Pilbara Iron Company (Services) Pty Ltd v Construction, Forestry, Mining and Energy Union

[2012] HCATrans 37

[2012] HCATrans 037

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S273 of 2011

B e t w e e n -

PILBARA IRON COMPANY (SERVICES) PTY LTD (ACN 107 210 248)

Applicant

and

CONSTRUCTION, FORESTRY, MINING AND ENERGY UNION

Respondent

Application for special leave to appeal

GUMMOW J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 10 FEBRUARY 2012, AT 2.59 PM

Copyright in the High Court of Australia

MR J.N. WEST, QC:   May it please the Court, I appear with my learned friends, MR H.J. DIXON, SC and MR A.B. GOTTING, for the applicant.  (instructed by Freehills)

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friends, MS C.M. HOWELL and MR A.M. SLEVIN, for the respondent.  (instructed by Slater & Gordon Lawyers)

GUMMOW J:   Yes, Mr West.

MR WEST:   Your Honours, this application comes from the Full Court of the Federal Court of Australia which dealt with legislation, now repealed, and where, in its present form, the legislation does not employ the same terminology as the repealed Act, however.  We submit that there are, at least, four serious errors in the judgment below, namely, firstly by way of summary a disconformity between paragraphs 46 at application book 44 and each of paragraphs 47, 48 and 49.  Indeed, that collection of four paragraphs contains, as it were, the apex of the errors in the reasoning in the court below.

Secondly, the Full Court interpreted section 327 of the Workplace Relations Act as requiring that an employer choose a type of employee with whom an agreement was to be made, yet the statute contained no such requirement.  Thirdly, the Full Court built upon the requirement for a type of employee to be identified to impose a further requirement that such an agreement be made with all of the employees of that type, when no such requirement existed. 

Finally, the Full Court failed to deal with the principal argument of the applicant, namely that the agreement the applicant had made was with employees in a single business dismissing it upon the basis that if it were correct then the words “part of a single business” would be rendered redundant.

In fact, what the court did in the first paragraph of its judgment in two sentences, the first sentence is innocuous; it states the obvious.  The second sentence is the problem.  That second sentence effects a slicing away of the first argument, the principal argument of the applicant.  What the court does is to refine the question from being whether or not the employee collective agreement was made with employees in a single business or employees in a part of a single business to focus upon the latter part of a couplet, and not the former.

The case that was put below was that the agreement satisfied the first part of the couplet.  It did not have to satisfy the other, but we put in the alternative that in any event it did.  The consequences, if I may put in summary to start, of the Full Court’s decision, notwithstanding the repeal of the legislation, were this.  At the very least there are some 20 other industrial agreements with employers in industries as disparate as packaging, cement making, metalliferous mining and newspaper journalism and covering well in excess of 3,000 employees in at least three States of this country, each of which has a scope clause prescribing coverage for fewer than all of the employees in a single business or part of a single business.

GUMMOW J:   What do you say is the criterion to identify a part of the business, other than a number of employees?

MR WEST:   It is something less than the whole of the business, your Honour, and it can be, as the Act is set out to admit, that because Parliament could not foresee the variations in nature in which economic activity might take place in commerce, one could look at any subpart of a business.  Guidance was given by way of example only in the statute, and in the definitional provisions in section, I think, 322.  Your Honours have it in the extract from the legislation.  It is reprint No 9.  If your Honours go to page 240, section 322(1)(a) defines relevantly for these purposes what a single business is.  Then over the page at 241, subsection (3):

For the purposes of this Part, a part of a single business includes, for example:

(a)      a geographically distinct part of the single business; or

(b)a distinct operational or organisational unit within the single business.

GUMMOW J:   Well, one can understand that.  What else is there?

MR WEST:   Well, your Honour, there may be any number of variations.

GUMMOW J:   What was there here?

MR WEST:   Here there were 10 employees who were identified ‑ ‑ ‑

GUMMOW J:   Out of?

MR WEST:   There were only 10 to start with, your Honour.  The workforce was, in effect, bifurcated.  There was already a workforce there working under separate coverage. Then 10 employees were hired out of – there were some 300 others.  The 10 were engaged in the same classifications as the others but there was never any intention to make an agreement with all of the others, just the 10 and they soon came after them. 

