United Firefighters Union of Australia v Country Fire Authority
[2014] FCA 17
•31 January 2014
FEDERAL COURT OF AUSTRALIA
United Firefighters Union of Australia v Country Fire Authority [2014] FCA 17
Citation: United Firefighters Union of Australia v Country Fire Authority [2014] FCA 17 Parties: UNITED FIREFIGHTERS UNION OF AUSTRALIA v COUNTRY FIRE AUTHORITY File number: VID 440 of 2012 Judge: MURPHY J Date of judgment: 31 January 2014 Catchwords: CONSTITUTIONAL LAW — trading corporation — whether the Victorian Country Fire Authority is a “trading corporation” — whether the Country Fire Authority is engaged in “substantial” trading –the test for substantial trading — constitution of the Commonwealth, s 51(xx)
CONSTITUTIONAL LAW — legislative power of the Commonwealth – implied limitation – whether implied limitation extends to enterprise agreements approved by Fair Work Australia – whether the referral of legislative power to the Commonwealth under the Fair Work (Commonwealth Powers) Act 2009 (Vic) is subject to the implied limitation
INDUSTRIAL LAW — statutory interpretation – whether the referral of legislative power to the Commonwealth under the Fair Work (Commonwealth Powers) Act 2009 (Vic) should be read as subject to the implied limitation – use of extrinsic materials
INDUSTRIAL LAW — interpretation of enterprise agreements – consultation clauses – dispute resolution procedure - whether terms are objectionable terms under the Fair Work Act 2009 (Cth) – whether terms are unlawful terms under the Fair Work Act 2009 (Cth) – whether consultation terms are permitted matters under the Fair Work Act 2009 (Cth) – meaning of no extra claims clause – private arbitration under the Fair Work Act 2009 (Cth) – whether matters can be reserved in an enterprise agreement for private arbitration – validity of dispute resolution procedure that allows for private arbitration
Legislation: Building Regulations 2006 (Vic)
Country Fire Authority Act 1958 (Vic)
Country Fire Authority Regulations 2004 (Vic)
Fair Work (Commonwealth Powers) Act 2009 (Vic)
Fair Work (Commonwealth Powers) Bill 2009
Fair Work (Registered Organisations) Act 2009 (Cth)
Fair Work Act 2009 (Cth)
Fair Work Regulations 2009 (Cth)
Industrial Relations Act 1988 (Cth)
Industrial Relations Amendment Act (No 2) 1994 (Cth)
Industrial Relations Reform Act 1993 (Cth)
Workplace Relations Act 1996 (Cth)Cases cited: Aboriginal Legal Service of Western Australia (Inc) v Lawrence (No 2) (2008) 37 WAR 450
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27
Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241
Austin v Commonwealth of Australia (2003) 215 CLR 185
Australasian Meat Industry Employees Union v Coles Supermarkets Australia Pty Ltd (1998) 80 IR 208
Australian Industry Group v Fair Work Commission (2012) 205 FCR 339
Bankstown Handicapped Children’s Centre Association Inc v Hillman (2010) 182 FCR 483
Boral Resources (NSW) Pty Ltd v Transport Workers’ Union of Australia (2010) 202 IR 135
Clarke v Commissioner of Taxation (2009) 240 CLR 272
Commonwealth Bank of Australia v Financial Sector Union (2007) 157 FCR 329
Commonwealth of Australia v The State of Tasmania and Ors (1983) 158 CLR 1
Construction, Forestry, Mining and Energy Union v Queensland Bulk Handling Pty Ltd (2012) 224 IR
Construction, Forestry, Mining, and Energy Union v The Australian Industrial Relations Commission (2001) 203 CLR 645
Dempster v Comrie (2000) 96 FCR 570
E v Australian Red Cross Society and Ors (1991) 27 FCR 310
Fencott v Muller (1983) 152 CLR 570
Finance Sector Union of Australia v Commonwealth Bank of Australia (2005) 158 FCR 158
Klein v Metropolitan Fire and Emergency Services Board (2012) 208 FCR 178
Kucks v CSR Limited (1996) 66 IR 182
Marmara v Toyota Motor Corporation Australia Ltd [2013] FCA 1351
Melbourne Corporation v Commonwealth (1947) 74 CLR 31
Metropolitan Fire and Emergency Services Board v United Firefighters’ Union of Australia (Vic Branch) (2012) 223 IR 448
Momcilovic v The Queen (2011) 245 CLR 1
New South Wales v Commonwealth (2006) 229 CLR 1
O’Toole v Charles David Pty Ltd (1990) 96 ALR 1
Parks Victoria v Australian Workers Union and Ors [2013] FWCFB 950
Queensland Electricity Commission v Commonwealth (1985) 159 CLR 192
Quickenden v O’Connor (2001) 109 FCR 243
Re Australian Education Union; Ex parte Victoria (1995) 184 CLR 188
Re Media, Enertainment and Arts Alliance; Ex parte Hoyts Corporation Pty Ltd (1992) 178 CLR 379
Re State Public Services Federation; Ex parte Attorney General (W.A.) (1993) 178 CLR 249
State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282
Stenhouse v Coleman (1944) 69 CLR 457
The Queen v Hegarty; Ex parte City of Salisbury (1981) 147 CLR 617
The Queen v Portus; Ex parte City of Perth (1973) 129 CLR 312
The Queen v The Judges of the Federal Court of Australia; ex parte The Western Australian National Football League (1979) 143 CLR 190
The Queen v Trade Practices Tribunal; Ex parte St George County Council (1974) 130 CLR 533
United Firefighters’ Union of Australia v Metropolitan Fire and Emergency Services Board (1998) 83 FCR 346
Victoria v The Commonwealth (1996) 187 CLR 416
Western Australia v Commonwealth (1995) 183 CLR 373Date of hearing: 22-24 April 2013 Place: Melbourne Division: FAIR WORK DIVISION Category: Catchwords Number of paragraphs: 250 Counsel for the Applicant: Mr R Kenzie QC, Mr W Friend SC, Mr T Dixon and Ms S Bingham Solicitor for the Applicant: Davies Lawyers Counsel for the Respondent: Mr J Bourke and Mr T Jacobs Solicitor for the Respondent: Clayton Utz
IN THE FEDERAL COURT OF AUSTRALIA
V DISTRICT REGISTRY
FAIR WORK DIVISION
VID 440 of 2012
BETWEEN: UNITED FIREFIGHTERS UNION OF AUSTRALIA
ApplicantAND: COUNTRY FIRE AUTHORITY
Respondent
JUDGE:
MURPHY J
DATE:
31 JANUARY 2014
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
introduction
The proceeding arises out of an enterprise agreement between the Country Fire Authority (“CFA”) and the United Firefighters’ Union of Australia (“UFU”). The agreement, titled the “Country Fire Authority/United Firefighters’ Union of Australia Operational Staff Enterprise Agreement 2010” (“the Agreement”), was approved by the Fair Work Commission (“the Commission”) on 21 October 2010 pursuant to the Fair Work Act 2009 (Cth) (“FW Act”).
Central to the dispute is the fact that cl 27 of the Agreement requires the CFA to employ 342 career firefighters over a six year period and to conduct a minimum of three recruitment courses in each year training at least 30 recruits each.
It is uncontroversial that the CFA did not comply with the recruitment regime in the Agreement, nor with another recruitment regime agreed between the parties in March 2011 which followed the UFU’s notification of an industrial dispute to the Commission about the CFA’s non-compliance with the terms of cl 27.
The UFU commenced this proceeding in June 2012 and by its Further Amended Application it seeks:
(a)a declaration that the CFA has breached s 50 of the FW Act by contravening cl 27.4 of the Agreement;
(b)injunctive relief requiring the CFA to:
(i)conduct four recruit courses in 2013;
(ii)train 100 recruit firefighters in 2013; and
(iii)remedy the effects of any contraventions of cl 27.4 found to have occurred;
(c)in the alternative to (b), injunctive relief requiring the CFA to:
(i)conduct three recruit courses in 2013;
(ii)train 90 recruit firefighters in 2013; and
(iii)comply with cl 27.4.7 of the Agreement by requesting its employees to approve a proposed variation to Schedule 1 of the Agreement to record all deployments in the year ending 31 December 2012;
(d)the imposition of penalties on the CFA for the alleged breaches pursuant to s 546 of the FW Act; and
(e)an order that any penalty imposed be paid to the UFU.
In its defence the CFA contends that cl 27 of the Agreement is invalid on the basis that it is inconsistent with the implied constitutional limitation on legislative power described in Melbourne Corporation v Commonwealth (1947) 74 CLR 31 (“Melbourne Corporation”) at 78-79 (“the Melbourne Corporation principle”). In its cross-claim the CFA seeks declarations that together with cl 27, cll 26, 28 and 122 are also invalid on the same basis. It also argues that cll 13, 14, 15.1.2, 15.1.3, 16 and 38.3 of the Agreement are invalid on various other grounds.
The CFA did not offer the Court any cogent explanation for its failure to conduct the recruitment courses as it had agreed, or for its failure to train the number of recruit firefighters as it had agreed. Nor did it offer any explanation for having entered into the agreed recruitment regime if its staffing requirements were other than as indicated in the Agreement. But what began as a dispute regarding performance of the Agreement under the FW Act has become a dispute about the breadth of power of Federal and state legislatures under the Australian Constitution (“Constitution”). The CFA’s apparent about face on the Agreement it reached is of little relevance in dealing with that question.
For the reasons I set out below:
(a)the UFU’s application to enforce the award must be dismissed;
(b)cll 26, 27, 28 and 122 of the Agreement are inconsistent with the Melbourne Corporation principle, as expressed in Re Australian Education Union; Ex parte Victoria (1995) 184 CLR 188 (“Re AEU”), and are therefore invalid; and
(c)the CFA’s cross-claim that the other impugned provisions of the Agreement are invalid must be dismissed.
The facts and procedural history
The parties
The UFU is a registered organisation of employees pursuant to the Fair Work (Registered Organisations) Act 2009 (Cth) and a body corporate capable of being sued. It is a registered organisation that may apply for orders in relation to contraventions of the Agreement pursuant to s 539 Items 4 and 5 and s 540 of the FW Act. It has members employed by the CFA and covered by the Agreement.
Under the Country Fire Authority Act 1958 (Vic) (“CFA Act”) the CFA is vested with the duty to prevent and suppress fires in country Victoria. It is a body corporate with perpetual succession and is capable of suing and being sued pursuant to s 6 of the CFA Act.
The enterprise agreement
It is common ground that the UFU, the CFA and all CFA employees in the relevant classifications of employees covered by the Agreement. It was approved by the Commission on 21 October 2010 and commenced operation on 28 October 2010. It specifies a nominal expiry date of 30 September 2013 in accordance with s 186(5) of the FW Act and has not been terminated or replaced. It includes clauses relating to:
(a) consultative processes (cl 13);
(b) the introduction of organisational change (cl 14);
(c) dispute resolution (cl 15);
(d) the role of the Consultation Officer and disputes regarding consultation and change (cl 16);
(e) contracting out and the maintenance of various employment classifications (cl 26);
(f) safe staffing levels (cl 27);
(g) current staffing arrangements (Schedule 1);
(h) secondment and lateral entry (cl 28);
(i) allowances and reimbursements (cl 38); and
(j) lateral entry (cl 122).
Importantly, under the heading “Safe Staffing Levels”, cll 27.4.2 to 27.4.4 and 27.4.7 of the Agreement provide:
27.4.2The CFA will employ an additional 342 career firefighters over the next 6 years.
