Pp Consultants Pty Ltd v Finance Sector Union

[2000] HCATrans 164

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S178 of 1999

B e t w e e n -

PP CONSULTANTS PTY LTD

Applicant

and

FINANCE SECTOR UNION OF AUSTRALIA

Respondent

Application for special leave to appeal

GLEESON CJ
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 14 APRIL 2000, AT 11.46 AM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR H.J. DIXON, for the applicant.  (instructed by Allen Allen & Hemsley)

MR R.C. KENZIE, QC:   May it please the Court, I appear with my learned friend, MR I. TAYLOR, for the respondent.  (instructed by Turner Freeman)

GLEESON CJ:   There is an affidavit, I think, in support of your application, Mr Jackson, is that right?

MR JACKSON:   Yes, your Honour.

GLEESON CJ:   Do you object to that, Mr Kenzie?

MR KENZIE:   No, your Honour.

GLEESON CJ:   We have read that.

MR JACKSON:   Your Honours, the issues which merit the grant of special leave, it is submitted, are those which appear at page 74 of the application book in paragraphs 1 to 3.

GLEESON CJ:   How would you summarise the point of departure between the primary judge and the Full Court?

MR JACKSON:   As a matter of law, your Honour, in this way, that the Full Court appeared to take the view – and I will take your Honours to the exact references in that regard – that in determining whether there was a transmission, to put it shortly, one looked to the activities before and after and activities really – and I do not mean this in any offence – at a low level, the physical activities, the actual work that was done.  That is one thing.  What in a sense was done by the primary judge was to look at the relationships and ultimately the legal relationships to determine the question which, in our submission, is that posed by the statute, namely, whether there has been transmission, et cetera, of a business or part of a business.

To put it shortly, the terms of section 149(1)(d) provide that the persons bound by the award are:

any successor, assignee or transmittee…..to or of the business or part of the business of an employer –

that is the word selected.  The approach taken by the Full Court, if I could give your Honours two passages, one at page 59, paragraph 30 – this perhaps encapsulates, in effect, in answer to the question your Honour just asked me, “a fundamental difference”:

PP Consultants concentrates attention on the nature of the transaction…..FSU looks at the degree of identity between the activities…..It seems to us the latter approach is the correct one.

Then at page 61, paragraph 33, and it is the fourth line of that paragraph:

That being so, it is logical to focus on the nature of the activities undertaken by the two employers and the question whether there is any material change in the nature of the employee’s duties or working conditions.  This is more pertinent to the underlying policy of the paragraph –

and your Honours will see the remainder of what is being said.  I said two references.  Could I just give a third:  page 59, which adds to the aspect of “part of the business”.  At the third line:

There is no reason to think that the conduct of those transactions –

that is banking transactions –

and the performance of those functions were not an apt and sufficient bundle of business activities to constitute “part of a business”.

The approach taken by the Full Court treats the central question as being whether the same activities are being carried on before and after.  As your Honours have seen, the test that was applied in this case to hold that where the Bank ceased to conduct the branch but instead appointed a chemist under an agency agreement, the chemist was a successor, et cetera, of part of the business of the Bank, because that is the test required.  That approach was taken because some of the activities, fundamentally deposits and withdrawals, were carried on in the chemist shop as they had been carried on, I think, next door before.

That approach appears to be based largely on some observations of a court of three members in Re Australian Industrial Relations Commission; Ex parte Australian Transport Officers Federation (1990) 171 CLR 216. It should be behind tab 2 in the volume your Honours have. That was not the case under section 149(1)(d). It was a case arising under an eligibility rule in circumstances where there had been a statutory rearrangement of government functions. The relevant part of the eligibility rule your Honours will see at page 222, about halfway down the page, where it says:

A successor or assignee or transmittee of the business of any of the foregoing -

so long as-  There was an underlying question of construction whether the governmental activities were a business.  Your Honours can see that dealt with at page 225 at about point 2 on the page where the submission is referred to.  Then at the bottom of page 225, going through to about point 3 on point 226, there is the term “business” takes its colour from its surroundings and that in the context it was speaking of “the business of government”.  There was then the principal question for present purposes which your Honours will see at page 228, about point 5, where their Honours said:

That brings us to the final and most difficult question:  whether, on the facts of the case, the RTA is “a successor or assignee or transmittee of the business of” the CMT.

