FEDERAL COURT OF AUSTRALIA

Affinity Health Pty Limited v Keene [2009] FCA 643

Workplace Relations Act 1996 (Cth)

Workplace Relations Amendment (WorkChoices) Act 2005 (Cth)

Industrial Relations Act 1996 (NSW)

Advertiser Newspapers Pty Ltd v Industrial Relations Commission of South Australia(1999) 90 IR 211

Amcor Ltd v Construction, Forestry, Mining and Engineering Union (2005) 222 CLR 241

Automatic Fire Sprinklers Pty Limited v Watson (1946) 72 CLR 435

Blue Circle Southern Cement Ltd v Warren (1996) 67 IR 225

City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (2006) 153 IR 426

Clark v Pittwater RSL Club Ltd (1988) 84 IR 309

Kucks v CSR Ltd (1996) 66 IR 182

Tokyo Network Computing Pty Ltd v Tanaka [2004] NSWCA 263

Termination Change and Redundancy Case (1984) 8 IR 34

Visscher v Australian Industrial Relations Commission [2007] FCAFC 206

Woolworths (South Australia) Pty Ltd v Russian (1996) 66 IR 13

AFFINITY HEALTH PTY LIMITED v KAREN KEENE

NSD 1689 of 2008

PERRAM J

15 JUNE 2009

SYDNEY

THE COURT ORDERS THAT:

1.                  The appeal be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

Introduction

1                     The respondent, Ms Keene, is a nurse.  For a number of years she worked at St George’s Private Hospital in the senior nursing position of “Clinical Nurse Consultant – Urology”.  There was a practice of urologists at the hospital and her duties, unexceptionally, included a significant degree of interaction with those urologists.  The hospital decided to terminate the provision by it of nursing services to the urologists with effect from 1 October 2007.   Two weeks before this cessation, on 17 September 2007, the hospital informed Ms Keene that the arrangements with the urologists would cease on 1 October 2007.  On the same day she was told, in writing, that the hospital would offer her employment in a more junior position and at lower pay.  This was not satisfactory to her.  She contended that she had been made redundant and that the hospital was bound to pay her severance pay.  The hospital denied this.  Ms Keene commenced proceedings before the Chief Industrial Magistrates Court against the present appellant, Affinity, seeking an order that she be paid her severance pay.  It is now not in dispute that Affinity was the relevant employer. 

2                     On 7 October 2008 the learned Industrial Magistrate found in Ms Keene’s favour and awarded her the sum of $25,916.60 together with interest from 17 September 2007.  Affinity now appeals from that judgment. 

3                     Three issues arose in the appeal.  They were:

(a)        The transfer to lower duties issue.   Affinity contended, and Ms Keene denied, that it was legally permitted to transfer her to a lower position at lower pay (compendiously “lower duties”) by reason of the terms of one of the relevant industrial instruments.

(b)        The dismissal issue.   Affinity argued that it had never terminated Ms Keene’s employment so that no obligation to make the severance payment arose.  Ms Keene, on the other hand, submitted that in the absence of any legal entitlements to do so, Affinity’s unilateral assignment of her to lower duties and her unwillingness to accept such a demotion (made manifest by her resignation) were to be treated in law as a termination of her employment by Affinity. 

(c)        The procedural issue.  Affinity submitted that Ms Keene’s argument that she had been dismissed by Affinity by reason of its transfer of her to lower duties was not pursued before the learned Industrial Magistrate and should not be permitted now to be pursued in this Court.

Urology at St George’s Private Hospital

4                     St George’s Private Hospital is a well known private hospital in Sydney’s southern suburbs.  Until October 2007, a group of urologists operated a practice at rooms leased from the hospital under the name “Urology Sydney”.  They are not in evidence, but it would appear that there were commercial arrangements between the hospital and the doctors under which the hospital provided both nursing and cleaning services to Urology Sydney.  A dispute arose between the doctors and the hospital as a result of which the hospital ceased, on 1 October 2007, to provide to the doctors the nursing and cleaning services which theretofore it had. 