27.4.3The CFA will conduct a minimum of 3 recruit training courses per year, or a greater number of recruit training courses to be agreed between the UFU and the CFA to train the new recruits to give effect to clause 27.4.2. Neither party will unreasonably withhold agreement for a greater number of recruit training courses per year.
27.4.4Each recruit training course will train a minimum of 30 recruits, or a greater number to be agreed between the UFU and the CFA. Neither party will unreasonably withhold agreement to a greater number of recruits per course.
…
27.4.7On or before September 1 of each year, the CFA will request that its employees approve a proposed variation to Schedule 1 of the agreement to record all deployments in the preceding year. For the avoidance of doubt, each variation will insert into Schedule 1 the deployments undertaken in the preceding year. Following each approval by the CFA’s employees, the CFA and the UFU will take all necessary steps to cause Fair Work Australia to approve the variation to the agreement.
The recruit training dispute
In or about late February or early March 2011 a dispute arose between the UFU and the CFA as to the operation of cl 27 of the Agreement. On 7 March 2011, in accordance with the dispute resolution procedures in cl 15 of the Agreement, the UFU applied pursuant to s 739 of the FW Act to Fair Work Australia (the predecessor to the Commission) seeking resolution of the dispute.
On 20 June 2011, Fair Work Australia published a Statement with an attached document setting out a resolution of the dispute concerning the implementation of clause 27.4.3 of the Agreement (“the Agreed Resolution”). The Statement records that the parties had agreed to a recommendation of the Commission of 16 June 2011. The Agreed Resolution provides that:
(a)during the calendar year 2012 the CFA would conduct four recruitment courses and train 100 recruits;
(b) those four courses, each comprising 25 recruits, would be held on the following dates:
(i) 20 February 2012 to 8 June 2012;
(ii) 16 April 2012 to 3 August 2012;
(iii) 25 June 2012 to 12 October 2012; and
(iv) 20 August 2012 to 7 December 2012;
(c) during 2013 the CFA would conduct four recruitment courses and train 100 recruits;
(d) those four courses, each comprising 25 recruits, would be held on the following dates:
(i) February 2013 to June 2013;
(ii) April 2013 to August 2013;
(iii) June 2013 to October 2013; and
(iv) August 2013 to December 2013;
(e)any variation to the agreement regarding the number of recruit training courses per year, their timing and the number of recruit firefighters in each course would be by the consent of both parties; and
(f)that Fair Work Australia would not have the power to arbitrate on the reduction in the number of recruit courses held in any one year or the total number of recruits to be involved in any one year.
The UFU contends that the Agreed Resolution records an agreement reached by the parties as to the implementation of cl 27.4. The CFA did not deny this. It conducted the first two abovementioned training courses in 2012, training 50 recruits as agreed.
However, in March 2012 the CFA notified the 25 recruits accepted into the third course, scheduled to be conducted between 25 June and 12 October 2012, that the course had been cancelled and the next recruitment course would be conducted between 6 August and 7 December 2012. The CFA then failed to conduct that recruitment course as well.
In summary, the CFA conducted two and not four recruit courses of 25 recruits per course in 2012. In relation to recruitment in 2013, the evidence is that the CFA intended to conduct two recruitment courses, training 15 recruits in the first course and 20 recruits in the second. It follows that the CFA again failed to conduct the agreed number of recruit training courses, and failed to train the agreed number of recruits, as set out in either the Agreement or the Agreed Resolution.
As at 1 September 2012 the CFA had made various deployments of firefighters in fire stations around Victoria. It is uncontentious that the CFA did not request its employees to approve a proposed variation to Schedule 1 to record the deployments for the year ending 31 August 2012, as required by cl 27.4.7 of the Agreement.
ISSUES FOR DETERMINATION
The UFU alleges that in March 2012 the CFA unilaterally decided to conduct recruitment courses on terms other than those in the Agreed Resolution. Regardless of whether or not the CFA made any such unilateral decision, it is uncontentious that the CFA did not meet the terms of either the Agreement or the Agreed Resolution in relation to the number of recruitment courses or the number of recruits trained.
Section 50 of the FW Act provides that a person must not breach a term of an enterprise agreement. The UFU claims that:
(a)by conducting fewer than four recruit courses or training fewer than 100 recruits in 2012 the CFA contravened the Agreed Resolution, which is alleged to form part of the Agreement; or, alternatively
(b)by conducting fewer than three recruit courses of 30 recruits each in 2012 the CFA contravened the Agreement; and
(c)by deciding to conduct fewer than four recruit courses and train fewer than 100 recruits in 2013, the CFA contravened the Agreed Resolution, which is alleged to form part of the Agreement; and
(d)by failing, refusing or neglecting to request its employees to approve a proposed variation to Schedule 1 of the Agreement to record its deployments for the year ending 31 August 2012, the CFA contravened the Agreement.
The CFA defends the proceeding on grounds including that:
(a)the CFA is not a “constitutional corporation” for the purposes of s 51(xx) of the Constitution. It says therefore that the Commission’s power to approve the Agreement only arises by operation of the Fair Work (Commonwealth Powers) Act 2009 (Vic) (“the Referral Act”); and
(b)cl 27 of the Agreement:
(i)is invalid and unenforceable by reason of s 5(1)(a) and (b) of the Referral Act;
(ii)is invalid and unenforceable by reason of the implied constitutional limitation on Commonwealth legislative power described in Re AEU; and alternatively
(iii)is of no effect and unenforceable because it is not a term about a permitted matter for the purpose of s 253(1) of the FW Act; or
(c)cl 27.4.7 is of no effect and unenforceable because it is inconsistent with s 255(1) of the FW Act and/or the scheme of the FW Act including Part 2-4 of the FW Act;
The CFA argues that because the Agreed Resolution relates to cl 27 it is of no effect. Alternatively it argues that Fair Work Australia failed to comply with the statutory requirements necessary to vary the Agreement. It argues that the Agreed Resolution is therefore unenforceable under the FW Act.
The CFA also cross-claims that:
(a)cll 26, 28 and 122:
(i)are invalid and unenforceable by reason of s 5(1)(a) of the Referral Act; or
(ii)are invalid and unenforceable by reason of the implied constitutional limitation mentioned above; or
(iii)are of no effect and unenforceable because each is not a term about a permitted matter for the purposes of s 253(1) of the FW Act;
(b)cll 13, 14 and 16 are:
(i)“objectionable terms” for the purpose of s 12 of the FW Act and, by reason of s 253(1)(b) and/or s 356 of the FW Act, have no effect; and/or
(ii)“unlawful terms” for the purpose of s 194 of the FW Act and, by reason of s 253(1) of the FW Act, have no effect;
(c)cll 13, 14 and 16 of the Agreement are not “consultation terms” as required by s 205 of the FW Act and therefore of no effect, and the model term prescribed by the Fair Work Regulations 2009 (Cth) (“the Regulations”) is taken to be a term of the Agreement;
(d)sub-clauses 15.1.2 and 15.1.3 of the Agreement are invalid as they are inconsistent with various provisions and with Pt 2-4 of the FW Act, and because they are not permitted matters as defined in s 172 of the FW Act;
(e)clause 38.3 of the Agreement is invalid and unenforceable; and
(f)the Commission has no jurisdiction to arbitrate in respect of:
(i)the UFU’s dispute resolution application filed with the Commission and dated 20 December 2012; and
(ii)change-over allowances as provided by cl 38.3 of the Agreement.
The parties agreed that various issues required determination. With some small changes my decision follows the agreed structure.
(a) Issue 1
Is the CFA a constitutional corporation within the meaning of s 51(xx) of the Constitution and therefore a “constitutional corporation” within the meaning of that expression in the FW Act?
(b) Issue 2
If the CFA is a constitutional corporation, are cll 26, 27, 28 and 122 of the Agreement or any of them (including in their combined or cumulative operation) in whole or in part invalid by reason of the implied limitation on Commonwealth power referred to in Re AEU?
(c) Issue 3
If the CFA is not a constitutional corporation, are cll 26, 27, 28 and 122 of the Agreement or any of them (including in their combined or cumulative operation) in whole or in part invalid by reason of the operation of s 5 of the Referral Act?
(d) Issue 4
If the clauses or any of them are valid:
(a)has the CFA acted in contravention of cl 27 by failing to comply with the Agreed Resolution?
(b)does the Agreed Resolution constitute an agreement pursuant to cl 27.4.3 of the Agreement?
(c) are the terms of the Agreed Resolution enforceable as a term of the Agreement?
(d)does any breach of a term of the Agreed Resolution constitute a breach of the Agreement?
(e)alternatively, has the CFA acted in contravention of cll 27.4.3 and 27.4.4 of the Agreement?
(f)has the CFA acted in contravention of cl 27.4.7 of the agreement by failing to request its employees approve a proposed variation to Schedule 1 of the Agreement to record the deployments in the preceding year ending 31 August 2012?
(e) Issue 5
Are cll 26, 27, 28 and 122, of the Agreement or any of them in whole or in part invalid or unenforceable by reason of s 253(1)(a) of the FW Act because they are not about permitted matters as defined in s 172 of the FW Act?
(f) Issue 6
Is cl 27.4.7 of the Agreement invalid or unenforceable by reason of the operation of s 255(1) and/or the objects and scheme of the FW Act?
(g) Issue 7
Are cll 13, 14 and 16 of the Agreement in whole or in part:
(a) objectionable terms for the purpose of s 12 of the FW Act; and/or
(b) unlawful terms for the purposes of s 194 of the FW Act;
and therefore to the extent that they are objectionable or unlawful of no effect by reason of s 253(1)(b) or s 356 of the FW Act?
(h) Issue 8
Are cll 13, 14 and 16 of the Agreement or any of them consultation clauses for the purpose of s 205(1) of the FW Act?
(i) Issue 9
If cll 13, 14 and 16 of the Agreement or any of them are invalid and of no effect, is the model consultation clause as prescribed by the Regulations a term of the Agreement?
(j) Issue 10
Are cll 15.1.2 and 15.1.3 of the Agreement (whether in conjunction with cl 15 or otherwise) inconsistent with:
(a) ss 186(6)(a), 739(1)(4) and (5) and 738(b);
(b) part 2-4 of the FW Act;
and therefore invalid?
(k) Issue 11
Is cl 15.1.3 of the Agreement a permitted matter as defined in s 172 of the FW Act?
(l) Issue 12
If cl 15.1.3 of the Agreement is not a permitted matter is it invalid or unenforceable by reason of s 253(1)(a) of the FW Act?
(m) Issue 13
Is cl 38.3 of the Agreement (whether in conjunction with cl 15 or otherwise) a permitted matter as defined in s 172 of the FW Act?
(n) Issue 14
Is cl 38.3 of the Agreement (whether in conjunction with cl 15 or otherwise) inconsistent with:
(a) ss 186(6)(a), 739(1), (4) and (5) and 738(b);
(b) Part 2-4 of the FW Act;
and therefore invalid and of no effect?
(o) Issue 15
Is cl 38.3 of the Agreement (whether in conjunction with cl 15 or otherwise) inconsistent with the requirement that an agreement have sufficient certainty under the FW Act and is therefore of no effect?
(p) Issue 16
Is cl 38.3 a term that provides a procedure for dealing with disputes as referred to in ss 738(b) and 739(1) and therefore invalid and of no effect?
Issue 1 - Is the CFA a constitutional corporation within the meaning of section 51(xx) of the Constitution and therefore a “constitutional corporation” within the meaning of that expression in the FW Act?