At page 230 there appears the passage that is of significance for present purposes.  At about point 2 on the page their Honours say:

According to the natural reading of the language of the successor clause, the inquiry should be directed to ascertaining whether the business or the activities formerly carried on by the CMT are still carried on by the RTA, notwithstanding that the RTA also carries on one or more other substantial activities.

One sees the word “activities” used there but it seems apparent enough, when the Court went to apply that to the test, what it was asking was whether the same activity or perhaps function of government was being carried on by the body that had carried on that activity, meaning in a sense function, before.  That that is so appears from page 230 in the first new paragraph on the page in a passage which goes through to page 231, about point 2 on the page.  So that one really does need to take that case in context where what was being said was that because different parts of government were dealing with different governmental functions, there was yet a transmission, et cetera, of the business.

The approach taken by the Full Court, in our submission, really leaves out of account the fact that one does need to start from the statutory language and section 149(1)(d) does speak in terms of businesses.  No doubt a comparison of activities before and after is of relevance in determining what has taken place, but that is not the test.  That this case is one of some importance appears, in our submission, from paragraph 30 of our submissions at page 81.  That takes one to Mr Cross’s affidavit at paragraph 70 and may I take your Honours to that for just a moment.  In

paragraph 3(a) he refers to there being currently in place 32 similar agreements.  On page 71, paragraph (c):

Many of the third parties…..have agency agreements with other commercial enterprises for the performance of a variety of functions.

He indicates some.  I would not be surprised these days to see in chemist shops agencies and other things, a number of agencies, for all types of products.  Your Honours will see in paragraph (e) on page 71 he refers to other banking organisations having very similar agreements and he expresses a conclusion in paragraph 4 and then refers in the remainder of the affidavit to government and governmental bodies and in paragraph 10 to another decision of the Full Court in which apparently an application for special leave to appeal has been filed but the matter has not proceeded so far.

CALLINAN J:   It is an affidavit in proper form, Mr Jackson.  It is probative and is in proper form which we have not always seen in the Court in special leave applications.

MR JACKSON:   I think I have a bit on both sides of matters of that kind.  Your Honours, those are our submissions.

GLEESON CJ:   Thank you, Mr Jackson.  Yes, Mr Kenzie.

MR KENZIE:   Thank you, your Honour.  As revealed by our friend’s submissions, the case of course is one of statutory construction, there being no underlying constitutional issue that is raised by the applicants for special leave.  The constitutional underpinnings of section 149(1)(d) go as far back as the George Hudson Case in the 1920s.

I should say something quickly about the principal matter addressed by our friend in relation to the Australian Transport Officers Case 171 CLR 216 and particularly the passage at page 230 read by our friend. Our friend referred to the context in which the Court there rejected submissions that it was necessary to show some form of identity between the old entity or employer and the transmittee, that is, that they had to look something alike. That submission was rejected and the Court there, in the context of an eligibility rule which mirrored the former provision, the ancestor of section 149, focused on the activities that were the subject of evidence.

Before I come to the more general submissions, what our friend’s submissions, as recently put, overlook is that the Court in that case was dealing with an eligibility rule that was then modelled on section 61(d) of the then Conciliation and Arbitration Act.  In our materials we have given your Honours a copy of the form of section 61(d) which, as I say, reflects the rule that was being discussed by their Honours in the ATOF Case.  Section 61(d) was a narrower provision in that it provided that an award was binding on:

any successor to, or any assignee or transmittee of, the business of a party –

and it did not extend to the reference to “part of the business”.

What has happened in the years since the ATOF Case is that the Federal Court has picked up the approach of the High Court in the ATOF Case, that is the approach to the terminology which was reflected in the statutory provisions, but has accepted and understood, as it had to, that the statute in question was radically changed in 1988 so that it came into the form of section 149 of the Act which one sees in the decision.  So that that which has changed is that Parliament has decided that a provision beneficial in its earlier form and interpreted as such in its earlier form has then been significantly widened by Parliament in 1988 into the form that it now bears.

