Health Services Union

[2017] FWC 792

[2017] FWC 792

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.318 - Application for an order relating to instruments covering new employer and transferring employees

Health Services Union
(AG2015/5182)

COMMISSIONER CRIBB MELBOURNE, 8 FEBRUARY 2017

Directions order requiring production of documents - issued by Deputy President Hamilton on 2 March 2016 - section 590(2)(c) of the Fair Work Act 2009.

[1] The Health Services Union (HSU, the union, the Applicant) has made an application under section 318 of the Fair Work Act 2009 (the Act) in relation to the change in pathology services contractor, by South West Healthcare, from Clinical Laboratories Pty Ltd t/as Healthscope Pathology (Healthscope) to Specialist Diagnostics Services Pty Ltd t/as Dorevitch Pathology (Dorevitch, the Respondent). The change occurred on 1 July 2015.

[2] The HSU contends that there was a transfer of business when Dorevitch replaced Healthscope as the pathology services provider by South West Healthcare. Dorevitch submits that a transfer of business did not occur in accordance with section 311 of the Act.

[3] There was a Mention/Directions conference held with Deputy President Hamilton on 16 October 2015 followed by a Directions teleconference on 6 November 2015. The HSU filed a draft Directions Order, on 6 November 2015, which set out a range of documents it sought to be produced by Dorevitch. On 12 November 2015, Hamilton DP issued a Directions Order requiring the production by Dorevitch of the documents sought by the HSU. The HSU’s substantive application was then listed for hearing on 19 - 21 April 2016.

[4] On 2 March 2016, Hamilton DP issued Directions in the same terms as the Directions Order dated 12 November 2015 except that the hearing dates were changed to 26-28 April 2016. Dorevitch did not consent to the making of the Order by Hamilton DP and objected to the production of the documents set out in paragraph 1 of the Directions. The union’s application was the subject of a private conference during the hearing on 27 April 2016. However, there was no agreement reached. Subsequently, the HSU requested that the application be relisted for further conciliation and arbitration.

[5] In the meantime, due to Panel changes in the Commission, the application was reallocated to the Commission as presently constituted. The application was then listed for hearing on Wednesday, 7 December 2016. The HSU was represented by Ms S Bingham of Counsel and Dorevitch by Mr J Forbes of Counsel. At the beginning of the hearing, the parties indicated that it had been agreed that the preliminary matter, concerning the objection by Dorevitch to the order for production of documents issued by Hamilton DP, should be determined prior to the substantive issues regarding section 318 being dealt with. 1

Directions order

[6] With respect to the Directions order for production of documents, issued by Hamilton DP on 2 March 2016, Dorevitch objected to the documents set out in paragraphs 1(a), (b) and (c). Paragraph 1 of the Directions order is as follows:

“[1] On or before Tuesday 19 April 2015 Specialist Diagnostic Services Pty Ltd trading as Dorevitch Pathology (SDS) will produce to the Commission and provide copies to the applicant of:

(a) All contractual documents between SDS and South West Healthcare and Health Purchasing Victoria for the provision of pathology services commencing on 1 July 2015, including but not limited to the pathology services contract, the service level agreement and tender documents.

(b) A document showing the current rates of pay paid by SDS for each classification of employee named in Appendix A of the Healthscope Pathology – Victoria – Medical Scientists & Technicians – Enterprise Agreement 2014-2017 and employed by SDSfrom 1 July 2015 at the Warrnambool Base Hospital and the Camperdown Hospital pathology laboratories.

(c) The contract of employment for each employee engaged by SDS from 1 July 2015 at the Warrnambool Base Hospital and the Camperdown Hospital pathology laboratories and employed in a classification referred to in Order (b) above.”

[7] I will deal with each part of paragraph 1 in turn.

