FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v National Jet Systems Pty Ltd [2012] FCA 243

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    In 2007 the appellant commenced proceedings in the Federal Magistrates Court of Australia (“the FMCA”) against the respondent seeking the imposition of civil penalties under the Workplace Relations Act 1996 (Cth) (“the WR Act”) which was then in force.

2    The proceedings had two elements: allegations of underpayment of salary; and, allegations that duress was applied by the respondent to some of its employees in connection with its desire that the employees make new Australian Workplace Agreements (“AWAs”) with it.

3    The present appeal is concerned only with a challenge to the judgment of the FMCA dismissing the allegations of duress which were finally pressed (Crosthwaite v National Jet Systems Pty Ltd (No 4) [2010] FMCA 965).

Background

4    The respondent provides aviation services under contract. It provides the services of pilots and crew to Qantas and to other Australian aircraft operators. In mid-2004 the respondent employed some hundreds of pilots and many more cabin crew and engineering and support personnel. About mid-2004 Qantas decided to change the mix of aircraft on some of its services. It proposed to replace BAe146 aircraft with Boeing B717 aircraft. The respondent was operating BAe146 aircraft for Qantas under the Qantas Link banner. It was required to bid for a new contract in competition with Jetstar. It was estimated that failure of the bid would cause the loss of about 25% of the respondent’s business, including approximately 80 pilot positions and many other staff. The respondent’s bid was successful, but training of a significant number of its pilots on B717 aircraft was then required. The training was costly, in the order of $30,000 for each pilot (originally intended to be 74 pilots, but ultimately 69). The respondent decided it should take steps to obtain a contribution to this, and other matters, by individual pilots employed by it.

5    Negotiations with pilots as a group was usually carried out, at least on an in principle basis, with the National Jet Systems (“NJS”) Pilot Group, through the NJS Pilot Group Committee. Late in 2004 the NJS Pilot Group Committee agreed in principle to the terms of a new AWA to be offered to individual pilots. The terms were supported by a majority of pilots in a ballot. The terms included salary reductions and a contribution by the first 74 pilots to undertake B717 endorsement training of $15,000 towards that training, which would be recoverable over a period if the respondent retained the Qantas contract. Although these matters were agreed in principle, the decision to make an AWA on the new terms was an individual one for each pilot.

6    Two pilots in particular, Messrs King and Kruger, resisted. Amongst other things they did not wish to make a contribution to the cost of B717 endorsement training, at least without a guarantee of repayment. Despite their lack of agreement to repay the cost, each received the B717 training. In due course the respondent implemented other means to commence to recover the cost of the training.

7    Another piece of background information is relevant at this point. The earlier AWAs with pilots passed their nominal expiry date before 1 July 2006, although each remained in force thereafter under the provisions of the WR Act. The AWAs required an adjustment to salary on 1 July each year to reflect CPI movements during their currency. The respondent took the view, acting on mistaken advice, that it was not obliged to meet the CPI adjustment after the nominal expiry date of the AWAs. Thus, the respondent withheld a 3% CPI adjustment due on 1 July 2006, and a 2.4% CPI adjustment due on 1 July 2007, from the 33 and 24 pilots respectively who had not by that stage signed the new AWAs, including, in each case, Messrs King and Kruger. The proceedings before the FMCA included claims for payment of those two adjustments and the imposition of penalties on the respondent for its refusal to make such payments. Those matters do not require further attention in this Court, but the number of pilots who were, as at 1 July 2006 and 1 July 2007, employed in accordance with the earlier AWAs (and not the new AWA) should be noted. However, it should also be noted that the pilots concerned were in many cases not those who had received B717 training. There may have been no pilots left in that category who had not signed a new AWA by 1 July 2007.

The case below

8    The case alleging duress against the respondent, arising from its conduct towards Messrs King and Kruger, was (so far as it requires consideration on this appeal) based principally on a small number of written communications and an application made in late 2006 to the Australian Industrial Relations Commission (“the AIRC”) to terminate the existing AWAs of Messrs King and Kruger.

9    The procedural history of the matter is complicated by the fact that effective from 27 March 2006, the WR Act was “reformed”. As part of this process the WR Act was restructured and its provisions (as “reformed”) renumbered. One consequence of relevance to the present appeal is that the applicant filed applications for civil penalties for breach of s 170WG(1) of the pre-reform WR Act and of s 400(5) of the post-reform WR Act, in respect of the conduct of the respondent pre- and post-27 March 2006 respectively. This complication may be largely put to one side in the discussion which follows, as the legal tests to be applied remained the same. In each case the respondent was enjoined by the WR Act from “apply[ing] duress to an … employee in connection with an AWA”. Some efforts were made by the respondent on the present appeal (and before the FMCA) to insist on a rigid separation of pre- and post-reform conduct. I do not need to be delayed by that question, in view of the conclusions to which I have come.

