Greater Dandenong City Council v Australian Municipal, Administrative, Clerical and Services Union

[2001] FCA 349

FEDERAL COURT OF AUSTRALIA

Greater Dandenong City Council v Australian Municipal, Clerical and Services Union [2001] FCA 349

INDUSTRIAL LAW – Freedom of association – Outsourcing of services – Home and community care services provided by local government council – Decision by council to engage in competitive tendering – Council received tenders from in-house team and an outside company – Price differential caused by lower wages and penalty rates payable under industrial instrument binding outside tenderer than that binding council – Tender awarded to outside tenderer – Council employees dismissed – Whether council dismissed any employee or altered position of any employee to the employee’s prejudice because the employee was “entitled to the benefit of an industrial instrument or an order of an industrial body” – Whether the words “entitled to the benefit” refer only to the existence of an instrument or order or include reference to the content of the instrument or order – Whether Council discharged the onus under s 298V to negative the rebuttable presumption that its conduct was engaged in for a prohibited reason - Whether case is affected by the constitutional immunity of State of Victoria – Order of trial Judge for reinstatement of dismissed employees – Whether Judge’s exercise of discretion miscarried.

Workplace Relations Act 1996, ss 298A, 298B, 298F, 298K, 298L(1)(h), 298U, 298V

Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 – applied
Kelly v Construction, Forestry, Mining and Energy Union (No 3) (1995) 63 IR 119 - cited
Davids Distribution Pty Ltd v National Union of Workers (1999) 91 FCR 463 - cited
Grayndler v Cunich (1939) 62 CLR 573 - considered
Grayndler v Broun [1928] AR (NSW) 46 - considered
Pearce v WD Peacock & Co Ltd (1917) 23 CLR 199 - cited
General Motors Holden Pty Ltd v Bowling (1976) 12 ALR 605 - cited
Davis v Amalgamated Television Services Pty Limited (1998) 81 IR 364 – cited
Moss v Fantil Pty Limited (1994) 58 IR 118 - cited
Eaton v McKenzie (1916) 12 Tas LR 94 - considered
Klanjscek v Silver (1961) 4 FLR 182 - considered
Musgrove v Murrayland Fruit Juices Pty Ltd (1980) 47 FLR 156 - cited
Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [2000] FCA 1008 - cited
Maritime Service of Australia v Burnie Port Corporation Pty Ltd [2000] FCA 1189 - cited
Burnie Port Corporation Pty Ltd v Maritime Union of Australia [2000] FCA 1178 - cited
Victoria v Commonwealth of Australia (1996) 187 CLR 416 - considered
Konrad v Victoria (1999) 91 FCR 95 - applied
Short v Hercus (1993) 40 FCR 511 - considered
The Queen v Industrial Commission (SA); Ex parte Adelaide Milk Supply Co-operative Ltd [1977] SAIR 1202 - considered
Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 - considered
State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In liq) (1999) 160 ALR 588 - cited
Taylor v Johnson (1983) 151 CLR 422 - cited
Chen v Minister for Immigration and Multicultural Affairs [2000] FCA 1901 - cited
Community and Public Sector Union v Telstra Corporation Ltd [2001] FCA 267 - applied
Jones v Dunkel (1959) 101 CLR 298 - considered
Connington v Council of Municipality of Kogarah [1913] AR (NSW) 40 - considered
Hunt v Railway Commissioners for New South Wales; Ex parte Brown-Smith [1928] AR (NSW) 151 - cited
Environment Agency v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 - cited
J & G Knowles and Associates Pty Ltd v Commissioner of Taxation (2000) 96 FCR 402 - cited
Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 - cited
Cowley v Dunn (1916) 16 Tas L R 94 - cited
Rodriguez v United States, 480 US 522 - cited
Australian Workers’ Union v BHP Iron-Ore Pty Ltd [2001] FCA 3 - cited
Hope v Bathurst City Council (1980) 144 CLR 1 - cited
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 356 - cited
TracyVillage Sports & Social Club v Walker (1992) 111 FLR 32 - cited
Municipal Council of Sydney v Commonwealth (1904) 1 CLR 208 - cited
Meriwether v Garrett 102 US 472 - cited
Mersey Docks v Cameron (1865) 11 HLC 443 - cited
Superannuation Fund Investment Trust v Commissioner ofStamps (SA) (1979) 145 CLR 330 – cited
Townsville Hospital Board v Townsville City Council (1982) 149 CLR 282 - cited
Registrar of the Accident Compensation Tribunal v FederalCommissioner of Taxation (1992) 178 CLR 145 - cited

GREATER DANDENONG CITY COUNCIL v AUSTRALIAN MUNICIPAL, CLERICAL AND SERVICES UNION
V765 of 2000

WILCOX, MERKEL and FINKELSTEIN JJ
4 APRIL 2001
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY	V765 of 2000

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

GREATER DANDENONG CITY COUNCIL
APPELLANT

AND:

AUSTRALIAN MUNICIPAL, CLERICAL AND SERVICES UNION
FIRST RESPONDENT

WENDY PHILLIPS
SECOND RESPONDENT

JUDGES:

WILCOX, MERKEL and FINKELSTEIN JJ

DATE OF ORDER:

4 APRIL 2001

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.Order 3(II) of the orders made by Madgwick J on 10 November 2000 be varied by substituting for the words “within 28 days of the date of this order” the words “on or before 4 May 2001”.

2.Order 3(VII) of the said orders be varied by substituting for the words “on 8 December 2000” the words “on a date to be appointed by Madgwick J”.

3.Otherwise, the appeal be dismissed.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIAN DISTRICT REGISTRY	V765 OF 2000

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

GREATER DANDENONG CITY COUNCIL
APPELLANT

AND:

AUSTRALIAN MUNICIPAL, CLERICAL AND SERVICES UNION
FIRST RESPONDENT

WENDY PHILLIPS
SECOND RESPONDENT

JUDGES:

WILCOX, MERKEL and FINKELSTEIN JJ

DATE:

4 APRIL 2001

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

WILCOX J

1. This is an appeal against a decision of a Judge of this Court (Madgwick J) that the appellant, Greater Dandenong City Council (“the council”), infringed s 298K(1)(a) and (c) of the Workplace Relations Act1996 (“the Act”) in relation to persons employed by the council in the provision of home and community care services.  The trial judge’s decision, Australian Municipal, Administrative, Clerical and Services Union v Greater Dandenong City Council [2000] FCA 1231, is now reported at 101 IR 143.

2. The applicants at first instance were the Australian Municipal, Administrative, Clerical and Services Union (“the union”), a registered organisation of employees, whose members included all but a few of the relevant employees, and Wendy Phillips, an affected employee who sued as a representative party, pursuant to Part IVA of the Federal Court of Australia Act1976, on behalf of all persons employed by the council on 17 May 1999 in the provision of home and community care services.  The union and Ms Phillips are respondents to this appeal.

3. The respondents at first instance were the council, the present appellant, and Glad Pty Ltd, a company trading as “Silver Circle”.  No orders were made against Glad Pty Ltd and the company is not a party to the present appeal.  During the hearing before Madgwick J, Glad Pty Ltd was usually referred to as “Silver Circle”.  I will follow that course.

   The relevant statutory provisions

4. Section 298K appears in Part XA of the Workplace Relations Act.  Subsection (1) provides:

   “(1)     An employer must not, for a prohibited reason, or for reasons that include a prohibited reason, do or threaten to do any of the following:

   (a)dismiss an employee;

   (b)injure an employee in his or her employment;

   (c)alter the position of an employee to the employee’s prejudice;

   (d)refuse to employ another person;

   (e)discriminate against another person in the terms or conditions on which the employer offers to employ the other person.”

5. Section 298L identifies various items of conduct that constitute a “prohibited reason”, for the purposes of s 298K. The item relied on in this case is conduct carried out because the employee “is entitled to the benefit of an industrial instrument or an order of an industrial body”: see s 298L(1)(h).

6. Section 298U specifies the relief available in this Court in respect of a breach of Part XA of the Act. The Court is empowered, if it considers it appropriate in all the circumstances of the case, to impose a penalty, to order reinstatement of an employee, to order payment of compensation and/or to grant injunctive relief.

7. Section 298V of the Act creates a rebuttable presumption, in an application under Division 6 of Part XA, that the respondent’s conduct was carried out for the particular reason alleged in the proceeding against that respondent.

   The facts

8. At the hearing of the appeal, there was no challenge to the findings of primary facts made by Madgwick J.  Accordingly, it is appropriate to summarise the facts of the case by reference to those findings.

9. At material times, the council was bound by an award of the Australian Industrial Relations Commission, Victorian Local Authorities Interim Award 1991 (“the award), and an agreement certified under Part VIB of the Act, the Greater Dandenong City Council Enterprise Bargaining Agreement 1998 (“the certified agreement”). It is common ground that each of these instruments was an “industrial instrument”, within the meaning of s 298L(1)(h) of the Act: see the definition of “industrial instrument” in s 298B(1).

10. The council was constituted under the Local Government Act 1989 (Vic). Under that Act, the council’s functions included the provision of “health, education, welfare and other community services including … Aged, disabled and disadvantaged persons services”: see item 2 of Schedule 1 of the Act. The council in fact provided such services; including, particularly, home and community care for the disabled, frail and aged. These services, which are often called “HACC”, include general home care and assistance, as well as the assessment of the need of persons for whom assistance is sought and the provision of more specialised in-home care as required. Immediately prior to 23 May 1999, the council employed approximately 75 persons in connection with HACC services.

11. In 1994 the Local Government Act was amended (by the Financial Management Act 1994 (Vic)) in such a way as to introduce incrementally a regime of compulsory competitive tendering for Victorian local government. In 1994-95 councils were required to have “competitive arrangements” in respect of 20% of their expenditure; in 1995-96, 50%. Madgwick J explained the effect of the new provisions, ss 208B, 208C and 208D, in this way:

    “‘competitive arrangements’ are, relevant to present purposes, either contracts for the supply of goods or services to the Council or ‘in-house agreements’ by members of a Council’s staff for such supply.  In either case the arrangement is to be entered into by the Council after either a ‘competitive process’ conducted by the Council or approval by the Minister under s 208F for stated reasons.  A ‘competitive process’ requires public written tenders and the award of the contract to one of the tenderers.  It is clear that the successful tenderer need not have made the lowest tender: s 208C(1)(c).”

