FEDERAL COURT OF AUSTRALIA

One Tree Community Services Inc v United Voice (No 2) [2020] FCA 390

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    Absent consent, the first respondent is to provide a minute of further proposed orders, if any, and any submissions (not exceeding 3 pages) within 10 days;

3.    The applicant is to provide in response a minute of proposed orders and any submissions (not exceeding 3 pages) within 10 days.

4.    Unless the Court orders otherwise, any additional orders will be determined on the papers.

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

REASONS FOR JUDGMENT

MCKERRACHER J:

1    One Tree Community Services Inc is a not-for-profit organisation which provides community, children’s and training services. Through a tender process, One Tree acquired a business and its former employees together with an enterprise agreement, which applied to those employees at the time of acquisition. The Enterprise Agreement contains a dispute resolution clause. Under that clause, industrial arbitration is referred to the Fair Work Commission if the dispute cannot be resolved through internal processes. One Tree seeks to restrain the Commission from conducting an arbitration. One Tree says it cannot be compelled to arbitrate in the Commission as it has never consented to doing so. The first respondent, United Voice (now the United Workers Union), says that by acquiring a business subject to the Enterprise Agreement, it is deemed to have agreed to the dispute resolution clause and to arbitration in the Commission. For the reasons which follow, the United Workers Union is correct.

FACTUAL BACKGROUND

2    These matters are common ground between the parties.

3    One Tree is a ‘national system employer’ as defined in s 14 of the Fair Work Act 2009 (Cth) (the FW Act). It is a not-for-profit organisation which is registered with the Australian Charities and Not-for-Profits Commission, with a particular focus on providing its services in rural and remote areas. One Tree is incorporated pursuant to the Associations Incorporation Act 2015 (WA) with the registration number A0740188W.

4    The United Workers Union is a registered organisation under the Fair Work (Registered Organisations) Act 2009 (Cth).

Defence Childcare Program

5    One Tree currently operates the Defence Childcare Program (DCCP) as a service provider on behalf of the Commonwealth Department of Defence. The DCCP is delivered by an internal division of One Tree known as the ‘One Tree Defence Childcare Unit’.

6    The DCCP involves the operation and management of Defence Childcare Centres, Defence Outside School Hours Care facilities and Individual Case Management services. The DCCP is designed to provide childcare to the families of Defence personnel and local communities. The main aspect of the DCCP is the operation and management of 19 childcare services (16 long day care and three out of school hours care) at Childcare Centres across Australia, including in regional and remote areas.

7    Prior to 1 January 2019, the DCCP was operated on behalf of the Department by Mission Australia Early Learning. Mission was formerly known as Mission Australia Early Learning Services Limited. Mission has not at any relevant time been associated with One Tree within the meaning of s 50AAA of the Corporations Act 2001 (Cth).

Tender for the DCCP

8    In or around March 2018, the Department published a Request for Tender for the operation of the DCCP, as part of a competitive tender process. The tender was for the delivery of the DCCP from 1 January 2019 for an initial period of 3 years, with an option for an extension.

9    On or around 12 April 2018, One Tree made a tender submission to the Department for operation of the DCCP.

10    One Tree had no involvement in the drafting of the Mission Australia Early Learning Services Enterprise Agreement, 2013 - 2016 (the EA) or in the agreement-making process under the FW Act with respect to the EA which applied to Mission’s employees during its time as the DCCP provider.

11    At no time has One Tree made an application to the Commission as a new employer receiving transferring employees to vary or set aside parts of the EA as a transferrable instrument under s 318 or s 320 of the FW Act.

Selection as DCCP service provider

12    On or around 20 July 2018, One Tree was advised by the Department that it was successful in its bid to become the DCCP service provider.

13    On 25 July 2018, One Tree subsequently executed a formal agreement with the Department to provide the DCCP services for an initial period of three years.

14    On 14 August 2018, the Department publicly announced that One Tree had been selected as the new contract provider for the DCCP.

Asset transfer agreement and term sheet

15    In or around August 2018, One Tree commenced negotiations with Mission in relation to various matters which would facilitate a transfer of the DCCP between providers. An aspect of the negotiations was the potential for One Tree to employ some or all of Mission’s employees who had been involved in the DCCP, to avoid having to recruit its own workforce.

16    A term sheet was agreed between Mission and One Tree on or around 22 October 2018.

17    The term sheet purported to outline the:

key commercial and legal terms of a proposed Agreement for the transfer to [One Tree] of certain assets used by [Mission] in connection with the Services and the transfer of certain employee entitlements.

Among those were the following:

(a)    Mission agreed to transfer to One Tree a number of assets in relation to the DCCP for a sum of $1 (cl 2 and cl 6);

(b)    One Tree agreed to make offers of employment to all of the employees of Mission employed at the Childcare Centres on substantially similar and no less favourable terms (cl 15( 1));

(c)    Mission was required to transfer to One Tree all employee records and personnel files of existing employees of Mission engaged in providing the DCCP services who were offered and accepted employment with One Tree (Transferring Employees) and to advise One Tree of the value of all employee entitlements of the Transferring Employees (cl 11);

(d)    One Tree agreed to recognise the length and continuity of service of Transferring Employees and to take on all accrued entitlements, ‘save that [One Tree] will not recognise prior service for the purposes of redundancy entitlements’ (cl 15(2)); and

(e)    to compensate for the matters in subpara (d) above, Mission agreed to pay to One Tree various amounts referable to an agreed percentage of the value of the accrued service-based liabilities (cl 15(3)).

18    Following agreement per the term sheet, a proposed formal asset transfer agreement was prepared by Mission’s solicitors and was the subject of further negotiation. The asset transfer agreement was agreed to and executed soon after.

19    Schedule 3 of the asset transfer agreement contained a list of employees (as defined under the asset transfer agreement) and included, amongst other things, the following details for each of the employees listed: staff number, first name, preferred name, surname, joining date, service start date, birth date, email address, hours per week and location.

Correspondence with Mission employees prior to 1 January 2019

20    In or around October 2018, a letter was sent by Ms Coral Callan, One Tree’s then General Manager of Children’s Services, to Mission employees engaged in providing childcare services at the Childcare Centres in relation to One Tree taking over the DCCP.

Offers of employment

21    In November 2018, a template contract of employment (in the form of an offer letter with two attached Schedules), was finalised by One Tree to be used when making offers of employment to Transferring Employees.

22    In the same month, One Tree made offers of employment to all of the employees of Mission employed at the Childcare Centres. The letters of offer stated, amongst other things, that the offer of employment was conditional on the completion of the asset transfer agreement between Mission and One Tree. The only variation in the offers was that some contracts for non-casuals did not include the ‘For casuals’ section in the body of the letter which said that some employees had additional benefits as outlined in Sch 1 (such as those relating to hours of work, rates of pay or vehicle entitlements).

