United Firefighters' Union of Australia v Fire Rescue Victoria
[2025] FWCFB 54
•16 MARCH 2025
| [2025] FWCFB 54 |
| FAIR WORK COMMISSION |
| DECISION |
Fair Work Act 2009
s.739—Dispute resolution
United Firefighters’ Union of Australia
v
Fire Rescue Victoria
(C2024/5387)
| DEPUTY PRESIDENT COLMAN | MELBOURNE, 16 MARCH 2025 |
Dispute arising under enterprise agreement – whether a UFU discretionary trust for risk cover is an ‘agreed income protection policy or scheme’ for the purposes of the agreement – whether FRV is required to continue making payments into the trust – payments made from trust funds to UFU – failure of UFU to comply with Commission order to produce side agreement with trustee – UFU conduct referred to General Manager re possible offences – relevance for the determination of the dispute of UFU refusal to produce document – dispute determined
This decision concerns a dispute that has been referred to the Commission for determination by the United Firefighters’ Union (UFU) under s 739 of the Fair Work Act 2009 (Act) and the dispute resolution procedures in two parts, Divisions A and B, of what is known as the Fire Rescue Victoria Operational Employees Interim Enterprise Agreement 2020 (Agreement). The two divisions were previously separate enterprise agreements called the Metropolitan Fire and Emergency Services Board, United Firefighters Union of Australia, Operational Staff Agreement 2016 and the Country Fire Authority / United Firefighters’ Union of Australia Operational Staff Agreement 2010. Following the establishment of Fire Rescue Victoria (FRV) on 1 July 2020, the two agreements, which applied to FRV pursuant to Part 2-8 of the Act, were varied and renamed.
The dispute pertains to clause 48 of Division A and clause 56 of Division B of the Agreement, each of which state that the UFU and FRV will ‘consult and implement an agreed income protection policy / scheme for all employees covered under this Division’ (the Income Protection clauses). Arrangements pursuant to these clauses have been in place for a number of years. Prior to January 2023, employees were covered by an income protection insurance policy provided by ATC Insurance Solution Pty Ltd (ATC). The parties referred to this as the ‘Protect’ scheme. Under the agreed arrangements, employees authorised FRV to deduct insurance premiums from their wages. FRV then reimbursed employees for these amounts. The key benefits of the policy were weekly injury, sickness and death benefits, as well as capital benefits for various injuries and damage. The ATC policy and the deduction and reimbursement arrangements were agreed by the UFU and FRV, however the quantum of the reimbursable amount was determined by the Commission pursuant to the dispute resolution procedures in the Agreement. The most recent substantive order was made on 21 October 2022 by Commissioner Wilson (PR747084). Paragraph 3 of that order stated:
‘Employees who have income protection insurance under the arrangements agreed between UFU and FRV from time to time will be entitled to reimbursement of their premiums up to an amount of $50.43 per week or such other amount as is agreed between the UFU and FRV for the period of operation of the Fire Rescue Victoria Operational Employees Interim Enterprise Agreement 2020 and any agreement which directly replaces that agreement, to indemnify them for the cost of such insurance, subject to the employee providing proof of payment.’
A further order made by Commissioner Wilson on 27 November 2023 (PR768712) increased the maximum reimbursable amount to $55.22.
In September 2022, the UFU decided that it did not want to continue the ATC policy, which was due to expire on 1 November 2022, and that it would instead look for other providers. To allow time for this to occur, the UFU proposed to FRV that the ATC policy be extended until 1 January 2023. On 26 October 2022, the UFU presented a recommendation to this effect to the FRV / UFU Consultative Committee, the body established by the parties for the purposes of consultation pursuant to the Agreement. The recommendation was endorsed and the ATC policy was extended.
On 27 October 2022, Peter Marshall, branch secretary of the UFU, and Laura Campanaro, UFU industrial officer, met with Craig Harms from Howden Insurance Brokers (Australia) Pty Ltd (Howden). They discussed the possibility of Howden putting in place an ‘alternative risk scheme’ by means of a discretionary trust (see further below). Ms Campanaro gave evidence that she and Mr Marshall were impressed with Howden, and from that point Howden was the clear frontrunner to be the new provider. Ms Campanaro said that she assisted Mr Marshall to select Howden as the new provider and to obtain FRV’s agreement to this. She said that already in September 2022, they had told Kirstie Schroder, FRV’s deputy secretary, and Martin Braid, FRV’s deputy commissioner, that the ‘UFU was going to change provider’, and that Ms Schroder and Mr Braid had not objected.
