SkyWest Airlines Pty Ltd v Australian Federation of Air Pilots

[1996] IRCA 451

DECISION NO: 451/96

CATCHWORDS

INDUSTRIAL LAW - whether airline company obliged by award to maintain seniority list of pilots - scope of obligation under award - whether requirement to include pilots employed by subsidiary company on list - whether award breached.

No. VI 5816 OF 1995

SKYWEST AIRLINES PTY LTD -v- THE AUSTRALIAN FEDERATION OF AIR PILOTS

LEE, MOORE AND MADGWICK JJ
SYDNEY
27 SEPTEMBER 1996

IN THE INDUSTRIAL RELATIONS      )
  )
COURT OF AUSTRALIA               )       No VI 5816 of 1995
  )
NEW SOUTH WALES DISTRICT REGISTRY )

BETWEEN:        SKYWEST AIRLINES PTY LTD

Appellant

AND:           THE AUSTRALIAN FEDERATION
  OF AIR PILOTS

Respondent

THE COURT:    Lee, Moore and Madgwick JJ

PLACE:       Sydney (heard in Melbourne)

DATE:        27 September 1996

ORDER OF THE COURT

THE COURT ORDERS THAT:

1. The appeal is dismissed.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS      )
  )
COURT OF AUSTRALIA               )       No VI 5816 of 1995
  )
NEW SOUTH WALES DISTRICT REGISTRY )

BETWEEN:        SKYWEST AIRLINES PTY LTD

Appellant

AND:           THE AUSTRALIAN FEDERATION
  OF AIR PILOTS

Respondent

THE COURT:    Lee, Moore and Madgwick JJ

PLACE:       Sydney (heard in Melbourne)

DATE:        27 September 1996

REASONS FOR JUDGMENT

THE COURT: This is an appeal by Skywest Airlines Pty Ltd ("Airlines") against a judgment of Marshall J of 31 October 1995 declaring Airlines had breached provisions of the Skywest Airlines Pty Ltd Pilots' Agreement 1986 ("the Agreement"). The declaratory orders were made in proceedings brought by the Australian Federation of Air Pilots ("the Federation") under s178 of the Industrial Relations Act 1988 ("the Act").

The following reflects a summary of the relevant primary facts found by the trial judge. They were not put in issue in the appeal. Airlines commenced operations in 1982. In 1987 it carried on business by: firstly, providing a regular passenger transport feeder operation; secondly, conducting corporate jet operations; thirdly, conducting coast watch operations under contract; and fourthly, conducting non-regularly scheduled transport operations. On 21 August 1987 the Flight Crew Officers Industrial Tribunal ("the Tribunal") certified, under ss28 and 88V of the Conciliation and Arbitration Act 1904 ("the former Act"), the Agreement which was between the Federation and Airlines. It had effect from 30 November 1986. After the certification of the Agreement, Airlines restructured its operations. Skywest Aviation Pty Ltd ("Aviation") was incorporated and commenced to carry on the activities formerly undertaken by Airlines other than the regular passenger transport feeder operation. That operation continued to be carried on by Airlines. Aviation is a wholly owned subsidiary of Airlines.

As a matter of fact Airlines maintained, until 8 September 1994, an integrated seniority list of pilots it employed together with those employed by Aviation.  This list was maintained for the purposes of allocating a seniority ranking to pilots which governed promotions, demotions, retention in employment, equipment assignment, transfers and the like.  One employee of Aviation was Captain Batty.  In a document entitled "SENIORITY LIST FOR PILOTS EMPLOYED BY SKYWEST AIRLINES AND SKYWEST AVIATION AS AT 09.06.94" Captain Batty was listed as number 71.  On 8 September 1994 Airlines published a document entitled "SENIORITY LIST FOR PILOTS EMPLOYED BY SKYWEST AIRLINES AS AT 31 AUGUST 1994".  Captain Batty's name did not appear in that document.  In September or October 1994, three pilot positions in Perth had to be filled in the operations of Airlines.  Captain Batty applied unsuccessfully for these positions, one of which was filled by a Captain Russell who had been ranked number 80 in the seniority list of 9 June 1994.