12. In March 1996 the council foreshadowed the seeking of tenders for the provision of HACC services.  An in-house bid team was formed.  Ms Phillips was provided with a document prepared by council management which recommended that the in-house team enter into a Local Area Work Agreement, pursuant to cl 9 of the certified agreement, in order to reduce the labour costs that would be payable if the in-house bid was successful.  It was apparently the view of some members of council management that, unless there was a reduction in the amounts payable for penalty rates and travelling times, as compared with the amounts payable under the certified agreement, an in-house bid would be unable to compete with external bids.  However, members of the bid team were not prepared to accept a reduction in the conditions contained in the certified agreement.  So the in-house bid was prepared on the basis of existing terms and conditions.

13. Tenders closed on 23 December 1998.  Two tenders were received: the in-house bid and a bid from Silver Circle.  Each tender was prepared on the basis of providing a fixed number of hours of HACC service over a three year period.  Leaving aside penalty rate payments, the in-house tender was for a price of $7,770,665 and the Silver Circle tender was for $6,610,429.

14. The council appointed an evaluation committee to assess the bids by reference to four criteria: financial stability (pass/fail), price (45%), capability to develop and deliver specified outcomes (25%) and management capability qualifications (30%).  The committee passed both tenderers in respect of financial stability and found little difference between them in relation to capability and management.  However, there was a big difference in relation to price.  Silver Circle’s price advantage was accentuated by the committee’s belief that the in-house tender would generate a greater penalty rate cost, because of higher rates, than would the Silver Circle tender.  The committee recommended that council accept Silver Circle’s tender.

15. Silver Circle was bound by a consent award of the Australian Industrial Relations Commission, the Home and Community Care Award 1995 (“the HACC award”).

16. The report of the evaluation committee was considered at a council meeting held on 22 February 1999.  There was lengthy debate, during which extensive reference was made to the cost difference between the two tenders and to the fact that this difference arose because the wage and penalty rates under the certified agreement were higher than those under the HACC award binding Silver Circle.

17. The council’s chief executive officer, Mr Heine, told council that, if it selected the Silver Circle tender, all council’s HACC employees would need to be made redundant.  He forecast that, in this eventuality, Silver Circle would engage all the retrenched staff, at least for the first three months of the contract, in order to fulfil its obligations thereunder.

18. At the end of the debate, by a majority of seven to three, the council resolved to accept the Silver Circle tender.

19. On the following day, 23 February 1999, council’s HACC staff were told they would become redundant on 21 May 1999.

20. By a letter dated 30 April 1999, the council changed the retrenchment date to 23 May 1999.  On that day the employment of all council’s HACC employees was terminated for reasons of redundancy.

21. In relation to employment with Silver Circle, Madgwick J found:

    “Also on 23 February a meeting was held by Silver Circle at which all the HACC workers were invited to apply for employment with Silver Circle.  Such employment was to be offered, it was explained, on a three month probationary basis, and was to be governed by the Silver Circle Award.  It had been known to agents of the Council that, if Silver Circle succeeded, such an offer would be made.  Some of the HACC workers were offered and accepted employment with Silver Circle.  As a result, these workers were then paid significantly less for doing virtually identical work.  Ms Philips gave evidence that she was providing the same services and even had the same clients.”

    The reasoning of Madgwick J

22. Madgwick J noted it was not in dispute that the HACC workers were dismissed by the council on 23 May 1999. He also referred to comments about s 298V made by Gaudron J in Patrick Stevedores Operations No 2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 at para 123 and by Moore J in Kelly v Construction, Forestry, Mining and Energy Union (No 3) (1995) 63 IR 119 at 130. Madgwick J concluded at para 36:

    “Accordingly, it is prima facie to be presumed that the employees concerned were dismissed (or otherwise subjected to s 298K conduct) for the reason that they are entitled to the benefits of the relevant industrial instruments, or at least that such was one of the reasons for their dismissal. It was therefore incumbent upon the respondent to demonstrate the contrary.”

23. At para 37 Madgwick J rejected a contention by the council that, before s 298V comes into operation, an applicant must prove the existence of facts constituting the cause of action under s 298L; including that the alleged reason was in fact operative. He noted a statement of Cooper J and myself, in Davids Distribution Pty Ltd v National Union of Workers (1999) 91 FCR 463 at para 109, that s 298V “enables the allegations to stand as sufficient proof of the fact unless the employer proves otherwise” (Madgwick J’s emphasis).

24. Madgwick J noted (at para 38), and apparently accepted, evidence given by the council’s human resources manager that the fact that HACC employees were entitled to the benefit of the certified agreement was not a motivating factor in the council’s decision to call for competitive tenders.  However, his Honour commented (at para 39) that the reason for calling tenders was immaterial, the decisive matter was the reason for the terminations.

25. Madgwick J accepted that the decision to accept the Silver Circle tender was made by the council, whereas the decision to terminate the HACC employees was made by Mr Heine.  But he commented (at para 41):

    “Despite the fact that a few vacancies elsewhere in the Council’s operations were available to some HACC staff after the Council’s decision, it is clear that for all practical, present purposes, the employees’ dismissal was made unavoidable by the Council when it accepted the Silver Circle bid. In terminating the employment of most and making attempts to redeploy some HACC employees, including paying them their redundancy entitlements, Mr Heine was in reality simply implementing the Council’s earlier decision. Although the final decision was technically his (s 94A of the LGA provides that the CEO is responsible for dismissing Council staff) the Council was the employer and Mr Heine was acting in accordance with the Council’s wishes, as indicated by the councillors’ decision; Mr Heine was not acting on his own behalf but on behalf of the Council.”

26. After some discussion about the proper approach to evaluation of the council’s reasons for accepting the Silver Circle tender, Madgwick J said (at paras 55 to 59):

    “There is no doubt that the price differential between the bids was a reason for the Council’s acceptance of the Silver Circle bid, although price alone does not, of course, constitute a prohibited reason.  However, a strong inference does arise that the dismissals occurred, in part, because of the employees’ Award and Agreement entitlements. The suggestion that the competitive tendering imperatives and Silver Circle’s price constituted the only real and operative reason for the Council’s decision is unpersuasive. 

    It is clear from s 208C(1)(c) of the LGA that the Council was not obliged to accept the lowest priced bid, and even had it been, the Act, as federal legislation, would have prevailed, pursuant to s 109 of the Constitution, over the requirements of the LGA. More importantly, no evidence was led … to suggest that any decision-maker believed that he or she was so obliged.

    While the relative price of the bids was of great significance to the Council’s decision, and price of itself is not sufficient to constitute a prohibited reason, in the circumstances of this bid, the only significant factor going to establish that price differential was the HACC workers’ entitlements under the Award and Agreement.  Further, it is likely that it was well-known to all councillors that the discrepancy between the Council’s and Silver Circle’s industrial instruments accounted for the great part of the price disparity.  Councillors are political figures, elected and usually relying upon support groups that keenly follow matters of local politics.  In reality, they would have been unlikely, in my opinion, not to know the main reasons why the CCT process might constitute a real threat to the continuation of the Council’s employment of a significant part of its workforce.

    Further still, representatives of the Council’s middle management had, albeit at least partially in the HACC workers’ own interests, as those representatives conceived those interests, tried to induce them to forego some of the benefits that the Award and the Agreement provided for them.  It is, in my opinion, inconceivable that the middle management view had not permeated to the Council’s decision-makers (of both the formal and perhaps informal varieties).

    The majority Councillors are very likely to have known and to have shared that view.  They are also very likely to have shared a further view that was abroad, that the HACC workers were unreasonable in declining to agree to a voluntary diminution of their Award and Agreement entitlements and that they had only themselves to blame for being unable to undercut or match the Silver Circle bid.”  [Original emphasis]

1. After commenting that the council called evidence from only one of the councillors who voted to accept the Silver circle bid, Madgwick J said (at para 62):

   “That no other such witness was called suggests that none could have provided evidence contrary to the powerful inference already apparent from the available evidence that the Council was motivated by the HACC workers’ entitlements.  That inference may therefore be more confidently drawn: Jones v Dunkel.” [(1959) 101 CLR 298]

2. Madgwick J concluded this portion of his reasons by saying (at para 65):

   “For these reasons the respondent has failed in a factual sense to establish that a reason for the dismissal or any other s 298 [sic: 298K] conduct … of the HACC workers was not because of their entitlement to the benefits of the Award and Agreement.  On the contrary, in my opinion the Council’s decision was, in part, so motivated.  In my view, an actual, operative and significant reason for the Council’s actions was that the substantial majority of the HACC staff were entitled to the benefits of the Award and the Agreement.”

3. Madgwick J turned to the reach of s 298L(1)(h). He said (at paras 66 to 68):

   “There are arguably two ways of reading s 298L(1)(h).  It may mean either:

   (i)all that is prohibited is s 298K conduct wholly or partly motivated by the very fact that the employee concerned is entitled to something, whatever it may be, under an industrial instrument that could be called a benefit, or;

   (ii)conduct is also prohibited if motivated by the level, degree or extent of the entitlement.

   The first interpretation fixes upon the mere fact of entitlement, the second on the nature of the entitlement.  If the first meaning is correct, then the respondent Council must succeed.  It plainly had, by its agents, no intention at all to discourage the HACC workers from having some kind of entitlements under an industrial instrument per se.

   However, textually, the use of the term ‘benefit’ and the employee’s ‘entitlement’ to it, tends against this construction.  The express concept is not whether motivation for the s 298K conduct is simply regulation of the parties’ entitlements by award or agreement, but whether it is the employee’s ‘entitlement’ to ‘benefit’ thereunder.  Moreover, if this is the correct meaning of the paragraph, its application is confined to the conduct of employers who ideologically object to the intrusion into their enterprises of any ‘award or agreement … made under or recognised by’ any Commonwealth or State (or Territory) statute: ….  It is unlikely that, on such a crucial subject, Parliament would have concerned itself with such fringe eccentricities; employers (and employees) are concerned with the nature of entitlements, not the mere formality of their existence.

   The seeming difficulty about the second available meaning is that the provision may catch some employers who have no ideological aversion to award coverage of their employees, or to trade unionism among them, but who simply wish to cut costs where they find that a significant reason for present costs is the level of entitlements under an industrial instrument.  On analysis, this supposed difficulty is only to say that, in some situations, questions of degree, characterisation and judgment will be called for.  These potential uncertainties are hardly novel or significant obstacles to any entrepreneur or undertaking.  In any case, it is a ‘problem commonly encountered’ in statutory interpretation that ‘nice questions of degree’ may be involved: Superannuation Investment Fund Trust v Commissioner of Stamps (SA) (1979) 145 CLR 330 per Stephen J, at 348 – 350.” [Original emphasis]

4. His Honour pointed out (at para 69) that the expense of an employee’s performance of work will often be a genuine reason for action by an employer. But he drew a distinction between a case in which an employer determined he or she could not afford to pay an award increase and closed the business (where there would usually be no breach of s 298L(1)(h)) and a case where an employer dismissed an employee who was paid an award wage and promptly hired another person to do the work at an lesser wage.

