Esso Australia Pty Ltd v The Australian Workers' Union, the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia and the “Automotive, Food, Metals,

[2019] FWC 3696

[2019] FWC 3696

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.225 - Application for termination of an enterprise agreement after its nominal expiry date

Esso Australia Pty Ltd
v
The Australian Workers’ Union, the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia and the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union
(AG2016/4853)

Oil and gas industry
DEPUTY PRESIDENT GOSTENCNIK	MELBOURNE, 30 MAY 2019

Application for termination of the Esso Offshore Enterprise Agreement 2011 – application to reopen case – application granted.

[1] On 7 February 2019 I concluded hearing an application by Esso Australia Pty Ltd (Esso) pursuant to s.225 of the Fair Work Act 2009 (Act) to terminate the Esso Offshore Enterprise Agreement 2011 (Agreement) and reserved my decision. By their application lodged on 10 May 2019 The Australian Workers’ Union (AWU), the Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) and the “Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) (collectively “the Unions”) have applied to reopen the proceeding, specifically the Unions’ case, for the purpose of allowing them to adduce further evidence.

[2] The further evidence that would be adduced if I allow the case to be reopened would be an extract from the Bloomberg website showing the oil price as at 1 May 2019 (Bloomberg Extract) and an updated exhibit 3 in the proceeding (Updated Exhibit 3) adjusted for the new oil price. Esso opposes the application.

[3] There is doubtless power to allow the Unions to reopen their case and Esso does not contend otherwise. Section 589(1) of the Act enables the Commission to make procedural decisions as to how, when and where a matter is to be dealt with. Pursuant to s.589(3), such a decision may be made on the Commission’s own initiative or on application. Section 590(1) allows the Commission to inform itself about any matter in such a manner as it considers appropriate. The issue raised by the application to reopen the Unions’ case is not one of power but rather whether I should permit them to do so, or as will be apparent shortly, whether I am required to do so given the terms of s.226. To that extent the issue raised involves the exercise of a discretion and, as seems common to the parties, the discretion should be exercised in conformity with established principles applied by courts in respect of reopening a case, taking into account and acting in conformity with the statutory scheme under which the discretion arises.

[4] The competing positions of the Unions and of Esso may be briefly stated. The Unions contend that the language of s.226 which requires the Commission to terminate an agreement if it is not contrary to the public interest to do so, and if it is appropriate to do so, suggests the Commission must be satisfied about these matters at the date of the termination decision, rather than at some earlier time such as the conclusion of the hearing. They contend the matters in s.226 about which there must be satisfaction may change over a short period, for example the “circumstances” of the parties. This suggests that the Commission may take changes in circumstances into account so that any decision made will reflect the contemporaneous position rather than a position which no longer obtains when a decision is made. The Unions primarily contend that the evidence they seek to adduce is fresh evidence, the terms of s.226 require the Commission to act on the basis of the most up-to-date information available, and consequently the Commission is bound to receive the evidence.

[5] The Unions contend in the alternative that if the reception of the evidence it seeks to adduce is discretionary, the discretion must inevitably be exercised in the Unions’ favour in this case. This is because the evidence is clearly relevant and fresh and there is no real prejudice to Esso beyond the prejudice to Esso’s case which flows from the content of the evidence, rather than from the circumstance of its admission after the close of the evidence. They contend that this is consistent with the requirement in s.578(b) of the Act for the Commission, in performing functions and exercising powers in relation to a matter under the Act, to take into account, inter alia, equity, good conscience and the merits of the matter.

[6] As to the materiality of the evidence they seek to adduce, the Unions contend that it is relevant and material because:

•  a major feature of Esso’s case was that it was trading in a distressed position with poor profitability performance;

•  Esso had provided an outlook for net profit before tax falling from $621 million in 2019 to $352 million in 2023, based on a forecast oil price of US$61.32 per barrel; and

•  the substantially higher profits that Esso will derive from the higher oil price swamp the savings that Esso expects to achieve should the Agreement be terminated.

[7] For its part, Esso contends that the power to allow the Unions’ to reopen their case to adduce further evidence is discretionary and the use of present tense in s.226 is no justification for implying a fetter on the Commission’s discretion as to how to inform itself. Esso contends that an important consideration in deciding whether the discretion should be exercised is the public interest in finality of litigation, which also applies to proceedings in the Commission, including under s.226, as a matter of legal principle to give effect to the relevant objects and scheme of the Act. ¹ Esso contends that the Unions’ primary contention is flawed and would leave the Commission in the impossible position of having to reopen and update itself whenever a party applied.