The Commission has jurisdiction to approve an enterprise agreement involving a “national system employer”. The term national system employer is defined in s 14 of the FW Act to include a “constitutional corporation.” Section 12 defines “constitutional corporation” as a corporation to which s 51(xx) of the Constitution applies.
Section 51(xx) of the Constitution provides:
51. The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to:
…
(xx.) foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth;
…The test to be applied when considering whether a corporation is a “trading corporation” under s 51(xx) has been the subject of much judicial consideration. As Black CJ and French J (as he was then) said in Quickenden v O’Connor (2001) 109 FCR 243 (“Quickenden”) at [41]:
The criteria for identifying a corporate entity as a trading or financial corporation have evolved out of a contest between narrow and more expansive approaches adopted by Justices of the High Court, generally reflecting like approaches to Commonwealth power and the scope of federal jurisdiction.
The CFA contends that it is not a “trading corporation”. Although the issue is not without difficulty, for the reasons I set out below I consider that it is.
The CFA’s purpose
First, the CFA submits that corporations which are not formed for the purpose or predominant purpose of engaging in trading activities and which do not carry on activities for that purpose are not properly characterised as trading corporations notwithstanding that the activities of the corporation otherwise appear to be trading activities. In this regard it relies on the reasoning of the majority in The Queen v Trade Practices Tribunal; Ex parte St George County Council (1974) 130 CLR 533 (“St George”) per Gibbs, Menzies and McTiernan JJ. Gibbs and Menzies JJ held that whether a corporation is a trading corporation is to be determined by consideration of its purpose as a guide to its character, rather than simply a consideration of those activities in which it actually engages. McTiernan J reached the same outcome as Gibbs and Menzies JJ by a process of statutory interpretation. In dissent, Barwick CJ and Stephen J found that the council in question was a trading corporation because it engaged in significant trading activities.
I accept the CFA’s contention that its predominant purpose is not one of trading or commerce. The CFA is under a statutory duty to prevent and suppress fires in country Victoria and the CFA Act vests control of the prevention and suppression of such fires in the CFA, together with an obligation to protect life and property in case of fire: see CFA Act ss 6, 14 and 20. These are its purposes and on the reasoning of at least Gibbs and Menzies JJ in St George the CFA is not a trading corporation.
However, in my opinion the view of the majority in St George is no longer good law. The dissenting view in St George found favour with a majority of Barwick CJ, Mason, Murphy and Jacobs JJ in The Queen v The Judges of the Federal Court of Australia; ex parte The Western Australian National Football League (1979) 143 CLR 190 (“Adamson”). In this case the High Court was required to determine whether or not various corporations involved in the promotion and presentation of Australian Rules Football were trading corporations despite various factors distinguishing those corporations from other corporations created for the purpose of trade and the pursuit of profit. In reaching its conclusion the majority determined that the relevant corporations’ activities were trading activities such that the companies themselves were correctly described as trading corporations.
Describing how the term “trading corporation” in s 51(xx) should be interpreted, Barwick CJ said at 208:
The full connotation of the description “trading corporation” cannot be displaced by the denotation it may have had at any past time. It is a power evidently intended to be available in circumstances current in future times. Like other descriptive expressions in the Constitution, e.g. telephonic communication, the description “trading corporation” must be allowed to embrace all that may fall within it according to its natural meaning and the circumstances of the time at which a decision as to validity or constitutional power has to be made.
In modern times having regard to the diversification of corporate activity and the virtual elimination of ultra vires from the law relating to companies registered under Companies Acts, e.g. s.20 of the Companies Act, 1961 (N.S.W.), the nature of a company may not be discernible from a perusal of its memorandum. The only sure guide to the nature of the company is a purview of its current activities, a judgment as to its nature being made after an overview of all those activities.
Similarly Mason J at 233, with whom Jacobs J concurred at 237, said that the term trading corporation:
…is not and never has been a term of art or one having a special legal meaning… Essentially it is a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation.
At 234 Mason J further explained:
Not every corporation which is engaged in trading activity is a trading corporation. The trading activity of a corporation may be so slight and so incidental to some other principal activity, viz. religion or education in the case of a church or school, that it could not be described as a trading corporation. Whether the trading activities of a particular corporation are sufficient to warrant its being characterized as a trading corporation is very much a question of fact and degree.
At 239 Murphy J said:
The constitutional description of trading corporations includes those bodies incorporated for the purpose of trading; and also those corporations which trade. A corporation which trades is a trading corporation even if it gained incorporation under an Act which forbids trading. The suggestion that such a corporation ceases to be one when engaged in the forbidden activity resembles the submission which was rejected by Fullagar J. in Williams v. Hursey where he stated that the notion of qualified legal personality is unintelligible.
…
Even though trading is not the major part of its activities, the description, “trading corporation” does not mean a corporation which trades and does nothing else or in which trading is the dominant activity. A trading corporation may also be a sporting, religious, or governmental body. As long as the trading is not insubstantial, the fact that trading is incidental to other activities does not prevent it being a trading corporation. For example, a very large corporation may engage in trading which though incidental to its non-trading activities, and small in relation to those, is nevertheless substantial and perhaps exceeds or is of the same order in amount as the trading of a person who clearly is a trader.
(Citations omitted.)
In the later decision of State Superannuation Board v Trade Practices Commission (1982) 150 CLR 282 (“State Superannuation Board”) the Court considered the analogous question of the test for whether a corporation was a “financial corporation” for the purpose of s 51(xx). The majority, per Mason, Murphy and Deane JJ, took an approach which was in substance the same as that in Adamson. At 303 to 304 their Honours said:
It is our view that the Court’s approach to the ascertainment of what constitutes a “financial corporation” should be the same as its approach to what constitutes a “trading corporation”, subject to making due allowance for the difference between “trading” and “financial”. After all, the two adjectives form part of the general category “and trading or financial corporations formed within the limits of the Commonwealth”. The two classes are not mutually exclusive - a corporation may be a financial as well as a trading corporation.
In this respect the decision in Adamson is of importance for two reasons. First, the majority of the Court (Barwick C.J., Mason, Jacobs and Murphy JJ.), rejecting the argument that the purpose for which a corporation is formed is the sole or principal criterion of its character as a trading corporation, concluded that the relevant character of the football leagues and the football club was to be ascertained by reference to their established activities. In adopting this view their Honours disapproved the approach taken by the majority in St. George which placed emphasis on the purpose for which the County Council was formed (see, for example, p. 562).
Secondly, the judgments of the majority in Adamson make it clear that, in having regard to the activities of a corporation for the purpose of ascertaining its trading character, the Court looks beyond its “predominant and characteristic activity” (cf. p. 213 per Gibbs J.). Barwick C.J. spoke of making a judgment “after an overview” of all thc corporation’s current activities, the conclusion being open that it is a trading corporation once it is found that “trading is a substantial and not a merely peripheral activity”. Mason J. said that it “is very much a question of fact and degree” having earlier stated that the expression is essentially “a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation.”
Murphy J. said “As long as the trading is not insubstantial, the fact that trading is incidental to other activities does not prevent it being a trading corporation”. Indeed, it was essential to the majority’s approach and to its rejection of St. George that a corporation whose trading activities take place so that it may carry on its primary or dominant undertaking, e.g., as a sporting club, may nevertheless be a trading corporation. The point is that the corporation engages in trading activities and these activities do not cease to be trading activities because they are entered into in the course of, or for the purpose of, carrying on a primary or dominant undertaking not described by reference to trade. As the carrying on of that undertaking requires or involves engagement in trading activities, there is no difficulty in categorizing the corporation as a trading corporation when it engages in the activities.
(Citations omitted and emphasis added.)
Similarly in Commonwealth of Australia v The State of Tasmania and Ors (1983) 158 CLR 1 (“Tasmania Dam Case”) Mason, Murphy and Deane JJ found that the Hydro Electric Commission of Tasmania was a constitutional corporation, based on the fact that the Commission was engaged in large scale trading activities: Tasmania Dam Case at 156 per Mason J, 269 to 272 per Deane J and 179 per Murphy J.
This activities based test has been applied by various appellate courts: see Quickenden at [47] per Black CJ and French J; Aboriginal Legal Service of Western Australia (Inc) v Lawrence (No 2) (2008) 37 WAR 450 (“Aboriginal Legal Service”) at [68] per Steytler P and at [79] per Pullin J; Bankstown Handicapped Children’s Centre Association Inc v Hillman (2010) 182 FCR 483 (“Bankstown”) at [48] per Moore, Mansfield and Perram JJ.
The CFA submits that the “purpose” test applied in St George is to be preferred in the present case, and that to the extent that Adamson, State Superannuation Board, and the Tasmania Dam Case held that the extent of a corporations’ trading activities determined the issue, they were incorrectly decided. I do not agree. In my view the better approach is that the corporation’s actual activities are predominantly determinative of whether it is a constitutional corporation. That is not to say that the purpose for which the corporation was created will never be influential in deciding whether or not it is a constitutional corporation, but where a corporation is active, it is what the corporation does rather than what it was set up to do that will usually be determinative: see Fencott v Muller (1983) 152 CLR 570 at 601-602 per Mason, Murphy, Brennan and Deane JJ. In any event, I am bound to follow Adamson and the other authorities cited.
What constitutes a trading activity?
The term “trading activities” generally connotes activities of a commercial nature involving, in essence, the exchange of goods and services for reward: Aboriginal Legal Service at [67] per Steytler P and at [104] per Le Miere JA. The test for whether a corporation’s activities amount to trading is a broad one. In Adamson Mason J said at 235:
I do not limit the concept of trading to buying and selling at a profit; it extends to business activities carried on with a view to earning revenue.
In Aboriginal Legal Service at [68] Steytler P summarised the relevant law and I respectfully adopt that summary. It was also endorsed by the Full Court in Bankstown and at [48] the Court said:
The notion of what is a trading corporation for the purposes of s 51(xx) of the Constitution has evolved and expanded in the last three decades. The applicable principles were conveniently and helpfully summarised by Steytler P in Aboriginal Legal Service of Western Australia (Inc) v Lawrence (No 2) (2008) 37 WAR 450 in the following passage (at [68]):
(1) A corporation may be a trading corporation even though trading is not its predominant activity: Adamson at CLR 239; ALR 473; State Superannua- tion Board [(1982) 150 CLR 282] at CLR 303-304; ALR 14-15; Tasmanian Dam case at CLR 156, 240, 293; ALR 625, 789, 833; Quickenden at [49]-[51], [101]; Hardeman [(2007) 166 IR 196] at [18].
(2) However, trading must be a substantial and not merely a peripheral activity: Adamson at CLR 208, 234, 239; ALR 473, 478, 542-543; State Superannuation Board at CLR 303-304; ALR 14-15; Hughes v Western Australian Cricket Association Inc (1986) 19 FCR 10 at 20; 69 ALR 660 at 671 (Hughes); Fencott [(1983) 152 CLR 570] at CLR 622; ALR 49; Tasmanian Dam case at CLR 156, 240, 293; ALR 625, 789, 833; Mid Density [(1992) 39 FCR 579] at 584; Hardeman at [22].
(3) In this context, “trading” is not given a narrow construction. It extends beyond buying and selling to business activities carried on with a view to earning revenue and includes trade in services: Ku-ring-gai at ALR 624, 644; FLR 139, 159-160; Adamson at CLR 235; ALR 474; Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 at 184-185, 203; 40 ALR 609 at 618, 635; Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 at 330; 59 ALR 334 at 339; 4 IPR 467 at 472; Quickenden at [101].
