Construction, Forestry, Mining and Energy Union v Lend Lease Building Pty Ltd (formerly known as Lend Lease Project Management and Construction Australia Pty Ltd)

[2014] FWC 4032

[2014] FWC 4032

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.739—Dispute resolution

Construction, Forestry, Mining and Energy Union
v
Lend Lease Building Pty Ltd (formerly known as Lend Lease Project Management and Construction Australia Pty Ltd)
(C2014/4292)

DEPUTY PRESIDENT GOOLEY MELBOURNE, 19 JUNE 2014

Alleged dispute about any matters arising under the enterprise agreement and the NES; [s186(6)].

[1] On 29 May 2014, I issued a decision 1 and interim order2 in relation to this dispute. That decision sets out the background to the dispute which I do not repeat here.

[2] The Construction, Forestry, Mining and Energy Union (the CFMEU) seeks final orders in relation to this dispute in the following terms:

(a) that Lend Lease Building Pty Ltd (LLB) take all steps reasonably available to it to have, and use its best endeavours to procure, Lend Lease Corporation Ltd or PFS Nominees Pty Ltd to not alter or close the Defined Benefits Division of the Lend Lease Superannuation Plan so as to permit the members of the Defined Benefits Division covered by the Lend Lease Project Management & Construction/CFMEU Joint Development Agreement Mark 8 2012 -16 to remain members of the Defined Benefits Division until its nominal expiry date of 31 March 2016 or the agreement is superseded by a replacement enterprise agreement.

(b) that Lend Lease Building Pty Ltd refrain from engaging in its proposed contravention of clause 11.2 of the Lend Lease Project Management & Construction/CFMEU Joint Development Agreement Mark 8 2012 -16, in that Lend Lease Building Pty Ltd proposes to not make or will permit not to be made superannuation contributions to the Defined Benefits Division of the Lend Lease Superannuation Plan in respect of 23 construction workers that are members of that part of that Plan.

(c) that Lend Lease Building Pty Ltd take all steps reasonably available to it to have, and use its best endeavours to procure, Lend Lease Corporation Ltd not to be involved in a proposed contravention by Lend Lease Building Pty Ltd of clause 11.2 of the Lend Lease Project Management & Construction/CFMEU Joint Development Agreement Mark 8 2012 -16, in that Lend Lease Corporation Limited proposes to close the Defined Benefits Division of the Lend Lease Superannuation Plan of which 23 construction workers are members.

(d) that Lend Lease Building Pty Ltd refrain from engaging in its proposed contravention of clause 6 of the Lend Lease Project Management & Construction/CFMEU Joint Development Agreement Mark 8 2012 -16, in that Lend Lease Building Pty Ltd proposes to not make or will permit not to be made superannuation contributions to the Defined Benefits Division of the Lend Lease Superannuation Plan in respect of 23 construction workers are members of that part of that Plan.

(e) such other orders that the Commission considers appropriate to settle the dispute and addresses the proposed acts and/or omissions of Lend Lease Building Pty Ltd and/or Lend Lease Corporation Ltd.

[3] The CFMEU further sought orders in the same terms against Lend Lease Corporation Ltd (LLC).

[4] Evidence was given by Mr Stuart Maxwell and Mr Frank O’Grady for the CFMEU and Mr Eric Hensley, Mr Steve Broadhead and Ms Amanda Hughes for Lend Lease Building Pty Ltd (LLB).

[5] This dispute concerns the future superannuation benefits of 23 employees. As the High Court recognised “for some people, superannuation is their greatest asset apart from their houses; ... The legitimate expectations which beneficiaries of superannuation funds have that decisions about benefit will be soundly taken are thus high. So is the general public importance of them being sound. 3”

[6] The employees affected by the decision of LLC to close the Defined Benefits Division (DBD) of the Lend Lease Superannuation Plan (LLSP) are long term employees of LLB. So much is clear from the fact that DBD has been closed to new employees since 1 January 1999. The employees have remained members of the DBD and have not been persuaded by LLB that they would be better off by moving from the DBD to an accumulation fund.

[7] Employees who elect to become members of defined benefit funds do so, with the legitimate expectation that they will receive, upon retirement, the benefits promised by the fund. While I accept that private sector defined benefit funds are not absolutely guaranteed, as the employees in the Ansett defined benefit fund discovered in 2001, employees who chose to remain in defined benefit funds do so for a variety of reasons including the fact that they are less exposed to the vagaries of the market than those who opt for accumulation funds.