GLEESON CJ:   Mr Kenzie, is it your case that the proprietor of the pharmacy was the successor or the assignee or the transmittee of something?  Which?

MR KENZIE:   We submitted that it was at least the successor but probably the transmittee or assignee, but the authorities of the Court to which I have referred are to this effect, your Honour, that when one approaches the section as a whole, when one looks at what Parliament was trying to do by transposing the obligations of an award to a successor, transmittee or assignee, by widening the terminology to “part of a business”, it took one away from the notion that when one saw the expression “successor, transmittee or assignee”, that one was dealing with those expressions as perhaps traditionally understood.  The effect of the authorities – and there are a number of them in the Federal Court – is really set out in paragraph 32.  I will turn up the reference but continue.

CALLINAN J:   At page 60, Mr Kenzie.

MR KENZIE:   Yes, it is the passage in paragraph 32 at page 60 and there are references at paragraph 33 at page 61 to the approach set out in the North Western Health Care decision by Justice Madgwick who pointed out that the effect of the section when read as a whole is that it is designed as a catch‑all provision.  It is a situation in which Parliament has decided ‑ ‑ ‑

GLEESON CJ:   It cannot really be designed to catch all.  It does not catch ‑ ‑ ‑

CALLINAN J:   Partners.

MR KENZIE:   No.

GLEESON CJ:   It does not catch people who do not come within its terms.

MR KENZIE:   No, your Honour.  By that it is meant that there has to be some form of passage from a former employer to a new employer, some form of passage of the business.

GLEESON CJ:   That fits within the statutory description?

MR KENZIE:   Yes, your Honour.

CALLINAN J:   Mr Kenzie, I notice you and Mr Jackson were both in the Australian Transport Officers Case, and of course it was an original jurisdiction case, but the Court only sat three on that occasion apparently.  It is a little unusual.

MR KENZIE:   Yes.  It was a prerogative writ proceeding based on ‑ ‑ ‑

CALLINAN J:   I know.  It was original jurisdiction.

GLEESON CJ:   I am sure it was no reflection on you and Mr Jackson.

MR KENZIE:   No.  It is some time ago now, your Honour.  Yes, it was a prerogative writ proceeding based on a decision of the federal commission dealing with an eligibility rule of an organisation, but the relevance of it in that respect was that the authorities of this Court show that the approach to eligibility rules of organisations is that they must be approached broadly, not as though drafted by lawyers.

GLEESON CJ:   To what part of the business of the Bank did the proprietor of the pharmacy succeed?

MR KENZIE:   Your Honour, the answer to that is this, and it flows from the description of the facts that is given.  Firstly, PP Consultants took over an assignment of the lease operated by the Bank in Byron Bay.  There were then particular arrangements in relation to the enlargement of premises, and from that point of time when the pharmacy opened undertaking banking activities, it took over those activities that were described by the court in paragraph 32 of its decision.  In paragraph 32 the court accepted that:

the bank still carried on a banking business in which it sought to earn profits by exploiting lending margins –

but said:

But it disposed of an important aspect of operating that business in Byron Bay:  the maintenance of premises –

they being the premises that – they were enlarged but included premises taken over from the Bank when the lease was assigned –

and employment of staff to service the customers who were the source of its loan funds, lending margins and bank fees.  It substituted PP Consultants for itself, in relation to this aspect of the business.

GLEESON CJ:   What is the meaning of this expression “exploiting lending margins”?

MR KENZIE:   I think the submissions of the Bank in the submissions put to the court at first instance and on appeal were that all relevant decisions, ultimate decisions, in relation to the result of banking activity were going to be decisions taken by the Bank.  In other words, fundamental to Mr Jackson’s submissions was that the Bank retained the ultimate control over the business of banking.

GLEESON CJ:   I am sorry, it is just not an expression with which I am personally familiar and I want to be sure what it means.  The business is earning profits by exploiting lending margins.  Could you just explain to me the meaning of that expression?

CALLINAN J:   It is what banks do, is it not?  They take money on deposit from their customers and pay them 3 per cent and lend it out at 7 per cent?

MR KENZIE:   I think it is no more complex than that, your Honour.  I think it is their Honours’ way of describing banking business and I do not think there is any more magic in it than that, your Honour.

GLEESON CJ:   I see.

