FEDERAL COURT OF AUSTRALIA

Liquor, Hospitality and Miscellaneous Union v Prestige Property

Services Pty Ltd [2005] FCA 408

INDUSTRIAL RELATIONS – appeal - application for penalty and recovery of underpayment pursuant to s178 of the Workplace Relations Act 1996 (Cth) – claim for breaches of cl 8A(a)(ii) of the Building Services (Victoria) Award 1994 – interpretation of award in light of industrial reality and the context and purpose of the award – meaning of “in premises of State Governments Departments and Instrumentalities” – appeal dismissed

Workplace Relations Act 1996 (Cth) s178

Employee Relations Act 1992 (Vic) s172(6)

Building Services (Victoria) Award 1994

Amcor Limited v Construction, Forestry, Mining and Energy Union [2005] HCA 10, applied

Kucks v CSR Ltd (1996) 66 IR 182, cited

Edwards v Giudice (1999) 94 FCR 561, cited

P & O Pty Ltd v ALHMWU [1999] FCA 1129, referred to

LIQUOR, HOSPITALITY AND MISCELLANEOUS UNION v PRESTIGE PROPERTY SERVICES PTY LTD AND WILTARI PTY LTD

V 1106 OF 2004

MARSHALL J

14 APRIL 2005

MELBOURNE

ON APPEAL FROM THE MAGISTRATES COURT OF VICTORIA

THE COURT ORDERS THAT:

1.         The appeal is dismissed.

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

ON APPEAL FROM THE MAGISTRATES COURT OF VICTORIA

REASONS FOR JUDGMENT

1                     This appeal raises for consideration a short point of construction. It concerns the proper interpretation to be given to the words “(i)n premises of State Government Departments and Instrumentalities” where they appear in cl 8A(a)(ii) of the Building Services (Victoria) Award 1994, (“the award”) an award made by the Australian Industrial Relations Commission (“the AIRC”).

The parties

2                     The appellant, the Liquor, Hospitality and Miscellaneous Union (“the LHMU”), is an organisation of employees registered pursuant to the Workplace Relations Act 1996 (Cth) (“the Act”). It is a party to the award. Amongst persons eligible for membership of the LHMU are cleaners. Some of those cleaners are engaged by cleaning contractors who have contractual relationships with the State of Victoria or State Government instrumentalities. Others are engaged by cleaning contractors who contract with private bodies for the provision of cleaning services.

3                     The respondents are employers in the contract cleaning industry. The first respondent, Prestige Property Services Pty Ltd (“Prestige”) at various times between 1 January 1998 and 31 July 2001 employed the following employees to work as cleaners at a building located at 8 Nicholson Street, East Melbourne (‘the Nicholson Street building”). Those employees were: Vivian Giordimania, Helen Kanros, Georgina Markakos and Svetlana Petrov (“the Nicholson Street employees”).

4                     On 1 August 2001, the second respondent, Wiltari Pty Ltd (“Wiltari”), succeeded to the business of Prestige. Wiltari thereafter employed the Nicholson Street employees up to and including 31 March 2003.

5                     At various times between 25 February 2002 and 31 March 2003 the following employees were employed by Wiltari at a building located at 240 Victoria Parade, East Melbourne (‘the Victoria Parade building”). Those employees were: Sneana Atansoka, John Illiovski, Chris Tyris, Helen Tyris and Bozidar Trajkov (“the Victoria Parade employees”).

6                     At all material times Prestige and Wiltari were bound by the award and the Nicholson Street employees and the Victoria Parade employees were entitled to the benefits provided by the award.

7                     The  Nicholson Street building was at all material times owned by a large insurance company. A contract in respect of cleaning work to be performed at that building was entered into between Prestige and the insurance company on 8 February 2001, although Prestige (under a former name) had contracted to perform cleaning duties at the building since the late 1980s. The building consists of about 17 floors, 8 of which are tenanted to the State, through its Department of Natural Resources and Environment (“DNRE”). The remainder of the building is occupied by the insurance company. That has been the position since at least 2000. The cleaners employed to perform work at the Nicholson Street building, at all material times, were dedicated to particular floors.

