Jemena Asset Management (3) Pty Ltd & Ors v Coinvest Limited [2011] HCATrans 45

[2011] HCATrans 45

[2011] HCATrans 045

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M127 of 2010

B e t w e e n -

JEMENA ASSET MANAGEMENT (3) PTY LTD (ACN 086 013 461)

First Appellant

JEMENA ASSET MANAGEMENT (4) PTY LTD (ACN 009 641 187)

Second Appellant

JEMENA ELECTRICITY NETWORKS (VIC) LIMITED (ACN 064 651 083)

Third Appellant

and

COINVEST LIMITED (ACN 078 004 985)

Respondent

FRENCH CJ
GUMMOW J
HEYDON J
CRENNAN J
KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 2 MARCH 2011, AT 10.15 AM

Copyright in the High Court of Australia

__________________

MR A.J. MYERS, QC:   May it please the Court, I appear with MR C.B. O’GRADY on behalf of the appellant.  (instructed by Herbert Geer)

MR P.J. HANKS, QC:   Your Honours, I appear with MR S.J. MOORE for the respondent.  (instructed by Maddocks)

MR S.J. GAGELER, SC, Solicitor‑General of the Commonwealth of Australia:   If the Court pleases, I appear with MR C.P. YOUNG for the Attorney‑General of the Commonwealth intervening under section 78A of the Judiciary Act.  (instructed by Australian Government Solicitor Canberra)

FRENCH CJ:   Yes, Mr Myers.

MR MYERS: Thank you. The court below decided that there was no inconsistency within section 109 of the Constitution between these two laws – I am using the words of the court below ‑ ‑ ‑

FRENCH CJ:   Do you have an outline of your oral submissions, Mr Myers?

MR MYERS:   No, I do not, your Honour.

FRENCH CJ:   Yes, well, you are expected to hand one up at the beginning – no more than three pages.

MR MYERS:   I can only beg the Court’s pardon.  I learned of this a few moments ago.

FRENCH CJ:   Yes, all right.

MR MYERS:   The inconsistency between Commonwealth legislation – using the words of the court below – which deals with all ordinary aspects of long service leave entitlements which might arise in an industrial relationship between employer and employee by imposing on employers an obligation to give paid leave – or make payment in lieu of leave – when the employee has been employed for 10 years or more, on the one hand an estate law which imposes on the employer an obligation to give leave or make a payment or, depending upon the construction of the State Act, merely make a payment in relation to an employee’s period of employment in the construction industry without reference to the employee’s period of employment with the employer.  We say, of course, that that is wrong, and there is the constitutional inconsistency.  

May I ask the Court to go to the appeal book, the reasons for decision below and, in particular, to page 445.  In paragraph 29, the court below, in our respectful submission, correctly sets out the applicable law and there appears to be no difference between the parties and the intervener at this level.

GUMMOW J:   What is it that makes rules 27, 28 and 29 the law of a State?

MR MYERS:   I am sorry, I did not follow your Honour.

GUMMOW J:   We have to find an inconsistency between a law of the Commonwealth and a law of the State.

MR MYERS:   Yes.

GUMMOW J:   How do we get into the rules at all, unless they are a law of the State?

MR MYERS:   Quite so.  If they are not a law of the State, it is a question of inconsistency between the State Act and the Commonwealth agreements.  Certainly the matter was argued below on the basis that the rules of the trust deed were the law of the State.

FRENCH CJ:   Do you not have to take us first to the State Act and just show us how these obligations upon employers arise via the trust deed and the rules and presumably in a way that is traceable back to the statute itself.  It is not entirely clear.

CRENNAN J:   There is a rule‑making power under the deed.  It is at 258 but that does not really conclude the position, does it, in relation to this question?

MR MYERS:   I can take the Court to ‑ ‑ ‑

CRENNAN J:   Well, it may not conclude.

MR MYERS:   I can take the Court to the State statute.  The primary provision is section 6 and if the Court were to look at the appellant’s submissions, section 6 is set out in the annexure to the submissions.  It is page 21.  Yes, I have it now.

FRENCH CJ:   I think there is a bundle of respondent’s relevant materials which contains a copy of the State Act, which I take is the relevant copy?

MR MYERS:   Yes, it is.

FRENCH CJ:   Yes.  All right, section 6?

MR MYERS:   Section 6.  First of all it says:

Every worker is entitled to long service leave, and to be paid benefits out of the fund, in respect of continuous service in the construction industry.

We can skip subsection (2), and (3):

The amount of the entitlement and the method by which that amount is to be calculated are as determined from time to time by the trustee in accordance with the trust deed.

Then if one looks at section 7 it provides:

The trustee must not, without the prior approval of the Governor in Council, exercise any power, authority or discretion given to the trustee by the trust deed the exercise of which would have the effect of enlarging the class of persons capable of being paid benefits out of the fund.

Subsection (2):

Without limiting sub‑section (1), that sub‑section –

(a)has effect with respect to any addition to, or any amendment, modification, variation -

et cetera, which refers to certain defined expressions.

FRENCH CJ:   The primary obligation really comes out under section 4, does it not, in respect of the obligation to pay the long service leave charge and then that is tied into the calculation in section 4(2) in accordance with the trust deed.

MR MYERS:   Yes, it is.  Then if one goes to the trust deed itself, which is in the appeal book - the copy of the trust deed which contains the provisions enforced at the material time is at page 325 of the appeal book.

FRENCH CJ:   These are the rules under the trust deed?  The trust deed itself, I think, appears at 253.

MR MYERS:   Yes, your Honour is quite right.  These are the rules under the trust deed.  But the trust deed itself is at 253 as your Honour the Chief Justice has said, and at page 258 is the power to make rules - at line 30:

Trustee may make Rules

The trustee may from time to time, subject to the Act, this deed and the Rules . . . make Rules relating to the Fund, including (without limitation):

(a)the determination and payment of entitlements of Beneficiaries under this deed;

(b)the obligations of persons to make contributions to the Fund; and

(c)the general administration of the Fund.

The trustee is empowered to modify the rules.

The Rules must be construed as part of this deed –

et cetera, and then the trustee’s general powers are set out to invest and manage the fund - 6.2:

6.2.1Notwithstanding any other provision in this deed, prior to the Effective Date the Trustee may not exercise any power under this deed without the prior written approval of the Minister.

6.2.2As from the Effective Date, the Trustee may exercise its powers under this deed in accordance with the Act.

FRENCH CJ:   Maybe you can dispel a misconception that I have, but my initial reading of the State Act and the trust deed has left me with the impression that neither the provisions of the deed nor the rules themselves have statutory force, but what they do is to give content to obligations imposed by provisions of the State Act which are, for example, the calculation of a long service leave charge and so forth.  Is that a correct general characterisation?

MR MYERS:   I believe it is.  It is difficult to say that they have statutory force in the absence of any express provision of the statute which says so.

FRENCH CJ:   Yes.  They are not really a law of the State of Victoria.  They are a factum upon which the law operates.

MR MYERS:   That is probably true.  One cannot find in the legislation any provision which gives these rules the force of statute. 

FRENCH CJ:   Where does that leave us when we are looking at 109?

MR MYERS:   It leaves us with a State Act which confers, or rather creates – if I can go to section 6:

Every worker is entitled to long service leave, and to be paid benefits out of the fund, in respect of continuous service in the construction industry -

which, without any further content, is directly inconsistent with the federal instrument. 

CRENNAN J:   You are focusing on the words “long service leave”?

MR MYERS:   “[I]n the construction industry” because – if I can take you now to page 98 of the appeal book - this is the relevant federal agreement, the part dealing with long service leave:

Leave entitlements

24.2.1Subject to this award employees shall be entitled to long service leave at the ordinary rate of pay unless otherwise provided:

24.2.1.2on completion of 10 years’ service – 13 weeks’ leave; and

24.2.1.2for each additional one year of service – 1.3 weeks’ leave.

Then if one looks at 24.4 on page 99:

Except as provided elsewhere in this clause, payment of salary during any period of leave shall be made to employees at the ordinary rate of pay in the same manner as if they had continued working provided that any variation in the rate of pay shall be taken into account from time to time as it occurs.

Across the page at 24.4.5:

Payment in lieu of leave will not be made except to give effect to –

and there are four exceptions there.  They are immaterial for present purposes but there are exceptions.

CRENNAN J:   Am I right that there is no express provision in the federal instruments for portable long service leave?

MR MYERS:   None at all and, indeed, the provisions of 24.2 are contrary to portable long service leave.  It is continuous service in the employ of the employer.  That is the first thing that one would say.  The second is that there is, with some exceptions that are strictly limited, and I have just referred to them, under the federal award the employee has to take the leave and cannot take payment of the sum of money and keep working.  That is made very clear, if I could direct the Court’s attention on page 99 of the appeal book to 24.3.8:

Acceptance of paid employment during the period of leave will not be permitted.  Failure to comply with this condition will be treated as a breach of discipline.

The federal scheme is completely at odds with the scheme envisaged in outline, not in all its details, in the State Act.  Even without looking at the rules, which, as the Chief Justice has said constitute the facts and upon which the legislation operates, or in relation to which it operates, it is clear that there is an inconsistency.  If I could go back to section ‑ ‑ ‑

GUMMOW J:   Do you not have to say that the inconsistency is manifested by a qualification upon the power of determination by the trustee because what the trustee has done is exercise its power under section 6, has it not, in a way that produces this result?  To an extent you have to say there is an inconsistency in the ambit of the power.

MR MYERS:   I do, by reference to section 6(1), your Honour, which says:

Every worker is entitled to long service leave, and to be paid benefits out of the fund, in respect of continuous service in the construction industry.

FRENCH CJ:   Does that actually go anywhere?  I mean, what does that do?  It has to be linked with 6(3), does it not?  I mean, 6(3) is the crunch point; that is where the money comes from.

MR MYERS:   I was coming to section 6(3).  Certainly I accept that, your Honour.

The amount of the entitlement and the method by which that amount is to be calculated are as determined from time to time by the trustee in accordance with the trust deed.

But, nonetheless, section 6(1) creates an entitlement to long service leave and to be paid benefits in respect of continuous service in the construction industry in relation to every worker.  There is no getting around that.  It is in clear contradiction to the federal scheme, which does not recognise, to put it in a shorthand term, portable long service leave.

GUMMOW J:   I do not think section 6(1) has an independent life other than joined to 6(2) and 6(3), does it?  If we just had 6(1) there you would not get very far; you would not know how much and you would not know the method.  It is just a method of drafting.

MR MYERS:   That is true, your Honour - 6(3) provides for the working out of the basis right that is given, or for the manner of the working out of the basic right that is given, but the creation of the right is 6(1).