MR KENZIE:   But it is responsive, as one understands it, to submissions that were made by the appellant to the effect that there was no transmission or assignment because the Bank continued to involve itself in the fundamentals of banking, including making decisions.

CALLINAN J:   The pharmacy employees could not set what the margins were.

MR KENZIE:   That is right, and it was said that there was no transmission of a going concern in the total sense.  What the court said was that one had to focus on the fact that Parliament had expanded the legislation.  In the wake of already beneficial legislation, it had inserted the reference to “part of the business”.  Did that reference to “part of a business” mean that the fact that the Bank still had control of banking business as a whole but that it had assigned a discernible part of its activities in this respect mean that the statute could not apply and said ‑ ‑ ‑

GLEESON CJ:   I think you were referring us to this in answer to my question, “How would you describe the part of the business to which the proprietor of the pharmacy became the successor?”.

MR KENZIE:   Your Honour, that is the business as described by the court in paragraph 32 and further down at line 40 of paragraph 32:

Before the agreement was made between the bank and the respondent, the bank had the right to conduct its business, including the part now conducted by the respondent ‑ ‑ ‑

GLEESON CJ:   But where do I find a description of “the part”?  I would just like to see how “the part” is described.

MR KENZIE:   It is described, your Honour, as we would submit it, early in paragraph 32.

GLEESON CJ:   Is it that portion beginning with the words “the maintenance of premises”?

MR KENZIE:   Yes, your Honour.  Again, at page 58, line 50, the court said at the bottom:

It is undoubtedly the case here that conduct of banking transactions with bank customers at specified premises and the functions engaged in by the employees themselves, were constituent, indeed “core”, functions of a bank.

GLEESON CJ:   Presumably receiving deposits, perhaps cashing cheques, that sort of thing?

MR KENZIE:   Yes, your Honour.  The functions that the ‑ ‑ ‑

CALLINAN J:   It is all set out in the Bragency Agreement, as they call it.

MR KENZIE:   Page 3.

GLEESON CJ:   There is probably an ATM machine in the wall.

CALLINAN J:   Yes, there is and there is an arrangement for the maintenance of it under the agreement.

MR KENZIE:   That is right.

CALLINAN J:   But, Mr Kenzie, it was characterised as, and could not have been anything else except, an agency agreement, is that not right?

MR KENZIE:   That is so, your Honour.

CALLINAN J:   It is at page 6.

MR KENZIE:   That is so.

CALLINAN J:   Then that may well raise a question whether the creation of an agency relationship can involve a transmission, succession or whatever ‑ ‑ ‑

MR KENZIE:   Yes, your Honour, a question in the sense but not one seriously attended with doubt, having regard to the history of the legislation and the expansion of the legislation in 1988, in our respectful submission.  There is no collision between the notion of an agency agreement and the notion of assignment of a part of a business within the contemplation of section 149.

We do submit that when one is aware of the statutory history, one sees that what is essentially involved in the case is this question of statutory construction which is, after all, based on the notion of the word “business” which has been accepted by this Court, including in the ATOF Case itself, as a word which takes its colour and content from its surroundings and one has the development of the statute so that Parliament, against that background, has widened the section to say, yes, well not only that, but part of the business, and work had to be found for that to do.  The authorities of the Court are numerous and clear, in our respectful submission.  There is a host of authority supporting the approach of the Court.  In more recent times the North Western Health Case, which is on our friend’s list, has involved exactly the same approach, the approach which involves the same approach to the words of the section as were involved in the High Court in construing an eligibility rule in the ATOF Case – different format but the same considerations leading to a broad construction of the statute applying.

So it is beneficial legislation.  The clear purpose of the section has been found and must be said to provide protection to relevant employees during a period before which the commission can examine their award entitlements.  It has been, as we have submitted in paragraph (7) of our submissions, a proposition well supported by authority that a business is to be looked at broadly, that none of the words of section 149(1)(d) are to be approached narrowly, and that the approach of looking at the reasoning of the Court in ATOF, which was, after all, looking at a provision which mirrored the ancestor, an appropriate approach.  We have set out those decisions - I do not go to them now – in paragraph (14) of our submissions.