8                     In late 2001 or early 2002, Wiltari was approached by Global Property Solutions Pty Limited (“Global”) to contract for the provision of cleaning services at the Victoria Parade building. The Victoria Parade building was at all material times occupied by DNRE. Wiltari contracted with Global to provide cleaning services at the Victoria Parade building from 25 February 2002. The identity of the owner of that building is unclear.

Historical context

9                     State awards made by the Industrial Relations Commission of Victoria regulated the employment of most cleaners in Victoria prior to 1 March 1993. As at 21 September 1992, four State awards regulated employment in the cleaning industry. They were:

·                    the Building Services Award;

·                    the Building Services (State Government Departments and Instrumentalities) Award (“the SGDI award”);

·                    the Cleaners and Domestic Arts Assistants (Government Schools) Award; and

·                    the Miscellaneous Workers Post-Secondary Education (TAFE) Award (together “the four former State awards”).

The first two awards are most relevant for current purposes.

10                  So far as is relevantly material, the Building Services Award applied to the employment of cleaners engaged by a contractor in a building, excluding cleaners covered by other named State awards, including the other State awards referred to in the preceding paragraph of these reasons.

11                  The SGDI award relevantly applied to persons engaged as cleaners, employed:

“(a)     By a contractor engaged by a State Government Department or Instrumentality, or

(b)               Pursuant to s 41A of the Public Service Act 1974, by a State Government Department, or

(c)               By a State Government Instrumentality”

12                  On 1 March 1993 the Employee Relations Act 1992 (Vic) abolished all State awards in Victoria. See s 172(6) of that Act. Previously, on 24 November 1992, the Public Sector Management Act 1992 (Vic) repealed s 41A of the Public Service Act 1974 (Vic).

13                  The four former State awards ceased to exist as at 1 March 1993. In the aftermath of that event the LHMU sought the making by the AIRC of four federal awards replicating the four former State awards. The AIRC refused that application as it did not comply with its then applicable wage fixing principles.

14                  On 16 March 1994, the LHMU and relevant employer bodies signed a memorandum of agreement, “concerning first awards to be made by the Australian Industrial Relations Commission in relation to the terms and conditions of employment in the contract cleaning industry within the State of Victoria.”

15                  That agreement consisted of five paragraphs. The first paragraph committed the parties to make a joint application for a federal award “that preserves rates of pay and allowances as they were prescribed for the contract cleaning industry in the [four former State awards].” (emphasis added).

16                  The second paragraph committed the parties to a single award which prescribed common conditions of employment, other than where doing so would result in a reduction in income of employees. The second paragraph also committed the parties to a two stage process. The first stage was to be:

“[a]n initial application to the Commission for a minimum rates award, the scope and incidence of that award being in similar terms to the incidence of the former Building Services Award.”

The second stage was to be:

“…where the paid rates applicable in the former paid rates awards applicable to the cleaning industry are incorporated as separate parties into the Building Services Award.”

17                  The third paragraph of the agreement provided for specific variations of some of the provisions of the former State Building Services Award in its translation across to the federal system.

18                  Paragraph 4 provided:

“That those parts of the Award prescribing rates of pay for work performed in Government Schools, Colleges of Technical and Further Education and State Government Departments and Instrumentalities, include a provision exempting an employer from the payment of the rates prescribed in those parts where a lawful employment agreement, pursuant to Part 2 of the Employee Relations Act 1992, Victoria, exists for a period of 5 months from October 11, 1993.” (emphasis added)

19                  The final paragraph committed the parties to further discussions on a range of matters, none of which are presently material.

20                  On 16 March 1994, an application for the making of what became the first federal award in the contract cleaning industry in Victoria came before the AIRC, presided over by Deputy President Acton (as her Honour then was). This was the first stage of the two stages referred to in the second paragraph of the agreement.

21                  The advocate for the LHMU, Mr Heyes, tendered the 16 March agreement to the AIRC. Submissions were made in support of the making of the award. Acton DP stated that she was prepared to make an award in the terms sought by the parties and invited them to supply the AIRC with a draft order. The award was issued on 26 April 1994 but applied retrospectively to the first pay period on or after 1 February 1994.