Ms Campanaro’s evidence was that at some point after the meeting with Howden on 27 October 2022, she and Mr Marshall told Ms Schroder and Mr Braid that the UFU was now considering the Howden proposal, although she did not mention the name ‘Howden’ because she considered it to be confidential. Why she thought this was not explained. Ms Campanaro’s evidence was that she and Mr Marshall told Ms Schroder and Mr Braid that a ‘trust’ would be used; that the ‘premium’ would be the same as that paid under the Protect (ATC) scheme; and that there would be enhanced benefits compared to the Protect scheme, such as health insurance cover. Ms Campanaro said that Ms Schroder and Mr Braid raised no objections to what she described.
On 21 December 2022, Mr Marshall presented a one-page paper to the Consultative Committee. It stated that FRV and the UFU had ‘previously met’ to discuss new arrangements and that it was recommended that the committee ‘endorse the new provider to be Howden Insurance Brokers (Australia) Pty Ltd (Howden) with the insurance underwritten by Arch Underwriting at Lloyd’s (Australia) Pty Ltd (Arch)’. It was proposed that the new arrangements take effect from 1 January 2023, and that they replace any other arrangements, agreements and providers. The minutes of the meeting record that the Consultative Committee ‘agrees and endorses the new income protection arrangements effective 1 January 2023’.
On 30 December 2022, Mr Marshall sent a letter to FRV advising that in accordance with the resolution of the Consultative Committee on 21 December 2022, ‘Howden Insurance Brokers have been engaged and all is on track for income protection under the new scheme to commence for eligible operational FRV employees on 1 January 2023 at 4.00pm’
Ms Campanaro said that on 6 January 2023, she and Mr Marshall had a Zoom meeting with Ms Schroder and other FRV representatives to discuss the payroll arrangements for processing member contributions. Bank details for the trust were provided to FRV. Payments into the trust commenced in February 2023.
The Howden alternative risk management scheme
Craig Harms is employed by Howden as its head of alternative risk management. Mr Harms said that alternative risk schemes involve the use of a discretionary trust to manage risk, and that in his 25 years of experience he had set up some 100 alternative risk schemes in Australia for clients that included the AFL, Cricket Australia, Multiplex and various councils. He said that alternative risk schemes were a different method of managing risk and had been in use since the early 1990s. Whereas traditional insurance arrangements would see Howden’s client have a contract with an insurer, under which the insurer promised to make a payment if a defined event occurred, an alternative risk scheme entailed the use of a discretionary trust to cover certain risks, with the trustee making payments if the risks eventuate. The trustee usually pays claims directly out of available trust funds up to a limit but takes out insurance to cover risk beyond the limit. He said that such schemes can often be cheaper than traditional insurance policies. In particular, the insurance policies that the schemes use are cheaper because they do not cover all of the risk, only the residual risk after the payout from the trust.
Mr Harms said that in October 2022, he was told by an industry contact that the UFU was looking to renew its income protection insurance for FRV firefighters. Mr Harms contacted the UFU and reviewed the Protect scheme. It provided income protection insurance from ATC, as well as other benefits, including capital payments for injury or death, return to work and rehabilitation assistance, funeral expenses, and emergency home help, as well as a discretionary benefit in case the insured’s domestic partner became unwell and could not continue to perform domestic duties. Mr Harms said that he thought the premium for the Protect scheme was expensive for what it provided. He recommended an alternative risk scheme that could provide greater benefits. Mr Harms said that at some point in late 2022, the UFU accepted his recommendation and asked him to put an alternative risk scheme in place. He then had Howden’s lawyers prepare a standard trust deed. On 23 December 2022, the trust deed was executed by the trustee, Alternative Risk Management Services Pty Ltd (ARMS), which is owned and controlled by Howden. It was countersigned by the UFU. Mr Harms was appointed the responsible manager for ARMS and is authorised to act as the trustee.
Mr Harms said that ARMS holds a financial services license issued by ASIC. The scheme is a managed investment scheme but it is exempt from registration, on condition that it keeps the trust’s funds at call in an Australian Authorised Deposit-taking Institution. It is a condition of the licence that ARMS joins the Australian Financial Complaints Authority (AFCA) scheme and thereby agrees to abide by AFCA’s decisions. The members of the trust are those people whom the trustee permits to join from the eligible pool of people, who are either FRV operational firefighters or members of the UFU. The trust has 3,598 members.