23    At the time of making these offers, One Tree was aware of the EA, and that the EA would ‘apply’ to and ‘cover’ One Tree and the Transferring Employees, within the meaning of those terms within, and by operation of, the FW Act.

24    The template contract of employment stated that One Tree would

recognise the length and continuity of your period of service with [Mission] … for all purposes (except redundancy entitlements)

and that One Tree:

will not recognise prior service for the purposes of current or future redundancy entitlements (including any redundancy entitlements which may arise under Subdivision B of Division 11 of Part 2-2 of the [FW Act] or any Applicable Industrial Instrument)

25    This phrase ‘Applicable Industrial Instrument’ was defined in cl 4 of Sch 2 to the template contract of employment, where it said that ‘an industrial instrument such as a modern award or enterprise agreement may apply to your Employment’. In Sch 1 to the template contract of employment, the EA was identified as the Applicable Industrial Instrument.

26    Clause 51 of Sch 2 to the template contract of employment read:

To the extent permitted by law, any legislation or Applicable Industrial Instrument applies to the Employment as a matter of law and does not form part of this Agreement.

27    On or around 9 November 2018 and after offers of employment were made by One Tree, One Tree sent an FAQ sheet, approved by Mission, to the Mission employees engaged in providing childcare services at the Childcare Centres.

28    171 employees of Mission accepted an offer of employment from One Tree, which employment commenced in each case on 1 January 2019. Their employment with Mission concluded at the end of December 2018. Other than the template contract of employment, there was no other agreement made between One Tree and any of the 171 Transferring Employees.

29    For each of the 171 Transferring Employees, One Tree elected, or purported to elect, not to recognise their prior service with Mission for all redundancy purposes.

Correspondence with the United Workers Union

30    On 11 September 2018, One Tree received a letter by email from Ms Helen Gibbons, Assistant National Secretary of the United Workers Union, about One Tree’s success in the tender process for the DCCP. One Tree did not respond to this letter.

31    On 14 November 2018, One Tree received a letter by email from Ms Natalie Dabarera, an Industrial Officer of the United Workers Union, seeking an urgent response about the offers of employment that One Tree had made to employees of Mission and their contingency upon the conclusion of the asset transfer agreement.

32    On 14 November 2018, Ms Irina Cattalini sent an email to Natalie Dabarera in response to her letter of that day stating that such questions could not be answered, citing commercial confidentiality.

Mission application to vary redundancy pay

33    On 18 February 2019, Ms Cattalini received correspondence by email from Mr Stephen Bull of the United Workers Union regarding a proceeding in the Commission involving Mission and the United Workers Union (matter no. C2018/7056). The proceeding was an application by Mission to vary its redundancy pay obligations in relation to the Transferring Employees (the Mission Application).

34    One Tree was not and is not a party to the Mission Application.

35    On 26 February 2019, One Tree’s solicitors, DLA Piper Australia, wrote to the Commission in relation to the Mission Application.

Dispute with the United Workers Union

36    On 5 March 2019, Ms Cattalini received a further email from Mr Stephen Bull of the United Workers Union, in which Mr Bull alleged that the United Workers Union was in dispute with One Tree for the purposes of cl 77 of the EA, concerning the service histories of the United Workers Union members who were Transferring Employees. The United Workers Union alleged that by reason of cl 61 of the EA, ‘it was not open for One Tree to decide not to recognise the transferring employees (sic) service for the purpose of redundancy’ (the Dispute). The United Workers Union said that it intended to notify the Dispute to the Commission ‘as permitted by clause 77.5 of the [EA]’.

37    Ms Cattalini instructed One Tree’s solicitors, DLA Piper, to respond to the United Workers Union on the basis that there had not been compliance with the dispute resolution procedure under the EA. A letter to this effect was sent by DLA Piper to the United Workers Union on 6 March 2019.

38    On 7 March 2019, the United Workers Union lodged a Form F10 - Application for the Commission to deal with a dispute in accordance with a dispute settlement procedure (Form F10) with the Commission (the FWC Application).

39    The FWC Application was allocated the matter number C2019/1489 by the Commission.

Objection to the Commission’s jurisdiction

40    On 15 March 2019, One Tree lodged a Form F1 - Application which outlined jurisdictional objections to the FWC Application.

41    On 28 March 2019, a hearing was held in the Commission, before Commissioner Johns, in relation to One Tree’s jurisdictional objections.

42    On 3 July 2019 and after further written submissions had been lodged, Ms Cattalini received an email from the Commission attaching a copy of a decision issued by Commissioner Johns ([2019] FWC 4235) who determined that the Commission was ‘properly invested with jurisdiction to hear and determine the Dispute.

43    In response to the Commission’s jurisdictional finding, One Tree applied for urgent injunctive relief in this Court on 8 August 2019 seeking to restrain the Commission from determining the Dispute. On 19 August 2019 I made orders restraining the Commission from determining the Dispute, however, those orders were stayed for 48 hours and on 20 August 2019 the Commission vacated its listings of the Dispute: One Tree Community Service Inc v United Voice [2019] FCA 1309 (One Tree No 1)

44    There has been further evidence on affidavit from Ms Callan, Ms Cattalini and Mr Ben Williams filed since my decision in One Tree No 1. It is unnecessary to discuss that evidence. Determination of the legal questions did not turn on that evidence once the common ground was established in the terms set out above.

ONE TREE’S ARGUMENTS

45    By a proposed amended originating application, One Tree seeks two substantive forms of relief giving rise to four issues. The first is a permanent injunction or writ of prohibition against the Commission seeking to restrain it from hearing and determining the Dispute the subject of the relevant proceeding. Secondly, One Tree seeks a declaration as to the proper construction of the EA, being an enterprise agreement made and approved under the FW Act, regarding the periods of prior service of One Tree employees for the purposes of redundancy pay entitlements. The remaining issues are closely related to the second, and are advanced in the alternative to One Tree’s argument as to the proper construction of the EA.

46    One Tree argues that the Commission does not have jurisdiction to hear and determine the FWC Application by way of ‘purported’ arbitration. The argument is premised on the claim that One Tree did not negotiate the terms of, or enter into, the EA with any of the Transferring Employees and has not consented to arbitration on any of the EA’s terms. To the extent then, that the FW Act and the EA purport to authorise the Commission to arbitrate the Dispute, One Tree argues that they are beyond the legislative power of the Commonwealth in that they impermissibly seek to confer judicial power on the Commission, which is not a Ch III court. According to One Tree, the Commission has no power of ‘private arbitration’ in this case because there is no ‘arbitration agreement between the parties to the dispute’, being One Tree and the United Workers Union, or alternatively, any of the relevant employees.

47    The United Workers Union asserts that the EA obliges One Tree to recognise prior service of employees. One Tree disputes this. One Tree also seeks to assert that the clauses would not be enforceable against One Tree in any event because clauses with that construction would either not be about ‘permitted matters’ or would otherwise be repugnant to the statutory scheme established by the FW Act.