5                     Ms Keene was one of three nurses who were provided by the hospital to Urology Sydney.  She was appointed by the hospital to the position of Clinical Nurse – Consultant – Urology in about April 2006.  That position was a senior one, ranking just below nursing unit manager.   Her position description for this job was in evidence before the learned Industrial Magistrate.  It revealed that her duties included considerable involvement with Urology Sydney but also more general work within the hospital itself.  So much was made plain by the evidence led on Affinity’s behalf by the nursing unit manager who supervised Ms Keene.  She told the Magistrate that Ms Keene spent some of her time on each shift at Ward 1 North, and the rest at Urology Sydney.  The parties tendered an agreed statement of facts which accepted too that Mr Keene worked both for the hospital and for Urology Sydney.

6                     Ms Burton, the Chief Executive Officer for the hospital, gave evidence about the circumstances leading to Ms Keene’s movement to lower duties.  The doctors were told at the end of  August 2007 that the hospital had decided to “relocate and refocus” its resources as a result of which certain theatre lists previously allocated to them would no longer be available.  The language of that correspondence was courteous but it belied a deeper antagonism.   Ms Burton had a conversation with the hospital’s director of clinical services (a Ms Emmer) in the following terms:

Burton:      Given the deteriorating commercial relationship between the Hospital and Urology Sydney we need to protect our staff from becoming involved in any conflict or legal proceedings.  We need to close off our arrangements with Urology Sydney.  Urology Sydney is threatening legal action and all arrangements between Urology Sydney and the Hospital now need to be kept separate.  We need to cease all nursing, cleaning and other services that the Hospital provides to Urology Sydney.  We need to protect all our Hospital employees from this conflict.  Therefore we need to bring those Hospital employees who the Hospital has directed to provide services to Urology Sydney completely back into the Hospital fold.

Emmer:     Okay.  I need to get advice on the best way to proceed from Keith Richardson.  I will also need to talk to the nurses involved.

Burton:      Tell Keith that there is no need to make any of the nurses redundant as positions exist within the Hospital into which each may be transferred.

                (emphasis added)

7                     Shortly thereafter, on 17 September 2007 the director of clinical services implemented Ms Burton’s plans to protect the hospital employees “from the conflict” by telling Ms Keene that the arrangement with Urology Sydney would come to an end on 1 October 2007.   On the same day Ms Keene received a letter from the hospital telling her the same thing and offering her the position of clinical nurse specialist on Ward 1 North.   This involved a substantial drop in pay and a reduction in status and duties.  On 28 September 2007 Ms Keene resigned in writing; she claimed an entitlement to severance pay in accordance with what she said were her rights under the relevant award.  Finally, perhaps showing that Ms Burton’s concerns to protect the hospital’s employees were misplaced, Ms Keene took up a position with Urology Sydney on 2 October 2007 as a practice nurse which was, apparently, a somewhat different position.   Naturally, her previous accrued entitlements did not attach to her new employment.

Other relevant matters

8                     By the time the matter came to this Court it was not in dispute that Affinity was to be treated as the employer, although the evidence suggested that that question was not necessarily susceptible to a simple or straightforward answer.  So too, there was no dispute that Ms Keene’s position as a clinical nurse consultant had ceased to exist on and from 1 October 2007.  The parties were also in agreement that the texts of the relevant industrial instruments were to be found in an Enterprise Agreement between Ramsay Health Care and the New South Wales Nurses’ Association 2006-2008 (“the enterprise agreement”)and the Nurses Private Sector (Redundancy State) Award (“the redundancy award”). On the commencement of the amendments to the Workplace Relations Act 1996 (Cth) (“the Act”) wrought by the Workplace Relations Amendment (WorkChoices) Act 2005 (Cth)(“WorkChoices”), these State instruments ceased to apply to constitutional corporations by reason of s 16 of the Act, which relevantly, had the effect of preventing the Industrial Relations Act 1996 (NSW) from applying to constitutional corporations.

9                     It was only ss 12 and 40 of the Industrial Relations Act 1996 (NSW) which made the award and the enterprise agreement binding on the respective parties.  Once they ceased, on 27 March 2006 (the commencement day for WorkChoices) to operate, Affinity ceased to be bound by those instrument as a matter of State law.