Mr Harms said that there are three classes of benefit available under the trust. The first class are benefits underwritten by insurance from Arch for the benefit of members. The policy covers loss of income, death and disability, accidental dental injury, and broken bones. The trust also offers these benefits directly from its own funds in respect of claims up to a limit of $200,000; beyond the limit, claims are covered by the insurance. The second class of benefit is provided by the trust using its own funds only. This covers Ambulance Victoria membership, $750 towards health insurance premiums, and reimbursement of hospital admission excesses. The third class of benefit is comprised of other insurance policies that the trust has taken for the benefit of members, namely legal expenses insurance and spouse life insurance. Mr Harms said that, in preparing his statement, he realised that the latter insurance was limited to UFU members, and that this was an error that he had set about correcting.
Mr Harms said that although the trustee had a discretion to make payments to members under the trust, any member who was refused a claim could appeal to AFCA or seek to have a court compel the trustee to comply with the trust. Mr Harms said that from 1 January 2023 to 29 February 2024, the trust had paid out to members $2,823,556 for loss of income, which was 84.37% of all payouts; and from 1 March 2024 to 12 February 2025, it had paid out $4,274,003 for loss of income, or 74.59% of all payouts. He said that, considered from the viewpoint of payments to members, the ‘UFU scheme’ had been predominantly one for income protection, and that he expected that this would remain the case.
FRV requests for further information about the Howden scheme
On 6 January 2023, FRV requested Mr Harms to advise it of the trust’s Australian Business Number. The same day, the UFU provided FRV with the details of a bank account into which payments would be made by FRV on behalf of employees for cover pursuant to the new arrangements. The name of the account was the same as the name of the trust that had been established: the ‘United Firefighters Union of Australia Victorian Branch Discretionary Trust’.
On 13 January 2023, FRV requested Mr Harms to provide a breakdown of the $50.43 weekly fee. He was asked to do so in ‘granular detail, identifying the amounts relating to the following components to help us sufficiently assess each component for FBT purposes and members’ reportable component’. Mr Harms’ evidence was that he had some trouble with this request, because there was a single member contribution which was not able to be broken down further. However, he wanted to help FRV and replied that, excluding GST, the member contribution was $45.91, and the trust was paying 11.9% of contributions to Arch as premiums for the insurance cover, which equated to a $5.42 premium, plus $0.60 stamp duty. On 17 January 2023, Mr Harms sent a further message to FRV stating that from the $50.43 weekly contribution per member, $39.89 was for ‘trust cover’, $3.36 was for lump sum insurance cover, and $2.00 was for loss of income insurance cover.
From October 2023, FRV sought to obtain further information from the UFU about the Howden scheme, including a copy of the trust deed, as well as information about the allocation of membership contributions as between insurance, discretionary payments and other fees. In November 2023, the UFU provided the trust deed to FRV’s tax advisors on a confidential basis but did not provide the deed to FRV.
On 1 May 2024, the FRV Commissioner, Gavin Freeman, sent a letter to Mr Marshall stating that FRV understood that the trustee provided certain insurance cover for loss of income, lump sum and additional benefits, as well as ‘trust cover’ for income protection which was provided on a discretionary basis. He stated that FRV understood that of the weekly $50.43 paid by FRV in respect of member contributions, only a small amount was used to pay for income protection, and that consequently a large proportion of those contributions were likely to be subject to fringe benefits tax (FBT), with a consequential FBT liability for FRV of some $7,000,000 per year. Mr Freeman said that it was critical that FRV had visibility over payments made from public funds and the purposes of those payments, and that currently it did not have adequate visibility of the application of the reimbursements made to employees for their member contributions. Mr Freeman requested the UFU to provide FRV with a copy of the trust deed and stated that it would likely be necessary for FRV to ‘propose steps to reduce the reimbursements paid to employees’ to reflect the amount that was referrable to income protection insurance.
On 20 June 2024, Mr Marshall sent a letter to Mr Freeman notifying FRV of a dispute under the Agreement. He stated that the dispute related to ‘the recent proposals of FRV to reduce the reimbursements to reflect the FBT payable by FRV’. Further discussions between the parties did not resolve the matter.
The UFU application under s 739 of the Act
On 7 August 2024, the UFU lodged its application under s 739 of the Act. The application sought an order from the Commission that FRV ‘continue to pay the full amount of the income protection allowance’ as fixed by the order made by Commissioner Wilson, as amended on 27 November 2023. The matter was the subject of conciliation before Commissioner Wilson but remained unresolved.