48    One Tree emphasises that it only became aware for the first time of the existence of the EA and the fact that it covered and applied to Mission’s employees involved in the operation of DCCP on or around 8 August 2018.

49    The negotiations between Mission and One Tree involved discussions about the accrued service based entitlements of Mission employees (including annual leave, long service leave and redundancy pay entitlements) and whether One Tree would recognise the prior service of these employees that it subsequently employed for the purpose of those entitlements. The potential redundancy entitlements of Mission employees in the DCCP was in the order of $1.4 million to $2 million.

50    Ultimately, as between One Tree and Mission, it was agreed that:

(a)    One Tree would recognise prior service and continuity for service based entitlements, excluding redundancy pay entitlements, of any Transferring Employees in exchange for payment from Mission to One Tree of a negotiated amount for the estimated present liabilities; and

(b)    One Tree would not recognise prior service for redundancy pay entitlements of any Transferring Employees because the parties could not agree on an appropriate financial combination with respect to the value of those liabilities to be paid by Mission to One Tree.

51    One Tree says the offer to the employees was consistent with these commercial agreements that One Tree would not recognise redundancy entitlements. One Tree asserts this was the position consistent with its rights at common law as a matter of freedom of contract, being rights specifically recognised and reinforced by s 122(1) of the FW Act.

52    It is agreed that the Transferring Employees were covered by the EA, being an enterprise agreement made under the FW Act when employed at Mission. By operation of law and irrespective of the consent or agreement of One Tree or any of the Transferring Employees to this outcome, the Transferring Employees remain covered by the EA in their employment with One Tree as a result of s 313(1)(a) of the FW Act such that the EA now covers and applies to One Tree and the Transferring Employees as a ‘transferable instrument’.

53    However, One Tree contends that the employees expressly contracted out of the EA by agreeing to cl 51 of their employment contracts which provided that:

To the extent permitted by law, any legislation or applicable industrial instrument applies to the Employment as a matter of law and does not form part of this Agreement.

According to One Tree, the employment contract is the only agreement entered into by it and the Transferring Employees. Moreover, it notes that none of the Transferring Employees were provided with the EA at the time of signing their employment contracts.

54    The United Workers Union contends that cl 61 and cl 63 of the EA require or compel One Tree to recognise the prior service. One Tree contends they do not. Clauses 61-64 are in these terms:

61.    Transfer of Employment

61.1    Where there is a transfer of employment in relation to an employee as specified in subsection 22(7) of the [FW Act], the employee is not entitled to any redundancy pay due to the termination of his or her employment by [Mission].

61.2    An employee is not entitled to redundancy pay in relation to the termination of his or her employment if:

(a)    the employee rejects an offer of employment by another employer (the second employer) that:

(i)    is on terms and conditions substantially similar to, and, considered on an overall basis, no less favourable than, the employee’s terms and conditions of employment with [Mission] immediately before the termination; and

(ii)    recognises the employee’s service with [Mission]; and

(b)    had the employee accepted the offer, there would have been a transfer of employment in relation to the employee,

subject to any order by the [Commission] to pay the employee redundancy pay where it is satisfied that the employee was treated unfairly.

62.    Alternative Employment

62.1    Where [Mission] obtains other acceptable employment for an employee who is entitled to redundancy pay under this Part, [Mission] may make an application to the [Commission] to reduce the amount of redundancy pay to be paid to the employee.

63.    Redundancy payments

63.1    Where an employee is not able to be redeployed and he or she is terminated on the grounds of redundancy, the employee is entitled to the following redundancy payments:

63.2    Former service with ABC Learning Centres and B4Kids that has been accepted by [Mission] will count as service for the purposes of calculating the employee’s redundancy pay.

63.3    Where the Modern Award provides for a higher redundancy payment than specified in clause 63.1, including under any transitional provisions, the higher redundancy payment will be applicable.

63.4    For part time employees, the weekly hours of work for the purposes of calculating the redundancy payment will be equal to the average weekly hours of work over the shorter of the previous five years or the duration of the employee’s continuous service.

63.5    An employee who is retrenched will also be provided the notice of termination of employment that is required by Section 67 and may be paid in lieu of all or part of that notice.

63.6    An employee is entitled to finish his or her employment with [Mission] during the notice period. Where this occurs, the employee will not be paid for the part of the notice period that was not worked, but his or her redundancy payments and other termination payments will be calculated as though the employee worked for the entire notice period.

63.7    For the purposes of this Section, “weeks’ pay” means the employee’s base rate of pay.

64.    Job Search Entitlement

64.1     Where [Mission] provides an employee with notice of termination on the grounds of redundancy, he or she is entitled to up to one day off with pay each week in order to look for another job. [Mission] may require the employee to provide evidence of his or her job search activities on any paid time off work under this clause. Where the employee does not provide such evidence, [Mission] may withhold payment for that time.

…

55    As to the Court’s jurisdiction to determine the question of whether the Commission has jurisdiction to resolve the Dispute, One Tree relies upon:

(a)    s 39B(1) of the Judiciary Act 1903 (Cth) insofar as it seeks an injunction or writ of prohibition against the Commission (which is constituted by officers of the Commonwealth);

(b)    s 39B(1A)(b) of the Judiciary Act as a matter arising under the Constitution;

(c)    s 39B(1A)(c) of the Judiciary Act as a matter arising under the FW Act; and

(d)    s 562 of the FW Act, which confers jurisdiction on this Court ‘in relation to any matter (whether civil or criminal) arising under this Act’.

56    Jurisdiction is not in dispute and I am also satisfied that I have jurisdiction. On the occasion of filing the originating application, One Tree served all Attorneys-General with notice of a constitutional matter pursuant to s 78B of the Judiciary Act. A reasonable time has elapsed and all Attorneys-General, except for the Attorney-General of the Northern Territory have responded indicating that they do not wish to intervene in the proceeding at this stage.

The proper construction of the EA

57    One Tree says that the substantive dispute between the parties, including in the FWC Application, involves the proper construction of cl 61 and cl 63 of the EA set out above. The United Workers Union relies upon cl 61 and cl 63 to contend that One Tree is compelled to recognise the prior service of the Transferring Employees with Mission and potentially any prior service with ABC Learning Centres and B4Kids for redundancy purposes. One Tree says that on their proper construction, those clauses do not have that effect. It argues that cl 61.2 of the EA is not relevant. Clause 61.1 speaks of the obligations (more correctly, the rights of Mission, not One Tree) and cl 61.1 of the EA purports to relieve Mission of responsibility for redundancy entitlements in a transfer of employment scenario. Whether or not that is so, One Tree contends the clause says nothing at all of the obligations or rights of One Tree vis-a-vis any Transferring Employee.

