Federal Court of Australia

Boulos v M.R.V.L Investments Pty Ltd [2020] FCA 1259

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to rule 30.01 of the Federal Court Rules 2011, the following question be heard separately from any other question in the proceedings:

The questions arising on paragraphs 3 to 12 of the Defence (other than paragraphs 10D and 10E) and paragraphs 1 to 6 of the Reply.

2.    The matter be listed for a case management hearing at 9am on 10 September 2020.

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

REASONS FOR JUDGMENT

(Revised from transcript)

THAWLEY J:

1    By an amended interlocutory application filed on 4 August 2020, the respondent (Merivale) seeks an order under r 30.01 of the Federal Court Rules 2011 (Cth) for certain questions to be heard and determined separately from any other question in the proceeding.

2    Merivale submits that the Court should consider separately granting the relief sought in the following prayers for relief in the Originating Application:

(1)    prayer 3: a declaration to the effect that the Hospitality Industry (General) Award 2010 covered and applied to Merivale, the applicant, and each Group Member in respect of his or her employment by Merivale; and

(2)    prayers 4 and 6, but only in so far as it concerns the applicant and only in so far as it concerns payments under the Award: orders under ss 545 and 546 of the Fair Work Act 2009 (Cth) and under s 547 of the Fair Work Act for interest.

3    The applicant does not oppose the making of an order under r 30.01, but submits that the separate question should not extend to questions about whether relief under ss 545, 546 and 547 of the Fair Work Act should be refused as a matter of discretion. These questions only arise if it is found that (a) the Award covers and applies to the applicant; and (b) there have been contraventions of the Fair Work Act. The applicant submits that the separate question ought be confined to the questions, being ones largely of “statutory construction”, about whether the Merivale Employee Collective Agreement 2007 (Merivale Agreement) operated and, if so, when.

4    As I understood it, the applicant also submitted in oral argument that a separate question could extend wholly to questions of liability, however, that was not the subject of any formal application.

Background

5    The following background is taken from material before the Court on the interlocutory application and it is not to be taken as conclusive findings of fact. They are identified merely to resolve the interlocutory application.

6    The Merivale Agreement was lodged with the Workplace Authority Director on 21 December 2007. It is common ground between the parties that, under Div 5A of Pt 8 of the Workplace Relations Act 1996 (Cth) as in force at that time, the Director was required to decide whether he or she was satisfied that the Merivale Agreement passed the “fairness test” prescribed by the Workplace Relations Act.

7    In March 2008, the Workplace Relations Amendment (Transition to Forward with Fairness) Act 2008 (Cth) (Transitional Act) came into force. The Transitional Act repealed and replaced Div 5A of the Workplace Relations Act to replace the “fairness test” with a “no-disadvantage test”. The Transitional Act inserted a new Sch 7B into the Workplace Relations Act, which outlined transitional arrangements for existing collective agreements.

8    By letter dated 15 December 2008, the Director notified Merivale that the Merivale Agreement did not pass the fairness test, and invited Merivale to vary the Merivale Agreement by lodging an undertaking to vary the Original Notice.

9    On 29 December 2008, Harmers (on behalf of Merivale) wrote to the Workplace Authority, providing an undertaking to vary the Merivale Agreement.

10    On 30 January 2009, the Director wrote to Merivale notifying it that the Merivale Agreement lodged on 21 December 2007, as varied by the undertaking, did not pass the fairness test and had stopped operating.

11    The applicant alleges that, at the time that Harmers provided an undertaking on 29 December 2008, the Merivale Agreement could not be varied by the lodgement of the undertaking, having regard to Sch 7B to the Workplace Relations Act. Merivale has indicated that it will argue that, on the proper construction of cll 2 and 3 of Sch 7B to the Workplace Relations Act, the provisions of Div 5A continued to apply to the Merivale Agreement, with the effect that the Merivale Agreement could be varied by lodgement of an undertaking.

12    The applicant also alleges that the Merivale Agreement ceased to operate on 30 January 2009 when the Director confirmed that the Merivale Agreement, as varied by the undertaking, did not pass the fairness test. In response to that contention Merivale relies on the following further events.