GUMMOW J:   Look, you could not have an action for statutory debt simply by relying on 6(1).

MR MYERS:   No you could not, that is true.  But, nonetheless, without 6(1), 6(3) would not have anything with which it could operate and the amount of the entitlement and the method by which that amount has to be calculated are to be determined from time to time by the trustee in accordance with the trust deed.  There is nothing in 6(3) which would entitle the trustee, for example, to decide that long service leave entitlements would not arise in respect of continuous service in the construction industry.  Obviously, the working out of 6(1) requires one to respect the terms of that section.

FRENCH CJ:   So the way it works is 4 sets up the obligation of an employer to pay the trustee a long service leave charge in respect of each worker.

MR MYERS:   Yes, it does.

FRENCH CJ:   That is to be calculated again - subsection (2), I think, brings in the trust deed.  It is however it is done under the trust deed, subject to a maximum of three per cent in subsection (3).  Then there is a recovery power in respect of those charges, and then that is all linked presumably to the entitlement provision, which is section 6, so there is at least a notional entitlement.

MR MYERS:   The fund is constituted in pursuance of the provisions of section 4, and the entitlement is to be paid benefits out of the fund, certainly.  Without the fund, there could be no entitlement.  In any event, if the true position is that the relevant State law is only the Act itself, then the matter is very simple. 

There is a very clear, a manifest inconsistency because the federal enactment provides that long service leave is in respect of continuous service with a particular employer and not in an industry.  It provides that long service leave has to be taken as leave, and not as a sum in lieu of leave, and it provides that the employer simply pays wages at the ordinary rate during the period of leave and does not fund the leave by payment into a fund established by a third party.

The Court will be conscious that the matter was dealt with differently below and the written outlines of submissions that have been filed in this Court proceed as if the terms of the trust deed were to be looked at as part of the State law, but if they are treated merely as the facts upon which the law operates, then strictly one does not get to them.

KIEFEL J:   Just returning to section 6(1), since the legislation does not make any provision for leave by way of time off work, it provides only for payments, could it be the scheme of the Act in section 6 that the leave spoken of is notional, that is to say, that section 6(1) recognises an entitlement to a worker arising out of the worker’s continuous service, and it describes that entitlement, as is commonly understood, an entitlement to leave, to time away from, but says that it is to be met only by “benefits out of the fund” and in that sense “leave” – “leave” is almost a redundant word.  It is a concept or a notion.  But 6(1) is only speaking about making payments to the worker and that is confirmed by subsection (3), because that is the only work that the trustee has.  The only powers that the trustee is given is with respect to the payment of money, not with respect to any monitoring or provision of leave in the sense of time off.

MR MYERS:   Two things, I think, in response to your Honour’s question.  The first is to note that section 6(1) of the legislation provides that every worker is entitled to long service leave – that is the first - and to be paid benefits out of the fund.  So the legislation itself appears to contemplate long service leave in the ordinary sense.

KIEFEL J:   You are putting the focus in a different place.  I would read it as perhaps “Every worker is entitled in respect of continuous service in the construction industry”.  That is what the entitlement is for.

MR MYERS:   In relation to.

KIEFEL J:   It is a question of what you get for that and long service leave may be leave as a word, a notion, it may be completely notional because all that is provided that they are to receive is to be paid benefits.  That is confirmed by subsection (3).  I do not know whether it is any more complicated than that.

MR MYERS:   In any case where an employee has long service leave under say the Commonwealth scheme, a conventional arrangement of time off work, the employee is paid benefits during that period.  Under the Commonwealth Act the benefits are measured by the amount of the ordinary wage.  Now, it would be perfectly possible under the scheme that this Act establishes to have the trust deed provide that the employer, at the time the right to long service leave benefit arises as a result of continuous employment in the construction industry, shall give the worker six months of leave.  The amount of the benefit, that is to say, the ordinary remuneration, is to be paid out of the fund.  That would be quite possible. 

Now, the way in which the deed is actually constructed is very tricky and it is not entirely clear whether something like that would not even be possible under the terms of the deed.  Our friends deny this.  We simply say it is not entirely clear that the trustee could not, even under the present rules, do something as I have said.  Certainly, the trustee could create a few more rules which provided for the sort of arrangements that I have put.

KIEFEL J:   Where would be the trustee’s source of power to make any rules with respect to the provision of leave as such within the Act?

MR MYERS:   They are within the trust deed basically.

KIEFEL J:   There is no section that inferentially one can even draw a power to the trustee from.

MR MYERS:   We say, with respect, that is not so because even looking at 6(1):

Every worker is entitled to long service leave.

CRENNAN J:   The problem, Mr Myers, is surely that looking at 6 as a whole the entitlements which 6 are covering are benefits out of the fund.

MR MYERS:   Yes, that is so but that is only with reference to the amount that is paid.  Is the amount paid in a lump sum or is it paid when a period of leave is taken?  Could I ask the Court to look at page 311 of the court book?  These are the rules that existed before the present.

FRENCH CJ:   This is an earlier version – there are two versions, are there not?

MR MYERS:   Yes, there are two versions.  This is the earlier version.  I just want to really make good what I am putting.  I am looking at rule 35:

When a Worker (including a Worker who has been a Working Sub‑Contractor) becomes entitled to Long Service Leave Benefit under these Rules, Long Service Leave shall be granted by his Employer as soon as practicable having regard to the needs of his establishment, but subject to these Rules -

So, the rules as they existed before the present rules certainly provided for long service leave in the conventional sense to be taken by the ‑ ‑ ‑

FRENCH CJ:   You would read that with rule 27, would you not, on page 306?

MR MYERS:   Indeed, indeed, which is still in the present rules.  It is a little bit marooned.

FRENCH CJ:   Yes, that is right and it immediately raises the question, how does this impose any obligation on an employer.  We are talking about rules made under a trust deed.  If it is going to impose an obligation on an employer it has to be via the Act which rather – and if there is no pathway through the Act whereby there is an obligation imposed on the employer to actually grant 13 weeks’ long service leave after a certain amount of time in the industry, then it may rather support the proposition that Justice Kiefel put to you that the long service leave entitlement spoken of here, albeit with rather poor drafting, is put in as a basis for calculation of the benefit to which the worker is entitled. 

MR MYERS:   Your Honour, the earlier rules which have been modified - and I grant they are not the rules that apply in the period the Court is concerned with, make it perfectly clear that the employer is to give long service leave.  There can be, with respect, no doubt about it.

FRENCH CJ:   They can make it as clear as they like but the question is what is to stop the employer saying, “Well, you can say what you like in your rules, there is no pathway by which they bind me”.

MR MYERS:   If the employer is in the construction industry, then the employer is bound by section 6(1).

FRENCH CJ:   So you say that section 6(1), one would have to read section 6(1) as being given content by reference to the rules from time to time.

MR MYERS:   Yes.  Indeed, that is how the scheme is established and operated.  I suppose employers would be delighted if the Court were to say that all this is of no effect, it is a castle in the sky, but truly if the legislative intention is that this fund should be set up and ‑ ‑ ‑

FRENCH CJ:   Well, you would have to read 6(3) “The amount of the entitlement” as referring to the entitlement to the enjoyment of long service leave as well as the entitlement to a payment out of the fund.

MR MYERS: Yes, one would. The other thing that I was going to say in response to Justice Kiefel’s question, and I do not want to get too far from answering the question, the Court will have noticed that both the respondent and the intervener make the concession that if the rules impose or create an obligation to give leave rather than simply pay a sum of money then there is an inconsistency within section 109 of the Constitution.

What we say is that that concession is rather paradoxical because that scheme for dealing with long service leave or benefits for long service would be less in conflict with the federal instruments than the present scheme if it only entitles the employee to a sum of money because then the present scheme has the effect that an employee after continuous service in the construction industry – leave that aside – instead of being required to take some leave can take a sum of money and keep working.

KIEFEL J:   If section 6(1) is some statutory assumption that leave is to be provided by the employer, is that position arrived at by reference to a view historically of the statute and the rules which have been made prior to the coming into effect of section 6(1)?  I mean, is that how one approaches it?  Is there some built‑in assumption here?

MR MYERS:   There is a built‑in assumption by reference to the use of the expression “long service leave”.  It is a well‑understood expression in the Australian employment context.

KIEFEL J:   You would say, “(Every worker is entitled to long service leave) (to be provided by the employer pursuant to)” something?  Is that how it works, because the trustee does not provide it, you said the employer must and it must be pursuant to something.  It has to be something placing an obligation on the employer.

MR MYERS:   In the case of this scheme it would be what is prescribed by the trustee.  The trustee, first of all, in the original scheme, which is evidenced at the appeal book on page 311, required the employer at the time the leave accrues to grant leave in the ordinary sense.  That has been muddied because rule 35 has been left out but, as the Chief Justice has pointed out, rule 27 ‑ and go back to rule 27 – is still in the existing, that is to say the form of the rules that operates at the time the Court is concerned with:

Every Worker is entitled to a Long Service Leave Benefit in respect of Continuous Service in the Construction Industry –

Now, “long service leave benefit” is specially defined at 27.2:

The amount of the entitlement is:

(a)      on the completion by a Worker of fifteen years’ Continuous Service in the Construction Industry – 13 weeks’ Long Service Leave –

et cetera.  Now it is 10 years but it is the same provision.  That appears, I should tell your Honours exactly where ‑ ‑ ‑

FRENCH CJ:   By the way, just before you leave 27.1, it is a little confused when one goes to the definition of “long service leave benefit” which is an entitlement paid out of the fund, whereas “long service leave” means long service leave which ‑ ‑ ‑

MR MYERS:   Yes, it is, your Honour.  If I could go to the rules with which the Court is directly concerned and look at appeal book page 360, that is where 27 is.  It is in the same terms except that it has gone to – there is 10 years continuous service.

GUMMOW J:   It looks like a duty of imperfect obligation.  What is the sanction if the employer does not observe 27, and how could there be a sanction just on a trust deed?

MR MYERS:   The employer would be in breach of section 6 of the Act.  If one is talking about a sanction created by Parliament, it is a breach of that provision which is directed to the whole world; every worker in entitled to long service leave, et cetera.  The amount of the entitlement is determined from time to time by the trustee in accordance with the trust deed.

GUMMOW J:   But even with respect to these monetary payments, what is the sanction?

MR MYERS:   The employer has no obligation to make the monetary payments, unless your Honour is referring to the contributions to the fund, and the contributions to the fund are set by the trustee, and the statutory obligation comes from section 4(3).  Section 5 enables a trustee to recover the fund.  That is not a sanction, though ‑ ‑ ‑

FRENCH CJ:   There is no remedy in relation to a failure to provide up to 13 weeks long service leave.