[8] It is said that the DBD is being closed to ensure that all employees’ benefits are market comparable; to provide equity and consistency across all Lend Lease employees; and to reduce operational costs. 4

[9] It was not put in issue that the cost of maintaining the DBD for a declining number of employees carried with it additional expenses, but when considered against the uncontested evidence that the DBD has a significant surplus, no compelling argument was put forward to justify the change. If the employees of the DBD are prepared to risk a lower retirement benefit then they should have that option. If LLB is unable to persuade employees that they would be better off in an accumulation fund, then in my view, LLB should take all steps available to it to ensure that employees can remain in the DBD.

[10] The parties submitted that my task was to resolve the dispute over what the Agreement means. In resolving this dispute, it was not submitted that I am at large to decide what is industrially fair in all the circumstances. As was said in Kucks v CSR Ltd 5 in interpreting an agreement “meanings which avoid inconvenience or injustice may reasonably be strained for .. ... a court is not free to give effect to some anteriorly derived notion of what would be fair or just, regardless of what has been written into the award.”

[11] The parties have by agreement given the Fair Work Commission power to resolve disputes by arbitration if a dispute remains unresolved after the initial steps in the dispute resolution procedure have been complied with. The Fair Work Act 2009 provides at s.739 that any decision must not be inconsistent with the Agreement.

Was the dispute resolution procedure complied with?

[12] In resolving such disputes the Commission must first be satisfied that the dispute resolution procedure has been complied with and then, and only then, can it resolve the dispute.

[13] In Charles Sturt University v NTEU 6 the Full Bench of the Australian Industrial Relations Commission in finding that the Commission did not have the jurisdiction to determine a dispute if the dispute resolution procedure had not been complied said as follows:

“[10] The jurisdiction of the Commission, as a creature of statute, is limited to the jurisdiction conferred on it by the Parliament. The Parliament has authorised the Commission to accept appointment as a private arbitrator for the resolution of disputes over the application of certified agreements (s.170LW). When the Commission acts as private arbitrator under the dispute settlement procedure in a certified agreement it does so pursuant s.89(a) and an approval given pursuant to s.170LW of the Act. In its capacity as private arbitrator, the jurisdiction of the Commission is limited to disputes over the application of the agreement – a limitation arising from the terms of s.170LW. However, the jurisdiction and power of the Commission as private arbitrator under a dispute settlement procedure is also subject to any limitations in the agreement conferring power on the Commission.”

...

[14] ...............on any view, neither the procedure in clause 58.1 nor the procedure in clause 58.2 had been followed before the matter was referred to the Commission.

[15] It follows that the Commission has no jurisdiction under clause 58.5 unless that condition precedent to referral has been satisfied. Given our finding that the procedure in clause 58.2 had not been followed the Senior Deputy President had no jurisdiction to conduct a private arbitration pursuant to clause 58.5 in relation to the dispute.”

[14] The first step in the dispute resolution procedure is a discussion about the dispute between those directly affected. For the reasons set out in my earlier decision, I accept the CFMEU’s submission that it is able to initiate the dispute resolution procedure. A dispute is not able to be referred to the next level of the procedure until a genuine attempt to resolve the dispute has been made at the appropriate level. Referral to the Commission may only occur if the dispute still exists after the steps in the procedure has been complied with. If a party refuses or fails to follow any step in the procedure, the party that has complied with the dispute resolution procedure is then able to bypass the steps and refer the dispute directly to the Commission.

[15] While LLB submitted that there had not been a genuine attempt to resolve the dispute prior to it being referred to the Commission, the CFMEU submitted that this had occurred at the information meetings called by LLB to discuss the proposed changes.

[16] Mr Maxwell gave evidence that, at an information session on 28 February 2014, “we specifically mentioned in the presence of Mr Hensley and the construction workers that we believed that it was a retrograde step for the CW’s as they had a guaranteed amount under the defined benefit plan as opposed to being exposed to the market under an accumulation scheme.” 7 It was his evidence that after Mr Hensley left there was further discussion which included discussion about whether the proposal was legal and if it was a breach of the Agreement.8

[17] Mr O’Grady gave evidence that on 28 February 2014, they “raised [their] concerns about the closure of the defined benefit scheme afterwards with Mr Fadel and Mr Hensley and in correspondence with LLB.” 9 Mr O’Grady said that “we made it clear to Mr Fadel and Mr Hensley that the CFMEU believed that this proposal was in breach of the JDA and that we weren’t going to accept these changes.”10

[18] Mr Hensley said that he could not recall Mr Maxwell making the comment set out in paragraph [31] of his statement. Mr Hensley could not recall the meeting or comments referred to by Mr O’Grady in paragraphs of [11] and [19] of his statement.