(4) The making of a profit is not an essential prerequisite to trade, but it is a
usual concomitant: St George County Council at CLR 539, 563, 569; ALR
372, 375, 379; Ku-ring-gai at ALR 625, 645; FLR 140, 167; Adamson at
CLR 219; ALR 461; E at FCR 343, 345; ALR 633, 635; Pellow
[(unreported, AIRC, O’Callaghan SDP, PR973365, 19 July 2006)] at [28].(5) The ends which a corporation seeks to serve by trading are irrelevant to its description: St George County Council at CLR 543; ALR 377; Ku-ring- gai at ALR 643; FLR 160; State Superannuation Board at CLR 304-306; ALR 15; E at FCR 343; ALR 633. Consequently, the fact that the trading activities are conducted in the public interest or for a public purpose will not necessarily exclude the categorisation of those activities as “trade”: St George County Council at CLR 543; ALR 377 per Barwick CJ; Tasmanian Dam case at CLR 156; ALR 625 per Mason J.
(6) Whether the trading activities of an incorporated body are sufficient to justify its categorisations as a “trading corporation” is a question of fact and degree: Adamson at CLR 234; ALR 473 per Mason J; State Superannuation Board at CLR 304; ALR 15; Fencott at CLR 589; ALR 52; Quickenden at [52], [101]; Mid Density at FCR 584.
(7) The current activities of the corporation, while an important criterion for determining its characterisation, are not the only criterion. Regard must also be had to the intended purpose of the corporation, although a corporation that carries on trading activities can be found to be a trading corporation even if it was not originally established to trade: State Superannuation Board at CLR 294-295, 304; ALR 7, 15; Fencott at CLR 588-589, 602, 611, 622-624; ALR 52, 70, 74, 80; Hughes at FCR 20; ALR 671; Quickenden at [101]; E at FCR 344; ALR 636; Hardeman at [18].
(8) The commercial nature of an activity is an element in deciding whether the activity is in trade or trading: Adamson at CLR 209, 211; ALR 453, 455; Ku-ring-gai at ALR 624, 627-628, 643, 648; FLR 139, 142, 160, 167; Bevanere at FCR 330; ALR 339; IPR 472; Hughes at FCR 19-20; ALR 671; E at FCR 343; ALR 633; Fowler; Hardeman at [26].
As this passage indicates, services of a type analogous to those provided by the CFA are not excluded from the ambit of trading activities. Although the CFA may not seek to produce profits or to expand its market share for the benefit of its private interests, its activities may still mean that it is properly seen as a trading corporation. The fact that it conducts its activities in the public interest also does not exclude the activities from being trading: Aboriginal Legal Service at [68(5)], [70] to [71]. For example, in Bankstown, although the activities of the corporation were focussed on the provision of welfare services to handicapped children the corporation was found to be engaging in trading activities: Bankstown at [55].
The CFA’s activities
In the hearing significant time was spent on evidence and submissions regarding CFA activities which produced revenue. The revenue sources relied upon were:
(a) fire insurance company contributions made to the CFA;
(b) owner and insurance intermediary payments to the CFA;
(c) charges made by the CFA for the provision of firefighting at uninsured properties;
(d) charges made by the CFA for attendance at false alarms;
(e) charges made by the CFA for services involving hazardous materials;
(f) charges made for the provision of reports to property owners seeking consent to proposed variations from the building safety codes relating to fire safety;
(g) charges made by the CFA for fire equipment maintenance services;
(h) monies received from the sales of fire safety related goods;
(i) property rental income;
(j) charges made by the CFA for consultancy services provided;
(k) charges made by the CFA to the TAC for road accident rescue services provided; and
(l) charges made by the CFA for the provision of advice regarding dangerous goods.
What follows is an analysis of each or these revenue sources in order to determine whether it is properly characterised as arising from a trading activity. For the purpose of the analysis I have relied on the CFA’s activities for the 2010-11 financial year which is the period in which the Agreement was approved. The references to the CFA Act and the Country Fire Authority Regulations 2004 (Vic) (“CFA Regulations”) are references to those provisions as they existed in that period.
The CFA’s trading activities
The CFA concedes that three of these activities are trading activities. Those activities and the approximate income received by the CFA from them in the 2010-11 financial year are:
(a) fire equipment maintenance services - $5,743,798;
(b) sale of goods - $4,787,336; and
(c) property rental, excluding subsidised property rental for CFA employees - $615,854.
In its amended outline of argument the CFA conceded that consultancy work that it performs is trading, but in final submissions it departed from that concession. It submits that the consultancy work was provided in return for what, on the evidence of Michael John Wootten, the Executive Director of Business Services of the CFA, was grants and contributions from other government departments and agencies.
I do not see Mr Wooten’s evidence as taking those payment outside the ambit of trading activities. The CFA provides consultancy services to other parties and receives payment for the provision of that service. It matters not that the service is provided for the benefit of the community, nor that the revenue may only cover the cost associated with providing the service, nor that the payment may be by way of grants or contributions from other state government agencies or departments. It is a trade in the CFA’s expertise in return for revenue. In my view the CFA was correct to originally concede that the sum of $212,961 received for those services was revenue from trading.
In my view further CFA activities, beyond those which it concedes, are also trading activities. I now deal with those activities.
Subsidised rental of properties
The CFA provides subsidised rental properties to some employees as a part of their remuneration. The rental income derived from this scheme in the relevant year was $48,320. The CFA concedes that its other property rental income is revenue from trading, but seeks to distinguish the subsidised rent received. Mr Wootten states that the subsidised rent is designed to assist the CFA to attract and retain employees in country towns. The CFA submits that such income is not properly characterised as a part of trade.
I do not agree. In Quickenden rental income from properties owned by the University was designated as trading income: Quickenden [23]-[24] and [49]-[51]. In Bankstown at [50] the question as to whether making a profit is a usual concomitant of trade was treated as barren on the basis that it is the commercial nature of an activity which indicates whether it amounts to trading. The CFA’s rental of property to its employees, even though at a discount, is not altruistic and remains a commercial activity which involves the payment of money by tenants in return for enforceable property rights. In my view the rental of property for a financial return is a trading activity.
Road accident rescue services
The CFA provides road accident rescue services and it charges the Traffic Accident Commission (“TAC”) for doing so where its service involves a “compensable incident”. A compensable incident is a road accident where an injured person is freed from a vehicle by a CFA brigade accredited to perform specialised road accident rescues. In the relevant year the CFA received $1,495,470 from the TAC for such services.
Section 97B of the CFA Act provides:
Authority may provide road accident rescue service
(1)The Authority may provide a road accident rescue service for persons involved in road accidents by the use of brigades which have been specifically approved for that purpose by the Co-ordinator in Chief of Emergency Management under the Emergency Management Act 1986.
(2)The Authority may charge for the provision of services under subsection (1) in accordance with the regulations.
(Emphasis added.)
At the relevant time r 100 provided:
Road accident rescue
(1)In respect of road accident rescue services provided to people entitled to compensation under section 60(2)(a) of the Transport Accident Act 1986, the Authority may charge the Transport Accident Commission fees agreed with the Commission, having regard to the matters set out in subregulation (3).
(2)In respect of road accident rescue services provided to people entitled to compensation under section 99(1)(a) of the Accident Compensation Act 1985, the Authority may charge the Accident Compensation Commission the fees agreed with the Commission, having regard to the matters set out in subregulation (3).
(3)The fees agreed must take into account—
(a)the relevant portion of the purchase or replacement cost of vehicles, equipment and protective clothing used to provide the services and other items used for the service; and
(b)the operating costs of providing the services, including maintenance costs and the costs of employing staff to operate the services; and
(c)the organisational costs, including the cost of training people to provide the services, the co-ordination of the services, the welfare of people providing the services and the corporate support costs incurred in providing the services; and
(d)any other costs incurred in providing the services.
Under these provisions the CFA is empowered to provide these services and is able to charge a fee to the TAC for their provision. The CFA contends that the provision of road accident rescue services is of the same character as the CFA’s fire fighting services. It submits that it is a critical operational function which does not have a commercial character and that the charges are made for cost recovery only.
In my view this activity has a sufficiently commercial character to be a trading activity. First, while the CFA is empowered to provide a road accident rescue service it is not under a statutory duty to provide such a service, which distinguishes it from the CFA’s fire prevention and suppression activities. Nor is it an activity directly related to the prevention and suppression of fires. I note also that not all CFA firefighters perform this work. Only CFA brigades that have been provided extra training and task specific equipment, and which are approved to do so, may perform the road accident rescue service.
Secondly, the statutory provisions that underpin the road accident rescue service and the payment for it are different to the provisions relating to insurance company, owner and intermediary payments for attendance at fires which I discuss below. In my view the language and context of s 97B and r 100(3) is more suggestive of a trading activity than the provisions relating to contributions by insurers and others.. This may be seen in the fact that r 100(3) envisages that the CFA and the TAC will agree on the value of the fee to be paid. Embedded in this is an aspect of bargaining as to the fee to be paid to the CFA. It is distinguishable from those activities where the CFA’s cost recovery is determined by reference to a statutory formula. The capacity to bargain gives to the CFA and the TAC a freedom which is indicative of commerciality and evidence of trading: Adamson at 211; Bankstown at [48](8)].
In this regard I also note that the CFA is entitled to charge a fee only where its attendance involves a compensable incident. This itself indicates that the CFA is being compensated by the TAC for the provision of the service, which further indicates its commercial aspect. There is an element of exchange of the service for the payment of the fee.
It appears that the TAC payments do not cover the CFA’s estimated costs of providing the road accident rescue service and have only increased by reference to the CPI index in recent years. But, in conformity with the regulations, the CFA must have had a negotiation with the TAC and there is nothing in the legislative provisions to prevent that negotiation from being an ongoing one. The bargaining in relation to the fee is another indication that the fee is in exchange for the service and indicates commercial activity.
Thirdly, activities performed on a full or partial cost recovery basis may nevertheless be trading activities. In Bankstown at [51] the Full Court asked rhetorically:
Does the fact that a corporation likewise provides such services but on effectively a cost recovery basis only, render it inappropriate to characterise that corporation as a trading corporation?
The Court held that the relevant corporation which provided welfare services to the community, in large part paid for by the New South Wales Government, was a trading corporation. The Court also noted that the corporation had to bargain in a competitive environment for the contract to provide those services, and decided that the corporation’s activities were properly viewed as trading activities: Bankstown at [56].
Advice regarding dangerous goods
The CFA charges organisations that hold “fire protection quantities” of various dangerous goods a fee for the provision of advice on fire protection, placarding and emergency management planning. The amount of revenue earned through the provision of this advice in the relevant period was $31,433.
Members of the public are obliged under the regulations to seek the CFA’s advice if they desire to store dangerous goods in prescribed quantities. The CFA submits that it only charges a fee so as to recover some of its costs incurred in providing the advice rather than to make a profit. It contends that it is not a trading activity, arguing that there is no commercial activity involved.
I do not agree. Regulation 96(1)(b) allows the CFA to set its own fee for provision of this advice, without reference to any externally fixed criteria. The evidence is that the CFA sets the fee based upon the size and complexity of each job. This distinguishes this situation from Quickenden where the amount of the student’s liability for the provision of tertiary education was set by law: Quickenden at [51]. The fact that the CFA has chosen to provide the service on a cost recovery basis is no reason to treat it as a non-trading activity: Bankstown at [55] to [56]. I consider it has a sufficiently commercial character to be seen as a trading activity.