GUMMOW J:   There is no equivalent of section 5 to back the entitlement to take this time off.

MR MYERS:   No, but section 5 is a provision for the recovery of money.  You would not expect there to be a sanction of that kind.  It is not truly a sanction; it is just an ability to recover a debt.

FRENCH CJ:   It is a question of what is the remedy - you talk about an employer being in breach of section 6?

MR MYERS:   If an employer is in breach of section 6 an employer is in breach of Victorian statute and, certainly, at the least, one could get an order that the statute be obeyed.  I have dealt, I think, with the first question that the Court has asked of me.  If one is to look at the terms of the deed itself in determining whether there is an inconsistency, as the court below did and ‑ ‑ ‑

GUMMOW J:   Well, it was required to by the framing of the question, was it not?  What you want from us, as appears at page 456, is an answer yes to question (a) and question (a) is set out in 415 and it talks about inconsistency “and the instruments referred to therein, being the trust deed”.

MR MYERS:   Yes.  The answers that we would seek are set out on page 15 of the written submissions.  The reference and the answers is to the CILSL Scheme.  Now, that is admittedly a reference not only to the Act, but also to the rules that give the Act some greater content.  I was going to point out, and I shall do so very briefly, what the court below decided.  Could I again go to page 445 of the appeal book.  I think I had gone to page 446.  In paragraph 31 the court below correctly identified that section 17(1) of the Commonwealth Act:

sought to ensure that an award, certified agreement or workplace agreement would prevail over inconsistent State laws –

Now, State laws, as your Honours’ questions indicate, are State laws or some sort of subordinate legislation, not trust deeds.  Then if one goes to paragraph 37 on page 447, the court below said this:

In our view this appeal does not concern the direct collision between the two pieces of legislation, where obedience to one is disobedience to the other . . . Here, there is an imposition of an additional duty on particular employers under the State Act, but no inconsistent duty or conflicting duty to that imposed by the Federal Scheme Instructions . . . In no way does the State Act or State Scheme deny or vary any right, power or privilege conferred by the Federal Scheme Instruments.

Well, we say that is evidently wrong because the federal scheme instruments do not provide for long service leave or for payment of benefits for continuous service in any industry, but only continuous service with a particular employee.  The effect of this scheme is to impose additional duties upon employers; duties to contribute to the fund and duties to contribute with reference to employees who have not satisfied any period of service which entitles them to long service leave.  Then, if I can take the Court to paragraphs 45 and 46 on page 449 of the appeal book dealing with indirect or covering the field inconsistency, the court below said this:

It may be accepted that the Federal Scheme Instruments deal with, and intend to deal with, exhaustively, long service leave entitlements of employees in relation to their particular employers.  It can also be accepted that the provisions of the State Act impact upon long service leave entitlements of employees, in that the provisions enhance the entitlement of workers by virtue of the creation and administration of the fund.  However, this is not to say that the State Act or the State Scheme pertains to the industrial relationship between employers and employees in the context of the Federal Scheme Instruments and their enforcement . . . 

The proper characterisation of the field or subject matter of the Federal Scheme Instruments is that they relate to the industrial relationship between employee and particular employer, and the obligations and liabilities created through and by that relationship.  The field does not extend to the complete subject matter of rights and liabilities of the employees and employers sourced otherwise than through that relationship.

That is saying, in effect, because of the interposition of the trustee, there is no indirect inconsistency.  We say, however, that the State Act and the State scheme does pertain to the industrial relationship between employers and employees.  The only reason that an employer has an obligation to contribute to the fund, in respect of service in the construction industry, is that the person is an employee. 

It is absolutely central to the employer/employee relationship, and the benefit that the employee gets is one that the employee gets by virtue of that relationship.  The benefit is access to the funds which are available in respect of persons who have had continuous service in the construction industry.

BELL J:   But that is a benefit that does not depend upon the relationship between the employee and the employer being constant.  The employers may change.

MR MYERS:   Certainly.

BELL J:   So that one understands that the court, in making the observation that it did at 45 and 46, is contemplating, amongst other things, one would have thought, that reality, in the context of an industry with an itinerant workforce.

MR MYERS:   If I may say so, leaving aside the context, the Full Court of the Federal Court really only looks at the matter from the point of view of the rights of the employee, but the obligations of the employer to contribute to the fund from which the employee derives a benefit arise only because of the employer/employee relationship.  They are not independent of it in any sense, we say.

BELL J:   That is looking at it from the employer’s perspective, but it does not completely describe the scheme, or the relations with which the scheme deals.

MR MYERS:   Nor to ignore it from the employer’s point of view does it completely describe the scheme.  In fact this, by any analysis, we would say, is an additional obligation, an inconsistent obligation imposed upon an employer.  The benefit that the employee secures from the fund is a benefit that can only be secured because of the contract of employment with the employee who has made the contribution.

GUMMOW J:   Where does the notion of portability come out of the trust deed?  How do we see that established under the trust deed?

MR MYERS:   It has to begin with paragraph 27, which I have already taken your Honours to at page 360:

Every Worker is entitled to a Long Service Leave Benefit in respect of Continuous Service performing Construction Work for an Employer -

It is the notion of continuous performance which carries with it the idea of portability, essentially, your Honour.  Instead of being continuous service with a particular employer it is continuous service in an industry with possibly many employers.

GUMMOW J:   It means with any one or more employers.

MR MYERS:   It does, yes.  It does.

BELL J:   The scheme seeks to avoid double dipping, as it were, does it not?  So that in the event one has an employee in continuous service with the one employer in the construction industry, how does it work?  Does the ‑ ‑ ‑

MR MYERS:   I think it is clause 40.  In general terms - I just cannot put my hand on the clause at the moment – what these rules do is provide that the employer who has made payment in those circumstances is entitled to recoupment out of the fund of the amount of the payment, not the amount of contributions made which will almost necessarily be larger but the amount of the payment.  It is 40.3, I think is the primary provision.

BELL J:   Yes, 40.3.

MR MYERS:   Let me read it:

Where:

(a)any person is given Long Service Leave or any payment in lieu of Long Service Leave to which he is entitled otherwise than under these Rules; and

(b)the Employer who gives the leave or makes the payment or any other person employing the Worker . . . has paid Long Service Leave Charges in accordance with Rules . . . 

the Employer shall be entitled to be reimbursed from the Fund to the extent of -

certain sums.  There is a little twist because the entitlement to long service leave that is referred to there is, I believe, under the State legislation as appears from 40.4 where:

the Worker has:

(i)served a minimum period of 10 years’ service with a single employer and qualifies for long service leave under the Long Service Leave Act 1992 (Vic) -

I do not make any particular point of this, but it is not entirely coincident with the terms of the federal award.  There are some instances where a payment that has to be made under the federal award may not fall within the terms of 40.3 and 40.4.  That is what the court below decided.

FRENCH CJ:   Just going back for a moment to Justice Gummow’s question, is it right to say that the concept of portability is really brought in through the notion of continuous service in the construction industry, and the definition of “continuous service”?

MR MYERS:   Yes, it is, and I hope that that is what I said, your Honour.  I certainly meant to say that.  It is that reference to continuous service in 27 which is pivotal.

CRENNAN J:   In the construction industry.  It is defined very widely.

MR MYERS:   It is, and it is given further content in paragraph 21 on page 354.  In our written outline, which I certainly shall not attempt to repeat, we deal first with the question of direct inconsistency, and that is at paragraphs 37 and following, and we put forward the reasons why we say that even under the form of the rules with which the Court is now concerned, there is a right to leave and not merely a right to be paid a sum of money and keep working. 

We say alternatively that if the scheme does not confer an entitlement to long service leave in the ordinary sense, that is, to leave with pay, it does impose obligations which are inconsistent with the scheme of the federal instruments, and I have taken your Honours to those provisions of the federal instruments which require that leave be taken with pay and you do not work during the period.  You do not get a sum of money on Friday afternoon and then turn up on Monday morning and keep working.  That is not long service leave.

We say that the inconsistency is primarily of two kinds.  First of all, the State scheme on that hypothesis or that view of the meaning and effect of the legislation and the rules alters the nature of the entitlement from one to leave to an entitlement to a sum of money and you turn up again on Monday morning.  Secondly, it alters the nature of the service to be accrued before the entitlement arises.  It is not service with a particular employer.  It is service within the industry.  They are two fundamental inconsistencies.  The respondent deals with this in two principal ways.  First of all, if one looks at page 10 of the respondent’s outline at paragraph 21.1 the respondent says:

The CILSL Act imposes an additional duty on particular employers, but that duty is not inconsistent or in conflict with those imposed by the Federal Instruments.

The additional duty is presumably intended to mean a duty to contribute to the fund.  The duty to contribute to the fund is also itself in conflict with the federal instruments because the federal instruments do not provide, or rather I should put it positively, provide for an entirely different form of long service leave.  The assertion in paragraph 21.1 is simply wrong.  There is an additional duty.  There is a duty to pay the fund and there is a duty to pay it in respect of all construction employees, even those who have not served their time.  In paragraph 29.1 of the respondent’s outline on page 14, this is said:

The Rules prevent an employee from receiving payment of a long service leave benefit from the Fund where that person has already received long service leave payments from an employer.

They do not do any such thing.  They provide for recoupment to the employer.  That is simply wrong.  Rule 23.10, which may be what the respondent had in mind, provides:

For the purpose of determining any entitlement under these Rules, any Long Service Leave or payment in lieu of Long Service Leave granted or paid by the employer to a Worker or to which a worker has become entitled (other than under these Rules) in respect of any service in the Construction Industry which is under these Rules taken into account in computing the Worker’s entitlement to Long Service Leave shall be taken into account and be deemed to have been leave taken or payment made under these Rules.

Again, it does not go the distance that our friends assert in 29.1.  In paragraph 29.3 the proposition is put by the respondents - this is page 15:

Neither the limitation of the amount that an employer can be reimbursed (the amount paid by the employer to its employee) nor the absence of a right to reimbursement of contributions in respect of employees who do not accrue sufficient service for long service leave under the Federal Instruments impairs the operation of the Federal Instruments -

It certainly impairs the operation of the federal instruments as regards the obligations of the employer.  The federal instruments provide for quite different obligations.  It is all very well to simply look at it from the point o view of the employee, but that is not sufficient.  In paragraph 30.1 a further answer is given and it said this:

The obligations imposed on employers by the CILSL Act are not obligations to their employees; and the rights conferred on employees by the CILSL Act are not rights against their employers.