10    The FMCA concluded that the respondent did not breach the statutory prohibitions by any of the conduct alleged by the applicant, whether considered separately or in combination. The FMCA gave detailed reasons for its rejection of the allegations of duress. Those reasons included an analysis of the various elements of the conduct relied upon by the appellant. In the present appeal much of the reasoning of the FMCA, and the conclusions reached from the analysis, were challenged. As each of the written communications, and the application to the AIRC, was the subject of some debate in the appeal the most efficient approach will be to explain why I do not regard them, separately or together, pre- or post-reform, as amounting to the application of duress. In that respect, I have come to the same conclusion as the FMCA.

11    It will first be useful to say something about the elements of duress.

Duress

12    I take it to be sufficiently established for the purpose of the statutory scheme in the WR Act that an allegation of duress must be sustained by proof of two matters: conduct negating effective or real choice; and application of pressure by unlawful, unconscionable or illegitimate means. It will be necessary to explain the bases for this conclusion.

13    In Barton v Armstrong [1976] AC 104 (a case which went on appeal to the Privy Council from the judgment of the New South Wales Court of Appeal) consideration was given to the emerging idea of economic duress. The majority advice said (at 118):

The scope of common law duress was very limited and at a comparatively early date equity began to grant relief in cases where the disposition in question had been procured by the exercise of pressure which the Chancellor considered to be illegitimate – although it did not amount to common law duress. There was a parallel development in the field of dispositions induced by fraud. At common law the only remedy available to the man defrauded was an action for deceit but equity in the same period in which it was building up the doctrine of “undue influence” came to entertain proceedings to set aside dispositions which had been obtained by fraud: see Holdsworth, A History of English Law, vol. V (1924), pp. 328-329. There is an obvious analogy between setting aside a disposition for duress or undue influence and setting it aside for fraud. In each case – to quote the words of Holmes J. in Fairbanks v. Snow (1887) 13 N.E. 596, 598 – “the party has been subjected to an improper motive for action.”

14    The minority advice of Lord Wilberforce and Lord Simon of Glaisdale said (at 121):

The action is one to set aside an apparently complete and valid agreement on the ground of duress. The basis of the plaintiff’s claim is, thus, that though there was apparent consent there was no true consent to the agreement: that the agreement was not voluntary.

This involves consideration of what the law regards as voluntary, or its opposite; for in life, including the life of commerce and finance, many acts are done under pressure, sometimes overwhelming pressure, so that one can say that the actor had no choice but to act. Absence of choice in this sense does not negate consent in law: for this the pressure must be one of a kind which the law does not regard as legitimate. Thus, out of the various means by which consent may be obtained – advice, persuasion, influence, inducement, representation, commercial pressure – the law has come to select some which it will not accept as a reason for voluntary action: fraud, abuse of relation of confidence, undue influence, duress or coercion. In this the law, under the influence of equity, has developed from the old common law conception of duress – threat to life and limb – and it has arrived at the modern generalisation expressed by Holmes J. – “subjected to an improper motive for action”: Fairbanks v. Snow, 13 N.E. Reporter 596, 598.

In an action such as the present, then, the first step required of the plaintiff is to show that some illegitimate means of persuasion was used.

and:

The next necessary step would be to establish the relationship between the illegitimate means used and the action taken.

15    The reference in those passages to negation of consent and to illegitimate means of persuasion should be noted. It will be necessary to return to those two elements.

16    The advice of the Privy Council in Pao On v Lau Yiu Long [1980] AC 614 (a judgment of the Privy Council on appeal from the Court of Appeal of Hong Kong) was delivered by Lord Scarman. His Lordship said (at 635):

Duress, whatever form it takes, is a coercion of the will so as to vitiate consent. Their Lordships agree with the observation of Kerr J. in Occidental Worldwide Investment Corporation v Skibs A/S Avanti [1976] 1 Lloyd’s Rep. 293, 336 that in a contractual situation commercial pressure is not enough. There must be present some factor “which could in law be regarded as a coercion of his will so as to vitiate his consent.” This conception is in line with what was said in this Board’s decision in Barton v Armstrong [1976] A.C. 104, 121 by Lord Wilberforce and Lord Simon of Glaisdale – observations with which the majority judgment appears to be in agreement. In determining whether there was a coercion of will such that there was no true consent, it is material to inquire whether the person alleged to have been coerced did or did not protest; whether, at the time he was allegedly coerced into making the contract, he did or did not have an alternative course open to him such as an adequate legal remedy; whether he was independently advised; and whether after entering the contract he took steps to avoid it.

17    Lord Scarman then made some observations on the question whether commercial or economic pressure might amount to duress and, after referring to “American law” and some English cases, said (at 636):

In their Lordships’ view, there is nothing contrary to principle in recognising economic duress as a factor which may render a contract voidable, provided always that the basis of such recognition is that it must amount to a coercion of will, which vitiates consent. It must be shown that the payment made or the contract entered into was not a voluntary act.