1. Paragraph 1(a) of the Directions order - category A/contractual documents

Dorevitch

[8] On behalf of Dorevitch, it was sought that paragraph 1 in its entirety of the order be set aside. The basis for this submission was that these documents were being sought as part of a fishing expedition. It was stated that the union was chasing down the documents to see if there was anything that might assist their case. 2 Further, Dorevitch contended that they objected to paragraph 1 of the order on the grounds that the documents sought to be produced (contracts and tender related documents) contain confidential and highly commercially sensitive information. It was stated that there is a substantial risk that the union will disclose this information and that this information might directly or indirectly damage Dorevitch in its future commercial endeavours.3

[9] It was submitted that, in dealing with the objections to the order, the Commission must start with the threshold issue of determining what the issues in dispute are. Once these are determined, Dorevitch argued that these will then frame how the Commission assesses the potential forensic relevance of the documents. 4

[10] Dorevitch contended that the threshold issue for the Commission is to determine whether there has been a transfer of business between Healthscope and Dorevitch. It was submitted that, for there to be a transfer of business, the four requirements of section 311 need to be satisfied. 5 It was submitted that sections 311(a), (b) and (c) are satisfied and that the heart of the issue was in relation to section 311(d).6 In order for there to be a connection between Healthscope and Dorevitch, it was argued that the connection had to be of the type described in subsections (3) to (6). It was stated that subsections (4), (5) and (6) are not relevant. Therefore, the connection that needed to be established is the one set out in section 311(3) of the Act.7

[11] It was submitted by Dorevitch that the connection between the two companies must be evidenced by an arrangement between Healthscope and Dorevitch about the use of assets. Dorevitch argued that the issue concerns whether or not there is an arrangement between the two companies that deals with the use of the premises where the employees work and use of the employees’ know-how (intellectual property). 8

[12] With respect to what type of arrangement would meet the test in section 311(3), the Commission was referred to two authorities in this regard. In Zabrdac v Transclean Facilities Pty Ltd 9 (Zabrdac), it was stated that Commissioner Bissett had distilled a long line of authorities in relation to the expression “arrangement”. Dorevitch contended that Bissett C had summarised the requirements for an “arrangement” as: that there is communication between the parties to the arrangement; the parties must reach some understanding and that there is some expectation that each of the parties will behave in a particular way that has some substance and is not contrived.10

[13] Further, the Full Bench decision in John Lucas Hotel Management Services t/as World Square Pub v Ms Vanessa Hillie 11 (John Lucas Hotel Management) was highlighted in relation to the Full Bench’s view that the word “arrangement” should be interpreted broadly. The Full Bench had then gone on to say that, for an “arrangement” to exist, one party must have assumed a moral obligation, or given an assurance or undertaking that it will act in some way.12 Dorevitch argued, therefore, that there must be an assurance or undertaking between the two companies and that the two companies must be involved.13

[14] In relation to the documents sought under paragraph 1(a), Dorevitch contended that there was nothing in Mr Elliott’s evidence which suggested the existence or possibility of a connection between the two companies. It was argued that the Commission could not simply rely on the fact that employees once worked for one company and now work for another. Dorevitch submitted that the application for production of documents was directed at finding out if there is a connection. It was said that there is nothing in the evidence that points to a gap that is to be filled by these documents. 14 In addition, it was argued by Dorevitch that Dorevitch’s witnesses have denied (in their witness statements) that there is an arrangement or connection.15

[15] With respect to the tender documents, Dorevitch said that it was assumed that what is sought is the response to the tender by Dorevitch. As Healthscope was also a tenderer, Mr Forbes contended that there could not be anything in Dorevitch’s response to a tender which would evidence an arrangement with a competitor who was also tendering for the same work. 16

[16] In terms of the assertion that Dorevitch owns or has beneficial use of certain Healthscope assets, Dorevitch submitted that this was a flawed argument. This was because the laboratories in which Dorevitch is now working and the employees’ know-how have never been assets of Healthscope. It was stated that there was nothing in the commercial documentation between Dorevitch and South West Healthcare which could evidence an arrangement between Dorevitch and a third party about those things. Dorevitch indicated that the premises out of which the pathology services are operated are owned by South West Healthcare. It was indicated that the evidence will be that Dorevitch has a commercial lease arrangement with South West Healthcare in the same way Healthscope did. As well, Dorevitch stated that the evidence will be that all of the Healthscope equipment moved out and the Dorevitch equipment moved in. 17