58    One Tree argues that the only part of cl 63 of the EA with any potential relevance to the United Workers Union’s contention is cl 63.2. On the face of that clause, it says nothing about prior service of any employee with Mission. Logically, it cannot speak of such service because it is speaking of service prior to the employee’s service at Mission (being that with ABC Learning Centres and/or B4Kids). Further, the clause cannot be sensibly construed, One Tree argues, as seeking to impose any obligations on One Tree because it is dealing with prior service (prior to employment at Mission) ‘that has been accepted by [Mission]’. The clause is dealing only, One Tree says, with the redundancy obligations of Mission. It has no sensible or meaningful operation with respect to One Tree.

59    Importantly, One Tree argues, the FW Act specifically contemplates such a scenario and allows the Commission to vary an agreement to either remove terms that are not capable of meaningful operation or to remove an ambiguity or uncertainty. One Tree argues that is the appropriate solution here. The solution is not to rewrite some other person’s agreement, contrary to the scheme of the FW Act as a means of attempting to shoehorn obligations onto another employer when that was never in the contemplation of the industrial parties or capable of resulting from an orthodox interpretation of the language of the clause. For those reasons, One Tree says the Court should make a declaration to the effect it seeks in para 4 of the claim.

Alternative claims

60    Alternative arguments are advanced on the assumption that the Court concludes that either or both of cl 61 and cl 63 of the EA operate to impose an obligation on One Tree to recognise the prior service of any Transferring Employees with any or all of ABC Learning Centres, B4Kids or Mission for the purposes of their redundancy pay entitlements.

61    To the extent that either or both of those clauses have that effect (of imposing obligations on One Tree, as opposed to Mission), One Tree seeks to argue that they would not be about a ‘permitted matter’ and as such would be of no effect to that extent. ‘Permitted matters’ are defined by s 172(1) of the FW Act. Section 172 and s 182 of the FW Act are as follows:

172    Making an enterprise agreement

Enterprise agreements may be made about permitted matters

(1)    An agreement (an enterprise agreement) that is about one or more of the following matters (the permitted matters) may be made in accordance with this Part:

(a)    matters pertaining to the relationship between an employer that will be covered by the agreement and that employer’s employees who will be covered by the agreement;

(b)    matters pertaining to the relationship between the employer or employers, and the employee organisation or employee organisations, that will be covered by the agreement;

(c)    deductions from wages for any purpose authorised by an employee who will be covered by the agreement;

(d)    how the agreement will operate.

Note 1:    For when an enterprise agreement covers an employer, employee or employee organisation, see section 53.

Note 2:    An employee organisation that was a bargaining representative for a proposed enterprise agreement that is not a greenfields agreement will be covered by the agreement if the organisation notifies the FWC under section 183 that it wants to be covered.

…

182    When an enterprise agreement is made

Single enterprise agreement that is not a greenfields agreement

(1)    If the employees of the employer, or each employer, that will be covered by a proposed single enterprise agreement that is not a greenfields agreement have been asked to approve the agreement under subsection 181(1), the agreement is made when a majority of those employees who cast a valid vote approve the agreement.

…

62    One Tree contends that the only relevant matters supporting cl 61 and cl 63 is s 172(1)(a) of the FW Act by which matters pertaining to the relationship between an employer that will be covered by the EA and that employer’s employees who will be covered by the EA. The provision is speaking in advance of any ‘agreement’ being made (under s 182) or approved (under s 186). It is specifically referring, One Tree says, to the employer and the group of that employer’s employees who come to make the agreement under s 182 of the FW Act and matters pertaining to their relationship as such. Any term of an agreement to be made between Mission and Mission’s employees employed at the time (whose employment will be covered by the EA), must pertain to their relationship as such. To the extent that any such term seeks to impose obligations upon some other employer, not party to or involved in the relationship between Mission and its employees, One Tree says that would not be a permitted matter and is of no effect. That, One tree says, is the gravamen of the obiter observations in Construction, Forestry, Mining and Energy Union v Newlands Coal Pty Ltd (2006) 153 IR 110 (at [13]). Alternatively, One Tree argues that to the extent that cl 61 and cl 63 of the EA preclude or prevent One Tree exercising a right to not recognise prior service of Transferring Employees for redundancy purposes, the clauses would be invalid as being inconsistent with the FW Act. The scheme of the FW Act specifically empowers the transferee employer in a ‘non-associated entity’ transfer scenario, to not recognise prior service of transferring employees for redundancy purposes. This is said to be evidenced by s 22(5) and the note thereto, ss 22(7), 22(8) and 122(1) of the FW Act. Where the two employers are associated entities, the transferee employer has no right or option to not recognise the prior service: s 22(5) of the FW Act. Section 22 of the FW Act provides:

22    Meanings of service and continuous service

General meaning

(1)    A period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include any period (an excluded period) that does not count as service because of subsection (2).

(2)    The following periods do not count as service:

(a)    any period of unauthorised absence;

(b)    any period of unpaid leave or unpaid authorised absence, other than:

(i)    a period of absence under Division 8 of Part 2-2 (which deals with community service leave); or

(ii)    a period of stand down under Part 3-5, under an enterprise agreement that applies to the employee, or under the employee’s contract of employment; or

(iii)    a period of leave or absence of a kind prescribed by the regulations;

(c)    any other period of a kind prescribed by the regulations.

(3)    An excluded period does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service.

(3A)    Regulations made for the purposes of paragraph (2)(c) may prescribe different kinds of periods for the purposes of different provisions of this Act (other than provisions to which subsection (4) applies). If they do so, subsection (3) applies accordingly.

Meaning for Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2

(4)    For the purposes of Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2:

(a)    a period of service by a national system employee with his or her national system employer is a period during which the employee is employed by the employer, but does not include:

(i)    any period of unauthorised absence; or

(ii)    any other period of a kind prescribed by the regulations; and

(b)    a period referred to in subparagraph (a)(i) or (ii) does not break a national system employee’s continuous service with his or her national system employer, but does not count towards the length of the employee’s continuous service; and

(c)    subsections (1), (2) and (3) do not apply.

Note:    Divisions 4 and 5, and Subdivision A of Division 11, of Part 2-2 deal, respectively, with requests for flexible working arrangements, parental leave and related entitlements, and notice of termination or payment in lieu of notice.

(4A)    Regulations made for the purposes of subparagraph (4)(a)(ii) may prescribe different kinds of periods for the purposes of different provisions to which subsection (4) applies. If they do so, paragraph (4)(b) applies accordingly.

When service with one employer counts as service with another employer

(5)    If there is a transfer of employment (see subsection (7)) in relation to a national system employee:

(a)    any period of service of the employee with the first employer counts as service of the employee with the second employer; and

(b)    the period between the termination of the employment with the first employer and the start of the employment with the second employer does not break the employee’s continuous service with the second employer (taking account of the effect of paragraph (a)), but does not count towards the length of the employee’s continuous service with the second employer.

Note:    This subsection does not apply to a transfer of employment between non-associated entities, for the purpose of Division 6 of Part 2-2 (which deals with annual leave) or Subdivision B of Division 11 of Part 2-2 (which deals with redundancy pay), if the second employer decides not to recognise the employee’s service with the first employer for the purpose of that Division or Subdivision (see subsections 91(1) and 122(1)).