Now, those 10 employees were identified by reference to the date at which they commenced their contracts of employment, 28 July 2008, and the agreement was expressed in its scope clause to cover all employees who were employed on and after that date.  The employees employed after that date who performed the same sort of work would be automatically covered by the agreement by operation of section 351 of the statute.

Now, we could well have called those 10 people and all who came after them, the new start employees.  That would have been an administrative discrimen which would identify clearly for our purposes who those employees were.  One could imagine that an employer with such an arrangement might even, depending on the commercial arrangements they enter into, pay those employees from a separate account.  They may wish to use those employees in another part of the workplace.  But that discrimen and that subset is, in our respectful submission, a relevant definition and description of a part of a single business.

GUMMOW J:   Not of a part of the workforce?

MR WEST:   No, but a part of the single business, your Honour, because here there was a single business as set out in the description of the industry which the company carried on and the case put was ‑ ‑ ‑

HEYDON J:   Would you call them persons employed at the time in part of a single business?  They either have to be persons employed at the time in a single business, or in part of a single business.  What was your case?

MR WEST:   That they were employed in a single business.

HEYDON J:   And just identify the group of people by their names, or in some fashion of that kind, what work does part of a single business do?

MR WEST:   Your Honour, it may have work to do where what the statute is trying to encourage is the making of industrial agreements to suit the individual circumstances of the workplace.  That indeed was one of the objects of this particular part of the statute, set out on page 1 of reprint No 9, section 3(e):

The principal object of this Act is to provide a framework for cooperative workplace relations which promotes the economic prosperity –

and the like –

(e)enabling employers and employees to choose the most appropriate form of agreement for their particular circumstances –

It may well be that there is a particular location or structure which the employer uses, which is far less than the whole and which is only thought of as part of the single business, because it does not perform all of the work of a single business.  It may be broken up in some functional way.  It may not be.  It may just be that no direct function or division is involved, just that it has not acquired all of the functional capacity that the business conducts.

In those circumstances, the Act was making it clear that an agreement could be made with people in such a part, but you did not have to do it that way, and here if 10 employees were engaged and after them came as many as indeed here some 1400, there was no reason why one could not describe those people as being employed in a single business. When one looks at the description on page 28 of the application book of the single business which is set out on page 28 at about point 20 on the page, in that quote it sets out the activities of this single business, and almost directly opposite on the next page, page 29, one sees the provisions of section 327.

In our respectful submission, it is very difficult to see why employees, not having to be all of them, engaged in the industry described on page 28 do not satisfy the first limb of section 327 on page 29. This statute used to provide until 2006 that all employees in a single business or in a part of a single business were required to make the agreement. When 327 came into operation in 2006, the requirement for all was taken out. That appears, if one compares reprint No 6 in the Court’s bundle on page 220 of that reprint, section 170LI, “Nature of agreement”, (1)(b):

all persons who, at any time when the agreement is in operation, are employed in a single business, or a part of a single business –

That requirement does not appear in section 327. In our respectful submission, whilst the Full Court was dismissive of the proposition that the definition was facilitative, the court remarked, “Facilitative of what was never explained.” It was because one was not asked, and something which facilitates nothing achieves nothing. But that simply overlooks what the statute was trying to do, and the imperfect position in which Parliament must be in trying to contemplate, in an industrial statute meant to encourage the making of agreements between employers and employees which are suitable to them, the various types, sizes and structures of the businesses which will be involved. So understood, that is all that section 327 and the definition were doing.

Once the requirement for all was removed, then there was absolutely no reason why the agreement with 10 employees and applying to all those who came after them was not an agreement with employees in a single business.  The way in which the court approached it was concentrating on what was meant by part, which was unnecessary, but concentrating on that and then looking to see whether or not one could, as it were, introduce restrictions by looking at the word “part”.  The vast bulk of this judgment looks at that question ‑ ‑ ‑

GUMMOW J:   It is “in a part” actually, is it not?

MR WEST:   In a part, yes, in a part.  When one gets to paragraph 46 on page 44 of the applications book the Court says the reason the primary judge found against the Union was that he considered that the construction for which it contended required reading into the section the word “all” before the words “persons employed”, et cetera.  Then they declare that it is unnecessary, however, to go that far.  The court makes that declaration three times, on that line and on line 48 on page 45 and again at about 28 on page 45.