18    Lord Scarman returned to the issue in his dissenting (but now widely cited) judgment in Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 (“Universe Tankships”) where his Lordship said (at 400):

It is, I think, already established law that economic pressure can in law amount to duress; and that duress, if proved, not only renders voidable a transaction into which a person has entered under its compulsion but is actionable as a tort, if it causes damage or loss: Barton v. Armstrong [1976] A.C. 104 and Pao On v. Lau Yiu Long [1980] A.C. 614. The authorities upon which these two cases were based reveal two elements in the wrong of duress: (1) pressure amounting to compulsion of the will of the victim; and (2) the illegitimacy of the pressure exerted. There must be pressure, the practical effect of which is compulsion or the absence of choice. Compulsion is variously described in the authorities as coercion or the vitiation of consent. The classic case of duress is, however, not the lack of will to submit but the victim’s intentional submission arising from the realisation that there is no other practical choice open to him. This is the thread of principle which links the early law of duress (threat to life or limb) with later developments when the law came also to recognise as duress first the threat to property and now the threat to a man’s business or trade.

19    It will be noted that in Lord Scarman’s formulation two elements must be found in combination: pressure amounting to compulsion of the will and illegitimacy of pressure.

20    As to what was meant by the term “illegitimate”, Lord Scarman said (at 401):

In determining what is legitimate two matters may have to be considered. The first is as to the nature of the pressure. In many cases this will be decisive, though not in every case. And so the second question may have to be considered, namely, the nature of the demand which the pressure is applied to support.

The origin of the doctrine of duress in threats to life or limb, or to property, suggests strongly that the law regards the threat of unlawful action as illegitimate, whatever the demand. Duress can, of course, exist even if the threat is one of lawful action: whether it does so depends upon the nature of the demand. Blackmail is often a demand supported by a threat to do what is lawful, e.g. to report criminal conduct to the police.

21    The unmistakeable and clear emphasis on the necessity for each element (compulsion and illegitimacy) to be present has, in my respectful opinion, become blurred in some cases in this Court. In part, that is because the legislature has chosen to focus on the application of pressure, rather than on its result. The reason is clear enough. The legislative code is not only concerned with undoing the effects of duress, or setting aside a transaction which results from duress. The statute is concerned with prohibiting and punishing the application of duress in the first instance. Nevertheless, in order to satisfy the elements of duress, so as to conclude that it has been applied, certain things must still be present. It may not be necessary to wait until the illegitimate pressure has produced its inevitable result but, under the classic formulation set out above, lack of a practical alternative, or effective negation of choice would be regarded as an essential feature. Compulsion, as identified by Lord Scarman, clearly involved application of pressure which vitiated consent. A threshold must be crossed to satisfy this test. It involves more than pressure which would tend to compel, or be hard to resist.

22    The other element, illegitimacy, may be more elusive. In his further discussion of this issue Lord Scarman observed (at 401) that unlawful action would be illegitimate. A more difficult question arises in cases where action, or threatened action, might be lawful, but is nevertheless “illegitimate”. Lord Scarman gave, as an example, a case of blackmail constituted by a threat to do a lawful act, such as reporting a matter to the police. With respect, the example has a tendency to confuse because blackmail itself may be an unlawful act. However, it is clear that Lord Scarman intended to draw attention to the difference between an illegitimate demand (e.g. blackmail) and the means (perhaps a threat of otherwise lawful action) by which the demand was, if necessary, to be enforced. The point is an important one. If the means used to apply pressure are unlawful, the pressure will be illegitimate. The use of lawful means to achieve an unlawful demand will also constitute illegitimate pressure. And, as earlier observed, the pressure must be accurately described as compulsive, in the sense that it vitiates consent.

23    In Universe Tankships the critical issue on the question of duress was whether the action threatened was lawful or unlawful. It was not necessary to further examine the possible reach of the notion of illegitimate conduct. However, that question did receive some attention in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40. McHugh J said (at 45-46):

The rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure exercised upon one party by another party when the law regards that pressure as illegitimate: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 at 384 per Lord Diplock. As his Lordship pointed out, the consequence is that the “consent is treated in law as revocable unless approbated either expressly or by implication after the illegitimate pressure has ceased to operate on his mind” (at 384). In the same case Lord Scarman declared (at 400) that the authorities show that there are two elements in the realm of duress: (a) pressure amounting to compulsion of the will of the victim and (b) the illegitimacy of the pressure exerted. “There must be pressure”, said Lord Scarman “the practical effect of which is compulsion or the absence of choice”.

24    His Honour went on:

Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress.

25    What is unlawful conduct may be readily ascertained in many cases. What is unconscionable, or otherwise illegitimate, conduct may be more difficult to establish.

26    Unconscionable conduct involves more than just taking advantage of someone, or their inferior bargaining position. In ACCC v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 (“Berbatis Holdings”), Gleeson CJ said (at [7]):

7    … unconscionability is a legal term, not a colloquial expression. In everyday speech, “unconscionable” may be merely an emphatic method of expressing disapproval of someone’s behaviour, but its legal meaning is considerably more precise.

and (at [11]):

11    A person is not in a position of relevant disadvantage, constitutional, situational, or otherwise, simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power, and good conscience does not require parties to contractual negotiations to forfeit their advantages, or neglect their own interests.

27    Similarly, Gummow and Hayne JJ accepted (at [56]) that:

56    … a person in a greatly inferior bargaining position nevertheless may not lack capacity to make a judgment about that person’s own best interests.