[17] It was acknowledged that the arrangement did not have to be direct between the old employer and the new employer. However, Dorevitch contended that there is nothing in the evidence which points to an indirect relationship. Rather, it was said to be guesswork on behalf of the HSU and that the Commission should not trouble itself with fishing expeditions which this one was said to be the most classic. 18 Dorevitch argued that the only basis on which the HSU is relying is that there are employees now employed by Dorevitch who used to be employed by Healthscope.19

[18] It was stated that there are no dots and the HSU is hoping that the documents sought to be produced will result in there being some dots that they can try to join together. It was submitted that the documents sought have nothing to do with Healthscope which is one of the parties that is supposed to be in the arrangement. In terms of the exercise of the Commission’s discretion, Dorevitch contended that it should not be put to the trouble of disclosing highly confidential, sensitive documents to a party in the vain hope that that party might be able to make a case. 20

[19] With respect to the union’s contention that the employees’ know-how is an intangible asset of Dorevitch’s, Mr Forbes stated that an employee’s stock of knowledge is not an asset of the employer. It was argued that there is a long line of authorities that there is a fundamental distinction between an employer’s confidential information and an employee’s stock of knowledge. Mr Forbes contended that an employee’s stock of knowledge is not an asset of Healthscope. 21

[20] In reply, Mr Forbes submitted that the union had not addressed the key question of whether there is evidence of a connection between the two companies. It was said to not be about whether there was a seamless transition. Rather, it was stated to be about whether there is a connection between the two companies as evidenced by an arrangement between them. Mr Forbes contended that there was nothing in Mr Elliott’s evidence which points to the possible existence of an arrangement. 22

[21] In relation to the union’s comments that the documents should be provided to the Commission before the Commission determines the relevance, Dorevitch argued that, if it is only relevance to be determined, that would be appropriate. However, it was stated that Dorevitch is seeking that the order be set aside on the basis that it should not be made because it is an abuse of process. Mr Forbes contended that fishing is an abuse of process and that seeking these documents is a fishing expedition. 23

Health Services Union

[22] It was submitted on behalf of the HSU by Ms Bingham that the Commission should determine that these documents are relevant and whether they should be provided with conditions attached. 24 The union argued that the basis for the order issued is section 590(2)(c) which provides the Commission with the ability to require that “other information” be provided to the Commission.25 The HSU explained that the only objection raised by Dorevitch, in the conference before Hamilton DP, was in relation to the contractual documents in paragraph 1(a) and not the other documents.26 It was argued that, in the course of the directions conference, the orders were issued pursuant to the Commission informing itself in these matters. In doing so, the HSU contended that the Commission had ruled as to the production of these documents in the presence of the parties.27 Therefore, from the union’s perspective, there has been a change in Dorevitch’s view in relation to the production of documents in paragraphs 1(b) and (c).28

[23] The Commission was referred to the decision of Moore DP in Optus Communications Pty Ltd and Australian Postal and Telecommunications Union and the Australian Telecommunications Employees’ Association/Australian Telephone and Phonogram Officers’ Association 29 with respect to the Commission’s powers under section 111(1)(t) of the Industrial Relations Act 1988. It was argued that the Commission cannot actually determine the relevance of the documents without actually seeing the documents. The union stated that the usual practice was that documents are to be produced to the Commission in the first instance.30

[24] With respect to the particular documents requested by the union, Ms Bingham stated that she had instructions from Mr Elliott that neither he nor the Branch will use any of the documents produced other than for the purpose of these proceedings. Further, it was stated that any financial figures, except those relating to wages and salaries, should be redacted with the Commission seeing the original documents prior to the reductions. In addition, Ms Bingham stated that the union was happy, if the documents are provided, for an order that they be returned to Dorevitch without copying. 31 Further, it was observed that the Commission has the ability under section 594 of the Act to make orders in relation to confidentiality amongst other things.32

[25] The HSU submitted that the Act does not require there to be a direct arrangement between the old employer and the new employer. It was stated that most public sector organisations would have issues associated with direct access between incoming and outgoing contractors. The union referred the Commission to the same paragraph in the John Lucas Hotel Management decision in relation to an arrangement existing where one party has given an assurance or undertaking that it will act in a certain way. 33