[8] As to whether the discretion should be exercised, Esso contends that although it accepts that the evidence the Unions wish to adduce is “fresh”, at least in the broad sense referred to in the authorities on the discretion to reopen, it nevertheless must be shown that the evidence is so material that the interests of justice require its admission and that the evidence if admitted would most probably affect the result. It contends that the evidence in the Bloomberg Extract and the Updated Exhibit 3 is not sufficiently material to warrant a reopening of the Unions’ case.

[9] Esso contends that while the material in the Bloomberg Extract and the Updated Exhibit 3 may have relevance in a broad sense, it is not important enough to justify a reopening of the case months after the hearing has concluded. This is because the Unions mischaracterise Esso’s case for termination of the Agreement. Specifically, Esso says that:

•  its case for the introduction of the 14:14 roster is not based on a narrow economic case for change. The reasons for it seeking an alteration to rosters extend beyond productivity improvements and cost saving and include significant safety improvements arising from a reduction in the number handovers and changeover flights;

•  it accepts that there is an inherent volatility in the price of oil and global factors outside of its control impact the price. It does not rely on the forecast price remaining at US$61.32 per barrel; and

•  the oil price in the Standard Measure of Oil and Gas (SMOG) data was a point-in-time snapshot estimate and the main evidentiary value of the SMOG data was to demonstrate the longer-term decline in the volumes that Esso predicts it will produce in the next 5 to 10 years.

[10] Esso contends that the evidence in the Bloomberg Extract and the Updated Exhibit 3 is no more than a snapshot of the oil price at a point in time; it is not a forecast nor a reliable indicator of future oil prices. Esso points to the fact that the Unions have already adduced evidence that an oil price of US$70 per barrel is a more reliable near-term forecast than US$60 per barrel. It says that the actual oil price as at 1 May 2019 does not add anything material to the near-term forecast evidence which is already before the Commission and certainly does not raise a likelihood of the evidence affecting the outcome of the case. Esso also contends there is prejudice to it in the form of further delay in dealing with its application and in the use of the selective new development on oil price.

[11] Turning then to the issues I need to decide, I am not persuaded that the terms of s.226 require that I allow the Unions to reopen their case in order that the material in the Bloomberg Extract and the Updated Exhibit 3 be received as evidence. I accept that the terms of s.226 require the Commission to reach a state of satisfaction upon current information, but this in my opinion informs the exercise of the discretion, it does not place a fetter on its exercise. It cannot be the case that the contemporaneous nature of some of the considerations raised by s.226 mandate a reopening of a case whenever a party seeks to bring to the Commission’s attention updated material relevant to one or more of the considerations. Once it is accepted, as the Unions appear to do in their reply submissions, that it would be necessary for the party to demonstrate that the evidence was new evidence and that it was relevant, and I would add, is material in the sense that it is likely to affect the deliberations, it is clear that these are matters that condition or inform the exercise of a discretion; they do not mandate an outcome.

[12] Ultimately it seems to me that the exercise of the discretion to allow the Unions to reopen their case is to be guided by the principle of whether in the circumstances of the application to terminate the Agreement, the interests of justice are better served by allowing them to reopen their case than by refusing their application to do so. ² The evidence that is sought to be adduced in relation to an application to reopen the case plainly needs to be fresh evidence, that is, evidence that was not available and could not have been adduced at the time of the hearing. It must be relevant in the sense that it engages with one or more issues requiring determination and it must be material, that is sufficiently probative of one or more of those issues so that it may be said that its admission will most probably affect the deliberations as to the result.

[13] There is no real contest between the parties that the material sought to be adduced in the Bloomberg Extract and the Updated Exhibit 3 is both fresh evidence and relevant. The contest is really one as to its probative value. As is evident from the summary of contentions appearing earlier, Esso says the material is of limited probative value because, inter alia, it accepts that the oil price is volatile and fluctuating and its case is not limited to seeking termination of the Agreement merely because of productivity improvements and cost. I accept that this is so. Nonetheless, and as the Unions point out, Esso has relied in part on its current and future economic circumstances in support of its application to terminate the Agreement. The evidence the Unions seek to adduce seems to me to be plainly relevant to and potentially probative of that part of Esso’s case as the oil price appears to be an important part of its analysis.