The CFA’s non-trading activities
The UFU seeks to characterise various other CFA activities as trading activities. I do not consider that they are for the reasons I now set out.
Insurance Company Contributions
Under s 75 of the CFA Act the total quantum of monies to be paid to the CFA by the Victorian government and by fire insurance companies are set by the relevant Minister. Section 75 requires the CFA to give the Minister an estimate of expenditure for the following year, but the decision as to how much money is to be made available to the CFA is at the discretion of the Minister and contingent on the approval of the Governor in Council.
Pursuant to s 76 of the CFA Act, 77.5% of the total funds paid to the CFA are paid by insurance companies. It relevantly provides:
(1)The total amount of contributions are to be contributed as follows—
(a)22.5 per cent from the Consolidated Fund;
(b)77.5 per cent by the insurance companies insuring against fire property situated within the country area of Victoria.
In 2010-11 insurance companies paid a total of $309.2 million to the CFA. The UFU contends that under this legislative scheme the CFA provides the service of suppressing and fighting fires in exchange for these payments by the insurers, and argues that it is irrelevant that the percentage contribution is fixed by statute. In effect, the UFU contends that the UFU’s activities in fighting and suppressing fires are trading activities.
I do not accept this contention. The CFA has a statutory duty to prevent and suppress fires in country Victoria. Although I do not see the existence of its statutory duty as fatal to the contention that the CFA is a constitutional corporation, I see no indicia of commercial activity in the CFA’s provision of these services. I do not see its fulfilment of its statutory duty in fire prevention and suppression as a business activity carried on in exchange for the revenue derived from the insurer’s contributions. To use the words of Mason J in Adamson at 235, it is not a business activity carried on with a view to earning revenue. The payments made by the insurers under s 76 are properly seen as being made to ensure that the CFA has sufficient resources to carry out its statutory functions, rather than being treated as commercial activity by it.
Amongst other things, the CFA’s activities in preventing and suppressing fires involve no element of freedom of choice which is a common feature of commercial or trading activity. For example, it has no discretion to decide that it will not attend a particular fire on the basis that the relevant insurer has refused or failed to make the required contribution. Its position is quite different to that of a party to a commercial arrangement.
In Quickenden the Full Court was asked to decide whether a university’s provision of education in return for fees was a trading activity. While Black CJ and French J did not decide that question, their Honours said at [51]:
The Act creates a liability for each student to the University in respect of each course of study undertaken in a semester. The amount is not fixed by the University but rather by the Minister under published guidelines. The concept of “trading” is a broad one. It is doubtful, however, that it extends to the provision of services under a statutory obligation to fix a fee determined by law and the liability for which, on the part of the student, appears to be statutory.
(Emphasis added.)
I share Black CJ and French J’s doubt. I add that the scheme in Quickenden revolved around a student choosing to attend the university and pay fees related to the education received. There is even less scope for freedom of choice by the parties in the present case as the CFA Act requires the CFA to prevent and suppress fires and requires the insurers to pay for 77.5% of its likely expenditure in doing so.
Owner and Intermediary Payments
The CFA’s next largest source of non-government revenue is payments made to it pursuant to s 80A of the CFA Act. Under s 80A compulsory contributions are required to be made to the CFA by insured property owners and insurance providers who are not caught by ss 75 to 76. The amount of the contribution is to be determined by reference to a prescribed formula.
In 2010-11 these payments totalled $14,726,912. This revenue also arises from the CFA’s performance of its statutory obligation to suppress and prevent fires. For essentially the same reasons as I have already given in relation to the insurers’ contributions, I can see no element of commercial exchange or other indicia of commercial activity underpinning these payments. The compulsory payments are properly seen as having been legislated so as to ensure that the CFA has sufficient resources to carry out its statutory functions. I do not consider that these contributions arise from trading activity.
Section 87 – Uninsured Property Attendance
Where the CFA provides a fire fighting service to a person whose property is not insured, that person can be held liable to pay the reasonable expenses associated with the attendance. Section 87 of the CFA Act provides the mechanism by which this liability is created. In the relevant period the CFA recovered $15,531 of its costs in providing fire fighting services to uninsured property owners.
For the reasons previously given, I consider that this revenue has no bargaining element nor is there any other element of commercial exchange in the activity. I do not accept the UFU’s contention that the property owner is liable to pay money in exchange for services rendered. The activity was not entered into with a view to earning revenue.
Attendance at False Alarms
Under s 20B of the CFA Act the CFA may charge a fee to the owner or occupier of premises for attendance at a false alarm of fire, where it considers there was no reasonable excuse for the false alarm. CFA Regulation 97 prescribes the charge for attendance by reference to the number of fire-fighting appliances required to attend and the length of time they were in attendance. In 2010-11 the CFA received $1,810,504.30 from compulsory charges associated with attendance at false alarms.
The UFU contends that these activities are trading activities. For essentially the same reasons as I have already given, I do not agree. I can see no element of exchange or other commercial indicia in the payment. Looked at one way it has the appearance of a levy that the CFA may impose so as to deter careless behaviour in relation to fire alarms. Viewed another way, it reflects a legislative policy to require persons who carelessly allow false alarms to occur to pay the cost of the CFA’s attendance. It is not business activity entered into with a view to earning revenue.
Hazmat Services
Under r 97(1)(d) liability for the cost of CFA attendance at a hazardous materials incident is borne by the owner or occupier of the premises at which the incident occurred or, in the case of an incident occurring on a road, the owner of the vehicle transporting the hazardous material. Regulations 97(2) and 98 set out the method of calculation of the fee. They do not prescribe the actual fee but the calculation of the fee is limited to specified costs, and the CFA has no capacity to bargain in relation to the fee.
In the relevant year the CFA received $430,749 in relation to attendance at hazardous materials incidents. The UFU contends that because people are liable to pay a fee to the CFA for its attendance, thereby generating revenue, the activity is trading. I do not agree.
The CFA has a statutory duty to attend any incident involving hazardous materials where it involves a risk of fire, and there is no capacity for the CFA to reach an agreement with the recipient of the service in relation to the fee. It is unable to refuse to attend a Hazmat incident on the basis that the cost of the attendance cannot be recovered from the person made liable to pay it under the CFA Regulations. While it is a question of degree, I can discern no sufficient element of commerciality in the service to treat it as trading activity.
Building Fire Protection Services
The National Construction Code and other construction standards set various fire safety standards. Persons seeking permits to build outside these standards are able to seek a variation of the fire safety requirements in the codes from the CFA. Regulation 309 of the Building Regulations 2006 (Vic) provided:
Requirements for permits involving fire safety matters
(1)The report and consent of the chief officer must be obtained to an application for a building permit which involves any of the following fire safety matters if those matters do not meet the deemed to-satisfy provisions of the BCA—
(a)fire hydrants;
(b)fire hose reels;
(c)fire control centres or fire control rooms;
(d)fire precautions during construction;
(e)fire mains;
(f)control valves;
(g)booster assemblies;
(h)emergency vehicle access;
(i)fire indicator panels;
(j)proscenium curtain drencher systems;
(k)fire services controls in passenger lift cars.
(2)In a report under subregulation (1), the chief officer may consent to a variation of the requirements of the BCA if the chief officer is satisfied that a satisfactory degree of fire safety is achieved.
(3)When a building permit is issued which involves the installation of fire sprinklers and the installation does not meet the deemed-to-satisfy provisions of the BCA the relevant building surveyor must forward details of the installation to the chief officer.
In the relevant year the CFA received $192,896 in such fees. The UFU argues that the CFA is able to charge any amount for the provision of reports and consents to variations of fire safety standards (up to a prescribed maximum set out in r 312) and submits that this is a trading activity.
I do not accept this contention. The Chief Officer of the CFA has a statutory duty to consider applications for reports and consents in relation to building permits which involve fire safety matters. This duty is closely related to the CFA’s central statutory duty to prevent and suppress fires. For essentially the reasons previously given, I see insufficient indicia of commercial exchange or other commercial indicia to treat it as trading activity.
Is the CFA a trading corporation?
The UFU contends that the CFA carries the onus of establishing that it is not a constitutional corporation because of the presumption of validity in relation to the Agreement: Stenhouse v Coleman (1944) 69 CLR 457 at 466 per Starke and at 470 per Dixon J; O’Toole v Charles David Pty Ltd (1990) 96 ALR 1 at 41 per Deane, Gaudron and McHugh JJ. I accept this contention but given the evidence before the Court nothing turns on the issue. The question falls to be determined on the evidence .
In total in 2010-11 the CFA received about $12.93 million in revenue from trading activities. There can be little doubt that this amount of trading in most circumstances would be considered “substantial”. However, the CFA is a large organisation and in that year its total revenue was approximately $466.5 million. As a proportion of total revenue, that referrable to trading activities accounts for about 2.7%.
The CFA submits that the Court must also take into consideration the value derived from the approximately 55,000 volunteers that carry out CFA functions. According to a paper published in 2008 by the Centre for Risk and Community Safety at the Royal Melbourne Institute of Technology University the value of the CFA’s volunteers to the Victorian community can be estimated at about $840 million.
These volunteers plainly play a valuable role in the CFA and are vital in the delivery of its services to the Victorian community. However, I do not give much weight to the CFA’s estimate that they added $840 million of value. First, the evidence did not make clear the process by which that figure was reached, the academic responsible for the calculation was not made available for cross-examination, and the CFA led no evidence as to the veracity of the estimate.
Secondly, there are many organisations that must be seen as trading corporations even though supported by the community who see value in the maintenance and promotion of the organisation’s work. In State Superannuation Board the majority said at 304:
The point is that the corporation engages in trading activities and these activities do not cease to be trading activities because they are entered into in the course of, or for the purpose of, carrying on a primary or dominant undertaking not described by reference to trade. As the carrying on of that undertaking requires or involves engagement in trading activities, there is no difficulty in categorizing the corporation as a trading corporation when it engages in the activities.
Indeed, we would go on to say that there is nothing in Adamson which lends support for the view that the fact that a corporation carries on independent trading activities on a significant scale will not result in its being properly categorized as a trading corporation if other more extensive non-trading activities properly warrant its being also categorized as a corporation of some other type.
It may be accepted, as the CFA contends, that it is properly categorised as a “volunteer and community based fire and emergency services organisation”. But whether it is also a trading corporation requires consideration of how the trading activities of the CFA sit within the organisation overall and whether they are “substantial” or “not insubstantial”, to apply the test used in Adamson.
In Adamson Barwick CJ held at 208 that if trading was “substantial” then the corporation would be a constitutional corporation. At 234 Mason J, with whom Jacobs J agreed at 237, described the question of whether a corporation was a trading corporation as “very much a matter of fact and degree”. His Honour elaborated in explaining that a corporation should not be considered a trading corporation if the trading activities were so slight and incidental to some other principal activity that the corporation could not be correctly defined as a trading corporation. Murphy J characterised the matter slightly differently again, explaining at 239:
A trading corporation may also be a sporting, religious, or governmental body. As long as the trading is not insubstantial, the fact that trading is incidental to other activities does not prevent it being a trading corporation.