5. Madgwick J referred (at paras 70-71) to what was said by Evatt J in Grayndler v Cunich (1939) 62 CLR 573 at 594 and 596 and concluded that the second of the two ways of interpreting s 298L(1)(h) “is clearly to be preferred”.

6. The High Court of Australia determined Grayndler v Cunich on a procedural issue; only Evatt J addressed the legal issues underlying the case.  Nonetheless, the case played a significant role in Madgwick J’s reasoning; so it should be noted. 

7. Cunich was prosecuted under s 9 of the Commonwealth Conciliation and Arbitration Act 1904 in relation to the dismissal of two employees.  Cunich had a policy of not employing unionists.  The policy was apparently based on the then rule that only members of a relevant union were entitled to benefits prescribed by an award.  The dismissed workers had recently joined the Australian Workers’ Union and thereby become entitled to award rates of pay.  Those rates were higher than their previous rates.  The magistrate found that the employees were dismissed because they had lawfully entitled themselves to the benefit of the award, and this represented an additional liability for Cunich.  However, the magistrate dismissed the information because he regarded himself as bound by a decision of the New South Wales Industrial Commission (Grayndler v Broun [1928] AR (NSW) 46) that a comparable State provision was not intended “to prevent an employer from meeting that position and relieving himself of the burden” by dismissing the relevant employees.  Evatt J thought the Commission’s decision was wrong.  At 595 he said:

   “… we are not investigating a case where a business or department is being closed down, but a case where an employer has determined (1) that the enterprise as a whole shall be conducted entirely upon conditions of private bargaining which are less favourable to employees than award conditions, and also (2) that every employee who qualifies himself to obtain the better award conditions shall immediately be dismissed.  This is one of the obvious cases which sec 9 was designed to cover.”

8. After dealing with some other matters, Madgwick J considered the meaning of s 298K(1)(c) of the Act. At para 85 he referred to Patrick Stevedores wherein Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ at para 4 referred to para (c) of s 298K(1) as “a broad additional category which covers not only legal injury but any adverse affectation of, or determination in, the advantages enjoyed by the employee before the conduct in question”. Madgwick J also noted (at para 86) part of a passage in para 32 of the joint judgment:

   “The conspiracy alleged - more accurately, the conspiracies alleged - were to engage in two examples of contravening conduct. The first alleged conspiracy was an agreement to reorganise the Group whereby the position of the employees would be altered to their prejudice for reasons which included the reason that the employees were members of the MUA. This would be a conspiracy in contravention of par (c) of s 298K(1). The second alleged conspiracy, which has not yet been brought to completion, was an agreement to take action whereby the employees would be dismissed (by the employer companies) for the reason, or for reasons which included the reason, that the employees were members of the MUA. This would be a conspiracy in contravention of par (a) of s 298K(1).” [Madgwick J’s emphasis]

9. At para 88 Madgwick J held the certainty that the HACC employees would be dismissed as a result of the councillors’ resolution was, in the language of para 4 of Patrick Stevedores, an “adverse affection of, or determination in, the advantages” enjoyed by the employees before the relevant conduct.

10. Madgwick J considered para (b) of s 298K(1) had no application in this case. But he found against the council in respect of both para (a) and para (c) of the subsection. At paras 94 to 96 his Honour summarised his views in this way:

    “In this case, to recapitulate, the employer was concerned as to the comparative expense of its employees performing the HACC work, and knew that the entitlements of those employees to the benefit of the relevant industrial instruments were the main reasons for that comparative expense.  The employer also believed that the main reason why the expense might be reduced was that the independent contractor’s employees would be unable to access entitlements of similar value.  Further, the employer knew that it was probable that at least some of the contractor’s employees would come from the ranks of the employer’s own subject employees and that the work would be performed in substantially the same ways.  Finally, the employer’s agents had attempted to have the employees voluntarily reduce their entitlements.  The decisive action was taken only after reference to the employees’ decision to accept that they were, in effect, labourers unworthy of their present hire.

    In my opinion, these facts lead to a positive inference that an operative, if subsidiary, reason for the Council’s actions was that the subject employees had those very entitlements.  At the very least, in my opinion, it can safely and without injustice be said that the Council has failed to discharge its s 298V onus of proof of the contrary.

    As submitted by the respondent, it is clear from the oral evidence of Mr Heine and Mr Trestrail that the Council acted throughout the tender process in subjective good faith, and without an anti-union attitude.  However, the bona fides of the Council’s officers is here relevant only to the quantum of any penalty, not to liability for it, although in some cases the employer’s attitude to such matters will be of assistance to negate a prescribed reason.”

11. In paras 97 to 125 Madgwick J dealt with, and rejected, an argument advanced on behalf of the council to the effect that the implied constitutional immunity against interference by Commonwealth laws with a State’s capacity to function as a State operated, in the circumstances of this case, to prevent the application of ss 298K and 298L of the Act. That argument was repeated before us and I will return to it.

12. Finally, at para 126, Madgwick J turned to remedies.  He held “there are plainly mitigating circumstances (so) a nominal penalty will suffice”.  His Honour observed (in para 127) that, where reinstatement is sought for proven, unlawful termination of employment, “it should generally be regarded as the primary remedy and awarded, except where it would be impracticable so to do, or where there are other just and compelling reasons against that course”.  In the present case, he said, there was no material to show it would be more than inconvenient for the council, and attended with some expense, to reinstate the relevant employees.  He said:

    “Whatever, if anything, might be the implications for the Council’s legal relations with Silver Circle is not something that principle would permit to be used against the wronged employees.  There is nothing impracticable about ordering reinstatement.

13. At paras 128 and 129 Madgwick J considered, and dismissed, discretionary arguments against reinstatement: that the proscribed reason was merely influential in the council’s dismissal decision, rather than the sole or primary reason; and that the employees had displayed unreasonable rigidity in wishing to retain the conditions of work prescribed by the certified agreement.  He then said (at para 130):

    “I have also considered whether reinstatement would be an available and appropriate remedy if my conclusion about the breach of s 298K(1)(a) is incorrect, so that the only breach is of s 298K(1)(c).  At least in the circumstances of this case, where the offending alteration of the employees’ position was the creation of circumstances in which they would certainly be dismissed and no longer enjoy reasonable security of their employment, it seems to me that affirmative answers to these questions must be given.”

14. However, some time had elapsed since the dismissals.  Madgwick J thought some employees might now prefer compensation to reinstatement.  So his Honour ordered a conference concerning remedies.

15. On 10 November 2000 Madgwick J made formal orders in which he:

    (i)noted that seven named group workers had opted out of the proceedings;

    (ii)made a declaration that the council contravened s 298K(1)(c) of the Act on 22 February 1999 by resolving to contract out the HACC services on which the group workers were employed;

    (iii)made a declaration that the council contravened s 298K(1)(a) of the Act on 23 May 1999 in dismissing the group members;

    (iv)ordered the reinstatement, within 28 days, of 47 named group workers, such reinstatement being with deemed continuity of employment;

    (v)referred issues concerning compensation for the reinstated employees, and the other group workers, to a conference before a Registrar;

    (vi)imposed a single penalty of $100; and

    (vii)stood over other issues connected with compensation.

    The appeal

16. Prior to any formal orders being made, the council had filed a notice of appeal against Madgwick J’s decision.  His Honour ordered the appeal be expedited.  He refused a stay of the reinstatement order.

17. The council filed a notice of motion, returnable before the Full Court, seeking a stay of the reinstatement order pending the appeal.  The Full Court, as presently constituted, heard that motion on 23 November 2000.  At that time both parties sought, and undertook to be ready for, an early hearing of the appeal.  On that basis, the Court stayed the operation of the reinstatement order until the hearing of the appeal or any earlier order of the Court.

18. Upon the hearing of the appeal, on 11 December 2000, Mr F Parry and Mr B Lacy appeared for the council. Mr M Bromberg and Ms R Doyle appeared for the union and Ms Phillips. Mr J H Dixon SC and Mr J Tuck appeared on behalf of the Minister for Employment, Workplace Relations and Small Business, intervening pursuant to s 471 of the Act. The Minister’s submissions were confined to issues of construction of the Act; in particular ss 298K and 298L. At the conclusion of the hearing of the appeal, the Court extended the stay until the delivery of judgment.

19. Counsel raised three main issues in support of the council’s appeal. The first issue concerned Madgwick J’s interpretation, and application to this case, of s 298L(1)(h) of the Act. The second contention was that Madgwick J erred in failing to find a constitutional immunity in respect of the application of ss 298K and 298L, in the circumstances of this case. The third point raised by the appellant related to the primary judge’s decision to order reinstatement. I will deal separately with each of these issues.

    The proper interpretation of s 298L(1)(h): an historical survey

20. The major issue in the appeal concerns the proper interpretation of s 298L(1)(h). At para 29 above, I set out the “two ways of reading” the paragraph identified by Madgwick J. The issue is whether the conduct referred to in s 298K(1) must have been undertaken because the employee was entitled to the benefit of an industrial instrument or order, regardless of its content – that is, what Madgwick J called “the mere fact of entitlement” - or whether it is sufficient that the conduct was a response to the content of a particular instrument or order.

21. The council and the Minister argue for the first alternative. In doing so they rely heavily upon the legislative history of ss 298K and 298L.

22. Section 9(1) of the Commonwealth Conciliation and Arbitration Act, as enacted in 1904, was in these terms:

    “No employer shall dismiss any employee from his employment by reason merely of the fact that the employee is an officer or member of an organization or is entitled to the benefit of an industrial agreement or award.
    Penalty :  Twenty pounds.”

23. Counsel for the council suggest that, in this formulation, the words “entitled to the benefit” mean “entitled as a matter of law under the Act and not entitlement to particular benefits under the instrument”. They go on:

    “In a system where the role of organisations was paramount and the legislative scheme contemplating awards binding on employers and organisations and their members (see s.29) then it is clear that the reference to entitlement to the benefit of an award was to complement the protection of members of organisations.  After all, one could become entitled to the benefit of an award by joining the organisation.”

24. Counsel also draw attention to the standing provision in 1904 Act.  Section 123 of that Act provided:

    “An employee entitled to the benefit of an award may, at any time within 6 years from any payment becoming due to him under the award, but not later, sue for the amount of the payment in the Court …”

    Counsel comment:

    “This sentence is consistent with the construction advanced by the Appellant – the term ‘benefit’ is used to describe the state of being covered by an award”.