28    In my view a similar rigour should be applied to the notion of what is illegitimate conduct. Conduct correctly described as illegitimate in this context must infringe a legal standard. The issue is not a moral one, nor one for personal value judgments. The test is necessarily objective.

29    In Westpac Banking Corporation v Cockerill (1998) 152 ALR 267 Kiefel J (at 288-290) discussed some aspects of the cases to which I have so far referred. Her Honour said (at 289) that it was established that “lawful pressure might operate as duress”. However, her Honour (at 289-290) emphasised:

The cases, apart from Crescendo Management, which recognise the possibility of “economic” duress, such as Barton v Armstrong and Pao On v Lau Yiu Long [1980] AC 614, emphasise the feature that the pressure applied is so coercive of the will that consent is treated as vitiated.

and went on to say (at 290):

Relief will not be granted…only on the basis of an inequality, even a great inequality, of bargaining position.

30    Those tests, which were well-established in the general law, were, as it seems to me, modified by Moore J in Schanka v Employment National (Administration) Pty Ltd (1999) 166 ALR 663. Moore J said (at [42]-[43]):

42    In my opinion s 170WG(1), properly construed, applies to the conduct of a person applying duress irrespective of whether that conduct actually results in the making of an AWA and irrespective of whether, as a matter of fact, the party subjected to that conduct did not freely make the AWA if one was made.

43    That is not to say that in ascertaining whether conduct contravened s 170WG(1), the potential effect of the conduct on the exercise of free will by the person to whom it is applied is irrelevant. It plainly is in this way. The conduct of the contravening party must involve illegitimate pressure. I doubt that the mere fact that an employer offers employment on the basis that an AWA in certain terms must be made, is illegitimate pressure. It would do no more than place the potential employee in the position of either declining or accepting the employment on those terms and regulated that way, that is by an AWA. Something more is probably necessary and whether pressure is illegitimate will ultimately depend on the factual context in which the allegation of duress arises. But it must be pressure that is likely to have the effect of denying the exercise of free will if an AWA was made. It also must be intended to have that effect.

31    The two elements of duress seem here, with respect, to have been brought together in a single concept – i.e. pressure will be illegitimate if it is likely to have the effect of denying the exercise of free will. With respect, this omits one matter recognised at the outset when consideration was being given to whether economic pressure could be a form of duress. It was accepted that economic pressure could, in some circumstances, be overwhelming. That does not mean that its use involves duress. That is why it was necessary to identify an element of illegitimacy – i.e. generally either unlawful or unconscionable conduct.

32    In Finance Sector Union of Australia v Commonwealth Bank of Australia (2000) 106 FCR 16 Gyles J discussed a range of cases concerning “coercion” and “duress”, including Crescendo, Barton v Armstrong and Universe Tankships. The tests for coercion and duress may be regarded as identical. After his survey of authorities, Gyles J concluded that in the context set by the WR Act it was necessary to identify compulsive conduct which was unlawful, illegitimate or unconscionable. As to the first element, his Honour said (at 20):

20    … In my opinion, there is a significant difference in ordinary meaning between concepts such as influence, persuasion, inducement and the like, on the one hand, and coercion, on the other.

33    In my respectful view, the analysis of Gyles J involved a correct application of established legal principle. His Honour’s approach was described by Weinberg J in National Union of Workers v Qenos Pty Ltd (2001) 108 FCR 90 (at [128]) as compelling. It was applied by Merkel J in Seven Network (Operations) Ltd v Communications, Electrical, Electronic, Energy Information, Postal, Plumbing and Allied Services Union (2001) 109 FCR 378. Merkel J said (at [41]):

41    The … cases establish that there must be two elements to prove “intent to coerce” under s 170NC(1). First, it needs to be shown that it was intended that pressure be exerted which, in a practical sense, will negate choice. Secondly, the exertion of the pressure must involve conduct that is unlawful, illegitimate or unconscionable.

34    Notwithstanding the views expressed by Moore J in Schanka, I take the need to establish each of the two elements, to the necessary standard of proof, to be firmly established. Those elements establish the legal content of the term chosen by Parliament to state the nature of the prohibited conduct in both s 170WG(1) of the pre-reform WR Act and s 400(5) of the post-reform WR Act.

35    Nevertheless, in Canturi v Sita Coaches Pty Ltd (2002) 116 FCR 276 Ryan J appeared to take a different position, saying (at [43]):

43    In my view, the consensus of the authorities to which I have referred is that duress, in the relevant sense, involves the illegitimate application of pressure to induce a party to enter into an AWA, or to discourage a party from taking that course. What is illegitimate is a question of fact to be decided in the circumstances of each case which may include whether there is an existing relationship of employer and employee or some other relationship of utmost good faith between the parties to the proposed AWA.

(Emphasis added)

36    In my respectful view this passage does not state the correct test. While it may be true to say that the matter need not in every case be tested by asking whether someone’s will was, in fact overborne (a circumstance which is, in any event, not a sufficient indication of duress on its own) neither is it correct to ask if pressure is intended to “induce” or “discourage”. The pressure must be such as to leave no real choice. It must negate, not merely burden, the will. In addition, it must be unlawful, illegitimate or unconscionable pressure.

