FEDERAL COURT OF AUSTRALIA
Finance Sector Union of Australia v Commonwealth Bank of Australia
[2005] FCA 796
INDUSTRIAL LAW – claim of unlawful discrimination – a bank decides that its subsidiary is to become the employer of its employees in a core business unit – the subsidiary entered into an enterprise bargaining agreement with certain of its employees – the agreement is certified by the Australian Industrial Relations Commission – the certified agreement provides for employees to be employed on the terms and conditions of individual contracts of employment that are to have effect as if they were terms and conditions of the certified agreement notwithstanding that individual contracts may exclude the terms of the certified agreement – former employees of the bank are employed by the subsidiary on individual contracts of employment – whether the bank prejudicially altered the position of its employees for reasons that include the reason that they are entitled to the benefit of industrial instruments binding upon the bank – whether the employees are ascertainable – whether the certification of the enterprise bargaining agreement was invalid – whether the clause providing for individual contracts was a matter that was not a ‘permitted matter’ and therefore may be severed from the certified agreement – whether the bank breached the terms of its industrial instruments by failing to consult with the union – whether the union has standing to apply for a declaration that the certification of the enterprise bargaining agreement is invalid – whether the subsidiary employed its employees as agent for the bank – consideration of the relief that is appropriate in the circumstances
Workplace Relations Act 1996 (Cth) ss 170LI, 170LT, 170MD, 170NHA, 170XA, 178(1), 298K(1) and 298L(1)(h), 298T and 298U
Acts Interpretation Act 1901 (Cth) ss 13(3) and 15AA
Judiciary Act 1903 (Cth) s 39B(1A)(c)
Patrick Stevedores Operations No 2 Pty Ltd & Ors v Maritime Union of Australia & Ors (1998) 195 CLR 1 – cited
Maritime Union of Australia v CSL Australia Pty Ltd (2002) 113 IR 326 – cited
General Motors Holden Pty Ltd v Bowling (1976) 12 ALR 605 – cited
Maritime Union of Australia & Ors v Geraldton Port Authority & Ors (1999) 93 FCR 34 – distinguished
BHP Iron Ore Pty Ltd v Australian Workers’ Union & Ors (2000) 102 FCR 97 – distinguished
Australian Workers’ Union & Ors v BHP Iron‑Ore Pty Ltd (2001) 106 FCR 482 – cited
Community and Public Sector Union v Telstra Corporation Ltd (2001) 107 FCR 93 – applied
Jones v Dunkel (1959) 101 CLR 298 – applied
Miba Pty Ltd & Ors v Nescor Industries Group Pty Ltd & Ors (1996) 141 ALR 525 – cited
Nescor Industries Group Pty Ltd & Ors v Miba Pty Ltd & Ors (1997) 150 ALR 633 – cited
Electrolux Home Products Pty Ltd v Australian Workers’ Union (2004) 209 ALR 116 – cited
Australian Industry Group v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union & Ors (2003) 130 FCR 524 – cited
Kilpatrick Green Pty Ltd v The Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia & Anor [1998] FCA 559 – cited
Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 – cited
Bropho v State of Western Australia (1990) 171 CLR 1 – cited
Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 194 CLR 355 – applied
SAAP & Anor v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 215 ALR 162 – cited
Safety Net Adjustments and Review – September 1994 (1994) 56 IR 114 – cited
Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2001) 203 CLR 645 – cited
Re Willow Fashions (Australia) Pty Ltd (in liq); Leveque v Downey as liquidator of Willow Fashions (Australia) Pty Ltd (in liq) (unreported, Supreme Court of Victoria, Hayne J, 27 April 1995) – applied
Damevski v Giudice & Ors (2003) 133 FCR 438 – distinguished
Ryan v Textile Clothing and Footwear Union of Australia & Anor (1996) 2 VR 235 – cited
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors (2004) 211 ALR 342 – cited
Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission & Ors (1999) 93 FCR 317 – cited
Shop Distributive and Allied Employees Association v Minister for Industrial Affairs of the State of South Australia (1995) 183 CLR 552 – cited
Oil Basins Pty Ltd v Commissioner of Taxation (1993) 178 CLR 643 – applied
FINANCE SECTOR UNION OF AUSTRALIA v COMMONWEALTH BANK OF AUSTRALIA AND COMMONWEALTH SECURITIES LIMITED
VID 185 OF 2003
MERKEL J
9 SEPTEMBER 2005
MELBOURNE
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
VID 185 OF 2003 |
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BETWEEN: |
FINANCE SECTOR UNION OF AUSTRALIA APPLICANT
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AND: |
COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 FIRST RESPONDENT
COMMONWEALTH SECURITIES LIMITED ACN 067 254 399 SECOND RESPONDENT |
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MERKEL J |
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DATE OF ORDER: |
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WHERE MADE: |
MELBOURNE |
THE COURT ORDERS THAT in accordance with the directions given by the Court, the applicant file and serve minutes of the orders it proposes will give effect to the reasons for judgment in this matter.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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VICTORIA DISTRICT REGISTRY |
VID 185 OF 2003 |
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BETWEEN: |
FINANCE SECTOR UNION OF AUSTRALIA APPLICANT
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AND: |
COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 FIRST RESPONDENT
COMMONWEALTH SECURITIES LIMITED ACN 067 254 399 SECOND RESPONDENT
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JUDGE: |
MERKEL J |
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DATE: |
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PLACE: |
MELBOURNE |
REASONS FOR JUDGMENT
1. Introduction
1 The present proceeding is about a scheme by one of Australia’s largest corporations, Commonwealth Bank of Australia (‘CBA’), to establish individual and unregulated contracts of employment in part of its business. CBA’s scheme, which is essentially an industrial regulation avoidance scheme, possesses an ingenuity that is reminiscent of the tax avoidance schemes of the 1970s. The question arising in the proceeding is whether, notwithstanding the ingenuity, the scheme was unlawful.
2 The applicant (‘FSU’) is an organisation which is registered under the Workplace Relations Act 1996 (Cth) (‘the WR Act’). FSU is claiming declaratory and injunctive relief, as well as the imposition of penalties, against CBA and its wholly owned subsidiary, Commonwealth Securities Limited, (‘CommSec’), which is the second respondent.
3 The dispute between FSU, CBA and CommSec arises out of a decision by CBA in May 2002 (‘the PFS decision’) to establish CommSec as the future employer of employees to be employed under individual contracts of employment in the Premium Financial Services business unit of CBA (‘the PFS business unit’). By 2002, the PFS business unit had been established as one of the five core business units within the CBA group of companies. The unit, which had brought together a number of CBA’s wealth management businesses, provided a variety of financial and advisory services to meet the needs of approximately 250 000 affluent clients of CBA.
4 A consequence of the PFS decision was that CommSec, which previously had only carried out stockbroking and associated advisory services for CBA customers, would employ and then provide to CBA the employees who were to work in CBA’s PFS business unit. CBA’s intention was that over time, CommSec employees, rather than CBA employees, were to provide the PFS business unit’s services to CBA’s customers. However, the PFS business unit was to remain ‘part of the bank’ and the employees working in that unit were to continue ‘to work for the bank.’
5 Mr Michael Katz, a Group Executive of CBA and the Chairman of CommSec, was responsible for all business activities within the PFS business unit and was the CBA executive responsible for making and implementing the PFS decision. While Mr Katz had a dual capacity, the evidence is clear that the driving force behind the PFS decision was CBA, rather than its subsidiary, CommSec. Indeed, no case to the contrary was sought to be made out. Thus, CBA was responsible for making and implementing the PFS decision. CommSec was also involved in making and implementing the PFS decision but that has no bearing upon FSU’s entitlement to relief if it otherwise makes out its claims against CBA.
6 Mr Katz stated in his affidavit:
‘Having determined that the PFS business should run off a CommSec base, I determined in or about May 2002 that CommSec should also be the employer of choice to engage new (as in non-Bank) employees, and over time, to engage existing employees of the Bank, in the PFS business unit.
I determined that CommSec, and not the Bank, should be the employer because of the advantages that would flow to the PFS business in the following areas:
(a) Branding;
(b) Licensing issues; and
(c) The provision of an adaptable platform of employment conditions.’
7 The reference by Mr Katz to ‘an adaptable platform of employment conditions’ is a reference to the decision made by CBA and CommSec to employ CommSec’s employees engaged in the PFS business unit under the Commonwealth Securities (CommSec) Development Agreement (2002) (‘the CommSec Agreement’) to which CommSec and certain of its employees, but not FSU, were parties. It appears that, unlike CBA, CommSec had a workforce that was not unionised and FSU had no representative role or function within CommSec.
8 On 31 July 2002, the CommSec Agreement was certified by the Australian Industrial Relations Commission (‘the AIRC’) under s 170LT of the WR Act on an application for certification made pursuant to Div 2 of Pt VIB of the WR Act. The agreement was to remain in force from 30 July 2002 to 1 July 2005. However, at all relevant times, CBA and CommSec intended that the employment of employees was to be under individual contracts. That result was able to be achieved because cl 12 of the CommSec Agreement provided for CommSec to enter into individual contracts of employment (‘cl 12 agreements’), the terms of which were to prevail over any inconsistent terms of the CommSec Agreement. The advantages of cl 12 agreements, from CBA’s and CommSec’s point of view, were stated to be as follows:
· ‘Allow CommSec to agree terms and conditions as agreed on an individual basis
· Individual contract rather than a collective agreement – moving the business forward
· Flexibility to suit growing business.’
9 The cl 12 agreements subsequently entered into by CommSec with its employees in the PFS business unit provided that the cl 12 agreement ‘entirely excludes the operation of the CommSec … Agreement.’ As a consequence, the cl 12 agreements provided CBA and CommSec with what was, in effect, an unregulated workplace. That situation arose because the parties to the cl 12 agreement were able to agree on the terms and conditions of employment without regard to the specific terms of the CommSec Agreement, although overall, the employee was not to be ‘worse off’. Thus, the cl 12 agreements provided the means by which CommSec was able to achieve its objective of having an ‘adaptable platform of employment conditions.’
10 CBA’s system of industrial regulation provided for CBA employees, including those employed by it in the PFS business unit, to be employed under the Commonwealth Bank of Australia Employees Award 1999 (‘the CBA award’); the Commonwealth Bank of Australia (Core) Enterprise Bargaining Agreement 2000 (‘CBA’s core 2000 EBA’); the Commonwealth Bank of Australia Customer Service Division Enterprise Bargaining Agreement 2000 (‘CBA’s 2000 EBA’); the successor to the above enterprise bargaining agreements, the Commonwealth Bank of Australia (Core) Enterprise Bargaining Agreement 2002 (‘CBA’s 2002 core EBA’); or under Australian Workplace Agreements made pursuant to Pt VID of the WR Act. The instruments governing the industrial regulation of CBA’s employees are compendiously referred to in these reasons for judgment as ‘CBA’s Industrial Instruments.’ Unlike the situation in relation to the CommSec Agreement and the cl 12 agreements, FSU had a significant role under CBA’s Industrial Instruments.
11 The alleged contraventions of the WR Act all arise as a result of the PFS decision — that CommSec, rather than CBA, be the future employer of employees engaged in CBA’s PFS business unit. The relief sought by FSU includes declaratory relief that:
(a) CBA contravened ss 298K(1)(b) and (c) of the WR Act by injuring or altering the position of its employees in the PFS business unit to their prejudice for a prohibited reason, namely that the employees are entitled to the benefit of CBA’s Industrial Instruments: see s 298L(1)(h) (‘the discrimination claim’);
(b) CBA failed to consult with FSU or inform it of the PFS decision, and therefore breached CBA’s core 2000 EBA, CBA’s 2000 EBA and CBA’s 2002 core EBA (‘the non-disclosure claim’);
(c) the employment by CommSec of employees in the PFS business unit was an employment by it as agent for CBA with the consequence that CBA failed to comply with or breached the CBA award, CBA’s core 2000 EBA, CBA’s 2000 EBA and CBA’s core 2002 EBA (‘the agency claim’); and
(d) the certification by the AIRC of the CommSec Agreement was invalid (‘the invalidity claim’).
12 The injunctive relief sought by FSU is designed to ensure that CBA’s and CommSec’s employees are entitled to the conditions they would have enjoyed as their minimum entitlements under CBA’s Industrial Instruments. FSU is also seeking to prohibit CBA and CommSec from continuing to employ employees in the PFS business unit on any condition of employment that is more disadvantageous than the counterpart condition of employment under CBA’s Industrial Instruments.
13 The affidavits and exhibits relied upon by the parties are voluminous. However, as the hearing proceeded, it became clear that there were few, if any, issues of fact that were in dispute. Rather, the dispute related to the legal consequences of the PFS decision and, in particular, to whether the evidence established FSU’s entitlement to the relief it was seeking. As the facts that are relevant to the discrimination, non-disclosure, agency and invalidity claims differ, it is appropriate to set out my findings of fact in relation to each of those claims when dealing with them.
14 Before turning to FSU’s four claims, I make one further preliminary observation. It was open to CBA and CommSec to adduce evidence on a number of issues that were peculiarly within their knowledge but they failed to do so. That observation is particularly applicable to Mr Katz. In those circumstances, where I have determined that an inference adverse to the case being made out by CBA and CommSec was reasonably open on the evidence and that it is appropriate to draw that inference, in reliance upon Jones v Dunkel (1959) 101 CLR 298, I have stated that the failure of CBA and CommSec to adduce evidence has entitled me to be more confident as to the inference I have drawn.
2. The discrimination claim
(a) The law
15 Section 298K(1) of the WR Act, relevantly, provides:
‘An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:
(a) …
(b) injure an employee in his or her employment;
(c) alter the position of an employee to the employee’s prejudice;
(d) …
(e) …’
16 Section 298L(1)(h) provides that conduct referred to in s 298K(1) is for a prohibited reason if it is carried out because the employee:
‘is entitled to the benefit of an industrial instrument or an order of an industrial body’.
