FEDERAL COURT OF AUSTRALIA

Mylan v Health Services Union NSW [2013] FCA 190

THE COURT ORDERS THAT:

1.    Claims 1 and 7 in the amended originating application filed on 21 February 2013 are dismissed under s 31A of the Federal Court of Australia Act 1976 (Cth).

2.    Matter NSD 1830 of 2012, commenced by application filed on 16 November 2012, is otherwise transferred to the Supreme Court of New South Wales pursuant to s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth).

3.    Order 2 is stayed until 2 April 2013.

4.    Costs are reserved.

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

REASONS FOR JUDGMENT

Background

1    The respondent (“the union”) is a NSW union registered under the Industrial Relations Act 1996 (NSW) (“the IR Act”). The applicant, Mr Mylan, was an officeholder in the union until 21 June 2012. At that date, he held the position of Deputy General Secretary and was acting in the position of General Secretary. At the same time, Mr Mylan held identical positions in a branch of a federal union registered as a federal organisation under the Fair Work (Registered Organisations) Act 2009 (Cth). The federal union is the Health Services Union. Its branch was called HSU East Branch. The union was responsible for Mr Mylan’s salary and other benefits.

2    On 21 June 2012, Flick J made orders (“the Orders”) that vacated all elected offices in both the union and HSU East Branch and placed the union and HSU East Branch into administration. Fresh elections were ordered. Those events occurred in circumstances which received a good deal of media attention at the time but neither the underlying events, or the interest taken in them, are particularly significant for present purposes, except peripherally.

3    The General Secretary of the union, and of HSU East Branch, in whose positions Mr Mylan was acting when the Orders were made, was Mr Michael Williamson. Mr Mylan commenced to act as General Secretary in both organisations on 22 September 2011 after Mr Williamson stood down from those positions. Mr Mylan later received an increase in salary in his acting position, which is significant for one aspect of matters yet to be discussed.

Industrial Court proceedings

4    On 6 October 2012, the union commenced proceedings against Mr Williamson in the Industrial Court of New South Wales under s 270 of the IR Act, claiming compensation from him as an officer of the union; and for breaches of s 267 (acting dishonestly to deceive or defraud) and s 268 (use of position for profit) of the IR Act. Those proceedings (“the Industrial Court proceedings”) have since been transferred to the Supreme Court of New South Wales (“the Supreme Court”).

Supreme Court proceedings

5    On 7 October 2012, the union commenced proceedings in the Supreme Court (“the Supreme Court proceedings”) against Mr Williamson, Mr Mylan and Ms Kerrie Seymour, who was earlier Divisional Assistant Secretary of the union and HSU East Branch. There were initially two additional defendants but claims against them have been settled. The Supreme Court proceedings have a number of aspects and are quite complicated. The causes of action relied on include breach of fiduciary duty, breach of a general law duty of care and claims for repayment of overpaid salaries.

6    One foundation of the claim that the three defendants should repay monies to the union is that resolutions of the Union Council, which authorised salary payments to them in increased amounts on 26 November 2010, 8 February 2011 and 13 November 2011, should be treated as invalid. The factual contentions in support of that legal proposition centre mainly on alleged conduct by Mr Williamson, but they are not confined to such allegations and also include some allegations against Mr Mylan. I shall return to the significance of those features of the Supreme Court proceedings shortly.

Federal Court proceedings

7    On 16 November 2012, Mr Mylan commenced proceedings in this Court (“the Federal Court proceedings”) claiming he was not paid his legal entitlement by the union when (he alleges) his employment came to an end. The union accepts, for the purpose of the matters with which this judgment is concerned, that Mr Mylan held employment with the union co-extensively with holding office in it. I will accept that suggestion for the purpose of this judgment but I do so only on the basis of the parties’ agreement.

