John Holland Group Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union

Case •

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•

28 July 2010
IN THE SUPREME COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

LIST A
No. 1423 of 2010

JOHN HOLLAND GROUP PTY LTD (ACN 050 242 147) Plaintiff
- and -
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION (ABN 59 459 725 116) and others (according to schedule attached) Defendants
- and -

COMMONWEALTH

ATTORNEY-GENERAL

 Intervener

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JUDGE:

Pagone J

WHERE HELD:

Melbourne

DATE OF HEARING:

12-13 July 2010

DATE OF JUDGMENT:

28 July 2010

CASE MAY BE CITED AS:

John Holland Group Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union & Ors

MEDIUM NEUTRAL CITATION:

[2010] VSC 322

1st revision 03/08/10

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EMPLOYMENT LAW – Variation of nominal expiry date in Union Greenfields agreement – Election to vary made after repeal of Workplace Relations Act 1996 (Cth) – Variation not permitted under Workplace Relations Act 1996 (Cth), Fair Work Act 2009 (Cth) or Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) –Availability of common law rights – Whether agreement to vary constitutes a variation of the agreement.

CONSTITUTIONAL LAW – s 51(xxxi) Australian Constitution – Loss of contractual entitlement – Schedule 3 Item 9 Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) – Law not one with respect to acquisition of property.

CONTRACT – Frustration – Benefit and performance – “Because of” – s 32ZI Fair Trading Act 1999 (Vic).

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APPEARANCES:

 Counsel Solicitors
For the Plaintiff Mr M Wyles SC with
Mr R Peters 		Herbert Geer
For the Defendants Mr H Borenstein SC with
Ms W Harris 		Slater & Gordon

For the Commonwealth Attorney-General

 Dr S Donaghue Australian Government Solicitor

HIS HONOUR:

  1. John Holland Group Pty Ltd (“John Holland”) seeks to enforce against the defendants the provision of a Deed of Settlement made on 18 April 2007.  Four of the defendants maintained that the provision John Holland seeks to enforce is inoperative or unenforceable as and from 1 July 2009 when the Workplace Relations Act 1996 (Cth) (“the WR Act”) was repealed and the Fair Work Act 2009 (Cth) (“the FW Act”) and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) (“the Transitional Act”) came into effect.  The fifth defendant did not dispute John Holland’s claim but took no active part in the proceeding.

  1. The present dispute has arisen in the context of an industrial compromise which was reached between John Holland and five unions at a time when the compromise was governed by the WR Act. The background to the compromise arose from a decision by John Holland to acquire the Ansett Engineering business which it intended to commence as a new business to be called “John Holland Aviation Services”. The business it sought to acquire had been a division of Ansett Airlines through which Ansett provided engineering services to aircraft operators. The business continued to be conducted by Ansett’s administrators after the airline’s collapse in 2001 and in 2006 John Holland commenced negotiations with the administrators for the purchase of the Ansett Aviation Engineering Services business with the intention of establishing it as a new business. At the time there was in existence an enterprise agreement between Ansett and a number of unions containing terms concerning the employment by Ansett of its employees. In February 2007 John Holland made written offers to approximately 89 Ansett employees and to 6 employees of Integrated Management Services Pty Ltd who were then employed at the maintenance facility at Tullamarine. The offers included a letter and a proposed Australian Workplace Agreement which John Holland sought to have the employees accept as a condition of their employment in the new business with John Holland. In early March 2007 a memorandum was sent by the second defendant to its members employed in the Ansett business stating that they would lose entitlements payable by Ansett if they accepted the offers made by John Holland. On 9 March 2007 John Holland commenced proceedings in the Federal Court against the second defendant alleging that it had made misleading statements in the memorandum which it said contravened s 401 of the WR Act. 

  1. A meeting was convened on 12 March 2007 between representatives of John Holland, the ACTU and the five unions to resolve the industrial dispute. The meeting took place over 12 and 13 March 2007 and ultimately led to a compromise between the parties. It was agreed between them that the employees would be governed by a “union greenfields agreement” within the meaning of s 4 of the WR Act.  John Holland initially sought to secure a five year term for the union greenfields agreement through the negotiations, but that proposal was rejected by the unions and the ACTU.  The compromise negotiated and reached was that the term of the greenfields agreement would be set at three years but that the parties would enter into a side agreement giving each of John Holland and the unions the option to extend the term of the union greenfields agreement by a period of either one or two further years.

  1. The importance to John Holland of a five year term was explained in evidence by Mr Stephen Sasse.  He said that John Holland expected that it would take about five years of operation for the new business to get a stable demand from its customer base and that, whilst building up the business, John Holland needed the employees to give it particular flexibility in their working conditions.  It expected, and apparently found it to be the case, that it required employees who were willing either to work or not to work at short notice depending upon client demand.  The Australian Workplace Agreements which John Holland had offered before the compromise were predominantly of five years duration with the explicit goal, which had been made clear to the proposed employees, that John Holland needed at least that time frame of industrial stability in order to establish the new business.  John Holland had had a good response to its offers of Australian Workplace Agreements.  Mr Sasse estimated that the company in mid March could have proceeded to staff its business on Australian Workplace Agreements had the agreement with the unions and the ACTU not been reached.