17 It is common ground that CBA’s Industrial Instruments are ‘industrial instruments’ for the purposes of s 298L(1)(h).
18 Section 298V, which reverses the onus of proof, provides:
‘298V Proof not required of the reason for, or the intention of, conduct
If:
(a) in an application under this Division relating to a person’s or an industrial association’s conduct, it is alleged that the conduct was, or is being, carried out for a particular reason or with a particular intent; and
(b) for the person or industrial association to carry out the conduct for that reason or with that intent would constitute a contravention of this Part;
it is presumed, in proceedings under this Division arising from the application, that the conduct was, or is being, carried out for that reason or with that intent, unless the person or industrial association proves otherwise.’
19 Section 298T(1) provides for applications for orders under s 298U in respect of contraventions of s 298K(1): see Patrick Stevedores Operations No 2 Pty Ltd & Ors v Maritime Union of Australia & Ors (1998) 195 CLR 1 at 18 [4]. In the present case, no point was taken that FSU, as a registered organisation under the Act, did not have standing under s 298T to apply for orders pursuant to s 298U in respect of the discrimination claim. It appears that FSU’s standing is likely to arise under ss 298T(1), 298T(2)(b) and 298F(2)(a) and (b) because CBA’s conduct in making and implementing the PFS decision was related to the fact that CBA’s Industrial Instruments were binding on it and applied to the employment of the relevant employees: see Maritime Union of Australia v CSL Australia Pty Ltd (2002) 113 IR 326 at 327-328 [4]-[7].
20 Section 298U, relevantly, provides:
‘298U Orders that the Federal Court may make
In respect of conduct in contravention of this Part, the Court may, if the Court considers it appropriate in all the circumstances of the case, make one or more of the following orders:
(a) an order imposing on a person or industrial association whose conduct contravened or is contravening the provision in question a penalty of not more than:
(i) in the case of a body corporate — $10,000; or
(ii) …
(b) …
(c) …
(d) …
(e) injunctions (including interim injunctions), and any other orders, that the Court thinks necessary to stop the conduct or remedy its effects;
(f) any other consequential orders.’
21 The discrimination claim raises three issues. First, whether the conduct of CBA in making and implementing the PFS decision was for a prohibited reason, namely that those CBA employees who may have been injured in their employment, or whose positions may have been prejudicially altered by the PFS decision (‘the relevant employees’), were entitled to the benefit of CBA’s Industrial Instruments. Secondly, whether the relevant employees were ascertainable. Thirdly, whether the relevant employees were injured in their employment or suffered a prejudicial alteration to their position by the making and implementation of the PFS decision.
22 The requirement that there be a ‘prohibited reason’ or ‘circumstance’ was considered in General Motors Holden Pty Ltd v Bowling (1976) 12 ALR 605 which concerned the construction of a statutory predecessor to s 298K(1). In that case, Mason J, with whom Gibbs, Stephen and Jacobs JJ agreed, stated at 619:
‘It is sufficient if the circumstance is a substantial and operative factor. And it does not cease to be such a factor because it is coupled with other circumstances or because regard is had to it in association with other circumstances not mentioned in the section.’
The words ‘or for reasons that include a prohibited reason’ were later added to s 298K(1). In Maritime Union of Australia & Ors v Geraldton Port Authority & Ors (1999) 93 FCR 34 (‘Geraldton Port Authority’), R D Nicholson J considered the amendment and stated at 69 [224] that in his view:
‘the words “or for reasons that include a prohibited reason” in s 298K(1) effect a change to the law and permit a reason to be an operative reason provided it is one of the reasons for the conduct. It would not therefore have to be the “substantial” reason. It would have, of course, to be “operative” — that is it would have to be a reason.’
23 FSU claimed that a contravention of s 298K(1) of the WR Act can occur if the conduct of the employer is directed at an ascertainable class or group of employees, rather than just at an individual employee. It then contended that CBA employees in the PFS business unit at the time of the implementation of the PFS decision were an ascertainable class or group of employees. It was common ground that the PFS decision was implemented by CBA and CommSec in about September 2002 when cl 12 agreements in respect of work in CBA’s PFS business unit were first offered by CommSec.
24 CBA and CommSec relied on the judgment of the Full Court on an appeal against an interlocutory injunction in BHP Iron Ore Pty Ltd v Australian Workers’ Union & Ors (2000) 102 FCR 97 (‘BHP Iron Ore’) to contend that s 298K(1) concerns discrimination against individual employees, rather than discrimination against classes or groups of employees. In BHP Iron Ore, the employer’s offer of improved remuneration and conditions under individual workplace agreements to all of its employees employed under an award or under a series of collective agreements was said to discriminate against those employees. The Full Court observed at 108 [35]:
‘It has to be borne in mind, in construing s 298K, that it proscribes conduct by “an employer” directed to “an employee” or “other person” (emphasis added). That use of the singular suggests that the alleged injury or alteration of position has to be examined in light of the circumstances of each individual employee. (It is not the point that in the interpretation of statutes, the singular ordinarily includes the plural; here we are concerned with the indications of legislative intention to be discerned from the actual language used.) It is also significant that the conduct struck at by each paragraph of s 298K is expressed by an active verb: “dismiss”, “injure”, “alter the position”, “refuse to employ”, and “discriminate”. That implies that the proscription is essentially against an intentional act of the employer directed to an individual employee or prospective employee.’
25 At the trial, Kenny J in Australian Workers’ Union & Ors v BHP Iron‑Ore Pty Ltd (2001) 106 FCR 482 at 499 [53] referred to the Full Court’s observation and stated:
‘Section 298K(1) is, upon this view, concerned with the conduct of an employer that is directed to an individual employee. This does not mean that in dismissing one employee who is a union member for a prohibited reason, an employer commits a civil wrong, and that wrong is not committed if, for the same reason, the employer dismisses all employees who are union members. The Full Court was directing its attention to the nature of the injury contemplated by the provision. That is, the conduct in question must injure an employee individually in the sense that it would have injured him or her, regardless of whether it was actually done to an individual employee or a group of employees. The relevant inquiry is whether an employer has, by the employer’s conduct, injured the position of an employee individually: cf Community and Public Sector Union v Telstra Corporation Ltd (2000) 99 IR 238 at 245-246 [24] per Finkelstein J. The Full Court must have intended to exclude conduct that injured individuals only when directed to a class of employees.’
26 A broad view of s 298K(1) was subsequently taken in Community and Public Sector Union v Telstra Corporation Ltd (2001) 107 FCR 93 (‘Telstra’). In Telstra, the Full Court held that conduct directed at all of the Telstra employees entitled to benefits under an award or certified agreement was conduct that was capable of being the subject of the discrimination that is prohibited by s 298K(1) because the employees, against whom the conduct was directed, were ascertainable. The facts in Telstra were as follows. In the course of a downsizing of Telstra’s operations, the managing director of Telstra’s employee relations group issued an email to managers and team leaders which the Full Court found at 100 [14] that ‘many managers would understand … to be an instruction to give employees on an individual contract more favourable treatment in the redundancy selection process.’ The Full Court concluded that the sending of the email prejudicially altered the position of the employees of Telstra who were entitled to benefits under an award or certified agreement. On the issue of whether the relevant employees had to be individually targeted or merely be ascertainable, the Full Court stated at 101[21]:
‘Telstra also relied on the observation by a Full Court of this Court in BHP Iron Ore … that the proscription in s 298K(1) “is essentially against an intentional act of the employer directed to an individual employee or prospective employee”. Telstra contended that the e-mail was not an intentional act directed at any individual employee. However, the observation of the Full Court also holds true where the act is intentionally directed at a number of unidentified employees. The e-mail in its terms discriminated against each employee of Telstra who was employed under an award or a certified agreement. Accordingly, liability arises where the conduct is directed at a number of ascertainable employees as well as against a particular employee.’
28 In Telstra, the Full Court also considered the circumstances in which an indirect or consequential alteration of position can constitute prejudicial alteration under s 298K(1). The Full Court stated, at 100 [17]-[18], that:
‘The question is whether…Telstra had altered the position of any of its employees to the employee’s prejudice within the meaning of s 298K(1)(c). In Patrick Stevedores at 18 the majority of the High Court held that the subsection covers “not only legal injury but any adverse affectation of, or deterioration in, the advantages enjoyed by the employee before the conduct in question”. The majority also observed (at 20) that the reorganisation of companies within the Patrick Group resulted in the security of the employer companies’ businesses being “extremely tenuous” with the “security of the employees’ employment [being] consequentially altered to their prejudice”. The reorganisation did not directly affect or alter any legal rights or obligations of the employees but it left their future employment less secure. Although this issue was not in dispute, the majority appears to have had no difficulty in accepting reduced security of future employment as falling within s 298K(1)(c) because it brought about an adverse affection of, or a deterioration in, the advantages enjoyed by the employees before the reorganisation.
Where the alteration of position is alleged to be indirect or consequential, as in Patrick Stevedores and in the present case, a difficult question may arise as to whether a prejudicial alteration of position has in fact occurred. Answering that question may involve questions of degree. It is sufficient for present purposes to say that if the prejudicial alteration is real and substantial, rather than merely possible or hypothetical, it will answer the description in s 298K(1)(c).’
29 The Full Court was satisfied that the prejudicial alteration was real and substantial. It observed at 100-101 [19]-[20]:
‘Before the sending of the e-mail Telstra’s employees employed under awards and certified agreements enjoyed the benefit of being subject to redundancy only in accordance with a process which rated their eligibility for redundancy on the basis of merit … There was an adverse affection of, or deterioration in, that benefit after the sending of the e-mail as a result of the additional detrimental criterion applicable to employees employed under awards or certified agreements. The detrimental criterion was real and substantial for the employees whom it affected.
Thus, while the refined or amended criterion has not been acted upon, and therefore may not have caused any injury to an employee, the employment of employees on awards or certified agreements had become less secure, in a real and substantial manner, than it had been previously. In those circumstances the position of the relevant employees had been altered to their prejudice within the meaning of s 298K(1)(c). It follows that while we consider that the primary judge was correct in concluding that, as the e-mail had not been acted upon, it did not injure any employee, we do not agree with his Honour’s conclusion that the e-mail had not altered the position of any of the employees to their prejudice.’
30 In BHP Iron Ore, the Full Court determined that employees had not suffered a prejudicial alteration of their position as a result of the employer offering individual agreements to all employees employed under an award or a certified agreement. The Full Court stated at 109 [38]:
‘In the present case, the only undisputed intentional act of BHPIO has been to offer to each employee improved remuneration and conditions to be embodied in an individual workplace agreement. That, of itself, did not change, in either absolute or relative terms, the remuneration or any of the conditions of employment of the employee to whom the offer was made. A change in absolute terms occurred only upon acceptance of the offer and the consequent coming into existence of a new contract of employment. It is true that, after some offers have been accepted by individual employees, a change can be discerned in the remuneration and conditions of employment of those employees, viewed in relation to the remuneration and conditions of employment of those employees who have not accepted the offer. However, the position of each of the latter employees has not been changed to his or her detriment by an intentional act of the employer. The relative change which we have just identified is brought about by the acceptance by some employees, and the rejection by others, of an offer made indiscriminately to all employees.’
(b) A prohibited reason
31 FSU’s discrimination claim was pleaded in the fourth amended Statement of Claim (‘the Statement of Claim’) as follows:
‘97. In or about May 2002, and as a servant or agent of the CBA and as an agent of CommSec, Katz made [the PFS decision]…
98. In furtherance of [the PFS decision] since May 2002 the CBA has purported to or alternatively has not created any new positions or filled any vacant positions in relation to the employment of employees in the CBA’s PFS Business at manager level or below and CommSec has purported to or alternatively has created all new positions and engaged all new employees to work in the CBA’s PFS Business at manager level or below.
99. The conduct identified at paragraphs 97 and 98 was directed at ascertainable employees, namely the Existing Employees.
100. The conduct identified in the paragraphs 97 and 98 constitutes or threatens an injury in employment or a prejudicial alteration in the position of the Existing Employees within the meaning of paragraphs (b) and (c) of section 298K(1).
101. The conduct of the CBA threatened to or alternatively has brought about an injury or adverse affectation of, or a deterioration in the advantages enjoyed by the Existing Employees prior to the [PFS] decision … because the CBA did or did purport to:
(a) Deny to the Existing Employees their prior capacity to remain employees of the CBA and have the benefit of the CBA Industrial Instruments and access new promotional opportunities within the CBA’s PFS Business;
(b) Deny to the Existing Employees their prior capacity to remain employees of the CBA and have the benefit of the CBA Industrial Instruments and access new transfer opportunities within the CBA’s PFS Business;
(c) Deny to the Existing Employees their prior capacity to remain employees of the CBA and have the benefit of the CBA Industrial Instruments and access new opportunities for career advancement within the CBA’s PFS Business and in particular for Existing Employees in relationship management roles the opportunity to provide financial advice;
(d) Deny to the Existing Employees their prior security of employment by reason of the conduct described in paragraphs (a) to (c) above.
102. The conduct referred to in the preceding paragraphs was carried out for the reason that or for reasons that include the reason that the Existing Employees are entitled to the benefit of the CBA Industrial Instruments.
103. …
104. Each of the CBA Industrial Instruments is an industrial instrument within the meaning of section 298L(1)(h) of the WRA.
105. In the premises, the CBA has contravened section 298K(1)(b) and/or (c) of the WRA.’
32 The PFS decision was admitted by CBA to be a decision by Mr Katz that CommSec ‘should be the employer to engage new employees in PFS, and over time, to engage existing employees of the [CBA] in PFS.’ CBA and CommSec also made the following admissions:
(a) CBA admitted that, since May 2002, it has not engaged any new employees at manager level or below and did not create any new positions or fill any vacant positions in relation to the employment of employees at manager level or below in its PFS business unit;
(b) CommSec admitted that, since May 2002, it has created all new positions and engaged all new employees to work in the PFS business unit at manager level or below.
33 Mr Katz was not called by CBA or CommSec to give evidence at the hearing. However, evidence was given by other CBA employees that there were commercial benefits in having CommSec, rather than CBA, provide the PFS business unit’s services. The benefits were said to be related to ‘branding’ and ‘licensing’ issues.