8    Mr Mylan’s claims (as now amended) are that he was not paid his full entitlements with respect to:

(1)    Notice of termination of employment under the Fair Work Act 2009 (Cth);

(2)    Annual leave under the Annual Holidays Act 1944 (NSW);

(3)    Annual leave loading under the Health Managers (State) Award and the Health Employees’ Conditions of Employment (State) Award;

(4)    Long service leave under the Health Employees’ Conditions of Employment (State) Award;

(5)    ADOs (allocated days off) under the Health Employees Conditions of Employment (State) Award;

(6)    Redundancy entitlements under the Managing Excess Staff of the NSW Health Service Policy; and

(7)    Redundancy entitlements under the Fair Work Act 2009 (Cth).

9    Claims 1 and 7 depend on s 117 and s 119 respectively of the Fair Work Act 2009 (Cth) (“the Fair Work Act”). The other claims depend on State legislation, State awards or the general law. In each case the claim is based upon a calculation which takes as its starting point the salary being paid to Mr Mylan at 21 June 2012, when the Orders were made. That circumstance may generate a contest arising from the acting nature of Mr Mylan’s duties as General Secretary but that is not the point of present significance. Mr Mylan’s right to a salary at any level approaching what he was actually being paid at 21 June 2012 has been put directly in issue in the Supreme Court proceedings. In addition, claims have been made in the Supreme Court proceedings that he should repay to the union substantial amounts paid to him as salary before the Orders were made.

Application for summary dismissal and transfer of Federal Court proceedings to Supreme Court proceedings

10    By an amended interlocutory application filed on 20 February 2013, the union applied, in the Federal Court proceedings, for summary dismissal of claims 1 and 7 (“the Fair Work claims”) and for an order that the balance of the proceedings be transferred to the Supreme Court under the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) (“the Cross-vesting Act”). The intention is that all three proceedings (the Industrial Court proceedings, the Supreme Court proceedings and the Federal Court proceedings) be heard by one court. There are, however, some complicating matters to take into account when assessing this apparently straightforward suggestion.

Potential stay of Supreme Court proceedings

11    Criminal charges have been laid against Mr Williamson. Those charges relate to some of the matters which have been alleged in the Supreme Court proceedings. An application has been made to stay the Supreme Court proceedings until the criminal charges have been heard and determined. If a stay is granted a significant delay to the Supreme Court proceedings may occur.

Fair Work claims not under the jurisdiction of the Supreme Court

12    Another complication is that the Fair Work claims are not within the ordinary jurisdiction of the Supreme Court. Neither may they, in my view, be transferred to that court under the Cross-vesting Act. The union has proposed a number of solutions to the difficulty that may represent. Before I discuss them, relevant provisions of the Cross-vesting Act should be set out. In my view, those provisions are:

4    Additional jurisdiction of certain courts

4(1)    Where:

(a)    the Federal Court or the Family Court has jurisdiction with respect to a civil matter, whether that jurisdiction was or is conferred before or after the commencement of this Act; and

(b)    the Supreme Court of a State or Territory would not, apart from this section, have jurisdiction with respect to that matter;

then:

(c)    in the case of the Supreme Court of a State (other than the Supreme Court of the Australian Capital Territory and the Supreme Court of the Northern Territory)--that court is invested with federal jurisdiction with respect to that matter;

…

4(4)    This section does not apply to a matter arising under:

    …

(ab)    the Fair Work Act 2009;

…

5    Transfer of proceedings

…

5(4)    Where:

(a)    a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Federal Court or the Family Court (in this subsection referred to as the first court); and

(b)    it appears to the first court that:

(i)    the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of a State or Territory and it is more appropriate that the relevant proceeding be determined by that Supreme Court;

(ii)    having regard to:

(A)    whether, in the opinion of the first court, the relevant proceeding or a substantial part of it would have been incapable of being instituted in that court, apart from this Act and any law of the Australian Capital Territory or the Northern Territory relating to cross-vesting of jurisdiction; and

(B)    whether, in the opinion of the first court, the relevant proceeding or a substantial part of it would have been capable of being instituted in the Supreme Court of a State or Territory, apart from this Act and any law of a State or Territory relating to cross-vesting of jurisdiction; and

(C)    the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State or Territory referred to in sub-subparagraph (B) and not within the jurisdiction of the first court apart from this Act and any law of the Australian Capital Territory or the Northern Territory relating to cross-vesting of jurisdiction; and

(D)    the interests of justice;

it is more appropriate that the relevant proceeding be determined by that Supreme Court; or

(iii)    it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of a State or Territory;

the first court shall transfer the relevant proceeding to that Supreme Court.