That may be true from the point of view of a strict legal analysis, but it is sufficient, for the purposes of the inconsistency, to find that the employers have duties in respect of long service leave to employees which are inconsistent with the Federal instrument.  It is not just a matter of looking at to whom various rights are owed, and we point out that the intervenor in paragraphs 31 and 32, that is page 9 of the intervenor’s written submissions, parts company with the respondent, and with the Full Court, and joins company with us in saying:

to the extent that the Full Court characterised the field covered by the award and agreements in a way that denied that a portable long service leave scheme was a matter pertaining to the industrial relationship between employers and employees, it was in error.

That is elaborated in paragraph 32.  We say that if authority be needed for that proposition there is a succinct statement of the matter in a superannuation context found in the reasons for decision of Justice Brennan in the Shell Case. It is case 11 on the appellant’s list. The reference is 174 CLR 345, and I am going to go to page 363. It is a statement of principle with which one could not disagree. In the middle of the page:

Generally speaking, disputes about “matters pertaining to the relationship of employers and employees” are disputes about duties and obligations owed by employees to employers which confer benefits on employers and about duties and obligations owed by employers to employees which confer benefits on employees.  When an award is made in settlement or part settlement of an industrial dispute it prescribes the duties and obligations owed by employees to employers or by employers to employees.  It may be framed in terms of a right to a benefit rather than in terms of a corresponding obligation to provide the benefit but, in that case, the benefit awarded is one dependent on the fulfilment of the obligation of a party to the award to provide it.  Superannuation benefits are significant benefits of employment but those benefits are not provided to an employee by an employer:  they are provided by a third party, usually the trustee of a superannuation fund.

In Manufacturing Grocers it was held that a dispute as to the liability of employers to make a contribution to a superannuation fund for the benefit of employees was an industrial dispute, but the Court drew a distinction between the right of employees to have the employer make such contributions and the right to receive the superannuation benefits purchased by the contributions.  The Court said in reference to the claims there pending before the Commission:

“To the extent to which they relate to superannuation benefits, they are no more than claims for payments to be made by employers by way of contributions to superannuation funds answering a particular description.

GUMMOW J:   That is a dissenting judgment, is it not?  These cases are all about industrial disputes, are they not?

MR MYERS:   They are. 

FRENCH CJ:   That is the baggage that “pertaining” carries.

MR MYERS:   Well, we are in the same general field.  If I could go on.  I will not read the quote:

In addition to the obligation to make a contribution of a particular amount, the claims considered in Manufacturing Grocers related to the payee to whom the contribution was to be made.  The identity of the payee is an element in the right of the employee and the corresponding obligation of the employer:  only by payment of the prescribed sum to the prescribed payee can the employer discharge the obligation and only by that payment does the employee acquire the benefit which “is to arise out of the employment of the employee by the employer”.

By parity of reasoning ‑ ‑ ‑

GUMMOW J:   You have to read that with page 356, the second paragraph, in the joint reasons.

MR MYERS:   Certainly.  But, nonetheless, as a statement of principle we submit that it is correct, that the ‑ ‑ ‑

GUMMOW J:   It depends what you mean by “principle”.

MR MYERS:   Well, that the notion of inconsistency is not confined by some idea that the rights that one has to find are owed by employer to employee directly.  It is sufficient if those rights pertain to the employment relationship.  That has been, in my respectful submission, the way in which these sort of questions have been approached in the industrial law context.  I am not asserting that it is a statement that is directly in point dealing with the particular matter that this Court is concerned with, but it is the correct approach to the question.

GUMMOW J:   Does anything come out of the Hospital Benefits Case 151 CLR 302?

MR MYERS:   We say not.  It is a distinguishable case because essentially there, for our purposes, the amount of the impost received by the Commonwealth went into consolidated revenue.  Here the amount of the levy that is imposed or the charge that is imposed upon the employer goes into the fund out of which the employees receive the benefit, whether it be paid leave or a lump sum in lieu.  I am not thereby saying that the Hospital Benefits Case is entirely without any relevance to this matter, but it is in the end a very different situation.  Here the whole point about it is that the charge that is levied on an employer in relation to the employment of an employee in the construction industry goes into a fund to give a benefit to that and other employees.

If I can say something about indirect inconsistency again.  We deal with this, of course, in our written submissions, paragraphs 49 and following.  We say that the Full Court made an error in that it characterised the scheme creating the federal instruments as pertaining to the relationship between employer and employee and the State scheme as not pertaining to that relationship.  Certainly we say the former is correct.  The federal instruments pertain to the relationship between employer and employee, but, likewise, the State scheme pertains to that relationship. 

I have already put to the Court several times in several ways why it does pertain to that relationship, but at bottom it is this, that the contributions to the fund have to be made by an employer because the employer employs someone in the construction industry.  They pertain directly to the employer/employee relationship in that sense and they pertain to the employer/employee relationship in another sense too, that the fund is used to confer benefits upon the employee whether in the form of paid leave or a sum in lieu of leave. 

Now, the intervener agreed with us that the court below was incorrect in this matter in those two paragraphs 31 and 32 of its submissions which I have adverted to.  The intervener put things in a different way from the respondent and if I may deal with that.  Could the court look at page 10 of the intervener’s written submissions.  There is an unnumbered paragraph after paragraph 34 and this is what is said:

That the Full Court erred to the extent it considered that a portable long service leave scheme is not one that pertains to the industrial relationship between employer and employee does not mean that a conclusion of inconsistency follows.

So, notwithstanding that error, they say the conclusion of inconsistency may not be correct –

The Full Court was otherwise correct to hold that the State scheme “does not intrude into the field of the industrial relationship between employer and employee –

and these are the words that carry all the weight of the submission –

in a way that the Federal Scheme Instruments expressly or impliedly exclude”.

and that is left hanging in the air.  But if one goes back to paragraph 24 of the submissions, one, I think, understands what is meant by the authors of those submissions:

As to the provisions of the award and agreements in this case, there is no express provision in the award or agreements that either establishes a portable long service leave scheme or ousts the operation of the State Act.

That is to say in the end, that there is no provision that ousts the operation of the State Act, but that is to ignore the test for inconsistency which the court ought to apply.  One can say that the federal instruments deliberately exclude portable long service leave schemes.  They provide for long service leave through continuous service with the employer.  To suggest that they are in some way not operating inconsistently with the State scheme is without any foundation.  They deliberately exclude the possibility of a portable long service leave scheme by their very terms.

FRENCH CJ:   Sorry, what does that mean, “they deliberately exclude”?

MR MYERS:   They exclude.  I should not use the word “deliberately”.  The statue  ‑ ‑ ‑

FRENCH CJ:   Well, they do not include.

MR MYERS:   They do not include.  They do not include it.

CRENNAN J:   I suppose one question would be, why could not continuous long service leave with an employer stand happily with continuous long service leave in an industry?  What is necessarily inconsistent about it?  Why cannot they happily live together?

MR MYERS:   But they are different things altogether.  Continuous long service leave with an employer is not satisfied by long service leave with other persons.

CRENNAN J:   No, but that covers one group of people and another group who, as Justice Bell put it, move around in the industry would be covered by provisions in relation to portable long service leave.

MR MYERS:   The Commonwealth instruments do not distinguish between the construction industry and other industries.  They apply to all industries and they say that you are entitled to long service leave if you have done your time with a particular employer.

CRENNAN J:   I am just saying there is nothing intrinsically inimical to providing for workers who move around in terms of long service leave entitlements and the fact that of course there are long service leave entitlements in relation to continuous employment with one employer.

MR MYERS:   Not as a matter of social policy, but a scheme that provides for long service leave by continuous employment with a single employer is inconsistent with a scheme that suggests or that provides for long service leave through employment with a number of employers.  One is inconsistent with the other.  One is not saying that one or the other may good or bad as a matter of social policy, but as a matter of logic the one is inconsistent with the other.  You cannot have continuous employment with one employer standing in the same scheme as continuous employment with a number of employees.  All I am attempting to do is to deal with this rather Delphic remark at the end of the intervener’s submissions in a way that the federal scheme instruments expressly or impliedly exclude.

HEYDON J:   That seems to start with a discussion of cover the field inconsistency and then in the last sentence move into direct inconsistency in paragraph 24.

MR MYERS:   It does.  But looking elsewhere in these submissions to try and work out what is meant by that, it appears that it must be what is in paragraph 24.  Unless the Court has any questions, they are the submissions on behalf of the appellant.

FRENCH CJ:   Yes, thank you, Mr Myers.  Yes, Mr Hanks.

MR HANKS:   Your Honours, we are still learning how to do this and we may have not exceeded the three‑page limit, but my learned friend, Mr Gageler, said we had written too much. 

Your Honours, might I go back to the Act and set out how we see the Act, the deed and the rules operating.  We accept, as the Chief Justice suggested, that the deed and the rules give content to the particular entitlements and obligations created by the Act and one cannot gauge the dimension of those entitlements and obligations without regard to the deed and the rules.

GUMMOW J:   Why are not the opening words of section 6(1) conjunctive, as they appear to be?  In other words, “entitled to long service leave” and entitled “to be paid benefits”.

MR HANKS:   From the fund, effectively.  It does not say it, but that is so, your Honour, “benefits out of the fund”.

GUMMOW J:   No, that and “entitled to long service leave.”

MR HANKS:   Indeed.

GUMMOW J:   Not “entitled to long service leave to be satisfied by payments out of the fund”.

MR HANKS:   That is so.  There are several ways of dealing with that enigma, if I might put it in that way.  One is to endorse what Justice Kiefel said, that this is an illusion.  It is a slogan that is used to convey a reference to the entitlements for payment.  That is one way of dealing with it.  Another way of dealing with it is to say that the Parliament had in mind two distinct forms of benefit.  One was the provision of leave, and the other one was to payment of benefits out of the fund.  So far as the content of each of those is concerned, we are told by subsection (3) that we need to go to the determinations made by the trustee:

from time to time . . . in accordance with the trust deed.

GUMMOW J:   In subsection (3), there is the word “amount”.  Is that limited to money?

MR HANKS:   I do not think it is limited, your Honour, no.  I would not say it was limited.  Nevertheless, in order to determine what content might be given to the entitlement to leave, we would need to go to the trust deed and the rules made under the trust deed to see what content it has, just as we will need to go there to identify the content of the entitlement to be paid benefits out of the fund.

FRENCH CJ:   The amount referred to seems to be referring to one quantity, not two disparate things, you know, a number of days and an amount of money.  It is rather an amount of an entitlement, and that amount is to be calculated.  Rather, it pushes in a direction of money, I suspect.

MR HANKS:   It might do that, your Honour, but I am, as it were, putting it at its worst for us because I wanted to make this point, that if this section, section 6, is read as creating some inchoate right to leave at the expense of employers, then to that extent – notwithstanding that it is inchoate – but to that extent, there is a potential inconsistency with the terms of the federal instruments, but only a potential inconsistency.