  1. In fact, however, John Holland did not proceed with the Australian Workplace Agreements as the means by which it would employ staff but proceeded to acquire the former Ansett business on the strength of the agreement it had reached with the unions and the ACTU.  What was agreed to in March found expression in two documents executed in April 2007.  One was the union greenfields agreement executed by John Holland and the defendants on 18 April 2007 (“the greenfields agreement”).  The other was a side agreement described as a Deed of Settlement made between the same parties as well as the ACTU (“the Deed of Settlement”).  The greenfields agreement was lodged with the Office of Employment Advocate in May 2007[1] pursuant to the terms of the WR Act and applied to the employment of staff in the John Holland business once the acquisition from Ansett was completed. Clause 4 of the greenfields agreement provided that it would expire on 30 March 2010 but clause 6 of the Deed of Settlement provided for the extension of the expiry date.

    [1]From 1 July 2007 the Employment Advocate was replaced with the Workplace Authority Director.

  1. On 22 December 2009 John Holland sought to exercise the election provided for in the Deed of Settlement to extend the expiry date of the greenfields agreement.  Between April 2007 and 22 December 2009 the WR Act was replaced with the FW Act and the Transitional Act.  Four of the five unions who were parties to the greenfields agreement and the Deed of Settlement maintained in this proceeding that the election in the Deed of Settlement was no longer able to be exercised on 22 December 2009 because of the repeal of the WR Act and the coming into force of the FW Act and the Transitional Act.  One of the unions, the fifth defendant, is not in dispute with John Holland about these matters but is a party to the proceeding for conformity and took no other part in the dispute.[2]

    [2]Any reference in these reasons to the defendants should be understood as including the fifth defendant where the reference is to the conduct of the parties or the legal relations with them, but to exclude the fifth defendant where the reference is to submissions made in opposition to John Holland in this proceeding.

A. Enforceability of the Election Clause

  1. The primary position of John Holland was that the option in clause 6 of the Deed of Settlement was enforceable against the defendants as a common law contract. The defendants’ response was that the common law option, such as it was, had nothing upon which to operate once the industrial effect of the greenfields agreement was overtaken by the FW Act and the Transitional Act.  The response to this by John Holland was that the greenfields agreement was also enforceable as against the unions as a common law agreement even though it was conceded, correctly in my view, that it could not be enforced as from 1 July 2009 against its employees.

  1. The Deed of Settlement contains a number of recitals and both the recitals and its terms make it clear that its subject matter was not only to provide agreement about the greenfields agreement.  The Deed of Settlement, also deals, for example, with the Federal Court proceedings initiated by John Holland and also contains an agreement that John Holland will terminate the Australian Workplace Agreement offers on certain conditions.  There are in the Deed of Settlement independent and separate undertakings capable of severance from each other.  Clause 25 acknowledges this in general terms by providing that “each provision of, part of or undertaking” in the deed was a separate and severable undertaking and that, if for any reason any provision was unlawful, void, invalid or unenforceable, then such provision or part shall be severed without affecting the validity or enforcement of the remainder of the deed. 

  1. Clause 6 of the deed is part of a group of clauses under the heading “Extension of Expiry Date”. Its terms are specific and are unquestionably directed to the nominal expiry date in the greenfields agreement which was dealt with in the deed in clauses 3 to 5 under the heading “union greenfields agreement”. Clause 6 may have had the effect of giving to John Holland the comfort that it could elect to secure an absence of industrial disputation for a term which could be extended from three to five years from the date of acquisition of the former Ansett Aviation business, but its terms are not so expressed. Clause 6 does not in terms impose any obligation on the unions not to engage in industrial action; Clause 8 does have that effect but it is subject to John Holland meeting the provisions of, amongst others, clause 6 and that John Holland had extended the expiry date as provided for by clause 6.

  1. Clause 6 provides:

The Agreement has a nominal expiry date of 31 March 2010.  Either John Holland or the Unions may elect in writing no later than the last working day on or before 1 January 2010 to extend the operation of the Agreement by either 12 months or 24 months.  If John Holland or the Unions elect to extend the expiry date by 12 months then no later than the last working day on or before 1 January 2010, either John Holland or the Unions may elect in writing to extend the agreement by a further 12 months.  If John Holland or the Unions makes any election to extend the expiry date of the agreement, all parties hereby agree to extend the nominal expiry date of the Agreement.  All parties further agree to do all things reasonably necessary to obtain approval for the extension of the nominal expiry date including procuring votes of the employees in favour of the extension of the nominal expiry date and executing any document reasonably necessary to obtain approval of the variation and to lodge the variation of the Agreement.