Both parties made submissions about whether the substantiality of trading activities must be assessed in absolute terms, or whether it should be assessed relative to the corporation’s overall activities. In Bankstown the majority of the Full Court said at [52]:
There is no bright line delineating what is or is not a trading corporation. That is exemplified by the division of opinion in Aboriginal Legal Service of Western Australia (Inc) where a minority of the Court characterised the Service’s activities as that of a trading corporation but the majority did not. As Black CJ and French J observed in Quickenden 109 FCR 243 at [52] “… the characterisation of a body corporate as a trading corporation is a matter of fact and degree” repeating similar observations of Mason J in Actors and Announcers Equity 150 CLR at 211.
I respectfully agree. It is this which guides my analysis.
In determining whether the Bankstown Handicapped Children’s Centre Association was a constitutional corporation, the majority focussed its attention on the large sums of money received by way of contract between the Association and the New South Wales Government. The Full Court appeared to prefer a relative test in relation to substantiality saying at [53]:
In the present case we, as the parties did, focus on the services provided by the Association under the arrangements it had with DOCS [Department of Community Services] and particularly the provision of OOHC services. As noted earlier, we review the position in 2006. Plainly those activities were a substantial part of its activities and not a peripheral activity. During 2005/2006 these arrangements generated a substantial part of the income of the Association. In 2005/2006, the fees received from DOCS for welfare services agreed to be provided by the Association were in excess of $3.3 million. In that year, that income was some 35% of the income as disclosed in the profit and loss statement of the Association.
The Court went on to conclude at [54] that if the services provided under the DOCS arrangement were trading activities then the Association would be a constitutional corporation.
In Quickenden it was contended that the University of Western Australia was a trading corporation despite its predominant purpose and activity being the provision of tertiary education. The majority held that it was not necessary to decide if the income derived from HECS fees paid by both students and by the Commonwealth Government to the university in return for the education provided was income received in trade. The substantial rental and investment income received by the university was sufficient to warrant its characterisation as a trading corporation. In the relevant financial years the investment income amounted to approximately 17% of the university’s annual operating revenue. In relation to whether that figure was significant enough to justify the conclusion that the corporation was a trading corporation, the majority said at [51]:
For present purposes, however, this aspect of the claimed trading activities can be disregarded. For it is plain that the other activities cited are trading activities and are a substantial, in the sense of non-trivial, element albeit not the predominant element of what the University does. The University was not established for the purpose of trading and at another time, closer to the time of its creation, it may not have been possible to describe it as a trading corporation. But at the time relevant to this case and at present, it does fall within that class.
(Emphasis added.)
The term “substantial” is imprecise but it at least encompasses trading amounts that are “not so small as to be trivial”: Quickenden at [51]. In that case the majority treated substantial and nontrivial as synonymous. In the present case the CFA contends that their trading activities are peripheral, insignificant or otherwise incidental. These terms are drawn from the various cases: see for “peripheral” Adamson at 208 per Barwick CJ; State Superannuation Board at 304 per Mason, Murphy and Deane JJ; for “incidental” Adamson at 234 per Mason J; for “significant” see Adamson at 233 per Mason J; E v Australian Red Cross Society and Ors (1991) 27 FCR 310 (“E v Red Cross”) at 345 per Wilcox J; Quickenden at [47] per Black CJ and French J.
The ordinary meaning of these words is straightforward. The Shorter Oxford Dictionary defines them to include the following:
(a)“peripheral” means marginal, superficial, of minor importance, not essential or relevant to but subordinate to;
(b)“insignificant” means lacking significance, meaningless, devoid of weight or force, ineffective, ineffectual, of no importance, trivial, trifling, or contemptible; and
(c)“incidental” means occurring as something casual or of secondary importance; not directly relevant to; following up on as a subordinate circumstance.
The CFA is plainly dependent upon the state government and the fire insurers for the vast bulk of its financial support. It is also clear that its activities are not predominantly trading activities. However, I do not see the CFA’s trading activities as peripheral, insignificant, incidental or trivial when considered either in absolute terms or relative to its overall activities.
Six different CFA revenue sources arise from trading activities, three which are conceded and three which I have found to be so. The six activities are:
(a) fire equipment maintenance services;
(b) sales of goods;
(c) property rental, including subsidised property rental to employees;
(d) consultancy services;
(e) road accident rescue services; and
(f) advice as to dangerous goods.
The scope of these activities is broad. While they are secondary to the CFA’s primary purpose I would not describe any of them as insignificant, incidental, trivial or unimportant. For example, the road accident rescue service is a specialised emergency service that the CFA has agreed to provide in country areas, which has required special training of CFA employees beyond the usual fire training, and which the CFA recognises as an important part of the range of services it provides. The CFA has no statutory obligation to provide this service and it does so at a cost to road users and the State through the Traffic Accident Commission. I would not describe the provision of this service as incidental to the CFA’s activities nor as a fortuitous or casual occurrence of subordinate importance. Nor should its provision, viewed in the context of all of its services, be described as trifling, ineffective, superficial or marginal.
For essentially the same reasons the provision of fire equipment maintenance services, consultancy on matters related to fire safety, the provision of advice related to the storage of dangerous goods and the sale of goods related to fire safety should not be seen as insignificant, incidental, trivial or unimportant activities considered against the range of services the CFA provides. I infer from the evidence that these activities are seen as important by the CFA, although they are not its central or predominant focus.
Nor do I consider that the revenue from these trading activities is incidental in the sense of arising fortuitously or as a result of some other activity. The income is earned deliberately by the CFA from these six specific sources and on the basis that the CFA have special expertise or products of value which they provide in exchange. Taken together the income from these activities is substantial.
While the quantum of income from the CFA’s trading activities relative to its non‑trading activities is small, I am disinclined to treat almost $13 million of revenue as minimal, trivial or insignificant. It should be seen for what it is, a significant volume of trading revenue albeit dwarfed by the money received from non-trading sources. The CFA put on no cogent evidence that $12.93 million was insignificant to its operations, and no evidence was given that it could be easily foregone by the organisation. Put another way, it is likely that the CFA would be impaired in its capacity to provide services in road accident rescue, fire equipment maintenance, fire safety consultancy or sale of fire safety related goods, which it regards as important in the range of services offered, if it was not able to charge fees for doing so.
Although the $12.93 million of trading income is plainly a substantial amount in absolute terms, it is only a small percentage relative to the CFA’s total income. Even so, I do not consider it is trivial or minimal in relative terms.
In E v Red Cross the Australian Red Cross Society was one of the respondents. Wilcox J held that its supply of blood and blood products was the gratuitous provision of a public welfare service, substantially at government expense, and was not a trading activity. The Red Cross received a total of $44.9 million from the government in respect of its non-trading blood supply services, and about $2 million from trading activities. Another respondent, a major hospital, made approximately $18 million from trading activities and, in the words of Wilcox J, that sum was dwarfed by a State government subsidy of $112 million. His Honour concluded that the disparity between the money earned through trading and the money received by way of government subsidy was unimportant explaining at 345:
Trading activities yielding some $18 million per year can only be described as substantial. It seems to me that the scale of the hospital’s trading activities in 1984-1985 was such that it should be regarded as then being a trading corporation.
See also United Firefighters’ Union of Australia v Metropolitan Fire and Emergency Services Board (1998) 83 FCR 346 (“UFU v MFB”) at 354 to 356 per Marshall J.
The CFA contends that both E v Red Cross and UFU v MFB were wrongly decided in that they incorrectly applied an absolute test. While I consider that the CFA’s trading revenue is plainly significant if considered in absolute terms, I do not approach the issue that way. Considering its trading revenue relative to its non-trading activities, the question is not without difficulty and is one of fact and degree. In my opinion the CFA undertakes sufficient trading for it to be seen as “not insubstantial”, not trivial, insignificant, marginal, minor or incidental, and I find that it is a trading corporation.
issue 2 - If the CFA is a constitutional corporation, are clauses 26, 27, 28 and 122 of the Agreement or any of them (including in their combined or cumulative operation) in whole or in part invalid by reason of the implied limitation on Commonwealth powers referred to in Re Australian Education Union; Ex parte Victoria (1995) 184 CLR 188?
It is uncontroversial that the CFA is an agency of the State of Victoria. Broadly, the CFA submits that clauses 26, 27, 28 and 122 of the Agreement are invalid and unenforceable by reason of the Melbourne Corporation principle. The CFA submits that the impugned clauses of the Agreement infringe the Melbourne Corporation principle as described in Re AEU.
The Melbourne Corporation principle is derived from the federal structure of the Constitution. The classic formulation of the rule describes a limitation on the legislative power of the Commonwealth consisting of two elements. In Re AEU at 231 the majority, comprised of Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ, described the limitation as:
… (1) the prohibition against discrimination which involves the placing on the States of special burdens or disabilities (“the limitation against discrimination”) and (2) the prohibition against laws of general application which operate to destroy or curtail the continued existence of the States or their capacity to function as governments.
(Citations omitted.)
The rule has sometimes been expressed differently and in Austin v Commonwealth of Australia (2003) 215 CLR 185 (“Austin”) at [124] Gaudron, Gummow and Hayne JJ explained that there is “but one limitation, though the apparent expression of it varies with the form of legislation under consideration”.
In Re AEU the High Court held that a federal industrial award (made under a predecessor to the FW Act) that impaired the capacity of a state government to determine the number and identity of state government employees and/or the number and identity of such employees to be made redundant, curtailed the state government’s capacity to function as a government and thereby infringed the implied limitation. The majority explained at 232:
At this point it is convenient to consider South Australia’s argument based on impairment of a State’s “integrity” or “autonomy”. Although these concepts as applied to a State are by no means precise, they direct attention to aspects of a State’s functions which are critical to its capacity to function as a government. It seems to us that critical to that capacity of a State is the government’s right to determine the number and identity of the persons whom it wishes to employ, the term of appointment of such persons and, as well, the number and identity of the persons whom it wishes to dismiss with or without notice from its employment on redundancy grounds. An impairment of a State’s rights in these respects would, in our view, constitute an infringement of the implied limitation.
(Emphasis added.)
The impugned clauses of the Agreement
In dealing with the dispute resolution term in the 2010 MFB Agreement (which is relevantly indistinguishable from the term before me) a differently constituted Full Bench approved Boral: Metropolitan Fire and Emergency Services Board v United Firefighters’ Union of Australia (Vic Branch) (2012) 223 IR 448 at [23] (“MFB v UFU”) per Kaufman SDP, Hamilton DP and Gregory C.
I cannot see any basis for construing the word “dispute” in s 738(b) of the FW Act other than in accordance with its ordinary meaning. No cogent argument was put for it to be read down so that it is limited only to disputes arising under the agreement or relating to the National Employment Standards. Section 738 must be given its ordinary meaning, which does not include the unstated limitation for which the CFA contends.
In my view s 739 also tends to confirm that the scope of any power in the Commission to resolve disputes pursuant to a dispute resolution term in an agreement is a matter for the parties. Section 739(4) provides, simply, that subject to consistency with the Act, if the parties have agreed that the FWC may arbitrate it may do so.
This construction is consistent with the objects of the FW Act. Section 3(e) provides that one of objects of the Act is to provide accessible and effective procedures to resolve grievances and disputes. Giving “dispute” in s 738(b) its ordinary meaning means that the parties have an effective mechanism to deal with disputes which pertain to “permitted matters” but which may not have been contemplated when the agreement was made and are not covered by it.
If there be any ambiguity, Parliament’s intention in this regard is clear. The Explanatory Memorandum, Fair Work Bill (Cth) 2008 at 2733 states that a dispute resolution procedure may deal with matters beyond the scope of the enterprise agreement, providing as follows:
Modern awards and enterprise agreements must include a term providing a procedure for settling disputes about matters arising under the modern award or enterprise agreement (as the case may be) and in relation to the [National Employment Standards] (these requirements are set out in clause 146 for modern awards and in clause 186 for enterprise agreements). A modern award or enterprise agreement may also provide a procedure for settling other disputes at a workplace. This Division [Div 2 of Part 6-2 - “Dealing with Disputes”] will also apply to those matters.