25. The Commonwealth Conciliation and Arbitration Act was amended in 1914 by repealing the original s 9 and substituting a new provision.  It included subs (1) as follows:

    “(1)An employer shall not dismiss an employee, or injure him in his employment, or alter his position to his prejudice, by reason of the circumstance that the employee –

    (a)is an officer or member of an organization, or of an association that has applied to be registered as an organization ; or

    (b)is entitled to the benefit of an industrial agreement or an award; or

    (c)has appeared as a witness, or has given any evidence, in a proceeding under this Act.

    Penalty :  Fifty pounds.”

    It will be noted the range of proscribed conduct was broadened and the word “merely” omitted.  However, the new provision retained the formula “entitled to the benefit”.

26. Counsel for the appellant say that, in 1904 and 1914, “[t]he concern of Parliament was with the protection of organizations at a time when awards could only bind employers in respect of union members”; a situation that persisted until the Metal Trades Case in 1935.  They cite a comment of Isaacs J, in Pearce v WD Peacock & Co Ltd (1917) 23 CLR 199 at 205, about s 9 being one of the means of effectuating the statutory object of facilitating and encouraging the organization of representative bodies of employers and employees and the submission of industrial disputes to the Federal Arbitration Court.

27. In 1947 the Commonwealth Conciliation and Arbitration Act was amended in such a way that the old s 9 became s 5.  Paragraphs (a) and (c) of the section were expanded to cover additional conduct, but para (b) was left unchanged.  The paragraph still referred to an employee being “entitled to the benefit” of an industrial agreement or award.  This situation continued unchanged until the repeal of the Conciliation and Arbitration Act (as it had become in 1950) in 1988. 

28. Dealing with this period, counsel for the council cite an observation of Mason J (with whom Gibbs, Stephen and Jacobs JJ concurred) concerning s 5(1) and (4) of the Conciliation and Arbitration Act in General Motors Holden Pty Ltd v Bowling (1976) 12 ALR 605 at 616:

    “The two subsections are, broadly speaking, designed to protect an officer, delegate or member of an organization against discrimination by his employer.  They have a legislative history which extends back to the turn of the century when the trade union was a more fragile institution than it is today and when it stood in need of a large measure of protection from employers.”

    Counsel comment:

    “Clearly the fact of entitlement to the benefit of an industrial award was inextricably linked with the rights to union membership and the role of organizations.”

29. In the statute that replaced the Conciliation and Arbitration Act, the Industrial Relations Act 1988, the relevant provision was s 334. That section further expanded the list of prohibited reasons but retained the notion of entitlement to benefit. Paragraph (e) of s 334(1) covered the situation where “the employee … is entitled to the benefit of an award or an order of the Commission”. The word “award” was defined by s 4 of the 1988 Act so as to include a certified agreement. The definition was later expanded to cover an enterprise flexibility agreement.

1. As counsel point out, the 1996 amendments to the Industrial Relations Act, that transformed it into the Workplace Relations Act 1996, included significant amendments to the protections available to employees.  Importantly, in counsel’s submission, the words “award or an order of the Commission” were replaced by a reference to “an industrial instrument”, a term that is widely defined.  It covers awards and agreements made under State or Territorial law.  Counsel say:

   “… the ‘benefit’ of the industrial instrument no longer necessarily arises under the Act but can be under an industrial law of the Commonwealth, State or Territory. Again it is not the benefits in the industrial instrument that is the focus but the fact of entitlement as the benefit of the instrument under whatever law underpins that benefit.”

2. Counsel for the council also mention s 298F(2) of the Act which, they say, “provides the appropriate constitutional underpinning of s 298K and s 298L(1)(h)”. Section 298F(2) provides:

   “This Part applies to conduct carried out with a purpose or intent relating to:

   (a)the fact that an award, a certified agreement or an AWA applies to a person’s employment; or

   (b)the fact that the person is bound by an award, a certified agreement or an AWA.”

3. Counsel for the council observe that outsourcing is not new; Australian businesses have been contracting out functions for many years. They say the legislation has to be construed against that background; a wide interpretation of s 298L(1)(h) will render unlawful a long-accepted commercial practice.

4. The submissions made on behalf of the Minister add little to those of the council. Counsel emphasise the significant changes to industrial law effected by the 1996 amendments.  They also refer to two New South Wales decisions, Davis v Amalgamated Television Services Pty Limited (1998) 81 IR 364 and Moss v Fantil Pty Limited (1994) 58 IR 118. However, those decisions are of little assistance; they deal with differently worded statutory provisions.

5. The submissions made on the issue of interpretation by counsel for the respondents concentrate on the decided cases.  The point under present consideration appears never to have been the subject of judicial discussion.  However, counsel for the respondents argue it is implicit in all the reported cases that the words “entitled to the benefit” of an award etc cover a case where the prescribed conduct is taken because of the content of the award etc.  They have not been able to find any case where the issue has been whether the employer took action because of the mere fact of the award, as distinct from its content.

6. The earliest reported case appears to be a decision of the Full Court of the Supreme Court of Tasmania: Eaton v McKenzie (1916) 12 Tas LR 94. The case was concerned with the application of s 9(1)(b) of the Commonwealth Conciliation and Arbitration Act 1904, as amended in 1914. Both appellants were master builders carrying on business in Hobart. They were parties to an award, made by the Commonwealth Court of Conciliation and Arbitration in 1913, that governed the working conditions of builders’ labourers. They each employed builders’ labourers and paid them wages calculated in accordance with the award. On 18 May 1916 the Court varied the award, so as to increase the rate of wages payable thereunder as from midnight on 1 June 1916. Shortly before that time – in one case on 31 May, in the other on the afternoon of 1 June – each appellant dismissed all his builders’ labourers. Both appellants were convicted of contraventions of s 9(1)(b). The Full Court unanimously affirmed the convictions. Dealing with the case of the appellant McKenzie, Nicholls CJ said at 95-96:

   “To me it seems quite plain that the appellant dismissed the respondent for the reason that the respondent was one of those entitled to the benefit of an award which would, next day, cause his wages to be increased.  The appellant gave no evidence of inability to pay, of dismissal by reason of reduction of hands in the course of regulation of the work, or of any other cause besides the award.  He said, ‘If the award had not been varied, I should have carried on as usual.’  It seems to be the fact that he can carry on, despite the variation.”

   At 97 Crisp J said:

   “Many motives may influence employers in dismissing their employees; they may not be able to pay the wages, they may decline to pay them in any event, they may dismiss for purely political reasons, but if the magistrate in the particular case before him sees that the real basic reason for the dismissal was the award, then his duty is to convict. If an employer finds that he cannot pay the wages fixed by the award, there is nothing in the Act to compel him to do so, or to punish him if he decides to go out of business. In my opinion an employer who is satisfied that to pay the wages awarded means ruin to himself, and who, in consequence, dismisses his men or any of them, has not dismissed them because of the award but because he could not pay. It may be said that the award is at the root of his decision in any event, but while that is so I still think there may be a material distinction between the case of the employer who says, ‘I cannot pay’, and that of him who says, ‘I will not pay’. In this case, on a review of the evidence, I think the magistrate could not help finding that the real reason for the dismissal was the award.”

7. It will be noted that the dismissed men had long been covered by the award.  They were not dismissed because they were covered, but because of a change in the content of the award, so as to increase their wages.

8. The next case, in chronological order, is Grayndler v Cunich, to which reference has already been made. It seems the two dismissed employees had recently become union members, and thereby become entitled to higher wages. In holding that the employees were dismissed because they had become entitled to the benefit of the award, the magistrate did not distinguish between the fact of the award and its content, although he did note that the employer “was saddled with an additional liability by reason of the men having joined the union”. Evatt J seems to have thought the content of the award was the material factor. He said at 594:

   “Mere membership of the union was only of indirect concern to the employer.  Had the award prescribed conditions which were less favourable than those which obtained on the job, the employer would either have been pleased with those who, by joining the union, obtained worse conditions, or at least would not have intervened.  Fitzgerald was dismissed, as finding 7 plainly shows, solely because the defendant had to pay him more wages so soon as he became entitled to the more favourable award conditions.”

9. Klanjscek v Silver (1961) 4 FLR 182 was a decision of the Commonwealth Industrial Court (Spicer CJ, Joske and Eagleston JJ). In that case the content of the award was a critical issue. The defendant carried on business as a shirt manufacturer. At the relevant time she employed 25 people, 13 of them as piece-workers. The piece-workers were paid the piece-work rate prescribed by the (Federal) Clothing Trades Award 1960 together with a flat rate of 36 shillings per week.  At a time of business downturn, the employer proposed to the piece-workers that their wages should be reduced by eliminating the flat rate payment.  The resultant wages would still be above the minimum wage specified in the award; however, under the award, it was necessary for the employees to consent to any reduction in wages.  They refused to consent and were dismissed.  The Court dismissed a charge of contravention of s 5 of the Conciliation and Arbitration Act, holding the dismissals were not by reason of the fact that the employees were entitled to the benefit of the award but because the business operations had become unprofitable.  At 186 the Court said:

   “… we have to consider the case on the basis that, unless the employees, through their representative, agreed to a reduction of rates, they were entitled, by virtue of the award, to the benefit of the existing rates, and that this fact was an element in the dismissal of the employees, since if they had not been so entitled Silver would have continued to employ them at a lower rate, which would, however, still have been within the limits imposed by the award.  We therefore have to consider whether a dismissal in such circumstances is a breach of the section.”

10. After referring to the history of s 5 and some decisions under its New South Wales equivalent, the Court said at 187:

    “… we think that, at least, the section should not be considered as intending to penalize an employer who closes down his operations because his operations have become unprofitable, even though the minimum rate prescribed by the award is one of the factors in this result.  A fortiori, where the employer is willing to continue to operate in accordance with the award, provided only that his employees will consent to reduce the existing piece-work rates to a lower rate which is still above the minimum, the employer commits no offence.  In such a case he is not actuated by the reason that the employees are entitled to the benefit of the award, but by the reason that his operations have become unprofitable.”

11. If s 5 of the Conciliation and Arbitration Act only covered a case where an employee was dismissed because of the fact of an award, as distinct from its content, the Commonwealth Industrial Court gave itself unnecessary trouble in Klanjscek v Silver.  As there was no suggestion that the employer objected to the fact that the employees were covered by the Clothing Trades Award, the Court could have dismissed the information on that simple ground.