(6)    If the national system employee has already had the benefit of an entitlement the amount of which was calculated by reference to a period of service with the first employer, subsection (5) does not result in that period of service with the first employer being counted again when calculating the employee’s entitlements of that kind as an employee of the second employer.

Note:    For example:

(a)    the accrued paid annual leave to which the employee is entitled as an employee of the second employer does not include any period of paid annual leave that the employee has already taken as an employee of the first employer; and

(b)    if an employee receives notice of termination or payment in lieu of notice in relation to a period of service with the first employer, that period of service is not counted again in calculating the amount of notice of termination, or payment in lieu, to which the employee is entitled as an employee of the second employer.

Meaning of transfer of employment etc.

(7)    There is a transfer of employment of a national system employee from one national system employer (the first employer) to another national system employer (the second employer) if:

(a)    the following conditions are satisfied:

(i)    the employee becomes employed by the second employer not more than 3 months after the termination of the employee’s employment with the first employer;

(ii)    the first employer and the second employer are associated entities when the employee becomes employed by the second employer; or

(b)    the following conditions are satisfied:

(i)    the employee is a transferring employee in relation to a transfer of business from the first employer to the second employer;

(ii)    the first employer and the second employer are not associated entities when the employee becomes employed by the second employer.

Note:    Paragraph (a) applies whether or not there is a transfer of business from the first employer to the second employer.

(8)    A transfer of employment:

(a)    is a transfer of employment between associated entities if paragraph (7)(a) applies; and

(b)    is a transfer of employment between non-associated entities if paragraph (7)(b) applies.

The situation is different, however, for non-associated entity transfers, One Tree argues. The FW Act purports to recognise such a right (at s 22(8), including the note’s reference to subdiv B of Div 11 of Pt 2-2). The fact that the right might be described as facilitative in that the transferee employer may choose to exercise or not exercise it makes it no less a statutory right. Once this point is reached, a term of an enterprise agreement cannot remove that right from a transferee employer as it would create direct inconsistency with the scheme of the FW Act. One Tree asserts any such term is invalid to that extent.

Private arbitration in the absence of an arbitration agreement

63    One Tree wishes to have the constructional issues resolved first by the Court, suggesting that the arguments which follow do not require consideration if the construction it advances is favourable. I do not accept, for reasons which follow, that this is the appropriate course of deliberation. One Tree stresses that a judicial pronouncement as to the proper construction, meaning and effect of cl 61 and cl 63 of the EA, as they relate to the present facts, would operate as a res judicata as between One Tree and the United Workers Union and would resolve the Dispute. The Dispute is the necessary foundation for any exercise of power by the Commission in the FWC Application. Once resolved in a binding fashion, it could not be said to remain for the purpose of any exercise of power by the Commission to resolve it. One Tree argues that in such a case, the jurisdictional foundation for any attempted exercise of power by the Commission would be absent for other reasons.

64    However, One Tree presses its argument nonetheless contending that the EA which covers and applies to it by operation of statutory device and which contains an arbitration term in cl 77.5 with which it, One Tree, has not agreed as between it and the United Workers Union or any Transferring Employee cannot confer a valid power of private arbitration on the Commission in the FWC Application. One Tree argues any attempt to do so would amount to the determination of existing rights and obligations in the absence of One Tree’s agreement and would amount to an impermissible exercise of judicial power by a body other than a Ch III court.

65    The question, shortly stated, is whether it is sufficient to establish the Commission’s jurisdiction to deal with the Dispute by way of arbitration that an enterprise agreement containing an arbitration term applies to One Tree with force of law by statutory effect, notwithstanding that One Tree has not otherwise reached agreement with the other party to the Dispute as to the content and application of that arbitration term.

66    One Tree argues the only jurisdiction the Commission has to ‘arbitrate’ the Dispute is that purportedly conferred on it by cl 77.5 of the EA. Clause 77 of the EA provides as follows:

PART M.    DISPUTE RESOLUTION

77.    Procedures for preventing and settling disputes

77.1    If a dispute relates to:

(a)    a matter arising under this Agreement other than relating to termination of employment; or

(b)    the National Employment Standards; this Section sets out procedures to settle the dispute.

77.2    An employee who is a party to the dispute may appoint a representative for the purposes of the procedures in this Section.

77.3    In the first instance, the parties to the dispute must try to resolve the dispute at the workplace level, by discussions between the employee or employees and the relevant supervisors and/or managers.

77.4    If discussions at the workplace level do not resolve the dispute, a party to the dispute may refer the matter to the [Commission].

77.5    The [Commission] may deal with the dispute in two stages:

(a)    the [Commission] will first attempt to resolve the dispute as it considers appropriate, including by mediation, conciliation, expressing an opinion or making a recommendation; and

(b)    if the [Commission] is unable to resolve the dispute at the first stage, the [Commission] may then:

(i)    arbitrate the dispute; and

(ii)    make a determination that is binding on the parties.

77.6    While the parties are trying to resolve the dispute using the procedures in this Section;

(a)    an employee must continue to perform his or her work as he or she would normally unless he or she has a reasonable concern about an imminent risk to his or her health or safety; and

(b)    an employee must comply with a direction given by the employer to perform other available work at the same workplace, or at another workplace, unless;

(i)    the work is not safe;

(ii)    applicable occupational health and safety legislation would not permit the work to be performed;

(iii)    the work is not appropriate for the employee to perform; or

(iv)    there are other reasonable grounds for the employee to refuse to comply with the direction.

77.7    The parties to the dispute agree to be bound by a decision made by the [Commission] in accordance with this Section.

67    In relation to this argument ss 595, 738 and 739 of the FW Act relevantly provide:

595    [Commission’s] power to deal with disputes

(1)    The [Commission] may deal with a dispute only if the [Commission] is expressly authorised to do so under or in accordance with another provision of this Act.

(2)    The [Commission] may deal with a dispute (other than by arbitration) as it considers appropriate, including in the following ways:

(a)    by mediation or conciliation;

(b)    by making a recommendation or expressing an opinion.

(3)    The [Commission] may deal with a dispute by arbitration (including by making any orders it considers appropriate) only if the [Commission] is expressly authorised to do so under or in accordance with another provision of this Act.

Example:    Parties may consent to the [Commission] arbitrating a bargaining dispute (see subsection 240(4)).

…

(5)    To avoid doubt, the [Commission] must not exercise the power referred to in subsection (3) in relation to a matter before the [Commission] except as authorised by this section.

…

738    Application of this Division

This Division applies if:

…

(b)    an enterprise agreement includes a term that provides a procedure for dealing with disputes, including a term referred to in subsection 186(6); or

(c)    a contract of employment or other written agreement includes a term that provides a procedure for dealing with disputes between the employer and the employee, to the extent that the dispute is about any matters in relation to the National Employment Standards or a safety net contractual entitlement; or

…

739    Disputes dealt with by the [Commission]

(1)    This section applies if a term referred to in section 738 requires or allows the [Commission] to deal with a dispute.