The “agreement” referred to in this clause of the Deed of Settlement is defined as that which in these reasons is referred to as the greenfields agreement. The terms of clause 6 gave both John Holland and the unions a significant industrial benefit through an election to extend the greenfields agreement beyond the three years initially agreed. The right in clause 6 is not against, or given by, John Holland’s employees: they are governed by the greenfields agreement and the provisions of the legislation which give it effect. What clause 6 sought to achieve was agreement as between an employer and certain unions about the nominal expiry date of the greenfields agreement which they had negotiated to apply to the employees whose involvement was otherwise not sought. The mechanism by which this substantial industrial benefit was secured, however, assumed the existence of the regime created by the WR Act and did not contemplate, as it could not contemplate, the terms of the FW Act or the Transitional Act which only subsequently came into existence after a general election and a change of government. 

  1. The exercise by John Holland of the election in clause 6 is no longer able to give the greenfields agreement the statutory effect which it might have given had John Holland made the election before 1 July 2009. Section 351 of the WR Act had given the greenfields agreement the force of law binding John Holland, those of its employees who were subject to the agreement and the unions who had made the agreement with John Holland.  It could be varied for the purposes of the WR Act in accordance with part 8 division 8, but s 367(2) had provided that a workplace agreement could not be varied except in accordance with the provisions specified in the sub-section. The relevant means by which the greenfields agreement could have been varied was in accordance with division 8.[3] Division 8 sets out various provisions that needed to be complied with for a variation to have effect, including the approval of the employees affected by the agreement provided that they had been given a reasonable opportunity by the employer to decide whether they wanted to approve the variation and either a majority of persons had validly voted for the approval or had decided that they wanted to approve the variation.[4]  Variations to workplace agreements were required to be lodged with the Employee Advocate within 14 days after a variation was approved[5] but an employer was forbidden from lodging a variation with the Workplace Authority Director if the variation had not been approved in accordance with s 373.[6]

    [3]Workplace Relations Act 1996 (Cth) s 367(2)(a).

    [4]Workplace Relations Act 1996 (Cth) s 373(2).

    [5]Workplace Relations Act 1996 (Cth) s 375(1).

    [6]Workplace Relations Act 1996 (Cth) s 374(1).

  1. Clause 6 of the Deed of Settlement contemplated that the variation to the nominal expiry date (if the election were exercised) would be the subject of formal approval in accordance with the WR Act as it existed at the time the Deed of Settlement was made. The last sentence in clause 6 makes this clear by imposing upon the parties an obligation to do all things reasonably necessary “to obtain approval for the extension of the nominal expiry date” if (which might not have occurred) the election was exercised. The nominal expiry date in the greenfields agreement was important to the parties but it was also an important feature of the operation of industrial agreements under the WR Act.  The nominal expiry date was the first matter identified under the heading “Required Content” as part of the necessary content of workplace agreements.[7]  The legislation provided that the nominal expiry date was, in general terms, to be either the date specified in the agreement (if less than five years) or the fifth anniversary of the date on which the agreement was lodged (in other cases).[8]  The nominal expiry date governed the relationship between overlapping collective agreements,[9] limited the rights to terminate a workplace agreement,[10] and fixed the threshold date for the commencement of protected industrial action.[11]  It was something which the legislation made capable of variation by extension.[12] 

    [7]Workplace Relations Act 1996 (Cth) s 352.

    [8]Workplace Relations Act 1996 (Cth) s 352(1)(b).

    [9]Workplace Relations Act 1996 (Cth) s 348(3).

    [10]Workplace Relations Act 1996 (Cth) ss 392, 393.

    [11]Workplace Relations Act 1996 (Cth) ss 440, 494.

    [12]Workplace Relations Act 1996 (Cth) s 352(2).

  1. The natural reading of clause 6 is that the nominal expiry date of the greenfields agreement was 30 March 2010 (as provided in clause 4 of the greenfields agreement) unless and until the election in clause 6 was exercised. The repeal of the WR Act and the introduction of the FW Act as from 1 July 2009 provided no mechanism to extend the nominal expiry date of the greenfields agreement other than through the Transitional Act.  An effect of the Transitional Act was to make the greenfields agreement a transitional instrument for the purposes of FW Act. Schedule 3 of the Transitional Act provides that a workplace agreement under the Workplace Agreement Act is a “WR Act instrument”.[13]  It also provides that a transitional instrument cannot be varied except as provided for in the Transitional Act.[14]  The variations permitted in the Transitional Act include those in schedule 8 (which the parties agree in this proceeding are not available to be relied upon by John Holland) and those in part 3 of schedule 2 which deal with conduct and processes begun before the repeal of the WR Act.[15]  Putting to one side for the moment any argument about the application of the transitional provision dealing with conduct and processes begun before repeal of the WR Act,[16] it follows that clause 6 cannot be invoked under the WR Act (because it has been repealed), the FW Act or the Transitional Act (because they do not permit variation).

