the SGA [sic] was enacted in 1992”. They refer to the 1993 amendments to the Industrial Relations Act 1988 (Cth) “that first introduced the notion of an award being a safety net underpinning direct bargaining, while preserving the ability to make paid rates awards”. Counsel say:

“The idea that an award rate could any longer bear any relationship to earnings was effectively ended with the passage of the Workplace Relations Act 1996 (Cth). The focus on the award rate of pay only being a minimum safety net was reinforced with only certain allowable matters that could be the subject of an award. Provisions relating to the making of paid rates awards were abolished. Provisions were also introduced requiring awards to provide for flexibility, productivity and efficiency.

The amendments were directed at making the award system a safety net system providing merely minimum wages and conditions. Focusing the award system on the minimum safety net function involved changes to the role of the Commission, the scope of awards and arrangements for the adjustment of awards.”

82                  Counsel detail the effect of the 1996 legislation and examine the impact of the changed policy upon workers in the coal-mining industry. Much of this material is set out in judgments of members of the High Court of Australia in Re Pacific Coal Pty Limited; Ex parte Construction, Mining and Energy Union [2000] HCA 34; 203 CLR 346.

83                  As I understand counsel’s point, it is that fairness requires that, in the application of s 13 of the SGA Act, attention needs to be given to the actual earnings of the employee, rather than the (probably lesser) sum specified by the award as wages payable to a member of a class of employees.

84                  Secondly, counsel say that, even if contributions made by employers under the NSW Act fall within para (a) of the definition of “reference earnings” in s 13(5) of the SGA Act, the contribution required of each employer includes a fixed money sum ($31.20 per week). They argue the contribution required to be made by the employer is, therefore, “not a percentage of anything”. It follows, they suggest, that para (b) of s 23(2) of the SGA Act has no application to contributions made by New South Wales employers; with the result that s 23(5) applies. The significance of that result would be that the charge percentage reduction effected by s 23 is to be calculated by reference to the relationship between the employer’s superannuation contributions and the individual employee’s actual ordinary time earnings, rather than the employee’s “notional earnings base” ascertained under s 13(2).

85                  In relation to Queensland employees, the applicants put only the first argument. They say the effect of the Queensland Act is to fix employer contributions by reference to the award wage for a particular classification of employees (coal-cutting machineman); that is not a specification of contribution “by reference to the earnings of a member of a class of employees identified by the award or law”.

86                  The word “earnings” is not defined in the SGA Act. However, counsel for the applicants argue it should be given its ordinary English meaning. They cite The New Shorter Oxford English Dictionary (“the amount of money earned; income from work etc”) and Macquarie Dictionary (“money earned; wages; profit”). Counsel also refer to judicial authorities, especially the comment of Lord MacNaughten in Abram Coal Company Limited v Southern [1903] AC 306 at 307-308 about “earnings” meaning “the full sum for which a man is engaged to work”. That statement was made in a workers’ compensation context. Counsel argue the phrase “earnings of a member of a class of employees”, in para (a) of the definition in s 13(5) of the SGA Act, means “the full sum that an employee receives for being engaged to perform work and cannot be limited to a minimum award rate of pay that does not reflect the actual rate of pay received, either for ordinary hours or all hours worked”.

87                  Counsel for the applicants recognise that the definition in para (a) of s 13(5) is not concerned with the earnings of an individual employee, but rather with the earnings of a member of a class of employees; the earnings of particular employees are irrelevant. Mr Crawshaw acknowledged, in oral argument, that this consideration makes it difficult to give to the word “earnings” its full ordinary English meaning; money earned is likely to vary from one employee to another. However, he offered two comments on the difficulty. The first comment was that the practical impossibility of calculating the “earnings” of a member of a class of employees is an indication that para (a) does not apply to this case; therefore, “reference earnings” must be calculated in accordance with para (b) of the definition; that is, the actual earnings of the particular employee. Second, if para (a) does apply, the word “earnings” requires the inclusion in the calculation of the value of all remuneration benefits, whether by way of wages or otherwise, payable under the award to a standard member of the class.