13    On 4 June 2009, the Acting Director wrote to Harmers, rescinding the Original Notice which had advised that the Merivale Agreement did not pass the fairness test. The Acting Director indicated that the advice on how the Merivale Agreement could be varied to meet the fairness test would remain the same (the Rescission Decision).

14    On 10 June 2009, the Director wrote to Merivale, notifying it that the collective agreement lodged by Merivale on 21 December 2007 did not pass the fairness test and invited Merivale to lodge an undertaking to vary the agreement so that it would meet the fairness test.

15    On 11 June 2009, Harmers (on behalf of Merivale) provided an undertaking to the Workplace Authority (Second Undertaking).

16    On 12 June 2009, the Director wrote to Harmers, stating that the collective agreement as amended by the Second Undertaking passed the fairness test.

17    Merivale has indicated that it will argue that the Rescission Decision, and the subsequent decisions of the Director which culminated in the decision that the Merivale Agreement passed the fairness test, had effect according to their terms, such that the Merivale Agreement lawfully operated from 11 June 2009. For his part, the applicant denies that the Original Notice was validly rescinded: he denies that the Director had power to rescind the Original Notice and says further that the Director did not purport to rescind the decision.

18    Merivale has indicated that it will also argue that, in any event, the decisions of the Director should be treated as valid unless and until set aside by a court. Merivale contends that the applicant’s case involves a collateral challenge to the validity of those decisions.

19    The applicant was employed by Merivale on a full-time basis as a Pastry Commis Chef. He was so employed from 2 October 2016 until the conclusion of the shift commenced by him on 17 March 2017.

20    The applicant claims, and does so also on behalf of group members, remedies under the Fair Work Act in respect of alleged underpayments of entitlements under either the Award or the Merivale Agreement during the six year period ending on the date of the filing of the Originating Application, namely 24 December 2019.

21    The applicant’s case proceeds on two distinct bases:

(1)    The applicant’s primary case is that the Award was in operation, as the Merivale Agreement ceased to operate. The applicant alleges Merivale contravened the Award, and claims relief in respect of the alleged contraventions.

(2)    The applicant’s alternative case is that, if the Merivale Agreement did continue to apply, Merivale contravened the agreement in various respects and the applicant claims relief in respect of alleged contraventions of the Merivale Agreement.

22    The applicant accepts that if the Merivale Agreement applied, then it did so to the exclusion of the Award. Either the Award or the Merivale Agreement applied to the applicant’s employment.

relevant principles

23    The principles guiding the application of r 30.01 were not in dispute. They have been summarised in Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 240 FCR 276 at [8], AWB Limited v Cole (2006) 253 FCR 288 at [26]-[40], City of Swan v Lehman Bros Australia Ltd (2009) 73 ACSR 86 at [26]-[27] and University of Sydney v Resmed Ltd (No 5) [2012] FCA 232 at [40]-[47].

24    As a general rule, “all issues of fact and law should be determined at the one time”: AWB at [29]; see also Reading at [7]. As cautioned by Kirby and Callinan JJ in Tepko Pty Limited v Water Board (2001) 206 CLR 1 at [168], “[t]he attractions of trials of issues rather than of cases in their totality, are often more chimerical than real”.

25    Merivale must demonstrate that it is just and convenient for the order to be made: Reading at [9]-[10]; see also EnergyAustralia v Australian Energy Limited [2001] FCA 1049 at [5]-[8].

26    In making such an order, the Court must have before it either the facts as agreed between the parties or the Court must determine the facts before determining the question in dispute, otherwise the question will be purely hypothetical: Rainsford v Victoria (2005) 144 FCR 279 at [36]; Bass v Permanent Trustee Company Limited (1999) 198 CLR 334 at [49]. Whilst the parties have not produced to the Court a final statement of facts agreed between the parties, both parties agree that whether the Merivale Agreement or the Award applies is largely a question of statutory interpretation.

