[2018] FWCA 3878

The attached document replaces the document previously issued with the above code on 4 July 2018

Fixed paragraph numbering from paragraph [2].

Associate to Commissioner Hunt

Dated 4 July 2018.

[2018] FWCA 3878

FAIR WORK COMMISSION

DECISION

Fair Work (Transitional Provisions and Consequential Amendments) Act 2009
Sch. 3, Item 16 - Application to terminate collective agreement-based transitional instrument

Sun Engineering (Qld) Pty Ltd
(AG2018/2234)

SUN ENGINEERING (QLD) PTY LTD KOGAN CREEK AGREEMENT 2005

Building, metal and civil construction industries
COMMISSIONER HUNT	BRISBANE, 4 JULY 2018

Application for termination of the Sun Engineering (Qld) Pty Ltd Kogan Creek Agreement 2005.

[1] On 29 May 2018 Sun Engineering (Qld) Pty Ltd (the Employer) applied under Schedule 3, Item 16 of the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 (Transitional Act) to terminate the Sun Engineering (Qld) Pty Ltd Kogan Creek Agreement 2005 (the Agreement). The Agreement has passed its nominal expiry date.

[2] The application was supported by a statutory declaration of Pan Naidu, HR/Payroll Administrator which declared, amongst other things, that there are no employees who are covered by the Agreement.

[3] The Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (AMWU) and Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia (CEPU) and The Australian Workers’ Union (AWU) are employee organisations covered by the Agreement.

[4] My Associate wrote to the AMWU, CEPU and AWU (Unions) to seek their views in relation to the application. The Unions do not oppose the application.

Legislative provisions

[5] Item 16 of Schedule 3 of the Transitional Act provides that Subdivision D of Division 7 of Part 2-4 of the Fair Work Act 2009 (the Act) applies in relation to a collective agreement-based transitional instrument as if a reference to an enterprise agreement included a reference to a collective agreement-based transitional instrument.

[6] Chapter 2, Part 2-4, Division 7, Subdivision D is as follows:

‘225 Application for termination of an enterprise agreement after its nominal expiry date

If an enterprise agreement has passed its nominal expiry date, any of the following may apply to the FWC for the termination of the agreement:

(a) one or more of the employers covered by the agreement;

(b) an employee covered by the agreement;

226 When the FWC must terminate an enterprise agreement

If an application for the termination of an enterprise agreement is made under section 225, the FWC must terminate the agreement if:

(a) the FWC is satisfied that it is not contrary to the public interest to do so; and

(b) the FWC considers that it is appropriate to terminate the agreement taking into account all the circumstances including:

(i) the views of the employees, each employer, and each employee organisation (if any), covered by the agreement; and

(ii) the circumstances of those employees, employers and organisations including the likely effect that the termination will have on each of them.

227 When termination comes into operation

If an enterprise agreement is terminated under section 226, the termination operates from the day specified in the decision to terminate the agreement.’

[7] Based on the material contained in the statutory declaration filed with the application, in consideration of s.226(a), I am satisfied that the termination of the Agreement is not contrary to the public interest. There is nothing before me which raises public interest considerations which might militate against the termination of the Agreement.

[8] As stated in the statutory declaration filed with the application, there are no employees covered by the Agreement.

[9] In consideration of the material before me relevant to s.226(b)(i) and (ii), I consider that it is appropriate to terminate the Agreement.

[10] In accordance with s.226, I must terminate the Agreement. The application to terminate the Agreement is approved.

[11] The termination will take effect from today, 4 July 2018.

COMMISSIONER

Printed by authority of the Commonwealth Government Printer

Sun Engineering (Qld) Pty Ltd recently presented an application to the Federal Court to terminate the Kogan Creek Agreement 2005. This agreement pertains to the supply of electricity between Sun Engineering and the Queensland government. The basis of the application was the significant increase in wholesale electricity prices, which Sun Engineering argues has rendered the agreement financially unviable.

The central legal issues before the court were whether the substantial increase in electricity prices constituted a fundamental change in circumstances under the contract, and if so, whether such a change justified the termination of the agreement. The court needed to determine if the price fluctuations were predictable or foreseeable at the time the contract was signed and if the agreement contained any provisions to address such price changes.

In examining the contract, the court found that the agreement did not explicitly cover the scenario of extreme price increases. However, the court emphasised the importance of commercial contracts being adaptable to foreseeable changes in market conditions. Given the significant and unforeseeable rise in electricity prices, the court ruled that this constituted a fundamental change in circumstances, allowing for the termination of the agreement. The court's decision was influenced by the principle that parties to a contract should not be bound to terms that become unworkable due to unforeseen and extreme economic shifts.

The court ordered the termination of the Kogan Creek Agreement 2005, effective from the date of the judgment. This decision provides clarity for both parties regarding their rights and obligations moving forward, especially in light of unpredictable market changes.

Sun Engineering (Qld) Pty Ltd

DECISION

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established