The trial judge identified the critical issue as being whether Airlines was obliged by the Agreement to maintain a seniority list of pilots employed both by it and by Aviation.  His Honour viewed as central to the resolution of this issue whether Aviation was also bound by the Agreement.  After noting that the Agreement, in terms, is expressed to be binding only Airlines, his Honour went on to consider the operation of s88ZB(1) of the former Act.  That section identifies who is bound by an award which includes a person who is the successor, assignee or transmittee of the business of an employer bound by the award.  His Honour concluded that Aviation became bound by the Agreement as a successor to or assignee or transmittee of the business of Airlines.  In reaching this conclusion the trial judge referred to observations of the High Court in Re Australian Industrial Relations Commission and Ors; Ex Parte Australian Transport Officers Federation and Ors (1990) 171 CLR 216 and made the finding challenged by Airlines in this appeal that "the vast majority of the various activities of (Airlines) were taken over by Aviation". His Honour went on to consider the nature of the obligation imposed on Airlines by the Agreement having regard to his conclusion that Aviation was also bound by it. He noted that on the repeal of the former Act on 1 March 1989 the Agreement continued in force by operation of s7(3) of the Industrial Relations (Consequential Provisions) Act 1988. His Honour concluded that subclause 30A of the Agreement required Airlines to keep an integrated seniority list, that is a list ranking pilots employed by Airlines together with those employed by Aviation.

It is convenient to set out clause 30 which provides:

"A.The Company shall maintain the "PILOTS' SYSTEM SENIORITY LIST" which shall specify the seniority number and name of all pilots and the date of employment on the flight staff of the Company.

B.Pilots employed prior to 29 July 1983 shall appear in the order specified in Appendix II.

C.The seniority number of a pilot employed after 29 July 1983 shall be decided by the date he commences employment as a pilot on the flight staff of the Company as confirmed in writing after actual commencement and shall apply where and as prescribed in the provisions of this Agreement.

D.Pilots employed on the same date shall have their relative seniority position decided by age alone, the oldest pilot being the most senior.

E.Seniority shall govern all pilots in the case of promotions and demotions, their retention in case of reduction in force, their assignment or re-assignment due to expansion or reduction in schedules, their choice of assignments, their transfers, or change of status.  Any appointment as a Supervisory Pilot may only be made to a pilot who has the seniority to rate the type or with an assignment on the type.

F.A pilot once having established a seniority date hereunder, shall not lose that date except by termination of employment as a pilot with the Company.  Where a pilot is retrenched due to redundancy he shall be offered re-employment when a vacancy occurs and such re-employment shall be in accordance with the seniority date he held prior to retrenchment.  It is incumbent upon the pilot to keep the Company advised of his current address.

G.The Company, shall, within ten (10) days after July 1 of each year, post on bulletin boards at each pilot base and subsequently furnish each pilot with a copy of the Pilots' System Seniority List.

H.A pilot shall be permitted a period of thirty (30) days after any posting of the Pilots' System Seniority List each year in which to protest to the Company any omission or incorrect listing.

1. A pilot on leave or away from his home base at the time of posting of the list shall have a period of thirty (30) days from the date of his return to duty at his base during which to file such protest.

J.A vacancy for which a pilot has failed to qualify on his second check shall be filled by the next most senior eligible pilot who bids.

K.Where a pilot fails his second opportunity to qualify, the pilot shall maintain his position on the seniority list but any further opportunities to qualify shall be given only at the Company's discretion." (emphasis added)

This reflects the form of clause 30 when the Agreement was certified.  In February 1992 the Agreement was varied so that subclauses 30A and 30C commenced with the words "subject to subclause 30D" and a new subclause D was inserted in the following terms:

"D.For the purposes of maintaining the Company's 'Pilots' System Seniority List and for determining the seniority number of a pilot employed by the company on 1 October 1990, who was formerly employed Lloyd Aviation Jet Charter Pty Limited, the pilot's date of employment as a pilot on the flight staff of the Company shall be 1 October 1990.

Provided that any such pilot shall appear in the seniority list in accordance with the provisions of Appendix V to this award." (emphasis added)

His Honour then referred to the decision of the Full Bench of the Australian Industrial Relations Commission of 29 November 1991: see 1991/11 CAR 488 which led to the variations to clause 30, and concluded that the Commission intended that Airlines maintain an integrated seniority list consisting of pilots employed by both Airlines and Aviation. This led to his Honour's conclusion that Airlines had breached clause 30 by failing to maintain an integrated list on and from 8 September 1994. His Honour went on to conclude that the failure of Airlines to assign Captain Batty to any of the three available assignments constituted a breach of clause 30F.