If that inconsistency were to be realised – if, for example, there were to be in the current operating rules something approaching the old rule 35.1, to which the Court has been taken, then one might say that the power has been exercised.  The power that is contemplated by section 6(3) has been exercised in a way that brings about what is sometimes described as operational inconsistency with the federal law.

GUMMOW J:   Where do we see 35.1?

MR HANKS:   Your Honours were taken to that by our friend, Mr Myers.

FRENCH CJ:   It is 311, I think.

MR HANKS:   It is on page 311.  This is the form of the rules which were in the second schedule to the trust deed, when the trust deed was executed from early – the precise date, I do not have in my head – but early in 1997.

HEYDON J:   1 April 1997?

MR HANKS:   Thank you, your Honour, yes.

HEYDON J:   It did say defined in the Act.

MR HANKS:   Yes, thank you, your Honour.  Your Honours see that there is a demand on the employer to grant long service leave.

FRENCH CJ:   It does not seem to fit within the logical structure of the Act in any event because it does not deal with a mode of calculation of an entitlement.

MR HANKS: There are two problems, your Honour. That is one of them. That would be one problem. It might be that the trustee lacked the authority to make a rule in those terms. That is one way of looking at it. The other way of looking at it, and it is the way I was articulating was that assume that the authority can be found in the Act to make a rule in those terms, that would bring about an inconsistency with the federal law to the extent that the federal law was found to define much more – in quite different terms the obligation of the employer. There would be an inconsistency within section 109.

We go back to the language of section 109 and we are reminded that the State law is invalid to the extent of the inconsistency. As Sir Owen Dixon said in Wenn’s Case, that language is very important.  It introduces a presumption where there is inconsistency that a State law will survive apart from its inconsistent aspects.

CRENNAN J:   The same point arises, I think, out of the current – I was going to say in relation to the current rules.  If you look at 331, there is a definition of “long service leave” which has been carried over from the previous set of rules where we were looking at rule 35:

means long service leave which a Worker is entitled to under these Rules by virtue of the Act -

It does not seem to get translated into any rule.

MR HANKS:   No, it does not.

FRENCH CJ:   Rule 27 would be the closest, would it not?

CRENNAN J:   Rule 27 would be the closest.

MR HANKS:   Yes, but the way the rules are currently constructed for all their imperfection and there are imperfections as the Full Court pointed out in the drafting of the rules, they have grown a little bit like Topsy over the years without perhaps sufficient regard being paid to their coherence.  But for all their imperfections, the only entitlement that the rules create in workers, in employees, is an entitlement to demand a payment from a fund, that is, go to the trustee and say, “I am eligible for payment of a financial benefit.  I have accrued sufficient continuous service in the industry.  Please pay me out of the fund”.

The sanction for not meeting that entitlement would be some, we would think, proceeding between the worker on the one hand and the trustee of the fund on the other because there is an obligation which derives from section 6 of the Act and then from the rules as made from time to time by the trustee.  There is an obligation on the trustee to meet that payment out of the fund.

I wanted to take the Court, if I could, into the rules in a little more detail.  I do not want to spend too much time on this but, if we start with the entitlement of the worker, the amount of which is to be determined by the trustee in accordance with the trust deed from time to time, we would go to, as the Chief Justice said, we would go to rule 27.1.  We find that on page 360.  There is the entitlement –

to a Long Service Leave Benefit in respect of Continuous Service performing Construction Work for an Employer –

That is the basic entitlement.  There is an obligation on the trustee under 27.4 on page 362 to –

pay from the Fund to the Worker forthwith upon receipt of a request in writing from the Worker the Long Service Leave Benefit to which he is entitled.

The amount of the entitlement is articulated in 27.2, and your Honours will see that the rules here slip back into the language of leave, rather than entitlement to a payment, but when one reads the rules as a whole, as we think it is essential to do, it is sufficiently plain that the rules contemplate a claim by the worker on the trust deed for payment out of the fund.  The amount of that payment, the sum that is to be paid, calculated through this prism, in the way that Justice Kiefel suggested, the prism of notional leave.  The rules also say – and I wanted to take your Honours back to 6.2 in the rules, which are found on page 340:

There is to be paid out of the Fund:

(a)the Long Service Leave Benefits provided for under these Rules -

together with other payments that must be made from time to time, but the critical provision is 6.2(a).  That is the debit side of the ledger as far as the trustee is concerned.  The trustee administers the fund, the trustee has an obligation to meet claims for entitlements made by workers, the trustee is obliged to make those payments out of the fund.  That is clear.  The credit side starts with rule 11.1 which, in substance, gives content to section 4(2) of the Act. 

I remind your Honours that section 4(2) provides that the amount of the charge, the charge that was levied by subsection (1), is determined by the trustee in accordance with the trust deed from time to time and if we then go to 11.1, here is the provision relating to the timing of the payment of the charge.  Clause 11.2 has detailed provisions relating to the calculation of the amount of the charge, and that is really a matter for the trustee to determine from time to time in its discretion subject to the ceiling which is set in section 4 of the Act at 3 per cent of wages.  If we go then back to rule 6.1 – I have taken your Honours to 6.2 a little earlier to deal with the debit side.  This is the credit side:

There is to be paid into the Fund:

(a)The Long Service Leave Charges paid to the Trustee under these Rules and in accordance with the Act in respect of persons doing Construction Work –

Your Honours can see that there are other sources of revenue for the fund.  It is, no doubt, assumed that the moneys that are paid in will be invested and there will be some profit earned from the investment.

GUMMOW J:   Is this trust deed an administrative instrument under the Victorian system, do you know?

MR HANKS:   We think not, your Honour.  That is a very beguiling question because the Full Court asked that very ‑ ‑ ‑

GUMMOW J:   It is a beguiling question.  It keeps the hands of the legislative council off it I suppose.

MR HANKS:   That is beguiling, your Honour.

GUMMOW J:   To disallow it.

MR HANKS:   That very question was raised in the Full Court and we did not have an answer for it and until your Honour asked it again, I had completely forgotten it, so I am unable to answer it, your Honour, at this stage.  I will have a look at that over lunchtime, if we last that long, your Honour.  I wanted to, if I could, now respond ‑ ‑ ‑

CRENNAN J:   You could always give us a note if you felt the need to.

MR HANKS:   A note?  You mean homework?  Yes, your Honour.  If that is ‑ ‑ ‑

CRENNAN J:   Speaking for myself, if you do not do it today, you could do it subsequently, I would have thought.

MR HANKS:   Justice Crennan, I would be only too happy to oblige.

GUMMOW J:   It is quite important to understand that, to understand this legislative structure.

MR HANKS:   Yes, I appreciate that, your Honour.  At the moment we are simply proceeding on the basis that there are very direct references in the Act to what the trustee determines from time to time in accordance with the trust rules and that can only be  ‑ ‑ ‑

GUMMOW J:   There is a power of amendment, is there not, of the Act?

MR HANKS:   Yes.

GUMMOW J:   Of the deed, I am sorry.

MR HANKS:   The deed, indeed there is, and I will say a little bit about the power of amendment later if I might.  I will come back to that.

GUMMOW J:   Rule 5.

MR HANKS:   Yes, there is, your Honour.  It would be surprising if there were not such a power, but it is there.

HEYDON J:   I am sorry I am interrupting, Justice Gummow.  What is to stop a shrinking of rights and obligations pursuant to amendments made under rule 5.1?  Only industrial action or agitation?

MR HANKS:   Well, no, not really.  The trustee is unlikely to be a party to industrial action. 

HEYDON J:   No, but the people who are missing out on long service leave entitlements ‑ ‑ ‑

MR HANKS:   I am sorry, your Honour?

HEYDON J:   Those who are missing out on long service leave entitlements might have just cause for industrial action if their rights were shrunk.

MR HANKS:   They might, indeed.

HEYDON J:   Is there any legal remedy for that?  Would it be a breach of trust for the trustee to ‑ ‑ ‑

MR HANKS:   Your Honour has in mind, for example, a variation to the calculation of entitlements so that, for example, whereas now there is a period of 10 years continuous service.  Perhaps I can just make this point, your Honour.  That is a relatively recent change, a beneficial change.  Previously the minimum period was 15 years of continuous service before there were drawing rights on the fund.  One can see that in the original rules, but there was an adjustment or an amendment to the rules.  We would not accept that there was any reason why the trustee could not go back to 10 years – I am sorry, to 15 years rather, as the minimum period that was required.  The trustee has a board, the board has representatives of various interest groups and no doubt these things would be ‑ ‑ ‑

GUMMOW J:   So where do we see that?

MR HANKS:   Probably in the articles of association, I think, your Honour.

FRENCH CJ:   There is a reference to amendment and leave for special resolution to the board, I think, at 13.4, is there not?

MR HANKS:   Yes.  I think Justice Gummow was asking me where we would find the composition of the board.

FRENCH CJ:   Yes.

MR HANKS:   I will need to reflect on that, if I might, your Honour.  I think I might be dependent on my instructions rather than on any particular reading of the trust deed or the articles of association.  We will check on that.

BELL J:   Appeal book 221 deals with the initial board of directors under the articles.

MR HANKS:   Yes, thank you, your Honour.  But that does not tell us anything, if I might – it is somewhat cryptic as to whether they have any ‑ ‑ ‑

BELL J:   Then there is detailed provision with relation to classes, yes.

MR HANKS:   That is right.  I think in order to answer that effectively, I will need some time, your Honour, and we are very happy to do that.

CRENNAN J:   Your note is getting bigger.

MR HANKS:   It only has two items on schedule.

HEYDON J:   Article 20 tells us something about how it is set out.  There are those who represent workers, those who represent employers and those who have investment, actuarial, legal expertise.  That is perhaps the safeguard that the class A directors will be vigilant to make sure that things run conformably with the interests of the employees.

MR HANKS:   Yes, your Honour, but those are essentially internal controls.  I think your Honour asked me whether there might be some external control.

HEYDON J:   Could one go to the court to complain about an amendment?

MR HANKS:   Some breach of a trust obligation on the part of the trustees?

HEYDON J:   Yes, some defiance of the substratum, some doctrine like that.

GUMMOW J:   To what extent is this creature a trustee, it is generally understood, other than by its title?

MR HANKS:   The trustee has obligations under the deed.  Why would it not have fiduciary obligations to beneficiaries?

GUMMOW J:   I do not know.

MR HANKS:   We would say it did have fiduciary obligations, but, with respect ‑ ‑ ‑

FRENCH CJ:   There seems to be an assumption that the Trustee Act applies to it, save for two particular provisions, I think.