10                  The vacuum in regulation brought about by that state of affairs was foreseen by Parliament, which included in the Act a Schedule 8 designed to deal with such transitional issues.  Schedule 8 is not for the faint hearted or those who are repelled by the abstract.  For present purposes it can be taken to do two things:  first, it calls into existence, by Division 2 of Part 2, an object known as “Preserved Collective State Agreement”.  Clause 13 gives that object the same content as the corresponding pre-existing state collective agreement, and explicitly picks up the provisions in such agreements dealing with redundancy and termination.  Clause 11 binds the parties to the original agreement to the terms of that deemed instrument. 

11                  Secondly, Part 3 creates an object entitled a “Notional Agreement Preserving State Awards” (referred to in the schedule as a “NAPSA”) which carries out a similar duplicative process in the case of State awards.

12                  In this case, those deeming processes do not result in substantive alterations to the rules which applied to the parties immediately prior to the commencement of WorkChoices; their immediate effect is only that the rights created by the enterprise agreement and the redundancy award are sourced in Federal, rather than State, law.  It would be a mistake, however, to assume that the operation of these deemed instruments is always consonant with the State instruments which they replace.  This is because Schedule 8 itself at times explicitly impacts upon the terms which are preserved.  It is also because, in some cases, the operation or meaning of the State instruments may have been effected by the original state legislation supporting them in a way which has not been reproduced in the Act itself.   In any event, it is not necessary to say anything further about this aspect of the matter. 

13                  It is useful then to turn to the issues.

(a)        The Transfer to Lower Duties Issue

Clause 6(viii) of the redundancy award provides:

(viii)           Transfer to Lower Paid Duties

Where an employee is transferred to lower paid duties for reasons set out in subsclause (i) of the said clause 4, the employee shall be entitled to the same period of notice of transfer as the employee would have been entitled to if the employee’s employment had been terminated, and the employer may at the employer’s operation make payment in lieu thereof of an amount equal to the difference between the former ordinary-time rate of pay and the new ordinary-time rate for the number of weeks notice still owing. 

14                  Affinity contended that this clause operated to confer upon it the right to move Ms Keene to lower duties when the preconditions for it were satisfied. Those preconditions were only that the transfer had to take place “for the reasons set out in subclause (i) of the said Clause 4”. Clause 4 must be seen in the context of cl 6(i), the relevant portion of which is as follows:

(i)        Notice for Changes in Production, Programme, Organisation or Structure

This subclause sets out the notice provisions to be applied to terminations by the employer for reasons arising from production, programme, organisation or structure in accordance with paragraph (a) of subclause (i) of clause 4, Introduction of Change.

15                  Naturally, this directs attention to cl 4(i)(a):

Where an employer has made a definite decision to introduce major changes in production, programme, organisation, structure or technology that are likely to have significant effects on employees, the employer shall notify the employees who may be affected by the proposed changes and the union to which they belong.

16                  As the argument was put, once Affinity determined to introduce a “major change” in “organisation” which was “likely to have significant effects on employees” it was entitled under cl 6(viii) to give effect to these major changes by moving an employee to lower paid duties. 

17                  The correctness of that proposition depends upon acceptance of the notion that the phrase included in cl 6(viii):

“where an employee is transferred to lower paid duties …”

operated as the conferral of a right to so transfer.  Affinity submitted that such a construction was to be preferred because, first, it was clear and, secondly, because an understanding of the origins of cl 6(viii) showed that that must be what it meant.  That history showed that cl 6(viii) was a lineal descendant of the redundancy clause created in the Termination Change and Redundancy Case (1984) 8 IR 34 and (1984) 9 IR 115 (“the TCR cases”).  

Consideration

18                  The following propositions should be accepted. 

(a)        A practical approach to the interpretation of instruments generated by Schedule 8 should be adopted, consistent with the approach adopted by Madgwick J in Kucks v CSR Ltd (1996) 66 IR 182 at 184 to awards and by French J in City of Wanneroo v Australian Municipal, Administrative, Clerical and Services Union (2006) 153 IR 426 at 440 to industrial agreements.