12. A similar comment may be made about Musgrove v Murrayland Fruit Juices Pty Ltd (1980) 47 FLR 156, a decision of the Federal Court. In that case Smithers J dismissed an information under s 5(1)(b) of the Conciliation and Arbitration Act, but only because, on the facts, he rejected the contention that the employer dismissed the prosecutor for taking a lunch break prescribed by the award.  His Honour considered whether there was a direct connection between this award entitlement and the dismissal.  If he had thought the offence was committed only where there was a link between the dismissal and the fact of an award, as distinct from its content, it would not have been necessary to address that question.  As there was obviously no such link, the information would have been dismissed on that basis.

    The proper interpretation of s 298L(1)(h): conclusions

13. I have mentioned all known decisions dealing with the Commonwealth legislative antecedents of s 298L(1)(h). They are surprisingly few in number, considering that the antecedents go back to 1904. Of course, there may be other decisions that neither counsel nor I have located. But what is striking about the known cases is that it has always been thought necessary for the court to determine whether the employer’s conduct was related to the existence of particular award conditions. It seems no court has ever thought the reach of the relevant provision was restricted to a case where the employer had an ideological or principled objection to an employee being covered by an award, as distinct from an aversion to some term of the award.

14. The approach taken in respect of the antecedents of s 298L(1)(h) does not necessarily apply to the current provision. Theoretically, at least, it is conceivable that Parliament intended s 298L(1)(h) to have a reach and application different from its predecessors. It is necessary to construe the present provision in its own legislative context. However, to the extent that judicial decisions concerning the predecessor provisions are relevant to resolution of the issue of construction, they favour the argument of the respondents rather than that of the council or the Minister.

15. Section 298K and 298L appear in a Part of the Act (Part XA) entitled “Freedom of Association”. The objects of that Part are stated in s 298A, which reads as follows:

    “As well as the objects set out in section 3, this Part has these objects:

    (a)to ensure that employers, employees and independent contractors are free to join industrial associations of their choice or not to join industrial associations; and

    (b)to ensure that employers, employees and independent contractors are not discriminated against or victimised because they are, or are not, members or officers of industrial associations.”

16. During the course of argument, reference was made to the title and objects of Part XA.  The suggestion was that they support the view that the words “benefit of an industrial instrument or an order of an industrial body” refer to the fact that the employee is entitled to benefit by such an instrument or order, as distinct from the content of the instrument or order; in other words that the employee has an association with the instrument or order.  However, this argument takes too narrow a view of the concept of freedom of association.  It fails to appreciate the link between a person’s freedom to engage with others in collective industrial action and that person’s entitlement to enjoy the fruits of such action.  I referred to this link in Construction, Forestry, Mining and Energy Union v BHP Steel (AIS) Pty Ltd [2000] FCA 1008. In that case the respondent refused to proceed with a proposal that a person take a position at its steel works, on a “job swop” basis, unless the person repaid the value of award benefits he had recently received in respect of his retrenchment at the respondent’s colliery. The case was conducted, on both sides, on the basis that s 298L(1)(h) is concerned with particular award benefits. In discussing a decision of Moore J concerning s 334 of the Industrial Relations Act, I said at para 48:

    “It is fundamental to the notion of freedom of association that employees should be free to join, or refuse to join, industrial organisations; and not be subject to discriminatory action or victimisation on account of their choice. Likewise, it is fundamental that employees should be free, if they choose to do so, fully to participate in the affairs of registered organisations and in lawful actions designed to protect and further the interests of such organisations and their members. Once again, they must not be penalised for taking that course. Similarly, employees should be allowed, without penalty, to take advantage of entitlements provided by, or under, the Act, including award benefits. To victimise, or discriminate against, an employee who insists on obtaining and receiving award benefits, is to offend notions of freedom of association; such an action undermines the right of collective action.”

17. This passage was cited with approval by Ryan J in Maritime Service of Australia v Burnie Port Corporation Pty Ltd [2000] FCA 1189 at paras 51 and 52. His Honour’s decision was reversed by a Full Court for other reasons: see Burnie Port Corporation Pty Ltd v Maritime Union of Australia [2000] FCA 1178. However, the Full Court did not express disagreement with Ryan J’s adoption of what I had said.

18. The point made by counsel for the council about the form of s 298F(2) has a superficial attraction. That subsection refers to conduct carried out with a purpose or intent relating to the fact that an award etc applied to a person’s employment, or that the person is bound by an award etc. However, the role of s 298F(2) must be borne in mind. The circumstances referred to in that subsection are but one of a series of circumstances that give rise to the application of the Part: see ss 298D to 298H.

19. Counsel for the council and counsel for the Minister both contended the interpretation adopted by Madgwick J would have unacceptable consequences. They stated, correctly, that the potential application of s 298L(1)(h) is wider than was the potential application of the corresponding provisions in the Conciliation and Arbitration Act and Industrial Relations Act. Section 298L(1)(h) refers to “the benefit of an industrial instrument” and this term is defined by s 298B(1) so as to mean:

    “… an award or agreement, however designated, that:

    (a)is made under or recognised by an industrial law; and

    (b)concerns the relationship between an employer and the employer’s employees, or provides for the prevention or settlement of a dispute between an employer and the employer’s employees.”

    The term “industrial law” is defined to mean:

    “… this Act or a law, however designated, of the Commonwealth or of a State or Territory that regulates the relationships between employers and employees or provides for the prevention or settlement of disputes between employers and employees.”

    Counsel comment:

    “Clearly the definition of industrial instrument covers a much wider range of instruments than was ever covered in the past.  It extends to awards or agreements made under State Law.  These instruments were never covered or referred to in the past.  This greatly extends the scope of Part XA to protect the position of employees entitled to the benefit of such instruments.”

20. However, the fact that the paragraph now applies to a wider range of instruments is not a reason for departing from the settled interpretation of the words “is entitled to the benefit of”.  The expansion is probably because of parliamentary concern to extend Commonwealth freedom of association protection as far as possible.

21. In their written submissions, counsel for the council said:

    “It may be recalled that the scope of s.298K(1) is potentially quite wide.  It can cover taking away overtime, moving from one position to another, not giving work to irregular employees, and certainly dismissal.  Is it to be the position that once one of the reasons for such conduct is the existence of a wage increase in an award a new provision in an award for a regime of hours, higher penalty rates etc that such normal business decisions become unlawful.  The potential scope of s.298K(1) with s.298L(1)(h) is enormous on this reading.  Is that what the legislature intended in 1904?  Is that what the legislature intended in 1996?”

22. I agree the scope of s 298K(1) is wide. There may be occasions upon which the application of the interpretation adopted by Madgwick J, and favoured by me, will lead to an apparently harsh result. That is not a new observation. In Eaton v McKenzie, in 1916, Nicholls CJ said at 96 it had been “urged for the appellant, with much force, that this law, if construed according to the plain and usual meanings of its words, will produce consequences sometimes absurd and sometimes oppressive”. The Chief Justice said he believed that to be true; nonetheless he dealt with the case on the basis of those meanings. He obviously thought the court should leave it to the legislature to take whatever action was needed to cope with any absurdity or oppression that might emerge. That Parliament did not find this necessary but, on the contrary, repeatedly re-enacted the formula “entitled to the benefit of”, supports the impression, that might anyway be gleaned from the paucity of decided cases, that Nicholls CJ’s view was overly pessimistic.

23. In considering the effect on outsourcing of the trial judge’s interpretation, it is important to note, as we have seen, that this interpretation is consistent with the interpretation that has invariably been applied to s 298L(1)(h) and its statutory predecessors; yet, as counsel for the council themselves emphasise, outsourcing is a long-standing phenomenon in Australia and has expanded markedly in recent years. This has been done without giving rise to a plethora of cases in which reliance has been placed on s 298L(1)(h). Perhaps the explanation is that outsourcing usually involves much more change than in the present case.

24. Although the details vary from case to case, outsourcing typically involves the engagement of a contractor who carries out a function or operation, previously undertaken by the enterprise itself, in a more efficient way; perhaps by the use of more sophisticated equipment, perhaps by using specialised labour. It will generally be possible for an outsourcing employer, accused of s 298K(1) conduct for a s 298L(1)(h) reason, to negative that reason by proving other reasons for the decision to outsource. What makes this case unusual is that the functions to be undertaken by Silver Circle were exactly the same as those previously undertaken by the council and would be performed by many of the same people and in virtually the same way. It was not suggested that new equipment would be used; the only envisaged “efficiency” was a saving in costs by moving the labour force from the certified agreement to the HACC award.

1. In my opinion Madgwick J was correct in adopting the second of the two interpretative approaches identified by him. Section 298L(1)(h) does not apply only to conduct motivated by the fact that an industrial instrument or order applies to an employee.  It applies, also, where the employer is motivated to engage in proscribed conduct because of the content of the instrument or order.

   The application of this interpretation

2. As I have mentioned, counsel for the appellant do not challenge the findings of primary facts made by Madgwick J. However, they submit that, even if his interpretation of s 298L(1)(h) was correct, Madgwick J erred in its application. Counsel say:

   “… the learned Judge focussed simply on one meeting of Council on 22 February 1999 and did not give any consideration to the legislative regime binding on the Council, the recommendation by the panel nor the role of the Chief Executive Officer.  This led to an inquiry that was too narrow and a finding on the facts that was incorrect.”

3. In elaborating this submission, counsel observe that the meeting of council on 22 February 1999 was only one of a sequence of events, that commenced with the decision in March 1996 to select HACC services for tender and ended with the termination of the HACC employees’ employment on 23 May 1999.  Counsel emphasise the report of the evaluation committee and point out that, at the trial, counsel for the union and Ms Phillips indicated he would make no criticism of the council for failing to adduce evidence from the four officers who constituted the evaluation committee; counsel told Madgwick J “our central focus is on the decision of the councillors”.

4. Counsel for the appellant say their opponent at the trial was entitled to take that course, but this did not justify Madgwick J confining his attention to the council meeting.  In their written submissions, they say his Honour’s focus was too narrow:

   “The learned Judge gave no weight or consideration to:

   (a)the obligation to engage in compulsory competitive tendering on the Appellant.  It had no choice but to comply with State law.

   (b)Home Care was selected for such tendering in 1996 and the Appellant followed the process in the legislative scheme.

   (c)There was a panel set up that assessed the tenders in compliance with the legislative scheme.  The Respondents said they would not rely on their reasons.  That is very well for them but no reason for the learned Judge to simply ignore this step in the decision making process.

   (d)      The Council accepted the recommendation of the panel and the CEO.”