37    In Granada Tavern v Smith [2008] FCA 646, 173 IR 328, Heerey J referred to Ryan J’s statement in Canturi and said (at [75]):

75    Whatever may be the position in other contexts, s 400(5) does not require, as an essential element of contravention, an overbearing of the will of the employee. There can still be a contravention even if, as in the present case, the employee does not sign the AWA and thus has not had his or her will overborne. By contrast, at common law the question of duress will usually only arise where the plaintiff is seeking to avoid the consequence of some act or event allegedly produced by the duress of the defendant, such as the payment of money or the entering into a contract.

38    With respect, this is an accurate statement of an important distinction. However, the distinction does not signify, in my view, that compulsive pressure is not an element in duress under the WR Act. At [78] Heerey J said:

78    … Characterising conduct as unconscionable involves a value judgement. …

39    In my view this is not the approach which should be applied to the ascertainment of duress (see Berbatis Holdings per Gleeson CJ already cited). The cases make it clear that unconscionable pressure is pressure which must pass a legal, not a moral, threshold. Although there may be value judgments involved, it is legal values, not moral values, which must be assessed.

40    The concept of “illegitimate” pressure (when it is not used to signify unlawful or unconscionable pressure, but something else) is not without its difficulties. Until recently it does not appear to have been used as a separate category in its own right. In Crescendo McHugh J used it as a term to embrace both unlawful and unconscionable pressure. So did Lord Scarman in Universe Tankships. However, it has in this Court recently been spoken of separately from unlawful or unconscionable pressure.

41    In Williams v Construction, Forestry, Mining and Energy Union [2009] FCA 223; 179 IR 441, and in Williams v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union [2010] FCA 754; 196 IR 365 Jessup J found that illegitimate conduct occurred without finding that the conduct was unlawful or unconscionable. Detailed reasons were given.

42    In my respectful view, some further discussion of this aspect is necessary, when a suitable case is presented. However, in light of my factual conclusions it will not be necessary to explore the concept of free-standing illegitimacy in the present case, and it would be inappropriate to do so.

The factual case

43    The appellant’s case proceeded by reference, principally, to a small number of pieces of correspondence, and by reference to an application made by the respondent to the AIRC to terminate the existing AWAs of Messrs King and Kruger. This conduct was said to reveal the application of illegitimate pressure, sufficient to represent duress. The approach appeared to me to draw heavily, as perhaps Moore J did in Schanka, on the idea that an AWA must be offered free of inducement, persuasion or pressure. It would have been very easy for the legislature to prescribe that an AWA should be offered free from inducement or incentive (whether positive or negative). It would also have been artificial and impractical. It would, in fact, be contrary to the idea of “bargaining”. The word “duress” must, in my view, bear its decided meaning. Conduct must be identified which is, at least, intended to remove choice. In addition the pressure must be, at least, illegitimate.

The respondent’s plan

44    As I mentioned earlier, under the pre-existing AWAs pilots could not be obliged to contribute to the cost of endorsement training. The terms of the new AWA approved in principle by a majority of the pilots contemplated contribution by up to 74 pilots of 50% of the cost of B717 endorsement training (with the possibility, but not the certainty, of a pilot subsequently recovering the contribution in succeeding years) and an immediate reduction in salary of up to $1,000 per annum, amongst other changes. No pilot could be forced to accept. Many did not sign new AWAs at once. Messrs King and Kruger never signed new AWAs.

45    The FMCA found that on 25 July 2005 the respondent, through its officers, formulated “a plan” to deal with pilots who had not accepted the terms of the proposed new AWA and executed one. This “plan” was said, on the appellant’s case, to be significant. There is nothing surprising, much less sinister, about the formulation of business objectives, or discussion of the possible means to achieve them. The respondent, on the evidence, regarded itself as facing a difficult financial position. Rightly or wrongly, a view seems to have been taken that there was nothing unreasonable about seeking and, if possible securing, a contribution from the group whose jobs would be saved if the respondent managed to obtain and retain the Qantas contract involving operation of the new aircraft. A majority of pilots had given in principle approval to the concept. The particular steps then taken require assessment, but that assessment is not to be approached upon the footing that those steps proceeded from a position of illicit purpose.

Letter 6 September 2005

46    On 6 September 2005 the respondent wrote to pilots who had not signed an AWA containing the new terms. Those pilots included Messrs King and Kruger but it is important to understand that, at this point in time, they were only two of many pilots in this position, and to whom the letter was sent. That is important because the letter appears to have followed a common form. Another piece of relevant information is that when pilots were offered B717 training (as Messrs King and Kruger each were) they were sent a letter asking for acceptance of certain terms and conditions associated with the training, including a commitment to contribute $15,000 to the cost of that training. The letter of offer (as it was referred to) referred to the agreement in principle to the terms of the new AWA to be offered, which would, if signed, make a legally effective provision to the same effect. Many pilots apparently signed the letter of offer. There was evidence that some pilots, who had not signed the AWA by late 2006, had nevertheless signed the letter of offer, accepting the conditions there stated. Mr King’s letter of offer was dated 24 May 2005; Mr Kruger’s was dated 27 June 2005. Neither signed the letter of offer, but both received B717 training nevertheless. The existence of those background circumstances, which extend beyond the particular circumstances of Messrs King and Kruger, is relevant to bear in mind.