[14] Esso claims, as part of its case in explaining the commercial context in which it operates, that it is affected by its poor oil producing assets and their profitability performance. It says oil reserves are in decline and due to many poor profitability performing assets and some operational limits, many of its platforms are not producing oil. Esso’s total revenue from its Bass Strait Oil production operations fell from more than 90 percent of its total revenue in 1985 to about 30 percent of total revenue in 2017. As already noted, Esso accepts that the price of oil fluctuates and that it is volatile. It also points to the fact that since July 2017, substantial increases, inter alia, in the oil price is a positive for Esso and that it contributes to its improved financial performance. ³

[15] I accept that it is not part of Esso’s case that the viability of its operation is at risk if the Agreement is not terminated or that the possible financial savings it might achieve through termination are of great significance in relation to the commercial context in which it operates. ⁴ However Esso contends in its substantive application that the commercial context is relevant both to the consideration as to appropriateness raised by s.226(b) and to the context through which the public interest consideration in s.226(a) is viewed.⁵ Evidence of the current oil price in comparison to forecasts on which some of Esso’s analysis relies is thus relevant to assessing the commercial context faced by Esso and consequently to be weighed in the mix of factors relevant to both the public interest consideration and appropriateness. It is also relevant to and may be probative not just of parts of Esso’s case but also of the case mounted by the Unions in opposition to the application to terminate the Agreement. I therefore consider that the evidence sought to be adduced will affect the deliberations necessary to properly consider the matters required by s.226 requires.

[16] Turning briefly to prejudice, these proceedings have been delayed for many reasons. The hearing of the application to terminate the Agreement was ultimately progressed in February 2019 over the objection of the Unions as to the adequacy of the timetable. The application was lodged in August 2016 but not prosecuted because of the orders made by Vice President Watson purporting to terminate protected industrial action⁶, resulting ultimately in proceedings for a workplace determination. A workplace determination was not made because the orders were subsequently revoked⁷ on application by Esso. Neither the purported orders made by Vice President Watson nor the then extant workplace determination proceeding presented a legal bar to the prosecution of Esso’s termination application. Presumably Esso chose not to prosecute its case and was content to allow the Agreement to operate to await the making of the workplace determination which when made would have replaced the Agreement. A large part of the delay is the result of a decision Esso made not to press its application throughout 2017 and much of 2018. A short delay in the context of the course of the conduct of the proceeding is not in my view materially prejudicial.

[17] Esso also contends that if the case is reopened to consider this selective new development in the oil price, Esso would be left with an invidious choice of restricting any response to avoid further delay, or risking further delays by responding with a more complete consideration of relevant post-hearing developments. Again, any delay by reason of allowing Esso to respond would be short in comparison to the history of this proceeding. In opposing the Unions’ application to reopen their case Esso has already made some submission, earlier summarised, directed at minimising the weight and probative value of the Bloomberg Extract and the Updated Exhibit 3. I do not consider that the short delay in allowing Esso to put on responsive material represents an invidious choice. The choice it faces is a strategic or forensic one. Such choices commonly confront litigants, including in matters before the Commission.

[18] There is undeniably a public interest in the finality of litigation, including in respect of applications before the Commission. There is also sometimes justice in allowing a party to reopen its case to lead fresh, relevant and potentially probative evidence directed to material considerations affecting a decision that will need to be made. It is a balancing exercise but I am persuaded for the reasons stated that in the circumstances of the application to terminate the Agreement and having regard to the nature of the material sought to be adduced, the interests of justice would be better served by allowing the Unions to reopen their case for the purpose of entering into evidence the Bloomberg Extract and the Updated Exhibit 3.

[19] The Unions’ application to reopen their case is limited to tendering the two documents and does not require any additional hearing time. The application is granted and the evidence in the Bloomberg extract and the Updated Exhibit 3 is admitted.

[20] I will allow Esso a further 7 days from the date of this decision to file and serve any material responsive to the material in the Bloomberg Extract and the Updated Exhibit 3, including any further submissions. The Unions may file and serve a short reply submission within 7 days thereafter and I will allow Esso a rejoinder. If these timeframes are too short, I will entertain an application, preferably by consent, to extend the timeframes.

DEPUTY PRESIDENT

Determined on the papers

Written submissions:

The Unions – 15 May 2019

Esso – 17 May 2019

The Unions’ reply – 20 May 2019

Printed by authority of the Commonwealth Government Printer

<AE890812 PR708793>

1 Esso relies on ss.171(a), 577(a) and (b), 578, 589 and 590

² See Hawthorn Glen Pty Ltd v Aconex Pty Ltd (No 1) [2007] FCA 2010 at [18] – [21] and the authorities referred to therein, particularly Urban Transport (NSW) v Nweiser (1992) 28 NSWLR 471 at 478

3 See Esso’s Final Submissions at [13], [14], [81]

4 Ibid at [73]

5 Ibid at [74]; see also Esso's Outline of Submissions, Commission Book pp 3640 – 3655

6 PR 588352

7 [2018] FWCFB 4120, PR588352, (2018) 281 IR 147