5. Counsel go on:

   “Consideration of all the circumstances reveals that the Councillors were apt to query the reasons for the disparity in the tender prices. The Councillors were considering the CEO’s recommendation following upon a process of management endeavours to promote a more competitive in-house bid. It is not unreasonable and in fact entirely rational that they should have adverted to the obvious disparity in prices and to seek an explanation for it. Little wonder that the Councillors should be surprised by the difference, particularly as the same union that represented the home care workers in the Council was a party to the other award. However, once the Councillors were aware of the fact of the disparity and the reason for it the Act did not require them to reject the recommendation for the more advantageous bid merely because the advantage was due to award differences. Price was but one of two other criteria in which Silver Circle was superior on the bid. But the reality is that the dye had been cast back in 1996. The price difference that was revealed in the separate bids was a matter that the Councillors but briefly turned their minds to on 22 February 1999 in their consideration of the recommendation of the CEO. The real issue was whether, in all of the circumstances, the Appellant dismissed the home care workers, or prejudicially altered their positions, for a prohibited reason. Whether the conduct was for a prohibited reason could not be ascertained by confining the inquiry to the decision of the Council on 22 February 1999. That decision and the reasons for it could be understood properly only after looking at all of the circumstances.”

6. Counsel for the appellant also point out that it was resolved, on 22 February 1999, to accept the Silver Circle tender subject to two conditions:  successful completion of the proposed transition plan and confirmation from Silver Circle of completion of a planned capital injection.  Counsel point out that the contract between the council and Silver Circle did not arise until fulfilment of the two conditions.  They say:

   “The HACC workers’ positions would be affected only if Silver Circle fulfilled the conditions precedent and ultimately took up the contract with the Appellant.  A consequence of the fulfilment of those conditions would be that the Appellant would enter into an agreement with Silver Circle to provide the HACC services, Silver Circle would take up the contract and the positions of the HACC workers in the Council then would become redundant.  The positions of each of the HACC workers would be redundant not because of an intentional act by the Appellant to change their positions to their prejudice but rather because Silver Circle fulfilled the conditions precedent to acceptance of their offer to the Appellant to provide the HACC services and a contract was made for Silver Circle to perform the services.  Consequently, the learned Judge has erred in finding that the positions of the home care workers were altered to their prejudice by the resolution on 22 February 1999.”

7. Counsel also argue:

   “To the extent that there was any alteration of the home care workers’ positions, and of the dismissal, they were not effected by the intentional act of the council on 22 February 1999, but rather the consequences of it …  The resolution did not alter the home care workers positions to their prejudice for two reasons.  First, the acceptance of the Silver Circle bid was subject to a condition precedent.  Second, their terms of employment and the entitlements incidental to it were not cancelled or repudiated by the resolution.”

8. I agree with counsel that the council meeting of 22 February 1999 was only one of a sequence of events that resulted in the termination of the employment of the HACC employees. It would be wrong to focus on that meeting to the exclusion of other events in the sequence. However, Madgwick J did not make that error. He recounted the whole sequence of events, commencing with the enactment of the 1994 legislation requiring councils to engage in compulsory competitive tendering. He referred to the March 1996 decision to apply this procedure to the provision of HACC services, the discussions concerning an in-house bid, the appointment and report of the evaluation committee, the council meeting and its aftermath. There is no reason to think his Honour overlooked any of that history when determining whether or not he was satisfied that the council did not contravene s 298K(1)(a) or (c) of the Act.

9. It is correct to say that Madgwick J gave particular attention to the council meeting of 22 February 1999.  That is not surprising; if the council had reached a different conclusion in relation to acceptance of the Silver Circle tender, there would have been no reason to terminate the employment of council’s HACC employees; this case would not have arisen.  It is also correct to say that the termination was not effected by council itself, at that meeting, but by Mr Heine as council’s chief executive officer.  However, in taking that step, Mr Heine was simply implementing council’s decision.  As the evidence cited by his Honour demonstrates, the councillors who attended the 22 February meeting were well aware that the inevitable result of a decision by them to accept the Silver Circle tender would be the dismissal of most (if not all) of council’s HACC employees.  Nonetheless, council accepted the Silver Circle tender.  Mr Heine then took the action that they expected, and intended, him to take.

10. The council’s decision directly and immediately caused the employees’ position to be altered to their prejudice: see s 298K(1)(c). The prejudice would not ripen into dismissal unless two conditions were satisfied, but the prejudice immediately arose. And the council’s decision was the operative cause of Mr Heine’s termination action: see s 298K(1)(a). While it is true that the HACC employees’ terms of employment “were not cancelled or repudiated by the resolution”, they were cancelled as a direct and foreseen consequence of the resolution.

11. It is factually incorrect to say, as do counsel for the appellant (see para 85 above), that the HACC employees were not made redundant “because of an intentional act by the Appellant to change their positions to their prejudice”.  Council intentionally took a course that it knew would alter the employees’ position to their prejudice.  Upon the basis of Madgwick J’s findings, a principal reason why it took that course was that, whilst employed by the council, the HACC employees were entitled to the benefit of the award and certified agreement while employees of Silver Circle (even if they were the same people) would not be so entitled.

12. It is important to note that counsel for the council do not submit the decision of their client was uninfluenced by Silver Circle’s price advantage; they concede it was one of the criteria the council took into account.  Nor do counsel suggest that Silver Circle’s price advantage was other than a reflection of the differences in the terms and conditions of the industrial instruments respectively binding the council and Silver Circle.  Under those circumstances, it seems to us, to put the matter at its lowest, that it was open to Madgwick J to reach the conclusion (as he did at para 65 of his reasons) that the council “has failed in a factual sense to establish that a reason for the dismissal or any other [s 298K] conduct … was not because of the [HACC workers’] entitlement to the benefits of the [award and certified agreement]”.

13. The findings of ultimate facts made by Madgwick J were based on inferences derived by his Honour from his findings of primary fact.  The outline of submissions filed on behalf of the council contained no challenge to those inferences.  The only points raised, in relation to the findings of ultimate facts, were those discussed above.  Consequently, counsel for the union and Ms Phillips dealt only with those matters.

14. During oral argument, and in response to some observations from the Bench, counsel for the council suggested Madgwick J erred in the drawing of inferences. However, they put no argument in favour of that suggestion. Accordingly, I do not regard it as a matter falling for present consideration. In my opinion, Madgwick J did not fall into any error in relation to the application of the interpretation of s 298L(1)(h) that he (correctly) adopted.

    Constitutional immunity

15. In Re Australian Education Union; Ex parte State of Victoria (“AEU”) (1995) 184 CLR 188, the High Court considered a submission that s 51(xxxv) of the Constitution does not authorise the exercise by the Australian Industrial Relations Commission of any power in relation to industrial disputes between a State, exercising governmental functions, and its employees. The Court did not uphold the whole of that submission but it accepted some limitations in the reach of the Commonwealth’s legislative power. In their joint judgment at 231, Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ said:

    “The limitation consists of two elements: (1) the prohibition against discrimination which involves the placing on the States of special burdens or disabilities (“the limitation against discrimination”) and (2) the prohibition against laws of general application which operate to destroy or curtail the continued existence of the States or their capacity to function as governments.”

    The first element is not invoked in the present case; the council relies on the second element. 

16. Counsel for the council contend their client must be regarded as the State of Victoria for the purposes of the doctrine of constitutional immunity.  Madgwick J accepted that proposition, but his decision to do so is disputed by the union and Ms Phillips.

17. In relation to the second element of the limitation, the six Justices in AEU said (at 232) the “exercise of Commonwealth power ‘to control the States’ would be an exercise of power inconsistent with the continued existence of the States as independent entities and their capacity to function as such”. At a later point (on the same page) their Honours mentioned an argument put by South Australia (an intervener) that referred to impairment of a State’s “integrity” or “autonomy”. They went on:

    “Although these concepts as applied to a State are by no means precise, they direct attention to aspects of a State’s functions which are critical to its capacity to function as a government.  It seems to us that critical to that capacity of a State is the government’s right to determine the number and identity of the persons whom it wishes to employ, the term of appointment of such persons and, as well, the number and identity of the persons whom it wishes to dismiss with or without notice from its employment on redundancy grounds.  An impairment of a State’s rights in these respects would, in our view, constitute an infringement of the implied limitation.  On this view, the prescription by a federal award of minimum wages and working conditions would not infringe the implied limitation, at least if it takes appropriate account of any special functions or responsibilities which attach to the employees in question.”

18. At 233 the Justices also mentioned the critical importance of a State government’s ability:

    “… not only to determine the number and identity of those whom it wishes to engage at the higher levels of government, but also to determine the terms and conditions on which those persons shall be engaged.  Hence, Ministers, ministerial assistants and advisers, heads of departments and high level statutory office holders, parliamentary officers and judges would clearly fall within this group.  The implied limitation would protect the States from the exercise by the Commission of power to fix minimum wages and working conditions in respect of such persons and possibly others as well.”

19. AEU was considered, in the context of a teachers’ redundancy award, by a Full Court of the Industrial Relations Court of Australia (Wilcox CJ, Lee and Madgwick JJ) in Re Australian Education Union; Ex parte Victoria (1996) 73 IR 250. That decision contains an extensive discussion about the reach of the AEU doctrine.  The Court distinguished between statutory provisions and awards that fetter the ability of a government to determine the identity of the persons whom it wishes to employ and ordinary industrial legislation that imposes burdens, including financial burdens, on State governments in common with others.

20. It is not contended that the application of ss 298K and 298L to the council’s employees would impair the entitlement of the council to determine the number and identity of those whom it wished to engage “at the higher levels of government”; it is accepted that HACC employees are not at that level. However, it is argued they affect the capacity of the council to govern because they inhibit the reorganisation of council’s service delivery. Counsel say:

    “The decision to outsource the HACC services cannot be construed in isolation from the process associated with compulsory competitive tendering.  It must be seen in the context of the operational requirements of the State to maintain a competitive service.  Thus the Council by its resolution on 22 February 1999 adopting, as it did, the management recommendation regarding the successful tender, gave effect to the operational requirement of the State to maintain a competitive service.  Appellant could not compete with the successful tender.  The reason it could not compete was because of the individual entitlements under the award imposed a greater burden for the Council than the burden of the successful tender under a different award.”

21. Counsel do not argue ss 298K and 298L are invalid. They say the council’s immunity limits the operation of s 6 of the Act. That section provides that the Act binds the Crown in right of the Commonwealth, each of the States, the Australian Capital Territory and the Northern Territory.