On 24 September 2024, Commissioner Wilson granted an application by FRV for an order requiring the UFU to produce a copy of the trust deed. The UFU appealed from and sought a stay of the decision. On 11 October 2024, the President refused the stay ([2024] FWC 2839). His Honour noted that the UFU had waited until the close of business on 7 October 2024 to lodge its appeal, leaving no possibility of the stay being determined before the time for compliance with the order had passed, which was 10.00am the following morning. The President stated that the UFU had elected to disregard the requirement of the order to produce the trust deed, that a contravention of an order of the Commission was an offence, and that a stay should not be granted to validate the UFU’s failure to comply with the order.
On 2 December 2024, pursuant to ss 582 and 618(2) of the Act, the President directed that the UFU’s s 739 application be dealt with by this Full Bench.
The UFU subsequently withdrew its appeal against Commissioner Wilson’s order to produce the trust deed. But still the document was not produced. It was not until FRV obtained an order from the Federal Court compelling the UFU to comply with the order that it finally did so (order of Neskovcin J, 20 January 2025).
At a directions hearing on 4 December 2024, FRV advised the Full Bench that it proposed not just to resist the order sought by the UFU in its s 739 application but to seek an alternative order in resolution of the dispute. The parties asked the Full Bench to set a timetable that would allow sufficient time for them to prepare materials, taking into account the Christmas and New Year period, and we agreed. Submissions and evidence were subsequently filed in accordance with our directions.
Summary of the UFU’s argument
The UFU’s written submissions reframed the dispute and the relief that it sought. It contended that the questions for the Full Bench to determine in order to resolve the dispute were whether the Howden arrangements were an ‘income protection policy / scheme’ within the meaning of the Income Protection clauses, and if so, whether this policy or scheme was agreed between the parties. The revised order now sought by the UFU was a declaration from the Full Bench that the Howden arrangements were such a scheme, and an order that FRV implement that scheme by making contributions of $55.22 per week.
The UFU contended firstly that the proper construction of the phrase ‘agreed income protection policy / scheme’ was one of broad compass and that as a matter of fact the present arrangements established with Howden constituted such a policy or scheme. The clauses did not speak of an ‘income protection insurance policy’, and the word ‘policy’ was not to be read in this narrow sense. A formalised plan for regular contributions towards income protection and other benefits would meet the description of an income protection policy or scheme. The provisions were not confined to traditional income protection insurance policies. Further, ‘income protection’ meant ‘income replacement’, and the common understanding of the parties was informed by the way in which the concept had previously been applied by them. In this regard, the evidence of Ms Campanaro and Mr Harms was that the previous ‘Protect’ scheme provided for several benefits that went beyond mere income protection, including benefits for dependents of firefighters, and therefore the fact that the scope of the arrangement was broader than that of its predecessor did not mean that it now fell outside the scope of the Agreement.
The UFU contended that any arrangement that could be characterised as a scheme providing substantially for income protection would be a scheme for the purposes of the Income Protection clauses, even though it might provide other additional benefits. It submitted that, based on the evidence of Mr Harms, the Full Bench should conclude that the alternative risk scheme established by the discretionary trust was a scheme falling within the meaning of the Agreement. Although the trust pays for a range of benefits, Mr Harms’ evidence demonstrated that since its inception, the trust had paid an average of 80% of claims for loss of income with most of the rest being for injury-associated items. The UFU contended that as a matter of fact, the Howden scheme was an income protection scheme, as contemplated by the Agreement.
The UFU submitted that although the Howden scheme employed a discretionary trust, this did not prevent it from being a ‘scheme’, which is a concept broad enough to embrace a wide variety of different legal structures and arrangements. Further, the evident purpose of the Income Protection clauses was to protect against the hazards of accident and illness, and there was no sensible reason to rule out schemes that were capable of providing income protection in practice. In addition, the trustee was bound to exercise its discretion in the best interests of members and would not be expected to act in breach of its duties by denying legitimate claims.
The UFU contended that it was clear that FRV had agreed to the Howden scheme. Ms Campanaro’s evidence had recounted the interactions between the UFU and FRV concerning the new arrangements. She told senior FRV representatives that there would be a new provider and they did not object. She and Mr Marshall told Ms Schroder and Mr Braid that a trust would be utilised, that the premium would be the same as that paid under the old Protect scheme, and that there would be enhanced benefits such as health insurance cover, and Ms Schroder and Mr Braid raised no objection to these matters. Further, in her witness statement, Ms Schroder confirmed in her evidence that during her discussions with Ms Campanaro in October and December 2022 about a new income protection scheme, Ms Campanaro told her that the proposed scheme involved a discretionary trust. The UFU noted that the Consultative Committee minutes of the meeting of 21 December 2022 recorded Mr Marshall as referring to ‘previous discussions’, and that the committee had endorsed the new scheme at that meeting.