27    The Court must also have regard to the overarching purpose pursuant to s 37M of the Federal Court of Australia Act 1976 (Cth): University of Sydney v Resmed Ltd (No 5) [2012] FCA 232 at [41]; Buchanan v TAL Life Limited [2015] FCA 42 at [28]-[29]. These two decisions were relied upon at [11]-[12] in Fair Work Ombudsman v Construction, Forestry, Maritime, Mining and Energy Union [2018] FCA 956, where Bromberg J allowed an application for questions relating to the application of an enterprise agreement under the Fair Work Act to be considered separately from the other questions in the proceeding.

28    Where the separate determination of the question may save time and cost by “substantially narrowing the issues for trial, or … contribute to the settlement of the litigation”, this will tend in favour of granting the order. However, where the separate determination would prolong the litigation and “result in significant overlap between the evidence adduced on the hearing of the separate question and at trial” (such as where the same witness would need to be called more than once during the hearing of the proceeding), this will tend against granting the order: Reading at [8].

29    As discussed in TVW Enterprises Ltd v Duffy (No 3) (1985) 8 FCR 93 at 95, “[w]here the decision of a particular question may determine the outcome of an application and save the parties the expense of a trial upon all the issues, the advantages of the use of the power [to order a separate question be determined] are plain”.

CONSIDERATIOn

30    Merivale submits that the determination of the questions it proposes is likely to require consideration of the following sub-issues:

(1)    Was the effect of cll 2 and 3 of Sch 7B to the Transitional Act that the Merivale Agreement was varied by the lodgement of the undertaking on 29 December 2009, and did it commence to operate at that time?

(2)    Was the Original Notice, dated 15 December 2008, which notified the respondent that the Merivale Agreement must be amended within 14 days and contained a draft undertaking proposing three options to vary the agreement to pass the fairness test, validly rescinded by the Director on 4 June 2009?

(3)    Did the Merivale Agreement as varied by the Second Undertaking on 11 June 2009 have lawful effect and lawfully operate?

(4)    If the answer to 1, 2 and/or 3 is “no”:

(a)    Should the Court exercise its discretion to grant the relief sought by prayer 3 of the Originating Application; and

(b)    Should the Court in its discretion grant the relief sought by prayers 4 and 6 of the Originating Application, but only in so far as it concerns the applicant and only insofar as payment of entitlements under or with respect to the Award is claimed?

31    Issues 1 to 3 relate to the question about the operation of the Merivale Agreement. Issue 4 concerns whether, if the Award applies, relief under ss 545, 546 and 547 would in any event be refused as a matter of discretion.

32    As mentioned, the applicant is not opposed to, and indeed agrees with, resolving issues 1 to 3 by way of separate question, but is opposed to issue 4 being the subject of a separate question.

33    In my view it is clear that a resolution of issues 1 to 3 is likely to or may result in a substantial saving of cost for the parties. If the Merivale Agreement applies, the Award does not. The applicant’s case will then not need to address the contended contraventions of the Award.

34    The applicant submitted that it was not appropriate to include a question dealing with issue 4 for the following reasons.

35    First, paragraphs 10D and 10E of the Defence, which contend in summary that Merivale acted to significant detriment on the basis that the Merivale Agreement was in force, are only invoked if the Court concludes that the Award applied. Those paragraphs of the Defence plead:

10D.     Further or alternatively to paragraphs 10A, 10B and 10C, if the Merivale Agreement ceased to operate on 30 January 2009, or at any time prior to 4 March 2019, which is denied, then the respondent says:

(a)     in reliance on the Merivale Agreement as varied by the Second Undertaking having lawful effect and lawfully operating, from 10 June 2009 it took steps in the manner in which it operated its business which it would not have taken if it had been aware that the [Hospitality Industry – Accommodation, Hotels, Resorts and Gaming Award 1998 (Former Award)] applied from 2007 and the Hospitality Industry (General) Award 2010 (Award) applied from 1 January 2010, which included:

(i)     trading on weekends and public holidays, or trading more regularly on weekends and public holidays, in circumstances where provisions of the Former Award and Award regarding minimum wages, casual or part-time loadings, Saturday, Sunday, public holiday, evening or other penalties and shift allowances/penalties and overtime would otherwise be applicable;