(ii) The respondents’ argument

88                  All counsel representing coal-mining companies submit the provision to be used, in determining the reference earnings of relevant employees, is para (a) of the s 13(5) definition, not para (b). They accept it is necessary to determine the earnings of a standard member of the class of employees. However, they say, in this context, “earnings” really means minimum wages. Counsel argue employees are likely to have different work patterns, so there will be differences in the extent to which they take advantage of non-wage benefits provided by the award. If the word “earnings” is treated as extending beyond minimum wages, it is argued, there would be no possibility of determining the earnings of a member of a class of employees.

89                  Counsel for the coal-mining companies say the applicants’ argument leading to the conclusion that this case is covered by para (b) of the definition in s 13(5) would apply equally in every other case; so para (a) would be otiose. However, it must be assumed para (a) was enacted for a purpose. If it is possible to do so, the paragraph should be construed in such a manner as to give it a real role in the statutory scheme.

90                  In the course of oral submissions, Mr West said the task, in applying the definition of “reference earnings” in s 13(5) of the SGA Act, is first to determine whether the employer is contributing for the benefit of the employee in accordance with an industrial award or a statute. If so, it is necessary to ascertain whether the contribution is specified “by reference to the earnings of a member of a class of employees identified by the award or law”. As I understand the submission, it does not matter whether or not the particular employee is a member of the relevant class of employees, although presumably that would ordinarily be the case; certainly, the yardstick is not the earnings of the particular employee.

91                  The third and fourth respondents, for whom Mr West and Mr Hatcher appear, are both Queensland employers. Consequently, those counsel are not concerned with the intricacies of the NSW situation. They say the Queensland position is straightforward. The only identified contribution is calculated on a percentage basis, being 7.5% of the award wage for a coalcutting machineman under the Consolidated Award. They claim additional amounts are in fact contributed by their clients, on behalf of employees, to a complying superannuation fund; these payments may be taken into account under s 23(5) of the SGA Act.

92                  Mr Buchanan and Mr Cross appear for New South Wales employers. They make the important basic submission that, “although the amount of a shortfall (and hence the amount of the tax payable) is calculated by reference to total salary or wages paid by the employer to the employee, the mechanism for reducing shortfall does not depend, in most cases, upon any reference to the total salary or wages paid by the employer to the employee”. They say subss (2) to (5) of s 23 of the SGA Act each specifies circumstances directing reduction of the charge percentage. In the present case, they submit, notional earnings should be calculated by reference to para (a) of the definition in s 13(5) of the SGA Act, the term “member of a class of employees” being understood as a representative or typical member of the relevant class. The relevant class is the group embraced by the specified award classification.

93                  Mr Buchanan and Mr Cross contend the reference earnings applicable to the New South Wales employees in the present case comprises contributions calculated (on a percentage basis) having regard to the “reference rate” determined by the Corporate Trustee under s 2(5) of the NSW Act and contributions under CoalSuper Trust Deed. Counsel recognise the latter contributions are not calculated as a percentage of anything. But they say this is immaterial: “it is sufficient if contributions (not necessarily all contributions) are required to be calculated this way”.

94                  Counsel say it does not matter that percentage rates under the NSW Act are fixed by the Corporate Trustee, rather than directly by the statute. In their written submissions, counsel submitted:

“The Corporate Trustee has no independent discretion in the specification of the reference rate which provides the factum on which the percentage calculations directed by section 19(2B) to (2E) of the NSW Act proceed.

Section 2(5) of the NSW Act contemplates that the parties to the Restructuring Agreement may agree upon a rate other than the weekly rate of wage prescribed for Group B. In such a circumstance the Corporate Trustee must adopt that rate. However, it seems clear, read in context, that the ‘rate’ must be an alternative weekly rate of wage for a class of employees. Section 2(5)(b) of the NSW Act provides that the date of the Corporate Trustee’s determination is to be the date from which the ‘specified rate’ is ‘payable as wages to loadermen or any class of loadermen’. Notwithstanding the apparent antiquity of the description of the class, it is clear that the rate must be a rate of wage for a class of employees.

Whatever the rate, the obligation to make percentage contributions of the reference rate remains and, it is submitted, renders the NSW Act compliant with section 23(2) of the SGA Act.