[26] With respect to the basis in the union’s material for the order in paragraph 1(a), it was stated that the Health Purchasing Victoria request for tender document included a requirement for a transition plan at the completion of the agreement (section 4.7). It was understood that the transition plan would be a three-way arrangement and that it would not be effective unless there was something going on between Healthscope and Dorevitch. The request for tender document was stated to also indicate that, in the event the tenderer is successful, the transition plan would become the service implementation plan. 34 The union argued therefore that it was not engaged in a fishing expedition and that the transition plan is an “arrangement”.35

[27] Other elements of this “arrangement” was said to include the contractor making lease payments to South West Healthcare for use of the laboratory and collection areas (section 5.3 .15) and the storage of histology slides (section 5.19). As well, the HSU contended that contract personnel, ethical purchasing and the contract period are matters that go to arrangements that were informally in place with respect to the outgoing and incoming employer. 36 A further tell-tale sign of an arrangement between Healthscope and Dorevitch was said to be Dorevitch’s meetings with health staff about potential employment with Dorevitch as part of the change over from the old employer to the new employer.37 It was said to be assumed that the documents requested will evidence a seamless transition.38

[28] It was submitted by the union that the transition plan meets the requirement for the arrangement to be about the beneficial use of some or all of the assets, whether tangible or intangible. This was on the basis that, subject to a lease between Healthscope and South West Healthcare, Healthscope has a beneficial use of that lease (laboratory benches and fixtures). Although new equipment came in with Dorevitch, it was said that the same infrastructure existed ie. the same benches, tearoom etc. 39

[29] In terms of the issue of know-how, this was stated by the union to be an intangible asset - employees with long service whose know-how was developed by Healthscope over the 20 years they held the pathology contract. The union argued that Dorevitch had the beneficial use of the know-how which had been developed by Healthscope. 40

2. Paragraph 1(b) of the Directions order - category B/classification documents

Dorevitch

[30] Mr Forbes argued, on behalf of Dorevitch, that the order would require Dorevitch to produce or create documents which are not currently in existence. It was stated that it was an order for the creation of documents and that it was well-established that party should not be required to create documents. 41

[31] Further, it was contended that the documents sought in this category do not inform the question that the Commission needs to answer. This was on the basis that the document sought is premised on the rates of pay which apply to employees covered by an agreement which does not apply to Dorevitch. 42 Dorevitch indicated that it might be relevant to the substantive case but that the Commission should not trouble itself with this particular request now.43 Mr Forbes stated that, in the future, there might not be an argument about these documents. However, if there was, Mr Forbes indicated that it would not be a long one.44

Health Services Union

[32] The HSU contended that it is a document that is required to be produced in some manner or form to the Commission. 45 The union was of the view that the Commission should make a ruling on these documents in terms of whether they are relevant to the section 318 proceeding. This could include making an order as to when these documents should be produced.46

3. Paragraph 1(c) of the Directions order - category C/employment documents

Dorevitch

[33] It was submitted that these documents are not relevant to the question before the Commission in relation to the order to produce objection and that these documents are properly obtained by the union from its members. 47 Further, it was indicated that these documents go to the substantive issues and so the Commission should not be concerned with the request in relation to these documents now.48 Mr Forbes argued that the Commission did not need to rule on paragraphs 1(b) and (c) at this stage. It was said that this could be done at a later time if there is an argument to be had at that time.49

Health Services Union

[34] The union argued that, for practical reasons, the Commission should make a ruling about whether these documents are relevant for the section 318 proceeding. It was stated that all of the employment contracts (about 20) are relevant to the exercise of the Commission’s discretion. 50

4. Considerations and conclusions

[35] It was common ground that the threshold area of dispute between the parties in relation to the substantive application concerns section 311(3) of the Act. Section 311(3) is as follows:

“Transfer of assets from old employer to new employer

(3) There is a connection between the old employer and the new employer if, in accordance with an arrangement between:

(a) the old employer or an associated entity of the old employer; and

(b) the new employer or an associated entity of the new employer;

the new employer, or the associated entity of the new employer, owns or has the beneficial use of some or all of the assets (whether tangible or intangible):

(c) that the old employer, or the associated entity of the old employer, owned or had the beneficial use of; and

(d) that relate to, or are used in connection with, the transferring work.”