34 In so far as ‘branding’ was concerned, it appears that, in relation to the PFS business unit’s services, CBA often used the ‘CommSec’ brand name in association with CBA’s name and trademark. Evidence in relation to branding was given by Mr Rickard, Executive General Manager, Premium Banking and Investment Services, who had executive responsibility for business activities within the PFS business unit. He stated that in early 2002, and prior to the PFS decision, CBA’s new PFS business unit was aligned for branding purposes with the business being conducted by CommSec. Thus, it is unlikely that ‘branding’ reasons were a significant factor in the subsequent PFS decision. In any event, if some separation between CommSec’s and CBA’s ‘branding’ was being sought, it did not require that a different legal entity provide the service. For example, the use of ‘CommSec’ as a business name could have been sufficient in that regard.
35 In so far as ‘licensing’ was concerned, it is appropriate to put to one side CommSec’s stockbroking and associated advisory services as they were not part of the services provided by CBA’s PFS business unit. In respect of the services provided by the PFS business unit, the evidence is to the effect that, although the financial services that CommSec was licensed to provide differed in some respects from those that CBA was licensed to provide, the difference was a matter of convenience or choice, rather than of necessity. Mr Rickard’s evidence was to the effect that, apart from the stockbroking and Australian Stock Exchange aspects of CommSec’s business, there was no reason why CBA could not be licensed to provide the same services as CommSec. In any event, it appears from Mr Rickard’s evidence that the employees of CBA (as a related corporation) were able to be authorised by CommSec to provide its financial advisory services. I would add that it was suggested by CBA and CommSec that some additional training and qualifications were required to ensure CommSec’s licensing obligations and business requirements were met. I do not regard anything as turning on that issue as such training and qualifications as were regarded as desirable were able to be provided to, or required from, PFS business unit employees irrespective of whether they were CommSec or CBA employees. While it was open to CBA and CommSec to decide upon the training and qualifications that should be pre-requisites to employment or advancement in the PFS business unit, it was of little or no consequence whether that employment or advancement was undertaken by the financial adviser as an employee of CommSec or as an employee of CBA.
(c) Ascertainable employees
37 The next question is whether the employees the subject of the alleged discrimination by CBA were ascertainable. The PFS decision was alleged by FSU to be discriminatory against the ‘Existing employees’, who were defined in the Statement of Claim as meaning:
‘…those employees employed by the CBA in positions of manager or below employed in the CBA’s PFS Business at the time at which CommSec Contracts were first offered to prospective employees for positions in the CBA’s PFS Business.’
38 Although FSU’s Statement of Claim alleged a contravention in respect of the Existing Employees (as defined), senior counsel for FSU was prepared to confine the discrimination claim to Executive Managers, Relationship Managers and Assistant Relationship Managers. The names of those employees appeared on a list of the staff of CBA employed in Premium Banking Centres as at 14 October 2002. The confinement by FSU of the employees the subject of the discrimination claim to managerial positions was well advised. The relevant employees probably did not extend beyond persons in managerial positions. The matters set out in [43]-[47] below make it unlikely that support staff in the PFS business unit were targeted to become employees of CommSec employed under cl 12 agreements. In that regard, the likelihood is that the ‘adaptable platform of employment conditions’ sought by Mr Katz was an objective sought in respect of managerial, rather than support, employees. Thus, I doubt that the support employees, such as receptionists, were targeted, or adversely affected, by the PFS decision.
39 Managerial employees in the PFS business unit were recorded in CBA’s Premium Banking records and are able to be named or identified. The relevant employees fall into three categories, based on their positions in Premium Banking, as at October 2002 — Executive Manager, Relationship Manager and Assistant Relationship Manager. In the absence of evidence to the contrary, I am prepared to infer that CBA’s records as at October 2002 are likely to accurately record the names of the relevant employees as at September 2002, being the date on which the PFS decision was first implemented. It was open to CBA to adduce evidence of why the list was inaccurate, or as to the ‘unascertainability’ of the relevant employees, but it did not do so. That entitles me to be more confident as to the inference I can properly draw on that subject.
40 CBA and CommSec claimed that Executive Managers were not covered by CBA’s Industrial Instruments. The CBA award covers, inter alia, ‘Grade MC’ employees. That category is stated to include employees exercising ‘managerial’ responsibilities as defined in Bank policy and exercising roles involving team leadership. One example of a ‘Grade MC’ position given in the award was a ‘Team Leader Premium Banking (Complex Personal).’ A CBA generic position description document recorded the position of ‘Executive Manager, Premium Banking (Complex Personal)’ as having an ‘MC’ classification. In my view, there is no substance in the claim that Executive Managers are not persons falling within the ‘Grade MC’ classification in the CBA award.
‘40. At all relevant times, the personal banking and relationship management activities of Premium Banking were carried out by employees of the CBA in positions titled “Relationship Manager” or like positions (“Premium Banking Relationship Managers”) “Assistant Relationship Managers” and other support staff.
41. Some 280 positions were created in Premium Banking for Relationship Managers, Assistant Relationship Managers and Executive Managers.
42. The function of Executive Managers was to lead a team of Relationship Managers and Assistant Relationship Managers.
43. Premium Banking Centres were established by the CBA across Australia, including the following locations: Sydney CBD, Chatswood, Hurstville, Parramatta, North Sydney, Canberra, Brisbane, Gold Coast, Adelaide, Bourke St Melbourne, Camberwell, Collins Street Melbourne, Geelong, Ballarat and Perth (“the Premium Banking Centres”).
PARTICULARS
Details of the employees and teams allocated to the Premium Banking Centres as of October 2002 are given in exhibit “SMC-26” to the affidavit of Sharron Caddie dated 27 August 2004 (“the Caddie Affidavit”).’
42 Exhibit ‘SMC-26’ was described in an affidavit of Ms Sharron Caddie, a National Assistant Secretary of FSU, as follows:
‘79. To the best of my knowledge, the shift of employees from other sections of the Bank into PFS occurred in about July of 2002. I am not aware whether this involved a physical shift for employees coming from the Equities section or the Executive Banking section of Institutional Banking. Nor am I aware of the numbers of employees of CommSec who were involved in the shift.
80. So far as Premium Banking was concerned, there was no physical shift of employees so far as I am aware. The various Premium Banking centres which had been set up by Premium Banking whilst part of the Customer Services or later the Retail Banking Division continue to operate. In fact the Centres continue to be called Premium Banking Centres. There were approximately 280 employees employed in the Premium Banking Centres when they were shifted into PFS. The FSU files contain a printout from the CBA database stated to have been last updated on 14 October 2002. That printout sets out each of the Premium Banking locations and the Executive Manager, Relationship Managers, Assistant Relationship Managers and (where existing) receptionists employed in each of the Centres. The list contains 272 employees of the CBA. Now produced and shown to me and marked Exhibit “SMC-26” is a true and correct copy of the extract to which I have referred.
81. I am advised by Rosemary Keogh that she checked the names in the list of employees in Premium Banking Centres against the membership records of the FSU. She advised me that 165 of the employees listed in Exhibit “SMC-26” are members of the FSU.’
43 CBA and CommSec claimed that the relevant employees were not ascertainable and contended that the PFS decision was a decision that CommSec was to recruit suitably qualified employees from within, and outside, CBA. That latter premise may be accepted. However, the issue under s 298K(1) is not concerned with CommSec’s employment policy. Rather, it concerns whether CBA has, for a prohibited reason, injured or altered the position of a number of its employees who are ascertainable. Plainly, the existing managerial employees of CBA working within Premium Banking at the time of the PFS decision were suitable employees who were likely to be offered the equivalent positions in CommSec. They were the persons who were directly and immediately affected by the decision, which was intentionally targeted at them. At a meeting held with FSU on 1 November 2002, CommSec’s solicitor, when asked why the positions in the Premium Banking Centres were to become ‘CommSec jobs’ was recorded as making the following response:
‘Have EBA. Want to use it. Top end of market employees. Premium employees.’ (emphasis added)
44 Later in the meeting, Ms Sequeira (CBA’s Executive General Manager, Human Resources - PFS) was recorded as saying:
‘No more jobs created in CBA. PFS will all be Com[m]Sec employees. Maybe 500 +.’
45 One aspect of the process by which the PFS decision was to be implemented was stated to involve:
‘Specific project timetables … being drawn up for conversion of existing staff.’
46 The reference to ‘existing staff’ is likely to be a reference to the CBA managerial employees in the PFS business unit who were being targeted for employment by CommSec. In that regard, Ms Sequeira also stated at a meeting held on 6 December 2002 that she expected that, as a result of the conversion of existing employees, ‘several hundred’ such employees would become employed by CommSec.
47 Having regard to all of the evidence, I am satisfied that the PFS decision was intentionally directed by CBA at the managerial employees employed by it in the PFS business unit, who were, at all material times, ascertainable. That conclusion is not affected by the fact that, over time, CBA and CommSec also intended to recruit other suitably qualified persons from outside of CBA.
(d) Prejudicial alteration of position
(i) Promotional, advancement and transfer opportunities
49 The prejudicial consequences of the PFS decision were said to include the loss of:
(a) promotional or advancement opportunities;
(b) transfer opportunities; and
(c) security of employment.
50 As the evidence on loss of security of employment was unclear, I propose to concentrate on the claims based on loss of promotional, advancement and transfer opportunities as the relevant evidence on those matters was clear and uncontroverted.
51 As explained above, CBA admitted that, after the PFS decision, it ceased to engage any new employees at manager level or below in the PFS business unit, and did not create any new positions or fill any vacant positions in relation to the employment of employees at manager level or below in that unit. CommSec admitted that, since May 2002, it has created all new positions and engaged all new employees to work in the PFS business unit at manager level or below. Therefore, for each category of the relevant employees, a question arises as to whether or not these circumstances constituted a prejudicial alteration to their position.
52 The relevant facts can be summarised as follows. By early in 2002, the PFS business unit was one of CBA’s core business units. The PFS business unit was subsequently combined with CBA’s Institutional and Business Services unit, thereby extending the range of services and clients. From May 2004 onwards, the combined unit was called ‘Premium Business Services’. However, the combination of the two units is not of significance as it further enhanced, rather than diminished, the career prospects of managers employed by CommSec in the combined unit.
53 By the date of the PFS decision, a significant number of CBA’s Executive Managers, Relationship Managers and Assistant Relationship Managers were employed in CBA’s PFS business unit at CBA Premium Banking Centres throughout Australia. CBA undertook the training of these managers to enable them to become qualified to provide financial and other advice that they were expected to provide to the PFS business unit’s clients. It also represented to those managers that the PFS business unit provided good prospects for their career advancement in CBA. In an executive letter signed by CBA’s managing director dated 20 December 2001, CBA stated that ‘[w]ealth management [was] a key growth area for the bank.’ There was also uncontroverted evidence that, at a meeting between representatives of CBA and FSU on 9 August 2001, the representatives of CBA described Premium Banking as offering ‘new career paths that don’t already exist in the Bank.’ There was also evidence that CBA described Premium Banking as providing staff with a ‘new opportunity for career progression and development.’
54 In the PFS business unit, Assistant Relationship Managers are at a lower grade than Relationship Managers who, in turn, are at a lower grade than Executive Managers. Thus, prior to the PFS decision, the Assistant Relationship Managers and Relationship Managers employed by CBA had a career path with good promotional and advancement opportunities within the PFS business unit. After the PFS decision, those opportunities were no longer available to those managers unless they resigned their employment with CBA and commenced employment with CommSec under cl 12 agreements.
55 Ms Caddie gave evidence, which was not controverted by CBA, about the transfer opportunities that existed within CBA prior to the PFS decision:
‘One of the advantages of working for a large organisation like the CBA is that opportunities for transfer within an employee’s chosen field of employment are often available. In the past there has been a capacity for an employee such as a Relationship Manager to transfer from one Premium Banking Centre to another as positions became available. In my experience, employees often seek a transfer for reasons of career advancement or personal convenience.’
56 It is common ground that, after the PFS decision, should a managerial employee wish to transfer to another position within the PFS business unit, that employee would be required to resign from CBA and to become an employee of CommSec employed under a cl 12 agreement.
57 It follows from the foregoing that, prior to the PFS decision, employees in the positions of Relationship Manager and Assistant Manager had significant promotional, advancement and transfer opportunities within CBA’s PFS business unit. From the making and implementation of the PFS decision in September 2002 onwards, those promotional, advancement and transfer opportunities became foreclosed to those employees unless they resigned from CBA and took up employment with CommSec. While it is correct that the resignation was voluntary, it is clear that the decisions not to create any new CBA positions in PFS, and to fill PFS vacancies using CommSec employees, were intended to induce, and did induce, existing CBA employees in the PFS business unit to take up employment with CommSec if they wished to advance their careers in the PFS business unit.
58 The promotional opportunities argued to be affected by the PFS decision were only relevant to Assistant Relationship Managers and Relationship Managers because any promotion for Executive Managers to higher managerial positions was to take place within CBA, rather than within CommSec. That situation arose because the position of Executive Manager was the highest position in the PFS business unit. However, in respect of transfer opportunities, the situation in respect of Executive Managers was the same as that for Relationship Managers and Assistant Relationship Managers. Thus, if an Executive Manager position became available in a PFS business unit in another Premium Banking Centre, it would no longer be filled by a transfer unless the Executive Manager resigned from CBA and commenced employment with CommSec. The loss of that opportunity is significant as it not only precluded relocation but, importantly, precluded transfers of Executive Managers to the more significant Executive Manager positions in other Premium Banking Centres. While there was little evidence on this point, I am prepared to infer that the more significant PFS Executive Manager positions would be in the Premium Banking Centres that service clients in the major financial centres such as Sydney and Melbourne.
59 Of course, as the promotional, advancement and transfer opportunities were available to the relevant employees within CommSec, the question of prejudicial alteration must arise from the fact that a CBA managerial employee wishing to access those opportunities is required:
(a) to resign from CBA and therefore no longer have the benefit of employment under any of CBA’s Industrial Instruments; and
(b) take up employment with CommSec under a cl 12 agreement made pursuant to the CommSec Agreement and have such benefits as are available under those agreements.