…

5(9)    Nothing in this section confers on a court a jurisdiction that the court would not otherwise have.

…

9    Exercise of jurisdiction pursuant to cross-vesting laws

…

9(2)    The Supreme Court of a Territory may:

(a)    exercise jurisdiction (whether original or appellate) conferred on that court by a provision of this Act or of a law of a State relating to cross-vesting of jurisdiction; and

(b)    hear and determine a proceeding transferred to that court under such a provision.

…

13    The effect of those provisions, for the Fair Work claims, is that those claims may not be transferred to the Supreme Court. The Supreme Court would have no jurisdiction to hear and determine those claims. It does not have such a jurisdiction without the Cross-vesting Act and it is not given such a jurisdiction by the terms of the Cross-vesting Act.

Transfer of part of a proceeding to another court

14    Another matter to take into account is that there does not appear to be any facility to transfer only part of a proceeding to another court. I agree with what Hodgson J said in Marks v Hellier (1990) 14 Fam LR 276 at 280:

… in my view, the Cross-vesting Act does not authorise transfer of part of proceedings. There is no definition of “proceedings” which suggest that is so, and the specific reference in parts of s 5 to “a specific part of the relevant proceeding” suggests strongly that the power to transfer “the relevant proceeding” does not extend to a power to transfer part only of the relevant proceeding…

(See also the endorsement of this statement by Einstein J in ERG Transit Systems Ltd v Keane Australia Micropayment Consortium Pty Ltd [2009] NSWSC 1296 at [20].)

15    Counsel for the union very properly drew these authorities to my attention. He submitted, however, that I should, if necessary, transfer the whole of the Federal Court proceedings to the Supreme Court, leaving it to Mr Mylan to discontinue the Fair Work claims if he wished and recommence them again in this Court. A related submission was that I should take into account the fact that the union has executed a Deed Poll in favour of Mr Mylan permitting him to sue the union upon the Deed Poll as if his claimed entitlements arose under the Fair Work Act. This, it was submitted, would allow Mr Mylan to advance those claims without prejudice before the Supreme Court.

16    I do not think it would be appropriate to purport to transfer to the Supreme Court claims which it has no jurisdiction to hear and determine. That would not be a proper use of this Court’s power and I doubt it would be an order authorised by the Cross-vesting Act. The execution of the Deed Poll makes no difference to that conclusion. I would not, in any event, have been attracted to a procedure which effectively extinguished the Fair Work claims procedurally against Mr Mylan’s opposition. It might have been otherwise if those claims were discontinued by consent, with him being content to rely on the Deed Poll, but he is not.

Interaction between Federal Court proceedings and Supreme Court proceedings if application for summary judgment was dismissed

17    However, that is not the end of the matter. The application with which I am dealing first seeks summary judgment on the Fair Work claims relying on s 31A of the Federal Court of Australia Act 1976 (Cth) and r 26.01 of the Federal Court Rules 2011 (Cth). Section 31A(2) and (3) provide:

31A    Summary judgment

…

(2)    The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3)    For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

    for it to have no reasonable prospect of success.

…

Rule 26.01(1)(a), (c) and (4) provide:

26.01 Summary judgment

(1) A party may apply to the Court for an order that judgment be given against another party because:

(a)     the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or

…

(c)     no reasonable cause of action is disclosed; or

…

(4) If an order is made under subrule (1) dismissing part of the proceeding, the proceeding may be continued for that part of the proceeding not disposed of by the order.

…

18    The provisions of s 31A and r 26.01 set out above provide a clear power to dismiss the Fair Work claims, leaving the balance of the proceedings on foot if summary dismissal is justified. If the application for summary judgment succeeds, the procedural bar to transferring the proceedings to the Supreme Court is resolved. In my view the summary judgment application does succeed. I shall explain why shortly. However, before I do it would be as well to indicate what course may have been taken if summary judgment had not been appropriate, and to indicate why.