GUMMOW J:   I understand you were agitated about that.  What do you say about what Mr Jackson says at paragraphs 22 and 23 on page 162 and 163?  He said it is hypothetical. 

MR WEST:   With respect, your Honour, it is not a hypothetical question at all.

GUMMOW J:   No, no.  Yes, go on.  Paragraph 23 – he is saying you have derided this as hypothetical, he is saying it is not at all, look what happened here, 10 out of 2,723 employees.

MR WEST:   But, your Honour, what happens in this judgment is that the court seems to examine some sort of sociological underpinning for the purpose of the section but that sociological examination does not assist in answering what was meant and the court virtually admits it, in the end concluding that nothing it has looked at helps it understand what was meant.  But it involves ‑ ‑ ‑

GUMMOW J:   Look, Mr West, the question is whether if you got in here and you were arguing the case here, would you succeed?

MR WEST:   We would submit we would.

GUMMOW J:   Necessarily succeed merely by pouring acid on the Full Court?

MR WEST:   No, indeed.  Your Honour, we submit that we would succeed upon the basis that the statute in its plain meaning, particularly following the removal of the word “all” did not require all employees either in the single business or in the part of a single business to be covered by the agreement, and it certainly did not require the employer to identify types of employees.  Now, the types of employees is a device, with respect, to enable the court to find that while saying, as it does three times, that it is not necessary to read in the word “all” it finds that this is not a relevant agreement because it does not apply to all of the employees of a relevant type.

Now, whilst the “all” comes in in relation to the discussion about type of employee, and the court does that in paragraph 46 on page 44.  The court refers to “some only” and then requires there to be a type of employee.  There is no such requirement in 327, it is entirely unstructured as to what sort of employees they would be.  Providing you have two or more then there is no reason why you cannot make an agreement with them, and there is no requirement for all of them.

For those reasons, your Honour, we submit that the construction for which we contended in the court below was correct and that the limitation which has been encrusted onto it by the Full Court is non‑existent.  The suggestion that what the employer might be doing is creating an arbitrary group of employees or using an arbitrary classification also does not come from the statute.  The employer and the employees who wish to make the agreement are free to do it, no matter how many of them there are beyond two.

HEYDON J:   How does section 340(2) work on this approach?  It postulates, as it were, a class consisting of all the persons employed whose employment will be subject to the agreement and it gives a majority of that group the opportunity to veto the making of the agreement.  Does that work if you can just pick any…..group you like ‑ ‑ ‑

MR WEST:   No, there is no requirement there.  That is a simple question where you offer the agreement to perhaps a large number of employees, or employees not restricted in any way in the selection process that you follow and they have a vote, and there is a majority involved in that, no matter what it is.  But that has nothing, in our respectful submission, to do with the situation where an employer and a group of employees wish to make an agreement and do so.  The whole purpose of the agreement is to cover the employees at the time who are to be covered.

HEYDON J: Section 327 deals with employee collective agreements and so does 340(2). If you picked a number of people and the majority of them

said they did not want to, can you then just take the minority and say, “Well, we will just do an agreement with you, there will be no votes against it at the meeting”?

MR WEST:   You could.

HEYDON J:   Does that not make 340(2) pointless, though?

MR WEST:   No, your Honour, because if all of the employees with whom you wish to make agreement A agree with that then there is no problem.  You never have a problem with approval or majorities.  If, however, you offer the agreement to a large number of people because you want to cover them all under the one agreement, and you may wish to, you may not wish to have a series of different agreements with different parts of your workforce; you are free to do that too.  I see the red light has come on.

GUMMOW J:   Yes, it has.  Yes, Mr Jackson.

MR JACKSON: Your Honours, we want to say two things fundamentally. The first is that the better view of section 327, in our submission, is that the agreement entered into by the applicant and its 10 new employees did not satisfy the requirements of the provision. I will come to that in just a moment if I may. The second is that the case does not in reality have the importance attributed to it by the applicant. If I could just say one thing about that, and I will come back to this, 13 of the agreements, I think it is, have already expired, of the 20 that they are talking about, and other features, your Honours.