The UFU submitted that the Full Bench should take account of the evidence of the discussions that occurred between the parties in relation to the proposed new Howden scheme and that it should find that the new scheme for income protection was indeed agreed between the UFU and FRV. The UFU submitted that if it was such a scheme, the Full Bench should declare this to be the case, and FRV should be ordered to comply with it.
Summary of FRV’s argument
FRV submitted that the Howden scheme was not an income protection policy or scheme for the purposes of the Income Protection clauses because it was a discretionary trust set up for purposes that went beyond an income protection scheme. It further contended that the arrangements were not agreed because they went beyond what was endorsed in the Consultative Committee meeting on 21 December 2022, as evidenced by the minutes of that meeting. The minutes record that what was agreed and endorsed by the committee was a new income protection arrangement effective 1 January 2023, whereby the new provider would be Howden with insurance underwritten by Arch. There was no mention of a discretionary trust, or of payments being used to source other benefits under the new arrangements.
FRV contended that the scope of the alternative risk management scheme travelled well beyond the domain of income protection to matters such as personal legal insurance. Moreover, the risks that would or could be covered were at the discretion of the trustee. There was no requirement in the trust deed for income protection to be one of the covered risks, and although such cover was presently provided as a matter of fact, there was no guarantee that this would not change, as members’ benefits under the trust remained at the discretion of the trustee. Further, membership of the trust was open to persons who were members of the UFU, irrespective of whether they were employees of FRV, thereby potentially diluting the benefits that might be available to employees from funds paid into the trust.
FRV submitted that the arrangements that had been put in place by the UFU did not accord with what the Consultative Committee had endorsed at the meeting on 21 December 2022, and that it was only after the Consultative Committee meeting on 21 December 2022 that it emerged that payments were to be made into a discretionary trust, and that the majority of member contributions were being spent on things other than income protection insurance. It had then become apparent that the Howden arrangements had created a significant FBT liability for FRV. From October 2023, FRV sought to obtain further information about the arrangement, including a copy of the trust deed, which, despite an order made by Commissioner Wilson requiring its production, was not produced by the UFU until the Federal Court compelled it to do so in January 2025.
FRV submitted that even if it had agreed with the UFU to obtain insurance or risk cover on items or benefits going beyond income protection, that would not be an agreement meeting the description of the Income Protection clauses and it would not have any force under the Agreement. The orders sought by the UFU would therefore be contrary to the terms of the Income Protection clauses, which would offend the direction in s 739(5) of the Act that the Commission not make a decision that is contrary to a fair work instrument, which includes an enterprise agreement.
FRV contended that Commissioner Wilson’s order of 21 October 2022, as varied on 27 November 2023, was clear in stating that ‘employees who have income protection insurance under the arrangements agreed between UFU and FRV’ are entitled to ‘reimbursement of their premiums’ of up to $55.22. The orders did not require reimbursement for payments relating to other matters. FRV said that the orders now sought by the UFU would be inconsistent with Commissioner Wilson’s orders, and no justification for this had been established.
FRV submitted that there were significant public interest considerations weighing against the Commission making an order that required it to make or reimburse payments made to a third party, namely a discretionary trust, for items going beyond income protection insurance. It said that the UFU had gone to great lengths to avoid producing the trust deed to the Commission and FRV, even when ordered by the Commission to do so. The UFU’s non-compliance with the Commission’s order for many months remained unexplained. This was a circumstance that was relevant to the Commission’s consideration as to how it should exercise its discretion in resolving the dispute. So too was the fact that the UFU had refused to produce documents called for by FRV’s counsel during cross-examination, despite the Full Bench dismissing the UFU’s objection and ordering their production forthwith.
FRV said that all of these matters weighed heavily in favour of the Full Bench declining to make the orders sought by the UFU, and instead making the orders proposed by FRV, under which it would be deemed sufficient compliance with the Income Protection clauses for FRV to reimburse employees for the cost of income protection insurance provided by Howden with insurance underwritten by Arch up to a maximum amount of $55.22.
Consideration
A number of preliminary matters must be addressed. First, the UFU objected to FRV’s use in the proceeding of the trust deed, which was the subject of supplementary submissions filed by FRV. The UFU contended that such use was inconsistent with the order for production of the document on 24 September 2024. We disagree. But to the extent it might be necessary we vary that order to permit use to be made of the trust deed in the proceeding. It is relevant to the dispute. No sensible reason to restrict its use has been advanced by the UFU.