47    Taking it as an example, the letter to Mr King, dated 6 September 2005 read as follows:

You may recall that several months ago we discussed and you agreed to the terms and conditions that would allow you to be trained and endorsed to fly the B717 aircraft.

On the basis of your verbal agreement to the letter of offer and the fact that a signed Australian Workplace Agreement (AWA) was required to allow the terms and conditions of your employment to be varied to allow you to fly this type of aircraft, we granted approval for you to attend the training.

To date, and despite several reminders that the necessary documentation in support of your verbal agreement was required, we have not received either a signed letter of offer or signed AWA.

This letter is a final reminder and request for you to make clear your plans in relation to the above. If the matter is simply an oversight, we request that you sign and return the documents (which are attached again to this letter for your convenience) in the enclosed envelope.

We will call you over the next 2 days to discuss whether the failure to return the necessary documentation is an oversight or if you have changed your mind in relation to any of the terms and conditions previously agreed so we are aware of your intentions.

While the signing of this document remains voluntary your acceptance of the training was based on your verbal agreement that you would do so. I therefore need to remind you that we reserve our rights to seek reimbursement for the costs of the training and without a signed AWA, your current terms and conditions do not allow for your employment to extend to a B717 type aircraft.

Please feel free to contact me at any stage if you would like to discuss the above matter further either prior to or following our follow up call so we can resolve this matter and move forward.

Yours sincerely,

Geoff Roberts

General Manager – Flight Operations

48    Mr King denied any oral commitment of the kind alleged in this letter. It is not clear whether the assertion of an oral commitment was framed with Mr King specifically in mind. More importantly, there was no doubt, in my view, that Mr Roberts accepted that it was open to Mr King to refrain from signing an AWA if that was his decision, even if that represented a change of position on his part. Whatever view may be attributed to the notion of duress, the letter did not, in my view, represent an example of it.

49    Mr King replied on 28 September 2005. He pointed out that he had not actually received the letter of offer until after he had completed his B717 training. His primary concern seemed to be that there was some doubt (referred to by him as “trigger conditions”) about whether the respondent might be obliged in the future to reimburse him for any contributions he might make towards the cost of B717 training. His letter included the following statements:

I accepted the B717 conversion training at that time on the understanding that only concessions made by the pilot group were a) temporary 1% pay reduction, b) salary sacrifice 50% of the simulator training cost to be repaid incrementally and c) a two hour increase in the overtime rate to be implemented at some future date.

…

Geoff, I am also happy to sign the letter of offer to start my salary sacrifice contribution towards to [sic] cost of the endorsement training, providing the repayment trigger conditions are removed, as these conditions were never part of any of the conditions to which I agreed at the time of accepting conversion training.

50    The letter to Mr Kruger, dated 6 September 2005 was in the same terms as the letter to Mr King, supporting the inference that the same letter was sent generally at this time. It seems to me to represent an attempt to achieve clarification and greater certainty about the intentions, and current positions, of a relatively large group of then uncommitted pilots.

Letter 5 January 2006

51    On 5 January 2006 a further letter was sent to Messrs King and Kruger (and, I infer, to other pilots still uncommitted). The letter read:

As you are aware, NJS and the Pilot Group committee negotiated a new AWA in the early part of this year as part of the means to secure the introduction of the B717 type aircraft to our Airlink operation.

The negotiation of that agreement and the salary/financial arrangements and outcomes were critical to the success of our bid and as a consequence secured the long-term employment of hundreds of NJS staff.

The negotiation process was conducted to ensure that, notwithstanding the reality that an AWA is an individual contract between you and the Company, there was agreement from the whole pilot community to the terms and conditions of the agreement. We saw this as critical maintaining the equity of conditions within the pilot community, particularly as we were asking that you accept a $1,000 reduction in salary as part of the deal.

Gaining this agreement was also crucial to the success of the B717 bid because the costing of that bid took in the salary reductions and contributions to endorsement costs that you were to make on signing.

While currently 98 of the pilot community has signed and returned their AWA, our records indicate that you have not yet done so.

On 6th September, Geoff Roberts wrote to you to remind you to review and sign your AWA on the basis that you have verbally agreed to do so. Geoff has advised me that he has received no response from you and we are therefore not receiving your contribution to your endorsement costs expended by the company.

I find this both disappointing and untenable.

As part of my duties, I am required to report on the financial aspects of the Boeing 717 project that relate to aircrew expense. The project is nearing the completion of the mobilisation phase and actions pertaining to pilot training need to be closed out in the very near future. Please let me know by the close of business on the 20th of January 2006 your intentions in relation to the NJS Pilots’ AWA and the commitment to make repayment for the B717 training you have received.