60 The issue of whether that alteration of position is a prejudicial alteration involves a comparison between the entitlements of employees under CBA’s Industrial Instruments (‘the CBA entitlements’) and the entitlements of employees employed under the CommSec Agreement and a cl 12 agreement made pursuant to that agreement (‘the CommSec entitlements’). FSU’s case was that the CommSec entitlements are both financially and legally inferior to the CBA entitlements.
(ii) Financial entitlements
61 A precise comparison between the CBA financial entitlements and the CommSec financial entitlements is difficult. However, FSU handed up a table based on the evidence that established that the minimum CBA entitlements were significantly higher than the minimum CommSec Agreement entitlements for the relevant employees. For example, under CBA’s 2002 core EBA, the minimum pay entitlements were as follows:
Assistant Relationship Manager
· as at 17 May 2002 – $39 634
· as at 1 July 2003 – $41 219
Relationship Manager
· as at 17 May 2002 – $48 441
· as at 1 July 2003 – $50 379
Executive Manager
· as at 17 May 2002 – $68 995
· as at 1 July 2003 – $71 765.
62 The CBA award minimum pay entitlements were $33 200, $39 350 and $53 596 respectively for Assistant Relationship Managers, Relationship Managers and Executive Managers. The employment conditions under CBA’s Australian Workplace Agreements were not to be inferior to those in the CBA award as they had to pass a ‘no disadvantage’ test that required a comparison of their terms with the terms of the CBA award.
63 Pay entitlements under the CommSec Agreement were as follows:
Category A (which includes Assistant Relationship Managers)
· Minimum – $25 205
· Maximum – $28 130
Category B (which includes Relationship Managers)
· Minimum – $30 363
· Maximum – $33 609.
64 CBA and CommSec did not dispute the accuracy of the above figures. The fact that the minimum and maximum CommSec Agreement pay entitlements were substantially less than the minimum and maximum CBA pay entitlements was one of the objectives of CBA when it made the PFS decision. That fact alone is a significant prejudicial alteration to the position of the relevant CBA employees who were being induced to take up employment with CommSec as a result of the making and implementation of the PFS decision.
65 FSU also relied upon the cl 12 agreement pay entitlements as part of its ‘prejudicial alteration of position’ case. It is difficult to compare the entitlements under the cl 12 agreements with the CBA entitlements because under the cl 12 agreements, the actual pay entitlement varied from agreement to agreement. However, I am satisfied that one of the advantages being sought by CBA by having CommSec as the employer was to minimise minimum pay entitlements and to maximise discretionary or incentive payments. As I later explain, a New South Wales clerical award (with low minimum rates of pay) was deliberately selected by CBA and CommSec for the no-disadvantage test to be applied to the CommSec Agreement. While the cl 12 agreements prescribe actual, rather than minimum and maximum pay entitlements, it was open to CBA and CommSec to present a case that the actual, as opposed to discretionary or incentive, entitlements resulted in the relevant employees being entitled to receive more than their CBA entitlements. The CBA and CommSec did not present that case.
66 In respect of the cl 12 entitlements, I am prepared to infer that, generally, they were likely to be less than the minimum entitlements under CBA’s Industrial Instruments. The main reason for that inference is that one of the advantages sought by the certification of the CommSec Agreement and by the cl 12 agreements was that the cl 12 agreements could place a greater emphasis on discretionary entitlements and bonuses, rather than actual pay entitlements. However, that might not have been the situation in all cl 12 agreements (eg it was suggested that that was not the case for Ms Mariam Habib, a former employee of CBA and later of CommSec). Nonetheless, the fact remains that the minimum CommSec Agreement entitlements provided CommSec with the freedom to negotiate the cl 12 agreements on the basis of a minimum entitlement that was substantially less than the minimum entitlement available under CBA’s Industrial Instruments. That was, of itself, a prejudicial alteration of position. In the result, the likely outcome was a lower actual pay entitlement. I can more confidently draw that inference in the absence of evidence adduced to the contrary in respect of the relevant employees by CBA and CommSec. Although I am satisfied that, generally, the cl 12 agreements were likely to also result in lower actual entitlements than were payable under CBA’s Industrial Instruments, I prefer to rest my decision on prejudicial alteration in respect of the cl 12 agreements on the basis of the lower minimum payment rates prescribed by the CommSec Agreement, rather than on the actual rates of pay under the cl 12 agreements.
(iii) Legal entitlements
67 Thus far, I have approached the issue of minimum and maximum entitlements on the basis that all of those entitlements are entitlements under industrial instruments that are protected and enforceable as such under the WR Act. However, FSU challenged that assumption. It argued that the cl 12 agreements and the CommSec Agreement do not operate as validly certified agreements for the purposes of the WR Act and therefore do not enjoy the protection of the WR Act in so far as CommSec employees in the PFS business unit are concerned. FSU accepted that, even if its invalidity argument succeeded, the employees nonetheless had common law contracts with CommSec. However, FSU claimed that those contracts had no status or protection under the WR Act. Thus, FSU claimed that, not only are the financial entitlements under the CommSec Agreement and under cl 12 agreements made pursuant to that agreement inferior to those under CBA’s Industrial Instruments, but the legal entitlements under those agreements are also inferior.
68 CBA and CommSec claimed that the invalidity argument was not pleaded in respect of the s 298K(1) discrimination claim and was only developed late in the trial. FSU maintained that the invalidity argument was implicit in its s 298K(1) claim but nonetheless sought leave to amend its Statement of Claim if I formed the view that that was necessary. FSU pointed out that the invalidity claim had always formed part of its case against CBA and CommSec.
69 FSU’s Statement of Claim pleaded prejudicial alteration (including adverse affectation) as including, inter alia, the denial to the relevant CBA employees of the benefit of CBA’s Industrial Instruments. No particulars were sought or given in relation to that pleading. The alteration and affectation pleaded can only be prejudicial or adverse if the benefits under the CommSec Agreement, or the cl 12 agreements made under that agreement, are inferior. The inferiority may be financial or legal. I am satisfied that the unparticularised pleading is sufficiently broad to encompass the invalidity argument raised separately in the Statement of Claim and now being advanced by FSU in respect of its s 298K(1) claim. In any event, the invalidity claim in respect of the CommSec Agreement, and of the cl 12 agreements, was an issue that was ‘in the ring’ and contested at trial: see Miba Pty Ltd & Ors v Nescor Industries Group Pty Ltd & Ors (1996) 141 ALR 525, approved on appeal in Nescor Industries Group Pty Ltd & Ors v Miba Pty Ltd & Ors (1997) 150 ALR 633 at 644. In those circumstances, I do not regard it as necessary for FSU to amend its pleading in respect of its discrimination claim. Nonetheless, senior counsel for CBA and CommSec claimed, and I accepted, that his clients were taken by surprise by the invalidity argument being raised as part of the discrimination claim. Accordingly, I indicated that CBA and CommSec were entitled to seek leave to reopen their case to deal with that claim but senior counsel appearing for those parties indicated that there was no further evidence that his clients would seek to lead. That response was not surprising as the invalidity claim was expressly pleaded, albeit as a stand alone cause of action, and raises an issue of law, rather than of fact. I would add that if I am incorrect in the view I have formed (that it was open to FSU to rely on its present pleadings in respect of the invalidity claim in relation to its s 298K(1) case), I would grant leave to amend to enable the invalidity argument to be put in relation to the discrimination claim. The argument is before the Court in any event, involves an issue of law and the amendment does not, in any relevant sense, prejudice CBA or CommSec.
70 FSU claimed that the CommSec Agreement could not be validly certified under the WR Act by the AIRC and, as a consequence, the cl 12 agreements did not have effect as certified agreements under the WR Act. The argument was based on cl 12 of the CommSec Agreement, which provided:
‘12. Individual Agreements
During the operation of this Agreement, CommSec and an employee may enter into an individual agreement that may exclude in part or whole the operation of this Agreement. Where such agreement is reached, it will prevail over the terms of this Agreement to the extent of any inconsistency.
Such agreement must be in writing and the employee must not be worse off, on an overall basis, than he/she would have been under the terms of this Agreement.
An individual agreement made under this clause will be deemed to be part of this Agreement. A breach of an individual agreement will be taken to be a breach of this Agreement and may be enforced accordingly. Individual agreements made under this clause will only have effect during the operation of this Agreement.
An individual agreement made under this clause may be varied or terminated in accordance with the terms of the individual agreement or by agreement with CommSec.
An employee is entitled to approach his/her representative at any stage for advice or assistance.
It is the intention of CommSec and employees that individual agreements made under this clause are to facilitate a better accommodation of business and/or employee needs at the workplace level.’
71 FSU claimed that an agreement that included this provision cannot validly be certified by the AIRC in accordance with ss 170LI, 170LT and 170LU of the WR Act. In particular, FSU contended that, by reason of cl 12, the AIRC could not be satisfied that the requirements set out in ss 170LI, 170LT and 170LU had been satisfied. Its argument focused on the intended effect of cl 12 which was that the terms and conditions of a cl 12 agreement, which were not formulated at the time of certification, were to have effect for the purposes of the WR Act as if they were terms and conditions of the CommSec Agreement. FSU contended that that consequence undermines the purpose of the statutory scheme providing for the certification of agreements and is not authorised by the WR Act.
72 Certification of an agreement under the WR Act has significant consequences: see Electrolux Home Products Pty Ltd v Australian Workers’ Union (2004) 209 ALR 116 (‘Electrolux’) 144-145 [108] per McHugh J. In particular, a certified agreement is binding on the parties and breaches of it may be enforced by way of the penalty provisions (s 178(1)) and other remedial relief (ss 178(6) and 179). Certification operates to restrict employers’ common law rights of contract, tort and property and will also result in the terms of the agreement prevailing over awards or orders of the AIRC to the extent of any inconsistency (s 170LY(1)(a)) and, subject to certain exceptions, over inconsistent State laws or awards (s 170LZ(1)) and certain Commonwealth laws (s 170LZ(4)). Also, the employees bound by a certified agreement are entitled to access the unfair dismissal provisions of the WR Act as ‘federal award employees’: see s 170CB(1)(c) of the WR Act. Further, prior to the nominal expiry date of a certified agreement, the employees and employers bound by the agreement cannot engage in industrial action or a lock out respectively, in support of claims in respect of matters dealt with in the agreement: see s 170MN and National Fleet Network Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union & Ors [2005] FCA 917 at [11]-[25].
‘170LE Valid majority
For the purposes of this part, a valid majority of persons employed at a particular time whose employment is or will be subject to an agreement:
(a) make or genuinely make the agreement; or
(b) approve or genuinely approve:
(i) the agreement; or
(ii) the extension of the nominal expiry date of the agreement; or
(iii) the variation or termination of the agreement;
if:
(c) the employer gives all of the persons so employed a reasonable opportunity to decide whether they want to make the agreement or give the approval; and
(d) either:
(i) if subparagraph (ii) does not apply — a majority of the persons; or
(ii) if the decision is made by a vote — a majority of the persons who cast a valid vote;
decide, or genuinely decide, that they want to make the agreement or give the approval.
…
170LI Nature of Agreement
(1) For an application to be made to the Commission under this Division, there must be an agreement, in writing, about matters pertaining to the relationship between:
(a) an employer who is a constitutional corporation or the Commonwealth; and
(b) all persons who, at any time when the agreement is in operation, are employed in a single business, or a part of a single business, of the employer and whose employment is subject to the agreement.
(2) The agreement must be made in accordance with section 170LJ, 170LK or 170LL.
…
170LK Agreement with employees
(1) The employer may make the agreement with a valid majority of the persons employed at the time whose employment will be subject to the agreement.
…
(3) At or before the time when the notice is given, the employer must take reasonable steps to ensure that every such person either has, or has ready access to, the proposed agreement, in writing.
…
(7) Before the agreement is made, the employer must take reasonable steps to ensure that the terms of the agreement are explained to all the persons employed at the time whose employment will be subject to the agreement.
…
170LT Certifying an agreement
(1) If an application is made to the Commission in accordance with Division 2 or 3 to certify an agreement, the Commission must certify the agreement if, and must not certify the agreement unless, it is satisfied that the requirements of this section are met.
(2) The agreement must pass the no-disadvantage test (see Part VIE).
…
(6) If the agreement was made in accordance with section 170LK, a valid majority of persons employed at the time whose employment would be subject to the agreement must have genuinely made the agreement.
…
(8) The agreement must include procedures for preventing and settling disputes between:
(a) the employer; and
(b) the employees whose employment will be subject to the agreement;
about matters arising under the agreement.
170LU When Commission to refuse to certify an agreement
…
(2) Despite section 170LT, the Commission must refuse to certify the agreement if the Commission thinks that a provision of the agreement is inconsistent with:
(a) a provision of Division 3 of Part VIA; or
(b) an order by the Commission under that Division; or
(c) an injunction granted, or any other order made, by a court under that Division.
(2A) Despite section 170LT, the Commission must refuse to certify an agreement if the Commission is satisfied that it contains objectionable provisions (within the meaning of s 298Z).
…
(5) Despite section 170LT, the Commission must refuse to certify an agreement if it thinks that a provision of the agreement discriminates against an employee, whose employment will be subject to the agreement, because of, or for reasons including, race, colour, sex, sexual preference, age, physical or mental disability, marital status, family responsibilities, pregnancy, religion, political opinion, national extraction or social origin.
…
170MD Varying a certified agreement
(1) Either:
(a) if paragraph (b) does not apply — the employer; or
(b) if one or more organisations are bound by the agreement — the employer and the one or more organisations;
may, in writing, vary the agreement.
(2) The variation has no effect unless the Commission approves it.
(3) The Commission must, by order, approve the variation if, and must not approve the variation unless, it is satisfied that:
(a) a valid majority of the employees whose employment is subject to the agreement at the time genuinely approve the variation; and
(b) the Commission would be required to certify the agreement as varied if it were a new agreement whose certification was applied for under this Part.
…
(7) A certified agreement is not able to be varied except in accordance with:
(a) this section (including as it applies in accordance with section 170MDA); or
(b) subsection 113(2A) (which deals with discriminatory agreements); or
(c) section 170MC (extending the nominal expiry date); or
(d) section 170ME (which deals with undertakings); or
(e) section 298Z (which deals with the removal of objectionable provisions).