19    In order to do that, it is necessary to say something further about the Federal Court proceedings and the Supreme Court proceedings. The proceedings in this Court are seemingly straightforward, so far as they disclose Mr Mylan’s position. No doubt they would generate some issues of construction and calculation and there may be some factual contests to resolve in the ordinary way, but they could be expected to be relatively short if it was not for the way they will inevitably be defended. The defence will necessarily put in issue Mr Mylan’s entitlement to the salary upon which his calculations are based. The argument and factual contentions will no doubt be the same as those which are relied upon in the Supreme Court proceedings to seek recovery from him of unpaid salary. In the Supreme Court proceedings, the pleaded case to that effect extends for over 30 pages. I was told that a requirement to plead to the claims in the Federal Court proceedings will result in a replication of the contentions in the Supreme Court proceedings and I see no reason to question that forecast. The result is that there is a considerable degree of overlap in prospect, although even allowing for that, the Federal Court proceedings appear to me nevertheless to remain much less complicated than the Supreme Court proceedings potentially will be.

20    Despite the inevitable overlap, it does not appear to me at the moment that it would be desirable to encourage the idea that the Supreme Court proceedings might conveniently be transferred to this Court. One reason is that they involve additional parties, as well as additional issues. Of course, that is not a matter ultimately for my decision. As it appears to me at the moment, if it was not possible to transfer the proceedings in this Court to the Supreme Court, which in my view is the most efficient course to take, it would have been better to adjourn the Federal Court proceedings until the Supreme Court proceedings had produced a legally binding answer about the assessment of Mr Mylan’s salary. The primary issues in the Federal Court proceedings could have been dealt with thereafter in an even more confined case. Of course, that would still be an available course, even if the Fair Work claims are summarily dismissed, but it is not as good a solution, in my view, as overall control of all the issues within its jurisdiction by the Supreme Court, including the Industrial Court proceedings now in its charge. Questions of stay of the proceedings, whether in whole or in part, while the criminal charges are heard and determined, may be more readily evaluated by a court with overall control of all civil proceedings.

Summary dismissal

21    I return to the application for summary judgment. The Fair Work claims depend on the proposition that Mr Mylan’s employment was terminated by the union. That element is made necessary by ss 117 and 119 of the Fair Work Act, which are the statutory foundation for the Fair Work claims. They provide:

117    Requirement for notice of termination or payment in lieu

(1)    An employer must not terminate an employee's employment unless the employer has given the employee written notice of the day of the termination (which cannot be before the day the notice is given).

Note 1: Section 123 describes situations in which this section does not apply.

Note 2: Sections 28A and 29 of the Acts Interpretation Act 1901 provide how a notice may be given. In particular, the notice may be given to an employee by:

(a)    delivering it personally; or

(b)    leaving it at the employee's last known address; or

(c)    sending it by pre-paid post to the employee's last known address.

(2)    The employer must not terminate the employee's employment unless:

(a)    the time between giving the notice and the day of the termination is at least the period (the minimum period of notice) worked out under subsection (3); or

(b)    the employer has paid to the employee (or to another person on the employee's behalf) payment in lieu of notice of at least the amount the employer would have been liable to pay to the employee (or to another person on the employee's behalf) at the full rate of pay for the hours the employee would have worked had the employment continued until the end of the minimum period of notice.

(The amount of notice is worked out under s 117(3)).

119    Redundancy pay

(1)    An employee is entitled to be paid redundancy pay by the employer if the employee’s employment is terminated:

(a)    at the employer's initiative because the employer no longer requires the job done by the employee to be done by anyone, except where this is due to the ordinary and customary turnover of labour; or

(b)    because of the insolvency or bankruptcy of the employer.

Note: Sections 121, 122 and 123 describe situations in which the employee does not have this entitlement.

(The period of redundancy pay is worked out under s 119(2)).