22                  On 20 July 1994, the relevant parties were before the AIRC, constituted by Commissioner Bacon, for the second stage of the process referred to in the second paragraph of their agreement of 16 March 1994. Once more, Mr Heyes appeared for the LHMU. He referred Bacon C to the second paragraph of the agreement and to the four former State awards for the purpose of satisfying the AIRC of the entitlement to the rates of pay set out in these expired awards of the employees of contract cleaning companies engaged in cleaning the various types of offices referred to in those awards.

23                  Bacon C approved the variation of the award. He said at p 11 of the transcript that:

“I am convinced that the award should be varied in accordance with the wishes of the parties, and that it should be varied with an effective date of the first pay period which commences on or after today’s date. And I adopt the view of the parties that they shall provide to me within 14 days an agreed order to vary the award to reflect the views that they have expressed here this afternoon.” (emphasis added).

The award as varied

24                  The consent variation included the insertion of cl 8A of the award to reflect the fact that each of the four former State awards (apart from the Building Services Award) were paid rates awards which included an allowance reflecting the connection between the work performed and the State Government. The allowance had its origin in the State Incremental Payments Scheme known as “SIPS”. See P & O Services Pty Ltd v ALHMWU [1999] FCA 1219 at [35], per Ryan J.

25                  Clause 8A is headed “Excess Supplementary Payment”. It provides for additional payments to be made to employees above the general rates of pay provided for their classifications by cl 8 of the award. Clause 8A(a) states:

“That in addition to the rates of pay prescribed in clause 8 – Classifications and wage rates, the following payments shall be made for all purposes of the award.

Adult employees

(i)      TAFE:           In premises of Colleges of Technical and Further Education

         (additional rates are then prescribed)

(ii)     S.G.D.I.:        In premises of State Government Departments and Instrumentalities.

         (additional rates are then prescribed for three classifications)

(iii)    SCHOOLS:    In premises of government schools

         (additional rates are then prescribed for various classifications)

The proceeding below

26                  On 9 September 2003, the LHMU filed a complaint in the Magistrates’ Court of Victoria in its Industrial Division at Melbourne.  The complaint alleged that Prestige and Wiltari had breached the award contrary to s178 of the Act.  Prestige and Wiltari denied breaching the award.  The parties agreed on the quantum of the underpayment in the event that the award had been breached.

27                  The LHMU called, as a witness, its then Assistant Secretary of its Victorian Branch, Mr Breheny.  Mr Breheny referred to the history of award regulation of the LHMU’s members in the cleaning industry in Victoria.  Under cross-examination, Mr Breheny agreed that the SGDI award only imposed on a contractor an obligation to pay an extra allowance if a State department or instrumentality engaged that contractor.  In circumstances, prior to 1994, where a department rented a floor in an office building and the cleaning of the building was done by a contractor with no contract with the department itself, but with the building owner itself, the LHMU would raise the issue of payment of the allowance and seek its payment, although there was no legal obligation for it to be made.

28                  Mr Breheny also gave evidence about the matters referred to above in these reasons under the heading “historical context”.  He stated that the negotiations that occurred between the relevant industrial parties in 1994 were “very complex and difficult”.

29                  The only other witness for the LHMU was Mr Angelevski, who was an organiser with the LHMU in the contract cleaning industry portfolio with responsibility for a number of worksites in the Melbourne Central Business District, including the Nicholson Street and Victoria Parade buildings.  He said that Prestige (in fact Wiltari) took over the cleaning contract at Victoria Parade in January 2002 and that the previous contractor, Budget Maintenance, had paid the SGDI allowance.

30                  Prestige and Wiltari called Mr Lazzeri, the General Manager of the parent company of Prestige.  Mr Lazzeri gave evidence that only in the last couple of years had he become aware of a State Government department being tenanted at the  Nicholson Street building.  Mr Lazzeri gave evidence of the contractual arrangements between Prestige and the owner of the building, which is dealt with under the heading “historical context”, above in these reasons.

31                  Mr Lazzeri gave evidence that it was unusual in 1994 for “non-Government buildings” to be occupied by Government departments.  He said that it was possible that there was a “smattering” of government tenancies, but none of a substantial nature, to his knowledge.  Mr Lazzeri said that when Prestige tendered for a government contract in a government building it factored in the SGDI allowance but when it tendered in the “non-government market” it didn’t factor in the SGDI allowance or pay it.