Note: subsection (7) would not apply to an agreement in so far as the obligations under the agreement can change because of the terms of the agreement itself.
…
170XA When does an agreement pass the no-disadvantage test?
(1) An agreement passes the no-disadvantage test if it does not disadvantage employees in relation to their terms and conditions of employment.
(2) Subject to sections 170XB, 170XC and 170XD, an agreement disadvantages employees in relation to their terms and conditions of employment only if its approval or certification would result, on balance, in a reduction in the overall terms and conditions of employment of those employees under:
(a) relevant awards or designated awards; and
(b) any law of the Commonwealth, or of a State or Territory, that the Employment Advocate or the Commission (as the case may be) considers relevant.’
(a) the terms of the agreement have been approved and genuinely made by a valid majority of employees bound by the agreement and who have had its terms explained to them: see ss 170LE, 170LK and 170LT(6);
(b) the terms of the agreement only relate to matters pertaining to the employee-employer relationship: see s 170LI(1) and Electrolux at 122 [17], 145 [111], 156-159 [157]‑[166] and 180 [251]-[253];
(c) the terms of the agreement do not include inconsistent, objectionable or discriminatory terms: see ss 170LU(2), 170LU(2A) and 170LU(5);
(d) the agreement passes the no-disadvantage test: see ss 170LT(2) and 170XA; and
(e) the agreement contains dispute prevention and settlement procedures: see s 170LT(8).
75 Further, any variation of the agreement must, by order, be approved by the AIRC, which must refuse to approve it in certain circumstances: see s 170MD(3). In Kilpatrick Green Pty Ltd v The Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia & Anor [1998] FCA 559, Ryan J observed that a suggestion that the AIRC had countenanced the variation, perhaps very substantially, of a certified agreement without such a variation being certified, would ‘implicate the Commission in an improper delegation or abdication of its duty of certification.’
76 Subject to a possible exception in respect of ‘facilitative provisions’ (to which I later refer), the cumulative effect of the above provisions is such that it is an implicit, if not explicit, requirement of the statutory scheme for certification that the agreement being certified contain all of the terms that are to have effect as a certified agreement as a result of the certification. If the position were otherwise, the AIRC could not satisfy itself of the requirements in respect of the matters set out in ss 170LE, 170LI, 170LK, 170LT, 170LU, 170MD and 170XA. Thus, those terms must both be in existence and be considered by the AIRC prior to it certifying the agreement. It would be antithetical to that scheme for the AIRC to be empowered to validly certify an agreement when it had no knowledge of the terms of the cl 12 agreement that will ultimately be binding on the employer and the employees as if it were an agreement certified under the WR Act. More specifically, it is self-evident that a consequence of the certification of the CommSec Agreement, including cl 12, is that a cl 12 agreement may be given effect to as if it were a certified agreement notwithstanding that:
(a) a valid majority of employees may never have considered, let alone approved, its terms;
(b) the agreement may contain terms that do not pertain to the employee-employer relationship;
(c) the agreement may contain inconsistent, discriminatory and objectionable provisions;
(d) the AIRC, as opposed to the contracting parties, has not considered whether the agreement passes the ‘no-disadvantage’ test;
(e) the agreement may exclude the operation of the dispute prevention or settlement procedures in the CommSec Agreement; and
(f) the agreement varies the certified agreement without the variation being considered, let alone approved, by the AIRC.
77 I referred above to a possible exception in respect of ‘facilitative provisions’ which the AIRC has permitted to enable ‘agreement at enterprise level to determine the manner in which [a] clause is applied at the enterprise’: see Safety Net Adjustments and Review – September 1994 (1994) 56 IR 114 (‘Safety Net’) at 136. The AIRC (at 137) contrasted such provisions with ‘a built-in contracting-out provision in an award, which should not occur’ because, if the parties wish to divest themselves of their obligations, ‘they should do so in accordance with the processes provided by the Act.’
78 A facilitative provision, which provides for the parties to agree upon the details of the manner in which a particular clause is to operate at the enterprise level, is unlikely to affect the AIRC’s ability to be satisfied that the pre-conditions to certification have been met. Also, such a provision is unlikely to result in a variation of the agreement (for the purposes of s 170MD) in the event that agreement is subsequently reached upon the details of the operation of the clause at an enterprise level. In that regard, a facilitative provision may therefore fall within the marginal note to s 170MD(7), which states that the sub-section ‘would not apply to an agreement in so far as the obligations under the agreement can change because of the terms of the agreement itself.’ Although s 13(3) of the Acts Interpretation Act 1901 (Cth) provides that such notes are not to be taken to be part of the Act, the note indicates an intention that provisions such as facilitative provisions may not be regarded as variations for the purposes of s 170MD. Whether a facilitative provision is permissible may depend upon the width of the provision and, also, whether it purports to merely provide for the agreement made pursuant to it to operate between the parties, but not to become a provision of the award or certified agreement (as the case may be).
79 It is obvious that the purpose of the provisions to which I have referred is that the AIRC is to determine whether all of the terms of the agreement, which might be relevant to the statutory duties of the AIRC to which I have referred and which are to have effect as terms of a certified agreement during the period of its operation, satisfy the relevant statutory requirements. The cl 12 agreements, made pursuant to cl 12 of the CommSec Agreement, exclude all of the terms of the CommSec Agreement and substitute their terms as the terms and conditions of employment that are to have effect as if they were terms of the CommSec Agreement. It is clear that the cl 12 agreements and, it must follow, cl 12 of the CommSec Agreement which authorises those agreements, not only undermine the certification role of the AIRC under the WR Act, but also defeat the purpose of the statutory provisions to which I have referred. The Court should not construe the relevant provisions to produce those consequences if a construction that gives effect to the legislative purpose is reasonably open: see s 15AA of the Acts Interpretation Act 1901 (Cth) and Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 at 423, approved in Bropho v State of Western Australia (1990) 171 CLR 1 at 20. As Lord Diplock observed in ‘The Courts as Legislators’ in The Lawyer and Justice (1978) 263 at 274:
‘if … the Courts can identify the target of Parliamentary legislation their proper function is to see that it is hit; not merely to record that it has been missed’.
80 In my view, subject to a probable exception in respect of facilitative provisions, it is an implicit requirement of the statutory provisions to which I have referred that the agreement being certified contain all of the terms that are to have effect as a certified agreement as a result of the certification. That construction gives effect to the purpose of the relevant provisions, is reasonably open and should be adopted.
81 However, it does not follow that every failure by the AIRC to satisfy the requirements of WR Act will result in invalidity. In Project Blue Sky Inc & Ors v Australian Broadcasting Authority (1998) 194 CLR 355 (‘Project Blue Sky’) McHugh, Gummow, Kirby and Hayne JJ stated at 389 [92]:
‘Traditionally, the courts have distinguished between acts done in breach of an essential preliminary to the exercise of a statutory power or authority and acts done in breach of a procedural condition for the exercise of a statutory power or authority. Cases falling within the first category are regarded as going to the jurisdiction of the person or body exercising the power or authority. Compliance with the condition is regarded as mandatory, and failure to comply with the condition will result in the invalidity of an act done in breach of the condition. Cases falling within the second category are traditionally classified as directory rather than mandatory.’ (footnotes omitted)
82 See also SAAP & Anor v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 215 ALR 162 (‘SAAP’) at 183 [77] per McHugh J, 203 [173] per Kirby J and 211 [208] per Hayne J.
83 When regard is had to the significance of the requirement that the agreement being certified contain all of the terms that are to have effect as a certified agreement as a result of the certification; to the mandatory requirements that must be satisfied for certification; and to the consequences of certification; the conclusion is inevitable that the requirement is one that is an ‘essential preliminary’ to certification or, as was suggested in SAAP, an imperative requirement of non-compliance with which will result in invalidity.
84 The same result can also be reached by a simpler route. Section 170MD(2) provides that a variation to a certified agreement has no effect unless the AIRC approves it. Section s 170MD(7) provides that a certified agreement is not able to be varied except in accordance with s 170MD and certain other specified provisions of the WR Act. A cl 12 agreement, by excluding all of the terms of the CommSec Agreement, is plainly a variation of that agreement. In so far as cl 12 of the CommSec Agreement purports to give effect to a cl 12 agreement as if it were a certified agreement, it cannot have that effect by reason of ss 170MD(2) and 170MD(7) CBA and CommSec contended that cl 12 permits the CommSec Agreement to be varied and for the varied agreement to have effect as a certified agreement. However, the WR Act does not empower the AIRC to override the imperative statutory requirements of s 170MD. Therefore, any exercise of power by the AIRC purporting to do so is ultra vires and of no effect.
85 CommSec and CBA contended that cl 12 was analogous to a ‘facilitative provision’ in the sense that that term is used by the AIRC. It was a brave contention. Clause 12 was undoubtedly facilitative of CBA and CommSec’s desire to opt out of all of the obligations imposed by the CommSec Agreement but, as the AIRC pointed out in Safety Net, if there is to be a divesture of the obligations imposed on the parties by the agreement, that can only be done in accordance with the statutory processes that provide for such changes; in the present context, s 170MD. Clause 12 enabled, and the cl 12 agreements provided for, a divestiture of all of the obligations imposed by the CommSec Agreement. Accordingly, cl 12 does not fall within the possible exception in respect of facilitative provisions.
86 For the above reasons, I have concluded that the inclusion of cl 12 in the CommSec Agreement resulted in the invalidity of the certification of the CommSec Agreement by the AIRC. As was made clear in Electrolux, it is not to the point that all of the provisions of the CommSec Agreement, other than cl 12, are provisions that may be the subject of a certified agreement. It is also not to the point that the cl 12 agreements may not in fact have contained conditions prohibited by the WR Act. The issue is whether the AIRC had jurisdiction to certify the CommSec Agreement and I have found that it did not have that jurisdiction. It must follow that the certification of the CommSec Agreement is invalid and also the cl 12 agreements, being variations of the CommSec Agreement which do not comply with s 170MD, do not have effect as if they were certified agreements under the Act.
87 CBA and CommSec contended that, if I concluded that the AIRC did not have jurisdiction to certify the CommSec Agreement by reason of cl 12, the agreement, save for cl 12, is validated by s 170NHA of the WR Act.
88 Section 170NHA provides:
‘If:
(a) application was purportedly made to the Commission to certify an agreement under Division 2 (including that Division as applied by subsection 5AA(2) or (3) or subsection 494(2)) or Division 3; and
(b) the Commission purported to certify the agreement on or before 2 September 2004 under Division 4 (including that Division as so applied); and
(c) the agreement, as purportedly certified, deals with one or more matters that are not permitted matters; and
(d) the application and certification were (but for this section) invalid because the agreement deals with matters that are not permitted matters, and for no other reason;
then, to the extent only that the agreement deals with permitted matters, the fact that the agreement deals with matters that are not permitted matters is taken for all purposes not to affect, and never to have affected, the validity of the application or certification.’
89 Section 170NHC(1), relevantly, defines a ‘permitted matter’ in respect of an agreement purportedly made under Div 2 of Pt VIB as a matter pertaining to the relationship of an employer and the persons in the single business, or part thereof, whose employment is subject to the agreement.
90 Section 170NHA requires severance of the clauses that deal with ‘matters that are not permitted matters’ so that the certification of the agreement is validated in so far as it relates to ‘permitted matters’. However, it is clear that the validation is only to occur where the invalidity has arisen ‘because the agreement deals with matters that are not permitted matters’, namely matters that do not pertain to the employer/employee relationship and therefore fail to comply with s 170LI. As was explained in the Explanatory Memorandum in respect of the Workplace Relations Amendment (Agreement Validation) Bill 2004, s 170NHA came about as a result of the High Court decision in Electrolux and s 170NHA:
‘… places the parties in the position they would have been in had their agreement complied with the Electrolux decision at the time it was certified, approved or varied.’
The Explanatory Memorandum also stated:
‘The Bill will not validate those parts of an agreement that do not pertain to the employment relationship. Nor will the Bill remedy other defects in the certification process. If an agreement is invalid as a result of some other flaw in its making, certification or approval, this Bill will not render it valid.’
91 On the basis of my reasoning in relation to invalidity, it is clear that the reason for invalidity of the certification is that the agreement contains cl 12. While one defect in cl 12 is that it does not restrict a cl 12 agreement to matters that pertain to the employer/employee relationship, the invalidity comes about because of flaws in the certification of the CommSec Agreement that travel well beyond any failure to comply with s 170LI. Thus, in the present case, the invalidity is not because the certified agreement deals with matters that are not ‘permitted matters’ as defined or, put another way, the invalidity did not arise because the CommSec Agreement did not satisfy the employer/employee relationship requirement in s 170LI. Rather, the invalidity has arisen because:
(a) the AIRC did not have the power to certify the CommSec Agreement because it did not have before it, and did not consider, all of the terms of the agreement that are to have effect as a certified agreement; and
(b) cl 12 impermissibly provides for a variation of the CommSec Agreement to have effect as a certified agreement without compliance with s 170MD.
92 Accordingly, s 170NHA does not validate the CommSec Agreement.
93 In Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission (2001) 203 CLR 645 at 658 [34] the High Court, in a joint judgment, explained the consequence of invalidity of a certified agreement:
‘The parties to an industrial situation are free to agree between themselves as to the terms on which they will conduct their affairs. Their agreement has effect according to the general law. If their agreement is certified, it also has effect as an award. To the extent that the agreement provides in a manner that exceeds what is permitted either by the Constitution or by the legislation which gives the agreement effect as an award, it cannot operate with that effect. But the underlying agreement remains and the validity of that agreement depends on the general law, not the legislative provisions which give it effect as an award.’