(b)       Such transitional instruments are to be interpreted and understood in context.   That context includes the entire document but, naturally enough, extends also to the industrial circumstances giving rise to the original instrument: cf. Amcor Ltd v Construction, Forestry, Mining and Engineering Union (2005) 222 CLR 241 at 246[2] per Gleeson CJ and McHugh J.

19                  The application of those principles is straightforward.  First, contrary to the submissions of Affinity, I see nothing in the TCR cases which lends credence to the suggestion that the Commission was intending to confer upon employers an entitlement to transfer its employees to lower duties in the case of significant structural change.  Accepting the relevance of the TCR cases as part of the relevant context, that context is singularly devoid of material which supports Affinity.

20                  Secondly, turning to the ordinary meaning of the text of cl 6(viii), the short fact is that it does not confer a right to transfer; rather, it proceeds upon an assumption that such a right already pre-exists or that the parties have otherwise so agreed.  The asserted right, therefore, lacks a footing in the express language of the clause. 

21                  Thirdly, such a right is not to be implied. To arm an employer with a right unilaterally to demote its employees – that is reduce their remuneration and status – is not to be inferred other than in clear language which is, so it seems to me, absent.  Indeed the natural and ordinary meaning of cl 6(viii) is to the contrary of that which Affinity submits.  It follows that Affinity had no right to assign Ms Keene to lower duties and its contention to that effect must be rejected.

(b)  The Dismissal Issue

22                  Affinity submitted that severance pay was due to Ms Keene only if she had been terminated “pursuant to cl 6”.  That language was drawn from cl 7(i), the relevant part of which was as follows:

(i)        Where the employment of an employee is to be terminated pursuant to clause 6, Termination of Employment, subject to further order of the Industrial Relations Commission of New South Wales, the employer shall pay the following severance pay in respect of a continuous period of service.

23                  The text of the relevant portion of cl 6 is set out above.  Naturally, it refers to termination by an employer for the reasons set forth in cl 4 which, it will be recalled, relates, broadly speaking, to reasons pertaining to structural change.

24                  Affinity submitted that its letter of 17 September 2007 did not terminate Ms Keene’s employment; rather it offered her alternative employment.  It was Ms Keene, by her letter of 28 September 2007, who resigned.

25                  In circumstances where Affinity had no entitlement pursuant to cl 6(viii) to move Ms Keene to lower duties and to reduce her remuneration its act in purporting so to do was a repudiation of the contract of employment: see Woolworths (South Australia) Pty Ltd v Russian (1996) 66 IR 13 at 16 per Olsson J; Clark v Pittwater RSL Club Ltd (1988) 84 IR 309 at 311-312 per ­­–Wright and Marks JJ, McLeay C; Advertiser Newspapers Pty Ltd v Industrial Relations Commission of South Australia (1999) 90 IR 211 at ­­­220-221 [50] per ­­­­­­­­­­­­­­Bleby J (with whom Doyle CJ and Martin J agreed); Tokyo Network Computing Pty Ltd v Tanaka [2004] NSWCA 263 at [6] per ­­­­­Handley JA (with whom Mason P and Tobias JA agreed).

26                  To unilaterally indicate to Ms Keene that her own position was no longer available and instead to offer her the position of a clinical nurse supervisor with less pay, less status and lower duties was, so it seems to me, just such a repudiation.

27                  That Ms Keene decided to resign in the face of that act of repudiation is to be characterised as Affinity’s act of termination: see Blue Circle Southern Cement Ltd v Warren (1996) 67 IR 225 at 230  per Hill J; Advertiser Newspapers Pty Ltd v Industrial Relations Commission of South Australia (1999) 90 IR 211 at 216-218 [31]-[36] per Bleby J (with whom Doyle CJ and Martin J agreed).  The application of that principle in this case is straightforward, as the learned Industrial Magistrate found [17]; Ms Keene’s employment was terminated by Affinity because her position became redundant, it unlawfully offered her lower duties and she resigned in the face of that unlawful repudiatory conduct, events which, taken together, should be seen as Affinity’s act of termination.