Captain John Siebert

Group General Manger Air Transport Operations

52    This letter, also, clearly does not constitute duress. Neither were either Mr King or Mr Kruger singled out for its reception. No doubt the letter may be seen as an attempt to impose a measure of persuasive pressure on its recipient, but the position of the respondent about the issues referred to was neither neutral, nor required to be. Each of Mr King and Mr Kruger had received the B717 training. Although they had not agreed to pay for it, they obviously knew that the terms of the proposed new AWA had been collectively approved, that the respondent had based its commercial position with Qantas on that understanding, that the respondent for its part regarded the commitment to contribute towards training to be an essential part of the arrangements, that many pilots had agreed informally or formally to the contribution and that they, individually, could not be forced to do so. I can see nothing wrong with a statement by the respondent that the position was “disappointing”. “Untenable” is a much stronger word, but in my view its use does not amount to duress. Strong language alone does not amount to illegitimate pressure, much less a negation of choice. The use of such language must always be considered in context.

53    On 19 May 2006 Mr King sought advice from Mr Lawrie Cox, an official of the Australian Federation of Air Pilots (“AFAP”) about his “legal position and ‘moral’ position”. Mr Cox subsequently represented both Mr King and Mr Kruger before the AIRC. There is some evidence that Mr Cox, a very experienced official of the AFAP, advised both Mr King and Mr Kruger that they could not be obliged to sign a new AWA. Whatever advice they were given, Mr King and Mr Kruger certainly conducted themselves at all times in a manner consistent with a belief that they could not be obliged to sign, and were within their rights to refuse to sign, a new AWA.

Telephone conversations

54    The FMCA found that on 18 May 2006 Mr King received a telephone call from Mr Roberts, General Manager – Flight Operations of the respondent. Mr King told Mr Roberts that he had not received a reply to the letters sent by him in September 2005 and January 2006. Mr Roberts asked to be sent further copies of the letters. The FMCA found there was nothing in the phone call which amounted to duress. I agree, on the findings made by the FMCA, which were not challenged on the appeal.

55    Similarly, the FMCA found that telephone calls made to Mr Kruger by Mr Roberts in late May and in July 2006 did not amount to duress. The FMCA found that Mr Kruger consistently asserted his understanding that he was not obliged to sign the new AWA. It is not suggested that Mr Kruger’s understanding was challenged.

56    Mr Roberts indicated, in one of the telephone calls, that the respondent would “pursue” Mr Kruger. The FMCA found, based in part on Mr Kruger’s own evidence, that this statement related to the cost of B717 training, which Mr Kruger had by then undertaken.

57    On the findings made by the FMCA, which were not challenged on the appeal, I agree that the telephone calls to Mr Kruger did not amount to duress.

Letter 20 June 2006

58    On 20 June 2006 the respondent replied to Mr King’s letter of 28 September 2005. The letter mounted an argument that Mr King was bound in some way by the in principle agreement negotiated with the NJS Pilot Group Committee. It suggested that Mr King’s existing AWA had that effect. However, the writer, Mr Roberts, acknowledged the limitations in his assertion in the final paragraph of the letter:

Andrew, the situation of having several Australian Workplace Agreements operative within one group of the workforce is no longer a situation that the Company is willing to tolerate. Whilst I stress that it is your decision as to whether or not to sign the 2005 NJS Pilots AWA, you need to be advised that pilots operating the B717 who are not employed on an AWA that governs the operation of that aircraft, is a position that the Company finds untenable. We intend to proceed further rectify that situation.

59    Again, the words “[not] willing to tolerate” and “untenable” are strong ones, although they are clearly used to describe the respondent’s view of the situation. A forecast that steps will be taken to “rectify that situation” may not be without some threatening overtones but the law does not generally regard a stated intention to invoke existing legal rights to be duress and nothing more can, in my view, be implied from the statement in the letter.

60    This letter appears to represent the high point of any unilateral, individual instance of the application of pressure to either Mr King or Mr Kruger.

Memorandum 30 June 2006

61    On 30 June 2006 a memorandum was sent to pilots who had not signed a new AWA (33 pilots including Messrs King and Kruger) advising them that they were not entitled to an increase in salary under their existing AWA. The memorandum was intended to draw to their attention the opportunity to sign the new AWA. Undoubtedly, it was intended to contribute persuasively to consideration of their situation. Equally undoubtedly, it was not conduct amounting to duress. The memorandum commenced as follows:

I note that you are one of the NJS pilots that has not as yet, signed the 2005 NJS Pilots Australian Workplace Agreement (AWA).

Whether you do so remains entirely up to you but I thought it was necessary to let you know that as a consequence of this you remain bound by the terms your previous employment agreement, which does not allow for CPI adjustments to base salary beyond the expiration date of the applicable agreement (Clause 3 refers). This means that you will not be eligible for a CPI increase as of 1st July 2006.

The purpose of this memo is to provide you with the opportunity to sign the 2005 agreement, which would make you eligible for the CPI increase as of 1st July 2006, provided the agreement is signed and returned by 15th July 2006. Apart from some mandatory changes outlined below that are required under the recent Workchoices amendments, your AWA will remain consistent with that of your colleagues who have also signed the 2005 agreement.