Although the Corporate Trustee may fix a new special rate (section 19(7) of the NSW Act), should the special rate, in the future, not be fixed as a percentage of the reference rate, that would not render the NSW Act non-compliant with section 23(2) of the SGA Act.”

95                  Dr Jessup and Ms Harding drew attention to the Explanatory Memorandum for the Taxation Laws Amendment (Superannuation) Bill 1992, the Bill that introduced early amendments to the SGA Act. In chapter 8, and under the heading “Background to the legislation”, the memorandum said:

“Section 13 (and section 14) of the Act set out the meaning of ‘notional earnings base’. Essentially, for an employee to have an earnings base other than ordinary time earnings, the requisite employer contribution currently must be determined under an award, arrangement or superannuation scheme and must be based on the earnings of that employee.” (Original emphasis)

The memorandum gave an explanation of the proposed amendments:

“Subsection 13(1) of the Act will be amended so that contributions made under a federal, state or territory law in place prior to 21 August 1991 will have an earnings base comparable to that which would have applied had the contributions been made under an award, agreement or superannuation scheme in place prior to that date. [Subclause 78(a): Paragraph 13(1)(ab)]

Subsection 13(2) will then be amended, and subsection 13(5) added, to remove the requirement that a notional earnings base be related only to the earnings of the employee in question. An earnings base under awards, or laws, in place prior to 21 August 1991 will also be acceptable if related to the earnings of a member of a class of employees (the ‘standard employee’), even if the employee in question was not in that class. [Subclause 78(b) and 78(d): Subsections 13(2) and 13(5)]

For example, an award which required a contribution for all drivers of an amount equal to 4% of the earnings of a Grade 1 driver, would have an earnings base for all drivers (including those who weren’t Grade 1 drivers).” (Original highlighting)

96                  The memorandum referred to a new s 25A, dealing with the situation where an award specified a monetary contribution that was required to be adjusted if there was an increase in earnings. That section was repealed in 1995.

97                  Dr Jessup and Ms Harding take a different position to Mr Buchanan and Mr Cross in relation to the contributions required of employers pursuant to s 19(2A) and s 19(3) of the NSW Act.

98                  It will be recalled that s 19(2A) requires a contribution either at the “special rate” or the “pension CPI contribution” rate, depending upon whether or not the employee is a member of Part 3 of CoalSuper. Each of these rates is fixed by the Corporate Trustee, under s 19(7) and s 19AD respectively. Although the Corporate Trustee is required, in each case, to consider an actuarial report, neither rate is required to be fixed by reference to earnings. Accordingly, Dr Jessup and Ms Harding do not contend the charge percentage is reduced under s 23(2) of the SGA Act by contributions made under s 19(2A) or s 19(3) of the NSW Act. They accept the item of $31.20 per week, payable under cl 2.4.1 of the CoalSuper Trust Deed and s 19(3) of the NSW Act, is not to be taken into account under s 23(2). However, they contend that payments pursuant to the salary sacrifice agreement must be taken into account, these payments being calculated as a percentage of the wage fixed by the Interim Award for Group B employees. They point out that the salary sacrifice agreement was ratified by the Tribunal. The argue, therefore, that payments under the salary sacrifice agreement are “required by an industrial award”.

99                  Dr Jessup and Ms Harding argue “the obligation [of employers] to contribute a flat dollar amount under s 19(2A) or s 19(3) of the NSW Act does not mean that s 23(2) of the SGA Act cannot apply to a contribution made under s 19(2E)”. They contend that is a figure calculated as a percentage of the Reference Rate, because each subsection imposes “a separate, discrete, obligation to contribute, depending on the particular circumstances of the employee”.

100               Dr Jessup and Ms Harding put submissions in relation to the Queensland situation, similar to those of Mr West and Mr Hatcher.

101               The clients of Mr Goot and Mr Heath are all New South Wales employers. Their submissions focus on the detail of the New South Wales agreements and legislation. They put submissions about them consistent with those of Mr Buchanan and Mr Cross.

102               Mr Durack and Mr Gotting represent many Queensland employers. In relation to the applicants’ primary contention, they adopt the submissions put by other respondents’ counsel.