    [13]Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) sch 3 item 2(2)(c), sch 3 item 2(1), sch 3 item 3.

    [14]Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) sch 3 item 9(1).

    [15]Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) sch 3 item 9(1)(e) and (g).

    [16]See Section C below.

  1. John Holland nonetheless maintained that apart from any effect under or through the legislation, it may rely upon clause 6 as a matter of contract as between itself and the unions who were parties to the Deed of Settlement and the greenfields agreement. The proposition put for John Holland was that the greenfields agreement, once it had made the election in clause 6, meant that as between it and the unions there were common law rights and obligations which continued to the varied nominal date irrespective of whether the greenfields agreement could be enforced as an industrial agreement under the WR Act, the FW Act or the Transitional Act. John Holland contended that enforcement of clause 6 of the Deed of Settlement might not engage all of the rights and obligations which the Deed of Settlement may have contemplated when it was made but that it would give John Holland contractual protection against industrial action from the unions until the extended date. For the purposes of this argument it may be accepted that the greenfields agreement is not a legally enforceable instrument according to its terms.[17] What is critical to the argument is whether the terms of the Deed of Settlement can be enforced by John Holland against the unions upon the supposition (as between John Holland and the defendants) that the greenfields agreement had the extended nominal expiry date upon the election being made under clause 6 on 22 December 2009.

    [17]Ryan v Textile Clothing & Footwear Union Australia [1996] 2 VR 235.

  1. In my view that contention cannot be supported as a matter of construction and lacks reality as a matter of contractual bargain between the parties notwithstanding that one may be sympathetic to the position of John Holland.  The Deed of Settlement between John Holland and the unions did not confer upon John Holland a contractual right devoid of legislative effect under the WR Act.  The unions did not agree in terms or substance not to engage in industrial action for a period of three, four or five years at the election of John Holland subject to it agreeing contractually with them to maintain the greenfields agreement.  What was contemplated in the Deed of Settlement in terms and in substance was that the greenfields agreement would have effect as an instrument through the WR Act and that, on that basis, amongst other things, John Holland could elect to extend the date of the greenfields agreement with the character and quality as a greenfields agreement under the WR Act for the period of a further one or two years. The basis upon which the unions agreed to clause 6 would be wholly absent if the greenfields agreement lacks the quality and effect of an industrial instrument under the WR Act either directly through the WR Act or indirectly through the FW Act or the Transitional Act. Indeed, the necessary (and in my view correct) concession by counsel for John Holland that its employees were no longer bound by the greenfields agreement after expiry of the specified nominal expiry date bolsters the construction against John Holland because the argument contemplates the possibility that the greenfields agreement could have no practical effect for or against the employees for whom it was negotiated and yet still bind the unions. Such a construction cannot have been intended by the parties and none of the words expressly, impliedly or by any fair reading require that it be adopted. In my view clause 6 has become inoperative and unenforceable by the repeal of the WR Act, the introduction of the FW Act and the inability of a variation of the nominal expiry date being allowed other than through the Transitional Act. A consequence is that clause 6 is effectively severed from the deed by force of clause 25.

B. Was the Deed itself a Variation?

  1. An alternative argument made by John Holland was that clause 6 of the Deed of Settlement in combination with the greenfields agreement constituted and effected from inception a variation of the greenfields agreement by force of the deed. The argument, counter intuitive when expressed, appears to depend upon the impact of the words “for the purposes of this Act” in s 368 of the WR Act.  That section relevantly provided that for the purposes of the WR Act a variation to a workplace agreement was made at, relevantly, “the time when the employer and the organisation or organisations agree to the terms of the variation”.  The contention for John Holland was that a consequence of the particular wording of this section was that the variation effected by the subsequent notice on 22 December 2009 was, for the purposes of the WR Act, to be regarded as having occurred at the time of the agreement in April 2007 rather than when actually made some 20 months or so later.  I do not consider this argument to be tenable on the terms of the provision.