(ii)     focusing, or more heavily focusing, on trading as a specialty food focused business in various venues which traded on weekends than it otherwise would have;

(iii)     by reason of paragraph 10C(a)(ii) above, recruiting more international chefs on working visas, and local chefs, than it otherwise would have and thereby committing to greater expenditure that [sic] it otherwould [sic] have;

(iv)     taking on greater levels of debt finance for operating venues (having regard to the diferent [sic] labour cost structures under the Merivale Agreement) than it otherwise would have;

(b)     in reliance on the Merivale Agreement as varied by the Second Undertaking having lawful effect and lawfully operating, from 10 June 2009 the respondent did not take steps in the manner in which it operated its business which it would have otherwise taken if it had been aware that the Former Award applied from 2007 and the Award applied from 1 January 2010, which included the following steps which were not taken:

(i)     charging customers a surcharge on public holidays and Sundays;

(ii)     maintaining certain payroll and employee records which would have been required to be maintained to comply with the Former Award and the Award (but which were not required to be maintained to comply with the Merivale Agreement);

(iii)     engaging a higher proportion of full-time and part-time employees and instead engaging a higher proportion of casual employees;

(iv)     arranging rosters in a way which would involve lower costs to the respondent having regard to the working hours and meal break provisions under the Former Award and the Award;

(v)     determining annualised salaries in accordance with the Former Award and the Award or otherwise determining not to pay employees on an annualised salary basis;

(vi)     implementing changes to ensure its business and service model operated in a leaner, more efficient way, which include but are not limited to:

(a)     reducing the number of employees and/or the total hours worked in areas to service customers;

(b)     outsourcing work that was performed by employees under the Merivale Agreement;

(c)     using technology and alternative systems and processes more prominently or deploying other customer servicing methods as a means of increasing efficiency and reducing the cost of hiring employees; and

(d)     broadening of job descriptions and role design;

(vii)     further particulars may be provided prior to trial.

(c)     in reliance on the Merivale Agreement as varied by the Second Undertaking having lawful effect and lawfully operating, from 10 June 2009, a number of employees or former employees were paid at rates which are greater than they otherwise would have been paid under the terms of the Former Award or the Award;

(d)     a significant proportion of former employees of the respondent are no longer contactable by the respondent;

(e)     since the Merivale Agreement was lodged on 21 December 2007, there has been a high turnover of full-time employees and an even higher turnover of causal [sic] employees, and less than 3% of the initial 870 employees of the respondent as at 21 December 2007 remain employed by the respondent;

(f)     the respondent paid back pay to employees as pleaded at paragraph (u) above;

(g)     the Merivale Agreement was terminated by the Fair Work Commission by order dated 21 January 2019 taking effect as and from 4 March 2019 (2019 FWCA 293) and the Award has applied to the respondent and employees previously covered by the Merivale Agreement since that date;

(h)     the Workplace Authority has ceased to exist since 1 July 2009;

(i)     at all relevant times the respondent gave effect to s 206 of the [Fair Work] Act which requires an employer to pay employees to whom an enterprise agreement applies at least the same base rate of pay that would be payable to the employee under any award that is in operation and covers the employee;

(j)     in the premises of the facts pleaded at paragraphs 10D(a) and 10D(b) above, the Court ought not exercise its discretion to issue a declaration that throughout the period of 6 years ending on the date of filing the originating application the Award covered and applied to the applicant and each group member in respect of his or her employment by the respondent, nor should the Court grant any other relief (whether under ss 545-546 of the Fair Work Act or otherwise) based upon any finding that the Merivale Agreement as varied by the Second Undertaking did not have lawful effect or did not lawfully operate in the period to 4 March 2019.