(Emphasis added.)
In the Private Arbitration Case, the High Court dealt with a dispute surrounding a dispute resolution term in a certified agreement under the IR Act. The relevant dispute resolution term had a broad scope, providing in effect that the Industrial Relations Commission could privately arbitrate any dispute at the workplace.
At the time, under s 170MC(1)(c) of the IR Act the Commission could not certify an agreement unless satisfied that it included procedures for preventing and settling disputes about “the application of the agreement”. Under s 170MH(a) an enterprise agreement could contain a term which authorised the Commission to arbitrate disputes about “the application of the agreement”. The IR Act was repealed with effect from 31 December 1996 and replaced by the Workplace Relations Act 1996 (Cth) (“WR Act”), but the transitional provisions provided that agreements previously certified remained in effect. Section 89A of the WR Act limited the definition of “industrial dispute” by reference to the “allowable award matters” set out in subs (2) and (3).
It was uncontentious that the dispute resolution term in the certified agreement went beyond the “allowable matters” in s 89A and beyond disputes over “the application of the agreement”. The employer argued that s 89A operated not only to limit the Commission’s ordinary arbitration powers, but also to limit its powers to conduct a private arbitration pursuant to the dispute resolution term in the agreement.
Although doing so in a different context to that before me, at [28]-[29] the High Court comprising Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne, and Callinan JJ endorsed Hegarty, noting that dispute resolution procedures were intended to ensure that any settlement of a dispute was effective and enduring. Having said this their Honours explained at [34]:
The parties to an industrial situation are free to agree between themselves as to the terms on which they will conduct their affairs. Their agreement has effect according to the general law. If their agreement is certified, it also has effect as an award. To the extent that an agreement provides in a manner that exceeds what is permitted either by the Constitution or by the legislation which gives the agreement effect as an award, it cannot operate with that effect. But the underlying agreement remains and the validity of that agreement depends on the general law, not the legislative provisions which give it effect as an award.
The High Court held that the limitations on “allowable award matters” in s 89A did not apply to the Commission’s power to privately arbitrate disputes. The Court confirmed that, if the parties specifically so agree, the Commission has a broad power to privately arbitrate disputes. In my view the Court’s approach illustrates the weakness of the CFA’s contention. As the Court explained at [30]-[32]:
There is, however, a significant difference between agreed and arbitrated dispute settlement procedures. As already indicated, the Commission cannot, by arbitrated award, require the parties to submit to binding procedures for the determination of legal rights and liabilities under an award because Ch III of the Constitution commits power to make determinations of that kind exclusively to the courts. However, different considerations apply if the parties have agreed to submit disputes as to their legal rights and liabilities for resolution by a particular person or body and to accept the decision of that person as binding on them.
Where parties agree to submit their differences for decision by a third party, the decision maker does not exercise judicial power, but a power of private arbitration. Of its nature, judicial power is a power that is exercised independently of the consent of the person against whom the proceedings are brought and results in a judgment or order that is binding of its own force. In the case of private arbitration, however, the arbitrator’s powers depend on the agreement of the parties, usually embodied in a contract, and the arbitrator’s award is not binding of its own force. Rather, its effect, if any, depends on the law which operates with respect to it.
To the extent that s 170MH of the IR Act operates in conjunction with an agreed dispute resolution procedure to authorise the Commission to make decisions as to the legal rights and liabilities of the parties to the Agreement, it merely authorises the Commission to exercise a power of private arbitration. And procedures for the resolution of disputes over the application of an agreement made by parties to an industrial situation to prevent that situation from developing into an industrial dispute are clearly procedures for maintaining that agreement. Parliament may legislate to authorise the Commission to participate in procedures of that kind. Accordingly, s 170MH of the IR Act is valid.
Clause 15 of the Agreement reflects the parties’ choice of a dispute resolution procedure which extends beyond the minimum requirement in s 186(6), although limited to the “permitted matters” in s 172(1) of the FW Act. On the plain words of cl 15, by operation of ss 739(4) and (5) the Commission may arbitrate disputes which go beyond the matters expressly covered in the Agreement, although it has no power to make a decision inconsistent with the terms of the Agreement.
I can see nothing inconsistent with the FW Act in this result. The parties may be seen to have recognised that, during the nominal three year term of the Agreement, disputes between them may arise that they did not contemplate when the Agreement was drafted. The parties apparently recognised that such disputes, although pertaining to the employment relationship and the relationship between the UFU and the CFA, may not be covered by the Agreement. The parties apparently saw some value in a dispute resolution procedure with a broad scope, presumably in order to maximise the application of the Agreement and the prospect of enduring industrial peace.
Nor do I accept the CFA’s contentions that, unless cll 15.1.2 and 15.1.3 are narrowly construed, certainty concerning bargained outcomes is undermined, the inclusion of a mandatory “flexibility term” in the Agreement is rendered meaningless, the operation of the “better off overall test” is undermined, and the “no extra claims” clause in the Agreement is rendered meaningless.
First, this argument proceeds on the wrong premise. Clause 15 provides for the resolution of disputes which, whilst being “permitted matters”, may relate to issues outside the express terms of the Agreement. It is axiomatic that the dispute resolution clause itself is part of the Agreement, and whatever it provides for in respect of its own scope is part of the scope of the Agreement. Subject to the minimum requirements of s 186(6) the parties were free to choose the scope of any dispute resolution term they wished to have in their Agreement. The parties chose a dispute resolution procedure of broad scope and it is now part of the Agreement.
Secondly, the Agreement remains sufficiently certain in my view, and I consider that the flexibility terms have work to do. The “better off overall” test must be decided on the basis of the Agreement at the point of approval as that is the “test time”: see s 193(6). This does not render cl 15 invalid.
Further, in an attempt to bolster its argument, I consider that the CFA overstates the uncertainty that might arise from the agreed scope of cl 15. It is important to remember that s 739(5) provides that the Commission is not empowered to make a decision in a private arbitration that is inconsistent with the relevant enterprise agreement. That is, a decision in any private arbitration cannot displace a term of the Agreement.
Further, the “no extra claims” clause in cl 65 of the Agreement operates to significantly reduce any uncertainty. Clause 65 prohibits extra claims by either party during the life of the Agreement. I do not accept that it is rendered meaningless if the dispute resolution procedure in cl 15 is not read down. Clause 65 is also part of the Agreement and must be given its effect.
I have not had the benefit of detailed submissions by the parties as to the meaning of cl 65, but its purpose is plain enough. I respectfully adopt Bromberg J’s explanation of the meaning of “claims” in the context of a “no extra claims” clause in Marmara v Toyota Motor Corporation Australia Ltd [2013] FCA 1351 at [19]-[33]. I see “claim” in cl 65 as a reference to a demand made by one of the parties which pertains to the employment relationship or to the relationship between the CFA and the UFU, usually but not necessarily as part of an industrial bargaining process. Noting that the parties negotiated a comprehensive agreement running to 166 pages I see the intent of cl 65 as being to lock in the outcome of that former bargaining process so that on commencement of the Agreement the parties had a high level of certainty in the Agreement reached. I infer that to that end, the parties agreed that no extra claims could be made during the life of the Agreement.
As I explain later, they also agreed on a list of Reserved Matters which could be raised later and if so raised were not to be treated as extra claims. Whether a particular issue pertaining to the employment relationship that later arises is an “extra claim” will depend, amongst other things, its nature, whether it is covered in the Agreement, and whether it is a Reserved Matter.
The effect of cl 65 is to prohibit the parties from making extra claims and correctly construed the dispute resolution term does not empower the Commission to privately arbitrate “extra claims”. That is, contrary to the CFA’s contention I do not accept that cl 15 allows the UFU to seek a private arbitration in respect of any matter. The UFU concedes that the parties cannot make extra claims outside the Agreement.
Some disputes may not involve a “claim”, or alternatively may not be an “extra claim” because the parties have agreed that such a claim is a Reserved Matter. The prohibition in cl 65 does not prohibit disputes which do not fall within that clause from being resolved through the dispute resolution process even if they relate to matters not covered in the Agreement. For example, Senior Counsel for the UFU suggested that some matters relating to individual employment grievances would not necessarily fall within the terms of the Agreement.
Finally, I do not accept the contention that the dispute resolution procedure in cl 15 is not a term about matters pertaining to the employment relationship between the CFA and the employees covered, or the CFA and the UFU. In my view the authorities referred to by the CFA are not apposite to the present case. The cases upon which the CFA relies relate to whether an industrial dispute can exist where the principal question between the parties is whether an award could confer power on the former Australian Industrial Relations Commission. No such question arises in the present case.
Issue 11: Is cl 15.1.3 of the Agreement a permitted matter as defined in section 172 of the FW Act?
It follows from my reasoning above that cl 15.1.3 is a permitted matter within s 172 of the FW Act.
Issue 12: If cl 15.1.3 of the Agreement is not a permitted matter is it invalid or unenforceable by reason of section 253(1)(a) of the FW Act?
Given my conclusion that the clause is a permitted matter it is unnecessary to decide this issue.
Issue 13: Is cl 38.3 of the Agreement (whether in conjunction with cl 15 or otherwise) a permitted matter as defined in section 172 of the FW Act?
Issue 14: Is clause 38.3 of the Agreement (whether in conjunction with cl 15 or otherwise) inconsistent with:
(a) sections 186(6)(a), 739(1), (4) and (5) and 738(b);
(b) part 2-4 of the FW Act; and
therefore invalid and of no effect?
Issue 15: Is clause 38.3 of the Agreement (whether in conjunction with clause 15 or otherwise) inconsistent with the requirement that an agreement have sufficient certainty under the FW Act and is therefore of no effect?
Issue 16: Is clause 38.3 a term that provides a procedure for dealing with disputes as referred to in sections 738(b) and 739(1) and therefore invalid and of no effect?
I will deal with Issues 13, 14, 15 and 16 together as they all relate to one short clause of the Agreement.
Clause 38 of the Agreement is headed “Allowances and Reimbursements General” and it deals with various allowances that are payable including allowances for personal expenses and accommodation, meals, spoilt meals, travel expenses and reimbursement, attendance at training facilities, driving licence fee reimbursement, relieving duty, after hours work, after hours disturbance, temporary work location, change of residence, uniforms and equipment, first aid, language, and certain qualifications.
The dispute relates to cl 38.3 which provides:
In accordance with existing practice the parties agree that any new allowance and/or variation to an existing allowances claim will be referred to FWA for determination. Both parties reserve their rights to put their respective positions.
If broadly construed this clause sits poorly, or may be seen to be inconsistent, with other parts of the Agreement, particularly cl 65 which prohibits any extra claims and cl 15 which sets out the dispute resolution procedure.
The evidence
The evidence shows that in negotiating the Agreement the parties reached a comprehensive agreement, but were unable to reach agreement on a number of issues. They obtained the Commission’s approval of the Agreement as it stood, and reserved a number of matters for later discussion and, if necessary, private arbitration.
This is clear from a letter of 13 August 2010 from Mick Burke, Chief Executive Officer of the CFA, to Peter Marshall, the Branch Secretary of the Victorian Branch of the UFU. The letter states:
Matters to be referred to arbitration
To avoid any doubt, please find attached the complete list of matters which the parties have agreed should be arbitrated by Fair Work Australia if they are not able to be otherwise agreed.