  1. Clause 6 of the Deed of Settlement did not purport to have the effect of constituting an agreement as at April 2007 that the nominal expiry date would then be some date other than 30 March 2010 as might (or might not) be elected subsequently. At best what was agreed to was that as at April 2007 the parties would in the future agree to a variation of the date. This argument of John Holland is not that the Deed of Settlement and the greenfields agreement depend upon common law rights in disregard of the legislation. The argument, rather, depends upon the incorporation of the opening words of s 368 to enable John Holland to maintain that what occurred on 22 December 2009 (in exercise of the right in clause 6 of the Deed of Settlement) must be seen to speak as from April 2007. Fundamental to the argument, however, is not the opening words of the section but, rather, the meaning of the words “the time when the employer and the organisation or organisations agree to the terms of the variation” in subclause (d) of the section. There is no warrant to read those words as having been satisfied by legal fiction when the facts clearly show that the terms of the variation had not been agreed until, at best, the election in December 2009 (and might never have been made). It may be accepted that the parties agreed something in April 2007 and that the something which they agreed to related to an extension, but it does not follow that what was agreed by clause 6 satisfies the statutory description of agreement of terms which depended upon a future act which might or might not have occurred. Whether the statutory condition was satisfied requires a finding of fact and does not contemplate the operation of legal fiction as between the parties. In any event, a fair reading of clause 6 is that the parties agreed in April 2007 to agree to something in the future and was not an acknowledgement of an agreement in April 2007 of some event which was plainly contemplated as only a possibility.

  1. It is therefore unnecessary for me to consider the various sub issues that were raised in connection with this contention but it may be desirable for me to state in summary form some views about them.  The variation contended for by John Holland as effective upon the agreement in the Deed of Settlement could not have come into operation because it was not the Deed of Settlement but the greenfields agreement that had operation under the WR Act. Section 367 of the WR Act limited the way in which the greenfields agreement was capable of variation. For present purposes what needed to be complied with was the terms of division 8 which, amongst other things, required lodgement of the variation with the Workplace Authority Director under s 377. That did not occur. The WR Act, the FW Act and the Transitional Act provide no mechanism to amend the greenfields agreement by judicial order or to permit the Court to waive compliance with any of the procedures in division 8 of the WR Act or elsewhere in that legislation.

C. Commencement of a process to vary

  1. A separate contention for John Holland was that the variation to extend the nominal expiry date of the greenfields agreement was permitted under a specific provision in the Transitional Act.  It provided that a transitional instrument (which for present purposes includes the greenfields agreement) could not be varied except under one of seven specified provisions.[18] One of the exceptions was a variation under schedule 8 which included an unlodged variation of agreements such as the greenfields agreement.[19] Another exception was under part 3 of schedule 2 which deals with conduct before the repeal day of the WR Act. John Holland correctly accepted that it cannot bring itself within the terms of schedule 8 but maintained that it may come within the terms of part 3 of schedule 2 on the basis that a process to vary the greenfields agreement was begun before the repeal date of the WR Act. 

    [18]Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) sch 3 item 9(1).

    [19]Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) sch 8 item 8(1).

  1. The critical question for this issue is whether before 1 July 2009 there was begun “a process to vary” the greenfields agreement within the meaning of the words “a process to vary” as enacted in the Transitional Act.[20] The existence of clause 6 may be relevant to a process to vary but no process to vary had begun until an election was made. That did not occur until 22 December 2009 by which time the WR Act had been repealed and, therefore, John Holland’s contention of a variation under the Transitional Act must also be rejected.

    [20]Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) sch 2 item 11(1A).

  1. I do not stop to consider in any detail whether the alternative contention made on behalf of the unions might also have prevented reliance by John Holland on this exception.  It was contended for the unions that John Holland could not rely upon the exception dealing with conduct which had begun before the repeal day of the WR Act because it was a more general exception than the exception dealing with workplace agreements and workplace determinations made under the WR Act which required recourse to schedule 8 of the Transitional Act.  Much unnecessary time can be spent in analysing whether one provision is more particular or more general than the other and then considering whether the legislature intended to exclude the more general if the more particular did not apply.  For present purposes I have assumed both that the provisions might have some overlapping operation (as I consider them to have) and that if the fact be as contended for by John Holland (which I have rejected in the preceding paragraphs) that it was the exception upon which they relied that was engaged as the more specific rather than the other provision which they accepted they could not otherwise come within.

D. Infringement of Constitutional Guarantee regarding acquisition of property other than on just terms

  1. John Holland maintained an alternative claim that its inability to extend the nominal expiry date by reason of the repeal of the WR Act constituted an impermissible acquisition of property other than on just terms contrary to the provision of s 51(xxxi) of the Constitution.  On 30 June 2009 John Holland had a chose in action under the Deed of Settlement which effectively permitted it to extend the nominal expiry date in the greenfields agreement by one or two years.  It also had a right as against the unions to the extent that the unions had agreed not to take or organise protected action against John Holland before any date to which John Holland might have elected to extend the nominal expiry date of the greenfields agreement.

  1. The law which John Holland identified in its statement of claim as infringing any constitutional protection was schedule 3 item 9 of the Transitional Act which prohibited variation of the greenfields agreement (assuming that it was unable to come within the terms of the exception[21] permitting variation under part 3 of schedule 2).[22] It is sufficient to dispose of this argument that the law identified by John Holland as having the effect of acquiring from it property other than on just terms is not a law with respect to the acquisition of property within the meaning of s 51(xxxi) of the Constitution. Assuming that the section is otherwise capable of operating as John Holland contended, it is still necessary for there to be a law that satisfies the description as one with respect to the acquisition of property. Item 9 of schedule 3 to the Transitional Act does not satisfy that description.