10E.     Further or in the alternative to paragraph 10D, the respondent says:

(a)     from at least 10 June 2009, group members have been in a position to assert that they are entitled to a declaration that throughout the period of 6 years ending on the date of filing the originating application the Award covered and applied to the respondent, the applicant and each group member in respect of his or her employment by the respondent;

(b)     from at least 15 September 2016, being the date that the applicant commenced employment with the respondent, the applicant has been in a position to assert that he is entitled to a declaration that throughout the period of 6 years ending on the date of filing the originating application the Award covered and applied to the respondent, the applicant and each group member in respect of his or her employment by the respondent;

(c)     no such declaration was sought until 24 December 2019 when the applicant commenced these proceedings;

(d)     in the premises of paragraphs 10E(a) to 10E(c) above, further or alternatively, in the premises of those paragraphs combined with some or all of those pleaded in paragraphs 10 and/or 10D above, the Court ought not exercise its discretion to issue a declaration that throughout the period of 6 years ending on the date of filing the originating application the Award covered and applied to the applicant and each group member in respect of his or her employment by the respondent, nor should the Court grant any other relief (whether under ss 545-546 of the Fair Work Act or otherwise) based upon any finding that the Merivale Agreement as varied by the Second Undertaking did not have lawful effect or did not lawfully operate in the period to 4 March 2019.

36    The applicant submits that requiring preparation on this point will result in wasted costs and Court time, inefficiency and inconvenience. The applicant submitted that substantial evidence would be required from Merivale, the applicant would be likely to seek discovery and substantial cross-examination would be required.

37    Secondly, the applicant noted that s 570 of the Fair Work Act would preclude recovery of any wasted legal costs thrown away by reason of having to litigate points of the Defence which did not or might not need to be determined due to the judicial determination of the issue of whether the Award or the Merivale Agreement applied.

38    Thirdly, the applicant submitted that resolution of the question would not involve a conclusive or final judicial decision in relation to the applicant’s claim because the discretionary power would only arise for consideration if the Court had concluded that the Award applied. The applicant’s entitlement to relief under ss 545 and 546 of the Fair Work Act is not, on the applicant’s submission, dependent upon the Court making a declaration that the Award applied, merely a finding that it did apply.

39    Fourthly, by considering the determination of discretionary questions relating to the relief claimed by the applicant in reliance on ss 545 and 546 of the Fair Work Act without determining whether each of the alleged contraventions had occurred, the Court would be making a discretionary decision without having all relevant facts before it: AWB at 296.

40    In my view, it is not appropriate to determine separately the issue whether, if the Award did cover the applicant, as a matter of discretion, relief would be refused under ss 545, 546 or 547. That question should be answered after identification of the nature of any contraventions and their consequences. It seems to me that the applicant would be entitled to put forward substantial evidence relevant to discretion, including in relation to contraventions concerning people other than the applicant on the assumption that the Award applied. The applicant would be entitled to adduce evidence in respect of the nature and extent of the contraventions. That is not to say that the applicant would be required to identify on a final basis all of the contraventions to various group members or the consequences to those group members, but nevertheless, the applicant would be entitled to raise the issue as a matter relevant to whether discretion would be refused under ss 545, 546 or 547.

41    Further, it is at least possible, and perhaps likely, that discovery would be required. Merivale alleges that it took a number of financial and other decisions on the basis of its assumption that the Merivale Agreement applied. This is likely to require significant evidence on the part of Merivale and is also likely to require significant factual investigation on the part of the applicant. It is likely that the applicant would seek discovery, and it may well be that the applicant would be entitled to discovery or might issue subpoenas with a view to establishing that Merivale was at least aware of a risk that the Merivale Agreement might not apply, and that it took decisions notwithstanding its appreciation of such a risk. Those are matters to be determined at a later date, but they seem to me to be obvious matters, which are likely to be investigated. For those reasons, it seems to me that issue 4 being determined separately and before the other issues in the proceedings is unlikely to result in a sufficient saving in costs or delay to warrant determining that issue in advance.

42    Issues 1 to 3 can be resolved expeditiously and quite probably on the basis of substantially agreed facts. I do not accept that issue 4 could be fairly determined without identification of the factual matters earlier referred to. I note that issues 1 to 3 would not be able to be determined until the opt-out process has been completed, but notwithstanding, it seems to me that issues 1 to 3 can be resolved expeditiously.

Conclusion

43    For those reasons, I order that the question identified in the applicant’s outline of submissions in paragraph 1 be heard and determined separately from any other question in the proceedings.

Associate:

Dated:    2 September 2020