But coming to section 327, what is says that an employer may make an employee collective agreement with persons in one of two categories. Category one is persons employed in a single business of the employer or, secondly, persons employed in part of a single business. Your Honours, so far as the “part” is concerned what, in our submission, is the correct position is that it has to be a part which is rationally selected in a sense, rationally selected in the sense that it refers to, for example, the types of bodies given, the types of parts given by examples in the definition in sections 322(3) or otherwise something that satisfies that test.

May I say, your Honours, that this is a case where both courts below have held that the 10 employees did not form a part in the terms of that part of section 327. The references, your Honours, can be seen at page 13 in the primary judge, paragraph 27 of his reasons, and your Honours will see that at the start of paragraph 27, the first four lines, and then he goes on to say:

The examples given by s 322(3) clearly relate to functional matters reflecting the organisation of an employer’s business.

Then, your Honours, the last five or six lines of that paragraph:

Notwithstanding an argument to the contrary by the respondent, I do not think the identification of the group of employees by reference to their trade or calling would necessarily, or in most cases, sufficiently describe “a part of a single business”.  Nor do I accept that identifying a group of employees by reference to the date upon which their employment commenced would achieve that objective. 

In the Full Court at page 44, paragraph 45, lines about 10 to 18 on that page they said:

The part of the single business concerned cannot simply be the employees with whom the employer has chosen –

as the other parties to the proposed agreement.  Your Honours, what the provision comes to, in our submission, is that it is right to say that the taking out of the word “all” did not have a significant effect because what the provision means is that you either make an agreement or propose to make an agreement with the employees of the single business or you propose to make an agreement with the employees in part of that single business. 

The part has to be, and I use the term for brevity, something that one can rationally describe as a part and it is right to say, in our submission, that the select 10 employees by virtue of the fact that they are the ones you propose to make the agreement with and they started work on or before a certain day in expectation of the agreement is something that does not fall within the question of part.

Then one comes to the question of was it a proposed agreement with a single business – obviously not.  Your Honours, the provisions of section 340(2), to which your Honour Justice Heydon referred, suggest that one is speaking about a vote which will take place in a realistic manner.  The provision is not to be construed as if it were one that does not operate within a system, a system involving significant choice, not something done by reference to an agreement with a very small number and an imposition upon the remainder and of course, dissentients are bound by the agreement accepted by the majority, that is section 351. 

Your Honours, we would say, if I go to the reasons for judgment of the Full Court at page 45, paragraphs 47 and 48, their Honours were correct in saying that:

it becomes clear that the notional insertion of the word “all” before “persons employed” is hardly necessary. 

Indeed, the provision reads, in our submission, as saying well, either one does or one does not. Your Honours will see what they say in the next two sentences in paragraph 47, and then also at paragraph 48. We would submit what the Full Court there said was correct. Your Honours, could we also say that as the Full Court said at paragraph 45, page 44, in lines 21 to 26, the applicant’s argument would have the result that much of section 327 was redundant.

The second feature, your Honours, is that in the same passage your Honours will see at line 21 on page 44 there is a reference to what is said to be the applicant’s “principal argument”.  They say the:

principal argument, that the agreement was valid because it was formed with employees in the single business, would render the words “part of a single business” redundant.

Your Honours will see the next sentence.  Now, your Honours, my learned friends say our principal argument was not dealt with.  Well, it was, pretty shortly, in our submission, because there was not much to it.  If one looks at the reasons lying behind what the Full Court said that was correct.  Could I come then, your Honours, to a third aspect on this.  The statement of the approach to interpretation by the Full Court at page 35, paragraph 24, seems entirely orthodox. 

Could I say one thing in passing?  Our learned friends have referred in their authorities to a number of cases about how to construe provisions.  You should construe them broadly, not know and express limitations and so on.  But the cases on which they rely are the cases which follow Knight v FP Special Assets dealing with powers conferred on a court and the reasons for that, not cases like this at all. 

Your Honours, could I just say then, going to the importance of the issue, there are 20 agreements referred to in the affidavit which commences at page 51.  Only four of those appear to have scope clauses, which have a temporal component of the nature or anything really like the nature referred to here.  They are the HWE Newman Agreement in paragraph 42 of that affidavit, page 58; the HWE Orebody Agreement at paragraph 46, page 59; the HWE Yandi Agreement, page 60, paragraph 50 and the BHP Billiton Employee Workplace Agreement, page 56, paragraph 28.