    [21]Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Cth) sch 3 item 9(1)(g).

    [22]See Section C above.

  1. It may be accepted that s 51(xxxi) “has assumed the status of a constitutional guarantee of just terms … and is to be given the liberal construction appropriate to such a constitutional provision”[23] but its impact must be upon a law capable of bearing the characterization as a law with respect to the acquisition of property.[24]  A law can, of course, have more than one character and, therefore, a law can be at the one time a law with respect to the subject matter of a number of different grounds of legislative power.[25] However s 51(xxxi) “cannot indirectly operate to exclude its enactment from the prima facie scope of another grant of legislative power” unless the law can fairly be characterized as of a law with respect to the acquisition of property.[26] A law does not bear the character as one supported by s 51(xxxi) of the Constitution, and therefore invalid for failing to pay just compensation, merely by affecting property interests.[27]  In Nintendo Co Ltd v Centronics Systems Pty Ltd[28] it was said in the joint judgment:

The cases also establish that a law which is not directed towards the acquisition of property as such but which is concerned with the adjustment of the competing rights, claims or obligations of persons in a particular relationship or area of activity is unlikely to be susceptible of legitimate characterization as a law with respect to the acquisition of property for the purposes of s. 51 of the Constitution.[29]

[23]ICM Agriculture Pty Ltd v The Commonwealth of Australia (2009) 240 CLR 140, 169 [43] (French CJ, Gummow and Crennan JJ) quoting from Clunies-Ross v The Commonwealth of Australia (1984) 155 CLR 193, 201-2 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ); see also ICM Agriculture Pty Ltd v The Commonwealth of Australia (2009) 240 CLR 140, [136] (Hayne, Kiefel and Bell JJ) and [185] (Heydon J); Newcrest Mining (WA) Ltd v The Commonwealth of Australia (1997) 190 CLR 513, 567-8 (Gaudron J); Smith v ANL Ltd (2000) 204 CLR 493, [74], [77], [102] - [108] (Kirby J) and [175]-[177] (Callinan J).

[24]Attorney-General (Commonwealth) v Schmidt (1961) 105 CLR 361, 371-2 (Dixon CJ); Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270, 285 (Deane and Gaudron JJ); The Commonwealth of Australia v WMC Resources Ltd (1998) 194 CLR 1, 48-9 [126]-[127] (McHugh J).

[25]Mutual Pools & Staff Pty Ltd v The Commonwealth of Australia (1994) 179 CLR 155, 188 (Deane and Gaudron JJ).

[26]Ibid; see also Commonwealth v WMC Resources Ltd (1998) 194 CLR 1, 50-1 (McHugh J).

[27]Mutual Pools & Staff Pty Ltd v The Commonwealth of Australia (1994) 179 CLR 155, 169-171 (Mason CJ) and 189 (Deane and Gaudron JJ); Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 181 CLR 134, 161 (Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ) and 167 (Dawson J); Bourke v State Bank of New South Wales (1990) 170 CLR 276, 288-9 (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).

[28](1994) 181 CLR 134.

[29]Ibid 161 (Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ).

The law which John Holland seeks, and must succeed, to impugn does not bear that character.  Any effect which the Transitional Act had upon a contractual entitlement of John Holland against the unions was at best incidental and subservient to the principal purpose and effect sought to be achieved by the legislation. The provision is an integral part of the set of statutes designed to phase out the earlier provisions. It is not a law that destroyed a right which John Holland could have had against the unions if the terms of the right had been directed to prevent the unions from engaging in industrial disputation at the election of John Holland for a period of time. What the law does is to set its sights upon the means by which industrial agreements were to be entered into and modified after 1 July 2009. It happened that a contractual term John Holland had against the unions was linked to the statutory regime by which a date for the term of an industrial agreement could be varied. The loss by John Holland of any right against the union was but an incident of its indirect entitlement having been made to depend upon the workings of the statutory regime which was repealed and substituted with that now in place. Its claim under s 51(xxxi) of the Constitution can not succeed.

E. Independent Entitlement under Clause 8

  1. John Holland separately contended that it may rely upon clause 8 of the deed independently of clause 6. Clause 8 provides:

Subject to John Holland meeting the provisions of clauses 6, 7, 9, 10 and 11, the unions agree that they will not take, organise or encourage protected industrial action in support of any claim against John Holland in respect of JHAS before the new expiry date if John Holland, prior to the nominal expiry date, makes an election to extend the nominal expiry date of the agreement.  For the avoidance of doubt, if John Holland elects to extend the agreement to either 30 March 2011 or 30 March 2012, the unions hereby agree not to take or organise protected action against John Holland before that date.  The unions and John Holland acknowledge the right of all parties to seek relief and/or compensation as contemplated by clause 22 and 23 in the event that the obligations contained in clauses 6, 7, 8, 9, 10 and 11 are not observed.