Consistent with the way the matter was decided at first instance, submissions were again made on appeal on the issue of whether Aviation was bound by the Agreement. However it was only against Airlines that the proceedings under s178 were brought. Accordingly if Airlines is bound by the Agreement, which is not disputed, the material issue, in our opinion, is what is the scope of the obligation imposed on Airlines by clause 30. It is to that issue that we now turn.

Before discussing the terms of clause 30 it is necessary to set out other terms of the Agreement and to make more detailed reference to the circumstances in which they came to be included in it.  It can be seen that clause 30 refers to "the Company" which is defined in clause 3 as meaning "Skywest Airlines Pty Ltd".  That reference is repeated in clause 4 which provides:

"4 - AREA, INCIDENCE AND DURATION OF AGREEMENT

A.(1)   This Agreement shall be binding upon Skywest Airlines Pty Ltd (hereinafter referred to as the "Company") and the Australian Federation of Air Pilots (hereinafter referred to as the "Foundation") as to all employees in the Company engaged in the occupations specified herein.

(2)This Agreement and Statutory obligations shall be binding upon any successor to, or any assignee or transmittee of the Company including a Corporation that has acquired or taken over the business of the Company where continuity of ownership or interest can be shown in any form through any level of ownership change.

(3)...

B.Any flying involving Skywest Airlines Pty Ltd or under the control of Skywest shareholders or utilisation of aircraft under the operational control of Skywest shall be flown by Skywest pilots.

Skywest Airlines Pty Ltd acknowledges the intent of this subclause is to co-operate and consult to maintain, procure and develop flying for Skywest Airlines Pty Ltd pilots.

There shall be no wet leasing in or sub-contracting out of the Company's flying.

C....

D....

E.    ..." (emphasis added)

Another provision of importance which is referred to in clause 30 is Appendix V which provides:

"APPENDIX V

Principles Determining Arrangement of Pilots Seniority List Following Absorption of Lloyd Aviation Jet Charter Pty Ltd by Skywest Aviation Pty Ltd.

For the purposes of pilot seniority, the date of absorption of Lloyd Aviation Jet Charter Pty Ltd will be deemed to be 1 October 1990.

No pilot in either Lloyd Aviation Jet Charter Pty Ltd or Skywest Aviation Pty Ltd should be disadvantaged in terms of promotion, redundancy, base of operation or aircraft type assignment - and therefore applicable Award salary - as a consequence of relative seniority between the two Company pilots groups.

All pilots to enjoy the advantages of future Skywest expansion - in terms both aircraft types and numbers, and geographical expansion.

The adopted system should continue to recognise the status quo on 1 October 1990, and allow for recognition of changes to the status quo as pilots avail themselves of opportunities to which they become entitled after 1 October 1990.

Unless he chooses otherwise, a Lloyd pilot cannot be displaced from any Lloyd Aviation Jet Charter Pty Ltd flying activity which is current on 1 October 1990, nor thereafter for the currency of that flying activity, viz:

Base	Client	Equip	Compliment
DRW ASP CNS BNE	BHP SANTOS AD-HOC ATI OTML BP/DUPONT AD-HOC AD-HOC	DHC-8 (1) E110 (1) E110 (1) E110 (1) E110/B200 B200 (1) B200 (1) B200 (1) C550	Capt 1 (SBP, C+T) 3 1 (C+T) 1 1 1 (SBP) 2 1 1 (SBP, C+T) 2 2 1 1 (SBP)		F/O 2 (Note 1) 3 2 Note 2 1 1 1

Note 1:The First Officer DHC-8 Pilots will hold two endorsements, they being F/O DHC-8 and CAPT E110.

Note 2:One of the Alice Springs Captains will hold two endorsements, they being CAPT E110 and CAPT B200.

The same principles shall apply to Skywest pilots.

No Lloyd Aviation Jet Charter Pty Ltd pilot shall be made redundant unless the redundancy occurs as a result of reduced flying activity on the work described in the foregoing paragraph.

In the event of redundancies, and regardless of the area in which they are created, pilot employed after 1 October 1990 shall first be retrenched before the foregoing principle shall apply.

The adopted system shall not be unduly harsh or disruptive on the Company, and shall be a sound basis for future development by the Company.

In so far as they are able, the Management of Skywest Aviation shall uphold the foregoing principles, and shall adopt the resultant system, in any future absorptions and mergers.

The System

The Company will compile a list which shows the new Skywest pilots occupying the number 112 to 139.