(2)    The [Commission] must not deal with a dispute to the extent that the dispute is about whether an employer had reasonable business grounds under subsection 65(5) or 76(4), unless:

(a)    the parties have agreed in a contract of employment, enterprise agreement or other written agreement to the [Commission] dealing with the matter; or

(b)    a determination under the Public Service Act 1999 authorises the [Commission] to deal with the matter.

Note:    This does not prevent the [Commission] from dealing with a dispute relating to a term of an enterprise agreement that has the same (or substantially the same) effect as subsection 65(5) or 76(4) (see also subsection 55(5)).

(3)    In dealing with a dispute, the [Commission] must not exercise any powers limited by the term.

(4)    If, in accordance with the term, the parties have agreed that the [Commission] may arbitrate (however described) the dispute, the [Commission] may do so.

Note:    The [Commission] may also deal with a dispute by mediation or conciliation, or by making a recommendation or expressing an opinion (see subsection 595(2)).

(5)    Despite subsection (4), the [Commission] must not make a decision that is inconsistent with this Act, or a fair work instrument that applies to the parties.

(6)    The [Commission] may deal with a dispute only on application by a party to the dispute.

68    It may be seen that pursuant to s 739(4) of the FW Act if, in accordance with cl 77.5 of the EA the parties have agreed that the Commission may arbitrate (however described) the Dispute, the Commission may do so.

69    The drafting and structure of this combination of statutory provisions reflects the constitutional limitations on the capacity of the Commonwealth legislature to confer judicial power on a body other than a Ch III court. It obviously seeks to conform with the judgment of the High Court in the Private Arbitration case: Construction, Forestry, Mining and Energy Union v Australian Industrial Relation Commission (2001) 203 CLR 645.

70    One of the issues in the Private Arbitration case was the validity of the dispute resolution clause in an agreement between parties to an industrial dispute. The relevant enterprise agreement had been certified by the Australian Industrial Relations Commission (AIRC) pursuant to the Industrial Relations Act 1988 (Cth) and given statutory force accordingly. Like cl 77.5 of the EA in this instance, the clause in question in the Private Arbitration case purported to confer on the Commission’s predecessor a power to resolve disputes between the parties in a binding fashion.

71    A question arose as to whether the dispute resolution clause was valid as a term of an agreement given statutory force by the Commonwealth legislature when ‘certified’ by the AIRC because it sought to confer judicial power on the AIRC which was not a Ch III court.

72    The High Court (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ) (at [26]) held that ‘a power to make a binding determination as to legal rights and liabilities arising under an award or agreement is, in its nature, judicial power’. One Tree says it is beyond debate that the arbitral power purported to be exercised by the Commission in the FWC Application would be judicial power unless it is ‘private arbitral’ power.

73    One Tree also relies for this contention on the passages (at [30]-[31]) of the Private Arbitration case where the High Court said as follows:

30    There is, however, a significant difference between agreed and arbitrated dispute settlement procedures. As already indicated, the Commission cannot, by arbitrated award, require the parties to submit to binding procedures for the determination of legal rights and liabilities under an award because Ch III of the Constitution commits power to make determinations of that kind exclusively to the courts. However, different considerations apply if the parties have agreed to submit disputes as to their legal rights and liabilities for resolution by a particular person or body and to accept the decision of that person as binding on them.

31    Where parties agree to submit their differences for decision by a third party, the decision maker does not exercise judicial power, but a power of private arbitration. Of its nature, judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought and results in a judgment or order that is binding of its own force. In the case of private arbitration, however, the arbitrator’s powers depend on the agreement of the parties, usually embodied in a contract, and the arbitrator’s award is not binding of its own force. Rather, its effect, if any, depends on the law which operates with respect to it.

74    One Tree contends that the constitutional necessity for the agreement, which will usually be embodied in the contract to the dispute being resolved by the Commission, is expressly recognised by s 739(4) of the FW Act. The passages from the Private Arbitration case reveal the essential characteristic grounding the arbitrator’s power, namely, the agreement between the parties to the dispute to submit their disputes to a third party for determination as opposed to a court. As French CJ and Gageler J said in TCL Air Conditioner (Zhongshan) Co Ltd v Judges of Federal Court of Australia (2013) 251 CLR 533 (at [29]), the arbitration power of the Commission is ‘a function the existence and scope of which is founded on agreement as distinct from coercion’. One Tree argues that it follows that for a valid exercise of private arbitral power, whether in the context of a dispute under s 739 of the FW Act or a private arbitration clause outside the industrial sphere, there must be a valid agreement between the parties to the purported arbitration in which those parties have agreed to submit their disputes to a third party, in this case the Commission, for resolution or determination.

75    Further, One Tree emphasises that before considering the existence of any arbitration agreement between parties to a dispute, the parties to the dispute need to be determined. The parties in this instance are clearly One Tree and the United Workers Union. One Tree points out that there is no evidence of any communications between One Tree and a single Transferring Employee about the subject matter of the Dispute. There is no evidence that any Transferring Employee has progressed the Dispute as a party through the procedure in cl 77 of the EA. It is the United Workers Union which purports to be in dispute with One Tree ‘concerning the service histories of our members who are Transferring Employees’.

76    One Tree contends that in order for the Commission to deal with the Dispute there needs to be a correlation between the party to the Dispute and the named applicant. There is no agreement, let alone an arbitration agreement, of any type made at any time between One Tree and the United Workers Union. One Tree did not reach agreement with the United Workers Union as to the terms of the EA, either when the EA was ‘made’ or at any subsequent time. Indeed, there is no evidence that the United Workers Union agreed the terms of the EA with anyone, including Mission. The ‘offer’ and ‘acceptance’, if there be one, was between Mission and its employees at the point the EA was ‘made’ under s 182(1) of the FW Act. One Tree had no involvement in that process.

77    Moreover, One Tree asserts that the EA is not an ‘agreement’ in any general law sense sufficient to constitute an ‘agreement’ for the purpose of establishing the power of private arbitration. It is a statutory artefact which happens to be called an ‘agreement’ where the legal efficacy of its terms ‘arise under statute, not contract, and, as mentioned above, will be felt also by those who did not agree to them’: see Toyota Motor Corporation Australia Ltd v Marmara (2014) 222 FCR 152 (at [89]).