(iii) Conclusions on “reference earnings” (s 13(5))

103               I accept the applicants’ contention that the word “earnings” usually connotes more than wages; in most contexts, it is apt to refer to an employee’s total remuneration. However, it is clear, both as a matter of construction and by reference to legislative history, that the phrase “earnings of a member of a class of employees”, in s 13(5)(a) of the SGA Act, is not a reference to the earnings of any particular employee. It is a reference to the earnings of what has been called a “standard” or “representative” employee; that is, one who shares the characteristics of all other members of the selected class, in this case their earnings characteristics. This means idiosyncratic earnings must be left out of account.

104               However, contrary to submissions made on behalf of respondent employers, I do not think it follows that “earnings” must always be limited to wages, so-called. There may be a financial benefit available to all members of the relevant class, in their capacity as employees; for example, an allowance for compulsory overtime or shift work or for working in dirty or dangerous conditions. I see no reason why such benefits, which are common to every member of the class, should not be described as “earnings” of a standard member; and, therefore taken into account under para (a).

105               Of course, the situation is different in relation to benefits that vary from employee to employee; for example, payments for voluntary overtime or shift work. It cannot be said they are within the earnings of a standard member.

106               The applicants’ submission that “reference earnings” are to be calculated, in relation to coal-mining employees, under para (b) of s 13(5), rather than para (a), relies upon an interpretation of the word “earnings”, in para (a), that includes all benefits taken by an individual employee. It is said that, on that interpretation, para (a) is unworkable and, therefore, inapplicable. If one rejects the postulated interpretation, as I do, the claimed unworkability disappears and there is no reason to doubt the applicability of the paragraph. Accordingly, I reject the applicants’ contention that reference earnings are to be calculated under para (b), rather than para (a), of the definition in s 13(5) of the SGA Act.

(iv) Conclusions on s 23(2)(b)

107               I turn to the applicants’ argument that s 23(2) has no application to the reduction of charge percentage for the relevant employees; that is, for those whose contribution is to a fund other than a defined superannuation scheme. It is conceded by Mr Crawshaw that paras (a) and (c) of s 23(2) are satisfied in this case. The issue concerns para (b). Mr Crawshaw points out the contribution of $31.20 per week made by New South Wales employers pursuant to s 19(3) of the NSW Act (and ultimately cl 2.4.1 of the CoalSuper Trust Deed) is not specified as a percentage of anything; it is certainly not a “specified percentage of the employee’s notional earnings base or a percentage of that base calculated in accordance with the award or law”.

108               All parties accept that the figure of $31.20 is not a specified or calculated percentage, within the descriptions contained in para (b); but there is a dispute as to what flows from this. On the one extreme, the applicants argue (if I correctly understand their counsel) that, in consequence, none of the contributions made by New South Wales employers falls within para (b); the reason being that the proper approach is to look at the contribution as a whole and ask whether that whole contribution is a percentage of the employee’s notional earnings base or a percentage of that base calculated in accordance with the award or law. The effect of the $31.20 element is that this question must be answered in the negative. Therefore, counsel say, it must be determined that para (b) is not satisfied and subs (2) is inapplicable. The intervening subsections being admittedly inapplicable, counsel argue the charge percentage reduction is to be calculated under subs (5).

109               On the other extreme (as I understand their argument) counsel for some respondents contend that it is enough that at least one element of the employer’s total contribution is calculated on a percentage basis; if so, all elements of the contribution are to be taken into account in the s 23(2) calculation.

110               It seems to me the correct view lies between these extremes and accords with the submission made by Dr Jessup and Ms Harding. It is erroneous to suppose an employer necessarily makes only a single “contribution” to a superannuation fund on behalf of a particular employee. Depending upon the circumstances, an employer may make a number of separate contributions, each of them arising out of a different legal obligation. One or more contributions may comply with para (b) of s 23(2), and thereby bring subs (2) into play in relation to those contributions; the charge percentage being reduced under s 23(2) to the extent of their value. Other contributions may not comply with para (b), with the result that subs (2) does not apply to them. But those contributions may be taken into account in making a s 23(5) computation that further reduces the charge percentage.