[19] I accept Mr Maxwell’s evidence that Mr Hensley was advised that the members considered a change from the DBD to an accumulation fund was a retrograde step. I accept Mr Maxwell’s evidence that in discussions with members after the information session there was discussion about whether the proposal by LLB was legal and in breach of the Agreement. I do not accept Mr O’Grady’s evidence that representatives of LLB were present when that discussion occurred. Had this occurred, Mr Maxwell would have made reference to this in his witness statement. I consider Mr O’Grady has confused the information session and the meeting with members.

[20] I do not consider that advising LLB that the members considered the proposal a retrograde step constitutes a discussion about a dispute. There is no suggestion in that statement that the CFMEU told LLB that the Agreement required LLB to maintain a defined benefit superannuation plan. There is no evidence that the CFMEU ever advised LLB, prior to filing the notification to the Commission, that the decision was a breach of clause 6.

[21] The fact that LLB had not been notified of the dispute is evident from the various correspondence sent by the CFMEU to LLB, post 28 February, which did not mention a dispute. Apart from seeking additional information the CFMEU did not seek any further meetings with LLB to resolve the dispute. The CFMEU never gave LLB written confirmation of the dispute. 11

[22] It was only when LLB announced its final decision to close the DBD that the CFMEU advised LLB that there was a dispute about LLB’s right to close the DBD and it did so by filing a notice of dispute with the Commission and providing a copy to LLB. The dispute notified was a dispute over LLB’s announcement that the DBD of the LLSP would be closed. In its dispute notification the CFMEU advised that the decision was a breach of clauses 6 and 11.2 of the Agreement.

[23] I find therefore that there was not a genuine attempt by the CFMEU to resolve the dispute by direct discussions with LLB prior to it referring the dispute to the Commission. Even if Mr O’Grady’s evidence is accepted, and the CFMEU told LLB that it and the members thought the proposal, if implemented, was a breach of the Agreement, there is no evidence of any other steps in the two months after the information sessions, apart from requests for information, that the CFMEU took to resolve the dispute prior to notifying the Commission. There were no submissions that LLB had not complied with the dispute resolution procedure so as to permit the CFMEU to bypass the procedure and refer the dispute directly to the Commission. 12

[24] I therefore find that the Commission does not have the jurisdiction to settle the dispute by arbitration.

[25] If I am wrong and I do have jurisdiction to resolve the dispute, it is necessary to determine what clause 11 of the Agreement requires LLB to do. It is not my role to determine if there has been a breach of the Agreement, nor whether by its conduct LLC is involved in a breach of the Agreement. I am required to, as a step in the dispute resolution process, to first determine what obligations, if any, the Agreement imposes on LLB.

Principles of construction of enterprise agreements

[26] DP World Brisbane Pty Ltd v The Maritime Union of Australia 13 sets out the approach to be taken to the interpretation of enterprise agreements and I adopt the approach set out in that decision.

Can LLB in reliance on clause 11.1 unilaterally change the entitlements of employees under clause 11?

[27] It was submitted by LLB that prior to the making of the Agreement that the predecessor agreements provided that benefits could be unilaterally changed without reference to the Agreement.

[28] That is not correct. Prior to 1999, the JDAs had a similar provision to clause 11.1 namely that the benefits provided “may be altered by Lend Lease or the respective Trusts from time to time, without reference to the Agreement” but they also provided, in relation to superannuation, “superannuation in accordance with the Lend Lease Superannuation Scheme. This will apply as long as rules of the Companies’ Scheme are not changed to the detriment of the Employees.” 14

[29] The concept that the parties would agree that benefits could not be unilaterally reduced was not new.

[30] The CFMEU submitted that notwithstanding the history of the clause, the inclusion of the words “except for superannuation” meant that LLB could not unilaterally alter employees’ superannuation contributions or benefits.

[31] LLB submitted that LLB had, despite the inclusion of the words “except for superannuation” retained the right to alter employee entitlements.

[32] Evidence was called by both LLB and the CFMEU about their understanding of why the words “except for superannuation” were included in clause 11.1(c) but there was no evidence given of the mutual intention of the parties other than the words of the Agreement.