Secondly, the UFU asked the Full Bench to make a confidentiality order under s 594 of the Act that would prohibit the publication of written submissions and statements addressing the content of the trust deed. The UFU contended that the deed was commercially confidential, as it constituted or laid bare a proprietary business model that had been developed by Howden. But the evidence of Mr Harms was that this was a ‘standard trust deed’. He did not say that it was confidential. Section 594 empowers the Commission to make an order prohibiting or restricting the publication of evidence and documents provided to the Commission if it is satisfied that it is desirable to do so because of the confidential nature of any evidence, or for any other reason. We are not so satisfied and decline to make a confidentiality order.
Thirdly, in the course of cross-examination, Mr Harms was asked questions about the profit and loss statement (PLS) for the trust for the period to 29 February 2024, a copy of which had been attached to his witness statement. Among the operating expenses identified in the PLS is an item referred to as ‘promotion/management costs’ in the amount of $480,000. Mr Harms was asked what this item entailed. He replied that it was payment to the UFU for services rendered to the trust. Mr Harms was then asked whether there was a written agreement in respect of such services, and he replied that there was. FRV called for this document to be produced, along with certain other documents referred to by Mr Harms in cross-examination. Counsel for the UFU sought instructions and, after a short break, advised the Full Bench that some of the documents were available but others were more difficult to locate. After a further adjournment, the UFU advised the Full Bench that it objected to the production of the documents and asked for its objection to be programmed for a separate hearing. We rejected this. After hearing further from the UFU, we ordered the documents that had been called for to be produced to the Commission. The UFU did not produce them. It advised the Full Bench that it proposed to seek judicial review of our decision to require production of the documents, and that it would not participate further in the proceeding that day. We advised the UFU that the proceeding would continue and that if it wished to present oral argument, its opportunity to do so was now; if it did not wish to do so, we would have regard to the UFU’s written submissions in determining the dispute. The UFU chose to leave the hearing. It did not discontinue its application. We proceeded to hear oral submissions from FRV. We then reserved our decision.
For the second time in the one proceeding, the UFU has failed to comply with orders of the Commission to produce documents. It refused to comply with the order of Commissioner Wilson to produce the trust deed, until it was finally ordered to do so by the Court. It has failed to comply with the order of the Full Bench given on transcript to produce the documents that were called for in the cross-examination of Mr Harms. The UFU’s failure to comply with the Commission’s orders is unacceptable. Section 677(3) of the Act states that a person commits an offence if the person attends before the Commission, is required by the Commission to produce a document, and refuses or fails to do so. We will request the General Manager to refer the matter to the Australian Federal Police. The UFU’s defiance of the Commission’s orders will also be relevant to our deliberations on the resolution of this dispute, as we will see in a moment.
We turn now to the substantive dispute and our disposition of it.
It was common ground between the parties that the Commission was authorised by the dispute resolution procedures in clauses 21 of Division A and 26 of Division B of the Agreement to determine the dispute by arbitration. It is clear that the essence of the dispute between the parties is the one articulated in the UFU submissions: is the Howden arrangement an income protection policy or scheme for the purposes of the Income Protection clauses, and if so, was it agreed?
The UFU is correct to say that the words ‘policy’ and ‘scheme’ are of broad scope, and that income protection is not necessarily confined to an insurance policy provided by an insurance company. So much is clear from the word ‘scheme’, and the absence of any reference in the Income Protection clauses to ‘insurance’. We also agree with the UFU that a policy or scheme could be one for income protection and also deal with other matters. The previous policy had benefits that went beyond income protection, although these were related to matters more readily associated with an inability to work and a need for income to be replaced. It would be necessary to consider the overall character of the relevant policy or scheme.
We have concluded that the Howden scheme is not an ‘income protection policy / scheme’ within the meaning of the Agreement. First, in order to be an income protection policy or scheme, we consider that the relevant policy or scheme must deal with the subject matter of income protection. The trust deed does not do so. It makes no reference to income protection whatsoever. This is not just a matter of wording. It is one of substance. As Mr Harms explained in his evidence, the Howden scheme is an alternative risk management scheme. It relates to any and all risks that the trustee might decide to cover from time to time. It is not an income protection policy or scheme, even though it is capable of providing similar benefits. It is in fact a general risk management scheme.
Secondly, in our opinion, when the Income Protection clauses speak of income protection, they contemplate not only payments to employees who are not able to earn their income for reasons such as illness or incapacity, but also that their income will indeed be protected by these payments. Under the previous scheme, employees were covered by insurance policies that gave them conventional legal rights that were readily enforceable at law pursuant to the relevant contracts. Under an alternative risk management scheme, the benefits to be received by members of the trust are at the discretion of the trustee. The trustee has an obligation to act in the best interests of the trust’s members, and this general duty can be enforced in a court, but the trustee has no obligation to make any particular payment to a member. And although an aggrieved member can make a complaint to AFCA, this is not the same thing as enforcing an existing, quantified, legal right.