[36] Paragraph 1(a) of the Directions Order goes to the requirements of section 311(3) in that the documents requested concern the contractual documents between Dorevitch and South West Healthcare and Health Purchasing Victoria. I will deal with the objection by Dorevitch to paragraph 1(a) in the first instance. The objections to paragraphs 1(b) and (c) will then be considered.

Paragraph 1(a) of the Directions order

[37] The primary ground of objection by Dorevitch is that the documents sought in relation to paragraph 1(a) represent a fishing expedition by the union and are not relevant to the issue that the Commission must address. This question was said to be whether there is an arrangement between Healthscope and Dorevitch in relation to the use of the premises and use of the employees’ know-how. It was argued that it was a fishing expedition by the union as there was no basis in their evidence which supported the production of these documents.

[38] In addition, it was argued by Dorevitch that the documents sought contain confidential and highly commercially sensitive information.

[39] On the other hand, the union submitted that it was not a fishing expedition and highlighted a number of areas in the evidence which refuted Dorevitch’s claim. The key evidentiary platform was said to be the request for a transition plan as set out in the Health Purchasing Victoria request for tender document. The transition plan was described by the union as an “arrangement” as required by section 311(3). This was on the basis that the plan required a three-way arrangement which would not be effective unless there was something going on between Healthscope and Dorevitch. Other elements of the “arrangement” included the storage of histology slides, meetings of Healthscope employees with Dorevitch regarding future employment and the contractor making lease payments to South West Healthcare for the use of the laboratory and collection areas.

[40] The union submitted that the documents should be produced to the Commission in the first instance and that their relevance should be determined at that point. In relation to the commercially sensitive and highly confidential nature of the documents, the union was prepared to give undertakings regarding its use together with appropriate redactions and/or confidentiality orders.

[41] I have carefully considered the submissions of the parties but have not been fully persuaded by either party in relation to their views regarding the fate of paragraph 1(a) of the Directions order.

[42] The threshold issue in dispute between the parties concerns whether there is a connection between Healthscope and Dorevitch (section 311(3)). In this case, evidence of such a connection would be an arrangement between Healthscope (the old employer) and Dorevitch (the new employer) whereby Dorevitch has the beneficial use of some or all of the assets that Healthscope had beneficial use of that relate to, or are used in connection with, the transferring work. In this matter, it is particularly the laboratories’ infrastructure (eg. benches and fixtures) and the employees’ know-how.

[43] Under section 590 of the Fair Work Act 2009, the Commission is able to inform itself in relation to any matter before it.

[44] In order to assist the Commission determine the threshold issue set out in paragraph [42] above, the Commission has decided to make an order, under section 590(2), for Dorevitch to provide to the Commission, the following documents:

1. Any documents evidencing an assignment of the lease between Healthscope and South West Healthcare, for the use of the laboratory and collection areas at the Warrnambool Base Hospital and Camperdown Hospital campuses of South West Healthcare, to Dorevitch.

2. Any documents evidencing a new or separate lease between Dorevitch and South West Healthcare for the use of the laboratory and collection areas at the Warrnambool Base Hospital and Camperdown Hospital campuses of South West Healthcare.

3. Any documents evidencing an arrangement between Dorevitch and Healthscope in relation to the provision of pathology services for South West Healthcare by Dorevitch.

4. The transition plan provided by Dorevitch in accordance with section 4.7 of Health Purchasing Victoria’s request for tender on behalf of South West Healthcare for the provision of pathology and radiology services.

[45] An order to this effect will be issued separately.

[46] Consequently, paragraph 1(a) of the Directions order will be set aside.

Paragraphs 1(b) and (c) of the Directions order

[47] These documents concern the current Dorevitch rates of pay for each employee, for the classification set out in the Healthscope Pathology Victoria - Medical Scientists & Technicians - Enterprise Agreement 2014 - 2017 51 and the contract of employment for each employee who was engaged by Dorevitch on 1 July 2015.