[33] However even without the words, clause 11.1(c) does no more that state the obvious. Industrial instruments do not regulate the benefits to be provided by superannuation funds. Industrial instruments may deal with the level of contributions, regularity of contributions, choice of funds and employee pre tax contributions. All superannuation funds are governed by trust deeds which are not able to be modified by industrial instruments. In addition, superannuation is governed by statute. In making the statements in clause 11.1 about superannuation benefits, clause 11.1 does no more than state the obvious.

[34] I accept the submission of the CFMEU that whatever the work of clause 11.1(c) superannuation was carved out by the inclusion of the words “except for superannuation”.

[35] I agree with LLB’s submission that clause 11.1(c) does not impose obligations on LLB. However neither does it permit LLB to change its obligations in clause 11.2.

Does the Agreement require LLB to maintain a defined benefit fund?

[36] Clause 11.2 imposes obligations on LLB. Clause 11.2(a) sets out the funds to which a superannuation contribution can be made. Clause 11.2(b) defines the default superannuation fund. Clause 11.2(c)(i) sets the contribution level for members of the LLSP accumulation fund and clause 11.2(d) sets the contribution level for any other accumulation fund.

[37] LLB submitted that clause 11.2(c)(ii) of the Agreement does not impose obligations on LLB and merely sets out that some employees may be members of the defined benefit fund. It does so it was submitted, to make clear that LLB does not have to make contributions to an accumulation fund on their behalf.

[38] LLB contrasts the use of the word “will” in clause 11.2(c)(i) with the words in clause 11.2(c)(ii). It also submitted that as clause 11.1 refers to benefits LLB “is currently able to provide” this supports its submission that the benefits can be changed.

[39] The word “may” in clause 11.2(c)(ii) is not used in a permissive sense. It simply acknowledges that some employees are members of the DBD but as they are not compelled to be, their status may change.

[40] It submitted, without explaining why, that it would be commercially inconvenient or commercial nonsense to treat the clauses as “guaranteeing or warranting to employees that LLB will provide continuing membership of the DB division or in the alternative, LLB would procure LLC to maintain the DB division.”

[41] It also points to the surrounding circumstances, in particular LLC’s right to terminate the DBD; the fact that LLB does not contribute the defined benefits fund; and that changes have been made without reference to the Agreement.

[42] I do not accept these submissions. I accept that the Agreement does not compel LLC to maintain a defined benefits fund. LLC is not party to the Agreement. The Agreement addresses LLB’s obligations and employees’ benefits.

[43] Clause 11.2(c)(ii) describes the level of the benefit provided to members of the DBD. Because the DBD is non-contributory, the clause does not define the level of contribution. It simply sets out the method of calculation of the benefit payable to employees. It is LLB’s obligation to ensure that there is sufficient money available to meet this obligation.

[44] Currently LLB meets its obligations under clause 11.2(c)(ii) through its arrangement with LLC. LLC pays the contributions to the trustee and LLB reimburses it. However the obligation in clause 11.2(c)(ii) is LLB’s obligation, not LLC’s. If LLC decides that it no longer wants to maintain the DBD, it is of course able to do so and the Commission does not have the power through the dispute resolution procedure of the Agreement to make orders preventing it from doing so. As I said in my earlier decision, the LLC has not agreed to have disputes about its obligation, if any, to maintain the DBD resolved by the Commission. However, if LLC closes the DBD this does not absolve LLB of its obligations under the Agreement.

[45] I therefore find that LLB has an obligation under the Agreement to provide the benefits set out in clause 11.2(c)(ii).

[46] However given my decision that the Commission does not have the jurisdiction to resolve this dispute, it is not necessary to consider what orders could be made to resolve the dispute.

Conclusion

[47] As I have found that the Commission does not have the jurisdiction to resolve this dispute, the application is dismissed and the interim orders are set aside and an order to that effect has been issued with this decision.

DEPUTY PRESIDENT

Appearances:

B Docking for the CFMEU

C Ward and P Young for Lend Lease Building Pty Ltd

Hearing details:

2014.

Sydney:

26 May and 6 June.

 1   [2014] FWC 3547

 2   PR551116

 3 [2010] HCA 36

 4   Exhibit R1 at [19]

 5 66 IR 182 at 184

 6   PR963494

 7   Exhibit A15 at [31]

 8   Ibid at [32]

 9   Exhibit A16 at [19]

 10   Exhibit A16 at [11]

 11   See clause 19(d) of the Agreement

 12   Sec clause 19(c) of the Agreement

 13   [2013] FWCFB 8557 at [28]-[37]

 14   Exhibit R2 at EH1

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