Thirdly, in considering the meaning of the Income Protection clauses, it is relevant to take into account how employees covered by the Agreement might reasonably have understood the provisions when they voted to approve it. It was the employees of FRV who made the enterprise agreement when a majority of them cast a valid vote to approve it (see s 182 of the Act). This design feature of the bargaining framework in the Act warrants an approach to interpretation that is mindful of the ordinary meaning of words and phrases as they may be understood by ordinary people, and the practical realities that may be associated with them. In our assessment, employees covered by the proposed agreement would reasonably have expected that an income protection policy or scheme that might be agreed by FRV and the UFU would be one that specifically protected their income if they were unable to work. We doubt that it would have been in the reasonable contemplation of an ordinary worker that an income protection policy or scheme might include a discretionary trust, whose trustee was at liberty to decide which of all the risks in life should be covered by the scheme from time to time, and whether an employee should receive any payments at all if the chosen risks materialise.
Fourthly, the revelation at the hearing that the UFU has received payment of $480,000 from trust funds for ‘promotion / management costs’ is a matter that is relevant to the proper characterisation of the Howden arrangements and whether they are a policy or scheme of the kind described in the Income Protection clauses. These provisions concern income protection policies or schemes ‘for all employees covered under this Division’, not policies and schemes that confer benefits on the UFU. It is one thing to say that an income protection scheme might also confer certain associated or other benefits on employees and still retain the character of an income protection policy. But the fact that the scheme has been a vehicle for significant payments to be made to the UFU has the consequence that it does not properly meet the description of an income protection policy or scheme for all employees covered by the Agreement. It would appear that it is in fact a scheme for the benefit of all employees covered by the Agreement and for the benefit of the UFU.
Fifthly, the Commission would not be minded to reach a conclusion that an arrangement was a policy or scheme for the purposes of the Agreement if it held a concern about the probity of the arrangement that might affect its proper characterisation. We have such a concern. The trust deed defines the UFU as the trust’s ‘advocate’, whose role includes promoting the trust and encouraging participation in the scheme (clause 4.1 of the trust). It specifically states that the advocate is not entitled to a fee in relation to its role under the deed (clause 13.2). Yet the UFU has been paid $480,000 from trust funds. Perhaps there is a good explanation, but if there is, the UFU did not present it to the Full Bench. It said nothing about the matter other than to oppose the production of a relevant document and then ignored the Commission’s order that the document be produced. The UFU made no attempt to clear the air. What now hangs in the air is doubt as to what if anything justified these payments.
The Howden arrangement is not an income protection policy or scheme as referred to in the Income Protection clauses. We have also concluded that it was not ‘agreed’ with FRV. In our view, for the UFU and FRV to consult and implement an agreed policy or scheme, they must both know at least its essential features. The UFU contended that FRV did know the essential features, because Mr Marshall and Ms Campanaro told Ms Schroder and Mr Braid that the new arrangements would use a trust, that the premium was the same, and that it covered other benefits. But these are not the essential features of the arrangement. These are little more than the bare bones. Moreover, the reference to the same ‘premium’ was apt to mislead. While the contributions would be the same, what they paid for would be very different. Previously, they paid substantially for premiums for income protection insurance. Now they would be deposited into the trust, with only a small portion used to pay for income protection insurance premiums. There does not appear to be any evidence that the UFU told FRV that the new arrangements were an alternative risk management scheme, or that the payments made into the trust would cover claims directly, or of the fact that the risks to be covered would be determined at the trustee’s discretion. And there was certainly no mention of the ability of the scheme to be used in a way that would see almost half a million dollars paid to the UFU from trust funds.
The UFU said that FRV had not asked questions about the new arrangements, and that it was content to commence the arrangements without asking for further details of the high level features that had been conveyed to it by the union. It said that the Consultative Committee had approved the UFU proposal at the meeting on 21 December 2022, and that FRV had agreed to the Howden scheme on that date. It suggested that if FRV did not ask questions beforehand, that was its own fault. In our view, FRV ought to have asked more questions about the proposed arrangements prior to or at the Consultative Committee meeting, and before it commenced making payments into the trust. But that does not mean that the new scheme was agreed. In our opinion, whereas a party to a contract who accepts an offer without reading or understanding its terms will be bound by it at law, the Income Protection clauses require actual agreement, not ostensible or deemed agreement, at least in respect of the essential features, which include the matters we have referred to above. What has been implemented in this case is not something that was in fact agreed.