John Holland contended that notwithstanding any inability to extend the nominal expiry date under clause 6 of the deed, it may nonetheless rely upon clause 8 to require the unions “not to take or organise protected action against John Holland” before such date as it sought to have elected under clause 6. It is true that a consequence of the regime put in place by the Deed of Settlement in the framework of the WR Act would have secured for John Holland freedom from union organised industrial action coming within the terms of clause 8 of the Deed of Settlement, but that freedom was conditional upon, and based upon, an expectation of a statutory regime which had ceased to exist.  Counsel for John Holland correctly accepted that the greenfields agreement and the deed did not bind its employees after 1 July 2009.  Its employees are free to undertake industrial action directly or through unions or associations other than those who were parties to the deed and the greenfields agreement.  It follows that the factual state of affairs contemplated in clause 8 as the underlying factual circumstance upon which the unions had agreed not to take or organise protected action might simply not exist and could not be enforced, procured or relied upon by the unions.  It would be a curious construction of the operation of clause 8 if it were to bind the unions to a promise if the expectation upon which the promise was given could no longer be enforced, relied upon or contractually expected.

  1. The more natural construction of clause 8 is that it is predicated upon a valid exercise of the option in clause 6 resulting in an actual extension of the nominal expiry date of the greenfields agreement with the statutory consequences which it was anticipated to have had under the WR Act had it continued in force.  Clause 8 expressly contemplates that John Holland would have made “an election to extend the nominal expiry date” of the greenfields agreement and that this would result in a new expiry date.  The precondition to the unions’ obligation not to take protected action is not met where, as here, there is no extension to the nominal expiry date of the greenfields agreement.  It is true that a consequence sought by John Holland by its commercial bargain was to be free from industrial action but there is nothing in the objective circumstances, or the words of the provisions, which would justify a conclusion that the parties intended that consequence to be detached from the obligation arising from, and the arrangements in place through, the WR Act as it existed at the time the parties entered into the deed.

F. Compensation under the Frustrated Contract Provision

  1. The final claim made by John Holland arises under s 32ZI(1) of the Fair Trading Act 1999 (Vic) (“the Fair Trading Act”).  The section applies:

… if a party to a discharged contract obtained a valuable benefit (other than a payment of money to which section 32ZG or 32ZH applies) before the time of discharge because of anything done by another party in or for the purpose of the performance of the contract.

John Holland maintained that this provision is enlivened because a party (namely the unions) to a discharged contract (namely the Deed of Settlement) obtained a valuable benefit (namely the union fees they received) before the time of discharge (namely before 1 July 2009) because of anything done by another party (namely something done by John Holland) in or for the purpose of performance of the contract (namely by John Holland entering into the greenfields agreement in performance of the Deed of Settlement).

  1. The difficulty for John Holland is not in establishing that the Deed of Settlement is a frustrated contract for the purposes of Part 2C of the Fair Trading Act. Indeed, the defendants concede that Part 2C is prima facie engaged. The difficulty for John Holland is identifying what, if any, valuable benefit the unions obtained “because of” something done by John Holland in performance of the deed. The only valuable benefit relied upon by John Holland in this regard is the union fees paid to the unions by its employees up to 1 July 2009. It tendered a table showing union fees paid to the first four defendants over the periods from 1 April 2007 to 30 June 2009 totalling $83,564.32. The only other evidence bearing upon amounts received by these defendants was redacted summaries tendered by the defendants of union fees paid by the 120 John Holland employees. These showed that 104 employees had commenced their union membership before 18 April 2007; that is, before commencement of any employment with John Holland.

  1. The statutory provision requires a connection between the benefit obtained by the unions and the thing done by John Holland. The link between the two is found in the words “because of” appearing in s 32ZI. John Holland contended that the link was satisfied by meeting a “but for” test. It is plain that the section contemplates a broad ambit for what may be done to satisfy the test as may be seen by the statutory description of what may be done as “anything done by another party”. However, the link between what John Holland may have done with the valuable benefit must be more than a precondition to the benefit. The words “because of” which the legislature has chosen as the link between the benefit to the receiving party and the thing done by the performing party requires that the benefit be explained by the performance. That view accords with the fundamental principle underlying the provisions as the prevention of unjust enrichment.[30] The requisite connection between one person’s benefit and another person’s performance which for s 32ZI is made to depend upon the words “because of”, may be broader than the link required to establish a claim in restitution or for unjust enrichment, but it does require more than satisfying a “but for” test. The words “because of” denote a connection or relationship between two things by which one is the explanation of the other.[31]  Connecting words such as “in respect of”, “relating to”, “connected with” and cognate expressions are apt to cover a wider connection between two things,[32] but the connection required by the words “because of” requires a connection of cause and effect.[33]

    [30]BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] 1 WLR 783, 799 (Robert Goff J); see also Lord Goff and G Jones, The Law of Restitution (3rd ed, 1986) 491-2; JW Carter, E Peden and GJ Tolhurst, Contract Law in Australia (5th ed, 2007) 795-9.