111               Subject to the applicants’ alternative contention about the effect of the March 2001 award variation, it seems clear that the contribution required of employers by s 19(2E) of the NSW Act is a “specified percentage of the employees’ notional earnings base”, within the meaning of s 23(2)(b). That contribution is calculated “at a weekly rate equal to 5 per cent of the Reference Rate (less the pension CPI contribution)”. The Reference Rate is specified by the Corporate Trustee from time to time but the specification is required to respond directly to any variation in the weekly wage rate for Group B employees under the Interim Award. Accordingly, the contribution is a percentage of the employee’s notional base calculated in accordance with that award.

112               The situation is different in relation to the payment required under s 19(2A)(a) of the SGA Act. That paragraph requires “contributions at a weekly rate equal to the special rate”. The term “special rate” is defined by s 19(7) to mean a rate fixed from time to time by the Corporate Trustee after considering an actuary’s report. As it happens, the current special rate is a specified percentage of the Reference Rate. But it is not required to be a percentage of anything. Accordingly, that part of the employer’s total contribution falls outside para (b) of s 23(2).

113               I summarise the New South Wales situation by saying that the only part of the employer’s total contribution that falls within s 23(2), and then only subject to the applicants’ alternative argument, is the payment of 5% of the Reference Rate (less pension CPI contribution) required by s 19(2E). The other elements identified in the table at para 37 above fall outside s 23(2), but they are to be taken into account in relation to s 23(5).

114               The only aspect of the Queensland employers’ contributions that has been the subject of debate in this case is that portion of it which is equal to 7.5% of the award wage of a coalcutting machineman under the Consolidated Award. Subject to the applicants’ alternative argument, that is obviously a contribution calculated as a percentage of the employee’s notional earnings base calculated in accordance with an award. Accordingly, it falls within s 23(2)(b) of that Act. The charge percentage is reduced by s 23(2) to the extent of that contribution.

The alternative contention

(i) The applicants’ argument

115               The applicants’ alternative argument is that even if “the NSW and Qld Acts satisfied the requirements of ss 13(5)(a) and 23(2) of the SGA, the Acts ceased to do so from 1 March 2001”. In order to evaluate this argument, it is necessary to note relevant events since 1 March 2001 and consider their significance.

116               In para 44 above, I noted the order made by the Full Bench of the Commission on 12 January 2001 (effective from 1 March 2001) substituting the new category of “Mineworker – Induction Level 2” for the previous category of Group B workers, which included persons employed as a coalcutting machineman.

117               The effect of that award variation was that there was no longer an “award wage for a coalcutting machineman” under the Consolidated Award, as assumed by s 4 of the Queensland Act: see para 39 above.

118               The position in New South Wales was similar, but not identical. In para 34 above, I noted that the “Reference Rate”, used under the NSW Act for the calculation of contributions under s 19(2B) and (2C) (four per cent or five per cent, depending on circumstances), was related to the weekly rate for Group B employees under the Interim Award. That award was set aside, by an order made by a Full Bench of the Commission on 19 June 2000 and effective that day. According to a statement made by the Full Bench of the Commission in its decision of 5 December 2002, that was done on the basis that the Interim Award had been subsumed by the Consolidated Award.

119               According to counsel for the applicants, the effect of rescission of the Interim Award was that the Corporate Trustee no longer had power, under s 2(5) of the NSW Act, to vary the Reference Rate, which is the basis of the contribution payable under s 19(2E) of the NSW Act; as in Queensland, the statutory provision became unworkable.

120               In the result, counsel argue it is incorrect to say the contributions required of employers by s 19(2E) of the NSW Act and s 4(1) of the Queensland Act fall within s 23(2)(b), at least after 1 March 2001. Counsel say these contributions cannot constitute “a specified percentage of the employee’s notional earnings base” because the definition of “notional earnings base” in s 13(2) is based upon the definition of “reference earnings” in s 13(5) and para (a) of that definition requires the relevant class of employees to be identified by an award or a statute. Once the relevant class disappears from any award, there is no such identification.

121               The second limb of s 23(2)(b) refers to “a percentage of that base calculated in accordance with the award or law”. Once again, say counsel, if para (a) of the s 13(5) definition does not apply, that paragraph cannot be used as a source of the reference earnings which translates in s 13(2) to the notional earnings base.