78    One Tree says that even if one or more Transferring Employees were regarded as the ‘party’ to the Dispute in the FWC Application, the same result would follow. One Tree made no agreement or contract with any of them at the time the EA was made. One Tree has only made one agreement with each Transferring Employee and it specifically excluded the relevant terms of the EA as terms of the bargain between them. The fact that the EA now covers and ‘applies to’ One Tree by operation of s 313 of the FW Act, whether One Tree likes it or not, cannot of itself establish a valid general law arbitration agreement (the identity of the other party to that purported agreement being unclear). Section 313 of the FW Act provides as follows:

313    Transferring employees and new employer covered by transferable instrument

(1)    If a transferable instrument covered the old employer and a transferring employee immediately before the termination of the transferring employee’s employment with the old employer, then:

(a)    the transferable instrument covers the new employer and the transferring employee in relation to the transferring work after the time (the transfer time) the transferring employee becomes employed by the new employer; and

(b)    while the transferable instrument covers the new employer and the transferring employee in relation to the transferring work, no other enterprise agreement or named employer award that covers the new employer at the transfer time covers the transferring employee in relation to that work.

(2)    To avoid doubt, a transferable instrument that covers the new employer and a transferring employee under paragraph (1)(a) includes any individual flexibility arrangement that had effect as a term of the transferable instrument immediately before the termination of the transferring employee’s employment with the old employer.

(3)    This section has effect subject to any [Commission] order under subsection 318(1).

(Emphasis added.)

79    One Tree also argues that the fact that it was aware of the existence of the EA and then employed the Transferring Employees knowing that the EA would ‘transfer’ to it under s 313 of the FW Act with respect to their employment, cannot establish a valid arbitration agreement with those employees either. The terms and conditions of statutory instruments establishing statutory terms and conditions of employment, including the EA, do not become contractual terms, enforceable in contract unless specifically agreed to. For this contention, One Tree relies on Byrne v Australian Airlines Ltd (1995) 185 CLR 410 (at 419-423).

80    One Tree asserts that, unlike all of the other various terms and conditions of employment agreed to between One Tree and the Transferring Employees, the terms of the EA, and their existence and applicability to the employment are recognised ‘as a matter of law’ only. This is because the parties purported to agree that the EA would expressly not form part of the contract by cl 51 of Sch 2 of the terms and conditions of employment. Insofar as One Tree and the Transferring Employees were concerned, they expressly agreed to ‘not agree’ to the terms of the EA.

81    In short, One Tree says that in the absence of any arbitration agreement between One Tree and the United Workers Union or, alternatively, any Transferring Employee, the Commission has no jurisdiction to arbitrate the Dispute. Any attempt to do so against One Tree’s will would involve the impermissible exercise of the judicial power of the Commonwealth. For those reasons, it is argued that the Court should permanently restrain or prohibit the Commission from hearing and determining the Dispute the subject of the FWC Application.

CONSIDERATION

82    The constitutional question will be determined first. This was the contention which was relied upon to support the application for an interlocutory injunction which was granted. More importantly, if the question is resolved against One Tree, as it must be, the proceeding should be dismissed and the second broad question dealing with the various arguments concerning the construction of the EA is properly left for the Commission to determine as it would have done had it been raised and absent the orders in One Tree No 1.

83    Sections 311 to 318 of the FW Act deal with some of the employment consequences that result from a transfer of a business. The key issue here pertains to s 313 which is set out above (at [78]).

84    The simple effect of s 311 being satisfied is that any enterprise agreement which covered Mission and the Transferring Employees immediately before the termination of their employment with Mission now covers One Tree and the former Mission employees in relation to the transferring work by virtue of s 313. This is common ground.

85    By s 318(1) and s 320(2) of the FW Act, the Commission is empowered to make orders as to the application and coverage of the EA as a transferrable instrument, or to vary the EA such that its terms can be made capable of ‘meaningful operation’ or ‘better aligned to the working arrangements of the new employer’s enterprise’. No such order has been sought by One Tree and no such order has been made. When making its offers of employment to the Transferring Employees, One Tree was fully aware of the EA and that the EA would apply to, and cover it, and the Transferring Employees.

The constitutional argument

86    It is clear that the judicial power of the Commonwealth can only be exercised by a court described in s 71 of the Constitution and that the Commission is not such a court. However, a body does not exercise the judicial power of the Commonwealth if the source of the body’s decision-making authority lies in the consent of the parties for it to determine a dispute, rather than in the sovereign power of the State as authorised by a democratic body politic. There is no ‘exercise of the judicial power of the Commonwealth’ where ‘the existence and scope of the authority to make the arbitral award is founded on the agreement of the parties in an arbitration agreement’. So much is clear from TCL Air Conditioner (at [31]). Moreover, in TCL Air Conditioner, French CJ and Gageler J observed (at [28]):

Underlying each of those dimensions of the judicial power of the Commonwealth is its fundamental character as a sovereign or governmental power exercisable, on application, independently of the consent of those whose legal rights or legal obligations are determined by its exercise. That fundamental character of the judicial power of the Commonwealth is implicit in the frequently cited description of judicial power as “the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects”, the exercise of which “does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action”. Judicial power “is conferred and exercised by law and coercively”, “its decisions are made against the will of at least one side, and are enforced upon that side in invitum”, and it “is not invoked by mutual agreement, but exists to be resorted to by any party considering himself aggrieved”.

(Citations omitted.)

87    In discussing the passage at [28] of the Private Arbitration case, French CJ and Gageler J also observed in TCL Air Conditioner (at [29]):

Therein is the essential distinction between the judicial power of the Commonwealth and arbitral authority, of the kind governed by the Model Law, based on the voluntary agreement of the parties. The distinction has been articulated in the following terms:

Where parties agree to submit their differences for decision by a third party, the decision maker does not exercise judicial power, but a power of private arbitration. Of its nature, judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought and results in a judgment or order that is binding of its own force. In the case of private arbitration, however, the arbitrator’s powers depend on the agreement of the parties, usually embodied in a contract, and the arbitrator’s award is not binding of its own force. Rather, its effect, if any, depends on the law which operates with respect to it.

The context of that articulation puts its reference to “private arbitration” in appropriate perspective. The context was that of a challenge to the capacity of a statutory body consistently with Ch III of the Constitution to exercise a statutory function to settle a dispute where so empowered by an agreement entered into as a result of statutory processes. The reference to “private arbitration” was not to a private function, as distinct from a public function, but rather to a function the existence and scope of which is founded on agreement as distinct from coercion.

(Citations omitted.)

88    The plurality in TCL Air Conditioner (Hayne, Crennan, Kiefel and Bell JJ) (at [75]) similarly noted that where parties ‘agree to submit their differences or disputes as to their legal rights and liabilities for decision by an ascertained or ascertainable third party’, then ‘the decision maker does not exercise judicial power, but a power of private arbitration’. There is a ‘consensual foundation of arbitration’ (at [109]) and where an award includes such a clause, this can be seen as ‘the ultimate product of the parties’ agreement to submit their differences or dispute to arbitration’ (at [110]).

89    The question in the present case is whether there was any form of consent or agreement by One Tree. The primary issue is what the effect of s 311 and s 313 of the FW Act have upon One Tree’s acquisition of the business and the employment of the Transferring Employees.