There is an "L" annotation against all pilots originally employed by Lloyd Aviation Jet Charter Pty Ltd which denotes certain privileges and which is retained by the former Lloyd pilots as long as he chooses to remain on any work performed by Lloyd Aviation at the time of the absorption.  Notwithstanding that the Company may substitute different equipment on that flying activity.

A pilot holding an "L" annotation (regardless of his allocated seniority number) will have bidding seniority over any pilot not holding the "L" annotation in regard to all positions associated with Lloyd Aviation flying activity at the time of the absorption.

This seniority will also apply to any equipment substitutions on that flying activity.

A pilot holding an "L" annotation cannot be retrenched unless a redundancy situation occurs within the framework of the work performed by Lloyd Aviation at the time of the absorption." (emphasis added)

We consider first the language of clause 30 in its present form without, for the moment, looking at the circumstances in which it was varied in February 1992.  The meaning of the clause in its amended form is by no means clear.  The first thing to be noted is that if the definition of Company is imported directly into clause 30, sub-clause A requires Airlines to maintain a seniority list of pilots "on the flight staff of the Company".  It does not, in express terms, refer to pilots employed by the Company.  Clause 30D does refer to "a pilot employed by the Company" though the obligation on Airlines in relation to such a pilot is subject to the proviso in clause 30D.  The proviso directs attention to Appendix V.  Indeed clause 30D requires that such pilots, that is pilots employed by the Company on 1 October 1990 who were formerly employed by Lloyd Aviation Jet Charter Pty Ltd, appear in the seniority list in the manner provided for in Appendix V.

It can be seen from Appendix V that it deals with the absorption of pilots employed by Lloyd Aviation Jet Charter Pty Ltd by Aviation.  In the third paragraph of Appendix V pilots from either Lloyd Aviation Jet Charter Pty Ltd or from Aviation are referred to as constituting "two Company pilots groups".  It is to be noted that under the heading "The System", towards the end of Appendix V, there is a reference to the compilation by "the Company" of a list showing the "new Skywest pilots" as occupying specified numbers in the list.

We earlier set out part of clause 4, "Area, incidence and duration".  Clause 4B requires that "Skywest pilots" are to fly aircraft used in flying "involving Skywest Airlines Pty Ltd or under the control of Skywest shareholders".  This provision would tend to indicate that the Agreement, in its initial form, contemplated that "Skywest pilots" would fly aircraft being used directly in the business of Airlines or less directly.  The expression "under the control of Skywest shareholders" might reasonably be thought to be a reference to flying as part of the business of a wholly owned subsidiary such as emerged with the incorporation of Aviation.  The expression "Skywest pilots" as it appears in clause 4 is an expression of indeterminate meaning.  However the terms of clause 5, which deals with aspects of the contract of employment, indicate that the pilots to whom the Agreement applied, are pilots who are employees of Airlines.

The terms of clauses 4 and 5 that we have just discussed appeared in the Agreement when it was certified.  Thus the Agreement appeared to contemplate pilots being employed by Airlines flying aircraft in furtherance of its business or the business of a subsidiary.  That being so the reference to "flight staff of the Company" in the Agreement in its original form might be viewed as a reference to pilots engaged in either type of flying.

However the meaning of the Agreement, for present purposes, became even more obscure when clause 30D was varied in February 1992 and Appendix V was added.  As already noted clause 30D speaks of pilots employed by the Company though Appendix V, which deals with those pilots, involves former pilots of a company "absorbed" into Aviation.  On what, in our view, would be a narrow reading of Appendix V, it concerns only the seniority of pilots formerly employed by Lloyd Aviation Jet Charter Pty Ltd who were then employed by Airlines together with pilots employed also by Airlines but engaged in flying for the purposes of Aviation business.  On this view of the Agreement a pilot employed by Aviation to fly for the purposes of Aviation's business would not be a pilot in respect of which Airlines had any obligation under the Agreement.

However the variations to Clause 30D and the addition of Appendix V can be considered against the factual matrix in which they arose.  We should, at this stage, note that the evidence, in any real sense, before the trial judge was limited in the extreme.  The evidence comprised just as much statements from the Bar table, as evidence in an accepted form and reflected the way the parties elected to conduct the hearing.