22. Although Madgwick J accepted the council should be regarded as an emanation of the State of Victoria and, therefore, an entity entitled to the State immunity propounded in AEU, he thought the immunity did not apply to ss 298K and 298L. He was influenced to that conclusion by Victoria v Commonwealth of Australia (1996) 187 CLR 416, in which the High Court considered a challenge to the constitutional validity of many of the amendments made to the Industrial Relations Act by the Industrial Relations Reform Act 1993. The amendments included the insertion into the Industrial Relations Act of a new Division (Div 3 of Part VIA) circumscribing termination of employment. The Court unanimously held the new Division, apart from a couple of provisions, to be constitutionally valid. The Court also unanimously held it was binding on the States, except in relation to termination on account of redundancy and terminations, on any ground, of employees at the higher levels of government: see ss 511 to 521. This conclusion extended to s 170DF of the Industrial Relations Act, which the Court considered separately: see ss 529 to 533. Section 170DF forbade an employer to terminate an employee’s employment for any one of many specified reasons, each of which involved some form of discrimination. Some of the reasons were similar in substance to those mentioned in s 298L(1) of the Workplace Relations Act. Madgwick J thought the High Court’s ruling about s 170DF was important; it established that anti-discrimination provisions bound the States, subject only to two exceptions: employees at the higher levels of government (an exception that was conceded to be inapplicable) and redundancy (an exception that Madgwick J thought not to apply to this case, upon proper analysis.)

23. It is not necessary to list all the cases in which reference has been made to AEU and Victoria v Commonwealth.  However, it is useful to mention Konrad v Victoria (1999) 91 FCR 95, a case in which a Full Court of this Court held that Div 3 of Part VIA of the Industrial Relations Act applied to the employment of Victorian police officers. At 104 North J said that s 170EE of the Industrial Relations Act, which authorised reinstatement orders, would be “invalid if it operates to destroy or curtail the capacity of a State to function as a government”:  He explained:

    “In Re AEU the High Court held that the Act was invalid insofar as it prevented a State from dismissing employees on grounds of redundancy. Several factors may explain this view. Redundancy arises when an employer has no further need for a job to be done. Large scale redundancies in the public service have occurred in recent years. They have followed fundamental restructuring of the work of the public service. The result has been that State governments no longer require many jobs to be done which had previously been done. To impede a State in a fundamental reorganisation of its workforce may be seen as intruding into its ability to implement a structure for government administration, and to compel it to retain employees which it does not need. In that sense it is quite distinguishable from, for example, the termination of an employee for disciplinary reasons. Such a termination does not relate to the structuring of the State workforce but rather relates to the composition of the workforce by persons conforming to appropriate behavioural standards. Thus, the reasoning that may have led the High Court to determine that the Act could not apply to terminations by the States on grounds of redundancy does not apply to terminations for other reasons.”

1. Thus, there has been an unbroken line of State and Federal authority in favour of the proposition that, for the purpose of deciding whether there has been an unlawful dismissal for the reason that an employee is entitled to the benefit of an award or certified agreement, it is necessary to draw a distinction between the “reason” or motive behind the dismissal and what produced that motive.  In this connection, reference should be made to an obiter observation by Evatt J in Grayndler v Cunich (1939) 62 CLR 573. Cunich had been charged with offences against s 9. A magistrate dismissed the informations and the informant sought to bring the matter before the High Court by notice of appeal. The appeal was struck out for being incompetent. However, Evatt J held the appeal was properly instituted and dealt with its merits. In the course of his reasons, he said (at 596) that Grayndler v Broun was wrongly decided, in so far as it laid down that an employer is entitled to dismiss an employee entitled to an award merely because his reason for doing so is that he does not wish to be saddled with the heavier burden of the award rates.  Evatt J said that “[i]f this general principle were accepted, a vital provision would be completely excised from the statutory scheme”.

2. I do not take Evatt J to be criticising the result in Grayndler v Broun.  In that case the employees were not dismissed merely because they were entitled to an increase in wages.  They were dismissed because the defendant could not afford to pay the award wages.  In that circumstance it was found that the employer was not obliged to keep his employees.  That is, because the burden of award rates means that it is no longer profitable to operate the business, it is not unlawful to dismiss the employees.  The criticism was directed to the comment by Street J that an employee could be dismissed where award rates would have “saddled [the employer] with a heavy additional liability.”  It is not necessary to decide presently what Street J meant by this observation and whether it goes too far.

3. The trial judge acknowledged that if the appellant’s decision to accept the Silver Circle tender were based on price alone, there would be no contravention of s 298K. He said: “Price of itself is not sufficient to constitute a prohibited reason”. But the trial judge went on to explain that “in the circumstances of the case, the only significant factor going to establish that price differential was the HACC workers’ entitlements under the award and agreement [and] it was likely that it was well known to all councillors that the discrepancy between the Council’s and Silver Circle’s industrial instruments accounted for the great part of the price disparity.” For this and other reasons, which I will mention in a moment, the trial judge found that an “actual, operative and significant reason” for the appellant’s action to accept the Silver Circle tender and dismiss its employees was that the employees were entitled to the benefits of the award and the agreement, although later he did say that this was “an operative, if subsidiary, reason”.

4. Those findings led the trial judge to conclude that there had been a contravention of s 298K(1)(a) (dismissal for a prohibited reason) and s 298K(1)(c) (injury for a prohibited reason). In relation to the contravention of s 298K(1)(a), the trial judge said that the appellant could not be protected “against engaging in prohibited conduct merely because it declared ‘redundancy’ to be the reason for dismissal”. He said that “the real reason for dismissal was the council’s decision (made in part for a proscribed reason) to outsource the HACC services, not because of an absence of work.”

5. On appeal, the appellant did not challenge this approach. First, in relation to the construction of s 298K(1)(a), the appellant did not argue that a distinction should be drawn between, on the one hand, the “real reason” for the dismissals (lack of work) and, on the other hand, the “real reason” for acceptance of the Silver Circle tender, one consequence of which was that dismissals became likely, if not inevitable. On one view, and it is a view that I prefer, s 298K(1)(a) cannot be concerned with conduct that falls into the latter category, because it does not involve a dismissal. To my mind, the true question to be determined was whether acceptance of the Silver Circle tender fell within s 298K(1)(c). This said, I do agree with the trial judge that acceptance of the Silver Circle tender altered the position of employees to their prejudice within the meaning of s 298K(1)(c). The trial judge referred to the key case Patrick StevedoresOperations No.2 Proprietary Limited v Maritime Union of Australia (1998) 195 CLR 1 where, in their joint judgment (at 18), Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ said of s 298K(1):

   “Paragraph (a) covers termination of employment; par (b) covers injury of any compensable kind; par (c) is a broad additional category which covers not only legal injury but any adverse affection of, or deterioration in, the advantages enjoyed by the employee before the conduct in question.”

   That reasoning has direct application. 

6. Second, the appellant did not argue that the trial judge was in error in the manner in which he approached the task of making findings of fact.  This is a matter to which I must return.  At this point, it is sufficient to note that the trial judge may not have drawn a sufficient distinction between the immediate reason (motive or purpose) for the dismissals or the acceptance of the tender, and the proximate reason (cause) which explained why that action was undertaken, as is required by cases such as Connington v Kogarah, Grayndler v Broun and Klanjscek v Silver.  The mere fact that the appellant was aware that the Silver Circle tender was lower, because Silver Circle had the benefit of lower award rates, may say nothing about the reason for acceptance of the tender or for the ultimate dismissal of the staff. 

7. Let me put the matter more directly in the context of municipal councils. Municipal councils provide many services to their ratepayers, from garbage collection to baby health care centres to meals-on-wheels for elderly citizens. Often they do not have sufficient funds to provide the services that the community requires. Every day decisions are taken on the allocation of scarce resources. The principal object of the new and mandatory competitive process provisions is to create efficiencies that will enable councils to provide more and better services. If a council, in the course of competitive tendering, accepts a tender which is lower than others because the tenderer has less onerous obligations under an industrial instrument, the mere acceptance of the tender cannot result in a contravention of s 298K. A construction of the section that produces that result would be unacceptable. That is not to deny, however, that there could be a case where the “real” reason for the acceptance of a tender is a prohibited reason. But, speaking generally, where a council is performing its statutory obligation to enter into contracts for the provision of goods and services in respect of 50 per cent of its total expenditure, and the council carries out that obligation strictly in accordance with the relevant statutory provisions (express and implied), it will not contravene s 298K.

8. On the appeal, and it seems also at trial, the appellant chose as its principal battle, a contest about the construction of the relevant statutory provisions. It argued that s 298L(1)(h) had a narrow scope. The argument was that the section is concerned only with dismissal based on the fact that an employee has some entitlement under an industrial instrument, regardless of the nature or level of that entitlement. The appellant assumes that if that is the proper construction of the provision, it will succeed on the appeal, because the trial judge said as much.

9. I have a clear view about this aspect of the operation of s 298L(1)(h). My view does not depend upon any purposive or other modern principle of statutory construction. It does not depend upon the legislative history of the provision. It depends simply upon the meaning of the words used in the provision, taking into account the context in which those words are used. Once this would have been known as the “literal rule” (J Willis, “Statute Interpretation in a Nutshell” (1938) 16 Canadian Bar Review 1), or the “plain meaning” rule (Rodriguez v United States, 480 US 522 at 525-6 (1987)). In my opinion, the language of the provision covers both a situation where the relevant conduct is motivated by the mere fact that an employee is entitled to an industrial instrument as well as a situation where that conduct is motivated by the level, degree or extent of that entitlement. Take the following two cases by way of example. The first is where an employee becomes entitled to the benefits of an award for the first time. He is then dismissed for that reason. The second example is where an employer is bound by an award which is varied to increase the benefits payable to his employee. The employer dismisses the employee because his award rates have increased. In each case the question to be asked is: “Was the employee dismissed because the employee was entitled to the benefit of an award?”. In each case, the answer must be in the affirmative. In the first example, the answer is in the affirmative because it is the existence of the award that has brought about the dismissal and a person to whom the award applies “is entitled to the benefit” of it. In the second case, the answer is in the affirmative because the additional benefits have come about because the employee “is entitled to the benefit” of an award. I see no reason why it is necessary to draw a distinction between the two situations and hold that one is within, and the other outside, the section. I do not believe that this view is inconsistent with what was said by Kenny J in Australian Workers’ Union v BHP Iron-Ore Pty Ltd [2001] FCA 3 at [66], where she dealt with a different subsection. It is consistent with the decisions in Connington v Council of Municipality of Kogarah, Grayndler v Broun, and Klanjscek v Silver.  In any case, to hold otherwise would not be a sensible result and, as we know, statutory construction (the golden rule) is aimed at attributing to parliament a rational intention, whenever possible. 