I would like to reiterate that the Annual Leave Provisions for PADS are not agreed and need to be arbitrated. The Annual Leave clause in the current version of the new agreement needs to be removed and replaced with the existing provision.
As previously discussed, I do not believe the positions of OM (Fire Inspection) and OO (Scientific) should be dealt with until the present incumbents of the equivalent PTA positions leave those positions.
(“Reserved Matters letter”.)
Under the heading “Matters for Arbitration” the attached list sets out 44 matters (“Reserved Matters”), which could be arbitrated by the Commission if not otherwise agreed to. The specified Reserved Matters appear to be largely allowances claims made by the UFU, but include at least one matter reserved by the CFA, titled “CFA claim – re Evidence in Support of Sick Leave”.
The CFA’s contentions
The CFA raises various legal issues regarding the legal effect and validity of cl 38.3. It argues that the Reserved Matters letter from its CEO, and the attached list of Reserved Matters, cannot bear on those legal issues. It contends that cl 38.3 is invalid and of no effect because it:
(a)is not a permitted matter under the FW Act;
(b)does not allow the Agreement have sufficient certainty; and
(c)is not a dispute resolution term under the FW Act.
Is cl 38.3 a “permitted matter”
The CFA contends that cl 38.3 purports to confer upon the Commission a power that it otherwise does not have under the FW Act, that is, a general power to arbitrate on a claim for a new employment condition by way of a new allowance or a variation to an existing allowance. It notes that cl 38.3 contains no restriction on the number, nature or content of any new allowance claims or variation claims that may be brought forward and arbitrated, nor proscribes any criteria by which any such claims are to be determined.
It argues that, properly characterised, cl 38.3 is therefore a term about the power of the Commission and not a term that pertains to the relationship between the CFA and its employees. In this regard it reiterates similar arguments made in relation to cll 15.1.2 and 15.1.3. It contends that the clause is therefore not a clause about a “permitted matter” within s 172 of the FW Act and, by operation of s 253(1)(a), of no effect.
Does cl 38.3 allow the Agreement to have sufficient certainty
The CFA further contends that cl 38.3 is inconsistent with the requirement of the FW Act that an agreement have sufficient certainty, and is therefore of no effect. It contends that the enterprise agreement making provisions in the FW Act contemplate that the content of an agreement will have certainty. Without such certainty it argues that the parties would be unable to agree on an agreement, the relevant employees would be unable to decide whether to vote to approve an agreement, and the Commission would be unable to determine whether an agreement meets the “better off overall” test in ss 186(2)(d) and 193 of the FW Act.
The CFA says that, if cl 38.3 is valid, significant aspects of the terms and conditions covered by the Agreement would be determined by a process of arbitration rather than collective bargaining and after the Agreement has commenced operation. It notes that the FW Act contains various specific provisions as to the circumstances and manner in which an enterprise agreement may be varied: see ss 207(3), 211, 209, and 217A. It also points to ss 3(f), 5, 50, 217, 313 and 318 as supporting its contention that the FW Act contemplates that the terms of an agreement should be certain and not simply identify potential claims that may be arbitrated.
Further, the CFA submits that it is impermissible for parties to include a term in an enterprise agreement which allows for new substantive changes to be made to existing terms. In this regard the CFA relies on FSU v CBA at [76] per Merkel J and the decision on appeal in Commonwealth Bank of Australia v Financial Sector Union (2007) 157 FCR 329 (“CBA v FSU”) at [172] per Branson J.
Is cl 38.3 a dispute resolution procedure
The CFA also contends that cl 38.3 does not purport to be, and is not, a dispute resolution term as provided in s 186(6), 738(b) and 739. It argues that cl 38.3 simply purports to permit any new or varied allowance claims to be determined by arbitration and says that this is not a dispute procedure. It contends that, under the language of the term, a dispute does not even need to exist.
Accordingly it argues that the clause is an invalid attempt to provide the Commission with a source of power to arbitrate additional allowance claims and is of no effect.
Consideration
It is established that the construction of an enterprise agreement should have regard to the industrial context and should strive for a practical and common sense outcome. In an often quoted passage regarding the interpretation of industrial awards Madgwick J said in Kucks v CSR Limited (1996) 66 IR 182 at 184:
It is trite that narrow or pedantic approaches to the interpretation of an award are misplaced. The search is for the meaning intended by the framer(s) of the document, bearing in mind that such framer(s) were likely of a practical bent of mind: they may well have been more concerned with expressing an intention in ways likely to have been understood in the context of the relevant industry and industrial relations environment than with legal niceties or jargon. Thus, for example, it is justifiable to read the award to give effect to its evident purposes, having regard to such context, despite mere inconsistencies or infelicities of expression which might tend to some other reading. And meanings which avoid inconvenience or injustice may reasonably be strained for. For reasons such as these, expressions which have been held in the case of other instruments to have been used to mean particular things may sensibly and properly be held to mean something else in the document at hand.
I respectfully agree.
In Australasian Meat Industry Employees Union v Coles Supermarkets Australia Pty Ltd (1998) 80 IR 208 at 212, Northrop J said that certified agreements must be construed in the same way as awards. His Honour approved Madgwick J’s statement of the principles to be applied and noted that those principles had an even stronger application in relation to agreements such as in the present case.
In Amcor Limited v Construction, Forestry, Mining and Energy Union (2005) 222 CLR 241 Kirby J at [96], and Callinan J at [129], also endorsed Madgwick J’s approach. In this case Kirby J relied on various contextual considerations to construe the relevant agreement. His Honour explained:
The nature of the document, the manner of its expression, the context in which it operated and the industrial purpose it served combine to suggest that the construction to be given to cl 55.1.1 should not be a strict one but one that contributes to a sensible industrial outcome such as should be attributed to the parties who negotiated and executed the Agreement. Approaching the interpretation of the clause in that way accords with the proper way, adopted by this Court, of interpreting industrial instruments and especially certified agreements.
(Citations omitted.)
Accordingly I do not accept the CFA’s contention that the Reserved Matters letter from its CEO, and the attached list of Reserved Matters, does not bear on the validity of the clause. The context in which cl 38.3 must be construed is that the parties had agreed that various Reserved Matters were put to one side, and had agreed that they could be brought to private arbitration by either party after the Agreement was approved. The Reserved Matters include a large number of allowances. They were “reserved” so that they would not be treated as extra claims falling within cl 65, which otherwise would have prevented them from being advanced during the term of the Agreement.
Having regard to this context, I accept the UFU’s contention that cl 38.3 should be read as nothing more than an exception to (or carve-out from) the no extra claims clause in cl 65. I construe it as no more than a recognition that the parties had not reached agreement as to some allowances and had reserved those matters to be either agreed later or privately arbitrated by the Commission. That is, they had concluded the Agreement but reserved various allowances in the Reserved Matters list, and any matter on that list could be advanced without offending cl 65. Properly construed, cl 38.3 does not allow any new allowance and/or allowance variation claim to be the subject of a private arbitration. That power resides in cl 15 and that clause only allows private arbitration of allowances not caught by the prohibition on extra claims.
On the basis that, properly construed, cl 38.3 does not stand alone as a provision conferring power to grant new allowances or vary existing allowances, I do not see the Agreement as inconsistent with the FW Act. It was open to the parties to agree upon a dispute resolution procedure that related only to matters arising under the Agreement, just as it was open to the parties to refuse to set aside any Reserved Matters capable of being later arbitrated. The parties chose a different course, and that course was available to them.
On the basis that cl 38.3 does no more than invoke the dispute resolution power in cl 15 I do not consider that it falls outside the “permitted matters” in s 172. I accept the CFA’s contention that cl 38.3 is not a dispute resolution term as provided in ss 186(6), 739 and 738(b) of the FW Act. But it is not invalid because, properly construed, it is not a source of power for the Commission to privately arbitrate such matters.
As I have said, the Agreement is not as uncertain as the CFA contends just because it allows a number of matters to be the subject of private arbitration by the Commission. The power to privately arbitrate disputes at all only arises because the parties specifically agreed to a dispute resolution term that contemplated that. The broad scope of the power of private arbitration under cl 15 is also the result of the parties’ specific agreement. The Private Arbitration Case is authority for the proposition that the parties to an industrial agreement are able to create a broad power of private arbitration in the Commission.
In this context I note that any debate about the validity of cl 38.3 is essentially arid. Even if I accept the CFA’s contention that the clause is invalid, the dispute resolution procedure in cl 15 means that the numerous allowances included in the Reserved Matters list can be brought before the Commission for private arbitration.
I now deal with the CFA’s reliance on FSU v CBA and the decision on appeal. The circumstances in that case are relevantly distinguishable from those before me. In that case cl 12 of the certified agreement provided for the employer and an individual employee to make a further agreement that excluded in part or whole the operation of the certified agreement. The further agreement would prevail over the terms of the certified agreement to the extent of any inconsistency. The further agreement was to be considered a part of the certified agreement and the responsibility of determining whether various statutory tests were met was left to the employer and the employee.
In CBA v FSU, Branson J at [172], with whom Spender J and Marshal J agreed, found that the primary judge correctly decided that the Commission could not certify the original agreement because cl 12 meant that the Commission was not able to “compare the overall terms and conditions of employment of the employees in relevant respects if the agreement were certified and if the agreement were not certified.” The comparison was necessary to the certification process and could not be undertaken because the terms and conditions could be fixed at a later time by the employer and the employees.
No such difficulty arises in the present case. In the present case the Agreement cannot be so undermined or changed. As I have said, I consider that cl 38.3 is not to be construed as providing power to privately arbitrate any allowance claim. Further, cl 65 operates to exclude from private arbitration any matter that is an “extra claim”. The allowances cannot be added to or varied other than by reference to allowances listed in the Reserved Matters and through a dispute resolution process that involves private arbitration by the Commission as its final step. There is no delegation of the Commission’s responsibility as in FSU v CBA and the invalidity that was found to exist in that case does not arise.
Finally, the CFA’s contentions regarding the provisions of the FW Act about the variation of enterprise agreements are not to the point. The evidence shows that in negotiating the Agreement the parties were unable to conclude negotiations on a number of matters and agreed to set them aside as Reserved Matters. They also agreed that, other than those matters, there were to be no extra claims. It seems that the parties recognised that, if they could not later agree to vary the Agreement in relation to those matters, they wanted a mechanism available to them to resolve the relevant dispute. That was their choice and that approach is not prohibited by the FW Act.
CONCLUSION
In conclusion, for the reasons given:
(a)the UFU’s application for declaratory and injunctive relief, together with a penalty, for the alleged breach of cl 27.4 of the Agreement must be dismissed. The clause is invalid and of no effect;
(b)I will make the declarations sought by the CFA that cll 26, 27, 28 and 122 of the Agreement are invalid by reason of the implied limitation on the Commonwealth’s legislative power;
(c)as the CFA is a constitutional corporation, it is unnecessary to decide the CFA’s application for declarations that cll 26, 27, 28 and 122 of the Agreement are invalid by reason of s 5 of the Referral Act; and
(d)the declarations sought by the CFA that cll 13, 14, 15.1.2, 15.1.3, 16 and 38.3 of the Agreement are invalid must be refused.
I direct the parties to confer and file draft minutes of orders reflecting these reasons within seven days.
I certify that the preceding two hundred and fifty (250) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy. Associate:
Dated: 31 January 2014APPENDIX A
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