    [31]Trust Company of Australia Ltd v Commissioner of State Revenue [2006] VSC 64 (Unreported, Hansen J, 5 April 2006) [46]-[47]; Thomson v Orica Australia Pty Ltd (2002) 116 IR 186.

    [32]Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110, 111 (Mann CJ); Workers’ Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642.

    [33]Human Rights and Equal Opportunity Commission v Mount Isa Mines Ltd (1993) 46 FCR 301, 321-2 (Lockhart J).

  1. In this case John Holland maintained that its employees would not have paid union membership fees if they had been employed under Australian Workplace Agreements because the unions would have been irrelevant.  Mr Sasse said in evidence that John Holland would have entered into Australian Workplace Agreements with its employees had there not been agreement in March 2007 which found expression through the greenfields agreement and the Deed of Settlement.  The evidence tendered by the unions showed that even under the greenfields agreement some employees did not take out union membership.  This fact was relied upon by John Holland for the proposition that those who did pay union membership must only have done so because of the greenfields agreement. However, its argument seems, rather, to undermine the contention of a link between the payment of union membership fees and John Holland’s entering into of the greenfields agreement: union membership seems to have been thought to be irrelevant by some employees notwithstanding the greenfields agreement. 

  1. It is for John Holland to establish its case and to tender evidence which is sufficient to do so.  The bare payment of union membership fees (even ignoring the evidence tendered by the unions on this matter) would not be sufficient to establish the link that the payment of union fees was “because of” John Holland entering into the greenfields agreement.  The section does not operate just because a person has obtained a valuable benefit “in connection with” (or some such other more general connecting word or phrase)[34] the performance of another under a frustrated contract.  The section operates where the connection satisfies the description as the benefit being “because of” the relevant performance under a frustrated contract.  The words “because of” require that the benefit be explained by, and not merely connected with, the performance.  The evidence tendered by John Holland does not make that out. 

    [34]Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280; DC Pearce and RS Geddes, Statutory Interpretation in Australia (6th ed, 2006) [12.8].

  1. In the circumstances it is not necessary to consider what amount would be just for the unions to pay John Holland in all the circumstances. Section 32ZI(2) limits the amount payable to the value of the benefit obtained and, therefore, in the circumstances of this case it could not exceed $83,564.32. The fact that not all employees of John Holland were union members indicates that membership of the union was, at least in part, to be explained for some reason other than the existence of the greenfields agreement. Nothing is offered through evidence or submission which would provide a confident basis for measuring how much of the union membership fees might justly be considered referable to the existence of the greenfields agreement. In those circumstances had I been called upon to do so I would have decided that the amount payable to John Holland should only be nominal and fixed at $1.00.

G. Costs

  1. I will hear the parties about the orders for costs which I should make.  The fifth named defendant has not participated in the proceeding but may have incurred some costs which may be the subject of some agreement between the parties.  The Commonwealth is not seeking costs against any party and none of the parties are seeking costs against the Commonwealth.  There remains, however, the question of costs to be awarded as between the plaintiff and defendants which may be affected by evidence which had not been tendered at the hearing.  Subject to any submissions about those matters I will order that the claim be dismissed.

SCHEDULE OF PARTIES

No. 1423 of 2010
BETWEEN:
JOHN HOLLAND GROUP PTY LTD (ACN 050 242 147) Firstnamed Plaintiff
- and -
AUTOMOTIVE, FOOD, METALS, ENGINEERING, PRINTING AND KINDRED INDUSTRIES UNION (ABN 59 459 725 116) Firstnamed Defendant
AUSTRALIAN LICENSED AIRCRAFT ENGINEERS ASSOCIATION (ABN 84 234 747 620) Secondnamed Defendant
AUSTRALIAN WORKERS UNION (ABN 28 853 022 982) Thirdnamed Defendant
AUSTRALIAN MUNICIPAL ADMINISTRATIVE CLERICAL & SERVICES UNION (trading as the AUSTRALIAN SERVICES UNION) (ABN 28 519 971 998) Fourthnamed Defendant
NATIONAL UNION OF WORKERS (ABN 19 834 341 836) Fifthnamed Defendant
- and -
COMMONWEALTH ATTORNEY-GENERAL Intervener

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Most Recent Citation
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Cases Cited

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Statutory Material Cited

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Trust Company of Australia Ltd v Commissioner of State Revenue [2006] VSC 64
Delooze v Healey [2007] WASCA 157
Workers' Compensation Board of Queensland v Technical Products Pty Ltd [1988] HCA 49