32                  Prestige and Wiltari also called Mr Barwise, the Operations Manager of Prestige.  He gave evidence of Prestige’s arrangements with the owner the Nicholson Street building as referred to under “historical context” above in these reasons.  He also gave evidence of the relationship between Global and Wiltari with respect to the Victoria Parade building and DNRE’s sole tenancy of that building.

The reasoning of the Court below

33                  His Honour, Mr Braun SM, gave ex-tempore reasons for judgment, in transcript, after the luncheon break on the final day of a three day hearing.

34                  His Honour observed that the LHMU had contended that the excess supplementary payment provided by cl 8A of the award was payable when cleaners cleaned premises occupied by State Government departments and instrumentalities.  On the other hand, Prestige and Wiltari contended, as he understood it, that the payment was payable in such circumstances only where the particular cleaner is employed:

(a)        by a contractor engaged by a State Government department or instrumentality;

(b)        pursuant to s 41A of the Public Service Act 1974 by a State Government department, or

(c)        by a State Government instrumentality,

(in fact mirroring the incidence clause of the former SGDI award).

35                  Before this Court, on the appeal, counsel for the respondents, Mr Murphy, conceded that the submissions before his Honour should have been refined to delete (b) and (c) above, given that s 41A of the Public Service Act had been repealed and given that the award itself is confined to operate in the contract cleaning industry.

36                  His Honour noted that both counsel asked him to “look at the larger factual matrix” and “have regard to the history which led to the making of this federal award”.  His Honour rightly had misgivings about aspects of the evidence before him, which included the understandings of the witnesses as to what was hoped to be achieved by the making of the award.  His Honour said:

“… this is a matter which must be resolved by having regard to the award itself and if permissible to various other historical documents or actions from which it can be seen or from which the common intention of the parties can be gleaned.”

37                  The learned magistrate referred to the four former State awards, the applications to the AIRC and the 16 March 1994 agreement.  He noted the submission of Counsel for the LHMU that cl 8A referred to work “in premises of State Government Departments and Instrumentalities”, and that this constituted a clear change in language, as compared with the former SGDI award.  All that was required, so the argument ran, was that a cleaner cleaned an office occupied by a State Government department or instrumentality for the allowance to be paid, irrespective of who the cleaning contractor employer had contracted with to perform the work.  The key to the payment of the allowance was the location of the performance of the work, without more.

38                  His Honour next referred to the judgment of Ryan J in P and O, which dealt with another aspect of cl 8A.  In P and O, Ryan J considered the correct interpretation of the words “in premises of Colleges of Technical and Further Education” and held that they included premises occupied by a tertiary institution, which had become a university.  The Court in P and O had before it the 16 March 1994 agreement, which was in evidence before the learned magistrate.  At [36] in P and O, Ryan J said:

“Cl8A… was inserted by consent to preserve that element of remuneration for cleaners of premises in which it had previously been payable, even if the cleaners were no longer directly employed by the State of Victoria or the statutory corporation which occupied the relevant premises.” (emphasis added).

39                  The identity of the premises in which an extra allowance had been payable in TAFE sector was the subject of its own particular history as referred to by Ryan J in his quoting of aspects of a 1996 decision given by Commissioner Deegan in which she considered an application by the LHMU for an “industry allowance” for cleaners employed by cleaning contractors in higher education institutions in Victoria.

40                  The learned magistrate considered that P and O was distinguishable, as it did not consider the aspect of the meaning of cl 8A that he was called upon to consider.

41                  His Honour concluded that the history of the meaning of cl 8A, so far as it dealt with State Government departments and instrumentalities favoured the construction attributed to Mr Murphy which the learned magistrate described as set out at [34] above.

The submissions on appeal

42                  Counsel for the LHMU on the appeal, Mr Friend, submitted that his Honour failed to give effect to the words chosen by the industrial parties to be inserted into the award as cl 8A and instead substituted different words in ascribing a meaning to the actual words used.  He also contended that the reasons of the learned magistrate failed to adequately disclose why he preferred the view of the construction of the relevant words advanced by counsel for the employer.  Mr Friend also submitted that his Honour failed to give effect to the agreement of the parties.