Attached is a copy of the amended 2005 NJS Pilots AWA for you to consider and sign if you wish.

62    The second paragraph contained a misstatement of the legal position, but was not itself an unlawful act of any kind. Withholding the increase was unlawful, but it was accepted for the purpose of the present appeal that it was the result, as the FMCA held, of a genuine error or misunderstanding. Otherwise the memorandum contained explicit recognition that signing the new AWA was voluntary.

Application to the AIRC

63    By mid- to late-2006 there were four pilots who had received B717 training but had not signed a new AWA, although two had signed the earlier letter of offer and made a commitment in that fashion to contribute towards the cost of their training. Mr King and Mr Kruger appeared to be the only pilots who had done neither. The respondent made an application to the AIRC, as it was entitled to do under the WR Act, seeking to terminate the existing AWAs of the four pilots.

64    Termination of the AWAs would mean that the pilots were only entitled to the wages and working conditions provided for by the relevant underpinning federal award, and therefore allow the respondent, if it wished, to commence paying a much reduced salary (in the case of Messrs King and Kruger at the rate of approximately $14,000 p.a. less). In due course, the application was only pressed against Messrs King and Kruger, a circumstance which has some relevance. It suggests that the matter at issue was recovery of the cost of training, rather than a fixed pre-occupation with signing the new AWA.

65    The AIRC was obliged to consider whether termination of the existing AWAs would be contrary to the public interest, and to refrain from termination in that event. The AIRC determined that it would not be contrary to the public interest to terminate the AWAs of Messrs King and Kruger and determined that that should happen three months after the date of decision (15 September 2006). The date of effective termination was, therefore, 15 December 2006.

66    On 13 December 2006 the respondent sent a memorandum to Messrs King and Kruger advising them that their salary and other remuneration would be paid in accordance with the award.

67    I think it is clear that the respondent took this step to enforce a regime whereby it could reduce the salary of Messrs King and Kruger and commence to “recover” the $15,000 contribution, which the respondent regarded as an important component of the arrangements for B717 training it had agreed with the NJS Pilot Group Committee. This step was not pursued against the two other pilots who had not signed the new AWA but had signed the letter of offer, thereby already making a commitment to this contribution. Hence, it may not fairly be said that the objective of the application to the AIRC was connected necessarily with the new AWA. In any event, the application to the AIRC could not be regarded as duress. That would involve the proposition that the WR Act contemplated that an application made as permitted by its own terms, to a body established under it, to be determined having regard to the public interest, might be characterised as duress, and therefore unlawful conduct to be penalised.

68    I do not accept (at least in the circumstances which the present case provides) that this could be so. Furthermore, there is no real reason to suppose that these steps were any longer connected with the offer of an AWA. They are equally consistent with the respondent accepting that Messrs King and Kruger had made a decision not to sign the new AWA. There was no reason why the respondent could not thereupon exercise its own rights under the WR Act. That may not reasonably be described as illegitimate.

Resignations

69    Mr King applied for a position in another organisation as a captain (rather than first officer) in early November 2006. He was successful. He resigned on 30 November 2006, with effect from 31 December 2006, only shortly after the salary reduction took effect.

70    Mr Kruger applied unsuccessfully for a position elsewhere in December 2006. He subsequently resigned on 3 August 2007 to go to another airline.

71    Neither Mr King nor Mr Kruger ever signed a new AWA. So far as I can tell they each believed throughout the events I have mentioned that they were not obliged to do so, a view shared by the respondent.

The respondent’s conduct as a whole

72    In my view, whether considered separately or cumulatively, the respondent’s conduct did not constitute duress. The respondent undoubtedly made several attempts to persuade Mr King and Mr Kruger to sign the new AWA. From May 2006 onwards these efforts became more sustained. However, while pressure was applied, the means adopted did not negate choice and were not unlawful, unconscionable or illegitimate. There is abundant evidence that the respondent proceeded at all times on the basis that Mr King and Mr Kruger were not obliged to sign a new AWA if they did not wish to do so. Furthermore, there is adequate evidence that the respondent explicitly acknowledged this state of affairs in its dealings with Mr King and Mr Kruger.

Conclusion

73    Although my reasons do not conform in all respects with those of the FMCA my conclusions about the central issues in this appeal are the same. In my view the conduct relied on by the appellant did not constitute the application of duress.

Disposition of the appeal

74    The conduct to be examined in the present case amounted to no more than an attempt (unsuccessfully) to persuade Messrs King and Kruger to sign a new AWA, and the exercise of undoubted rights under the WR Act. It did not negate choice. It could not do that, and it was clear from all the correspondence that the right to decline to sign an AWA was never in question.

75    There was no relevant unlawful conduct by the respondent, nor was its conduct unconscionable within the legal meaning of that term. There was, moreover, no conduct approaching conduct of the character considered by Jessup J in the Williams cases. There was, accordingly, no conduct that might be described as unlawful, unconscionable or otherwise illegitimate. It follows that neither limb of the test for duress was established.

Associate:

Dated:    16 March 2012