94 Therefore, the employment relationship between CommSec and its employees is governed by a common law contract of employment, albeit one that was purportedly entered into pursuant to cl 12 of the CommSec Agreement. Such a contract is not protected by or enforceable under the WR Act. Thus, the cl 12 agreements resulted in CommSec’s PFS business unit employees working in an unregulated workplace in so far as the WR Act is concerned. In contrast, PFS business unit employees whose conditions of employment were governed by CBA’s Industrial Instruments are so protected and their rights under those instruments are enforceable under the WR Act. As outlined above, the protection and the enforceability rights conferred by the WR Act are real and substantial. It must follow that, as CommSec’s employees in the PFS business unit do not have the benefit of their terms of employment having the protection and enforceability accorded to certified agreements by the WR Act, there is a legal, as well as a financial, inferiority in the CommSec entitlements when compared with the CBA entitlements. That legal inferiority is an additional factor in the prejudicial alteration to the position of the relevant employees that has resulted from the PFS decision.
(e) Discrimination by CBA
95 CBA argued that any prejudicial alteration came about as a result of a CBA employee’s decision to resign from CBA and take up employment with CommSec under a cl 12 agreement, rather than as a result of any conduct on the part of CBA: see BHP Iron Ore at [38]. However, BHP Iron Ore is distinguishable from the present case. In BHP Iron Ore there was an offer to each employee of ‘improved remuneration and conditions to be embodied in an individual workplace agreement.’ On the facts in that case, the prejudicial alteration to the position of the employees could only arise in respect of employees who failed to accept the offer. However, the Full Court found that any relative change to an employee’s detriment was brought about by the acceptance by some employees, and the rejection by others, of an offer made indiscriminately to all employees. If an indiscriminate offer to all the relevant employees was all that occurred in the present case, it may not be distinguishable from BHP Iron Ore. However, in the present case, the prejudicial alteration came about because it was integral to the making and implementation of the PFS decision that employees remaining with CBA were to lose the promotional, advancement and transfer opportunities in CBA’s PFS business unit that, but for the PFS decision, would have otherwise accrued to them in the normal course of their employment. CBA altered the criteria for access to those opportunities by imposing a requirement that, for that access, the relevant employees had to resign from CBA. No analogous circumstance existed in BHP Iron Ore for employees who rejected their employer’s offer. Thus, the making and implementation of the PFS decision by CBA resulted in an adverse affectation of, or deterioration in, the opportunities available to the relevant employees. Of course, the relevant employees were able to access those opportunities, and indeed, were induced by CBA to access those opportunities, as employees of CommSec. However, to do so they were required to resign as employees of CBA, take up employment with CommSec and then suffer the financial and legal detriments referred to above, which arise from employment under the cl 12 agreements. Thus, the present case is one that is properly to be characterised as a prejudicial alteration to the position of the relevant employees by reason of CBA’s conduct, rather than by reason of the conduct of the employees in accepting or rejecting an offer of employment with CommSec.
96 A similar answer can be given to CBA and CommSec’s reliance on Geraldton Port Authority at 73 [243]-[244] where RD Nicholson J did not accept that an offer of voluntary redundancy contravened s 298K(1). As his Honour pointed out, the offer of redundancy was not a threat to injure the employee in his or her employment as the offer may be accepted or rejected by the employee and, once it is accepted, the redundancy takes effect. In both BHP Iron Ore and Geraldton Port Authority, prejudicial alteration of position by reason of the employer’s decision, of a kind that occurred in the present case, was not found to have occurred.
(f) Relief
97 It is clear from the foregoing that FSU has established that the making and implementation of the PFS decision by CBA resulted in the relevant employees suffering an alteration to their position to their prejudice by reason of conduct by their employer, CBA. The prejudice, which was real and substantial, resulted from the loss of career opportunities if they did not resign from CBA, and from the financial and legal inferiority of the cl 12 agreements to which they would be subject if they did resign and then take up employment with CommSec. Accordingly, there has been a contravention by CBA of s 298K(1) of the WR Act in respect of each of the relevant employees.
98 It follows that FSU is entitled to a declaration that CBA, for a prohibited reason (namely that the relevant employees were entitled to the benefit of CBA’s Industrial Instruments), made and implemented the PFS decision and thereby prejudicially altered the position of each Executive Manger, Relationship Manager and Assistant Relationship Manager employed by CBA in its PFS business unit immediately prior to the implementation of the decision. It would also follow that penalties may be imposed under s 178(1) in respect of each contravention of s 298K(1). A further hearing will be necessary in respect of those penalties.
99 FSU is also entitled to injunctive relief under s 298U restraining CBA from continuing to engage in the contravening conduct. The injunction that is appropriate is to restrain CBA from inducing or attempting to induce any of the relevant employees to commence employment with CommSec under the financially or legally inferior terms described above, where such conduct is engaged in for the reason, or for reasons that include the reason, that the employee is entitled to the benefit of any of CBA’s Industrial Instruments.
100 FSU also sought remedial or consequential orders under s 298U requiring CBA to offer the managerial employees who resigned from CBA and commenced to be, and remain, employed by CommSec in the PFS business unit:
‘employment … in the position held by the employee on the basis that no term or condition of employment is less advantageous to the employee than a corresponding term or condition of employment currently applicable to that employee.’
101 In my view, it is not appropriate to make an order that results in employees receiving the most advantageous terms of both their current employment contract with CommSec and of CBA’s Industrial Instruments. While it is appropriate to remedy the prejudicial alteration suffered by the employees, it is not appropriate to place the employees concerned in a position that is better than the one that they would have been in had the contravention of s 298K(1) not occurred. The remedial relief I am prepared to grant is to allow CBA’s managerial employees to revert to their former positions in CBA without disadvantage if they choose to do so. That may be achieved by requiring CBA to re-employ those persons on terms that ensure that they have suffered no financial disadvantage by resigning their employment with CBA and taking up employment with CommSec.
(g) FSU’s other invalidity claims
102 FSU also claimed that the CommSec Agreement was invalid on two other bases arising from the following facts. On or about 6 June 2002, CommSec began discussions with certain employees in relation to what ultimately became the CommSec Agreement. These employees were employed by CommSec in a clerical capacity in New South Wales and their employment fell within the scope of the Clerical and Administrative Employees (State) Award (‘the NSW Clerks Award’), which is an award of the New South Wales Industrial Relations Commission. The clerks were employed in the securities business of CommSec and were working in the operations section of that business which was located at 52 Martin Place, Sydney. The clerks participated in a ballot and a majority approved the CommSec Agreement. Clause 3 of the CommSec Agreement states that it ‘shall bind Commonwealth Securities Limited (CommSec) and employees performing work in accordance with this Agreement.’ Clause 4 of the agreement provides that the CommSec Agreement ‘will cover employees of CommSec who perform work in accordance with clause 7.’ Clause 7 of the CommSec Agreement provides:
‘Work performed by employees under this Agreement will be determined by CommSec and categorised as follows:
Category A Work
Work in this category can include a wide range of clerical work which can have the following characteristics:
· Work can be routine and repetitive and can require basic to good operational knowledge. Problems can be mostly familiar and there can be some discretion in relation to solutions.
· Work can be performed either under direct supervision with regular checking of progress toward more limited supervision with checking of work relating to overall progress.
· An employee in this category applies knowledge and skills to a range of tasks.
Some typical examples of the type of work in this category can include (although not limited to):
· Document and transaction processing
· Routine processing of customer/client business
· General administrative tasks
· Basic sales and customer service and support
Category B Work
Work in this category can include a wide range of clerical work which can have the following characteristics:
· More complex clerical tasks may be undertaken than in Category A and the employee may be required to work without supervision with some general guidance on progress and outcomes.
· Work may involve leading a team or supervising the work of others (minimum managerial authorities and accountabilities).
· Work in this category requires a depth of knowledge and a broad range of skills where discretion and judgement may be required.
CommSec will position employees into one or the other of these categories.
Some tasks assigned to a role in Category A or Category B may not exhibit all of the characteristics identified for this Category.
Additionally, some tasks assigned to a role in Category A may include Category B tasks and some tasks assigned in Category B may include some or all of the characteristics of work in Category A.
During the operation of this Agreement, CommSec may review and change the manner in which work is classified in accordance with this provision. Where this occurs an employee will not have their salary reduced and will be overall no worse off compared to this Agreement.’
The CommSec Agreement defined ‘clerical work’ as meaning:
‘tasks of a broad nature performed within CommSec or by CommSec on behalf of a related corporation or an agent, including although not limited to, document handling, information management, document and transaction processing, sales and customer service and support (phone and/or Internet based) and settlement work.’
103 Clause 7 has been carefully drawn so as to enable CommSec to categorise work as falling within the definition of Category A or Category B work even though the work is not clerical work. By using that drafting device, CommSec was purportedly able to categorise the work of managerial employees, who do not perform ‘clerical work’, as falling within Category B Work.
104 In July 2003, CommSec made an application to the AIRC for certification of the CommSec Agreement. The application for certification was made on the basis that CommSec’s securities business was the single business in which employees covered by the agreement would be working and that the business in question was being carried on at 52 Martin Place, Sydney 2000. It was also made on the basis that the CommSec Agreement would apply to the whole of the single business.
105 Prior to certifying the CommSec Agreement, the AIRC was required to consider whether the agreement satisfied the no-disadvantage test set out in s 170XA of the WR Act. Section 170XA(2)(c) requires a comparison with a relevant or designated award. In a statutory declaration made on behalf of CommSec in support of the certification application, the NSW Clerks Award was stated to be the award that regulates the terms and conditions of ‘employees covered by the agreement.’ At the certification hearing, the AIRC was told by CommSec that the Employment Advocate had determined that the relevant award for the purpose of the no-disadvantage test was the NSW Clerks Award.
106 The solicitor for CommSec, in her opening words to the AIRC in the application for certification, said:
‘[T]he agreement covers those employees performing essentially clerical work. That work involves processing, approval work under strict guidelines and data entry with some limited sales and customer service work.’
107 The statutory declaration and the representation might have been literally correct in that the agreement appeared to only cover employees performing ‘essentially clerical work’. However, when regard is had to the purpose of the statutory declaration and of the representation (ie to persuade the AIRC to use the NSW Clerks Award for the no-disadvantage test); to the drafting device that purportedly enabled CommSec to categorise non-clerical work as work carried out under the agreement; and to CommSec’s intention to do so in respect of managerial employees; the statutory declaration and the representation was quite misleading.
108 The AIRC applied the no-disadvantage test using the NSW Clerks Award and on 30 July 2002 the AIRC granted the application to certify the CommSec Agreement. The formal certification occurred on 31 July 2002.
109 In implementing the PFS decision, CommSec entered into agreements with employees under cl 12 of the CommSec Agreement. The employees include persons designated as Personal Advisers, Associate Advisors, Relationship Managers, Assistant Relationship Managers and Financial Advisers employed in the PFS business unit at CBA Premium Banking Centres throughout Australia.
110 On the basis of the evidence outlined above, FSU argued that the CommSec Agreement was also invalid because the application for certification was made on the false basis that:
(a) the single business in which employees covered by the agreement would be working was the CommSec securities business;
(b) the business in question was being carried out at 52 Martin Place, Sydney 2000; and
(c) the CommSec Agreement applied to the whole of the single business identified in (a) and (b) above.
111 FSU also argued that the CommSec Agreement was invalid or, at least, cannot apply to the relevant employees because it only has application to employees employed in a clerical capacity. FSU contended that the relevant employees were not employed in positions that fall within the definition of ‘clerical work’ contained in the CommSec Agreement. The substance of CBA’s and CommSec’s riposte, which might be correct, is that the definitions of clerical work enable CommSec to categorise non-clerical work as clerical work.
112 I do not need to determine whether the CommSec Agreement was invalidly certified as a result of FSU’s ‘single business’ or ‘clerical work definition’ arguments, because I have already determined that the agreement was invalidly certified. However, the evidence I have outlined reveals a course of conduct on the part of CBA, presumably on the basis of legal advice, that raises matters of concern. The evidence suggests that CBA and CommSec have implemented their objective of securing an ‘adaptable platform of employment conditions’ by:
(a) selecting CommSec to be the employer of managerial employees in the PFS business unit; and
(b) making an application to the AIRC for certification of the CommSec Agreement representing that the agreement was only to cover workers ‘performing essentially clerical work’ at CommSec’s Martin Place premises and that therefore the NSW Clerks Award was an appropriate award for the AIRC to use in applying the no-disadvantage test.
113 The representation appears to be misleading as the CommSec Agreement was intended to and later did cover non-clerical employees (ie managerial employees) in CBA’s PFS business units throughout Australia in respect of whom the NSW Clerk’s Award was both disadvantageous and inappropriate as an award for the application of the no-disadvantage test. Also, CBA and CommSec had carefully drafted the ‘clerical work’ definitions in the CommSec Agreement to enable them to categorise non-clerical employees as clerical employees. Those matters do not appear to have been disclosed to the AIRC. I have outlined my concerns about how the PFS decision was made and implemented as they may be relevant to the penalties that are appropriate in the circumstances. Also, CBA may have an explanation that places the evidence I have described in a different light. If so, it will be open to it to proffer that explanation during the penalty hearing.
3. The non-disclosure claim
114 FSU alleges that a penalty should be imposed on CBA under s 178(1) of the WR Act for breaches of cll 18.3.2, 18.3.4, 39.3 and 39.4 of CBA’s 2000 core EBA, of cll 18.3.2, 18.3.4, 39.3 and 39.4 of CBA’s 2000 EBA and of cll 17.3.2, 17.3.4, 37.3 and 37.4 of CBA’s 2002 core EBA, each of which is an agreement certified under s 170LT of the WR Act. The alleged breaches arise as a result of the non-disclosure by CBA to FSU of the PFS decision.
115 The relevant clauses in each of the three certified agreements differ slightly but the differences are not relevant to the breaches alleged. There are two sets of clauses that are relevant. The first set is expressed to ‘have effect in situations where the Bank is considering or implementing change that impacts upon working arrangements and could give rise to potential redundancy and/or redeployment situations’ (cl 18.1.1 and cl 17.1.1 respectively).
116 The three EBAs define ‘redundancy’ to mean:
‘a position redundancy where work (or a major portion of it):
(a) is no longer required to be performed; or
(b) is to be performed at a new location which requires a change in residence of the employee concerned;
as a result of re-organisation; changed business practice; technological change; downturn in business; a decision to reduce the number of employees; or a general reduction in classification levels or positions.’
