Kaizen Hospitals (Essendon) Pty Ltd & Ors v Australian Nursing and Midwifery Federation & Ors

[2015] HCATrans 180

[2015] HCATrans 180

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S60 of 2015

B e t w e e n -

KAIZEN HOSPITALS (ESSENDON) PTY LTD

First Applicant

KAIZEN HOSPITALS (MALVERN) PTY LTD

Second Applicant

KAIZEN HOSPITAL (MOUNT DISTRICT) PTY LTD (ACN 110 824 085)

Third Applicant

and

AUSTRALIAN NURSING AND MIDWIFERY FEDERATION

First Respondent

FAIR WORK COMMISSION

Second Respondent

MACQUARIE HEALTH CORPORATION LTD

Third Respondent

Application for special leave to appeal

GAGELER J
GORDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 7 AUGUST 2015, AT 12.22 PM

Copyright in the High Court of Australia

____________________

MR A.R.MOSES, SC:   Your Honours, if it please the Court, I appear on behalf of the applicants, with my learned friend, MR Y. SHARIFF.  (instructed by McArdle Legal)

MR R.C. KENZIE, QC:   May it please the Court, I appear in this matter with my learned friend, MS A.M. DUFFY, for the respondent.  (instructed by Ryan Carlisle Thomas Lawyers)

GAGELER J:   Mr Moses.

MR MOSES: Your Honours, the critical issue which lies at the heart of this special leave application is the integrity of decision‑making of the Fair Work Commission, a statutory tribunal of limited jurisdiction, when it failed to act on the facts as known to it at the time of purporting to exercise its powers to grant approval of an enterprise agreement pursuant to sections 185 and 186 of the Fair Work Act.

In essence, the Commission relied on fabrication over known and undisputed facts, in order to hold that it had before it three valid enterprise agreements and that is not in dispute between the parties, your Honour, and we say that that was an act by that Commission, contrary to the observations of Justice Mason in Peko‑Wallsend, that an administrative decision‑maker should act on known facts to it at the time of making a decision.  But, in this case, it deliberately turned a blind eye to what was a known fabrication.

GAGELER J:   Well, it turns on the construction of two provisions of the Fair Work Act, does it not?

MR MOSES: Well, the Act, of course, has to be read as a whole, your Honours, but it is true that they used section 793, as the Full Court did, to buttress a contention that somehow that could be deployed to overcome the mandatory requirements of section 185. What they did, your Honour, was to conflate the issue of contract and a statutory instrument. This enterprise agreement was a statutory instrument but they conflated their consideration of these issues by taking into account contractual notions of ostensible authority and that is ‑ ‑ ‑

GORDON J:   What about section 182?

MR MOSES:   Yes.  Can we turn to that, your Honour?  So, your Honour, that appears at page 419 to 420 of the application book in which it states that:

the agreement is made when a majority of those employees who cast a valid vote approve the agreement.

However, your Honour, the mere fact that an agreement is made by a valid vote does not give any legal effect to the agreement. As Justice Flick said at first instance, in granting prerogative relief, the final step in the process, the vetting process, is the power exercised by the Commission pursuant to section 186. So, as we know from cases of this Court in terms of statutory construction, we must read the provisions in a harmonious manner and cannot ignore clear words in provisions of the Act that give power to the Commission to deal with this matter.

As Justice Flick said, they purported to act as a rubber stamp in respect of this matter and ignore what flowed after a point in time when both the Commission and the union were told by the individual himself, who purported to sign the agreement, that in essence it was a fabrication.  He had no authority, contrary to the declaration that he executed.  He had no authority ‑ ‑ ‑

GAGELER J:   Well, he had no actual authority, Mr Moses.

MR MOSES:   No, no, your Honour, he had no authority in relation to the matter.  Can we go to the terms of the documents themselves, your Honour, which is very important?

GAGELER J:   Well, wait a minute.  It is accepted that he had no actual authority.

MR MOSES:   Correct.

GAGELER J:   There is a finding that he had ostensible authority.  Are you seeking to contest that finding?

MR MOSES: Well, your Honour, can we say this? We do not need to contest that finding in respect of the matter that is before this Court; that is, this relates to a statutory construction point concerning section 186. The question of ostensible authority confuses the issue that was confronting the Commission. Can I just note, your Honours, if your Honours just make a note of this? At page 116 of the application book, paragraphs 117 to 120, their Honours held that there were arguments, cogent arguments, the doctrine of apparent authority could not prevail and your Honours will note a number of the propositions are put.