Apart from applying established authority, we do submit that the court in this case applied an accepted view of the policy underlying the approach taken to section 149(1)(d), and we refer to that in paragraph (12) of our submissions.  There is no secret about the policy underlying section 149(1)(d).  That has been accepted as far back as George Hudson in the 1920s.  It has a beneficial purpose.  It is designed to ensure that an industrial settlement in its integrity is retained and not lost or disposed of with the consequent loss of rights because of a change in business which might be big or small.

The other aspect, your Honours, is that, contrary to our friend’s submissions, the approach of the court in no way involved a focus only on the activities of the old and new employer.  The approach of the court was not that those words are to be ignored.  It was true that the court said that they were not to be given their strictest legal meaning but it was clear that there still had to be a transmission or succession of some sort.  So that it is incorrect for our friends to submit that the court has simply forgotten about the words of the statute.  What it has done is that it has said that the statute has to be approached on the basis that “business” has to be explained broadly.  Once you accept the broad notion of “business” and part thereof, you simply cannot find work to do.  You cannot construe the rest of the section narrowly.  That approach is well supported by authority.  It does find support in the approach in the ATOF Case and there has been virtually no disagreement within the Federal Court about that matter.

Your Honours, as to our friend’s submissions in relation to the importance of the case and to some of the matters raised in the affidavit, firstly, it would not have been lost on your Honours that one of the changes to the legislation introduced in 1988 was that the words “subject to any order of the Commission” were added.  So that one of the things that is different between section 61(d) and section 149(1)(d) is that the legislation now and the legislation considered by the court provides that there is nothing immutable about succession, transmission or assignment.  It is simply something that happens in the absence of an order of the commission to the contrary.  That order of the commission can be made at

the time the award is made or later.  So that there is no point of overriding and overwhelming general importance.  Section 149(1)(d) will only operate in those circumstances.

As to the materials in our friend’s affidavit, there is no material before the Court to indicate that any of those instances that have been identified in the affidavit are in any way necessarily affected by section 149(1)(d) at all.

GLEESON CJ:   Thank you, Mr Kenzie.  Yes, Mr Jackson.

MR JACKSON:   Your Honours, the first thing is my learned friend speaks of the history of the provision, but the reality of the situation is that what one has is the ATOF Case which is the leading case so far as the interpretation of provisions of this kind, generally speaking, is concerned.  The difficulty that has arisen has been in this case and the North Western Health Case where later courts have taken the observations of members of the Court in that case out of context, with respect.  If one does take them in context, one gets a result of the nature for which we contend rather than the broader approach that has been adopted in these cases.

The second thing is our learned friend refers to there being a host of authority but if one is looking to find the members of the host, one finds really this case in the intermediate court, the Court of Appeal and one finds the North Western Health Case and some other cases simply following those cases in recent times.  The third thing is this, that your Honour the Chief Justice asked what was “part of the business”.  That seems to be dealt with at page 60 commencing about line 40.  If one goes through to line 14 to the top of the next page, that seems to be the way the Full Court described it.  Could we just say there is actually an error in what they said because they said at about line 45:

After the agreement, the bank did not have the right so to conduct that part of the business –

but what one sees is at page 77, paragraph (d) at the top of the page.  That is part of our submissions but your Honours will see where we submit that there was such a right to set up separately again.

So what we would say in relation to the matter is that if one goes to see ultimately what the court said, it does not clearly sound, in our submission, very much like being a transmission, et cetera, of a business or part of it.

CALLINAN J:   Do you say that it was an agency business and there was no succession of an agency business?

MR JACKSON:   Yes, your Honour.  We put it in a number of ways.  That is one way of putting it.  We say the Bank carried on exactly the same business before as it did afterwards.

CALLINAN J:   And a new business, a business of agency, was created?

MR JACKSON:   Yes.  We have no part of the Bank’s business.  Your Honours asked why three Judges sat in the earlier case.  It was, I think, at a time before there was the ability to remit matters to the Federal Court dealing under, I think, now section 39B(1).  The Court did not seem entirely enamoured of dealing with a number of rules - interpretation cases.

GLEESON CJ:   In this matter there will be a grant of special leave to appeal.

AT 12.20 PM THE MATTER WAS CONCLUDED