90    In my view, the FW Act achieves a statutorily mandated consent. This is necessary for the protection of employees who are not parties in any sense to the contractual acquisition of a business. None of the cases discussed denies the capacity of Parliament to stipulate that consent will be deemed to have been given in the circumstances of acquisition of a business. Part 2-8 of the FW Act establishes a mechanism whereby an enterprise agreement will come to apply to a ‘new employer’ as if the new employer were the original employer to whom it originally applied. Clearly this is a statutory mechanism for establishing deemed consent for the benefit of clarity and certainty, particularly for employees who have legal rights which can be dispensed with as One Tree has purported to do in acquiring the business.

91    Importantly, this should not be understood as imposing a mandatory deemed consent in circumstances where consent cannot be avoided. A form of mandatory consent may give rise to other questions, but that is certainly not the case in the present circumstances.

92    A new employer does not need to structure itself in a manner that gives rise to a ‘transfer of business’ under s 311(1) of the FW Act. Very simply, One Tree could have recruited its own workforce. Indeed, it had contingency plans to recruit its own workforce if it could not reach agreement on the Transferring Employees. This was made clear by Ms Callan in her oral evidence. Further, as noted, in an appropriate case a new employer who does not want the transferable instrument to apply to it or wants that instrument to be varied in some way can apply to the Commission under s 318 and s 320 of the FW Act seeking to have the transferable instrument modified to reflect its preferred position.

93    The effect of an enterprise agreement is that consent is deemed in certain circumstances, not only for an acquiring employer, but also for employees who did not vote to approve an enterprise agreement by virtue of the fact that they were not employees at the time. These future employees are taken to have consented to the agreement even though the agreement was approved by a historical majority of employers, some or all of whom may no longer be employed. By One Tree’s argument, these future employees would all be able to avoid an arbitration pursuant to a dispute resolution clause if they preferred not to go to arbitration. This is clearly not the intent of the statutory regime. The effect of One Tree’s subjective, personalised consent argument would be to allow all such persons who did not personally vote to approve the EA to disregard it if they so chose. Construction of the statute consistent with that argument should not be accepted.

94    The effect of Pt 2-8 is that One Tree is deemed to have consented to the EA, including cl 77. As a result, the Commission can exercise arbitral power, given the consent objectively construed by statute of One Tree and the United Workers Union to the ongoing application of the EA.

95    In any event, if the matter is viewed in terms of express consent, as One Tree contends, the argument also fails. Consent is a concept to be determined objectively. In this instance, One Tree’s consent was manifested through its actions. To the extent the argument advanced for One Tree focusses on principles of contract law, contracts are to be construed objectively. As noted in Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, Gleeson CJ, McHugh, Kirby Hayne and Callinan JJ said (at [34]) ‘the “general test of objectivity [that] is of pervasive influence in the law of contract”‘ dictates ‘[t]he legal rights and obligations of the parties turn upon what their words and conduct would be reasonably understood to convey, not upon actual beliefs or intentions’. More recently, this was reinforced in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ (at [38]) who, in referring to Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 (at [25]), said:

Although the word ‘intention’ is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties.

(Citations omitted.)

96    The High Court further noted in Toll (at [40]-[41]):

40    This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

41    In Taylor v Johnson (1983) 151 CLR 422 (at 429), Mason A-CJ, Murphy and Deane JJ explained the significance of the difference between the subjective and objective theories of contractual assent by reference to the impeachment of a contract on the ground of unilateral mistake. They said:

“According to the subjective theory, there is no binding contract either at common law or in equity, equity following the common law in this respect. Of course in deciding whether the contract is void ab initio for the unilateral mistake, regard will be had to the doctrine of estoppel in order to determine whether effect should be given to the claim that there has been unilateral mistake. On the other hand, according to the objective theory, there is a contract which, in conformity with the common law, continues to be binding, unless and until it is avoided in accordance with equitable principles which take as their foundation a contract valid at common law but transform it so that it becomes voidable. The important distinction between the two approaches is that, according to the subjective theory, the contract is void ab initio, whereas according to the objective theory, it is voidable only.”

Their Honours went on to say that

“the clear trend in decided cases and academic writings has been to leave the objective theory in command of the field”.

(Citations omitted.)

See also, JD Heydon, Heydon on Contract (Lawbook Co Australia, 2019) (at 34), Smith v Hughes (1871) LR 6 QB 597 (at 607) and Taylor v Johnson (1983) 151 CLR 422 (at 428-430). It is not enough that One Tree negotiated with Mission not to be bound by the EA in relation to the redundancy entitlements. The employees were not a party to that transaction. Nor is it enough that by effectively dictating the terms of any ongoing employment, One Tree told employees that such rights would not be recognised. It may have had the opportunity to take that course had the statute not dictated otherwise. The statute did dictate otherwise and One Tree consented to being bound by the EA regardless of its transactional statements for the following reasons:

(1)    it was entirely optional as to whether or not One Tree acquired the business. It did not have to take any steps that would trigger the transfer of business provisions of the FW Act. However it did so knowing of the existence of the EA; and

(2)    no application has ever been made by One Tree (as might be expected shortly following the acquisition) to the Commission for an order that the EA not apply to it under s 318 or for an order to vary cl 77 of the EA pursuant to s 320 of the FW Act. No comment is made about the likely prospects of either such applications, but given that the statutory regime contemplates such applications in appropriate circumstances, the absence of making such an application might suggest acquiescence on One Tree’s part to the terms of the EA.

Constructional argument

97    The appropriate place for determination of the constructional argument is in the Commission. The legislative intent in s 186(6), which requires that there be a dispute resolution term referrable to the Commission or another independent party is to encourage dispute resolution, including by way of arbitration outside of the judicial system. That is a fundamental statutory requirement which would be avoided if the relief sought by One Tree on the basis of the constructional argument were to be entertained. Nothing in Teys Australia Beenleigh Pty Ltd v Australasian Meat Industry Employees Union [2015] FCA 1033 per Bromberg J suggests otherwise or requires the Court to determine all issues in the matter. His Honour (at [36]) was anxious to avoid the most important factor being a potential for inconsistent decisions if the matter proceeded in both the Court and the Commission. That concern will not arise in this instance as I propose to leave the constructional argument for the Commission.

Alternative proposed claims by One Tree

98    One Tree has sought to make alternative claims in relation to cll 61-63 of the EA (set out above at [54]).

99    The two arguments are that, first, cl 63.2 is unlawful because it is not about a ‘permitted matter’ insofar as it seeks to bind any future employer, such as One Tree and, secondly, that cl 61 and cl 63 are unlawful in their entirety because they are inconsistent with the FW Act in seeking to restrict the capacity of, first Mission, and now One Tree to elect not to recognise prior service. These are also, in effect, constructional arguments best determined in the Commission where this dispute should always have been resolved.

100    I do not propose to allow these amendments to the originating application which were made well after commencement of the litigation and which, again, relate to constructional matters more appropriately dealt with by the Commission.

CONCLUSION

101    The application will be dismissed with costs. I will hear the parties on any other terms.

Associate:

Dated:    25 March 2020