117 The requirement that the CBA inform FSU is as follows (in CBA’s 2002 core EBA, these clauses are numbered 17.3.2 and 17.3.4):
‘18.3.2 When the Bank has reviewed a work area, practice or function, the Bank will inform the FSU of the outcome and provide the FSU with the following information —
(i) details of the new employee structure applicable to the area and an explanation of the impact;
(ii) details of the positions to be abolished including position numbers where available; and
(iii) details of the proposed date of implementation of the new structure.
…
18.3.4. The FSU will have a period of two weeks from the time the information in terms of subclause 18.3.2 [or subclause 17.3.2 in the case of the CBA’s 2002 core EBA] is provided to seek discussions with the Bank on the proposals and to comment on the review findings. The Bank will make its representatives available for discussions prior to implementing any findings.
…’
‘39.1 The Bank and the FSU recognise the importance of consultation and co-operation on major issues.
39.2 ‘Consultation’ is defined as either party seeking the views of the other on major change issues before decisions are made, providing an opportunity of influence on the final outcome. ‘Major change’ is defined as change which is likely to impact significantly on employees and/or their work environment.
39.3 The Bank and the FSU agree that consultation on major change shall occur as follows:
39.3.1 Each party will keep the other informed on matters of mutual interest and concern, and the Bank will inform the FSU at an early stage of proposals for major change.
39.3.2 Such issues will be raised as early as is practical to allow for consultation, and the views of each party are to be considered before finalisation of the initial recommendations for change.
39.3.3 As part of the consultation process, the initiator of the change will supply an estimate of the likely impact on existing arrangements.
39.3.4 It is recognised that, due to commercial imperatives, on rare occasions the consultative process may need to occur over a time frame as short as one day. However, generally, either party will be given a minimum of one week to respond to proposals. Such a period may be extended on request of either party.
39.3.5 Having regard to all the relevant input after completion of the consultation process, final decisions will be made by the Bank and early information will be provided to the FSU on those decisions and details of any new arrangements to be implemented. Additional discussions may be sought by the FSU prior to implementation.
39.3.6 Commercial confidentiality will be respected by both parties.
39.4 All reasonable efforts will be made to achieve agreement on changes which are the subject of consultation. Where agreements are made and either party subsequently decides to withdraw, in the absence of other provisions, not less than six weeks’ notice of intent to withdraw shall be given. In these circumstances, the dispute resolution procedure will be followed.’
119 It is common ground that, prior to the making and implementation of the PFS decision, CBA did not consult with FSU or notify or inform it of the PFS decision. The evidence is that FSU first became aware of the PFS decision in October 2002 as a result of concerns expressed by some FSU members about the implementation of the PFS decision.
120 The questions arising in respect of the first set of clauses are:
(a) whether, prior to the PFS decision being made and implemented, there was a situation in which CBA was considering or implementing change that impacts upon working arrangements?
(b) did CBA review a work area, practice or function?
(c) could the change described in (a) give rise to potential redundancy and/or redeployment situations?
121 If the questions in (a) and (c) are answered in the affirmative, it was not seriously in dispute that CBA was required to inform FSU of the PFS decision and its consequences for employees and did not do so.
122 Prior to the PFS decision, CBA was plainly considering implementing change that impacted on the working arrangements of its employees. It is also clear that CBA ‘reviewed’ a work area, practice or function, being the PFS business unit. As a result, a change was to be brought about by CBA ceasing to be the employer of employees engaged in the PFS business unit of CBA and CommSec becoming the employer of those employees. The change impacted on ‘working arrangements’ of the relevant managerial employers as it directly affected their promotional, advancement and transfer opportunities, as well as their future employment which was proposed to be by CommSec, rather than CBA.
123 I am also satisfied that the change was one that could give rise to potential redundancy or redeployment situations. The PFS decision resulted in CBA not engaging any new employees at manager level or below, and not creating any new positions, or filling any vacant positions, in relation to the employment of employees at manager level or below in the PFS business unit. The evidence also shows that, as a result of the PFS decision, the positions affected by the decision were, over time, to be made redundant within CBA and were likely to result in redeployment of the employees affected by the decision within CommSec. The potential redundancy was a ‘position redundancy’, rather than a ‘personal redundancy’, as the managerial employees faced the potential loss of managerial positions within CBA’s PFS business unit, rather than being made redundant personally. Of course, co-incident with the loss of positions within CBA was the creation of equivalent positions within CommSec resulting in the potential redeployment of existing managerial employees to those equivalent positions.
124 Thus, CBA was required, but failed, to inform FSU about the PFS decision, and that failure resulted in it breaching the first set of conditions in the three certified agreements. Accordingly, FSU is entitled, under s 178(1) of the WR Act, to have penalties imposed by the Court in respect of the breaches.
125 In respect of the second set of clauses, the question is whether CBA planned to implement ‘major change’, namely change which is likely to impact significantly on employees. I am satisfied that the making and implementation of the PFS decision was likely to impact significantly on employees. Earlier in these reasons, I found that the making and implementation of the PFS decision resulted in prejudicial alteration to the financial and legal position of the relevant employees. For the reasons already given, I am satisfied that those consequences flowed directly from the PFS decision and had a real and substantial impact on the employees affected by the decision. Plainly, prior to the making and implementation of the PFS decision, it was clear that the decision was likely to have the impact that it did on employees. Accordingly, I am satisfied that CBA also failed to consult with FSU in respect of ‘major change’ as required under the second set of clauses of the three certified agreements. CBA therefore breached those clauses. Thus, FSU is also entitled to the imposition of penalties under s 178(1) of the WR Act in respect of those breaches.
126 As with the discrimination claim, a further hearing will be required for the purpose of hearing the parties on the penalties that are appropriate. I would add that, on the evidence presently before me, the breaches appear to be serious because, subject to any explanation that might be proffered, they appear to be consistent with a plan to make and implement the PFS decision in a manner that ensured FSU, which would have opposed the PFS decision, was not aware of it until after it had already been implemented.
4. The agency claim
127 The agency claim is that, notwithstanding the express terms of cl 12 agreements entered into by CommSec with its employees, each cl 12 agreement was made by CommSec acting as agent for CBA. It must follow, so it was argued by FSU, that CBA failed to pay the minimum entitlements due to employees under CBA’s Industrial Instruments. FSU proffered Ms Mariam Habib (a former employee of CBA and later of CommSec) as an example, claiming that, during the course of her purported employment with CommSec, she remained entitled to the terms and conditions of the CBA award and of CBA’s 2002 core EBA. FSU contended that, in the circumstances, CBA should have made, but failed to make, payments to Ms Habib in accordance with her award and EBA entitlements in respect of notice, severance and annual leave loading. Obviously, if the agency claim fails, the claim in respect of Ms Habib’s alleged entitlements must also fail.
128 Significantly, FSU did not contend that the cl 12 agreements entered into by CommSec with its employees were a sham. In the absence of a sham allegation, the proper approach to establishing the identity of the parties to an employment relationship is to consider the terms of the contract between the parties.
129 A similar issue was considered in Re Willow Fashions (Australia) Pty Ltd (in liq); Leveque v Downey as liquidator of Willow Fashions (Australia) Pty Ltd (in liq) (unreported, Supreme Court of Victoria, Hayne J, 27 April 1995). In that case, Willow Fashions (Australia) Pty Ltd (‘Willow Fashions’) transferred its employees to various other companies. Despite the transfers, the working arrangements of the employees of Willow Fashions did not change in any respect. Willow Fashions and the companies to which the employees had been transferred subsequently went into liquidation. In the liquidation of Willow Fashions, the employees lodged proofs of debt claiming retrenchment payments, annual leave and long service leave alleged to have accrued as a result of their employment with Willow Fashions. Hayne J stated, at 11-13:
‘In this connection it is important to bear steadily in mind that ordinarily speaking, the legal rights and obligations of the parties to a contract depend upon their intentions and:
“The relevant intention of each party is the intention which was reasonably understood by the other party to be manifested by that party’s words or conduct notwithstanding that he did not consciously formulate that intention in his own mind or even acted with some different intention which he did not communicate to the other party.”
(Gissing v Gissing (1971) AC 886 at 906 per Lord Diplock; Australian Broadcasting Corporation v XIVTH Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-[549] per Gleeson CJ). Thus the uncommunicated subjective intention of one party to a contract is, ordinarily speaking, irrelevant in determining the nature and extent of the rights and obligations of the parties to that agreement. It is for this reason that for a supposed contract to be a sham, it must be demonstrated that it was the common intention of the parties that the acts or documents concerned are not to create the legal rights and obligations which they may give the appearance of creating (cf Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802 per Diplock LJ.) Thus, even if it is assumed that the intention of either or both of the corporate parties to the contracts with the employees was to create some illusion or pretence, that is not sufficient to demonstrate that what otherwise would be an agreement binding upon those corporate parties may be treated as a sham.
In the present case it is not disputed that the employees, having taken advice of the union, assented to the arrangement proposed to them by [the director and company secretary of Willow Fashions]. There is no suggestion that any of the employees intended that an agreement which was reached with Willow Fashions and [the transferee companies] should not create the legal rights and obligations which those agreements gave the appearance of creating.’
130 FSU, in contending that CBA was the true employer of the relevant employees, relied upon the following passage (at 478 [172]) in my reasons for decision in Damevski v Giudice & Ors (2003) 133 FCR 438 (‘Damevski’):
‘Approaching the issue of intention to contract and agency in the manner discussed in Gissing, Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd and Garnac Grain I have concluded that, notwithstanding the labels employed in the relevant documents, the “real substance” of the Endoxos and Damevski agreements was that AICA/MLC’s role in the relationship between Endoxos and its former employees was that it acted as agent for both parties in creating privity of contract between them.’
131 However, as CBA and CommSec pointed out, in Damevski I distinguished between cases in which the contractual arrangements between the parties are embodied in a single document and cases in which they are not. I observed (at 469 [147]):
‘Although Damevski signed a letter accepting AICA/MLC’s offer the present case is not one in which the contract entered into by Damevski with AICA/MLC is to be found in a single document. Rather, the tripartite contractual arrangements made between Endoxos, AICA/MLC and Damevski were partly in writing, partly oral and partly to be implied. Thus, as was explained in Gissing; Australian Broadcasting Corporation and Garnac Grain, it is necessary to consider the course of dealing and communications between the three parties, both before and after 19 August 2001, in order to determine whether AICA/MLC created privity of contract between Endoxos and Damevski.’
132 Where the contractual arrangements between the parties are contained in a single document there is far less scope for reliance upon conduct that occurred subsequent to the making of a contract to assist in construing it as creating an agency of the kind claimed by FSU, absent an allegation of sham: see Ryan v Textile Clothing and Footwear Union of Australia & Anor (1996) 2 VR 235 at 261-262 per Hayne JA.
133 The cl 12 agreements, which include the agreement Ms Habib exhibited to her affidavit, appear to be in substantially the same form. The clauses that are relevant to the identity of the employer are as follows:
(a) The agreement is headed ‘CommSec’ (with a CBA logo appearing next to this heading) and underneath that heading, in smaller type, the words ‘Commonwealth Securities Limited (CommSec) (ABN 60 067 254 399) appear;
(b) The first paragraph of the agreement reads:
‘Welcome to Commonwealth Securities Limited. I write to offer you employment with CommSec on the basis of an Individual Agreement. This agreement is made under clause 12 of the CommSec Development Agreement’.
(c) The footer of the first page of the agreement reads:
‘Commonwealth Securities Limited ABN 60 067 254 399 is a wholly-owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia and is a Participating Organisation of the Australian Stock Exchange’.
(d) CommSec has express obligations in the agreement as the employer in respect of remuneration; superannuation; participation in a discretionary bonus scheme; probation; staff policies; the performance of duties and roles; termination; redundancy and redeployment; misconduct; proprietary rights in work results; other employment; confidentiality and restraint; variation; and dispute procedures; and
(e) The sample cl 12 agreement exhibited to Mr Rickard’s affidavit provided:
‘In order for you to take up employment with CommSec it will be necessary for you to resign from CBA as CommSec is a separate legal employer in its own right.’
134 FSU argued that the agreement did not contain any terms that excluded a relationship of agency between CommSec and CBA. FSU also claimed that some of the provisions of the agreement indicated, or were evidence of, an agency relationship between CommSec and CBA in relation to the employment of employees by CommSec. One portion of the agreement referred to appeared under the heading ‘Mobility’ and provided:
‘You will perform duties and roles as directed by CommSec at any location where CommSec, its agents, or its parent company and related corporate bodies operate.’
FSU also referred to a portion of the agreement that provided:
‘Redeployment under this clause includes within CommSec, or its parent company or related corporate bodies, including their agents.’
Another portion provided:
‘In the event that CommSec transmits its business or part of it, or outsources any of the functions to another employer or as a result of restructuring requires your employment contract to be continued with a different entity, a redundancy situation will not apply as a result of that change where the new employer is bound by this Agreement under the Workplace Relations Act 1996 or offers employment on substantially the same terms and conditions as are contained in this Agreement.’
Finally, FSU relied upon part of a clause which concerned restraint and confidentiality obligations. The relevant part read:
‘A reference to CommSec in this clause includes a reference to related body corporate of CommSec including but not limited to Commonwealth Bank of Australia and Commonwealth Insurance Ltd.’
135 The facts, viewed objectively, concerning the employment of employees under the cl 12 agreements are clear. CommSec entered into the cl 12 agreements intending to be the employer of the employees who signed the agreements. The employees entered into the agreements intending to become employees of CommSec. CommSec and the employees intended that the cl 12 agreements operate according to their terms. CommSec paid the employees’ salaries in accordance with the agreements and presented employees with group certificates in respect of those payments. The employees were contracted to be employed by CommSec to provide the PFS business unit’s services. CommSec’s role was essentially that of a labour hiring agency which provided its employees to provide services within a business conducted by another entity. CBA reimbursed all of the costs and expenses incurred by CommSec in providing the services of the employees. There is no evidence that CommSec had agreed to act as agent for CBA in employing any employees or that CBA had agreed to appoint CommSec to act as its agent in respect of any such employment.