MR HANKS:   Yes.  But the central question, as we understand it, that is being agitated today is, what is the significance of the rules and the provisions in the trust deed so far as spelling out the content of the entitlements and the obligations that are created by the Act?  With respect, we do not need to go into the equitable status of the trustee and the trust deed in order to answer that.  Plainly, it is an instrument and the rules are an instrument that find a place in the legislation in the sense that they spell out obligations and entitlements.  Your Honours asked a question about the power to amend.  That is the power that is found in Article 5.2 of the deed on page 258.

FRENCH CJ:   There is a separate provision, I think, to which I drew your attention earlier before, the amendment of the deed itself.  That is the whole of the various interested classes of people.

MR HANKS:   Yes, your Honour.  Our friends this morning alluded to the power of amendment as raising the possibility that the trustee might make a rule which perhaps reinstated rule 35.1 or put it in more definite terms even and purported to impose an obligation on employers to grant leave to workers.  That is a matter that we have identified in point 10 of the summary that we handed up to your Honours and that really is our answer to it.  It is elaborated in paragraph 26, which has a number of subparagraphs, in our written outline.  The short answer to it is that that power to amend cannot by itself impair the operation of the federal instruments until it is exercised in the way that our friends have hypothesised.

GUMMOW J:   It would be a Kakariki type point.

MR HANKS:   Yes, it would entirely.  Indeed, we have referred not only to what was said in Kakariki but the Mining Act Case, or should I say, Commonwealth v Western Australia 196 CLR 392. I do not need to take your Honours to the report because we have set out the passage in our written submissions in paragraph 26.5. Very much the situation that was considered by the Chief Justice and Justice Gaudron in paragraphs 60 and 61 in Commonwealth v Western Australia.  The situation there was that the Mining Act might be read as conferring an authority to enter upon land, the land in question being land that might be the subject of a declaration under the Commonwealth Defence Regulations.  Their Honours’ resolution of the argued possible conflict was that – and this is in paragraph 61:

were authority to be granted pursuant to the Mining Act –

that is the State Act –

to enter upon or conduct mining activities on land in the perimeter area at a time or times specified in an authorisation under –

the Commonwealth regulation –

reg 51(1) for the conduct of a defence operation or practice, there would be direct inconsistency between that authorisation and the authority granted under the Mining Act.

So that is precisely the situation that might transpire if the power given to the trustee to modify the rules under Article 5.2 were used so as to confer a specific obligation on an employer to grant leave.  But we do not have that situation, and there can be no inconsistency in the existence of a power which by itself creates no conflict.

I wanted to just deal very quickly with a point that our friend, Mr Myers, made towards the close of his submissions.  He took your Honours to the rules that we say, if it is relevant, rules that prevent double dipping, and Mr Myers went first to rule 40.3, which is on page 376 of the appeal book.  I do not think there is any dispute between us that the substance of that rule is that it entitles an employer to be reimbursed from the fund in the amount of any charges that the employer has paid into the fund where the employer – I will have to recast that, I have been tripped up by the language, it is not hard to do – entitles the employer to be reimbursed in the amount of long service leave payments that the employer has made outside this scheme – for example, under an award – in circumstances where the employer has paid charges to the trustee under this scheme.

It is, of course, a proportionate reimbursement.  The employer may have paid charges for two years, three years or seven years into the fund in respect of a particular employee and the employer may then have provided that employee with 10 years long service leave.  In those circumstances, as 40.3 operates, the employer is entitled to come to the trustee and say “I want a reimbursement for the appropriate proportion of the money that I paid to my employee under the award”, and the trustee would be obliged to do that. 

Where we part company with our friends is that they have drawn the Court’s attention to 40.4 which they say limits, or could be read as limiting, the operation of 40.3, but when one reads 40.4(a), one sees that within that paragraph, there are two alternative subparagraphs, (i) and (ii), and (ii) deals with some integration with the State Long Service Leave Act but (i) deals with an entirely different situation, and plainly where the worker in question had, as it is put:

served the minimum period of Continuous Service in the Construction Industry required for . . . Benefit to be paid under these Rules –

That would be sufficient to justify the employer to come forward and say “I have made a payment under the award, as well as having paid charges into the fund.  I want a reimbursement.”  So at least the rules make some attempt to limit the financial impact on an employer who has met its obligations under the Act, the State Act, and has also met its obligations under a federal award.

The other matter – the other aspect of double dipping that is dealt with in the rules is 23.10 on page 358.  We do not resile from the submission that we made in our written submissions that the effect of that is that where a worker has been granted long service leave by the worker’s employer under, for example, an award or a certified agreement and then comes to the trustee and claims payment of the entitlement under the State Act, the amount of the leave granted by the employer is deemed to be payment made under these rules.  The worker would not be able to come forward and put his hand out again.  That is a minor aspect of the case but we wanted to ‑ ‑ ‑

FRENCH CJ:   The Act actually contemplates incidentally, does it not, the possibility of corresponding laws and reciprocal arrangements?

MR HANKS:   It does but essentially, I think, what it is contemplating primarily would be reciprocal arrangements with schemes in other States.  There are such schemes ‑ ‑ ‑

FRENCH CJ:   Yes.  It does allow for the possibility of such arrangements with the Commonwealth.

MR HANKS:   Yes, it would.  Yes, it would.  Eventually, we come back to what we think is the fundamental difference between us and the appellant here and that fundamental difference is that when one reads section 4 and section 6 of the Act with the rules, as one is directed to by those provisions in the Act, the liability imposed on an employer is a liability to make a payment to the trustee which money then goes into the fund.  That is the only obligation that is imposed on an employer.

The entitlement that is conferred on a worker is an entitlement to come to the trustee and demand payment from the fund if the worker can establish continuous employment for the minimum period specified in the rules in the construction industry and there is no other entitlement that a worker can point to as arising under section 6 of the Act as given content by the rules. 

It is relevant, we say, that the worker’s rights against the fund do not depend on the employer having paid any charge in respect of that worker.  There is no link.  They are freestanding obligations and entitlements with no correlation.  So let us assume that our friend’s client declines to pay the charge to the trustee but there are employees of the appellant who have, let us say, 10 years’ continuous service in the construction industry.  They have every right to come to a trustee and demand the payment of the long service leave benefit.  The trustee cannot resist.

The trustee cannot say, your employer has not stumped up, go away, because that is irrelevant.  The entitlement arises by reason of continuous service in the construction industry.

HEYDON J:   In the medium or long‑term if employers did not pay up some insolvency would ensue.

MR HANKS:   That is right.

HEYDON J:   In a practical sense there is a link between employers paying under their duty to pay and employees getting their benefits when they request them if conditions have been satisfied.

MR HANKS:   Well, that is the perfect world, your Honour, the perfect practical world, but if employers were not to make contributions plainly one of the options that is open to the trustee is to sue to recover, but one option that is not open to the trustee is to decline or refuse to pay the worker, the worker has got an entitlement.  That really was the point that I wished to make, that there is that clear segregation between the obligation cast on each employer and the entitlement of workers.

HEYDON J:   27.4 says:

The Trustee must pay from the Fund –

not out of its own pocket.

MR HANKS:   Yes, that is right.

HEYDON J:   If there is nothing in the fund ‑ ‑ ‑

MR HANKS:   It is a practical matter, your Honour.  We are a long way from that.  The fund as a practical matter has accumulated a substantial capital balance, but this is a hypothetical scenario which could transpire if there was resistance on the part or simply failure on the part of employers to discharge their legal liability under section 4 of the Act.  If the fund did shrink to zero, then as a practical matter, your Honour, the entitlements of each worker would be worthless; that is true.  Again, as a practical matter, one might expect some action on the part of the trustee before that situation approached.  We would say, as a matter of legal analysis, it is important to recognise that strict segregation, that lack of any interdependence between the obligations of an employer and the entitlements of workers or employees.

CRENNAN J:   Does that help underpin an argument that the scheme does not cut across the federal instruments insofar as they provide for long service leave in respect of continuous employment with particular employers, as distinct from in an industry?

MR HANKS:   We think it is certainly relevant to that argument, your Honour.  Indeed, we have tried to articulate towards the end of our written outline why it is that the obligation imposed by section 4 of the Act and the entitlement created by section 6 of the Act do not pertain to the employment relationship.

GUMMOW J:   Now, why do you fix upon this notion of industrial relationship as some sort of lodestar?

MR HANKS:   Yes.

GUMMOW J:   We have moved beyond 51(xxxv).

MR HANKS:   Indeed, we have.

GUMMOW J:   And all that rather unattractive baggage really.

MR HANKS:   Well, our point, your Honour ‑ ‑ ‑

GUMMOW J:   So why are we worried about the ghost of the Grocers’ Case and so on?  I just do not understand it.  In particular, I do not understand how – yes, you seem to have led the Full Court to what they said at paragraph 45.

MR HANKS:   It might have been all their own work, your Honour.

GUMMOW J:   Not this notion of pertaining to industrial relationships between them.  What is the force of industrial relationships?

MR HANKS:   Well, I will put it this way if I could, your Honour, the award, the 1998 award ‑ ‑ ‑

GUMMOW J:   Yes, could well have been supported by the corporation power, actually.

MR HANKS:   It might have been, your Honour, but it was made in settlement of the dispute, and it was a dispute between employer and employee about the terms of employment, and the dispute arose out of their relationship, and I am describing that relationship as an industrial relationship.  I am not using – I do not think I am using 51(xxxv) language.

GUMMOW J:   You have to get the word “industrial” in to get yourself hooked into 51(xxxiv).

MR HANKS:   Yes.  The relationship between employer and employee, if I could use the longer term, does not pertain to ‑ ‑ ‑

GUMMOW J:   All the employers look like trading corporations to me.

MR HANKS:   Yes, I am sure they are, your Honour.

FRENCH CJ:   I think the arcane pleasures of things that pertain and things that do not has somehow translated into some of the statutory provisions of the Workplace Relations Act because I can remember getting involved in the metaphysics of some of that in my latter years ‑ ‑ ‑

MR HANKS:   Mr Moore has just uttered the magic words “170LI”, your Honour.  It has been added, to some extent.

GUMMOW J: What about section 109 of the Constitution?

MR HANKS:   Yes, we are back to there, and we are back to the question whether – and there is a very simply answer to this without getting into the esoterica that might be entirely out of place.

GUMMOW J:   Well out of date, but anyway.

MR HANKS:   Yes.  Without getting into that esoterica, the simple question here:  in what way does the State Act impair the operation of the Federal instruments?

GUMMOW J:   That I can understand.

MR HANKS:   Yes.  The federal instruments simply impose an obligation on the employer to grant leave to an employee after 10 years service with that employer.

KIEFEL J:   Was the Full Court at paragraphs 45 and 46 saying that the federal scheme only dealt with an aspect of the relationship of employer and employee?