122               In this context also, counsel for the applicants make an observation about consequences. As I understand counsel, there are two points. First, the old Group B classification was linked to the particular job performed by the employee, whereas the new classification, “Mineworker – Induction Level 2” is a “single stream classification which does not contain any demarcation relating to the performance of work”. Second, and perhaps more important, under the old form of the award, the award wage, upon which contribution was to be calculated, was $578 per week; under the varied award, only $492.20 of that sum is treated as wages.

123               Counsel for the applicants deal with the effect of the rescission of the Interim Award and the variation of the Consolidated Award. They say:

“Under the NSW Act, the ‘reference rate’ is the rate specified by the Corporate Trustee following a variation to the Group B rate in the Award. Following the deletion of the Group B rate from 1 March 2001 there is no further trigger for the Corporate Trustee to specify a new rate. Indeed the named award no longer exists because it was rescinded by the Full Bench in its decision of 18 May 2000. It is submitted that the rate by reference to which contributions are calculated would thereby be frozen. It is not possible to substitute a new classification for the classification referred to in section 2(5) of the NSW Act.

Under the Queensland Act, the requisite contributions are specified as a simple percentage of the award wage for the coalcutting machineman classification. The Act becomes a nonsense in circumstances in which that classification ceases to exist. It is submitted that in these circumstances there is no rate in the Queensland Act by reference to which contributions are calculated. Again, it is not possible to simply substitute a new classification for the words ‘coalcutting machineman’ in section 4 of the Queensland Act.”

124               Counsel for the applicants contend the same problem arises in using the salary sacrifice agreement (even if it should be regarded as an “award”) as a source of contribution for the purposes of the s 13(5) definition; the amount payable by employers under the salary sacrifice agreement is a specified percentage of the Reference Rate; and that term is defined by the salary sacrifice agreement as meaning Group B under the Consent Award.

(ii) The respondents’ argument

125               Counsel for the respondent coal-mining companies submit the rescission of the Interim Award and the variation of the Consolidated Award had no practical significance. A number of reasons are advanced, the shortest and clearest of which is the effect of the legislation of each State dealing with the application of their statutes to repealed or amended provisions.

126               Section 68(3) of the Interpretation Act 1987 (NSW) provides:

“… in any Act or instrument:

(a) a reference to an Act that has been repealed and re-enacted, with or without modification, extends to the re-enacted Act, as in force for the time being, and

(b) a reference to an instrument that has been repealed and re-made, with or without modification, extends to the re-made instrument, as in force for the time being,

and a reference to a provision of the repealed Act or instrument extends to the corresponding provision of the re-enacted Act or the re-made instrument, as the case may be.”

127               The word “Act” is defined, by s 68(4)(a) of the Interpretation Act, to include a Commonwealth Act. Section 68(4)(b) states that an “instrument” includes “an instrument under such an Act or Ordinance”. The argument is that the Interim Award was an “instrument” under a Commonwealth Act, the Workplace Relations Act; accordingly, the reference in the NSW Act to the Interim Award extends to the re-made instrument, the Consolidated Award, and the reference to Group B employees in the Interim Award extends to the corresponding provision, Mineworker – Induction level 2, in that re-made instrument.

128               The relevant Queensland statute is the Acts Interpretation Act 1954 (Qld). Section 14H(1) of that Act provides:

“In an Act, a reference to a law (including the Act) includes a reference to the following:

(a) the law as originally made, and as amended from time to time since it was originally made;

(b) if the law has been repealed and remade (with or without modification) since the reference was made – the law as remade, and as amended from time to time since it was remade;

(c) if a relevant provision of the law has been omitted and remade (with or without modification) in another law since the reference was made – the other law as in force when the provision was remade, and as amended from time to time since the provision was remade.”

Subsection (3) of s 14H defines “law” as including a law of the Commonwealth.

129               Section 7 extends the usual meaning of the word “law” to include “statutory instruments made or in force under the law”; the word “law”, once again, being defined to include a Commonwealth law.

130               Counsel argue the Consolidated Award was a statutory instrument in force under a Commonwealth law, the Workplace Relations Act. Therefore, by force of s 14H(2) the reference to coalcutting machineman in s 4(1) of the Queensland Act is to be taken as a reference to the substituted provision in the Consolidated Award: Mineworker – Induction Level 2.