28                  Of course, there is a difference between the termination of employment and the termination of a contract of employment as Automatic Fire Sprinklers Pty Limited v Watson (1946) 72 CLR 435 shows.  The former is concerned with the status of a relationship, the latter of contract.  As the Full Court’s decision in Visscher v Australian Industrial Relations Commission [2007] FCAFC 206 shows, it is possible for an employment relationship to outlast the contract giving rise to it.  However, that principle has no application here.   The relationship of employment in this case was brought to an end by Ms Keene’s resignation.   Well-established principles make it clear that that termination was to stand to the account of Affinity. 

(c)        The Procedural Issue

29                  Affinity submitted that Ms Keene had run no such case before the Industrial Magistrate and should not now be permitted to run such an argument.  This notion should be rejected for three reasons.

30                  First, it is quite plain that such a case was run by the industrial advocate who appeared for her.  During the hearing that advocate submitted as follows:

MARITHEFTIS:  Your Honour, in summary, Ms Keene was employed as a CNC.  She has a contract of employment that actually shows that.  That contract, if I take you to exhibit 6, shows that she was permanently appointed to that position of CNC, halfway down the page at location E.  On 17 September, she receives a letter from her director of clinical services, stating the position that she holds, clinical nurse consultant, will no longer exist, effective 1 October 2007.  She is offered alternative employment as a clinical nurse specialist with her salary to be maintained to that of clinical nurse consultant for 15 weeks.

The award agreement that we have just handed up, exhibit 10, your Honour, has included in it a redundancy clause.  It is about 16 pages from the back, your Honour, unfortunately there is no numbering on the pages. If I may take you to the award.  At the third page of that redundancy part of the award agreement, your Honour, it has got application, there are more than 15 employees with the employer, therefore this award agreement is current.  I take you to cl 6, termination of employment.  The employer will be relying upon subclause 8, Transfer to lower paid duties.  This particular part of the agreement, your Honour, only refers to the notice period.  It does not refer to the severance pay, which appears under cl 7 of the following page.

Ms Keene has clearly been employed for more than 6 years.  It is agreed she is over 45, therefore she would be entitled to 20 weeks worth of severance pay.  As I said earlier, she was given notice on 17 September 2007, and as per cl 6 of that agreement, she would be entitled to five weeks of notice period.  She worked two of those weeks, your Honour, and then resigned on the grounds that the offer of alternative employment wasn’t acceptable.  We concede, your Honour, she is not entitled to the 23 weeks that we have stated in our application.  It was 20 weeks for redundancy and three weeks in lieu of notice.  We concede that the in lieu of notice should not be paid.

(emphasis added)

31                  Ms Keene’s entitlement to severance pay only arose if she was terminated. The submissions on her behalf were clearly directed at that very issue.

32                  Secondly, before the Industrial Magistrate counsel for Affinity clearly thought that the case he was meeting involved an assertion by Ms Keene of the fact of her termination.  This is so because he submitted to the contrary:

There is no termination.  Indeed, we would say that this is one of the areas where termination – and I will just address this – where there may be terms that one could see to be termination at Common Law.  The provisions of the Act, through the transitional provisions, making rise to the industrial instruments, make it clear that in this particular situation, an employer does possess a right to transfer.  That right would be a unilateral right within classifications that fall within the range of classifications and categories of employment within the relevant award.

33                  It is apparent from that submission that Affinity was directly confronting the termination argument by submitting that there had been no repudiation.   The reason for that was not, as it submitted in this Court, because there was no contractual dismissal – a proposition seemingly accepted in the above passage – but because it had a unilateral right to assign Ms Keene to lower duties.

34                  Thirdly, the Industrial Magistrate clearly understood such a case to have been put.  So much is apparent from the following passage in his reasons for judgment:

At common law the applicant was faced with a unilateral repudiation of her contract of employment; an effective termination of the position in which she was employed.  However, the applicant is here not seeking a remedy for a breach of contract but seeking a remedy under s 720 for a breach of the Award.

and

In this regard Clause 6(viii) must be read as a transfer to a lower paid duties subject to agreement being reached between the parties to such transfer and not read as the subclause granting a unilateral right to the employer to transfer the employee(s) concerned to lower paid duties.

35                  In the circumstances, the argument that the matter was not raised before the Industrial Magistrate is quite untenable and I reject it. 

Conclusion

36                  The appeal should be dismissed.

Associate:

Dated:         15 June 2009