43                  On the issue of the correct construction of cl 8A, Mr Friend submitted that it was not open to his Honour to construe the relevant words in a manner inconsistent with their ordinary meaning.  He contended that history and context may aid construction of the clause but cannot justify a re-writing of it.  He submitted that the words “in premises of State Government Departments and Instrumentalities” may only be open to two interpretations.  The first is that it means premises owned by such bodies.  The second is that it means premises occupied by those bodies.  Mr Friend contended that the interpretation favoured by his Honour did not fit within either of those two possibilities.

44                  Mr Friend submitted that it was a purpose of the disputed provision to prevent the reduction in rates of pay by the contracting out of cleaning.  He said that such was the intention of the relevant State awards as at 1992.  He contended that it was the intention of the parties to permit the allowance to be paid to cleaners who cleaned premises occupied by State Government departments and instrumentalities, irrespective of whether a cleaning contractor employer contracted directly with such a body or with a private company.  The trigger for the payment of the allowance, so the argument ran, was the performance of cleaning work in premises occupied by such bodies.

45                  Counsel for the respondents, Mr Murphy, submitted that it was not the intention of the AIRC in July 1994, or the intention of the parties to the award, to widen the circumstances in which the allowance had been payable, when compared with the expired State SGDI award.  Mr Murphy contended that his Honour was correct in accepting that position but conceded that his reference to s 41A of the Public Service Act and employment by a State instrumentality was otiose.

46                  Mr Murphy submitted that a purposive approach to the provisions of cl 8A of the award supported the conclusion of the learned Magistrate, with the qualification referred to in the preceding paragraph.

47                  Mr Murphy also submitted that the reasons of the learned magistrate did disclose a reasoning process.

Consideration

48                  To adopt the language of Gleeson CJ and McHugh J in Amcor Limited v Construction, Forestry, Mining and Energy Union [2005] HCA 10 at [2]:

“The resolution of the issue [before the Court] turns upon the language of the particular [award], understood in light of its industrial context and purpose …”

49                  Further as Kirby J said in Amcor at [66]

“No longer do courts (or industrial tribunals) seek to give meaning to contested language considered in isolation from the context in which the words are used and the purpose for which the words were apparently chosen.”

See also at [96], where Kirby J cites withapproval from the judgment of Madgwick J.  In Kucks v CSR Ltd (1996) 66 IR 182 at 184.

50                  An examination of the history of the award provision under discussion and the circumstances of its making supports the view that it was intended to make payable to those persons engaged in the contract cleaning industry and who were previously entitled to the rates provided by the SGDI award, an allowance which would restore their former state award entitlements.

51                  The award applies in the contract cleaning industry.  It therefore does not apply to persons directly employed by the State or its instrumentalities.  The intention of cl 8A(a), in so far as it related to persons employed by a contractor engaged by the State or a State instrumentality, was to preserve the rates of pay which were applicable to such persons.  In other words, a cleaner employed by a cleaning contractor which contracted with a State emanationwas, as at 1 March 1993, entitled to a higher rate of award pay than a cleaner employed by a cleaning contractor which contracted with a non-State entity or emanation.  As at 1 March 1993 there was no legal liability to pay SGDI rates to a cleaner working for a contractor, which did not have a contract with a State Government body but contracted with a private body to clean premises occupied by State public servants or employees of State instrumentalities.

52                  The intention of the July 1994 amendment to the award was to preserve the 1 March 1993 conditions that were applicable to persons who had the benefit of the SGDI award before 1 March 1993 and were employed in the contract cleaning industry.  It was not the intention of the July 1994 amendment or the 16 March 1994 agreement, from which it originated, to expand the circumstances in which SGDI rates were applicable in the contract cleaning industry.

53                  In this respect the 16 March 1994 agreement is pivotal.  Its first paragraph revealed its stated aim of the preservation of rates of pay in the contract cleaning industry including those previously prescribed by the SGDI award.  Paragraph 2(b) of the agreement referred to making “the paid rates applicable in the former paid rates awards applicable to the cleaning industry”.  It is not disputed that the SGDI award was a paid rates award.  The intention of the parties was that the benefits of that award be maintained by federal award prescription.  The agreement says nothing about altering the status quo.  In the hearing before Bacon C, Mr Heyes referred to persons “engaged in cleaning state government offices”.  Doubtless many people who clean State Government offices will be entitled to the allowance.  However loosely used language by one advocate before the AIRC, which is not entirely consistent with the written agreement which underpinned his submissions, cannot be relied upon to justifiably support the conclusion that the parties were jointly agreeing to extend the circumstances in which the former paid rates would be payable thereafter.  The intention of the parties is most clearly expressed in the 16 March 1994 agreement and that agreement intended to preserve the existing status quo which applied under State regulation.