We note that there was no evidence adduced from anyone who attended the Consultative Committee meeting on 21 December 2022. Ms Campanaro and Ms Schroder did not attend the meeting. Mr Marshall attended the meeting. He also attended the hearing. But he did not give evidence. The evidence of what was approved at the meeting is set out in the minutes of the meeting. What was endorsed was that the new ‘provider’ would be Howden, with insurance underwritten by Arch. As the UFU pointed out in its submissions, strictly speaking, this does not make sense, because Howden is an insurance broker, not an insurance company that provides insurance, and Arch does not underwrite the insurance under the Howden scheme but in fact provides insurance covering claims above the $200,000 threshold. The UFU contended that the minutes simply reflected a lay summary of the new arrangements. We reject this. Mr Marshall no doubt knew what he meant when he spoke to the meeting. But what he said is not in evidence because he did not give any evidence. There is no evidence of FRV agreeing, whether through the Consultative Committee or otherwise, to the essential features of the arrangement that was implemented. The evidence does not sustain a finding that the UFU and FRV agreed on the new arrangements.
The first order sought by the UFU would have the Full Bench determine that the Howden scheme is a policy or scheme within the meaning of the Agreement. We will not make this order because we have reached the opposite conclusion. And we will not make the second order, which was consequential upon the first. We will however make some observations about it. The second order would have directed FRV to implement the Howden scheme by reimbursing employee contributions to the scheme in the amount of $55.22 per week or other agreed amount for the period of operation of the Agreement. This proposed order would have marked a significant departure from the orders of Commissioner Wilson that set the quantum of the reimbursable amount, because it would have altered the subject of the payment. The order currently requires FRV to reimburse income protection insurance premiums. It does not require reimbursement of other amounts. Had the Howden scheme fallen within the Income Protection clauses, the Full Bench would have been empowered through the dispute resolution procedure in the Agreement to make orders superseding those of Commissioner Wilson for the purpose of arbitrating the present dispute. This would entail the exercise of discretion. A consideration weighing heavily against making the second order would have been the fact that the UFU failed to comply with our order to produce the documents that were called for in cross-examination. The fact that a party has failed to comply with an order of the Commission to produce documents tells against the discretionary granting of relief sought by the party, not because that party should be punished (punishment is generally for the courts, not the Commission), but for reasons of basic fairness: a person should not expect the Commission to issue orders against others if it will not follow the Commission’s orders itself. Further, the consequence of a failure to comply with an order to produce documents is likely to be that the other side has been deprived of relevant evidence, and that the Commission would have sound reasons to doubt that it was appropriate to reach the conclusions and make the orders that the offending party has asked the Commission to make. That is the case here. We would not make an order extending the scope of the payment obligation in Commissioner Wilson’s order given that trust monies have apparently been used to make substantial payments to the UFU in circumstances that remain opaque, a situation that the UFU has contributed to by refusing to comply with our order to produce the documents called for by the FRV.
We do not propose to make the orders sought by FRV. We doubt that there is a proper basis for us to make them given our conclusion that the Howden scheme is not an agreed income protection policy or scheme within the meaning of the Income Protection clauses. But assuming that the authority conferred on the Commission by the Agreement to arbitrate disputes would permit us to make orders about risk management arrangements that do not fall within the Income Protection clauses, we decline to do so. The order seeks to disentangle the insurance premium from the bundle of discretionary benefits made available to employees pursuant to the Howden arrangement. This is a difficult exercise and we are not persuaded that the proposed order would necessarily succeed in its endeavour.
In our view the appropriate course is to determine the dispute by recording our conclusion that the Howden scheme is not a policy or scheme for the purposes of the Income Protection clauses. A consequence of this is that the payment orders of Commissioner Wilson do not operate in respect of the Howden scheme. Those orders require FRV to reimburse employees up to $55.22 for their income protection insurance ‘under the arrangements agreed between the UFU and FRV from time to time’. There are presently no such arrangements.
The parties should now do what the Income Protection clauses in the Agreement require, which is to consult and implement an agreed income protection policy or scheme for all employees covered by the two divisions of the Agreement.
DEPUTY PRESIDENT
Appearances:
H. Borenstein K.C. and J. Fetter of counsel for the United Firefighters’ Union
R. Sweet K.C. and B. Avallone of counsel for Fire Rescue Victoria
Hearing details:
2025
Melbourne
11 March
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