[48] As observed during the hearing, it is my view that these two sets of documents relate to considerations contained in section 318 of the Act. The union sought that the Commission deal with these documents on a pragmatic basis by making an order with a prospective date. This would obviate the need for the parties to return to the Commission to deal with orders in relation to these documents. Dorevitch, however, resisted this submission and urged the Commission to deal with these documents separately as they are related to the substantive matter.

[49] I am content to give priority to an orderly process over pragmatics on this occasion. Paragraphs 1(b) and 1(c) of the Directions Order will also be set aside. However, subject to any further submissions by the parties, it should be noted that, if the Commission was requested by the HSU, in relation to the substantive hearing, to issue an order in the terms of paragraphs 1(b) and (c), on the basis of the material currently before the Commission, the Commission would be of a mind to issue the order sought.

Paragraphs 2 - 7 of the Directions order

[50] As new Directions in relation to the filing of material by the parties for the substantive application need to be made, together with a new hearing date, the remaining paragraphs of the Directions order (2 - 7) will be set aside also.

Future programming

[51] Within a week of receipt of the documentation to be produced by Dorevitch, the Commission will advise both parties as to whether any of the documents will be provided to the HSU. At the same time, the Commission will give consideration to whether any undertakings from the union, redactions or confidentiality orders, need to be put in place before any of the documents are made available to the union. The decision as to what is appropriate course of action in this regard will only be made following discussions with the parties.

[52] Following settling of the documentation, within two weeks, a telephone Mention/Directions conference will be held. The purpose of the teleconference will be to discuss whether the parties wish to file supplementary submissions and/or witness statements and, if so, a new timetable and also a new hearing date for the substantive application.

Appearances:

S Bingham of Counsel for the Health Services Union of Australia

J Forbes of Counsel for Specialist Diagnostics Services Pty Ltd t/as Dorevitch Pathology

Hearing details:

2016.

Melbourne:

December 7.

 1   Transcript PN 16 - 18 and 25 - 27

 2   Ibid PN 42 and 274 - 309

 3   Ibid PN 44

 4   Ibid PN 49 - 55

 5   Ibid PN 56 - 57

 6   Ibid PN 57 - 71

 7   Ibid PN 71 - 72 and 317

 8   Ibid PN 76 - 80

 9   [2011] FWA 4492

 10   Transcript PN 87 - 97

 11   [2013] FWCFB 1198

 12   Ibid at [20] and Transcript PN 99 - 102

 13   Transcript PN 103

 14   Ibid PN 109 - 110

 15   Ibid PN 110

 16   Ibid PN 111

 17   Ibid PN 115 - 149

 18   Ibid PN 149 and 153 - 154

 19   Ibid PN 155

 20   Ibid PN 155 - 156

 21   Ibid PN 309 - 312

 22   Ibid PN 313 - 315

 23   Ibid PN 316

 24   Ibid PN 262

 25   Ibid PN 190 - 197

 26   HSU’s Outline of Submissions in Reply, dated 11 April 2016, at paragraph 11 and Transcript PN 198 - 200

 27   Transcript PN 201

 28   Ibid PN 211 - 214

 29   Print K1985, 26 February 1992

 30   Transcript PN 216 - 226

 31   Ibid PN 227 - 229

 32   Ibid PN 230

 33   Ibid PN 231 - 233

 34   Ibid PN 234 - 245

 35   Ibid PN 246 and 252

 36   Ibid PN 248

 37   Ibid PN 249 - 255

 38   Ibid PN 256

 39   Ibid PN 257 - 260

 40   Ibid PN 261 - 262

 41   Ibid PN 43 and 158

 42   Ibid PN 166 - 170

 43   Ibid PN 176 - 178

 44   Ibid PN 271

 45   Ibid PN 230

 46   Ibid PN 263 - 265

 47   Ibid PN 43

 48   Ibid PN 176 - 178

 49   Ibid PN 271

 50   Ibid PN 265 - 267

 51   AE410772

Printed by authority of the Commonwealth Government Printer

<Price code C, PR590068>