MR HANKS:   Yes.

KIEFEL J:   That is really what it was saying; it does not cover the whole of the ‑ ‑ ‑

MR HANKS:   That is what we think, your Honour

KIEFEL J:   With respect to the subject matter of long service, it does not deal with the whole of the matters as between employer and employee; it deals with an aspect of it.

GUMMOW J:   It is the last sentence of 46 though.  It talks about “sourced otherwise than through that relationship.”  I do not understand that.

MR HANKS:   I am afraid I cannot interpret it for your Honour.  We would prefer to put it simply that– and perhaps we are here guilty of oversimplification.  Inconsistency can take a number of forms and we are reminded of what was said by Sir Owen Dixon in the Kakariki Case and by all members of this Court in the Telstra Case, that you may find inconsistency where the State law impairs, or negates certain obligations, privileges, created by the federal.  That is one situation.  Or, you may find inconsistency where you can see in the federal law an intention to state exclusively and exhaustively what shall be the law on the particular subject, and the State purports to regulate that same subject; to enter the field in other words.

We note that this Court said in Telstra that you can have one type of inconsistency where you do not have the other and that was the very point upon which the resolution of the appeal in Telstra v Worthing depended.  So looking at – if we can use the term – looking at those species of inconsistency here there is nothing in the obligation cast on an employer to make a payment to a fund nor in the entitlement given to a worker to demand that the trustee make a payment from that fund that in any way impairs the operation or negates or qualifies the rights and the privileges and the liabilities that can be found in the federal instruments, because they are of a very different kind.  They are obligations from the employer to the employee to grant leave after 10 years service with that employee.  Here we have only an obligation to make a payment to a fund and then an entitlement to go to the trustee and draw from the fund.

KIEFEL J:   Is the approach of the Full Court, in the words to which Justice Gummow referred, sourced otherwise than through that relationship consistent with what you are putting, that is, that the State scheme does not really involve the employer in the sense that the federal scheme does?

MR HANKS:   Yes.  What the State scheme does not do is to interfere with the mutual rights and obligations inter se of employer and employee. 

KIEFEL J:   At least not to the same extent. 

MR HANKS:   We would say not at all.

KIEFEL J:   Not at all.

GUMMOW J:   Yes, you would have to say that this fund, although it is called a trust fund, does not involve beneficial ownership in any of these employees, at least until such time as they have a right to make a demand.

MR HANKS:   That is right, your Honour.  We think that is reinforced by the point that I had spent some time emphasising that there is simply no – the right to draw on the fund is not contingent upon any employer having made a payment in respect of that worker.

FRENCH CJ:   You would have to say that the Act does not have or authorise the effect of imposing upon the employer an entitlement enforceable by the worker for actual time off.

MR HANKS:   That is right and if it did it would be inconsistent with the federal instruments, but it would be invalid to that extent.  It would otherwise remain operative.  Your Honours, there is something that Sir Owen Dixon said in Wenn’s Case 77 CLR 84 about this very point. I wanted, your Honours, if I could ask you, to go to page 122. I do not need to put it in full context. I will take your Honours to the fourth line:

while s. 109 invalidates State legislation only so far as it is inconsistent, the question whether one provision of a State Act can have any operation apart from some other provision contained in the Act must depend upon the intention of the State legislation, ascertained by interpreting the statute.

GUMMOW J:   That phrase “ascertained by interpreting the statute” is important, too.

MR HANKS:   Yes, indeed. 

The same thing is put in another way by saying that every part of a completely interdependent and inseparable legislative provision must fall within “the extent of the inconsistency.” No doubt s. 109 means a separation to be made of the inconsistent parts from the consistent parts of a State law. But it does not intend the separation to be made where division is only possible at the cost of producing provisions which the State Parliament never intended to enact. The burden of establishing interdependence in such a case is necessarily upon those who assert it -

Not on us.  It would lie on our friends if they said there is some aspect here that is inconsistent and that brings the whole legislation down.

FRENCH CJ:   One is not really assisted here in the interpretative process by.....provision in the Interpretation of Legislation Act about reading things within the – because after all, the Commonwealth law can come and go or change and so ‑ ‑ ‑

MR HANKS:   I think that is the very point that Sir Owen alludes to at the end of the paragraph.

FRENCH CJ:   Yes, I see.

MR HANKS: It is found in the words of section 109, “to the extent of the inconsistency”, the burden of asserting the interdependence. Perhaps it is not a light one, that burden. That is why the State Acts Interpretation Act 1930 is unimportant, even if upon its terms it applies to a case under section 109, and when one thinks about the standard reading down provisions in State and ‑ ‑ ‑

FRENCH CJ:   It would be contingent on what happens to be around at the time, I think.

MR HANKS: They speak in terms of power, so as not to exceed the power of the Parliament and that is not what section 109 is about. It is not about power. It is about the operative effect of the law, assuming it is valid, in ‑ ‑ ‑

GUMMOW J:   That seems to be the force of the last sentence in that paragraph.

MR HANKS: Yes, it is. It is stated very shortly, but, with obvious respect, very perceptively. Those words, to the extent of the inconsistency that are found in section 109, do have significant work to do in many situations. Your Honours will recall for example in Butler v Attorney‑General (Vic) it was said that they have a temporal connotation, and that was, I think, the Chief Justice’s point to me, that the Commonwealth law can come and go, and when it goes, the State law may revive or will revive. 

They also have a substantive connotation to the extent of the inconsistency and, therefore, if it is found that in some way the State law contemplated imposing an obligation on an employer to provide leave in different circumstances to the obligation found in the federal instruments, therefore inconsistency, but it would only be that obligation that would cease to be operative and not the obligation to pay money into the fund and not the entitlement to draw money from the fund.  Your Honours, we have otherwise put everything in writing.  I have not touched all the points in my perhaps too elaborate set of propositions.

GUMMOW J:   Is this the sort of statutory trust that was being talked about in the Accident Compensation Case (1993) 178 CLR 145? Remember that case? You have this creature which is called a trust, but it is to some degree. It is like a curate’s egg, really.

MR HANKS:   I cannot improve on that, your Honour.  I cannot improve on the curate’s egg, although that may not be the appropriate metaphor.

GUMMOW J:   But it is not sufficiently akin to a trust to confer direct immediate rights on employees.  It is all about the employer making contributions to the fund which is then bound by this statute in this peculiar fashion.

MR HANKS:   Yes.  We would say ‑ ‑ ‑

GUMMOW J:   That, you say, is critical in getting to 109.

MR HANKS:   Yes.  I trust this is an answer to your Honour’s question.  We would say that the rights that employees have are the rights recognised in the Act, filled out, given content to, by determinations made by the trustee from time to time ‑ ‑ ‑

GUMMOW J:   Which could be controlled for abuse of power, I suppose.

MR HANKS:   Yes, your Honour.

GUMMOW J:   To that degree it would be a trust.

MR HANKS:   Yes.  That is so, your Honour.  As your Honour made clear right at the beginning of argument this morning, we must go back to the State Act.  This was a case about 109 inconsistency between a law of the Commonwealth and a law of the State and we do know this much – that law means statute law.  That is what we know.  It does not mean some vaguer concept than that.  Our friends must point to provisions in the statute which they say are inconsistent.  We say that, in doing that, the statute does not stand by itself; it quite overtly contemplates that the rules made under the trust deed from time to time will give content to the obligations and the entitlements.  That is why we do need to look to the rules, because that is what the statute tells us to do.

GUMMOW J:   The Chief Justice and I were putting to your opponent that there was a problem with separate question (a) for this very reason.  It uses this expression “the CILSL Scheme”, which has all these appendages, not just the law.

MR HANKS:   Yes.  If we look at the totality of the paragraph that hangs there, at the bottom of paragraph (a) in the question – I am looking at page 415 of the appeal book – the question is whether there is inconsistency between the Act and then in parenthesis “and the instruments referred to therein” ‑ ‑ ‑

FRENCH CJ:   The logic of it would be, would it not, that in a practical sense you would look to inconsistency between the trust deed and the rules and the federal instruments and then say, “If there be inconsistency, the power conferred by the Act does not extend that far”.

MR HANKS:   That is right.

FRENCH CJ:   Therefore, the instrument, the trust deed and the rules are potentially invalid.

MR HANKS:   Yes.

FRENCH CJ:   Because they fall outside the statutory power.

MR HANKS:   Yes, that is right.

CRENNAN J:   So rule 35, under the old rules, would be problematic.

MR HANKS:   It would be problematic.  Within eight months or so of the trust deed being adopted, it disappeared.  In December 1997 it was removed.  Then shortly after that there was a renumbering of rule 35 to take account of its disappearance.  Justice French, I entirely agree with that analysis that what this is about ultimately is a question of authority or power given to the trustee and that power would have to be read as potentially contracting and expanding by reference to potentially inconsistent Commonwealth laws.  When it contracted then certain rules would lack authority.

GUMMOW J:   In a way Kakariki comes back in, does it not, even there?

MR HANKS:   Yes, or the West Australian mining case.

GUMMOW J:   Yes.

MR HANKS:   Very much that form of analysis, we would say.  On our submission, having regard to the nature of the entitlements created by the rules which are limited to drawing rights on the fund and the obligations created by the rules which are limited to an obligation to pay particular money, specified amounts at specified intervals into the fund, we do not get into that territory.

FRENCH CJ:   You might have a set of rules which is authorised by the Act because there does not happen to be any inconsistent federal instrument and then down the track – and then the power contracts and the rules lose

their legal foundation.  I suppose that is how it would work, even though they were valid at the time that they were made.

MR HANKS:   That is right.  We just have to stay calm and work through the analysis.  Yes, your Honour.  If the Court pleases, those are the submissions for the respondent.

FRENCH CJ:   Thank you, Mr Hanks.  Yes, Mr Solicitor.

MR GAGELER:   Your Honours, we have produced a short outline of submissions to which I will adhere extremely closely. 

FRENCH CJ:   Perhaps we can just have a quick look at it since it is so short.

MR GAGELER:   Well, then I will not have anything to say.

FRENCH CJ:   Let us have a quick look at it then.

HEYDON J:   What is the missing word in paragraph 5 line 2?

MR GAGELER:   A typographical error, your Honour.  The word “industrial” slipped in somehow.  Strange things happen.  Your Honours, we see a very short route to the resolution of the appeal and we are conscious of a number of distractions.  The short route is to apply the approach articulated in Ex parte McLean and expounded in general terms in Telstra v Worthing and APLA and as applied in a very relevant space in Collins v Charles Marshall and in TA Robinson v Haylor. 