But the second feature, your Honours, about them is that most of the agreements may well be capable of satisfying section 327 on the basis that they relate to a part of a single business of the company, in any event. If

one looks, for example, at the scope clauses in the 10 journalists’ agreement referred to at page 54, paragraph 18 that appears to describe journalists in all of those organisations, thereby describing distinct operational or organisational units. 

The scope clause in the HWE Surface Agreement, page 57, paragraph 34, is not temporally based and describes employees working in classifications of workers at surface mining operations and construction and/or preparatory work, et cetera.  Now, your Honours, this may well describe distinct operational or organisational units within those businesses and also, your Honours, the scope clause in the HWE Crushing Agreement is in similar terms, but refers to “mobile crushing”, paragraph 38, page 57.  So that, your Honours, it is quite erroneous, with respect, to regard the decision in this case as necessarily affecting those agreements.

The third feature is that of the 20 agreements, 13 have expired.  If I can just give the names, your Honours – Star Services, SRS Employer Greenfields, the Ten Journalists Agreements and the BHP Billiton Iron Ore Union Agreement and a 14th will expire on the 31st of next month.  Your Honours, also the other five are with the same company – HWE Mining – they expire in 2012 and at least some of them appear, prima facie, to refer to geographically distinct parts of a business – to pick up the words of section 322(3)(a). 

In short, your Honours, we would submit this is not a matter which has the importance attributed to it by the applicant.  It is a remnant case from previous legislation and the decision of the Full Court should put an end to it.  Could I add one thing, your Honours?  In terms of numbers, at the time when the agreement was entered into with the 10 new employees, as you will see from page 4 and the primary judge’s reasons, paragraph 2 – there were 2,973 employees in four groups of classifications performing work in connection with the rail network and the result sought to be achieved by our learned friends is one which, we would submit with respect, does just not seem right.

GUMMOW J:   Mr Jackson, we see that on page 164, your client accepts that there should be no order for costs to this ‑ ‑ ‑

MR JACKSON:   Yes.

GUMMOW J:   Yes, Mr West.

MR WEST:   Your Honour, the expiry of the agreements is, with respect, of no consequence and that is because when the agreements pass their nominal termination date they continue.  They continue to operate until such time as another agreement is put in their place.  Secondly, the question

of whether or not the descriptions of types of employees such as boilermakers or crushers, and the like, is an accurate way – or a permissible way – to interpret this legislation, is now an open question given the way in which the Full Court approached it because, for that proposition to be correct – namely, electricians, boilermakers, or whatever – it depends upon the proposition that types of employees have to be identified.  Then is the second requirement that all employees of the type have to be identified. 

So that agreements – and there are some in the list - where they apply only to union members would not satisfy that requirement.  None of the temporal connections would satisfy that requirement.  Nor, indeed, do those of the HWE category that contain a provision that requires that they only apply to persons who are employed on or after the date of the approval of the agreement.  That suffers from exactly the same vice. 

So that it is not right to say that the breadth of this issue across other industries is diminished in this way.  Indeed, there are 3,000 employees alone caught by the HWE agreements and the BHP Billiton agreements before we go to any other industries, and that means that for those 3,000 people, their agreements have evaporated.  They do not know it yet, but all that one has to do is test it.  Someone has to sue for a benefit given under the agreement at law, and the agreement will be then found to have disappeared for the same reason that ours did.  In our respectful submission, that is a matter of great concern in industrial relations, particularly as it does obviously apply in the mining industry.

Our learned friend’s submissions, with respect, do not grapple with the problem created by the requirement for all employees to be covered, either in the part or in the single business.  That matter remains, in our respectful submission, as a significant problem.  There is no requirement for all employees.  The way in which the Full Court approached it, saying that these employees were not in a part of a single business does not actually explain why they are not employees in the single business, if there is no requirement for all.  If we are right about that, then the opposite result should apply.  Otherwise, we rely upon our written reply, if the Court pleases.

GUMMOW J:   There are insufficient prospects of success on any appeal to warrant a grant of special leave in this case.  Special leave is refused.

The Court will now adjourn until 10.15 am on Tuesday, 28 February 2012 at Canberra.

AT 3.37 PM THE MATTER WAS CONCLUDED