54                  The reference in paragraph 4 of the agreement to work preformed “in …State Government Departments and Instrumentalities” in allowing a short term savings clause for employment agreementsunder State law, is expressed loosely.  However, it relates to circumstances in which an employment agreement would apply which would have amongst its terms, the provisions of an expired State award.  The expired SGDI award would be confined to the incidence clause in existence as at 21 September 1992 and would not regulate, as at 1 March 1993, or thereafter the employment of persons who were not employed by contractors with cleaning contractors under a State body.  In other words, paragraph 4 of the agreement was only referable to those persons with an existing entitlement to rates of pay provided by the SGDI award, but later convertedinto an employment agreement by virtue of the Employee RelationsAct 1992 (Vic).  It provided an exclusion to an existing entitlement.

55                  In July 1994 Bacon C stated that he agreed to vary the award “in accordance with the wishes of the parties” and “to reflect the views they have expressed here …”.  The agreement is best expressed in the 16 March 1994 document.  That document, properly construed, evinces no intention to widen the reach of the paid rates applicable in the SGDI award to employees of cleaning contractors who do not have a relevant contract with a State Government body.

56                  Prestige and Wiltari at all material times, employed the Nicholson Street employees pursuant to a cleaning contract with a private insurance company.  Wiltari, at all material times, employed the Victoria Parade employees pursuant to a cleaning contract with Global.

57                  Viewed in isolation from its antecedents cl 8A(a)(ii), literally construed, is capable of being referable to cleaners employed to clean premises occupied by State Government departments and its instrumentalities, whatever the contractual situation.  However, the literal interpretation would produce an odd result.  It would purport to apply to offices owned by State bodies but could not do so because the award applies only to the contract cleaning industry and not to cleaners engaged directly by the State.  Once it can be seen that the literal interpretation may produce an odd result it is more imperative that one carefully examine the history of the clause consistent with “industrial reality” (see Amcor at [14] per Gleeson CJ and McHugh J) and the award’s context and purpose.

58                  I have no doubt that cl 8A(a)(ii) is capable of being abused by employers who sub-contract out cleaning contracts to relatedor other companies after originally contracting with a State body.  It is within the power of the AIRC, on proper application, to remedy that mischief.  It is not appropriate to interpret the award to overcome that problem if by doing so one travels beyond the intention of the award maker, when it intended to do no more than give effect to the wishes of the industrial parties as expressed in their written agreement.  Equally, an interpretation in favour of the LHMU position may attach award liability to those employers who contract with private bodies in circumstances where State Government bodies later become tenants in the buildings covered by such contracts.  In these circumstances the payment of SGDI rates may present a windfall for the cleaners concerned.  This would have been the case with respect to the Nicholson Street employees.  Whilst the circumstances of Wiltari obtaining the contract at the Victoria Parade building may have deprived the Victoria Parade employees of a previous entitlement.  However it is the role of the LHMU to bring such issues to the attention of the AIRC to attempt to overcome anomalies.  The potential for abrogationof award rights by contracting out cannot govern the meaning of cl 8A(a)(ii) when there is no evidence that it was inserted to deal with that difficulty, but when there is evidence to show that it was inserted for a different purpose.

59                  Mr Friend acknowledged that the appeal point concerning the reasoning process of his Honour would evaporate if the Court determined that the judgment below was correct, even though the precise interpretation of the disputed clause given by his Honour was not correct.  It seems that no useful purpose would be served by considering whether the judgment disclosed a reasoning process. To the extent that it matters, although inelegantly expressed (no doubt largely because of its ex-tempore nature in a very busy Court), I consider that the judgment did allow its reader to understand why it had rejected the claim of the claimant before it and disclosed the steps involved which led to the result arrived at by his Honour. See Edwards v Giudice (1999) 94 FCR 561 at [44] to [48].

Order

60                  Having regard to the foregoing, it is appropriate to order that the appeal be dismissed.

Associate:

Dated:              14 April 2005