22    The union relied on two contentions to advance its claim for summary dismissal. The first contention was that Mr Mylan’s contract of employment necessarily contained implied terms to the effect that his employment was co-extensive with holding office in the union and ceased when office was lost. The second contention was that any contract of employment was necessarily frustrated when the Orders removed Mr Mylan from office in the union.

23    Counsel for Mr Mylan was at pains to emphasise the separate legal character of any contract of employment and distinguish it from holding office. The argument was that any employment had been brought to an end by the union independently of loss of office. On this approach, employment survived loss of office and any employment did not terminate simply with loss of elected office pursuant to the Orders. The argument has some pitfalls and counsel was careful to try to avoid them. The Fair Work claims assume termination of employment and so it was necessary to assert for the purpose of the argument that employment was brought to an end by the union, but it was not possible to identify a date or act of termination which could reasonably be attributed to the union, except notionally. In my view, it is undeniable that any employment was brought to an end, directly or indirectly, as a result of the Orders and not through any independent conduct of the union.

24    Mr Mylan, it appears, was first appointed to a casual vacancy in an elected position of a union organiser in 1998. Thereafter he held a series of elected offices in the union being, I was told, elected unopposed on each occasion. However, that short description obscures an important matter. Rules 18A(a) and (e) of the union provide:

18A(a)    Notwithstanding any other provision of these rules, each of the persons elected from time to time to offices of the Health Services Union East Branch of the Health Services Union, being an organisation registered under the Fair Work (Registered Organisations) Act 2009 of the Commonwealth shall be taken to be validly elected to the corresponding office of HSUeast, the State organisation, from and for so for so long [sic] as the Industrial Registrar is satisfied that:

(i)    the membership of the Health Services Union East Branch and the membership of HSUeast are identical or substantially similar (except for members employed in the Australian Capital Territory); and

(ii)    the rules of the Health Services Union East Branch relating to the election of the holders of offices comply substantially with the requirements relating to election of the holders of offices under the Industrial Relations Act 1996; and

…

(e)    A person who ceases to hold office in the Health Services East Branch shall forthwith cease to hold the corresponding office in HSUeast.

    …

25    Accordingly, so far as his most recent office in the union is concerned, Mr Mylan obtained the office automatically upon his election to an office in HSU East Branch. So far as the union rules are concerned, he also lost it automatically when the Orders vacated the office of Deputy General Secretary (and perhaps General Secretary in which he was acting) in HSU East Branch. The Orders also acted directly on the offices of Deputy General Secretary and General Secretary in the union.

26    Although I generally accept the submission of the union about the implication of terms and frustration, the position in my view is reasonably straightforward. I have no doubt that any employment which Mr Mylan may have held with the union was co-extensive with holding office in the union and depended upon that circumstance. When he ceased to hold office in the union by operation of the union rules, the position was no different than if he had been displaced at an election. The circumstances upon which any employment depended no longer existed. Any employment was at an end without any necessity for action by the union. In any event, Mr Mylan’s office (and any employment) was lost by operation of law as a result of the Orders.

27    Interestingly, in Marshall v Harland & Wolff Ltd [1972] 2 All ER 715, a case relied upon by both parties, a similar consequence is referred to (at 718):

For our part, we do not see how a court or tribunal can decide whether a dismissal is wholly or mainly on account of redundancy without, in an appropriate case, first considering whether there was a dismissal at all or whether in truth the relationship of employer and employee had been dissolved by operation of law at an earlier point of time.

28    There was no relevant act of termination of employment by the union. A critical element of the case under each of s 117 and s 119 of the Fair Work Act is absent. The claims cannot succeed.

Conclusion

29    In my view, there is no prospect at trial that evidence might be led to overcome the legal consequences of the matters I have referred to. This is therefore an appropriate case in which to summarily dismiss the Fair Work claims.

30    Once that is done there is no impediment to a transfer of the proceedings to the Supreme Court and it is in the interests of justice that an order be made to that effect.

31    If either party wishes to apply for costs that should be done promptly, and before any appeal is filed, so that if necessary the outcome of the present application may be reviewed in its entirety.

Associate:

Dated:    7 March 2013