10. The trial judge found that an operative reason for the appellant’s acceptance of the Silver Circle bid was that HACC staff were entitled to the benefits of an award and a certified agreement by a process of inference from other facts.  The facts upon which the inference was based were stated by the trial judge to be the following:  (1) the appellant was concerned about the comparative expense of its employees performing the HACC work (the comparison is between the rates of pay under the in-house tender and the rates under the Silver Circle tender); (2) the appellant knew that the entitlement of those employees was the main reason for that comparative expense; (3) the appellant believed that the main reason that the expense might be reduced was that Silver Circle’s employees would be unable to access entitlements of a similar value; (4) the appellant knew that it was probable that at least some of Silver Circle’s employees would come from its own ranks and perform the same work; (5) the appellant had attempted to have its employees voluntarily reduce their entitlements; (6) the decision to accept the tender was taken only after reference to the employees’ decision to accept that they were, “in effect, labourers unworthy of their present hire”.

11. The finding was the subject of criticism on the appeal.  That criticism was largely based upon the alleged failure by the trial judge to take into account, or have proper regard to, a number of factors, including (a) the statutory obligation imposed upon the appellant to engage in compulsory competitive tendering; (b) the establishment of a panel to assess the tenders; and (c) the appellant’s decision to adopt the recommendation of the panel to accept the Silver Circle tender.  I am not at all convinced that all these criticisms are warranted.  The operative decision was made by the councillors of the appellant.  Before the decision was taken, the issue was the subject of vigorous debate.  There was discussion about the panel’s recommendation, the interests of the recipients of the appellant’s health care services and the interests of the appellant’s ratepayers generally.  The trial judge had regard to those matters, as is evident from his reasons.

12. The real criticism, if any can be levied at the process of finding the inferred fact, is that the inference was not open.  Whether an inference can be drawn from facts found is a question of law:  Hope v Bathurst City Council (1980) 144 CLR 1, 8-9. If the inference was not open then there is an appellable error of law: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 356. If the inference is one about which minds may differ, there will be no error: TracyVillage Sports & Social Club v Walker (1992) 111 FLR 32 at 37-38.

13. On the facts as found, the inference was not open.  In the first place, facts (1) to (5) do not support the inference.  They do support the finding, which was made, that the appellant’s decision to accept the Silver Circle tender was based on price and that the appellant knew the reasons for the difference in price between the in-house tender and the Silver Circle tender, a proposition which is hardly surprising.  But neither that fact, nor facts (1) to (5) taken together, justify the conclusion that what motivated the appellant’s action was the very fact that its employees had superior entitlements under their award and agreement.  It seems to me that the trial judge failed to distinguish between the immediate reason for the relevant act, be it the dismissals or the acceptance of the Silver Circle award, and the proximate reason for that act.  I can make the point by reference to two sentences in the reasons.  The trial judge said:  “The major and decisive factor in the Silver Circle bid’s acceptance was its price.  The major and decisive factor in the difference in price was that, as everyone conceives it, Silver Circle would remunerate the workers doing HACC work under the Silver Circle award and not the Council’s industrial instruments.”  The finding that price was a “major and decisive factor” is plainly correct.  To describe the other “major and decisive factor” (that the price difference was the result of different award rates) as a motive for the decision is where the error is to be found.  This “major and decisive factor” is not what motivated the decision but merely explains the difference in price.  The trial judge did not give proper regard to the appellant’s statutory obligation when weighing these facts.  Then there is fact (6), namely that the decision to accept the Silver Circle tender was taken after the employees had refused to reduce their award rates to enable the in-house tender to be more competitive.  That the appellant’s decision was taken after this had occurred does not, either alone in combination with facts (1) to (5), support the inference.  Indeed, on one view of the matter, asking the employees to reduce their entitlements, to make their in-house bid more competitive, tends to favour the appellant’s case, rather than the contrary.

14. This is not, however, sufficient to dispose of the appeal. The trial judge based his decision on an additional ground. He said that “at the very least … it can safely without injustice be said that the [appellant] ha[d] failed to discharge its s 298V onus of proof”. Section 298V relevantly provides that “if … it is alleged that [conduct] was … carried out for a particular reason or with a particular intent … it is presumed … that the conduct was, … carried out for that reason or with that intent unless [it is] prove[d] otherwise.” This provision creates a presumption which requires a particular conclusion to be drawn until the contrary is proved. That is, s 298V assigns to the defendant the legal burden of proof in respect of the issue to which the provision relates. Thus, at trial, the appellant had the obligation to prove that the dismissal of its employees or the alteration of their position to their prejudice was not for a “prohibited reason”. If it failed to convince the trial judge to the appropriate standard of proof, it would lose that issue.

15. But there is a limit to the operation of s 298V. It will cease to have application in a case where there is sufficient evidence to enable the trial judge to make a positive finding whether conduct has been carried out for the alleged reason or with the alleged intent. Put another way, the presumption imposed by s 298V must be drawn when there is not sufficient evidence before the court to permit the judge to determine what are the true facts, that is, true in the sense of being more probable than not. When the judge has that evidence, he cannot resort to s 298V as an alternative to finding facts.

16. Here the trial judge was satisfied that there was sufficient evidence for him to decide whether or not the relevant conduct had been engaged in for a prohibited reason. Not only was the trial judge satisfied that he had the evidence, he made a finding in that regard. It was not therefore appropriate for the trial judge to place any reliance on s 298V, even as a “fall-back”.

17. However, because, in my opinion, the trial judge was not entitled to find by inference from the proven facts that the appellant had dismissed its staff or accepted the Silver Circle bid for a prohibited reason, it still leaves open the question whether there is other evidence which permits that finding to be made, or whether such a finding must be made because of s 298V.

18. No argument was addressed to this court on any of these matters. To answer the questions would require a close examination of the whole of the evidence, including a detailed assessment of the evidence given by Councillor Melham, which the trial judge described, without explanation, as “not helpful” to the appellant’s case. Although I incline to the view that the evidence was sufficient to discharge the onus imposed by s 298V, it is neither appropriate not possible for this court to decide the matter for itself. Not only would it be necessary to sift through the whole of the evidence and form views without the aid of any submissions, it might also be necessary to make judgments about the evidence of Councillor Melham without the advantage of having seen him give it. Regrettably the matter should be remitted to the trial judge for his reconsideration. This course is necessary because of the manner in which the appeal has been argued.

19. In view of this conclusion, it is not necessary to consider the other ground of appeal. But because it was the subject of considerable argument, I should express my views. The appellant says that s 298K and s 298L are invalid to the extent that they operate to limit the ability of the State of Victoria (of which, it is said, the appellant is an agent) to determine the number and identity of those whom it wishes to dismiss on the grounds of redundancy.

20. In this connection two questions arise. The first is whether the appellant is an “emanation” or “agency” of the State and, second, whether s 298K and s 298L “unduly interfere” with the performance by the appellant of its functions.

21. The answer to the first question was given as long ago as 1904 by the High Court in the first volume of its authorised reports.  In Municipal Council of Sydney v Commonwealth (1904) 1 CLR 208 the question was whether a municipal rate could be levied on Commonwealth property. Section 114 of the Constitution provides that “a State shall not without the consent of the Parliament of the Commonwealth … impose any tax on property of any kind belonging to the Commonwealth …”. The court held that s 114 prevented the municipality from levying rates on Commonwealth land. In the course of his judgment, O’Connor J referred with approval to the decision of the United States Supreme Court in Meriwether v Garrett 102 US 472, 511 (1880):

    “Municipal corporations are mere instrumentalities of the State for the more convenient administration of local government.  Their powers are such as the legislature may confer, and these may be enlarged, abridged, or entirely withdrawn at its pleasure.  This is common learning found in all adjudications on the subject of municipal bodies, and repeated by text-writers.”

1. That a municipal corporation in Victoria is a “mere instrumentality of the State” is evident from the statute pursuant to which it is established. First, it carries out functions of government. According to s 6 of the LocalGovernment Act a principal object of a council is “to provide for the peace, order and good government of its municipal district.”  It carries out that function by making “local laws” under s 111.  A contravention of a local law may be made an offence punishable by a fine:  s 115.  To fund its operations a council may raise taxes in the form of general rates and various other charges.  It is given power to sell land to recover unpaid rates and charges.  Second, notwithstanding these wide powers of government, a council is under the direct control of the executive.  The Governor in council can revoke in whole or in part any local law:  s 123.  The council must report to the executive, by preparing an annual report which must be submitted to the responsible Minister:  s 126.  If the Minister considers it necessary, he or she may direct the municipality to prepare further financial statements and provide other information:  s 127A.  By s 185B the Minister may limit the income a council can raise from rates and charges.  Certain investment powers can be exercised only with the approval of the Minister and the Treasurer: s 193.  And so on.

2. Whether the relevant test is the so-called “functions” test (eg Mersey Docks v Cameron (1865) 11 HLC 443, 465; 11 ER 1405, 1413) or the modern “control” test (eg Superannuation Fund Investment Trust v Commissioner ofStamps (SA) (1979) 145 CLR 330; Townsville Hospital Board v Townsville City Council (1982) 149 CLR 282; Registrar of the Accident Compensation Tribunal v FederalCommissioner of Taxation (1992) 178 CLR 145) the appellant meets the requirements of an agent of State.

3. The question whether ss 298K and 298L “unduly interfere” with the functions of the appellant is a matter upon which views may differ. In Konrad v Victoria (1999) 91 FCR 95 I expressed the opinion that the provisions of the Workplace Relations Act which impose an obligation upon the State of Victoria to reinstate a police officer who had been unfairly dismissed were beyond power.  However, this was a minority view.  Ryan J said that it was not a necessary incident of the existence or functioning of a State to reserve to it the unfettered power to terminate the employment of a Crown servant on a whim or out of spite or otherwise without a valid reason:  Konrad at 103. North J said (at 107): “To require a State to reinstate an employee who has been unjustifiably dismissed, in circumstances where it is not impracticable to reinstate the person and where it is otherwise appropriate to reinstate the person, is not an undue interference with the capacity of the State to function as a government”. It is clear the views of the majority, although not directly applicable, do nevertheless require me to conclude that provisions now under consideration are not invalid as being beyond the power of the Commonwealth parliament.

4. Finally, as to the appellant’s argument about the relief granted by the trial judge, I agree with Wilcox J.

5. For the foregoing reasons, I would allow the appeal, set aside the orders made by the trial judge, and remit the matter to the trial judge for further hearing.

I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.

Associate:

Dated:             4 April 2001

Counsel for the Appellant:	RM Doyle
Solicitor for the Appellant:	Maddock Lonie & Chisholm
Counsel for the First and Second Respondent:	F Parry QC and B Lacey
Solicitor for the First and Second Respondent:	Maurice Blackburn Cashman
Counsel for the Intervener:	H Dixon
Solicitor for the Intervener:	Freehills
Date of Hearing:	11 December 2000
Date of Judgment:	4 April 2001