So the first question is to look at the Commonwealth award given effect by the Commonwealth Act and to ask, what are the obligations of the employer and the corresponding entitlements of the employee under the award?  Answer; the obligation of the employer is to grant long service leave in the circumstances spelt out in clause 24.2 and to pay the employee in those circumstances the amount spelt out in clause 24.4. 

Next question:  does the State Act, in its legal or practical operation, impair or detract from the performance of those obligations or the receipt of those entitlements:  answer, no.  As to the legal operation, you look to the State Act read in its current form in conjunction with the rules and you see that it imposes and confers no obligation or entitlement on an employer to grant or withhold long service leave at all and you see that it, in its legal operation, imposes or confers no obligation or entitlement on an employer to pay or withhold payment from an employee.  If you move from there to the practical operation of the State law, there is a potential, always, for a State law, practically, to impair the operation of a Commonwealth law.

Your Honour Justice Gummow usefully looked at the cases in this field in APLA v Legal Services Commissioner 224 CLR 322, particularly at paragraphs 205 to 207, and your Honour will recall pointing out that practical impairment is always a question of fact and degree, but if you look here, the only impairment could be the creation by the State regime, that is the State Act picking up the State rules, of an economic disincentive to compliance with the Commonwealth award obligation.

That, as we see it, is accommodated within the scheme of the rules themselves by this mechanism.  If there is payment by an employer to an employee directly in compliance with the award obligation, then there is a reimbursement of the corresponding charge that may have been paid into the fund by the employer, that is what rule 40.3 apparently does, although the drafting could perhaps be criticised, and there is a reduction in the amount paid out of the fund to the employee.  That is what rule 23.10 apparently does, although again the drafting could be criticised.  That is, rule 23.10, as we understand its operation, counts such a payment towards the entitlement to which rule 27 refers. 

So that is the answer to question 2.  You go on though and ask the further question, is the award, on its proper construction, nevertheless an exhaustive statement of the obligations of the employer, and corresponding entitlements of the employee?

GUMMOW J:   There may be some difficulty with the word “corresponding” because that suggests some ‑ ‑ ‑

MR GAGELER:   You could even leave out question 3, your Honour, I am thinking of the drafting here.

GUMMOW J:   No, but the word “corresponding”, it may be ‑ ‑ ‑

MR GAGELER:   You could leave out any reference to entitlements.  The obligations of the employer on the subject matter of long service leave; you could put it that way.

GUMMOW J:   Because the way trust deed seems to work, as Mr Hanks has been explaining to us, it is not corresponding.

MR GAGELER:   If your Honour just reworks question 3 to just read this way - is the award on its proper construction nevertheless an exhaustive statement of the obligations of the employer on the subject matter of long service leave - which is a sufficient question, our submission is that it is a question of the construction of the award in its context, and the answer really is the answer we give in paragraph 23 of our submissions and that is, read in its context, this award should be taken to have a narrower focus.

Now, as for the distractions, your Honours, distraction number one is whether the State law is a tax.  It has not featured particularly in our learned friend’s oral submissions, but Mr Hanks does pepper his written submissions with references to this State law being a tax.  True, but a State tax can be inconsistent with a Commonwealth law.  Example:  Commonwealth v Queensland, which was a State tax on exempt Commonwealth bonds.  A further example, the most recent example is Bayside v Telstra 216 CLR 595. Your Honours will recall that was a State tax on telecommunications facilities.

Distraction number two is whether the State law pertains to the industrial relationship between employers and employees.  That, of course, is a question that one would consider for the purpose of determining whether an award could be made under the Commonwealth Act as it stood at the relevant time.  Part of the definition of “industrial dispute” incorporated those words, that was section 4(1), and you would have asked the same question for the purposes of an agreement because that same language was used in section 170LI. 

So you would be asking that question for the purpose of a Commonwealth Act, but you would be off on the wrong track if you are asking that because the characterisation of the State law as something that could or could not be done under a head of Commonwealth legislative power or under a provision that gave effect to an instrument is simply not what section 109 requires you to do. The statement of Chief Justice Latham in Colvin v Bradley, which we have given a reference to, is a very clear statement to that effect.

Distraction number three is as to what might but has not been done under the State Act or under the rules as they might have existed in a period prior to the one under consideration or as they might exist in some later period.  To the two cases we have mentioned there, Mr Hanks’ reference to Commonwealth v Western Australia could be added.

Distraction number four, might I add, would be this, in our submission.  It would be whether the trust deed is a statutory instrument.  That is a difficult question, it seems, under the Victorian legislation.  I am sorry – whether it is a subordinate instrument.  The question would be whether it is an instrument made under an Act which, of course, brings in a lot of ‑ ‑ ‑

GUMMOW J:   What section are you reading from, Mr Solicitor?

MR GAGELER: I am reading from section 38 of the Interpretation of Legislation Act 1984, but I do not want to put a firm submission because it is State legislation and not Commonwealth legislation. I simply want to say, whatever the answer to that question is does not impact on the section 109 question before your Honours and that is for this reason. Assume that the trust deed is a subordinate instrument, that would make no difference to the operative effect that is given to the trust deed by the Act, that is, it is only the effect that is given through the operation of section 4 and section 6 of the State Act with which we are concerned.

FRENCH CJ:   The primary question is whether the trust deed and the rules have the force of law and if they give content to the Act, they do not of themselves have statutory force thereby, even though they might fall into the characterisation of a subordinative instrument.

MR GAGELER:   That is right.  The only force of law with which we are concerned is the force that is given by sections 4 and 6 of the State Act and then finally, your Honours – this does not come up in our submission – but if the question were, could an award or an agreement impose an obligation on the employer to pay into this trust fund, or an equivalent trust fund, in circumstances where the ability to make an award or the ability to enter into an agreement was qualified by that statutory language of pertaining to the relationship between employers and employees – assuming all of that, the answer is yes and, in our submission, the Manufacturing Grocers’ Case is indistinguishable.  

It dealt with, amongst other things, the imposition and obligation on an employer to make payments into a portable defined benefits superannuation scheme and there is no difference in principle between an obligation to make payments into a portable defined benefits superannuation scheme and the imposition of an obligation to make payments into a portable defined benefits long service leave fund.  Your Honours, those are our submissions.

FRENCH CJ:   Thank you, Mr Solicitor.  Yes, Mr Myers.

MR MYERS:   Mr Hanks, as one of the principle planks of his oral submissions, said that there is no link between the obligation of the employer to pay a sum to a fund and the entitlement of the employee to receive a payment from the fund.  That is evidently wrong.  The obligation to pay to the fund arises from the fact, and only from the fact, that the employer employs a person in the construction industry.  The entitlement to receive payment from the fund arises from the same fact. 

The federal instruments provide a clear scheme for the payment of long service leave.  The obligation that the employer has is to give leave and to pay the ordinary wages or salary during that period.  This is to impose a different and conflicting obligation upon the employer.  It is an obligation to make a payment to a fund by reason of the employment and notwithstanding that the condition of a certain period of employment having been satisfied has not been satisfied and that is what the matter is about.  It is, in our respectful submission, the clearest example of an inconsistency.

Your Honour Justice Kiefel asked the question whether the Commonwealth instruments deal with the whole of the relationship between employer and employee in relation to long service leave.  They do, in our respectful submission.  They evidently deal with every aspect of it and they do not provide for portable long service leave.  The court below was correct when it said it may be accepted that the federal scheme instruments deal with and intend to deal with exhaustively long service leave entitlements for employees in relation to their particular employers and they deal exhaustively with the obligations of employers to make payments in respect of long service leave entitlements of employees.

KIEFEL J:   I suppose it is a self‑fulfilling answer though, is it not?  It depends on what you say are the entitlements to long service leave.  It is an open‑ended question.  So perhaps looking at the relationship by reference to a subject matter described in that way is not very helpful.

MR MYERS:   If is the fact, the federal instruments prescribe when employers incur obligations in respect of long service leave to provide for another and different obligation which provides for payments in other and different circumstances is inconsistent.  It is just as though the federal Act provided for a wage of $100 per week and the State Act provided for a wage of $150 per week.  They are inconsistent.  The employer in that case ‑ ‑ ‑

KIEFEL J:   They are not if you think of the State Act as providing for plus $50.

MR MYERS:   No, but the employer cannot get a discharge of his obligation to the employee by paying $100, which is what the federal legislation says.  That was the very example that Sir Garfield Barwick gave, I think it may have been in Worthing’s Case.  Maybe it was not in Worthing’s Case.  It was in some such case.  That is precisely the sort of conflict there is here.  The question of ‑ ‑ ‑

CRENNAN J:   I suppose one answer to that, I do not want to detain you too much, but are the provisions in rule 40 and rule 23.10 which introduce a level of consonance between the two different systems, which is what I was putting to you before, that it is not a question of whether it is socially desirable to have portable long service leave.  If you look at the way the

State system works, it is not necessarily inconsistent with the Commonwealth award.

MR MYERS:   But the State system requires the payment of this sum of money because of the employment relationship to a trustee in circumstances where the federal instruments do not require anything.  So it is an additional and, therefore, in this context, inconsistent obligation.  The fact that there is some elements of recoupment does not change the essential character of the obligations arising as they do entirely out of the employment relationship on both sides of the question.

Just looking at the Solicitor’s question 2, Does the State Act, in its legal or practical operation impair or detract from the performance of those obligations or the receipt of those entitlements?  He says no, but he does not mention the fact that there is an obligation to pay an amount which the federal legislation does not impose.  He does not answer his question.  He deals with some distracting irrelevances.

Could I just say something about this question of the nature of the trust which Justice Gummow has engaged my friends about.  In my respectful submission, the outcome of this appeal will not depend upon the nature of the trust because it does not really go to the heart of this question of inconsistency, as we have put and as I have just put it again in reply.  But why should, I ask, one deny this fund and the relationships that attach to it the nature of a trust?  My learned friend Mr Hanks did not answer that question. 

This is no different from many superannuation trusts which would have a very similar set‑up.  The legislation itself assumes that the provisions of the Trustee Act apply to it with, I think, a couple of exceptions.  His Honour the Chief Justice adverted to that.  There is no reason why the employees should not have the rights of beneficiaries under a trust, including a level of proprietary interest in the subject matter of the trust, when they have satisfied the requirements of the trust deed to be entitled to a payment.  In our respectful submission, there is no reason at all to deny this the character of the trust.  They are the submissions in reply.

FRENCH CJ:   Thank you, Mr Myers.  I understand, Mr Hanks, that you are partly let off your homework, at least so far as the reference to subordinate instruments is concerned.  I think Justice Crennan would still like to have your note on the other matter.

MR HANKS:   If your Honour pleases.

FRENCH CJ:   The Court will reserve its decision and adjourns until 10.15 tomorrow morning.

AT 12.52 PM THE MATTER WAS ADJOURNED