There are three of them that the Court outlined there, and having made all these, frankly, correct conclusions, the joint judgment then concluded that the problem with those conclusions is that they overlooked section 793 and that appears at page 116 of application book, paragraph 121. The provision appears at page 427 of the application book, and what their Honours noted was this:

the problem with these considerations is that they overlook the effect of s 793 and the scope that section provides for a corporation to be bound by the acts of its agent even if those acts are undertaken without actual authority, provided that the agent acts within the scope of his or her apparent authority.

And their Honours went on to make further observations at paragraphs 123 to 124 in respect of the question of apparent authority prevailing over actual authority.  And finally, on this point at page 118, their Honours noted this, paragraph 129:

subsequent knowledge of the lack of actual authority, disclosed before the FWC is called upon to exercise its approval function, is irrelevant to the assessment of whether the agreement was validly made.

Now, it is apparent from that reasoning, as I have said, your Honours, that the two members of the Full Court refer to section 793 to buttress the contention that section 185(2) of the Act could be satisfied on the basis of a false instrument being presented before the Commission.

GAGELER J:   What do you mean by false instrument?

MR MOSES:   Well, can I go to those documents, your Honour, which is at ‑ ‑ ‑

GAGELER J:   No, no, we do not need to go back to the facts.  What do you mean by a false instrument?

MR MOSES:   Two points, your Honour.  The documents that were signed by the individual, Mr Subramanian, on 3 August 2012, were documents which he executed in circumstances where he admitted ‑ and there was no evidence other than this, your Honour, before the Commission ‑ that he was not authorised to sign the agreement, contrary to the representation made in the document, firstly, and that is at page 230 of the application book, line 10.  And secondly, your Honour, at page 154 of the application book, there was a representation in that document that he was an officer or employee of the employer, being the applicant, of which he was neither.

At page 145, your Honour, of the application book, is the communication that he sent to the union on the date in August, 28 August, informing them that he had no authority to have signed that agreement so he signed ‑ ‑ ‑

GAGELER J:   Yes, he had no actual authority.  But are you trying to go beyond that accepted position of no actual authority to raise some question of fraud, or something akin to it?

MR MOSES:   We do not need ‑ no, we do not need ‑ ‑ ‑

GAGELER J:   Why are we going to this material?

MR MOSES:   No, your Honour, we do not need to say that.  What we need to say is that at the time that the Commission came to consider the approval of the enterprise agreement it had before it evidence undisputed, your Honour, that these agreements were in fact not agreed to by the employer and, in fact, the person who purported to sign documents which were lodged with the Commission admitted that he was plainly not authorised to sign the agreement, firstly, on behalf of the employer and, secondly, contrary to the requirement, he was not an officer or an employee of the employer applicant, so ‑ ‑ ‑

GAGELER J:   Accepting all of that, the question was whether he was an agent who by virtue of section 793 had authority, relevantly, to make the agreement on behalf of each of the employers.

MR MOSES:   Your Honour, that is not how the matter was approached.  The way in which the matter was approached, your Honour, was this ‑ if I can just by way of brief background, because this is an important issue that does have, your Honour, consequences in respect of the framework of industrial relations ‑ that in the first stage of these proceedings the enterprise agreements were lodged with the Commission.  They were approved.

The matter went before a Full Bench of the Commission and the Commission quashed the approval of those enterprise agreements because it concluded ‑ your Honour, this is behind ‑ if I can provide your Honours with a bundle of authorities, this decision is behind tab 4 of the bundle and this is quite important from the ostensible authority.  If I could seek your Honours’ leave to provide this ‑ ‑ ‑

GAGELER J:   Is this an authority or is this just part of the sequence of events that led up to the ‑ ‑ ‑

MR MOSES:   Well, this is part of the sequence of events, but there are statutory provisions in here, but tab 4, your Honour, is the decision of the Full Bench in 2012, because what occurred in that decision was that it quashed ‑ ‑ ‑

GAGELER J:   Well, it is up to you how you spend your time but we have really got to get the point of construction for you to ‑ ‑ ‑

MR MOSES:   No, I will be quick but I wanted to answer your Honour’s question about this question of agency ‑ ‑ ‑

GAGELER J:   Yes.

MR MOSES: ‑ ‑ ‑ because the way in which, your Honour, the matter transpired in 2012 was that the initial allegation or assertion by the union was that a Mr Cook of an entity known as SIAG was the bargaining agent for the company and that accordingly he had been validly appointed, and the Full Bench, your Honours, in that decision concluded that in fact Mr Cook had not been validly appointed as the bargaining agent for the applicants, pursuant to section 176(1)(d) of the Fair Work Act.