131               As I understand them, counsel for the coal-mining companies say it was not really necessary for the Commission to add a note to the Consolidated Award. However, they say that, by doing so on 5 December 2002, the Commission eliminated any doubt that the new classification of Mineworker – Induction Level 2 was to replace the previous Group B classification. Counsel point out the Commission backdated its note to 12 January 2001, the date of its previous order.

(iii) Conclusions

132               I do not find it necessary to discuss any of the other responses offered by counsel to the applicants’ alternative argument. By adding a note to the Consolidated Award on 5 December 2002, the Commission made clear that the new classification of Mineworker – Induction Level 2 included the four Group B classifications, including coalcutting machineman. Consequently, any reference in the Consolidated Award to coalcutting machineman was to be understood as a reference to Mineworker – Induction Level 2.

133               It seems to me the State interpretation legislation answers the alternative argument put by the applicants. In relation to the New South Wales situation, there is little scope for argument. Section 68(3) of the Interpretation Act specifically provides that the word “Act”, in that section, includes a Commonwealth Act and an “instrument” includes an instrument made under a Commonwealth Act. An award is made by order of the Commission, rather than directly under a statute. However, it is still accurate to say it is made “under” the Act which confers on the Commission authority to make that order. Section 111(1)(b) of the Workplace Relations Act empowers the Commission, in relation to an industrial dispute, to “make an award or order”, including by consent.

134               The Queensland situation differs from that in New South Wales in that s 7(1) refers to “statutory instruments made or in force under the law”, a term wide enough to include Commonwealth law. The term “statutory instruments” is not defined. It is not immediately apparent what limitation was intended to be imposed by the word “statutory”. However, it seems to me an award made by the Commission must be regarded as a statutory instrument made under Commonwealth law; specifically, under s 111 of the Workplace Relations Act.

135               The applicants’ alternative argument should be rejected.

Disposition

136               Having regard to my conclusions concerning the case put by the applicants, it is inappropriate for me to grant any of the relief requested by them in their Amended Application: see para 72 above. The appropriate course is to dismiss the proceeding. I will do so, on the basis that the applicants have not established they are entitled to the relief claimed.

137               As I propose to dismiss the proceeding on that basis, I see no advantage in dealing with the weighty submission put by some counsel – notably Mr Durack and Mr Gotting on behalf of the 39^th to 44^th respondents – that, having regard to the fact that the applicants do not assert the existence of a superannuation guarantee shortfall, the proceeding is not a “matter” within the meaning of Chapter III of the Constitution or, alternatively, should be dismissed on discretionary grounds. Nor is it necessary for me to deal with many other matters that were raised during the course of the hearing.

138               In summarising the applicants’ arguments, I mentioned submissions about the impact on the superannuation guarantee legislation of changes in Commonwealth industrial law and practice in the period since enactment of the SGA Act. Those changes have affected many fundamentals of the 1992 industrial system. The applicants may be right in asserting the changes have adversely impacted on the adequacy and fairness of the SGA Act. However, that is a matter for Parliament to determine. The role of the Court is only to endeavour to understand, and then to apply, the legislation; as it stands and whether it is satisfactory or not.

139               The SGA Act deals with a subject of major importance to a large proportion of the Australian population. It ought to be readily accessible and intelligible to everyone. However, although the purpose, and general philosophy, of the SGA Act is readily understandable, its provisions would be unintelligible to most people. They are complex in the extreme. It would not seem to be a difficult task to simplify the scheme of the SGA Act; for example, by relating the amount of the superannuation contribution directly to the individual employee’s earnings. But if simplification of the scheme of the SGA Act is thought to be impossible, it surely ought to be possible to simplify its expression. A good start would be to reduce the Act’s excessive reliance on complex definitions, most of which require resort to other complex definitions. I add it is surely possible to bring together, and express in clearer language, the numerous superannuation provisions affecting the coal-mining industry in New South Wales.

140               I will reserve the matter of costs. Although the application fails, I do not think it necessarily follows that the applicants should be ordered to pay the costs of all the respondents. Most respondents were joined at their own request and on the understanding that they might be left to bear their own costs in any event. If any party seeks an order for costs, that party should make application by a written submission forwarded to my associate.

Associate:

Dated: 30 July 2003