136 FSU contended that, as a matter of substance, the employees were employees of CBA because CBA:
(a) paid the employee’s salaries, albeit by way of reimbursement to CommSec;
(b) supervised the work of the employees;
(c) was the entity to, and for, whom the employees provided all of their services;
(d) determined the salaries of, and the content of the work carried out by, the employees;
(e) provided all of the resources and facilities necessary for the employees to carry out their work;
(f) made all of the relevant decisions concerning the promotion and disciplining of the employees.
137 The problem confronting FSU is that those contentions lose the force they might otherwise have had when it is not alleged that a cl 12 agreement is a sham and it is appreciated that the arrangement between CommSec and CBA is that CommSec is to employ the employees engaged in the PFS business unit. Further, CommSec is to provide those employees to CBA, so that they carry out their work within CBA for CBA’s PFS business unit. Thus, although CommSec employees may be acting as agents for CBA in providing the PFS business unit’s services, the services are being provided by CommSec’s employees. In those circumstances, absent an allegation of a sham, there are insurmountable obstacles confronting any argument that CommSec is not the employer of the employees concerned.
138 The cl 12 agreements were contracts that clearly and expressly stated that CommSec was the employer of the employees. Furthermore, it was made clear to the relevant employees that they must resign from their employment with CBA if they were to be a party to a cl 12 agreement. There is also no reason to conclude that any new (ie non CBA) employees signing cl 12 agreements did not intend to become employees of CommSec. There appears to be no scope for any argument that CommSec and any of its employees did not intend that the cl 12 agreements operate as they appear on their face, namely as a contract of employment between CommSec and the employees. As was pointed out in the joint judgment of the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd & Ors (2004) 211 ALR 342 at 352 [40]:
‘… It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.’
139 Applying these principles to the present case, it is clear that the common intention, viewed objectively, of the contracting parties to a cl 12 agreement is that CommSec was to be the employer. The surrounding circumstances, and the purpose and object of the cl 12 agreements, fully support and re-enforce that conclusion.
140 For the above reasons, I am satisfied that CommSec is the employer of the employees with whom it entered into cl 12 agreements. It follows that FSU’s agency claim and its claim of breach of the CBA award and CBA’s 2002 core EBA, on the basis of its agency claim, must fail.
141 As I have rejected the agency claim, it is unnecessary to deal with CommSec’s and CBA’s abuse of process argument in respect of the agency claim. However, it is appropriate to observe that there is nothing improper about FSU pursuing the discrimination claim on the basis that CommSec is the employer, appearing in the AIRC to argue that that is so in respect of its industrial dispute with CommSec, and also pursuing its agency claim as an alternative claim in the present proceeding.
5. The invalidity claim
142 The declaratory relief sought in respect of FSU’s invalidity claim was in the following terms:
‘The certification order made by Senior Deputy President Duncan on 30 July 2002 certifying the Commonwealth Securities (CommSec) Development Agreement (2002) is invalid.’
143 For the reasons set out above, I have concluded that the CommSec Agreement was not validly certified by the AIRC. However, CBA and CommSec opposed the grant of declaratory relief claiming:
(a) the Court has no jurisdiction to grant the relief;
(b) FSU has no standing to apply for the relief; and
(c) the Court should exercise its discretion to refuse to grant the relief.
144 Under s 39B(1A)(c) of the Judiciary Act 1903 (Cth), the Court has jurisdiction in any matter arising under any laws made by the Commonwealth Parliament. It is now well established that a matter arises under a law of the Commonwealth:
‘if the right or duty in question in the matter owes its existence to federal law or depends on federal law for its enforcement.’
or:
‘if the source of a defence which asserts that the defendant is immune from the liability or obligation alleged against him is a law of the Commonwealth.’
See L.N.C. Industries Ltd v B.M.W. (Australia) Ltd (1983) 151 CLR 575 at 581.
145 The rights and duties arising by reason of the certification of the CommSec Agreement under the WR Act owe their existence to that Commonwealth Act and depend upon it for their enforcement. If the certification of the agreement is invalid, the rights and duties that would otherwise arise as a result of the certification do not exist. Plainly, in the present case, a justiciable controversy has arisen in relation to that claim and that controversy is a matter arising under the WR Act. As was pointed out by Wilcox and Madgwick JJ in Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission & Ors (1999) 93 FCR 317 at 358 [130]:
‘This Court … has the same jurisdiction to review the process of certification and the validity of certified agreements as it has in relation to analogous processes and documents under other Commonwealth legislation. That jurisdiction includes “jurisdiction in any matter: arising under any laws made by the Parliament”: Judiciary Act, s 39B(1A)(c). The validity of the certification order so arises. That means the Court has jurisdiction to make an appropriate declaration of right.’
146 The more substantive issue is whether FSU has standing to seek a declaration that the certification of the CommSec Agreement is invalid. In support of their contention that FSU does not have standing, CBA and CommSec submitted:
‘The Applicant is not a party to the CommSec Agreement. It did not appear in the AIRC at the time of the certification application, nor was it requested by any employee covered by the CommSec Agreement to act on behalf of such employee in negotiations prior to the certification of the Agreement: see s.170LK(4) and (5). It had no right to intervene in the certification proceedings: s.43(2)(b).’
And:
‘If the Applicant had sought to appeal against the certification of the CommSec Agreement, it would have had no standing to institute an appeal under s.45(1)(eaa) because it is not a party to the Agreement: s.45(3)(ba). The Applicant would have had no standing to institute an appeal under s.45(1)(g) unless it could demonstrate that it was a person aggrieved by the decision to certify: s.45(3)(d).
As the Applicant is not a party to the Agreement and was not involved in the certification process and did not make any representations on behalf of any employees in accordance with s.170LK(4) and (5), the Applicant would not have had standing to appeal under s.45(3)(d).
The union does not have sufficient interest in the validity of the CommSec Agreement to confer upon it standing to seek a declaration that the Agreement is invalid. No current employee of CommSec subject to the operation of the CommSec Agreement has given evidence in support of the union’s claim. If granted, the declaration would deprive all the employees currently subject to the CommSec Agreement to the benefit of the enforcement provision of the Act: s.178 and s.179.’
147 It can now be taken to be established that a person, who has no standing to bring an action under a particular Act, may nonetheless have standing to seek relief in respect of non-compliance with the Act if the person can establish a ‘special interest’ in the subject matter of the action: see Shop Distributive and Allied Employees Association v Minister for Industrial Affairs of the State of South Australia (1995) 183 CLR 552 at 558. As was pointed out in the unanimous judgment of the High Court (at 558):
‘The rule is flexible and the nature and subject matter of the litigation will dictate what amounts to a special interest.’
148 Thus, in Maritime Union of Australia v Burnie Port Corp Pty Ltd [2000] FCA 1189 (‘Burnie Port’), Ryan J found that a union had standing to seek injunctive relief to restrain a contravention of the WR Act in relation to Australian Workplace Agreements, notwithstanding that it was not a party to the agreements. Ryan J was satisfied that the union had a special interest in protecting its members from being subjected to the unlawful application of duress and in ensuring the lawful conduct of industrial relations under the WR Act.
149 The following circumstances justify the conclusion that FSU had a special interest in the subject matter of the claim, being whether the certification of the CommSec Agreement is invalid. First, as was explained in relation to the discrimination claim, the invalidity of the certification was one of the factors that led me to conclude that CBA breached s 298K(1) of the WR Act. Plainly, FSU had a special interest in raising that ground as, if made out, it had the consequence that FSU members were being unlawfully induced to depart from the regulated CBA workplace, in which FSU had a significant role under the WR Act, and commence employment in the unregulated CommSec Workplace, in which FSU has no role. Also, since invalidity is an important element of FSU’s s 298K(1) claim, it becomes difficult for CBA and CommSec to contend that FSU has no interest in seeking declaratory relief if that element is established. That is particularly so when it is appreciated that FSU, as a registered organisation, has an important role under the WR Act to protect its members from the unlawful conduct of industrial relations by an employer: see s 298T(2)(b) of the WR Act and Burnie Port per Ryan J at [22].
150 Also, the invalidity claim implicitly involves a claim by FSU that cl 12 agreements, to which FSU members are parties, are being wrongly represented by CommSec and CBA to employees to be operating as if they were certified agreements under the WR Act. Plainly, that representation has been, and is being, relied upon by CommSec and CBA to induce, inter alia, FSU members employed by CBA to resign their regulated employment with CBA and take up unregulated employment with CommSec. When FSU’s role in the regulated workplace of CBA is appreciated, FSU has a special interest in protecting its members from that misrepresentation by seeking a declaration of invalidity that will establish as between FSU, CBA and CommSec that the representation is wrong.
151 Further, the fact that FSU has received a ruling by the AIRC in its favour that it has an industrial dispute with CommSec arising as a result, inter alia, of the PFS decision and its implementation, (which include the cl 12 agreements and the CommSec Agreement), further re-enforces the conclusion that FSU’s interest in compliance with the WR Act is clearly different to that of a member of the public.
152 Finally, it is not correct for CommSec and CBA to contend that FSU has no standing under the WR Act in relation to challenging the certification of the CommSec Agreement. Under ss 45(1)(g) and 45(3)(d) of the WR Act, a registered organisation aggrieved by a certification decision is entitled to apply for leave to appeal on the ground of jurisdictional error, albeit that in this instance, the application would be out of time. Thus, FSU is not necessarily excluded by the WR Act from challenging the validity of the certification.
153 The remaining question is whether the declaration should be refused for discretionary reasons. It might have been more appropriate for FSU to have sought leave to appeal out of time to the AIRC if the only issue between it and CBA and CommSec was the validity of the certification of the CommSec Agreement. However, the present dispute between the parties related to the broader question of whether the making and implementation of the PFS decision, of which the certification of the CommSec Agreement was but one part, was unlawful. As one element of that dispute involved the validity of the certification, I do not regard it as improper or inappropriate for FSU to seek relief in this Court in respect of that matter.
154 Also, in view of CBA’s and CommSec’s unlawful concealment of the PFS decision from FSU until after its implementation, there is little merit in regarding the AIRC (where any application for leave to appeal was out of time), rather than this Court, as the more appropriate forum for this issue. In any event, CBA and CommSec were contending before the Court that the AIRC had no jurisdiction to hear any appeal by FSU.
155 The matter, however, that has concerned me is whether it is appropriate to grant the declaratory relief sought in the absence of representation on behalf of the employees who were parties to the cl 12 agreements. However, the following factors have led me to conclude that that should not be regarded as a bar to the grant of declaratory relief in the present case.
156 First, CommSec employees were given notice of this proceeding and of the injunctive relief FSU was seeking. While the notice did not reveal the invalidity claim as such, the employees were on notice of the dispute between FSU, CBA and CommSec and there is no evidence that any employee wished to be represented, or to intervene, in that dispute.
157 Secondly, I have determined the invalidity claim as part of FSU’s s 298K(1) case. The declaration merely gives effect to that determination.
158 Thirdly, although in a practical sense the declaration is likely to have consequences for CommSec’s employees, the declaratory relief is only binding on persons who are parties to the proceeding: see PW Young QC, Declaratory orders, 2nd edn, Butterworths, Sydney, 1984 at 3 [101].
159 Fourthly, the invalidity claim involves a question of law and there has been full argument on it by a competent contradictor: see Oil Basins Pty Ltd v Commissioner of Taxation (1993) 178 CLR 643 (‘Oil Basins’) at 649.
160 Finally, there is a public interest in the Court declaring that the cl 12 agreement procedure is not one that is valid under the WR Act in respect of a certified agreement. While it is unclear as to whether the procedure is being adopted by other employers, I have little doubt that, given the quest by a number of other major employers for unregulated individual contracts, it is in the public interest that the Court makes it clear that the procedure adopted by CBA is not lawful.
161 In Oil Basins at 648-649, Dawson J summarised the requirements for declaratory relief:
‘In Russian Commercial and Industrial Bank v. British Bank for Foreign Trade Ltd. ((1921) 2 AC 438, at p.448.) in a passage cited in Forster v. Jododex Aust. Pty. Ltd. ((1972) 127 CLR 421, at pp.437-438.), Lord Dunedin set out the requirements which must be satisfied before a court will exercise its discretion to make a declaration:
“The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, some one presently existing who has a true interest to oppose the declaration sought.”
And in Ainsworth v. Criminal Justice Commission a majority in this Court said ((1992) 175 CLR 564, at pp.581-582.):
“It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which (i)t is neither possible nor desirable to fetter by laying down rules as to the manner of its exercise. However, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions. The person seeking relief must have a real interest and relief will not be granted if the question is purely hypothetical, if relief is claimed in relation to circumstances that (have) not occurred and might never happen or if the Court’s declaration will produce no foreseeable consequences for the parties.”’
162 In my view, the above requirements have been satisfied. The declaratory relief sought is directed to the determination of a legal controversy, is sought by a party who has ‘a real interest’ in the relief being granted and will produce foreseeable consequences for the parties. In the circumstances, I am satisfied that there is no discretionary or other bar to the grant of the declaratory relief sought by FSU in relation to its invalidity claim.
Conclusions
163 For the above reasons, I have concluded that FSU has made out the discrimination claim, the non-disclosure claim and the invalidity claim but has failed to make out its agency claim. FSU is entitled to declaratory relief in respect of the three claims on which it has succeeded, to the imposition of penalties in respect of the discrimination and non-disclosure claims and to injunctive relief in respect of the discrimination claim. I propose to direct that FSU, after consulting with CBA and CommSec, file the orders it proposes will give effect to these reasons for judgment.
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I certify that the preceding one hundred and sixty-three (163) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel. |
Associate:
Dated: 9 September 2005
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Counsel for the Applicant: |
M Bromberg C with C Dowling |
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Solicitor for the Applicant: |
Maurice Blackburn Cashman |
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Counsel for the Respondent: |
J Middleton QC with M McDonald |
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Solicitor for the Respondent: |
Freehills |
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Respondents’ further written submissions: |
19 August 2005 |
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Applicant’s further written submissions in reply: |
8 September 2005 |
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Date of Hearing: |
18, 19, 21, 22, 28 and 29 July 2005 |
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Date of Judgment: |
9 September 2005 |