He was the individual that had attended all of the negotiations and made representations to the union, the ANF.  That decision was delivered on 18 October 2012.  On that very day, the ANF lodged the enterprise agreements again, which are at page 149 of the application book, attaching to them the documents which it knew by that time, because of the communication that had been sent to it by Mr Subramanian, that he had no authority to enter into, and by that time they shifted their position and purported to assert that there was reliance on Mr Subramanian’s ostensible authority in entering into the enterprise agreements because he held himself out to be the corporate manager of the applicants.

Now, the difficulty with that observation, as Justice Flick noted at first instance, was none of the employees had ever sighted a document from this man.  They did not know who he was.  There was no evidence about any of this at the time they voted for the enterprise agreement, and that was the missing link that Justice Flick adverted to in respect of the way in which the union had sought to conduct the matter, the second time it came around, before the Commission.

Our key point simply is this, your Honours, and if one goes to ‑ and we cannot say it any better than what Justice Flick observed at page 71 of the application book at paragraph 47 where his Honour noted in clear terms that:

The power imposed by s 186(1) is not a mere power to “rubber stamp” all that has gone before; the power has the hallmarks of a “final vetting process” to ensure that the enterprise agreement is one which is to be “approved”.

And what the Full Court did, your Honour, with all due respect, was to apply notions of contract, not statute, in dealing with this because an enterprise agreement is a statutory artefact. It only has legal efficacy because of statute, not contract. It imposes pecuniary penalties on individuals if it is not complied with, including accessorial liability. So, they applied the wrong notions when seeking to ascertain what the Commission should have been doing, and turning its attention to, at the point of section 186(1).

Can I, just on the point, your Honours, of the statutory provisions, just ask the Court to note in section 185(2), which is one of the key provisions in respect of this matter:

The application must be accompanied by:

(a)       a signed copy of the agreement; and

(b)any declarations that are required by the procedural rules to accompany the application –

and the word “must”, imposes a requirement for which there is no exception. Now section 185(5) provides that –

regulations may prescribe requirements relating to the signing of enterprise agreements –

Could I ask your Honours then to go to page 429 of the application book where regulation 2.06A is set out?  Now, I just ask your Honours to note in respect of the regulations there, subsection (1), it notes that it:

prescribes the requirements for the signing of an enterprise agreement ‑

and in (2) ‑

a copy of an enterprise agreement is a signed copy only if:

(a)     it is signed by:

(i)the employer covered by the agreement –

and your Honours will then see at (b)(i), it sets out at (ii) ‑

an explanation of the person’s authority to sign the agreement ‑

and the language of that provision reinforces that the requirements of section 185(2) and that regulation compel particular steps for which there is no exception or any discretionary exception, and at page 428 of the application book your Honours will see section 794, that states:

For the purposes of this Act, a document may be signed on behalf of a body corporate by an authorised officer –

and the like. And our opponents, of course, your Honours, place reliance on what appears at page 427 of the application book, section 793(1), but as this Court has said, you have got to read the provisions as a totality in the statute and they must be read subject to section 794, section 185(2) and regulation 2.06A. Our central contention, your Honour, is that section 185 of the Act specifically required applications for approval to be accompanied with, firstly, agreements which have been executed in accordance with the terms of the Act and, secondly ‑ ‑ ‑

GAGELER J:   I am sorry, what do you say is required by the terms of the Act for the execution of an agreement?

MR MOSES:   They needed to be accompanied, your Honour, by a separate, statutory declaration by an officer or employee of the applicant with the representation that they were authorised to enter into that agreement on behalf of the employer.

GAGELER J:   Now, that particular argument, where is that dealt with by the Full Court?

MR MOSES:   Your Honours, that is dealt with by the Full Court in its judgment.  If your Honours go to page 116 of the application book, your Honours will see there the joint judgment of their Honours Justice Buchanan and Justice Jagot.  By the time of the applications, they note the facts that the appellant knew – I will come back to – I will just set the setting for this, your Honour, first that:

By the time of the applications by the appellant on 18 October 2012 Mr Subramanian clearly had no actual or apparent authority to sign any document to support the applications and it was clear he had no actual authority when he purported to sign the documents as a representative of each of the employers.  The appellant was not, on 18 October 2012, under any false impression about the true position.  Neither was the FWC.

That is the setting, your Honour.  If your Honour then goes back to page 101 of the application book, it is Justice Greenwood that talks in terms of this issue at paragraph 62:

Section 185(2), taken in conjunction with Reg 2.06A(2)(a)(i), contains a mandatory requirement that a copy of the enterprise agreement signed by the employer be put in evidence in support of the application. There was no copy of the enterprise agreement signed by an person acting with the express actual authority of the employer to sign the agreement put into evidence before Deputy President Hamilton on the approval applications.