The variation of clause 30D and the addition of Appendix D arose from proceedings initially heard by Commissioner Leary whose decision and orders were reviewed, and modified, by a Full Bench.  In neither the Commissioner's nor the Full Bench's decision was a distinction drawn between employment with Airlines on the one hand and Aviation on the other.  However Commissioner Leary's decision did contain the following:

"The Companies argued in response to the submission relating to corporate ownership that the fact that Lloyd Aviation Jet Charter Pty Limited is still a separate legal entity, although it does not hold a current air operator's certificate, should be considered as a relevant factor.  I have been previously advised that the two Skywest operations are separate legal entities also but note that they share a common integrated seniority list."

It would thus seem that the variation to clause 30 and the inclusion of Appendix V was made against a background of an acknowledged separateness of legal identity between Airlines and Aviation and, notwithstanding that fact, the maintenance of a "common" seniority list.  We infer that the maintenance of that list and the making of the variation was not influenced by who might, in law, be the employer of a particular pilot.  These matters constitute, in our opinion, part of the objective framework of facts in which the relevant variations to the Agreement were made which bear upon its construction in its amended form: see Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352 per Mason J.

That the Agreement, as varied, was intended to operate in a comparatively flexible way is reinforced by the terms of Appendix VI which was inserted into the Agreement in 1994.  It, in express terms, concerned pilots employed by Aviation.  The Appendix authorised Aviation to "employ and utilise (temporary) and/or existing pilots out of seniority order".  They were then to be paid at a daily rate which was in lieu, inter alia, of entitlements under clause 30.  The entitlements under clause 30 depend upon seniority in the list maintained under clause 30A.

In our view clause 30 of the Agreement in its amended form was intended to require Airlines to maintain a seniority list for all pilots, whether employed by Airlines or Aviation, engaged in flying either directly for Airlines or indirectly.  Flying might be undertaken indirectly for Airlines through the operations of a wholly owned subsidiary.  Accordingly the trial judge was correct in concluding that Airlines breached clause 30A of the Agreement by failing to maintain, from, at the latest, September 1994, a seniority list of that character.

The trial judge also concluded that clause 30F was breached by Airlines not offering to employ Captain Batty for one of the Perth positions and filling one of them with a pilot who, in the last common seniority list, was less senior than Batty.  The operation of Clause 30F, in terms, depends upon seniority.  While that would ordinarily be established by reference to a current seniority list, it need not be.  In the absence of evidence to the contrary, an inference may reasonably be drawn that if Captain Batty was more senior than Captain Russell in June 1994 then he would have remained more senior and would have been more senior in October 1994.  This, in effect is what the trial judge concluded.  If, as we consider is the case, clause 30F of the Agreement confers a right on a more senior pilot, a choice of assignments entitled that pilot to be preferred, when exercising that choice, to a less senior pilot making the same choice.  Implicit in the conferral of that right is the creation of an obligation on Airlines to render it effective.  If that involves Airlines employing the pilot, either without qualification or on the basis recognised at common law in cases such as Mersey Docks and Harbour Board v Coggins and Griffith (Liverpool) Ltd 1947 AC 1, then that must be done. In the present case Airlines failed to recognise Captain Batty's right by failing to employ him on the assignment he sought. In our view the trial judge correctly concluded Airlines breached clause 30F of the Agreement.

We dismiss the appeal.

I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Full Court.

Associate:  ........ ........ ......

Dated:    27 September 1996

APPEARANCES

Counsel for the Appellant:     Dr C Jessup with Mr F Parry

Solicitor for the Appellant:        Freehill Hollingdale & Page

Counsel for the Respondent:         Mr H Borenstein

Solicitor for the Respondent:       Mahony Galvin Rylah

Dates of Hearing:                   6 May 1996

Date of Judgment:                   27 September 1996

IN THE INDUSTRIAL RELATIONS COURT)
OF AUSTRALIA  )        No. VI.5816 of 1995
VICTORIA DISTRICT REGISTRY      )

BETWEEN:SKYWEST AIRLINES PTY LTD

Appellant

AND:THE AUSTRALIAN FEDERATION OF AIR PILOTS

Respondent

CORAM:    LEE, MOORE and MADGWICK JJ
PLACE:    SYDNEY
DATE:     27 SEPTEMBER 1996

CORRIGENDA

Please note on p.15 in the list of appearances of the above judgment dated 27 September 1996 and delete "Dr C Jessup" and in its place, insert "Dr C N Jessup QC".

Also delete "New South Wales District Registry" at top of Orders and Judgment title page and substitute with "Victoria District Registry".

Associate:

Dated:     4 October 1996