GAGELER J:   Well, you have added the words “express actual authority”.

MR MOSES:   I am sorry, your Honour.

GAGELER J:   You have just added the words “express actual authority”.

MR MOSES:   I did. I did, your Honour.

GAGELER J:   Yes.

MR MOSES:   I did.  Thank you. Yes, it is “express actual authority”.  That is right. 

GAGELER J:   Yes.

MR MOSES:   Thank you, your Honour.  Your Honour, as I took your Honours to earlier in respect of the Full Court’s reasoning, they confronted the issue that had been advanced by dealing with it at page 116, paragraph 121, as I took the Court to earlier.  The general proposition, your Honours, appears to be that that general provision can override the specific requirements set out in the three provisions that I have taken your Honours to, and we say that that cannot be deployed for that purpose.

The requirement of affixing a signature is not a mere formality. It is a compulsory requirement, as Justice Greenwood observed at paragraph 62. Further, the requirement to lodge a statutory declaration under section 185(2)(b) was also a mandatory requirement and, again, can we ask your Honours note Justice Flick’s reasoning at pages 71 to 72 of the application book and it is from the bottom paragraph 49 over to the next page which we respectfully submit is undoubtedly correct and that is that:

The task of the Commission when granting approval for the purposes of s 186(1) is not so confined that it “must approve” an “agreement” which it is then known has been entered into by a person without authority.  It was not open in the circumstances of the present case for the Deputy President to “waive” compliance with a “requirement” imposed by s 185(2)(b) pursuant to r 4 of the Fair Work Australia Rules ‑

and I will not read the rest of the passage out to your Honours but the Full Court departed from Justice Flick’s approach at this point, solely by reliance upon section 793 ‑ ‑ ‑

GAGELER J:   Yes.

MR MOSES: ‑ ‑ ‑ and section 793 does not operate to read down the compulsory requirements in section 185(2). Nor does it permit the Commission to transform an instrument into something which it is plainly not by the time it comes to deal its statutory functions, and the two members of the Full Court, of course, accepted the settled proposition that the touchstone of ostensible authority’s estoppel ‑ that is at page 117 of the decision ‑ but they accepted that there was no evidence ‑ this is at paragraph 123 ‑ that the applicants had held out to Mr Subramanian as having any authority to sign an enterprise agreement.

This was because they accepted, as I told your Honours earlier, there was no evidence that any of the employees who voted on the agreements, in any way relied upon what he had done in terms of the documents, and that is at page 115, paragraph 113, and the way in which the two members of the Court concluded that the applicants were nevertheless bound by the signature of Mr Subramanian was that they concluded:

that the act of signing each agreement on 1 August 2012 cannot be divorced . . . from the substance of the steps and procedures which preceded it ‑

and your Honours will see that at page 117, paragraph 126.  That conclusion relies upon the act of employees voting on the agreement and the steps preceding as the foundational basis for ostensible authority and the problem with that proposition is that all that conduct, bar one meeting, was carried out by Mr Cook of SIAG, who the Full Bench in its 2012 decision found had not been validly appointed as the bargaining agent or representative of the applicants.

GAGELER J:   Mr Moses, the red light is on.

MR MOSES:   I see that, your Honour.  There is only one other point that I wish to make and then I will conclude, if that is convenient to your Honour.

GAGELER J:   Yes.

MR MOSES:   Your Honour, what we say is that section 793 needs to be read subject to section 794, section 185 and regulation 206. In the present case, as we have said, it was well‑known at the time of approval that this was not the case and that in this case what the Commission and, indeed, the Full Court has permitted to occur is a fiction to be relied upon by the Commission when exercising its statutory powers. Those are our submissions.

GAGELER J:   Thank you.  We do not need to hear from you, Mr Kenzie.

The decision of the Full Court of the Federal Court, from which special leave to appeal is sought, turned on the construction and application of section 793 of the Fair Work Act 2009 (Cth). We are not persuaded that the approach adopted by the Full Court to the construction and application of that section is attended by sufficient doubt to warrant the grant of special leave. Special leave is refused. Do you ask for costs, Mr Kenzie?

MR KENZIE:   I do, your Honour.

GAGELER J:   Special leave is refused with costs.

The Court will now adjourn to 2.00 pm on Monday, 10 August in Perth.

AT 12.46 PM THE MATTER WAS CONCLUDED